I beg to move, in page 1, line 9, after "construction," insert "extension, alteration or improvement."

May I suggest that it might meet the convenience of the Committee if this and the next Amendment standing in my name—in page 1, line 10, after "structure," insert:

I think that would be convenient.

Under this Clause an additional grant is made of one-tenth of the capital expenditure incurred—

"on the construction of a building or structure which is to be an industrial building or structure occupied for the purposes of a trade carried on"

by a person incurring expenditure. In paragraph (5) of the Explanatory Memorandum it is stated:

"The Initial Allowance of 10 per cent. of the capital expenditure on industrial buildings applies only to new construction."

In the Memorandum the word "new" is emphasised. The object of the Amendment is to provide that the allowance should be made in respect of capital expenditure incurred on the "extension, alteration or improvement" of the building or structure. I think that the words are self-explanatory and I need not detain the Committee by submitting arguments why the Amendment should be accepted. I am sure that the right hon. Gentleman and the Committee generally can conceive that, if this allowance were restricted to new buildings, many cases would arise where the help it is intended to give to industry would not be forth-coming. In many cases it would, in fact, be detrimental nationally that such arrangement should be made. It is conceivable that, new extensions and developments might be made in connection with buildings capable of reconstruction, and, in days when there may be short-ages, it would be false economy to restrict this to new buildings. I hope the right hon. Gentleman will not take that view but would rather that he will accept the principle that, if the expenditure is regarded as capital expenditure for purposes of taxation, then it shall have the initial allowance provided under this Clause. If, of course, the expenditure is regarded as a proper charge against revenue, then it will not apply. I hope that the right hon. Gentleman will see his way to accept the principle involved in the Amendment.

rose —

I do not want to stop my hon. Friend but I think the point of this Amendment is met. It certainly is not my right hon. Friend's intention that this initial allowance should be confined to new buildings which are put up as a whole. Under Clause 63 (2), the definition Clause, the word "building" is defined as covering part of a building, and that carries out the intention which is common to my right hon. Friend, and my hon. Friend the Member for Faversham (Sir A. Maitland), that anything in the nature of reconstruction of improvements or additions which are capital expenditure should be covered and should rank for the initial allowance. That is our intention and I think it is completely covered by "building" including "part of a building," I hope that in view of this my hon. Friend will not press his Amendment.

Will this also cover annual allowances provided for in Clause 2?

Yes, it will cover annual allowances.

May I ask you, Major Milner, if the Amendment standing in my name—in page 1, line 24, at end, insert:

"'Construction of a building or structure' shall include reconstruction, any expenditure on a building or structure which has been disallowed for income tax purposes, and any construction or reconstruction arising as the result of war damage"—

will be called? If not, I would like to speak on this Amendment.

I think the hon. Member would be wise to speak on this Amendment.

The proposal I suggest is one which should have the support of the Committee, because we must go further than the definition of "construction of a building or structure." A good deal of property has been damaged by enemy action, and I respectfully submit that, in addition to the reasons already given, the definition should include expenditure of any kind in restoring a war-damaged building or site, expenditure on the normal construction, alteration, enlargement or improvement, and demolition of premises on the one site and their reconstruction on another and more suitable site. The third reason is extremely important, having regard to the Town Planning Act. Many buildings which have been damaged may be replaced elsewhere. I respectfully submit that that is something which should come into the definition.

Here again I am in the happy position of being able to tell the Committee that my hon. Friend's point is met. There is nothing in the Bill to exclude either construction or reconstruction of a building or part of a building, when that construction or reconstruction results from war damage. If you put in express words that might suggest that it did not cover reconstructions or constructions arising from some other cause. I have studied my hon. Friend's Amendment. I thought he might be under some apprehension as to whether Clause 62, which relates to the exclusion of subsidies, might be construed as covering war-damaged premises. But there is an Amendment in the name of my right hon. Friend, which, I think, will prevent that point being raised, even if it could have been raised on the wording as it is. The main answer to my hon. Friend is that construction or reconstruction which results from war damage is, plainly, within the words of the Bill and will qualify for an allowance. It would be wrong to put in special words singling it out when the general words obviously cover it.

I am very much obliged to my right hon. and learned Friend for his statement, which shows clearly that what we seek to obtain by this Amendment is now covered by the Bill. May I ask whether I am right in assuming that any expenditure which would not be allowed as revenue expenditure for taxation purposes would rank for benefit under this condition—any expenditure, that is, of the nature contemplated?

I think so, though I do not know whether one could say so absolutely and categorically. The reason why it would not be allowed for Income Tax is that it was capital expenditure. I cannot see why if a man is refused an allowance because it is capital expenditure on a building, it would not plainly be expenditure which was covered by the words "construction of a building or part of a building." I think that that is all right.

11.15 a.m.

The interpretation by the Attorney-General of this matter is rather terrifying. I gather from him that if a building has been damaged by enemy action and partially rebuilt, the partial rebuilding will rank for depreciation allowance under this Bill as new construction. In the first place, the rebuilding is financed, not by the owners of the buiding but out of the war damage contribution; secondly, it means that ancient and dilapidated buildings which are patched up after being damaged through the war, rank for contribution at double the rate that the old mills and factory allowance gave them. One of our major troubles in this country has been the proneness of industrialists to patch and adjust and, in their own words, "improve buildings" which ought to have been demolished. The interpretation which has been given means that a premium is put upon this very unfortunate habit of failing to realise when a building ought to be completely scrapped, redesigned, and rebuilt. I sincerely hope that the Attorney-General is wrong, particularly in the case of buildings which are rebuilt, not out of funds provided by the industry itself, but out of the fund accumulated from war damage contributions.

Might I put this point to the Attorney-General? Is not the real intention here to make some allowance for improvements? The Amendment appears to be completely desirable because it proposes that the words "extension, alteration or improvement" should be inserted. Surely the extension, alteration, or construction that is meant, is an improvement in any case. If that were made clear, I think it answers very well the point of the hon. Member for Chesterfield (Mr. Benson).

I heard, of course with great respect, but with some little surprise, my right hon. and learned Friend the Attorney-General say, having regard to the reference in the interpretation Clause to a part of the building, that the word "construction" would necessarily cover extension, alteration or improvement. He started by saying it was the intention of the Government that it should be covered. He would agree, however, that the intention of the Government is neither here nor there, in the construction of the provisions of an Act of Parliament. However, I understood him to go on to say that in his view, as a lawyer, these words will be covered by the word "construction." I want to be clear that the Attorney-General was not attaching any importance to the intention of the Government but was attaching importance to his own interpretation and construction of those words.

I thought it relevant first to tell my hon. Friend that the intention of my right hon. Friend was the same as his; I then went on to say that their common intention was, in my view, carried out. I will look at it again, but I am quite clear that it is carried out and that the position is as stated. With regard to the point made by my hon. Friend the Member for Chesterfield (Mr. Benson), I do not think he will have the Committee with him on it. I agree that a war damaged building is restored with money provided partly by the State, partly by a fund to which everybody has contributed, including the man himself, but that surely is not the point. The grievance which this Bill is designed among other things, to remedy, is that under the present Income Tax law people who have factories, however they have got them—someone may have a factory given to him by his father—should be able to put aside a reasonable sum to enable that building to be replaced at the proper date for replacement. These provisions will assist, therefore, in preventing the evil to which my hon. Friend referred, namely, that of industries because they have not got the capital put aside, continuing to use premises after those premises have become out of date. I do not know that we can enter into a general discussion of the principle on this Amendment, but, on consideration, I think the hon. Gentleman will find that this provision as applied to a war-damaged building, is likely to assist what he desires, namely, the prompt replacement of buildings.

I am grateful to my right hon. and learned Friend for his assurance. My own view was that this Amendment might better arise on Clause 63, but I have known cases in which people have waited too long to bring up points in Committee and so I have raised the matter at the first opportunity. I have also an Amendment down on Clause 63 which I do not propose to discuss now. I am prepared to accept the assurances given by the Attorney-General and, in the circumstances, I beg leave to ask to withdraw the Amendment.

Amendment, by leave, withdrawn.

I beg to move, in page 1, line 15, at end, insert:

"Provided that no initial allowance shall be made to any person for any year of assessment in respect of which a notice of election given by him under Section three of this Act has effect."

May I seek your advice and guidance Major Milner? There is an Amendment on Clause 3, page 4, line 22, to insert:

"Provided also that no balancing allowance or balancing charge shall be made to any person for any year of assessment in respect of which a notice of election given by him under Sub-section (7) of this Section has effect."

There is also an Amendment proposing to insert in Clause 3, a new Sub-section (7) as follows:

"Notwithstanding anything in the provisions of this part of this Act if any person to whom section one of this Act and Subsections (1) to (6) of this Section would otherwise apply, by notice in writing to the inspector of taxes not later than six months after the appointed day or six months after the passing of this Act whichever is the later date, elects to be treated for the purposes of income tax as if Section one of this Act and Sub-sections (1) to (6) of this Section had not been passed he shall be so treated for all years of assessment:

Provided that if such person, by a later notice in writing to the inspector of taxes, cancels such election, Section one of this Act and Sub-sections (1) to (6) of this Section shall apply to him for the year of assessment commencing on the sixth day of April following the date on which such notice of cancellation is given and for all subsequent years of assessment, but no initial allowance shall be made to him under Section one of this Act in respect of any expenditure incurred by him before the sixth day of April preceding the date on which such notice of cancellation is given."

These Amendments and the parent Amendment are inter-related. Would it be in Order to discuss all three together, the substantive one being the proposed new Sub-section (7)?

Yes, I think they can best be discussed together and that all consequential Amendments should also be included in the discussion.

The substance of the matter I wish to raise is as I have said contained in the Amendment proposing to introduce a new Sub-section (7) to Clause 3. This, I should explain, is an Amendment which, if adopted, would have the effect of allowing certain persons to contract out of the provisions of the Bill. Now this is generally admitted to be a most complicated Bill and the more it is studied, the more the impression appears to have grown that after it has been in practice for some little time, it will require speedy amendment. In consequence, there are many industrialists who very much fear that they may be adversely instead of favourably affected by the Bill as drawn. The reason for that is this: There have been for many years two well-established canons of taxation. The first is that there should be no taxation of capital appreciation and, correspondingly, no allowances for capital losses. That is the first. The second is that there should be no retrospective legislation and I hope to show that in this case there will be grave risk of retrospective taxation. In other words, Income Tax is really imposed from year to year. The balancing charges introduced into this Bill bring in an entirely new principle of taxation. How will it operate? Let us assume that a realised price on the sale of a business brings in a larger sum than the written-down value of the assets. That surplus is not income, it is capital appreciation. Therefore, the balancing charge would be a tax on capital appreciation. Yet this is an Income Tax Bill, not a capital appreciation Bill.

That is my first point, and my second is this: If the Bill be not amended in the way which the various Amendments to which I am speaking seek to amend it, what will be the result? The tax inspector will be able to claim that when the price realised exceeds the written down value of the assets then the past year's wear and tear allowances have been too generous, and this Bill is intended to recover those too generous allowances. It is to take back the excess. I think this is surely a most undesirable innovation in Income Tax law. In consequence of the fears which I have pointed out as briefly as I can, there has arisen a well-founded anxiety that under this Bill some industries at least may be worse off, which is quite contrary, I am sure, to my right hon. Friend the Chancellor's intention. Therefore, the desire to contract out arises. If contracting out is permitted, that is to say, certain industries are allowed to go on as they are under the existing law, their present liabilities will remain and the Treasury loses no interest, because the Treasury will not in any way suffer.

The first paragraph of the proposed new Sub-section (7) is intended to provide that a person, if he so desires, may give six months' notice to elect to be treated outside the provisions of this Bill. If, at a subsequent date, it is found by experience that there are certain defects in the Bill—and I have not the slightest doubt that that will be so—and we subsequently have to amend this legislation, the person who elected to go outside the provisions of the Bill during the period when he considered he would otherwise suffer may, when the improved legislation has been passed, elect to go back. Of course, if he does that he will not be allowed to have the best of both worlds; he will not be allowed to claim any back allowances to which he otherwise may have been entitled. That, in brief, is the case I make for my Amendment, and the other Amendments which are consequential to it.

My hon. Friend has been discussing his first Amendment to which his further Amendment on Clause 3, in page 4, line 22, is, I think, relevant, and then he spoke of his proposed new Subsection (7). But coupled with that is another proposed new Sub-section (6) to which he did not refer: I am not quite sure whether he hopes to deal with that separately later, or whether he intended that it should be dealt with now as well.

With the approval of the Chair I was hoping to deal with it separately, because it involves an entirely different principle.

I think that would be a better way.

11.30 a.m.

The object of my hon. Friend's Amendment is to enable a person who owns an industrial building at the appointed day to elect that the provisions of the Bill relating to initial allowances and to balancing allowances and balancing charges shall not apply to him, subject to the proviso that he may, at a later date, cancel his option to remain outside the provisions of. Part I of the Bill, and decide to come back within the scope of Part I. The scheme of the Bill is this. In respect of an industrial building an initial allowance is followed by an annual allowance of 2 per cent. and that allowance continues for 45 years, by which time the whole cost of the industrial building is written off. There is a further provision for what is called a balancing allowance or charge where the building is either scrapped or sold, and which comes into operation in two ways. If it turns out that the allowances made have not been justified, and that the building on sale realises more than the written down value, then the balancing charge operates; conversely, if the building on sale realises less than the written down value, then the balancing allowance is made. The purpose is to ensure that the true amount in every case is written off on an industrial building.

My hon. Friend's proposal would have this effect: The election which he contemplates would apply to the industrial building owned by the person making the election, but it would have no effect on the annual allowances. It would take the person who so elects outside the scope of the initial allowances and outside the scope of the balancing charge or balancing allowance, although he would be entitled to the annual allowance. I am not sure whether that is what my hon. Friend intended, but that is the effect of his Amendment. My hon. Friend says he fears that our proposal may produce retrospective taxation, and I want to make it quite clear that the balancing charges rectify the position only so far as either the initial allowances or the annual allowances have been made under the Bill; that is to say, you can never be charged more by way of a balancing charge than you have received by way of initial allowance and annual allowance under the Bill. As the operative date under the Bill for expenditure on new buildings is 6th April, 1944, it is clear that nobody can be taxed retrospectively through realising a building at a higher price than the building originally cost. The balancing charge can only operate to rectify unduly high allowances which may prove to have been granted since the date of operation of the Bill.

My hon. Friend said that some industries fear they may be worse off under the Bill than they are under the existing law. Under the existing law, in the ordinary way, there is neither any initial allowance nor any annual allowance in respect of ordinary industrial buildings. The cases which my hon. Friend must have in mind are cases where the "mills, factories allowance" is granted at the present time. That allowance, which was introduced in 1937, is of very limited scope and application. It appplies to certain industrial buildings whose structure is liable to damage because it contains heavy plant or machinery. We are providing under the Bill an option to persons who have hitherto received the allowance under the mills and factories provision. For the next five years they may, if they choose, remain outside the scope of this Bill. Broadly speaking, what they have received under the "mills, factories allowance" is equivalent only to 1 per cent. of the capital cost of the buildings. Under the provision in the Bill, the annual allowance is to be 2 per cent. of the capital cost of the buildings, but there may be rare cases—I am told this applies especially to electricity undertakings—where the "mills, factories allowance" may prove to be more beneficial than the allowance provided by the Bill. In respect of people so placed there will be an option to remain outside the scope of the Bill for the next five years. We think that is a reasonable option. The option suggested by my hon. Friend is not, I think, a reasonable one. He would give a complete option to everybody to remain outside the scope of the Bill for an indefinite period but at any time, if they found that it suited them better, to come in. That would be "Heads I win, tails you lose" for everybody under the Bill. That is not a position to which the Treasury can agree.

My right hon. Friend the Financial Secretary asked why my hon. Friend, in the Amendment, makes an exception of the provision of the annual allowance for the building. I think the answer is quite simple. It is necessary to retain this because the present allowance under Section 15 of the Finance Act, 1937, is to cease. My right hon. Friend then suggested that a charge could not arise when the original cost of the building was taken into account, but surely, we are taking into account the cost to which a building has been depreciated by the allowances which may have been made. He then said that those allowances may be unduly high. I ask him why he should suggest they are unduly high. Surely, if a building is sold, as it might very well be at the present time, at a price in excess of that to which it has been written down, the reason is to be found in the change in the value of money. I do not think the question of what the building originally cost enters into the subject of this Amendment. It is the replacement cost which has to be compared with the amount to which the building has been written down, and if the building has been written down, by a procedure that has been well established and agreed to, to a sum which could not be less than it would fetch in the open market, at the present time and for a good many years ahead, it is not right to say that the depreciation allowances in the past have been unduly high.

Surely, the only object of the Amendment, which may not be perfect in every respect, is to draw the attention of my right hon. Friend to the fact that there are bound to be, both as regards buildings which we are now discussing and as regards machinery which we shall be discussing later, sales during the next five or 10 years—in some cases enforced sales arising out of compulsory amalgamation and the like—which will result in a higher price being obtained for the buildings or plant than that to which they have been written down. My hon. Friend was only pointing out, it seemed to me, that in making a balancing charge a tax is being made upon capital appreciation, and, furthermore, a tax is being made upon an assessment which has been looked upon as finished and done with. That is why I do not think my right hon. Friend has given quite sufficiently sympathetic consideration to this Amendment.

This Amendment is based on an entire misconception. There is no capital tax involved in the Bill. What the Amendment asks for is that there shall be a depreciation allowance where no depreciation has occurred. Under the Bill a depreciation allowance is made for a certain number of years until a building is sold. If when the building is sold it is found that no depreciation has occurred, all that the Bill provides is that, by the balancing charge, the depreciation allowances which have been made shall be handed back, and nothing more. For example, if a building is put up which costs £1,000 and for 10 years attracts, say, two per cent., with the result that it receives an allowance of £200, and if then that building is sold at £1,000 or £2,000, no capital depreciation has been suffered by the owner, but he has received allowances amounting to £200 for depreciation which has not taken place. Why, then, should not the Board of Inland Revenue say, "We have made these allowances on the assumption that depreciation would take place, but no depreciation has taken place, and therefore we are not asking for a tax upon your capital, but merely that the depreciation allowances which have been made and which have been found to be unnecessary, should be handed back." Surely, that is equity.

11.45 a.m.

May I ask my right hon. Friend what would be the position in the case of those cotton mills, affected by an earlier Finance Act, which had been sold at alleged high prices, and in connection with which the Finance Act gave the Income Tax authorities the right to assess what was termed a permanent loss, with the result that the purchase price following the last war was written down to the value in the books previous to the war? That mill may well be sold again and a good deal of what has been termed permanent loss will be recovered. What will be the position of cotton mills which find themselves in that situation?

This is not the sort of thing which I can be sure that I understand better than other people.

Those words ought to be entered in the Journals of the House.

If I appear to make statements positively, I hope the Committee will understand that that is for brevity, and that I mean them interrogatively. It seems to me that there is some confusion between depreciation in one sense and depreciation in another sense in which it would be more appropriate to use the word "dilapidation." The Financial Secretary spoke of allowances proving to have been unduly high, and the hon. Member opposite said that, when the time comes and you sell a thing, and you get more than the number of pounds written down in your books, that proves that no depreciation has occurred, But surely what really matters is not depreciation in that book-keeping sense, but dilapidation in the strict sense, the point of these allowances being that at the end of a period the replacement cost of the physical assets should have been saved. It is true that once upon a time the two things might have been very much the same. It is the safest of all historical generalisations that money continually goes down in value. Our ancestors thought it was almost the principal duty of the King's Government to keep the value of money the same from generation to generation, but even when money consisted of hard lumps of metal, it did, in fact, go down in value all the time. Nowadays, when it consists of little bits of paper in the minds of the advisers of the Treasury, blown about by every wind of doctrine, we may be reasonably certain that that historical tendency has been accelerated, and we do not see any prospect of stopping it. Surely it can easily happen that buildings may be written below their selling value considerably, but that the replacement cost may be very much more. That is where the balancing payment will arise and it is where money will be most particularly needed in order that the equipment for production, the actual physical capital equipment, should be reconstructed and replaced.

I find myself in some difficulty regarding the arguments on this Amendment. This is a complicated Bill. I suppose that those who have put down Amendments and those who represent the Government are the experts and we, who are endeavouring to understand it, are to some extent the jury. There is one point that is not at all clear. I do not like this suggestion that taxation is to be placed upon the saleable value of a building. It may be all right, but I should like to receive some explanation on it. It seems to me that, if you are selling a business, there may be a good deal involved besides the actual building, and even the actual plant. When a sale takes place it should not be difficult so to adjust it that the building was always sold at the written-down price.

One of the dangers that we foresee is what would happen when compulsory transfers or sales are made.

I can only hope that we may receive a little further explanation on the matter. I have never felt that the actual sale price in any case, even of securities, is anything like a valid criterion of the article disposed of.

I would fain emulate the modesty of my hon. Friend the Member for Cambridge University (Mr. Pickthorn). I, therefore, admit at once that the Bill is concerned with matters which are highly technical, and we should all beware of expressing ourselves too dogmatically on the points that arise. My hon. Friend the Member for Gravesend (Sir I. Albery) suggests, as I understood, that there is a possibility of a "wangle," by which values really attributable to plant and machinery can be attached to a building, or the other way about. It is unfortunately the case that in the administration of Income Tax one has always to be on the look-out for manipulations of that kind, but the Bill proceeds on the footing that it is possible to deal separately with buildings and with plant and machinery and it is only on that assumption that we can rationally discuss its provisions. It is also the fact that the Bill is concerned with money values. It takes the value of a building, or of plant and machinery, and writes those values down conventionally, according to a prescribed scale. Therefore, it is idle to raise points about the artificial nature of money values. It is true, but that is what we have to deal with here. I could not understand, nor could my advisers, the bearing of the point raised by my hon. Friend the Member for Southampton (Mr. Craven-Ellis). The Bill is concerned with new allowances. It does not touch anything in previous legislation which may have provided an allowance for exceptional depreciation, or whatever it may have been.

When I come to the substance of the point raised by my hon. Friend the Member for Cambridge University, I think he was quite wrong when he said the Bill should be regarded as concerned with dilapidation, rather than with depreciation. The law distinguishes. For all buildings there is a repairs allowance, and that is the allowance concerned with physical deterioration. What the Bill is directed to in the parts dealing with buildings is the view, which I think we can regard as well-founded, that buildings become out-of-date, apart from their actual physical condition, with the passage of time. In respect of that process of becoming out-of-date, the Bill provides for certain allowances.

We are introducing a new principle in the Bill, a principle foreign to our Income Tax system as we have hitherto understood it. We are introducing in the assessment of Income Tax allowances in respect of capital depreciation or loss of capital value of buildings. That is a new principle, we have to recognise it, and we have to face all its implications. All the criticisms that we have had in previous speeches in regard to the balancing charge under the Bill seem to me to be based on a failure or a refusal to recognise that this new principle has been introduced, and that it has the inevitable implication of any proposal of giving for Income Tax purposes an allowance for depreciation, that there should be a possibility of adjusting allowances if circumstances show that, in terms of money values, there has not been the depreciation which is assumed in the scale laid down in the Bill. I trust that so far I have succeeded in making my point clear.

I would add one further observation in regard to what was said about a change in values. The two processes of getting out-of-date and of the raising of value, which automatically come of a change in the value of money, may go on simultaneously; but, so far as a building for which allowances have been made in respect of getting out-of-date under the Bill has to be replaced at a different standard of value, the new value of the building, or the cost of the building produced in replacement under new conditions, will again reckon under the Bill for the initial allowance and the annual depreciation allowance. So, over a long period of time, if you assume a continuing process of buildings getting out-of-date and being scrapped—it is a policy of this Bill to encourage timely scrapping—and being replaced at higher values over the whole period, it will be found that the Bill will work so as to cover, by way of initial allowance or by annual allowances over the years, all the capital costs of the original building and the replacing buildings, and any other buildings that may be erected to replace the second, and so on indefinitely. From that point of view, I submit that the plan of the Bill is sound and that, if we were to accept the arguments put forward by my hon. Friends opposite, we should be cutting at a vital principle of the Bill. For that reason, I cannot accept either the Amendment or the principle underlying it, which we shall see creeping out on other Amendments.

I find some difficulty in arguing on this Amendment because the Clause dealing with buildings comes before the Clause dealing with machinery. My right hon. Friend said that there was an inevitable adjustment—and we must accept it—if the depreciation allowances are proved to have been too high. Under existing arrangements with machinery, we have not got that adjustment What we are asking is that adjustments be not applied in the case of buildings. The Financial Secretary said that it was not a reasonable option that a firm should have the ability to contract out of the Bill. I would remind the Committee that the objective of the Bill, as given by my right hon. Friend, is to give substantial financial assistance to industry. If the objective of the Bill is to give that financial assistance, and the firm think that the Bill does not give it to them, they should have the right to stay as they are. Nobody can call it unreasonable if a firm, on considering the new proposal, say that it is no help to them and that they prefer to stay as they are. The hon. Member for Cambridge University (Mr. Pickthorn) made it clear that the level of money is what will determine the price obtained for a building when it is finally sold. If this is a capital tax, let us have it out in the open as such. Let us go into capital gains and say whether we want to tax them or not. There is a lot to be said on both sides about a tax on capital gains, but let us talk about them on a capital tax Bill and not on an Income Tax Bill.

12 noon.

I want to make a helpful remark. An hon. Member below the Gangway on the other side made a reference to a ramp, and the Chancellor of the Exchequer said that there was always that possibility, and that one had always to be on the look-out. That is surely a deplorable state of affairs. In effect, the Chancellor is saying to Members on the other side that, unless they are watched day and night, they will rob and loot without any limit. The hon. Member who moved the Amendment said that he had a number of other Amendments and that they all hung together. If only the money grubbers would hang together and the nation took over industry, we should be saved a lot of this trouble.

I do not know exactly what help the observation of the hon. Member for West Fife (Mr. Gallacher) has been to the Committee. I want to put three points, and it would be helpful if we could get clear answers to them. This Bill is so complicated that we want to get the position thoroughly clear. I would like my right hon. Friend to state categorically—although I think it is clear from the Bill—that no balancing charge can ever exceed allowances which have been granted. The second point is that, whether we think it right or not, our Income Tax law takes no account of the changes in the purchasing power of money. That operates in a way which, as I think, is unfortunate, in that one cannot accumulate in depreciation reserves the full replacement cost. The Chancellor has said that in the long run it comes to the same thing, because you get the initial allowance on the higher charge and you can write off the higher charge. He is right. In the long run, the Treasury would not lose if people were allowed to accumulate the full replacement cost, but I do not expect to get that. I only want it made clear that, as things stand, the law will take no account of the change in purchasing power of money and, therefore, if, owing to the fall in the purchasing power of money, a value has decreased, that is treated as a profit.

My third point is that the Financial Secretary complained of the Amendment because he said it tried to make the best of both worlds. Suppose the Amendment had been so framed as to give a firm the option to contract out altogether, so that they got neither any claim to an initial allowance nor any claim to the new depreciation allowance; would that Amendment have been accepted? It is conceivable that there might be concerns, other than those entitled to the one per cent. vibration allowance, who might like to keep out of this altogether and have neither the initial allowance nor the depreciation allowance. I wish to know whether, if the Amendment had been so drafted, it would have been accepted.

I had not intended to speak again on this Amendment, but as my hon. Friend, with every desire to help, has put certain specific points, I would like to respond to his invitation to give him categorical answers. The first point he put is this: Is there in the Bill any provision under which a balancing charge can exceed allowances that have been granted for the first time under the Bill? The answer to that is: No. The second point that he put was: Is it clear that the Income Tax law takes no account of changes in the value of money? That is so. If the value of stock goes up but the increase is due to a change in the value of money, that is brought into account on sale, and similarly if it goes down, because of a change, that is regarded as a loss. The law takes no account of the change in the value of money. The third point, perhaps a hypothetical one, was: If this Amendment had been so framed that, under it, owners of industrial property had the option of going out of the Bill altogether—

So far as concerns buildings.

So far as concerns buildings, would that have been acceptable? I, myself, cannot see how any owner could expect to be better off by standing out of the Bill altogether than by coming under it, because, as I have said, the balancing charge cannot ever exceed the allowance previously granted, including in certain circumstances what my hon. Friend called vibration allowance—the "mills, factories allowance"—and exceptional depreciation allowance allowed under the Bill.

There is, I think, perhaps one special case that might be argued, the case of electrical power undertakings to which my right hon. Friend referred. As the law stands I believe there is an anomaly in the treatment of that particular case. I will not go into detail because it would take too long, but apart from that I cannot see what advantage would be gained by standing out. Certainly I would not view with favour a proposal under which, because of some possibly fancied advantage, individual undertakers should be given an option to stay out for a time and then change their minds and come back again if they thought it suited them better. I think the attitude we must ask people to take in regard to this Bill is to look at the provisions as a whole and see that the Measure leaves this Committee as a consistent whole, with provisions properly balanced against one another, fitting neatly and naturally into the whole picture. Then the Committee must make up its mind whether, taken as a whole, the provisions of the Bill are or are not reasonable.

May I point out to the Chancellor that, under the Bill, owners of many industrial buildings which are in existence to-day would be far worse off in the future than they have been in the past? That arises in this way. Under the Bill a new building, by virtue of the initial allowance and the annual allowance, may be completly written off in 45 years. With regard to existing buildings, prior to 1918 no allowance was made in computing profits for depreciation of buildings. Generally speaking, the position is that it will be found that factory allowance does not exceed one per cent. of the cost of the buildings, with the result that if the appointed day is to be 6th April, 1946, the factory allowance will come to an end in 1951. By that time only one-third of the cost of existing buildings can have been Written off, and that is a very serious matter.

Thus it would appear that, under this Bill, the owners of existing factory buildings would be that much worse off than if the Bill had never been brought forward. We all know many cases where buildings are more than 50 years old and have many years of useful and economic life before them, and if Parliament is going to insist that these buildings are to be allowed to be written off only as to two-thirds of the cost, I suggest that a gross injustice will be done to the owners of those buildings. Therefore, I would press the Chancellor to consider giving the owners of those buildings, not an option to come in and to go out as they please, but an option to retain the factory allowance, or alternatively, the five years after the appointed day should be extended to a minimum period of at least 10 years.

I have no sympathy with the Amendment which has been moved because I think it is highly undesirable that the taxpayers should have an option to dodge in and out of a scheme of taxation whenever they think tit to do so. That, as I understand it, was the purpose of the hon. Member's Amendment and those which are consequential upon it. On the other hand, there has been discussion on what is obvious from the Bill, namely, that this scheme is extremely complicated. It is complicated unnecessarily by the introduction of the provision which deals with the sale of a building during the currency of its life. It is quite unnecessary to take into account whether the building is sold for a lesser or greater amount than the computed depreciation at that period.

It is admitted by the Chancellor of the Exchequer that the most that can be granted by way of depreciation allowance is the original cost of the structure, not its replacement cost. Its replacement cost has nothing whatever to do with this scheme of making allowances for depreciation. It is the loss of the original money value expended upon the building which, in the end, has to be allowed for. If a new building precisely the same costs more or less, it has nothing to do with the question. Therefore, it is introducing an entirely unnecessary complication if it happens that in a particular case a building is sold for a certain figure and then a balancing charge or allowance is made. If this legislation is passed in its present form, the effect of the provision with regard to balancing charge or balancing allowance will be taken into account both by the purchaser and the landlord. If the Bill had been framed in a simpler way, as it might have been, in a form in which the allowance continues, based upon the original cost without any readjustment on the occasion of a sale, then that fact also would be taken into account both by the vendor and the purchaser, and the purpose which underlies this proposal would be achieved quite simply and without this unnecessary complication.

12.15 p.m.

I know how anxious the Chancellor and the Financial Secretary are to get on with the Bill and, therefore, I should like to bring the discussion upon this Amendment to an end. I do not propose to press the Amendment, although I must confess that I am far from convinced by all the arguments that have been attempted in rebutment of the points which I tried, and possibly failed, to make. I still feel that, in practice, and this is the fear of very experienced Parliamentary counsel who have studied this complicated Bill, it will not work out quite in the way foreshadowed by the Front Bench. However, time alone will show; we have put our fears on record, and for the moment, I am prepared to leave things at that. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

I beg to move, in page 1, line 18, after "interest," insert:

"as defined for the purposes of this Part of this Act."

This Amendment and the following one are really drafting Amendments. My right hon. Friend has thought it better to define relevant interest in a new Clause which will be found on page 872 of to-day's Order Paper and which can be discussed when we come to it. The two Amendments are moved simply to take out of this Clause words which have become unnecessary now that we are proposing to insert a general definition in a new Clause.

Amendment agreed to.

Further Amendment made: In page 1, line 19, leave out from "reversionary" to the end of line 24.—[ The Attorney-General. ]

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

One of the major purposes which the Chancellor has in mind in this Clause is to stimulate rebuilding and the modernisation of the structures in our industry. Frankly, I think he is going to fail in this Bill. The reason I suggest that is that he has provided no adequate stimulus. I am aware that there is to be 100 per cent. depreciation allowance and that he is giving an initial allowance of 10 per cent., but it is because he has spread his stimulus over 45 years that I think he will find that his proposals will do very little—

I am sorry to interrupt the hon. Member, but he is going rather beyond the Clause.

It deals with the initial allowance, and the point I wish to make is that the initial allowance is entirely inadequate. It is an initial allowance of 10 per cent. and—

The hon. Member will be in Order as long as he keeps to the question of the initial allowance and does not go into things that happen under other Clauses.

I do not propose to go into what is done in other Clauses. In the matter of rebuilding our industrial properties we are faced with an urgent problem. Our industrial plant is bad enough from the point of view of being obsolete, but our industrial buildings are infinitely worse, and that is not because, taking industry as a whole, there has been any shortage of money for rebuilding. That may be the case in some concerns, but I am not referring to individual firms. Taking industry as a whole there has always been any amount of reserves available for rebuilding if the desire had been there. It has not been due to a shortage of cash but to a shortage of enterprise and a shortage of will. [An HON. MEMBER: "And the threat of nationalisation."]

I quite see that the discussion on this Clause can be wide, but I do not think we ought to go into the question of nationalisation and everything connected with that question. I am not rebuking only one hon. Member, but am drawing attention to the fact that I do not think it is possible to go into the whole question of nationalisation and the amount of money available under this particular Clause because that is a very big issue going far beyond the Clause.

I certainly do not wish to raise the question of nationalisation. I do not wish to raise a large question like that on this comparatively small issue. It is hon. Members opposite, with their woolly and discursive minds, who have interjected that question. There has been one very definite reaction to this Bill, and it has not been one of welcome for what has been offered but a squeal over the loss of the one per cent. vibration allowance to which the Financial Secretary referred.

I do not know whether any hon. Members have seen a memorandum on this Bill which was issued by the Leeds Chamber of Commerce. In order to point out the disastrous effects of the Bill on their members they issued a long list of firms whose buildings were 50, 60 or 100 years old who would not get the 2 per cent., or the 1 per cent. either. They were not primarily concerned with rebuilding, otherwise they would have welcomed the 10 per cent. initial allowance, but were concerned with maintaining their old age pension of 1 per cent. on their antiquated and dilapidated buildings. They have the slum dwellers' mentality in Leeds, apparently, and it will take more than a 10 per cent. initial allowance to break down that mentality. This Leeds mentality as shown by their Chamber of Commerce memorandum is the problem that we have to face.

We have to break the habit of keeping on with old dilapidated buildings, and I say that the stimulus to new building offered by the Chancellor is quite inadequate. I am sure that we shall require shock tactics if we are to succeed. A stimulus which is so long drawn out is altogether ineffective. I have great respect for the Financial Secretary. He is an imperturbable person, but if he were struck by lightning even his imperturbability would be temporarily disturbed, but if the same amount of electricity were applied to him over a period of 45 years he would never know that anything had happened to him. What we require are shock tactics if we are to break this obsolete mentality in British industry. Does anybody suggest that the offer of 10 per cent. on the cost of a £10,000 building, which with Income Tax at 10s. in the £ means actually an allowance of £500, is going to affect the members of the Leeds Chamber of Commerce? If he does he is a great deal more optimistic than I am. I have had one battle with the Attorney-General on this Clause with regard to whether the allowance was applicable to alterations, adjustments and so-called improvements. It is this habit of altering and adjusting which has landed British industry in the mess in which it is at the present time with regard to its buildings. During the past fortnight the National Society of Pottery Workers has issued an extraordinarily valuable memorandum on the reconstruction of the pottery industry. Both in concept and in detail I think it is far away the best memorandum that has been issued by any industry, from either the workers or employers' standpoint. Let me read what they say in regard to buildings: quid pro quo for allowances for rebuilding. That will mean—this may be out of Order—

I have been very patient with the hon. Member, but for him to go back over events of the last 100 years is really not fair. A Committee stage does become impossible if we are to have these long historical references on every Clause.

I do suggest, with very great deference, that I have been strictly in Order.

No. I have already reminded the hon. Member that he has been out of Order, and I say that he has gone a very long way beyond what is in Order on this Clause.

Question put, and agreed to.

Clause, as amended, ordered to stand part of the Bill.

CLAUSE 2.—(Annual Allowances.)

12.30 p.m.

I beg to move, in page 3, line 10, at end, insert:

As the Bill stands, all those buildings now treated under Part I will receive initial allowance, and thereafter the annual allowance for the 45 years' life. My right hon. Friend would probably argue that if the life of the mine is less than the 45 years, the buildings will attract a balancing allowance at the end of the period and that that should meet the reasonable requirements of the operators. That is not so, and the Chancellor of the Exchequer has found that it is not so in the case of machinery and plant. What applies to the plant applies also to the buildings. If the life of the mine is short, the balancing allowance must be large. The Chancellor has put down an Amendment to Clause 23 under which a mine may go back over the last six years of its life and recover the balancing allowance against the profits of all those six years, and while that is very welcome, it does not make the position satisfactory.

There are two reasons for this. In the first place it is quite common, towards the end of the life of a mine, that the enterprise makes little or no profit. This may come about because the raw material itself is badly needed or because the owners are anxious not to cut off employment in a district where alternative employment cannot easily be found; but more often because the ore body may have been lost, and a search is going on to find an extension of that ore body. In that period it may be well worth while that the mine shoud be kept going. That search may be fruitless, and in that case it would not be possible to recover the whole capital cost of the buildings, even by going backwards over the last six years of the mine, because the profits would not be sufficient. That is the kind of case which, as hon. Members who know anything about mining industries in remote parts of the Empire are aware, may easily arise. I commend the Amendment to the Committee because it seems to fall within the excellent words which the Financial Secretary used in winding up the Second Reading Debate. and which become of no value when the deposit is exhausted, it is unfortunately the case that, as the Bill stands, there will be instances where the whole of the capital cost will not have been written off. I think that defeats the spirit and purpose of the Bill.

I support the Amendment which has been so well moved by my hon. Friend the Member for Chippenham (Mr. Eccles). It discloses a gap in the Bill which needs to be filled. The very class of buildings which are excepted under Clause 21, in a part of the Bill inserted for the express purpose of benefiting mining enterprises, will become, in the case of many mines, valueless long before that 50-year period has been exhausted. As will be well known to the Committee, mines are not enterprises that are set down in some convenient place according to planning, on the outskirts of a manufacturing city, where the buildings of the industry can be readily adapted to some other purpose. They are put down where the ore bodies are located, which may be anywhere. In many cases when mines cease to work the buildings become quite valueless. The Chancellor and his advisers had very good reason for making the exception that they made in Clause 21, and unless they make some provision on the lines of the Amendment, the buildings will come a total loss to those who have embarked upon the enterprises. The amount of allowances which are generally provided for in the Bill will not and cannot entirely allow for the amortisation which the Chancellor hopes for.

I thank my hon. Friend the Member for Chippenham (Mr. Eccles) and my hon. and gallant Friend the Member for Camborne (Commander Agnew) for the extremely clear way in which they have expressed their case on the Amendment and described its purpose. The Amendment, however, is of quite a limited character. Part I of the Bill deals with industrial buildings. So far as wasting assets in mines and so on are concerned, they fall to be dealt with under Part III. In Clause 21, expenditure which can be written off is capital expenditure

"on the construction of any works which are likely to become valueless when the source is no longer worked."

Then there are some further words limiting the general definition. The result of that is that the Amendment now before the Committee can apply only to miners' dwelling-houses and other welfare buildings. Expenditure on other works in connection with mines falls to be dealt with under Part III. The proposal is that where dwelling-houses and welfare buildings in connection with a mining venture are constructed they should be written off not by the 2 per cent. annual allowance applicable generally to industrial buildings under the Bill, but by reference to what is calculated to be the period of the life of the mine. That would obviously involve a number of criteria which are not very easy to judge. If my hon. Friends will look at the last two or three lines of the Amendment they will see the words:

"that the source is likely to cease to be worked and the probable value of the building or structure at that date to the person carrying on the trade."

Those criteria introduce an element of uncertainty.

I would like to point out to the Financial Secretary that those are the Chancellor's words and not ours and are taken from the Amendment in his name. If that is a good Amendment, the same must be said of our own.

My hon. Friend's point is perfectly fair. Where you are writing off the works necessary for the operation of the mine it is right and proper that you should do your best to estimate the life of the mine, but this Amendment deals in the main with miners' dwelling-houses. So far as mines in this country are concerned it would be virtually impossible to decide in advance whether, on the termination of the life of the mine those dwelling-houses would or would not have any value. Modern methods of transport have effected very great changes. In the part of the country where I live there used to be an iron ore mining industry, which died out: that was in Cleveland in 1895. In the dales you can find rows of abandoned miners' cottages. On the other hand, in the coalfields of Yorkshire, where pits have been closed down for twenty years, it could have been said that the houses would become valueless, but the fact is that those houses are inhabited to-day because the workers can be transported to some other mine or can go by bus or tram to some other form of occupation. The houses preserve their value, although the mine is worked out and has been closed down.

It is obvious that it would be very difficult to say in advance in connection with a mining undertaking that the houses are bound to have little or no value when the mine is worked out. There may be cases where you can say that with absolute certainty, possibly in the case of a copper mine in Rhodesia, but your law must be of general application and must cover all cases. In the vast majority of cases it would not be possible to say in advance that miners' dwellings would be of no value or of very little value when the mine is worked out. Those miners' dwellings will attract the two per cent. annual allowance under Part I. Suppose the life of the mine proves to be short and the houses prove to be of little or no value, then the matter which we discussed on the previous Clause comes into operation; a balancing allowance would be attracted.

12.45 p.m.

My hon. Friend the Member for Chippenham said that he could conceive of a case where houses which had been written off for 20 years, and which attracted the 50 year depreciation allowance, had little value, and that when the balancing allowance came to be made there might be but little profit in the final year or the penultimate year of the mining company's undertaking against which the balancing allowance could be set. I suppose it is conceivable that that might happen. It is not a very likely contingency, but we are ready to consider a proposal similar to the one which we have in Part III of the Bill, for spreading backwards, over the six years preceding the cessation of operations, the allowances which may be attracted in the last year. In that way we should be doing our best to ensure that there were some profits against which the balancing allowance could be made. We will certainly consider that between now and the Report stage. I hope that with that explanation my hon. Friend will be satisfied.

It seems to me that the Amendment really anticipated the reply of the Financial Secretary. The Amendment does not assume that buildings will be valueless when the mine becomes worked out. The Amendment says that the Commissioners shall make an assessment

"having regard to the … probable value of the building or structure at that date to the person carrying on the trade"—

that date being the time when the mine is assessed as having no working value. I should have thought that that anticipated the whole of the argument put forward by the Financial Secretary. It leaves it to the Commissioners to consider whether those buildings will have any value or not.

It will involve the Commissioners projecting their minds forward, and saying what value those buildings will have, in certain circumstances, 20 or 25 years hence.

The Financial Secretary has not entirely met the case put by the Amendment. He has not accepted the Amendment, but I think there is force in what he said about the difficulties which the Commissioners would have in anticipating the value of buildings at some uncertain date. It is satisfactory to note that, if he can, he is going to see that there is machinery provided somewhere in the Bill, under which the Commissioners will be able to find some figures against which they can favourably credit a balancing allowance, so that these buildings will not, in fact, be the dead loss which otherwise they certainly would be if nothing was to be done.

Before I ask leave to withdraw the Amendment, I would like to point out to the Financial Secretary that if there is any scrap of value in these buildings at the time the deposit ceases to be worked, that is picked up elsewhere in the Bill. We are seeking simply to establish the principle that where the asset does become valueless, the whole capital cost shall be written off somehow. The assurance has been given by the Financial Secretary that he will provide for the short life mine. We shall always be in trouble, because the coalmines in this country last a very long time, and some of us have to consider short life mines in other parts of the world. It is to get short life mines a fair deal that we moved the Amendment which I now ask leave to withdraw.

Amendment, by leave, withdrawn.

Amendment made: In page 3, line 21, at end, insert "and."—[ The Attorney-General. ]

Clause, as amended, ordered to stand part of the Bill.

CLAUSE 3.—(Balancing allowances and balancing charges.)

I beg to move, in page 4, line 4, at end, insert:

"( b ) that interest, being an interest depending on the duration of a foreign concession, comes to an end on the coming to an end of that concession; or."

This Amendment is the first of a series designed to meet a point which was raised during the Second Reading Debate by the hon. Member for the City of London (Sir G. Broadbridge). My right hon. Friend has since considered the point, and I hope the Committee will agree it is one which ought to be met. In a number of foreign countries public utility undertakings are carried on by British companies under concessions which have a limited duration in time. When they come to an end, the assets which the company have set up, pass, it may be to a foreign government, or to a municipality, in some cases with, in some cases without compensation. If the concession comes to an end, and the assets pass from the company in the period covered by depreciation proposals, it is right that that should be regarded as an occasion on which a balancing allowance can be claimed. If compensation is paid, that will be taken into account in the same way as if the asset were sold, and there was a purchase price.

May I say how grateful we are to the Chancellor for this Amendment? It will be of great assistance to those companies whose concessions are limited to a certain period, at the end of which they may not have worked out the deposit. I am sure that all those who have considered this Amendment realise that it has a real value.

Does "foreign" include the Dominions? It occurs to me that there might be concessions in parts of the Empire, and I would like to know if they will be covered by the Amendment.

We will look into that. I would not like to say now.

Amendment agreed to.

I beg to move, in page 5, line 30, at end, add:

There is another aspect of this particular issue. The Water Bill, which has been in Standing Committee, is intended to bring about compulsory or voluntary amalgamations of water undertakings. We know there is a view widely held, and in which I share, that there are far too many small electricity undertakings. We want either voluntary or compulsory amalgamations to be brought about. This Clause which I am seeking to amend will hinder that very beneficial transformation which we desire to bring about, and I do not want to see any step taken by the legislation with which we are dealing to-day which will interfere with or hinder the future legislation which we may, in our wisdom, be prepared to carry out. Therefore, I think that, in the case of these public utility undertakings, it is but right that where the terms upon which they are to be transferred have already been determined by Act of Parliament, or otherwise prescribed, they should be excluded from the operation of the balancing charge and the balancing allowance. I think the Chancellor will be bound to see that this is a rather special type of case and I hope he will sympathetically view what I think is a reasonable and a very necessary Amendment.

1.0 p.m.

I make no complaint, but I think my hon. Friend will recognise that he has involved me in something of a difficulty by putting down an Amendment very general in its scope, and seeking to justify it by two rather special types of case. As the Amendment stands my hon. Friend will not be surprised to hear that I see the strongest objection to accepting it. It is true, no doubt, that cases will arise where a building, with its equipment and plant, is disposed of as a going concern. In such a case the problem at which my hon. Friend the Member for Gravesend (Sir I. Albery) hinted earlier may well arise, but in that, as in other cases, we shall have to do the best we can to make a suitable apportionment as between the building on the one hand and the plant and machinery on the other. Any problem that arises there is inescapable. The particular fact to which my hon. Friend first made reference in arguing the case for this Amendment—the case of the public utility which is compulsorily acquired under provisions approved by Parliament—presents, as he says, very special features. I am not in a position to say off-hand how far the fact that there is something in the nature of a Parliamentary commitment in regard to the terms of acquisition is affected by the provisions to which he refers.

It remains true that the balancing charge can only be made in respect of allowances granted under this Bill or of analogous allowances under the mills and factories or the special depreciation provisions. So far as that is concerned, it is a matter outside the terms of the arrangement for expropriation; and the balancing charge, where it is to be levied, is merely a settlement on taxation. But it is a special case. The same problem arises in Clause 14, in regard to plant and equipment. I have that in mind, and, subject to what I may have to say on Clause 14, all I can say now is that it is a point that I am willing to consider between now and the Report stage. The other special case to which he referred was that of transfer as between one and another of a group of associated concerns, where it may be a matter of internal reorganisation without any real change of direction. There again, I have not had a chance of giving proper consideration to what is involved; but, while I cannot give any definite undertaking, I will consider the matter fairly between now and the Report stage, to see whether, in the special features of such a transaction, there is a case for applying, to that limited extent, the principles of the Amendment, which I must ask the Committee not to accept.

I am sure the hon. Member for Stockport (Sir A. Gridley) will be highly gratified by the reply he has had from the Chancellor of the Exchequer. I think I am right, although this is highly complicated, in saying that in the case of public utilities there is no provision for goodwill in the event of acquisition; so that the reference in the remarks of my hon. Friend the Member for Gravesend (Sir I. Albery) about wangling, cannot apply in that case. The only other point that I should like to make is on the question of coal amalgamations. It has not arisen yet, but a great deal of thought is being given by the Ministry of Fuel and Power to the question of how to deal with the the coal situation, which, as we heard yesterday, is appalling at present. One of the methods which has been thought of by Mr. Robert Foot and other people is voluntary amalgamation. I am not an expert on this matter, but I am told that the Bill would virtually prohibit voluntary amalgamation. The only method by which amalgamation could be effected would be by creating holding companies, with a long series of subsidiary companies to preserve the tax position. That seems to me an extremely complicated and untidy method of dealing with such amalgamations. If some words like those of the Amendment could be included in the Bill, we could proceed with amalgamations of collieries, in order to get good, cheap coal in future.

I am most grateful to the Chancellor for his undertaking to consider the matter between now and the Report stage, and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause, as amended, ordered to stand part of the Bill.

CLAUSE 4.—(Writing off of expenditure and meaning of "residue of expenditure.")

Amendments made: In page 5, line 33, after "this," insert "Part of this."

In line 34, after the second "this," insert "Part of this."—[ Sir J. Anderson. ]

I beg to move, in page 5, line 44, at end, insert:

"Provided that where at the said time an event occurs which gives rise or may give rise to a balancing allowance or balancing charge, the amount directed to be written off by this subsection as at the said time shall be taken into account in computing the residue of that expenditure immediately before that event for the purpose of determining whether any and if so what balancing allowance or balancing charge is to be made."

This Amendment and the next three are really drafting Amendments to correct a slip, but, as the words are a little technical the Committee might wish to have a word of explanation. As the Committee know, in arriving at the balancing charge or allowance you take the first cost, say, £1,000, then you deduct any allowances that have been made initially and annually, say, £400. That leaves £600, which is called the reserve residue of expenditure. If you get for your building £500, for the difference of £100 you get an allowance. If you get for your building £700, for the difference the other way you get £100 charge. It is possible that the building may be sold, for example, at the end of the trader's last accounting period, as a going concern, at the same instant of time as the annual allowance became due. In those circumstances, if he is to get the annual allowance, that ought to be taken into account in deciding the amount of the balancing charge or the balancing allowance. As the Bill is drafted, the residue of the expenditure has to be calculated immediately before the sale or other event which gives rise to the balancing charge or allowance. If the matter were left as it is, the allowance which he would get would not be taken into account, whereas it obviously ought to be. This Amendment and the next three all stand together. They are designed to meet the point which I have sought to explain.

Amendment agreed to.

Further Amendments made: In page 6, line 7, leave out "date," and insert "time."

In line 9, at end, insert:

"Provided that where, at the time when an amount falls to be written off under this Subsection, an event occurs which gives rise or may give rise to a balancing allowance or balancing charge, the amount directed to be written off by this Sub-section as at that time shall be taken into account in computing the residue of the expenditure immediately before that event for the purpose of determining whether any and if so what balancing allowance or balancing charge is to be made."

In page 7, line 15, leave out from "sale," to "exceeds," in line 17.—[ Sir J. Anderson. ]

I beg to move, in page 7, line 23, at end, add:

"(9) Where the Crown is at any time entitled to the relevant interest in a building or structure, the preceding provisions of this section shall have effect as if all such annual allowances, balancing allowances, mills, factories or exceptional depreciation allowances and balancing charges had been made as could have been made if—

The object of this Amendment, which I do not think the Committee will want me to explain in detail, is to ensure that where the Crown has been the owner of an industrial building, and subsequently sells it to a private person, the same rules shall be followed in computing the allowances that the purchaser is entitled to as if he had bought it not from the Crown but from another company or private individual. Obviously it would be quite wrong if people were in a better position, from the tax point of view, because they happened to buy from the Crown rather than from a private person.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

CLAUSE 5.—(Buildings and structures-bought unused.)

Amendment made: In page 7, line 33, leave out "he buys the building or structure," and insert "the purchase price becomes payable."—[ Sir J. Anderson. ]

I beg to move, in page 7, line 40, at end, add:

"(2) Where the expenditure incurred on the construction of a building or structure was incurred by a person carrying on a trade which consists as to the whole or any part thereof, in the construction of buildings or structures with a view to their sale, and, before the building, or structure is used, he sells the relevant interest therein in the course of that trade, or, as the case may be, of that part of that trade, paragraph (b) of the preceding subsection shall have effect subject to the following modifications:

In order to make this Amendment clear, let me contrast two cases. In the first case, the man who intends to set up business employs a private contractor to build his factory and pays him a sum which covers his profits. In the second case, he does not get the building put up himself by a building contractor, but he buys it from someone who has gone into the building business and has built the factory. As the Bill is drafted, his allowance would be based on the cost that the building contractor had himself incurred, whereas, obviously, looking at it from his point of view, it should be based on what he has had to pay. This Amendment provides that that should be done.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 6 ordered to stand part of the Bill.

CLAUSE 7.—(Cessation of mills, factories allowances.)

1.15 p.m.

I beg to move, in page 8, line 42, leave out "four," and insert "nine."

I take it, Mr. Williams, that we can discuss with this Amendment, the following Amendment, in my name?

Yes.

This Amendment needs but a brief explanation. The position at the moment is that Part I of the Bill provides for depreciation allowances on industrial buildings. Existing buildings are allowed to have an annual depreciation of 2 per cent. for the remainder of their 60 years' life, or continue to receive, for five years, the present mills and factories allowance. After the end of the period, whichever of these two alternatives may be chosen by the taxpayer, existing buildings will not get any allowance. I submit that that is a hardship. The "mills, factories allowance" has been in operation for only a comparatively short time, and for a great part of that limited time we have been in a state of war, with the result that any possibility of modifying factory buildings has been almost entirely ruled out. There has not been sufficient time to write down the cost of the existing buildings in most cases, particularly in the textile industries which were referred to on an earlier Amendment by the hon. Member for Chesterfield (Mr. Benson). Moreover, the rebuilding of such factories during the next five years is a remote possibility, in view of the terrific demand there will be in the building and contracting trade for all classes of building. Inevitably, there will have to be an order of priority, and who can say where on the list the construction of new cotton mills may find a place? The view is held that this period of four years, which is really five years, is too short in all the circumstances at the present time and the purpose of this Amendment, therefore, is to increase the five years to 10 by altering the word "four" to "nine."

I support this Amendment because I, too, feel that the period of five years would impose a hardship on many people. I referred to this point on the Second Reading, and I can appreciate the reason for the Chancellor's decision. We are not questioning that, because we know that we must bring our industrial buildings and equipment up to date. Accepting the principle that there must be a time limit, and that the 2 per cent. will apply only to the buildings referred to by my hon. Friend and others, we feel that if the Chancellor can see his way to extend this period, it would meet cases which, need assistance.

As I understand the position, there is agreement that the existing provision governing the "mills, factories allowance," which has been in operation for only a short time and which it is recognised presents quite a number of anomalies, should be brought to an end, and that its place should be taken in due course by the more liberal and much better balanced provisions of this Bill. The question that arises on this Amendment is at what point of time the transition from the present "mills, factories allowance" to the provisions of this Bill should be effected? No one can say when it will be physically possible to bring the old buildings, which qualify for the allowance, irrespective of age, up to date. In this Bill we chose the period of five years because we were anxious to give every possible encouragement to owners to replace their out-of-date buildings by new and up-to-date buildings at the earliest possible moment. It may well happen that that period of years will, in practice, prove to be inadequate, and I say at once, quite frankly, that if that should turn out to be so, there would be a clear case for extending the period.

But I do feel that we should not, here and now, assume that the period of five years will be inadequate. I would much prefer to leave the provision as it stands, with the clear understanding that the period has been fixed with a definite pur- pose in view, and that if circumstances stultify the decision to be taken now there will be a clear case for a simple amendment of the law to extend the period of time. To extend it now would really imply a pessimistic view as to the future in this particular respect, and might tend to encourage people who are qualified for the allowance, but because of the age of the buildings would not be qualified for allowance under this Bill, to delay the steps necessary to bring their buildings up-to-date. I, therefore, hope that my hon. Friend, whose argument, in substance, I accept, will not, for the reasons I have given, wish to press his Amendment.

Having regard, again, to what my right hon. Friend has said, and the fact that we can look forward to at least some amendment of the present Bill, I beg to ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

CLAUSE 8—(Definition of "industrial building or structure.")

Amendment made: In page 9, line 24, after "section," insert "in this Part of this Act."—[ The Attorney-General. ]

I beg to move, in page 9, line 29, after "dock," insert, "inland navigation."

This Amendment is to meet a point made by the Canals Association, who have drawn attention to the fact that a number of railway companies do not themselves actually engage in the business of transporting goods, and who feel that they ought to be included.

Amendment agreed to.

I beg to move, in page 9, line 42, after "manufactured," insert "or produced."

This Amendment secures that a warehouse used for the trade of the storage of agricultural produce which has not been delivered to any purchaser shall receive the same treatment under Part I of the Bill as a warehouse used for the storage of manufactured goods that are still in the ownership of the manufacturer. This meets a point made by my hon. Friend the Member for Walsall (Sir G. Schuster) on the Second Reading.

Amendment agreed to.

I beg to move, in page 10, line 2, after "sea," insert "or air."

Having regard to the considerable development of air transport, and the likelihood of goods being transported by air, I think we should make provision for air transport in the same way as we do by sea.

We think it right to accept this Amendment, that the development of air transport would justify it, and that we had better make provision for it now.

Amendment agreed to.

I beg to move, in page 10, line 2, after "Kingdom," insert, "or elsewhere."

This Amendment relates to storage which may belong to British companies that are subject to taxation in this country, and which possess storage facilities in different parts of the world. In view of the fact that they are assessed for Income Tax in this country the words, "or elsewhere," would cover the whole range of their operations.

This point would be material only if the concern which carried on trade was liable to United Kingdom Income Tax in respect of its profits—that is to say, if it was a company controlled in the United Kingdom.

That is my point.

The object of the paragraph is to deal with the storage of goods in their delivery by sea or—as a result of our last Amendment—by air into any part of the United Kingdom, and the purpose of putting in those words was to make sure that certain storage undertakings which take delivery of goods on their arrival in the United Kingdom, but which are not the dock undertakings already covered by the Bill, should be treated pari passu with the dock undertakings.

It would seem, therefore, that the purpose of the paragraph is only to achieve a position of equity between dock undertakings which conduct storage operations and other companies which are not dock undertakings but also provide storage in the United Kingdom. It would not seem appropriate to add the words which the hon. Member wishes here to insert.

1.30 p.m.

In view of the explanation given by my right hon. Friend, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

I beg to move, in page 10, line 2, at end, insert:

"(v) of goods or materials which are to be sold to the public in any retail shop; or"

This Amendment is very limited in scope but hangs together with a number of other Amendments, and I hope I shall be in order in speaking on it in connection with those Amendments and at the same time be allowed to make subsidiary points on the other Amendments when they arise.

The Committee ought to be clear about this and know which other Amendments the hon. Member has in mind.

May I explain the position? I think I can make it clear in a very few words. In the first place, if the two Amendments standing higher up on page 858 of the Amendment Paper had been called—

In page 9, line 26, at end, insert:

it was the intention of myself and my hon. Friends to argue generally in favour of widening the scope of the Bill by drawing the line of distinction between industrial buildings, on the one hand, and dwelling houses, on the other hand. That would have meant including retail shops, hotels and so on within the provisions of the Bill so far as buildings are concerned. As that wider Amendment has not been called, I should like to argue the case of buildings used in connection with the retail shop trade. I would myself have preferred to argue the broader principle; indeed I shall have pleasure in supporting my hon. Friends in regard to the hotel position, and I hope that they will support me in regard to retail shops.

It is clear that the matter of retail shops begins here and that hotels and other things come in later Amendments. The position of retail shops can be discussed here with the general consent of the Committee, but we cannot bargain about this.

I was merely making a unilateral declaration. The point I want to make is that this question as to whether buildings used in connection with retail trade should be included within the scope of the Bill and be treated as industrial buildings is a wide question, and I can hardly speak on this very limited Amendment without saying something about the broad issue. I hope I can do that very briefly, because I put forward the main points in my speech in the Second Reading Debate. I submit that there is a very important broad issue.

On a point of Order. This Amendment deals simply with warehouses for retail shops. There are other Amendments dealing with retail shops later and I wonder whether it would be for the convenience of the Committee and you, Mr. Williams, that my hon. Friend on this Amendment should cover all the retail shop ground and not the hotel ground, which could be taken separately. I think it would be for the convenience of the Committee if we could have a debate on the retail Shop Amendments.

Does the definition in Clause 8 of "industrial building or structure" have application to the production industry only, and is not "part of a dwelling house, retail shop, show-room, hotel or office" specifically excluded? I wonder whether the Attorney-General would suggest, what I was going to suggest, that possibly all those things, which obviously change fundamentally the intention of the Government to limit the Bill to production industry, might be discussed together and dealt with once and for all?

I am in the hands of the Committee on this point. It is a matter of some complication and I think we ought to keep the hotels separate. We might here discuss, if it is agreeable to the Committee, the question of retail shops and the whole wider policy of retail shops to cover the further Amendments, reserving the fact that there may be one or two Amendments later on which hon. Members may wish to have a Division so as to enforce some particular principle of their own in connection with retail shops. If that is agreeable, I think it is a reasonable way of dealing with the matter.

It is really a matter for the hon. Member himself who moved the Amendment. The points are not quite identical. Whether the storage warehouse for goods to be sold in retail shops should come in would not necessarily stand or fall with the whole principle of whether retail shops should come in. If the hon. Member wants to discuss on the purely narrow point of warehouses, which is covered in this Amendment, the Committee would do better to discuss it separately, but if he thinks that it should stand or fall on the whole question of shopkeepers, then I agree with the suggestion that we should discuss them together. But it seems to be a matter for the hon. Member himself to decide.

I am grateful to you, Mr. Williams. I suggest to the Committee that it really would be better to take this first opportunity of discussing the whole question of the position of the distributive trades, but from certain words which you used I hope I am justified in drawing the conclusion that, if there are some ancillary points that are not covered by the general discussion, I shall still be in Order in raising them on the particular Amendments as they come up. May I explain what I mean by this question?

We have got the point of Order cleared up to this point. I understand that the hon. Member himself agrees with what the right hon. and learned Gentleman has said. I understand him definitely to want a wide discussion here, and I understand that the Committee are agreeable to this. We can have a discussion on the retail shops here. There may be points of detail on some Amendments later which the hon. Gentleman may wish to divide upon. We cannot have a further discussion on retail shops, though the hon. Member might move his Amendments in a few words; we must have the one discussion at this stage. Is that agreeable?

Agreed.

I am much obliged. On the broad issue, the point I want to submit to the Committee is that it is a fundamental error in this Bill, that it seeks to draw the line between something which the Government seem to regard as productive industry and various other processes which, in my submission, are really indivisible from the process of production. The object of the Bill is to encourage modernisation of equipment of all kinds and, by encouraging modernisation, to improve the productive power of the country and to diminish the cost of production. The whole basis on which I have been arguing is that the process of distribution is really an essential element in the process of production which in fact consists in converting raw materials into some final product in the hands of the consumer. I want to urge that economy and efficiency in the process of distribution are just as important in the national interest as economy and efficiency in the process of manufacture.

I gave some figures, in speaking on the Second Reading Debate, to illustrate what a very important part of our economy this process is. I only gave rough estimates and I would like to amplify them by a quotation from a publication to which reference has already been made in this Debate and which I strongly recommend all hon. Members to read. It is an extremely interesting book recently published by Messrs. Cadbury called "Industrial Record, 1919–1939." This book points out that, on an estimate given by the Ministry of Food, in the course of the war, the cost of distributing about £900,000,000 worth of food was £450,000,000, so that the total which the public had to pay was brought up from £900,000,000 to £1,350,000,000. The book goes on to say:

Do those figures include the cost of advertising?

I cannot answer that with certainty, and I do not want to be drawn into detail. I think that the hon. Member will admit that whatever the details may be, there is a margin of enormous importance involved in the cost of distribution. It is sufficient for my point to establish that fact. I want to submit that it is an entirely erroneous idea to think that we, in this country, are interested in encouraging efficiency in what is called production and not in keeping down the cost of distribution. What we are concerned with is what the consumer has to pay. All wages and all rates of pay must bear some relation to what the consumer has to pay. If we can save £200,000,000 or £300,000,000 a year in the cost of distribution that is just as great a benefit to the country as if we could save £200,000,000 or £300,000,000 a year in production. Anyone who studies this little book will realise what this means. On the one side there is all the pioneer work and ingenuity, so well described in this book, which went into the achievement of being able to put on the market a 2 oz. bar of chocolate at 2d. and thereby enormously increase consumption. On the other you find all this much more than outweighed by the cost of the quite elementary process of distribution. Moreover, if we are talking in terms of our competitive power and export markets, it all comes to the same thing. Our costs will depend on the cost of living in this country. Our power to compete in export markets will, therefore, be largely affected by whether we can reduce the cost of distribution.

1.45 p.m.

There is another point I would like to bring up. The Chancellor told us in the course of the Budget Debate about his arrangement for a double Income Tax convention with other countries. We shall get into great complications if the system on which our Income Tax is assessed differs from that which prevails in other countries. That, I submit to the right hon. Gentleman the Financial Secretary, is a very practical point to be taken into account now.

I have constantly argued in favour of having a really rational system of taxing income. This at present we have not got. We start out with the idea that we are going to tax income. That principle has been carried out so far as personal income is concerned. It has even been extended to rents, less any cost of recovering them. But, when we came to industrial profits, we stopped short—at least until this Bill was introduced. Now we have had from the Chancellor, in his opening speech in the Debate on this Bill, acceptance of the principle that when you tax the profits on industry you should tax the real profits, after allowing for all costs including proper provision for depreciation. Unfortunately, however, he has not carried this principle to its logical conclusion, and he has said that he is going to give that treatment—it is not favourable treatment, it is simply just treatment—to what he calls productive industry but to deny it to all sorts of other commercial undertakings. There is absolutely no logic in that case, and I submit that this is a matter of very serious principle which we should do well to consider now before we allow the Bill to go any further.

In conclusion I want to add that there are two questions involved. There is the whole wide issue of retail shops, and there is also mixed up with it—and on that I do not think the Bill is at all clear—the question of buildings which are described as ancillary to the business of the retail shops. One of the points which I want to raise in connection with later Amendments is whether a warehouse which is run in connection with a large retail undertaking is specifically excluded as "ancillary to a retail shop" or whether it is to get the benefit as a warehouse just as though it were owned by somebody who has no connection with the retail trade. That is a subsidiary point, however, and I stand on the main principle that retail distribution is an essential part of production and that, to be both just and logical, the Chancellor should have tried to base taxation on what is the real income of every commercial undertaking and should not have drawn the dividing line he has drawn.

I should like to support my hon. Friend's Amendment from the particular point of view of a different type of distributor, the small retail shopkeeper. I have no interest in shopkeeping, either retail or wholesale, but the small shopkeeper is, in my opinion, a very worthy member of the community whose interests this House ought to safeguard. He is a man who has set himself up in business by thrift, initiative and hard work, which we used to regard as virtues and which I hope we still regard as virtues. He is a man who has suffered very heavily as a result of the war; and, what is more, without the whole-hearted co-operation of the small shopkeeper the Government would not have been able to carry through the present rationing schemes as successfully as they have done.

However, I do not want to put forward this case on grounds of compassion or sentiment. I want to support what my hon. Friend has just said. It seems to me that it would be quite illogical, when we are talking about the cost of production of an article, to ignore the cost of its distribution. In other words, an article does not get into the hands of the public merely when it leaves the factory. There are other charges, other services which have to be performed, and the cost of those services is very relevant to the final cost of the article to the consumer. The Chancellor, in his Budget speech, reminded us of the four respects in which our economic position has deteriorated since 1938. He told us that we have lost our export trade, that we have lost the larger part of our overseas investments, that we owe staggering sums of money all over the world. I hoped he was going to say more about the last point he mentioned, that in certain respects we have lagged behind the United States and other countries in the efficiency of our production. It is to the efficiency of our production that we must look to restore our prosperity. The hon. Member for Seaham (Mr. Shinwell) said yesterday that all we on this side of the House were interested in was to reduce wages—

I am afraid that I must interrupt the hon. and gallant Gentleman Speeches are rather on Second Reading lines and hon. Members should endeavour to keep to the precise point of the Amendment before the Committee. I hope the hon. and gallant Member will do so.

I do not know, Major Milner, whether Mr. Williams informed you, but we are taking a rather wide discussion on this particular Amendment.

I agree entirely—on the question of retail shops, but not on the multitude of subjects upon which the hon. and gallant Gentleman has been touching.

I apologise, Major Milner. The point I really wanted to make was that we must consider everything that leads to the modernising of our equipment and that it is only in this way that we can reduce our costs and raise the standard of living of the people of this country. I think it is a fair criticism of many branches of British industry and of the British distributive trades to say that what we go in for is botching and patching instead of a radical reorganisation of all our distributive machinery. We want to get away from that botching and patching and to encourage distributors to adopt the most efficient methods of distributing their goods. That is why I entirely support what my hon. Friend has said, that we cannot differentiate between the distribution of goods and the whole of the productive costs.

My last point is this. I believe that if we stick to the Bill in its present form it is bound to lead to all sorts of anomalies and arguments. Let me give two relevant examples. A small shopkeeper may be a man who makes a living by repairing boots or shoes. If he sets up a partition in his shop and behind that does his cobbling, that part of the shop, I suppose, is entitled to the concession under this Bill, but the front part of the shop where he collects the money and displays the boots with the bottoms upwards does not receive the concession. In the same way the part of the butcher's shop where a man sells meat is regarded as the distributive part of his shop, but if in the back part he makes sausages that, I suppose, is a factory—[HON. MEMBERS: "No"]—and he is entitled to the concession there. Therefore I entirely support what my hon. Friend has proposed, that this concession should be allowed to the distributive trades not only because it is just and reasonable but because it is logical, when we are considering this matter of our commercial machine, to include the costs of distribution.

I confess that I am rather impressed by the arguments advanced in favour of this Amendment. I am not sure that I am impressed by the purpose of the Bill as a whole, but assuming that it is intended to, and would if it were operated, improve the efficiency of productive industry, there does not seem to me to be any logic in the distinction which the Bill draws, unless we are going back to the French school of economists called the Physiocrats who argued that distribution added no value at all to things and, therefore, the whole source of value was in agriculture. As a matter of fact we know very well that efficient, speedy distribution is as large a part of the productive mechanism of modern society as the actual production of the article itself in factory, workshop or mine. Therefore there does not seem to me to be any logic in the distinction which is drawn. Let me give an illustration. There may be a certain number of articles displayed in a shop window which are passing from one process of production to another, for instance spare parts of a wireless set, or tools. They are not in themselves finished products, but they are on the way to becoming so. Surely, therefore, the ultimate consumer of those articles, who will consume them productively in the act of productive consumption, ought to be made aware of their existence, and ought to have as much facility as possible to know anything about them as the man in the factory.

There is another argument which I think ought to be conclusive. We ought to encourage shopkeepers and distributive organisations of all kinds to modernise their buildings if only for the sake of the people who are employed in them. I do not see why, assuming that the advantages supposed to be conferred by this Bill are beneficial, the very large number of workers engaged in the distributive industry should be denied those benefits. As a small boy of about 12 years of age I worked as a butcher's errand boy. I worked very hard. We did not finish until 1 o'clock in the morning and I had to work under the most appalling conditions. Things are very much better now, but if it can be shown that this Bill will assist or stimulate the owners of businesses to bring their premises up to date and make them light and airy and wholesome, then we ought not to withhold the advantages from the people engaged in the distributive industry. My mind is not quite made up on the matter, but I shall have to receive from the Financial Secretary to the Treasury very conclusive arguments be- fore I will take the view that my hon. Friend's Amendment ought not to be pressed to a Division.

There are one or two occasions when it might be said that all men meet on an equal footing, and one is when they sympathise with each other as Income Tax payers. I support the claim put forward on behalf of the retail distributors, not because of the work they have done and not because of any sympathy one may have with them, but, as has been said, because this is a Bill which is intended to stimulate industry as a whole and, in my submission, it is impossible to separate the retail distributor from the remainder of industry. Unless the home market is thoroughly secure it is impossible for a manufacturer to establish sufficient business to reach out into the export markets and establish himself there. In securing his position in the home market, he must rely upon the retail distributors. Many other reasons have been advanced, but that one, in addition to those which have been put forward by other hon. Members and particularly by the hon. Member for Ebbw Vale (Mr. A. Bevan) struck me as giving good grounds why the right hon. Gentleman should consider this matter again, and I venture to suggest that he should be prepared to concede the point which this Amendment seeks, and not have the matter forced to a Division.

2.0 p.m.

I feel certain that the arguments that have been raised to-day will have to be examined by the Chancellor or the Financial Secretary, because there is sufficient evidence that you cannot draw a line, as the hon. Member for Ebbw Vale (Mr. Bevan) has said, in distribution or shopkeeping to-day, showing where distribution begins or ends or where production begins or ends. I am greatly concerned myself with the points raised up to now, despite the fact that the hon. and gallant Member for Hornsey (Captain Gammans) said he had no particular interests in the shopkeeping trade. Indeed, I thought he was a spokesman for a very large section of it, just as the hon. Member for Walsall (Sir G. Schuster) is very well acquainted with, and has tremendous business experience of, that branch of trade which has helped to crush the small shopkeeper—as the Co-operative movement is often accused of crushing the small man. But I do not think that has anything to do with any particular branch of trade. It has to do with the relief we are expected to give.

The small boot repairer has been referred to, but there are not many small boot repairers left in the villages or in the towns. [An HON. MEMBER: "Any number of them."] It is true to say that there are machinery and all kinds of equipment in nine-tenths of the premises where boots are repaired, but that undoubtedly means that that part of the building is a factory, while the front is just a means of distribution—receiving, distributing and collecting money.

In connection with the West End of London, I would venture the opinion—and I believe this can be supported by good evidence—that the vast number of shops of big multiple firms or big departmental stores, which accept shoes for repair over their counters, send them to a factory. Some of them go to the Caledonian Road, where there is a very big factory. Five or six firms, sending boots to a factory, keep a big industrial concern going, and that factory would itself benefit by this Clause. We have to look at this problem exactly as it is, and we cannot agree to a clear line, because a clear line is impossible. When we come to the question of the butcher, I would emphasise that, in a small butcher's shop, you may find a man with a sausage machine like a mangle, but you would never argue that his place was a factory. So many processes have been added to the butchering trade in distribution to-day, that you can find big firms which have created factories to link up with 10, 15 or 20 shops, and employ as many hands in the factory as are likely to be employed in the shops which distribute the commodities.

According to the attitude of the Chancellor of the Exchequer, the factory where all the different meat by-products are made would rank for relief, but not the shop where they are sold. In the case of a small shop, where they produce their own meat by-products on the premises, and are registered and exhibit a notice that the place comes under the Factory Acts, how is the Chancellor to distinguish between the two? What of the baker, who is distributing from some big depot, whose bakery may be miles away, and who has 20 or 30 shops, or, it may be, only three or four? The big bakery miles away will benefit, but not the shops. But the baker who has his bakery at the back of his premises will benefit to the extent of the alterations or adjustments which may be done within the Act, because he is producing bread or confectionery in part of the premises. He would thus benefit as regard the premises at the back of the shop but not for the shop itself.

I come now to the major point—that about the employees—and I make this point for the attention of the Financial Secretary on behalf of the employees. I am concerned that employees should have good and reasonable conditions. We have many Shops Acts on the Statute Book, and we have imposed conditions on employers regarding feeding arrangements, canteens and so on. We are making it a punishable offence if an employer does not comply with certain conditions regarding those feeding facilities. I venture to suggest to the Committee that nine out of ten small shops are to-day unable to comply with the conditions laid down by Act of Parliament regarding feeding arrangements, and it costs a lot of money to do it. Why should they not, in endeavouring to provide canteens or feeding facilities behind their premises, and to establish reasonable conditions for their employees, be allowed this relief?

Suppose they were big employers, concerned with a dairy. Dairy distribution over the last 25 years has so changed that there are very few small dairymen left in London, but there are many big dairies around London, and some of them employ from 200 to 500 workers. Where the dairy is well removed from the premises, and there is nothing that can be recognised as a factory, the dairy will benefit, but not the shop or those parts of the premises where the actual commodity reaches the consumer. The whole thing is topsyturvy, and I suggest, in all seriousness, that, to give the benefit to the distributor—and I recognise that there are going to be difficulties—is a very reasonable and sensible suggestion which may remove the matter from all political controversy, so that we may regard it as a good thing for the well-being of the nation and, particularly, of the employees. I believe it will be reasonably well received by the rest of the community.

On Second Reading, I pointed out that I considered the division as drawn by the Chancellor arbitrary and illogical and all that has been said today confirms me in that view. I would support the case put forward by the hon. Member for Walsall (Sir G. Schuster). With regard to the particular point raised by the hon. Member for Ebbw Vale (Mr. Bevan), there are many cases which I could quote to the Committee where we have manufacturing dovetailing into warehousing and running on into retail shops. It is all called "servicing," and is a growing business of service in which you get the whole paraphernalia from beginning to end, in one building or group of buildings. The hon. Member for Walsall referred to the booklet issued by Messrs. Cadbury, but anybody who studies that booklet will be convinced, I am sure, that an enormous amount of work is necessary in bringing our retail establishments up-to-date. When that is done, it will give better facilities for the workers and will also reduce the cost of distribution—a matter to which we ought to give very earnest consideration. Lastly, I feel that the point brought forward by my hon. Friend is only a matter of justice. We should not try to differentiate and give very favourable treatment to productive industry and very much less sympathy and support to distributive industry.

On an earlier Amendment, I said I would make a suggestion, and I suggested that, if the Government took over industry, we should be saved a lot of this trouble. The hon. Member for Walsall (Sir G. Schuster) seemed to think that the suggestion was not of much account, but I listened to him today, as I always listen to him, with very great interest. The hon. Member is a very intelligent man, and he made out a splendid case for the suggestion which I had presented earlier. He, quite correctly, drew attention to the importance of distribution and the value of the small shop. He is very anxious to have efficiency. It is essential that we should have efficiency. But has the hon. Member ever been in a small shop? I do not think so—or, if he has, they knew he was coming. Cadburys have published a book, all about the enormous cost of distribution. They mention in that book, that you can go into a small shop, as an ordinary person, nobody caring whether you are there or not, and see a well-dressed smart young man come in, stick his elbow on the counter and rest his head on his hand and chatter away for a long time that the best chocolate in this country is Cadbury's chocolate. He goes out and a few minutes later another smart young man comes in, leans on the counter with his head on his hand and chatters away that the best chocolate in the country is Rowntree's chocolate. This process goes on—

rose —

I am dealing with distribution. [ Interruption. ] Imagine the time of the small shopkeeper being taken up by Cadbury, Rowntree, Tobler, Peters and heaven knows how many of them. In the process of distribution, he has to sustain these fellows. Go into any town you like—

The hon. Member's speech is very interesting, but it is not related to the Amendment. He must relate his remarks to the Amendment before the Committee.

I am sorry, Major Milner, if there is a misunderstanding, but other speakers were given very wide scope by your predecessor in the Chair. I have been dealing only with the arguments presented by the hon. Member. While I am in full accord with the arguments of the hon. Member for Ebbw Vale (Mr. A. Bevan) about small shopkeepers, I am in favour of the small shopkeeper getting the benefit.

I am in favour of small shopkeepers getting the benefit, but to give small shopkeepers the benefit of this provision will not solve the problem of distribution or bring about efficiency of distribution. The only way to bring about efficiency of distribution is for the Government to get rid of all the chocolate makers, who send out all these advertisements, who send out well-dressed travellers and build hotels to shelter them, and what not, and to take a sensible method—

The hon. Gentleman has now got beyond the purview of the Bill.

2.15 p.m.

My right hon. Friend the Chancellor find himself in this diffi- culty because of the acceptance of a rather wide general principle which may itself appear sound but which I believe, as the result of practical experience, will undoubtedly in administration inflict serious hardship upon a large number of people and concerns who might well claim to be assisted. I quite understand the principle on which my right hon. Friend has worked. He has said specifically that it is to exclude the distributive trades from the provisions of the Bill. My right hon. Friend says that this Bill is to provide for a series of allowances for productive industry only. On the face of it, that seems to be a principle which can be accepted, and it seems to give a line of demarcation which apparently it would be thought possible to put into effect, but my own experience is that in Income Tax affairs it is extraordinarily difficult to draw a clear line as between one category and another without inflicting injustice. It is part of the function of the Chancellor to see that any remission in taxation or any alleviation of the burden is fairly and equitably distributed. The first challenge I make to my right hon. Friend is this. Is it right on this broader basis that he should introduce this system of alleviation for the benefit of one section of the community without having regard to the right and proper claims of other sections? I will give an illustration of how this thing would operate. A few days ago I wrote to my right hon. Friend about the position of a number of fruit growers who were anxious to enter into a co-operative arrangement for the storage of fruit, which, of course, would mean ultimately for the disposal of fruit. The inquiry was whether a company of that kind and for that purpose would be entitled to receive the allowances in this Bill. My right hon. Friend wrote a courteous reply in which he said:

"I have found it possible to agree to include buildings used in connection with a trade of storing manufactured goods or agricultural produce before first sale, since such storage is an adjunct of production, but I am afraid I could not propose a further extension to cover the buildings of a company engaged in packing and marketing fruit since these operations belong to the realm of distribution."

The argument may be a sound one, in the sense of carrying out the Chancellor's proposals, but it is completely unjust. Therefore, I suggest to my right hon. Friend the Chancellor that he ought to consider the points made concerning the extension of this Bill to a larger section than those covered by the principle that they must be engaged in sheer production. In practical life there are occasions when it is almost impossible to differentiate as between production and distribution costs. We have a responsibility upon us to see that any allowances that are given are fairly and equitably distributed, and I hope my right hon. Friend will consider the representations now submitted to him and to the Committee.

I would like at this stage to tell the Committee the attitude of the Government towards this Amendment. I have been waiting, I must confess, to see whether any of my hon. Friends who are interested in the hotel industry were going to take advantage of the speech of my hon. Friend the Member for Walsall (Sir G. Schuster) and come in on this Amendment in return for his support at a later stage on the question of hotels.

There is plenty of time yet.

There is a disposition in all parts of the Committee to express sympathy with the small shopkeeper, and that sympathy I share. At the same time, let us be clear that few, if any, small shopkeepers would reap any advantage if this Amendment were carried. What the precise Amendment before the Committee deals with is a rather narrow point connected with storage premises; but if retail shops were brought within the definition of "industrial structures" under Clause 8, which we are now on, very few small shopkeepers would derive any benefit of any sort or kind. In the first instance, they would have to prove that their shop had been constructed during the last fifty years; secondly, they would have to prove what they had spent upon the construction of the shop; and then a calculation would have to be made, if they could produce those accounts, to show what allowance they were entitled to for a residue of a notional life of fifty years attributable to the shop, which would rank as an industrial structure. Therefore, it is clear that very few small shopkeepers would gain anything if shops were brought within the scope of Part I of the Bill. In most cases they could not show that their shops had been constructed during the past fifty years, and even if they could do that, they would have great difficulty in producing the necessary accounts to show what they had expended upon them.

Several hon. Members have said that it is very difficult to make a distinction, as we do in the Bill, between that part of industry which is productive and that part which deals with distribution. Hon. Members have drawn attention to the difficulties of drawing a line, but of course it was done under the derating proposal in 1928, and that is the model which we have followed in Clause 8 of the Bill. All the difficult questions which then arose as to whether garages and so forth were industrial hereditaments or not have been settled, and there really is not any practical difficulty, as far as the law is concerned, in drawing this distinction. It is true that it is only in regard to buildings that any distinction is drawn in the Bill between productive industry and other forms of trade, but let us be clear what the position is as regards buildings other than those which come within Part I of the Bill. Under Income Tax law every building attracts the statutory allowance in respect of repairs, which is a fixed proportion of its annual value, and anybody who can show that he has spent more upon the repair and maintenance of the building than the statutory allowance can claim the excess as an allowance for Income Tax purposes. Shops, of course, attract those benefits. So far as they contain plant or machinery, moreover, they also attract the benefits under other parts of this Bill—wear and tear allowances, initial allowances, and so forth.

The reasons which prompted the Chancellor to exclude shops and several other forms of buildings from the benefits under Part I of the Bill were twofold. They were partly administrative reasons, and partly the desire to concentrate the benefit of the Bill upon what my right, hon. Friend described as productive enterprise. Let me say a word about the administrative difficulties in which we should be involved if shops ranked as industrial hereditaments. Many shops are also dwellinghouses, and it is very difficult to say which part of the premises is the shop and which part is the dwellinghouse. As all hon. Members are aware, at the present time the Board of Inland Revenue are carrying an immense burden, especially in connection with the Pay-as-you-earn system. They would have a very large task thrust upon them if they had to examine every retail shop in the country, and go into the question of when it was constructed and how much had been spent upon it. The administrative problem involved would be a very heavy one. Moreover, in regard to shops especially, there is the difficulty of separating the value of the shop from the value of the site upon which it stands. You may get a depreciating building but an appreciating site, and hitherto the two things have been treated as one.

Let hon. Members note that if we were to bring shops and retail premises within Part I of the Bill, the whole machinery of Part I would have to be applied to them. It is not only a question of the annual allowance. There would be the initial allowance, the balancing allowance and the balancing charge. Hon. Members will recognise the extreme difficulties in which this would involve us. A man might buy a shop for a certain figure and might sell his interest in it at a higher figure—and shops very frequently change hands at a higher figure—and then the whole of the machinery with regard to the balancing charge would come into operation; it would have to be decided what part of the allowances already granted ought to be set against the appreciation in the value of the shop and what part ought to be disregarded on account of the appreciation in the value of the site. The administrative difficulties really would be extremely formidable if many hundreds of thousands of small shop premises were brought within Part I of the Bill.

The other reason which prompted the Chancellor to limit this scheme to industrial buildings engaged in production was that productive or creative industry is the foundation of national prosperity. It is the production and the export of things, not the retail distribution at home, that is the real strength and life blood of the country. I think that that is the case for excluding the distributive trades from this part of the Bill. There would be immense administrative complexity on the one hand, and very little advantage to the shopkeeper on the other. In many cases it would result in the smaller shopkeepers getting nothing, and where they did get anything they would probably be harassed by the operation of what are called balancing charges. I am sure that, on balance, the advantage lies with the exclusion of distributive premises from the scope of the Bill.

2.30 p.m.

My right hon. Friend cannot complain if those who support the later hotel Amendment have been stung into activity by his provocative observation when he started. I have always been in sympathy with this Amendment and was ready to support it before, but it became so abundantly clear that it met with the general approval of the Committee that it seemed unnecessary to add a further voice. I do not think the Committee will have been very impressed with my right hon. Friend's argument. It came really to this firstly that not many people would benefit from it and then he went on to say that the administrative difficulties would be enormous on account of the hundreds of thousands of people involved. It seems to me that those two arguments are inconsistent. He must choose one or the other. If hundreds of thousands of people are involved it appears to be of substantial benefit to a great number of people; if there are not many people concerned it will not cost very much.

What I meant was that there might be many claimants but very few successful ones.

That at least makes a little clearer what my right hon. Friend had in mind. I rather suspected that that was what his explanation of my comment was going to be, but his arguments do not tally all the same. There is a considerable difference between examining claims and meeting them. What he said was that a lot of claims would have to be made, and not many would be met. The answer to that is, if only a few are going to be successful, it is a benefit which should be extended to those few, and it becomes clear that the expense to the Exchequer would not be substantial.

The only other point that my right hon. Friend made was that he wished to concentrate on what he called productive industry. That really is begging the question. The very point that every speaker has made is that distribution is an essential element in the productive industry, and that you cannot consider produc- tive industry as merely the manufacture of the goods with which you are concerned. So long as goods remain at the factory, they are valueless for the purpose of consumption. They only become available for consumption when they are distributed, and distribution is an essential element in the production. For these reasons I support the Amendment and hope that the Committee will do likewise.

I am afraid we cannot possibly regard my right hon. Friend's reply as at all satisfactory. He completely failed to deal with the main argument that has been advanced, that the distributive end of a trade is a part of production and that there is no effective production without effective distribution. He said, first of all, that very few people will benefit and, secondly, that there will be thousands of applications. The fact that the administrative machine cannot cope easily with the job is no justification for not doing justice. Finally, he said, what surprised me very much, that if there were people rash enough to apply for benefits, probably they would be so discouraged by the treatment that they failed to receive that they would be very sorry that they started. When my right hon. Friend says that very few people will benefit, may I give one obvious example? There are many shopkeepers, particularly small shopkeepers, whose whole business would be greatly advantaged by an improved shop front and improved display of their wares. There can be no doubt that, if the Amendment were carried, such a shop would rank for the allowance for depreciation, whereas at present it does not. No amount of discouragement by the official machine could get beyond the simple fact that that shopkeeper would benefit.

I am pretty sure that things like shop fronts and improvements to the furnishings of shops come under Part II and not under this Part of the Bill.

I am glad to hear my right hon. Friend say that, but I should like him to verify it and make the position clear after that.

My right hon. Friend, in dealing with the vexed question of hotels on the Second Reading, made the point that alterations to buildings would not qualify. Surely a shop front on modern lines would come within the Bill.

This is certainly the first time that I have understood that a shop front was regarded as a piece of equipment and not part of the structure. I hope we shall have some more serious answer from the Government to the very serious case that has been put.

My right hon. Friend threw out in a jocular vein a challenge to some of us who are supporting the Amendment in connection with hotels. I do not rise to take advantage of that offer but to support the Amendment on its merits. I do not think my right hon. Friend really made out a good case. It is essential, if we are going to bring down the cost of living, that we should have effective distribution. I agree, that if you have effective production without effective distribution, you are probably going to waste a good deal of the money that you are spending on production. I agree with my hon. Friend the Member for Walsall (Sir G. Schuster). Every speech that has been made from every part of the Committee has been against my right hon. Friend and it might be to his advantage to reconsider his position and, if necessary, have a fresh discussion on Report.

When the right hon. Gentleman tells us that he believes that shop fronts are included under Part II, does he also include the equipment of canteens and other places, and will that be extended later on to kitchens in hotels and other equipment?

The question that my hon. Friend has asked only shows, if the Chancellor of the Exchequer gives way on this, the deep water that he will get into. In this Measure we are giving relief to productive industry in order to assist it to keep up a high standard of efficiency and introduce new methods. I grant that distribution is exceedingly important, and of course plays a role in the final cost, but it seems to me that the problem of distributive industry is much less a problem of introducing new machinery and new processes of technical efficiency and much more a question of getting rid of useless middle men, and getting rid of organisational questions rather than technical questions. Regarding it from that point of view, I hope that the Chancellor will stand firm.

I can sympathise with the mover of this Amendment, but it does not seem to me very clear that help of this sort to the distributive trade should be of the very first priority at this particular time, because this is not the time when we want to encourage an increase of consumption. Our first priority is, surely, to reduce costs for the export trade. I should be sorry to see a diversion of any relaxation that the Chancellor can see his way to give away from the most important thing of all, reducing our costs of production, so that the terms of trade will be in our favour instead of against us. As we have heard from the Chancellor yesterday, our major financial problem at the moment is our huge foreign debt.

On the Second Reading I spoke against the inclusion of retail shops. I have listened to every speech to-day and I am still against their inclusion. This is an illogical Bill. The Chancellor of the Exchequer admitted it on Second Reading. Of course, distribution is part of the total process from raw material to retail consumption, but the Chancellor said that he wished to start this time on allowances where they were most needed. The distributive trade flourished between the two wars. For every 100 persons in the distributive trades in 1924 there were 178 in 1937. In agriculture there were only 70 in 1937, in mining between 60 and 70, and in the engineering trades just over a 100. It is clear that the slumps which affected us, and the ups and downs of the industrial world, made it more precarious to be a producer than a distributor, and the result was that in the bad periods the distributive trades stood up to it better than the primary production trades. If we are going to begin to give help in the way envisaged in this Bill, we ought to begin where the shoe obviously pinches most, and that is the creative and productive part of our economy. Perhaps later on we can go on to the shops. I thought the hon. Member for West Fife (Mr. Gallacher) well disposed of the shops argument because he showed that the high cost of distribution is not going to be cured by this allowance. It would not make any material difference. Our shops are really all right in comparison with our industrial buildings, and in comparison with the capital equipment in agriculture and mines. It seems obvious that the real case is for the instruments of production, and I hope that the Chancellor will stand firm.

2.45 p.m.

Everybody in the Committee will have great sympathy with the case, generally speaking, of the retail trader, for we are all anxious to set him on his feet again after the war. I would, however, remind my hon. Friend the Member for Walsall (Sir G. Schuster) and those associated with him in this Amendment, that this Measure, although it is called the Income Tax Bill, is not designed to give relief of Income Tax all round the country to all classes of the community who deserve relief. If it did, the individual taxpayer would come in for his share of relief. Indeed, the Chancellor in his Budget speech was well aware that private individuals in their personal incomes were urgently desirous of having relief, but he was unable to give that yet. The Bill is restricted to giving such reliefs by way of these allowances as will encourage the flow of goods once more into the shops and will encourage the manufacture and production of those goods. Later, we can give any special encouragement that may be needed to the modernisation of the distributive trades.

I had not meant to speak again, but the three last speeches have shown such a complete misconception of the case which we have put forward that I must say a few words. I want to make it absolutely clear that we are not asking for anything like relief for certain classes of taxpayers. We are saying that here is a Bill the intention of which is to encourage productive industry to modernise itself and make itself efficient. Whether it will be effective for that purpose or not is a matter for argument, though personally I believe that it will help to some extent in that direction. But that is not the point. What I have been arguing is that, if that is a desirable purpose in the national interest, we ought not to stop short at what the Chancellor calls productive industry. We have to take into account the whole process of production and distribution. May I re- mind my right hon. Friend of one small point? He has an Amendment down to page 11 of the Bill with regard to electrical power. In the definition of "electricity undertaking," which is "an, undertaking for the generation, transformation or conversion of electrical energy," he wants to insert after "conversion" the words "transmission or distribution." He therefore recognises in that case that distribution is an essential part of the whole process. That, I submit, is fairly good logical support for the arguments that we have been putting forward.

I also want to pick up a point in the Financial Secretary's speech, the whole of which I found extremely unconvincing. He talked about the repairs allowance. Many of us argue that the fact that people who own buildings can get repairs allowances has been one of the curses of this country, for it has led people to go on with patched-up old buildings. Many of us believe that that has been in the long run a source of loss to the Inland Revenue and that they would have done better financially if they had encouraged the construction of modern buildings by generous depreciation allowances. That is the basis of my argument now. Nothing I have heard in the Debate has in the least weakened my feeling that the group of Amendments we have put down ought to be accepted. We are putting them forward, not to help a particular class of trader, but to help a tremendously important part of the productive machinery which employs over 2,000,000 people to be effective, to do its job properly in the national interest and to create good conditions for its employees. We believe that if that is to be achieved it is necessary that every kind of building and equipment should be modernised, and we want to see that the assistance given by this Measure to that process shall be extended to the distributive industry.

I am very sorry indeed to have to rise in order to endeavour to rebut in toto the arguments that have been submitted by my hon. Friend the Member for Walsall (Sir G. Schuster), who has been so consistently helpful in regard to the subject matter of this Bill ever since I first adumbrated its provisions in my Budget speech of last year. Before I come to the main issue which the Committee are debating, may I dispose of a minor point which my hon. Friend raised in regard to the modernising of shop fronts? The position in that respect is that there will be, as the Bill stands, no allowance for the original installation of a shop front, but when the shop front is renewed in order to bring the shop in its outward shape completely up to date, the whole cost of renewal will be allowed as a charge against profits. A full allowance will be made. That is the position of to-day, and it will continue when this Bill becomes law.

If the modernisation of a shop front involves part structural alterations of other parts of the building, will that be allowed?

I believe that the answer is "No." I was addressing myself to the particular point which I understood had been put.

The Financial Secretary used the term "furnishing." Does he mean everything that is needed for the improvement of a shop?

My hon. Friend should allow us to deal with that when we come to the question of plant, machinery and equipment. I would be out of Order if I dealt with it now. The issue we are discussing in regard to buildings does not arise in the same form in regard to plant and equipment, but we will deal with the position of plant and equipment when we come to it. I dealt with shop fronts because that has a structural aspect and a particular point had been raised about it.

On the main issue, may I remind the Committee that I submitted the proposals now embodied in this Bill in considerable detail in my Budget statement of last year. They were fully discussed. I made it absolutely clear that the proposals that I felt able to put forward involving relief to taxpayers in respect of certain items of expenditure which had not been hitherto the subject of relief, would, according to my plan, be subject to very definite limits; not because I put forward any argument which discriminated sharply on merits between one case and another, but because I felt that in existing circumstances there must be a limit to the concessions of this kind that could be made and because my purpose was to deal with the most urgent cases. I am not necessarily trying to single out specially deserving taxpayers. I am, on the contrary, singling out classes of expenditure which, in the national interest, deserve to be treated on a priority for this purpose. I do not think that I should have proceeded with this Bill had I not felt that I had hon. Members with me in the project which I had submitted, limited as it then was.

I am sure my right hon. Friend will admit that, as far as I am concerned, I have raised this point from the very beginning.

I agree, but that does not affect what I am saying, that I made my plans perfectly clear and that it was with the clearly expressed support of hon. Members that I went forward to undertake the formidable task which has resulted in the presentation of this Bill. I am not going to pretend that it is a simple matter to draw the line and say, on this side there are classes of expenditure which deserve to qualify for relief, and on that side there are classes that do not so qualify. If I were differently situated, I could agree that a case could be made out for extending the relief over the whole range of productive processes, but I have made the broad distinction that was made on the de-rating Act of 1929. There, the same distinction was broadly made between creative industry, manufacturing industry in the broad sense, and all the other processes of distribution, and so on, that go to the preparation of the final product. There, as here, there were difficult border-line cases. There was the case of transport and the case of storage. One had to do the best one could.

In this Bill I have included transport, because it possessed for this purpose the same general feature as manufacturing industry, namely, the necessity for being always up to date with changing processes and changing equipment. I thought that when my hon. Friend quoted an illustration from the distribution of electricity in support of his general thesis that the distribution side of industry should be included in the Bill, I thought that he made a false point, because the distribution of electricity involves, like transport, being continually up to date and being prepared to discard and renew whenever necessary. There are tremendous changes continually taking place in the electrical industry. Therefore, it is consistent with the principles of the Bill that the distribution system of an electrical installation should be treated on the same footing as the actual generating plant.

3.0 p.m.

It is a question of degree. I submit to the Committee with great confidence that if one is to look at this matter from the point of view of priorities, there can be very little doubt that in the national interest allowances for the renewal of manufacturing plant and equipment, and for the buildings in which that equipment is installed, should rank high in priority. If I depart from that and admit an extension in cases in which to be completely up-to-date is manifestly not so vitally important and does not have anything like the same bearing on efficiency of production as in the case of the typical factory, where am I? I am perfectly certain I cannot draw any line at all. I shall find myself, before I finish, in the position of giving an initial allowance and a depreciation allowance to an ordinary building indistinguishable from a dwelling house in which some kind of trade or business is carried on. I am certain of it. I have looked at the whole thing very carefully. I submit to the Committee that hon. Members must really make up their minds whether they are prepared to have this, which everyone admits is good so far as it goes, and be content for the time being to stop there, or whether they are going to jeopardise the whole plan by pressing for its extension into fields into which I, with all the responsibilities that rest upon me, do not feel it possible to go.

May I ask my right hon. Friend a question? I am sure he appreciates that I am not one who wishes to embarrass the Government when they after careful consideration put something forward as being in the national interest. On the other hand, I myself, and I am sure those who support me, feel that a very important question of principle is involved here, and we feel that the Bill, as it stands, is drawn up on a wrong principle. The question I want to ask my right hon. Friend is this: Am I right in understanding what he has said just now as meaning that he does not dispute with us the principle that distribution is an essential part of production? If I could get from my right hon. Friend an assurance that he recognises the principle, and that we are merely being asked now to take a first step, an extension of which may perhaps be considered later, then, speaking for myself, the whole position is changed. But I would find it difficult to avoid asking the Committee to vote against the Amendment if we are to be asked now to give way on a principle which we have with complete sincerity argued.

I did my best a few moments ago to make my view and my attitude absolutely clear. I do not know that I can improve on what I have just said. I thought I had made it clear that I regard this as a matter of priorities. I did not reject as a matter of principle the suggestion that it would be a good thing if we could, to extend this kind of relief more widely. Indeed, I think I said in terms that I quite agree that a case could be made out for distribution as part of the productive process and so on. I merely pointed out that, having considered the matter from every point of view, I had put forward a plan which in its original presentation was subject to a quite definite and clearly understood limitation, and I do not see my way 12 months thereafter, when the process of elaboration of this plan has been completed, to withdraw radically from that original plan. My hon. Friend and I are not divided on any question of principle.

So far as I am concerned, I am satisfied with that. We have established the case, and I beg to ask leave to withdraw the Amendment.

Amendment by leave, withdrawn.

I beg to move, in page 10, line 5, at end, insert: in foreign plantations—properties owned abroad where vegetable products of various kinds are produced—there were often buildings which were as isolated from ordinary towns and so on as, for instance, miners' dwellings in some places in this country. Therefore, it seems that buildings used for the purpose of foreign plantations should be included.

The other point is quite separate. It brings into this Bill agricultural contractors' depots. There are a number of businesses of agricultural contractors who have machines of various kinds for ploughing and threshing and so on, and it is thought right that their depots should be brought into the Bill.

Is the Amendment which my right hon. and learned Friend has just moved intended entirely to cover the point which would be raised by the Amendment which stands on the Order Paper in the name of my hon. Friend the Member for Oldham (Mr. Dodd) and the hon. Member for Stockport (Sir A. Gridley) and myself—

In page 10, line 5, at end, insert:

The point was raised earlier, and we said we would look into it. I should have had it in my mind. If the Committee look at the definition of "foreign plantation" in the Amendment which my right hon. Friend has put down on Clause 8, page 11, line 14, it will be seen that "foreign plantation" is defined as "any land outside the United Kingdom." I think that covers the point.

Amendment agreed to.

I beg to move, in page 10, line 5, at end, insert:

"or

( f ) for the purposes of a trade which consists in the reception of guests and travellers and the provision for them of living accommodation and food."

Before we discuss the Amendment may I ask whether we are to understand, Mr. Williams, from your previous Ruling, that we shall be able to discuss the whole question upon it, and that the subsequent Amendment will be taken without discussion in order that we might have the opportunity of dividing upon it, if necessary?

The Ruling was upon a separate point. The Amendment which I am now about to call deals, I understand, with the matter of hotels. I gather that hon. Members desire to have an opportunity of dividing later as mentioned by the hon. and gallant Member.

Some of us are anxious to express our view on that particular matter, if necessary in the Division Lobby.

The Amendment covers the whole question and has been selected with a view to a general discussion.

I wonder if that means that we shall be unable to divide upon the second Amendment on top of page 859 of the Amendment Paper in the name of the hon. and gallant Member for South Cardiff (Sir A. Evans), in page 10, line 5, at end, insert:

"or

( f ) for the purposes of a trade carried on in an hotel."

Yes. The Amendment I have selected is thought to cover the whole of the Amendments, and that is one of the reasons why the other Amendment was not selected.

May I submit to you, Mr. Williams, with great respect, that there is a very important point in the Amendment which has not been selected, because it covers a whole category of establishments which it may or may not be practicable for the Chancellor to accept?

That may be the case, but anyhow the Chair has made its decision.

Will it be possible for you, Mr. Williams, to accept an Amendment to the Amendment you are calling, in order to bring out the distinction?

I should have to see it first and I could not give a decision until I had seen it.

Further on the point of Order, Mr. Williams. I thought you ruled when we had the last discussion, that we ought to have a Division on certain Amendments which were not being discussed.

No. I said on the last Amendment, so far as my memory goes and I think it is right, that it was dealing with shops and I said there were certain points on which we could have a Division on this later. The Amendment I am calling deals with hotels, and is totally different.

I am sorry to trouble you again, Mr. Williams, but I submit there is a very great difference here. Some of us are not prepared to accept the inclusion of boarding houses but are prepared to accept hotels alone, in Part I of the Bill. It is a very important point.

It is a point which does not affect my decision.

3.15 p.m.

The object of the Amendment is to bring within the scope of the Bill the hotel and catering industry. Unless the Chancellor reconsiders his decision on this matter, the very bright future which he and the Minister of Labour held up for the industry upon the introduction of the Catering Wages Bill will be jeopardised. On that occasion my colleagues and myself opposed the Measure not because it was proposed to set up the Catering Wages Committee but because we thought that the rehabilitation of the hotel and catering industry should be dealt with as a whole. We were given the assurance by the Chancellor, who was one of the backers of the Bill, that every opportunity would be afforded to improve the conditions of the people in the industry, and that is what we all desire. It is essential if that is to be done, for a great deal of money to be spent upon hotels and catering establishments.

The argument that hotels are not a productive industry may be logical, but in that case so is the inclusion of the transport services. It may not be productive in the sense that it manufactures for export but there is no question that it produces foreign exchange, an invisible but a very vital export. It is recognised that hotels are a vital part of the tourist industry and that most of our hotels require to be brought up-to-date. It is certainly true that if the Minister of Labour has his way great obligations will be imposed upon the hotel people of this country.

In improving the conditions of the staff a very great deal of expense will be involved. It is also vital that if we are to attract visitors from overseas we must improve our hotels. It is all very well for Ministers to say that foreign tourists prefer old-fashioned hotels which have been modernised, but that requires the installation of hot and cold water, of bathrooms and of lifts, as well as of air conditioning. That is not provided for in Part II of the Bill, although I believe that equipment, in the sense of a lift, is included.

I therefore urge the Chancellor to reconsider this matter. I know he is very anxious to keep the Bill within reasonable limits but we are asking for something which is logical and reasonable. In bringing foreign exchange here, as is essential to the economy of this country, and in bringing to this country tourists, we shall need modern, up-to-date hotels. I urge him therefore to reconsider leaving them outside the scope of the Bill.

I think the Committee will agree that if there was any doubt at all on the last matter we discussed as to whether the distributive trade was an essential part of productive industry, there can be little doubt in the minds of the Committee of the just claims of the hotel industry to be regarded as a productive industry of the first order. There seems to me to be a lack of collective Cabinet responsibility in this matter. We have heard the views of some Members of the War Cabinet and the views of other Members of His Majesty's Government, but they do not seem to be in line with the views of my right hon. Friend the Chancellor of the Exchequer, who after all is the king of the castle, when it comes to the expenditure of public money. In winding up the Third Reading Debate on the Catering Wages Bill, my right hon. Friend the Minister of Labour, in discussing the question of the hotel industry within the tourist trade as a whole, used these words: Though some of us might not agree with all the Minister of Labour said when that Bill was under discussion in the House, few of us disagreed with that point of view. I took the view that it showed great vision. I was delighted to see, shortly afterwards, that the Minister of Labour was reinforced in that argument by a new Member of the Government, the Secretary to the Overseas Trade Department, who, I am glad to see in his place, because after all the tourist trade is of the greatest importance to him and to his Department. In fact, he said in the House the other day, replying to the right hon. Gentleman the Member for Chorley (Sir D. Hacking), that His Majesty's Government were impressed with the need for encouraging visits by overseas tourists and promoting the proper development of the tourist industry.

The Chancellor himself, on more than one occasion, has expressed himself as conscious of the possibilities of this great industry in relation to the needs of the Treasury. I understand that when a deputation waited on him the other day in reply to a question put by Lord Besborough, who led the deputation, my right hon. Friend went so far as to say that he conceded the justice of the case of the hotel industry, but that the proposals on the Paper were so wide as to include boarding houses, and perhaps dwelling houses of all kinds, that if he accepted the proposal there would be no limit, and it would be impossible for him to set any limit, on the obligations of the Treasury under the Bill. That is a point of view we understand. We appreciate that, and whilst my hon. Friends and I would like to see boarding houses included, if it were practicable so to do, we do not feel that because the Chancellor cannot go that far, he should preclude, from the benefits of Part I of this Bill, the hotel industry, which is so important in relation to our invisible export trade.

Our claim in a nutshell is this: The hotel industry to-day is a productive industry. It is productive in the most important sense that it is productive of the foreign currency which my right hon. Friend is so rightly anxious to entice to this country. I am not sure that the Committee are fully seized of the importance of this trade in relation to Treasury revenue. Let me submit to the Committee one or two figures which I think will be of some interest. I wonder if the Committee appreciates, when we are thinking in terms of export trade, that in round figures the cotton industry was responsible for an export of £68,500,000, machinery £49,750,000, iron and steel £48,500,000, coal, unfortunately a comparatively low figure of £39,750,000, woollen goods £35,500,000, chemicals £24,750,000 and the tourist trade for no less than £31,500,000. The figures are for 1937. I think that was the best year to take because 1938—so far as the tourist trade is concerned—was obviously a disturbed year, and unfortunate events interfered with the free flow of tourist traffic to this country. If, and I use the word advisedly, our hotels throughout the country are brought up to date, and a standard is set which compares favourably not only with the Continent but with the United States of America, it is quite possible, and not an exaggeration to say, that there is every prospect, in the early post-war years, of raising that figure of £31,500,000 to something in the vicinity of £100,000,000. Therefore in that respect my right hon. Friend and the Treasury would benefit.

The Financial Secretary, in resisting our plea on Second Reading, that hotels should come under Part I, said that if hotels were included this would necessarily mean the inclusion of boarding houses, and if that were done there was no certainty where the line would be drawn. It is for that reason we regretted the Ruling of the Chair which prevented our bringing our proposals within limits which would satisfy the Chancellor. As that Ruling was made I cannot pursue it, except to say that I hope we might have an opportunity on the Report stage of discussing a proposal which is entirely practical and deals with the objection which the Government have made. If the words on the Order Paper which we suggest do not appeal to my right hon. Friend, and do not fit into the legal requirements, we shall be very happy to consider any form of words he might suggest, provided that the principle is accepted.

When thinking in terms of foreign currency coming into this country, and one must, as the Chancellor said, regard the problem in that light, let us frankly admit that it is the licensed hotel, and not the boarding house, which appeals most to our foreign friends, especially the Americans, and if they are to visit us for a second time the quality of our hotels has to be good in every respect. The Financial Secretary said a lot of very curious things in that Debate. He said another thing which I find difficult to appreciate—that in his view, as far as his observation went, tourists, particularly from the United States, preferred an old fashioned hotel with modern appliances inside, and it was those which would attract the benefit of this Bill under Part II. I do not know where his travels in this country have taken him.

I have stayed, as possibly my hon. and gallant Friend has, at an admirable hotel owned by my hon. Friend the Member for Royton (Mr. Sutcliffe), which was erected in the days of Queen Elizabeth.

Of course, if that is the kind of hotel which my right hon. Friend has in mind, I do not think that any one who has visited it would disagree with him; they would endorse what he has said. But unfortunately if any potential hotel proprietor comes along to-day and attempts to turn an Elizabethan house into a modern hotel, and to provide central heating, hot and cold water, baths, and perhaps in the days to come, modern, silent lifts and air-conditioning, does my right hon. Friend suggest that he can do that without structural alterations to the building, involving very heavy cost, because when he is doing that which involves altering the building, he would fail to qualify under Part I of the Bill?

3.30 p.m.

I am very grateful to my right hon. Friend for his interjection, because he has put my case in a nutshell. We want to see more hotels of the quality of that of my hon. Friend, who sits behind the Financial Secretary and serves him so well. Suppose the hotel owner proceeds under the terms of this Bill, as at present drafted. Installing central heating, air-conditioning, lifts, hot and cold water in the rooms, and so forth, such work would be considered as additions to the building, and would not qualify under the plant and machinery Clause. It is a very serious matter for the industry. No one knows better than the Chancellor, from his examination of the Income Tax returns of hotel proprietors, that the hotels which can afford to spend large sums of money on modernisation, when they are to be taxed on every pound they spend on their buildings, are very few and far between. It is not only a question of staffs. The manager may be first class, the chef may be good, the administration may be good. But if the plumbing is bad; if the rooms are cold, when they should be warm; if there is no bar or it is out of use—it is "out" as far as they are concerned.

May I appeal to my right hon. Friend to reconsider this matter, and to bear in mind that, as my hon. and gallant Friend has pointed out, there are other questions of equal importance? We must not look at this question only from the point of view of our distinguished visitors. What about our own people: are not they entitled to a reasonable degree of comfort and convenience? I ask my right hon. Friend to attack the problem from an even more practical point of view. I want him to bring that elastic imagination of his to bear on the revenue which will pour in as a result of placing this industry on a business-like footing. In conclusion I appeal to my right hon. Friend to be courageous and of long vision. I invite him to cast his bread on the waters, and, forsooth, he will be rewarded abundantly.

I am afraid we must now come down to earth. My right hon. Friend the Financial Secretary dealt with this question in his Second Reading speech. He stated the position, I need hardly say, quite accurately. I do not want to do anything to discourage, or to omit anything within my power to encourage, the hotel industry of this country. I have no doubt that, as we have been told, it is in great need of improvement in various directions. I have great hopes of it in future as a means of bringing in those invisible exports, which are as valuable as, and perhaps even more valuable than, visible exports.

As well as the elusive dollar.

That is what hangs on it. When my hon. and gallant Friend the Member for South Cardiff (Sir A. Evans) and my hon. and gallant Friend the Member for the Isle of Wight (Captain Macdonald) suggested that there was in this matter some conflict of view between one member of the Government and another, any suggestion of that kind, I need hardly say, was just as devoid of foundation in this instance as in all other instances of which I have recently heard. My attitude towards this proposal must inevitably be similar to the attitude I felt myself compelled to take up on the Amendment that we last discussed. I cannot avoid making a brief reference to the question of boarding houses, as falling within the category of hotels. I do not believe that it would be practicable to draw a line as between one establishment and another for the reception and entertainment of guests: to say that here you have a hotel, and there you have a boarding house. Go to a place like Blackpool: walk up and down its streets. You see a four-starred hotel, standing in its magnificence, inviting the more richly-endowed visitors to that resort to enter in its portals. In a more humble street you find house after house doing its best—not always, I think, with complete success—to make itself look attractive.

Are any American visitors going to stay anywhere except in a place where they have a licensed bar? Is not that a definition?

Is that a clear definition? I do not see that definition here. Anyhow, I should hesitate before I made the presence of a licensed bar the ground for discrimination for the purpose of tax relief, in favour of the licensed bar. I should find that rather inconsistent with certain considerations that I may have to put to the House from time to time.

Surely my right hon. Friend will admit that there are many definitions of hotels in Acts of Parliament. In fact, there is a definition put down in the form of an Amendment, which will come before, us very shortly.

It is not only a question of a definition for a particular purpose, but of a definition for the purposes of this Bill, for the underlying purpose of discriminating between those who manage one class of establishment and those who manage another. It is there that I see the difficulty; and my right hon. Friend must see that it is a very real difficulty. [ Interruption. ] Then I should land myself in difficulties of another kind. I should have to include any building in which any sort of trade or business was being carried on. The attractiveness of a hotel is not necessarily dependent only on the character of the structure. Reference has been made to equipment. My hon. and gallant Friend the Member for South Cardiff spoke about hot water systems, lifts, central heating, air-conditioning, and all sorts of things. All that plant and equipment will, under another part of this Bill, be eligible for an allowance. It may get the allowance which is set out in this Bill, or it may, in some cases, qualify for an allowance on a renewal basis. At all events, the equipment of the hotel, which counts for so much from the standpoint of the comfort of the occupant, is eligible for relief.

It may be said: What about the installation of that equipment? What about the plumbing and the holes in the wall, and all the rest of it? What about the lift shaft, if a lift is installed? I am quite prepared to consider, not in relation to the building, but in relation to the equipment, when we come to it—and I hope I am not out of Order, because this is a question of treating in a particular way something that may be regarded as a part of the building—but I am quite prepared to consider whether we could not treat structural work connected with the installation of equipment so that it would qualify for relief as part of the cost of installing that equipment, provided it has no value apart from the equipment which has been installed. It seems to me that, if one did that, one would go a considerable way without at all destroying the principles on which this Bill has been framed, to meet the substance of the case that has been put forward, because the substance of that case is that people who come from foreign countries to visit us here as welcome guests will like every comfort and will be accustomed to modernity and will look for up-to-date facilities and amenities in the hotels that they frequent. It is quite consistent with the principles of this Bill that where it is of importance in the national interest that something should be kept up to date, an allowance should be made.

Therefore, I make this suggestion to my hon. Friends—who, I know are troubled about this matter and who know that I have given a great deal of thought to it and have received deputations and listened to eloquent pleas before I heard my hon. and gallant Friend who has just sat down—I suggest that if, on examination I find it possible on Report to enlarge the scope of the provisions dealing with equipment in these establishments, whether they are boarding houses, private hotels, licenced hotels or whatever they may be, I shall have gone quite a long way, and that my hon. Friends may then be content, in view of the general considerations which I have already put to the Committee, to withdraw the Amendment.

I think those hon. Members who support the Amendment will be bound to admit that the Chancellor has indicated a measure of agreement with our point of view and gone a considerable way towards meeting our wishes, but I hope that he will find some suitable form of words which will include the kind of work to which my hon. Friends have referred, because, indeed, the case which was made against the Amendment previously by the Financial Secretary was really a very bad case. As I understood it, the objections have really been made to the Amendment on two grounds. One is what I might call the old departmental answer about the danger of opening a door. Government Departments, I understand, are always terrified of opening doors because they never know what they are going to find on the other side. Why they should anticipate that there is disaster on the other side I have never been able to see. It may well be that, sometimes, when you open a door you find something very pleasant on the other side. I am not very much impressed with that argument. The other argument of the Chancellor was that visitors to this country only like "Ye Olde Inn" with oak beams inside. That may be so, but they also like to find hot water and central heating inside, and, for that purpose, we have put this Amendment on the Order Paper. However, I think that, having regard to what the Chancellor has said it is perhaps not necessary to pursue the matter further at this stage.

3.45 p.m.

It would be ungrateful not to express thanks to the Chancellor of the Exchequer for the suggestion he has made, though, naturally, as good Parliamentarians, we should much prefer to see on the Paper what is proposed before deciding to accept it, but we are appreciative of the concession which the right hon. Gentleman has suggested he will make on the Report stage. It does not go as far as inclusion in Part I of the Bill, and, for that reason, we are a little disappointed, but, half a loaf being better than no bread, we accepted as an indication from the Chancellor that he is going to be helpful in the interests of the export trade which he is always so anxious to encourage. This Bill is a means of helping the export trade, and the Chancellor said so in his speech on Second Reading, and it is that aspect that I feel so keenly about. Hotels play a very large part in bringing over visitors from overseas, who bring a very large invisible export trade. The figure mentioned by the hon. and gallant Member for Cardiff (Sir A. Evans) is no exaggeration, and I think it is also no exaggeration to say that this invisible export is capable of very high expansion, even to the value of £100,000,000 a year, and I think we will receive the encouragement of the Chancellor in trying to build up that industry to that height.

I am sure every Member of the Committee, and the hotel and boarding house industry, will all be very glad to hear of the concession which the Chancellor of the Exchequer has made this afternoon. I would, like other speakers, like to stress the vast importance of this industry to the Chancellor himself. Figures have already been given in that respect, and I would only like to point out to the Chancellor, with all due respect, that the hotel industry is not included in Part I of the Bill as it is not considered to be a productive industry. It may not be a productive industry in the sense of producing things, but the Chancellor himself on Second Reading said that it was the production of things and the export of things, rather than the distribution at home of things, that matters most. That must naturally have meant the obtaining of foreign exchange, and the Chancellor agrees that we must increase our export trade, and, by the production of things and the rebuilding of the export trade, obtain foreign exchange. That is one very important way, but I affirm that the hotel industry is another very important way of obtaining foreign exchange, and it is for that reason that I am so glad to hear of the concession which the Chancellor has made. I would have preferred the hotel industry to be included in Part I of the Bill, because that would have given great encouragement to the owners of hotels to bring their hotels, as soon as possible, up to modern standards which meet the modern requirements of hotel life.

Another reason is that I think everybody expects a very large influx of foreigners to this country, especially Americans, as soon as it is possible for them to come over here, and I think they will be chiefly interested in seeing our towns, villages and countryside before they have been put back to more or less normal conditions, and, therefore, time is of importance in order to modernise our hotels and provide efficient and up-to-date hotels for their accommodation as soon as possible. I am very interested in this matter, as the hotel and boarding house industry is a very important one in my own constituency and, therefore, on that account, I am particularly grateful to the Chancellor for the concessions which he has made.

I want to ask the Chancellor a question in order to make sure that I correctly understood him with regard to the concession he proposes to introduce for hotels and boarding houses. I understand he does not propose to put down any Amendments to the Bill for this purpose until the Report stage, but that during the Committee stage, when we come to Part II, he will be in a position to indicate rather more particularly what is his intention. May I know if that is the correct interpretation of what he said?

It obviously depends on the further progress of the Bill, at what point I shall find myself ready to propose the actual wording of the concession which I have indicated, and which, by the way, will not be confined, in terms, to hotels and boarding houses. It will have to be obviously more general. It applies to equipment. My right hon. Friend the Member for Chorley (Sir D. Hacking) talked about half a loaf being acceptable. The initial allowance for ex- penditure that may be incurred will, if I see my way to give effect to the proposal that all work in connection with the installation of fittings will qualify for the allowance, be 20 per cent. and not 10 per cent., so that it will be two loaves, and not half a loaf that my right hon. Friend will get.

As one whose constituency probably contains more hotels and boarding houses than any other in the country—whose owners I have been trying to impress with the necessity of modernising their hotels and boarding houses by the introduction of hot and cold water, central heating and all the other amenities that are required—I welcome what the Chancellor has said and I shall look forward with great interest to the Amendment he is to put down on the Report stage.

In view of the statement which has been made by the Chancellor of the Exchequer and the very important concessions that he has undertaken to introduce at a later date, I would like to thank him on behalf of my colleagues and myself.

Of all the Bills to which I have listened, the proceedings on the details in this Bill have been most impressive. It has made a deep impression on my mind to see the Conservative Party relying upon Britain being a museum piece. We are apparently to maintain our position in the world by improving hotels and boarding houses. This country is to be a centre for getting foreign exchange.

Does not the hon. Member wish foreigners to enjoy the beauties of his own native land in the same way as his own people do?

Yes, but I do not want Britain to rely on the kindness of foreigners coming here. I have heard speaker after speaker from the Conservative benches, and that has been the prevailing impression made upon me. They have lost their drive. I could understand Members of the Conservative Party saying that we must export goods all over the world, but I say definitely and emphatically that too much emphasis has been placed upon receiving visitors here.

Is the hon. Member aware that any other subject would have been out of Order on the Amendment?

For the last hour or so, my mind has been going back and I have been wondering whether I was in Britain or in Italy. That is the impression which has been left on my mind, and what surprised me was that that impression should have been given by Members on the Conservative benches. It shows a complete lack of virility to depend upon foreigners coming to our hotels in order to benefit foreign exchange and the standard of life of our people. What nonsense. What a defeatist attitude to take towards the future. I therefore asked the Conservatives in this House to rally themselves, to pull themselves together, and not rely upon hotels and boarding houses for the future prosperity of our people. If this is the attitude of the Conservative Party in facing the difficulties of the future then I, for one, tremble for the future of our country.

I have just listened to perhaps the most reactionary speech of modern times from the hon. Member for Aberavon (Mr. Cove). The Chancellor told us the other day that one of our problems is to restore export trade, and whether we send exports in ships to other people, or send people back with exports on their backs or in their stomachs does not matter very much. I hope that the Minister of Labour, who was responsible for the Catering Wages Bill and made eloquent speeches as to the importance of this industry, will not read the hon. Member's speech because, if so, he may make a report upon it next Tuesday to his party.

I hope that the constituents of the hon. Member will read the speech of the hon. Gentleman and remember it at the next Election. Some of us in this House are not really satisfied with the concessions which have been made. A great many eulogistic speeches have been made to the Chancellor but the concessions which have been announced are not really concessions at all. They are merely for examination, but we hope that during the Report stage something will be given to us.

Amendment negatived.

Chairman to report Progress, and ask leave to sit again.—[ Major A. S. L. Young. ]

Committee report Progress; to sit again upon Tuesday next.

I want to say first that I am sorry my right hon. and learned Friend the Minister of Aircraft Production cannot be here, but I am indebted to my hon. Friend the Parliamentary Secretary for his presence, since I know he changed his time table quickly to make this possible. Also, although I am going to complain about the siting of a research station at Bedford, I know that my hon. Friend the Parliamentary Secretary is in no way influenced by the fact that his division is thereabouts. In this matter the Government are speaking with two voices. They are saying, as they have said in the White Paper on Full Employment, and as the right hon. Gentleman the Chancellor of the Exchequer has said, as the Minister of Production has said, and as my right hon. Friend the President of the Board of Trade has said, that there is a great need to achieve the classification of industry in this country. The President of the Board of Trade has made speeches inside this House and outside saying that by controlling building licences he means to steer industry into the depressed areas of our land. There is, indeed, a Bill before the House which has precisely that object. However, when the Government have a chance of following their own advice, they refuse to accept it. The medicine—which I consider good medicine—that they hand out to the private manufacturer and the independent industrialist they will not accept for themselves.

Briefly, the Ministry of Aircraft Production have decided to set up a research station for aeronautics near to Bedford. This is not a small undertaking. It is to be the main station for a great and developing industry, and will take several years to construct. I have not a reliable figure, but I am told that when it is fully developed it will cost rather more than £2,000,000, and will employ some 2,500 scientists and technicians. It is, further, a station which, I am told, will need, when it is completed, a power station with a capacity of two-thirds that of the Battersea power station, or about the combined capacities of the Manchester and Glasgow power stations. So it will be realised that we are not talking about a trifling sideshow but a very big enterprise.

My contention is that the Government, in order to give a lead to the people they seek to guide, should put this station in an area where there is obviously an urgent need for the leavening of heavy industries. I wish to talk a little about Scotland and a little about Prestwick, but I want to make it plain that I am not primarily concerned to argue that case. If the Government had decided to go to South Wales, to the North-East coast or the North-West coast, then I would have had no case, and would have applauded their action. When my right hon. and learned Friend the Minister of Aircraft Production replied to me on this subject recently, he gave seven reasons why Bedford was chosen as the only possible site. I do not pretend that those reasons are inconsiderable, although I think that only one of them is of very great importance. But I feel bound to say that industrialists will find not seven but 70 reasons why the station should be sited near Greater London than in Llanelly, Tees-side, or in my own division of Greenock. If the Government can find no way round the seven reasons they put forward they can hardly expect that other industrialists will find ways of doing it.

I want briefly to look at the reasons. The second reason—I prefer to leave the first until the last, because it is considerable—was that this site had good flying approaches. I can hardly imagine that this is the only airport in the country which has good flying approaches. There must be scores of operational airports where, during the last five years, there have been good flying approaches. I need only mention Prestwick. I was told that three extensive runways will be needed. Can the Parliamentary Secretary indicate how extensive these runways will be, because I am assured that there are at least two places in the country—one of which I do not wish to mention—which have runways at least 3,000 yards long? I think it unlikely that the need for runways of greater length will be contemplated anywhere in the next 10 years. If the Parliamentary Secretary could indicate to us even approximately the type of runway his Ministry are thinking about, we might have to reconsider our arguments.

I was told, fourthly, that suitable weather is needed. We need not argue about that. The Minister of Aircraft Production has told the House that the best weather belt in this country extends from Prestwick to Workington. Then, he told me—and I am a little puzzled about this—that we need a site capable of extensive architectural layout. I cannot imagine that in the case of any of the big airports there is any scarcity of flat ground capable of the architectural development that might be needed for a research station. We are not looking for ambitious contours or nice hillsides; we are looking for flat sites capable of easy industrial development. They could be found adjacent to any of the big airports, and there is no need to go to Bedford for that reason.

Sixthly—and here I sympathise—there was a need to ensure that there would be substantial electrical power available, or at any rate that electrical power of substantial proportions could be developed. Within the last 18 months the House has agreed to back considerable sums of money for the development of hydro-electricity in Scotland. I hope that at no distant date it will also agree to spend money developing considerable hydroelectric power in the Bristol Channel area, which would bring Wales into the picture. I would also mention that unless there is some reason why steam development is preferable to water development—I know of no technical reason—the power for Bedford will have to be carried a considerable distance, and will mean additional buildings to achieve the necessary power.

The seventh reason was one at which I am glad the House took offence. It was that this research station should be near to the main universities. I am certain that the technicians which this research station will need will not be gathered from any two universities of this country, but from a great many. I do not think the inference was that the laboratories of those universities would be of any great moment, because I imagine the research station will have any laboratories it needs. I agree that the first point which the right hon. and learned Gentleman made was a substantial one. It was that the station should be near to London, near to the Ministry, near to the offices of the firms that would be associated in this development. Yet I maintain that this war has shown us the very great dangers of centralising near London. Even in times of peace there are good national reasons why we should seek to restrict development around London. At any rate we must, unfortunately, think in terms of the additional security that we can get from bombing. To come so near to London with what is to be our main research station is an unjustifiable risk. Moreover, the distance from London will become a less and less important factor. I was impressed by a speech of the Parliamentary Secretary this week when he talked about machines flying 700 miles an hour. I suppose that is no remote possibility. It means that a research station placed in the West of Scotland would be at any moment of urgency within half an hour of London. I cannot believe that proximity to London is going to be an insuperable reason in the near future.

I think it can be agreed that answers to each of these seven points can be found, and I suggest that the requirements in six of the categories which the right hon. and learned Gentleman laid down could have been found at Prestwick—room, weather, architectural lay-out, power and nearness to technical schools and universities. I am not really claiming that the West of Scotland has a prior claim. It has no greater claim that any other distressed area. I am claiming that the Government have an overriding obligation to consider the needs of these communities, because they are already terrified about what is going to happen to them at the end of the war. So, too, is the Government. They have made that plain by their attempts to influence outside opinion. I am arguing that what they consider to be desirable behaviour for independent in- dustrialists they ought to apply to their own Ministries—in this case the Ministry of Aircraft Production.

4.18 p.m.