House of Commons
Thursday, May 14, 1942
[Mr. SPEAKER in the Chair.]
Private Business
PRIVATE BILL PETITIONS. [Lords.]
(STANDING ORDERS NOT COMPLIED WITH.)
Mr. SPEAKER laid upon the Table Report from one of the Examiners of Petitions for Private Bills, That in the case of the Petition for the following Bill originating in the Lords the Standing Orders have not been complied with, namely:
South Wales Electric Power Bill [ Lords ].
Report referred to the Select Committee on Standing Orders.
Aberdeen Corporation (Fish Market Rates) Order Confirmation Bill
Read the Third time, and passed.
Ministry of Health Provisional Order (Caernarvon) Bill,
"to confirm a Provisional Order of the Minister of Health relating to the borough of Caernarvon"; presented by Mr. Ernest Brown; read the First time, and referred to the Examiners of Petitions for Private Bills; and to be printed [Bill 26].
Ministry of Health Provisional Order (Mold Gas and Water) Bill,
"to confirm a Provisional Order of the Minister of Health relating to the Mold Gas and Water Company'; presented by Mr. Ernest Brown; read the First time, and referred to the Examiners of Petitions for Private Bills; and to be printed [Bill 27].
Ministry of Health Provisional Order (Poole) Bill,
"to confirm a Provisional Order of the Minister of Health relating to the borough of Poole"; presented by Mr. Ernest Brown; read the First time, and referred to the Examiners of Petitions for Private Bills; and to be printed [Bill 28].
Oral Answers to Questions
National War Effort
Holidays
asked the Minister of Labour whether he has considered the effect on the workpeople of three blackout winters and long hours since 1938, and that the Ministry of War Transport is discouraging travelling; and will he, in conjunction with all local authorities make the best possible arrangements to enable the people to enjoy their periods of relaxation during the next few months?
Yes, Sir. I regard it as most important that workers should be enabled to make the best use of their well-earned leave in spite of the restricted nature of the facilities available. The local authorities have already been approached through the Ministry of Health and the Scottish Department of Health, and I much appreciate the help that they and the voluntary organisations concerned are giving in planning holiday-at-home attractions. I am sending my hon. Friend a copy of a leaflet on this subject which has been distributed to local authorities and others.
Will my right hon. Friend convey to the Ministry's officials the appreciation of the industrial sections of the people at the adoption of an enlightened policy of this kind, and can he say what steps are being taken to see that municipalities and local authorities carry out the policy?
I have put every pressure on them that I could, and if any recalcitrant local authority does not respond and if any hon. Member will call my attention to the matter, I will take steps to find some substitute procedure at once.
asked the Minister of Labour what is the policy of the Government with regard to the holiday period to be taken this year by directors, managers, office staff and workpeople; and whether any national agreements have been entered into, or advice given, as to a maximum period?
I would refer my hon. Friend to the general announcement made earlier this year, a copy of which is printed in the OFFICIAL REPORT of 3rd March.
Does that cover all ranks in industry? Will my right hon. Friend bear in mind that some guidance from the Government would be very much appreciated?
I have no power to cut down the ordinary holidays made under agreements, and I think it would be a very unwise thing to do, but we have given guidance. It is not a legal document.
Jewellery Trade, Birmingham
asked the Minister of Labour whether he is aware of the large number of firms that are being closed down in the Birmingham jewellery district due to the withdrawal of labour by his Department; and will he consider dealing a little less drastically with these small businesses, especially those employed mainly on orders for export?
In accordance with arrangements agreed with my right hon. Friend the President of the Board of Trade, labour is being withdrawn from firms that have not obtained nucleus status under the Concentration Scheme. This labour is urgently needed for important war employment, and I regret I cannot agree to vary the present arrangements.
Does the Minister consider it necessary to call men of the age of 72 and women over 60 for interviews at employment exchanges, even if labour is short?
Oh, yes. The hon. Member would be surprised at the capabilities of men of 72.
Public School Boys and Girls
asked the Minister of Labour whether he is aware of the reserve of labour that exists amongst boys and' girls in public schools between the ages of 15 and 19 years; and will he consider issuing an order to compel all to work for one year on munitions, agriculture, nursing, & c., as long as the war lasts?
No, Sir. A large proportion of these boys and girls are devoting a considerable part of their time while at school to different forms of national service in the war effort. I consider that it is more advantageous to develop these arrangements to the utmost rather than to make the complete break that would be entailed by a year's absence from school.
Does the Minister consider that this section of the community is contributing as much to the war effort as other sections, and does he really consider that one year's break would not be an advantage to them, irrespective of what calling they took up after the war?
I regard this as a very vital matter. I have to keep in mind not only the period of the war, but the period after the war.
Boys' Wages, Wiltshire
asked the Minister of Labour whether he is aware that wages of £5 and £6 a week are being paid to boys of 14, 15 and 16 years of age in Wiltshire; that the payment of such high wages is causing drunkenness and gambling amongst these boys; and what steps he is proposing to take to remedy this state of affairs?
No, Sir. I have no evidence of this and shall be glad if my hon. Friend will send me particulars.
While I thank my right hon. Friend for his reply, is he aware that the Women's Institutes in Wiltshire have expressed grave concern at the position there, and that full details can be obtained from the county educational authority?
I have requested my right hon. Friend the President of the Board of Education to send me particulars of these cases. Under the new agreement, the amounts which the hon. Member has mentioned mean that these boys must be working excessive hours. I shall be very glad to get particulars.
Does not my right hon. Friend agree that it is most unfair to make such allegations unless they can be substantiated?
Prosecutions
asked the Minister of Labour the number, respectively, of workpeople prosecuted by his Depart- ment and imprisoned up to date for violating the several Orders and Regulations of his Department in England, Scotland and Wales, separately?
The available records indicate that the number of workpeople so prosecuted and sentenced to imprisonment is as follows:—In England 2,195 workpeople were prosecuted and 167 sentenced to imprisonment; in Wales 78 were prosecuted and seven sentenced to imprisonment; in Scotland 408 were prosecuted and 46 sentenced to imprisonment.
Will not the Minister reconsider his policy, especially in view of the fact that these people in prison do not produce anything? Does he understand that there is a good deal of resentment, especially in the coalfields, against this system?
The final sanctions were imposed by the House under the Defence of the Realm Regulations. If the law is defied, I cannot interfere with the final sanctions under the law.
Is the Minister aware that when these men appear before the courts, they are not allowed the alternative of a fine, but practically all of them are sent to gaol, and would it not be possible to put them on probation just as if they committed an offence against the ordinary common law?
I will take that up. However, the House has insisted that the question of the continuity of work is vital. I am afraid I cannot relax under that head.
Is it not the duty of the Minister towards the thousands of workpeople who are pulling their full weight to see that these slackers are punished?
Why do no employers go to gaol?
asked the Minister of Labour whether any instructions or suggestions have been given to those conducting prosecutions on behalf of the Ministry to the effect that they should generally, or in particular cases, press upon the court for the imposition of sentences of any special length or severity?
No, Sir.
asked the Secretary of State for the Home Department how many cases he has had reported to him for action of employers or managers of factories engaged on essential war work whose methods have led to a slowing down of the war effort; how many prosecutions have been initiated and with what results?
I am not quite certain what offences my hon. Friend has in mind; but in any event he is under a misapprehension if he thinks that it is my responsibility to decide whether proceedings should be taken either against employers and managers of factories or against the workers in those factories for alleged offences against the Defence Regulations and the Orders made thereunder. Such cases are not automatically brought to my notice, and I am not in a position to supply information about the number or results of proceedings of this kind.
As I left the particular Department open, to be written in by those responsible for writing it in at the Table, will my right hon. Friend inform me to which Department I should put a similar Question in order to obtain a definite reply?
I am not unfamiliar with the problem of settling to whom these Questions should be addressed. Often it is a case of "When in doubt give it to the Home Office." I really have not the information, and I do not know whether the Department could get it, but I think it could only come from the Supply Departments or the Ministry of Production.
As this involves not merely the reporting of slowing-down methods but also the prosecution of those responsible, I want to know who will be responsible for the prosecution of those who are reported for adopting methods of slowing down production.
If the issue of prosecution arose, I should think almost certainly the question of prosecution would be a matter for the appropriate Supply Department.
Training Centres
asked the Minister of Labour why Employment Exchanges are refusing suitable persons applying to be admitted to Government training centres, particularly as many prospective recruits to the Services are unemployed, or partially so, and when such training might be of value to them and the country after the war?
There may in particular cases be reasons, owing to early liability to military service or otherwise, why a course of civilian training would not be appropriate, but subject to such considerations I am not aware that suitable applicants are being rejected. I shall be glad if my hon. Friend will send me particulars of any cases he has in mind.
Does not the Minister consider that even in the case of those who are to be called up at an early date, it is desirable to give them this special training, in view of their after-war employment?
That is a matter which has to be considered in conjunction with my right hon. Friend the President of the Board of Education. The whole question of training youth is now under consideration.
Unemployment Benefit
asked the Minister of Labour whether he will institute an inquiry to discover why, when we are short of man-power and while industrial conscription is in force, it was necessary to pay, during the four weeks ended 28th March, £578,000 to people because they were unemployed?
No, Sir. I know of no reason for supposing that such an inquiry would reveal any facts which would justify the diversion of staff for this purpose.
Is it not rather a pity that there should be a lot of people doing nothing when we are short of man-power?
I do not agree that they are doing nothing. They are very busy, as a matter of fact.
If they are very busy, why is the Minister paying them money for doing nothing?
These men are entitled to public assistance, as some of them are the victims, unfortunately, of a failure to have a rehabilitation service much earlier.
Do I understand that people who are fit and able to work are receiving unemployment benefit, or are these people unable to work and receiving unemployment benefit?
Both. In some cases the men are changing from one job to another, or are stood off, and obviously they are entitled to benefit.
Is not a good deal of this money paid by the State to maintain people who have been partially disabled by industry, so that, therefore, the State is carrying the burden of industry?
asked the Minister of Labour what percentage of the £578,000 paid in unemployment benefit and unemployment allowances during the four weeks ended 28th March, 1942, was paid to coalminers?
I regret that the information asked for is not available.
Scottish Salmon Fisheries
asked the Minister of Labour whether he is aware that Scottish salmon fisheries are working to only 40 per cent. of their capacity, due to lack of labour, and having regard to the small number of skilled men involved, many of whom are retained on labouring jobs with slender claims to the protection of the Essential Work Order, whether he will temporarily release them for about two months to ensure that a valuable food supply is harvested?
I am in consultation with my right hon. Friends the Secretary of State for Scotland and the Minister of Food on this matter and will communicate further with my hon. Friend.
Questions
Factory Accidents
asked the Minister of Labour whether his attention has been called to the use of the word "green" on page 4 of the Annual Report of the Chief Inspector of Factories for the year 1940, Cmd. 6316; and why the word is used?
I agree that this phrase may be misunderstood, and it would be better for it not to be used. Instructions have been issued accordingly.
Trade Unions (Statistics)
asked the Minister of Labour the number of registered trade unions in the United Kingdom, their total membership and their total funds, for the year ended, 1941, or the nearest available date; and whether the unregistered trade unions have to send a yearly return to the Registrar of Friendly. Societies?
The number of registered trade unions, their total membership and total funds as at 31st December, 1940, the latest date for which figures are available, are as follow:—
Unions 513 Members 5,416,500 Funds £25,118,400
Unregistered trade unions are not required to send a yearly return to the Registrar of Friendly Societies in respect of their total membership and funds but Only of the receipts, funds, effects, expenditure, assets and liabilities of their political funds.
Public Health
Tuberculosis
asked the Minister of Health the powers vested in standing committees set up under the Public Health Act, 1936, under Section 173 (2); and whether these powers enable the committees to grant financial assistance to' the dependants of all tubercular patients?
Under the Section to which my hon. Friend refers the council of a county or county borough may make such arrangements as they think desirable for the after-care of persons who have suffered from tuberculosis. I have no power to interpret the provisions of the Section.
If a council is in difficulty as to what are their exact powers, cannot they apply to the Minister for guidance?
I expect they would apply to me if they had any difficulty, but I must warn my hon. Friend that I have no power to interpret the Section. He will see, however, that my answer is in very wide terms.
Who has the power to interpret if the Minister has not?
Scabies
asked the Minister of Health whether he can give any information regarding the investigation of scabies by Dr. Kenneth Mellanby; how many persons were infected with the disease; how long the period of examination lasted; what results were obtained; how many of the persons infected were conscientious objectors; whether it was a condition of registration that they should I undertake this experiment; and whether there were any temporary or permanent dangers attaching to it?
This investigation began at my instance, but is now being continued under the auspices of the Medical Research Council. Its object has been to obtain more knowledge of the parasite, the means by which scabies is spread, and the best methods of treatment. For this the services of human volunteers were essential. Forty-seven volunteers have been infected. They have remained under examination for varying periods up to 18 months. The investigation is still in progress, but preliminary results are to be found in the White Paper now available regarding scabies. Of the volunteers infected the majority, and all of those infected for more than one week, are conscientious objectors; none of them has been directed to this duty by a tribunal, though some who were already engaged in it when they went before a tribunal were exempted from military service on condition that they continued in the work or took up first-aid duties." They have t suffered discomfort rather than danger, but I am advised that they have not been free from risk of incurring some prolonged disability.
Was there a medical examination before these people underwent this experiment, and has there been a medical examination since, and, if so, with what result?
The matter comes at the moment under the Medical Research Council, and the examination is still continuing. It is most valuable work, and I have no doubt that it will have valuable results.
Young Workers (Dental Treatment)
asked the Minister of Health whether he is aware of the pioneer dental scheme organised in Cambridge for young workers who have left school but who are ineligible for benefit from approved societies; and whether he will encourage all local authorities to take similar action?
I have no recent report upon the scheme, but I will make inquiries and consider my hon. Friend's suggestion.
Will the Minister consider taking some joint action with the President of the Board of Education with a view to seeing, that the work done in the schools is not thrown away during the years of adolescence?
I am always glad to work closely with my right hon. Friend.
Central Advisory Water Committee (Report)
asked the Minister of Health whether, in view of the interest in post-war reconstruction, he will cause to be published the final report of the Central Advisory Water Committee, which is at present in draft form, having in mind the amount of labour and research expended in compiling it, and the importance of water supply and the management of rivers and waterways?
Some notes had, I am informed, been prepared on the direction of the Chairman to focus discussions with a view to the presentation of an agreed report on the question of the management of rivers. As the war supervened, the anticipated discussions in Committee did not take place, and there is therefore no report of the Committee in existence on this subject.
Will my right hon. Friend reconsider this matter, because I am informed on good authority that the report has been drafted?
I have been very careful about this matter, and I am sure that my answer is correct. I might add that this is one of the subjects which is under consideration with the many other varied problems concerning reconstruction.
If the details of the report are not published, how can the matter be under consideration?
I meant "issue" and not the report.
In view of what happened in regard to the water supply at Hong Kong and Singapore, has the Minister set up a committee to deal with the problem in this country?
My hon. Friend had better put down a Question on that point.
Milk Inspections
asked the Minister of Health whether he is aware of the waste of petrol, and official time and money, involved in the duplication of milk inspections by county councils and rural district councils because graded milk is under one authority and ordinary milk under another; and what remedial measures he proposes to take?
It is open to councils to arrange among themselves in order to avoid any duplication of inspection, so far as that may be consistent with duly carrying out their responsibilities. I will make inquiries with regard to the particular case about which my hon. Friend has communicated to me.
Does not the Minister agree that it is desirable that there should be co-ordination and not this waste?
I do not know about coordination, but undoubtedly it is desirable that they should work together.
Midwives' Salaries Committee
asked the Minister of Health whether he is now in a position to announce the names and terms of reference of the Committee on the Salaries of Midwives?
Yes, Sir. I will circulate a list of the members in the OFFICIAL REPORT, The terms of reference of the Committee are:
"to draw up agreed scales of salaries and emoluments of State-certified midwives employed in England and Wales on maternity work in hospitals or maternity homes or in the domiciliary midwifery service, of non-medical supervisors of midwives, and of pupil midwives."
I am requesting this Committee to consult with the Nurses' Salaries Committee before making recommendations in regard to overlapping matters.
Does that include inspectors of midwives?
I will look into that and let my hon. Friend know.
What proportion of the Committee are women?
There are 25 members on the Committee, including the Chairman, and 13 of these are women.
Following is the list:
Midwives' Salaries Committee — Members.
CHAIRMAN.
The Rt. Hon. Lord Rushcliffe, G.B.E.
County Councils' Association.
Mr. J. Evans.
Miss K. J. Stephenson, C.B.E.
Dr. W. A. Bullough.
London County Council.
Dr. W. Allen Daley.
Queen's Institute of District Nursing.
Lady Richmond.
Mrs. Hurle.
Mrs. Kevill-Davies, M.B.E.
Association of Municipal Corporations.
Mr. Councillor Brosch.
Ald. Sir George Martin, K.B.E., J.P.
Mr. J. Lythgoe.
British Hospitals Association.
Mr. C. S. Wentworth-Stanley.
Mr. G. G. Panter.
College of Midwives.
Mr. F. Grundy, M.D., M.R.C.S., D.P.H., Barrister-at-Law.
Mr. Arnold Walker, M.A., M.B., F.R.C.S., F.R.C.O.G.
Miss Coni.
Miss Deane.
Mrs. Ross.
Mrs. F. R. Mitchell.
National Association of Local Government Officers.
Mr. C. A. W. Roberts, M.B.E.
Association of Supervisors of Midwives.
Miss M. E. Platt.
Trades Union Congress.
Miss J. Murphy, S.R.N., R.F.N., S.C.M.
Royal College of Nursing.
Miss L. Beulah.
Miss M. G. Sanday.
Miss M. F. Webb.
State Service
asked the Minister of Health whether it is intended that post-war reconstruction shall include the establishment of a complete State health service to be made available without charge to the whole population; and what steps are being taken to this end?
I am not at present in a position to make any statement on the wide issue raised by my hon. Friend, except that all the implications involved in the establishment of a complete public health service are being examined.
Will the Minister keep well before him the fact that a socialistic free service is the only road to good health for the nation?
My hon. Friend will notice that I stated "all the implications." That is only one of them.
Questions
Evacuated Employees (Rating Relief)
asked the Minister of Health whether he is aware of the hardship experienced by employees of firms which have been evacuated through their having to continue to pay local rates on their houses; that the Income Tax authorities have offered to grant relief of Schedule A Income Tax to the extent to which relief from local rates is given on furnished unoccupied houses; and whether he will instruct local rating authorities to grant relief in such cases?
I have received representations on this matter. Reduction or remission of rates on the ground of the poverty of the person liable is wholly within the discretion of the rating authorities, and I am not empowered to give any such instruction to them as my hon. Friend suggests.
Population Statistics
asked the Minister of Health whether he can give, for the five years, 1909 to 1913, 1920 to 1924 and 1934 to 1938, the numbers in each age-group then living?
The figures asked for, so far as available for England and Wales, have all been published; and since a very extensive tabular statement would be necessary to set them forth, I will send my hon. Friend particulars of the relevant publications, which it should be possible for him to consult in the Library of the House or in the Library of the Registrar-General's Department.
Does this not emphasise the extreme importance of having a provisional census as soon as possible seeing that we are working at present on the 1931 Census?
Armed Forces (Pensions and Grants)
asked the Minister of Pensions what percentage of claims for hardship grants from men in the Services has been rejected; and will he take steps to see that the conditions governing these grants are more widely known and understood?
From the beginning of the scheme to 2nd May of this year the percentage of applications for war service grants which have been rejected is 20. The conditions governing these grants have been exceptionally widely publicised, as many members of this House will know; and I am continuing and extending the steps that have already been taken.
asked the Minister of Pensions how many doctors would be required for the establishment of an adequate number of pensions appeal tribunals?
Including the additional appointments which would have to be made to my own staff, I estimate that between 35 and 50 whole-time doctors would be required for the purpose in question.
Would it not be quite easy to obtain doctors and cannot the Minister take steps to set up these tribunals as soon as possible?
I have made every endeavour to secure doctors, but at the moment it is not possible to obtain them.
Can anything be done with the doctors already serving in the Army, who, fortunately, have not had much to do?
That avenue has been explored, as has every other avenue.
asked the Minister of Pensions whether a pension is payable in the case of a serving man killed in an accident while out on evening pass or short leave?
Pension is not normally payable in the circumstances stated, since what the man does or where he goes on such occasions is a matter of his own choice, and an accident sustained at such times cannot, therefore, be regarded as attributable to service. If, however, the accident occurred on the direct journey to or from the man's home when a short period of leave had been given for the express purpose of enabling him to visit his home for a reason such as family bereavement or distress at home, I am empowered to accept any resulting disablement or death as attributable to service.
In view of the fact that commanding officers are encouraged to give their men evening passes and short leave, ought not a man, taken away from his home and sent to some other part of the country where an accident happens while he is on military service, to become pensionable?
I have made a thorough review of this question, and I have again consulted my Advisory Committee on the matter. I have announced the improvements made in dealing with these accident cases, and I think that I have gone as far as it is possible.
Do the words "serving men" include members of the Home Guard?
If a member of the Home Guard is on duty, I can deal with his case.
asked the Minister of Pensions whether he is aware that when a naval man who, through long service in the Royal Navy, has earned a life pension, and was recalled for service in the war, is wounded and discharged as unfit, his long service pension is taken into account when assessing disability pension, leaving him little better off; and whether consideration will be given to an amendment of the Regulations?
A man in receipt of a Service pension who is recalled and subsequently sustains a disability attributable to service in the present war may receive, in substitution for the Service pension, either a disability pension calculated in accordance with the peacetime Regulations of the Service to which he belongs or a disability pension under the war pensions code as for a non- regular member of the Forces, whichever is the more favourable. I am, however, looking into the matter.
Will the right hon. Gentleman keep in mind that we ought to be a little more generous rather than niggardly when men have served for many years?
I am keeping all the points at issue in mind.
Does not the Minister consider it unjust that, because a man has a Service pension, his disability pension is reduced, whereas if he had a pension from a local authority, it would not be reduced?
That is one of the points I shall take into consideration.
asked the Minister of Pensions whether he will consider the advisability of establishing a special clinic for the treatment of disabled ex-Service men suffering from gastric disorders?
I consider that the medical needs of these cases are adequately met by existing arrangements, but a suggestion has been made that this matter should be discussed between medical experts, and I have offered to arrange this.
asked the Minister of Pensions whether he has now any statement to make as to the setting-up, at an early date, of a pension appeal tribunal?
I have nothing to add to the statement which I made on 19th March in reply to the hon. Member for Deritend (Sir J. Smedley Crooke), except that consideration is being given, as I promised, to the suggestion made by the hon. Member for Nelson and Colne (Mr. Silverman) during the Debate on the Adjournment on 29th April.
The following Question stood upon the Order Paper in the name of Sir JOHN MELLOR:
35. "To ask the Minister of Pensions whether he will reconsider the policy of treating widows of Home Guard officers, killed in the course of duty, less favourably than widows of other commissioned officers killed in the same circumstances."
May I ask for your guidance, Sir? I addressed this Question to the Chancellor of the Exchequer, and it appeared on the Paper in that form. I submit that that was the correct procedure, because on Thursday the Minister of Pensions stated in a supplementary reply on the same point that he could not answer for policy. The Chancellor of the Exchequer has transferred this Question to the Minister of Pensions, although it deals with policy and not with administration. I ask you. Sir, if you will direct that this Question should be retransferred to the Chancellor of the Exchequer and postponed until the next Sitting Day?
Perhaps we had better hear what the answer of the Minister of Pensions is first.
I am consulting the other Departments concerned in this matter and will communicate with my hon. Friend in due course.
Civil Defence
Persons from Neutral Countries (Identity Cards)
asked the Home Secretary whether, in the interest of public security and to prevent the incoming of spies, he will issue instructions that no person from a neutral country will be admitted into the United Kingdom of Great Britain and Northern Ireland unless the identity card produced has attached to it the photograph of the person seeking admission?
As my hon. Friend is aware, the whole subject of the entry of persons from Eire into Northern Ireland has received the most careful consideration and is continually being reviewed. I do not think, however, that the interests of public security would be advanced by refusing to accept for identification purposes any documents other than those bearing the holder's photograph.
Is the right hon. Gentleman aware that persons have come from Eire to Northern Ireland without identity cards and have been found out after being there for some time, and that others have come in with borrowed identity cards? What measures is he going to take to prevent spies coming in?
I do not think that the affixing of a photograph would solve that problem.
Exit Permits to Northern Ireland
asked the Home Secretary whether, as the arrangement that six months must elapse between the granting of permits to Northern Ireland people resident in Britain to enable them to visit Ulster occasions hardship to all, and especially to teachers, he will fix the intervening period at five instead of six months?
As my hon. Friend is aware, my attention has been frequently drawn to this matter, and I have given it the most sympathetic consideration, but the necessity for maintaining the restrictions on travel to or from Ireland has not in any way lessened. I can only say that, if changed circumstances should at any time seem to permit of an arrangement under which school teachers and others could be granted permits to return to their homes in Northern Ireland for Christmas, as well as for the summer holidays, I shall be only too glad to examine the matter further but, in the meantime, I regret that I must adhere to my previous decision.
Is the right hon. Gentleman aware that this is being very seriously felt in Northern Ireland, and by people from Northern Ireland working in Great Britain, especially teachers? They can only have one holiday in the year, and many of them have to take lodgings here during their holidays.
Has the right hon. Gentleman yet considered the proposal put up to him under which it would be possible to get permits twice a year instead of having a rigid period of six months between each application?
Yes, and I answered a Question at the time. It was not considered that it would be a wise thing to do. There is a certain amount of congestion, and the passport people have difficulties, and we have to be careful for security reasons. While I am sympathetic and sorry to cause inconvenience, as things stand I cannot alter it, but, if I get a chance to reconsider it, I will do so.
National Fire Service
asked the Home Secretary whether he has considered a communication sent from the Whittlesey (Isle of Ely) Urban District Council, pointing out that the divisional headquarters of the National Fire Service at Whittlesey is overstaffed, and complaining that petrol is being unnecessarily used; and whether he is making investigations and is in a position to make a statement?
I have consulted the Regional Commissioner about these representations, which appear to be based upon an incomplete knowledge of the facts. The divisional headquarters at Whittlesey are responsible for the administration of the Fire Service over a wide area, comprising two counties, and not merely in the urban district of Whittlesey, and the Regional Commissioner does not consider the staff employed excessive. The allegations of petrol wastage concern the use of a motor car to convey some members of the divisional staff from Wisbech to Whittlesey. This has been necessary following the transfer of the divisional headquarters from Wisbech, because some of the staff have not so far been able to find accommodation at Whittlesey, but the Regional Commissioner is looking into the question whether other arrangements cannot be made.
asked the Home Secretary whether he is aware that members of the National Fire Service, whose personal belongings, kept at their fire stations, have been destroyed by enemy action, are unable to get coupons with which to obtain replacements; and will he take steps to deal with this matter urgently?
A fireman who has lost articles of clothing which are replaceable only against the surrender of coupons can apply to the local collector of Customs and Excise for additional coupons in the same way as any member of the general public. If my hon. Friend is aware of any case where additional coupons have been refused to a fireman merely because he was a fireman, I shall be glad to make further inquiry if he will send me particulars.
Wardens Service
asked the Home Secretary whether he has any statement to make on the resignation of the Honourable Arthur Howard, General Wallace Wright, V.C., and other prominent air-raid precautions officials?
I am glad to have an opportunity of making a statement on this matter in amplification of the announcement which I caused to be issued last week. As regards the resignation of Mr. Howard, I have nothing to add to the terms of that announcement, but as regards the remainder of the Question, the position is that as it has been decided not to make any fresh appointment to the post of Principal Warden, the assistants to the former Principal Warden, of whom General Wallace Wright was one, have been given notice of the termination of their appointments as such. They were offered temporary appointments in a new capacity as advisers to the Regional Commissioners on matters relating to the Wardens Service, and one of them (Mr. K. Dowson, O.B.E.) has accepted an appointment in this capacity, but I regret to say that the remainder have not felt able to accept the offer.
I should like to make it clear that the new arrangements do not in any way imply that either I or the Regional Commissioners are lacking in appreciation of the importance of the Wardens Service. The cardinal part which the wardens have played in the stirring times through which the Civil Defence Services have gone since the autumn of 1940 is well recognised by all who have had anything to do with them, and I can assure the House that it will be our constant endeavour, in co-operation with the local authorities, to see that the welfare and efficiency of the service are fully maintained.
Is the effect of the answer that in future the wardens will be directly under the local Civil Defence committees in the same way as the ambulance service and other parts of Civil Defence?
Yes, Sir, subject to the general supervision of the Regional Commissioners.
Shelters
asked the Home Secretary whether Anderson and Morrison shelters, under certain circumstances, such as suitability of premises, etc., are now provided free to all, without regard to income?
The free supply of these shelters is normally limited to per- sons whose income does not exceed £350 a year, but in certain special circumstances free issues are made irrespective of this income limit.
Does my right hon. Friend know that the Corporation of Winchester are advertising free Morrison and Anderson shelters, whereas people in other towns which need them far more had to pay for them?
Free shelters are available up to the income limit. I am not aware that Winchester Corporation are supplying them universally free, but if there is any evidence to that effect I will look into it. The policy is the policy which I have stated.
Questions
Police Widows' Pensions
asked the Home Secretary what action has been taken on the Report of the Select Committee upon Police Widows' Pensions presented last September?
asked the Home Secretary whether it is intended to take steps to enable the pensions of police widows and other dependants, paid under the Police Pensions Act, 1921, to be supplemented?
This matter has been considered at meetings of the Police Council, but I regret that I cannot at present add anything to my previous replies on this subject.
In view of the very inadequate provision now made for police widows, is it not time that the recommendations of the report should be expedited?
I should very much like to do so, but the matter is still before the Police Council, who have not yet arrived at agreement on the matter, and it is important that before I do anything, or arrive at a conclusion, I should know the views of the Police Council.
London Dance Halls (Thefts)
asked the Home Secretary whether his attention has been called to the increasing thefts of handbags, coats, etc., at London dance halls; and whether women detectives are available for managements in order to protect the public and trap the offenders?
I have no information which suggests that there has been any noticeable increase in this class of offence. As regards the second part of the Question, apart from the responsibility of clients to take all reasonable care of their possessions, it is primarily a matter for the managements concerned to take steps by the provision of adequate staff or otherwise, to safeguard the property of clients while on their premises.
Permanent Secretary to the Treasury
asked the Prime Minister whether, in connection with the forthcoming retirement of the Permanent Secretary to the Treasury, he will consider, as regards the appointment of his successor, the separation of the function of responsibility for the personnel and organisation of the Civil Service from the function of Permanent Secretary to the Treasury, creating a special post for the former?
Similar suggestions have been made from time to time. I can only say that they have been noted.
Is the right hon. Gentleman aware that in all ranks of the public service there is widespread recognition of the necessity for radical reform and that an indispensable condition of that reform is the separation of functions as suggested in the Question, so that we can have a real head of the service answerable for its organisation and personnel?
I am sure that my right hon. Friend will note the information given by the hon. Member.
Is the right hon. Gentleman in sympathy with the principle in this Question?
That is another matter.
Will my right hon. Friend consider appointing a committee to investigate this problem?
Old Age Pensions
asked the Prime Minister whether he has considered the terms of a resolution, passed at a meeting of old age pensioners, held in the Picton Hall, Liverpool, on 10th May, unanimously requesting that a revision in the rates of pensions paid should be made; that the basic rate should be not less than 20s. per week per person; that supplementary payments should be made to cover the increased cost of living; that the means test and stamp qualifications should be abolished and the aged provided with modern dwellings at rents they can afford; and what answer he has returned?
asked the Prime Minister what reply he has given to the resolution carried by the Atherton branch of old age pensioners asking for a substantial increase in the old age pension?
I have been asked to reply. I have considered the resolutions referred to, and I would refer my hon. Friends to the reply I gave to my hon. Friend the Member for Leigh (Mr. Tinker) on 3rd March.
That reply gets us nowhere. We are asking for something definite from the Government to let us know the real position. I can assure the right hon. Gentleman that unless the Government do something, they will have trouble all the time.
Will my right hon. Friend give further consideration to this matter? It is causing considerable agitation throughout the country, and I feel that it would be the wish of the House if I suggested that the most serious and sympathetic consideration should be given to it before the Government reply to the representation. The old age pensioners are a very deserving section of the community.
Does the right hon. Gentleman realise that a couple of old age pensioners living together are receiving less to live upon, allowing for rent and other charges, than many juveniles in industry? Apart from that, does he not appreciate that the feeling in the country is very intense on this issue and that we cannot wait much longer?
I have dealt several times lately with various aspects of this matter.
But the right hon. Gentleman's replies have always been unsatisfactory, and, in view of the feeling in all quarters of the House, is it not time the Government took notice of what has been said?
How much would the personal allowance for Income Tax have to be diminished in order to provide the money for this increase?
The cost of the addition to current expenditure on pensions and supplementary pensions mentioned by my hon. Friend in his Question would be something in the nature of £200,000,000 a year.
Is the right hon. Gentleman aware that the people of this country as well as old age pensioners want the means test abolished?
Will it be in Order for me to call for the right hon. Gentleman's resignation?
asked the Prime Minister whether he has considered the appeal made to him by a mass meeting of old age pensioners and supporters, held at the Picton Hall, Liverpool, on Sunday, 10th May, when a resolution was passed asking for an increase on the basic rate of 10s. a week; and will he give an early date for the matter to be discussed by Parliament?
I would refer my hon. Friend to the answer which has just been given by my right hon. Friend the Chancellor of the Exchequer to my hon. Friend the Member for Everton (Mr. Kirby). As regards the second half of the Question, I would refer my hon. Friend to the answers which I gave on 30th April to Questions on this subject arising out of the Business statement.
What we are asking for is that the House of Commons might have an opportunity of hearing the views of all Members. If the Government give that opportunity, I will accept the decision.
I have told my hon. Friend that there were a number of other matters which it was more urgently desired to discuss in the House, but a consideration would be given, if Members desired, to having such a discussion at an early date.
In view of my right hon. and learned Friend's frequently expressed views on this subject over many years in his political life, has not he any resilience with regard to it?
I have plenty of resilience on the subject, but the House has not the time at the moment to discuss it.
Temporary Probation Officers
asked the Home Secretary whether he will consider amending Rule 65 of the 1926 Rules governing the salary to be paid to temporary full-time probation officers so as to bring these rules in line with the 1937 Rules governing permanent officers, and to allow a salary to be paid to temporary officers in keeping with present day conditions?
I am anxious that all probation officers—whether temporary or permanent—shall be persons properly qualified for their important public duties and shall be suitably remunerated. I will look into the point raised by my hon. Friend.
Education
School Meals
56 and 57.
asked the President of the Board of Education (1) whether he is aware that the income scales for free school meals of many local education authorities are based on the assumption that 5s. a week is sufficient to feed, maintain and clothe, each additional child beyond the first, whereas the Ministry of Health scale for evacuated children is 8s. 6d. per week for lodging and feeding only; and will he take action to secure more equitable treatment of large families by local education authorities;
(2) whether he is aware of the wide disparity of the income scales adopted by different local education authorities in deciding whether elementary schoolchildren shall receive free meals; and, as the bulk of the cost of free school meals for elementary schoolchildren is met by the Board of Education, will he lay down a standard income scale for the guidance of local authorities, to ensure equality of opportunity for free school meals throughout the country?
Local education authorities are under a statutory obligation to satisfy themselves whether parents are able to pay for school meals provided for their children. In July, 1940, the Board asked all authorities, whose scales had not recently been revised, to review the position, and the income scales of most authorities have been revised in consultation with the Board in the light of the increased cost of living. It is the Board's practice to take exception to any scale which does not provide for meals to be given free where the net income for a family of five is less than 8s. or 9s. per head with suitable gradations for larger and smaller families, and in many instances considerably higher scales have been adopted. I am aware, however, that in some areas the scales are less generous and I propose to circulate to local education authorities the hon. Member's Question and my reply with a request that in such cases the scales should be reviewed.
May I thank my right hon. Friend for his reply?
Government Policy
asked the President of the Board of Education what progress has been made in consultations with educational bodies respecting possible proposals and legislation; and when he expects to be ready to introduce an Education Bill dealing with war-time needs and post-war development?
The consultations with representatives of educational bodies and other interests on educational problems, initiated by my predecessor, have been carried on and are proving very useful. The Government are not yet in a position to decide upon the nature of its final plans, and the stage of legislation has not yet been reached. We are in a formative period, and I can assure the hon. Member that consideration will be given at this time to any constructive ideas that may be put forward.
When is the right hon. Gentleman likely to be in a position to make an announcement with regard to legislation, especially in view of the widespread hope in many educational quarters that a Bill will be introduced in the near future?
I certainly trust that those hopes will not be disappointed, but we have not got far enough with our preliminary negotiations.
When is it likely that the preliminary work will be concluded?
I cannot give any exact date.
Church Services, Lewes (School-Time Attendance)
asked the President of the Board of Education whether he is aware that the Lewes Education Committee is arranging for the scholars in one of their schools to leave the school building and attend a religious service in church once each week and intends to extend this practice to other schools in the same area; whether parents have been fully informed that this is not compulsory; whether children not attending the service are required to attend the school during that period; whether registers are marked in the church or the school and at what time; what is the respective position of teachers and ecclesiastical representatives involved in this scheme; and whether it has his approval?
This proposal which was communicated to my Department by the local education authority has been under examination by the officers of the Board. I am having further inquiries made and will then send the hon. Member an answer to the several points which he has raised.
Does the Minister appreciate that meanwhile this sets an example to other education committees which might give rise to a good deal of conflict in the educational world? Does he not think it better that if a minister of religion wishes children to attend his church, he should arrange for services out of school time?
It is because I realise the importance of this subject that I have taken the trouble to which I refer in my answer of investigating the matter before I send the hon. Member an answer.
Is my right hon. Friend aware that last night I had the opportunity of meeting a large audience of my constituents in Lewes, and that I found that no measure of dis- satisfaction exists on this matter; and further, that there is only an ardent desire to remind the questioner of the inestimable value of the virtues of humility and minding one's own business?
Physical Training (Sports)
asked the President of the Board of Education whether he is aware that there is a growing feeling in the country that, in addition to the development of physical training and simple recreation games, efforts should be made to develop the more vigorous and specialised sports; and whether he will convene a meeting of representatives of the governing bodies of the major sports, such as athletics, gymnastics, swimming and wrestling, etc., to explore ways of developing such activities in the interest of the physical and mental well-being of our younger generation?
The governing bodies of sports are members of the Central Council of Recreative Physical Training, with which my Department works in close collaboration. I do not underestimate the great importance of the activities to which my hon. Friend refers, but I have received no approach on these subjects from the Council.
Will the right hon. Gentleman take it from me that a good many people are in favour of the idea in this Question, and will he not agree that while a lot of work is being done there is still plenty of room for the encouragement of co-ordination among the various bodies?
Yes, Sir.
Younger Teachers (National Service)
asked the President of the Board of Education whether directions have been given to the educational authorities throughout the country that the younger men and women teachers should be released for service in the war effort, their places being taken by those who are beyond serving age; and why, as in the instance cited to him, such directions, if given, are not being followed?
The policy decided upon under present circumstances is that men teachers over 35 in recognised schools are not to be called up, and those under 35 whose calling up has been deferred will have their deferment continued. The loss to the schools of several thousand of the younger men teachers makes it essential to the proper conduct of the public system of education that women teachers should remain in the schools, and it is for this reason that women teachers in recognised schools are not to be considered for withdrawal to the Auxiliary Services or to other forms of national service.
Will my right hon. Friend say whether there is anything in the instance which I gave him which called for his intervention?
I certainly looked into the instance, and I see all the human significance of the matter.
Agricultural Work (Children)
asked the President of the Board of Education whether he is aware that the National Union of Agricultural Workers and certain educational bodies have expressed strong protests against the employment of child labour in agriculture during school hours; and whether he intends to take any action in the matter?
I have seen reports in the Press of protests by the National Union of Agricultural Workers and by the National Association of Labour Teachers. I do not think it has been generally realised that the conditions under which children may be employed have been revised and regulated with the utmost care. The answer to the last part of the Question is in the negative.
Is the right hon. Gentleman aware that these bodies are of very great standing, one being vitally interested in agriculture and the others interested in education, and that their views should be at least considered by him, and that they are firmly opposed to the use of child labour during term-time?
Is it not only a question of bodies being of great standing but of human bodies being fed?
Will the right hon. Gentleman make the examination of these children obligatory and not optional, in order to protect them from over-strain to the heart and other serious injuries which might arise if they undertake this work?
The hon. Member will notice in the Circular the reference to the medical side of the conditions. We considered the point he raised, and I do not think we shall be able to go further than we have done in the Circular.
Will the right hon. Gentleman state definitely whether the Board of Education approve in principle of children between 12 and 14 working in the fields during school terms?
If we did not approve of it we should not have agreed to this.
How is it intended to proceed in this matter? Will a Defence Regulation be placed on the Table of the House of Commons?
I have placed the relevant documents in the Library of the House as a result of the Questions which were asked last week.
School Attendance, London Area
asked the President of the Board of Education whether he can give any indication of the amount of absenteeism of children of school age in the London area; how it compares with normal times; whether there are enough school-attendance officers to enforce attendance; and whether he has any figures available which he can give dealing with the problem?
Yes, Sir. The percentages of attendances for the last three weeks have been 86.1, 85.3 and 84.2, as compared with an average of 86.9 for the last year before the war. The staff engaged on the enforcement of attendance compares favourably with that employed before the war.
Can the right hon. Gentleman say whether there is sufficient accommodation for the children in London who want to attend school?
That point does not arise out of the Question.
School Medical Service
asked the President of the Board of Education whether he is aware of a shortage of doctors in the school medical service; and what steps he is taking to remedy this deficiency?
All branches of medical practice have suffered owing to the needs of the Fighting Services, and the school medical service has necessarily had to bear its share. I have impressed upon local education authorities in circulars, copies of which I am sending to my hon. Friend, the importance of making the best possible use of available medical man-power.
Youth Committees
asked the President of the Board of Education whether he is aware that the large growth of pre-Service training units is rendering local youth committees unsuitable for dealing with the new problems involved; and what action he proposes to take?
Action has already been taken to strengthen the hands of youth committees. Local education authorities were asked in Circular 1577 to arrange for the representation (where it did not already exist) of the Cadets and the A.T.C. on their local youth committees, and my right hon. Friend the Secretary of State for War has similarly asked county cadet committees, and the sub-committees formed for independent education areas within the counties, to provide for representation from the education side. Arrangements have also been made to ensure contact between the authorities and the responsible local officers of the cadets. I believe that satisfactory consultation and liaison should thus be secured.
National Finance
Income Tax (Children's Allowances)
asked the Chancellor of the Exchequer what was the total value of the allowances granted to Income Tax payers in respect of dependent children last year, or for the latest estimable period; how many taxpayers benefited by this allowance and in respect of how many children?
The total cost of the allowances given to Income Tax payers in respect of dependent children in 1941–42 is estimated at £80,000,000. This relief was shared by 4,000,000 taxpayers and was given in respect of 5,500,000 children.
Select Committee on National Expenditure (Reports)
asked the Chancellor of the Exchequer to what extent the recent reports and /or recommendations of the Select Committee on National Expenditure have been, or are to be, acted upon; and whether he is satisfied that the Departments concerned do give these reports immediate and serious consideration?
The 11th report of the Select Committee for the Session 1939–40, the 12th and 18th reports for 1940–41 and the first report for the current Session summarise the action taken by Departments on the Committee's recommendations. The answer to the second part of the Question is in the affirmative.
Does not the right hon. Gentleman consider that these reports are of sufficient importance to be brought before the House of Commons for discussion?
Discussion is a matter for the Leader of the House.
Is the Chancellor aware that this Committee has been sitting for two and a half years, and that on no occasion have its reports been debated in this House, and will he use his influence to arrange for some of the more important reports to be brought up for debate?
I think that subjects arising out of these reports have been debated from time to time.
Tobacco (Old-Age Pensioners)
asked the Chancellor of the Exchequer whether he will issue coupons to old-age pensioners, when drawing their weekly pension, so that they may obtain a limited supply of tobacco at pre-Budget prices?
I would refer my hon. Friend to the answer which I gave to my hon. Friend the Member for Heywood and Radcliffe (Mr. Wootton-Davies) on 23rd April.
Does the Minister realise how very widespread throughout the country is the feeling that a very oppressive burden has recently been placed upon these old persons and cannot he devise some means of relieving them of it?
We have very carefully considered this matter in our Debates upon the Finance Bill, and I cannot agree that this is an oppressive burden.
Does my right hon. Friend not realise that if he agreed to increase the old-age pension scale, he would not be troubled with this type of Question?
I am very much interested to hear that this Question arises from the increase in the tobacco tax.
Does not the right hon. Gentleman realise that we want very much more than that?
Ah!
Stock Conversion
asked the Chancellor of the Exchequer whether he is prepared to agree to any extension of the classes of securities for which conversion offers are allowed to be made?
Yes, Sir. In November last, following the completion of several conversions of local authorities' stock, I agreed that public utility undertakings should be allowed to convert to lower rates issues bearing interest at over 4 per cent. I low feel justified in allowing the conversion of any other issues bearing interest at over 4 per cent. provided that the conversion offers are within the terms of the prospectuses upon which the issues were originally made. As in previous cases, it will be necessary that the terms and dates of the offers should be agreed in each case, and I propose to deal, in the first instance, with those cases in which Treasury consent in principle has already been given.
May I ask whether there is any limit to the types of security concerned? Would it apply to industrial debentures?
I will inquire about that. The matter is, in fact, being dealt with by the Capital Issues Committee.
Excess Profits Tax (Consulting Engineers)
asked the Financial Secretary to the Treasury, whether the profits made by, partnerships, & c., and private firms of consulting engineers are subjected to Excess Profits Tax or only to Income Tax and Surtax?
I am advised that individuals, or individuals in partnership, acting as consulting engineers are regarded ordinarily as carrying on a profession within Section 12 (3) of the Finance (No. 2) Act, 1939, and are not, therefore, within the charge of the Excess Profits Tax. They are, of course, liable, in the ordinary course to Income Tax and, in cases where the total income of the individual exceeds £2,000 per annum, to Surtax.
That is not an answer to my Question. I asked whether the profits of partnerships of consulting engineers, as partnerships, are subject to Excess Profits Tax?
And I have just given an answer that individuals in partnership as consulting engineers are regarded as carrying on a profession, within the Act, and therefore are not subject to the tax.
That relates to individuals within the partnership. Is the partnership as a whole subject to the tax?
Questions
Northern Ireland and Eire (Smuggling)
asked the Financial Secretary to the Treasury whether, in view of the smuggling of foodstuffs from Northern Ireland into Eire, which is depriving people in that part of the United Kingdom of food needed for their own sustenance, he will consider the advisability of increasing the penalties on those convicted of this offence?
The Customs Acts already provide monetary penalties of treble the value of the goods (with an alternative of two years' imprisonment), plus £500 for the evasion of export prohibitions, and, in addition, the goods are forfeit to the Crown. Penalties under existing Acts which have recently been imposed in some serious cases of smuggling across the Border will, it is hoped, check this practice, but consideration is being given to the adequacy of the penalties provided for certain types of offence. It is hoped, moreover, that the suppression of this illicit traffic will be materially assisted by the new Defence Regulation 76 A, which empowers Customs officers to require from persons found in control of excessive stocks of prohibited goods proof that the goods are not intended for exportation.
Is the right hon. and gallant Gentleman aware that a very serious question is arising? Has he seen it stated that smugglers can insure against any loss and against whatever fine is inflicted, and that they can pay a fee to a lawyer and go on their way rejoicing?
My hon. Friend omitted to hear me say that there was an alternative of two years' imprisonment. I do not know how one can insure against that.
I did hear what my right hon. and gallant Friend said about imprisonment. No matter how heavy the fine may be, the smuggling traffic goes on.
Government Departments
Rationing Schemes (Staffs)
asked the Financial Secretary to the Treasury the total numbers of person employed by the Government in connection with the rationing of food, clothing and petrol, respectively?
The staff of the divisional and local organisation of the Ministry of Food amounted to 29,656 on 1st April, 1942, in addition to which 90 persons are employed at the headquarters of the Ministry in the division responsible for the administration of rationing. The divisional and local organisation carry out functions in regard to food control and distribution quite apart from rationing, and it is not possible to state the number of persons employed exclusively on rationing. The staff employed at the Board of Trade in operating the coupon rationing scheme for clothing amounts to approximately 900, and the staff at the Petroleum Department engaged full-time on rationing duties is approximately 2,250. Staff employed in connection with the control of the manufacture and distribution of food and clothing, which has an important bearing on the general rationing system, are not all included in the above figures.
Those figures do not, of course, include those persons who are employed by local authorities in connection with this matter. Am I correct in assuming from what the right hon. and gallant Gentleman has said that the Government employees now number about 100,000, in connection with the three rationings referred to in my Question?
I do not think that can be the case, because 29,656, plus 900 and 2,250 make nowhere near 100,000.
I thought my right hon. and gallant Friend's first figure was 79,000 odd.
No, Sir, only just over 29,000.
Public Relations and Press Officers
asked the Financial Secretary to the Treasury the number of persons in all Government Departments, respectively, as public relations officers and Press officers; the total number of persons in their respective Departments; and the total annual cost?
The information for which my hon. Friend asks is not immediately available. I will circulate particulars in due course in the OFFICIAL REPORT.
Could not these officers confine their operations to public relations and exclude the function of personal advertisement of Ministers?
Sometimes we have more important work to do, and the collection of these statistics does take time. I am not proposing to hide them. I will give them to the House in the OFFICIAL REPORT as soon as I have them.
Would it not be more advisable and cheaper if the Government were to depend upon efficiency for their publicity?
Farmers' Lime Supplies (Summer Delivery Payment)
The Government have had under urgent consideration the question of the maintenance of lime supplies for farmers in the United Kingdom for the 1942–43 season. In view of labour problems in the lime industry and the increasing demands of essential industries other than agriculture for lime, limestone and chalk, there may be a serious shortage in the total supplies available for agriculture in the winter liming season, unless farmers take substantially more of their lime requirements this summer than they have hitherto done during that period of the year and so enable lime producers to operate their works throughout the year at maximum possible capacity. As an emergency measure, therefore, it has been decided to make a summer delivery payment to farmers. This payment will be equivalent to an increase in the rate of Exchequer contribution under the Land Fertility Scheme from 50 per cent. to 75 per cent. and will be payable in respect of the cost of deliveries made under the Scheme and received by occupiers of agricultural land during the period from 18th May to 31st August inclusive.
The payment is intended to compensate for the inconvenience and any additional costs involved in storage and double handling. Separate application for the payment should not be made. It will be added automatically to the scheme contribution, and farmers should be careful to bear in mind that the instructions given by them on the form of application for the scheme contribution as to whom they desire payment to be made, that is, whether to themselves or to their suppliers, will be taken as applying also to the extra payment.
Can the Minister give an estimate to the House of what is likely to be the annual cost in this case?
No, Sir. That will, of course, very largely depend upon the extent to which advantage is taken of the scheme. In view of the urgency of the matter, we shall be using the authority of the Appropriation Act to incur expenditure in order to override the limitation of the grant of 50 per cent. which was laid down by the Agriculture Act, 1937, but we shall take the earliest opportunity to regularise the position, by amending legislation.
May I point out that when this lime is delivered in bags and is put into stock, the bags break, and that it costs double as much to spread it from broken bags? Will the Minister give instructions to have the lime better packed?
May I ask whether the scheme will apply to Scotland?
I am responsible only for England and Wales.
Business of the House
Would the Leader of the House tell us the Business for the immediate future and for after the Whitsuntide Recess?
The Business will be as follows:
First and Second Sitting Days—The Adjournment of the House will be moved for the promised Debate on the War Situation and the Organisation for Joint Planning.
Third Sitting Day—We shall take the Motion for the Whitsuntide Adjournment.
During these Sittings we shall ask the House to make further progress with the Anglo-Venezuelan Treaty (Island of Patos) Bill [ Lords ], which it is desired to pass into law before the Adjournment.
I think it will be for the convenience of the House if I give an indication of the Business which we propose to take after the Whitsun Recess.
First Sitting Day—Committee stage and, if possible, remaining stages, of the Minister of Works and Planning Bill, and of the Pensions (Mercantile Marine) Bill; Second Reading of the Marriage (Scotland) Bill [ Lords ] and of the Royal Naval Volunteer Reserve Bill, which is expected to be received from another place. The Business for the First Sitting Day is, of course, subject to alteration, should it be necessary to make a statement on the general war situation or take any other urgent Business.
Second Sitting Day—Committee stage of the War Damage (Amendment) Bill.
If more time is required, we shall finish the Committee stage of the Bill on the Third Sitting Day.
The Business to be taken on the Third Sitting Day will depend upon the progress made with outstanding legislation and will naturally be affected by any possible change of Business on the First Sitting Day.
I will make a further statement later as to the Business on the Third Sitting Day.
Am I right in assuming it is the intention of the Government that a member of the Government will open the Debate on the next Sitting Day?
No definite arrangement has been made as regards that matter, but I will bear in mind what the right hon. Gentleman says.
Is the Prime Minister likely to make a war statement during either of those days, or to take part in the discussions?
That will depend upon the war and upon the Prime Minister.
I understand that it has been agreed that on the second Sitting Day the ordinary Rule shall be suspended to allow for a longer Debate. I would ask the Leader of the House to consider whether it would not be for the convenience of the House as a whole, as there are a great many Members who wish to speak, to suspend the Rule on both days?
I understand that there has been no such agreement nor, so far, any suggestion of suspension. If however, there is to be suspension, I suggest to the House that it should be on the first day, which would be far more convenient, and not on the second day.
Actually the matter was raised, and it has perhaps been forgotten. I think it was then suggested that the suspension should be on the second Sitting Day. All I am asking now is whether it may not be necessary to suspend on both days.
We will certainly consider the matter.
Does the right hon. and learned Gentleman propose to make a further statement in the course of today's Sitting on the Government's intentions regarding the Debate—as to whether the Prime Minister will himself speak, and who is likely to open the Debate?
I do not think I shall be able to do that to-day, because the matter has not yet been drawn to the attention of the Government. I will, however, take steps to see that it is brought to their attention.
Will an early opportunity be given after the Recess for a discussion of the new scheme for the purchase of ships?
I must consider that matter. I have had no notice of the point, and I cannot answer it now.
I understand from the Leader of the House that the Debate on the next two Sitting Days is to be in two main divisions, the conduct of the war and the revision of the joint planning arrangements. Will the right hon. and learned Gentleman bear in mind that there is a very large number of people in this country who want to have a full and proper Debate on the affairs antecedent to the fall of Malaya and Singapore, but that the majority of people are not interested in the reorganisation of joint planning?
I presume that hon. Members will raise such points as they think of importance.
National Expenditure
Ninth Report from the Select Committee brought up and road; to lie upon the Table, and to be printed. (No. 85.)
Orders of the Day
Finance Bill
Considered in Committee. [ Progress, 13th May .]
[Sir DENNIS HERBERT in the Chair.]
NEW CLAUSE.—(Deduction from Profits of contribution for the furtherance of export trade.)
(1) Notwithstanding anything contained in Rule 3 of the Rules applicable to Cases I and II of Schedule D where a person pays or has paid wholly and exclusively for the purposes of a trade in respect of which he is chargeable under Case 1 of Schedule D a contribution in furtherance of a scheme which is for the time being certified by the Board of Trade under this section, the contribution shall, in so far as it is paid or has been paid in furtherance of the primary object of the scheme, be allowed to be deducted as an expense in computing the profits or gains of the said trade.
(2) The Board of Trade shall certify a scheme under this section if they are satisfied:—
( a ) that the primary object of the scheme is or was the furtherance of the export trade of an industry in the United Kingdom;
( b ) that the scheme is or was in the national interest and in the interest of the said industry as a whole; and
( c ) that such numbers of persons engaged in the said industry as are substantially representative of the industry are liable to pay contributions in furtherance of the
scheme by agreement between them and the body of persons carrying out the scheme.
(3) The Board of Trade shall cancel any certificate granted under this section if they cease to be satisfied as to any of the matters referred to in the last foregoing subsection.
(4) In the event of repayment, whether directly or by way of distribution of assets in a winding up or otherwise, of a contribution or any part thereof which has been allowed to be deducted under this section, the deduction of the contribution or of so much thereof as has been repaid, shall be deemed to be an unauthorised deduction in respect of which an additional assessment shall be made under subsection (1) of section one hundred and twenty-five of the Income Tax Act, 1918, and notwithstanding anything contained in the Income Tax Acts the time within which such an additional assessment and any consequential assessment to surtax may be made shall expire before the end of the third year following the third year of assessment in which the repayment was made save always that a payment out of the funds provided under a scheme to a contributor in furtherance of export trade shall not be deemed to be a repayment within the meaning of this subsection provided the person receiving such payment shall bring it into charge in the year of receipt.
(5) For the purpose of this section a sum received by any person by way of repayment of contribution shall be deemed to be by way of repayment of the last contribution paid by him and, if the sum exceeds the amount of that contribution, by way of repayment the penultimate contribution so paid, and so on.
(6) In computing for the purposes of section thirty-three of the Finance Act, 1926 (which relates to relief in respect of certain losses), whether and to what extent a loss has been sustained by any person in the year nineteen hundred and thirty-four to nineteen hundred and thirty-five or in the period which under section thirty-four of that Act would be taken to be the year preceding the year nineteen hundred and thirty-five to nineteen hundred and thirty-six this section shall be deemed to have come into operation at the commencement of the year nineteen hundred and thirty-four to nineteen hundred and thirty-five or of that period as the case may be.
(7) The Board of Trade may at any time require the body of persons carrying out a scheme certified under this section to produce any books or documents of whatever nature relating to the scheme, and if the requirement is not complied with the Board may cancel the certificate.
(8). Anything required or authorised to be done under this section by the Board of Trade may be done by the president, a secretary, under-secretary or assistant secretary of the Board or any person authorised in that behalf by the President of the Board of Trade.
(9) In this section the expression "contribution" in relation to a scheme, does not include a sum paid by a person by way of loan or subscription of share capital, or in consideration of the transfer of assets to him, or by way of a penalty for contravening or failing to comply with the scheme.
(10) This section shall apply to all contributions made not earlier than the first day of January, nineteen hundred and thirty-nine (in furtherance of a scheme so certified by the Board of Trade), down to and including the fifth day of April, nineteen hundred and forty-one and thereafter to any contributions made during the present war to any export group established with the approval of and for the time being certified by the Board of Trade.—[ Mr. Summers .]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
I hope to show in the course of my remarks with what this Clause deals, why the present position is regarded as unsatisfactory, and in what way the Clause will remedy it. The position to-day is that firms who wish to join together for the furtherance of their export trade have contributed to a central fund and have deducted those contributions from their profits. The situation arising out of the war is such that the exports which it was intended that those funds should assist have not been possible, and considerable funds have accumulated. In the absence of some authority to justify the deduction of those contributions from their profits, it may be necessary for the Revenue authorities to assess the central body to tax, with the result that a very large part of the funds which have been accumulated will be dissipated, and will not be available when conditions prevail which will enable them to be used. It is intended, therefore, by the terms of this Clause to authorise deductions in certain circumstances from a firm's profits when contributing to a central fund for the furtherance of export trade, and by so doing render unnecessary any idea on the part of the Revenue authorities of assessing centrally.
I hope it will not be necessary for me to stress at any length the importance of the export trade of this country after the war. I believe there is a very strong desire in all parts of the House to do whatever may be possible to ensure that the people of this country after the war shall have adequate economic security, and it must, I think, be almost axiomatic that a flourishing export trade must be an indispensable feature of our post-war economic life. During the war we have lost many of our foreign securities, so that the necessary imports of foodstuffs and other materials after the war will more than ever be dependent upon our exports. It therefore seems to me of paramount importance that such funds as have been built up to assist that trade should be left available for the purpose for which they were intended. There is, however, an additional advantage which results from the effect of this Clause, namely, to encourage firms to band together for what I would call, if it is not a self-contradictory term, mutual self-help. That grouping of firms received kindly encouragement only yesterday from an article which appeared in "The Times" from a special correspondent, who, speaking of the need for industry to adapt itself to the new conditions and the new ideas which would prevail, said: of their organisation. It was no fault of the Government that many of these hopes were not fulfilled, owing to the counterclaims of shipping and man-power which prevented their intentions being carried out. But I suggest that the Chancellor of the Exchequer, when considering this matter, might remember that it was through the action of the Government—with which I find no fault—that the accumulated funds have in fact arisen. Therefore, there seems to be an obligation on the Government to see in what way they can deal with the effect of the action which they were compelled to take. After the war, if these funds are not available, it will take a considerable time to build them up from the contributions of the firms in business then. The firms might well find that their resources had been depleted as a result of the war and the opportunity which, but for this action, would have been there, might be lost.
There is one other point of a general character to which I would allude. There is no suggestion here of asking that the funds should be exempt from taxation, because when those funds are applied and the firms receive benefit from them, the receipts will be brought into account and will have to pay tax at the rate ruling at the time. It is not, therefore, a question of exemption from but rather of deferment of taxation until the time comes when these funds can be applied for the purpose for which they were intended. The form of this rather long Clause has been taken from the model, if I may so call it, of Section 25 of the Finance Act, 1935. That Section dealt with a similar situation, inasmuch as it related to the contributions made by firms for the elimination of redundant plant. Funds were created for that purpose and certain conditions laid down which had to be fulfilled before the necessary Board of Trade certificate could be given. With comparatively minor changes, to which I shall refer later, the wording of this Clause is almost identical with that of the provision made in 1935, in those somewhat analogous circumstances. There is no change in the actual terms and conditions which have to be fulfilled before the Board of Trade certificate can be granted. It seems reasonable to suggest that the conditions which were thought appropriate in 1935 for that purpose would be equally appropriate now for this purpose. There is no appreciable change in Sub-section (3), which gives the right to the Board of Trade to withdraw the certificate if they find that circumstances do not warrant its continuance. In Sub-section (4) provision is made for distributions from these funds to be brought into account by the recipients and tax paid on them at the rate prevailing at the time of their receipt. Sub-sections (5) to (9) are the same as those in the earlier Section, and it is not necessary to take up the time of the Committee with any details concerning them.
I would, however, draw particular attention to Sub-section (10). It will be noted that mention is made of the date, 5th April, 1941. The distinction between contributions made prior to that date and contributions made after it is this. Prior to that date the contributions would be eligible for the Board of Trade certificate whether from an export group or any other association, provided, of course, the conditions were fulfilled. After 5th April, 1941, however, the benefit of the certificate would be confined to an export group as we understand it. That date was selected because it was apparent that, by that time, there would be little scope for exports during the war except in those industries where export groups had been formed, and it did not seem unreasonable that contributions from others than export groups should be subjected to tax in the ordinary way. The other date in this Sub-section to which I would draw attention, is 1st January, 1939. This is inserted as the earliest date to which the provisions of the Clause may extend. I understand that, if any earlier date were selected, it might affect the E.P.T. standard of certain firms and therefore have the effect of adding a charge to the payments of those firms. Consequently the matter could not be handled by this method. If any hon. Members think that the benefits of this Clause ought to go back to an earlier date, they will realise that some other method would have to be found of achieving that result. I am advised that it is not possible by this method.
I hope I have said sufficient to indicate the importance of the subject with which the Clause deals and that hon. Members appreciate the opportunity which they have of assisting export trade after the war by giving their support to this proposal. It is not only the support of the Committee, however, which is necessary on occasions of this kind. It is even more important to secure the support of right hon. and hon. Gentlemen on the Front Bench. It may not be out of place to mention that only yesterday there was announced the formation of a committee by the Board of Trade for the purpose of developing exports after the war. I feel that the ideas inherent in this Clause would undoubtedly appeal to them, and if the Chancellor of the Exchequer has any hesitation in this matter, I hope the President of the Board of Trade will give himself a little relaxation from the tortuous paths of fuel rationing and devote a few minutes of his time to the easier, as I would hope, and certainly more congenial task of wheedling the Chancellor into taking an interest in this matter. If even that were not found sufficient, I have little doubt that the Minister of Production would be interested in this proposal, because it is surely calculated to assist in realising that picture of a Merrie England of which he spoke to us a few Sundays ago. The Chancellor of the Exchequer himself, in his speeches on the Budget and on the Second Reading of the Finance Bill, stressed the importance of post-war reconstruction. Here there seems to me to be an opportunity for the right hon. Gentleman to show his desire to put those ideas into practical form, and I hope, with that background, he will look favourably on the suggestion I have made.
I would like to congratulate the hon. Gentleman on his very interesting and most important speech. Whether this particular Clause—ingenious and involved—will achieve its purpose I will not attempt to say, but with its object and with the advertisement he has given its object I think the whole Committee will agree. The export trade has been paralysed by war necessities, and there is a real danger that in many of our best markets new industries will have grown up under war conditions, not only in foreign and neutral countries, but in some of our important Dominions, particularly Canada and Australia. It is right, it is vital, that our industries should be encouraged to organise for export, so that when the war is over they will be ready to exploit the markets which will be inevitably hungry for goods of all sorts. After the war this country, instead of being, as it has been for over 100 years, a creditor nation, will be, it is not unfair to say, a debtor nation. At any rate, we shall be in a worse position than we were in 1918 and 1919.
But if we are to provide employment and maintain our standard of living, it is essential that we should be in a position to import the hundred and one articles of materials and food which we must inevitably be short of and without which our industries cannot get going again. I am an old-fashioned person who believes that we cannot get imports without exports. Unless we are in a position to pay for the goods, we shall be badly short of those imports and they will not come in with that freedom so necessary for our well-being. I would say to the Chancellor—he does not require persuasion, I am sure—that if something of this kind will achieve the purpose, it should be encouraged. I am sorry that the President of the Board of Trade is not here—because this is a matter of vital concern to him—so that he might take the occasion to indicate his policy to achieve the purpose of this Clause. I think the hon. Gentleman who has moved the Clause has achieved a useful purpose in getting publicity for this matter, and it is also helpful to know that the industries of this country are looking ahead and are conscious of their responsibility to organise themselves and co-operate to work together, for the purpose of bringing about a quick and immediate revival of our export trade after the war.
I should very much like to support the hon. Member for Northampton (Mr. Summers) and the right hon. Member for South-West Bethnal Green (Sir P. Harris), because I feel that here is one of those ways in which the Chancellor can give us help and encouragement, and in a very substantial manner, without hurting national finances or doing any damage to the principles on which the revenue is collected and dealt with. Like the right hon. Member, I cannot attempt to understand whether this Clause will work or not, but I do know quite well that the Chancellor understands what we are driving at. We have grown up with these trade associations having their funds allowed, and there has been a voluntary arrangement which has worked so far. Now the fact that we cannot spend the money in these associations simply means that anything contributed goes into E.P.T. and other taxation. A great deal of trouble was taken to form these export groups, and they are in cold storage. If they have no funds, they will not be able to get away quickly when the time is ripe.
I have spoken before of the large amount of our export trade which is done by the small manufacturer. This is to help the small manufacturer. The large organisations have their overseas arrangements and will be taking steps to keep them in being, but large numbers of small manufacturers are looking forward with apprehension as to how they are to get going when the war is over. They are valuable, they have initiative and drive, they will go and "scratch out," as we say, where the business is, and they will want the assistance of these groups, and of the funds which would be there but for the fact that the demands for war production are such that there are no goods available and they therefore cannot sell them and accordingly cannot push them.
We know we shall need to export when the war is over. We shall have to export if we are to pay for our imports. We have grown up living on the investments of our forefathers. They will not be there after the war to the extent they were in the past. We shall need to keep our people at work. This Clause provides one case in which the Chancellor can, without hurting the national revenue, give us assistance because the money used will in the meantime be in the banks and can be invested. The national effort will not be hurt in the slightest degree by the Chancellor meeting us. If we have to wait for the Government to work out a scheme after the war, it will take time, but if preparations can be got in hand meantime, it will help materially in getting export trade going and getting men back to work.
I wish the President of the Board of Trade had been here to listen to this part of the Debate, the aim of which is very vital for the future of the export trade of this country. This Clause which has been proposed by the hon. Member for Northampton (Mr. Summers) is quite lengthy and is particularly interesting to me as one who has spent a large part of his life in export trade and in searching for it in all parts of the world. The Chancellor of the Exchequer knows full well how at the commencement of the last war we had abroad £3,000,000,000 or £4,000,000,000 and that from those investments we had quite a large amount coming to this country year by year in the form of invisible exports. These do not exist to anything like the same extent to-day as they did in the last war. In fact, they have to a large extent disappeared, and the gap in the future between invisible exports and the amount spent on imports will be very serious unless we can bridge it by export trade. Therefore after the war it will become still more vitally necessary than ever that we should not only maintain but increase our export trade.
I was fortunate enough a year and a half ago to go out to South America as a member of the Willingdon Mission, for two reasons. One was to foster good relations between the South American countries and this country, and the other was to explore all possible avenues in order to see what could be done to improve the possibilities of export trade. The then President of the Board of Trade, who is now the Minister of Supply, was exceedingly keen on the work of this Mission, and on doing everything possible to encourage our export trade. The situation has changed enormously since then. There has come the operation of Lease-Lend, and more or less the pooling of the business, and, if not the finances, at any rate the resources, of the United States and this country. We, therefore, do not require perhaps, to such a great extent, the maintenance of export trade in order to win foreign currency as we did a year or two ago. We should not close our eyes to the importance of this Clause. Taking my own industry, however, as an example, I am under the impression that the Clause is to some extent unnecessary.
As my hon. Friend the Member for Edgbaston (Sir P. Bennett) has pointed out, these export groups have been formed all over the country. I believe there are some hundreds; but there is a small number of very large groups. Some have come under the control of the Board of Trade, inasmuch as they are controlled statutorily, and it so happens that their excess income is not subject to taxation at all. In my industry there is an export group, which was formed about a year and a half ago. Members of our industry paid into the group a levy of a quarter of one per cent. on all the raw materials imported into this country and all the raw materials purchased in this country. There was accumulated a sum of about £1,000. The industry applied to the President of the Board of Trade to take statutory powers for the controlling of the finances for this export group. The result was that the levy of one quarter of one per cent. on all raw materials consumed still obtains; but the payments are made not to the export group, but to the President of the Board of Trade. All expenses of the group are met from the balances lying with the Board of Trade. It is estimated that these levies amount in the course of a year to about £40,000, and I believe that the expenses of the group amounted last year to about £18,000, so the Board of Trade has under its control about £22,000. In view of the fact that these funds are statutorily controlled, that £22,000 is not subject to taxation; but the Revenue authorities are considering whether £900 in respect of levies paid before the Board of Trade took control shall be subject to taxation. In all probability, I think, the decision will be in the affirmative. During the war years, while the export group of the leather industry cannot expend all the funds received from the levies imposed, there will be a large fund accumulating, which after the war will be available for the purposes for which it is required in connection with this Clause. Therefore, I say that, in the main, this Clause is unnecessary to-day, except to the extent that its operation, if the Chancellor of the Exchequer accepts it, by commencing in September, 1939, would then exempt £900 from taxation, in respect of my own industry.
Can my hon. Friend indicate the statutory authority under which the Board of Trade is holding funds, and apparently acting as a trustee for that group, until the end of the war?
So far as I am aware, the Board did not stipulate any period during which this scheme should operate; but, no doubt, the President of the Board of Trade was legally advised that he was in order in adopting this scheme, because he is going along with it, and so far there has been no deduction for taxation. Therefore, we look forward to the time when, after the war, we shall have an accumulation of funds which we can use for fostering the export trade of the country. Personally, I should not mind whether this Clause were accepted or not, if it were not made retrospective to September, 1939. I approve of that particular point, and, with that in mind, I hope the Clause will be accepted.
This seems to be an application to the Chancellor to allow funds to be retained in private hands which in the ordinary course would go into public hands, in order to meet a hypothetical position after the war. The hon. Member for Pudsey and Otley (Sir G. Gibson) has illustrated, by his example of the South American Commission and the activities of the Board of Trade, a tendency which was developing even before the war, for international trade to cease to be a matter for small groups of traders and individual firms and to become very rapidly a matter of negotiation between the nations. I have never seen any difficulty in purchasing goods from abroad. Manufacturers in other nations are only too willing to sell to us. The problem arises when we come to settle how these goods are to be paid for. To-day, and before the war, there has been developing a sort of economic nationalism. Nations are all planning their internal economy, and are not allowing individual traders to decide what imports may come into the country. The argument against this proposition is the possibility that after the war nations will have to negotiate on how international trade is to be conducted. To a large extent, it will not be by these little groups of traders, but by the Government, through some of the agencies they have set up. I think these traders should recognise that what a friend gets is not lost, that it is safe to transfer the money in the meantime to the Chancellor of the Exchequer, and that it will be a national problem to decide how foreign trade is to be developed after the war. It would be wise to leave to the Government the planning and the negotiations in regard to the whole of this international structure as to how that money is to be granted for the purpose of expanding international trade.
My hon. Friend the Member for East Stirling (Mr. Woodburn) is extraordinarily optimistic if he thinks that we are going to have international trade planned and carried out between Governments immediately after the war. I have no doubt that that would be by far the best way of dealing with our international trade, but I am afraid there is little hope of it. It' is highly important that selling organisations for foreign trade should be encouraged. This question is a very old one, and we have discussed it in this House for at least 10 years. I remember the question of the importance of the organisation of small group manufacturers into a trade organisation for export purposes coming up in 1929 or 1930. I am not sure what the Chancellor will regard as the bill for this Clause if he should accept it, but it cannot be very much, and there is the safeguard for my right hon. Friend that, if before the funds are exhausted in our war economy we arrive at the situation where trade is negotiated between nations, any return of these funds to the subscribers will come under the tax, and, with the safeguard of the Board of Trade, I think that the Chancellor of the Exchequer might look with a favourable eye upon this proposition.
I need hardly assure the Committee that I am in general sympathy with what has been said so powerfully about the importance of our export trade. I have myself endeavoured to emphasise that on several occasions. I do not think that there can be any question at all—and I was glad to hear what both my hon. Friends opposite said—as to its importance, or any doubt that we must do everything we can to further it after the war. If that were the issue, I would have no difficulty to-day. My hon. friend is, however, aware of the difficulties that arise from his proposal. It is not a new proposal. I have had the opportunity, and the advantage, of receiving a deputation, and also of having conversations with people interested in this proposal; and, while expressing my desire to help them, I ventured, as I was bound to do, to point out the difficulties of the proposal. The conclusions of those conversations —a conclusion with which I am in agreement—is that we must consider the matter together. The President of the Board of Trade and I shall be glad to consider any other proposals, of a more practicable and of a less objectionable nature than those in the proposal now before the Committee, and with which we alone can deal. We are not now dealing with the question of the benefit of the export trade. We have now to deal with the proposals at present before the Committee. I particularly must have regard to what they mean, and what their implications may be; and I must advise the Committee accordingly.
The object of the Clause, which has been fairly stated by my hon. Friend, is to provide for the allowance of deductions, in computing profits for Income Tax purposes, of contributions to schemes for the furtherance of export trade, to the extent that such contributions are not already allowable deductions. I will say a word or two later about the fund to which my hon. Friend has referred, but we have now to see exactly what his proposals really are. Under Rule 3 of the Rules applicable to cases 1 and 2 of Schedule D, deductions are prohibited, among other things, for any sum which is not wholly and exclusively expended for the purposes of the trade. They are also excluded in relation to capital expenditure and to any capital withdrawn for the trade. To the extent that expenditure of a purely revenue character is actually incurred in any year, it is already allowable in that year, whether that expenditure is incurred by an individual trader or has been paid into a common fund by a number of traders. There is no dispute about that. That is permissible.
This Clause asks for the allowance as deductions of sums which are paid into a fund to be retained as a reserve to be expended in subsequent years on the excellent object to which my hon. Friend has referred. It is based on the complaints that have been made that the weight of Income tax and Excess Profits Tax is such that the export industry are unable to set aside money for post-war development. That has been the burden of the complaint, and my hon. Friend has seen me upon it. It has also been further argued that in normal times certain expenditure would be incurred year by year for the furtherance of the export trade, but that in present conditions such expenditure cannot now be incurred and will have to be deferred until after the war. In computing profits for taxation purposes, all revenue expenditure—I emphasise that—of the year is allowed, but if a trader decides that it would be desirable to set aside a certain amount of money in one year for expenditure in a subsequent year, he cannot be allowed that for taxation purposes as a deduction in the year in which it was set aside. The deduction will be made, if the expenditure is of an ordinary revenue character, as and when such expenditure is actually incurred. I may also take another instance of a group of traders—similarly if they have put money into a common fund for the purpose of incurring ordinary revenue expenditure and actually incur that expenditure during the same year, then the amounts contributed by the individual members of the fund will be allowable deductions in computing their tax liability.
The fact that the expenditure might be incurred jointly instead of being incurred by the traders individually makes no difference to the admissibility or otherwise of the expenditure in question. But if a group of traders put money into a common fund as a reserve for expenditure, in a future year, the amount so contributed cannot be regarded as expenditure for the purposes of the trade in the year in which contributions are made, and the position is just the same as for an individual trader who puts by money for expenditure in the subsequent year. Therefore, the first objection which I make to this Clause—and I can put forward a more serious objection in a few moments—is that it runs directly counter to the principle I have enunciated, and would commit the Revenue to allowing allocations to reserve as a deduction in computing profit for taxation purposes. My hon. Friend has taken a precedent. The one he cited for his Clause follows closely that of Section 25 of the Finance Act, 1935, which provided for deductions from profits of contributions paid on the rationalisation of industry. That Section was directed, however, to a specific and immediate object, even though in some cases the object took some years to attain. It did not have as its main principle an allowance of contributions for expenditure to be incurred at some future time, and in some rather vaguely expressed manner.
Now I have another material point to put before the Committee about E.P.T. It seems clear that to the extent to which traders liable to E.P.T. contribute to the scheme to which the Clause would apply the effect of the Clause would be to enable these traders to build up reserves for the furtherance of the export trade, entirely at the expense of E.P.T. When I have explained that to hon. Members who have waited upon me in deputations, and others, the impossibility of that proposal has been generally realised. What in effect the Clause does, at its best—and I could criticise it much more severely—is to secure a subsidy from txation for the future development of export trade. If I once permitted this, without any limitation whatever, all sorts of funds would be built up. By that means the whole principle of E.P.T. would be defeated.
But would it not be necessary for a Board of Trade certificate to be obtained for these concessions to apply? Therefore, there would be no risk of funds being built up by a number of small firms all over the country. The very provisions inherent here would prevent the danger which my right hon. Friend has mentioned.
I cannot for a moment permit, nor do I think that the House would either, the Board of Trade or any Government Department to override the general law and principles of E.P.T., and say that a certificate for a particular industry or group of people should be allowed to be the means of defeating the general principles of E.P.T. law. That would put the Board of Trade in an impossible position, and I do not for a moment think that the House would ever allow any Government Department to act in that way. If we have to alter E.P.T. for this purpose, we must do it straightforwardly, and lay down certain principles by means of which it could be done. It is, however, my intention to make some provision for the future by means of the 20 per cent. which will be returned after the war. I am anxious about the position. I hope the Committee will not think that, because I am being critical about the Clause and its effect, I am unsympathetic. As I said in the course of my Budget speech, the President of the Board of Trade and I will will only be too happy, because we feel concerned about this problem, to discuss with any representative body of people any proposals which would not be open to the vital and serious objections which I have put forward to-day. During the next few months if any useful talks of that kind can be held, we shall be only too glad to hold them. I am unaware of the particular question which was mentioned about this fund. I shall be very glad to examine it, but as it is before the Inland Revenue it is to some extent sub judice .
This scheme has been in operation at least a year; so there is nothing sub judice about its operation. It was agreed to by the President of the Board of Trade along with the legal advisers to the Crown who drafted this scheme.
That makes it all the more hopeful. But I am not aware of it, and do not want to be committed in commenting on the scheme. I will, however, examine anything of that kind where that may be of use. If my hon. and learned Friend the Member for Ashford (Mr. Spens) looks at this Clause more closely, I think he will see that apart from practical difficulties, it goes very much further than I have indicated. But I do not want to criticise it further, because I think my hon. Friend brought it forward, quite rightly, more for the purpose of discussion by the Committee. It is quite right, on such a matter of vital importance, to see whether we can do anything further to assist the object he has in mind. As I have said, however, it would not be my duty to recommend acceptance of this Clause.
I am grateful for a great deal of what my right hon. Friend has said and not the least for the fact that he has focused a really vital point if and when anybody, under the present weight of taxation, attempts in any way to get a concession for the future or, indeed, for the present. In nearly go per cent. of the cases of trade companies a concession has, of course, to be at the expense of E.P.T., and the sooner the country realises that the better. It is implicit in this Clause that we must necessarily be asking for a concession in respect of E.P.T. Our view is that if we can get a reasonable allowance made for the future of the companies concerned in making contributions to these groups, so that the money which has been subscribed in the past and is being subscribed at the present time can be available and, immediately available, after the war, no better extra allowance against E.P.T. can possibly be made. We believe that that right against the present taxation would be of the utmost value to the future of industry after the war.
Let me now deal a little more with the new Clause. If the Government department—we suggest that it is a matter for the Board of Trade, but it would not be difficult to substitute the Treasury for the Board of Trade—which certifies the scheme considers that the contribution, whether paid solely out of current revenue, or whether, owing to the burden of Income Tax, some part of it might have to be paid out of reserves, is reasonable, then we consider that in the year in which the levy is paid it ought to be a proper deduction against the assessable profits of the company. We do not ask, as was rather implied by the Chancellor of the Exchequer, that the persons concerned should be able to fix their own levy and be as generous as they like for the future. We ask nothing of the sort. It is a scheme by which a group of companies concerned in an industry, and subject to approval by the Government Department of the amounts, and when, how and in what circumstances they would be returned, offer to the Chancellor what one would have thought would be the very acceptable bait that if the amounts should come back in any way into the funds of the company, the company would have to pay the current rate of Income Tax on them.
I want to deal also with the objection that the money would not be expended in the current year. Of course, it could not be expended in the current year for the purposes for which it is really wanted in present circumstances. We quite appreciate that. We recognise that we are asking for something special in this connection, but again, it is subject to a scheme which, we suggest, should be approved by the Government Department concerned. I think this meets both the points regarding the present Income Tax allowances. We realise that we ask for something special, but we do not want to give to the taxpayer any freedom in the matter. There would be a very definite scheme to be approved by the Government Department. We had thought that the Board of Trade would be the right Department, but having listened to the discussion in the Committee, I can quite understand that it may be that the Treasury would claim to be the proper Department to give the final decision on these schemes. We would not in the least object to that. If the principle is accepted that this would be a wise thing to do in the interests of the future trade of the country, then neither the fact that the levy would be contrary to existing regulations as regards Income Tax, nor the much more important fact that, in allowing the levy as a deduction in regard to Excess Profits Tax to some extent—indeed, to a substantial extent—we should be making an invasion of the usual means of assessing Excess Profits Tax at the present time, would not really matter in the least. The whole point is whether it would be in the interests of the future trade of this country that a reasonable amount of funds should be available immediately on the conclusion of the war, or even at an earlier stage if it were possible to expend them for the purposes for which they are wanted, subject to the control of a Government Department. If this thing is really important to the trade of the country it ought to be done in some shape or form, and arrangements ought to be made by which these people, particularly the smaller people, would be in a position to put by these comparatively small sums year by year, but that the sums should remain either in the hands of the Board of Trade or the groups, or somewhere else, safe, accumulating and immediately available for the purposes for which they are intended to be used as soon as an opportunity occurs.
I would like to refer briefly to the remarks made by my hon. Friend the Member for Pudsey and Otley (Sir G. Gibson). Certainly, he put forward an interesting aspect of the matter by suggesting that there are alternative means of achieving the object which I have in view, and which is not unknown to my right hon. Friend the Chancellor of the Exchequer. That in itself is a contribution. I hope that my hon. Friend will not become too optimistic about that alternative method merely on the ground that as yet no tax has been collected, because these things take a very considerable time, and it is a very dangerous foundation on which to build hopes that as yet no tax has gone. My hon. Friend mentioned that he is familiar with an export group which has some £22,000 at stake. I assure him that very much larger sums than that are at stake in this matter at the present time. If it would facilitate matters, I would gladly support what my hon. and learned Friend the Member for Ashford (Mr. Spens) said about the Treasury being the Department to issue such certificates.
It is not a matter for a Department. It is the question of principle that is involved. If I may say so, the proposal is really an attempt to give some Department of the Government, the Treasury or some other Department, power to vary the 100 per cent. Excess Profits Tax which is now imposed.
I was going to say that the Chancellor, in asking the Committee to reject the new Clause, based his case on the statement that the Clause intends to do away with the effect of the Excess Profits Tax on these funds. I would gladly find some way of alleviating the situation in which these funds are placed, but the Excess Profits Tax is there, and we cannot get away from it. It seems to me that the very object of this new Clause, with which the Chancellor claims to sympathise—
Not at all. I have not shown any sympathy for the Clause, but for the intention which has, I take it, inspired my hon. Friend to put forward this proposal.
I stand corrected. My right hon. Friend sympathised with the intention. The intention is to remove the effect of the Excess Profits Tax, and yet that is the ground upon which my right hon. Friend asks for the rejection of the Clause.
The intention is to help the export trade.
This is the method of achieving the help to which my right hon. Friend refers. While not greatly encouraged by what the Chancellor has said, in view of his determination, apparently, that Excess Profits Tax shall not be affected by any suggestions to help the export trade, one must hope that from the conversations which he suggests might take place with the President of the Board of Trade and others interested, some fruitful results may flow. I hope that when those conversations take place, the strong views which have been expressed in the Committee on this matter will find a useful place in the deliberations. In view of what the Chancellor has said, I beg to ask leave to withdraw the new Clause.
Motion and Clause, by leave, withdrawn.
NEW CLAUSE.—(Capital employed in the trade or business.)
Section twenty-seven of the Finance Act, 1940, which determines capital employed in the trade or business in the standard period, shall be amended by the deletion of the words "at that date" in Sub-section (5), with the effect that any financial reduction of capital shall not be taken into account in assessing the amount of capital employed in the trade or business.—[ Mr. Hammersley .]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
I readily realise that the objective and purpose of the Clause, appearing in my name and that of other hon. Members, may not be plain in its wording. I will, however, endeavour to describe its objective as clearly and as succinctly as I can. The new Clause concerns the determination of the standard on which Excess Profits Tax is based. It affects only those companies whose industrial experience has been so unfortunate in the standard years that they cannot have a profit standard; that is to say, they must rely on a substitute capital standard. Clause 27, Sub-section (5), of the Finance Act, 1940, provides a ceiling in respect of the determination of a substituted capital standard. The capital standard cannot be higher than six per cent. on the capital employed in the business, and the Subsection goes on to introduce a proviso in respect of this six per cent. capital employed in the business. It provides that you must reduce the assessment of the amount of capital employed in the business by such sums as the value of the assets were said to have permanently lost at the particular date.
The objective of this Clause is to ascertain more precisely what is meant by permanently lost at the date, and to remove an injustice which, I think, lies in the wording. As I have said, the Clause applies only to what can broadly be described as depressed industries. I have particularly in mind the cotton industry and the shipbuilding industry. These industries in the years gone by have been thought in many respects to be overcapitalised, and I very well remember Mr. Baldwin, as he then was, coming down to the Free Trade Hall at Manchester, making a most inspiring speech in connection with the reorganisation of the Lancashire cotton trade, and using the words, "Cut out the dead wood." It was a plea for financial reconstruction, and there were many people in this House, and I was one of them, who supported that plea for financial reconstruction, not on the grounds that financial reconstruction would indicate whether or not at any particular time capital had been permanently lost, but because by reconstruction by reducing the capital and getting it on to a lower basis, you would have a lower expectation of profits, and by that means make the industry more competitive and more likely to get on its feet again.
I am quite sure that it has never been the intention of the House, and I do not believe it is the intention of the Chancellor of the Exchequer, that firms which took that advice and went through the procedure of capital reorganisation, reducing their capital in order to deal with the existing circumstances, should be prejudiced by comparison with companies which were in precisely the same circumstances, but which did not go through that financial procedure. My object is to make certain that companies which have put their house in order by this financial reconstruction, including the writing-down of capital, are not prejudiced in the calculation of the capital employed in the business as determined for the purposes of E.P.T. It is a fact that their application for a capital reduction may have involved an affidavit stating that a certain amount of capital had been permanently lost, but at that time there was no consideration in the minds of the people concerned that there was to be an excess profits tax in the future. I consider that these companies should not be prejudiced, and I. should like to make it quite clear to the Financial Secretary, who I hope is following this point, that it is not part of my purpose to suggest that, if in fact capital has been permanenly lost, it should not be taken into consideration and deducted. My purpose is to suggest that a purely financial transaction which took place for a different purpose should not prejudice the situation, and for that reason I am introducing the new Clause in the form of removing the words, "at that date" from an earlier Finance Bill. I am informed by experienced accountants that my new Clause is unnecessary as companies are not so prejudiced, and that the intentions of the Act and the practice of the Inland Revenue are not to prejudice these companies. If that is so, I hope that my right hon. and gallant Friend will be able to make that specific statement, as I am sure the depressed industries which come under the ambit of these considerations will greatly welcome it.
This is, of course, a very narrow point. We are dealing here, as my hon. Friend the Member for East Willesden (Mr. Hammersley) has pointed out, with the over-riding ceiling which applies in the case of the capital of companies which are not using the ordinary standard, but which have applied for a substitute standard, which, as the 1940 Act states, is allowed on certain considerations being taken into account by the Board of Referees. We are not covering the whole field of E.P.T., but are dealing here with this very minute point. My hon. Friend seeks to take out words in the proviso to Clause 27, Sub-section (5) of the Act, where it says:
"if in the opinion of the Board of Referees the amount of capital computed as aforesaid was wholly or partly represented by assets—
I should like particularly to direct my hon. Friend's attention to the word "assets "—
"the whole or in part of the value of which had for the purposes of trade or business at that date been permanently lost."
My hon. Friend wants to take out the words "at that date ", but he does not seek to substitute other words for them. Obviously there must be some date at which something happens, if you are to have any standard at all. There must be a beginning. Perhaps my hon. Friend does not wish to press that point, but I am merely putting it to him against his new Clause.
It seems to me that, if the capital is permanently lost, then it is, in fact, lost, and that the introduction of the words "at that date" creates uncertainty. If my right hon. and gallant Friend is inclined to agree that subsequent to that date the value of the capital assets has been recovered and, therefore, is not permanently lost, that is precisely my point.
I still think we must have some date at which someone is to be in a position to say that they have been permanently lost, and the words as they stand seem to provide for that. I gather, however, that that was not my hon Friend's point. He suggests that in certain cases companies which had taken the prudent course of reorganising their capital and writing down their assets, either in whole or in part, should not be penalised under this proviso, as contrasted with other companies which also had assets which had lost no value, but which had not gone through the mechanical function of reorganising their capital structure. I think that is the point to which he really wishes us to direct our attention. I think the answer there is quite clear, that the question under the proviso as to whether the value of the assets have or has not been permanently lost is one of definite fact and is quite irrespective of what had happened to the capital structure as the result of the loss of their value. That question of fact, as to whether the value of the assets had or had not been permanently lost, is one which would be determined by the Board of Referees after, and only after, considering all the relevant circumstances. It is true that, if the company had written them all off, obviously that would be prima facie an indication that the value of the assets had been permanently lost. On the other hand, if the company had not gone through a reorganisation of capital commensurate with the real loss in value of the assets, that' would not be a completely relevant consideration when you are discussing with the Board of Referees whether or not the assets have been lost.
In other words there would be no prejudice?
There could be no prejudice, because the fact that the company has some assets which were permanently of no value, but had not reorganised its capital, would not enable the company to avoid consideration of its case. It would have to be considered just the same as a company which had re-organised its capital, because the only question at issue is the question of fact whether or not the value of the assets had been permanently lost. I think that is what my hon. Friend has in mind. I can give him that description of what occurs quite categorically. In fact, it could not be otherwise under the Act. If an application is made for a substituted standard, the Board of Referees have to lake into account what Parliament has laid down, and that is the fact whether or not the value of the assets has been permanently lost. That is irrespective of any re-organisation of the structure of the company. I can give the assurance that, as I am advised, no company would be prejudiced in the matter if we have no qualms about leaving the proviso as it now is. But, quite apart from that, the actual Clause that my hon. Friend suggests is not one that we could accept, for the reason that you must have some date.
I can imagine some cases where there might be something to be said for the Clause, but is not the weakness of this case that the writing down is really to get the true value of the assets, and was it not notorious that in this industry there had been a watering of capital which was somewhat of a scandal at a certain period? I do not see how you can argue that the former capital should be restored for the purposes of E.P.T. when it was raised by wholesale speculation.
I did not argue the case that the hon. Member suggests I argued. The case that I argued was that a company which had gone through the mechanism of writing down capital should not be prejudiced. On my right hon. and gallant Friend's assurance I beg to ask leave to withdraw the Clause.
Motion and Clause, by leave, withdrawn.
NEW CLAUSE.—(Extension of allowances for children to persons mentally or physically incapable of work.)
For the purpose of relief of assessment to income tax in respect of children, any child who, because of mental or physical disability, is incapable of employment shall be deemed to be a child of less than fourteen years of age.—[ Mr. Wootton-Davies .]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
The Clause seeks to pursue in logical sequence the already admitted practice of allowing a rebate of Income Tax in respect of children. Surely mentally or physically unfit children who are incapable of following any employment are in fact always children, and in these days of high taxation they create a considerable burden on their parents. I think the Clause needs no argument from me.
Yesterday I had to deal with an Amendment on the subject of allowances, and I pointed out that once you got into this sphere there was endless discussion, and endless hard cases could be raised. That was on the subject of housekeeper allowances. Now we come to the question of children's allowances, which have frequently in the past attracted the attention of the Committee. May I remind hon. Members, in case they have not got it at their fingers' ends, what the position now is? A parent gets relief from tax on £50 for what is called the child allowance, and that continues up to the age of 16 in normal cases. The Act of 1920, however, extended the age in the case of children receiving further education, in the accepted sense of the term. In 1938 that extension was taken a step further by bringing in children over 16 who were undergoing vocational training. It has always been considered as relief due to youth up to 16 and, over 16, due to the cost of education, and, putting it the other way round, the fact that because a child over 16 is continuing his education he is not entering into the field of possible earning. It follows from that that in the case of an incapacitated or mentally defective child, or whatever it may be, qua child, the relief of £50 comes to an end at 16 because ex hypothesi he is not continuing in vocational training or education. Therefore at 16 he ceases to be a child in this sense, and such allowance as is available in the way of relief from taxation becomes an ordinary dependant's allowance. For such a child as my hon. Friend is speaking of the parent gets £25 as dependant relative's allowance. That allowance was originally introduced in the Act of 1920 for a claimant who maintains at his own expense any person, being a relative of his or his wife, who is incapacitated by old age or infirmity from maintaining himself: "or infirmity" are the relevant words now.
Therefore, the person over 16, being no longer a child from the point of view of tax relief under the children's allowances becomes a dependent infirm relative for whom the £25 is available as relief from taxation, without, of course, any age restriction. One is always in a difficulty when these appeals are made, heartrending as they so often are, and it does not please anyone to have to resist them. It is clear, however, that I cannot bring myself to see that it would be reasonable in, for example, this selected case of an infirm person over 16, that because that person is a son or daughter of an individual, the relief should be £50. There is no proposal to raise the whole lot up to £50. A man now gets a relief of £25 if he is supporting his infirm father, and I find it difficult to see why he should get double relief for looking after an infirm child.
My right hon. and gallant Friend is now trying to justify the relief of £25 which parents get when the child becomes 16. Infirm children are much more costly to keep up to 15, 18 or 20, for they are bigger and require more things. The allowance ought to be increased to £75 rather than reduced to £25.
That shows where we are coming to. My hon. Friend is now talking in terms of £75. What I am putting to the Committee is that as things are to-day the dependant relative's allowance is £25, and a taxpayer gets that relief for looking after an infirm relative. That being the law, and there being no suggestion to alter it, I would find it difficult to be sure that it would be right for a man looking after an infirm father to get relief of £25 but if he were looking after an infirm daughter or son at 17 to get an allowance of £50.
This is one more illustration of what we were talking about yesterday and the grave difficulties which emerge when you bring out one case, terribly hard as some of them are. I hope that no one thinks that I do not feel deeply on this subject. It is a matter which the Chancellor of the Exchequer, when he decides on his Budget proposals, frequently has in mind. He considers whether there is somewhere where the shoe pinches much harder than anywhere else, but unfortunately in these difficult days he has had to steel his heart and make no changes with regard to any of these allowances. In fact, we cannot get any general taxation system so nicely adjusted that it will always be just and adequate in every case. There are always, unfortunately, bound to be hard cases with which one cannot deal within the general ambit of the Income Tax Code. My right hon. Friend feels that it is impossible at the present time to consider this proposal. Incidentally, it would cost £10,000,000 or thereabouts as a concession, and that is a considerable sum. Apart, however, from the cost which this concession would involve, it is a difficult one to justify unless we tackle the whole problem of all dependent relatives, and that is not possible, at any rate at the present time. I hope, therefore, that my hon. Friend who moved this new Clause on behalf of the hon. Member for South Croydon (Sir H. Williams), who raised the point five or six years ago, will see that we are not being callous or hard about it but that we just cannot help ourselves.
Would it not be possible to make some distinction between those people who are really sick, ill or mentally deficient and those who are ordinary dependent relatives? Has my right hon. and gallant Friend any figures to show the cost if the first class were treated separately? It seems wrong in principle that the £50 relief should be given merely on educational or vocational grounds. Those of us who see a good deal of these sad cases feel that £25 relief cannot be justified and that there is a strong case for raising it to £50.
The Financial Secretary has written to me this week about a case on these lines, and expressed his sympathy but said that unfortunately he could not do anything because the legal position prevented it. This seems to be an opportunity for altering the position so that the right hon. and gallant Gentleman might express in practical terms the sympathy he expressed in that letter. There seems to be a distinction to be drawn between children and other dependent relatives. The case I have in mind is that of a child who has never been to school, because he is mentally deficient; he is now 18 years of age and all the time has been an expense to his father. In the case of an elderly dependent relative the dependency does not as a rule extend over the same number of years as in the case of a child. In this case it looks as if the child, having been dependent on his parents for 18 years, may be dependent all his life. That does not happen in the case of other sick dependent relatives. The Financial Secretary has mentioned £10,000,000, which I assume would be the cost if all dependent relatives were brought in?
No, only this particular point.
Could not the right hon. and gallant Gentleman confine himself to the consideration of children who have been all along dependent upon their parents?
I have been confining myself to them, because that is what the new Clause deals with, but I have also dealt with what might follow from the concession. We cannot stop at this point, because "dependent relatives," as I pointed out, covers the case of all infirmity and not merely the infirmity of old age. The infirm dependants who are children may be the larger in number, but the relief for infirm dependants includes those of whatever age who are being looked after by relatives. I have no figures, and I doubt whether there are any available. They could not be got out in war-time, because we should have to go through all the returns and see what the relationship was.
My right hon. and gallant Friend has given the Committee cogent reasons why this proposed new Clause could not be accepted in its present form, because it would create certain anomalies by its incidence. I hope, however, that he will take note of the discussion we have had, remembering also the discussion on another new Clause dealing with allowances yesterday, and will report to the Chancellor that there is a real feeling in the Committee that the system of allowances must be looked at very carefully between now and the next Budget. It will not always be enough to say to the Committee that an alteration cannot be made because it will be out of line with something else in the existing law. No private Member can have the knowledge necessary to put forward a complete re- drafting of the whole allowance system. Personally, I think that in a few instances the allowances are too generous, in other instances not generous enough. It would be in accordance with the will of the Committee if the Chancellor were, between now and the next Budget, in view of the present very high rates of Income Tax, to review the whole allowance system so as to remove anomalies and unfairnesses.
On behalf of my hon. Friend I beg to ask leave to withdraw the Clause, but I should like to say that I think the Committee will expect some very different answer when the next Budget is presented.
Motion and Clause, by leave, withdrawn.
NEW CLAUSE.—(Amendment of Section 27 of Finance Act, 1940.)
Sub-section (5) of Section twenty-seven of the Finance Act, 1940, shall be completed by adding at the end of the first paragraph after the words "for the purposes of Excess Profits Tax" the words:
"unless the Commissioners are satisfied that the profits of the years from which the standard may be elected were depressed by exceptional circumstances which were wholly or mainly peculiar to those years."—[ Sir G. Schuster .]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
We have been listening to a series of discussions upon points which were represented by their advocates as points of minor significance. I do not want to disguise the fact that I regard the object of this new Clause as of major significance. I have put down a series of new Clauses designed to fulfil certain purposes which are closely connected, and perhaps I might make a few observations at the beginning about the general purpose which is in my mind. I am very glad to see here my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) and would particularly like him to give his attention to what I have to say. It is, of course, a very distasteful task at present to stand up in this Committee to ask for anything which can be represented as a reduction of taxation, and I want to make it clear that I support my right hon. Friend the Chancellor of the Exchequer in levying the maxi- mum possible measure of taxation. I do not want to appear as one who is objecting to taxation. It is distasteful, too, to discuss these matters in days like the present when there are before us other issues of much more vital importance.
Another reason I have for not liking my task to-day is that, to a great extent, companies with which I am connected are interested in these matters. It does not make any difference to me financially, but I have very much in mind my experience in a group of companies of which I am chairman. I am not putting this case forward on any sort of sectional ground, but I do feel—and my right hon. Friend knows this, because I have represented it to him very often—that the present system of taxation may be doing very great harm generally to the country. I would put that submission on two broad grounds. In the first place, I think Excess Profits Tax, as at present calculated, is doing grave injustice as between one business and another, and as between one class of investor and another. Secondly, I feel that Excess Profits Tax at its present rate, combined with Income Tax at 10s. in the £, and taking into account the methods on which Income Tax is assessed—that all these things in combination are likely to be weakening the financial structure of business in this country. I cannot speak on Income Tax in dealing with this new Clause, but I have tried to raise one or two points about it on other new Clauses. I will only now say, shortly, that as regards Income Tax the difficulty arises because the revenue authorities treat as taxable income something which is quite different from what anybody who is running a business on sound commercial principles regards as income available for distribution. Coming back to the question of Excess Profits Tax, before explaining precisely what I have in mind, I should like to remind the Committee of the very great injustice and inequality resulting from the present system. The Committee had cases put before it in the general discussion on the Budget.
I do not want to interrupt the hon. Member, but it seems to me that he is raising a discussion upon the Excess Profits Tax as a whole. That is a policy which has been decided upon, and he cannot go back to that. The hon. Member must confine himself to the new Clause.
Yes, Colonel Clifton Brown, but, as the new Clause is designed to alleviate some of the injustices in a small way, surely it is in Order to point out the nature of the inequalities that arise.
It depends on how far the hon. Member goes. I think he should stick to the new Clause and not deal with the general subject. That is the general rule. Otherwise, there would be no limit to the discussion.
I do not know whether I should be in Order in assuming that it is generally accepted that Excess Profits Tax, as at present levied, does cause very grave injustice. It I am in Order in assuming that, I need not deal with any of the cases; but surely, in order to establish my argument in favour of the new Clause, I must be allowed to show that, in fact, there is a need for this proposed amendment of the law.
No, certainly not. If the hon. Member tries to establish his argument, someone else will be entitled to bring forward arguments to refute it, and that would lead to a general argument upon Excess Profits Tax. What the hon. Member is allowed to do is to say that he thinks that the Excess Profits Tax is unfair and unjust and to leave it at that.
I find myself in some difficulty, because it will be difficult for me to establish my case without giving practical examples. May I test your patience a little longer, Colonel Clifton Brown, by mentioning shortly three practical cases which I have in mind? I was going to mention several cases just to illustrate the present position.
I have pointed out that cases will be in Order if they are concerned with the proposed new Clause. If they are not concerned with it they must be out of Order.
I am not very well versed in the ways of the Committee, but I think, on what you have just said, Colonel Clifton Brown, that they are in Order, and that it is relevant to mention them. I was going to refer in the first place to a case mentioned during the Debate on the Second Reading of the Finance Bill by the hon. Member for Streatham (Mr. Robertson). It is the case of a small engineering company which was started in the last war and worked for the Admiralty in the last war. When Admiralty work ceased the company went back to general engineering. Upon Admiralty activities reviving in 1935, they undertook experimental work for the Admiralty. The work, being experimental, was unprofitable, in fact it involved them in a heavy loss. The firm protested to the Admiralty and were told: "Do not worry, there is a lot more work to come and therefore you will recoup your losses when things get going properly." But the losses which they incurred were in the E.P.T. standard years, and when the time came to recoup themselves they found E.P.T. levied at 100 per cent. and thus were in an impossible position.
Another case that has been mentioned a good deal is that of an iron-ore mining company which has a subsidiary working in Spain. In the standard years of E.P.T., the Spanish Civil War made it impossible to work the mines in Spain at a profit. They were working at a loss of £20,000 a year. Now that mine has become very useful to our war effort. It is being run at a profit of £25,000 a year. The difference between the loss of £20,000 a year and the profits now being made has to come off the parent company's E.P.T. standard, which puts the company into a very unfair position.
Lastly, I was going to mention a group of companies, of which I am chairman, which happened, during the years of the E.P.T. standard, to conduct a reorganisation, and deliberately worked at less than the normal profit margin. It is a fact that, in the four years before 1935, the average profits were £470,000 more than the average profits for 1935–6–7, and in the three years subsequently have been £500,000 more. The result is a completely inadequate profits standard. The position in fact is such that, although a standard of earning power which made it possible to distribute a dividend of 6 per cent. on the ordinary shares was fully established before the war, now, unless there is a modification of the way in which E.P.T. is assessed, the ordinary shareholders cannot possibly get an ordinary dividend during the war. There is very little sympathy, of course, in this House, with large, wealthy companies of that kind, but this company has 45,000 ordinary shareholders, most of them very small people. I do not see why that class of investor should be subjected to such a tremendous inequality of treatment as compared with ethers merely because, for reasons quite unconnected with the war, the company's profits were abnormally low in 1935–6–7.
Will the hon. Gentleman allow me to interrupt him for a moment? I have listened with great interest to his argument, and I congratulate him on the way in which he has kept in Order. In the illustration he gave about the Spanish mine, did I understand him to say that because a loss of £20,000 a year was suffered in the relevant period and a profit of £25,000 has been made since the beginning of the war, 100 per cent. of £45,000 was the company's liability to the Treasury? Did I misunderstand that illustration?
The point is that the Spanish company was subsidiary to the English company, and therefore the English company has to make good £45,000 before it can earn any money at all.
Yes, but in order to apply the argument and enable us to make a proper comparison, ought not the hon. Gentleman to tell us what profits were made by the companies with which the subsidiary was associated?
I do not think that is relevant to the case which I am making. I shall be very glad to show the hon. Gentleman the company's report. I merely quoted the case as an example, and I think everyone will admit there is the possibility of these exceptionally hard cases arising under the law as it stands.
Of course, everyone would say—and here is where I come directly to the subject-matter of the new Clause—that provision is made in the law for hard cases of this kind; that, in fact, one is allowed to make application to the Special Commissioners and be put upon a capital standard instead of a profit standard, in which case you are allowed to make 6 per cent. on your genuine capital, and that surely no-one can complain, if that is allowed. That sounds a very reasonable argument, and I have never seen it clearly put at any time, and discussed, why this 6 per cent. allowance does not work out in a satisfactory way at all. In the first place,—and this is a point to which I have already referred—what is treated as income by the Revenue authorities so as to make up this 6 per cent. is very different to what the ordinary, sound, commercial business manager feels can be regarded as distributable income. They do not allow proper depreciation allowances, and there are many other factors into which I will not go now. Just as an illustration, I would again refer to the group of companies of which I am chairman. In our accounts for this year we have had to set aside a sum of no less than £137,000 for items which we think must be provided for, and which the Revenue authorities refuse to treat as expenditure allowable for Income Tax. I want to ask my right hon. Friend, as I have asked many times before, to look into this situation. Commercial income is entirely different from what is regarded as income for Income Tax purposes. In support of what I say on that matter a very good memorandum was addressed to my right hon. Friend.
I am afraid the hon. Gentleman is going beyond the new Clause. I cannot see anything about the effects of Income Tax in the new Clause.
I submit that what I am saying is absolutely strictly in Order, and relevant to my case. I am trying to demonstrate why the so-called capital standard does not satisfactorily deal with some of these specially hard cases. The first reason I was putting forward is in respect of what the Revenue authorities regard as income. What the authorities allow to be retained as providing a 6 per cent. return on capital, represents something very different from what persons who are managing businesses on sound principles can regard as distributable income. The point I am making is very strongly supported in a memorandum addressed to my right hon. Friend by the Institute of Chartered Accountants, which I submit must be regarded as a strictly scientific and impartial body.
That is the first point, that income for Income Tax purposes is not really true commercial income. The second point is that the capital as reckoned for establishing the capital standard—and this is a point raised in the next new Clause standing on the Order Paper in my name—is not, in all cases—
The hon. Member must not deal with the next new Clause. He must deal with one at a time.
I am sorry. I am afraid I am giving a lot of trouble. I think this is relevant to the present case because in this new Clause I am seeking to have the allowable revenue as based on the capital standard changed. I was saying that capital, for the purposes of E.P.T., is reckoned in such a way as not to include many of the items which have gone to make up the capital on which a return has to be paid. The third point is that in certain cases a company may have been started with preference shares, and be committed to paying a rate of interest higher than 6 per cent. on its preference capital. That, I may say, incidentally, I regard as a very unsatisfactory form of capitalisation, I have no sympathy with it at all, but you cannot get away from the fact that there are companies started on that basis. The securities of those companies may have ben dealt with for years on that basis, and the ordinary shares have had to establish their own position subject to these prior charges. Another point of apparent inequity—
I am sorry, but this new Clause refers to a standard which is affected by exceptional circumstances in certain years, and the hon. Member keeps talking about how that standard is arrived at. How that standard is arrived at is not dealt with under this Clause and may not therefore be discussed now. The standard is not affected by this New Clause.
I feel myself in a great difficulty; I want to keep in Order, but I cannot see how I can justify the new Clause I am moving unless I try to show what is happening under the existing law. Perhaps, however, I have said enough to put on record in the proceedings of this Committee a statement of the case that the existing Excess Profits Tax falls with great inequality or different classes of companies and different classes of investors and that injustice is really being done as a result, and secondly, that the various provisions under Section 27 for correcting that injustice are not such as to provide adequate correction in all cases. That is the point which I have been trying to make. The Section itself is, of course, a very complicated one. It is a very curious Section, I do not know how familiar hon. Members of this Committee are with it, but it is a Section which starts out three times to hold out prospects of relief, but, every time, the prospects are dashed by having a limiting ceiling put upon them. At the end of it all, in Sub-section (5), there is an overriding ceiling which prevents any of the relief given ever being such as to produce a revenue which is more than 6 per cent. on the capital as calculated for the purposes of E.P.T.
The object of my new Clause is that, in specially hard cases it shall be open to the referees to have some discretion as regards that limiting ceiling. I quite recognise that there has been very strong objection to giving completely unfettered discretion to the referees. I should have liked to press for that, but I understand that the view is that in the last war the unfettered discretion given to the referees resulted in relief going much too far. I am advised that the effect of the new Clause which I am moving is simply to give the taxpayer a chance to get the more favourable of the two ceilings, either the ceiling under Sub-section (3) or the ceiling under Sub-section (5). That is what I am advised. I, personally, should like to be arguing for a much wider discretion, and if the Clause, as drafted, would give that much wider discretion, then I stand squarely on the position that I should like to support it, because I believe that there are specially hard cases which can only be provided for by giving a very wide measure of discretion.
In conclusion, I would like to say this to my right hon. Friend the Chancellor of the Exchequer. I can quite understand that in the early days he would be extremely reluctant to open the door wide to discretionary treatment of hard cases, but by now he ought to be able to see fairly clearly what sort of cases would be involved, and I think he might now open the door to discretion with much greater safety than would have been the case, say, two years ago. Certain special cases have now emerged of whole industries that were hardly affected, and they have received a certain amount of consideration. Beyond that there are these isolated individual cases, and I submit that my right hon. Friend can quite safely deal with them now. I do want to urge that to do justice, even if it only be as between various classes of taxpayers, is a very important consideration. It is one of the things for which we are fighting. There can be a tyranny just as bad under a democratic system as any under an absolute despotism if no account is taken of the rights of minorities. The fact that the class for which justice is pleaded is a class which does not generally receive sympathy is, I think, something which ought not to be taken into account. As I said at the beginning, I most unwillingly stand up and plead the cause of this particular class. As I have often said before in this House, I dislike the whole system of carrying on with private profit-making during the war. I have gone so far as to say that a system of State Socialism would work in war. But if you are to continue a profit-making system, then let it be a sensible and just one, and also one which is not damaging to the general financial structure of the country.
I do not want to detain the Committee for long. I have listened with great attention to what the hon. Member has had to say. I understood him to be seeking to advance the claim in isolated instances of unusual hardship, and that what he wanted to move was a Clause that would give power to relieve exceptional injustices of that kind. But it seems to me, with all respect to his argument, that the Clause he has moved, so far from dealing with isolated instances of unusual hardship, would, if accepted by the Government, or carried by the Committee, really abolish the Excess Profits Tax altogether. The words of the Clause are that it shall not apply if
"the Commissioners are satisfied that the profits of the years from which the standard may be elected were depressed by exceptional circumstances which were wholly or mainly peculiar to those years."
—not wholly or mainly peculiar to the individual, or firm, or company but "wholly or mainly peculiar to those years." Exceptional circumstances were peculiar to the whole series of years between the end of the last war and the outbreak of this. Except for very exceptional and short periods, there was great industrial depression throughout the whole period, so that if this Clause were carried, any company which could show that its profits had fallen by reason of a worldwide depression which was peculiar to the years, say, from 1930 to 1933, would escape Excess Profits Tax altogether.
If the hon. Member refers to the proposal he will see the words
"… unless the Commissioners are satisfied that the profits of the years from which the standard may be elected were depressed by exceptional circumstances.…"'
Therefore the reference must be to certain depressed years affected by exceptional circumstances of particular firms because only particular firms would refer to their standard years being exceptional.
I entirely agree. That is what I am pointing out.
Perhaps I can simplify my hon. Friend's task, if I say that I have not the slightest hope that this Clause will be accepted. I move it because I feel very strongly that the principle on which it is based ought to be put to the Committee. I daresay the words could be improved upon. I certainly only intended that it should apply to cases in which there were exceptional circumstances.
I am much obliged for both interpretations which appear to some extent to cancel each other out, but the hon. Member will appreciate that the Committee is called upon to deal, not with the purpose of the hon. Member, but with the Clause before the Committee. My point is that nearly all the firms who are now making larger profits by reason of capital expenditure by the State for war purposes were, in fact, suffering from that depression in the years with which I am dealing, so that if the Clause were adopted the Committee would be abolishing entirely the principle, which I am perfectly certain the people of this country do not wish to see abolished, that the occasion of the war shall not be taken by persons or institutions to recoup themselves for profits they did not make, or for losses that they did make, under quite different conditions—the principle that there shall not be profit out of the war. The only objection to that I have met is the argument that people who were unemployed in those years are now employed and are getting higher incomes. That is no analogy. You cannot draw a parallel between work done and unearned profits, on invested capital.
The Committee must bear clearly in mind that in this Section and in this new Clause we are dealing with the provisions which the House has made, for exceptional circumstances. When the Finance Act, 1940, was passed, and when the matter was being considered, the case of the company which had been depressed in the standard period was considered and was dealt with in this Section. It was felt that it would be unreasonable to take the full sum between, say, zero profits and any profits which might be made in subsequent years and say that the whole of that had to go as Excess Profits, and the provision which the House made is set out in this Section. I agree it is a little complicated if one tries to read it through as if it were a story. It is in Sub-section (5), to which the new Clause is related, that the effective ceiling is applied. As I read the new Clause it would abolish that ceiling altogether in cases which come under Subsection (4). I think it would leave Subsections (2) and (3) operative. I rather doubt whether there is any great distinction to be drawn from the point of view of hardship between industries which were depressed as a result of general conditions or industries which were depressed or did not make profits for some special reason peculiar to themselves, such as, for example, a company doing experimental work, or a company with a mine in Spain interrupted by the civil war. I think they are entitled to consideration just as are companies which, for general reasons, had no profits and require a substituted standard for the standard years.
The question raised by the new Clause as I see it is really: Is the standard sufficient? The standard is 6 per cent. on capital as calculated in a particular way. The hon. Member says that capital ought to be calculated in a rather different way, and that Income Tax ought to be calculated in a rather different way, but one cannot go into that on this proposal. I do not think that the Committee would agree for a moment to what I understand would be the result of this Clause, namely, that there should be no ceiling at all, that there should be unfettered discretion for the Commissioners and the Board of Referees. It might be arguable that the figure was too low or too high, that it might be 7 per cent. or 5 per cent. I do not think it would be right to put in a provision which left this percentage standard entirely at the discretion of the Commissioners. Nor do I see any particular reason for applying a high standard when the smallness of profits may have been due to some circumstances peculiar to the company or some general circumstances. That seems to me to be a sufficient reason to reject this Clause. The hon. Member said he did not put it forward so much with the idea of its adoption as with the idea of raising certain general questions. So far as they are concerned they are not for me to deal with; nor, indeed, possibly, are they for my right hon. Friend to deal with on this Clause. That the imposition of a tax like E.P.T. does cause anomalies and hardship is obvious to everybody; it is in the nature of things. But those matters must be considered on their proper occasions. This Clause would, in effect, abolish the 6 per cent. limit and the discretion of the Commissioners or Referees; and my right hon. Friend could not advise its acceptance.
My right hon. and learned Friend the Attorney-General and the hon. Member for Nelson and Colne (Mr. Silverman) have argued as lawyers: I want to ask the attention of the Committee for a few minutes to show again in actual fact how the law, as it stands, is affecting companies. This new Clause deals with companies whose profits were depressed by exceptional circumstances wholly or mainly peculiar to the years from which the standard years may be selected. I am familiar with the case of a very important company, of high reputation in the country, which is exactly the type of company that suffers through there being no provision in the present Excess Profits Duty law on the lines of the proposed Clause. This company, in its own line of trade, is the outstanding exporting company in this country. At the beginning of 1935 the corresponding German industry, for reasons which were then understood by some people, and are now understood by all, decided to try to sweep British, American, and other competition out of the export markets of the world. The Germans slashed prices. In many markets their prices fell far below the cost of production in Germany or elsewhere. The Americans, who are often thought to be tough guys in business, decided that this was too much even for them, and they retired from the right. This British company was not going so easily to sacrifice a British interest. It followed and challenged the Germans and deliberately depressed its own profits, by cutting prices below cost, in order to hold this trade for Britain. It did that for two long years. By the end of that time, at very great loss to itself, it had succeeded in retaining for this country a highly important export trade and in smashing the German attempt to cut the ground away and destroy the well-founded efficiency of a great British industry.
In 1937 the Germans gave up: they came to heel; and prices rose once again to a remunerative level. But, as a result of the economic war, this British company had, during those two years, sacrificed profits to an estimated amount of £600,000 a year. Those are just the basic years for E.P.T., and consequently the company's profit standard is reduced permanently by an amount of the order of half a million pounds. It is quite clearly known that the German industry was acting on Government instructions, and with Government help. The British industry was endeavouring to defend a British interest. How is it repaid by the British Government? It finds that its reward is to have more than £500,000 a year now specially skimmed off its normal profits by the operation of E.P.T. I am certain that no one in the Committee would consider this an equitable and reasonable result. Now look forward. What is going to happen? That company, by reason of the exceptional circumstances of those two years, is being deprived of financial resources which it would be invaluable, in the national interest, for it to retain in these years and put to reserve, knowing that when the war—
All that is part of the general argument about E.P.T. It cannot be brought forward on this Amendment.
I beg your pardon, Colonel Clifton Brown. I thought I was permitted to show the particular hardships and damage caused by the peculiar circumstances pertaining to those two years. I will say no more oh the point, except that, because there were undoubtedly peculiar circumstances, not of an internal industrial character but of a major character, such as this House must recognise, that company is com- pelled to see gravely injured its own position and its power to defend national interests in the future. I know that the Committee desires Excess Profits Tax to be so arranged as to serve the national interest, and I wish to refer to a statement that the Chancellor of the Exchequer made on this very point on 5th June, 1940. He said:
"Everyone in the Committee, I think, will agree that the increase of the rate of tax to 100 per cent. makes it all-important … that the profits standard—the datum line—measuring the excess should be a just one."—[OFFICIAL REPORT, 5th June, 1940; col. 948, Vol. 361.]
So long as cases such as the one I have mentioned continue, that pledge, which the Chancellor gave two years ago, is not yet fulfilled.
Question, "That the Clause be read a Second time," put, and negatived.
NEW CLAUSE.—(Amendment of Fourth Schedule of Finance Act, 1941.)
There shall be added to paragraph 5 of the Fourth Schedule to the Finance Act, 1941, the following paragraph:
In calculating the maximum amounts upon which interest may be allowed in relation to the limit under Sub-section (3) and the limit under Sub-section (5) of Section twenty-seven of the Finance Act, 1940, the powers of the Commissioners and the Board of Referees under the said Section as applied by the Fifth Schedule to the said Act shall extend to include the excess of the cost of the investment in shares in another member of a group of companies over Cue proportionate part of the assets less liabilities of that member, provided that no greater amount shall be so added than would have been included as purchased goodwill if the assets less liabilities of that member had been acquired instead of the shares in the member company.—[ Sir G. Schuster .]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
This Clause is closely connected with the other Clause which I moved, and with the general case that I then made. I am afraid that the words of the Clause are somewhat obscure, and I would like to explain in elementary terms what it aims at. In assessing capital for E.P.T. purposes, a holding company, in the case of what is described as a wholly-owned subsidiary, is not entitled to put into its balance sheet its investment in that subsidiary at the cost which it paid for the shares. It has to go right through the shares down to the assets of the sub- sidiary company. That provision may—I do not say it will, because it is not certain how it is going to be worked by the taxing authorities—have the effect of cutting out from the capital assets of the holding company the sums which in fact it has paid for the goodwill of its subsidiaries. The Committee will appreciate that when a trading company is purchasing a subsidiary business, if it purchased the assets direct, it would, in the case of a business which had established a high earning power and a good name, pay not only cash value for the capital assets but probably also a substantial sum for goodwill. That would legitimately appear in the balance-sheet of the purchasing company as part of its capital assets. If, on the other hand, in order not to interfere with the trading name of the undertaking which it wishes to acquire, instead of buying the assets and taking them on for itself, it buys the shares of that trading concern, it may in effect pay for the goodwill by paying a premium on the shares. But when it comes to making up a statement for the purposes of Excess Profits Tax, you have to go right through to the assets of the company which has been bought, and there is no tangible asset to correspond to what has in fact been paid for goodwill.
I know that this point is appreciated by the Revenue authorities, and, as I say, I think it is not clearly decided yet how it is going to be interpreted, but I wanted to raise the point and put it to my right hon. Friend, because everyone must admit that it is a case where justice would require that an asset—and goodwill is a real asset—which has been actually purchased for a substantial sum of money should be treated as part of the capital of a company which has to fall back upon its capital to get standard for E.P.T. I hope that I have made the position clear. I will not detain the Committee longer. I only want to put the point to my right hon. Friend, and I trust that he will see that in this particular respect justice is done.
I hope that nothing that has been said on this Bill or on any of the previous Bills dealing with Excess Profits Tax can be taken to imply that my right hon. Friend and I do not want to see justice done. There are various values which are sometimes put upon that word, and true justice is not always easy to assess. If I understand this matter rightly, the hon. Gentleman proposes by his proposed Clause—we are dealing with substituted standards where it is impossible to get the ordinary procedure owing to the circumstances laid down in the law—that, in the case of a group of companies who cannot have a standard of actual profits, a capital asset of the nature of goodwill should be assumed to have been created—or may in fact have been created but not necessarily—when one company in the group acquires the shares of another company and the cost of the acquisition of these shares exceeds the amount of capital actually employed in the business when the shares were acquired. We always come back to the question, from the Excess Profits Tax angle, of the capital employed in the business. That is where a good many of these complications arise. It is a tendency to try and bring in other considerations which are not necessarily the same thing as the capital actually employed in the business.
I think that there is inherent in this proposal—I may be wrong—the assumption that the acquisition of the shares of the other company, which is the instance quoted, is equivalent to a direct purchase of the business with all its assets and liabilities. There is a clear assumption at the back of this proposal. The consideration which is paid by the purchasing company for the shares of the other company is of a nature comparable to the cash which is paid when a person actually buys outright the business of a second person, including all the assets. If that is the meaning of the Clause—and the underlying assumption is there—it is an unwarrantable one. In many of these cases there is no cash passing at all. It is a question of consideration. There is no real sale; it is a merger.
I can put the fallacy which is at the back of this proposal most clearly if I give a hypothetical case, and perhaps after my hon. Friend has studied what I have to say on this question he will, if he wishes, discuss it with me further or consider it before the next stage. Let me take this as an example. Company "A" has a share capital of £100,000, having accumulated say £50,000 of additional assets, making altogether an actual capital of £150,000; it is paying good dividends and its shares are passing at, say, £2 a share. Its capital assets for the purposes of Excess Profits Tax would be £100,000. Its shares are, as I say, passing at £2 and company "B" is formed for the purpose of buying all the shares. The capital assets still remain at £150,000, and, in view of the fact that the shares were passing at £2, it might very well create for the second company a capital of £250,000. It takes over all these shares without issuing any cash at all. It really issues these shares to the shareholders of the company and the merger is complete. The shares of the second company, which has taken over the first company, have no value at all except the value of the shares of the company which it has taken over, but its capital has become £250,000 in shares. How are we going to deal with this matter on the Excess Profits Tax basis? In the first instance company "A," on a substituted standard up to 6 per cent., would pay 6 per cent. on the £150,000, but when we come to company "B," its capital employed in the business is presumably £250,000, and its substituted standard would be 6 per cent. upon that amount merely by the merger arrangement. If my hon. Friend thinks that that is an example of what may occur as the result of his Clause he will see that it is an absurd result, and it is because we hold that it is just that sort of thing which might occur as a result of this Clause that I cannot on behalf of my right hon. Friend do otherwise than ask the Committee to reject this new Clause.
In spite of what my right hon. and gallant Friend has said may occur in certain cases merely by a merger, physical capital assets worth £150,000 may have £200,000 or £250,000 paid for them either in cash—in which case there would be no question at all as to the purpose of this Clause—or in shares. Why do people pay in shares—and they do not give shares away in this world—something more than the mere value of the physical capital assets of the business? It is because the business is something of very much more value to the purchasers than the mere value of the physical assets, and, that is commonly called goodwill. Goodwill often represents the expenditure of a vast amount of money by the company which has created that goodwill by spending it on advertising, on circularising people and on securing custom by means of their travellers and all that sort of thing. A business which a purchasing company buys is not only a physical asset; it is also the result of that money. The so-called inflationary value which a purchasing company pays for shares is not inflationary at all. It is paying just as much for a real asset of the business it requires as for any of the physical assets. I quite agree that there might be cases where that figure is put up to the skies and where it would be improper that you should merely take the figure that appears in the merger agreement as the figure paid for the goodwill, but in a vast number of cases it is genuine, and there is no reason why honest and genuine companies should be penalised because in certain cases there is reason to question the figure. I hope, therefore, that my right hon. Friend will consider whether the present arrangement does not act unfairly to honest purchasers.
The hon. and learned Member for Ashford (Mr. Spens) and the Financial Secretary before him were dealing with hypothetical cases, but we can all produce any number of hypothetical cases. The hon. and learned Member for Ashford suggested that goodwill was involved in a huge purchase price. But a purchasing company might buy out another company in order to get rid of competition, and a high price might be paid to get rid of a competitor who is a thorn in the flesh. Alternatively, there may be a high price paid by a purchasing company because of the high profits which may result in the future. Under the suggestions of the hon. and learned Member future and problematical profits would be immediately brought into revenue via a better substitute standard. I do not see how one can expect the Revenue to search out the various possibilities of motive as to why a particular price is paid for shares.
I agree that it is possible to raise all sorts of cases and that we must be very careful about transactions in the exchange of shares. My Clause was intended to cover only genuine cases, and I could tell the hon. Gentleman opposite of a very clear and specific case where his assumptions proved to be incorrect. I thought, however, that the danger would be avoided by the proviso at the end of the Clause:
"… provided that no greater amount shall be so added than would have been included as purchase to goodwill if the assets less liabilities of that member had been acquired instead of the shares in the member company."
That was the intention of the proviso, and I submit that there ought to be no difficulty for the Revenue authorities in distinguishing genuine cases from bogus cases.
Question, "That the Clause be read a Second time," put, and negatived.
NEW CLAUSE.—(Exempion from death duty in certain cases.)
The estate of any person killed in action, dying of wounds received in action, or killed when on Civil Defence duty, shall be exempt from all death duties.—[ Sir G. Jeffreys .]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
I am aware that in previous Sessions similar Clauses have been moved and have been rejected, but, none the less, I would appeal to my right hon. Friend favourably to consider this proposal as an act of bare justice. Whatever may be said for or against Death Duties under normal circumstances, there are surely no two opinions as to the inequity, and even cruelty, of imposing them on the estates of those who have died for their King and country in the course of doing their duty. Splendid and often young lives are freely given, and a grateful country shows its appreciation of such sacrifices by mulcting the dependants of the deceased with heavy and often crushing Death Duties. What an example of national gratitude and what an encouragement to our fighting men and those who risk, their lives in Civil Defence! The Financial Secretary was a front-line soldier in the last war, and all honour to him for it. He, at least, knows the feelings of fighting men on this subject. They freely give their lives for their country, but they do feel it unjust that the country not only expects the sacrifice of their lives but fines heavily the dependants of those who have made the sacrifice. Although they fear nothing else, they fear for those who are left behind. The pensions given to dependants are, at the best, no more than pittances.
I am aware that estates up to £5,000, under certain conditions, are exempt from Death Duties and that allowances are made for the years by which the deceased fell short of the normal expectation of life, but these, I submit, are only paltry allowances, although they show—and I think this is important—that it is recognised, and must be recognised, that hardship does exist. In spite of these small concessions the fact remains that even moderate-sized estates have to pay heavily. Presumably the yield of Death Duties is calculated on actuarial figures of normal mortality and not on abnormal war mortality. If that is correct and my proposal were adopted, there would be no loss to the revenue of any sum on which the Chancellor has the right to calculate in making his financial provisions. Surely my right hon. Friend is not counting on extra revenue out of the grief of the bereaved and out of loss of life for the country. If not, then surely he is not counting on casualties on a scale of those which occurred, shall we say, at the Battle of the Somme. In the last war I remember a talented officer who used to draw what were called fancy portraits. One of them was entitled "Portrait of a Revenue official studying a casualty list." That official was depicted beaming with satisfaction at what appeared to be promise of gain to the Treasury. Surely, that was only a fancy portrait, and nothing more. Surely, those are not the feelings of the Treasury in considering the prospect or otherwise of casualties, and the consequent Death Duties. If the Treasury have not such feelings, can my right hon. Friend resist this appeal?
I know it may be said that no possible remission of Death Duties could assuage the grief of those who are left behind. That is a fact—it could not—but such grief is very much accentuated by the worry and embarrassment, the forms and lawyers, and so forth, which are associated with assessment for Death Duties. In France, in 1940, a gallant young officer was killed. He was the bearer of a noble name, nobly devoted, and the owner of a great and historic estate. I have before me the announcement that was made in one of the newspapers at the time. It was headed by the name of the estate, and then "Heavy Death Duties." Surely a better headline might have been, "Life given for country—Death Duties remitted." All that I ask for in this matter is equality for all, whatever the estate, in case of death for their country. Surely, those who die for their country should pay no more than their lives, which, after all, is the greatest price they can possibly pay. In moving this new Clause, I do so with the more confidence because I believe that its adoption would be an act of justice and that the remission of these duties could upset no calculations on which the Budget and the financial estimates of the Chancellor may be based.
I am sure that every hon. Member sympathises with the motives which have actuated my hon. and gallant Friend in putting forward this case. Let me assure him at once that the Treasury and their officers are actuated by the same feelings of consideration for all those people who have lost and suffered in the war. We must, however, examine this matter from the point of view of the proposal now before the Committee. My hon. and gallant Friend proposes that the estate of any persons killed in action, dying of wounds received in action, or killed when on Civil Defence duty, shall be exempt from all Death Duties.
I must remind the Committee of the provisions for relief which have been very carefully considered from time to time by the House of Commons, and one of which was altered in a particular respect at my instance a short time ago. I think the provisions that have already been made are ample and generous. The House has made provision for the relief from Death Duties (in circumstances which I will mention in a moment) of the estates both of members of the Forces who die on active service and of civilians who die from injuries caused by the operation of war. The estates of the lower ranks of members of the Forces are completely and unconditionally exempted from Estate Duty if they die in the service of the Crown. In the case of the higher ranks, there is exemption for the first £5,000 of an estate, and a relief on the remainder which is calculated (I should have thought in a fair and proper way) by reference to the shortening of the deceased's expectation of life. This was the subject of many discussions in the House, and I think I can say that the House came to a general conclusion.
Another condition that was laid down—and again, I think quite properly—was that to be eligible for this relief the estate must pass to the widow or near relations. Obviously, that is a condition which must properly be imposed, and which does not find a place in my hon. and gallant Friend's new Clause.
Will my right hon. Friend tells us what is the dividing line between the lower and the upper ranks?
I am dealing with the matter only in a general way, but I will find out the exact definition and let my hon. Friend know. Further, if the estate passes to someone who is himself, in turn, killed on service, or dies in such circumstances as to make his estate eligible for relief, there is complete exemption on the second death. The reliefs granted to the higher ranks of members of the Forces are extended to cover the cases of civilians who die from injuries caused by the operation of war. This was done in a Section of the Finance Act of last year. Therefore, they, too, are exempted as to the first £5,000 of their estate, and they get relief on the balance calculated by reference to the shortening of the expectation of life, again provided that the estate passes to the widow or near relations.
I submit to the Committee that those exemptions were very carefully considered, and that proper conditions were laid down. I submit that in those circumstances the House have done their duty in this respect. This is not a subject on which I would wish to speak too emphatically, but, personally, I could not support a new Clause which granted complete relief, without limit and without any conditions, for the estates of all members of the Services and all Civil Defence workers who die as a result of enemy action. I do not think anyone would say that that would be a reasonable proposition. I think it would go much too far in the case of an impost the fundamental purpose of which is that property passing on death to other people should pay some toll to the State. I think the equitable way of relief, which the House have already decided, is to make allowance for the prematurity of the death by reference to the deceased's normal expectation of life. The present relief not only does this, but in addition grants complete exemption on the first £5,000 of an estate. In those circumstances, I submit that nobody has given more consideration and attention to this matter than the House, and I submit that we have come to a reasonable conclusion. I could not advise the Committee to make a complete exemption of this kind, without any conditions or limitations.
If I detain the Committee for a few minutes, it is not because I dissent from what the Chancellor has said, or because I have not the sympathy which inspired the speech of the hon. and gallant Member for Petersfield (Sir G. Jeffreys). It seems to me, however, that this is one of the clearest instances the Committee have ever had of how sentiment falsely applied leads to real injustice. There is only one way in which the State can carry out its just obligations to the dependants of people killed in its Services, and that is to give an adequate pension to such dependants without distinction of class, party or means. This Clause seeks to play upon the very natural and right sentiments of the country and to do something by a process of class distinction which ought to be done without any such distinction.
The Clause before the Committee amounts simply and solely to a proposal that the country shall grant something extra to those dependants whose need is the least. Most people who died in the Services have no estate. That is how our country has been constituted for a long time. Therefore, their dependants do not get anything. They pay no Death Duty because there is nothing upon which to pay, and the dependants are left to bargain as best they can with the Minister of Pensions, who is hampered by a very narrowly constructed and even more narrowly interpreted Royal Warrant, for such pensions as they may get. The hon. and gallant Member for Petersfield comes along and says that it is all right for people who have no money, but that, if people have money, the State ought then to remit that portion of the property upon which Death Duties are paid. I hope that the hon. and gallant Member will not think I am being unsympathetic or cynical—I do not feel unsympathetic—when I refer to a phrase he used. He said that he wanted equality in these matters, but I suggest that the very worst way to get equality is the way he proposes, and that, if he really wants the State to do the right thing in this matter, he ought to join—I know he does—with those of us who have been pressing the Government for a long time without success to provide adequate pensions for all.
I am sure that my hon. and gallant Friend the Member for Petersfield (Sir G. Jeffreys) will be most grateful to my hon. Friend the Member for Nelson and Colne (Mr. Silverman) for the exordium he has given to the Committee. I should like to say one or two things on that subject, but I am afraid I should be ruled out of Order. I do not think that my hon. and gallant Friend was wholly fair in his remarks. Although a recognised percentage of the Conservative party do not use the argument, it is occasionally put forward in certain circles that the Treasury is a kind of Shylock almost tearing the very entrails out of some dying man in the form of Death Duties. That really is not so. I hold no brief for my right hon. Friend, but he, the Treasury and this House have been at some pains during previous Budgets-to try and devise a fair system for the person deprived of his life by enemy action. I think I am right in saying that we have gone very much further in the matter than did the House of Commons in the last war. You have to balance one thing against another, and it is only fair to mention that there are cases in which, as a result of the new amendments to the law, large estates have actually benefited. Take the case of a young officer who is killed on service. He gets the benefit of the concessions, and his young son succeeds to his estate at a much earlier age than would otherwise have been likely. Speaking as a director of an insurance company, and knowing something about the tables of mortality, it means that the expectation of life has thereby been greatly increased. It may seem very callous to say that, but I think on the whole the Chancellor has dealt very fairly with these cases.
Question, "That the Clause be read a Second time," put, and negatived.
NEW CLAUSE.—(Amendment of Rule 7, Cases I and II, Schedule D, Income Tax Act, 1918.)
In Rule 7 of the Rules applicable to Cases I and II, Schedule D, of the Income Tax Act, 1918, for the words "so much of any amount expended in that year in replacing any plant or machinery which has become obsolete as is equivalent to the cost of the plant or machinery replaced" there shall be substituted the words:—
"the balance of the cost of any plant or machinery which has ceased to be required, otherwise than on a cessation of the trade." Notwithstanding anything contained in sec- tion thirty-nine of the Finance Act, 1941, this provision shall not apply to the computation of profits for the purposes of excess profits tax.—[ Sir G. Schuster .]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
I have to apologise to the Committee for the somewhat untidy form of this new Clause. It had to be altered at the last moment so as to be in Order for a curious reason, which, I think, it is worth while mentioning. If I understand the Rules of the Chair correctly, if one is now to bring forward a proposal which would, in fact, have the effect of extending the list of items which one is entitled to include as expenditure for purposes of Income Tax, one is bound to be out of Order, for the reason that by so doing one might be reducing some taxpayers' standards for E.P.T.—because whatever is applied now has to be applied backwards—and, therefore, perhaps increasing the liability of some taxpayer to Excess Profits Tax. This is a position which the Committee ought to appreciate—for it shows how the existence of E.P.T. acts as a blanket on a great many things which, otherwise, it might be desirable to do.
The object of this Clause is to give effect to a general idea which I have already mentioned, that is, to include as items of expenditure which are allowed as deductions from profits for the purpose of taxation certain items now disallowed. It is an attempt to correct what I believe to be a very serious defect in our present system of taxation. I have already referred to the large number of disallowed items—items which any prudent business manager feels bound to treat as expenditure before he can arrive at what are properly distributable profits. The trader says that he must debit this expenditure to this year's trading account, but the Income Tax authorities say that if he is putting money by for that purpose, he will, in fact, be defrauding the Revenue and piling up capital for years in the future.
The disparity which exists between the two points of view is dangerous. In the present case I am only seeking to include amounts necessary to write off the remaining value of assets which have become obsolete. The present position is that the remaining value may not be written off, unless it can be proved to the Revenue authority that the particular asset has been replaced. That sounds a reasonable principle, but the way in which it is interpreted varies considerably, and in many cases items which from the point of view of the trader represent a replacement are not so treated by the Revenue authorities. For example, in one of the businesses with which I am connected, if we were to close a shop at No. 2, High Street, Croydon, and open another in its place at No. 4, High Street, Croydon, we should not be allowed to treat the shop-fittings at No. 4 as replacements for those which had become obsolete at No. 2. That is a clear and perhaps a trivial case, but there are many others which may have a much more serious effect on industry. I hope that other hon. Members will have something to say on this matter. If expenditure which genuinely, from the point of view of the person running a business, represents replacement of an asset is regarded by the Revenue authority as a new expenditure, then no allowance is made for writing off the remaining value of the obsolete asset.
The point which I want to emphasise is that the result of all these differences of view between the Revenue authorities and sound commercial managements is really very serious with Income Tax at its present level. If one feels it necessary, as a matter of sound commercial management, to set aside a sum of money to meet what is really an item of expense or an item of loss, and, if that item is not treated as a legitimate expenditure for Revenue purposes, the amount has to be provided from revenue which has borne tax. Let me demonstrate by a simple example what high taxation means. If, with Income Tax at 5s. in the £, I have to apply £150,000 for items of that kind I have in effect to earn £200,000 gross profit in order to give me the £150,000 less taxation. When, however, Income Tax is raised to 10s. in the £ I have to earn £300,000 to provide £150,000 less tax. But with Excess Profits Tax sitting on top of one it is impossible to earn that extra £100,000. I am giving figures which represent without exaggeration an actually existing situation. I have often urged on my right hon. Friend that the present system of taxation really involves the danger of leading to unsound business practices, and I submit that it is a matter which needs serious review.
I have felt personally for many years that trade and industry suffer unduly during times of depression because of the miserably parsimonious allowances for depreciation and wear and tear. The other day I congratulated a friend of mine, a director of a well-known engineering firm, on the fact that during the last year it had made nearly £300,000 profit, and said it had, done very well for its shareholders. He replied, "No, we have not. Our standard of profits is £100,000, so that £181,000 will go to Excess Profits Tax and £50,000 will go in Income Tax and a certain amount of the residue will go in Surtax, and only some £25,000 or £30,000 will find its way into the pockets of the shareholders." He said their difficulty was that they were working their machinery 24 hours a day for six days a week, it was going down in value, and there were not the sums available to carry out replacements when the time came. I feel that if the Revenue authorities had been more generous millions of pounds' worth of machinery would have been scrapped, which would have caused a great improvement in trade in bad times because of new purchases to replace it. If this Clause is accepted there will undoubtedly be at the earliest possible moment the scrapping of a lot of machinery, which will provide a lot of scrap metal, which is wanted. I am satisfied that this proposal would help industry enormously by providing work in the manufacture of new machinery and would also help us to get on our feet in regard to being equipped with the latest and best types of machinery in order to fight out industrial war in the future successfully and efficiently.
I should like to follow on almost where my hon. Friend has left his argument. The charge is very often made against British industry that it is antiquated and unprogressive. In many ways this question of depreciation and obsolescence is responsible for that charge. The method of allowing depreciation and obsolescence allowance in the majority of cases is very unfair. I think most manufacturers would tell the Chancellor of the Exchequer that the allowances are never enough, and I do not think I am telling him anything new in telling him that. There is no allowance unless the machinery is replaced. It may be sold, but industry by and large does not consist of second-hand machinery merchants, and manufacturers must get the best and most efficient machinery for the job. Again, in a war-time period much machinery has been stored or set on one side. If it is sold, probably at a loss, no allowance is granted. If this proposal were accepted, much machinery which has been stored and has depreciated would be sold for scrap for manufacture generally. I hope the Chancellor will help industry by accepting the Clause.
While I am not binding myself to the words of the new Clause, I think that the Chancellor will, in the near future, be compelled seriously to consider the whole question of depreciation and obsolescence of plant. No one will dispute that the future of the country depends on its steady capitalisation and an increase per head of the capital value of plant. In the past, the growing capital of the country was provided by personal savings, but for many years now the rich have not been in any way adding to the accumulated store of capital. The rich have, in fact, no longer any raison d'etre whatever. One important source of the increased capitalisation of the country has been the building up of reserves by industrial companies and the replacement of obsolete machines by modern machines which may not affect their balance sheets. We have to realise that the capitalisation of the country is becoming more and more dependent on the building up of reserves by industry and that the rapid increased capitalisation of the country is important for our future.
Sooner or later the Chancellor will be well advised to put some premium on the scrapping of machinery and its replacement by the most modern types, even if it involves some subsidy arrangement in his depreciation and obsolescence allowances. If a machine has been written down to 50 per cent. of its original value, the obsolescence of that machine is another 50 per cent. if it is scrapped. Why should not a certain percentage of the value obtained for that machine be disregarded in the obsolescence calculation, so that the sooner the machine is scrapped the bigger will be the percentage of the value which the Chancellor collects and, therefore, the bigger the amount he allows for depreciation and obsolescence? We want a system of obsolescence and depreciation which will put a premium on the scrapping of a machine long before its real life is ended. That is important because of the greater and greater percentage of new capital and development capital which our industrial reserves now supply.
I hope that the Chancellor has been impressed by the unanimous opinions from all quarters of the Committee in favour of the new Clause. This is his opportunity to do something on these lines because it will not cost him much at the present time. The trouble with the system of allowing for obsolescence in the past has been that it has put a premium on keeping in industry machines that were doing the job although they were not the most efficient machines to do the job. Because they had not reached the position in which they were sufficiently written down, the whole of the loss would have had to be borne by the owner of the business. Take the case of a factory driven by a large steam-engine which has been written down 50 per cent. The trouble with the Inland Revenue is that they interpret this thing so narrowly. Suppose the owner of the factory decides to change the motive power and, instead of having one large engine, has independent motor drives to the various machines throughout the factory, the Inland Revenue authorities will make no allowance for obsolescence. If, on the other hand, he decides to put in something which is more economical in fuel and steam, but keeps the steam engine, he can claim the full obsolescence allowance. Such a position does not seem to me to make sense.
What does the owner of a factory do in practice? He takes the belt off the old steam engine and puts in the modern method of independent power and calls his old engine a standby plant. He continues to claim wear and tear on that engine for ever on a constantly decreasing written-down value, and the Chancellor is happy to allow him to do so. If he wants to clear the engine out and tidy up his factory and utilise the floor space, down come the Inland Revenue with their narrow interpretation, and say, "We cannot allow it." No plant will be changed in war time unless it is either finished for ever or otherwise cannot be used. Nobody can buy new machines at the Chancellor's expense because they have to get a supply licence. I hope that if the Chancellor cannot accept the new Clause—and I do not see why he cannot—he will give some assurance that before the next Finance Bill is introduced—and we are all sure he will introduce it—he will take counsel, as he does in other matters, with industrialists and Members of the House, and decide what is the best way of dealing with this problem, which has been neglected for far too long.
I hope that the Chancellor will not respond to the appeal that has just been made to him. I may be dull, stupid and ignorant about these matters; I am not a financial expert or industrialist; and, therefore, I must crave the indulgence of those who are. I confess I do not understand the arguments that have been addressed to the Chancellor in support of this new Clause. The great bulk of them have totally omitted from consideration that we are at war. All the arguments about depreciation of machinery, claims in respect of it, and encouragement to people to replace their machinery with better and newer machinery earlier than they otherwise would, have no relevance to the conditions in which we are living. I suggest that the depreciation which people are crying to be allowed for does not exist. Financially the machinery is appreciating rapidly.
The difficulty in which people will find themselves in replacing machinery will be a financial difficulty only to a very small extent. Their difficulty, either now or after the war, will be a market difficulty, not a financial one. They can be given as many allowances as it is possible to give and they can pile up as much financial reserve as they like, but they will not be able to buy another cog until the world is able to produce in the markets. The more money they pile up in order to compete with one another for the supply of new machinery in these conditions—a very limited supply—the more they will pay for the quantity they will get. The quantity will not increase at all. It is purely inflationary. If all these allowances are granted every industrialist with a claim to them will make it, they will all get the money, and then all of them will be competing with one another for things which are in very short supply. What will be the result? New machinery? Obviously not. This prob- lem is being dealt with as though it were a financial problem, but that is not the case. An hon. Member behind me who has since left the Chamber said, "You must do it in order that when the war is over we shall be able to fight." But when the war is over who is it whom we are going to fight? What he evidently had in mind was that at the end of the war We were to resume the international rivalry that largely brought about the present war. It really is a terrifying prospect. I cannot see that the case for the Clause has been made out, and I hope that the Chancellor will resist it.
The speech of the hon. Member for Nelson and Colne (Mr. Silverman) is a challenging one and I should love to spend the rest of the Sitting dealing with the points which he raised. I cannot do that, but I do support what is behind this new Clause. It is just another instance of where the 100 per cent. Excess Profits Tax really comes into the picture. During the discussion of the Budget Resolutions I referred to many points that were arising from the effects of this 100 per cent. E.P.T. upon industry and agriculture—in passing I would point out that this new Clause applies just as much to the agriculturalist as to the industrialist—and I suggested that there were very great difficulties in dealing with the matter in this House. I foresaw the points of Order that have been arising all day and I suggested that it would be desirable for the Government to appoint an expert committee to consider the effects of 100 per cent. E.P.T. on both industry and agriculture. We could refer to that committee all the complaints and new Clauses submitted here to-day, which have all met with the answer that nothing can be done because it would infringe the sacred principle of the 100 per cent. E.P.T. That committee would then present a report on which Parliament could take such action as it thought proper. I do not want that suggestion to be entirely forgotten, and I hope the Chancellor will consider it if he is going to reply, because one of the reasons why he cannot accept the Clause is that it infringes the sacred principle of the 100 per cent. E.P.T.
We have had, I think, a useful discussion, though it has been more upon the general principles than upon the proposed new Clause. First I should like to say a word upon the practice of the Inland Revenue authorities and then upon the exact proposal which is put forward in the Clause. In the end we always have to get back to the Clause, although it has been interesting to hear the number of speeches made which have had so little reference to the actual proposals before the Committee. I have had a good many interviews and talks with people during the last two years, and I do not think it is accurate to say to-day that the Inland Revenue authorities adopt a narrow interpretation of the obsolescence provisions or insist upon the replacement of machinery by machinery of the same kind, although no doubt exceptions may be found here and there. It was announced during the discussions on one of the Finance Bills a short time ago that the Inland Revenue authorities would in future be more liberal than they had been in the past, and I believe they have endeavoured to honour that undertaking by giving a wider and more generous interpretation of the obsolescence provisions. It may be that my hon. Friends have come across cases in which they think a wider interpretation should have been given, but I ask them to put themselves in the place of the authorities who have to hold a fair balance between all the considerations. I need not designate the particular body who came to see me the other day, but they did acknowledge that a much wider view had been taken.
As to the actual proposal of my hon. Friend, I do not think it is one which the Committee would be prepared to adopt, especially in the light of actual circumstances. This Clause has been submitted on many occasions but has always been rejected, because the exact proposal in it is that an obsolescence allowance should be made irrespective of whether the obsolete plant or machinery is replaced, thus setting aside a condition which I should have thought was not unreasonable. The proposal of my hon. Friend is objectionable in principle. The allowance under the existing law is an allowance related to expenses actually incurred in the year of account, and is not materially different in principle from the "renewals" allowance which is granted where the tools of a business are replaced. The allowance which my hon. Friend's Clause would give would be granted irrespective of any outlay in the year, and would be given where what has really happened is that a portion of the capital equipment of the concern has ceased to be used for one reason or another and has been discarded. It would thus, in fact, infringe the fundamental principle of the Income Tax, to which we must all adhere, that capital expenditure is not allowable as a deduction in computing profits.
Nobody has mentioned to-day—I hope it is not because they do not know of it—that the present proposal would, in effect, apply only to plant and machinery provided before 1st January, 1937, because as a war-time measure—there are special reasons for that—provision has been made for the allowance of obsolescence in respect of plant and machinery provided after that date without any condition as to replacement. The reason why we are making that exception is obvious. It is a war-time concession, which ought not to be taken as a sort of jumping-off ground for a general concession, such as is now suggested. The primary justification for that war-time provision is that trades are commonly called upon to instal plant which is not required in peace-time conditions. That is why that variation is made.
My hon. Friend's statement was very largely dependent, not upon the exact provisions of the new Clause which he proposes, but upon the interpretation by the authorities of the law as it now exists. I listened very carefully to his statements, as I always do. I think that the matters raised in his speech were more concerned with the interpretation, rather than with the alteration, of the law. The Committee will see that alteration could not possibly be accepted for the reasons which I have given, and which have always been accepted by the Committee whenever this proposal has been made. My hon. and learned Friend asked whether conferences could not take place between the Inland Revenue and other people affected, to consider whether any justifiable step could be taken. I could not have a conference of that kind, which would be allowed to affect the Revenue, the returns from E.P.T., or the principles which have been adopted by the House of Commons in connection with the Excess Profits Tax. That is a matter which I must reserve to the House of Commons and the Chancellor of the Exchequer. If it is simply a matter of clearing up difficulties which have been mentioned, I might well consider it, and perhaps some useful purpose might be achieved.
I am going to ask leave of the Committee to allow me to withdraw the proposed new Clause. I have had three shots at my right hon. Friend, and now I have at least got something out of him. His assurance that it is his intention that these provisions should be interpreted in a sensible way has gone a very long way to meet my point. I want to make only two short observations. First, I would like to pay a tribute from my own experience to the work done by the Income Tax inspectors. I have always found them extremely helpful and very hard working, but they suffer under a difficulty because of the vagueness of some of these provisions. One finds different interpretations by different inspectors.
The second thing which I want to say is that there must be available at Somerset House and among all the people who are working on these matters an enormous body of extremely valuable information. When I have argued with them, for example, that the provisions for depreciation and so on ought to be more liberal than they are, that industry is suffering from this deficiency, and that most people want to provide more than is allowed by the Revenue authorities, I have been told at Somerset House that the reverse is the case, and that most people try to deduct from their profits by way of depreciation allowances, amounts which are less than are allowed by the Revenue authorities. I should very much like to know the truth of that on matters of that kind. I venture to put the point to my right hon. Friend that there must be available, in that great body of knowledge which those people have of the way in which industry keeps accounts, in-formation of vast interest which could be put together in a very informative report for the public and for this House. I particularly emphasise this point now because we are moving towards times when—whatever may be the result of this war—public controls of business will increase. In such conditions it will be of great importance that the public should have a clear knowledge of the way in which business is carried on. On that the Inland Revenue authorities can throw a great deal of light. I beg to ask leave to with draw the Motion and the proposed new Clause.
Motion and Clause, by leave, with drawn.
Schedules 1 to 4 agreed to.
FIFTH SCHEDULE.—(Entertainments rates of Duty)
I beg to move, in page 29, line 18, to leave out "5d.," and to insert "6d."
I do not think there is any need for me to give a long explanation of this Amendment, which deals with the Entertainments Duty. The Committee will recall that I told the House during the Second Reading of the Bill that we had had a number of conferences with representatives of the theatre and cinema industries, with a view—at any rate on my part and I think on theirs—to coming to some reasonable arrangement as to the way this Duty should be applied. I was anxious, so long as I was able substantially to obtain the revenue that I desired, to fit in with the needs and requirements of these industries, and particularly to arrive at some reasonable figures which would give a rate of admission to certain seats which would be applicable to the public and would be recognised as convenient. Simply doubling the duty as was at first proposed would have meant very awkward amounts for a number of seats and would as a matter of practice have been most difficult to operate.
This Amendment and those which follow are devised to meet the requirements of the theatres and the cinemas, and have been generally accepted by them. As a result of this imposition I hope not only that I shall obtain the duty, but that there may be certain restrictions in consumption; but I have no intention or desire to deal the theatres and cinemas a blow from which they cannot recover. Happily, there is no prospect of that taking place. From such information as reaches me, the living theatre is doing very well at the present time, and the cinemas, as I see on the very infrequent occasions on which I regret to say I can go, seem to be doing very well also. I do not want to do anything to make things awkward for those two industries or for their patrons, and that is why I have made this very minor adjustment for their convenience, which I would ask the Committee to accept first.
On behalf of some of the people concerned, I should like to thank the Chancellor of the Exchequer. As he has explained, this is rather a matter of machinery than of finance. The arrangements which the Amendment brings into force are for the benefit of all concerned. I must say that I should be tempted, in other circumstances, to put down some reductions in this proposed tax, but one realises the object of the tax at the present time and one does not feel that one can in any way resist the tax, having in view the purpose for which we believe it has been imposed. At the same time, I hope that this is a purely war-time measure and that, when the war is over, the entertainment business generally will not continue to suffer from the very high rate of taxation now being imposed upon it. I express that hope not merely because of my interest in the business, but because I do not consider that it is desirable in normal times to put a high tax on what I believe to be a healthy form of entertainment.
Amendment agreed to.
Further Amendments made:
In page 29, line 19, leave out "5d.," and insert "6d."
In page 29, in line 31, leave out "1s.," and insert "10d."
Leave out "6d.," and insert "5d."
At the end, insert:
"exceeds 10d. and does not exceed 1s. 6d."
In line 34, leave out "2s. 2d.," and insert "1s. 11d."
Leave out "1s. 2d.," and insert "1s. 1d."
At the end, insert:
"exceeds 1s. 11d. and does not exceed 2s. 2d. 1S. 2d."
Leave out lines 37 to 42, and insert:
"exceeds 2s. 11d. and does not exceed 3s. 5d. 2S. 1d. exceeds 3s. 5d. and does not exceed 3s. 11d. 2s. 6d. exceeds 3s. 11d. 2S. 6d. for the first 3s. 11d. and 4d. for every 6d. or part of 6d. over 3s. 11d." —[ Sir K. Wood .].]
Schedule, as amended, agreed to.
SIXTH SCHEDULE.—(Provisions as to justices' licences, and certificates under the Licensing (Scotland) Acts, 1903 to 1924, in suspense by reason of war circumstances.)
I beg to move, in page 33, line 9, after "thereof," to insert:
"in relation to a refusal of licensing justices to grant an application under paragraph 8 thereof."
Clause 10 of the Bill, and this rather complicated Sixth Schedule, provide for the temporary suspension of justices' licences where premises have been damaged by enemy action. The second paragraph of the Schedule provides the mechanism whereby suspended licences may in due course be revived. The licensee must submit plans to the justices for rebuilding the premises, the justices must approve the plans, and the work must be carried out to their satisfaction. Under paragraph 6, it will be observed, where the war situation no longer justifies the suspension of the licence the justices may direct the extinguishment of the licence unless the approved works are completed within a specified time. Against all these decisions of justices, paragraph 13 gives an appeal to quarter sessions. The Amendment which I am moving includes, as a possible subject-matter of appeal from justices to quarter sessions, a refusal by the justices to extend the time fixed by them for approved works of reconstruction to be completed. It is only reasonable and logical to include this added safeguard against a possible extinguishment of a licence through some misfortune overtaking the licensee.
Amendment agreed to.
I beg to move, in page 34, line 41, at the end, to insert:
"and in a case in which it is certified that the war circumstances included the destruction of the premises or serious damage thereto, no regard shall be had for the purposes of this paragraph to the condition of the certificated premises."
This and the succeeding four Amendments on the Order Paper are necessary because of the fact that there is a variation in the licensing laws in Scotland as compared with the licensing laws in England. The Amendment that I am moving now is a drafting Amendment to make clear that in considering application for renewal of certificates in suspense under paragraph 9 of the Schedule, which is peculiar to Scotland, the licensing court will not be able to refuse the renewal merely because premises are destroyed or damaged and therefore unsuitable. Under the ordinary provisions of the licensing laws as to the renewal of certificates, which are applied by paragraph 9 to certificates in suspense, the court must satisfy itself that the premises concerned are suitable to be used as licensed premises and objection to the grant of renewal can normally be taken on general grounds, grounds which are unspecified in the Scottish Licensing Act but which presumably include the grounds that the premises are unsuitable. The Amendment makes it clear that, in considering applications, the court should not take account of the fact that the premises have been destroyed or damaged, but it will not limit the discretion of the licensing court to refuse a renewal on other grounds, namely, the unsuitability of the certificate holder, or for the reason that there are too many licensed premises in the district.
Amendment agreed to.
I beg to move, in page 34, line 44, at the end, to insert, should never have taken his original premises but should have requisitioned the alternative premises.
But it is possible that the only alternative premises in certain districts may be smaller than the original premises and, though suitable for carrying on a reduced trade, would not be suitable for the requirements of the requisitioning authorities.
Amendment agreed to.
Further Amendments made:
In page 35, line 2, after "authorised," insert "unless."
In page 35, In line 3, leave out "unless."
In page 35, In line 22, after "Schedule," insert:
"and in relation to a refusal of a licensing court to grant an application under paragraph 8 thereof."—[ Mr. Westwood .]
Schedule, as amended, agreed to.
SEVENTH SCHEDULE.—(Purchase Tax.)
Motion made, and Question proposed, "That this be the Seventh Schedule to the Bill."
I merely rise to ask the Chancellor to make a short explanation with regard to the silk and woven fabrics to which I referred on an earlier occasion. I understand that the Chancellor has good reason for keeping these in the present form. Perhaps he will be good enough to give an explanation.
The first point which my right hon. Friend made refers to garments and clothing made partly of silk. The first observation I would make is that the release of silk in the manufacture of clothing and cloth for sale in the piece is now generally prohibited, so that in fact any articles of clothing made of silk or trimmed with silk ribbon which are caught by the increased tax will be confined to those manufactured from the small stocks of minor accessories or silk fabrics still in the hands of the makers. I understand that very few complaints have been received on this account, though there have been a number of representations with regard to stocks of hats with silk linings or silk mixture ribbons, worsted suitings containing a few strands of silk, and gold lace for naval officers' uniforms and badges.
There has been a suggestion of a statutory exception for all articles containing less than 5 per cent. of silk by value. It would be extremely difficult to work that in practice. It would create a number of anomalies, and the position has been met by disregarding silk in small quantities in the form of utility stitching and binding, etc., but not, of course, ornamental silk trimmings or embroidery. For gold lace on naval officers' uniforms a similar concession is made. With regard to the second point, woven-figured fabrics, I understand that the majority of these fabrics are expensive furnishing materials, but the tax also applies to certain woven dress fabrics which have a definite pattern produced by weaving and some of these are less expensive. Clothing made up of such fabrics is not liable to the increased tax. The increase will apply only to fabrics when still in the piece or when made up for furnishing. The stocks held by retailers on 15th April are not affected. Some woven-figured rayon dress fabrics are included in the range of utility cloths, and the part of those stocks still in the piece and conforming to utility specification will be exempted if duly branded. The wholesale textile trade have represented that pending such exemption wholesale stocks of these fabrics will be frozen or diverted to makers-up. I understand that the position of these utility fabrics is being examined by the Board of Trade. It appears at present unlikely that any appreciable quantity will be available for sale to retailers in the next three months. I hope the thirst of my right hon. Friend for information is satisfied. Those concerned in the trade will be able to read my statement in the OFFICIAL REPORT. I hope that it will be of some use to them.
Schedule agreed to.
Eighth and Ninth Schedules agreed to.
TENTH SCHEDULE.—(Provisions for simplifying the machinery of assess ment, collection, etc.)
I beg to move, in page 40, line 27, at the end, to insert: I expressed my opinion of the Tenth Schedule when we were discussing Clause 41. It was a very contemptuous opinion. I put down this Amendment in the hope that the Chancellor will accept it and thereby go still further in simplifying Income Tax machinery and getting rid of a lot of extremely wasteful and unnecessary work. The proposal is that a surveyor, who is now known as an inspector of taxes, shall act as an additional Commissioner or as assessor, if so requested, by the local General Commissioners. An additional Commissioner, like an assessor, has no real function in our Income Tax machinery. The duties are entirely nominal and for the most part consist merely of signing assessment books or signing assessment notices. The assessor particularly is a sinecure position the duties of which in certain places in this country, such as Manchester, are carried out by some minor employee in the inspector's office.
I suggest, that in order to prevent the books of assessment being taken away from the inspector's office at the busy time of the year to have them signed by the additional Commissioner or by assessors, the inspectors themselves should be allowed to act as assessors or additional Commissioners where so requested. In Ireland, for instance, all inspectors do the duties of the additional Commissioner, and if that can be done in Ireland without any infringement of the liberties of the citizen it can be done here. If, in Manchester, some minor employee of the Inland Revenue can act as assessor, it is perfectly safe to allow an inspector to act as an assessor anywhere, particularly if one has the safeguard contained in my Amendment that he shall only do so when requested by the General Commissioners. They will save work; it will remove, at any rate, some of the necessity for taking away his instruments of trade from the inspector—that is, his books of assessment—at the busiest time. I hope the Chancellor will accept the Amendment.
We have come almost to the end of our proceedings, and it is a matter of gratification to me that my hon. Friend, who has assisted so much in our discussions, should have a subject which he thoroughly enjoys for the last little bit of the way. My hon. Friend, as we all know, has made a special study of this matter, and he can speak with authority, no doubt, of what he thinks is desirable, as far as the Amendments on the Paper and other proposals which he has very much in mind are concerned. He has spoken with conviction about his proposals, and I hope that that will give him some measure of satisfaction. But if I embarked upon the task of putting his proposals into effect, it would not be so enjoyable from my point of view. He has made a highly controversial proposal which has been a subject of discussion in the past, and which the local body of Commissioners, I am afraid, would strongly oppose. Therefore, I cannot look upon it is an agreed proposal, or as one likely to be accepted without a good deal of controversy.
I have endeavoured to deal with the severely practical side of the situation, and I have put forward those proposals on which it has been possible to obtain agreement. In time of war—perhaps because of the war—we have been able to come forward with a number of practical suggestions, which are not perhaps so extensive as my hon. Friend would desire, but which are, at any rate, very real proposals. This Amendment involves one of those matters which stir people and create a great deal of controversy. If I had embarked upon proposals of that kind, I should not have been able to put an agreed Schedule before the Committee. I ask my hon. Friend not to press the matter further, accepting it from me—as I know he will—that this Schedule represents the utmost I could attain by general agreement.
Of course I will withdraw this Amendment, but I should like to emphasise the last remarks of the Chancellor, that he has given us all he could get by general agreement. The clerks to Commissioners have stood pat on all their old archaic privileges; they still retain the right to delay and muddle and muck up the whole work of the inspectors of Income Tax, at the busiest period; and they have refused, despite the war, despite the immense strain put on the Inland Revenue, to give up one single privilege. Not a single item in the Schedule touches their privileges. They have given nothing away. They are perhaps the one body in the community who have taken that line.
Amendment, by leave, withdrawn.
I beg to move, in page 41, to leave out lines 42 to 46.
This is another attempt to help the Chancellor, one of those attempts for which he seldom seems grateful. Here again, we are up against the rigid insistence by this archaic body on their privileges. In 1930 the right to appoint collectors of Income Tax was taken out of the hands of the Commissioners—which really means the clerks to Commissioners—in every part of the country except London, where they retained all their old privileges. In order to maintain the efficiency of the collection of taxes, the Chancellor in this Schedule has laid it down, as it were, that the collector at Manchester should be able to collect Income Tax from people on his books even where they have moved to different places. Obviously, that is far simpler than for the collector to have to pass on the power to some other collector. But London, where you have the old archaic system of the clerks to Commissioners having their fingers on the collection machinery, is put inside a wire cage; and no outside collector can come into London following one of his own taxpayers. He has to go through various steps to maintain this little private privilege for London. This Amendment enables the Manchester collector to collect from a taxpayer who has moved to London, just as he could from a taxpayer who has moved to Sheffield, Rotherham, or Doncaster. I am trying to help the tax collectors of London, because not only is their tax-collecting system ancient but the tax collectors themselves are ancient. Of the 21 collectors in London at the beginning of this year, 10 were over 70 and three were over 80.
We are all getting older.
Not at that rate.
Yes, at the same rate.
The London collector is not what a collector in the provinces is supposed to be. These elderly gentlemen of 70 and 80 hold sinecures, and the work is done for them by collectors paid by the Inland Revenue. Until the London system is broken down and brought into consonance with that of the rest of the country, you will have this type of sinecure appointment, with gentlemen of 70 and 80 drawing their sinecure salaries, to the detriment of the Inland Revenue machinery. I have heard that some of these gentlemen were retired on 6th April—not retired altogether, but retired from being collectors. They have now been made assessors. So the right of the clerks to Commissioners in London to their patronage appointments has been maintained. It is rather disgraceful that these privileges, which are a hindrance, as I said before, should be maintained by this group of people, and it is rather a disgrace that the Chancellor has not had the courage to come down and crush these privileges.
I feel that my hon. Friend would not have made the charges that he has made unless they were serious. If these antiquated gentlemen are drawing these salaries for work which they are not doing, the sooner the Select Committee on National Expenditure inquires into the matter, the better. I propose to ask the Chairman of that Committee to call a meeting very shortly, to inquire into it: It is no use the Chancellor of the Exchequer saying that it is difficult to deal with such a matter during the war: it is not difficult. If these gentlemen are of no use, let them be disposed of, by a stroke of the pen, under the Emergency Powers Act. If what my hon. Friend has said is true, the position is perfectly intolerable.
I think that this is making a mountain out of a molehill. I find it very difficult to see why the hon. Member for Chesterfield (Mr. Benson) gets so heated when he talks about a privilege which is a sinecure. And in reply to the Noble Lord, I would say we have nothing to do with these collectors. They are the servants of the existing London Commissioners.
They ought not to be under these useless people.
There are many useless people in this world, and it is not the duty of those in charge of the Finance Bill to go looking for them. The point which the hon. Gentleman raises is a very small one. This Schedule, as my right hon. Friend has said, is intended to simplify certain of the formalities that at present clog the machinery of assessment and collection. It deals with some of the smaller problems which clog the machine in war-time. I said something about that on the Second Reading of the Finance Bill. There are, for instance, the difficulties of travel and of man-power. As a result of this Schedule, such steps as can be cut out will be cut out by agreement with all the parties concerned. This House is never very satisfied when one says that something has been done by agreement. The whole system under which Income Tax arises is very deeply rooted in our history, and it is not a thing which, in the middle of the war, one can uproot and replace by an entirely different system. It is inherent in a good deal of what my hon. Friend said the other day, and I would only remind him of the position of the collectors inside the City about which he waxes so eloquent. He may have forgotten that the arrangements under which the City of London Commissioners are in control and appoint collectors inside the City was laid down under Section 37 of the Finance Act—I hope he will note the year—of 1931.
I quoted that Act.
That was the year when possibly the hon. Member had even more influence than he has to-day upon the drafting of the Finance Bill. We must ask the Committee to do what they did on the previous Amendment—accept the fact that this is the result of arrangement and agreement of all parties concerned and is an instalment towards the better collection and assessment from the point of view of the machinery of Income Tax.
It is obvious from the speech of the right hon. and gallant Gentleman that this is an old-standing scandal and one of many which exist owing to the anomalous and particular position of the City of London. This House has always allowed them to be mediaeval and anachronistic. I hope that this matter will be gone into and dealt with after the war.
The last time that this particular problem was discussed in this House was on the Finance Bill of 1931, when this distinction was accepted.
Amendment negatived.
Schedule agreed to.
Eleventh and Twelfth Schedules agreed to.
Bill reported, with Amendments; as amended, to be considered upon the next Sitting Day, and to be printed. [Bill 29.]
Business of the House
I beg to move,
"That the Proceedings on Goverment Business be exempted at this day's Sitting from the provisions of the Standing Order (Sittings of the House)."
I move this Motion in order that there may be time, otherwise there might possibly not be, to get the Second Reading of the Anglo-Venezuelan Treaty (Island of Patos) Bill, which it is urgently required to pass.
Question put, and agreed to.
Pensions (Mercantile Marine) Bill
Order for Second Reading read.
I beg to move, "That the Bill be now read a Second time."
This Bill marks an important alteration in the position of members of the Merchant Navy and other seafaring persons under the Government scheme for compensation for disablement or death. It will be within the recollection of the House' that I brought forward a Bill for dealing with these members of the Merchant Navy some time ago and that I then stated that if in the light of experience I felt it was necessary to make amendments and improvements, I would bring forward a further amending Bill before the House. That is the reason why this Bill is before the House to-day.
It was recognised at the outset of the war that merchant shipping would be especially subject to enemy attack, and, therefore, it was considered proper that in cases where disablement or death was caused by enemy action, officers and men of the Merchant Service should have compensation on the lines laid down for officers and men of the Royal Navy, between which and the Merchant Navy there has always been the closest association. Awards in the past have been graded according to the rank in which the seaman was serving when he was injured or killed, and seamen in this respect were distinguished from the ordinary civilian whose war compensation is on a flat rate basis. Experience has shown that it is not only where "enemy action is involved that the Merchant Service merits comparison with the fighting Navy. Even where the enemy does not always attack, it was felt necessary to take special measures in order to minimise danger. For instance, ships are ordered to sail in convoy, lighthouses and other navigational lights are extinguished, and broadcasts, which would normally warn ships of special danger, such as recent wreckage, are cancelled. These measures sometimes result in substantially increased risks of collision, strandings and other marine perils, and the main purpose of this Bill is to bring within the full Government scheme cases where disablement or death results from these increased risks.
At the same time the scope of the Government scheme has been widened in other directions. Hitherto, the position has been that an award on a specially graded basis could be made in the case of a person employed in the seagoing service of a British ship and injured either while in the service of a ship or while travelling by sea or air to and from service or while on leave from a ship at a foreign port. Many representations were made in regard to this particular matter, and under this Bill, in addition to those cases, a person will qualify if, for instance, he is a seagoing man doing relief duties on a ship in port in the United Kingdom or travelling by sea as a passenger to and from a manning pool or held up by reason of sickness or some other cause beyond his control. I think hon. Members will realise that this is a duty which the Government ought to assume. British subjects on foreign ships chartered by the Government and in special circumstances British subjects on other foreign ships are also made eligible under this scheme. This, I am satisfied, will remove what has been a serious grievance as regards men who have taken service in ships or helped in the national effort on a ship not British owned. The Government scheme for compensation for the loss of effects is similarly extended so as to be kept in line with the scheme for disablement or death.
The Section of the Bill dealing with pilots and apprentice pilots provides that those whose normal occupation is pilotage shall qualify for compensation on a specially graded basis. The conditions which must be fulfilled at the time of injury are also recast, but nothing new in principle is added. I want to make it quite clear that we have not altered the principle. We have tried to amend the scheme so that cases brought within the scope of the Government scheme for compensation for disablement or death are removed from the field of compensation at common law or under the Workmen's Compensation Act. I think it is recognised that where the Government are undertaking certain compensation schemes it is only right and proper that we should relieve the owners of vessels from their liability, because the Government realise that these special schemes must be brought into being because of the special circumstances of the war. The Bill is retrospective, in that any case which has already occurred may now be considered in the light of the provisions in general but in effect from the date of the passage of the Bill.
I cannot say too much by way of tribute to the men of the Merchant Navy and our fishermen, to whom these provisions, I am glad to say, also apply. I feel that what is provided for in this amending Bill is only the just due of the men who are doing this gallant service, and I wish to say here and now that if in the light of experience I find that further improvements can be made, I shall not hesitate to come to the House and ask them to grant that privilege.
I feel that the whole House will wish to join with the Minister in the tribute he has paid to the men and officers of the Mercantile Marine and those who are serving in our fishing fleets. They have served the nation faithfully and well; they have endured sacrifices and borne the burdens of the battle, and there is nothing this House can do that is in any respect a full reward for the services they have rendered to the nation. This Measure is belated, but it has the advantage of being retrospective in its effect, and consequently no complaint can be made on that score. Although I am naturally suspicious of Government legislation, I find after close scrutiny that there are no substantial defects in this Bill. All I propose to do, therefore, is to endeavour to elucidate some points that are embodied in the Measure and to say something about the scale of compensation. I find that in Clause 2, Sub-section (2, c ) there appears to be some exclusion, in the following words:
Thirdly, I wish to direct attention to Sub-section (2, e ) of Clause 2. This seems to me to be a substantial point which requires elucidation. As I understand it, the provision is that officers and men of the Mercantile Marine, while in course of proceeding from the vessel on which they are employed to some other place, or from some other place to the place where the ship is, shall be duly compensated in the event of any accident occurring. But there is an exclusion here. The provision states: means. For example, suppose that men have signed on articles in Liverpool, and having been signed on, have to proceed to Southampton or Glasgow or Newcastle, or any other port in the United Kingdom, to join the ship. If in the course of the journey a man is injured, does he come within the scope of the Bill? If not, it seems to me to be a defect. After all, once a man signs articles he is in the employment of the company who are responsible for the management of the vessel. His pay does not necessarily begin from the day on which he signs the articles, but having engaged himself to a shipowner, or it may be to the Ministry of War Transport, he is in their employment, and if he meets with any accident in the course of proceeding from his home port to the place where the ship is situated, clearly he ought to come within the scope of the Measure. This applies also to the men engaged on coastal vessels. Frequently it happens that men on coastal vessels, when the ship is in dock, have to go ashore to purchase their stores.
As is known, there is a difference between the men on coastal vessels and the men employed in sea-going vessels, because on sea-going vessels they are provided with stores by the owner of the ship. Men on coastal vessels purchase their own stores. There are exceptions, but in the majority of cases they provide for their sustenance out of their own wages. Frequently they are required to go ashore, either in their home port or in some other port in the United Kingdom, to purchase what they need. If a man happens to be knocked down on the dockside, or when he is passing through dock sheds, and dies as a result of the accident, does he come within the scope of this Measure? It seems to me that, if this Measure is to be effective and fully to safeguard these men, my right hon. Friend might give the matter further consideration, if my assumptions are correct.
So far I have elucidated some points which have occurred to me in regard to the conditions of men in the Mercantile Marine. I now turn to the question of the scales. Reference has, with justification, been frequently made to this matter in this House. I recognise that the conditions of the men, compared with those which prevailed some years ago, are vastly superior. There has been a substantial improvement, and, of course, there has been a substantial improvement in pay, although much of the increase is attributable to what are described as war risks. Nevertheless I would admit at once that there has been a substantial improvement in the last 20 years or so. The question of compensation has, however, always been a bugbear, not only in respect of men of the Mercantile Marine, but also in the case of those employed on land. One of the problems which disturbs the men considerably is the compensation paid for loss of effects. Reference is made in this Measure to compensation for loss of effects in the case of certain men who were previously excluded, and I appreciate what my right hon. Friend has done in the matter.
It must be borne in mind that men going to sea require a considerable amount of material. They want sea boots, sometimes two or three pairs; they are subjected to a great deal of exposure and, therefore, require a change. Anyone who has been to our seaports and seen men in the Mercantile Marine proceeding to their ships will have noticed that they carry very heavy kitbags, much heavier than those carried by men in His Majesty's Navy. They are supplied with a great deal of equipment, and they can leave much of it on board ship. These men pay for it, and, although I do not wish to make any accusations, I am bound to say that ship chandlers and outfitters—I know there are honourable exceptions—do sometimes take advantage of the men. It will also be recognised that seamen do not always make purchases by cash. They buy out of their advancement. A seaman receives an advance note from the shipowner when he signs articles, it may be for half a month's pay, and sometimes it is for a month's pay. He proceeds to the ship outfitter and says," There is my advance note. I want so and so." Usually the outfitter when he cashes the note takes a fairly hefty commission, and, if he does not take a direct commission, he takes it indirectly by charging excessive prices for the goods. So men have to pay fancy prices for the goods they require in order to provide themselves at sea.
A kit may be very valuable, and a man may carry other things in addition which are of value to him, and probably of sub- stantial value. When he loses his kit through enemy action, he is paid a very inadequate sum to recompense him. I have heard complaints, not only from the men but from officers—and perhaps the officers are more unfairly treated than the men—because they require a great deal of equipment. I have heard complaints that an outfit which cost about £40 or £50 is recompensed by about half that sum, and in the case of the men a kit that may have cost about £30 is recompensed by much less than half that amount. That is a matter that ought to be dealt with. I hope the right hon. Gentleman will make representations to the appropriate Department to see that that is corrected. I beg him to understand that the amount of compensation is most inadequate, and I would say the same about compensation generally.
It is based entirely on naval rates, and on equality with the men of the Royal Navy, so the hon. Gentleman's argument must be against both rates.
The right hon. Gentleman never said a truer word.
We thought it was the fairest way to deal with it.
I know how often comparisons are drawn betwen the men of the Navy and the Mercantile Marine. Sometimes it is suggested that the latter are better off because they receive what are regarded as fairly high wages, but it is not easy to make these comparisons. After all, the men in the Services are provided with equipment and have certain privileges which are not open to the Mercantile Marine. The compensation generally, whether to the Mercantile Marine or to the Navy, is inadequate, but for the moment we are not dealing with the Navy. I recognise that, once you begin to tamper with the pension rates of one section, you must deal with the rates of others, but the Government must face up to that. If you want to sustain morale—and it is very important to sustain morale—you have to show these men that you are treating them fairly, and in particular those who depend upon them—proper allowances and the rest of it. It is no use paying eloquent tributes. If you give them good conditions and good compensation and wages, they will appreciate it very much more. I have said more than I had intended to say, but I have said it because it is the desire of every hon. Member to treat these men fairly and decently. There is no party feeling in this matter. It is a good thing that on an issue of this kind we can ignore all kinds of party feeling. We all want to do the right thing by these men. Here is an opportunity for us to do it. I hope that my right hon. Friend will pay due regard to the representations I have made.
The Government could not have brought to the House a Bill which is more acceptable than this one, which has for its object the remedying of grievances or injustices some of which might be regarded as serious by the man of the Mercantile Marine. Those of us who represent seaports frequently have evidence brought before us of the sacrifices and services of the men of the Mercantile Marine at this time. We could not be engaged in any better way than in trying to redress their grievances. For my part, I would not attempt to pay any tribute to them. When I see and hear what they are doing, it simply makes me feel very humble about any part I may be able to play myself. They are rendering a service for which we can never make sufficient repayment.
Like my hon. Friend the Member for Seaham (Mr. Shinwell), I do not find very substantial defects in the Measure and after the careful scrutiny he has made of the Bill I almost hesitate to suggest one other point that seems to me to call for reconsideration. I shall await with much interest the information which will, no doubt, be given to the House as a result of the points he has raised. The sets of circumstances which will give rise to marine risks which lead to loss of life or material are clearly set out in paragraphs ( a ), ( b ) and ( c ) of Clause 1, Subsection (2). I find it difficult to imagine that any substantial enlargement of those conditions can be required. When, however, I come to Sub-section (3), I find that say or what means will be adopted to decide whether the risks were substantially or not substantially increased by the set of circumstances set out in the three paragraphs. No one would wish to withhold, and the House would not allow anyone to withhold, any compensation that was due, on any narrowly-drawn argument whether lights were on or not, or whether the accident had been brought about by circumstances liable to argument of that kind. I should like to know exactly how this degree of substantiality is to be determined. Further, the House would wish to see that nobody is excluded from the scope of this Measure whom justice would require to be brought within the scheme of compensation. In connection with the definition of a mariner I think there is possible scope for cases which ordinary justice would require to be brought within the scheme being excluded. As defined in the principal Act, as amended by this Bill, a mariner is a he was proceeding home to take up his former post, or another post in the same service. The ship was subject to enemy action and the man lost his life, and his widow, because he is a passenger, would be precluded from receiving any compensation, if my reading of the Bill is correct. I ask the Minister of Pensions to be good enough to look at the Bill to see whether there is any loophope which ought to be stopped.
I think we are to be congratulated on doing the right thing in bringing in this Bill, and in general upon adopting a much better method than we did after the first German war. Then various ex gratia payments and sums were set aside for seamen and there was a sort of scramble for them. But some seafaring men were abroad and did not have the opportunity of seeing the notices which were put up in post offices regarding compensation. When they came back to this country they were naturally indignant, and a considerable proportion of my time was occupied in taking up the claims of people back from Chile or Valparaiso or other places who found their neighbours had got compensation while they themselves were precluded from claiming it because they had not seen the notices in time. I may be allowed to mention briefly to the House an experience of my own. A sailor came here to see me one day, and after he had explained what he wanted he finished by saying': "Well, Mr. White, do your best; and whatever you get, we go halves." That was a pre-eminently unsatisfactory method of dealing with a matter by halves. The whole system is wrong and should be dealt with in a more businesslike and just way. My only anxiety is to see the Bill made fully effective to carry out the purposes for which it has been introduced.
Like everybody else, I give a general welcome to the Bill but I am not quite as happy about it, as previous speakers have been, wide though their experience has been in this matter. I do not want to seem ungrateful about it, particularly as it meets some of the points which I raised in Debate on 19th March. First, I want to discuss the drafting of the Bill. It seems to be the most shocking example of what is called legislation by reference—I would rather call it legislation by Mumbo-Jumbo or legislation by flatulence—this windy, wordy and obscure document. If we are to have a Bill to give pensions to the Mercantile Marine, why not start right from the beginning and say: "These are the conditions in which pensions are to be paid to the Mercantile Marine"? And if we have to use some of the stuff which is in the principal Act, then let us write it out again in the Bill.
Suppose we were to take a copy of the Bill, hand it to a mariner and say: "This is what the British Parliament has done for you." We might as well throw him wastepaper for all the meaning this Bill would get into his head. You are not saving any time, any printing or paper by this method. I invite the House to look at Clause 2 (3), on page 4. I will read these 12 lines out. They are:
Can it be believed that neither in the Bill nor in the principal Act is there any definition of what is meant by a ship? I wonder if the Minister knows the definition of "ship" as used in the Bill. I will give way to him if he does. In order to discover what a ship is in the Bill, you have to look at the Merchant Shipping Act, 1894; but in spite of the great deeds of the hon. Member who is the Parliamentary Secretary to the Ministry of War Transport, by whose activities the equipment of our ships has been very much improved, I doubt whether there are even yet many ships which have on board a copy of the Merchant Shipping Act, 1894. The definition of a ship under this Bill is discovered only by prolonged research in the Library:
I now turn to the substance of the Bill. The Minister said that the object of the Bill was to deal with the Mercantile Marine in regard to pensions "on the lines laid down for the men of the Royal Navy." But that is not so at all. If you study the details of this Bill you find that that is very far from being so. Let us look at Clause 2, at the top of page 3—and by the way, I cannot understand why Clause 2 is not Clause 1, and Clause 1 is not Clause 2, because Clause 2 lays down the general principle and Clause 1 the limitation of the principle laid down in Clause 2, so that the cart is already before the horse. However, the principle laid down at the top of page 3 is that pensions shall be paid for a ), ( b ) and ( c ), which I know are enlargements of the definition of "war injuries" in the principal Act. Then—and I am glad my hon. Friend opposite drew attention to this —we have this most dangerous phrase, in lines 23, 24 and 25: c ), line 9. You may have a ship which, for some special war reason, is loaded over her marks—more than would be permitted in peacetime. She founders, and some of the crew are lost. That is a war risk, but suppose she foundered in a heavy gale. What is to prevent the Civil Service saying, "Oh, but you would have foundered anyhow in a gale like that; it was nothing to do with your being loaded over your marks."
It would come under the Compensation Act.
Maybe.
I am trying my best to follow my hon. and gallant Friend, but surely the point is this. If they are not actual war risks from which the ship founders, those who suffer are compensated under the Compensation Act or the Common law.
I agree entirely, but surely the purpose of this Bill is to put the Merchant Service on the same basis in regard to war risks as the Navy. Otherwise what are we doing? Condition ( b ) concerns lights, or light-ships or light-buoys being removed. That has happened everywhere. If a ship goes aground and there is loss, damage and so forth, surely while these words remain the clever people who rightly guard our Revenue will say, "Well, it was foggy; whatever had happened to the lights, it may have been fog that caused this damage." If any Member would care to go on the Embankment and look at the lower part of the steps at Cleopatra's Needle he will see how a vessel had her stem pushed back ten feet in the days when we had no lights on the bridges; but the Civil Service might say, "Oh, no, that was fog." Take paragraph ( a ) which covers convoy conditions, salvage and rescue pur poses. I remember towards the end of the last war I was in a convoy as a humble bottle-washer to a commodore of convoy, one of the gallant men we were discussing yesterday. We were steaming along quietly in the moonlight at midnight and the time came to alter course to port ten degrees. But the young officer in charge on the bridge gave the order "Starboard" instead of "Port," and all the convoy was turning to port except our ship. We were slowly converging on the other ships. The master was summoned from one of his rare rests and put the ship on her proper course. If he had not been summoned and these ships had collided, the men in that fo'c'sle might have been crushed to death. Apparently as the Bill stands that is covered by paragraph ( a ). I think it will be if we amend it, but so long as it is limited by the words in lines 23, 24 and 25 it will not, because it may well be said that it is not part of the natural dangers of convoy for the officer in charge to say "Starboard" when he means "Port." I do not know whether I have made my meaning clear to the Minister. I do not think the necessary amendment is very difficult and I hope the Minister will consider that point.
But there are far more perils than those which are not covered. Take the case of man overboard. As an illustration let us consider a convoy going to Russia through Northern waters. You have the naval escort and you have the merchant ships. A man goes overboard from one of His Majesty's ships: there is no argument about his widow's pension. Another man goes overboard from a merchant ship; not through enemy action but, shall we say, because some other ship is sunk and perhaps this ship sends a boat off to the rescue and in the course of that one of the falls carries away or jams, the boat is upset and he is drowned. In that case under paragraph ( a ) I think his widow will get the compensation which is provided because it will come under the head of rescue or salvage purposes. But if a man goes overboard from a merchant ship in the ordinary way, so to speak, and is lost and it is not in the course of rescue or salvage there is no compensation under this Bill or under the principal Act or any other Act. [ Interruption .] There is no point in this Bill if the Workmen's Compensation Act is all right. Why are we worrying? We are trying to give war rates of compensation for war service. I am saying that any man who is lost through going overboard from a British ship has lost his life on active service. What we want in this sort of Bill is the general principle that anyone on active service in British ships shall, whatever injury he receives, from whatever cause, have compensation. If that is not worth doing, this Bill is not worth doing at all.
I am following my hon. and gallant Friend now. This was discussed many months ago, almost at the beginning of the war, by the organisations who are interested. Do I understand him to suggest that we should abandon completely the Compensation Acts for the men of the Mercantile Marine during the war and bring them under this scheme? If that is his proposal, would he exempt shipowners from having to pay any compensation? If men in their employment suffer from an accident or if there is a fatality, does he suggest that they should not pay compensation?
I am not sure that I wholly follow my hon. Friend. The principal Act, on the confession of the Minister, does not provide for all the war risks in respect of which compensation should be paid. We are endeavouring to increase the number of cases in which compensation shall be paid for war risks. I merely say that there should be more. If the compensation to be paid under this Bill is no better than the ordinary compensation, I do not know what we are talking about.
Even at the present time, if a man engages on a British ship, owned by some person or company, and anything happens to him apart from the conditions laid down here, if it is an ordinary accident, he is entitled to compensation, and the shipowner or the indemnity association is responsible. Does my hon. and gallant Friend suggest that they should no longer be responsible, and that the Government should accept all the obligations? Clearly, if the Government are to accept all the obligations, they should take over all the ships.
I do not think it is necessary to go into that very wide field. It seems to me that the point I am making is perfectly clear. It is all very well for my hon. Friend to talk about the automatic way in which people are com- pensated. My post-bag indicates that it is not by any means always the case that if anybody dies his relatives are compensated. I hope that my hon. Friend will allow me to continue my argument.
I hope that my hon. and gallant Friend will send me the letters.
I send them to the Minister.
It is compensation; it is not the Minister's job.
I repeat that if I may be allowed for a moment to continue my no doubt dull and turgid observations, I shall be glad. The hon. Member talks about organisations. I too have been in touch with organisations, not with the Seamen's Union, but the master mariners' and officers' organisations, and they agree with me that these lines of which I have been speaking are dangerous and bad and ought to come out. If my hon. Friend will not support me, I cannot help it.
There is another large class of death and damage not covered by this Bill in the same way as it would be in the Navy. This is a more debatable and difficult field, I know, but I want to mention it. There is the case of the old captain, sometimes the old seaman, who has left the sea before the war and has come back and done his job, and done it well, but, through sheer strain, fatigue, and so on, he loses his health and dies. He is not covered by this Bill, though he may be covered by ordinary compensation. I have a letter about a captain—J.M. I will call him—of the R.N.R., who was taken ill and died at work in May, 1940. hiatus because you cannot say that you are, by this Bill, putting the Mercantile Marine on the same lines as the Royal Navy. You are not. If that man had been in the Navy his widow would have had a pension, but he was not and she has not a pension, and she will not get a pension under the Bill.
The hon. and gallant Gentleman must have misunderstood me. I made the statement that it was based on naval rates. I was dealing with pension rights.
I beg the right hon. Gentleman's pardon. I thought from what he said that they were all going to be on the same sort of status for qualification as well as rates. Certainly, that is what I should like to see. I apologise for taking so long. I am not happy about the details of the Bill any more than I am happy about the drafting. I hope that it will be strengthened in substance and the form of it clarified, but having said that I congratulate the right hon. Gentleman upon having gone some way at least towards giving effect to the eloquent speeches we all make about the noble services of these brave men.
It would no doubt be a source of invigoration to us all and of relief to Parliamentary draftsmen, who have worked so hard and devotedly in the face of great difficulties throughout the war, if Bills concerned with seafaring matters could be drafted by petty officers. I am sure that their language would be a great deal more forthright and appropriate. Since the hon. and gallant Burgess for Oxford University (Petty-Officer Herbert), who represents me with such agility of mind and speech, has raised the matter, I may observe that it occurred to me in reading the Bill that it read rather as though it had been put together by a crochet-hook. I am sure that a boat-hook would have been a great deal more appropriate. But in spite of whatever obscurity there may be, the House will give a general welcome to the Bill, and on behalf of my hon. Friends with whom I am associated and myself I give it a welcome.
The Measure demonstrates in a practical form—and I agree with the hon. Gentleman the Member for Seaham (Mr. Shinwell) that that is what matters—that we in this House recognise that the magnificent work done by the members of the Mercantile Marine and the fishermen during the war entitles them to consideration similar to that given to the men who serve in the Royal Navy. We have heard a great deal in this House about status of the Mercantile Navy, and I think I ventured to say in this House that if one looks -after the pay and circumstances of the men of the Mercantile Marine, the status will look after itself. Here is a good example of the way in which the pay, provision for dependants and the circumstances of the men in general should should be looked after. I express my appreciation of the fact that the schemes provided by this Bill apply to fishermen, and I am sure that the interest which the Minister takes in the fishermen, as is well known, is very largely responsible for the fact that for once the fishermen have not been forgotten.
But there is one matter, of limited scope it is true, to which I would like to refer. My hon. and gallant Friend the Senior Burgess for Oxford University referred to the definition of a ship, and I believe it is because of the limitations of that definition that lighthouse keepers are excluded from the operation of this Bill. I would like to acknowledge that I have had an opportunity of discussing this matter with the Minister and that he has treated the subject with his usual sympathy and accessibility. As I understand the Bill, if a member of the crew of a tender going to a lighthouse or a lightship is injured, his dependants are provided for and benefits accrue. I believe benefits also accrue in the case of injury to a member of the crew of a lightship itself. I am not quite clear about that, but I think it must be so. But when you come to the lighthouse keeper—a man who serves day and night, in fair weather and foul, perhaps for weeks without any relief and miles away from the shore—he is not covered by the provisions of this Bill. The reason, I am told—and I follow it fully—is that a lighthouse, being fixed in the sea, is not for that reason a ship. But by reason of the fact that it is fixed miles out at sea the hazards of these devoted people are very much increased.
I realise that an injured lighthouse keeper would have rights at common law and would receive such assistance as I have no doubt would be accorded to him by Trinity House. I have very high regard for Trinity House; it has magnificent traditions, and I know men are proud to serve it, but I ask the Ministers concerned in this matter to remember that the work of Trinity House is a national service, that at the same time it is a private body governed by Acts passed many years ago, and that it is the duty of Ministers to see that its servants are fully provided for. Subject to that one query, I would like to say that I welcome the Bill.
My Ministry regard this Bill as a very important Bill, and, therefore, we are glad it has had a very good reception from Members of the House, with the exception of the hon. and gallant Gentleman the Senior Burgess for Oxford University (Petty Officer Herbert), who dislikes its drafting. I can only say in defence that it was drafted by those who thought it their duty to put it in a form which Judges in courts could interpret. He gave as an example Clause 2, Subsection (3). The drafting is perfectly clear, although perhaps a little more paper and ink has been spent on it than he would have spent on it, and it may satisfy Judges better than his drafting would have done. When he says that compensation for seamen is a simple matter, I beg him to think again.
Does not my hon. Friend remember that one of the most serious and prolific complaints coming from Judges in this country during the past ten years is that they cannot understand the legislation which has emanated from this House?
No doubt both the hon. and gallant Member the Senior Burgess for Oxford University and my hon. Friend understood the example which was given without any difficulty at all. I want to recall to the House the very important advance which is made by this Bill, and I do so by asking them to think what it is like to navigate a convoy through the ice lanes of the Arctic Sea, a Russian winter or through the Atlantic in storm and fog. There are tremendous risks involved in war conditions, in the fact of being in convoy, in the fact of being without lights on the vessels, in the fact of being without navigation lights, lightships, lighthouses, and so on; all these create great perils for seamen which they do not run in times of peace.
I have here an account of a convoy which appeared the other day in Lloyd's List. The commodore said that they were coming South along the coast. They had to make a right-angled bend in the Channel at about midnight. At 11.50 p.m. the look-out sang out that there were ships on the starboard bow. The captain said, "That is the North-bound convoy, and we are going to meet them at the bend." He said, "When you are turning 40, 50 or 60 ships in lines round a bend in a channel which is perhaps 800 yards wide, you want all the room you can spare." Here were the two convoys on opposite courses meeting. For half an hour those ships were passing each other in line, doing what in the Navy is known as a "gridiron." Not one ship got out of place, and the whole lot passed at eight knots exactly as if they had been the Royal Horse Artillery doing their musical drive in a Royal Tournament. But there might very easily have been a collision, there might have been an attack, or a rumour of attack, or preparation for a attack by submarine. The commodore might have given orders to take evading action, and in that confined space collisions might very easily have happened. Under the law as it stood until now, there would have been no compensation for men who were killed and injured, except under the Workmen's Compensation Acts. This Bill brings them in.
Take another example, which I came across the other day, of a purely marine risk due to war conditions. There was no enemy action. It was many months ago, in the early stages of the war, and I was told it by the mate of a collier who had been in a vessel which was lost, down at a coastal convoy station. He said that the convoy was coming South in very heavy weather indeed, and a number of vessels went ashore. He was in safety. It was certain that he and his comrades on his ship would be saved, but a little distance off they saw another vessel with only its funnel and bridge above the water, and they sat there helpless while 17 men were washed off and drowned. There was no compensation under the law as it stood. They are now brought in. I will not go over the cases again, because my right hon. Friend the Minister of Pensions has already explained them, but in many cases where the risk to the men is increased by the fact of war conditions, the compensation will now be paid.
Having re-stated, so as to recall to the mind of the House, the important advance which is made, may I come to the detailed points which hon. Members have been good enough to raise? I start with the remarks of my hon. Friend the Member for Seaham (Mr. Shinwell), thanking him for what he said. First, there is the point about the lights in harbour waters and in port, in Clause 1, Sub-section (2), where the proviso makes what my hon. Friend called an exclusion. If a man falls down a hatch because there is not a light where in peace-time there would be a light, he gets compensation under the Bill. Why, when in harbour waters and in port, does he not get that compensation? Why is there an exclusion? The reason is that when the man gets into port the fact that the light is out becomes a part of the shore black-out to which everybody in the port is subject—not only the crew go on board the ship, but a great many other people. Dockers are continually on board day and night. If the provision were kept in force, it would be very unfair to give compensation to the seamen for what is a risk shared by ordinary civilians on an equal footing, and not give it to the dockers as well. That is the explanation, and I hope that my hon. Friend will think it is fair.
Except, of course, in the case of a seaman who may be living on the ship or standing by the ship. They move much more often from ship to shore than the dockers working by the ship only during the day.
They get workmen's compensation. I think that it is fairly regarded as a civilian risk which is shared by all other civilians in the port.
That is what I thought. My hon. Friend said "no compensation."
They have their ordinary claim under the Workmen's Compensation Acts. Then there is the point about detention in Clause 2, Subsection (2). That, of course, means when a man is a prisoner of war. It would apply by analogy if a seaman landed in a neutral country and could not get back to Britain owing to the lack of communications. He referred also to Sub-section (2, c ) and journeys which are made when proceeding to or coming from service at sea. My hon. Friend asked why journeys made while a man is on land in the United Kingdom are excluded. He asked whether once he had signed his articles, he was not in the employment of the ship if he was involved in an accident when travelling on a railway in this country. The answer is the same as in the case of the black-out. The man is travelling on the train with other civilians, and he shares the same risk. It is not a war risk, and he has the same claim to workmen's compensation, and the same claim against the railway if the accident is due to their negligence or fault. He has not the benefit of the schemes under this Bill, because they are intended to cover war risks in the Service while at sea. If my hon. Friend examines the question of journeys, he will see that the arrangements in the Bill are extremely generous, and that absolutely everything is covered, except when a man is on land in this country. He is covered when going out in a launch to join his ship, while in the pool in Montreal and while on leave in a foreign country. The same explanation applies to men on coasters who come ashore to buy their food. It is quite true that they come ashore rather more often, and that is why many prefer the coasters; they are more often in port, and the men can see their families more frequently. But while they are on shore their risks are the same as those of other civilians in the country.
I come now to loss of effects. I admit that up to the present time it has been a very genuine hardship to officers and men of the Merchant Navy that their loss of effects has not been covered when due to the new class of case with which this Bill has to deal. They have received compensation only when loss was due to direct enemy action—the bursting of an enemy shell or the impact of an enemy bomb. That has been a hardship, just as when they received no pension or compensation for injury, except under workmen's compensation. That is put right in this Bill. Henceforward they get compensation. I agree that the men need more equipment than members of His Majesty's Navy, because so much is provided for naval ratings. My hon. Friend spoke of the system of paying by advance notes, and he pointed out that ship chandlers very often took an unfair advantage and raked off a big commission. I know that has been true, but I hope and believe it is very much less true to-day because since the introduction of the pool a seaman gets pay while he is on shore.
Indeed, apart from his War Risk money, he is getting his normal pay. In fact he always has money in his pocket and does not have to resort to the advance note, as he did before. Moreover, there is the extending system, which I hope is rapidly extending, of stores in the clubs and institutes and hostels established for merchant seamen where they can buy all the equipment they want at cost price. At the Red Ensign Club in London, for example, seamen can buy what they want on the most favourable terms and can be sure that the articles are of first-rate quality.
My hon. Friend said the sums paid to the seamen were not very generous. It rarely happens that compensation gives you the full value of what you have lost, particularly the value to yourself, but the present scales were agreed to after long discussion with the officers' and men's societies only last year, and an increase of 33⅓ Percent. was made in the previously ruling rates, which I think more than covers the rise in prices. Therefore I hope he will think, after consultation with the leaders of the officers' and men's societies, that the present arrangement is fairly good as compensation schemes go.
Finally, he spoke of the rates of compensation and pensions and compensation for injury to men who are ill or injured. The principle upon which the Government have dealt with injuries to civilians is that all are treated alike. The company director with £20,000 a year and the dustman in the street get a common scale, and the rate taken is approximately equal to that given to the private soldier in the Army and the A.B. in the Navy. But just because the Merchant Navy was regarded as a Service, because it was felt that it was not possible to make a distinction between the treatment we gave to the Royal Navy which supported the convoys and the merchant ships which composed them, it was agreed that they should be treated as a Service and that the Navy scheme, with its scale, should be applied to the Merchant Navy; and a table of equivalents of rank was agreed to, such a rank as lieutenant-commander in the Navy corresponding to such a rank, it might be chief engineer, in the Merchant Service, and the same compensation pension and money for injury was given to merchant seamen as was given to the Navy. It may be that in that equivalence of ranks there are some adjustments to be made. I think there are. The National Maritime Board has been raising the question, and, if there are good cases proved where some adjustment should be made, I hope and believe that it will be done. But that the basis of the present scheme is right I cannot doubt, and, if my hon. Friend looks into the difficulties of applying a scheme to the Merchant Navy more generous than that applied to the Navy, it would be very hard indeed to arrange any such thing.
Now I come to the hon. Member for East Birkenhead (Mr. Graham White) and deal with his inquiry about the guiding principle in Clause 1 (3) and the words "if, but only if." The new arrangement works only if war conditions have substantially increased the risk to the men. He asked who was to settle disputed questions as to whether the risk had been substantially increased. It is to be settled by the Minister, who in fact has always been very generous in his treatment of such matters. The whole House has confidence in him, and' I think it is the best and most satisfactory arrangement that could be made.
At the beginning of his speech my hon. Friend led the House to think that the defence for the Bill being drafted by reference in this way was that it would enable the courts more easily to interpret it. Is it not perfectly clear that the courts will have nothing to interpret, because so far as the rights of the man are concerned, they will be determined by the Minister?
They can always go to the court for an interpretation. My hon. and gallant Friend the Member for Oxford University challenged the whole principle of Sub-section (3) of Clause I. He took the case of a ship loaded above her mark. It is true that we allow some kinds of abnormal loading in rare cases. We endeavour to ensure that every ship shall be safely loaded, and we try to exclude that element of risk altogether before the ship sails. Sometimes in an emergency we cannot do it. For instance, in the early stages of the war an ordinary ship was sent to Brest with cased petrol that was urgently needed. In ordinary times that would not be allowed. In Brest Harbour the petrol exploded, and all the crew were lost. Take a more difficult case, that of a vessel loaded with steel billets, although not intended for such a cargo, travelling the North Atlantic although it was built for tropical seas. There is a storm, and the ship is lost. Is it due to the storm or to the steel billets cargo or because it is on an unsuitable route? Under this arrangement the fact that it had a steel billet cargo and that it was on an unsuitable route will be accepted as substantially increasing the risk, and compensation will be paid. I hope that that gives the hon. Gentleman an answer and that he will agree that if we cut out Sub-section (3), we destroy the whole basis of the scheme. Then every risk at sea becomes the responsibility of the Government, there is no ordinary maritime risk on the owner, workmen's compensation will be wiped out during the period of the war, and the Government will carry the whole thing. It is not the system we have gone on, and it would be a difficult system to defend in view of the other arrangements for compensation which the Government have had to make.
What I had in my mind was the onus of proof being upon the widow, and I want to leave out these words and put something like "unless the contrary be shown" so as to leave the onus of proof on the Minister.
If my hon. Friend will be good enough to raise that point in Committee, we will look at it carefully and see whether something can be done.
In view of the wording of the Clause on page 5, line 35, and as the Leader of the House had the goodness to prompt my hon. Friend on this question, may I ask him to explain it? It states clearly:
"The injuries hereinbefore referred to are injuries falling within Section one of this Act and certified by the Minister of Pensions to have been sustained by such a person and in such a case."
May I ask whether under these terms any case can be brought to law by a seaman in view of the fact that the Minister of Pensions has the power to certify such a case?
I am advised by a high authority, the Leader of the House, that if the Minister refused a pension in what was believed to be a clear case, the applicant for the pension could demand it by petition of right in the courts.
I certainly would not question the authority of the Leader of the House on such a point. All I can say is that such an interpretation of pension law has never before been given by an occupant of the Treasury bench. Therefore, we are getting on a good deal. I should have thought myself, speaking with great humility, that all that the courts might be called upon to determine was whether or not the Minister had acted and nothing more than that. I should have thought the courts would refuse to adjudicate as to whether the Minister ought or ought not to have given a certificate. The only question for the court would be, Has the Minister given a certificate or has he not?
I am again advised by the same high authority that the difference is that this is a statutory pension right and not a pension under the Royal Warrant. If my hon. Friends are not satisfied, I hope they will raise the point in Committee. We will look at it. In connection with the definition of a mariner, a point was raised by my hon. Friend the Member for East Birkenhead concerning the case of a master who was sent, I think, from the United States to Africa, who sailed a ship there and who then came home as a passenger between jobs or while proceeding to another job. He asked whether such a man was covered. I venture the opinion, for what it is worth, from my own study of the matter, that under Clause 2, Subsection (2, f ) he is covered. He is on a journey home after doing a job for the Minister, and if the Minister says he is to come to this country, then he will be covered. If my hon. Friend is not satisfied when he examines it, we will look at it again in Committee. I come to the point made by my hon. Friend the Member for St. Ives (Mr. Beechman). Lighthouse keepers are not covered by the Bill. A lighthouse is not regarded as a ship. You cannot torpedo it. It is on land. Nevertheless, I have a perfectly open mind on the point, and I am glad to say that my right hon. Friend the Minister of Pensions has an open mind about it, and if my hon. Friend will raise it in Committee, we will see if something can be done for the lighthouse keeper.
In conclusion, I should like to summarise the improvements which this Bill will make. It extends the cover for mariners from direct enemy action to all the indirect results of war conditions which have been described. Those benefits are going to apply under this Bill not only to people in British ships but to men in ships chartered by the British Government and even to ships not chartered which are in the service of the Government. They will apply to accidents which occur on all the journeys which the mariner must make to and from his job, except only on land in the United Kingdom. They will apply to men in the pool who are working as a relief crew on a ship while some of the men of the crew are on leave. The Bill applies the same benefits respecting risks and journeys to the members of the pilotage and lightship services. It is retrospective in its action in that cases which arose before the passage of the Bill and since 3rd September, 1939, can be brought up and will be considered by the Minister. It applies the principles about extended risk not only to death and injury but to the loss of personal effects at sea, a matter which is of great importance to officers and men of the Mercantile Marine. Therefore, I say that while this is not a sensational or startling Measure it is a sound and important Measure and another step in doing justice to the men of the Mercantile Marine in return for the magnificent services they are giving to the country, and I hope the House will pass it quickly into law.
Question, "That the Bill be now read a Second time," put, and agreed to.
Bill read a Second time.
Bill committed to a Committee of the Whole House for the next Sitting Day.—[ Major Sir James Edmondson .]
Pensions (Mercantile Marine) [Money]
Considered in Committee under Standing Order No. 69.
[Sir DENNIS HERBERT in the Chair.]
Resolved,
"That for the purposes of any Act of the present Session to amend the Pensions (Navy, Army, Air Force and Mercantile Marine) Act, 1939, as respects mariners and other seafaring persons, it is expedient to authorise the payment out of moneys provided by Parliament of any increase in the sums payable out of such moneys under schemes made by virtue of the said Act of 1939 which is attributable to the provisions of the said Act of the present Session extending the scope of such schemes."—( King's Recommendation signified .)—[ Sir Walter Womersley .]
Resolution to be reported upon the next Sitting Day.
Anglo-Venezuelan Treaty (Island of Patos) Bill [Lords]
Order for Second Reading read.
I beg to move, "That the Bill be now read a Second time."
This is the first Bill which I have had the honour to move in this House, but, fortunately for myself and for the House, it is a very short and simple Bill. It deals with two Treaties recently made by His Majesty's Government with the United States of Venezuela. The first Treaty arranges for an equitable division between Trinidad and Venezuela of the sea bed of the Gulf of Paria. As hon. Members are aware, the Gulf of Paria is a shallow arm of the sea, lying betwen Trinidad and the coast of Venezuela. Trinidad gains from this Treaty because, under the sea bed are potential oil-bearing areas, and it is well to have this matter settled. At the same time the Venezuelan Government abandon any claim to the Soldado Rock in the Southern half of the Gulf. A White Paper will be laid, giving the text of this Treaty.
The second Treaty, of which the text is included in the Schedule to the Bill, provides for the ceding of the Island of Patos to Venezuela. This island has been claimed by Venezuela for some time past. It is very small. It lies in Venezuelan territorial waters. It is only a mile long and a quarter of a mile broad. Nobody lives on it, except one or two officials of the Customs, and since nobody lives on it, there is no question of the nationality of the inhabitants being changed. I am not a constitutional lawyer, but I understand that the question whether legislation is necessary or not for a cession of territory is an obscure one, and that pundits have expressed their views on this matter Sometimes, in the past, it has been a matter of controversy in this House. At any rate, it is thought desirable to obtain Parliamentary approval of this Treaty, before it is ratified, although only a tiny, minute area of British territory is involved. This cession is part of a general understanding, equally agreeable to the United States of Venezuela and to ourselves. This Treaty can do nothing but good, and has, so far as I can see, no seeds of harm in it. That may be rather rare in Treaties, but it is true of this one.
While I am not opposing the Second Reading of the Bill, it is well to point out that we seem to have gone an extraordinary way about it. We are to get the White Paper after the Bill is passed.
The Treaty which covers the cession of territory is in the Schedule to the Bill. The Treaty which governs this other matter, in which there is no cession of territory involved, will be put afterwards by my right hon. Friend.
Question, "That the Bill be now read a Second time," put, and agreed to.
Bill read a Second time.
Bill committed to a Committee of the Whole House.—[ Sir J. Edmondson .]
Bill immediately considered in Committee.
[Sir DENNIS HERBERT in the Chair.]
Clauses 1 and 2 ordered to stand part of the Bill.
Schedule
Motion made, and Question proposed, "That this be the Schedule to the Bill."
May I ask, with reference to Article 2 of the Schedule, whether His Majesty's Government will have any power of objection if there is any likelihood of this island becoming militarised? Is it thought to be of some strategic value, and, if so, what are we giving away?
This island lies, of course, in the territorial waters of Venezuela, and the Article does what it says—it requires the Venezuelan Government to give notice of their intention to build military or naval works upon it.
There is no power of objection to it?
No.
Question, "That this be the Schedule to the Bill," put, and agreed to.
Preamble agreed to.
Bill reported, without Amendment; read the Third time, and passed, without Amendment.
Coal (Valuation Procedure) Rules, 1942
Resolved,
"That the draft of the Coal (Valuation Procedure) Rules, 1942, proposed to be made under the Coal Act, 1938, a copy of which was presented to this House on 7th May, be approved."—[ Sir J. Edmondson .]
Sunday Entertainments Act, 1932
Resolved,
"That the Orders made by the Secretary of State for the Home Department under the Sunday Entertainments Act, 1932, extending Section 1 of the Act to— Mr. Peake .]
The remaining Orders were read, and postponed .
It being after the hour appointed for the Adjournment of the House, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order .