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Commons Chamber

Volume 451: debated on Wednesday 2 June 1948

House of Commons

Wednesday, June 2, 1948

The House met at Half past Two o'Clock

Prayers

[Mr. SPEAKER in the Chair ]

Oral Answers to Questions

Civil Aviation

Constellation Air-liners (B.O.A.C. Purchases)

asked the Parliamentary Secretary to the Ministry of Civil Aviation what were the grounds on which it was decided to purchase the five Constellation air-liners at £315,000 each when the price paid by the Aer Linte Eireann was only £250,000 each when they were no longer wanted by the Irish Company and the aircraft being purchased were second-hand.

The price paid for these aircraft was a matter for the commercial discretion of the Board of British Overseas Airways Corporation. I am, however, satisfied from the information supplied to me by the Board that the price paid was fair and reasonable.

Could not the Corporation have been urged to make adequate forward plans to enable them to have purchased this type of aircraft with equal facility to and at a similar price to that paid by the Irish company, and would the Minister see if he could impress upon the Corporations the need for this planning to prevent such bad bargains for this country as occurred in that instance?

As far as the first part of the first supplementary question is concerned, that would have been outside the then Government policy to "Fly British." In the light of the supplementary question it is only fair to the Corporations to say that they have for some time impressed upon the Minister of Civil Aviation the necessity for this economic type of aircraft.

Is it a fact that the world price for Constellations has gone up considerably since they were purchased originally by Ireland?

The price has gone up considerably and, of course, if an order were placed today it would take 12 months before one could get delivery.

Ringway Airport

asked the Parliamentary Secretary to the Ministry of Civil Aviation, what steps have been taken to enlarge and bring up to date Ringway airport.

Enlargement of the airport for Manchester has been deferred as one of the economies in capital expenditure for 1948 but airfield lighting and extended passenger buildings have been recently provided.

Does not the hon. Gentleman realise that it is very disappointing that the development programme for one of the larger cities of the country has been deferred, and will he keep this matter under consideration and take the earliest opportunity to give some further information?

Yes, we are pressing it forward and hope to include it in the next programme.

London Airport (Emergency Lighting)

asked the Parliamentary Secretary to the Ministry of Civil Aviation if in view of the dislocation caused by the power cut on Sunday, 23rd May, he will instal emergency generating plant at London Airport.

Emergency generating plant is already available at London Airport for all operational purposes; arrangements whereby this plant will also provide essential lighting in the public buildings are in progress.

Can the Minister say why this emergency lighting was not used for lighting up the runways during the great shutdown a week or two ago?

It was in operation within ten minutes of the breakdown. However, it is a hand operated plant and, therefore, there has to be a lapse of time between the breakdown and the bringing into operation of the emergency plant. Arrangements are being made as soon as possible to instal an automatic switch plant so that there will be no lapse of time at all, but ten minutes after the breakdown is quite good time.

In view of the fact that this involved the safety of the lives not only of British subjects, but also of subjects of foreign sovereign states, is it not a further indication that this matter was not one of day to day policy of the executive of the electricity authority?

Northolt Airport

asked the Parliamentary Secretary to the Ministry of Civil Aviation if he will consider leasing Northolt airport to B.E.A. in view of the complicated and wasteful nature of the present arrangements.

No, Sir, and I do not accept the implications in the latter part of the Question.

If I tell my hon. Friend that, when a mechanic in a hangar wishes to have an electric light bulb replaced, he has to report the matter to his foreman, who reports the matter to a liaison officer, who then has to report the matter to the Ministry of Civil Aviation, who then sends a man to put the lamp into the socket, does he not consider that that involves a certain amount of waste?

That, I should imagine, is a little Parliamentary exaggeration, but the lamp referred to in such a circumstance would be an electric light very high in a hangar which would require tower ladders with which to handle it. Normal bulbs for lighting that can be reached by ordinary methods are dealt with by the men in the workshop.

Yes, but may I assure my hon. Friend that it is possible for the employees of the Corporation to climb ladders equally with the employees of the Ministry of Civil Aviation, and will he get his new noble Friend to look into this policy of operating the whole of the airports of the country from the centre with a view to some decentralised administration?

British Honduras

asked the Secretary of State for Foreign Affairs what is the policy of His Majesty's Government towards a solution of the dispute with Guatemala concerning British Honduras.

As was explained in an answer to the hon. Member for Altrincham and Sale (Mr. Erroll) on 19th April, His Majesty's Government are anxious to reach a settlement of this dispute. Since the Guatemalan Government claim that by international law British Honduras belongs to Guatemala, His Majesty's Government consider that the claim should be decided by the International Court of Justice at The Hague in accordance with that Court's ordinary procedure for dealing with legal disputes. They have already taken steps giving the Court jurisdiction to decide this issue if the Guatemalan Government should choose to bring their claim there.

The Guatemalan Government have not, however, agreed that the case should be decided in accordance with the ordinary juridical procedure, but wish it to be dealt with as though it were not a purely legal issue. British Honduras is British territory, inhabited by British subjects. His Majesty's Government could not consider the surrender of this territory against the wishes of the inhabitants on any other basis than that they have no legal right to it.

In this case the wishes of the inhabitants are quite clear. The constitutionally elected representatives of the people of British Honduras, spontaneously placed on record on 16th March, by means of a resolution carried unanimously in the Legislative Council of the Colony, the people's unalterable wish that their national status as loyal British subjects and that the position of their country as a component part of the British Commonwealth shall remain unchanged. Similar resolutions of loyalty have also been passed at public meetings in various parts of the territory.

International Refugee Organisation

asked the Secretary of State for Foreign Affairs if other large or wealthy States outside the United Nations have been invited to subscribe to the International Refugee Organisation; and with what results.

My hon. Friend will appreciate that it is primarily the function of the Executive Secretary of the Preparatory Commission of the International Refugee Organisation to invite States not members of the United Nations to join the International Refugee Organisation, or to subscribe to it. As stated in my reply to his Question of 26th May, His Majesty's representatives abroad have been instructed to give all possible assistance in this matter. I understand that the Executive Secretary has in fact been in communication with certain non-members of the United Nations, and that there is reasonable hope of success in some cases.

Transjordan

Subsidy

asked the Secretary of State for Foreign Affairs whether, in view of the action of King Abdullah of Transjordan in attacking Palestine, he will end the annual contribution to him of£2,000,000.

I cannot accept the implication in the first part of the Question. As regards the continuance of the subsidy to Transjordan, I have nothing to add to the reply given to my hon. Friend the Member for Norwood (Mr. Chamberlain) on 31st May.

Is not this contribution and the maintenance of this contribution a condoning of the action taken by King Abdullah in invading Palestine and should we be involved in such an act?

I understand that King Abdullah did not invade at any point the territory which was allocated by the Resolution of the Assembly to a proposed Jewish State.

Is there any doubt whatever that Transjordan has initiated hostilities on territory which does not belong to her, and in that case has she not committed an act of aggression?

Certainly not. She has been invited by fellow Arabs to go into territory which was allocated to them—

Do not be too impetuous: I know your anxiety for trouble. She has gone in to assist her fellow Arab nationals in territory which the United Nations allocated to the Arabs.

In view of this very important answer, is this House to take it that the Foreign Minister now recognises the Resolution of U.N.O. and is prepared to recognise the State of Israel in view of the fact that he recognises that the other part of Palestine belongs to the Arabs?

Seconded British Officer

asked the Secretary of State for Foreign Affairs on what conditions Brigadier John Bagot Glubb Pasha has been loaned or seconded to the King of Transjordan; and what instructions have recently been given to this officer.

Up to 15th May Brigadier Glubb was an officer of the Colonial Administrative Service seconded to Transjordan from the Palestine Administration. This arrangement was designed to secure his pension rights, pension contributions in respect of his Transjordan service being paid by the Government of Transjordan to the Palestine Government. With the end of the Mandate, Brigadier Glubb, like other British officers on the establishment of the Palestine Administration, had the choice of leaving the Colonial Service, or of being considered for employment elsewhere in that Service. He opted to sever his connection with the Colonial Service. He has remained in the employment of the Government of Transjordan.

Has the Foreign Secretary any information whether this officer has been directing military operations in Palestine?

Is it not a fact that any British officer who has ceased to serve in the British Army, or on behalf of the British Government, is entitled to serve in the Arab Army?

Is my right hon. Friend saying that Brigadier Glubb's position is different from that of the 16 or 17 officers—or was it 21 officers—whom the British representative at Lake Success offered to withdraw from Palestine?

In view of the changed circumstances after 15th May, is not Brigadier Glubb now in fact proscribed in some degree by the terms of what I believe is called the Armed Forces (Foreign Enlistment) Act, which does not allow any British officer to serve in a foreign force at all?

Treaty

asked the Secretary of State for Foreign Affairs for what reasons the provision of Article Five of the Anglo-Transjordan Treaty of 22nd March, 1946, that mutual aid would be rendered in the event of one of the parties becoming involved in hostilities as a result of armed attack by a third party, has been omitted in the revised Treaty of 15th March, 1948.

Owing to the difficulty of defining aggression it was thought better in drafting the new treaty to rely on the United Nations Charter to determine cases in which the obligation of mutual aid might not come into play. We have accordingly, not attempted in Article 3 to define aggression but have, by means of Article 4, subordinated our obligation of mutual aid to our obligations under the United Nations Charter.

Is my right hon. Friend aware that through this change the Treaty is altered from one of mutual aid in defence against aggression to one of mutual aid in the event of hostilities arising from any cause whatever, with the effect that pending any decision by the United Nations regarding aggression this country is committed to assist Transjordan in any act of hostilities such as has recently arisen in Palestine?

So far as this Treaty about which I was asked is concerned, I went into the matter very carefully when it was being decided, and I came to the conclusion that in dealing with aggression I preferred, instead of a long. schedule trying to define what aggression was, to rely on the United Nations decision defining aggression.

Would it not then be better in that case to assist the Security Council to come to a rapid decision on a matter of this kind?

I think I have done that, and I have done it all the way through. I cannot help it if other people do not agree.

Can my right hon. Friend say whether under the Treaty we had any right to be consulted before King Abdullah accepted the invitation to assist his fellow Arabs in parts of Palestine, and can he say by whom that invitation was issued?

I cannot answer that. All I can say is that I had no right to intervene in that case.

Germany

Heinrich Wilhelm Kopf

asked the Secretary of State for Foreign Affairs whether the further investigation of the case of Wilhelm Kopf, Minister-President of Lower Saxony in the British zone of Germany, who was listed A, for alleged ill-treatment and pillage in Poland, by Committee I of the United Nations War Crimes Commission, on 6th November, 1947, is now complete; and if he will make a statement.

The inquiry held into the Polish charges against Heinrich Wilhelm Kopf was concluded on 7th April. The Military Governor has considered the report, and has accepted the recommendation that there is insufficient evidence against Kopf to justify his extradition as a war criminal. The Military Governor accordingly proposes to take no further action in the matter, and the Polish authorities in Berlin have been so informed. Although Herr Kopf's name was contained in United Nations War Crimes Commission's list No. 65, it was deleted on 25th March after the hearing of further evidence.

Bizonal High Court (Appointments)

asked the Secretary of State for Foreign Affairs what appointments have been made so far to the German Bizonal High Court; if he is aware that one of the candidates originally nominated by the British authorities was a member of the S.A. from 1933 to 1938; that another was a presumptive Class II offender under the de-Nazification regulations; that a British nominee for the post of President of the Court was praised by his Nazi superior for outstanding work in spreading the Nazi ideology in the legal profession; and if he will bear in mind the damage likely to be caused to the prestige of military government by the appointment of such men to high judicial office without adequate investigation of their records.

The only appointment which has so far been made to the German Bizonal High Court is that of President. My hon. Friend is under a misapprehension in suggesting that nominations for appointments to the Court have been made by the British authorities: nominations are, in fact, made jointly by the Economic Council and the Laenderrat for the Combined Economic Area for the consideration of the British and United States Military Governors. The three men to whom my hon. Friend refers were among the candidates from the British zone nominated by the Economic Council and the Laenderrat; none of them has, however, been passed as suitable for appointment. I fully appreciate the need for most carefully scrutinising persons appointed to high judicial office.

Ministerial Responsibility

( by Private Notice ) asked the Prime Minister what arrangements he has made for the discharge of those duties in respect of Germany previously entrusted to the Chancellor of the Duchy of Lancaster.

The administration of the British zones of Germany and Austria remains, as before, within the general responsibility of my right hon. Friend the Secretary of State for Foreign Affairs. The detailed arrangements for assisting him in this work are under consideration.

I am sure the Prime Minister will agree with the importance of the administrative tasks which have hitherto been carried out by the Minister of Civil Aviation as he now is, and the hon. Member for Attercliffe (Mr. J. Hynd); can we be told who is carrying out those tasks now?

They are being carried out under the general supervision of my right hon. Friend the Secretary of State for Foreign Affairs; they will be carried out by him and his colleagues in the Foreign Office.

Is not the condition of Germany one of the greatest of the questions which lie before us now, and is it not rather a serious thing that a Minister who has spent considerable time in acquiring knowledge of this problem and who, if I may say so, seemed to be showing a great deal of sympathy with its many aspects, should have to be removed and his place taken by someone who has to start over again from the beginning, even if such a person should be found?

I quite agree with the right hon. Gentleman in his tribute to the noble Lord who lately held this office; but, as a matter of fact, the general work of supervision of Germany is highly important, and it is under the close supervision of my right hon. Friend the Secretary of State for Foreign Affairs and my hon. Friend the Under-Secretary.

In considering this matter, will the Prime Minister give particular consideration to two principles, namely, that one Minister should definitely be responsible for Germany, either under the Foreign Secretary or not, but preferably under the Foreign Secretary, and that he should be in this House so that he can be cross-examined about the condition of Germany?

While I am sure everyone on this side of the House is most grateful that the present Chancellor of the Duchy of Lancaster is excluded from Germany, will the Prime Minister bear in mind the immense importance of having in charge of these duties a Minister who has time either to live in Germany or to visit it frequently? It has appeared from many Debates we have had that the Foreign Office is not really in touch with what is going on there, and it does seem vital.

I cannot accept that the Foreign Office are not in touch. We have never been in the position of having a resident Minister there. I do not think that a resident Minister in Germany would be a good idea.

No one has suggested a resident Minister. What we have suggested is a responsible Minister in this House who, whether under the Foreign Secretary or the Government generally, should be giving continuous attention to the very grave and painful problems which are daily developing in Germany.

The right hon. Gentleman could not have heard the question of his hon. Friend the Member for Flint (Mr. Birch), because that was exactly the suggestion he made.

"Resident" was the word I thought the hon. Gentleman used. The right hon. Gentleman may be assured that we have in this House the Secretary of State for Foreign Affairs, the Minister of State and the Under-Secretary who are continuously in contact with what is going on in Germany. There are matters of the highest importance with regard to its administration, and in these matters the Secretary of State for Foreign Affairs is the Minister responsible.

Does the right hon. Gentleman's last answer mean that among the plans he has in mind in relation to the administration of Germany, he is no longer considering the appointment of a Minister in this House who will be responsible and who will answer Questions?

There has never been a question of a Minister since the transfer from the War Office. The general supervision of matters in Germany has been under the Secretary of State for Foreign Affairs. He has been assisted in the past by a special Minister. I think now it is more suitable that it should come under his general supervision.

Whatever may be the real position, would the Prime Minister bear in mind the fact that because of the nature of the change that has taken place and the departure of the Minister in charge of these affairs, there is a danger that the German people may be inclined to feel that we in this House and the British Government now attach less importance to German affairs than we did before? Would my right hon. Friend explain what steps will be taken to counteract what it seems, to me, will be the automatic reaction to the recent decisions?

When does the right hon. Gentleman think he will be able to make a statement on this matter?

Any Question with regard to the detailed arrangements should be put to my right hon. Friend the Secretary of State for Foreign Affairs.

Can the Minister tell us, with respect to the three eminent Ministers to whom he referred, which have paid what visits to British occupied territory in Germany?

West African Furniture (Exhibition)

asked the Secretary of State for the Colonies whether he will arrange for an exhibition in London of West African furniture.

I have brought the suggestion to the notice of the Governors of Nigeria and the Gold Coast and am awaiting their replies.

Is the Colonial Secretary aware of the Debate which took place on 27th April during his absence abroad, when the dog-in-the-manger attitude of British furniture manufacturers was laid bare? Is the Colonial Secretary, who has so often advocated the development of Colonial industry now willing to take up the cudgels on its behalf?

That is a rather different matter. The Question confines itself to the narrow issue of an exhibition, and on that point I am sympathetic.

COLONIAL EMPIRE U.S.A. Dividends (Tax)

asked the Secretary of State for the Colonies whether he is taking steps to provide that the recent reciprocal agreement between His Majesty's Government and that of the U.S.A., whereby dividends on U.S. securities held by British citizens domiciled in the United Kingdom, are now subject to tax reducton at source by the U.S. authorities of 15 per cent, as against 30 per cent, previously deducted, is to be extended to Colonial territories; and how long he anticipates it will take before this can come into effect.

I am in communication with Colonial Governments regarding the extension referred to by the hon. Member but as the consent of the United States' Government will be required., and certain other preliminary steps have first to be taken, it is not possible to say if and when the extension will come into force in the case of any particular Colony.

Trade Unions (Political Levies)

asked the Secretary of State for the Colonies whether trade union advisers to Colonial Territories are empowered to recommend the imposition of political levies by Colonial trade unions; and whether any directions are given as regards the disposal of these funds.

No, Sir. It is, however, one of the duties of labour officers in Colonial Territories to explain to trade unions, on request, the law dealing with the levying and disposal of political funds. With regard to the second part of the Question, no directions are given, but the political funds of a Colonial trade union may only be disposed of in accordance with the rules of the union as approved by the Registrar of Trade Unions.

Can the Minister give an assurance that these advisers do not use their influence to direct these funds into the coffers of the English Labour Party?

The trade union advisers are completely non-political and take a strictly impartial view. They are there to assist the workers in the creation of combinations, and so far as I have ever heard, they have always done their work impartially, and to the satisfaction of employers as well as of workers.

East Africa (British Settlers)

asked the Secretary of State for the Colonies whether he will make a full statement with regard to the new policy announced in East Africa by the Under-Secretary of State for the Colonies that East Africa must have more British settlers and artisans in particular; and what steps are to be taken to implement this new policy at the earliest opportunity.

No new policy was announced by my hon. Friend. He did, however, advocate assistance in the development of the territories through the increased use of British technicians, artisans, building foremen and water foremen. He also called attention, as I have done in the past, to the valuable contribution of British settlement and technical skill in the development of these territories.

Would the right hon. Gentleman get into touch with the Minister of Labour and get him to circulate employment exchanges as to the opportunities in East Africa?

Is my right hon. Friend aware that the policy of increasing the number of European technicians in East Africa, is very welcome, but will he also realise that any attempt to increase the number of settlers, especially in parts of East Africa where the black is not allowed to settle, is a different problem; and would he get into touch with the appropriate Minister to try to get him to introduce a scheme to populate not the highlands of Kenya, but the Highlands of Scotland?

Holy Places, Jerusalem (Protection)

asked the Secretary of State for the Colonies what was the result of the negotiations which have been announced with Jews and Arabs for safeguarding the Holy Places in and around Jerusalem; and who is now responsible for their safety.

Truce proposals for Jerusalem initiated by the High Commissioner before his departure were accepted by the Political Committee of the Arab League and the Palestine Arab Higher Committee on 13th May but had not been accepted by the Jews when the Mandate ended. Thereafter truce negotiations were continued by the representative of the International Red Cross in Jerusalem, in conjunction with the Security Council Truce Commission. Responsibility for the safety of the Holy Places, which rested with the Mandatory Government, will be assumed by any successor administration which may exercise authority over Jerusalem and its immediate vicinity. Any questions relating to the progress of truce negotiations after 15th May or to present or future authority in Jerusalem should be addressed to my right hon. Friend the Secretary of State for Foreign Affairs.

West Indies

Dollar Currency

asked the Secretary of State for the Colonies if he will make a statement regarding the scheme that is being implemented by his Department to curb leakages of dollar currency from the British West Indian Colonies in accordance with the recommendations contained in the report made by Mr. Percy Donald after his visit to the British Colonies in the Caribbean, December-February, 1947–48, which report was submitted to him by the hon. Member for Middlesbrough, West, on 24th March.

The control of foreign exchange transactions in the West Indies is dealt with under local legislation. Prevention of leakages of dollar currency contrary to these regulations is a matter for local enforcement. I am considering what suggestions I can make for additional preventive measures.

What is the use of the Treasury taking all sorts of detailed steps in this country to control dollar expenditure when there are large openings for the wastage of dollars in our Colonial territories? Further, would he give consideration to the proposals in the report referred to in the Question to see if some of these areas cannot be turned into dollar earning, rather than dollar spending areas?

We are studying details of the report referred to, and we hope that we may be able to give more directions to Colonial Governments as regards dollar leakages.

Passports, Jamaica

asked the Secretary of State for the Colonies why British travellers in Jamaica are required to show their passports whilst this formality is dispensed with in the case of U.S. travellers; and whether he will secure that throughout the Colonial Empire British subjects on travel are not subjected to greater formalities than other nationals.

The conditions as regards passport formalities applicable to British subjects on entering Jamaica are the same, mutatis mutandis, as those applicable to United States subjects. I am not aware of any Colonial territory in which British subjects are subjected to greater passport formalities than Foreign nationals, but if the hon. Member has any evidence to the contrary I shall be glad to consider it.

Constitutional Reform, Trinidad

asked the Secretary of State for the Colonies whether he is aware that, in the Debate on the Constitutional Reform Committee's proposals in the Trinidad Legislative Council, only two out of the nine elected members supported the resolution in favour of the Majority Report with certain amendments, and that five of the elected members voted for a resolution in favour of responsible government; that the municipal councils and five of the seven county councils, have also declared in favour of responsible government; and what action he now proposes to take.

I am aware of the position mentioned in my hon. Friend's Question. I am now consulting the Governor's report and recommendations, which I have only just received.

Film Making, Jamaica

asked the Secretary of State for the Colonies whether he is aware that the proposed establishment of a film-making industry in Jamaica has been enthusiastically received in that Colony; and what approach has been made by the Jamaican Government to him with a view to his assistance to this project.

I am certainly aware of the proposals and I have been in communication with the Governor of Jamaica regarding certain concessions for which the promoters have asked.

Malta (Water Supply)

asked the Secretary of State for the Colonies what steps are being taken permanently to overcome the shortage of water in Malta, which is now increasing at alarming rate year by year.

As a result of a comprehensive survey of the water resources in Malta plans for increasing the supply by an extension of the underground water galleries and by sinking boreholes were submitted, and work on the necessary excavations was begun. An increase of about one million gallons in the daily intake of water has already been achieved, and it is hoped that on the completion of the schemes of improvement a further increase of a million gallons a day will be obtained. Assistance towards these schemes and towards the construction of a new trunk main is being given from the Colonial Development and Welfare Fund to the extent of £225,000. Apart from that financial assistance, responsibility for the improvement of the water supply in Malta now rests with the Malta Government.

Is the Colonial Secretary satisfied that with these improvements in the water supply, there will be an adequate supply in the future in view of the increasing population and the increased use of water in Malta?

I cannot give that absolute assurance, but it is a matter of anxious consideration, and obviously we want to co-operate with the Malta Government to the best of our ability.

Nigeria

Mission School (Teacher's Contract)

asked the Secretary of State for the Colonies if he is aware that teachers employed by the Sudan Interior Mission School in Nigeria are compelled to sign a contract agreeing to be dismissed without notice if they join the Nigerian Union of Teachers; and if he will take action on this.

The matter to which my hon. Friend refers is already being investigated by the Governor, who has promised a report as soon as possible.

Will my right hon. Friend say whether this school has any State support or any grants from His Majesty's Government?

I have called for a report. I cannot answer that point at the moment.

Yoruba National Movement

asked the Secretary of State for the Colonies if he has any information on the launching of a Yoruba national movement in Nigeria; what are its composition and aims; and what facilities are being put at its disposal by the Nigerian Government or by native authorities.

The Governor is sending me a report and I will write to my hon. Friend when it comes.

Malaya (Rubber Smallholdings)

asked the Secretary of State for the Colonies why he requested Mr. Bauer to visit Malaya to examine and report on rubber smallholdings in Malaya; and what was the cost to public funds.

A grant of £700 was made in I946 from Colonial Development and Welfare funds to enable Mr. Bauer to visit the rubber smallholdings in Malaya, because His Majesty's Government wished to have a report on the economic position of the smallholder in current conditions. Claims under the grant have totalled £668. In addition the cost of printing, which has not yet been completed, is estimated at £470 gross. No other direct cost has fallen on public funds in connection with this visit.

In view of Mr. Bauer's known hostility towards plantation interests in Malaya, was he exactly a suitable man to send?

He was sent to Malaya to study the problems of the smallholders, and his report has been of very considerable assistance, both to the local Government and ourselves.

Does that mean that the right hon. Gentleman cannot rely upon the reports from the Government in Malaya? Will he not answer?

ROYAL NAVY Ships (Sales to China)

asked the Parliamentary Secretary to the Admiralty which British ships have been loaned or transferred to China; what are the financial arrangements concerned; and whether he will make a statement.

Since my reply to the hon. Member's former Question on this subject on 3rd March, there have been further negotiations with the Chinese Government, as a result of which H.M.S. "Aurora" and eight harbour defence motor launches, which it had previously been intended should be transferred on loan, with a view to eventual purchase, have now been bought by the Chinese Government, and H.M.S. "Mendip" has been lent for a period not exceeding five years.

In my Question I asked whether a statement could be made defining the financial arrangements. As the Financial Secretary has said that certain ships were bought, can he say what was the price paid, and, with regard to the loan, of the ship mentioned, on what basis was it arranged?

No, Sir. It is not usual to disclose the terms on which ships are sold to a foreign Government.

Has cash been paid for these ships? It would be interesting to know this, in view of the cash owed by the Chinese Government under the Canton Claim.

Whether the transaction has actually resulted in cash being paid is, at this precise moment, another question. But, in fact, we shall get full value for money.

Would not the hon. Gentleman agree that these ships will be of far more use in Chinese waters than on the scrap heap in this country?

Is the Minister aware that the type of answer he has given will create the impression that these ships are a present to a reactionary Government.

No, Sir. They are nothing of the kind. There is no reason whatever why we should not let a friendly country buy ships from us as China has done. I make no apology for it, and I am glad we have been able to do it.

Rates of Pay

asked the Parliamentary and Financial Secretary to the Admiralty whether he will cause inquiries to be made from officers and men throughout the Service as to how far they are able to meet their living expenses on the present rates of pay.

No, Sir. I do not consider that any useful purpose would be served by initiating such action at the present time. I should like to take this opportunity to refute the misleading article on this subject which appeared in the "Daily Mail" on 22nd May for which, so far as the Navy is concerned, there is no foundation.

In view of the tact that the new Pay Code is not all that it was made out to be, will the Minister give an assurance that any such representations, whether they refer to that article or not, are given every consideration?

I do not accept the implication. I am surprised at the interest taken by hon. Members opposite in the pay of sailors, remembering as I do certain troubles that took place at Invergordon, when the Conservative National Government, far from increasing sailors' pay, actually reduced it.

Is not the hon. Gentleman aware that that is not the feeling within the Service, either in the home ports or abroad, and what means has he of ascertaining the feeling and carrying out his actions in accordance with it, if that is his intention?

I can assure the hon. Member that I have much better means than he has of ascertaining opinion in the Navy.

Does the hon. Gentleman's reference to Invergordon mean that he approves of mutiny?

Certainly not. I was only explaining that mutiny had arisen, or very nearly arisen, as the result of the policy of the Party opposite.

Has not the hon. Gentleman forgotten the events of 1931, that legacy of two years of futile Socialism?

Post Office

Cable and Wireless Station, Jerusalem

asked the Postmaster-General why Cable and Wireless closed its Jerusalem station.

As the safety of their staff and equipment was in considerable danger, and evacuation could not be arranged after a certain date, the Company closed down operations from Jerusalem. Service from Haifa and Tel Aviv will be continued as long as circumstances permit.

Is the Postmaster-General aware of the fact that an American service was installed in Jerusalem by the Radio Corporation of America even before Cable and Wireless withdrew? If it was safe enough for them, why was it not safe enough for us to stay there?

Political Advertisement (Label)

asked the Postmaster-General what action he is taking to prevent confusion being caused through the use by the Conservative and Unionist Party of a stamp which in size and colour is a replica of the silver wedding issue.

The use of the label in question is permissible, provided it is affixed to the back of the envelope. Some envelopes bearing the label on the front, in contravention of the Post Office rule, have wrongly been allowed to pass. I am directing the attention of all officers concerned to the importance of ensuring that the rule is properly observed.

Is my right hon. Friend aware that the majority of the loyal citizens in this country would be pleased if he would stop this shoddy, offensive, contemptible, political trick?

Would the right hon. Gentleman assure his hon. Friend that this stamp was issued long before the Silver Wedding stamp was issued?

Is not my right hon. Friend aware that the proper place for the Conservative Party is at the back?

Petrol Consumption

asked the Postmaster-General the quantity of petrol used by his Department during the first quarter of 1948, with comparable figures for the first quarter of 1938, 1946 and 1947.

Would the right hon. Gentleman say how he reconciles the increased consumption of petrol with the decreased collections and decreased deliveries?

Most of this increase has taken place in the engineering department, particularly with regard to telephones. The hon. Gentleman will be aware that, since 1938, there has been a lot of mechanisation up and down the country, and that, time after time, I have been asked from the other side of the House to mechanise in rural areas, particularly in hilly districts.

Deliveries, Dumfriesshire

asked the Postmaster-General whether he is aware that postal deliveries are made to Raeburnhead, Mid Raeburn and Raeburnfoot, Eskdalemuir, Dumfriesshire, on only two days a week; and whether he will arrange for more frequent deliveries.

I am looking into this matter, and I will write to the hon. Member as soon as possible.

Armed Forces

National Insurance Contributions

asked the Minister of Defence what contributions for National Insurance and National Health Services are to be paid by members of the Forces during their service.

This matter is still under consideration. The necessary regulations under Section 57 of the National Insurance Act will be made shortly.

Does the Minister mean to imply from that answer that members of the Forces will have to pay some contribution?

I do not imply anything. The hon. and gallant Member had better wait and see. We are fully aware of the special conditions which apply to Servicemen.

Is the Minister aware that the National Health Service Act takes no contributions from anybody? Obviously, hon. Members on the other side of the House do not know that.

Free Travel Warrants

asked the Minister of Defence why a free travel warrant is not issued to any Service man who is called to a university for an entrance examination or for an interview for other purposes connected with his future return to civil life.

Service men are entitled to three free leave travel warrants a year and I do not feel that the grant of further free warrants for the purposes referred to is called for.

Does not the right hon. Gentleman recall that the publicity, particularly of the Army, at the moment is encouraging men to join that Service with a view to their future after leaving it, and does he not appreciate that nothing could give more assurance that the Government mean what they say than if he gave these free travel warrants for those who are looking after their future life when they leave the Army?

I have already pointed out that they have three free railway warrants a year. I do not know where it would lead if we gave a sort of carte blanche every time a man asked for a free warrant to go for an interview for some employment.

Officers' Uniform Allowance

asked the Minister of Defence if he is now in a position to make a further statement on the uniform allowance to a newly commissioned officer.

Food Supplies

Catering Licence, Edinburgh

asked the Minister of Food whether he will now grant a licence to serve snack meals to Mr. Francis J. Fazackerly, 58, Haymarket Terrace, Edinburgh, who is a disabled ex-Service man engaged in business as a tobacconist and confectioner at the above premises.

Mr. Fazackerly has already been established as a tobacconist and sweet confectioner. I regret I cannot agree that he should be given additional priority to serve snack meals in an area which is already adequately catered for.

Would not the hon. Lady take into consideration the fact that this man is a disabled ex-Service man?

Certainly. We have taken that into account and we have effectively rehabilitated and established him, but I think that the hon. and gallant Gentleman would agree that, having given him two licences, it would not be fair to other ex-Service men to give him a third.

On what basis was a decision made that this area is satisfactorily catered for in this direction?

When an application for a licence is made we take into account the population and the fluctuations in population in the last few months. If we think it is necessary, we grant another licence.

Bacon Factories (Output)

asked the Minister of Food what is the present maximum potential output of bacon factories in this country; and what steps he is taking to ensure that these factories will be able to obtain their full requirements of British pigs at the earliest possible date.

The maximum potential output of the bacon factories in Great Britain is between three and four million cwt. a year. An increase in pigs for bacon production is one of the aims of the agricultural programme and the latest livestock census showed a marked increase in the numbers of breeding sows and young pigs. The continuation of this trend, however, depends on the supply of animal feedingstuffs about which my right hon. Friend, the Minister of Agriculture and Fisheries made a statement on 25th March.

Potatoes

asked the Minister of Food how many tons of last season potatoes are held in Lincolnshire; at what price were they purchased from the farmers; and at what price does he now propose to sell them back to the farmers for the purpose of feeding livestock.

Of 185,000 tons of reserve potatoes bought from growers in Lincolnshire only 2,400 tons remain. Growers are paid the prescribed fixed prices which vary according to the date of delivery and variety of potato. Two thirds of the 2,400 tons are already under orders to be distributed for human consumption and the balance will be needed for the same purpose. The last part of the Question does not, therefore, arise.

Would the Minister be good enough to give me figures instead of a lot of words? I asked the Minister what price her Department had paid for these potatoes and at what price it is now offering to sell them to the farmers as feedingstuffs. Could I have the figures?

The average price which we are paying to farmers now is £9 5s. The hon. Gentleman will see from my answer that these potatoes are not being used for stock feeding but for human consumption.

asked the Minister of Food where the cargo of 1,000 tons of potatoes which came into Grimsby docks in the last fortnight came from; why permission was refused for this cargo to be landed and to what port was it diverted; and who was the purchaser and how much loss does he expect to make on this shipment, when allowance has been made for transport charges and administrative expenses.

A cargo of 975 tons of potatoes from Denmark was diverted to Bremen and sold to the Control Commission for Germany because the recent spell of warm weather made them surplus to home requirements, and Germany is in great need of food to raise the caloric level to a more satisfactory figure. The loss involved in selling to Germany is about £5,500.

Is the Minister aware that only yesterday another steamer brought into Grimsby 1,700 tons of potatoes from Poland, and that there are already 6,000 tons at Grimsby and Immingham which are rotting? What does she propose to do about it, and is she aware that both the growers and the men who handle the potatoes feel that this is the greatest scandal for which even the Ministry of Food have been responsible.

I think that the hon. Gentleman is exaggerating. We have sold for animal consumption what is equivalent to one day's human consumption in this country. If we had not made this provision to tide us over what might have been a difficult period, hon. Gentlemen opposite would have been the first to have charged us with irresponsible administration.

Is the hon. Lady aware that a cargo of seed potatoes arrived in Preston this week and that it has been given up entirely for animal feeding? Would she say how much money the Government lost on that transaction?

This Question concerns a cargo of 1,000 tons of potatoes which arrived at Grimsby, and nothing else.

Before I say that I wish to raise this matter on the Adjournment, because I am totally dissatisfied with the answer, may I ask whether it is true that, allowing for the cost of transport, these potatoes have cost—

That is an argument not a question. Questions should be asked in order to get information, but hon. Members should not indulge in argument.

asked the Minister of Food how many tons of potatoes which were purchased by him at the full price, have been sold since the end of potato rationing for food for animals; how much per ton loss has resulted; what are the remaining stocks; and whether he is satisfied that they can still be sold in this country.

17,094 tons of potatoes or about one full day's supply have been sold in this way. The average loss was about £4 10s. a ton, as compared with what would have been realised by sale for human consumption. We now have left about 50,000 tons and these are all likely to be needed for human consumption.

In view of the scandal of the inefficiency with which this potato business has been handled, is it not about time that the Minister of Food resigned and let the hon. Lady "have a go "?

asked the Minister of Food how many tons of potatoes from the end of season reserve, purchased at £9 5s. per ton, have been dyed for sale as stock feed at £4 5s. per ton at the order of his Department; and why the price of £4 5s. was fixed at a time when imported Danish potatoes were coming on to the market at £3 15s. delivered at the nearest station to the purchaser.

Out of an end of season reserve of 700,000 tons, about 1,100 tons have been sold for stockfeeding at £5 a ton to farmers and £4 15s. a ton to merchants for resale. Up to the end of last week no Danish potatoes have been sold at £3 15s., but within the last few days, this price has been fixed for all potatoes sold for stockfeed.

Is the hon. Lady aware that merchants in the district have been only too anxious to buy these potatoes as ware potatoes rather than have them dyed for stockfeed, and whenever a request has been made for that to be done her Ministry have turned it down. Will she say why?

If the hon. and gallant Gentleman will give me specific details, I will look into the matter.

Is the Minister aware that this is not only a question of what has been sold for stockfeed but a question of thousands of tons which cannot be sold for any consumption at all?

Will the hon. Lady explain why it is necessary to compel farmers to send in monthly returns showing their stocks if the Ministry do not relate those returns to the consumption.

Can the Minister say whether the dye used in this process renders the potatoes unsafe for human consumption?

Speaking medically, I think that in view of the fact that the animals survive it must be innocuous.

Milk (Distribution)

asked the Minister of Food when the findings of the Committee investigating the retail distribution of milk will be published; and whether this will include the cost of distribution in rural areas.

Is the question of the retail distribution of milk in rural areas to be given attention by the Ministry in the near future?

It is not included in the report, but if the hon. Gentleman would like details, I will let him have them.

asked the Minister of Food if he is aware that certain Milk Retailers' Associations agreed at the beginning of May to refuse all changes of registration by consumers in their areas; that such a practice frustrates his wish to give the housewife freedom of choice of milkman; and what he proposes to do about it.

I would refer my hon. Friend to the reply which I gave to the hon. Member for Denbigh (Sir H. Morris-Jones) on 25th May.

Will my hon. Friend make it clear to the housewife that it is not the Minister, but the milk retailer, who is unwilling to set the people free?

In some parts of London, a retailer has refused to allow housewives to change, but I can assure my hon. Friend that, as far as most of the country is concerned, the housewives have been free to change.

Cheese Factories (Surplus Milk)

asked the Minister of Food how many of the factories formerly licensed for cheese making by the Milk Marketing Board are now closed by his orders; whether the existing factories are able to deal satisfactorily with all the milk during the flush period in May and June; and why he has refused to allow milk to be used for the manufacture of milk chocolate.

Some 40 cheese factories, many of them very small, have been closed as redundant. The existing factories have been able to deal with all the surplus milk available for manufacture. It is not possible to provide milk for the manufacture of milk chocolate until the requirements for higher priority milk products have been met.

Can the Minister say whether the factories have been able to take promptly all the milk that has been offered and whether in fact a considerable quantity has not gone sour; also can she say whether, in areas like the West of England, there are not more economical and quicker outlets in the milk chocolate and other confectionery factories?

No, Sir. During the last two weeks in which people have been able to take as much milk as they like, these factories have not been working to capacity.

Can the hon. Lady assure the House that none of the factories making specialised cheeses has been included in the closure.

About fifty factories were included in the closure and no doubt some of them were factories concerned with specialised cheeses. I will let the hon. Gentleman have the proportion.

Is it not most unwise that factories making many of these cheeses, which are of national and sometimes of international importance, should be closed?

Can the hon. Lady assure the House that the reason why factories have not been working to capacity is not because of shortage of labour?

Cereals

asked the Minister of Food to what countries the £75,042,695 of cereals and cereal feedingstuffs recorded in the Trading Account and Balance Sheet, 1946–47, as having been sold for delivery abroad were delivered; and of that sum what proportion of the sales were in respect of cereal feedingstuffs.

As the answer is rather long, I will, with permission, circulate it in the OFFICIAL REPORT.

Following is the answer:

The destinations were:

India, Allied Control Commission for Germany, Crown Agents for the Colonies, Middle East, British Services Overseas, South Africa, Eire, France, South-East Asia Civil Relief, Burma Office, Belgium, New Zealand, U.N.R.R.A.

Of the total amount of 3,549,382 tons only 136,941 tons were delivered out of United Kingdom stocks. The remainder were purchases for countries for which we had procurement responsibilities or acted as purchasing agents.

Of the total of £75 million, wheat and flour account for about 74 per cent., barley for 16 per cent., and maize and oats together for about 7 per cent. These grains were in the main intended for human consumption and I regret that I have no precise details of the proportion of barley, maize and oats used for feedingstuffs.

asked the Minister of Food what quantities of barley, maize and oats, respectively, have been imported into this country from the U.S.S.R. from 1st February to 30th April, 1948.

Eighty-five thousand five hundred and eighteen tons of Barley, 47,459 tons of Maize and 16,611 tons of Oats. A further 15,781 tons of Maize was shipped from Roumania under the Anglo-Soviet Trade Agreement.

Cocoa Beans

asked the Minister of Food if he will consider reducing the price of cocoa beans as many poor people in this country cannot afford the high price of the chocolate portion of the sweet ration.

Prices on the world market have been very high recently, but we shall certainly consider reducing the selling price of cocoa beans as soon as it appears possible to maintain a reduced price for a reasonable period without loss to the Ministry.

Can the hon. Lady say why the Government have sold to the hard currency countries at an exceptionally low price and have charged an exceptionally high price to the home consumer, because there does not seem to me to be any sense in the action?

I have explained very patiently to the hon. Gentleman before that this is a very profitable business, and, by selling chocolates and sweetmeats to the hard currency countries, we get dollars, which we can then translate into eggs and bacon, butter and cheese.

Does the hon. Lady consider that it is the businesss of the Ministry of Food to run a profitable business?

If we run an unprofitable business, we are charged by hon. Members opposite with being inefficient, and, if we run a business profitably, we are also apparently vulnerable to attack by hon. Members opposite.

Is the hon. Lady aware that this profitable business in cocoa is not unconnected with the disturbances in the Gold Coast?

asked the Minister of Food whether he will explain the continued shortage of supplies of cocoa beans throughout the country, having regard to the fact that the official estimated world crop is in the neighbourhood of 640,000 tons, as compared with the prewar production of some 700,000 tons per annum, and in view of the fact that 80,000 odd tons was purchased annually before the war by Germany.

The quantity of cocoa beans imported into the United Kingdom during 1948 will be approximately the same as average supplies in the prewar years 1934–38. The shortage is due mainly to increased requirements for export purposes and to the manufacture of considerably increased quantities of cocoa butter and cocoa powder. Cocoa butter is at present being used as an ingredient in sweets manufacture instead of other forms of fat which have not been available. The consumption of chocolate in liquid form has greatly increased since before the war.

Why is it, in regard to those cocoa beans which are exported. we do not get a proper, fair world price? That is a simple question; may I have an answer?

Fish (Curing)

asked the Minister of Food if he is satisfied that haddock and kippers are being cured satisfactorily; and whether it is possible for these fish now to be cured as they were in prewar days.

The Ministry employs inspectors to visit curing establishments, and reports show that the quality of kippers and smoked white fish is, on the whole, satisfactory. There is very little departure from prewar methods, and improvements are made wherever practicable.

Is the hon. lady aware that there is a considerable difference in the curing of these herring and haddock, as compared with prewar days? Is she also aware that even cats turn up their noses at this fish?

The only difference in pre-war days was that they were compelled to cure the fish on the day of landing, but, in view of the fact that the demand for kippers today is sometimes greater than the supply, it is necessary, when there is no room in the smoke-house, to transfer kippers to another port, and the process takes longer.

Is my hon. Friend aware that the amount of wood chips used in curing this fish was four times greater than it is today, and that, actually, we are getting so-called kippers which are simply stale herrings dyed?

Is the hon. lady aware that the dyed herring comes from foreign countries, and will she not encourage the home producer?

I will look into the point raised by my hon. Friend behind me. We do inspect the smoke-houses, and I will undertake to give special attention to the chips.

Economic Co-Operation (U.S. Assistance)

asked the Chancellor of the Exchequer what are the national measures already being taken by His Majesty's Government in relation to the Economic Co-operation Act of 1948 as referred to by our Ambassador to the U.S.A. in his note of adherence dated 3rd April; and at what stage it is anticipated that the U.S.A. will as mentioned in the said note of adherence undertake an obligation to make assistance available to this country.

The national measures are the applicable provisions of Section 115 ( b ) of the Economic Cooperation Act which will form the basis of the Bilateral Agreement to be negotiated with the United States. Pending the conclusion of such an agreement the U.S. Government propose to make assistance available in accordance with the terms of the Act.

Would the hon. Gentleman reply to my Question as to the national measures to be taken? My hon. Friend has told me under what Section they are to be taken, but not what they are. At what stage, if any, is it expected that the United States will undertake an obligation?

The measures already applicable are as follow. First, the promotion of industrial and agricultural production to enable the United Kingdom to become independent without outside assistance; secondly, co-operation with other participating countries in stimulating trade; and, thirdly, making efficient use of our own resources. In answer to the second part of the supplementary question, the United States has already undertaken to reimburse us for supplies from Canada which are already arriving.

Is my hon. Friend aware that his answer has only repeated the terms of the Section and not what is done by way of promotion, etc?

I think it is obvious that a great number of the actions which we have already taken fulfil the provisions of that Section.

War Damage Claim, Kingston-Upon-Thames

asked the Financial Secretary to the Treasury why, in view of the fact that information on which they previously acted has now turned out to be inaccurate, the War Damage Commission will not now consider the merits of the claim in respect of war damage put to them by the church wardens of the Parish Church of Kingston-upon-Thames in respect of church property located at I, Queen Elizabeth Road, Kingston-upon-Thames.

For the reasons given in the letters I wrote to the hon. Member on 7th April and 24th May.

Is it not a fact that the right hon. Gentleman's letters, to which he referred, indicated that the Commission came to a conclusion on grounds which are now proved to be wholly unfounded, and, in the circumstances, is it not a matter of elementary justice that he should reconsider the merits of the matter? Will he not agree that this kind of conduct gravely undermines public confidence in the impartiality and competence of this Commission?

As the hon. Member knows very well, the Commission did make a mistake and has apologised for it. They have since examined this claim, as the hon. Gentleman knows very well, and came to the conclusion that they should not accept it.

Is the right hon. Gentleman aware that they have not examined the merits of the claim, but have merely considered whether they should go into it or not? Is not that, in fact, what he told me?

Central Office of Information (Social Survey Division)

asked the Financial Secretary to the Treasury what are the functions of the Social Survey Division of the Central Office of Information; how many officials are employed as visitors; how many drivers are employed to drive them; what is the estimated amount of petrol consumed by this department; and how many members of the public have been interviewed during the past 12 months.

As the answer is rather long, I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.

Is the hon. Gentleman aware that one of these visitors, driven by a chauffeur, recently called at a factory in my constituency three times on one day to ask a man working there what he would do if he felt ill? Does he think that this is an economical way of spending public funds?

If the hon. Gentleman will give me particulars of the case he has now quoted, I will certainly look into it.

Following is the answer :

The Social Survey Division exists to conduct factual inquiries for Departments and to collect social data which are not obtainable from other sources. No salaried members of the staff are employed as visitors; interviewing is conducted by part-time investigators appointed as necessary and paid by fees based on the number of hours worked. No drivers are employed to drive members of the staff or investigators. Petrol is allowed only where public transport is not available. In the 12 months ended 31st May, 1948, the weekly average of petrol allowed was 50 gallons. In the same period, 82,710 interviews were made covering 39 separate inquiries.

Palestine (Truce Proposals)

I desire to thank the House for not pressing me to make a statement on Palestine earlier, and I am not in a position today to say very much.

The House will be aware that His Majesty's Government have been concentrating all their efforts on an endeavour to bring about a cease-fire and to create conditions in which the two parties would be brought together with a view to achieving a final solution of this problem. To that end we have submitted a series of resolutions to the Security Council, and the final one as amended was agreed on Saturday and has been put before the two parties. Their replies will now be considered by the Security Council.

I am glad that the reports indicate that both parties have accepted the four weeks cease-fire and have agreed that discussions should proceed with the mediator. There are indications that there are qualifications in the acceptance, but I am not yet in possession of the full qualifications of both sides. No doubt these will come before the Security Council today. In any case, I am sure I voice the feeling of the House when I say that we hope there are no detailed conditions which will prevent the cease-fire operating and the discussions proceeding. We have kept in the closest possible touch with the other Commonwealth Governments on all these matters. We are convinced that it would be premature to express any further views or opinions about the form which the eventual settlement may take.

It is the task of the mediator to make contact with both sides in order to seek a peaceful adjustment of the whole situation. We shall give him our utmost assistance in this task. The House will join me in wishing him every success in his most arduous and difficult role, but we are convinced that there is among both Arabs and Jews a large majority of moderate and peaceful men and women who would welcome nothing more than the prospect of a lasting and just peace. We are of the opinion that if this can be brought about and the two peoples can live together in harmony, this will play a great part in the economic development and progress which is so much needed throughout the whole Middle East.

Would it not help very greatly in getting an effective settlement if the Foreign Secretary made it clear that he accepts the Resolution of U.N.O. for two States, a Jewish State and an Arab State, in Palestine?

I should have thought that provocative questions would not help the truce.

Orders of the Day

Finance (No. 2) Bill

Considered in Committee [ Progress, 1st June ].

[Mr. HUBERT BEAUMONT in the Chair]

Part II—(Purchase Tax)

CLAUSE 19.—(New purchase tax rates.)

3.40 p.m.

I beg to move, in page 12, line 18, to leave out from the beginning, to the first "the," in line 19.

This is one of a series of Amendments designed and intended, and indeed calculated, to raise the whole question of the Purchase Tax on drugs and medicines and the immensely important question, in which the people of this country are vitally interested, of the proposed wholesale discrimination, for the first time, between the branded and proprietary medicines on the one hand and the non-branded and prescribed articles of medicine on the other hand. No one listening to the Chancellor's Budget speech, in which he spoke of extending the exempted list of medicines to a wider range of non-proprietary articles, could, I think, have envisaged that a wholesale discrimination of the character proposed in the Bill was intended.

What we propose in our Amendment, and in the remaining Amendments of the series, is that all drugs and medicines of whatever character should be exempted from Purchase Tax. It seems to us that this is the only way in which it will be possible to restore non-discrimination. The reason that this is the only course open to us is that the exemptions from Purchase Tax operate, as I understand the Bill, from 1st June, which was yesterday. Therefore, unless certain exempted articles are to be brought back within the scope of the tax the only way in which non-discrimination can be achieved is by proceeding to exempt drugs and medicines altogether from the scope of the Purchase Tax.

The pre-Budget position, as I understand it, was that all drugs and medicines were subject to Purchase Tax, with the exception only of certain either very costly or very essential drugs which were exempted by Treasury Order. The list of drugs contained in the Treasury Order is of course quite incomprehensible to the ordinary layman, containing, as it does, a number of words of at least 100 letters each. The new provisions are contained in Clause 19, now before the Committee; in Clause 21, which relates to drugs and medicines; and in the provisions of the 8th Schedule of the Bill. If hon. Members will turn to page 73 of the Bill they will find there that group 33 of the articles liable to Purchase Tax consists of

3.45 p.m.

In order to find which are the articles liable to Purchase Tax, one has to refer to Part II of the Schedule on page 75 of the Bill. This Schedule is a most remarkable one. It tells us that in order to secure exemptions from Purchase Tax the goods

This is the first requirement for exemption from Purchase Tax. The second requirement is contained in paragraph 3, which tells us: prescription. In addition to those hieroglyphics, the container must also have written thereon:

In addition, there may also be stated:

Let me say at this stage that I have no personal interest in this matter. I have no connection with Beecham's Pills or Veno's Cough Cure or any of the other numerous remedies in which the public are interested. Moreover, let me say also that I am not a faddist in this question of medicine. There are many people who are opposed altogether to what they call patent medicines. There are other people, on the other hand, who are medicine addicts, who cannot resist a temptation to purchase one bottle after another. I stand in the middle upon this matter. My philosophy can be summed up in the simple words, "A little of what you fancy does you good."

Really, all this discrimination now proposed for the first time is anomalous, and, in my submission, unfair. Let me give a few examples of substances which will be taxed and of precisely similar substances which will not be taxed; and these are substances of which the names are so simple that the ordinary member of the public may be expected to discriminate between the two sorts. If, Mr. Beaumont, you were to go into a chemist's and ask for a bottle of Californian Syrup of Figs you would have to pay 33⅓ per cent. Purchase Tax. If, on the other hand, you had been put wise to the provisions of this Bill, and, instead, asked for compound syrup of figs B.P.C.—those mystical letters meaning British Pharmaceutical Codex—you would escape Purchase Tax. Similarly, if you were to ask for Doctor Willis Browne's Chlorodyne you would pay tax.

I am much obliged. I got the prescription wrong. If, on the other hand, you asked simply for chlorodyne B.P.—or B.P.C.—you would escape Purchase Tax. The same applies to Glycothymoline. It would have to bear tax at 33⅓ per cent., whereas Glycerine of Thymol would escape tax altogether.

I turn from those examples. The ordinary man in the street might, with a little tuition, learn the names of the things which escape the tax. I turn now to things whose names, I think, it would be beyond his powers to know. Take a laxative which is called Agarol. That pays tax at 33⅓ per cent. But if you asked for something precisely similar in the following words, "Emulsion of liquid paraffin with agar and phenolphthalein" you would get an article precisely similar but free of Purchase Tax. Let me now name an even more homely and more generally used remedy. I refer to Eno's Fruit Salts. To escape Purchase Tax on that you would have to ask for—

—effervescent Sodium Citro-Tartrate B.P.C. I am much obliged to the hon. Gentleman, who is evidently in the trade.

I do say that this discrimination produces some absurd results. The main points against the discrimination, which will, I think, be enlarged upon by people with wider knowledge of these matters than I possess, are these. First of all, trade marks and names and brands protect the public by being a guarantee of quality. In the second place, the public are not familiar with the scientific names and designations to be found in these three volumes, and there is a great danger, therefore, if one has a number of these remedies upon a shelf in a cupboard, of taking out the wrong one and using it for the wrong purpose, with possibly very undesirable results; because it is quite clear that in order to avoid tax the label on the medicine must in no circumstances say for what purpose the medicine is to be used.

I have seen a note of the arguments used—I hope it was not a confidential note—when a deputation visited the Economic Secretary to the Treasury upon this matter. Was it confidential?

I am much obliged. It would appear that the main arguments used in support of this new form of discrimination were these. First, that the Chancellor could not afford the loss of revenue in taking tax off all drugs and medicines. That seems to me a very weak argument. Let us assume that the Chancellor had only a certain amount of revenue to sacrifice upon this. Then it could have been sacrificed evenly over the whole fields of drugs and medicines, and a new special rate of Purchase Tax could have been applied to them, at, say, 16⅔ per cent. or 20 per cent. The only reason I can find which could seriously be advanced in favour of this new form of discrimination is, that it is thought that these proprietary brands can stand the extra tax, that they can afford, that is to say, to bear this tax.

I want the Committee to examine for a moment who will, in fact, bear the tax upon these articles. In the ordinary way, of course, one would expect Purchase Tax to be borne by the purchaser; and, no doubt, where Purchase Tax is evenly and fairly applied equally to all articles of a similar description, the purchaser, in fact, pays the tax. But this will be the first occasion upon which similar articles in the one case bear a tax and in the other case do not. I very much doubt, in that circumstance, whether it will be the purchaser upon whom the incidence of the tax will fall. It would seem to me that if two precisely similar articles are the one to bear the tax and the one not to bear the tax the article upon which the tax is levied will be reduced in price, if it is to continue to compete with the untaxed article.

Therefore, it would seem to me probable that the burden of this tax will for the future fall, not upon the consumer, but upon the producer of the article in question. It thereupon becomes a new discriminatory tax, in addition to the 9s. rate of Income Tax and to the 5s. Profits Tax. It becomes a tax on turnover or on production upon articles produced by those firms engaged in the proprietory and branded drug trade. I cannot think of any reason which would justify such a discriminatory tax of this character, except a prejudice against what are called patent medicines as such. Such a prejudice is not uncommon.

4.0 p.m.

We have often examined this question before. I have heard it stated in the House that some of these branded articles cost very little to produce and are sold at excessive prices. My belief is that the customer is the best judge of what he wants. It is quite unreasonable to single out one trade for a special tax because it is thought that particular trade is making too much profit on this or that article. It is for the public to judge freely on the prices quoted between the efficacy of one form of remedy and that of another. We on these benches have been driven by what the Chancellor of the Exchequer has done to take up, without any form of qualification, the stand that the time has now come when all drugs and medicines should be freed of Purchase Tax altogether. That is the only way in which non-discrimination can be restored.

The right hon. Member for North Leeds (Mr. Peake) need not have assumed that because I was aware of the chemical equivalent of Andrew's or Eno's fruit salts, I was necessarily in- terested in the trade. I have had the benefit, in common with many hon. Members, of reading the memorandum issued by the Proprietary Association of Great Britain, and in that document is set out the chemical equivalents of some of the most commonly used proprietary medicines to which the right hon. Gentleman has referred. I do not intend to take up the time of the Committee in dealing with the right hon. Gentleman's argument. I prefer to deal with that aspect of this particular trade which I regard as vitally important—that is the export trade.

Proprietary medicines—those medicines sold under brand or trade mark—are manufactured not only for the home market but also for the export trade. In 1947, these proprietary medicines were exported to the extent of nearly 425 per cent. of the 1938 level. I understand that since then the target has been increased to a further 40 per cent over 1947, which should yield about £8½ million per annum. A somewhat remarkable feature of this memorandum is that it goes on to say:

I think that what will happen in practice will be this: chemists, when approached by a customer for any particular type of proprietary commodity, will say, "I have this proprietary brand, but I also have an equivalent compound which is not subject to Purchase Tax." That occurred very often even before Purchase Tax was introduced, and I can remember many years ago being offered by a chemist the equivalent of a nonproprietary brand at a much lower price. If one wanted to buy a bottle of aspirin, one could get it much cheaper than an equivalent quantity of a proprietary brand. I personally prefer to use Aspro because it is convenient, and anyone prepared to pay for convenience is entitled to do so.

I submit that there is no argument to sustain the views of the Proprietary Association of Great Britain that because Purchase Tax is sustained it will not be possible for manufacturers of proprietary medicines to sell their goods in this country. In point of fact, there is no real hardship imposed by this tax whatever. I do not think that proprietary medicines represent a very large sum out of the total budget of a household in any one week. They are used only in special circumstances, and people do not use their surplus purchasing power for acquiring proprietary medicines for hording or storage purposes. If it is a strong argument put forward by the Opposition that in the event of this Purchase Tax being maintained the manufacturers will find themselves in difficulties and unable to sell their goods at home or abroad, that, to my mind is not a reasonable argument for the reason I have enunciated.

I would say, in conclusion, that I look forward to the day when all medicines will be freed of Purchase Tax, but I would also say that I look forward to the time when commodities of all kinds are freed of Purchase Tax, because I do not believe that, except in the special circumstances in which we are living at the present time, indirect taxation is a good thing. Nevertheless, so far as this issue is concerned, I must say that the arguments put forward, which are merely a reiteration of the memorandum of the Association to which I have referred to, which we must recognise has a vested interest in proprietary medicines, are falacious in many respects.

I did not quite follow the thesis of the hon. Member for Bolton (Mr. J. Lewis) who does not like Purchase Tax and hopes to see it removed from medicines but who at the moment wants it to be continued. I do not see why, when we do not have a Purchase Tax on food, we should tax medicine. Why should we put a tax on people when they are ill which we do not put upon them when they are well? I do not want to repeat the arguments already made. My right hon. Friend the Member for North Leeds (Mr. Peake) addressed a very strong argument to the Chancellor of the Exchequer on this point. I want to deal with the problem from a rather special aspect.

I want the tax, if it has to be retained on medicines, to be shared equally throughout the country. In large areas of the country there are no chemist shops in the villages. The majority of my constituents, if they want to go to a chemist's shop have to go to one of the four market towns in the constituency, and as a result of the limitations imposed by the Ministry of Fuel and Power, that is a very infrequent occurrence at the present time. They buy their medicines at the local grocer's. In 1941, Parliament passed the Pharmacy and Medicines Act, which laid it down that a product under a proprietary designation could be sold by grocers and chemists alike. If it was sold without a proprietary designation it could be sold only by a qualified pharmaceutical chemist.

That was all right in 1941. It meant that the country people in remote areas could get their medicine by means of the branded product from the grocer, and they did not suffer any greater inconvenience or hardship than the people living in or near the towns, who could go to a qualified pharmaceutical chemist. As drafted, this Bill will mean that country people who go to the grocer for their branded products will have to pay 33⅓ per cent. tax on all their medicine, with no alternative; there is not the alternative of saying, "I do not want Vaseline, I want petroleum jelly." The grocer will not be allowed to sell it. This extra burden will be put upon country people who are ill, and I hope the Chancellor will tell us, whatever his main argument may be, whether it is his intention to tax people more heavily when they are ill than when they are well, because that is the anomaly which will arise from his present proposals.

I should like your guidance, Mr. Beaumont, on how far we can go in this Debate. There are standing in my name certain Amendments in the Eighth Schedule; namely, in page 73, line 41, at the end, to insert:

It would be more convenient if the hon. Member waited until the Schedule is under discussion.

That will make my task now easier and shorter. The first general principle is this: is it intended to tax people more heavily when they are sick than when they are well? I hope the Chancellor realises that feature of his proposals. It may be argued that it was done during the war years; but these things were then done in haste, and I always thought that the tax on medicine was a great mistake. If any hon. Member can point to some luxury medicines which can be singled out, that might be an argument in favour of this proposal. It is not as if, because a medicine is branded, it is not usually used in prescriptions, because many branded medicines are used by panel doctors in the preparation of their prescriptions. It would be extremely dangerous if only non-branded products could be used in panel prescriptions. This proposal will mean that panel patients will get a worse dose than before. The great advantage, generally, of proprietary medicines is that they are standard products.

Does the hon. Member agree that to go into a chemist's shop and purchase a chemical, in whatever form it might be, is quite a different thing from having a doctor's prescription made up, which very often costs much more than a proprietary medicine of the same compound? The hon. Member's argument that for a doctor's prescription the price charged would be reduced is, to my mind, erroneous. A prescription costs very much more than a branded medicine.

I am not thinking of when the hon. Member gets some peculiar prescription made up by a chemist. I am thinking of the panel doctor who gets the local chemist to dispense his medicine.

With those ordinary prescriptions—not the strange ones which the hon. Member for Bolton (Mr. J. Lewis) gets from his doctor—it will be found that use is made of products such as Vaseline or Aspro, or many of these common branded medicines. It is a very unhappy thing that, just before the new National Health Service comes into operation, it should be made to appear, as will be the fact, that prescriptions made up on the panel will be not so good as they were before, because the dispensing chemist will have to exclude branded medicines.

The hon. Member is quite mistaken when he declares that panel prescriptions do, or may, contain branded articles for which there are other and proper equivalents. A very sad view would be taken were a doctor to prescribe Aspro instead of aspirin, or vaseline instead of petroleum jelly. Any medical man who has had to prescribe under National Health Insurance would, I am sure, tell the hon. Member that he is wrong in making that statement.

4.15 p.m.

Before I made that statement I took the trouble to go to my own dispensing chemist in my constituency to find if that was the fact or not. In the past the dispensing chemist for the panel has used certain branded products because they are of a standard quality, which he cannot get if he is buying the formula under the B.P.C., or any of these other strange sibylline words. A very good example is that of Dettol, which is used in panel prescriptions. In the past use has not been made of the term Roxenol, which I believe is the S.P.C. designation of that product.

I cannot give way again. Hon. Members from the medical profession will have plenty of opportunity in the Debate of giving the Committee the benefit of their experience. I think that we should first have the point of view of the consumer. I quite see that the medical profession and the chemists may think that their own little union is getting some advantage out of the Chancellor's proposal, but I am not interested in that at the moment. I am thinking of the ordinary constituent and the ordinary Member of Parliament. I believe that these proposals will cause suffering to our panel patient constituents, particularly in the remote country areas.

There is one respect in which I disagree with my right hon. Friend the Member for North Leeds (Mr. Peake). He says the result of this tax will not be to impose a greater financial burden on the consumer, but that the cost will be borne by the branded medicine manufacturers. I do not believe that that will happen. I believe that this tax will be passed on to the consumer, and I think that it is quite wrong that the extra charge should be imposed on him. If the Chancellor can persuade me that these branded medicine manufacturers are making such huge profits that it is quite clear the tax will, in all cases, come out of the pockets of the proprietary medicine shareholders and not from the pockets of the consumers, that would be a good argument for saying that some tax on proprietary medicines would be valuable, although differentiation would have to be made between one proprietary medicine and another. There must be excluded from this list all proprietary medicines which could be used in panel prescriptions; also, we should have to deal with what I believe to be the hardest injustice of all: that although grocers sell all branded medicines, they cannot sell these B.P.C. medicines, and that people who have no chemist's shop in their near vicinity will be very unjustly treated under this Clause.

First, I ought to disclose my interest in this subject by telling the Committee that I am the Secretary of the Pharmaceutical Society. Although some of my members are engaged in selling some of these drugs and medicines, their interest is not financial because I agree with what the hon. Member for Thirsk and Malton (Mr. Turton) has just said, that this tax will be passed on to the consumers, and it is from the consumers' point of view that the Committee should examine the Chancellor's proposals.

This is a highly technical matter, and it is clear that in some of the literature which has been sent to Members of Parliament, in order to make the Chancellor's proposals clear to them, there has been rather more obscurity than clarity. I should also like to make one rather simple point here. It is that no attempt is being made in this Bill to amend the Pharmacy and Medicines Act, 1941. That was a very unsatisfactory Parliamentary compromise—as all compromises are—but it did attempt to settle a long-standing difference between chemists and grocers about the sale of medicines. It would be a pity if our attention was diverted from the objects of this Clause to the need to amend the earlier Act.

I should like to make clear a point on which I think my hon. Friend the Member for Thirsk and Malton was misinformed. There is no differentiation in the Chancellor's proposal between any classes of retailers. The differentiation is solely on the articles they sell. Whether the article is sold by a chemist or grocer or by any other retailer, the price is exactly the same.

Certainly. There is nothing in the 1941 Act or in these proposals which prevents a grocer from selling a branded proprietary article.

Does not Section 12 of the Pharmacy and Medicines Act, 1941, prevent the grocer from selling a non-branded product?

If a non-branded product contains a recommendation for use, then I agree; but there is nothing in these proposals to prevent a grocer from selling a branded or a non-branded product in the future just as he has sold it in the past. Therefore, the grocer is in precisely the same position. [HON. MEMBERS: "No."] Well, that must be a matter of opinion, but I am quite clear. So far as he is a retailer of drugs and medicines, a grocer is in entirely the same position if these proposals are passed as he is at present.

I most strongly agree with the general proposition of my right hon. Friend the Member for North Leeds (Mr. Peake) in moving this Amendment. He went back to the fundamental point that drugs and medicines are not suitable articles for taxation. However the problem is approached, we come back to the fact that a Purchase Tax on them amounts to taxation on sickness. It may not be a large increase in the cost, but it is an increase which has to be paid by the public very often at a time when their ordinary expenses are higher than usual. The issue was put to the Chancellor at the time of the Finance Bill last October. The Chancellor then said that, while he admitted the principle, he could not afford at present to forego—I think it was £18 million of taxation. It was purely, in his view, anti-inflationary taxation which he wanted to get from drugs and medicines. He promised, however, that between October and now he would have the whole question examined to see how far it was possible to lighten this taxation. The No. I Exemption Order and the proposals in this Bill represent the result, I presume, of his investigations. It is only fair to the Chancellor to say that in his No. I Order he has exempted a very large number of the important drugs used in medicine. In the Eighth Schedule of the Bill he has attempted to go beyond exemption by name and has attempted exemption by class. If we went on exempting by name we should reach ultimately a list of enormous length. Purely as a piece of machinery it becomes necessary to exempt by groups.

My difficulty over the proposals in this respect is that there is no question at all that grave injustice will be done by the proposals as they stand now. I would not quarrel with what I believe is the principle at the back of these exemptions, namely, that drugs and medicines prescribed by doctors should be free of tax; whereas, broadly speaking, drugs and medicines sold to the public as the result of national advertising are suitable for tax, assuming always that drugs are to be used for the purpose of collecting revenue. In this Bill the line has been drawn on the basis of trade mark. It is because that criterion has been used that injustice has been done. A very large number of trademarked articles which are not advertised to the public are normally sold only on medical prescription; they will, nevertheless, be caught by the proposals of the Bill and will have to bear Purchase Tax.

It may be said that manufacturers can take off the trade mark from those drugs and sell them unbranded. To do so, however, would seriously affect the goodwill which they have built up not only in this country but, what is more important at present, in the export market. I do not believe it is beyond the wit of Treasury draftsmen to find ways and means of extending the exemptions in Part II of the Eighth Schedule. The distinction could be drawn that where a trade mark is applied to designate the whole of the products of a particular manufacturer, then those products might be tax free; but if the trade mark was so used that it had become the name of the medicine, then it might bear tax. Again, my remarks are based on the assumption of the principle that revenue is to be collected from drugs and medicines.

There is another alternative which I do not believe has been considered by the Chancellor, and which occurred to me only yesterday evening when I was awaiting this Debate. This is not the first time there has been a tax on medicines; it is not the first time that the Treasury have had to draw a line between medicines sold on a doctor's prescription and those not sold on such a prescription. Under the old Medicine Stamp Acts the line was drawn in this way: if a medicine bore a clear indication that it was supplied for dispensing purposes only, that particular get-up—to use the elegant language of the Finance Bill—rendered that particular article tax free.

It was quite possible then, and I am told it would be quite possible now, for the wholesale trade to differentiate between a medicine which was labelled in the normal way, even if it bore a trade mark, and a medicine labelled to indicate that it was supplied solely for use in the dispensing of doctors' prescriptions. If that method had never been tried out it might be regarded by the Treasury as a dangerous innovation; but it has been tried for 20 years, I think, and it was found to work. I hope the Chancellor will look at this suggestion. It is one that has worked and with which his Department and the Board of Customs and Excise must be familiar. It will do exactly what I think he wants to do—to draw the line between medicines to be sold only on medical prescriptions and other medicines.

I revert to the matter on which my right hon. Friend the Member for North Leeds began his speech. It is quite clear that if the Schedule is left as it is, a number of very sound firms who export large quantities of well-known preparations under well-known trade marks will be handicapped in their home trade and ultimately in their export trade. By one expedient or another—by the extension of exemption in the second part of the Eighth Schedule or by this new suggestion which I have put forward, which has been tried and found workable—I believe their state can be made easier. Otherwise the anomalies bring us back to the point where we started, that drugs and medicines are not satisfactory subjects for Purchase Tax.

4.30 p.m.

Like most hon. Members of this Committee I have received representations from my constituents very largely based on a leading article in a well-known daily newspaper with a large circulation. In order to see what answer there could be to the statements made I turned, as a good professional man, to the pages of the "Pharmaceutical Journal" for 22nd and 29th May, and there I found complete answers to those statements which refuted the approach adopted by that paper. I was all the more ready to accept the arguments of the "Pharmaceutical Journal" against the misconceptions in the "Daily Mail," because the arguments adduced in the "Pharmaceutical Journal" were those of the hon. Member for Putney (Mr. Linstead). If any hon. Member is still inclined to accept what was said in that leading article, I would advise him to read those two issues of the "Pharmaceutical Journal."

The hon. Member for Putney has clearly and fairly put the difficulties before the Committee. How can we defend an extension of what the Chancellor has clearly indicated must be a limited concession and intended to apply to essential drugs and medicines to a range of proprietary articles, the consumption of which is stimulated by and the production of which is conditioned by, the success or otherwise of advertising? The concession being limited could not possibly extend over the whole field; so whether it is or is not desirable that drugs and medicines should be exempted is not the practical issue before the Committee at the moment. It is, therefore, the concern of the Committee to judge whether the concessions made within the limits of the money available are just. I agree that on a question of trade marks there will be some hardship to reputable firms, but how is it possible to discriminate between their trade marks and those of firms which advertise directly to the public?

Some little while ago I and another Member of this Committee were honoured by an invitation to meet a rather formidable collection of pharmacists, many of them engaged in the retail trade and others in the manufacturing section of the profession. There was a clear conflict of opinion as to the justice or otherwise of these proposals. The pharmaceutical profession divides medicines and drugs into two categories, the nomenclature of which is rather curious. They label them either as ethical drugs or non-ethical drugs. Non-ethical drugs, not so called in any derogatory fashion, are drugs which are directly advertised to the public and, therefore, purely commercial. In effect, I believe I am right in saying that the concession is made to the ethical range of drugs.

It has been suggested by some sections of the pharmaceutical profession that the way out may be found in this way, that all medicinal proprietories, before being allowed to advertise, should have to be registered, and the registration certificate number would have to appear on every advertisement. While this may be new in this country, it is not new in other countries because in some continental countries it is the rule. A fee should be charged for each registration to cover administration expenses, and all registered proprietary articles would be subject to Purchase Tax. The only medicinal proprietories exempt under this scheme, and on which Purchase Tax would not be payable, would be those which advertise exclusively in pharmaceutical and medical journals and which do not advertise in the fashion of ju-ju men in some of the more backward parts of the world.

I do not want to widen the scope of the Debate, but it might be of interest of hon. Members if I made one comment on the misconceptions which attend the wide use of certain trade marks in the field of drugs. In a remote village of the Cameroons, which could hardly be dignified by the name of a village because it was a collection of the lowest kind of mud and straw huts, I found a drug store in which every possible ju-ju was labelled M.B. There was even an M.B. preparation to guarantee faithfulness on the part of one's wife. This medicine man's idea of a trade mark is one I am sure that we do not wish to encourage. We can remember that it is not so long ago since the people of this country bought iodine lockets and wore iodine socks which were widely advertised. It is easy to see that in some cases there is this reliance on a trade mark to cure one's ills without reference to a qualified pharmaceutist or doctor, and this practice is not one to be encouraged. I hope the Chancellor will be firm in this matter, because I do not think a case has been made out for an alteration in the proposals in the Finance Bill.

Before the hon. Member for East Harrow (Mr. Skinnard) sits down, would he say what percentage of advertising of chemicals has been informative and educative and what percentage he considers to have no such value but to have been merely of what he calls a ju-ju nature?

I can only refer the hon. Member to the pages of the "Pharmaceutical Journal" for 22nd and 29th of May, in which the challenge was put forward that although in most papers the advertising was ethical, it was not true, as the "Daily Mail" said, that it was entirely so, and a distinct reference was made to the present advertising of so-called asthma cures.

I hope the hon. Member for East Harrow (Mr. Skinnard) who comes from the Golden City in the West of England, will forgive me if I do not follow him into the realms of ju-ju. I should like to take the opportunity of adding my protest against this tax. I wish the Chancellor of the Exchequer would look at this matter again, and I hope in particular he will look at the aspect referred to by my hon. Friend the Member for Thirsk and Malton (Mr. Turton), namely, the question of the effect of this tax upon grocers in the countryside. I have had constituents coming to see me and they have also written me many letters, which I am sure the Chancellor of the Exchequer would like to take into account. If I might briefly take the time of the Committee for a moment I should like to read one extract from a letter I have received:

"I should be obliged if you would do your best to help us grocers in the fight against the principle of the enclosed communication so that we can enjoy fair play and equal rights with the chemists."

My hon. Friend the Member for Putney (Mr. Linstead) made certain references to this question of the grocers and the chemists and for the life of me I could not see exactly what he meant. The position is that at the present moment, if the grocers sell a non-proprietary product, the grocers are not allowed to indicate the purpose of the product. In that case, how could they possibly from a practical point of view compete with the chemist? Apart from that it must be remembered that our great agricultural community has not always the facilities both of the chemist and the grocer and that the only selling agency may be the grocer. This must be borne in mind, as it affects the consumer. I believe that my hon. Friend mentioned that he is probably going further into the question of the corn merchant and the grocer, with regard to tax on cow drench. These matters are important. [ Laughter. ] This is no laughing matter for the countryside. I sincerely trust that the Chancellor of the Exchequer will look at this matter again, even if he does not feel able to accept the present proposal, and that we may get a more reasonable reply on the words now inserted in the Bill.

My hon. Friend the Member for South-East St. Pancras (Dr. Jeger) and I have an Amendment on the Order Paper to the Eighth Schedule to leave out paragraph 5, which refers to trade marks. Perhaps it would be for the convenience of the Committee if I spoke on that Amendment in what I have to say on the Amendment now before the Committee. Our Amendment is relevant to this discussion and it might be convenient if I dealt briefly with that matter.

On a point of Order. I do not want to go against the convenience of the Committee, Mr. Beaumont, but I think it was ruled, either by you or by your predecessor in that Chair when the matter was raised, that we should keep to the discussion of the Amendment and not encroach upon discussion of the Schedules until we come to them.

I was just preparing to tell the hon. Member for East Willesden (Mr. Orbach) that Amendments to the Schedules will be dealt with when we reach the Schedules, and not before.

I was not suggesting that we should endeavour to discuss the whole question at this stage, or that we should do more than reply to some of the arguments which have already been raised. I am anxious to save the time of the Committee.

We cannot have duplication of the discussion of the Schedules, and we must, therefore, keep to the Amendment to the Clause.

Surely your Ruling previously was upon an entirely different issue. The hon. Member opposite, to whom it was given, had raised the question of disinfectants. My hon. Friend and I particularly wish to talk about patent medicines.

The Ruling which I gave on the previous occasion applies also to the point raised by the hon. Member.

I have not generally been in favour of the Purchase Tax. I believe there are circumstances, however, in which the imposition of such a tax is justified, and that a case has been made out for Purchase Tax being placed upon the sale of patent medicines. These are preparations which were never patented, and a great many of which are not medicines. I have read, and probably other hon. Members have read, a memorandum issued by the Proprietary Articles Trade Association. That body, for the first time, seems to set itself up as a scientific organisation. It now poses as the protector of the public and it expresses very grave concern about possible damage to public health, about waste of manpower and loss of exports, in its remarks upon the principle of the Purchase Tax as applied to patent medicines.

I turn from a study of the memorandum issued to hon. Members to a reading of the minutes of the council meeting of this organisation. I find that the chief and major concern of the Proprietary Articles Trade Association is the maintenance of profits for their manufacturing and wholesale members. At those meetings, the council were never concerned about the quality of the products manufactured, from a therapeutic point of view, but always concerned that an article which cost pence to produce should sell for shillings. This body maintains, in the document which has been circulated to hon. Members, that the passage of the Bill

4.45 p.m.

The hon. Member is now getting away from the subject, and should bring his argument back to the Amendment.

I am trying to develop the case. I want to prove that what is required in this matter is more and not less discrimination. I ask the Committee to allow me a little indulgence to develop my argument.

If I allow the hon. Member indulgence I must allow the same indulgence to others who will follow him.

The right hon. Member for North Leeds (Mr. Peake) was permitted to mention the name of quite a dozen proprietary and branded articles and to discuss their value. I am not discussing the value of any articles but the people responsible for their preparation.

There is a great difference between naming products and describing the way in which they may be used, on the one hand, and going into the details of the companies who manufacture them, on the other.

I bow to your Ruling, Mr. Beaumont. I would like to point out that I differentiate between articles which are widely advertised and for which very great therapeutic value is claimed, and other articles which I think are produced for the public good by organisations which are interested in the public welfare. I would first of all mention Maclean's Stomach Powder, a preparation which was given to the world by a real chemist and exploited by a small man. This man created a mushroom firm, touted his product from door to door, broke every canon of ethical trading, amassed a fortune and made thousands of hypochondriacs.

I still cannot see any relation between the hon. Member's argument and the Amendment on the Paper.

Preparations of that kind, I claim, have no right to exemption from any rules or orders issued by the Treasury. I think I am justified in making a case of that description. I suggest seriously to the Committee that if people insist upon the luxury of purchasing preparations which claim therapeutic effect, they should be prepared to pay the tax. I am anxious that the Chancellor of the Exchequer should protect the legitimate medical products which have been manufactured by people who have spent money on research and who are concerned with the public welfare. There are many firms of this type which will be handicapped by this Clause of the Bill. I would mention, for instance, the firm of Glaxo Laboratories and their production of penicillin for His Majesty's Government during the war, and would go on to mention a firm it my own constituency—

I have already ruled that such matters are out of Order on this Clause.

I accept your Ruling, Mr. Beaumont, but perhaps you will permit me to continue developing my argument. Firms of this description only advertise to the medical, dental and veterinary professions. They are known for carrying out research, and from time to time they advance medical knowledge. I have in mind one which is not more than eight miles from this House, where as a result of a great deal of research a product was marketed to the medical profession and was some five years later placed upon the British Pharmacopoeia Fourth Addendum. They produced a preparation called Magsorbent—magnesium trisilicate—which I understand from members of the profession is very useful in certain digestive complaints.

Under the existing Schedule this preparation will be tax free if the trade mark is omitted, but surely this firm is entitled to have recognition of its products and should be allowed to use an identification mark indicating to the public at large and the medical profession in particular, that it alone is responsible for the preparation. Self-medication by quack remedies is undesirable but medical treatment of illness should not be taxed. The Schedule as framed may have disastrous effects on firms of the character which I have mentioned, who ought to be relieved from this tax, while we penalise the malevolent and the stupid.

I was hoping that the hon. Member for East Willesden (Mr. Orbach) would put forward some arguments to justify this tax. All he did was to throw mud at the manufacturers of proprietary medicines who have established themselves successfully. He did not elucidate the problem—

If the hon. Member will wait, perhaps I will give way to him. He posed a question to us—and I hoped he would give the answer—what is the difference between ethical and unethical stomach powders? What concerns me about this tax—I have no interest whatever in the trade concerned—is that I cannot see the justification for it. What is behind the tax? Is it the idea of raising revenue? Is it an anti-inflationary tax? If so, possibly before the year is out the Chancellor of the Exchequer may be thinking not so much of inflation as as deflation. Is it just a desire to meddle with something which is working reasonably well now, or is there some other hidden reason behind it?

There seem to me to be three very strong arguments against the tax, and I hope that whoever replies for the Government will try to deal with them. The first is that, whatever may be said of it, this seems to be a discriminatory tax of a very extreme order. We are taking one section of the drug trade and imposing a tax on it. The second argument is that it is certainly a tax on necessities. We cannot pretend, I hope, that drugs are luxuries. One does not buy aspirin as a form of dissipation. One may do that as a result of dissipation, but one does not buy drugs merely for the sake of buying them. It is therefore in a very direct sense a necessity. The third argument is that mentioned by more than one hon. Member—the effect on the export trade. Here is a trade which has increased its exports compared with before the war by over 400 per cent. The value this year is estimated to be something over £8,500,000. Surely, with the problem of balancing our imports and exports, we cannot afford to meddle about with an export trade which is as successful as this? There is no getting away from the fact that these proprietary medicines are sold abroad because they have a flourishing home market and also because their trade mark has been established in the home market.

Those are three very strong arguments which I hope will influence the Committee not to accept this tax. I wonder whether there is something else behind it. Is this an indirect attack on proprietary medisines? Is there some desire here to guide people to the doctors for their prescriptions instead of allowing them to go to the chemist or their local grocers and buying what they want? I do not believe that anybody will benefit from this. What will happen is that people will get medicines which will not have behind them the guarantee of quality which the reputable brands have today. I cannot see the slightest justification for the tax. I am amazed that hon. Gentlemen opposite are prepared just to accept this tax on the poor, and the sick poor at that.

I would like to make it perfectly clear first of all, in view of what the hon. Member for Hornsey (Mr. Gammans) has said, that by this Clause we are neither placing an additional tax on anything nor raising the tax on anything. I say that in view of some of the speeches which we have heard, and also in view of some of the passages in the memorandum from which the right hon. Member for North Leeds (Mr. Peake) gave us a lucid paraphrase. Later on, that memorandum speaks of the Finance Bill placing a penal tax on certain medicines. The Finance Bill does not do that at all. Before the Budget, most drugs and medicines, including proprietary medicines, paid Purchase Tax at 33⅓ per cent. There was a limited class of very essential medicines which was exempt. After the Budget, the proprietary medicines still pay the Tax at 33⅓ per cent. as they did before.

What we have actually done is this. Because we want to lighten the burden of tax paid by people suffering from illness, as so many hon. Members have said we should, we have somewhat widened the class of essential medicines exempt from the Tax. That was what we were advised to do from many quarters of the House last December. We have aimed at exempting those medicines and drugs described in publications recognised as medical authorities, and including most preparations commonly used and of established medical value. We have done that in a way which was quite accurately described by the right hon. Member for North Leeds. Not merely have we done what we have been advised to do, but the right hon. Member for West Bristol (Mr. Stanley) actually accused the Government last December of grave ineptitude in not having removed the essential drugs from the list before. We have therefore followed his advice in that respect.

I gather that as far as we have gone we have the right hon. Gentleman's support. We have, however, excluded branded products from the list of exemptions. We have done that not because they are necessarily without value, but because their inclusion would entail freeing virtually all the popular proprietary medicines from the Tax and would involve us in a loss of revenue which at present we simply cannot afford.

5.0 p.m.

The right hon. Gentleman accused the Government of having a prejudice against patent medicines. The Government have no prejudice against patent medicines. As a matter of fact, the right hon. Member for West Bristol last November said:

We believe, after listening to many suggestions from many quarters, that the line we have adopted will mean far fewer anomalies than any of the alternatives. I believe that the only practical alternatives before us are either to go back to where we were before the Budget, and suspend this change altogether, or to exempt all popular proprietary medicines, which is what this Amendment suggests. We cannot, as the hon. Member for Putney (Mr. Linstead) suggested, exempt all medicines supplied under a doctor's prescription for technical reasons—the Purchase Tax falls at the wholesale stage, and it is not therefore administratively possible—but we will look at his suggestions with a view to a slight variation of that arrangement.

Those who are asking us simply to go back to where we were before the Budget are wanting to impose additional taxation on medicines, and to impose it on precisely those medicines which scientific and medical knowledge suggest are of value. That we are not prepared to do. The other suggestion from Members opposite is that we should remove the Purchase Tax from all these medicines, and that too we are not prepared to do at this stage because of the loss of revenue involved. We have already lost £4 million by the existing exemptions, and we should lose a further £10 million if we were to sweep the tax away altogether. Since this is a counter-inflationary Budget, which we were urged to introduce, we cannot do that at this stage.

May I now remove one or two other misconceptions? Manufacturers of branded articles will, of course, be free, just as before, to sell their branded articles with exactly the same tax as before. They will also have the additional freedom to sell their articles, if they wish, without the branded name and free of all Purchase Tax, providing they fall within certain essential categories. I know it is said that they will now be subject to competition from similar products.

Has not one very important point been missed, that they will be allowed to sell their unbranded products so long as no dosage or instruction is shown? Is that not a rather dangerous aspect?

I do not think it is a dangerous aspect. It is said that unfair competition is involved by the distinction between branded goods and non-branded goods, but experience shows that branded popular proprietary articles are already selling at prices a very long way above unbranded articles, in many cases as much as 100 per cent, more. Therefore, I do not think that the small reduction in the price of the non-branded articles can really make much difference. We have had Aspros and aspirins mentioned. Perhaps I may explain to the Committee how the arithmetic works out. The price of 27 tablets of Aspro is at present 1s. 5d., of which about 3½d. is Purchase Tax. The price of non-branded aspirins, is 1s. for 100 tablets. We shall now take about 2½d. off the non-branded aspirins, bringing the price down to 11d. It is hard to believe that if people are willing to buy 27 tablets for 1s. 5d., as against 100 tablets for 1s. there will be much difference if the figure of 1s. 1½d. comes down to 11d. I do not think there will be any serious difference between the two, and if that is so the argument used in the case of the export trade also falls to the ground. Finally, we must remember that proprietary drugs which are essential and of medical value have already been exempted from Purchase Tax by the Treasury. As several Members have pointed out, an order was made on 1st April exempting quite a large number of these drugs.

There is one further misconception which my hon. Friend the Member for Putney disposed of, and that is that we are in some way discriminating between the grocer and the chemist. It is the Pharmacy and Medicines Act, 1941, which differentiates between the grocer and the chemist, while here we are differentiating between the non-branded products and the branded product. It will be seen that there is not much substance therefore in that argument.

Is there not discrimination being shown in the case of the agricultural worker who is not able to buy his supplies of drugs from a chemist but has to go to the grocer?

It is not this Bill which is doing that. If a complaint is being made that only grocers exist in rural areas for the purchase of these supplies, it is a complaint against the 1941 Act and not against this Measure.

The point in relation to these new reliefs and the old reliefs is that doctors will be now able to prescribe tax-free remedies for practically all ailments, and that hospitals and institutions will be almost entirely relieved of the necessity to buy taxable drugs. The new exemptions we have introduced will enable the housewife to buy tax-free the simple drugs for the family medicine cupboard, including aspirins, iodine and various other things of that kind. Let us remember that as from 5th July everyone will be able, under the National Health Scheme, to obtain free medicines prescribed by National Health Service doctors.

For all these reasons, we do not think that any serious or unjustifiable anomalies have been caused by this change. Having taken a lot of expert advice and having listened to a large number of suggestions which have been made we do not consider that any other line of demarcation, so far as we can see at present, could be found which would be more satisfactory. We think, however, that after some period of the working of the National Health Scheme we shall have gained valuable experience of the working of these new proposals, and we think that will be the proper time at which to review this subject. Until then I must ask the Committee to reject the Amendment.

Before the hon. Gentleman sits down, could I ask the following question? I am quite clear that on the non-branded goods the label can contain directions as to use and storage and quantitative particulars, but is there any reason at all why labels of non-branded goods should not also contain some particulars as to the type of use, because that would help?

I must confess that I find myself unsatisfied by the reply of the hon. Gentleman. However, I want to make it clear that on this side we appreciate that the difficulty we are discussing has arisen as a result of attempting to do something to help in the provision of drugs and medicines, and we welcome the relief which has been given. What we regret is that in the giving of that relief it should be necessary to adopt a method which appears to be discriminatory in its character. "Discrimination" I gather, is a word which the hon. Gentleman does not like; he prefers the more professorial word "demarcation," but the effects appear to be much the same in the long run.

He cannot deny that the result of this new proposal is that some drugs will be exempted from tax and some will still have to pay it. Our complaint is that the demarcation between those two appears to rest on nothing else but office convenience. It was the burden of the hon. Gentleman's speech that this was the easiest way of doing it. That is the trouble with all increasing bureaucracy, that in the end what is looked for is not justice or humanity but the easiest administrative course, and that is what has been chosen in this case, because no one can defend on pure logic the division that has been taken; no one can say that all those materials which are really helpful for the cure of human ills fall on one side and all the materials which are not helpful at all fall on the other. That, of course, is not so.

On the proprietary medicine side there is an enormous range, a range from articles which, although I am no doctor, I should frankly believe to be harmful to the individual, to, at the other end of the scale, articles which are probably better and purer and more in demand from the doctor than the compounds which will be exempted under these proposals. Yet no attempt has been made to make any differentiation between those two. The line of demarcation has been chosen to suit the convenience of the Department, and the result is that on the wrong side of the demarcation line will now fall a number of proprietary articles which are recognised by the medical world, as well as by the ordinary consumer, as being of extreme value.

Will the right hon. Gentleman give one example?

I have been brought up all my life to believe that vaseline was quite a good thing to use.

5.15 p.m.

Without at this moment entering into a discussion with the hon. Lady of a more particular character, I should say where required. There are, of course, a number of proprietary brands which, as the hon. Member knows, one's doctor will often prescribe—

The hon. Gentleman shakes his head. We have already had a lecture read by him which was a com pound of prejudice at the beginning and of indecision at the end.

The right hon. Gentleman says I have already read a lecture. I have not made a speech.

The hon. Gentleman who was sitting there made a speech, and at this distance it is difficult to see who it was.

Quite frankly, I do not know whether I ought to apologise to the hon. Member for South-East St. Pancras (Dr. Jeger) or to the hon. Member for whom I mistook him. In any case I apologise but, seriously, I think there is general agreement that there will be found among the lists of proprietary medicines a number of substances which doctors are in the habit of prescribing, and which no one would describe as anything but useful in the cure of sickness—

—and, therefore, we cannot accept an easy way out just because the Department are unable to think of some undoubtedly more complicated demarcation which would preserve those, and have to fall back on the simplest remedy which leaves these things excluded. I certainly would not try to put the case at its highest. I know that some people take the view that all patent medicines are good for one if one believes in them enough to take them. I do not take that view, and I have said in public that I think some are probably harmful. Therefore I do not put the case at its highest. As far as I am concerned, if the hon. Gentleman held out any hope that he would reconsider this, would think again of some new line of demarcation which could exclude the glaring anomalies created by this one, I should have been prepared to accept that, but he gave us no such hope. He has stood out for administrative convenience, first, last, and all the time, and for that reason we shall go into the Lobby against him.

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

The Committee divided: Ayes, 275; Noes, 156.

Division No. 166.]

AYES

[5.20 p.m

Acland, Sir Richard

Ganley, Mrs. C. S.

Murray, J D

Adams, W. T. (Hammersmith, South)

George, Lady M. Lloyd (Anglesey)

Nally, W.

Alexander, Rt. Hon. A. V

Gibbins, J.

Naylor, T. E

Allen, A. C. (Bosworth)

Gibson, C. W.

Neal, H (Claycross)

Allen, Scholefield (Crewe)

Gilzean, A.

Nichol, Mrs. M. E. (Bradford, N.)

Alpass, J. H.

Glanville, J. E. (Consett)

Nicholls, H. R. (Stratford)

Anderson, A. (Motherwell)

Goodrich, H. E.

Noel-Baker, Capt. F. E. (Brentford)

Attewell, H. C.

Greenwood, A. W. J. (Heywood)

Noel-Buxton, Lady

Austin, H. Lewis

Grenfell, D. R.

O'Brien, T.

Awbery, S. S.

Grey, C. F.

Oldfield, W. H

Ayles, W. H.

Griffiths, W. D. (Moss Side)

Oliver, G. H.

Ayrton Gould, Mrs. B

Gruffydd, Prof W. J.

Orbach, M.

Balfour, A.

Guest, Dr. L Haden

Paget, R. T.

Barstow, P. G

Guy, W. H.

Palmer, A. M. F

Barton, C.

Haire, John E. (Wycombe)

Parker, J.

Battley, J. R.

Hale, Leslie

Parkin, B. T.

Bechervaise, A. E.

Hall, Rt. Hon. Glenvil

Paton, Mrs. F. (Rushcliffe)

Benson, G.

Hamilton, Lieut.-Col. R

Paton, J. (Norwich)

Berry, H.

Hannan, W. (Maryhill)

Perrins, W.

Beswick, F.

Hardman, D. R.

Poole, Cecil (Lichfield)

Bing G. H. C

Hardy, E. A.

Popplewell, E.

Binns, J.

Harrison, J.

Porter, E. (Warrington)

Blenkinsop, A

Henderson, Rt. Hon. A. (Kingswinford)

Porter, G. (Leeds)

Blyton, W R.

Henderson, Joseph (Ardwick)

Price, M. Philips

Bottomley, A. G.

Hicks, G.

Pritt, D N.

Bowden, Flg. Offr. H. W.

Holman, P.

Proctor, W T.

Bowen, R.

Holmes, H. E. (Hemsworth)

Pryde, D. J.

Braddock, Mrs. E. M. (L'pl, Exch'ge)

House, G.

Pursey, Cmdr. H

Braddock, T. (Mitcham)

Hoy, J.

Randall, H. E

Bramall, E. A.

Hudson, J. H. (Ealing, W.)

Ranger, J.

Brook, D. (Halifax)

Hughes, Emrys (S. Ayr)

Rankin, J

Brooks, T. J. (Rothwell)

Hughes, H. D. (W'lverh'pton, W.)

Reeves, J.

Brown, T. J. (Ince)

Hynd, H. (Hackney, C.)

Reid, T. (Swindon)

Bruce, Maj. D. W. T.

Hynd., J. B. (Attercliffe)

Richards, R.

Butler, H. W. (Hackney, S.)

Irvine, A. J. (Liverpool)

Ridealgh, Mrs. M

Byers, Frank

Irving, W J. (Tottenham, N.)

Robens, A.

Callaghan, James

Jay, D. P. T.

Roberts, Goronwy (Caernarvonshire)

Carmichael, James

Jeger, Dr. S. W. (St. Pancras, S. E.)

Robertson, J J. (Berwick)

Champion, A. J.

Jenkins, R. H.

Ross, William (Kilmarnock)

Chetwynd, G. R.

Johnston, Douglas

Royle, C.

Cluse, W. S.

Jones, D T. (Hartlepool)

Sargood, R.

Cobb, F. A.

Jones, J. H (Bolton)

Scollan, T.

Cocks, F. S.

Kenyon, C.

Scott-Elliot, W.

Coldrick, W.

Key, Rt Hon. C. W

Segal, Dr. S.

Collindridge, F.

King, E. M.

Shackleton, E. A. A

Collins, V. J.

Kinley, J.

Sharp, Granville

Colman, Miss G. M.

Kirkwood, Rt. Hon D

Shurmer, P.

Cook, T. F.

Lang, G.

Silverman, S. S. (Nelson)

Cooper, Wing-Comdr. G

Lee, F (Hulme)

Simmons, C. J.

Corlett, Dr J.

Leonard, W.

Skeffington, A M

Cove, W G

Levy, B. W.

Skinnard, F. W.

Crawley, A.

Lewis, J. (Bolton)

Smith, C. (Colchester)

Cripps, Rt. Hon. Sir S

Lewis, T. (Southampton)

Smith, H. N. (Nottingham, S.)

Crossman, R. H. S.

Lipton, Lt.-Col. M

Snow, J. W.

Dagger, G.

Longed, F

Solley, L. J.

Davies, Ernest (Enfield)

Lyne, A. W.

Soskice, Sir Frank

Davies, Harold (Leek)

McAdam, W

Sparks, J. A.

Davies, R. J. (Westhoughton)

McAllister, G.

Stamford, W.

Deer, G.

McEntee, V La T.

Stross, Dr. B.

de Freitas, Geoffrey

McGhee, H G.

Stubbs, A. E.

Delargy, H. J.

Mack, J. D

Summerskill, Dr. Edith

Diamond., J.

McKinley, A. S

Swingler, S.

Dobbie, W.

Maclean, N. (Govan)

Sylvester, G. O.

Dodds, N. N.

McLeavy, F

Symonds, A. L.

Driberg, T. E. N.

Mainwaring, W H.

Taylor, R. J. (Morpeth)

Dugdale, J. (W. Bromwich)

Mallalieu, E. L. (Brigg)

Taylor, Dr. S. (Barnet)

Dumpleton, C. W.

Mallalieu, J. P. W (Huddersfield)

Thomas, D. E. (Aberdare)

Dye, S

Mann, Mrs. J.

Thomas, Ivor (Keighley)

Ede, Rt. Hon. J. C.

Manning, C. (Camberwell, N.)

Thomas, George (Cardiff)

Edward's, Rt. Hon. Sir C. (Bedwellty)

Marquand, H. A.

Thorneycroft, Harry (Clayton)

Edwards, W. J. (Whitechapel)

Marshall, F. (Brightside)

Thurtle, Ernest

Evans, Albert (Islington, W.)

Mellish, R. J.

Tiffany, S.

Evans, E. (Lowestoft)

Messer, F.

Timmons, J.

Evans, S. N. (Wednesbury)

Middleton, Mrs. L.

Titterington, M. F

Ewart, R.

Millington, Wing-Comdr. E. R

Tolley, L.

Farthing, W. J.

Mitchison, G. R

Tomlinson, Rt. Hon. G

Fernyhough, E.

Monslow, W.

Turner-Samuels, M.

Follick, M

Morley, R.

Ungoed-Thomas, L.

Foot, M. M.

Morris, Lt.-Col. H. (Sheffield, C.)

Vernon, Maj. W. F.

Forman, J. C.

Morris, Hopkin (Carmarthen)

Viant, S. P.

Fraser, T (Hamilton)

Mort, D. L.

Wadsworth, G.

Freeman, Peter (Newport)

Moyle, A.

Walkden, E.

Walker, G. H.

White, C F. (Derbyshire, W.)

Willis, E.

Wallace, G. D. (Chislehurst)

White, H. (Derbyshire, N.E.)

Wills, Mrs. E. A.

Wallace, H. W. (Walthamstow, E)

Whiteley, Rt. Hon. W.

Wise, Major F. J

Warbey, W. N.

Wigg, George

Woods, G. S.

Watkins, T. E.

Wilkins, W. A.

Yates, V. F.

Watson, W M

Willey, F. T. (Sunderland)

Young, Sir R. (Newton)

Weitzman, D.

Willey, O G. (Cleveland)

Younger, Hon. Kenneth

Wells, P. L. (Faversham)

Williams, D. J. (Neath)

Wells, W. T. (Walsall)

Williams, J. L. (Kelvingrove)

TELLERS FOR THE AYES:

West, D. G.

Williams, R. W. (Wigan)

Mr. Pearson and Mr. Richard Adams.

Wheatley, Rt. Hn. J (Edinburgh, E)

Williams, W R. (Heston)

NOES.

Amory, D. Heathcoat

Grant, Lady

Noble, Comdr. A. H P

Assheton, Rt. Hon. R.

Gridley, Sir A

Odey, G. W.

Astor, Hon. M.

Grimston, R. V

O'Neill, Rt. Hon. Sir H

Baldwin, A. E

Harden, J. R. E.

Orr-Ewing, I. L

Baxter, A. B.

Hare, Han. J. H. (Woodbridge)

Osborne, C.

Beamish, Maj. T. V. H

Harvey, Air-Cmdre. A. V

Peake, Rt. Hon. O.

Beechman, N. A.

Haughton, S. G.

Pete, Brig. C. H. M

Bennett, Sir P.

Hinchingbrooke, Viscount

Pickthorn, K.

Birch, Nigel

Howard, Hon. A.

Pitman, I. J.

Boles, Lt.-Col. D. C (Wells)

Hulbert, Wing-Cdr. N. J

Ponsonby, Col. C. E.

Bossom, A C

Hurd, A.

Poole, O. B. S. (Oswestry)

Bower, N.

Hutchison, Lt.-Cm. Clark (E'b'rgh, W.)

Rayner, Brig. R.

Boyd-Carpenter, J. A.

Hutchison, Col J. R. (Glasgow, C)

Reid, Rt. Hon. J S. C. (Hillhead).

Braithwaite, Lt.-Comdr. J. G

Jarvis, Sir J.

Renton, D. J.

Bromley-Davenport, Lt -Col. W

Jeffreys, General Sir G.

Roberts, H. (Handsworth)

Buchan-Hepburn, P. G. T.

Joynson-Hicks, Hon. L W

Robinson, Roland

Bullock, Capt. M.

Keeling, E H

Ropner, Col L.

Butcher, H. W.

Kendall, W. D.

Sanderson, Sir F.

Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)

Kingsmill, Lt.-Col. W.H

Savory, Prof. D. L

Carson, E.

Lambert, Hon. G.

Scott, Lord W.

Challen, C.

Lancaster, Col. C. G

Smith, E. P. (Ashford)

Cannon, H.

Langford-Holt, J

Snadden, W. M

Churchill Rt. Hon. W. S.

Law, Rt. Hon. R. K.

Spearman, A. C. M

Clarke, Col. R. S.

Clifton-Brown, Lt.-Col. G

Legge-Bourke, Maj E. A. H

Spence, H R.

Cole, T. L.

Lennox-Boyd, A. T.

Stanley, Rt. Hon. O

Conant, Maj. R. J. E.

Lindsay, M. (Solihull)

Stewart, J. Henderson (Fife, E.)

Cooper-Key, E. M.

Linstead, H. N

Stoddart-Scott, Col. M.

Crookshank, Capt. Rt. Hon H. F. C.

Lipson, D. L.

Strauss, H. G (English Universities)

Crowder, Capt. John E

Lloyd, Maj. Guy (Renfrew, E.)

Studholme, H G

Lloyd, Selwyn (Wirral)

Sutcliffe, H.

Cuthbert, W. N,

Darling, Sir W. Y.

Low, A. R. W.

Taylor, C. S. (Eastbourne)

Davidson, Viscountess

Lyttelton, Rt. Hon. 0.

Taylor, Vice-Adm. E. A. (P'dd't'n, S.)

De la Bare, R.

MacAndrew, Col. Sir C

Thorneycroft, G. E. P. (Monmouth)

Digby, S. W.

McCallum, Maj. D.

Thornton-Kemsley, C. N.

Dodds-Parker, A. D

Macdonald. Sir P. (I of Wight)

Thorp, Brigadier R. A F

Donner, P. W.

McFarlane, C. S

Touche, G. C

Drewe, C.

Mackeson, Brig. H. R.

Turton, R. H.

McKie, J. H (Galloway)

Dugdale, Maj. Sir T. (Richmond)

Vane, W. M. F.

Duncan, Rt. Hn. Sir A. (City of Lond.)

Maclay, Hon. J. S.

Wakefield, Sir W. W

Duthie, W. S.

Maclean, F. H. R. (Lancaster)

Ward, Hon. G. R.

Eccles, D. M.

MacLeod, J.

Webbe. Sir H. (Abbey)

Eden, Rt. Hon. A.

Macmillan, Rt. Hon. Harold (Bromley)

Wheatley, Colonel M. J. (Dorset, E.)

Elliot, Rt. Hon. Walter

Macpherson, N. (Dumfries)

White, Sir D. (Fareham)

Erroll, F. J.

Maitland, Comdr. J. W

Williams, C. (Torquay)

Fletcher, W. (Bury)

Manningham-Buller, R. E

Williams, Gerald (Tonbridge)

Fraser, H. C. P. (Stone)

Marlowe, A. A. H.

Willoughby de Eresby, Lord

Fraser, Sir I. (Lansdale)

Marshall, D. (Bodmin)

Winterton, Rt. Hon. Earl

Fyfe, Rt. Hon. Sir D. P. M

Mellor, Sir J.

York, C.

Galbraith, Cmdr. T. D.

Molson, A. H E

Young, Sir A S L. (Partick)

Gammans, L. D.

Morris-Jones, Sir H.

George, Maj. Rt. Hn. G. Lloyd (P'ke)

Morrison, Maj. J. G (Salisbury)

TELLERS FOR THE NOES:

Glyn, Sir R.

Morrison, Rt. Hon. W. S. (Cirencester)

Commander Agnew and

Gomme-Duncan, Col. A

Mott-Radclyffe, C E

Major Ramsay.

5.30 p.m.

I beg to move, in page I2, line 25, at the end, to insert:

" Provided that—

This is a formal Amendment which validates the collection of Purchase Tax in the case of the commodities which are mentioned in the Amendment on which we have now given remission of Purchase Tax. All this Amendment does is to validate the collection of the tax in the period between Budget Day, when it was imposed, and the date on which, in May or June according to the different classes of commodities on which remission was made.

Amendment agreed to.

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

It is desirable that this Clause should not pass from the Committee without some further reference to the remainder of its provisions. On the question of Purchase Tax generally, I wish once again to register the strong feeling which I have, and which I believe is shared by many hon. Members, as to the unfairness of the tax in its incidence on the retail trader. The Committee is aware of the point with which I am concerned, and I do not propose to elaborate it. It is simply that Purchase Tax has to be paid by the retailer when he buys the goods from the wholesaler or manufacturer. Then, whenever there is a variation in the rate of the Purchase Tax, he is the person who suffers. If the Purchase Tax is lowered the retailer, has, in a competitive market, immediately to lower the price of his goods notwithstanding the fact that he has already suffered the Purchase Tax on those goods. He has to suffer the amount of the reduction of the tax without being able to pass it on to the public.

Conversely and somewhat curiously the same situation arises when the Purchase Tax is raised, because again the retailer is hit. If he happens to have on hand old stock which has borne the lower rate of Purchase Tax he is unable to raise the price of the new stock upon which he has paid the additional rate of Purchase Tax until he has cleared the old stock, because he is not entitled to raise the price of the old stock upon which he has not paid the increased Purchase Tax. There- fore, he cannot sell two identical articles at different prices simply because he has bought them at different times when they were subject to different rates of tax. Therefore, whether the Purchase Tax goes up or down the retailer is the person who has to bear the rate of tax. That was never intended by this Committee when the Purchase Tax was first introduced. It was intended to be a tax to be borne by the public.

I understand that it is even now primarily intended by the Chancellor of the Exchequer to be an anti-inflationary tax to be borne by the public, but in the cases I have quoted it is not borne by the public but by the retailer. I cannot believe that it is past the wit and comprehension of the officials of the Treasury and the Board of Trade to work out a system whereby relief can be afforded in cases such as that. The right hon. and learned Gentleman will remember that I have raised this point with him before but the answer, as it was in the case raised by my right hon. Friend the Member for West Bristol (Mr. Stanley) on the first Amendment which we discussed today, was that administrative convenience rendered it impossible to give relief. I do not think that that is a sufficient answer, and I take this opportunity of bringing the matter again before the Committee in the hope that during the year the Chancellor will find a way and the means as well as an opportunity to do justice in this case.

I should like briefly to support what has been said by my hon. Friend the Member for Chichester (Mr. Joynson-Hicks), I do not oppose the principle of the Purchase Tax. I realise that, however harsh it may be, it is a necessary evil as an anti-inflationary measure at the present time, at any rate until such time as the Government can learn how drastically to reduce their own expenditure. But while this is a burden which we must all bear, it seems to me to be entirely inequitable that one section of the community should bear a much larger burden than the rest of us. As my hon. Friend has just said, it was not designed for that purpose; and as he has stated so clearly, the retailer does not gain anything if the tax is raised but he does sustain a loss if it is reduced. Moreover, if goods become shop-soiled or out of date, he has to reduce the price to sell them but he still has to bear the full rate of tax. Thirdly, he has to lock up a far greater amount of capital in articles which take a long time to sell for the same reward.

Therefore, I ask the Chancellor whether he cannot think of some administrative measure to give some refund to the retailers for this harsh treatment. Is it possible that he might allow them a small discount on the Purchase Tax with which they can form a fund to secure themselves against loss in the future? There is a further point. I wonder if the Chancellor realises how very disturbing all these changes have been. In fact, I believe that retailers have been heard to say that they are not quite sure whether the Government know their own minds. On this side of the Committee we can easily understand that the present Chancellor would wish to make many changes of importance in what was done by his predecessor, but can we hope that he will make sure that unnecessary changes, so disturbing to trade, are not made from now onwards?

I support the case put forward by my hon. Friend the Member for Chichester (Mr. Joynson-Hicks). This is not the first occasion on which we have brought forward this matter. It has come forward regularly, and each time we have been told that, while the Chancellor of the Exchequer and his advisers were very sympathetic, they saw no way by which they could deal with this. On the last occasion I ventured to suggest that I had a higher opinion of the brains in the Civil Service than, apparently, they had themselves, because I am quite certain that, if they really sat down and faced this matter, as industry and shopkeepers will have to face it in the days to come, they would find some way of tackling it.

At the moment it may not seem a very big matter, but I would remind the Committee that there are signs that the sellers' market is not going to last forever. When the sellers' market comes to an end there will be the necessity for taking steps to keep in full production the factories which are employed in making consumer goods. Otherwise, we shall have a great mass of unemployment. Some of us have been through this in the past and we know that there is nothing which prevents orders from being placed more than stocks which have been bought at high prices and cannot be reduced. Retailers will be badly hit, and there will be a hindrance to trade when that time comes. I urge the Chancellor of the Exchequer, in the time which is still available, to consider this matter very carefully, so that when the time comes he may be able to make some announcement which will relieve the minds of these people, who are seriously concerned about what will happen, and who will be in great trouble when it does happen.

The hon. Member for Chichester (Mr. Joynson-Hicks) raised the point of hardship created by increases or decreases in the tax. I do not think that any hardship is created to the retailer by an increase in the tax. He is free after the change to sell the goods which he bought before the increase in the tax at a lower price, and to sell goods which he bought afterwards at a higher price, and no loss falls on him. In the case of a decrease in the tax it is true, in theory, that the retailer is subject to competition from goods which escaped the tax, and that he may not be able to sell at the higher price the goods which he acquired before the tax was altered.

That is true, in theory, but the practical experience of those administering the tax is that retailers do not have serious difficulty, in the great majority of cases, in selling goods at the higher price. In any case, I am afraid I must repeat to the Committee that prolonged and exhaustive examination of this difficulty has established that it is quite impracticable to arrive at any other solution. The hon. Member for Scarborough and Whitby (Mr. Spearman) made the further point of changes in the Purchase Tax rates being disturbing to industry. That is one of the main reasons why we shall ask the Committee not to approve many of the Amendments on the Order Paper.

Will the hon. Gentleman face up to the position of the motor car industry and think what is going to happen if, in the future, the Purchase Tax is taken off? There will not be a single dealer who will be able to take a motor car, if he is told that he has to carry the heavy Purchase Tax, and that other people will be able to buy them without it. There will be a complete holdup of industry.

The hon. Member will realise that we have made no change in the Purchase Tax on motor cars in this financial year?

5.45 p.m.

I think that the whole of Clause 19 is particularly offensive and objectionable. It reveals the well-known attitude of the Government towards the small shopkeeper, who has never been a friend of the Government, and quite rightly. This Clause is not likely to add to the affection he would like to feel for them. The class attacked in Clause 19 is the small independent chemist. Not the multiple chemist, but the man whose shop is open day and night, Sunday and Saturday, at the service of the community. He usually conducts his own business with the aid of his daughter or his son. He is really a public servant of a very high quality. I do not think any of them have made large fortunes, but if there is a public servant it is the small chemist who will be very hardly hit by this particular Clause.

He is not, having survived other and many vicissitudes, so stupid as is supposed by the Chancellor of the Exchequer. He will deal with this situation very easily. He will look at his stock at the end of the year and say, "I am unable to value my stock at all. There is a Purchase Tax which may be on or it may not. "He will go before the inspector and say, "My stock is taken in at a nominal sum of £5."In that way he will get over the situation, and I give him that advice freely.

I feel sure that this arrangement, in many instances, will lead to what the Government do not want to have before them, namely, an increase in bankruptcies among small shopkeepers, who are suffering increasing rates and high costs of many descriptions. This new burden will break many of them. The Chancellor of the Exchequer has made out some case for the bookmakers who can pass their charges on to the public. But, as my hon. Friend the Member for Chichester (Mr. Joynson-Hicks) has said, it will not be possible to do that over the chemist's counter. The chemist has no way in which he can pass his extra cost over to the public, because he is selling largely at controlled and well-known prices.

I would put to the Chancellor of the Exchequer that there is an alternative to the Purchase Tax, a well known and well tried alternative, which has been recommended by scores of chambers of commerce and trade associations. It is a simple alternative, in place of all the manipulation and the clerical and expert work which is necessary in connection with Purchase Tax. It is a method which has been tried in other countries and which is recommended. I refer to a turnover tax which can be r per cent., 10 per cent., 20 per cent., or anything we like. That is a tax which could be readily and easily assessed—

The hon. Member may not discuss a turnover tax because it is not contained in the Clause. He must confine his discussion to the Clause which concerns Purchase Tax.

The suggestion of the Parliamentary Secretary was that alternatives had been considered and that no alternative was acceptable, and I ventured to make some observations upon that subject. I put it quite emphatically, and I speak as a small shopkeeper, that this will be looked upon as a penal blow to a group of shopkeepers who have no one to speak for them in this Committee. They are not co-operative societies, nor are they multiple. They are public servants discharging a highly technical and skilled form of distribution. The public will not like it, the shopkeepers will not like it, and I do not think that any considerable advantage will be obtained from this tax. The shopkeeper will tend to buy less and less. Fewer and fewer commodities will appear on his shelves, the public will have a restricted selection and will suffer as a consequence.

May I say that at this stage we might very well have had—and a great many hon. Members would have been interested in having—a rather full discussion on the codification and recasting of the Purchase Tax which the Chancellor of the Exchequer has undertaken? We do realise, however, that there are other parts of this Bill which are of great importance, and we are most anxious to co-operate with the right hon. and learned Gentleman in the friendly spirit which he showed last night, about midnight—in striking contrast to the Financial Secretary—in securing good humour in the Committee and making progress with the Bill. I hope that the right hon. and learned Gentleman will consider these points before the Report stage. The question of hardship upon the retailer when rates of Purchase Tax have been reduced has been raised on every Budget since 1945. We appreciate that there are grave administrative difficulties in finding a means to meet the problem. Nevertheless, the Government have shown themselves adept at meeting a number of other cases of hardship. Where there is a will there is a way. I still do not despair that some means may be found of meeting the hardship which undoubtedly falls upon retailers when rates of Purchase Tax are reduced.

The second point, which is of great importance, was made by my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman). Constantly since the war we have had alterations in the incidence and rates of Purchase Tax, not only between one Budget and the next, but between the Committee stage and the Report stage of a Finance Bill. We have had alterations even between the opening of the Budget on the first day and the winding up of the Budget Debates at the end of the fourth or fifth day. The right hon. and learned Gentleman may have an instance of that in mind. There is nothing more disturbing to trade and industry than to have these constant changes of front and changes of mind regarding the rate and incidence of Purchase Tax. It interferes with the steady flow of goods from the producer to the consumer. Every middleman and every retailer becomes a speculator. He withholds purchasing stock before a Budget and he buys in stock immediately the Budget is disclosed. We ask the right hon. and learned Gentleman to pursue a more steadfast policy regarding Purchase Tax—

Does the right hon. Gentleman mean that the Chancellor should make no concessions?

No. By all means let us have concessions, but do not let us have this continual state of change, first with increases of rates, followed by decreases, followed once more by increases. That is what we have had constantly during the last three years. I should like to see the right hon. and learned Gentleman pursue a steady and steadfast policy of gradual reduction of Purchase Tax. It would suit everybody if such a policy could be pursued. In suggesting to my hon. Friends that we do not have further discussion at this stage upon the theory and administration of Purchase Tax, I ask the Chancellor to bear in mind the points which have been made from these Benches.

I fully agree with the right hon. Member for North Leeds (Mr. Peake) that the Chancellor should pursue a steady policy in regard to this tax except in those cases where I have put down Amendments and where I hope he will make concessions.

Question put, and agreed to.

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

CLAUSE 20.—(Treasury orders.)

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

This is a Clause which deals merely in a formal way with Treasury orders. In the House in these days we are overwhelmed by the increasing number of orders which we must consider, and it is hardly right that we should pass this Clause without some hon. Member pointing out the circumstances. Under this provision it is true that the House will have power to move a Resolution against the orders, but orders are being used to such an extent that it is almost impossible for any private Member to follow them. It really means that less and less are these orders coming to the notice of the House and that more and more the power which we have to move a Resolution against them is becoming a formality. The power of the House to deal with these orders is rapidly being lost. I much prefer the old method under which anything laid down in the Budget ran for 12 months. I deprecate the fact that there is an increasing tendency on the part of the Government to take power to change taxation by order.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clauses 21 to 23 ordered to stand part of the Bill.

Part III-(Income Tax: Charge of Tax and Miscellaneous)

CLAUSE 24.—(Charge of income tax for 1948–49.)

I beg to move, in page 15, line 29, to leave out "total," and to insert "taxable."

I hope very much to find that the Chancellor is sympathetic towards this Amendment. In order to avoid delay I shall be as brief as possible.

The next Amendment on the Order Paper, to Clause 25, page 15, line 40, deals with the same point.

Certain Amendments which follow on the Order Paper are consequential on this Amendment, though they are on different Clauses, and I do not think there need be any discussion on them.

When Super tax was first introduced by Mr. Lloyd George nearly 40 years afro, it was levied on incomes of £5,000 a year and over. Now Surtax, which is the modern name for Super tax, is levied on incomes of £2,000 a year and over. There is a vast deal of difference between £5,000 in the days of 1910 and £2,000 today, which is certainly not worth more than £800 was at that time. The principles on which the assessment of Surtax is made differ from the principles on which the assessment of Income Tax is made. I suggest that the original plan should be reexamined. At present, in order to find a man's taxable income for Income Tax purposes, one deducts various allowances from the income. There is the personal allowance, marriage allowance, children's allowance and so on. But for the purpose of Surtax none of these deductions are made. Therefore, on any income over £2,000 a year the taxpayer pays the same rate of Surtax whether his income is earned or unearned, or whether he is a bachelor or a married man with a large family and heavy responsibilities.

If we take into account the proposals in this Budget, the effective rate of earned Income Tax between £1,900 and £2,000 is just over 7s. 3d.; but when we come to the slice of income between £2,000 and £2,100 the effective rate is us. There is a very severe increase which reflects this method of assessment. The theory of our Income Tax has always been that, as far as possible, it should be adjusted to the ability of the taxpayer to pay. It is obvious to every-one that a man or woman who has no family responsibilities has a greater ability to pay taxes than a man or woman with a similar income but with heavy responsibilities.

6.0 p.m.

I know very well the difficulties which there always are in making amendments to Income Tax law, and I am quite pre-pared to believe that the exact terms in which this Amendment is put forward may not be such as would meet with the approval of the Parliamentary draftsmen, though it is a simple Amendment and shows clearly to the Committee what is intended. Of course, we should be quite prepared to fall in with any suggestions which the Chancellor is able to make, and to modify our Amendment, if he could meet the substance of it. I think I have made clear to the Committee the main purpose of the Amendment.

I am sure that the right hon. Gentleman will not be surprised when I tell him straight away that we are unable to accept this Amendment. What he says about the present Income Tax law on this point is, of course, quite correct and I have no quarrel with some, at any rate, of the observations he has made. Logically there is an excellent case for giving these allowances in respect of Surtax in the same way as they are given in respect of ordinary Income Tax, but we have to remember that my right hon. and learned Friend has made certain Income Tax changes in this Finance Bill which help married men with families whose incomes are in the narrow belt round about £2,000 to £2,500. They are considerably helped by the changes that have been made. Up to £2,000, they get the ordinary allowances which we all get if we are married and have children, and if they earn their income, they get the earned income allowance. I admit though that the Surtax, which becomes payable when an individual's income tops the £2,000 mark, does bear on the whole of the total income and not only on the taxable income.

Apart from the fact that the Chancellor has made concessions and has helped the people whom the right hon. Gentleman has in mind, the cost of this concession rules it out. If it were agreed, it would cost something like £12 million in a full year, and the Chancellor cannot afford to lose that sum, which he needs at the present time for revenue purposes. Therefore, although I personally can foresee the time, when conditions are different from now and when some sort of concession might be given along the lines suggested—perhaps not the full concession asked for now, but some concession on the lines suggested by the right hon. Gentleman—I have to say that the Government take the view that the present is not the time to do it.

Amendment negatived.

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

I do not think the Committee should pass this Clause without making a very strong protest against the fact that, three years after the end of the war, we are still suffering Income Tax at 9s. in the £. If we were to look back even a few decades and see the scales that were operated then, how much more lively the trading community was, how much more enterprising was our overseas trade, how much more powerful was the whole British nation in those times, I think we should bring ourselves to deplore the fact that this high rate of taxation still persists.

We on this side of the Committee are not going to vote against this Clause, for that would mean that we wanted no Income Tax at all and we would not take that course. I want to say, however, on behalf of myself, and I am certain of other hon. Members on this side, that we deplore this high rate of taxation. We expected the Government to reduce it long since. The Government which was in power after the first World War succeeded in reducing it, and trade was very much more lively in consequence. Industry cannot for any length of time stand this permanent crippling Income Tax situation. I implore the Chancellor to consider very thoroughly, between now and next year, whether the circumstances of the time, the increasing financial stringency throughout the whole country, as well as the fact that taxpayers, big and little, are finding it much more difficult to purchase goods and services at the prices at which they stand today, do not warrant his coming to this Committee with a proposal to reduce the Income Tax by at least a shilling.

I, like my noble Friend, did not want to see this Clause roll off the production line without drawing the Chancellor's attention to certain very dangerous factors which have become apparent as a result of the burden of taxation upon industry, partly Income Tax and partly Profits Tax and the allowances for obsolescence and depreciation, which are having the effect of preventing industry from building up the reserves with which it might rehabilitate itself. We have heard criticism of industry that it is not modern; we hear it from America and we hear it among ourselves. The fact of the matter is that we are not able, at the present rate of taxation, to accumulate the funds with which industry can modernise itself, and, between now and a year hence, I am certain that the Chancellor of the Exchequer will find that one of his great problems will be how to allow industry to have funds to bring itself up to modern standards.

May I draw the attention of the right hon. and learned Gentleman to something very significant which happened in France? There, of course, inflation is much more obvious than it is here. Here it is present with us although that is not officially admitted. In France, they have, in fact, admitted that inflation is there and have realised that their industries will not be able to rehabilitate themselves at the values at which they stand at present, and so they have worked out a multiplication plan by which French industries are to be allowed to multiply the value of their plant and also to multiply the total of the accumulated depreciation and obsolescence allowances. This gives them a very largely increased plant value figure over the existing book values before the multiplication sum took place, and it is on this new value that their future obsolescence and depreciation allowances will be calculated. That is a realistic view, which will also be pressed upon this Government. The pound has not drifted so far away from its value as has the franc, but some increase of depreciation and obsolescence allowances from their Present scale, against the crippling weight of present taxation, presents a problem which will have to be faced, and, in some way, met.

My noble Friend the Member for Southern Dorset (Viscount Hinchingbrooke) has emphasised the difficulty in which the Committee find themselves in that we cannot divide against this Clause without voting for the total abolition of Income Tax which, however desirable it may be, certainly is not practicable at the present time. [ Interruption. ] We are, of course, fully capable of conducting our affairs without the assistance of a running commentary by the hon. Member for Nelson and Colne (Mr. S. Silverman).

I rise to make to the Government a suggestion which I made to them a year ago. I hope they will very carefully examine the whole of their machinery of Income Tax and Surtax. I said a year ago, and I repeat now, that I would like to see a distinction between earned and unearned income at all stages of taxation. I believe the time for that is now overdue. Although I am not a Surtax payer myself, and have no financial interest in this matter, I would say to the Financial Secretary that there is a point which has escaped not only the present Chancellor but more than one of his predecessors. It is this: the Surtax payers, few in number as they are, happen to be the only section of the community who have received no relief at all from the extra burden imposed upon them in 1931 by the late Lord Snowden when all kinds of uncomfortable inflictions were made upon us, including a 10 per cent. cut in the salaries of hon. Members of this House—a step which may well have to be taken again in the near future if we are to retain the respect of the nation. The Surtax payers have never been relieved of the additional burden which was placed upon them, and therefore I hope that this question, and the matter raised in the Amendment which we discussed just now, will receive some further consideration.

There is one other matter to which I would call the Financial Secretary's attention. There is a most astonishing change in the fortunes of the citizens of this country, so far as taxation is concerned, when it crosses this line of £2,000. I wonder what is the magic in that figure of £2,000. Is it because it is the amount by which the salary of the Chancellor of the Duchy of Lancaster has been increased? It applies not only to Surtax, but it is the demarcation line for the Special Con- tribution and, indeed, for the expenses arrangements made under the present Finance Bill. We do not want to delay the Committee long on this point—

—although we are rather tempted to do so when we hear the cheers from the sole representative of prohibition and misery, whose interruptions, if worthy to be made, should be made while he is standing on his feet. I should have thought that he was more capable of standing on his feet than anybody else. When the Government are framing their arrangements in future, I ask them to consider whether the time has not come for them to have another look, first at this question of earned as against unearned income at all stages, and then at the last Amendment which we discussed, so that when an opportunity arises and the situation is a little easier, there will be a very great improvement in the whole machinery of direct taxation.

6.15 p.m.

It is a very melancholy affair that three years after the end of the war the standard rate of Income Tax is still 9s. in the £. I do not think any Member on either side of the Committee can feel otherwise. There is an enormous Budget this year. It is a higher Budget, as regards taxation, than any Budget at any time during the war. The total burden of taxation this year is greater than it was at any time during the war, and it is a lamentable state of affairs that that should be so.

We are dealing in this Clause specifically with Income Tax, and I must address one or two considerations on that point. I do not know whether every Member appreciates what a very bad effect a high rate of Income Tax has on all business undertakings. A high rate of tax is a very powerful inducement to business undertakings to pay less heed than they should to the level of their expenditure. Those who are not engaged in business perhaps do not realise that as fully as those of us who are engaged in business. It encourages bad housekeeping throughout the community. It is extremely difficult for those concerned with management of business to check it. The higher the rate of Income Tax the more difficult it is to check the extravagance of the kind to which I am referring.

My second point is that a high rate of Income Tax is a very great discouragement to saving, because it reduces so substantially the return obtainable from the savings when they have been made. In times like these when so much income is taken away by tax, the margin out of which it is possible for an individual to save is reduced enormously. Those who have not studied the higher ranges of tax which can be seen in the tables with which we were provided at the time of the Budget, perhaps do not realise what an enormous proportion of high incomes is taken away by tax. In the case of the very highest level of incomes which are shown in the table, rather less than 7 per cent. of the taxpayer's income is left to him. That means that the other 93 per cent. is taken by the Treasury, and it is out of that 93 per cent. that a great deal of savings were made in the past.

The possibility of making savings has been reduced, and by the very high rate of tax people are discouraged from saving because the tax reduces so substantially the return from their investment. I am sorry to say, moreover, that it induces those who derive income from their investments to dip into their capital. That is another very serious state of affairs which has been happening more and more as the burden of taxation has increased.

I do not think we ought to overlook the fact that a very high rate of taxation encourages a good deal of speculation. It encourages speculative transactions all over the economic field. That is one of the disadvantages of high level taxation, from which one cannot escape. It is always associated with unduly high taxation. Of course, we are familiar with the arguments which have often been put forward from this side of the Committee on the question of incentive, and I do not propose to pursue that matter at any length this afternoon, but everybody who has been a taxpayer knows what effect taxation has on incentive. We have seen it under the Pay-as-you-earn scheme.

We have seen the effects of high taxation on the man who reaches a certain income level; he suddenly finds that the next pound or two of his earnings are to be subjected to a heavy tax. It is just the same all the way up the scale; it must not be thought that those who are earning high incomes are any less subject to those considerations than those who are earning. lower incomes. There are many men who are working in professions or in business who find that it is more agreeable to purchase rather more leisure by not working as hard as they could or as they would have done under different conditions. That is not a good thing from the point of view of the community, particularly at a time like this when we ought to work very hard.

There is one very serious matter which I do not think the Committee has considered at all in recent years, and it is this. It was frequently stated in this House of Commons in the period which immediately followed the Victorian days that it was very important to keep taxation low in time of peace in order to give a margin for emergencies. Do not let us forget that, taxed as we are to the very hilt now, in time of peace, no margin whatever of taxation is left if a serious emergency should come upon us at any time. [An HON. MEMBER: "Keep out of war."] I could not agree more. But keeping out of war is hard. This is a consideration, and a very important consideration, which we ought to bear in mind.

Taxes should be reduced at a time like this, when revenue is so buoyant. It will be much more difficult to reduce the standard rate of tax at a time when the revenue is less buoyant, and, furthermore, at a time like this it is even possible to reduce the rate of tax without causing a loss of revenue because, owing to the fact that the rate of tax had been reduced, we should have so encouraged the incentive motive that more work was done, more income earned, producing a higher quantity of income to tax. All that seems to be forgotten in these days. I suggest, as we have already said, that this huge Budget taxation should be reduced, for I verily believe that until there is a reduction in the standard rate of Income Tax there will be no real return of prosperity in this country and no real release of energy.

I hope my right hon. Friends and hon. Friends on this side of the Committee will agree that there is no reason why, in our anxiety to assist the Chancellor to proceed a little faster with this Bill, we should allow to go unchallenged the kind of poppycock we have heard from the other side of the Committee. All the speeches which have been delivered have been addressed to the question of whether the Income Tax is not too high, and no doubt those speeches will be very popular in the country. I think Income Tax is always too high. It was too high when it was sixpence, and the speeches which were made about how impossible it was for industry to support the burden of the increase were made in exactly the same terms on the occasion when Income Tax was increased from sixpence to ninepence. These speeches are easy to make; they are very popular speeches to make and they are very irresponsible speeches to make—completely, entirely and deliberately irresponsible speeches to make.

Hon. Members opposite pretended that they were in some difficulty. They could not vote against the Clause, they said, because to do so would have meant that we were to have no Income Tax, no revenue, and they were not in favour of that. Therefore, they said, they could not vote against the Clause. That is true, but, so far as I understand the rules of the Committee, there was nothing in the world to prevent them from putting down an Amendment to reduce the rate of Income Tax by a shilling, or 1s. 6d., or half-a-crown, or any other figure they think right. Whether or not that has ever been done is not the point; the point, I maintain, is that there was a very easy way out of the dilemma in which hon. Members opposite found themselves. If that involved something new, I am sure they would not have been afraid of it if it enabled them to do what they wanted to do—have the Income Tax reduced.

The real reason they did not do it is not that they had not the opportunity, or that they did not know they had the opportunity; it is because anyone can make a much more popular and irresponsible speech if he deliberates at large on this point of view than if he brings himself to say by how much Income Tax should be reduced, ties himself to a figure, puts it on the Order Paper and then goes bravely into the Lobby in support of it. The reason they did not do that was because they know perfectly well that this reduction cannot be made and if they were on this side, in office, they would not do it either.

The right hon. Gentleman the Member for the City of London (Mr. Assheton) says "Nonsense," but if he thought Income Tax should be reduced, and there was a way in which it could be reduced, and there was a figure lower than the figure in this Clause which he was prepared to defend, why in the world did he not put it on the Order Paper? The answer is that he knows there is no such figure. He would not dare to get up in this Committee and move—and to lead his followers in support—of an Amendment to reduce Income Tax by any particular sum. I will tell him why; it is because he knows it is not true to say that under modern conditions—although he did say it—there is any way of reducing Income Tax without loss of revenue. Both sides of the Committee have agreed for many months, as a result of the White Papers which have presented the economic affairs from time to time, that there ought not to be a general advance in wages. If there is to be no general advance in wages, there is no way of reducing Income Tax without reducing revenue.

The arrangements to which the hon. Member for Nelson and Colne (Mr. S. Silverman) refers are in regard to wage rates. There is not the slightest objection to more wages being earned if more work is done. In fact, it would be an admirable thing.

I think the right hon. Gentleman is not really doing himself justice. He does not mean, "if more work is done"; he means, "if there is more production." That is what he really means. The amount of work is not important in this matter. [ Interruption. ] I do not mean that the amount of work is not important; I mean it is not important for its own sake. The important thing is how much increased production we get, and it is only in the light of increased production that wages could rise. I think we are all agreed about that; there is no argument about it at all. The suggestion that there is some way in which Income Tax could be reduced today and that we should have, as a result, a total increase in the global amount of actual production, so that real wages could rise without there being any inflation, is just nonsense. The right hon. Gentleman the Member for the City of London knows it is complete nonsense.

What hon. Members opposite are saying is not that at all. They are saying, if you press them, that expenditure is too high. What they really want is that Income Tax shall indeed be reduced and that the revenue produced by the Income Tax shall be reduced; and they would defend that by saying, "It is a right thing to do as long as you bring down expenditure as well; expenditure is too high and you can reduce it, and thus there would be scope for a reduction of the Income Tax." But when they are asked where expenditure can be reduced they are in difficulties—except, of course, the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson); he is perfectly clear about it. He is the only one on that side of the Committee who has been honest. He said quite clearly, "You ought not to have had your family allowances yet, you ought to cut your food subsidies, you ought to spend less on the social services." Of course, if we were prepared to save a lot of expenditure in those directions, we could afford to give the money we saved to the Surtax payer and the Income Tax payer by reducing the rate of Income Tax.

It is because it would be a dangerous thing for them to say, and to defend in the Committee and in the country, that hon. Members opposite refrained from putting down an Amendment and were prepared rather to get the advantage of the airy, windy nonsense we have heard from that side of the Committee without suffering the consequences which would have followed if they had bound themselves to a figure on the Order Paper and boldly supported it.

6.30 p.m.

The hon. Gentleman said that we did not give examples of where expenditure could be reduced. I could give him one. The county agricultural executive committees in 1940 were run by 1,157 people at an annual cost of £330,000. Last year over 10,000 people were employed at a cost of £3,550,000.

It is my submission that that is excessive, and I believe that there are many other cases in Government Departments of similar increased expenditure. I believe that we could have as efficient, if not more efficient, services throughout the country with less waste, That is one case I can give the hon. Gentleman.

I am not going into that. [HON. MEMBERS: "Oh."] I will if it is wished, though I am not quite sure how much of it would be in Order. I can, perhaps, say one word about the only instance the hon. Gentleman gave. He says we are spending more in encouraging agriculture in 1948 than we did before. I suppose we are. However, I think the hon. Member for Louth (Mr. Osborne) is the only Member of the Committee who thinks that that money is not being very well spent. If the Opposition had agreed with the hon. Gentleman, I repeat, there was nothing in the world to prevent them from putting down an Amendment stating what the figure ought to be, and voting for it and defending it, and to make the speeches they have without doing that is sheer humbug.

If I were to follow the hon. Member for Nelson and Colne (Mr. S. Silverman) in using such epithets to describe the speeches of himself and his hon. Friends opposite as he used of ours, I might be accused of being as objectionable as I find him. I certainly hope that he and his hon. Friends will find the speech that I am about to make as offensive as I found his. I did not intend to embark upon this, and would not have made these remarks, if it had not been for the speech of the hon. Member for Nelson and Colne, but it is just poppycock to say that no reduction in expenditure in this country could be carried out without cutting the social services. The Chancellor of the Exchequer, the Financial Secretary, and anybody who surveys this matter with fairness knows perfectly well that when there is such an enormous volume of Government expenditure as we have now there is a good deal of waste. I say for the benefit of the hon. Member for Nelson and Colne that the reason why we have not put down an Amendment to reduce Income Tax or Surtax this year, is because the expenditure this year has to be met, and we agree with the Chancellor of the Exchequer most wholeheartedly in creating a Budget surplus. I am sorry I have to start with what, compared with what I really want to say, are irrelevant remarks.

I come now to two points which are affected by this Clause. They are two matters relating to the high levels of taxation. These are the two points I wanted to make. The first is that the high level of taxation does have the effect of directing capital into those channels where that tax is not applied, such as quick capital profits, or, in other cases, where tax can more easily be avoided. There is no doubt whatever that in many cases capital is being directed into undesirable directions. I am sorry that the Economic Secretary to the Treasury is not here, because I believe that one of the greatest difficulties the Government are having now in developing the policy of a planned economy is that the high rate of taxation is always working against them. It would pay the country to have capital directed into productive places, whereas, because of the high rate of taxation, it is directed into quick capital profits, and into the wrong places. That is one of the great difficulties we have when we plan economy. There must be the general incentive of profits, otherwise fiscal policy works against the Government.

The second point refers to what my hon. and gallant Friend the Member for Central Glasgow (Colonel Hutchison) said about reserves in industry. I do not believe the fact that industries and businesses have not been able to create sufficient reserves in recent years has had any immediate noticeable effect. I believe that that will come in due course. Since the war, owing to inflation, and owing to the fact that we have a sellers' market—or have had a sellers' market—at home and abroad, large paper profits have been made, and large amounts have been taken in taxation without any very immediate noticeable effects on business. I should like to warn the Chancellor of the Exchequer that now, if he is successful in creating a Budget surplus and killing inflation—certainly nobody hopes it more than I do—and if, as I believe is true, the sellers' market is beginning to come to an end, we shall be coming to very difficult times. There is a good deal of evidence that the sellers' market is coming to an end, and the fact that the President of the Board of Trade has increased the clothing coupons is evidence. It is when that market comes to an end, and only then, that the real effect on business of its not having been able to create profit reserves will be felt.

I do urge that these two points should be borne in mind. I have endeavoured to make two serious, sensible points. The second one is particularly important. I hope that the right hon. and learned Gentleman will not be diverted from thinking over what I have said, by the remarks I was forced to make at the beginning of my speech.

I want to raise a somewhat different point from that of my hon. Friend the Member for Oswestry (Mr. O. Poole). I feel that this Clause should not be allowed to pass without some comment on Subsection (2). That appears to me to be a new departure in the conduct of our financial business. Similar provision may have been made in other Bills recently, and it may have escaped my notice; if so, I am sorry; but that is no reason why I should not raise this matter now. As an example, let me refer to the effect of this Clause when taken in conjunction with the Gas Bill, which is before the House. Clause 34 of the Gas Bill, entitled "Income Tax Provisions," says that the gross amounts of any payments made by the stockholders' representatives should be deemed to be income for all the purposes of the Income Tax Acts.

I contend that, normally, such payments would not be taxed. It is like taxing the payment when a company is wound up. It is not a dividend but a final payment that would not be taxed. But what is happening here is that taxes are being imposed by a different Bill from the Finance Bill. Tax is being imposed through the Gas Bill. That appears to me to be wrong, because only a limited number of Members of this Committee were able to discuss that Clause in the Gas Bill upstairs, and matters of taxation ought to be open to discussion by all Members of the House of Commons. I want to make the point, too, that it does appear to me to be extraordinarily vague and I would say, if I may without being rude, "woolly" wording to say, as Subsection (2) of this Clause of the Finance Bill does:

Here I must step delicately, like Agag, because this is a matter of procedure and a matter for the Chair. I am sure that the Income Tax Clause in the Gas Bill —and I suppose that we cannot take Clauses out of the Bill—and therefore the whole Bill ought to have been discussed on the Floor of the House, because it imposes taxation. I would not welcome going through it all again, but I am not sure that there are not reasons why that should be done, because I believe that to have taken that Clause upstairs was contrary to the normal and right procedure of this House. I hope that I shall get some satisfactory answer on that point. I have raised it now on the Motion "That the Clause stand part of the Bill," but, naturally, an Amendment can, and will, be put down on the Report stage, if necessary.

It is a sobering thought that the standard rate of taxation is still 9s. in the £. I suggest to the Government that the time has arrived when there should be an independent investigation into not only the immediate effect, but the long term effects of taxation, and into the present methods of assessment and collection. I speak without the book, but my recollection is that at the end of the 1914–18 war there was a Colwyn Committee, and a Royal Commisson and the Budget of 1919 was founded very largely as the result of those reports. The principles of differentiation and graduation which have gone on since then are still based very largely on the practice of nearly 30 years ago.

The time has come when the whole aspect of taxation, and particularly direct taxation, should be reviewed. When thinking of suggestions to put before the Committee I jotted down four points which occurred to me to justify this request. Two have already been raised, and I will not speak on them at any length. The first is the extent to which the incidence of direct taxation does, in fact, prevent productive effort. There have been all sorts of statements made on this side or the other side of the Committee, but the full facts are not known., The second point mentioned by the right hon. Member for the City of London (Mr. Assheton), is the effect on savings, and the fact that if we do not get enough savings we shall not be able to create the new capital assets which we need to get us out of our present position.

The two points not mentioned, which I think are important, relate to the present distribution of the income of the people of this country. I would point out that 75 per cent. of the private incomes of individuals in this country, as shown by the official papers, is in the hands of persons with incomes of less than £500 per annum. The total income of all the persons with incomes of over £2,000 per annum, the Surtax level, before taxation is £695 million. That is less than one-quarter of our present national expenditure. If the whole of this income were taken away, there would still be three-quarters of our national expenditure which had to be financed from the pockets of the people with less than £2,000 a year. If we take the range of £1,000, it is still the fact that the total income before taxation provides less than one-half of the rate of national expenditure. Therefore, if the people of this country are to enjoy the benefits which they want from Government expenditure they should realise that they cannot do so without paying taxes. We have to devise some means by which these taxes shall bear upon them in the least harsh way that is possible.

6.45 p.m.

My final point is the accuracy of the present estimate. Last year, the Inland Revenue collected £100 million more than they had estimated—an excess of just about to per cent. We used to take pride in this country at the extraordinary accuracy of our estimating. Ten per cent. is an error which, I suggest, is too large. I believe that it comes from the fact that the whole of the Department is overburdened and over-worked. It is not entirely inefficiency—it is partially that and partially the changed conditions which do not assist accuracy of estimating. In estimating the total revenue and the total expenditure, there was, in fact, £580 million collected from the taxpayers of this country last year over and above what was necessary. Taking the excess of receipts over estimates, the total came to nearly £600 million, taken out of the pockets of the people of this country which it should not have been necessary to take. I think that suggests that there is need for reviewing the whole machinery of taxation.

I am sure that the Committee will not expect me to answer all the points made by hon. Members who have spoken on the Motion "That the Clause stand part of the Bill." They have said that Income Tax is very high and, of course, I wholeheartedly agree with them. It seems to me that it is not my job at the moment to take part in a discussion whether revenue should be less or expenditure should be brought down. I was, however, asked one or two questions by the hon. and gallant Member for East Grinstead (Colonel Clarke), and I will try to answer them.

As the Committee know, Subsection (1) of this Clause imposes the standard rate for the current year. Subsection (2) applies the existing Income Tax Code to the tax imposed at the standard rate. The hon. and gallant Gentleman wanted to know why certain words were inserted, and he took exception to the fact that we here refer to gas and to agriculture. He knows, because he was a Member of the Standing Committee which dealt with the Gas Bill, that we had a very long discussion on this matter on Clause 34 of that Bill. It was, I think, then pretty well established that it was right and proper, after the House had passed a Resolution on the matter, as it had, for the provisions which we inserted in that Bill to be inserted.

What we said, in effect, was this. As and when gas undertakings pass from their present ownership to that of the Gas Council, certain final payments will be made by way of dividends and interest. According to strict Income Tax law, these payments are neither dividends nor interest. However, they are income to the shareholders and debenture holders concerned in lieu of dividends and interest; they should therefore rank as dividends and interest under the Income Tax law. To me and, I think, to most hon. Members on that Standing Committee, that seemed to be the right and proper thing to do, and it was agreed to in Clause 34.

What we are doing in this Finance Bill is to apply the Income Tax code in the light of what we did in the Gas Bill. The same applies to the Agriculture (Scotland) Bill, during which hon. Members may remember that I reminded them that what we were doing was to see that, where the Secretary of State for Scotland took over a farm for one reason or another, the moneys received or paid by him should be reckoned as rents for Income Tax purposes.

My point is this. We are now giving a blank cheque to apply the existing code to specific instances of taxation which are not debatable on the Floor of the House, where matters of taxation should be discussed. They can be discussed only by a limited number of Members in a Standing Committee, and I hold, with due respect to the Chair, that that is contrary to the usual procedure of the House of Commons.

That question cannot be raised here today. It should have been raised on the Gas Bill.

With due respect, how could it be raised in open discussion by all hon. Members, except here on the Floor of the House? It could not be raised during the Committee stage of the Gas Bill, where there were only a limited number of Members. I may be wrong, but I understood that matters of finance, and particularly taxation, which affect the amount of taxation and its incidence on the taxpayer, should be discussed by all hon. Members, and not by a limited number.

I do not remember the precise contents of the Gas Bill; but clearly that question, were it a proper one, might have been raised during Second Reading; equally it might be raised during the Report stage or on Third Reading. In any event, I do not think the present occasion is the appropriate one.

Perhaps I can allay the hon. and gallant Member's fears by reminding him that, when the Budget was introduced, there was a Resolution on this matter. It would have been quite in order for us to have had a Debate on this matter on the Budget Resolution. In fact, the matter was not raised. But that was not my fault, nor that of my right hon. and learned Friend. The Resolution was put to the House, and could have been discussed, if some hon. Member had been so disposed. Under the Rules of the House, when a Bill is sent to a Standing Committee, the Standing Committee deals with the Bill; then on Report the House as a whole has an opportunity of debating particular questions. When we reach the Report stage of the Gas Bill, it will be in order for hon. Members to deal with this point if they so wish. In my view, it is a waste of time to raise this question now. Later on, when we again consider the Gas Bill, any hon. Member who wishes to raise this matter can do so, if he catches Mr. Speaker's eye.

In one thing which the right hon. Gentleman said he gave the impression that the House still has the same opportunity of discussing individual Budget Resolutions as it had in the past. That, of course, has now been taken from us, and this is but one more instance of the damage that has been done by that new procedure.

Yes, but the right hon. Gentleman knows very well that the only stage we have made formal is the Report stage.

The right hon. Gentleman cannot get away with it like that. As he well knows, all the Budget Resolutions except the last one, which is kept open, are put on the first day. Anyone can raise any point on any Resolution. What I am now saying is the truth. There was a Resolution on this matter; it was before the House; it was read from the Chair—I heard it—and, if I may say so without offence to the right hon. Gentleman, anyone could have raised this question at that stage. As I understand it, if hon. Members catch Mr. Speaker's eye, they will again be able to raise it when we reach the Report stage of that particular Bill.

The hon. and gallant Member for East Grinstead referred to the words in Subsection (2) which he said were too wide. That Subsection says that the provision shall extend to any enactment which has effect only after the end of the year 1947–48, and the hon. and gallant Member visualised it applying to all sorts of Government actions in the years ahead. It applies to any enactment, but the enactment must be one which has already been enacted. The provision is put there in order to apply to two Measures. One is the National Insurance Act, 1946, which. as the hon. and gallant Member knows, will come into full operation in the middle of this year. It has been agreed to by Parliament, the Income Tax Code already takes cognisance of it, and certain payments and benefits which accrue under that Act will be taken into account as the income of the recipients. These words enable the Income Tax Code to be applied in that case. They will affect an enactment which has already been passed, but which will only come into operation after the year 1947–48.

I do not want to weary the Committee, but another example is the English counterpart of the Agriculture (Scotland) Bill, to which I have just referred. I can allay the fears of the hon. and gallant Member. There is nothing sinister here; we are not taking excessive powers, which other Governments have not taken. This is simply a piece of machinery to assist the Income Tax authorities to take what they should take under the law, and the code has been agreed to by previous Parliaments.

I will not keep the Committee for more than one or two minutes, but I must say a little after the Financial Secretary's reply to my hon. and gallant Friend the Member for East Grinstead (Colonel Clarke). My hon. and gallant Friend has raised an important point. He has said that in a Standing Committee, of which we have no knowledge and in which we had no possibility of taking part, taxation is being imposed which normally should only be imposed on the Floor of the House. I have always understood that taxation was imposed in Bills taken on the Floor of the House—and whose Committee stage was taken on the Floor of this House. Owing to the fact that debate on the Budget Resolutions has been curtailed, in a way to which we on this side of the Committee take strong objection, there was no discussion before, although technically there might have been a discussion on the first day, when nobody knew what was happening. There could have been a discussion had there been a Report stage of those Resolutions, but there was not.

We are now faced with this position. We cannot discuss this question now; we do not know what it is about. It is something which happened upstairs in Committee, about which we have not been told. When that Standing Committee reports to this House, what will happen? I hope, Major Milner, that you will give this your closest attention. That Gas Bill will come down to us here, but there is no certainty that anybody will be able to raise this question on the Report stage, because during that stage there is no Question "That the Clause stand part of the Bill." Therefore, this matter may not then be raised. I suggest that this is constitutionally a most objectionable method of doing business, and I hope, Major Milner, that you, as our protector in these matters, will see that it does not happen again.

As the right hon. Gentleman will appreciate, I have no authority on the Report stage. That is a matter for Mr. Speaker.

I was appealing to you as Chairman of Ways and Means.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clause 25 ordered to stand part of the Bill.

CLAUSE 26.—(Alteration of certain reliefs.)

7.0 p.m.

I beg to move, in page 16, line 1, to leave out Subsection (1) and to insert:

We on this side of the Committee are now the accusers in our turn. We consider that the personal allowance of £135 is miserably low. It is £35 less than the right hon. Gentleman who has now left the Chair thought was quite intolerable in 1935; it is £90 less than the figure for which the present Chancellor then pleaded. I do not propose to recover the ground lost between the 1931 Budget and the beginning of the war. I am merely taking the Chancellor's own figure of £160 as the upper limit of personal allowance and applying it generally. The subsidiary point about this Amendment can be seen in Subsection (1) where there is an elaborate provision to deal with the upper limit of personal allowance and provide for the difference between £135 and £160, which difference has applied to it a certain ratio.

My Amendment does away with this complicated limitation of the tax to three-tenths of the excess over £135. It has never been adequately explained to the Committee, either in Budget or Finance Bill Debates, what is the purpose of this provision. I have gone right back to its author, Mr. Neville Chamberlain. In introducing this feature for the first time in the Budget of 1935, he said:

Let us take the case as it was in those days. A person with an income of £125 escaped tax. If the income for £126, tax was paid at is. 6d.—the then reduced rate—on £1, which amounted to 1s. 6d. tax in the year. I do not see any jump in that. Even if the figure was £140—the then upper limit—tax was paid at is. 6d. on £15; that amounts to £i 2S. 6d. —again, no serious jump. I should like to ask the right hon. and learned Gentleman, therefore, whether this Subsection, which has been repeated in Finance Bills time after time, has any real meaning at all. Taking the situation as it was then, I do not see how the one-fifth limit of tax on the excess of income ever came into operation. On the £15—the difference between £140 and £125—it would be £3 but, as I have already shown, the total tax that a man would pay in those days could be only £r 2s. 6d. The Bill as it now stands, as introduced by the Chancellor this year, is a complete anomaly, excrescence and superfluity.

Take the position now. Relief is given at the maximum rate on three-tenths of £25, which is £7 10S.; but a single man earning £160 pays tax at 3s. on £25, which is £3 15s. Again, therefore, the provision does not come into operation. I would like to ask the Financial Secretary three questions. First, will he justify—if he can justify—this provision under the Subsection? Secondly, what is the cost of the concession that is made in this Subsection? Although cost is not necessarily a determining factor we shall always welcome information on it. Thirdly, what would be the cost of my Amendment, which I believe would save a great deal of P.A.Y.E. accounting and be very acceptable to all taxpayers up and down the country?

I think the noble Lord has confused two things in his exposition of his Amendment—the allowances and the limit of taxable income. His reference to a Debate in 1935 related to personal allowances to be allowed. They are now at £180 for a married person; they were originally £225 and I presume that on that occasion the Opposition was moving to put the figure back to £225, from which it had been taken at the time of the emergency in 1930.

We are now dealing with something which is completely different—the limit of incomes which are not taxed at all. A person with an income of £135 is not taxed, but on an income of £136 one is taxed on all one's income, subject to such personal allowances as one is entitled to claim. It is obvious, therefore, why the jump occurs—because, by an increase of income of £1 one passes from the non-taxed into the taxed area. That is why it has always been necessary, and has always in fact been done, to have an area which is beyond the non-taxable and which eases off the load on those first few pounds. Otherwise the whole load of the entire income or whatever it is that is taxable would fall upon the smaller amount above £135, which is being earned and that means a heavy load indeed. For instance, if there were no marginal relief the charge on an investment income of £135 would be nothing and on £136 it would be £3 18s. That is to say that on that extra pound £3 18s. would be paid, and it is because of that that we have the grading. Provision is made up to £160 for the spreading of that load in order to ease what would be the hard case of a marginal amount.

If the noble Lord's method were adopted there would be no such marginal allowance at all, but an exemption limit up to £160 straight away. That would create a number of grave anomalies. It has always been the case that the figure below which taxation is not levelled has been almost the same allowance as for the single man. That is to say, the single man would get a sufficient allowance not to have to pay tax normally at that rate. If that is altered the position between the single man and the married man becomes very difficult to justify because it becomes so small. If the single man is put too high the married man has a legitimate demand for being still further up. That is the relationship between the amount on which tax is not charged and the charges to a single man, which has been approximately preserved throughout the Income Tax law. With the earned income relief raised to one-fifth, the single man will begin to pay at £137 10s. under the present provision, and that is why we have taken £135, which is the nearest £5, as the limit for exemption relief.

As regards the P.A.Y.E. position, in fact it would become unworkable on the present tables if the noble Lord's provision was adopted. I do not want to go into the technicalities of it, but it would mean reverting to those complex tables which take six months to make up, and, therefore, cannot immediately be adapted to any Budget changes. If the allowance between the single earned income within the area below which tax is not paid were to be widely operated, as would be the case if the Amendment were adopted, it would not be in the interests of P.A.Y.E. The noble Lord asked me what the cost would be. On the basis of no marginal relief, which he suggested, it would be Li million and if marginal relief were allowed it would cost £1¾million. In view of the complications and the effects on the Income Tax law we cannot accept this Amendment.

Amendment negatived.

7.15 p.m.

I beg to move, in page 16, line 27, after "hundred," to insert "and fifty."

The effect of this Amendment is to raise from £400 to £450 the total amount of earned income allowance which may be claimed or granted. It is a proposal to raise from £2,000 to £2,250 the maximum on which the whole allowance may be granted. I do not think it will come as a surprise to that most hard-hearted of my constituents, the Financial Secretary to the Treasury, to see this Amendment on the Paper in my name, because it is very similar in character to the one I put down just over a year ago. The object of the Amendment, which does not deal with the amount of the allowance at all, is to extend the range over which the earned income allowance operates; and, secondly, to grant immediate relief to the persons who come within that extended range. I hold the view very strongly that when it is possible to grant reliefs of taxation it is desirable to grant those reliefs over the widest possible field, even if the amounts are small, rather than to grant what I would call large lumps to selected groups of taxpayers.

There is another thing which should appeal to the Chancellor of the Exchequer and to the Financial Secretary, and that is that extending the range in the earned income group, is, in fact, much cheaper for the Exchequer than extending the amount of the allowance. I confess that last year I was staggered when the Chancellor of the Duchy of Lancaster, then the Chancellor of the Exchequer, informed the Committee that the cost of my modest Amendment would be £4 million while the cost of a change in the rate of the allowance would be £40 million. He then went on to advise the Committee that in his opinion the relief costing that £40 million was probably more appropriate

For some unknown reason this earned allowance stops at £2,000. There seems to be some mystery about this figure. When one gets to that point a complete change takes place in one's work and in one's income. The object of my Amendment this year, as last year, is to discover why the earned income allowance should not range over a wider field. If a senior civil servant, a professor of a university or a business executive is remunerated at the rate of £1,800 a year, and that is considered by his employers as a correct remuneration for his work, the State in its capacity as a tax collector regards the whole of that as being earned income and grants the appropriate allowances. If the same individual's remuneration is changed and fixed at £2,200, the State as a tax collector comes along and says, "That last £200 is not earned so it does not, from our point of view, receive the allowance." One must assume that, normally, if a man or woman is paid the higher rate it is because he or she is worthy of it, and if we pay our senior civil servants, our professors and other people the higher rates, then presumably it is because we believe that they are earning them. I, for one, believe that they have earned them, but the State as an employer, having decided to pay those higher rates, then comes along in its capacity as tax collector and says, "We are not going to grant you the allowance." That seems not only illogical, but completely unjust.

I have argued the general point in a previous year and I do not want to develop it any further. I am not unaware that the Chancellor has made very wide concessions in the earned income field, improving both the rate and the range. I do not want to be considered ungenerous by not ackowledging that fact. My complaint is that the Government still will not extend the range over this wall of £2,000, I hope that the Chancellor of the Exchequer or the Financial Secretary to the Treasury will be able to inform the Committee of the cost involved in my Amendment and of the reasons which prevent the Government accepting what I think will be found to be a very modest suggestion.

I support my hon. Friend's Amendment and in doing so I repeat that we appreciate that the Chancellor has made the Income Tax allowances better. For that we are very grateful. The aspect of the matter which I would like to emphasise is the great convenience and benefit which will come to the Chancellor of the Exchequer, particularly in his relationships with the civil servants employed by him, and by organisations under nationalisation like the National Coal Board. It is, surely, clear that one of the great difficulties which the Government are up against is that every bit of remuneration they give above £2,000 is so heavily taxed that increases above that figure are rendered void.

Take the question of the remuneration of the higher members of the Civil Service. I think everybody agrees that because of what they have received in previous years, the work they are doing, and the increase in the cost of living, civil servants are having an extremely bad time. I can see the difficulty they have in pressing for increases. d appeal to the generosity of the Chancellor of the Exchequer to meet them in this respect by the simple administrative expedient of treating as earned income what is actually earned income. That is all that is being asked of the Government in this case.

I do not want to make any political point, and I hope that hon. Members will not attach political significance to what I am saying. The National Coal Board and other nationalised undertakings are finding what the average business finds, that after a certain figure it is impossible by straightforward and sensible arrangements to induce good people to take on a new job. People say: "We are getting £2,000 now. There would be an awful lot of trouble. We should have to move house. For all this infernal nuisance we are only to get net the relatively small sum of £200 a year extra." The gross figure would be a very big one and it would appear to their friends that they were getting more than they really were, because of the operation of the tax above the £2,000 limit.

Take the case of Air-Commodore Whittle. In order to make his award really substantial it had to be given to him free of tax. It has been calculated that his award of £100,000 would otherwise have had to be £4 million in order to achieve the same result. Take the device by which we remunerate members of the Government Front Bench, in particular, the Prime Minister. In the old days his salary of £10,000 a year really mattered. It would buy something. It was not cut right down to about £3,000 by taxation. In those days, if the Prime Minister wanted a car we expected him to buy it and keep it. Now we have to give an expense allowance solely because of the high rate of taxation on earned income. The £4,000 a year expense allowance to the Prime Minister arises largely because of this treatment of £8,000 of his earned income as if it were unearned.

For all these reasons and because of the loyal service given by the higher civil servants in this country whose income is shorn away in this fashion, I ask the Chancellor of the Exchequer to meet us in what I think is a relatively inexpensive but frightfully important Amendment.

I hope that the hon. Member for Scarborough and Whitby (Mr. Spearman) will not mind if I intervene now. We have to reach Clause 45 tonight. The right hon. Member for West Bristol (Mr. Stanley) indicated that it was hoped that we could start on Clause 46 tomorrow. Time is going on and we have some very interesting Clauses to attend to. I hope, therefore, that hon. Members will not mind if I intervene now to say three things.

The first is that I do not think I need to argue this Amendment, which has become a hardy annual. The arguments I might use today, I used upon a former occasion. The next point is that the hon. Member for Westminster, St. George's (Mr. Howard) is like Oliver Twist. He is never satisfied. We gave him what he asked for last time, but now he comes back, still holding out his plate. He put down an Amendment to move the ceiling to £300 and we moved the ceiling to £400. It is true that the over-all figure of £2,000, because of the one-fifth instead of one-sixth, does make a difference of £100. Nevertheless, we have raised the ceiling, and that is a great benefit to a great many people of the kind the hon. Member desires to assist.

I can only remind the Committee that my right hon. and learned Friend has already made direct tax remissions of £103,500,000 in this field in this Budget. That is a pretty considerable sum. The cost of the proposed concession would be £1,750,000. That is not a very great sum, but it is a sum that we have to think of. If my right hon. and learned Friend had it to give away, all of us could think of more deserving directions than the one proposed. The ceiling is higher than it has ever been before. I hope that hon. Gentlemen opposite will be satisfied to let the matter rest at that.

7.30 p.m.

I am sure that the Financial Secretary would not wish to mislead us. The ceiling has not been raised. It remains at £2,000. It is the fractional rate which has been altered. We are asking, and we asked it last year, that the ceiling should be raised. Neither last year, nor apparently this time, has there been any intention to raise it.

I meant the ceiling of earned income relief. The maximum earned income relief was £250. It has now been raised to £400. I was using the word "ceiling" in that connection. If I have used a word which the hon. Member for Bath (Mr. Pitman) considers the wrong one, I hope he will forgive me.

The point is that the ceiling of income is £2,000. That remains steady. What is altered is the fraction.

Amendment negatived.

I beg to move, in page 16, line 29, at the end to insert:

" and ( c ) the words ' five-eighths,' were substituted in the said Subsection (2) for the words ' three-quarters '."

Hon. Members will remember that last year my right hon. Friend, now the Chancellor of the Duchy, indicated that he was favourably disposed at the proper time to make the change which my right hon. and learned Friend now proposes in this Amendment. I need not elaborate it. What we wish to do is well known.

Amendment agreed to.

I beg to move, in page 16, line 29, at the end, to insert:

"( c ) the words five hundred and fifty pounds,' were substituted in the said Subsection (2) for the words ' five hundred pounds.' "

Perhaps I might say without impropriety that this is almost a consequential Amendment, not only on my previous Amendment which I failed to get but on the Amendment for which the right hon. Gentleman has just obtained the approval of the Committee. The purpose is to raise from £500 to £550 the income of persons over the age of 65 on which they get this special allowance. In the vast majority of cases the whole of such income and more is truly earnings. It may not actually be earned by the individuals concerned working between the ages of 65 and their death, but the fact is that they are able to enjoy income which is a direct result of previous earnings. It is the fruit of earlier labours. It is genuine savings and should be treated as generously as any other income.

I am sorry, but I cannot accept this Amendment. I hope that the hon. Member for Westminster, St. George's (Mr. Howard) will realise that the reason I did not speak on the Amendment I moved just now was to save time. My right hon. and learned Friend has gone as far as he can go in this direction at this juncture. Taking into account the Amendment which I moved and the provision already made in the Finance Bill, the marginal band will run out at £757 in the case of a single person and £731 in the case of a married couple. All things considered, that is not too bad and I hope that the hon. Gentleman will be satisfied with it.

Can the right hon. Gentleman tell the Committee the respective costs of the Amendment for which he has received the Committee's approval and my Amendment? The difference between them is again a question of the rate or range, and it is important that we should know the cost.

The hon. Gentleman's Amendment would cost £750,000 in a full year and the cost of the concession contained in the Amendment which the Committee accepted just now is 500,000.

There is not much between us.

Amendment negatived.

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

I am disappointed rather than dissatisfied with the provision which the Financial Secretary has made. He is increasing the earned income allowance from one-sixth to one-fifth. Over the last three years the Government have been doing things too little and too late. They started with one-tenth and then brought it down to one-eighth, then to one-sixth and now to one-fifth. This is too small, and I want to express my disappointment in the hope that next year the observations which I am now making will be considered and will bear fruit. We have been told that we ought to be grateful for the small mercies which have been given to us. I want to put this to the Financial Secretary. The Chancellor of the Exchequer has two functions, one as Chancellor of the Exchequer and the other as Minister for Economic Affairs. As Chancellor of the Exchequer he wants taxation, and as Minister for Economic Affairs he wants production. I put it to the Financial Secretary that in demanding the maximum taxation and in making the reliefs so small each year he is making his task of getting maximum production all the more difficult.

I want to make a plea that the increase from one-sixth to one-fifth is not nearly adequate. I am making this plea especially for the *ell-paid artisans and the men in small managerial jobs up to £500 a year whom I would like to see freed of all direct taxation. The previous Chancellor, in his first financial statement on 23rd October, 1945, said:

The hon. Member is obviously very uncertain whether his arguments are in Order on this Clause.

I am sorry that the look in my eye did not have the effect that I hoped it would have.

Am I not in Order in referring to what the previous Chancellor of the Exchequer said on the effects which taxation has on production?

May I not refer to what the previous Chancellor of the Exchequer said in other Budget Debates?

I do not know what references the hon. Member is going to make, but I suggest that the fewer references we have, the sooner we can get on with the Business.

The then Chancellor of the Exchequer dealt with the same problem in his Budget speech on 9th April, 1946. He spoke of the way taxation on small earned incomes was retarding production. I again emphasise my point, that if the amount of earned income relief had been increased in this Clause from one-sixth to one-half instead of from one-sixth to one-fifth, the Chancellor of the Exchequer in his capacity as Minister for Economic Affairs would be a happier man and the country would be in a better position. To reinforce that argument, I will quote what the previous Chancellor of the Exchequer said. He said:

If it had given the incentive that the then Chancellor of the Exchequer hoped for, the Prime Minister would not now be pleading for an increase of 10 per cent. in production. I am trying to argue that this policy of little by little, these measly reliefs which have been given to those earning under £10 a week, is retarding the production we require. I wish now to refer to what the present Chancellor of the Exchequer said in his Budget Speech. He said:

Question put, and agreed to.

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

CLAUSE 27.—(Reduced rate relief.)

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

This Clause is very complicated, and it is complicated because it refers at great length to a number of other Enactments. I have found it difficult to understand. It deals with the extension of reduced rate relief, which is, I think, understandable and acceptable. It also deals with the separate assessment of a wife's earned income and gives her the benefit of the reduced rate relief. It is curious that up to now she has not had the benefit of reduced rate relief and after her personal allowance has been exhausted she has had to pay at the full rate. That has now been remedied, which is a good thing. I want to ask one question. If the husband's income is above the reduced rate limit and the wife's income is below the limit, can the balance of the wife's reduced rate be transferred and benefit the husband? I am advised that that point is not clear as the Clause is drawn, and I seek some assurance from the right hon. Gentleman.

I am advised that the Clause makes it quite plain how the income can be divided up and the taxation allocated. Obviously, we have to prevent the husband and the wife suiting themselves and getting more in the way of allowances than they would otherwise be entitled to get. I have a case here which may interest the Committee. The husband is entitled to an allowance of £60 for a child. His income is such that it is precisely equivalent to the total of the allowances to which he is entitled. In hat case he would pay no tax. The wife's earnings are substantial, and she pays at the standard rate on £100. In such a case, the husband could claim the child's allowance against the wife's income, because he would not be in the Income Tax field. We have to guard against that sort of thing happening, and I am advised that the wording of the Clause does this. I am sure no Member on the Committee wants to see such things happen. At the same time the Clause gives the necessary incentive to the wife.

May I ask the right hon. Gentleman what would be particularly vicious in the allowance for the child being set against the wife's income? After all, the wife probably gave birth to the child.

May I, then, refer briefly to the object of my Amendment, which was to have steps of one-quarter instead of the existing steps of one-third and two-thirds. Could the Financial Secretary give any reason why those steps should be maintained? I can quite understand that, for reasons of administrative convenience, it is not desirable to change them at the moment, but is there any objection in principle to consideration at a suitable time of an alteration to more and smaller steps at the reduced rate?

I listened with interest to the reply given by the Financial Secretary to the speech of my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) but I did not think he was quite taking the point. My hon. and learned Friend has been advised that the point he was making is not at all clear in the Bill. Perhaps the Financial Secretary would look at it between now and the Report stage.

Most certainly we will do that. We follow the Debate here and take notes of the points made, and I will certainly see that this point is followed up.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

CLAUSE 28.—(Life insurance premiums.)

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

This Clause appears to us to be excellent in intention in that it endeavours to simplify the administration of relief given against insurance premiums of one kind and another and comes into effect, not in the current financial year, but the one which follows, 1949– 50. I want to put one point briefly to the hon. and learned Gentleman. In addition to making the administration more simple and workable, there is apparently also involved here a relief to the taxpayer in that there is a loss to the Revenue of £5¼ million as a result of this Clause being inserted. While there would appear to be a relief to taxpayers as a whole, can he assure us that no individual taxpayer will suffer? Sometimes when one gets these general machinery Clauses which convey a block concession in terms of money, one finds afterwards that, when the machinery begins to operate, some individual taxpayers are worse off than before. It would assist the Committee if the hon. and learned Gentleman could give us an example or two as to how this Clause will operate, for we should then have a clear picture of it.

I cannot give the assurance asked for because it will be the case that in a very limited category the taxpayer may be a little worse off, though it can only be to the extent of £2 or £3. The only case in which it could happen would be where a person paid relatively large insurance premiums and had a small taxable income, and it is an unlikely case to arise. I can go into fairly elaborate figures to show that in such a case he might be £4 10s. worse off in a particular set of imagined figures.

As the hon. and gallant Gentleman said, the Clause is rather complicated. In the first place, it gives a relief which works out at £5¼ million but the main object is to simplify the matter administratively from the point of view of the tax tables. At the moment the difficulty which the coding clerks have is that the insurance premium relief is fixed under Section 32 of the Income Tax Act, 1918, in such a way that it varies according to the income of the taxpayer. If his income is less than £1,000, it is half a certain appropriate rate of relief; if it is under £2,000 it is three-quarters of a certain appropriate rate of relief; if it is over £2,000, it is the full rate of relief. As a consequence the coding clerk, when deciding what number he shall allot to a taxpayer, has to make a guess, he has to make a hazard as to what the income of the taxpayer is likely to be. Since it is obvious that one cannot tell at the beginning of the year what the income is likely to be, the result is that he has to attribute for purposes of relief a measure of repayment which may ultimately turn out to be wrong. In consequence, the coding tables become extremely difficult to work. To avoid that difficulty, what has been done is to substitute for that variable rate of relief a fixed rate of relief which appears in the Clause—two-fifths of the standard rate—and which will apply irrespective of the amount of the taxpayer's income.

That being so, the coding clerk can make a much more accurate estimate of the amount which falls to be granted as relief to the taxpayer, for it is comparatively easy to say in those circumstances what he is entitled to by way of relief. So by Subsection (2) two-fifths of the standard rate is fixed as the permanent appropriate rate. Subsection (3) deals with the case where the amount of premium is less than £25. In that case tax relief is at the full rate of a sum of £10, or the actual sum of the premiums if they are less than £10. In other words, the whole object of those new Subsections is to have a fixed rate which can always be applied according to the return of income.

Subsection (4) looks complicated but it is really a machinery Subsection. It simply means that in assessing the amount of the tax we treat the insurance relief in the same way as the personal relief—we take off taxable income first. Subsection (5) is to remove doubt. The Finance (No. 2) Act, 1940, for purposes of insurance premium relief, fixed the standard rate at 7s. This Subsection makes it clear that we are talking about the actual Income Tax rate and not that conventional Income Tax rate. Subsection (6) effects consequential repeals.

To sum up: the prime object is to simplify the codification procedure so that the coding clerks can make a proper attribution when fixing upon the coding figure which they will allot to a taxpayer. It benefits taxpayers, except a limited category whom it will damnify slightly in the matter of a few pounds.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

CLAUSE 29.—(Formal assessments under Schedule E to be unnecessary in certain cases.)

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

There is a point of importance arising out of the provisions of this Clause which to my mind needs a few moments' discussion. This Clause was referred to by the Chancellor in his Budget speech in what I can only describe as a slightly disingenuous passage. He said:

The implications of that statement were, first, that there was no real change, and secondly, that the Chancellor was in some way conferring a benefit on the taxpayer. I think there is rather more to the matter than that. I suppose the real reason for the Clause is the appalling state of affairs in the Inland Revenue itself. I am told that in many tax districts the notices of assessment—in other words, the check up assessments—are as much as two and a half years in arrear. I would be glad to know if that is the case. The matter was referred to in the report of the Select Committee on Esti- mates published in July, 1946. They said then with regard to the year 1944–45 that 73 per cent. of the notices of assessment had not been issued. I notice that the right hon. Gentleman is querying my use of the term "check up assessment." As I understand it, a coding notice is sent out, made out by the coding officer, partly on guess work, as the Solicitor-General indicated in his answer to discussion on the last Clause, and also it is given on information supplied by the taxpayer. On that coding notice the periodical deductions are made and towards the end of the year or just after the end of the year a check up assessment should be given. The taxpayer is then entitled to examine that statement of his account with the Revenue and to decide whether or not he has been correctly taxed.

I understand that is the system. One can quite understand, with the amount of work which is involved on the tax districts in connection with P.A.Y.E., that these assessments may have got substantially in arrear. As I understand the effect of the Clause, it will no longer be obligatory on the Inland Revenue to make this formal assessment, which I have called the check up assessment, which enables the taxpayer to decide whether he has paid too much, or too little. Quite irrespective of party politics, I ask the Committee to consider whether it is wise to say that it should not be obligatory on the Inland Revenue authorities to serve the notice of assessment on the individual taxpayer. It is true that it is limited in the Clauses to cases where the total net tax is approximately the same. It may however be that approximately the same result is obtained through different calculations and I suggest the individual taxpayer should have opportunity of checking up whether, owing to the alteration in the number of children, insurance premiums, the possession of savings, or some other reason, the amount of his tax liability has been accurately stated.

The Chancellor referred to the question of underpayments and said that he would not exact underpayments which were disclosed in this statement of accounts. But what about overpayments? There may equally be substantial overpayments. Does the Chancellor mean to pocket those? He does not appear to think the conces- sion will cost very much, but perhaps he thinks he will be able to pocket from the overpayments as much as he will lose on the underpayments. The right hon. Gentleman waves his hand at the clock, but this is an important matter, whether the individual taxpayer should be allowed to have his formal notice of assessment. I have no doubt the answer will be that the Clause provides for the individual taxpayer to ask for his formal assessment. That, in the case of the ordinary wage earner and small salary earner, is purely a paper safeguard. Is the average small wage earner going to look forward to the prospect of indulging in correspondence with his Inspector of Taxes? I can think of no pen friend he would be less likely to welcome. He would feel that he was stirring up a hornets' nest, and would decide to leave well alone. The Committee should pause before it parts with a Clause which dispenses with what should be the absolute right of the taxpayer.

I am sorry if I appeared impatient to the hon. and learned Member for Wirral (Mr. Selwyn Lloyd). He is quite right; I was getting impatient, because I think there are far more important Clauses than this in the Bill, and we want to reach them at not too late an hour. As the hon. and learned Member proceeded, I became more and more convinced that he was labouring under a misapprehension about what the Clause proposes to do. What was done by the then Chancellor of the Exchequer was done by general agreement, and it is now to be made statutory. It is quite wrong and untrue to say that there is an enormous time lag in these assessments. For two years, it has been agreed that formal assessments in these cases should not be made. What we are doing here is to make statutory what has been the practice for two years. It is a commonsense practice, which has, up to now, been followed because of the shortage of manpower in the Inland Revenue.

The hon. and learned Member is under a misapprehension if he thinks that this applies to those who have paid too much as well as to those who have paid too little. The present P.A.Y.E. codes do not take more tax from an individual than is due from him in the normal way. All the cases covered by this Clause are those in which the individual has been under-assessed-often by only IS. and sometimes by a little more. The total cost to the Exchequer will be £10 million in the course of a year, but we feel that it is very well worth it.

On top of that, where the individual taxpayer feels that he would like the formal assessment, perhaps in order to appeal or for some other reason, it will be quite open to him to have the assessment made and, if he is so minded, to act upon it. The whole thing is extremely reasonable, and I hope we may have this Clause without much Debate and get on to something more interesting.

Does the right hon. Gentleman say that in no case where the Inland Revenue thinks there has been over assessment will the operation of the Clause be brought into action? Does he not think it possible that there may be a dispute?

The Clause only applies in cases where the deduction has been the true deduction, or an underassessment. Anyone who has been over-assessed will still get his assessment and have a perfect right to his remedy. Even those who feel that they have not had a true assessment under the terms of the Clause may have a full assessment sent to them, and have the figures presented to them in the ordinary way, and can act on them, if they so desire.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

CLAUSE 30.—(Farming, and other profits arising from land.)

On a point of Order. Before the hon. Member for Brecon and Radnor (Mr. Watkins) moves his Amendment, may I inquire, Mr. Bowles, whether it is your intention to call the following Amendment in the names of my hon. Friends the Members for Windsor (Mr. Mott-Radclyffe) and Bodmin (Mr. D. Marshall) and myself: in page 20, leave out lines 32 to 41, and insert:

"Section eleven of the Finance Act, 1941 (which, as amended by Section twenty-eight of the Finance Act, 1942, exempts from assessment under Schedule D certain farming carried on by individuals or partnerships on land of an annual value not exceeding one hundred pounds) shall have effect as if for the words one hundred pounds,' there were substituted the words ' seventy-five pounds';

(2) Subject to the provision of Subsection (1) of this Section."

If not, shall we be allowed to make reference to it during the discussion of the Amendment of the hon. Member for Brecon and Radnor?

I do not intend to call the Amendment to which the hon. and gallant Member refers. He can make reference to it during the discussion on the Amendment which I have called upon the hon. Member for Brecon and Radnor to move.

I beg to move, in page 20, to leave out lines 32 to 41, and to insert:

First, I agree with the principle that all farmers should keep accounts. I sympathise with the Chancellor in his concern, which is with the profits of farmers. My concern is for those people who have no profits at all. Time and education will lead these people eventually to keep accounts, but the people I am represent- ing, people in two counties of a rural character, would not be liable to tax even if they kept accounts. Therefore, why should that duty be forced upon them now at this time when agriculture is called upon for a programme of expansion? There is no need to emphasise the plight of the hill farmers, about whom I am speaking, after their disaster of about 12 months ago. Coming from the part of the Principality which I represent, I know how difficult it will be to find the help which these small farmers will require to keep their accounts. I have great sympathy with them if they have to read a letter sent by the county secretary of the branch of the National Farmers' Union of which I am a honorary member. Surely, the Government do not expect them to read and follow what is contained in that long letter of three foolscap pages and a schedule about what farmers have to include in their accounts, and at the same time to intensify production. The people with an annual value of up to £50 deserve special consideration.

I am also concerned, as I am sure are other hon. Members, to see that no greater burden should be imposed on the officials in the tax offices. Any tax inspector would put his red pencil through and not bother any further about the tax liability of these people with land of an annual value up to £50 with whom I am concerned. I know that sweeping statements are made "Let them all pay." It is true that horticulturists, dairy farmers, and some other branches of agriculture are doing well, but the farmer I am concerned about is the type dealt with in a report which I read recently on the "Economic considerations and results in stock-raising farms in Brecon and Radnor" written by Mr. J. Phillips of the Agricultural Economics Department in the University College of Aberystwyth. I suggest to the Chancellor and his advisers that they should read that report.

8.15 p.m.

There I find that 56 per cent. of the farms in my constituency are over 1,000 feet up, and average 73 acres in Brecon-shire. The average is 80 acres in Radnor-shire. Half the crops in Brecon shire are to be found in farms of more than 100 acres and two-thirds of the crops, including grass, in Radnor are to be found in farms of over 100 acres. It will be difficult to show that there there is any profit for these people. I would specifically ask the Chancellor to look at one part of the report which concerns ten farms with an average acreage of 75.2. I hope that I am in Order in giving the Chancellor some facts as to what it really means to insist upon these people keeping accounts. I find that in this group of farms total receipts per farm are 735, which includes acreage payments, livestock, produce and even the produce consumed by those occupying the farms. These are stock-raising farms. On the expenses side, I find a figure of £532, exclusive of any allowance for the farmer and his wife. It might be said that this shows a profit of 203 per farm, but when one allows for a reasonable livelihood for the farmer and his wife it will be found that there is an adverse balance of £18. In the expenses rents, rates, seeds, fertilisers, implements, hired labour and casual labour have been included. I suggest to the Chancellor that in those examples he will find arguments in favour of my Amendment.

If he should say, "That is all very well, but let us take a look at someone else's constituency," I would refer him to a report by the gentleman whom I have mentioned dealing with certain hill farms in Caernarvonshire and Merionethshire. He will find therein that five hill sheep farmers there occupy farms of an average acreage of 138. There is an adverse balance on these hill sheep farms of £56.6 each, exclusive of any allowance for the farmer or his wife. These are remarkable figures which everyone in this Committee is bound to agree show that the outlook is not too good for these people. Unless there is intensification of production, unless there is a change in the cost and price structure of these farms, and if the existing level of production remains the same, I cannot see how the Chancellor will get any profit from these people. Therefore, why trouble them to furnish accounts at this particular time? Later on, if there is intensive production of cattle and milk, a remote possibility at present, the Chancellor could have another look at the question.

If the Chancellor examines the cash receipts of these places, he will find that they are too low to compensate for the family labour on the farm. We have so far heard nothing from the Government to meet the objections that have been made to this Clause. Perhaps with education and with the keeping of accounts being demonstrated and being the subject of lectures to young farmers' clubs, these farmers will in time automatically keep accounts, because farming itself is most businesslike. By accepting my Amendment and by proceeding by stages year after year, the Chancellor could ultimately achieve his purpose. I suggest to him that of all the Amendments on the Order Paper to this Clause, mine is the most reasonable, and I hope that he will accept it.

I would like to say a few words about this matter, mainly because, in my own part of the country, in Ulster, we have a very large number of small farms, and we are more likely to be affected by the proposals of the Chancellor of the Exchequer than any other part of the United Kingdom. I have here some figures prepared by the three joint Farmers' Unions, the National Farmers' Union, the Scottish Farmers' Union and the Ulster Farmers' Union, which show that the estimated number of farmers at present being assessed under Schedule B are 130,000 in England and Wales, 40,000 in Scotland and 80,000 in Northern Ireland, that is, with a population in England of roughly 40 million, in Scotland of something over 4 million and in Northern Ireland I¼ million.

Of those 80,000 farmers in Northern Ireland who are at present assessed under Schedule B it is estimated that only 5,000 would be liable to tax under the proposals of the Chancellor. What it means, therefore, throughout the whole of the country, and particularly in Ulster, is that we may possibly get tax from an extra 5,000 farmers, but we are proposing to ask 80,000 farmers to keep accounts which they have never been accustomed to keeping. In my own part of the country there are very few farms of over 50 acres, and there are quite a few of not more than 10 acres. Many of them, as the hon. Member for Brecon and Radnor (Mr. Watkins) has said about his constituency, are hill farmers. Many of them are of the type of Scottish crofters. But we have also a number of good dairy farms, small farms, generally under 50 acres.

Those farms are mostly worked by the owner and his wife and family. They are family farms. Their livestock and produce are sold almost entirely on a cash basis. They do not keep any accounts. If they were to keep accounts I doubt very much whether they would be kept in accordance with the proper form of farm accountancy. Are we going to ask these small farmers to call in official accountants? That, in my view, would be an absurdity. The owner of a typical family farm of 50 acres and under, as things are, would probably be entitled to a tax-free income of at least £300, owing to his marriage and child allowances. On no system of proper farm accountancy could such a farmer possibly be likely to make a profit of more than £300, or indeed anything like it. Therefore, under Schedule B assessment, that type of farmer would still not be liable to pay any tax.

In view of these considerations which apply to small farmers, hill farmers and others throughout the whole of the United Kingdom, and particularly in my part of the country, I would appeal to the good sense of the Chancellor of the Exchequer not to impose on these small men a system which will produce nothing more in revenue and which, owing to the hindrance that it will impose, will seriously affect the practice of agriculture in this country at a time when agricultural production is most vital in our national economy. I do not know what is going to happen to this Amendment and whether the Chancellor proposes to accept it or not. I am opposed to the whole Clause. I think it is a bad system but, at the same time, if this 'Amendment goes to a Division, I could not possibly vote against it because, if it were to be carried, it would certainly relieve a very large proportion of the small farmers.

I wish to approach this matter from a slightly different point of view. The right hon. and learned Gentleman, in his Budget statement said that he had two main objects in cutting out Schedule B altogether; first, to ensure that tax was paid on the true income and, in the next place, that right records should be made to help in the yearly review of costs. I entirely agree with those considerations. I think it is perfectly right to put down the assessment from £100 to £50. What I wish to examine is whether the farmer under £50 will in effect provide either of those types of payment which the right hon. and learned Gentleman seeks to obtain. I maintain that he will not. A £50 farm is a small farm. Very often, if it is a low ground farm, it is little better than a glorified smallholding. It may be bigger where it is a hill farm. But a farm of £100 is definitely a farm. As has been pointed out, such a farm is farmed by one family. They do not employ anybody on a farm of that size for the simple reason that they cannot afford it.

My hon. Friend the Member for Brecon and Radnor (Mr. Watkins) has said that he believes that farmers ought to keep accounts. All I can say, and I know something about it, is that the small farmer does not keep accounts and he will be put to the most frightful bother if he has to do so. It may be urged that other small men, such as shopkeepers, have to keep accounts of their stock. But the small farmer is not used to it. He hates it and it is a very serious business to him. I believe I am right in saying that the Minister of Agriculture is seeking to get agricultural workers who will first take this small type of farm. He has that very object in the Agriculture Bill he is introducing. I maintain that this provision is a definite disincentive to encourage these people to do what the Minister of Agriculture wants them to do.

I do not believe that the Chancellor will get any additional tax. If anybody is liable to less tax he can opt to come under Schedule D and put in his returns. I speak as one who has some small knowledge of agriculture. During this Debate I think that the Chancellor will hear practical opinions from practical men. I suggest that this is one of those theoretical considerations put forward with the most excellent objectives by somebody who does not know practical farming. I do not believe for one moment that if the individual who drafted this Clause understood practical farming, he would have brought forward this proposal. I ask my right hon. and learned Friend to have regard to that. I wish I could show him these small farmers—how they live and work. If I could do that, I believe that I would convince him and that he would drop this proposal.

8.30 p.m.

I support this Amendment and I agree with what has been said by the hon. Member for Accrington (Mr. Scott-Elliot). I feel sure that the Chancellor of the Exchequer must be truly aware of the difficulties under which these small farmers work and that he realises the great priority which should be given to farming. It is necessary that everything which possibly can be done should be done in every case. I ask him to consider this again. When I have discussed this point in my constituency with farmers, chartered accountants and lawyers who will have to look after these matters, I have found that they are most anxious about the technical detail involved. If the Committee would have patience with me I would like to read two sentences from a letter which puts the matter extremely well. This is with regard to all the different matters involved. The letter says:

"We pass them on to an already overworked chartered accountant, who, as you can well imagine, has the greatest difficulty in getting vouchers and other facts from the farmer who is invariably sent home to rout out details and who has to spend a lot of time on the job."

Therefore, that takes away from food production. The letter goes on to say:

"Add to this the chaotic state of the tax offices today, already hopelessly in arrears."

These are matters of great importance. The farmer is doing everything possible in order to produce as much food as he can to feed this nation. If he is to feel that he must carry out all this minute detail, he will not be encouraged, and, at the end of it, I do not think that the Chancellor will get very much out of this proposal. My right hon. Friend the Member for Antrim (Sir H. O'Neill) has quoted details of how much a farmer has to make in profit before he is taxable. I suggest that the number who will be involved will be very small. One should approach these matters from a much larger point of view. Importance today is put on food production. To these men the nation looks for food and the importance should not lie merely on the fact that one or two people should be taxed. I am against the Clause altogether but, as my right hon. Friend the Member for Antrim said, if we should come to the point of a Division on this Amendment I would most certainly support it.

Perhaps it might assist the Committee if I were to make a few observations at this stage. It is as well that we should appreciate the problem with which we are dealing. Figures are apt to be given rather loosely. The present position is that 120,000 full-time farmers pay tax under Schedule D on their profits. In addition, rather less than 40,000 pay tax under Schedule B. Therefore, the number we are dealing with is 40,000. During the war farming profits fell within the scope of the Excess Profits Tax and, therefore, we have the opportunity of seeing—whatever the value of the land that was occupied even where Income Tax is paid under Schedule B—what the profits were from farms of under £100 in annual value. Perhaps hon. Members will not be surprised to know that profits ranging from £1,000 to £9,000 a year were made on such holdings. I do not say that happened in a very large number of cases. It was on fruit farming of selective kinds and on silver fox farming, all of which at present pay under Schedule B. What conceivable justification is there—

It is under Schedule D, not Schedule B. There is a House of Lords case on it.

I may be wrong. I do not profess to know definitely. Whether that be so or not, there were a large number of fruit and vegetable-growing farms which, if the work is done on a rotation system, do not come under the market gardening provisions. There are a number of smallholdings where the rotation system is used for flowers, fruit and vegetables which in fact fall under the farming and not under the market gardening provisions. That is not our fault. That is the decision of the courts. Obviously, it is desirable that provision should be made for these people to pay Income Tax on a proper basis. I have the greatest sympathy with the cases which have been mentioned from all parts of the Committee. I do not think that they will be affected at all by this legislation, and I will say why in a moment.

The difficulty is that it is impossible to exempt anybody by the amount of the annual value. It is just as likely in some of the cases that the profit has been made from land of an annual value of £10 a year.. It is not the annual value which necessarily determines whether or not a person is to make a large profit. One may, on a large acreage, make a small profit, or one may, on a small acreage, make a very large profit by intensive farming. In those circumstances, it is obvious that we cannot exempt by any limit of the annual value. That would not enable us to catch the people we want to catch and to let out the people we want to let out.

On the other hand, we have had considerable experience of a similar type of case concerning the small shopkeeper. Theoretically, all small shopkeepers should make returns for assessment, but in fact the small shopkeeper, who it is obvious is not making a taxable income, is not asked to make a return. That is an administrative practice which has very sensibly grown up in order not to worry people, some of whom are not very good at keeping accounts, by making them make returns. Under this Clause we propose to adopt exactly the same administrative steps in the case of the small farmer. In those cases where it is obvious that the farmer who is a married man would not be making £300 a year, we should not ask him to make a return or assess him at all.

By and large, that can be judged, though not, of course, with extreme accuracy. Take the case of the little man who has a few acres in the hills. Obviously, as an administrative act, he would not be assessed. The only way by which this can be done in order to do the two desirable things—to make the person really making large sums of money even on a small acreage of land pay his proper Income Tax contribution, and at the same time not to trouble the mass of small farmers who obviously would not fall within the Income Tax limit—is to do it by administrative means. I am sure that small farmers who are earning incomes such as have been mentioned of well under £300 a year or round about that, need have no anxiety that they will be harried or caused to call in accountants and lawyers to help them in this matter.

There may be marginal cases where they will be assessed and it will be proved afterwards that they are liable to pay tax, but the administration will be so carried on as to minimise the trouble to such people, and I think that, from the common sense with which the tax legislation has been carried out and administered in the kind of case which I have given, that of the small shopkeeper, the Committee can rest assured that there will not be any undue discomfort to the 40,000 people concerned, but that, on the other hand, we shall recover from those classes not now paying tax in proportion to their earnings an amount which we estimate at about £2 million a year.

I want to refer to one point in the Chancellor's statement in regard to the number of farmers affected and how they will be affected. He said that there are 120,000 full time farmers paying tax under Schedule D, and fewer than 40,000 paying tax under Schedule B. That is a total of 160,000. There are 250,000 full-time farmers in the United Kingdom, so that that leaves 90,000 not accounted for. Therefore, I think we are discussing, even accepting the basis used by the Chancellor, not 40,000, but an additional 90,000 farmers.

The important point in this matter is, first of all, whether the estimated amount of £2,500,000 is likely to be received, and, secondly, at what cost in the production of food and in exasperation and frustration to the farmers concerned. A great deal has been made of the position of the hill farmers, and I was very glad to hear that the Chancellor understands their position and has every sympathy for them. My right hon. and learned Friend said that he hoped by administrative means to avoid troubling them unnecessarily. Quite obviously, it is very difficult to do that by administrative means, because there may be people who have quite a small acreage but who are doing very well. Who is to be the judge? Presumably, the local tax officer, and I cannot see how he can arrange a matter like that unless there is, in fact, an inquiry and unless the farmer himself has to make returns. There are all sorts of difficulties in the way of a scheme like this.

I do not agree with those who suggest that this Clause should be dropped altogether. I think it is an excellent idea that a start should be made in putting the farmers' tax position on a different basis, but I submit that, however, desirable it is as a long-term measure and one which will be welcomed in general and in principle by farmers, it is necessary to proceed by stages, and it is quite impossible, for a variety of reasons, to implement a step of this kind immediately and on a wholesale scale. I think the suggestion made in the Amendment which brings right away an additional number of farmers—those on the the larger and more profitable farms—under computation for tax by reason of their profits is an excellent beginning.

8.45 p.m.

We have been considering the position of hill farmers. There are many others in a constituency like mine in Somerset where the same conditions operate, and where the farm is carried on by the farmer and his wife and perhaps one man or some casual labour, and they are among the hardest worked individuals in this country. The people on such farms will be those who, I believe, under this Clause as it stands, will be asked to submit returns. It is an additional burden upon them because even if they can get an accountant to do it for them, it is a financial burden. Even if they have the ability and the necessary technical knowledge to do the accounting themselves, which I doubt, it is an additional burden when, every minute of every day, their efforts should be devoted to the production of food. Even if we could be certain of this extra £2,500,000 of tax being obtained, I think the cost in other directions would be prohibitive. There are all sorts of other difficulties. There are various conventions on these small farms, where the wife gets the egg money and things like that, and they will result in considerable trouble immediately.

I suggest that, if the Chancellor cannot accept the Amendment, he should, at least, look at this matter again to see if some other arrangement can be made. I think it is an excellent idea to make a start, but I submit that the thing cannot be done on a wholesale scale without causing a great deal of inconvenience. The next stage should be some investigation to produce a very simple form of accounts, so that gradually, by means of education, we can achieve the desired results. If it is done now, I think it will cause a great deal of frustration and loss of production and would indeed be a minor disaster.

I listened with great interest to the Chancellor, and I think that probably all of us find ourselves in some difficulty over this Amendment. The idea, as I heard the Amendment moved, was that we might, by putting in some other figure than £100—either £50 or £75—exclude a number of small people whom nobody, not even the Chancellor himself, as he indicated in his speech, wants to put to the trouble of keeping definite accounts. From the Chancellor's speech, it would seem that the figure of X75 or £50 is not really a good one, because he quoted figures which showed that, in the group of holdings about which we have been talking, the profits are up to 9,000. I should doubt if that was an average case, and I suppose that there was just one. I should be interested if we could be given some idea of what the average profits were, instead of the two extremes. It would be helpful if we could have more information in that respect, because there is great difficulty in getting at the actual facts, and, if we could have that information at some later stage before we finally part with the Finance Bill, I think it would help the argument. I am merely basing myself on what the Chancellor said, and it does now seem that the difference in the poundage is the right test in order to get away from the trouble of having accounts kept by these small people.

The next suggestion which the right hon. and learned Gentleman makes is that he will deal with the matter administratively so that such people whom we think need not make returns will not be called upon to make them. That is a very loose way for this Committee to deal with what, on any figure, and, at least, the figure given by my right hon. Friend behind me, is supposed to amount to something like 40,000 farmers, which is the figure given by the three farmers' unions. It seems to me a very loose way of saying that we want to make quite sure that those farmers who are in this category and are really making profits are taxed. It is the Chancellor's contention that he thinks, if that happens, he will get £2,250,000 out of it. It is a way of saying, "We think that we should get that amount out of them, but we think it is very complicated to do it by any form of legislation and so we decide to do it administratively, and we are going to empower the tax offices to decide who shall be one of those who will help contribute to the £2¼ million."

It is, of course, a perfectly normal procedure for tax offices not to assess people who obviously would not be taxpayers. In this case, as a matter of fact, it is the particular type of cultivation which really determines whether they are likely to be people who are making these sort of incomes or not. It is easier to distinguish in this case than it is in the case of a small shopkeeper, for example, many of whom, though technically they could make returns and should be assessed, in fact do not, because everybody knows that it is not worth troubling about.

If I am to take it that it is fairly easy to deal with this type of case because of the type of cultivation involved, is it not also easy to get some form of words which we can put into the Bill?

Then let it be tried again. We on this side of the Committee will reserve our position. We will not pursue the matter further tonight. We will consider this if the right hon. and learned Gentleman, now that he has disclosed to us what he wants to do and how he thinks it can be done, says that between now and the Report stage he will see if he can get some form of words to match the observations which he has made in his speech. If it is comparatively easy to know the sort of farmer whom one thinks will be concerned, let us try to find a definition. If the right hon. and learned Gentleman feels that it is quite hopeless, we ourselves will see whether we can think of anything between now and the Report stage. It is not really our duty. That is not our suggestion at all.

Our original suggestion and our view was that the whole of these proposals are quite unnecessary and that this Clause should not have been introduced into the Bill at all. I said that at an earlier stage of our discussions. However, having reached the point which we have reached, even if this has been tried before and there has been failure in the past, I hope the right hon. and learned Gentleman will try again and see whether he can be more specific and put down an Amendment before the Report stage.

This is the first occasion on which I have intervened in these Debates, but, as one of the small farmers, I feel that I ought to be allowed to offer a little advice to my right hon. and learned Friend on this matter. He has said that it is not advisable for Parliament to try to lay down the lines on which farmers should be assessed, whether under Schedule B or D. He said that it will be better to leave it to the officials in the tax office to decide which farmer shall be called upon to submit accounts and whether that farmer shall be taxed upon them or not. What he has not said is what principle shall guide the tax official in so doing. Will he go along the roads of rural England and see which small farms are well farmed, on which the small farmer works very hard, uses modern knowledge and has a very good output, and say to him, "You shall be assessed under Schedule D"? Will he then go further along the road and, on meeting a rather elderly man who has not adopted modern methods but gets up late in the morning and goes to bed early, say to him, "Because you have been slothful you shall not be called upon to submit any accounts"? It is not Parliament deciding these matters, but an official in the tax collector's office.

This is a very serious matter. The point submitted by my hon. Friend the Member for Brecon and Radnor (Mr. Watkins) was that the general principle should be that all farmers with an annual value of over £50 should come under Schedule D. But then the Chancellor says there are some who are below the £50 annual value, who might earn a great deal more money and who ought really to come under Schedule D. What has been done about the horticulturist? It does not matter what his annual value is. If he is a horticulturist pure and simple, he comes under Schedule D. Therefore, if the Chancellor or somebody else discovers a silver-fox farm or some other specialised form of agriculture which is particularly remunerative, why should not the Chancellor be able to devise methods of bring- ing in such people and submit his proposals to Parliament so that Parliament decides instead of an official?

The Chancellor has said that officials have been using their discretion in this matter for many years in respect of small shopkeepers and others, and that we can trust the officials to use their discretion in respect of the small farmers. But whereas a tax official may be able to understand shopkeeping and ordinary transactions, how can he use his skill in assessing these particular farmers and their farms by just casting an eye over them—or will he ask somebody else? Will he go to some other small farmer and say, "What about your neighbour? Do not you think he ought to be assessed under Schedule D and not B?" [HON. MEMBERS: "Oh."] It is all very well for my hon. Friends to get impatient, but I have not wearied the Committee on previous occasions on this matter. I regard this question not from a theoretical, but a practical point of view.

In British agriculture we have seen down through the ages men who have worked hard and gathered a little capital and then climbed. They have been the people who have made British agriculture —not the wealthy farmers. Their sons so often have not followed in the footsteps of their fathers, but today, as in the past, the men who use their strength and their skill to rise from the ranks of the workers gather together a little capital and use it. If, as the Chancellor said, there are some people whose annual value is below the £50 limit and who would escape taxation, are they not the very people who would reinvest that money in British agriculture for the greater benefit of the nation as a whole? Surely, that is the very thing we want to encourage. We ought to encourage those skilled people to use their ability, work hard, and long hours, and increase the production of food. If there are a few of those people in agriculture who, for the time being, will escape taxation, they will qualify a little later on if they remain on this earth long enough.

I appeal to the Chancellor to look at the matter once again and give an undertaking that he will consider how Parliament can decide who shall be assessed under which Schedule, and that he will allow Parliament to decide the matter at a further stage. I do not wish to see a great deal of work put upon the accountants and tax departments unnecessarily. Therefore, in view of the present shortage of accountants, the need to stimulate agriculture and to encourage our people to work hard, I hope my right hon. and learned Friend will consider this proposal favourably.

9.0 p.m.

First of all, I would like to say how much I appreciated personally what was said by the hon. Member for South-Western Norfolk (Mr. Dye). I think he has put the matter, much to the regret of one or two of his companions, from the practical farmer's point of view. We are grateful to him.

There are two points on which I would like to have some information and the first is whether the Chancellor of the Exchequer is quite sure that his figures for farmers under Schedule B and Schedule D are quite correct, because there are figures produced by the National Farmers' Union, who ought to know a good deal about this, which do not tally at all with those he has given. I feel that the whole object of this Amendment is to make sure that if men are not going to be taxed they will not have to go to the trouble of keeping accounts.

I think the Chancellor of the Exchequer has a very rosy-hued view of tax officials. I think they are a most admirable body of men and they do their job most conscientiously, but in that phrase "most conscientiously" lies a good deal which the Chancellor seems to have overlooked and that is, though admittedly they try to do their best for everybody, if they are going to be efficient tax collectors they will not be as kind-hearted, as gentle and as generous as he suggested in overlooking people they feel might be taxed. If they are efficient it is part of their job to go into the facts of every case carefully and see whether or not a man should be taxed. There must be a large number of people who will not ultimately be taxed but whose position must at least be examined with a view to seeing whether they should be taxed. That is why this Amendment should receive more consideration than it has been given up to now.

First, I feel I ought to disclose my interest. I have in the past made a good many stock valuations and I may claim to have some knowledge of this matter. I want to emphasise, as has been said by my hon. Friends, that the Chancellor should have another look at the position. No one on this side of the Committee, and I think no one on the other side, wants any farmer to get away with profits over and above what he should make without paying taxes, but I think the way the Chancellor is dealing with this problem is most expensive, most frustrating, and will in the end cost a great deal more money than the amount of the tax which he will collect.

If the Chancellor were a betting man I would like to make a bet with him that he will not recover million under Schedule D from these small farmers. The National Farmers' Union keeps a cross-section of accounts and those figures are available to the Chancellor if he would like to make use of them. The average farmer's profits per acre run at something like 2 and, of course, that would mean that these small farmers would not come up to the taxable amount. I was glad to hear the Chancellor say that he was going to exempt some of these people. That is a good resolution, but how does he propose to put it into effect? Will he set up a tribunal in a rural district before which farmers can come to show what they are doing, so that that tribunal will exempt them; or what other method will be adopted? These small farmers today are paying for valuations and they are being put to a great deal of unnecessary expense, and I suggest therefore that if the Chancellor continues with this Clause he should put the machinery to work at once so that these small men will know where they stand.

I think the Chancellor was a little out of date when he gave some figures. I think those large sums, made on small assessments, are not being made at the present time unless a man is a specialist on some particular job. I cannot help feeling that the way to catch these men is to find out who are the specialists and make them show their books, and not to make all the small farmers show their books in order to catch one or two men. I think on balance that the probability is that if the Chancellor does adopt this Clause, he will find that the small farmers will be making a claim for return of Income Tax which may have been deducted on any small investment they may have. The result will also be that those small farmers who have been putting in 70 to 8o hours a week in order to make their profits—and their wives and children probably put in long hours as well—will now charge their wives and children as labour in their accounts and the profits will not be there to tax.

I cannot help feeling also that the farmer who has been putting in 70 to 80 hours a week in order to make profits will not do so when he finds he is going to pay Income Tax on them. I would like to make a small bet that he will not put in 70 to 80 hours a week but will employ somebody else to put in the time, and that is of no use to the country or to the Chancellor. I hope that before the Report stage the Chancellor will think on this matter, and will take the advice not only of the National Farmers' Union but of the inspectors of taxes who, I think, will give him some advice which will perhaps alter his opinion. I am quite sure if he goes on with this arrangement and tells the farmers to show accounts, he will overload the machinery which should be available for the production of food.

I have listened to this most interesting Debate and I am sure that we on this side of the Committee do not wish unnecessarily to prolong it, although we attach very great importance to this subject. We are, however, in considerable difficulty. In answer to this particular Amendment, the Chancellor made a point which I myself find very difficult to ignore, and that is that any limitation by amount might in fact let out exactly the sort of people we are anxious to catch. Therefore, I would find considerable difficulty in supporting the Amendment which we are now discussing.

On the other hand, like hon. Members on all sides of the Committee, I am extremely unhappy about the idea of doing this merely by administrative action. The fact that the Chancellor in his speech was able to narrow to such a fine point the type of person whom, administratively, would interest the tax collector made me feel that there really was still some possibility of defining that type actually in the Bill. If that is impossible, possibly it could be approached from the other way—leaving the system as it is now but taking for the Chancellor the power to require certain people to make returns, and if the returns show a ration of profit to annual value above a certain ratio, making them liable under Schedule D.

Obviously, it is not for us to make these suggestions, but I feel, and I think my hon. Friends feel, that unless the Chancellor is prepared to say that between now and the Report stage he will look at this again with a view to doing by legislative means what he tells us he desires to do by administrative means, although we feel we cannot support this particular Amendment, we certainly feel that we should have to vote against the Clause as a whole.

As the instigator of this Debate, I would appeal to the Chancellor of the Exchequer to say that he will look at the matter again and so get me out of an embarrassing difficulty.

I am always glad to assist my hon. Friend in any way, but I should not be glad to mislead the Committee. This matter has been examined extremely thoroughly. We have looked at what we imagine are all the alternative ways of achieving this end. We think this is the best and only way of doing it, and so I cannot hold out any hope.

I am sorry I did not hear the first part of the Debate, but I should not like the occasion to pass without recounting to the Committee an experience I had in my own constituency during the Whitsun Recess. My constituency is essentially a county of small farms, high in the hills for the most part. A number of small farmers said to me they did not think it was worth while to carry on their farming. I was very surprised at this, now that the policy of assured markets and guaranteed prices is coming into effect, and now that they are making a reasonable living. I asked them why? They said that the physical task was becoming quite impossible, particularly that of the small farmer with only one or two farm workers. Farm workers are, quite properly, working under regulated hours. The farmers, however, and the farmers' wives are working all hours of the day and night, and particularly at week-ends, when the task of milking whole herds falls to the farmers from mid-day on Saturdays till the Monday mornings. I was very impressed at the way the men said they could not cope with this huge burden of work which fell on them individually. If people like those leave the farms it will be a very serious blow to agriculture. I hope the Chancellor will not close his mind to this matter. If he will produce a definition which will bring the certainty that extra work will not be cast on those men, he will make a real contribution towards keeping those men farming the hill lands.

Amendment negatived.

I beg to move, in page 21, to leave out lines 28 to 43, and to insert:

What does the Clause do as it stands? As it stands, without the Amendment I am moving, it compels the transfer of woodlands on change of ownership from Schedule B to Schedule D, whether that change of ownership is due to death or to sale or otherwise. Let me explain to the Committee what the effect is. If woodlands are assessed under Schedule B, every year there is an annual payment of tax on that assessment. If the Schedule B woodlands which, perhaps, have been paying an annual tax for 50 years, are transferred on the death of the owner compulsorily to Schedule D, we find that when the woodlands are felled the same profit is taxed again—the profit that has been taxed over a period of 5o years by payments in advance; and payments in advance mean paying a great deal more than the payment at the time, because money which is put aside accumulates.

I suggest to the Committee that on the face of it, and without any explanation, that is certainly very inequitable. But what will be the consequence of the proposal? In the first place, the temptation to owners of woodlands to cut down as much timber as they can whilst they are still alive will be very strong indeed, because the moment they die or the property changes hands this changed assessment falls upon them. It is quite clear, therefore, that there will be a strong temptation, which woodland owners will not find it easy to resist, to cut down timber which ought not to be cut.

9.15 p.m.

Of far greater importance is the fact that planting for the future will be discouraged. In fact, I would go so far as to say that it will become highly imprudent from the financial point of view to do any planting at all, except purely amenity planting. After all, planting trees on a large scale requires quite unusual qualities of character, because he who sows can never reap. Only those who are willing to do something which is of benefit only to the country, and possibly their grandchildren do this. It also requires great confidence in the stability of the country and the sense of fair play of the Board of Inland Revenue over a long period of years. The present arrangements permit a change from Schedule D to Schedule B on the death of an owner, and that is his sole financial incentive to plant. There are great risks and great disappointments in forestry. Perhaps I may be allowed to give the Committee a small illustration of a plantation which I planted last Autumn with great care, labour and expense, which was entirely burnt during Easter weekend this year. That was very disappointing after all the hard work in planting and transplanting the little trees and seedlings, clearing the wood, fencing it and putting wire round it: all that went in a day.

Another point which ought to be mentioned is that, generally when woodlands are cut down a considerable amount is cut down at one time. The experience in this country has been that in the two great wars we have gone through, and in the Napoleonic wars, great numbers of plantations were cut down all at one time. The consequence has been, as the Committee may see, that if the tax is imposed under Schedule D a great dollop of income goes in one year, which would normally be spread out over a very large number of years. Thus, a taxpayer may suddenly find himself, just for one year, with an income on which he pays a very high rate of tax, leaving him little or no profits; whereas if his income were assessed over a number of years the tax would be very much less. I hope the Chancellor will consider this matter carefully and see whether he cannot do something to alleviate this position. We have put down this Amendment which will help to meet the situation, and I very much hope the Chancellor will be able to accept it.

I would be glad to accept the sense of this Amendment, if the right hon. Gentleman would accept a manuscript Amendment to it, which I have handed to the Chair. I should be prepared to move as an Amendment to the proposed Amendment, in line I, to leave out from the first "the" to the end and add:

"taxation of woodlands which are managed on a commercial basis and with a view to the realisation of profits."

That is the same in substance, but I think it is more accurate in actual words. If the right hon. Gentleman will accept that Amendment to his Amendment I should be glad to accept his Amendment as so amended.

I ought to explain that the proper way to do this is for the Committee to agree that the words which it is proposed to leave out should be deleted, and then for the Chancellor formally to move his Amendment to the proposed Amendment.

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

Motion made, and Question proposed, "That those words be there inserted."

I beg to move, as an Amendment to the proposed Amendment, in line I, to leave out from the first "the" to the end, and to add:

"taxation of woodlands which are managed on a commercial basis and with a view to the realisation of profits."

The suggestion of the Chancellor covers those cases where the woods concerned are very small indeed. I am thinking of the ordinary owner-occupier of a farm which has, say, a five or ten-acre wood upon it, which is probably felled only every other generation at most. It would not be considered an operation on a commercial scale. We should encourage the smaller man as much as the larger.

I want to thank the Chancellor for what he has said. As far as it is possible to judge, the manuscript Amendment meets the principal point that we raised. I would, however, like to reserve further comment until the Report stage. If we find that the Amendment as it now stands does not meet our point we should like to be able to raise the matter again.

Amendment to the proposed Amendment agreed to.

Proposed words, as amended, there inserted.

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

I am not quite clear what Subsection (1, d ) aims at. The Chancellor will see that it refers to easements. I want to make quite sure that it refers only to royalties and not to easements such as electric light and water pipes. This is rather an important point, on which we should see where exactly we are going, with respect to the small farmer over whose land water pipes or electric light cables run. Secondly, I would like to ask what the first proviso refers to. It appears to refer to grazing, which is an agricultural term meaning land let for a certain portion of the year to an occupier who has the right to graze from some definite date to a further date in the year. If the term has some meaning more than that, I would like to know what that further meaning is.

I would like to ask the Chancellor of the Exchequer to explain the new definition of forestry land. Secondly, could he clear up one point which is worrying a great many people? It is believed that sums of money realised from timber felling may be assessable not only for Income Tax but also for Death Duties, and that in certain circumstances a charge of more than 20s. in the L can be assessed against the value of timber felled. That sounds a peculiar situation, but I would like the Chancellor to look at it and give an assurance later on, if not now, that this wholly unfair situation shall not arise in the future.

In regard to the second proviso, I am very glad that the Chancellor has made this alteration because there really was a grievance. I happen to know that many woodland owners were holding back and were nervous about entering the dedication scheme, because of a number of things certainly, but one of them was that they were afraid that this double taxation might so affect their position that it would not be worth while going on with the scheme.

As to Subsection (1, d ), the object is to stop a possible gap in the legislation where what is being done does not amount to commercial exploitation of the land. It might be argued that fees charged for admission to land or buildings or for parking cars are not liable under Subsection (1, b ), because the land is not being managed on a commercial basis or because the owner in collecting such fees is exploiting not his rights of occupation but his rights of ownership of the land. This clears up that case.

The first proviso to Subsection (1) ensures that where the land is only occupied for a portion of the year for trade purposes, tax under Schedule B. shall be charged for the rest of the year. Under paragraph ( c ) Schedule B tax will not be charged for the period during which the land is occupied for trade purposes.

Do I understand that all grazing or, to put it the Chancellor's way, temporary occupation for agricultural purposes, will be assessable to the occupier under Schedule D?

The new definition of forestry land which takes the place of the existing one in Section 34 of the Income Tax Act, 1945, is to ensure that only commercial woodlands which are assessed under Schedule D on a profits basis obtain the benefits of the allowance granted by the Income Tax Act, 1945, for capital expenditure on forestry land, and the change now made is necessary because the present Finance Bill alters the conditions under which woodlands are assessed under Schedule D and repeals Rule 7 of Schedule B, the Rule under which the occupiers of woodlands have hitherto been able to make their choice. That may need a consequential alteration in view of the Amendment which we have now accepted. As to the question whether Income Tax and Death Duties can both be charged on the same timber, Death Duties are not chargeable until the charges already existing have been deducted. Therefore, Death Duties cannot be paid on Income Tax because the Income Tax has to come first, if it is payable, before the amount of the Death Duties is arrived at.

Question put, "That the Clause, as amended, stand part of the Bill."

The Committee divided: Ayes, 276; Noes, 131.

Division No.167.]

AYES.

[9.30 p.m.

Adams, W. T. (Hammersmith, South)

Balfour, A

Bottomley, A. G.

Allen, A. C. (Bosworth)

Barstow, P. G

Bowden, Flg. Offr. H. W.

Allen, Scholefield (Crewe)

Barton, C.

Bowles, F. G. (Nuneaton)

Alpass, J. H.

Battley, J. R

Braddock, Mrs. E. M. (L'pl, Exch'ge)

Anderson, A. (Motherwell)

Bechervaise, A. E.

Braddock, T. (Mitcham)

Attewell, H. C.

Benson, G.

Bramall H, E. A.

Attlee, Rt. Hon. C. R.

Beswick, F.

Brook, D. (Halifax)

Austin, H. Lewis

Bing, G. H. C

Brooks, T. J. (Rothwell)

Awbery, S. S.

Binns, J.

Brown, George (Belper)

Ayrton Gould, Mrs. B.

Blenkinsop, A

Brown, T. J. (Ince)

Baird, J.

Blyton, W. R

Bruce, Maj. D. W. T.

Burden, T. W.

Hughes, H. D. (W'lverh'pton, W.)

Rankin, J.

Carmichael, James

Hutchinson, H. L. (Rusholme)

Rees-Williams, D. R

Champion, A. J

Hynd, H. (Hackney, C.)

Reeves, J.

Chetwynd, G. R

Hynd, J. B. (Attercliffe)

Reid, T. (Swindon)

Cluse, W. S

Irvine, A. J. (Liverpool)

Richards, R.

Cobb, F. A.

Irving, W. J. (Tottenham, N.)

Ridealgh, Mrs. M

Cocks, F S.

Jay, D. P. T.

Robens, A.

Coldrick, W

Jeger, G. (Winchester)

Roberts, Goronwy (Caernarvonshire)

Collindridge, F

Jeger, Dr. S. W. (St. Pancras, S.E.)

Ross, William (Kilmarnock)

Collins, V. J.

Jenkins, R. H.

Sargood, R.

Colman, Miss G. M

Johnston, Douglas

Scott-Elliot, W.

Cooper, Wing-Comdr. G.

Jones, Rt. Hon. A. C. (Shipley)

Segal, Dr. S.

Corbel, Mrs. F. K. (Camb'Well, N.M.)

Jones, J. H. (Bolton)

Shackleton, E. A. A

Corlett, Dr. J.

Jones, P. Asterley (Hitchin)

Sharp, Granville

Cripps, Rt. Hon. Sir S.

Kenyon, C.

Shawcross, C. N. (Widnes)

Dalton, RI. Hon. H.

Key, Rt. Hon. C. W

Shurmer, P.

Davies, Ernest (Enfield)

Kinghorn, Sqn.-Ldr. E

Silverman, S S. (Nelson)

Davies, Harold (Leek)

Kinky, J.

Simmons, C. J.

Davies, Haydn (St. Pancras, S.W.)

Lang, G

Skeffington-Lodge, T C

Davies, R. J. (Westhoughton)

Leonard, W

Skinnard, F. W

Davies, S. O. (Merthyr)

Leslie, J. R.

Smith, C. (Colchester)

Deer, G.

Levy, B. W.

Solley, L. J.

de Freitas, Geoffrey

Lewis, J. (Bolton)

Sorensen, R. W.

Delargy, H. J.

Lindgren, G. S.

Soskice, Sir Frank

Diamond, J.

Lipton, Lt.-Col. M

Sparks, J. A.

Dobbie, W.

Lyne, A. W

Stamford, W.

Dodds, N. N

McAdam, W.

Steele, T.

Donovan, T.

McAllister, G.

Stewart, Michael (Fulham, E.)

Driberg, T. E. N.

McEntee, V. La T

Stokes, R. R.

Dugdale, J. (W. Bromwich)

McGhee, H. G.

Stress, Dr. B.

Dumpleton, C. W.

Mack, J. D.

Stubbs, A. E.

Durbin, E. F. M.

McKinley, A. S.

Swingler, S.

Dye, S.

Maclean, N. (Govan)

Sylvester, G. O

Ede, Rt. Hon. J. C.

McLeavy, F.

Symonds, A L.

Edwards, Rt. Hon. Sir C. (Bedwellty)

MacMillan, M. K. (Western Isles)

Taylor, R. J. (Morpeth)

Edwards, John (Blackburn)

Mainwaring, W. H.

Thomas, D. E. (Aberdare)

Edwards, N. (Caerphilly)

Mallalieu, E. L. (Brigg)

Thomas, I. O. (Wrekin)

Evans, Albert (Islington, W.)

Mallalieu, J. P. W. (Huddersfield)

Thomas, John R. (Dover)

Evans, E. (Lowestoft)

Mann, Mrs. J.

Thomas, George (Cardiff)

Evans, S. N. (Wednesbury)

Manning, C. (Camberwell, N.)

Thorneycroft, Harry (Clayton)

Ewart, R.

Manning, Mrs. L. (Epping)

Thurtle, Ernest

Farthing, W. J

Marquand, H. A.

Tiffany, S.

Fernyhough, E.

Marshall, F. (Brightside)

Titterington, M. F.

Field, Capt. W. J.

Mellish, R. J.

Tolley, L

Fletcher, E. G M. (Islington, E.)

Messer, 'F.

Tomlinson, Rt. Hon. t

Foot, M. M.

Middleton, Mrs. L.

Turner-Samuels, M.

Forman, J. C.

Millington, Wing-Comdr. E. R

Ungoed-Thomas, L

Fraser, T. (Hamilton)

Mitchison, G. R.

Osborne, Henry

Freeman, J. (Watford)

Morley, R

Viant, S. P.

Freeman, Peter (Newport)

Morris, Lt.-Cot H. (Sheffield, C.)

Walker, G. H

Ganley, Mrs. C. S.

Morrison, Rt. Hon. H. (Lewisham, E)

Wallace, G. D. (Chislehurst)

Gibbins, J.

Mort, D. L

Wallace, H W. (Walthamstow, E.)

Gibson, C. W.

Moyle, A.

Warbey, W. N

Gilzean, A.

Murray, J. D

Watkins, T. E

Glanville, J E. (Consett)

Nally, W.

Watson, W. M.

Goodrich, H. E.

Neal, H. (Claycross)

Weitzman, D.

Greenwood, A W. J. (Heywood)

Nichol, Mrs. M. E. (Bradford, N.)

Wells, P. L. (Faversham)

Grey, C. F.

Nicholls, H. R. (Stratford)

Welts, W. T. (Walsall)

Griffiths, Rt. Hon. J. (Llanelly)

Noel-Baker, Capt. F. E. (Brentford)

West, D. G.

Griffiths, W. D. (Moss Side)

Noel-Buxton, Lady

Westwood, Rt. Hon. J.

Guest, Dr. L. Haden

Oldfield, W. H.

Wheatley, Rt. Hn. J. (Edinburgh, E.)

Guy, W. H.

Oliver, G. H

White, C. F. (Derbyshire, W.)

Haire, John E (Wycombe)

Orbach, M

White, H. (Derbyshire, N.E.)

Hale, Leslie

Paget, R. T.

Whiteley, Rt. Hon. W.

Hall, Rt. Hon. Glenvil

Palmer, A. M. F

Wilkins, W. A.

Hamilton, Lieut.-Col. R

Parkin, B. T.

Willey, F. T. (Sunderland)

Hannan., W. (Maryhill)

Paton, Mrs. F. (Rushcliffe)

Willey, O. G. (Cleveland)

Hardman, D. R

Paton, J. (Norwich)

Williams, D. J. (Heath)

Hardy, E. A

Pearson, A

Williams, J. L. (Kelvingrove)

Harrison, J.

Pearl, T. F

Williams, R. W. (Wigan)

Hastings, Dr. Somerville

Perrins, W

Williams, Rt. Hon. T. (Don Valley)

Henderson, Rt. Hon. A. (Kingswinford)

Piratin, F.

Williams, W R. (Heston)

Henderson, Joseph (Ardwick)

Poole, Cecil (Lichfield)

Willis, E.

Herbison, Miss M.

Popplewell, E.

Wills, Mrs. E. A.

Hewitson, Capt. M

Porter, E. (Warrington)

Wise, Major F. J

Holman, P

Porter, G. (Leeds)

Woods, G. S

Holmes, H E (Hemsworth)

Price, M. Philips

Wyatt, W.

House, G.

Proctor, W. T.

Yates, V. F

Hoy, J.

Pryde, D. J.

Younger, Hon. Kenneth

Hudson, J. H.. (Ealing, W.)

Pursey, Cmdr. H.

Hughes, Emrys (S. Ayr)

Randall, H. E

TELLERS FOR THE AYES:

Hughes, Hector (Aberdeen, N.)

Ranger, J

Mr. Snow and

Mr. Richard Adams.

NOES.

Agnew, Cmdr. P. G.

Harvey, Air-Cmdre. A. V

Pickthorn, K

Amory, D. Heathcoat

Haughton, S. G.

Pitman, I. J

Assheton, Rt. Hon. R

Henderson, John (Cathcart)

Poole, O. B. S. (Oswestry)

Baldwin, A. E

Hinchingbrooke, Viscount

Prior-Palmer, Brig. O.

Bennett, Sir P

Holmes, Sir J. Stanley (Harwich)

Raikes, H. V.

Birch, Nigel

Hope, Lord J.

Rayner, Brig R.

Boles, Lt.-Col. D C (Wells)

Howard, Hon. A.

Reid, Rt. Hon. J S. C. (Hillhead)

Bossom, A. C.

Hutchison, Lt.-Cm. Clark (E'b'rgh, W.)

Renton, D

Bowen, R.

Hutchison, Coal. J. R. (Glasgow, C.)

Roberts, Emrys (Merioneth)

Bower, N.

Jarvis, Sir J.

Roberts, H. (Handsworth)

Boyd-Carpenter, J. A.

Jeffreys, General Sir G.

Roberts, P. G. (Ecclesall)

Braithwaite, Lt.-Comdr. J. G

Joynson-Hicks, Hon. L. W

Robinson, Roland

Bromley-Davenport, Lt.-Col. W

Keeling, E. H.

Ropner, Col. L.

Buchan-Hepburn, P. G. T

Lambert, Hon. G

Sanderson, Sir F.

Bullock, Capt. M.

Langford-Holt, J.

Shepherd, W. S. (Bucklow)

Butcher, H. W.

Lennox-Boyd, A. T.

Smith, E. P. (Ashford)

Butler, Rt. Hon. R A (S'ffr'n W'ld'n)

Lindsay, M. (Solihull)

Smithers, Sir W.

Carson, E.

Linstead, H N.

Snadden, W. M.

Challen, C.

Lloyd, Maj. Guy (Renfrew, E.)

Spearman, A. C. M

Channon, H.

Lloyd, Selwyn (Wirral)

Stanley, Rt. Hon. O

Clarke, Col. R. S

McCallum, Maj. D.

Stewart, J. Henderson (Fife, E.)

Cole, T. L.

McCorquodale, Rt. Hon. M. S

Stoddart-Scott, Col. M

Conant, Maj. R. J. E

MacDonald, Sir M. (Inverness)

Sutcliffe, H

Corbett, Lieut.-Col. U. (Ludlow)

Macdonald. Sir P. (I. of Wight)

Taylor, C. S. (Eastbourne)

Crookshank, Capt. Rt. Hon. H. F. C

McFarlane, C. S.

Taylor, Vice-Adm. E. A. (P'dd't'n, S.)

Crowder, Capt. John E

Mackeson, Brig. H. R

Thomas, J. P. L (Hereford)

Cuthbert, W. N.

Maclay, Hon. J. S.

Thorneycroft, G E. P. (Monmouth)

Darling, Sir W. Y

Maclean, F. H. R. (Lancaster)

Thorp, Brigadier R. A. F

Davidson, Viscountess

MacLeod, J.

Touche, G C.

Digby, S. W.

Macpherson, N. (Dumfries)

Turton, R. H.

Dodds-Parker, A. D

Maitland, Comdr. J. W.

Vane, W. M. F

Drayson, G. B.

Manningham-Buller, R. E

Wadsworth, G.

Drewe, C.

Marlowe, A. A. H.

Walker-Smith, D

Dugdale, Maj. Sir T. (Richmond)

Marshall, D. (Bodmin)

Ward, Hon. G R

Eccles, D. M.

Molson, A. H. E.

Wheatley, Colonel M. J (Dorset, E.)

Elliot, Rt. Hon. Walter

Morris, Hopkin (Carmarthen)

White, Sir D. (Fareham)

Erroll, F. J.

Morrison, Maj. J. G (Salisbury)

Williams, C. (Torquay)

Fraser, Sir I. (Lonsdale)

Mott-Radclyffe, C. E

Williams, Gerald (Tonbridge)

Fyfe, Rt. Hon. Sir D. P M

Neven-Spence, Sir B.

Willoughby de Eresby, Lord

Galbraith, Cmdr. T. D

Nield, B. (Chester)

York, C

Gates, Maj. E. E

Noble, Comdr. A. H P

Young, Sir A S. L. (Partick)

George, Maj. Rt. Hn. G. Lloyd (P'ke)

Odey, G. W.

Gomme-Duncan, Col. A

O'Neill, Rt. Hon. Sir H

TELLERS FOR THE NOES:

Grimston, R. V.

Osborne, C

Mr. Studholme and

Hare, Hon. J. H. (Woodbridge)

Peto, Brig. C. H. M

Major Ramsay.

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

Clause 31 ordered to stand part of the Bill.

CLAUSE 32.—(Extension of time in relation to relief for capital expenditure on rehabilitation.)

I beg to move, in page 24, line 3, after "forty-eight,"to insert:

"or such later date as they may allow."

This and the following Amendments to this Clause in the name of my right hon. and learned Friend all deal substantially with the same point. The purpose of the Clause is to extend to March, 1952, the time limit in which capital expenditure on post-war rehabilitation must be incurred if it is to qualify for relief from Income Tax and Profits Tax. Time limits are laid down for the furnishing of particulars of such work. The hon. and learned Member for Wirral (Mr. Selwyn Lloyd) put down an Amendment to extend the time by 12 months in each case. We considered this matter carefully and decided to meet his point by the words here set out, namely, by extending the time limit at the discretion of the Commissioners. The Amendment makes possible an extension of the time limit, not by the fixed period suggested by the hon. and learned Member for Wirral, but at the discretion of the Commissioners. This, as I am sure the hon. and learned Member will agree, makes possible even more sympathetic handling of hard cases if necessity arises than would be the case under the terms of his Amendment, while it still leaves some incentive for the particulars to be completed in the shortest possible space of time. The large bulk of particulars or preliminary statements had already been supplied by March, 1948.

I was advised that there were a number of people who might have been led to believe, by announcements of the extension of these periods, that the date for the compiling of their particulars was no longer operative. That was why I put down my Amendment with a view to extending the period in each case by one year. After a discreet interval the Chancellor's Amendments appeared on the Order Paper. Having considered them and having heard what the hon. Gentleman has had to say, I feel that these Amendments meet my point. I agree that they are more flexible. On the question of incentive, I would say that there is both more and less incentive in view of the fact that the Commissioners will have discretion. I feel it is better to have the provision in the form in which the hon. Gentleman has moved the Amendment, however, as it is more flexible, and if discretion is administered in a reasonable manner, as I am sure it will be, my doubts will have been met. I thank the hon. Gentleman.

Amendment agreed to.

Further Amendments made: In page 24, line g, after "March," insert:

"or such later date as they may allow.

In line 12, leave out from "before," to "the," in line 13.

In line 14, at end, insert:

"or such later date as the said Commissioners may allow."— [ Mr. Marquand. ]

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

CLAUSE 33.—(Remission of balancing charges and other provisions, in case of certain undertakings absorbed under nationalisation schemes.)

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

This Clause deals with the very complicated question of balancing charges in connection with the nationalised industries. When any taxpayer disposes of an asset for more than its written down value he becomes liable to Income Tax and tax of a balancing charge on the difference between the two. This raises a number of difficult points, because there is a variety of ways in which the nationalisation schemes have been put through. It may vary from the compulsory acquisition of some of the assets of a private industry, such as railway wagons of an ordinary trader, to the compulsory acquisition of either a part or the whole of his business.

The balancing charge falls to be paid by a trader on that part of his assets which he sells at a figure greater than that to which they have been written down for tax purposes. It is a call upon him. In the case of a voluntary sale the trader is aware of the position. He weighs it up and takes it into account when the offer is made to him whether he will accept the price or not. It is a position in which we have all been in making deals in the past. But in the nationalised industries traders were forced to accept the price laid down by the Act, for instance, for railway wagons. The price laid down by the Act for these railway wagons is fixed and settled and the traders were not able to refuse the compensation offered. We feel, therefore, that the balancing charge should not be imposed in such a case, or in the case of the compulsory nationalisation of a business which has been taken over either in whole or in part.

The effect of the Clause as it now stands is to treat certain industries in one way, and the industries which have lost their assets as a result of nationalisation in quite different ways, due to the accident of the technical method of nationalisation. The wagons of collieries will give rise to no balancing charge because the Income Tax Act under which the charge is made is deemed not to apply. But in the case of the railways compensation stock was due to the shareholders direct and not to the companies, and, therefore, the assets of the companies were transferred to the Transport Commission. The companies were therefore left without any assets, and obviously no balancing charge will be levied as the companies have no assets.

On the other hand, road transport organisation is in a different position. The Road Transport Commission is not under any statutory necessity to take over all the liabilities of any transport undertaking and the possibility exists that a balancing charge will be levied on the ground that the undertaking had transferred its assets at a figure higher than the written down value. Conservative companies do write down the value as much as they possibly can, and it is a point which we feel ought to be taken into account. The position as we see it is that the haulage contractors will therefore be in a much worse position than would be the case of industries such as gas and electricity which are taken over under the other procedure. Therefore, we feel that this is a balancing charge which operates in one direction and not in another and which will give rise to many inequalities. Justice is not being done between all the parties. We ask the Chancellor if he will look into the question between now and Report stage to see whether he can introduce something which will enable fair dealing to be carried out as between the different sections of the community who have had their businesses taken over by nationalisation.

I support the Amendment on the Order Paper in the name of the hon. Member for Edgbaston (Sir P. Bennett). He has said that this is complicated, but it is no new matter. It dates back to the charges and allowances made under Section 17 of the Finance Act, 1945. In order to show what this Clause means, I have worked out two simple examples. The first is of a plant which cost 1,000 and the wear and tear allowed was £600, so that it was written down to L400. That plant was sold for £300 and there was a balancing allowance of £100. The second example worked the other way. There was a cost of £1,000 and the wear and tear allowed was £600. But in this case the plant was sold for £550, so that there was a balancing charge of £150 Our submission is that everyone should be treated alike in these matters, but that in the various ways in which the technique of nationalisation has taken place, the incidence of the balancing charges and allowances are not equal. I support my hon. Friend in his suggestion that the Clause should be amended so that everyone will be treated alike.

I hope it is clear that the Question which I proposed was, "That the Clause stand part of the Bill." I did not call the Amendment in page 24, line 26.

I am aware that the Amendment tabled in the name of my hon. Friends and myself has not been found acceptable, I imagine because it is thought that it imposes a charge. We had hoped—and we still think—that it did not impose a charge. Therefore, I would like to support my hon. Friends in showing the inequalities and the unfairnesses which may arise from this Clause as it now stands. This balancing charge question is complicated. As the Committee will understand, it arises when assets are transferred by a seller to a purchaser and where the price is greater than the written-down value of the assets which are transferred. The seller becomes liable for the balance of the amount by which the goods have been sold over what they stood in the books at the final sale.

That situation may have arisen in certain nationalised industries where the nationalised industry took over the liabilities of the transferor but, by Statute, when that has happened, the nationalised industry has been exempted from having to meet that liability. No Statute has exempted a similar occurrence in the cases which my hon. Friends mentioned, such as the transfer of road haulage transport and of certain railway wagons. Certain nationalised industries escape this form of taxation, while others do not. We do not think that is a fair situation. We think that it is a form of subsidy of a hidden kind for certain nationalised industries, and that this Clause is unsatisfactory. The situation would have been remedied if our Amendment had been found acceptable, but since that has not been possible, I ask the right hon. and learned Gentleman and his colleagues on the Front Bench to look at this matter to see whether an injustice is not being done, and something quite unsatisfactory in our taxation law is being set up for nationalised industries. I support my hon. Friends who seek the rejection of this Clause.

I wish to make only the short point that, as far as the balancing charge is concerned, it may be quite fair and reasonable where it is a question of voluntary sale, but when it is a compulsory sale under nationalisation, it can be something entirely different. In those circumstances, I hope the Chancellor will look into the whole question and see that there is proper equality.

I hesitate to enter into the legal side of this question, but I think that the Committee has some right to know what this means, and there has been no explanation by the Government as to how wide this Clause really is. It is a sort of forward-and-backward arrangement, which, so far as I am concerned, is unique. Subsection (5) provides that:

I am here to try to get information from the Government for my own constituency and the needs of my constituents. They are very dissatisfied at present with any information which they get out of the Government, and I hope that on this occasion the hon. and learned Gentleman who will reply will try to give the full facts and tell us why this precise moment has been chosen to deal with this all-embracing Clause. Will he also tell us why there has been such silence in the past on the part of the Government? When they are silent on a matter of this kind, it looks very suspicious and almost as if they are trying to hide something, or are trying some manoeuvre which might make it less possible to find out how big are the losses on nationalised industries. Whichever it is, whether it is on the one side or the other, I would like the Government to "come clean" on this matter, if they know how to do so, and tell the Committee precisely what they mean in this Clause. I could ask the Solicitor-General a lot more about this Clause. I have dealt only with Subsection (5). There are other Subsections in which I have an interest, but I want to shorten matters, as I always do. Perhaps the Solicitor-General will give a full explanation of the whole Clause.

10.0 p.m.

I will answer those questions of the hon. Member for Torquay (Mr. C. Williams) which I can remember. He wanted to know what it would cost the Exchequer, or what the Exchequer would gain, under the arrangement which is embodied in this Clause. The answer is—nothing. It will not cost the Exchequer anything, nor will the Exchequer gain anything. The arrangement is that the nationalised undertaking should step into the shoes of the undertaking whose enterprise is taken over, and, instead of paying a balancing charge upon the compensation, should have its depreciation allowances assessed by reference to the written-down portion of the assets which it takes over.

In other words, the contrast between the two positions is this: the nationalised undertaking which is made responsible for payment of the balancing charge is relieved of payment of the balancing charge, but, by way of compensation for that, it only gets its depreciation allowances on the written-down value of the asset which is taken over. In the long run, the Revenue comes out even; that is to say, it does not lose and it does not gain upon the transaction at all. The object is really to simplify the process of transition. If it were not for the Clause that we are now asking the Committee to approve, it would be necessary, in order to comply with the existing law, to value each and every asset that was taken over as part of the enterprise of the nationalised undertaking. That would be extremely difficult in many cases.

In the case of some assets—for example, the London Underground—it is almost impossible to put anything like an exact value upon them in terms of money. It would certainly be extremely difficult to do. It would also involve an enormous amount of work. It would involve a colossal amount of research to try to separate and itemise every single asset which was taken over, apportion it, and then assess the balancing charge upon that valuation which falls to be paid by the nationalised undertaking.

I think we are at cross purposes. Our objection is that the balancing charge might still be left as a liability on certain parts of road transport and on certain railway wagons. Our purpose was to remove that liability from them and not to take it away from the Government.

The Clause applies only where, under the terms of the nationalising Act, the balancing charge which would otherwise have had to be paid by the nationalised undertaking is taken over by the State undertaking; in other words, it applies only where the State undertaking is under a liability to pay a balancing charge. It does not apply at all where there is a balancing charge left to be paid by the nationalised undertaking. The nationalised undertaking is left in the position whereby it has only got to pay a balancing charge measured by the excess of compensation which it receives over the written-down value of the asset with which it operates. It does not apply to that case at all. It applies only to the case where the State enterprise takes over the liability to pay a balancing charge which would have been upon the nationalised undertaking.

I understood the criticism which was directed to the Clause by the hon. Member for Edgbaston (Sir P. Bennett), and I think the argument which would have been adduced in support of the Amendment on the Order Paper in his name was that the Clause should apply not only in the case where the balancing charge was to be paid by the State enterprise, but also in the case where it was left to be paid by the nationalised undertaking. That could not be done unless either the Treasury were put to a substantial loss or the State enterprise were put to a substantial loss, because if the nationalised undertaking pays the balancing charge, quite naturally, the State enterprise, having paid compensation, would seek to have its depreciation allowances assessed by reference to the amount of compensation paid over which would be more than the written-down value of the assets. That could not be done unless either the Treasury or the State enterprise got some compensating advantage out of the transaction.

As the matter stands, the Clause applies only where the State enterprise is liable to the balancing charge. Nobody loses anything. The Treasury does not gain and the State enterprise does not gain, nor does the nationalised undertaking lose. An hon. Member supporting the Amendment on the Order Paper drew a comparison. He said that in one case the result was a balancing allowance and in the other case a balancing charge. The answer in these two cases is that in one case the amount of money received must have been less than the written-down value of the assets and in the other case more than the written-down value of the assets. That is not a defect under the Income Tax Act, 1945. It depends on the amount received by way of compensation, and there is no injustice so far as that is concerned, arising from the terms of this Clause.

I hope that that explanation to the Committee—[ Interruption. ]—I prefaced my remark by saying "I hope"—has made this provision a little less obscure than it was before. It is difficult to make it quite clear unless one analyses the Clause piece by piece. As I say, it does not involve the Treasury in a loss or gain; it simply simplifies the transition and avoids there being a great deal of unnecessary valuation. I hope the Committee will now agree to the Clause.

I am sure that the Solicitor-General has made this matter crystal clear to everyone on the other side of the Committee. There are one or two of us on this side who are not quite satisfied that they understand it entirely.

This Clause gives to the new gas and electricity monopolies a taxation benefit denied to the ordinary taxpayer. I hope the Solicitor-General agrees with that. Perhaps he does not. If this Clause does not give to them a tax benefit denied to the ordinary taxpayer, I find it extraordinarily difficult to see what object there is in bringing the Clause forward. The point which we on this side think not quite fair is that when there is compulsory transfer of assets under nationalisation there should not be exemption from balancing charges and balancing allowances in the case of the company or taxpayer who is concerned. I fully understand the advantage which the nationalised industries seek to obtain from this Clause. I cannot believe that the Solicitor-General is right when he says there will be no cost to the revenue in this. There will be loss to the Revenue without any doubt. Though I quite understand that, as the Clause is drafted, it will wipe out the liability on condition that the national Boards' claim future wear and tear allowances are only on the written-down value of the assets transferred; nevertheless, there will be loss to the revenue for the time being.

What we want to ask is whether the private concerns cannot have the same benefit—the same cash benefit—which the nationalised boards are getting. We think, for instance, that the haulage operators are likely to suffer. They will be faced with heavy balancing charges in respect of assets acquired from them by the Transport Commission. While it may be quite reasonable in the case of a voluntary sale that a balancing charge should be borne by the seller, because he decides when to sell, and takes these things into account when settling the price, it seems unreasonable to maintain it when the sale is compulsory. That is the one point at issue between this side of the Committee and the other, and I do not think that the reply which the Solicitor-General has given us is at all satisfactory.

I also wish to press this point on the Financial Secretary and the Solicitor-General, because I think it is important, specially in view of the wider considerations my hon. Friend the Member for Torquay (Mr. C. Williams) mentioned. The principle, which, I am sure, the Committee realises, is that the Treasury will collect this money only where there is a sale; in other words, the written-down value does not accrue in this sale to the owner. Here is the State coming along and saying, "We will make you compulsorily transfer the property." The Treasury say, "Because you have compulsorily transferred this property, written down at a very low value, we are going to get this extra tax," which, probably, never could have been obtained but for the transfer. That is the principle which the Committee must, and I am sure does, appreciate.

We are drawing a distinction here between those owners who have had their property transferred under some Acts and those owners who have had property transferred under other Acts. The Financial Secretary came down to a Committee of the House two years ago, that considering the Coal Industry Nationalisation Bill, and made a very interesting speech, in which he said that the coal owners would not have to pay balancing charges on the transfer of their wagons. I appreciate that where it is a whole-time business that is being transferred it does not come under Section 40 of the Finance Act, 1947. However, there are composite companies under the Coal Industry Nationalisation Act part of whose business is transferred and part of whose business remains. In that case, in the coal industry the Treasury did not step in and take the money. What the Committee want to know is why it is that under these arrangements in regard to gas, electricity, and transport—the later nationalisation schemes—they wish to step in in this way.

I think that the clue is that which my hon. Friend mentioned in Subsection (5). If we are talking about the future, let us contemplate the nationalisation of steel. If at a future stage compensation is not based on the taking over on a share basis but on the value of the assets, as in the case of the coal industry, and if this Clause becomes law, then in future industry will have to pay the tax, whereas the coal industry in the past has not had to pay the tax, and that will be a very heavy burden on the transferor.

What I should like to hear is what is the principle behind this. Why is this distinction drawn, that where a man who happens to have been a coal-owner could be given the benefit of this tax relief, a man who happens to be a transport operator is not? If, in the future, a man happens to be a steel master, it looks as though he also will have to pay substantial tax at a time when normally the Treasury would not recoup itself. That is the point where the Solicitor-General—I think, unwittingly—misled the Committee in saying that the Treasury are not gaining anything out of this. They certainly are gaining a great deal of money under this, because the State is forcing people to transfer property which they would not otherwise have transferred. This is an important point, and I hope that the Government will make quite clear what is the principle behind this. In any event, let us have equity. Are the Government saying they were too generous in the past, and that they do not intend to be generous in the future? Are they basing their case on that argument? It would be a very fallacious one if they did. I think, with due respect, that the Committee are entitled to a clearer explanation than we have had so far from the Solicitor-General.

10.15 p.m.

I do not quite know why it has been accepted on both sides of the Committee that this is such an extremely complicated point. If I followed the remarks of the learned Solicitor-General correctly, he made exactly the same point as my hon. Friend the Member for the Edgbaston Division of Birmingham (Sir P. Bennett), and merely repeated the argument that industries which were taken over in their complete state, whose shares were transferred, were not liable to these balancing charges, and that, in fact, the balancing charges would only have to be paid by road hauliers, in the case of road vehicles, or private wagon owners. It is very remarkable that legislation should be brought in which benefits a coal owner in that particular case but leaves a man in another section of the community, whose business has been taken over by legislation in this Parliament, with this charge upon him. It is an extremely important matter, but I cannot see that it is an extremely complicated one.

The fact of the matter is that a road haulier or a private wagon owner who has had his assets compulsorily transferred from him against his will has left on his hands, through no fault of his own, a very considerable balancing charge. I should have thought that either the Financial Secretary or the learned Solicitor-General could give a perfectly simple and straightforward answer to what is, I should have thought, a perfectly simple straightforward question. I think the Committee deserves an answer of that sort. I suggest also that it is rather curious that the learned Solicitor-General should have made the distinction between the Treasury gaining or the industry that has been taken over gaining. After all, the nationalised coal industry, or the nationalised electricity industry now belongs to the Treasury, and if there is a loss in the industry it must ultimately be borne by the taxpayer through the Treasury. Surely, they are one and the same; there can be no distinction. There is no need to complicate this issue by that sort of argument. In fact, it is a perfectly simple, straightforward point which has been quite clearly made, and I should have thought that a perfectly simple, straightforward answer could have been given.

And clarify it, if I can. In the case of the coal industry there was available a special scheme, which was embodied in Section 29 of the Finance Act, 1947. That was a scheme which had particular features, the main features being that both the coal owners and the National Coal Board mutually gave up a number of advantages, the value of which at that time was not fully ascertained. That was a separate scheme which had its own particular features. Then the contrast is drawn between the case of an industry which is taken over by means of the shareholders in the industry being bought out, and the case of an enterprise whose assets are bought over by compensation being paid for those assets at is only in the former of those classes of case that this Clause is to operate. In the case of an industry whose shareholders are bought out the State enterprise takes over the tax responsibility of that industry; in other words, it takes over the balancing charge.

In the case where compensation is paid for the particular asset which is taken over, a balancing charge remains, as a matter of logical necessity, to be paid by the enterprise whose asset is bought out; in other words, it is an ordinary sale.

It is an ordinary sale as well, apart from that. [HON. MEMBERS: "No."] Certainly it is. I have the authority of the right hon. Member for the Scottish Universities (Sir J. Anderson) for saying, as he did, during the Debate on the Income Tax Act, 1945, that so far as the imposition of a balancing charge is concerned there is no logical reason why a distinction should be drawn between a compulsory sale and a voluntary sale. The test in each case is whether the compensation in the case of a compulsory sale, or the price in the case of a voluntary sale, is higher than the written-down value of the asset which is taken over.

Under Section 18 of the Income Tax Act, 1945, if there is an ordinary sale the transferor can set off that balancing charge against the new machinery which he buys. In other words, he can recoup himself. That is the difference between an ordinary sale and a compulsory purchase. In the latter case the man goes out of business and he cannot have the benefit of that Section.

The distinction is as the hon. Gentleman says, but it is a distinction of fact and not a distinction of principle. In the latter case that he mentioned, the previous undertaking ceases to exist. So far as the imposition of a charge is concerned, it is conditioned by the fact that the compensation or the price, whichever it is, is higher than the written-down value. What would happen if we did not pass this Clause is this: Under the terms of Section 60 of the Income Tax Act, 1945—I think it is—there being a takeover of this sort a notional sale is considered to have taken place. That Section provides that where there are circumstances in which a nationalised undertaking takes over the enterprise of a previous undertaking, each asset is considered to have passed upon a sale at the market price.

If we did not pass this Clause, that Section would operate and the law would say that, in the case of each particular asset, each piece of machinery which passes upon transfer by a notional sale, did so at the market price prevailing at the time. What would happen is that in each case one would have to ascertain the market price. Then there would have to be a balancing charge, assessed on that market price. Then the State enterprise, having acquired the asset at that notional market price, would be entitled to claim depreciation allowances, assessed by reference to that market price.

All we are doing is to say that such an arrangement would mean that we would have to value each and every piece of machinery. We would have to find out in regard to every asset transferred its market price at the time the enterprise was taken over. That would involve an enormous amount of work. It would be ex- tremely difficult to find out what the price would be. We say, therefore, that we will discard that idea of a notional sale and will assume that the nationalised undertaking takes the assets over at their exact written-down value. The result is that there will not be a balancing charge payable by the State enterprise, just as there would not have been one payable by the industry before it was nationalised.

If there had been a notional sale there would have been a balancing charge payable by the previous undertaking. Under the terms of the nationalising Act, the State enterprise takes over that balancing charge. We discard the idea of that balancing charge. We assume that the State enterprise takes over at the written-down value but gets less than the amount it would have otherwise got. It simply gets its depreciation allowances assessed by reference to the written-down value. In the long run, nobody gains anything. The State enterprise gets smaller allowances, but it does not pay any initial balancing charge. It is a matter of convenience. It is to avoid the interminable task of trying to assess the market value of every piece of machinery, which would be practically impossible.

Surely, nobody objects to the scheme that the nationalised industries should not have to go through the notional value procedure? The whole Committee must agree with that. All we are saying is that really two particular sets of the community so far are having the balancing charge levied on them. There is no point in justifying the Clause as it stands because everybody agrees with it.

The hon. and learned Gentleman was very kind just now in answering a question about this, and I now rise to thank him and to say that he has made the point perfectly clear. He can hardly expect me or any hon. Member to believe that the Treasury make a Clause of this kind merely to leave everything equal at the end of it. I have come to the conclusion that this is an extremely clever Clause, it is extremely well worded, and its sole purpose is the hiding in the future, by writing down values, of the appalling losses which will take place in Government industry. I am glad that the hon. and learned Gentleman has made that clear.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

CLAUSE 34.—(Railway wagons of National Coal Board.)

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

I shall be glad if I may have the following point elucidated. It is probably simple but the wording of the Clause is somewhat obscure, as so often happens in these long Finance Bills. Are we right in thinking that the object of this short and rather obscure wording is merely to remind us that a balancing charge should be paid in the case where wagons which are the property of the National Coal Board are transferred to the Transport Commission? It would appear to be a transfer of property and assets as between one nationalised industry and another. It seems to be a rather new point concealed in this rather difficult verbiage. I shall be glad if the Solicitor-General will confirm or deny that that is so.

Virtually that is the position. This is meant to deal with the acquisition by the National Coal Board of a number of railway wagons which belong to the nationalised colliery concerns. The National Coal Board took them over under the 1946 Act but at that time the wagons were held under requisition by the Minister of Transport by virtue of the Defence Regulations. Their day to day management was in the hands of the railway companies and not in the hands of the owners. Virtually what happened was that the National Coal Board, having kept these wagons for a period of a year, just passed them on. It simply acted as a means of transferring the wagons from the colliery owners to the Transport Commission. In those circumstances, it seemed rather unreasonable that the National Coal Board should be landed with the balancing charge and accordingly the object of the Clause is simply to wash out the National Coal Board and put the Transport Commission in the position it would have been in if it had taken the wagons over direct. That is really the object of the Clause. It is simply to simplify the process of legislation, and give reality to the position, namely, that the National Coal Board was only the nominal owner of the wagons.

10.30 p.m.

May I ask the Solicitor-General whether there will be any distinctive treatment in the matter of railway wagons owned by the National Coal Board and those owned by a private owner in respect of the question of the balancing charge? Will it not be the case under this Clause that the National Coal Board will escape any balancing charge but the private owner will have to pay one?

The Clause does not really make a distinction between the position of the private owners and the National Coal Board. The National Coal Board gave up certain rights under a general settlement and the colliery undertakings also gave up advantages, and it is difficult to draw an analogy since no precisely similar circumstances exist.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

CLAUSE 35.—(Widening of exemption for friendly societies and trade unions)

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

I would like to ask the Solicitor-General whether the annuity referred to in the Clause would be included in the income of the contributor who is required to pay the special contribution under the later Clauses of the Bill; and if this particular annuity referred to is income for that particular purpose.

That is hardly a question which arises on this Clause. It depends whether the particular industrial assurance society is carrying on an assurance business under the terms of Clause 49.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

CLAUSE 36.—(Amendment of agreement on double taxation in respect of British income tax and Eire income Tax.)

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

I should like to ask whether we are going to have an explanation of this Clause either from the Solicitor-General or the Financial Secretary.

All this Clause does really is to pave the way for the Second Schedule which contains an agreement—

I am very much obliged—it is the Ninth Schedule which contains the terms of an agreement which has been negotiated between Eire and this country. The agreement is one which follows two previous agreements relating to double taxation. Those two previous agreements set out the arrangements made between Eire and this country to give their respective nationals the advantages of double taxation relief in respect of Eire and British taxation. All that the Schedule does is this. It says that in the case of dividends from United Kingdom companies, if United Kingdom companies have already received double taxation relief in respect of Dominion Income Tax, one will substitute, under the previous agreements, the net United Kingdom rate for the British rate, the rate which one arrives at if one has taken into account the Dominion Income Tax relief accorded to the companies. It is a complicated agreement and deals with a limited type of income enjoyed by British nationals—it may be Irish nationals as it depends on their residence either in Britain or Eire—from companies who have already received Dominion Income Tax relief, and it says that in the case of that income the shareholder shall only be repaid at what I have described as the net United Kingdom rate of relief.

May I ask the Solicitor-General if the concessions or arrangements which are incorporated in this Clause are already in existence in relation to Dominion countries and to other countries similar to Eire, or is this peculiar to Eire?

This is a particular Clause which is part of an agreement which has been negotiated by different Governments. Different agreements have been negotiated between the British Government and other Governments than Eire.

There is a point which has worried me very much. That is whether this arrangement is between the Governments of the United Kingdom and of Eire. Eire is Gaelic for Ireland. I want to ask the Solicitor-General if this applies to Ireland or only to part of it. If the latter, why is Eire, which is recognising Jewry, not recognised in this agreement? It is a very important question.

It may be a very important question, but I am afraid it does not arise on this Clause.

I am obliged to the Solicitor-General for the explanation of what is meant by Clause 36 and the Ninth Schedule. It refers, as he has said, to complicated legislation, and it is very difficult to understand. I will just refer to the heading, which reads:

"Agreement between the United Kingdom Government and the Eire Government amending the Agreement of 1926 (as amended by the Agreement of 1928)."

I think that this is a case in which, for the benefit of people who want to understand it, the original agreement of 1926 might have been printed in the Ninth Schedule in its amended form as amended both by the previous agreement and now, showing the alterations in heavy type, as is sometimes done. I suggest for consideration that that should be done.

I thought the Solicitor-General was making some remarks which would be interesting if they were audible.

I am sorry. I should either have spoken or not have spoken. The original agreement was extremely long, and dealt with a great many matters. It would be impracticable to put it in the Ninth Schedule. The agreement was published as a White Paper, as such agreements usually are, as long ago as August, 1947. It would not be practicable to put it into the Act.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Part IV (Income Tax, Expenses Allowances, Etc.)

CLAUSE 37.—(Expenses allowances, etc.)

I beg to move, in page 26, line 27, to leave out from "Rules," to the end of line 29.

This Amendment is consequential upon a new Clause which is to be introduced, and which, I take it, I can deal with at present. It is in regard to the vexed question of expenses. To start with, I would like to make it clear that I and my hon. Friends who support me in putting forward this Amendment are entirely in agreement with the steps which are taken to deal with salaries which are disguised as expenses. There is no difference between us and the Chancellor of the Exchequer and those who are endeavouring to tighten up on an admitted evil which has caused great discussion. We agree that it should be dealt with, and dealt with effectively. But we would like to point out that the position as it is today is causing a considerable amount of discussion because of the difference which has existed in the past and because of the way in which the Revenue people have dealt with expenses, charging differently if under Schedule D—trade, or profession, or vocation—and Schedule E, which is employment. Under Schedule D, rule 3 (1) and (2), no sum can be deducted unless it is money wholly laid out for the purposes of the expenses of the trade or profession and this is much wider than the corresponding rule in Schedule E, where expenses must be wholly incurred in the performance of the duty.

This has resulted in substantial differences and anomalies between different individuals doing the same work. If an individual were engaged in a profession or vocation he would be allowed a wider latitude under Schedule D, than if he were employed under the stricter rules of Schedule E. We find the individual engaged in the profession or vocation is allowed to charge expenses such as professional fees and renewal of textbooks to keep himself up to date, whereas the comparable individual doing the same work in employment is not allowed such expenses. Under Part IV of this Bill the part dealing with expenses, these anomalies assume considerable importance, and we have put down the Amendment with the consequential new Clause to bring into line the two individuals and to remove the difference between the two Schedules. We are in entire sympathy with the tightening up of expenses, but we want the two brought into line.

I rise to support what my hon. Friend has just said. What would arise if our Amendment were carried, can be explained as follows. At the present time, the

Suppose a manufacturer said to a man he proposed to employ, or whom he was actually employing, as an accountant, "I will only employ you if you take a chartered accountant's certificate." That man would incur a considerable expense in qualifying as a chartered accountant. Would a tax inspector say that that was necessarily incurred in performing duties? There are a great many border-line cases of this kind in which we contend that the inspector is bound by the word "necessarily" and under this Bill he would have to interpret it in a very narrow way. We think that the intention of the Bill, and the purpose in the right hon. Gentleman's mind, would be quite satisfactorily carried out, and the rigidity which would otherwise be imposed upon the inspector of taxes would be eliminated, if our Amendment were accepted and the words "wholly and exclusively in the performance of his duties" remain.

10.45 p.m.

I hope that the hon. Member for Edgbaston (Sir P. Bennett) will not press this Amendment. As the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) knows, this is a hardy annual in debates on Finance Bills and I think that it has been proved beyond any doubt that there is good reason for the difference between the rules that are applied under Schedule E and those that are applied under Schedule D. In the one case the individual concerned is engaged in making a profit and must incur certain expenses, and in the other case, under Schedule E, he gets a fixed emolument, and, therefore, expenses wholly and necessarily incurred can be rigidly, or fairly rigidly, fixed. If the sheet anchor of this particular phrase, which it is desired to delete, were in fact deleted it would cause, I think, a great deal of trouble and a good deal of loss to the Inland Revenue, an illegitimate loss in my view. I do hope, as I have to resist it, that the hon. Gentleman will not press the Amendment. In no circumstances could we accept it in this connection.

I hope that the Financial Secretary has not said the last word on this subject. He said that this was a hardy annual. I do not think that is quite accurate. The question has been raised, it is perfectly true, during the past two years, but the necessity for raising it arose from certain action taken by the Government and I will explain, I hope, quite clearly, what I mean by that. I have on previous occasions called attention to the fact that, taking the two rules under Schedule E—Rule 9 and Rule 10—while it is perfectly true to say that the same formula applies under both rules, the procedure under the two rules has diverged quite widely. The words "wholly necessarily and exclusively" with which my hon. Friend the Member for Edgbaston (Sir P. Bennett) deals in his Amendment, are relevant.

Rule 9 is the rule applicable to ordinary employment. It is interpreted in the light of a number of decisions in the courts which go back over a long period, in fact to the time when the conditions, as the wording of Rule 9 rather indicates by reference to a horse, were quite different from those obtaining today. Now, in the application of Rule 9 the Board of Inland Revenue are very considerably hampered by existing judicial decisions. There are all sorts of decisions which make it difficult for them to apply Rule 9 with anything like the elasticity which is in fact applied under Rule 10. Under Rule 10 no question of an interpretation by the courts can possibly arise, because under that rule, which is applicable to a particular class of employment, employment paid for out of public revenue, the Treasury—not the Commis- sioners of Inland Revenue, not the Courts —have the last word.

The interpretation which has been applied by the Treasury—and I do not quarrel with it, because I think it is perfectly reasonable—is, in fact, substantially different from the interpretation which the Board of Inland Revenue have to apply to the corresponding Rule 9. For example, under Rule 9 the Inland Revenue have to deal with the individual case, and although in the individual case it may be true that expenditure is "wholly, necessarily and exclusively incurred for the purpose of the duties of the employment, unless it can be said that such expenditure would of necessity have to be incurred by every person in the employment or in that class of employment, they are not in a position to give relief.

Under Rule 9 the Treasury can deal with a class. It may be a very limited class. It may, according to the interpretation which has been adopted, be a class consisting of only one person.

I am sorry to interrupt the right hon. Gentleman, but, if I may say so, unless I am very much mistaken, he has completely missed the point. We are dealing here with the difference between the rules under Schedule D and Rule 9 under Schedule E—not Rule 10 which applies to the Crown Service and which, I quite agree, has been made by the Treasury for a special purpose.

It is not a rule which has been made by the Treasury, but a rule which is applied by the Treasury.

I am not missing the point at all. I am dealing with an Amendment which is concerned with an alteration in the wording of Rule 9. For the purpose of my argument, it does not matter whether the case for an alteration in the wording of Rule 9 can be based on arguments relating to Schedule D. I am dealing with Rule 9 which relates to Schedule E. I have made this point more than once before, and I am going to make it again. The same words are used in Rule 9 and Rule 10, but the interpretation of the words has diverged widely. When there was a question of applying Rule 10 in the case of the present Prime Minister, the then Chancellor of the Exchequer used an expression which does not appear anywhere in the Statute. He said that the justification for an allowance which was being made in that case—and I am not criticising what was done; we on this side of the Committee accepted it as reasonable—was that the allowance was necessary in order that the duties of the office might be discharged with dignity and efficiency.

I think that is a very good formula. It is a formula which, apparently, the Treasury were advised they could, in practice, apply in interpreting Rule 10 which, by the Statute, was made a matter entirely within their discretion. It is certainly not the criterion applied under Rule 9. I say, with considerable knowledge, that so long as there is that divergence between Rule 9 and Rule 10, the Commissioners of Inland Revenue and their officers will be very gravely hampered in endeavouring so to interpret the law as to do justice without unjustifiable discrimination, which they cannot do now. One cannot differentiate between the principle which one applies in the case of a man who happens to be remunerated out of public revenues, and the principle which one applies in the case of a man who is remunerated out of revenues which are not public revenues.

My point is brought into especial prominence if one considers the case of people who occupy a somewhat intermediate position with which Parliament has been concerned in the recent past. I mean persons employed under statutory boards, set up by legislation passed recently by Parliament, whose remuneration, although in a sense derived from public funds, is not derived from public revenues in the strict technical sense of the term.

I have every reason for saying that in my view, unless by some suitable Amendment—this Amendment or some other—Rule 9 and Rule 10 are brought into harmony, one with the other, it will be exceedingly difficult in practice, if not impossible—I think it will be impossible—for the officers of the Board of Inland Revenue so to interpret the Income Tax laws that they can justify to the taxpayer the action they are taking on grounds of common fairness and justice. It is today more than ever necessary, with taxation at its high level, that the officers of the Board of Inland Revenue should be in a position to do that, for their success in their difficult and delicate duties depends all the time on their being able to secure the co-operation of the taxpayers. That they will not secure unless they are in a position to make it clear that the conditions they are applying are being applied justly and reasonably. I agree with my hon. Friend who moved this Amendment that there have been abuses which ought to be removed. I think it is absolutely essential, in order to assist the Board of Inland Revenue to remove those abuses, that the terms of the archaic provisions of Rule 9 should be revised in the light of the provisions of Rule 10 as they are, in fact, being applied by the Treasury. That is the point I wish to make, and I submit it in all seriousness.

I support what has been said by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson). I think the Financial Secretary to the Treasury was really unfair when he suggested that this was another instance of the hardy annual. The point is that expenses as a whole are being tightened up by this Bill and, therefore, we have to look very carefully at the arrangements which may have been all right in the past but which will not be all right in the future. Let us suppose that this Amendment is not accepted and that Rule 9, in all its strictness, is applied. Am I not right in suggesting that this is the sort of thing that will happen? Under Rule 9 at present a man cannot recover travelling expenses to his work—that is the result of one of the decisions—so that a director, who may be a professional director, if you like, a director of a number of companies, may not recover his travelling expenses if he lives in London and travels to these various companies in different parts of England.

This Clause also applies to anyone earning over £2,000. We may even get the case of a consulting engineer who has to go round to his work and who will not be able to recover the expenses of travelling from his home to those various places where his work begins. That must be wrong and I think that the Amendment would put it right. Take another case. Very often a man has to take a trip abroad for his firm. He starts off with the ticket which his company has bought him and a certain amount of money. Very likely, when he reaches the foreign countries, he draws some more money from the branch of his company overseas. So far as I can see—the Financial Secretary to the Treasury will answer me if I am wrong—he will now have to account for every penny which he spends on that trip and make it clear to the Income Tax people that it was necessarily incurred in the performance of his duties on that trip.

The hon. Member might just consider what that means in a foreign country. When a man travels abroad for his firm for a week, or even a month, and is paying out small sums of money, the normal thing is that when he comes back, just as a civil servant does, he gets a lump sum. Under Rule 10 the Treasury allow a civil servant who goes abroad so much a day, according to the country to which he goes. Now, that cannot be done under Rule 9. Hon. Gentlemen opposite really ought to appreciate the difference between Rule 9 and Rule 10.

My final point is this. Will the Financial Secretary tell us whether the expenses allowances for members of the National Coal Board are at the present time being dealt with under Rule 10? It would appear to us that that is the case. For example, I believe the Treasury agreed to a lump sum of £10,000 for the expenses of the members of the National Coal Board. Now, that could not be allowed under Rule 9. Therefore, the members of the National Coal Board are being treated as civil servants. Why should they be treated better than the directors of an ordinary commercial undertaking? I think we ought to have an answer to that question.

There is one aspect of this matter which I should like to mention, and it is one I have discussed with businessmen in all parts of the Committee, especially those who have returned from business trips abroad, or whose associates have returned from such trips. We have now moved quite definitely from a sellers' to a buyers' market, and wherever we go in different countries we are confronted with competition from American salesmen, Belgian salesmen—salesmen of every nationality. Those who have been out to different countries know that the allowance which is made is so meagre that in many instances our salesmen cannot compete at all. If, in addition to those restrictions, when they come back they have to prove every penny they spent in, say, Sweden, or if when they have to stay for an extra two or three days in order to land an important order they have to prove that expense to the satisfaction of the accountants, it will put a tremendous brake on our exports and sales abroad.

I make a plea to the Financial Secretary to consider that aspect of it. It is entirely wrong that we should end this Debate in a spirit of condemnation of expenses incurred in the selling of goods, either at home or abroad, because in most cases the expense is completely justified. There is no way in which expenses incurred in selling goods in, say, Nottingham today can be compared with the expenses incurred in selling goods in Edinburgh or Glasgow tomorrow. There must be elasticity in this or it will do a grave injustice and disservice to industry.

There is one point which I wish to put to my right hon. Friend, as shortly as I can. It is one which has not been mentioned yet, and I think it should be. There is considerable discontent amongst professional men and engineers in industry on this point. Take the case of an engineer who is a member of a professional body, such as the Institute of Mechanical Engineers or the Institute of Electrical Engineers. He has to pass an examination; but as soon as he stops paying the annual fee he ceases to be a member, and he might then lose his job. These men feel that under this arrangement they ought to be able to charge that fee against Income Tax. I really feel that if the right hon. Gentleman cannot give attention to the other points which have been raised, this is a real point concerning workers in industry who do not get a large remuneration and who feel they ought to be able to charge this real expense against Income Tax, and I hope he will give that matter attention.

I would draw attention again to the case of business men who make journeys abroad for trade purposes. Having received a chit from the Board of Trade they go to the Treasury, which gives them the allowance in foreign exchange they need for the journey. Having therefore received from two Government Departments a blessing on their journey as being necessary to the commercial lifeblood of the country, they are now brought into question by junior clerks, and have to put in a petty cash expenses account in support of a figure which had been agreed by the Board of Trade and the Treasury before they left. That is a ridiculous waste of manpower.

The hon. Member for Elland (Mr. Cobb) has given a good example of the sort of case which the right hon. Member for the Scottish Universities (Sir J. Anderson) has been talking about. The point surely is this: we are all agreed that these words "Wholly, exclusively and necessarily" shall apply in any case, and the question is who is to be the judge of what is necessary. It is bound to be a subjective judgment, and for the moment there is this difference, that whereas under Rule 9 the Courts have ruled that contributions or membership fees to the society of engineers is not a charge which is necessary, and therefore it is not allowed to such a person, under Rule 10, if a civil servant is a member of such a society, then in the compilation of the average expenses for that class, since that is in the judgment of the Treasury, quite rightly, necessary for his holding the job—because he gets the sack if he ceases to be a member—it is allowed for the purpose of expenses in the Civil Service. The hon. Member has given a first-class practical example of the point. We are quite in agreement that it should be necessarily expended, but we want to have not only the same judge, but the same kind of judgment, so that you get a judgment covering the whole nation and not two sets of judgments.

In the intervention I ventured to make during the speech of the right hon. Gentleman I was trying to bring the Committee back to what I thought was the Amendment before it. As I understand the Amendment, it is in effect that part of the wording which now appears in Rule 9, Schedule E, should be deleted and the Rule applicable to Schedule D put in its place. I indicated earlier that to do that would be resisted by my right hon. and learned Friend as opening the door extremely wide, and that we could not agree to it for a moment. The difference between Schedule D and Schedule E is very plain. The expense incurred in making a profit in a business or profession under Schedule D is one thing. Expense incurred in the performance of an office for which you are paid a regular and fixed salary is quite another. Expenses legitimately incurred in the efforts to obtain a profit are one thing under the rules. Expenses incurred wholly, exclusively and necessarily in the performance of duties under Schedule E have meant and do mean quite another; if this were not so we should not be discussing the point now and some Members be seeking to assimilate the words. As I said, the Amendment would open the door extremely wide, and my right hon. and learned Friend cannot accept it for a moment.

It seemed to me that the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) gave his whole case away when he quoted the words of my right hon. Friend, now the Chancellor of the Duchy of Lancaster, when the arrangement was announced to the House affecting the Prime Minister's salary, when my right hon. Friend indicated that the arrangement was in part to keep up the dignity of the Office. I suggest that when he used that phrase, he was not relating it in any way to Rule 9 of Schedule E or even to Rule 10 of Schedule E but simply indicating to the House that that was one of quite a number of reasons why a certain part of that salary should not be treated as salary.

I was going on to say, and, if I am permitted, I will now say, that although that was so, I do not think it is conclusive evidence that the words used by my right hon. Friend were all the reasons why the change was brought within the ambit of Rule 10 of Schedule E—[HON MEMBERS: "It must be."]—My information is—I do not know whether the Committee know; I am sure that the right hon. Gentleman the Member for the Scottish Universities knows only too well because he has had a long experience both at the Inland Revenue and the Treasury and in various Departments —that the wording of Rule 10 of Schedule E is exactly the same as that of Rule 9.

It amounts to the same thing, and I am informed by those who have to deal with the working of Rule 10 that its application to those affected by it is exactly the same as the application of Rule 9 to those who come under Schedule E in ordinary outside occupations.

Will the right hon. Gentleman allow me? He has said that the application of Rule 10 to those to whom Rule 10 applies is exactly the same as the application of Rule 9 to those to whom Rule 9 applies. Leaving out of account altogether the only reason which the former Chancellor of the Exchequer gave in justification of the decision taken in the particular case to which reference has been made, I have to ask the right hon. Gentleman to say quite definitely whether the Treasury in applying Rule 10 have regarded themselves as bound by decisions of the courts taken in interpretation of what he said were the same words in Rule 9? My information is quite definitely to the effect that the Treasury have interpreted Rule 10 without regard to the relevant decisions of the courts under Rule 9 and to the established practice of the Inland Revenue under Rule 9. I know that to be a fact.

If the right hon. Gentleman knows it to be a fact, there is no need for me to answer his question. He has obviously made up his mind. I can only repeat that when he himself raised this on another occasion, I took the opportunity of inquiring whether it was as he stated, that Rule 10 was operated in a very different way from Rule 9, and I was informed that it was not so. Although the wording of the Rules are not entirely similar, the operative phrase about "wholly, exclusively and necessarily" does appear in both Rules. It may well be that the Treasury do permit a certain latitude, which perhaps is not permitted by some Inspectors of Taxes in regard to outside employment. Generally, it can be said, and it is my information, that the two rules are implemented in exactly the same spirit.

11.15 p.m.

I am very sorry to have to press this, but I speak from actual experience. When I was Chancellor of the Exchequer I had under Rule 10 to agree upon certain allowances which it was absolutely necessary to give to officers of the Crown who were serving in America, for otherwise it would have been impossible for them not merely to carry on their duties with dignity and efficiency, but to maintain their own livelihood at the same time. I can say as a fact that in the interpretation of Rule 10 for that purpose no regard whatever was paid, and there was no necessity to pay regard, to the decisions of the courts under Rule 9. Unless the administration of those two rules can be brought into line and made consistent so that they operate in the same way, the Inland Revenue will not be in a position in practice to discharge their functions with satisfaction to themselves or the taxpayers, with fairness to the revenue, or in a manner which conforms to the ordinary requirements of justice.

I think there was a general understanding that we should try to finish our deliberations at a certain point and not at too late a time this evening. Therefore I do not want to get drawn into an unprofitable argument which, so it seems to me in the light of what has been said already by the right hon. Gentleman and myself in reply, cannot be carried much further because he will obviously stick to his point of view, and I can only repeat what I have already said.

The illustration he gave, as I understood it, was that the individuals concerned went to the United States during the war and carried out certain duties. Rule 10 was applied, and in a fairly generous spirit, I believe.

I take it the right hon. Gentleman himself interpreted Rule 10, and he interpreted, as far as he could and in the light of his own judgment, in the proper spirit. In his view they were performing certain duties "wholly, exclusively, and necessarily," and I cannot see why they were not within the four corners of Rule 10, and as far as the spirit goes, within the four corners of Rule 9. I can carry the matter no further. I have no desire to burke dis- cussion or waste the time of the Committee. I know that the right hon. Gentlemen feels very deeply on this matter and it may well be that at some time the rules as laid down under the 1918 Act and its Schedules will have to be looked at, but I am here tonight to say, on behalf of my right hon. and learned Friend, that now is not the time and we cannot in any circumstances admit for one moment that it is possible to assimilate and to use the same yardstick for profits under Schedule D as is applied to expenses "wholly, exclusively, and necessarily" incurred under Rule 9, Schedule E.

If I thought there was any substance in the reply given by the right hon. Gentleman that illusion would have been dispelled by his closing sentence, because he gave us to understand that the differences between Rule 9 and Rule 10 were as the laws of the Medes and Persians, a matter of morality, almost of religion. He said one thing is one thing, and the other is another. That is the

lucid and conclusive argument he produced, but in the end he gives the whole thing away by saying that at some time or another these Rules may have to be looked at, but not now. That is the answer he gave last year to the hon. and gallant Member for North Portsmouth (Major Bruce) when he was asking for exactly the same thing. It might have been said last year that there was something in that answer but this year when we have the whole of this important section of the Finance Bill dealing exclusively with this question of expenses, if that is not the time to look again when is it ever going to be? We regard the answer of the right hon. Gentleman as wholly, exclusively, and I am afraid from my experience, necessarily unsatisfactory, and for that reason we certainly shall divide the Committee.

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

The Committee divided: Ayes, 259; Noes, 102.

Division No. 168.]

AYES.

[11.21 p.m

Acland, Sir Richard

Corbel, Mrs. F. K. (Camb'well, N W)

Grey, C. F.

Adams, Richard (Balham)

Corlett, Dr. J.

Griffiths, Rt. Hon. J. (Llanelly)

Adams, W. T. (Hammersmith, South

Cove, W. G.

Griffiths, W. D. (Moss Side)

Alexander, Rt. Hon. A. V

Cripps, Rt. Hon. Sir S

Guy, W. H.

Allen, A. C. (Bosworth)

Daggar, G.

Haire, John E. (Wycombe)

Allen, Scholefield (Crewe)

Dalton, Rt. Hon. H.

Hale, Leslie

Alpass, J. H.

Davies, Ernest (Enfield)

Hall, Rt. Hon. Glenvil

Anderson, A. (Motherwell)

Davies, Harold (Leek)

Hamilton, Lieut.-Col. R.

Attewell, H. C.

Davies, Haydn (St. Pancras, S.W)

Hannan, W. (Maryhill)

Austin, H. Lewis

Davies, S. O. (Merthyr)

Hardy, E. A.

Awbery, S. S.

Deer, G.

Harrison, J.

Ayles, W. H.

de Freitas, Geoffrey

Hastings, Dr. Somerville

Ayrton Gould, Mrs. B

Delargy, H. J.

Henderson, Rt. Hon. A (Kingswinford)

Baird, J.

Diamond, J.

Henderson, Joseph (Ardwick)

Balfour, A.

Dobbie, W.

Herbison, Miss M.

Barstow, P. G.

Dodds, N. N.

Hewitson, Capt. M

Barton, C.

Donovan, T.

Hobson, C. R.

Bechervaise, A. E.

Driberg, T. E. N.

Holman, P

Bellenger, Rt. Hon. F. J

Dugdale, J. (W. Bromwich)

Holmes, H E. (Hemsworth)

Berry, H.

Dumpleton, C. W.

House, G.

Beswick, F.

Durbin, E. F. M.

Hoy, J.

Bing, G. H. C.

Dye, S.

Hudson, J. H. (Ealing, W.)

Binns, J.

Ede, Rt. Hon. J. C.

Hughes, Emrys (S. Ayr)

Blackburn, A. R.

Edwards, John (Blackburn)

Hughes, Hector (Aberdeen, N.)

Blenkinsop, A.

Edwards, N. (Caerphilly)

Hughes, H. D. (W'lverh'pton, W.)

Blyton, W. R.

Evans, Albert (Islington, W.)

Hynd, H. (Hackney, C.)

Bowden, Flg. Offr. H. W.

Evans, E. (Lowestoft)

Hynd, J. B. (Attercliffe)

Bowles, F. G. (Nuneaton)

Evans, S. N. (Wednesbury)

Irvine, A. J. (Liverpool)

Braddock, Mrs. E. M. (L'pl, Exch'ge)

Ewart, R.

Irving, W. J. (Tottenham, N.)

Braddock, T. (Mitcham)

Farthing, W. J.

Jay, D. P. T.

Brook, D. (Halifax)

Fernyhough, E.

Jeger, G. (Winchester)

Brooks, T. J. (Rothwell)

Field, Capt. W. J.

Jeger, Dr. S. W. (St. Pancras, S.E.)

Brown, George (Belper)

Foot, M. M.

Jenkins, R. H.

Brown, T. J. (Ince)

Forman, J. C.

Johnston, Douglas

Bruce, Maj. D. W. T.

Fraser, T. (Hamilton)

Jones, D. T. (Hartlepool)

Butler, H. W. (Hackney, S.)

Freeman, J. (Watford)

Jones, J. H. (Bolton)

Callaghan, James

Freeman, Peter (Newport)

Jones, P. Asterley (Hitchin)

Carmichael, James

Gallacher, W.

Kenyon, C.

Champion, A. J

Ganley, Mrs. C. S.

King, E. M.

Cobb, F. A.

Gibbins, J.

Kirkwood, Rt. Hon. D.

Cocks, F. S.

Gibson, C. W

Lang, G.

Collindridge, F.

Gilzean, A

Lee, F. (Hulme)

Collins, V. J.

Glanville, J. E. (Consett)

Leonard, W.

Colman, Miss G. M.

Gordon-Walker, P. C.

Levy, B. W.

Comyns, Dr. L.

Greenwood, A W. J. (Heywood)

Lewis, J. (Bolton)

Lewis, T. (Southampton)

Paton, J. (Norwich)

Taylor, R. J. (Morpeth)

Lindgren, G. S

Pearson, A.

Thomas, D. E. (Aberdare)

Longden, F.

Peart, T. F.

Thomas, I. O. (Wrekin)

Lyne, A. W.

Perrins, W.

Thomas, John R. (Dover)

McAdam, W.

Plaits-Mills, J. F F

Thomas, George (Cardiff)

McAllister, G.

Poole, Cecil (Lichfield)

Thorneycroft, Harry (Clayton)

McGhee, H. G.

Porter, E. (Warrington)

Thurtle, Ernest

Mack, J. D.

Porter, G. (Leeds)

Tiffany, S.

Mackay, R. W. G. (Hull, N.W.)

Price, M. Philips

Tomlinson, Rt. Hon. G

McKinley, A. S

Pritt, D. N.

Turner-Samuels, M.

Maclean, N. (Govan)

Pryde, D. J.

Ungoed-Thomas, L.

McLeavy, F.

Pursey, Cmdr. H.

Wallace, G. D, (Chislehurst)

Mainwaring, W H.

Randall, H. E.

Wallace, H. W. (Walthamstow, E.)

Mallalieu, E. L. (Brigg)

Ranger, J

Watkins, T. E.

Mallalieu, J. P. W. (Huddersfield)

Rankin, J.

Watson, W. M.

Mann, Mrs. J.

Reid, T. (Swindon)

Weitzman, D.

Manning, Mrs. L (Epping)

Richards, R.

Wells, P. L. (Faversham)

Marquand, H. A.

Ridealgh, Mrs. M

Wells, W. T (Walsall)

Mellish, R. J.

Robens, A.

West, D. G.

Middleton, Mrs. L.

Roberts, Goronwy (Caernarvonshire)

Wheatley, Rt. Hn. J. (Edinburgh, E)

Millington, Wing-Comdr. E. R.

Ross, William (Kilmarnock)

White, C. F. (Derbyshire, W.)

Mitchison, G. R

Royle, C.

White, H. (Derbyshire, N.E.)

Monslow, W.

Sargood, R.

Whiteley, Rt. Hon. W.

Morgan, Dr. H. B

Scott-Elliot, W.

Wigg, George

Morley, R.

Shackleton, E. A. A

Wilkins, W. A.

Morris, Lt.-Col. H. (Sheffield. C)

Sharp, Granville

Willey, F. T. (Sunderland)

Mort, D. L

Shawcross, C. N. (Widnes)

Willey, O. G. (Cleveland)

Moyle, A.

Shurmer, P.

Williams, D. J. (Neath)

Murray, J. D

Silverman, S. S. (Nelson)

Williams, J. L. (Kelvingrove)

Nally, W.

Skeffington, A. M

Williams, R. W. (Wigan)

Neal, H (Claycross)

Skinnard, F. W

Williams, W. R. (Heston)

Nichol, Mrs. M. E. (Bradford, N.)

Smith, C. (Colchester)

Willis, E.

Nicholls, H. R. (Stratford)

Snow, J. W.

Wills, Mrs. E. A.

Noel-Baker, Capt. F. E. (Brentford)

Sorensen, R. W

Woodburn, Rt. Hon. A

O'Brien, T.

Soskice, Sir Frank

Woods, G. S.

Oldfield, W. H.

Sparks, J. A.

Wyatt, W.

Oliver, G. H

Steele, T.

Yates, V. F.

Orbach, M.

Stewart, Michael (Fulham, E.)

Younger, Hon. Kenneth

Paget, R. T

Stress, Dr. B.

Palmer, A. M. F

Stubbs, A. E

TELLERS FOR THE AYES:

Pargiter, G. A.

Swingler, S.

Mr. Simmons and

Parkin, B. T.

Sylvester, G. 0

Mr. Popplewell.

Paton, Mrs. F. (Rushcliffe)

Symonds, A. L.

NOES.

Agnew, Cmdr. P. G.

Gage, C.

Noble, Comdr. A H P

Amory, D. Heathcoat

Galbraith, Cmdr. T. D.

Odey, G. W.

Anderson, Rt. Hn. Sir J. (Scot. Univ.)

George, Maj. Rt. Ho. G. Lloyd (P'ke)

O'Neill, Rt. Hon. Sir H

Assheton, Rt. Hon. R.

Gomme-Duncan, Col. A.

Orr-Ewing, I. L.

Baldwin, A. E.

Grimston, R. V.

Pitman, I. J.

Barlow, Sir J.

Hannon, Sir P. (Moseley)

Ponsonby, Col. C. E.

Bennett, Sir P.

Hare, Hon. J. H. (Woodbridge)

Poole, O. B. S. (Oswestry)

Birch, Nigel

Haughton, S. G.

Prior-Palmer, Brig. O.

Boles, Lt.-Col. D. C. (Wells)

Henderson, John (Cathcart)

Rayner, Brig. R.

Bossom, A. C.

Hinchingbrooke, Viscount

Roberts, P. G. (Ecclesall)

Bowen, R.

Hope, Lord J.

Sanderson, Sir F.

Boyd-Carpenter, J. A.

Howard, Hon. A.

Scott, Lord W.

Braithwaite, Lt.-Comdr. J. G

Hutchison, Lt.-Cm. Clark (E'b'rgh, W.)

Shepherd, W. S. (Bucklow)

Bromley-Davenport, Lt.-Col. W

Hutchison, Col. J. R. (Glasgow, C.)

Snadden, W. M.

Buchan-Hepburn, P. G. T.

Jarvis, Sir J.

Spearman, A. C. M.

Butcher, H. W.

Jeffreys, General Sir G.

Stanley, Rt. Hon. O.

Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)

Keeling, E. H.

Stoddart-Scott, Col. M

Carson, E.

Lambert, Hon. G.

Studholme, H. G.

Challen, C

Lennox-Boyd, A. T.

Taylor, Vice-Adm. E A. (P'dd't'n, S.)

Channon, H.

Lloyd, Selwyn (Wirral)

Thomas, J. P. L. (Hereford)

Clarke, Col. R. S.

Low, A. R. W.

Thorneycroft, G. E. P. (Monmouth)

Clifton-Brown, Lt.-Col. G.

McCallum, Maj. D.

Thornton-Kemsley, C. N

Crookshank, Capt. Rt. Hon. H. F. C.

Macdonald. Sir P. (I. of Wight)

Touche, G. C

Crowder, Capt. John E.

McFarlane, C. S.

Turton, R. H.

Darling, Sir W. Y.

Mackeson, Brig. H. R

Wadsworth, G

Davidson, Viscountess

McKie, J H (Galloway)

Ward, Hon G. R.

Digby, S. W.

Maclay, Hon. J S.

Wheatley, Colonel M. J. (Dorset, E.)

Drayson, G. B.

MacLeod, J.

White, Sir D. (Fareham)

Drewe, C.

Macpherson, N. (Dumfries)

Williams, Gerald (Tonbridge)

Duthie, W. S.

Manningham-Buller, R. E.

Willoughby de Eresby, Lord

Eccles, D. M.

Marshall, D. (Bodmin)

York, C.

Elliot, Rt. Hon. Walter

Medlicott, Brigadier F.

Young, Sir A. S. L. (Partick)

Fletcher, W. (Bury)

Molson, A. H. E.

Foster, J. G. (Northwich)

Morrison, Maj. J G. (Salisbury)

TELLERS FOR THE NOES:

Fraser, Sir I. (Lonsdale)

Neven-Spence, Sir B.

Major Conant and Major Ramsay

Motion made, and Question proposed," That the Clause stand part pf the Bill."

11.30 p.m.

I hope we can now have from the Financial Secretary an answer to the question addressed to him in the Debate by the hon. Member for Chippenham (Mr. Eccles) to which he did not reply. The right hon. Gentleman showed himself on the last Amendment a great champion of Rule 9 and, by the vote of this Committee, it has now been decided that Rule 9 is to be imposed upon the great mass of those engaged in industry. If he is to champion Rule 9 for them let the application be universal, and we want now an assurance from him that those engaged in the nationalised industries are to be treated on the same footing as those engaged outside. If it is to be Rule 9 outside let it be Rule 9 inside the nationalised industries as well. We are in some confusion upon this point. Questions were asked about the position with regard to the civil aviation companies, and the answer that I saw in that connection appeared to be perfectly satisfactory. That laid down, I thought, quite definitely that as far as civil aviation companies were concerned directors and employees were to be treated on the Rule 9 basis. But where I am in difficulty is that I cannot square that with some of the action that has been taken with regard to some of the other nationalised industries.

With regard to the National Coal Board, for instance, the Minister for Fuel and Power made an announcement earlier that he had allotted to the National Coal Board a certain global sum for expenses, and the distribution of that sum was to be applied by the Chairman of the Board. Well, I cannot—perhaps I can nave the attention of one of the Ministers—I cannot square that statement that the expenses of the National Coal Board are to be settled on the basis of a global sum at the discretion, apparently, of the Chairman with the application in all its strictness of Rule 9 for which the right hon. Gentleman has been contending. I should have thought that any form of global application of expenses was quite outside the strict administration of Rule 9. We on this side would like to have, in view of the uncertainty thus created, a categorical answer by the right hon. Gentleman that all directors and employees of nationalised industries will be treated in exactly the same way as he has laid down as desirable for those engaged in private industry.

I hope to meet the right hon. Gentleman's desire for information by saying that all the nationalised industries will be dealt with under Rule 9. A global sum allocated has really nothing to do with the Inland Revenue. It may be in an ordinary company that the directors might agree to give the general manager a global sum for use and distribution among his various employees, for entertainment or other purposes. Each would have to account to the Inland Revenue for what happened to it. The fact that the general manager does something does not bind the Inland Revenue at all.

Arising from the discussion which we had on the previous Amendment, I would like to make two points. Let us take the case of a firm of public works contractors with an office in a main centre like Birmingham or London, with a very large number of contracts spread all over England. In order to carry out their duties, the directors of that firm have to visit all their contracts periodically, perhaps once or twice a week. They would normally get their railway fares and various expenses paid. Am I right in assuming that those directors would have to make a detailed return of their expenses for those journeys which for many years past have been paid as normal expenses by the firm; or will the Inland Revenue apply the powers of Clause 41 which, if I understand them aright, give them the power to agree that those sort of expenses need not be returned in detail on their returns? It seems to me to be going far too far if those sort of expenses have to be shown on returns. I think it would be very vexatious indeed.

My second point is that nowadays there are many small firms doing business away from their offices, either abroad or in different parts of England, who adopt a policy of not getting directors in from outside but create directors from their employees. Let us take the case of a man earning £1,500 a year, who normally travels abroad for a firm doing a great deal of business abroad. That man is allowed so much by way of expenses for his journey. The firm with which I am connected sends a man abroad, and, of course, we do not keep sending him abroad unless the results are satisfactory. If we say to that man who is successful, "We will make you a director," it is obviously to his disadvantage, because whereas before he could be given a sum —whatever the Treasury would grant—to enable him to travel for so many days abroad, and detailed inquiry would not be made into what he spent, the moment he becomes a director he has to make an absolutely detailed return, and as I understand it, a far more strict scrutiny will be made of those expenses. Therefore, it is greatly to his disadvantage. There is now less incentive to an employee to become a director than there was before. [ Laughter. ] It is not the slightest' good hon. Members opposite laughing, because it is an absolute fact.

I think I can go further than my right hon. and hon. Friends in welcoming this piece of legislation. I have expressed that view on many occasions. I have held the view for a long time that to pay people large expenses is fundamentally unsound, not particularly because it deprives the Revenue of tax which it ought to get, but because it undermines the whole principle of business. It is thoroughly unsatisfactory in every way and leads to extremely unsatisfactory labour relations. It is one of the most unfortunate tendencies which have developed in industry. It is mainly due to the very high rates of taxation, and that fact must be borne in mind. Going as far as I do in supporting this Clause, I think there is a great risk that the provisions will go so far that they will prevent people from incurring quite legitimate expenses and will discourage them from going abroad and developing their business because of the trouble involved. I hope that in bringing in this piece of legislation, the Chancellor will watch that position, and will not spoil what I think is a most desirable arrangement, by making it too vexatious in particular cases.

I support what was said by my hon. Friend the Member for Oswestry (Mr. O. Poole). If we carry this thing much further we shall reach a stage where nobody will become directors of companies except solicitors and accountants, who will work for fees, and I think that is a practice against the public interest. This Clause and the Clauses which are to follow may, I think, be very difficult to administer, for this reason. Items classed as expenses are now to be treated as remuneration of the director or employee and will be assessable under Schedule E. Under the Income Tax Employment Act of 1943 all the emoluments assessable for tax under Schedule E will fall within P.A.Y.E. arrangements. That is to say, if a man spends5 on some expense, say, giving a lunch, it is now to be added to his emoluments. If he goes back and claims it from his business, the duty of the accountant in his business, if the man is subject to P.A.Y.E., is to make an elaborate calculation and pay him only the 5 less the tax. The man then has to claim the tax back from the Inland Revenue.

The Financial Secretary to the Treasury will say that that will not often occur because under Clause 41 it is possible for the Surveyor of Taxes to exempt certain classes of expenditure, as it were, with a blank cover. I would ask the Committee to notice that this is not a satisfactory way of dealing with this, because under Clause 41 there is no appeal against the classes of exemption which the surveyor may make. Furthermore, the surveyor can at any time revoke the exemption. Even when it receives an exemption, therefore, let us say for lunches at the Savoy Hotel, the business will still have to keep detailed calculations of those lunches in case, by any chance, the exemption is afterwards revoked, for there will be no appeal.

There are a great many business firms who have looked at Clause 37 and have considered that these expenses are now to be classed as emoluments under Schedule E and that P.A.Y.E. arrangements are bound to work, and I think we need a very clear statement from the Government on that point. There is one further small point. The last two lines of the Clause refer to: thing to the Minister of Finance—he would have to regard that as an emolument. What happens as the Clause now stands, it would appear to me, is that if such a sum of money passed either directly or in the form of a piece of jewellery, or something of that kind, it will become an emolument of the servant of the company who uses that means to get a contract. I know this is a delicate matter, but this great trading nation—the United Kingdom—cannot apply its standard of morality to trade in Ruritania.

11.45 p.m.

This is a very difficult subject because, on the one hand, we want to cut out the sharp practices, and on the other hand we very much want to keep that happy relationship in the collection of taxes between the Inland Revenue and the good, honest, straightforward taxpayer.

I want to ask the Chancellor of the Exchequer two questions arising out of what he has just said about the nationalised industries. I think one may say that there is a great need for comparable justice right throughout the whole community. Do I understand the right hon. and learned Gentleman to say that if there is a member of, say, the National Coal Board who is a member of some learned society, which is bound up with and part and parcel of his job, then because he is operating under Rule 9—and, as the hon. Member for Elland (Mr. Cobb) has pointed out, under Rule 9 a man is not allowed to charge such things in the expenses—unlike the civil servant he will not be allowed to have that as an expense?

My second question is rather like the first, and is this. From what the right hon. and learned Gentleman said in answer to my right hon. Friend just now, will it not inevitably follow, since these allowances for expenses are given and are then to be assessed back on actual expenditure, that there will always be some degree of tax payable on those expenses, except in the very, very rare and purely hypothetical case where the thing happens to balance out to the total of £10,000? That is to say, the whole of that £10,000 will not, in point of fact, go out in tax from expenses, but a good deal of it, or at any rate some of it, will, in effect, be taxed because it will be operating under Rule 9. The Chancellor will appreciate that if it were working under Rule 10 none of it would be taxed at all, because that having been done by the Treasury it is thereby, as it were, franked as a tax from expenses, and is, therefore, clear of all argument; whereas he is saying that in a nationalised industry each member will have to account for his amount of expenditure of that notional sum allotted to him as expenses. Therefore, some of it is really bound to come back unless the Chancellor is—undoubtedly unintentionally—deceiving us to that degree in his answer. Would he let us know the answer to that question?

I want to say a few words on this subject, because I found myself unable to support the Government in the Lobby on the last Division. While I am at one with my right hon. and learned Friend in wishing to cut out abuses, I do not agree with him on this point, for two reasons. First, because I think this proposal is impracticable; and secondly, because I think it will have a bad effect on the overseas trading effort of directors who travel abroad. May I, as a person who has spent practically the whole of his life as a commercial traveller and not as a politician, quote from my own experience? I started in life selling wax figures on which ladies' dresses hang; a very reputable trade. We were all grossly underpaid, and there was all sorts of jiggery-pokery with regard to expenses. There was a frightful row about people who used to charge their washing in their expenses, and a rule was imposed by the firm for whom I worked that washing was no longer to be charged. Washing was cut out officially, but I can assure the Committee that washing still appeared in the expenses. That is precisely what will happen if we go into too much detail on the whole question of travelling expenses and the like. That is why, in my view, it is impracticable.

Secondly, on the more important question of directors' travelling in the interests of the business, it is quite absurd to ask people occupied in that kind of work to keep specific and detailed accounts of what they spend. I have had practical experience of this for 20 years, and I am fully at one in stopping people being outrageously extravagant. Any managing director who is not capable of understanding what is extravagant and what is not ought not to hold his job, and that is all there is about it. My own experience has been that we shall not be able to get our most capable, reputable and experienced people to go abroad unless they are told: "Here is the scheme, here is the trip, here is what you are expected to do, here is my estimate of the cost, and I expect you to keep within that figure." That is the only way it can be done. If there is any effort on the part of the Government to indulge in detailed investigations of this kind, I can assure the right hon. Gentleman that what will happen is that competent and capable people will merely refuse to travel abroad.

I do not propose to be drawn or tempted into giving answers on specific cases about how the law would apply in this or that circumstance. That is always liable to misinterpretation, and someone is always liable to say, "In this case I was told there would not be such action." One cannot judge on a few general words. One must see the actual details of the case before one gives an opinion on it, which was in effect what the hon. Member was asking. So far as this Clause is concerned, it will apply to nationalised industries in exactly the same way as to any other. There is no exemption here for nationalised industries in any way.

In regard to what the hon. Member has just said, we do not take such a depressing view of the possibilities of stopping people from undue extravagance at the expense of the taxpayer, which is what is happening at the present time. We have not the remedy of getting rid of the managing director if he does not know how to run his staff. Maybe the hon. Member thinks that is what we should have done, but it does not come within the Finance Bill. We are taking what steps are possible by another route to achieve the same object, and we shall see within the next year what the results are.

What I said was meant to illustrate the general point relating to normal day-to-day expenses in the general conduct of business. There are hundreds of examples that could be given of the normal expenses that a director or his staff have to incur in day-to-day work, like travelling or going out to meals. Will the right hon. and learned Gentleman say if they will have to make a return of that?

There is the other point that was made, in regard to P.A.Y.E. I forget whether the right hon. and learned Gentleman was in the Chamber at the time. It does seem to us that there is a real administrative difficulty here. Where there is an expenditure for a quite proper purpose a person will get that refunded to him less P.A.Y.E., which will have to be claimed back later. Here is surely a great complication that was not foreseen by the Chancellor of the Exchequer.

I do not think so. Such a payment would not come into the code number, and would not be affected. It would have to be accounted for separately, and there would have to be a payment on it separately if it was payable. If it was not, there would be no payment. The claim is made at the end of the period, and a P. A.Y.E. code number made at the beginning of the period would not take account of such payments.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

CLAUSE 38.—(Benefits in kind to be taken into account.)

The following Amendment stood upon the Order Paper in the name of Sir P. BENNETT:

In page 27, line 3, after "nature," to insert:

"not being benefits relating to retirement benefit schemes, saving schemes or hospital and sickness schemes."

In view of the Amendment to be moved by the Chancellor of the Exchequer, which covers this Amendment, I do not propose to move my Amendment.

Amendment made: In page 27, line 19, to leave out "held," and to insert "used."—[ Sir S. Cripps. ]

I beg to move, in page 27, line 45, to leave out from "meals," to "for," in line 46.

This is a very small matter. The Amendment suggests leaving out the words: teen facilities for neighbours who cannot provide them themselves. They do it in their own organisation in order to help others. In other cases, a meal ticket is provided to enable meals to be obtained at a restaurant. We contend that these provisions should not operate in such circumstances.

We should be quite prepared to accept the substance of this Amendment, but not as drafted. If the hon. Member would agree to my moving a manuscript Amendment to page 27, line 45, to leave out "business premises of the body corporate," and to insert, "canteen," which we think is the best way to deal with it, that will cover his point.

I thank the Chancellor of the Exchequer, and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

I beg to move, in page 27, line 45, to leave out "business premises of the body corporate," and to insert, "canteen."

I am not quite certain whether this covers all the points which my hon. Friend had in mind. If the Chancellor will allow us to raise this matter again on the Report stage if we find that it is not quite satisfactory, we can accept this. I am not sure that he dealt with the question of meal vouchers which was raised.

This Amendment misses the point which we were considering. We had in mind the directors or the management having a luncheon and their staff going outside to a canteen in another works. The Amendment means that the expenses of the board-room lunch, or whatever it may be called, can never be allowed.

That depends on the circumstances, whether it is part of a canteen or not.

Some are on such a lavish scale that I am sure that the expenses would not be asked for. Others are on the same basis as part of the canteen. This is certainly not intended to cover a board-room lunch at the Savoy or Claridges or such places where boards sometimes have lunches.

Surely the Chancellor will agree that a lunch in the City where distinguished strangers from foreign parts are present is often a most necessary part of business? Why should that not be allowed?

That might be charged as a matter of entertainment, just as a lunch at the Savoy to distinguished strangers might be part of the entertainment. I am talking about the directors alone—

They can have it at their own expense. We do not wish to allow that standard of fun at the expense of the taxpayer.

12 m.

I think the Chancellor of the Exchequer in his Amendment intends to meet all the points we are putting forward, but I am not quite clear whether the system of meal tickets, where no canteen is available either in the neighbourhood or in the works concerned, is to be covered by the Amendment. Will a system of meal tickets be covered? I do not think it will, in the Amendment.

If an outside restaurant were used and part of it were set aside for ticket holders, it would be covered; but if it were a case of isolated meal tickets which could be taken to any restaurant over a large area, that, of course, would not be covered.

Is there some legal definition of what in fact constitutes a canteen, because this word is going into an Act of Parliament and someone will have to interpret it when expenses are submitted.

I do not think there is any actual legal definition of canteen. There may be under the Defence of the Realm Acts, where there is the provision of canteens by the Ministry of Labour. Certainly there is no definition in any tax Act. But I think the word is perfectly well known; it is a common word in the English language.

There is a case which is quite common, of firms providing meal vouchers for Messrs. Lyons' restaurants. Would they be described as canteens?

If it is a case of all the staff going to a particular Lyons, that would be covered. It would be the canteen the firm is using. But if isolated members go to this, that or the other restaurant, that would not be covered.

Amendment agreed to.

I beg to move, in page 27, line 47, at end, to insert:

"(5) The provisions of Subsection (1) of this Section shall not apply to expense incurred by the body corporate in or in connection with the provision for a director or employee himself, or for his spouse, children or dependants, of any pension, annuity, lump sum, gratuity or other like benefit to be given on his death or retirement."

This is in substitution for the first Amendment which was to have been moved by the hon. Member for Edgbaston (Sir Peter Bennett). I think what it means is perfectly clear, and that it is reasonable to exclude such provision.

Amendment agreed to.

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

Clauses 39 and 40 ordered to stand part of the Bill.

CLAUSE 41.—(Saving for certain payments and expenses.)

I beg to move, in page 30, line 24, after "no," to insert "material."

This again is a very small point. The Clause deals with the benefits which can be granted and it states that the surveyor must be satisfied that there is no additional taxation. The Amendment suggests that we insert the word "material," because it is practically impossible without detailed investigation for the surveyor of taxes to be satisfied that there is absolutely no addition whatever. The whole object is to prevent any detailed and careful examination and we believe that the word "material" would achieve the object which is intended in the Clause, whereas if it is left out it would not be achieved in the manner intended. The decision as to whether there is any material additional tax or not is entirely in the hands of the surveyor, and it is not open to the person whose tax is being investigated to dispute his tax in any way.

I quite appreciate the hon. Member's desire, but I do not think that as a practical administrative step the word "material" would really be very helpful. One of the troubles of the word "material" is that a great many people will interpret it in a great many ways, and there would be a tendency both among inspectors and appeal commissioners to give a whole lot of different decisions. The intention of the Clause is that where there is a fair set-off of allowance against the sum paid, that sum need not be brought into the account at all. If it is a matter of a very small figure no one will pay any attention to it, but it is better to keep it on present lines, otherwise there will be administrative difficulties arising on what the word "material" means.

Amendment negatived.

I beg to move, in page 30, line 40, at end, to add:

"(2) Notwithstanding anything in the preceding provisions of this Part of this Act no sum shall be chargeable to income tax as income of a director or employed person by virtue of the said provisions when the aggregate of any expenses allowance and the value of benefits paid to or provided for the director or employee does not exceed fifteen pounds in any year of assessment."

The purpose of this Amendment is to try to meet to some extent the point to which the right hon. Gentleman has just been referring. It is designed to exclude from the complicated machinery of this part of the Bill small casual payments. payments made to someone, perhaps on a single occasion in a year to undertake some particular act of hospitality, or some particular journey. The limit which is fixed is £15, and that may seem to some hon. Members a curious figure, but the reason I selected it was that there was a precedent for it in the Finance Act, 1939, Sections 18 and 19. Expenses in those two Sections are specifically excluded if payments do not amount to more than £15 in the year covered by the return. It would save a great deal of trouble to the Inland Revenue and persons having to try to work this part of the Bill if some limit were fixed. This limit could not seriously damage the Revenue, and would as a matter of fact save a good deal of trouble to the Revenue and other persons concerned.

I quite understand the hon. Member's desire, but I think he will appreciate that if such provisions were made it would become automatic for everyone to have the £15 allowance. Obviously, if that is not to be accounted for in any circumstances it would be almost too great a temptation not to put in £15 anyway as a start. Moreover, an account would still have to be kept in the majority of cases, because the amount might come to more than It might come to in which case there would be no exemption. I do not think the Amendment would overcome the difficulties which the hon. Member has in mind. This again, as I said of the last Amendment, is a matter for sensible administration. If there is some very small sum of expenditure, for example, on office stationery on which it is calculated that during the year one has written so many private letters, that would be allowed. This could be taken into account in the administration and wholly excluded.

I am sorry to hear the Chancellor refuse an Amendment to the previous Clause and also this Amendment. Both were designed to avoid a lot of unnecessary work, or work which in nine cases out of 10 would not be necessary. The cost of this examination by the surveyors to satisfy themselves of the actual expenditure would probably be greater than the income. I should be glad if the Chancellor, with whose difficulties I can sympathise—and I do not want the 15 exemption to become automatic—would consider the matter further and see if there is not some way to eliminate this expensive work upon trivialities.

Amendment negatived.

Clause ordered to stand part of the Bill.

Clause 42 ordered to stand part of the Bill.

CLAUSE 43.—(Charities and non-trading bodies.)

I beg to move, in page 31, line 22, at end, to add "or to a local authority."

This Amendment is moved for the purpose of clarification. I am sure that it is not the intention of the Chancellor to include expenses paid either to members of local authorities or to, say, firms within the purview of this Part of the Bill.

I am obliged to the hon. Member for bringing my attention to this matter. The words in line 20 are, "any other body corporate," which of course includes a local authority, but there is, perhaps, some slight doubt whether, for instance, the water works department of a local authority would be a body corporate carrying on a trade. I shall have the matter looked into before the Report stage, and if it is necessary to insert words that local authorities' servants are not in fact to be included, I will insert the necessary words.

I beg to ask leave to withdraw the Amendment.

Amendment by leave withdrawn.

Motion made and question proposed, "That the Clause stand part of the Bill."

I am a little disquieted by the provision that this part of the Bill shall not apply to any body corporate established for charitable purposes only. I do not know whether the Chancellor would give us some examples of what charitable institutions would be exempt? I understand that the National Trust is a charitable institution. So far as I know it does not pay, or, if so, only in a minor degree. Are its officials to be allowed to ride high and handsome in regard to expenses? May we have some examples of what the Chancellor has in mind?

The noble Lord will appreciate that where an institution is run for charitable purposes, that institution is run by trustees, or persons of that kind, who look after the charitable funds. It is not thought that in these circumstances it is likely that there will be the sort of difficulties which would arise where there is a business or trade carried on. It would cover educational establishments, for instance, the universities, the public schools, and places of that kind. But the likelihood of this sort of thing happening is remote.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clauses 44 and 45 ordered to stand part of the Bill.

Committee report Progress; to sit again this day.

Agricultural Production

Motion made, and Question proposed, "That this House do now adjourn."— [ Mr. Joseph Henderson. ]

12.16 a.m.

I am very sorry to detain the House at this hour, but owing to the importance of the matter which I wish to bring forward, I must carry on even though it means detaining the staff and one or two hon. Members a little longer. I speak of the need for increased agricultural production in this country. On many occasions, Ministers of the Crown have emphasised the necessity for this increased production. The ex-Chancellor of the Exchequer has said that agriculture was the greatest dollar-saver which we had, and last August the Prime Minister, when he said he was rather disturbed about the economic situation, placed agriculture in the forefront of his speech; he said that increased agricultural production was essential. As a result of all this lip-service I think the nation very naturally expected that the increased production from agriculture would be treated as a battle operation. But, so far, the battle of words has finished with words, and nothing more.

May I suggest that the reason for the slowing down is that we have again been able to beg our daily bread from the great capitalist nation of the United States of America in the form of Marshall Aid. But some day the United States will get tired of giving us our daily bread. They will feel that it is about time we began to pull ourselves together and to produce a bit more of the food we are now begging. They have always been deemed by the party opposite to be a capitalist nation, and one hon. Member opposite has even described them as "shabby moneylenders." That is not the way to get them to give us increased aid and money. The opinion of many thinking men in this country is that this nation of ours is heading for disaster, and even hon. Members opposite have recently stated that, in their opinion, the Government are not treating agriculture as it should be treated; that it is not acting with the drive and urgency which should be apparent. The hon. Member for Chorley (Mr. Kenyon) said in the recent economic Debate that agriculture was not being treated with the urgency which it demanded, and he asked the Government to take more drastic action than they appeared to be wanting to do.

There are two forms of increased production to which I call attention. One is the increase of, shall I say, the "smalls," that is, bacon, eggs, poultry and so on—an increase which is only possible if feeding stuffs are available. Another form—I think the most important —is the bringing back into cultivation of the semi-derelict and marginal lands. I would like to make a suggestion. In these Adjournment Debates the Member responsible has to anticipate what the Minister is going to say and sometimes he does not guess right. It would be a much better Debate if ten minutes were given to the opener, ten minutes to the Minister, and five minutes to each of them to wind up. We should not then be guessing what the Minister is going to say. I want to anticipate what the Minister is going to say in reply to my statement.

In regard to feeding stuffs, I want to anticipate the Minister saying that we have purchased all the feedingstuffs that we can. If he has that in mind, I call his attention to what the Minister of Food said in the food Debate on 11th March: The Leader of the House also said in August:

It has been proved that there are feedingstuffs available in Russia and in the Argentine and we are not making any attempt to get them as we should. We have the commodities which both these countries want. We have coal and steel, which are the best means of barter in the world today, and yet we send that coal and steel to Holland to bring back goods which we do not want—luxury goods, hothouse strawberries, cherries, cucumbers, and all that sort of thing. We are sending coal and steel to Holland to bring back what we can produce and what we want to send to other countries to get feeding-stuffs.

There is another direction in which we can improve our output and that is by the development of our semi-derelict and marginal land. I do not know whether it is realised that there are 16 million acres of land in Great Britain still classed as rough grazing. I think I am right in saying that between the June returns, 1946, and the June returns, 1947, that acreage increased by something over 300,000 acres. That means that one-third of the agricultural land in this country is still classed as rough grazing. If we tackled a few million acres of that marginal land and rough grazing land and brought it into production, we should be doing a great deal more good for this country than by the millions of pounds which we are now pouring into Central Africa on what is a very problematical venture. Although those 16 million acres are not cultivable, several million acres of them are capable of producing, and I suggest that the Government should devote a few millions of the money which they are now sending abroad to the development of land which is doing nothing in this country.

I know that in answer to that suggestion it may be said that we have the hill-farming scheme. We have, but it should be realised that that scheme is operating to a very limited extent. It has been treated in a niggardly, half-hearted fashion. I would refer to a Question that was asked in the House recently by my hon. Friend the Member for Central Aberdeen and Kincardine (Mr. Spence) about the scheme in Scotland, to which the Under-Secretary of State for Scotland replied:

Not only is this the case in Scotland, but I have received several complaints from Wales. One instance concerns a friend of mine in Radnorshire. A friend of his put forward a scheme last July, and it was 10 months before the Ministry could make up their minds that they were going to turn it down because he was not farming according to the recognised practices of hill-sheep farming. This is a farm lying between 900 and 1,200 feet above sea level, and the sheep are entirely Welsh crossed; yet the scheme was turned down because he was not carrying on the recognised practice of hill-farming. I know of another case, of land 1,500 feet above sea level. The scheme was turned down because it was not comprehensive enough, and not enough money was being spent on it. The man wanted to lime and re-seed. The officials responsible wanted him to spend a lot of unnecessary money, and because he would not spend the money the scheme was turned down. That is the niggardly sort of way in which the schemes have been carried out in this country.

There are tremendous areas of land which are doing nothing at present. Experiments have been carried out by different people and enterprises in a certain amount of reclamation work. I know of one case of about 1,500 acres which have just been reclaimed near the Wash by some enterprising farmers. There is another case in Somerset, I think, where 4,000 acres of wasted land is doing nothing at all, and is waiting for a big drainage scheme to bring it back into production. I have mentioned only a few cases. There are thousands of acres of land which are being wasted in that way. The Minister has got his county agricultural executive committees in being. They should be given instructions that a planning survey should be made to see what is being done and they should report to the county committee. Any land which is not doing its job should be made to do its job.

I know this means that a certain amount of not very pleasant work would have to be undertaken. Farmers who are not doing their jobs may not like the activities of the district officers or their committees, but farmers must realise that they have the protection of the Agriculture Act. That Act takes away the big stick from the landlord, and it is now in the hands of the county executive committees. If farmers are not doing their job they have to make way for the young men who are waiting on the door step of the industry, wanting farms. I know some of my farmer friends will not be pleased at my saying this, but I have said it at several meetings and I am prepared to say it again. The Agriculture Act was never meant to protect the under-average farmer; it was meant to give protection to the man who is doing his job, and nothing else. The county committees will have to take a hand and to see that the land is really doing its job.

Another form of waste land in this country is the larger commons. In my own area, not far from my own farm, there are Zoo acres of common land doing nothing but grow bracken. In the middle there is an area fenced by squatters, growing grass and fruit trees, producing a lot of fruit, and yet all around is land not worth a shilling an acre. I know the Minister is vary chary about tackling the common rights. I say that these common lands have to be tackled. There is no reason why the common-holder should be allowed to neglect his lands any more than any other farmer. I suggest that these commons should be tackled, levelled, re-seeded and handed back to the commoners on the clear understanding that they must maintain these commons in a good condition. They should form a cultivation committee and the cultivation of the common should be carried on as any farmer carries on his farm, with labour supplied from a pool provided by the common-holders, and with artificial manures where necessary. I know these ancient rights are difficult things to tackle but it should be done in the interests of the common-holders.

There is a great deal more that I could say if I had the time. I want to impress upon the Ministry that there are many thinking men in this country who are becoming very frightened about the position. Marshall Aid will carry us on for a short time. That will come to an end. Farming is a long-term policy and we have to plan ready for the time when Marshall Aid finishes. Our export trade will never buy the food which is necessary for this country. The sooner we can increase our production of food and save the buying from abroad which is necessary at the present, the sooner we shall be able to feel that we are getting into a sound position.

12.33 a.m.

The Joint Parliamentary Secretary to the Ministry of Agriculture
(Mr. George Brown)

Nobody can complain if we spend time, even at this time of the morning, on a Debate on the need for the utmost urgency to be given to the business of producing all we can here at home. I do not complain of that at all.

I must say, in the firmest possible way, that I really was surprised at the manner in which the hon. Member for Leominster (Mr. Baldwin) opened his case. I really do not think we do any service at all to the industry we claim to have at heart, to our country, or to our friends across the Atlantic Ocean, by using phrases such as those used by the hon. Member for Leominster, suggesting that we have slowed down agricultural production at home because we are begging our bread again from capitalist America. It is untrue; it gives a very misleading impression abroad, it depreciates the efforts of the industry, it depreciates the efforts of the hon. Member's own friends, and it does great disservice to us, outside the shores of this land. Similarly with the statement that the United States would expect us soon to produce our own bread and not have to be given it. We are producing, here at home, from our own resources, very much more than we ever used to produce. Our industry is much more efficient and better equipped, and is well on top of the job.

However, there is room for argument, and I will deal with some of the points which the hon. Member quite rightly made, but I did first of all want to nail down that most unfair and, if I may say so with great respect, somewhat unpleasant misrepresentation of the situation here at home. When the hon. Member left that part of his propaganda and came to his attack proper, he said—I thought with a good deal of justification —that he thought there were two ways in which we might get increased production. One is from what he called "smalls," which I understand to mean pigs, poultry and things of that kind. I should like to draw his attention to the following figures. I will give him only two, because I have not a lot of time. The figures for breeding sows provide a very good indication of the extent to which we are increasing production. I take the figures as shown on our returns for 4th March this year, compared with a year ago. On 4th March, 1948, we had 80,000 more breeding sows than we had at the same time a year ago, which represents—

I must be given a chance to reply. I want to answer as many of the points as I can, and I have been left only 10 minutes. If I am to be interrupted I cannot deal fairly with the speech of the hon. Member, who took nearly 20 minutes to develop his case.

I am saying that in the year from 1947 to 1948 the number of breeding sows increased by no fewer than very nearly 45 per cent., or 80,000. The point made by the hon. Member was that this is a source from which we should be getting greater production. What I am now seeking to show is that, in fact, we are; in the last year we have had very considerable increases.

Would he compare the figures with those for 1939, of 11 million sheep, 2½ million pigs and 4½ million poultry?

As I have such a long case to answer I must in fairness ask that I be allowed to state the other side. The hon. Gentleman must allow me to develop my argument in my own way. I am not seeking to compare the figures with, 1939, because the point made by the hon. Gentleman was that this is where we ought now to be getting increases, and I am saying that this is where, in fact, we are getting increases; and we got them to the extent of 45 per cent. in 12 months. With regard to poultry, we are almost back to the pre-war figure. The poultry population in this country has increased by no less than 9 million.

United Kingdom at the moment. These two particular sources of increased production which depend, as the hon. Gentleman so rightly said, upon the supplies of feedingstuffs, are getting very considerably increased supplies, because more feedingstuffs are, in fact, available, particularly as a result of the Government decision to allow farmers to retain 20 per cent. of their coarse grains and their wheat, subject to the possibility that the wheat might be replaced by other coarse grains.

The hon. Gentleman went on to develop the argument about the supplies of imported feedingstuffs. He asked: why do we not buy all we want in the shape of feedingstuffs instead of buying bacon and eggs from Europe? That has been dealt with over and over again in this House. It simply is not true that we buy bacon and eggs when the alternative is feedingstuffs. That just is not true; and the Minister of Food and the Parliamentary Secretary to the Ministry of Food have dealt with that point over and over again. The hon. Gentleman went on to make the rather astonishing statement that feedingstuffs are available in Russia and the Argentine and that we are not making any attempt to get them. As it happens, a few days ago the President of the Board of Trade announced that the Government have made an approach to the Soviet Government to open negotiations that were expected to begin about now, with a view to concluding a new long-term agreement with that country; so it cannot possibly be said that we are not taking all the steps we can to get from that country the feedingstuffs that are available. Whether there are the large supplies the hon. Gentleman had in mind I am not sure.

He went on to say that we are sending coal and steel—which those countries need in return of feedingstuffs and so on —to Holland for useless luxury fruits, and not to Russia and Argentina. May I give two figures? The Trade and Navigation Accounts show that in the first four months of this year we sent Argentina 117,470 tons of coal, to a value of nearly £500,000, and iron and steel manufactures to the value of over £1,250,000. So we are sending to that country the coal and iron and steel manufactures which the hon. Gentleman said we ought to be letting them have. I did not arm myself with the figures relating to the Soviet Union, but it will be within the knowledge of everyone present that we are sending her considerable quantities of capital goods and other things that she needs. Our total imports from these two countries of feedingstuffs is about 2,000,000 tons, and it is the fact that we have got that amount which enabled my right hon. Friend to say on 25th March that we could at least maintain the present ration scales until 1949.

The hon. Gentleman made a rather loose and general remark about preferring to bring in useless luxury hothouse strawberries from Holland. Since he was kind enough to give me an idea of what he might say, I took the trouble to arm myself with the figures. In five months the total importation under this head gave the British public about one and a quarter pounds per head of imported vegetables and less than half a pound of imported fruit. I must point out that, if it is the doctrine of the Party opposite that one and a quarter pounds of imported vegetables and half a pound of imported fruit are useless luxuries which the British public ought to be denied, it is as well that that should go on record. I hope that in propaganda speeches outside they will make it clear that one of the controls they would impose is to refuse the public this modest addition to their present rather uninteresting and meagre diet.

The hon. Gentleman went on to deal with marginal land, and rather suggested that we were putting money into Colonial food production schemes rather than the development of marginal land at home. But this country depends more than any other on imported supplies of oils and fats; we depend on imports for 95 per cent. of our supplies. The groundnut scheme will make a contribution, when it is really going, of about 250,000 tons a year to our great need for oils and fats. It is not being done, as he so lightly said, to help Africa or Australia, but to get much needed additional supplies of these things for this country.

He spoke about hill-farming schemes being dealt with in a niggardly way. We are bound by the terms of the Hill Farming Act, and if a scheme is not for one of the purposes laid down, we clearly cannot issue grants under that Act. Giving subsidies when these are not directed to the purposes for which the Act was passed does no service to anybody, and does not improve farming and the state of the land in those areas. I have been out into the country and I have seen the schemes which have been conducted under the Hill Farming Act. I have seen what some county committees are doing, and I can tell the House that considerable work is being done. We are trying to speed it up. I confess quite freely that there has been some delay in approving schemes, but we have recently made arrangements so that urgent work can be done in advance of the actual approval of the scheme. I therefore hope that no work will be held up in that way.

The hon. Member for Leominster referred to common land. We are determined that our county committees shall take any land which can reasonably be taken without undue interference with commoners' rights and public rights of recreation and so on—which must be considered—and that it shall be brought into production, but obviously we have to measure the result which we shall get from those areas of land against the results which we might get from the same amount of machinery and labour and so on in other areas. Subject to that qualification, we are certainly doing what the hon. Member asked. In fact, the hon. Member failed to make out a single point that the appreciation of the urgency is not there. It is easy to make broad imputations—

The Question having been proposed after Ten o'Clock on Wednesday evening and the Debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Fourteen Minutes to One o'Clock.