House of Commons
Monday, June 7, 1948
The House met at Half past Two o'Clock
Prayers
[Mr. SPEAKER in the Chair ]
Private Business
CROMER URBAN DISTRICT COUNCIL BILL [Lords]
Read a Second time, and committed.
Oral Answers to Questions
Food Supplies
Imported Honey
asked the Minister of Food if, in view of the ample supplies of jam now available, he will allow imported honey to be sold off the ration, as it is no longer needed to supplement the jam ration.
No, Sir. Until sugar supplies improve we must continue to ration imported honey to secure fair distribution.
As honey was rationed in 1942 to supplement the jam ration, now that the jam stocks are considerable, how does the hon. lady account for its continuance, particularly in regard to honey for invalids?
The answer is quite simple. Honey is used as an alternative to sugar. Housewives use it for cooking, and manufacturers are very fond of using it instead of sugar, so that, if we took it off the ration, those people who manage to obtain it would be in a favourable position.
Could not something be done on behalf of invalids, to whom honey is a necessity?
would remind the hon. and gallant Member that home produced honey is de-controlled.
Could it not be put on points?
I will consider that. I think that the right hon. and learned Gentleman has made a very useful suggestion.
Monthly Bulletin
asked the Minister of Food the purpose of the monthly bulletin sent out by his Department, together with the basis of drawing up this report; the number of people engaged in this work; and the total annual cost.
The purpose of the monthly bulletin for women's organisations is to keep these organisations informed about the activities of my Department which are of interest to women; the contents are chosen accordingly. Compiling the bulletin occupies about 5 per cent. of the time of one officer, and the total cost is under £50 per annum.
Is the Minister aware that in the March bulletin food prices were shown at the present time, compared with 1921? Is he aware that it is a very misleading comparison, because no account was taken of the amount of money paid by way of food subsidies? If such figures are shown in future, will she see that a separate column is entered showing the amount of food subsidies, so that a true comparison can be made?
If the hon. Member looks again, he will find that that was the answer to a Question in this House. It is very useful to give these women's organisations, of which there are 34 in all, information which hon. Members acquire in the House.
But can the information be accurate? It is a misleading and inaccurate account in the March bulletin.
Beef (New Zealand Gift)
asked the Minister of Food whether he is aware that a gift of 3,224 lb. of prime beef was sent by the Fairfield Parents' and Teachers' Association, New Zealand, to Fairfield, Derbyshire, for distribution amongst the needy people of that parish; that this gift has been intercepted by his Department and taken into stock for issue in the ordinary way as part of the rations; that his Department have only offered in place of this gift to issue non-perishable foodstuffs at some unspecified date in the future; that his Department have expressed the wish to have discretion to include other areas if they deem the gift disproportionate to the size of the area selected by the donors; and whether he will instruct his Department to give effect to the generous intention of the donors of the gift in Fairfield, New Zealand.
The only practicable way to distribute gifts of fresh meat is as a part of the ration. This is known to the Government of New Zealand who, I am informed, explained the position to the Fairfield Parents' and Teachers' Association before their gift was sent. The poor and needy of the parish of Fairfield regularly receive their share of presents of food reaching the Overseas Gifts Centre from other sources, and for this reason we asked for, and received, permission to distribute a part in other areas, if the amount seemed disproportionate. As soon as arrangements can be made by my Department, however, Fairfield will be receiving a special allocation which will, I hope, compensate them for any present disappointment.
If it is the case that the hon. Lady's Department has received permission to distribute this gift in other areas, how is it that that information has not been given to Fairfield?
I understood that it had been.
My information is to the contrary.
Will the hon. Lady say by what right she interferes with gifts of this kind, when such food gifts are by no means the property of the Ministry of Food?
The hon. Gentleman has forgotten, or perhaps he does not know, that the cost of the transport of these gifts is borne by the British taxpayer, and that, furthermore, this meat comes out of the surplus which New Zealand has to export for the whole of this country.
Swedes
asked the Minister of Food how many tons of swedes and turnips he now holds at the latest available date, and especially, how many are lying in Sunderland, Tyne Dock and Blyth; and what was their total cost and cost per ton.
We have disposed of all the swedes we purchased and therefore no swedes belonging to my Department are lying at the places mentioned by the hon. Member.
Cannot the Minister say how many tons have been wasted or sold at a loss; can she say what was the total loss to the taxpayer on this transaction; and when will she realise that one of the main causes of our economic crisis is bulk purchasing?
I will answer those questions if the hon. Gentleman cares to put them on the Order Paper.
Is the Minister aware that wild allegations of the loss of food at dumps have been recklessly repeated by Representative Taber in the United States Administration, with disastrous effect on E.R.P.? Without asking for comment on that, would she make it plain hat large amounts of food have not been lost at dumps or allowed to rot away?
I would like to state categorically that no large amounts of food in this country have been lost. In fact, no more potatoes have deteriorated this year than in preceding years.
In order to clear up this matter, would the hon. Lady consider issuing a full statement about the potato question, particularly having in mind that in March the Minister stated that the position would be very tight, and three weeks later he took potatoes off the ration? Can that be explained fully?
I am afraid that is another question. This Question is about swedes.
Is not the Minister aware that, in a panic, she bought swedes and turnips because she said there was a shortage of potatoes, when there never was a shortage of potatoes?
Ministry Staff
asked the Minister of Food what reduction has been made in the staff of his Department consequent upon the termination of potato rationing.
None, Sir. No extra staff was taken on because of potato rationing.
Imported Strawberries
asked the Minister of Food what is the policy of his Department for this season in the purchase of strawberries from overseas; and what orders have been placed.
CATERING LICENCES GRANTED TO COMMERCIAL ESTABLISHMENTS AND REVOKED ON CLOSURE OF BUSINESS BETWEEN 16TH JANUARY, 1946 AND 15TH APRIL, 1948. Rural District. Licences granted (refusals in brackets). Licences surrendered. Net increase. 1946 1947 1948 (4 months). 1946 1847 1948 (4 months). Freebridge Lynn 2(1) 5(0) 1(0) 2 — — 6 Marshland … 7(1) 2(2) —(1) — — — 9 Docking … 11(0) 12(0) 2(0) 3 6 1 15
asked the Minister of Food how many new catering licences were approved in England and Wales during 1947; and what percentage of this number applied to rural district council areas.
The number of licences granted to catering establishments (excluding industrial canteens) in England and Wales during the 12 months ended 15th January, 1948, was 16,324. During that period 4,057 licences were surrendered on closure of business, resulting in a net increase of 12,267 establishments. The number of catering licences granted in rural areas is not readily calculated, and could only be obtained by extensive local inquiries.
Is the Minister aware that there is considerable dissatisfaction in these small villages about difficulty in getting a new catering licence?
The preceding Question asked by the hon. and gallant Member for King's Lynn (Major Wise) dealt with the number of licences which we have issued during the last two years to
Strawberries are imported on private account and no orders have been or are being placed by my Department.
Catering Licences
asked the Minister of Food how many applications for new catering licences were received and approved during 1946, 1947 and the five months ended 31st May, 1948, in the rural areas covered by the Freebridge Lynn, Docking and Marshland Rural District Councils, respectively.
As the reply includes a table of figures, I will, with permission, circulate it in the OFFICIAL REPORT.
Following is the information:
three villages, and the number is 30. From that I think that my hon. and learned Friend will agree that the rural areas have not been treated badly.
Will the Minister see if she can give as kind treatment to Northamptonshire villages as that given to Norfolk villages?
Potatoes
asked the Minister of Food what is the total quantity of potatoes re-exported during the past two months; and what loss has been incurred through such transactions.
No potatoes were re-exported during April. The Trade and Navigation figures for May are not yet ready, but I will gladly circulate them when they are available.
Is the Minister aware that a quantity of potatoes will need re-exporting from Yorkshire or otherwise they will go bad?
In view of all the bits of evidence which we are getting from various directions about the losses on potatoes, would the hon. Lady consider the suggestion of my right hon. and learned Friend the Member for Hillhead (Mr. J. S. C. Reid) that a full statement should be issued?
I am not denying that potatoes have been re-exported, but it would be improper for me to give the figures before my right hon. Friend the President of the Board of Trade has submitted them to this House.
Building Licences
asked the Minister of Food what applications for building licences have received the support of his Department during the period 1st June, 1947, to 31st May, 1948; and in which cases the applications, so sponsored, have received favourable consideration by the Priorities Sub-Committee.
During the year ended 31st May, 1948, about 1,700 applications for building licences for projects costing over £ 500 were supported by the Ministry of Food. In the bulk of these cases licences were issued by the Regional Licensing Officers of the Ministry of Works during 1947. Between January and May the Priorities Sub-Committee considered 18 cases submitted by the Ministry of Food for exemption from the ban on building announced in the White Paper on Capital Investment for 1948 (Cmd. 7268). Of these 18 cases, 16 were approved by the Committee.
Will my hon. Friend make available to the House particulars of the schemes that were submitted by her Department to the Priorities Sub-Committee indicating those which were unsuccessful?
I think that my hon. Friend will agree that this matter is confidential, but I will consider letting her have this information.
Bread Rationing
asked the Minister of Food whether he is aware that many firms, because of their failure to collect bread units from their customers, are bringing the law into disrepute; and whether, if the supplies of flour and wheat grains in the country so permit, he will consider suspending bread rationing for a trial period, in order to give the general public an opportunity to cooperate on a voluntary basis in avoiding the wasting of bread.
No, Sir. As to the second part of the Question, I would refer my hon. Friend to the reply given to the hon. Member for Evesham (Mr. De la Bère) on 10th May.
In view of the fact that the law in this respect is so often disregarded, would it not be better either to enforce the law or to suspend bread rationing?
I can assure my hon. Friend that the law is operating. During the last year we have had 171 successful charges for offences concerning bread rationing. I would like to remind the House that my right hon. Friend said recently that we shall abolish bread rationing as soon as it is prudent to do so.
Is it not the case that B.Us. collected by bakers are never counted by the Ministry, that that is a direct incentive to certain firms to break the law, and that it is done on a very large scale to the knowledge of the Ministry?
This time the right hon. and learned Gentleman is quite wrong. The local food offices are given directions to count a proportion of B.Us., and that is done.
If I put down a Question, will the hon. Lady give me the proportion of B.Us. which have been counted during the last three months?
Certainly.
Would the hon. Lady consider taking pastry off the bread ration, since it is generally recognised that there is no such wastage with pastry as may be the case with bread which, on occasions, is used for other purposes?
If the hon. Gentleman means cakes when he refers to pastry, I think that would be entirely wrong. It would simply mean that most of the flour would go to making expensive pastry.
Before any precipitate action is taken in regard to the removal of bread rationing, would my hon. Friend make it quite clear that there is a serious risk involved that, if it was rashly abandoned, thousands of loaves might be fed to livestock and the people's rations would be in jeopardy as a result?
I can assure my hon. Friend that that is precisely the reason why we are waiting before we take action.
Does not the hon. Lady agree that the position in regard to B.Us. is striking at the whole integrity of the rationing system and destroying the faith between her Ministry and the public; further, does she not realise that by carrying this on she is doing irreparable damage?
No, Sir.
Is the Minister aware that my Question specifically asked for a trial period in order to give the public an opportunity to co-operate in avoiding the wasting of bread?
I am afraid that we have learned in the hard school of experience that these voluntary schemes are not always successful.
National Butter
asked the Minister of Food what is the proportion of pure butter in the article sold as National Butter; and of what the balance is composed.
The Ministry issues only pure butter as defined by the Food and Drugs Act, 1938, for sale as National Butter. The second part of the Question, therefore, does not arise.
Would the hon. Lady say why this butter, if it is pure, flakes and breaks up when it is cut, which no pure butter ever has done up to now?
As it contains 86 per cent. butter fat, I cannot understand it. If the hon. and gallant Gentleman cares to send me a sample, I will have it examined.
I thought that the hon. Lady was not allowed to accept rationed foods.
Meat Offal
asked the Minister of Food whether he is aware of the difficulty of obtaining offal for human consumption at butchers' shops in Hunts; and what steps he is taking to overcome this shortage with a view to supplementing the meat ration.
Offals are distributed to all butchers throughout the country in proportion to the quantity of ration meat they receive. Huntingdonshire gets the same proportion as all other counties. All home-killed offals are distributed with the meat, and the Ministry is purchasing all available offals from overseas.
Is the hon. Lady aware that many people have become dependent upon offal for supplementing the meat ration, and that the quantity of offal available has diminished seriously in recent months? In order to prevent people from having to fall back repeatedly on fish, will she try to secure an improvement in the offal ration?
The hon. Gentleman must realise that if the offal was averaged over the whole population, each individual would receive ¾d. worth a week or, in terms of offal, 1 lb. of ox liver a year.
When will the Minister realise that if consumption is restricted production is restricted?
East African Groundnut Scheme (Land Erosion)
asked the Minister of Food what steps are being taken to prevent land erosion caused by large scale tree clearance in the Groundnut Scheme in East Africa.
The methods of avoiding erosion which have been developed in recent years, particularly in South Africa, in the United States of America and in Colonial territories have been applied in Tanganyika from the beginning of operations. As the answer is rather long, I will, with permission, circulate in the OFFICIAL REPORT a statement on the main measures being taken.
Following is the statement:
The arrangements are under the direction of a Chief Soil Conservation Officer who works in close co-operation with the Colonial Government Departments concerned. The groundnuts units are being sited in relation to the drainage and conformation of each region with a view to soil and water conservation. All clearing and agricultural operations are being undertaken along the contours, and windrows of bush vegetation are being left at suitable intervals. Any sloping land specially liable to erosion is being left under its natural vegetation. The crop rotations are being worked out with a view to building up fertility and avoiding erosion. A number of members of the field staff have already received courses of instruction in anti-erosion measures at the Witwatersrand University in South Africa.
Ice-cream (Price Regulation)
asked the Minister of Food what steps he proposes to take to deal with the persistent violation of the price regulations for ice-cream.
People who persistently overcharge are liable to have their allocations of rationed foods withdrawn.
Does not the Minister realise that the best way of dealing with the problem is to make more ice-cream available to the retailers?
I am afraid that the shortage of fats and sugar precludes that.
Sugar Beet Factories
asked the Minister of Food whether it is his intention to extend the number of sugar beet factories so as to handle a larger quantity of home-grown sugar than that grown on 400,000 acres as at present.
Under the Agricultural Expansion Policy the target for sugar beet has been fixed at approximately 400,000 acres annually up to and including the year 1951–52. The question of providing factory facilities to deal with the produce of a larger acreage does not therefore immediately arise.
If these two factors are associated, perhaps the Minister of Food would give a lead to the Minister of Agriculture to introduce more factories, and, in turn, to put more land into cultivation for sugar beet?
Wheat Stocks
asked the Minister of Food whether he can give the approximate stocks of wheat in the country today; and the relative figure last June and also June, 1938.
As I informed the hon. and gallant Member for Ludlow (Lieut.-Colonel Corbett) on 19th February, 1947, my right hon. Friend is only prepared to disclose our wheat stocks in the most exceptional circumstances. I am, therefore, unable to give the figures for which the hon. Member is asking.
Would the Minister state whether the quantity in stock today is greater or less than it was in the two years to which I have referred?
I am afraid the hon. Gentleman must study my previous answer.
Fresh Fish Supplies
asked the Minister of Food whether he is aware of the deterioration of fish between landing and retail distribution due to weather conditions and transport; and whether he will take action in order to ensure an adequate supply of fresh fish, particularly in view of the number of foreign visitors now in the country.
Nearly all fish is distributed inland quickly and in good condition. In hot weather, some fish goes bad on the journey, but good rail and road services are available for the transport of fish to most areas. My Department is always prepared to consider with the British Transport Commission any cases where deterioration has resulted from unsatisfactory transport. We expect good supplies of fish during the summer.
In connection with the last part of my Question, is the hon. Lady aware that the British Trawlers' Federation is offering to provide fish free to all competitors during the Olympic Games, and will she undertake to see that it is delivered in good condition?
I was not aware of that, but I am sure we are very grateful to the British Trawlers' Federation, and I will undertake to do as my hon. Friend asks.
Roads
Motor Vehicles (Hire-Purchase)
asked the Minister of Transport whether he will introduce legislation providing that, when a motor vehicle is subject to a hire-purchase agreement, the interest of the owner under that agreement shall be recorded in the registration book.
No, Sir. A registration book is not a document of title and cannot provide a record of legal ownership.
Is not my right hon. Friend aware that very great hardship is being caused to numbers of people who buy second-hand cars and subsequently find out that they did not belong to the apparent vendor at all, but to some finance company, and cannot he possibly make an exception to the general rule and indicate this by a simple entry at the time of registration?
That may be so, but, if I gave this responsibility to the licensing authorities, it would lead to very considerable difficulty.
Bus Fares, London
asked the Minister of Transport if he is aware of the high cost of bus fares charged by the London Transport Executive compared with other parts of the country; if, in view of the importance of cheap transport, he will call for a report as to the reasons for this; and what general directions he has issued to the Transport Commission on the policy of lowering fares.
In view of the responsibilities of the British Transport Commission under the Transport Act in regard to charges schemes, I have not issued any directions to them on this subject and I do not propose to ask for a report. The present level of London bus fares was authorised with effect from 9th February, 1947, after consultation with the Charges Consultative Committee, which had held a public inquiry. The average fare in London is only slightly over one penny a mile.
Is the Minister telling the House that he is satisfied with the present high level of fares in London; and could he also tell the House whether he believes that public ownership is proving advantageous from judging what is happening here?
Transport fares generally are below the average increase in the level of prices, and, as I have indicated in my reply, this was the subject of an exhaustive public inquiry, to which all users and consumer bodies presented their evidence. It was upon the decision of that inquiry that I based these charges.
May we take it from the Minister's reply that it is no part of his policy that bus fares in London should be higher than those in other parts of the country?
I do not think my policy comes into the matter at all. In the provincial areas, it is the licensing authority which examines, the evidence and the balance sheets of the bodies, and from these figures it is decided whether an increase should be made or not.
Has the right hon. Gentleman any authority to go beyond advising the Transport Commission as to increasing fares?
As I have already indicated, the British Transport Commission in this respect is charged with the responsibility of preparing charges. The scheme, when it is prepared, will go before the Transport Tribunal and every facility for public opinion to voice its views will then be prepared.
Is the Minister telling the House that in London there is a different system of determining fares from that in the provinces; that, outside London, this matter is decided on the balance sheets and accounts, and, in London, on a different basis altogether?
That is what I was indicating in regard to the connection with this Question, but the London Transport Executive was part of the controlled undertaking during the war and took over part of the responsibility from the Minister, and the latest increase was determined under that procedure. With the passing of the Transport Act, it becomes the responsibility of the British Transport Commission to prepare any revision of charges.
May I ask my right hon. Friend whether, in view of the desire of the Chancellor of the Exchequer that prices should be frozen, and since these prices enter very largely into the budgets of the workers, he will advise the Transport Commission that they should not raise their prices any further?
My hon. Friend entirely misunderstands the position. We are not discussing possible price increases: we are discussing an increase which was made in February of last year.
Carriers' Licences
27 and 28.
asked the Minister of Transport (1) the number of C licences issued during the first three months of 1948; and the increase or decrease this represents with the number issued in the first three months of 1947;
(2) the number of C licences issued in April, 1948.
As I indicated in my answer to my hon. Friend's Questions on 10th May, monthly figures of issues of carriers' licences generally are not available. Licensing authorities have however been keeping a running record of new C licences issued this year and I have obtained from them figures for the first three months which total approximately 16,300. Figures for April are not yet complete.
In view of the fact that the issue of C licences continues to increase, on top of the 100,000 or more increase in 1947, does not the Minister think that this is an undue expansion of C licences and represents transfers from A contract licences, and, possibly, A licences, and that the time has come to take some action in the matter?
I should not like to commit myself yet. As my hon. Friend knows, we indicated that we would watch the figures, but I certainly shall not take any action, or propose to take any action, until I have had a thorough and exhaustive examination into the reasons. At the moment, I am not in possession of any such information.
Would the right hon. Gentleman expand a little on what he means when he says he is not prepared to take any action yet? Does he mean that, if a private trader finds that he can handle his goods more effectively in his own vehicles, the Minister is going to take action against him to protect a State monopoly?
If I were to expand this matter, I think it would lead to the type of Debate we had on the Transport Act. I was replying to a supplementary question and my answer was related to that supplementary question.
Would not the Minister agree that there has been a certain uneconomic transfer to C licences for political reasons, and that that is a reason why he should take action now?
Would the Minister give careful attention to any advice he may receive from the Co-operative movement on this subject?
Consultative Committee
asked the Minister of Transport whether he is yet able to make a statement regarding the establishment of the Consultative Committee under the Transport Act, 1947.
I have now invited nominations for the Central Transport Consultative Committee for Great Britain from the national bodies representative of the interests concerned with a view to the early establishment of this Committee.
Is the Minister aware that in March he informed me that he was actively considering this matter? That is now three months ago. When may we expect that these committees will be set up? There is no doubt that the failure to appoint these consultative committees leads to difficulty in making representatives concerning transport.
I have just announced that I have taken steps to establish this Committee. It will now rest with the bodies concerned as to how quickly they submit their schemes to me.
Ferries (Report)
asked the Minister of Transport what action he intends to take on the recommendation made in the Ferries Report that all ferries connecting with trunk and classified roads should be treated as part of the highway unless, or until, a permanent crossing is made available.
The recommendation to which the hon. Member refers is of a long-term character, and the Report itself recognises that the immediate transfer of ferries to highway authorities would be impracticable.
Does the Minister realise that if this recommendation is carried out there will be a great advance in all such communications?
Yes, I certainly agree with the principle, without committing myself too far, but I would remind the hon. Gentleman that when this Committee was established it had to collect information on this matter because we were entirely devoid of information about ferries, their history and commitments.
Shipping
Passenger Service, Northern Ireland
asked the Minister of Transport whether he is aware that in Belfast and other places on both sides of the Channel queueing for sailing tickets between Great Britain and Northern Ireland during the July and August holiday period is already taking place; and whether he is still satisfied that adequate shipping facilities have been allotted to this service.
I understand that people are queueing for sailing tickets particularly for passages at the time of the Belfast July holiday. I am informed that the British Transport Commission and the independent lines will employ every available vessel this summer, including an additional ship which the independent lines are putting on the Liverpool-Belfast route next week. This service will then lift 1,400 more passengers each week than last year. I am advised that the services this summer should be adequate except at the peak holiday periods.
Why does the Minister allocate sufficient shipping to cross-channel steamers sailing to non-sterling currency areas so that passengers do not have to have sailing tickets, and permit only restricted services to sterling currency areas where people wish to spend their holidays, so that they have to queue for tickets?
I would correct the hon. Gentleman. It is not the Minister who allocates shipping in these cases.
Could not the Minister do something more to alleviate the agony of the all-night queueing in Belfast? Does not the Minister realise that it is even more depressing than all-night sittings in the House of Commons?
If the hon. Gentleman will read my reply he will find that in the opinion of those who provide the services, they are adequate except at peak hour traffic periods. The Northern Ireland route is not the only route which suffers congestion at peak hours.
Turn-round Time (Report)
asked the Minister of Transport whether he has yet received the report of the Working Party on the turn-round of shipping in the United Kingdom ports.
Yes, Sir. The report will be published in the next few days. I will arrange for a copy to be placed in the Library of the House.
Scandinavian Timber Carriers
asked the Minister of Transport under what conditions Scandinavian timber ships are chartered by his Department; and what steps he takes to see that these ships are not worked at a considerable loss, compared to rates charged by our own nationals.
A number of Scandinavian timber carriers have been taken up by my Department from time to time on normal commercial charters at market rates current for this type of charter for periods of about 18 months. They are managed on my behalf by British commercial shipping firms experienced in this class of trade, and are employed in importing into this country essential timber supplies, for which sufficient suitable British ships are not available. In the off-timber season, they are employed in carrying other essential cargoes at the same rates as those obtainable by British ships.
Is it not a fact that these Scandinavian ships are bringing timber from Hamburg to the West Country in some cases?
That seems to be another point. I cannot state exactly all the ports with which we are dealing from time to time.
Ministry of Supply
Depot, Broadwell (Canteen Facilities)
asked the Minister of Supply whether he is aware that a number of workers employed by the Ministry of Supply on the disposal of war chemicals and explosives at Broadwell, Forest of Dean, are without either canteen facilities or extra rations for heavy work; and whether he will take steps to secure that one or other of these alternatives is afforded to the men.
The isolated position and extensive area of this depot, which covers 30 square miles, have made it impossible to provide canteen facilities. I am informed by my right hon. Friend the Minister of Food that the workers at the depot do not come within the categories eligible for the special cheese ration. The depot will be closed by the end of the year.
Cannot the Minister do something to meet the plight of these men who literally have no canteen facilities at all
I am aware of that, but I am afraid there is nothing that can be done. It is not possible to provide canteen facilities, and that was known to the men when they were taken on.
Tractors and Farm Vehicles (Priorities)
asked the Minister of Supply what proportion of the output of British tractors, farm wagons and light utility vans is going to the export market and the home market, respectively; and what steps he has taken to give priorities for these vehicles to British farmers.
About 50 per cent, of the output of tractors, medium lorries and light vans is going to the home market. Wherever there is real difficulty in obtaining tractors, arrangements can usually be made through the Ministry of Agriculture for fanners to obtain early delivery of tractors for food production. Agriculture is one of the essential industries to which the motor industry is giving preferential delivery of commercial vehicles.
Is my right hon. Friend aware that many farmers in my own area find that the delay in delivery of these tractors and other farm machinery is as much as 18 months? In view of the vital need for food production, surely the period can be reduced considerably?
I very much doubt whether that can be true of tractors. I am rather surprised to hear that the delay in the delivery of commercial vehicles for farmers is as long as that.
May I point out that the Minister has not dealt with the last item mentioned in the Question—light utility vans—for which there is a very heavy demand by farmers? Can he give some idea of what steps he is taking to improve delivery of light utility vans?
I know there is a particular shortage of those vans, but the farming industry, together with other essential industries, is being given preference by the motor manufacturers.
Are there other industries more essential than farming?
No, but some are equally essential.
Is the Minister aware that in Devonshire it now takes longer to get a tractor than it did a year ago?
Is my right hon. Friend aware that in the case of utility vans, many farmers find that they get no priority whatsoever?
If they went into the matter, they would find that they do get priority, together with other essential industries.
Is the right hon. Gentleman also watching the spare parts position?
Yes, Sir.
Will the Minister go into this question himself, instead of putting the onus on the farmers?
I do not know whether the hon. and gallant Gentleman is suggesting that we should control the allocation of all commercial vehicles produced. We could not undertake that task.
Ministry of Works
Cement Supplies, North-East Scotland
asked the Minister of Works whether he is aware that there is still an acute shortage of cement in the North-East of Scotland; and will he greatly increase shipborne supplies.
I am aware that there was a temporary shortage of cement in the North-East of Scotland during May. Seaborne supplies of cement to Scotland have recently been increased, and the North-East area will receive its fair share.
While thanking the Minister for his reply, may I ask whether he is aware that when his Department were asked whether they considered that the ordinary laws of supply and demand should now operate, owing to the failure of the Department's distribution scheme, they replied that this was a reasonable interpretation of their views?
Is the Minister aware that the shortage is due not to a lack of ships, but to the fact that all the loading berths were taken up with ships loading cement for export?
I am not aware of that. The difficulty was to get the necessary ships.
Is the Minister aware that in view of the shortage of cement in Scotland, local authorities are asking for permission to make floors of timber in new houses? Would that have his support?
Central Office of Information (Premises)
asked the Minister of Works what office accommodation the Central Office of Information have in Baker Street, W.I; and what is the rent of these premises.
The Central Office of Information occupy two office buildings and part of a group of flats in the Baker Street area. These buildings have an area of 103,000 square feet, including storage space, and the total rent is £17,280 a year.
Is the Minister aware that there is a large window space which could be very useful for propaganda purposes facing Baker Street, that these windows are filthily dirty, that photographs are displayed there on faded, dusty, dirty beige, and that there is a lot of rust on all the structure? Is he further aware that this display is harmful to national prestige, but typical of Socialist mismanagement?
I am not aware of this, but I will look into the matter and see whether the hon. Member's information is correct.
Can the Minister tell us what the Central Office of Information is storing?
That is a question that should be asked of the Central Office of Information, when no doubt a proper answer would be given.
Do the premises occupied by the Central Office of Information include number 223B, Baker Street, once occupied by Mr. Sherlock Holmes?
Welsh Slate Industry (Report)
asked the Minister of Works whether copies of the Hibberd Report on the future of the Welsh slate industry have yet been sent to representatives of the employers and employees of the industry.
The Report as presented to me includes certain information obtained in confidence from individual firms. A version excluding this confidential matter is, however, being prepared and will be sent to representatives of employers and employees in the industry shortly.
Can the Minister say
It is my intention to do that collectively and individually in a few weeks' time.
Can the right hon. Gentleman tell me whether the Report covers only the Welsh Slate Industry or whether it covers the Cornish industry as well?
The Welsh industry.
Staff Accommodation, Edinburgh
asked the Minister of Works what steps are being taken to secure alternative accommodation for the staff of the Ministry of Food at present employed at the National Portrait Gallery, Edinburgh.
I regret that so far it has not been possible to find alternative accommodation for the staff of the Central National Registration Office now in the Scottish National Portrait Gallery. Unless alternative accommodation can be found in the near future I propose to erect temporary buildings to accommodate the staff now occupying the Gallery. No staff of the Ministry of Food is housed in the Gallery.
Can my right hon. Friend give any indication when this staff is likely to be moved?
That will depend on the speed with which the temporary office accommodation can be provided.
Does the right hon. Gentleman appreciate that on 22nd August the International Festival opens in Scotland and one of the attractions to foreign visitors is the magnificent collection of pictures which is not now available for them?
Would the right hon. Gentleman consider the desirability of abandoning the use of identity cards, which I fear very few people carry and which seem to be of little public use?
Is the Minister aware that there is a great deal of accommodation available in Holyrood Palace, and will he consider putting the Ministry of Food there?
Agriculture
Chief Officers (Salaries)
asked the Minister of Agriculture what are the salary and emoluments of the Chief Horticultural Officer. of his Department and those of the Chief Poultry Officer respectively.
The salary scale of the Chief Horticultural Officer is at present £1,420 to £1,600; and of the Chief Poultry Officer £1,150 to £1,470.
As there seems to be a disparity between these two sections of agriculture, is it the Minister's intention to bring them parallel?
As the hon. Member is aware, horticulture covers a very wide field, including specialist branches such as glasshouse production, fruit-growing, vegetable growing and flower production.
Soil Conservation, East Anglia
asked the Minister of Agriculture whether, in view of the importance of soil conservation he will conduct an investigation into the question of soil blowing in the Fen district and other parts of East Anglia.
Soil blowing is already receiving attention, and experimental work of various kinds is in progress which I hope will lead to more effective control.
Will the Minister consider that any experiments in soil binding which are taking place should be the responsibility of the Department and not left to the farmers themselves, in view of the great importance of this matter?
Experiments are now in progress at Cambridge.
Milk Regulations (Administration)
asked the Minister of Agriculture when his Department intends to take over the administration of the Milk Special Designations Regulations.
I hope within the next six months.
Arising out of that reply, does the Minister realise that the uncertainty among those at present responsible for carrying out these orders as to when they will relinquish their responsibility makes it very difficult for administration? For instance, they are uncertain whether they are justified in taking on more staff, and on other matters of that sort, and may I hope that a definite decision will be reached soon?
Foreign Workers (Pay)
asked the Minister of Agriculture why farmers are being called upon to pay higher wages for unskilled Polish workers than the British minimum rate for skilled British farm workers; and if, as this is unfair to farmer and farm worker alike and is creating dissatisfaction within the industry, he will have the terms of employment of Polish farm workers based upon British rates of pay and hours of work.
I would refer my hon. and gallant Friend to the reply I gave on 1st March last to the hon. and gallant Member for Henley (Sir G. Fox).
asked the Minister of Agriculture how many displaced European workers are employed under the Norfolk Agricultural Executive Committee in hoeing sugar beet this season; whether the men so employed are paid on time or piece rate basis; what are the average payments to the men per week; and the average acreage hoed per man to the latest convenient date.
The 360 European Volunteer Workers in the employ of the Norfolk A.E.C. are all on sugar beet hoeing. All are paid 90s. a week on a time-rate basis. The output of 260 of the workers is averaging about 1¼ acres per man per week. The remainder, who are recent arrivals are averaging about one acre a week.
Would it not be better to evolve a different system of payment so that the men's work could be more satisfactory, both from the point of view of the quality of the work and the amount?
I understand the quality of the work is reasonably good; it is only that they are newcomers to sugar beet lifting and it is their first experience. Based upon the normal hoeing rates, they would definitely earn more than 90s. a week by working longer hours.
Advisory Service (Cost)
asked the Minister of Agriculture what is the present strength of the National Agricultural Advisory Service and its cost in salaries; and what proportion of the personnel have practical experience as farmers.
There are at present 1,437 technical officers in the National Agricultural Advisory Service. The cost of salaries in 1948–49, based on an assumed average strength of 1,600, is estimated at approximately £950,000. Practical experience as well as academic training is normally a necessary qualification for all but specialist scientific and laboratory staff, but I could not say without making a special inquiry how many officers have had experience as farmers.
Water Supply Schemes
asked the Minister of Agriculture how many schemes for the provision of water to farmhouses and cottages have been approved under Section 5 of the Agriculture (Miscellaneous Provisions) Act, 1944; how many of the schemes approved have been completed; and what has been the total amount of the grants made for this purpose.
Connections to farmhouses and farm cottages usually form part of larger farm water supply schemes. I have no separate statistics that would enable me to answer the question in detail, but approximately 7,500 domestic dwellings have been covered by schemes approved for grant aid since the passing of the Act in 1944. Farm water supply schemes approved from July, 1941, to 30th April, 1948, number 27,642, of which 18,061 have been completed and approved for payment of grant approximating to £1,750,000. There is a considerable lag between date of completion of a scheme and date of payment owing to the need to submit claims and inspect the work.
Flood Prevention, River Trent
asked the Minister of Agriculture whether the proposed flood prevention works on the River Trent to the east of West Bridgeford, Nottingham, that were to be in the form of a cut to serve as a reservoir for flood waters, have been started; or when such work will be taken in hand.
The works have not been started, and could not be until the conclusion of certain preliminary negotiations by the Catchment Board. In fixing the starting date the considerations determining the level of capital investment permitted by present circumstances must be taken into account.
Can the Minister suggest the approximate date on which this will be commericed in this district?
I am afraid I could not do so at the present time. The Catchment Board are considering whether it will be necessary to promote a private Bill to facilitate the execution of the scheme.
Weeds (Spraying Machines)
asked the Minister of Agriculture whether, in view of the quantity of charlock in this year's corn crop, he is satisfied there are a sufficient number of spraying machines and supply of materials to destroy all annual weeds in corn and other crops to assist increased yields of crops per acre.
I am advised that there had been some local shortages of the new selective weed-killers this year, but that the supply of other types of weed-killers has been satisfactory. The supply of spraying machines is, in general, adequate.
Is my right hon. Friend aware that there is a great deal of charlock and other weeds in the corn this year, and that a much greater acreage has been sprayed with a view to destroying them and thus increasing the crop?
I agree, but charlock is no more plentiful this year than in a normal year, and there are more machines for spraying this year than we have ever had in the past.
Can the right hon. Gentleman say that there is still time this season to apply these selective weedkillers?
I am afraid it would be. useless at this point of time.
Hostel, Alne Hall
asked the Minister of Agriculture what is the number of the present staff employed at the Agricultural Camp at Alne Hall, near York; what has been the average number of agricultural workers in the camp during the last six months; what has been the cost of running Alne Hall and camp during the last 12 months; and what has been the total amount received during the same period by the Committee in respect of work done by agricultural workers accommodated at this camp.
The number of staff now working there is six and the average number of agricultural workers is 34. The cost of running the camp over the 12 months ended 31st March, 1948, was £4,600. The amount received by the Committee from farmers during the period of use as a hostel has been £1,520. These figures are, of course, not comparable. Farmers do not pay Committees for harvest volunteer labour, but pay the volunteers direct, and these pay Committees for their board and lodging.
Will the Minister investigate to see whether it is really necessary? It is highly uneconomic.
As the hon. Member is aware, I wrote to him on 24th May and informed him that this hostel was necessary at the moment. It is serving a very useful purpose. I can tell him—and he will be pleased, I imagine—that through this hostel no less than 11 new, permanent, regular agricultural workers have been obtained.
Building Licence, Hockwold
asked the Minister of Agriculture why the Land Commissioner has refused his approval to the application by Messrs. Peacock & Sons of Hockwold to build a new house for one of the sons seeing that all members of the family are fully engaged in agriculture and their farm is highly productive and both sons served during the War in the R.A.F. and the Fleet Air Arm.
My Department is not the licensing authority in such cases, but is consulted on their food production aspect. I am seeking full information about this particular case and will communicate further with my hon. Friend.
Is my right hon. Friend aware that the Assistant Land Commissioner for this area has made application and been provided with one of the council's agricultural cottages on his appointment? Will he not, therefore, deal more sympathetically with applications from those who have lived and worked in agriculture over a long period?
I understand that the Assistant Land Commissioner referred to has had considerable war experience—
So have these two.
—and has a wife and two children. My Department did not sponsor his application.
Water Scheme, Enborne Valley
asked the Minister of Agriculture if he has been consulted by the Metropolitan Water Board about the Board's scheme to flood 6,000 acres of the Enborne Valley in Hampshire and Berkshire; and if he will make a statement on the loss of food production which would be involved.
The answer to the first part of the Question is "No, Sir," but my Department would certainly be consulted, and the agricultural implications of the scheme would be fully taken into account, before any decision was reached. I am not at present able to make any statement on the loss of food production that would be involved if this scheme matured.
How does the right hon. Gentleman, who is responsible for food production, justify his detached attitude? May I ask him again to give the House these figures, because this is a very vital matter for those concerned, and for the country also?
I can assure the hon. Gentleman that I do not take a detached attitude towards this scheme. The application from the Metropolitan Water Board does not come to me, but goes to the Ministry of Health.
At what stage is the right hon. Gentleman consulted? Is there not a danger that the uncertainty will cause a certain amount of agricultural loss if he is to be consulted only at a late stage?
I understand that the scheme, in all its details, will have to be found to be satisfactory before application is finally made for this vast area to be taken out of agriculture.
But when will the right hon. Gentleman be consulted? At what stage?
I imagine, when the Minister of Health is satisfied that the technical details have been dealt with. Then the Ministry of Agriculture will be consulted.
Is the right hon. Gentleman aware that nobody locally has been consulted, and that there have been most deplorable consequences as a result of the lack of consideration?
There has been a good deal of publicity on this question, but so far, I repeat, my Department is not yet involved. Some other area also has been suggested. I could not say at the moment which of the two areas the Metropolitan Water Board has in mind as that which will cause the lesser loss to us of good agricultural land.
Is it not desirable that the right hon. Gentleman's Department should be brought into the discussions at the earliest date? The right hon. Gentleman will be put into a difficult position if other Departments accept the scheme and his Department, in this case the most important of all, rejects it. Cannot the right hon. Gentleman take action earlier?
I do not think this is the moment when the Ministry of Agriculture should be involved. These are only preliminary investigations which are taking place at the moment.
Playing Field, Yate (Release)
asked the Minister of Agriculture if he will arrange for the restoration of the playing field at Yate to the Yate Parish Council at an early date as there is no other place in the district that can be used by the children and the increasing population makes the need for this amenity greater than ever.
This site is being used as a camp for volunteers to meet the needs of farmers for supplementary labour. I hope to be able to release it after this year. The Gloucester Agricultural Executive Committee will be pleased to discuss with the local authority the possibility of making a part of the site available for the use of the children in the meantime.
Executive Committees (Accounts)
asked the Minister of Agriculture whether a decision has now been reached as to the publication of the 1946–47 income and expenditure accounts for the county agricultural executive committees.
Income and Expenditure Accounts were instituted, in times of great pressure when staffs were inadequate, as a preparatory step towards the preparation of full trading accounts, which present a more complete picture of the results of committees' activities. Trading accounts are being prepared for the current financial year and will be continued as a regular feature of the work of committes. These accounts will be audited by the Comptroller and Auditor General and published in the annual volume of Trading Accounts and Balance Sheets. In these circumstances I do not propose to publish the income and expenditure accounts for 1946–47 or 1947–48.
Do I understand from that reply that the full accounts of the county agricultural executive committees will be published county by county so that we shall all know what they are doing?
No. I did not say that.
If the right hon. Gentleman did not say that, why are these figures to be denied us? Can he confirm or deny, for example, that in the case of the Monmouth Agricultural Executive Committee they are only covering about 30 per cent, of their costs, and that the resulting loss is a costly and inefficient subsidy?
I think that if the hon. Gentleman will look at the answer I have given, he will find we are going just as far as possible.
Derelict Land, Monmouthshire
asked the Minister of Agriculture whether he is aware that no decision has yet been reached regarding an application made 12 months ago by the Monmouthshire Agricultural Executive Committee to take over 73 acres of derelict land belonging to the former St. Melons Golf Club; and what steps he proposes to take to gain early possession of this land for food production.
The proposal to take possession of this land under Defence Regulation powers was referred to the Dispossession Appeal Fund in February. The Fund did not recommend that immediate possession should be taken. On 1st March, Part II of the Agriculture Act was brought into operation, and the County Agricultural Executive Committee are now considering what action should be taken under these provisions.
Questions
State Forests (Rare Birds and Mammals)
asked the Minister of Agriculture if he will take steps to have the following birds and mammals, i.e., golden eagles, buzzards, kites, wild cats, polecats and martens, preserved in State forests in those parts of the United Kingdom in which any of the various species are found, in view of the fact that most of them are rare in Britain and none of them inimical to the interests of forestry.
There is a standing instruction on those lines throughout Great Britain.
Does the Minister realise that although cats figure rather prominently in the noble Lord's Question, this is not a party matter, and will my hon. Friend consider adding badgers to the list of animals to be preserved?
Is the Minister aware that farmers in Scotland do not want polecats or wildcats anywhere in the neighbourhood of sheep or lambs, and will he give an assurance that they will not be encouraged in Scotland?
The setting of traps for polecats is illegal throughout Great Britain and users are liable to prosecution.
Church Commission (Agricultural Cottages)
asked the hon. Member for the Park Division of Sheffield, as representing the Church Commission, what progress the Church Commissioners have made to date in their scheme for building 600 agricultural cottages on their estates in the North, Midland and Western areas.
The scheme of the Commissioners for building 600 cottages is still in the discussion stage, and in view of shortages of essential materials and labour, building must await the ability of local authorities to grant the necessary licences in their respective areas. The Commissioners are, therefore, pressing forward with an interim scheme for the erection as soon as possible of 100 timber houses for their agricultural workers in the areas referred to.
Will the hon. Gentleman accelerate his pressure also in the case of the scheme of the 600 houses? Seven months have gone by and nothing has been done at all.
Yes, Sir.
Members' Smoking Room (Superintendent)
asked the hon. Member for Walthamstow, West, as Chairman of the Kitchen Committee, what pension will be paid to Mr. Collins, Superintendent of the Members' Smoking Room, after 41 years' service as a servant of the House of Commons Kitchen Committee; and what attempts were made to find him alternative employment in the service of the House of Commons.
The Superannuation Scheme for the staff employed by the Kitchen Committee was commenced by the present Parliament, and has only been in operation for a short time. Mr. Collins is still about 12 years below the pensionable age of 65 years, and he has not been invalided out of the Committee's services and he cannot therefore draw pension under the scheme. The Committee has however agreed to make a generous money grant to Mr. Collins from a fund placed at its disposal through the generosity of a past Member of this House. Mr. Collins made no application to the Committee to find him alternative employment in the House of Commons, but wrote informing the Committee that he was leaving its service, and was taking up employment elsewhere.
Does my hon. Friend really mean to tell the House that a money grant of £200 after 41 years' service as a servant of this Parliament is a generous grant? Cannot he really make some arrangement for pension to be paid, considering also that Mr. Collins's father worked here until he was 83?
Mr. Collins is not the oldest employee of this House. Were we once to admit the idea that a man may leave the employment of the Kitchen Committee and go to other employment elsewhere, while we pay him a pension, no fund that I know of could stand the strain.
In spite of the fact that Mr. Collins, perhaps by inadvertence, has not made application for alternative employment under the Kitchen Committee, does my hon. Friend think there is no possibility of finding him employment suitable to his condition if he applies now?
Mr. Collins ought to make such application before we consider that.
Is it not a fact that a man who retires voluntarily at 54—before the minimum age of pension and without being medically unfit for work—would not receive a pension under any scheme on earth?
There is no scheme of which I know where a man who leaves his employment 12 years before his time would receive a pension unless invalided out of the service, which Mr. Collins is not.
Is the hon. Gentleman aware that, in spite of the unwillingness of the Committee to give Mr. Collins a pension, there is an appeal going out, as soon as the papers can be printed, to give every Member of the House and every Member of another place who was in this House during Mr. Collins' service an opportunity to acknowledge Mr. Collins' loyalty and devoted services?
Western Germany (Six-Power Conference)
The following Question stood upon the Order Paper in the name of Mr. JOHN HYND:
74. To ask the Secretary of State for Foreign Affairs whether the terms of the agreement reached at the London Conference with France and America and the Benelux countries on policy for Western Germany will be brought before the House before ratification; and whether the House will have an opportunity of debating the proposals.
At the end of Questions —
With your permission, Mr. Speaker, I will answer Question No 74. In his speech on 22nd January my right hon. Friend, in view of the breakdown of the Four-Power Conference, announced that an exchange of views on Germany would take place at an early date. The recent talks were conducted at meetings of delegations from the Governments mentioned, the results of which took the form of recommendations to Governments. These recommendations are now being considered by His Majesty's Government, and the other Governments represented, who have to decide whether to approve them. Any agreement to take action would not take the form of a treaty. It would not be subject to ratification. The question whether or not there should be a debate should be taken up with the Leader of the House. A communiqué dealing with the above recommendations is being published today.
Although the Minister says that this is not a treaty for ratification, is it not the case that before the agreement is implemented, a part of it requires to be ratified by the Parliaments of at least certain of the participants; and in view of the wide implication of the agreement and and tremendous interest which the House has shown on the question of Germany in the past, does not the Minister consider that a statement should at least be made to the House concurrently with the statement which we understand was released to the Press this morning; and when such a statement is made will the House have an opportunity of discussing it?
On the first point, while I cannot answer for the Parliaments of other countries, I understand that it is not necessarily the case that the agreement would require prior ratification by this Parliament. On the second part of the question, I think that there is a difference between the issue of the communiqué today, as I have indicated in my reply, and the approval of His Majesty's Government which still has to be given, and, therefore, I think that it would be more appropriate for a statement to be made when approval has been given than coincidentally with the issue of the communiqué.
May we take it definitely that when approval is given a statement will be made?
I have no doubt that my right hon. Friend will be prepared to make a statement in due course.
When consideration is given to this draft agreement, will attention be paid to the grave concern which has been aroused in France by this announcement, and the possibility of political turmoil in that country; and, bearing in mind the importance of close Anglo-French relations as the basis of any successful European policy, will the Government look at this matter very carefully indeed?
I would not like to comment on the substance of this matter in advance of my right hon. Friend's statement.
Is my hon. Friend aware that the question of a Debate was raised last Thursday with the Leader of the House, who seemed to be keeping an open mind towards the question? Can we take it that my hon. Friend does want this very important matter debated and that he will, therefore, reinforce our representations to our right hon. Friend?
That is a matter for my my right hon. Friend the Leader of the House, and I would not wish to commit him even to an open mind.
Socialised Industries (Questions to Ministers)
Perhaps the House will forgive me if I make a rather long statement.
I am now in a position to state the conclusions I have reached after careful consideration of the difficulties which have recently arisen with regard to Questions dealing with the nationalised industries.
May's "Parliamentary Practice," page 334, laws it down that Questions addressed to Ministers should relate to the public affairs with which they are officially connected, to proceedings pending in Parliament or to matters of administration for which they are responsible. Rule 26, at page 338, excludes Questions repeating in substance, Questions already answered or to which an answer has been refused.
The rule requiring Ministerial responsibility has had the effect of excluding a certain number of Questions about nationalised industries, but not very many since the responsibilities of Ministers under the relevant statutes are very wide, so far as obtaining information is concerned.
It is the rule against the repetition of Questions already answered, or to which an answer has been refused that has had the largest share in excluding Questions. The Government, in their desire not to interfere in the day to day activities of the Boards of nationalised industries, have by what might be termed a "self-denying ordinance" refused to answer many Questions on subjects which, by a strict interpretation of the statutes, might be held to fall within their responsibility. They are fully entitled to do so—that is a matter for their discretion. But such a refusal brings into action Rule 26 to which I have referred, and prevents the admission to the Question Paper of all future Questions dealing with the class of matters dealt with by the Question to which an answer was refused.
I have come to the conclusion that in the case of an entirely novel branch of administration, such as that relating to the nationalised industries, the strict application of this Rule might operate more harshly than either Ministers or Members generally would wish. I am, therefore, prepared to make a suggestion which I hope will recommend itself to the House, for the power of dispensing with its recognised rules belongs to the House alone and not to me.
I propose to leave the Rule which excludes Questions on matters outside Ministerial responsibility unchanged. But I am prepared, if it is generally approved, to exercise my discretion to direct the acceptance of Questions asking for a statement to be made on matters about which information has been previously refused, provided that, in my opinion, the matters are of sufficient public importance to justify this concession. "Public importance" is one of the tests for Motions for the Adjournment of the House under Standing Order No. 8, and in my experience it is not an unduly difficult test to apply.
One other condition, I think, is essential if this experiment is to succeed. The allowance or disallowance of Questions after the application of this test must be left to my discretion. I will not refuse to hear representations privately if good grounds are alleged. But I cannot allow my decision, once it is given to a Member, to be questioned or argued in the House.
I should like to add that, of course, it by no means follows that Ministers will be bound to answer any Question which I have allowed as being of "public importance"; that is their affair. In their case, considerations may arise of which I can have no knowledge.
I am sure that all quarters of the House will be grateful to you, Mr. Speaker, for the very careful consideration you have given to this matter, and for the trouble which you have taken about it. I should like to say that so far as His Majesty's Government are concerned, we are perfectly prepared to accept the decision you have reached, and to try out this new method of handling Questions on these matters.
We on this side of the House are most grateful to you, Mr. Speaker, for the trouble you have taken, and on any matter we should be only too glad that the decision should rest with you. But I must confess that I personally—I do not know whether the rest of my hon. and right hon. Friends were the same—found it a little difficult to follow the rather complicated statement, and to see exactly what effect the change would have on some of the kinds of cases raised in the past. It would appear that your discretion could not be brought into play until the same or a similar Question had already been put down, and information had already been refused by the Minister. For instance, under that rule we should not have covered the latest question on which we had some discussion, namely, the all-round breakdown of the electricity grid system on the Sunday before last. In view of the complexity of the matter, I am sure you will agree that it would be right for my hon. and right hon. Friends and I to consider the position and see what effect this has, and if we feel the necessity perhaps to bring any point to your notice.
I shall be very glad to consider any point right hon. Gentlemen on either side of the House choose to bring to my notice. I would say that I think the right hon. Gentleman has understood my statement wrongly. I admit it is complicated, but on a new matter such as the breakdown to which he referred, if a statement were asked for, whether it was the first time or not, it would pass the Table.
I thought the whole point was that it was put down and did not pass the Table.
Does your Ruling, Sir, give to Ministers any new discretion to refuse to answer Questions, a discretion which they would not have had in relation to Questions previously? Of course, they can still refuse to answer Questions on grounds of public security or safety, or other public grounds; but does your Ruling give them any new discretion to refuse, merely because this is a novel procedure?
I should like to join in expressing thanks to you, Mr. Speaker, for what you have done. But might I reinforce what has been said by the right hon. Member for West Bristol (Mr. Stanley), that this matter is rather complicated; and would you allow us to raise it again after we have had a further opportunity of reading what you have said, so that we can consider whether there is any other matter which we should like to put before you?
That seems to me an eminently sensible course, because it is a rather complicated matter. If any hon. or right hon. Gentleman wants to come and discuss it with me I shall be perfectly prepared to do so.
Would you, Mr. Speaker, be prepared to consider representations of this kind based on what you have said, in that some of us will find it a little difficult if the practice is to be changed without any formal alteration in the public Rules of this House? Some of us might be a little apprehensive that the mere reservation of this to the discretion of the Chair, without any formal alteration in the public Rules of this House, might tend to bring the Chair into public controversy instead of keeping it out. Would you be prepared to consider the possibility of altering the public Rules of this House so that we could see the basis upon which the Chair will work?
I have gone as far as I thought it was safe for me to go. It is not for me to change the public Rules of the House. It is for hon. Members to put down a Motion to change the public Rules. I have no authority for that.
Might I now give you notice, Mr. Speaker, of a point I should like you to consider when we revert to this question again? It is in reference to the learned Clerk's edition of Erskine May, page 334, from which you quoted, in which it is said:
" Questions addressed to Ministers should relate to the public affairs with which they are officially connected … or to matters of administration for which they are responsible."
If, as I understand the contention of the Government—a contention which has, to some extent, been accepted by you, although I do not criticise you for so doing—Ministers connected with the nationalised industries are not responsible for the administration, then in whom does responsibility rest? Surely, it is an extraordinary situation that in regard to vast industries, which are the property of the taxpayer arid nominally under the control of Ministers, the Ministers should not be responsible for answering Questions in Parliament? Otherwise, it means that a vast body of industry in this country is not responsible to anybody; not responsible to the shareholders, as it was in the old days, and not responsible to this House. I would ask you, Sir, with great respect—I know you will not misunderstand me when I say that I find myself in considerable disagreement with many of the contentions in your statement, grateful to you as I am for having made it—to give consideration to this aspect, which goes to the very root of Parliamentary democratic responsibility?
I join in the thanks which have been conveyed to you, Mr. Speaker, for having been so good as to give us guidance on this matter. I understood you to say that you were not proposing to alter the Rule which we now follow where a Minister says, "This is not my responsibility." But is that not the whole issue we are considering? Some of us feel that Ministers ought to be responsible, ought to accept responsibility, and ought to answer to the House—as, for example, in the recent case of the breakdown of electricity. That Question was refused at the Table when I tried to put it down. As I understand your statement today, that Question will continue to be refused on the same grounds. If that is so, I should think myself that the House might want to consider this anew, and I suggest respectfully that, rather than have one or two of us coming to you—which I understood you to say was a good idea, in reply to the right hon. and learned Member for Montgomery (Mr. C. Davies)—this ought to be considered on a proper basis, say by some all-party committee; or perhaps the Leader of the House could take some effective action in assessing opinion. I submit that this is really a very important matter, on which there ought to be official consultation, and which ought to be considered on the Floor of the House.
It is idle for the hon. Member to press me on that matter, which is one for the House itself. I have no power whatsoever in that respect.
In view of your statement, Sir, as I understood that your suggestion will require the approval of the House, may I ask the Leader of the House whether facilities will be given in order that your proposals—which I, personally, think will be welcomed wholeheartedly on this side of the House—may be considered and, I hope, adopted?
I think my hon. Friend had better examine Mr. Speaker's statement. As made, it appears to me to be a perfectly sensible solution of the problem. Of course, as I have said before, we have to learn in this matter as we go along; but I think it would be premature for me to commit myself to a Debate in the House. Mr. Speaker having carefully considered the matter, I am sure with fairness, it would be far better for us to examine the statement and hope—as I hope and believe—that it can work, with good will on all sides.
Will the Lord President of the Council consider reappointing the Select Committee on Procedure on this matter? That Select Committee met previously in this Parliament, and besides reporting on the major matter submitted by the Clerk at the Table, reported on a number of quite minor matters relative to this present question?
With respect, I do not think that would be an expedient course.
Would not the simple course be for us to examine the statement made and see whether it meets the wishes of the House, and, if it does not, for hon. Members to put forward a Motion to modify the Rules of the House? That seems to me to be the only way to deal with it.
Might I ask, Mr. Speaker, with respect, whether it is really very useful to quote Erskine May, because an entirely new situation has arisen? We now have these nationalised industries, as my noble Friend the Member for Horsham (Earl Winterton) pointed out, and if we cannot ask Questions of Ministers, then no one is responsible for the behaviour of these nationalised boards? I always thought that the first duty of Members of Parliament was to be guardians of the public purse; but if we cannot ask Questions, where are we? Are we to understand from your statement, Sir, that it is now you who will decide whether a Question is to be put down or not, and that it is not for the Minister to say, "I am responsible" or "I am not responsible"? That, as I understand it, was the position heretofore, when they got out of answering many awkward Questions by saying, "It is nothing to do with me."
May I ask you, Sir, when your statement begins to operate? Does it begin to operate after you have found out whether the House agrees to your proposals, or does it start tomorrow, for instance?
I think my proposal had better start to operate at once. Let us see how it works. In answer to the Question by the hon. Member for Orpington (Sir W. Smithers) regarding the matter of responsibility, I have taken that upon myself. I hoped that it would be helpful and acceptable to the House. It is an added burden for the Speaker but I willingly take it in the service of the House.
I do not know whether the answer you have just given to the hon. Member for Orpington was a considered one; if so, it removes any doubts which I had in mind about this proposal. If the proposal is that you shall decide whether a Question, because of its national importance, should be one for which a Minister is held responsible, that position is quite different from my understanding of your statement.
I thought that I was quite clear. If the subject appears to me to be of sufficient public importance, then I allow a Question; I authorise the Table to pass a Question to ask for a statement, whether it has been asked before or whether it has not. The decision, therefore, is mine. As regards the decision from the Minister, of course he may choose to answer or not to answer—that is his affair.
rose
Order.
Hon. Members are certainly not going to shout me down on a matter of such importance affecting the rights of the House. I ask you very respectfully, Mr. Speaker, to clarify the position. I understood you to say at the beginning of your statement—and I understood this to be the tone also of both the Leader of the House and my right hon. Friend the acting Leader of the Opposition—that time was going to be given to consider this question in view of its complexity, in order that there might be sought, through the usual channels or other ways, an expression of opinion on it. Now I understand you to say that the proposal is to be put into operation at once. I hope that your decision has not taken from any one of us the right, if he so desires, to object to this new departure, and that it will not be regarded as a reflection on the Chair if we raise the question again in a week's or a fortnight's time.
I think there are at the moment five Questions—one of them is from the hon. Member for Finchley (Captain Crowder)—which are being held up on the Order Paper. I think it is unfair to keep them waiting and the Minister waiting and, therefore, I want to authorise these Questions to be put to the Table at once. I think that is only fair.
While accepting that very reasonable suggestion, Mr. Speaker, may I ask that this should not be the final word on this very important matter. A great many other people have been giving consideration to this question and would like to put forward alternative proposals. Although we fully accept your Ruling for the present, we would like to have another opportunity of considering this matter and, in the meantime, of putting forward alternative proposals.
I feel that one of the most cherished and fundamental constitutional rights of this House is to venture, respectfully and temperately, to question a decision of the Chair upon any point affecting the rights of the House. With very great respect to the Chair, I think that that right has been exercised more sparingly in this Parliament than in any previous one. I understood you to say that you would not permit a discussion upon your Ruling in this matter. I venture to submit for your consideration Mr. Speaker, that it might be such a fundamental departure from our historic procedure as to raise an issue of very great importance, into which I would respectfully ask you to look further.
The hon. Member has put forward something which is entirely new. The Speaker's decisions in selecting Amendments are unchallengeable, as is his decision whether or not Questions are to be allowed at the Table. It is wrong that they should be argued in public with the Speaker, although they can be argued in private. That has never been done in the past. Recently we have something which is entirely new which I think would be an undesirable practice. I have allowed latitude twice because there was some uncertainty. I hope there will not be a recurrence.
There is one aspect, Mr. Speaker, to which I would ask you to give further consideration. As I understand it, the criterion upon which you are now acting is whether the question is one of public importance. For time immemorial it has been one of the principal functions of the House to give redress to private grievances. If public importance is to be the only test, will that not have the effect of removing that very important function of the House?
One is quite used to interpreting "public importance." We have Rule 8, which deals with definite matters of urgent public importance, which has never raised any great difficulties. I should have thought that the Speaker's judgment on that point might be accepted reasonably.
May we assume that nothing which has been said this afternoon will affect the rights of hon. Members to raise on the Adjournment matters disallowed as a Question?
The rights of hon. Members on the Adjournment will not be affected in any way whatsoever.
Orders of the Day
Finance (No. 2) Bill
Considered in Committee [ Progress, 3 rd June ].
[Major MILNER in the Chair]
>NEW CLAUSE—(Allowance for maintenance, repairs, etc.)
(1) If, either before or after an assessment to contribution is made, but in any case before such an assessment has become final, application in that behalf is made to the Special Commissioners, then in ascertaining total income and aggregate investment income for the purposes of this Part of this Act Rule 8 of No. V of Schedule A shall have effect as if, for all purposes thereof, for references therein to the cost of maintenance, repairs, insurance and management, according to the average of the preceding five years, there were substituted references to the said cost for the year ending on the thirty-first day of March, nineteen hundred and forty-eight, or such other date in the year 1947–48 as may be adopted by the owner of the land or houses with the consent of the surveyor of the district.
(2) For the purpose of ascertaining the last-mentioned cost, paragraph (5) of the said Rule 8 (which provides for applying the provisions of the Income Tax Acts as to claims for allowances or deductions and the proof to be given with respect to such claims, and for certification by the surveyor of the correctness of declarations by owners relating thereto) shall apply with the necessary modifications.—[ Mr. Glenvil Hall. ]
Brought up, and read the First time.
3.58 p.m.
I beg to move, "That the Clause be read a Second time."
This new Clause deals with allowances for maintenance, repairs and so on. Under the present Income Tax law, owners of property assessed under Schedule A are allowed to take into account the average cost over the previous five years of maintenance, repairs, insurance and management charges. It has been represented to the Government that this is an unfair basis to use in computing the aggregate investment income for the purpose of the Special Contribution and that it would be particularly unfair to those owners who have responded to the invitation to assist agriculture under the Agriculture Act, 1947, by rehabilitating their buildings and re-equipping the farms in their ownership. The valid point has been made that owning to the war, to shortage of materials and to lack of manpower, less than the average amount has been spent in this direction during the five years ending 1946–47. A much heavier expenditure has been incurred during 1947–48 and, unless owners are allowed to assess their expenditure on the basis of the last financial year, they will feel that an injustice has been done. The new Clause is, therefore, designed to permit owners to assess these allowances on the expenditure incurred by them in the financial year 1947–48, if they so desire.
4.0 p.m.
It will be seen that owners who wish to take advantage of these provisions must make application to the Special Commissioners before the assessment of the Contribution is made final. It might be argued that the assessment might be made before the owners have actually found out what their expenditure in this direction will be. I am, however, advised that it is unlikely that any of these assessments will be made before the last two months of the present year, and that there will therefore be ample time for owners who wish to take advantage of this Clause to determine what their expenditure for the last year, 1947–48, has been. Therefore, we think that the Clause will assist them, that the time given is adequate and that, when they come to elect, they will know where their advantage lies.
Subsection (2) is a piece of machinery to enable the claims for what should or should not be included as part of the cost during the period chosen to be assessed, decided and argued with the local inspector of taxes and not with the Special Commissioners. This is in accordance with general practice.
On behalf of my hon. Friends, I should like to accept the statement which the Financial Secretary has made, and to say that we welcome these new provisions, although, of course, we should have liked the Government to go further. We feel that there is a very good case to be made out for including any expenditure a landowner may have which is in excess of the Schedule A assessment. We appreciate that the Government have realised that owing to the war years it has been impossible in many cases to do improvements to estates until this last year and the year 1947–48, and therefore it will be of some assistance for owners to be able to claim on this year as the Financial Secretary has explained. It is a great improvement on the Bill as originally drafted.
Although I entirely agree with my hon. and gallant Friend the Member for Richmond (Sir T. Dugdale) that in certain cases this will mean an improvement, I hope that the Chancellor of the Exchequer will not think that it covers all the grievances there are on this point. I am pleased to see the Minister of Agriculture in the Committee, as we missed him very much in our Debates last week. He will inform the Chancellor of the Exchequer of the hill-farming schemes for maintenance and improvements which have been held up, not through any delay on the part of the owners or the tenants, but because of delays in giving approval, as a result of which there has been very slow progress. The effect of this levy will be that these schemes will be jeopardised unless some steps are taken to include the expenditure of all hill-farming schemes.
The difficulty is that the maintenance allowance for agriculture is not nearly so wide as the deferred repairs allowance which industry receives. If industries have their repairs and maintenance delayed through the unusual factor of war, they can put their money aside in a fund and get an allowance, but for some reason that has not been allowed in the case of agriculture. I ask the Chancellor of the Exchequer to look at this matter again. I admit that this is far better than merely taking the five-year period, but even in this last year a great deal of necessary maintenance and repair has been held up by the action of the Ministry of Works in refusing to grant licences. It is quite wrong that the money which would have gone into agriculture, had the Ministry of Works taken a different view, is now to be kept away from agriculture and put into the pocket of the Chancellor of the Exchequer.
Question put, and agreed to.
Clause read a Second time, and added to the Bill.
NEW CLAUSE.—(Provisions as to National Trust.)
(1) Where under a settlement any property (whether real or personal) was for the whole or any part of the year 1947–48 held upon trust for the National Trust subject only to a life interest of the settlor or to life interests of the settlor and his wife or her husband (whether jointly or in succession) any income arising from the property during that year or the part thereof in question shall be disregarded for the purposes of this Part of this Act:
Provided that nothing in this section shall affect the ascertainment of the amount of an individual's total income.
(2) In this section the expression "National Trust" means the National Trust for Places of Historic Interest or Natural Beauty incorported by the National Trust Act, 1907, or the National Trust for Scotland for Places of Historic Interest or Natural Beauty incorporated under the National Trust for Scotland Order Confirmation Act, 1935.—[ Mr. Glenvil Hall. ]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
The object of this Clause is to exclude from investment income, for the purposes of the Special Contribution, any income arising from property which is settled on the National Trust by a settlor who reserves a life interest to himself, or to his wife if she should survive him. Under the Bill as drafted, the income of the property would be treated as part of the tenant for life's aggregate invested income but he would be able, under Clause 56 (1), to raise a mortgage on the property for the purpose of paying that part of the Contribution assessed on him which was appropriate to the income from the property. In these circumstances, it might follow that, when the property came into the hands of the National Trust, they would be burdened with the mortgage. I think the Committee would desire that that situation should not arise, and this Clause is therefore proposed to obviate that risk.
The National Trust have asked me to express their thanks to the Government for this Clause.
May I also say on behalf of the National Trust that we are very grateful to the Chancellor of the Exchequer for what he has done in this respect.
While I am equally grateful to the Chancellor of the Exchequer for what he has done for the National Trust, may I ask why the National Trust alone has been picked out? Is it not unfair that some of the other charitable institutions which were mentioned the other night, such as the Bristol Orphanage, should not also be allowed to escape? I ask the Chancellor to look into this matter between now and Report stage with a view to including other institutions of a charitable nature, because I do not want the Chancellor to find himself in the position of having taxed institutions which it was his wish should not be included in this Bill.
I think it would be difficult to find a parallel to the National Trust. My own view is that this is carrying through a desirable change which will be a very valuable safeguard. As the National Trust for Scotland is affected, I think that there should be a word said from Scotland. I am interested in the National Trust for Scotland, and I think that the thanks of that body will certainly be forthcoming for this Clause.
I certainly do not dissent from this Clause, nor would I in any way discourage the work of the National Trust. The only comment I should like to make is that this Clause is necessitated only because of this extraordinary attempt to arrive at a capital levy by way of assessment of a man's income. We have here only one case out of many where a man is to be assessed on a capital which everyone knows he does not possess. In this case, because it happens to be National Trust, the Government have put it right, and I do not object to that. I only say that had it been possible for the Government to accept one of our Amendments it would have made unnecessary this and perhaps other concessions of this kind which the Government will be forced to make.
May I ask one question, which I hope is not very stupid? With regard to the statement made by the Financial Secretary, would it be possible in any circumstances for an individual to raise a mortgage on property which had been made over legally to the National Trust?
The answer is, "yes in certain circumstances."
What circumstances?
In the circumstances envisaged in the Clauses dealing with the Special Contribution.
Question put, and agreed to.
Clause read a Second time, and added to the Bill.
NEW CLAUSE.—(Easter offerings to be exempt from Income Tax.)
Easter offerings made to clergymen or other ministers of religion shall not be regarded as income for any of the Income Tax Acts for any future year of assessment.— [Sir P. Hannon.]
Brought up, and read the First time
I beg to move, "That the Clause be read a Second time."
This is what might be called a hardy annual on the Committee stage of the Finance Bill. In the past we organised deputations representing the various churches in this land to Chancellors of the Exchequer with a view to getting them to be a little more generous and considerate in this matter than up to the present has been the case in our public financial arrangements. I am fully confident that we shall be successful this time because the Chancellor of the Exchequer is such an outstanding exponent of Christianity in this country and he will be one of the first to support our position that this is one of the obligations which must be discharged by all those who make up the various Christian communities in this country.
I remember in days gone by a most highly respected Chancellor of the Exchequer, the late Sir Kingsley Wood, was approached by a number of us in this connection. He received us in a most friendly and kindly way, as he always did when receiving deputations representing various interests who were seeking concessions. We did not succeed, but in the present instance the Chancellor of the Exchequer can show to the world our recognition of the Christian churches in this country by accepting this new Clause.
These gifts are given voluntarily at Easter as part of the sums by which the sustentation of the church can be continued. Above all other questions coming before the Committee, nothing could more commend itself to Christian people than to make this concession to the various churches, who, in large measure, are dependent upon the contributions made at Easter for the continuity of their spiritual work. The Church of England, as the Established Church, has cerain other incomes under various schemes approved by this House, but in the other churches, as the Chancellor is aware, the spiritual work is dependent upon the contributions made voluntarily by their adherents.
No only at Easter.
I am dealing with Easter, because Easter makes a special appeal to the Chancellor himself. I am quite certain that he recognises that most of the special contributions being made at that time are given as an augmentation of the remuneration which clergymen receive for the continuation of the work of their office.
This question has repeatedly been before the House on the Finance Bill, and I suggest to the right hon. and learned Gentleman that he has now got an opportunity of showing how generous and kind he can be in the circumstances of the time. It does not mean anything substantial in the way of contributions to the finances of the country, and if the concession were made it would give great satisfaction to a large majority of people in this country who are engaged in the maintenance and continuity of the spiritual life of the nation. I appeal to the Chancellor, for whom I have the greatest possible regard, particularly for his views towards the Christian Churches in this country, to take this opportunity to show that he is prepared to make some concession in this respect.
4.15 p.m.
I should like to support the new Clause. I am sure the Committee will agree that my hon. Friend the Member for Moseley (Sir P. Hannon) has put forward a very strong plea for the clergy of our country. The Chancellor would be the first to admit that they are one section of our nation who have had little improvement in their standard of living in the last ten years. In fact, they have had none at all. Costs have gone up and in many cases they are running large rectories. They have a position to maintain in the eyes of their people and they have to provide for the education of their children. Altogether they are having a rough time indeed, and there is a strong case at this stage for this concession.
The concession will not be a big one in the aggregate. As I see it, if a company gives a bonus to an individual, at the end of the year he is taxed on that bonus, and quite properly too, but this is not a bonus. It is a gift, and if a parishioner sent £5 to a parson there would be no question of taxation on it at all. Surely if it is collected in a church it ought to be free of tax. I would ask the Chancellor to try to be generous on this occasion and give these men something to help them carry out their important work.
My hon. Friend the Member for Moseley (Sir P. Hannon) remarked that this was becoming a hardy annual, which I think describes the position correctly, because if my memory serves me right it was started in 1946 at 7.15 in the morning after an all-night sitting. I tried to get in but the Question was put about 9.15 a.m. I sincerely trust that the Chancellor on this occasion, considering the fact that we have started at a very reasonable hour, will approach it in a very reasonable way. I feel sure that he is fully aware that, as far as can be discovered when Income Tax was first introduced into Parliament, this money was never taxed, and that went on for 60 years. After all, 60 years is a very considerable time. I trust that the Chancellor will not come to the Box and argue that it is impossible to overcome the difficulties that would be introduced, for Parliament has treated this matter for 60 years as not being taxable, and if for such a length of time it could do so, it can do it again.
Here is a case where people on Easter Sunday—a day very dear to all our hearts—give a gift on which they have paid tax. It is a gift which, if it had been given privately, would not be taxed, but as an offering on the plate it has become part of the remuneration and is taxed. That does not appear to me to make sense, and I sincerely trust that the Chancellor will look at it not from the point of view of pure logic but as something far more important than pure logic—the point of view of the spirit in which those gifts are given to ministers of all Christian denominations. I do not wish to repeat the arguments which have already been put forward by my hon. Friends, but I support the new Clause most sincerely.
In a sentence or two I wish to support what has been said by my hon. Friends. This is a very real issue at present, and it is more acute now than when it was rised in previous years because of the rise in the cost of living and the static amount which is received by the clergy. I ask the Chancellor of the Exchequer not to be bound by what his predecessor has said on the subject. Although his predecessor was kindly and generous, he did not belong to one of the established Churches and therefore did not quite realise what Easter offerings are. Easter offerings are free gifts, and they are very important when the income of the benefice is very small. There is no obligation on the giver and there is no regularity about the gifts. I would add a personal note to the Chancellor. I and other hon. Members have been profoundly moved by his recent declarations about the importance of preserving a strong Christian ethic in the affairs of the nation. I would remind him that this is a great opportunity of putting right a serious inequity and of strengthening and supporting a class of men who render willing and cheerful service to Christianity.
Nobody in the Committee has a greater desire than I that these very hard-working and useful members of the community, the parsons, should receive adequate emoluments. It has been the custom, of course, in many denominations in the past that these people were paid entirely from voluntary funds. I suppose one can even say that of the Church of England itself, because the endowments were all in the first instance voluntary gifts by pious persons. It is obviously in the nature of the occupation that such persons as the clergy should be paid entirely by the voluntary gifts of the faithful. If they find themselves in a position in which they have not enough income upon which to live, the proper cure for that is that the faithful should give more.
This is not a matter in which the State would be justified in making a special exemption. It is not everybody who is a member of a church and though the case of the parson may very properly appeal to those who are anxious about such matters, it is not a question of universal assent that such a special recognition should be given to this limited class of persons in the community. When people appeal to me for generosity in this matter, I am sure that they have in mind that it is very easy to be generous with other people's money and sometimes more difficult to be generous with one's own. I feel that the long-established custom by which voluntary gifts, at Easter time or any other time indistinguishably, have been treated as income to the incumbent is one that is quite fair and should be continued. Indeed, the Committee perhaps know that if one looks in Crockford's Clerical Directory one will find that the customary Easter offerings are shown as part of the income of the livings. I think that is very good evidence of the way in which the offerings are in fact regarded, whatever arguments one may raise as to the particular character of such gifts.
If one were once to embark upon exempting these particular gifts for a particular class of persons, one would naturally have to exempt other gifts made in other circumstances to other persons. However much one is inclined and is anxious to support the Church, that is a personal matter and not a matter which has to do with State finances in this way.
Has any estimate been formed of the cost of the concession?
It is difficult to form an estimate of the cost. There is no accurate estimate of the cost. I think it would be impossible to stop at Easter offerings. For instance, there is the Nonconformist parson who is supported entirely by the offerings of his Church. We could not very well leave him out if we were to give the Church of England parson exemption as regards Easter offerings. Therefore, the exemption would have to be given over a much wider field. It is very difficult to estimate how great that range would be without undertaking a great deal of research to ascertain the figures.
I do not feel that the reply given by the Chancellor of the Exchequer can go without some comment. If I have risen in order to make that comment, it is partly because I should not like the case for the clergy to come from one side of the Committee only, and partly because it fell to me in 1943 or 1944 to initiate a full discussion of this matter.
I am bound to say that my right hon. and learned Friend has given no answer at all to the case that has been outlined. He has argued that to give this concession to the clergy would be to treat them as a special case. In my submission that is not at all true. The fact of the matter is that gifts to the clergy are being taxed whereas gifts to other people are not being taxed. The clergy are in a specially hard position at the present time. We ask only that the clergy should be put into the same position as other persons in regard to taxation. Income Tax was re-introduced in 1844. It was not until about 1907 that the Income Tax authorities came to the conclusion that Easter offerings ought to be taxed. Officials of the Treasury during the preceding years were not less able and perspicacious than their successors of to-day and they had come to the conclusion, after full consideration of the facts, that gifts to the clergy at Easter time were not a proper subject for taxation. I think that ought still to be the position today.
What is the real reason for the obduracy of the Treasury in this matter? My right hon. and learned Friend has let the cat out of the bag in his answer to the question which was put to him just before he sat down. It is the fear that if the Clause is passed it will be necessary to make very much greater concessions to other classes of persons. That matter is very easily dealt with. It was for that reason that in 1943—or 1944, whichever it was—we put a limit of £50 on the concession that might be made. That was illogical but it dealt with the practical problem that otherwise we might have people claiming remission of taxation to which they were not entitled. My right hon. and learned Friend cited the case of Nonconformist clergy being paid wholly by the gifts of their Church. That is not at all usual. I was brought up myself in one of the strictest sects of Nonconformity and I know that it is the normal thing for Nonconformist clergy to be paid fixed salaries.
The point arises also that there may be Whitsun offerings to curates, and so on. If we confined this concession to the Easter offerings, we should very quickly see the clergy conforming to the practice of receiving the gifts at Easter time only. I am convinced that I have stated the real reason why the Treasury will not give way on this matter, although it could be very easily dealt with administratively. My right hon. and learned Friend has said that the laity should pay more for the clergy if they want to see the clergy properly paid. We wish to pay more, but we do not want to see the Chancellor of the Exchequer taking nine shillings out of every 20s. that we give to the clergy. That is the real objection to the present position.
4.30 p.m.
Would it not be interesting to know how many clergymen pay the full 9s. in the £ on what they receive?
That is a legitimate question. I have had to use the standard rate of tax for the purposes of illustration. The circumstances vary too much for any other rate to be given. On that basis it is certainly the case that the Chancellor takes 9s. out of every 20s. which we give to a parish priest. This practice singles out the clergy among all other citizens in the country. For that reason I wish that even now the Chancellor of the Exchequer would give way.
I am very disappointed at what I regard as a thoroughly unsympathetic reply from the Chancellor. I find it difficult to accept his view that an accurate estimate cannot be given of the cost of such a concession. I should have thought that the Church Commissioners would be only too willing to furnish the Chancellor with an estimate of the proportion of money contributed towards the stipend in each living by way of an Easter offering to the incumbent.
There is another point on which the right hon. and learned Gentleman might have touched. The present Government have not been over-kind to the finances of the Church Commissioners as a result of some of their recent legislation. The compensation figures at which they have taken over various stocks and shares in transport, coal and other industries have resulted in a very serious inroad into the income of the Church Commissioners who had large capital sums invested in those industries. Since the income of most incumbents depends largely on the funds of the Church Commissioners, the drop in the income of the Church Commissioners has been very seriously reflected by a drop in the income of the small parishes. Today, small parishes are no longer an economic proposition compared with the position five or six years ago.
It is an extraordinary anomaly that money put into the plate on Easter Sunday by way of a gift to the incumbent may be taxed to the incumbent at 9s. in the £ when it was also taxed before it came out of the pocket of the parishioner who puts it into the plate. It is all very well for the right hon. and learned Gentleman to suggest that the simple solution is for the laity to subscribe more to the parish funds. That is a wholly admirable suggestion, but the taxation policy of the Chancellor has not made it very much easier for the layman to contribute more to the church.
Does the right hon. and learned Gentleman realise that if he were to give his parish priest a cheque a week before or a week after Easter it would be regarded as a gift and would be in no way subject to tax? On the other hand, if he puts a 10s. note or a £ 1 note into the plate on Easter Sunday, when it is known that the offering goes to the incumbent to augment his personal income, it is subject to tax. It is a most ridiculous anomaly and there are very strong arguments for regarding Easter offerings as gifts to parsons from their parishioners which should not be liable to tax. I hope the Chancellor will give this more sympathetic consideration.
It would be extremely unfortunate and wrong if the Opposition endeavoured to make party political capital out of the issue in regard to nationalised industries. [HON. MEMBERS: "It is true."] Like other members of the community, the Church has shared generally in the effect of legislation. So far as I know, no particular claim is made in regard to the effect of nationalised industries. Hon. Members opposite are doing the Church a disservice in putting that forward as an argument.
The Church is making every possible effort to raise money from the laity. The very grave position of Church finances is realised and every effort is being made to meet the difficulties. It is true that many incumbents are very hard pressed at present, and it is also true that many incumbents feel that this taxation of Easter offerings is wrong in principle. If the Chancellor of the Exchequer feels that there is a difficulty about the liability of cost for this concession which cannot be estimated, will he be prepared to receive from a representative body of the Church some estimate of what is involved so that it can be measured and not dealt with as a liability which the Chancellor cannot estimate?
I believe that in his heart of hearts the Chancellor must admit that it is wrong to tax this free offering of the laity, especially as in the overwhelming majority of cases it has previously been taxed to the donor. There is therefore a double taxation on that money. I appeal to the Chancellor to be considerate, bearing in mind the very grievous state of Church finances. If the Chancellor cannot meet this case now, perhaps he will be prepared to receive representations in order that it may be considered in a future Budget.
The hon. Member for Sheffield, Park (Mr. Burden) should not assume that this is a party point. The Opposition are very far from wanting to make it a party issue. It is a free vote issue. Whether we shall come to a vote we cannot yet say. Just to show how that is the case, I propose to go against some of my hon. Friends in the arguments which they have adduced, and support the Chancellor. The Chancellor's position is absolutely impregnable. If any collection of people give a person an amount of money per year, that is part of his income and must be taxed. The hon. Member for Keighley (Mr. Ivor Thomas) said that gifts to the clergy are taxed but that gifts to anybody else are not taxed. That is not the case at all. It arises because the clergy receive money at a particular moment in the year in a particular way. If any one, say, an author or a composer, did a particular thing annually which earned him money which was not part of his regular income, he would have to pay tax on it. It is because the clergy accept the money in this form that it has to fall within the purview of Income Tax.
Is not the noble Lord giving away his whole case? If I gave 20s. to my parish priest at Easter in one year, at Whitsun in another, at Christmas in another, and on the twenty-second Sunday after Trinity in another, it would not be taxed.
It depends on how it is done. I support the Chancellor of the Exchequer when he says he wishes to see our clergy better remunerated and that parishioners should look after their interests much more than they do. There are many ways in which they can do that without their donations falling within the purview of the Income Tax Acts. I would suggest to petitioners up and down the country that they look into the possibility of doing this without in any way infringing the Income Tax laws. It can perfectly easily be done, but on this specific issue of collecting money on Easter Day in the plate, once a year, that must be, like everything else, subject to Income Tax and the Committee could not possibly decide otherwise.
As has been said already in this short and interesting Debate, this is a matter which we have discussed over and over again in previous years. I do not think the Chancellor will dissent if I say that it rather depends on which side of the Committee one sits as to the attitude which is taken. I have known many of the strongest advocates of the exemption of Easter offerings in Opposition adopting a different position once they have achieved office. Like my noble Friend, I felt when the right hon. and learned Gentleman was replying that he put up an admirable resistance to the Clause on grounds of logic and, indeed, on grounds of the Treasury attitude to this matter, and I was sorry to hear the representative of the Church Com missioners—
I was speaking in a purely personal capacity, and in no way representing the Church Commissioners.
It is a little difficult for the hon. Gentleman to divest himself of that office which he holds, but whether in his private or public capacity, we are glad to have his support. However, I was sorry to hear him suggest that this was being treated on party lines.
Indeed, it is clear already that there is a divergence of opinion on these benches, and I understand from my right hon. Friend the Member for West Bristol (Mr. Stanley) that if this goes to a Division, the party whips will not be put on and that we shall go into the Division in a private capacity. I have always felt that the arguments in this matter are somewhat nicely balanced. There is much to be said on both sides, and that is the strength of every Government. The divergence which exists on the Opposition benches emerges, but if the Government Whips are put on, it prevents such support for the proposal as there might be from hon. Members on the benches opposite. That will be the difficulty in which the hon. Member for Sheffield, Park (Mr. Burden) will find himself in a few minutes if a Division is called.
However, I suggest that there are certain arguments in favour of this new Clause—because I, in turn, differ from my noble Friend—which obtain in view of the rather special circumstances of the time in which we meet. The first is the extraordinarily high taxation which now prevails. In the ordinary way, this Easter offering would carry Income Tax without any very serious consequences to the incumbent, but now, as an hon. Friend pointed out, the donor is taxed before he puts his contribution into the plate on Easter Day. Of course, that happens in other similar circumstances.
The right hon. and learned Gentleman said that the way to deal with this problem was for the faithful to be more generous even than they are at present, but I suggest to him that in the case of the Easter offering it is frequently the unfaithful who come down handsomely. There are many people living in a parish who do not attend Divine service but who make a contribution on that occasion. Indeed a case came to my knowledge only the other day in a certain parish—I certainly shall not tell the right hon. and learned Gentleman its name—where one of the unfaithful handed over at Christmas a cheque for £50 to the incumbent. "I never come to your church," he said, "but I am grateful to you personally, so I give you this now instead of at Easter, so that that fellow cannot get hold of it."
What the right hon. and learned Gentleman will do if he is not careful is to destroy the whole system of Easter offerings and also the Whitsun offering to the curate which follows a few weeks later. What could be easier than for a kind of miniature harvest festival to take place by which the vicar receives goods in kind of a generous character for the stocking of his household and larder? That would be within the law, and it might be a picturesque method of expressing one's appreciation of the work of the vicar—
It is traditional.
4.45 p.m.
My noble Friend tells me that it is traditional, from which I take it that it was the practice in days gone by. Here is a case where the whole system might be reviewed, not only from the point of view of the churches, which are obviously hit by the insistence on taxing this Easter offering. I would again suggest to the Chancellor that while he is on sound ground in his economic arguments—I think he has something of a split personality in this matter—the clergy are on a different basis from the rest of us since they do work which is essential if there is to be the spiritual revival in this country which so many of us want to see. It would have been a gesture if this new Clause could have been accepted, and if the hon. Member takes it to a Division, I shall go into the Lobby in support of it.
I have listened to the Debates on this subject for many years now and I am still waiting to hear the real case put forward for the Clause. The case is that the clergy should be put in a special and privileged position. We all know that the clergy are often underpaid, we all know that it would be nice for them if they could receive their Easter offerings free of tax, but that is not the case for the Clause. The point that the Committee has to put to the Chancellor if he is to accept the proposal is that there is a strong case for putting the clergy in a privileged position with regard to the tax law. If that cannot be established, then the case for the Clause falls. There has never been any attempt to put that case.
The legal position is that anybody who receives money, or money's worth, for the discharge of a service is liable to tax upon that money, whether it be a regular receipt or a casual one. It is not merely Easter offerings that are taxed, but hairdressers' tips, railway porters' tips—many people in receipt of tips receive considerable incomes which they have to return. A head porter or a head waiter frequently receives not one penny of salary but makes a large income in tips which is returnable for tax purposes. Do the supporters of this Clause urge that ministers of religion who are in receipt of what we may term a casual income— because it is not necessarily regular in amount or in time—should be put in a privileged position as compared with hairdressers, head waiters, hotel porters, railway porters and others? If it can be shown that there is some specific reason why they should have this privileged position, I will consider carefully how I shall vote, but until some case has been made for that privileged position, I shall not support the Clause.
If the hon. Gentleman invites an answer to his question, may I say that the nearest analogy to the tips he has cited are the fees the clergy receive for marriage and burial, and so on, and that Easter offerings, which are not given in respect of specific services rendered, are entirely different.
That is entirely wrong. As the Chancellor pointed out, the Easter offering is announced as part of the benefits of the particular incumbency.
I must ask my hon. Friend to remember that Crockford's is not an official publication, and the figures in it are notoriously inaccurate. Like what the soldier said, it is not evidence.
I did not for a moment suggest that Crockford's was an official publication, but the point is that Crock-ford finds it worth while to give these figures, even if they be erroneous as an indication of the emoluments of a particular benefice. To suggest that these payments are not like a tip to a waiter, but that the tip to the waiter is like the fees at a burial service, is stretching the position. If my hon. Friend is keen on the Clause, he must show why a minister of religion should be treated differently from other people who receive similar payments.
I should be grateful if I might reply to the hon. Member for Chesterfield (Mr. Benson). He says that this is a special privilege, and asks why the clergy should be placed in a privileged position. The answer is, because the clergy have special charges. Does the hon. Member realise that many country rectors are expected to defray the total expenses of the Sunday school treat out of their own pockets? Not only that, but the total expenses of the annual outing for the choir are often paid by the rector.
I can tell the hon. Member of a case in which, when the eldest son of the rector came of age, the rector was informed that it was the custom for him to give a dinner to the whole parish. The dinner took place on the village green and consisted of a magnificent spread of roast beef and plum pudding even though it was in summer time. The following morning, when the rector walked through the village he spoke to the parish clerk. He asked, "Now, John, how did the people like the dinner yesterday?" John replied, "Well, I ain't heard no complaints," and this was meant as the highest praise.
That is the sort of charge which this Easter offering is intended to defray. [HON. MEMBERS: "NO."] The people make this charitable offering at Easter because they know—I speak as the son of a clergyman and I know what I am talking about; I am the son of a country rector and I am speaking from personal knowledge—I know it is because of these additional charges that fall on the clergy that the people come forward and generously contribute to the Easter offering. There is no analogy whatever with the head porter, or the head waiter, referred to by the hon. Member for Chesterfield (Mr. Benson), who does not have to pay any such charges. I appeal to the right hon. and learned Gentleman to consider very carefully this concession, not from the point of view of giving a favour, but of conceding what is really a piece of justice which cannot be controverted.
I have no desire to repeat arguments that I put forward two years ago, but there are one or two things that should be said. I greatly regret that my hon. Friend the Member for Chesterfield (Mr. Benson) should have thought it right and proper to describe freewill offerings of parishioners to clergymen as tips. I would like the Committee to look at the matter from the other side, not so much the side of the clergy who receive, but the side of the parishioners who give. Very often families, especially the poorer families, children and adults, save up for months, and sometimes years, in order that they may gladly place on the offertory their own practical sacrifices in thanksgiving at this great queen of festivals. It seems a very grand thing in days like these that people should pay such sums, not as an offering and a tip, to the minister, but as a dedication to the services of the church.
Although I could not parallel cases put forward by the hon. Member the Queen's University of Belfast (Professor Savory), I know—and we all know—that there are large expenses of private charity and help that ministers are able to meet in this way. I do not think that these are days in which it is good to reduce still further practical opportunities for Christian and spiritual work. Here is an unobtrusive and anonymous way in which people—many of whom have not large incomes, but who have already been taxed on those incomes—are able to express their thoughts on the one day of the year which is more important to the people of this country than even the day on which my right hon. and learned Friend opens his Budget. If it means anything at all, Easter day means the hope and salvation of the world. If this new Clause goes to a vote, I shall be glad if a large number of Members will once again assert their belief in spiritual values, as against those material things which are, I believe, slowly strangling the life out of us all.
I hope the Committee will now come to a decision.
No.
I am sorry to delay the Committee, but I think it right that if there is to be a Division we should try to see exactly on what we are voting. I think it is a very great pity that the hon. Member for Stalybridge and Hyde (Mr. Lang) should have used the sort of arguments he put forward; although I am fully in agreement with many of them, I think they are out of place. The hon. Member for Keighley (Mr. Ivor Thomas) said how wrong it is that an Easter offering should be made and tax paid at 9s. in the £. In my constituency I have been most concerned, not only at the totally inadequate salary paid to ministers, but at the anomalies between parishes. In my district there is a large number of ministers and I cannot believe that many of them pay large amounts; I believe they pay practically no Income Tax at all. The local Inland Revenue inspectors are generous, within the limits of their powers, in granting allowances for expenses and in overlooking contributions at other times of the year.
The whole argument seems to be based on a complete fallacy. In the event of his being taxed on the full rate of 9s. in the £, the parson will be in financial circumstances in which he can pay that amount. I hope I know as well as anyone the enormous sacrifices clergymen make out of income for their parishioners, but I am most concerned by the fact that they are totally inadequately paid. I suggest that the tax would make an extremely small difference, and in my opinion the whole principle which is involved is quite wrong. There is no case for singling out clergymen as a special community for the purposes of tax, although it would be quite wrong to say that they are in the same position as head waiters. I urge my hon. Friends on this side of the Committee to consider whether this is the right moment to vote on the sort of argument which has been put forward, and whether the new Clause would make any great material difference in the case of the most needy clergymen.
I think my hon. Friend the Member for Chesterfield (Mr. Benson)—
Before the right hon. Gentleman replies, may I ask a question? Will he please state the difference involved in the Easter offerings? If I give the rector £ 5 as a present, should that come within the purview of Income Tax? Will the right hon. Gentleman give a definition of what the Easter offering is?
Certainly. It depends on whether the rector is the hon. Member's nephew, in which case the gift would come within an entirely different category, or whether the hon. Member was making what amounted to an offering either at Easter or at any other time.
I was saying that my hon. Friend the Member for Chesterfield put the issue fairly and squarely when he said that the acceptance of the Clause must rest on whether a case can be made out for putting the clergy into a special category. He afterwards amended what he had said by saying, I think perhaps unintentionally, that the Clause intended to put all ministers in a special category. That is not what the Clause does. It sets out to put the clergy of the Church of England in a special category so far as one particular offering on one given occasion is concerned.
5.0 p.m.
There is no mention of the clergy of the Church of England in the Clause. I speak as a member of the Church of Scotland, which has not Easter offerings in that way, but surely it is quite wrong to say that this exemption is sought purely for the Church of England ministers? It is for all ministers to have that particular kind of offering.
I accept that correction, but the general contention is true. It would put clergy of the Church of England and other ministers of religion in a special class. That, as my right hon. and learned Friend said, is something he cannot contemplate. It is not so much a question of cost. Unfortunately, I am not able to give the Committee figures of what the cost of accepting the Clause might be. I doubt whether it is possible to form any close estimate. In an individual case, it will depend on the number of children in the clergyman's or minister's family and on whether he pays his tax at the full rate or at some lesser rate. Then, I suppose, the amount of tax involved varies from area to area according to the amount of the Easter offering at any given time.
My hon. Friend the Member for Chesterfield was quite right when he said that, to be fair to the taxpayers as a whole, we should have to extend this concession to all who received similar gifts. I think that the same Member drew the correct distinction between a gift which is not only voluntary but is not in the nature of income and a gift which, although it is voluntary, also comes to an individual by virtue of his office. That is the distinction which the law has drawn for many years. If a gift is voluntary but comes to an individual by virtue of the fact that he holds a particular office or follows a particular employment, the Income Tax law of this country looks upon it as income and as a fit subject for an Income Tax charge.
The right hon. Gentleman is saying that the gift comes to a man because of his office or profession, and it is therefore taxable. Supposing that we in this Committee today were so impressed by the speech which the right hon. Gentleman is making that we took up a collection and handed it to him, would that be taxable, because surely it would come to him because of the office he holds?
I should judge that it would not be taxable because it would be, I assume, a gesture which would be made once for all. Quite obviously, if past experience is anything to judge by, it could not be said that it has been the usual thing to make offerings of that kind from time to time to the holder of a particular office. There have been tax cases on that point, though Financial Secretaries to the Treasury have not been involved. Cases have arisen in which a cricketer has been given a benefit match. There the courts have definitely decided that, as there was no expectation when he became a cricketer that he was to be given that benefit match, the proceeds could not strictly be said to be part of the emoluments that had come to him by virtue of his occupation. On the other hand, a footballer is entitled, I believe, by the terms of his contract, to a benefit match after he has been with a club for a certain number of years. Obviously a different set of circumstances arise there, and, in cases on this point, it has been held, and in my view quite rightly, that that income from the benefit match was income which accrued to him by virtue of the office he held and by the terms of the contract under which he served, and that it was, therefore, taxable as the income of his profession.
In view of what the Financial Secretary has said, if an Easter offering did not take place one Easter would it then be in order for Easter offerings to be taxed?
I do not want to delay the Committee too long on this matter. In reply to the question which the hon. Member has put to me, I would refer the Committee to the wording of the charging rule applicable to Schedule E, which says:
"Income Tax shall be charged on all salaries, fees, wages, perquisites or profits whatsoever arising from an office or employment."
Acting on those words, the courts have held, and the Inland Revenue accordingly act, on the assumption that an Easter offering or offerings of any kind coming to a clergyman or minster of religion by virtue of his office are income; that although they are gifts of a voluntary nature, they are nevertheless income and are properly chargeable as income for Income Tax purposes.
To which heading of the charging rule is my right hon. Friend referring?
I cannot say offhand, but the charging rule is not a very long one, and if my hon. Friend wishes I will help him afterwards to find it. I extracted the operative words in case the matter should be raised during our discussion. Those being the words of Schedule E it is obvious that, whenever an amount is received by way of a voluntary gift, whether at Easter or at any other time, in cash or by cheque, the individual minister or clergyman must return it as part of his income for the year, and that he is definitely liable to pay Income Tax upon that amount if he is liable to pay Income Tax.
May I now answer a point which was made by my hon. Friend the Member for Keighley (Mr. Ivor Thomas) who, if I understood him aright, indicated that it has only been since 1910, when a case was decided in the courts, that the Inland Revenue has insisted on clergymen and ministers of religion making a return of these offerings and on charging them tax upon them. That is not true. For 60 years after the Income Tax Act, 1842, offerings of this kind were charged to Income Tax by the Inland Revenue authorities. It is true that people frequently complained and said that it was unfair and not right, because these offerings were gifts and not income in the strict sense of the word. The Inland Revenue and successive Chancellors of the Exchequer have never agreed that this was so. They have assumed, and the courts have assumed, that it was income and properly chargeable.
In 1907, to test the position, a case was taken to court, and the Court of Appeal then upheld the Inland Revenue. From that time onwards, it has been quite obvious that what the Inland Revenue had previously done was right and since then more and more people have acquiesced in the tax being charged on clergymen and ministers of religion in respect of this offering. It is not right to say that this has only been going on since 1907. It was embodied in the Income Tax law and acted upon by the Inland Revenue much earlier than that. What gave publicity to the position was the Court of Appeal case in 1907. Since then it has been generally recognised.
I do not think that any other points were made that require any answer that has not already been given by my right hon. and learned Friend. We realise that clergymen and some ministers of religion are having a hard time, but so are other people, and to put them in a special tax category is, surely, not the way to help them. I am not sure that many of them would desire it. A much better way is for those interested—those whom my right hon. and learned Friend called "the faithful"—to rally round, and see to it that their minister of religion is properly looked after and provided for so that he may not be burdened with financial worries of his own, in addition to the care of his flock.
I doubt very much whether there are today many clergymen in a position of the one mentioned by the hon. Member for the Queen's University of Belfast (Professor Savory). Although they have many calls upon their purses, the provision of dinners and beanfeasts of one kind and another at various times during the year is not now, I am glad to think, one of them. Therefore, I hope that the Committee will realise that it is quite impossible for my right hon. and learned Friend to accede to the request embodied in this Clause. We realise that clergymen and ministers of religion have difficult times today; but this is not the way to help them.
Question put, "That the Clause be read a Second time."
The Committee divided: Ayes, 107; Noes, 215.
Division No. 179.] AYES. [5.12 p.m. Agnew, Cmdr. P. G. Glyn, Sir R Noble, Comdr. A. H. P. Amory, D. Heathcoat Gomme-Duncan, Col. A Odey, G. W. Barlow, Sir J. Granville, E. (Eye) Orr-Ewing, I. L. Baxter, A. B. Grimston, R. V. Peto, Brig, C. H. M. Birch, Nigel Harris, F. W. (Croydon, N.) Pitman, I. J. Bossom, A. C. Harvey, Air-Cmdre. A. V Ponsonby, Col. C. E Boyd-Carpenter, J. A. Haughton, S. G. Prior-Palmer, Brig. O. Bracken, Rt, Hon. Brendan Howard, Hon. A Reed, Sir S. (Aylesbury) Brarthwaite, Lt.-Comdr. J. G Hutchison, Lt.-Cm. Clark (E'b'rgh, W.) Reid, Rt. Hon. J. S. C. (Hillhead} Buchan-Hepburn, P. G. T Hutchison, Col. J. R. (Glasgow, C.) Roberts, W. (Cumberland, N.) Bullock, Capt. M. Jeffreys, General Sir G Robertson, Sir D. (Streatham) Burden, T. W. Keeling, E. H. Robinson, Roland Butcher, H. W. Kendall, W. D. Ross, Sir R. D. (Londonderry) Byers, Frank Kingsmill, Lt.-Col. W H. Sanderson, Sir F. Channon, H. Lambert, Hon. G Savory, Prof. D. L. Clarke, Col. R. S. Lang, G Shepherd, W. S. (Bucklow) Clifton-Brown, Lt.-Col. G. Law, Rt Hon. R. K. Skeffington-Lodge, T. C. Conant, Maj. R. J. E. Lloyd, Selwyn (Wirral) Smithers, Sir W. Crosthwaite-Eyre, Col. O. E. Lucas, Major Sir J. Stewart, J. Henderson (Fife, E.) Crowder, Capt. John E. Lucas-Tooth, Sir H. Stoddart-Scott, Col. M. Darling, Sir W. Y. MacAndrew, Col. Sir C. Studholme, H. G. Davies, Rt. Hn. Clement (Montgomery) Macdonald, Sir P. (I. of Wight) Sutcliffe, H. De la Bere, R. Mackeson, Brig. H. R. Thomas, Ivor (Keighley) Digby, S. W. Maclean, F. H. R. (Lancaster) Touche, G. C. Dodds-Parker, A. D MacLeod, J. Turton, R. H. Donner, P. W. Macpherson, N. (Dumfries) Vane, W. M. F. Drayson, G. B. Maitland, Comdr. J. W Wadsworth. G. Drewe, C. Marlowe, A. A. H Wakefield, Sir W. W. Dugdale, Maj. Sir T. (Richmond) Marples, A. E. Walker-Smith, D. Elliot, Rt. Hon. Walter Mellor, Sir J. Wheatley, Colonel M. J. (Dorset, E.) Erroll, F. J. Morris, Hopkin (Carmarthen) Williams, C. (Torquay) Fletcher, W. (Bury) Morrison, Maj. J. G. (Salisbury) Williams, Gerald (Tonbridge) Fox, Sir G. Mott-Radclyffe, C E. York, C. Fraser, H. C. P. (Stone) Neill, W. F. (Belfast, N.) Young, Sir A. S. L. (Partick) Fraser, Sir I. (Lonsdale) Neven-Spence, Sir B. Gammans, L. D. Nicholson, G. TELLERS FOR THE AYES: George, Lady M. Lloyd (Anglesey) Nield, B. (Chester) Sir Patrick Hannon and Mr Douglas Marshall.
NOES. Acland, Sir Richard Collins, V. J. Gunter, R. J. Adams, W. T. (Hammersmith, South) Colman, Miss G. M. Guy, W. H. Allen, A. C. (Bosworth) Comyns, Dr. L. Haire, John E. (Wycombe) Alpass, J. H. Cooper, Wing-Comdr. G Hall, Rt. Hon. Glenvil Anderson, A. (Motherwell) Cripps, Rt. Hon. Sir S Hamilton, Lieut.-Col. R. Attewell, H. C. Daggar, G Hannan, W. (Maryhill) Ayles, W. H. Daines, P. Hardy, E. A. Ayrton Gould, Mrs. B Dalton, Rt. Hon. H. Harrison, J. Balfour, A. Davies, Edward (Burslem) Hastings, Dr. Somerville Barstow, P. G Davies, Ernest (Enfield) Henderson, Joseph (Ardwick) Barton, C. Davies, Harold (Leek) Herbison, Miss M Batlley, J. R. Davies, Haydn (St. Pancras, S.W.) Holman, P. Bechervaise, A. E. Deer, G. Holmes, H. E. (Hemsworth) Belcher, J. W. Dodds, N. N. House, G. Benson, G. Driberg, T. E. N. Hoy, J. Berry, H. Dumpleton, C. W. Hudson, J. H. (Ealing, W.) Beswick, F. Dye, S. Hughes, Hector (Aberdeen, N.) Blackburn, A. R Ede, Rt. Hon. J. C. Hughes, H. D. (W'lverh'pton, W.) Bottomley, A. G. Edelman, M. Hynd, H. (Hackney, C.) Bowden, Flg. Offr. H W. Edwards, W. J. (Whitechapel) Hynd, J. B. (Attercliffe) Bowles, F. G. (Nuneaton) Evans, Albert (Islington, W.) Irvine, A. J. (Liverpool) Braddock, Mrs. E. M. (L'pl, Exch'ge) Evans, E.(Lowestoft) Irving, W. J. (Tottenham, N.) Braddock, T. (Mitcham) Ewart, R. Jay, D. P. T. Brook, D. (Halifax) Farthing, W. J. Jeger, G. (winchester) Brooks, T. J. (Rothwell) Follick, M. Jenkins, R. H. Bruce, Maj. D. W. T. Foot, M. M. Johnston, Douglas Buchanan, Rt. Hon. G. Ganley, Mrs. C. S. Jones, D. T. (Hartlepool) Callaghan, James George, Maj. Rt. Hn. G. Lloyd (P'ke) Jones, P. Asterley (Hitchin) Carmichael, James Gibbins, J. Keenan, W. Chamberlain, R. A. Gilzean, A. Key, Rt. Hon. C. W. Champion, A. J. Glanville, J. E. (Consett) King, Rt. Hon. C. W. Chater,D. Gooch, E. G. Kinley, J. Chetwynd, G. R. Goodrich, H. E. Lee, Miss J. (Cannock) Cluse, W. S. Greenwood, A. W. J. (Heywood) Leslie, J. R. Cobb, F. A. Grey, C. F. Levy, B. W. Cocks, F. S Griffiths, D. (Rother Valley) Lipton, Lt.-Col. M. Collindridge, F. Guest, Dr. L. Haden Longden, F Lyne, A. W. Perrins, W. Taylor, R. J. (Morpeth) McAdam, W. Piratin, P. Thomas, D. E. (Aberdare) McAllister, G. Poole, Cecil (Lichfield) Thomas, I. O. (Wrekin) McEntee, V. La T Popplewell, E. Thomas, John R. (Dover) McGhee, H. G. Porter, G. (Leeds) Thurtle, Ernest McKay, J. (Wallsend) Price, M. Philips Titterington, M. F. McKie, J. H. (Galloway) Proctor, W. T. Tolley, L. McLeavy, F. Pursey, Cmdr. H Tomlinson, Rt. Hon. G Macpherson, T. (Romford) Randall, H. E Ungoed-Thomas, L. Mainwaring, W. H. Ranger, J. Vernon, Maj. W. F. Mallalieu, E. L. (Brigg) Rankin, J. Viant, S. P. Mallalieu, J. P. W. (Huddersfield) Reeves, J. Walker, G. H Mann, Mrs. J. Reid, T. (Swindon) Wallace, G. D. (Chislehurst) Manning, C. (Camberwell, N.) Ridealgh, Mrs. M. Wallace, H. W. (Walthamstow, E.) Mathers, Rt. Hon. George Roberts, Goronwy (Caernarvonshire) Warbey, W N Middleton, Mrs. L. Rogers, G. H. R. Watkins, T. E Millington, Wing-Comdr. E. R. Ross, William (Kilmarnock) Weitzman, D. Mitchison, G. R. Royle, C. Wheatley, Rt. Hn. J. (Edinburgh, E.) Monslow, W. Scott-Elliot, W. White, H. (Derbyshire, N. E.) Moody, A. S. Shackleton, E. A. A. Whiteley, Rt. Hon. W. Morley, R. Sharp, Granville Wigg, George Morgan, Dr. H. B Shawcross, Rt. Hn Sir H. (St. Helens) Wilcock, Group-Capt. C. A. B. Moyle, A. Silverman, J. (Erdington) Wilkes, L. Murray, J. D. Silverman, S. S. (Nelson) Wilkins, W. A. Nally, W. Simmons, C. J. Williams, D. J. (Neath) Naylor, T. E. Skeffington, A. M. Williams, J. L. (Kelvingrove) Neal, H. (Claycross) Skinnard, F. W. Williams, W. R. (Heston) Nichol, Mrs. M. E. (Bradford, N.) Smith, H. N. (Nottingham, S.) Willis, E. Nicholls, H. R. (Stratford) Snow, J. W. Wills, Mrs. E. A. Noel-Buxton, Lady Sorensen, R. W Wise, Major F J Oldfield, W. H. Soskice, Sir Frank Wyatt, W. Oliver, G. H. Sparks, J. A. Yates, V. F Palmer, A. M. F Stewart, Michael (Fulham, E.) Parker, J. Summerskill, Dr. Edith TELLERS FOR THE NOES: Parkin, B. T. Swingler, S. Mr. Pearson and Paton, Mrs. F. (Rushcliffe) Sylvester, G. O. Mr. Richard Adams. Paton, J. (Norwich) Taylor, H. B. (Mansfield)
NEW CLAUSE.—(Exemption from purchase tax of motor cars for ex-service men and women disabled in the highest degree.)
The Commissioners may, subject to such conditions as they may impose for the protection of the revenue, remit purchase tax chargeable in respect of a motor car by virtue either of a purchase thereof or of such appropriation or application thereof as is mentioned in Section twenty-five of the Finance (No. 2) Act, 1940, if they are satisfied, by a certificate to that effect given to them on behalf of the British Legion, that the purchase, appropriation or application was made for the purpose of making the motor car available for the primary use of an ex-Service man or woman disabled in the highest degree and that the property will be retained by the British Legion for that purpose.—[ Sir I. Fraser. ]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
I think that a great many Members of Parliament will have had letters from constituents, or from the manufacturers of a certain vehicle called the Lamar car, asking that this vehicle should be free from Purchase Tax. For a minute or two, because it is relevant to what I shall say later, I will explain what the vehicle is and give my view about it. It is a kind of light car with four wheels, capable of being driven by any person whether disabled or not, but it is so designed that the controls can be used by people who have lost limbs or are in other ways disabled. The Committee will see, therefore, that while specially designed for the disabled it is capable of being driven by, and might be very useful to, persons who are not disabled. For that reason, successive Chancellors of the Exchequer have always refused to take the Purchase Tax off this vehicle.
For my part, I am bound to say that I understand the principle which has moved successive Chancellors to take that attitude. The Committee should know that where a man is disabled in the highest degree in military service—as, for example, a man whose spine has been shattered, who is called a paraplegic—he may be provided by the Ministry of Pensions with a three-wheeled vehicle as part of his compensation. Whether that is Purchase Tax free or not when purchased by the Ministry of Pensions, I do not know. The point is not material to my argument.
The case has been made—notably by the hon. Member for Bucklow (Mr. Shepherd) on a Friday afternoon recently—that the three-wheeled vehicles provided for those very badly disabled men are inadequate. They shake them up, they provide no protection from the weather and they cost nearly £200 each. It seems clear to many of us that these men would be far better off in an ordinary eight horsepower Morris, Ford, Austin or whatever it may be. The difficulties about providing them with such vehicles from the Ministry of Pensions are, first, that they must decide that they are suitable and adequate and, second, that they must deal with the question of Purchase Tax. Even if the Chancellor were to tell me that when a Department buys for Government use it does not pay Purchase Tax, the point is not wholly dealt with and my Clause, or something like it, is necessary.
The Committee should understand that this three-wheeled chair is of such an uncomfortable, ugly and extraordinary character that no one would want to use it unless he had been so seriously disabled as to have to use it. That is one of my complaints against it. It is also one of the Chancellor's safeguards, because the fact that it is so unusual and curious—indeed, so disadvantageous in many ways—means that nobody will want to use it except a disabled man. If he were to be given an eight horsepower Ford, Morris, Austin or some of the other familiar small cars, even if it had special brakes or gear levers to enable a man with damaged hands or legs to deal with it, it would still be capable of being driven by his wife, and by others than himself. It would be administratively impossible to make sure that a normal vehicle of that character was not driven at some time or other by a member of the family. That is why I want to call particular attention to the words: vehicles, or slightly altered four-wheeled vehicles of a standard pattern, to these severely disabled men, we might then feel sure that the wife, a member of the family or a friend might drive it on occasions. I suggest that any other course would be administratively impossible, and perhaps I might say ungenerous.
There is also another reason why I move this Clause. The number of people given a three-wheeled vehicle by the Ministry of Pensions is very limited. It comprises only those suffering from a particular disability, such as the paraplegic man, representing a small fraction of all those disabled in the highest degree. I want the Committee to approve that any ex-Service man or woman disabled in the highest degree to whom a motor car is necessary on account of disability, or partially on account of the handicap which the disability puts on his mobility and partly on account of the use it may be to him in business—either or both—to be able to get a car, and, second, to get a car free from Purchase Tax.
At present they cannot get a car. They are not on a long waiting list because they came back from the war disabled. Unless they happen to be doctors or nurses or are employed in a peculiarly narrow field, they cannot get a car. Second, the Purchase Tax falls very heavily upon them. It is because they are poor that they cannot afford Purchase Tax. Purchase Tax discriminates between the poor and the rich, but we cannot help that. So long as Purchase Tax exists that discrimination will continue. It will hurt the poor man more than it will hurt the rich man. But these people want these cars not because they are poor or rich, but because they have been badly hurt in the service of their country.
5.30 p.m.
I would like to support the new Clause which has been so ably moved by my hon. Friend. In particular, I would like to draw the attention of the Chancellor to the fact that, directly the war ended, we all recognised our debt to the disabled men by allowing a certain degree of priority in the purchase of second-hand cars. I sincerely trust that the Financial Secretary will not use the argument that he cannot accept this Clause because if a transfer occurred, arrangements might be made whereby other people might gain, be- cause this agreement is defeated by virtue of what I have just stated.
The point before the Committee at the moment is that all those men and women who fought in the last war will fully realise the good fortune which they have in not being disabled, and will also realise that it was only because a great many were disabled that they themselves were not. Therefore, I think we are placed in this peculiar position that, at all times, all men and women in this country throughout their entire existence will owe a debt to these men and women. The new Clause provides the reason why the car is necessary as being a necessity arising out of the disablement of the person concerned, and I sincerely trust that on this occasion matters will not arise in the heart of the Government to cause them to play with such arguments as that of the cost involved. I hope that, from all sides of the Committee, we shall approach this matter mindful of what these men and women have suffered.
I support the Motion which has been moved with such eloquence and such an effective marshalling of all the arguments by the hon. Gentleman the Member for Lonsdale (Sir I. Fraser). Hon. Members on both sides of the Committee want to do all they can to smooth the path of life for those who have lost limbs in the service of their country. Unfortunately, there are in the country now many thousands of these men and some women, owing to the fact that we have fought two great wars in one generation. Most of these men are trying courageously and successfully to earn their own living. They are not able, by reason of their disability, to walk very far, and they find it very uncomfortable to travel in crowded buses or trains.
Their need for a reasonably cheap form of transport is supplied by the Lamar car, a car of 3½ h.p. which develops 8 h.p. It is only built to the order of the disabled man, and it is built to his special specifications, so that it cannot very easily be abused. The wording of the new Clause would make an abuse of the condition that such a car should be free of Purchase Tax almost entirely impossible, and for that reason I plead with the Financial Secretary to agree to it. It will cost very little indeed to the Treasury, because the amount of money involved is not very large. It would go a very long way to bring satisfaction to large numbers of men and some women in this country to whom this country is under a great debt of gratitude.
I wish to support this new Clause with all the fervour I can command. I would point out that the proposal is that a Purchase Tax concession might be made not to a particular vehicle but to a disabled person. That is the object of the new Clause, and I suggest that these disabled persons do deserve some special consideration from what certainly ought to be a grateful country. I feel that we owe a very great debt of gratitude to these men, and I suggest that any loss to the Treasury by any form of remission of Purchase Tax in these cases would be comparatively small. The number of these badly disabled men is not so large that the concession regarding Purchase Tax would involve the Treasury in considerable loss. Any loss certainly would not be considerable when one reckons the enormous and almost astronomical figures with which the present Finance Bill deals.
I suggest, too, that there is a precedent for this in the Finance (No. 2) Act, 1945, when a concession of this kind was made in respect of wireless sets for blind persons. If such a concession could be made to the blind, I suggest that it might equally well be made to the very badly disabled men who have incurred their disablement in the service of their country. I would draw attention to the fact that the concession is sought for the purpose of making a motorcar available for the primary use of
I should, perhaps, begin by reminding the Committee of the principle upon which the Purchase Tax is based. It is levied at the wholesale stage, when it is quite impossible to know who the ultimate user of the goods or vehicle will be—whether it will be a disabled man, or a doctor or a nurse in a rural area, all three of whom we should like to help and who excite great sympathy, or whether it will be a road hog, who will use it to run down to Brighton Sunday after Sunday. Where a vehicle is such that it is possible at the wholesale stage, to know with a fairly reasonable degree of certainty who is going to use it, it is possible to consider whether the Purchase Tax should or should not be levied. Therefore, we can, if we want to, exempt from tax without difficulty certain invalid chairs which, obviously, no one but an invalid or a person disabled in war or in industry is going to use.
With the Larmar car which has been mentioned in this Debate, the position is different. The controls are all on the steering standard and it is, as the hon. Member for Lonsdale (Sir I. Fraser) pointed out, quite possible for an ordinary person to drive it. I do not object to that, because, in many cases, someone else may have to drive a car which is for the use of a disabled person. For this concession to be of any use, it would have to be such that it would be of use to the individual himself if he is capable of exercising control of the car, and to someone who helps him about and drives for him. All these considerations add to the difficulty. The result is that, with a car of any description which is not an invalid carriage in the strict sense of the term, a concession of this kind would be open to abuse. At the time that the tax is levied, one does not know who is going to use the vehicle. It may, for example, end by changing hands, and the ultimate user may not be the type of person who ought to be benefited.
The hon. and gallant Member for Petersfield (Sir G. Jeffreys) indicated that there was an analogous case in the Finance (No. 2) Act, 1945, when we extended a Purchase Tax concession to wireless for the blind. This is quite true; but at the time my right hon. Friend the present Chancellor of the Duchy of Lancaster pointed out that, although he was making this concession, he did it with some trepidation, and he hoped hon. Members would not seek to extend it into fields where it would be difficult to prevent abuse. With the blind he felt that he had a definite category of people who quite obviously needed help, and he was, therefore, able to make that concession. It is not a question of cost. If it were possible to make this concession to assist ex-Service men and women who have been badly disabled, we should be very willing to do so, even if it did cost a certain amount of money to the Exchequer. It is not the cost at all that is worrying us, but the difficulties which I have already enumerated and which seem to us to be insurmountable.
If the British Legion can find some means of ensuring that there is no abuse of this Clause, and if the tax can be remitted on the understanding that the car does not change hands once it is made the property of the British Legion, will the right hon. Gentleman reconsider his decision?
I was going on to deal with that point. I wanted to make this clear before making my final remarks. The Clause only deals with ex-Service men and women. A certain number of people who did not serve in the Forces have been disabled, some of them during the war, and quite a lot of them in industry. In the view of many—and I share their view, much as I sympathise with ex-Service men and women and will do everything I can to help them—it would be unfair to limit it to ex-Service men and women when we are dealing with taxpayers' money in a concession of this kind.
That is another reason why it is difficult for us to accept, even in principle, what this Clause sets out to do. Again, it is quite impossible for us to know what is meant by "disabled in the highest degree." I take it that what the hon. Member for Lonsdale has in mind is a man or woman who is 100 per cent, disabled. There are people whose disablement is lower than that in terms of percentage, but who need the help just as much as, and sometimes more than, several others who rank for 100 per cent, disablement pension. There would, therefore, be another difficulty in knowing at what point we should stop.
5.45 p.m.
Finally—and perhaps this will satisfy the Committee—I have been in touch with my right hon. Friend the Minister of Pensions on this matter; he tells me that he is very much aware of the difficulty experienced by many badly disabled ex-Service men in getting about, that motor cars for them have quite definitely and quite evidently come to stay, and the time has come for some sort of scheme by which the Ministry of Pensions itself will help badly disabled ex-Service men to have the free use of cars essential to their comfort and to their doing such work as they are able to do. I do not want Members to assume that every disabled man will get a motor car quite soon. I am saying no more than this. We have discussed this matter with the Ministry of Pensions, and the Minister of Pensions himself is very anxious to do something. He has this matter under consideration, and in due course—I trust that it will not be long—I hope that he will be able to announce to the House a scheme which, in his view and in mine, should, I am sure, meet the spirit which is behind this Clause.
In the event of the Minister of Pensions deciding, as I hope he will, that the four-wheeled vehicle is better—and as the Financial Secretary said, it has come to stay—would it be possible for an ex-Service man's wife and family on occasions to use the car without any difficulty arising owing to the fact that the Minister has given it to the man himself for his sole use?
The scheme has not been worked out yet. It is quite impossible for me to give any details of it. I am saying no more than this: what we ought to strive to do is to see that the ex-Service man is assisted in a way appropriate to his disability. To give him goods or vehicles free of Purchase Tax is obviously not the way. There are other disabled people besides ex-Service men. Nevertheless, the Minister of Pensions, who has ex-Service men particularly under his care, is now working on a scheme which will help certain disabled men to have free motor cars in order to assist them either to get about or to do such work as they are able to do. I cannot say any more than that, and I hope the Committee will not press me.
May we know when the concession will be made?
I do not know. I am simply indicating that that my right hon. Friend is working on a scheme. I asked the Committee not to raise the hopes of ex-Servicemen too high, because the scheme at the moment is still in a tentative stage. But I thought the Committee would be interested to know that some sort of scheme, such as hon. Members must have had in mind when they proposed this Clause, is already being discussed.
I would like to say a word or two about the scheme of the Ministry of Pensions, because I understand that a specification has been sent out from the Ministry of Works to the trade to build a three-wheeled vehicle which, I am informed by many people, is not satisfactory and is apt to turn over very easily. That is why in this Clause we ask that Purchase Tax should be taken off four-wheeled vehicles. Therefore, although the Financial Secretary is not prepared to accept this Clause as it stands, perhaps he will have a word with the Minister of Transport and the Minister of Pensions on the proposed design of the new car which I understand is to be presented free to disabled men, whether ex-Service or not, under the aegis of the Minister of Pensions. I have seen the specification; it is a three-wheeled vehicle. Many people think it is most unsatisfactory, and, that it would be much better to allow the Minister of Pensions to distribute four-wheeled cars to men whom he considers are deserving and who are very considerably disabled. Perhaps the right hon. Gentleman will have a word with his colleagues and go into the matter a little further.
The Financial Secretary cannot expect to make an announcement of this kind without also expecting it to reach the headlines. This is an encouragement to the ex-Service disabled man and to others who, not through their service, were also seriously disabled and who require the same kind of assistance. It seems to me very encouraging and I would like to ask my right hon. Friend whether, in the matter of administration, it would not be simpler for the Ministry of Pensions to retain ownership of the motor cars. The question of Purchase Tax or wrong usage could not then arise because the matter would always be under the Ministry of Pensions, both in the case of disabled ex-Service men and in the case of those disabled in industry. I want to say how very much the ex-Service man, especially, and those disabled in industry will welcome this suggestion.
I certainly do not wish to press the Financial Secretary unduly, because I think we all appreciate that he has shed a ray of light and hope on a difficult problem, but I have been going back in my mind—I listened very intently to what he said—to that part of his speech in which he said the Government did not accept this Amendment in principle. Surely, that is what the Financial Secretary is doing on behalf of the Treasury. I hope he will assure us on that point. At any rate he has helped tremendously in this respect: he has assured us it is not a matter of cost and I think we are grateful to him for saying that, because it reduces the position obviously to a matter of administration. In that connection, I will end by saying, "Where there's a will there's a way."
The chief argument used by the Financial Secretary to persuade us not to press this matter was that perhaps a car is to be placed at the disposal of the ex-Service man by the Minister of Pensions. That would be attractive in any circumstances, but I did understand him to say—and this appeals to me as a Scotsman—that it was to be a free car. Did he mean free of Purchase Tax, or quite free of any price? [HON. MEMBERS: "Altogether free."] Free altogether, then. That is such an important suggestion, and goes so much further than we dreamed of asking, that I am bound to say that we have heard too little about this proposal. We ought to hear more about it. I am a little troubled about it.
It would be a serious and dreadful disappointment to ex-Service men, after this very attractive suggestion, if they were to find it is not to be a free car, or to find it was to be a three-wheeler suitable only for certain people, or to find there were some other conditions attached. I was very happy to hear what the right hon. Gentleman said, but he must go further. He has to tell us a little more—indeed he has no alternative; otherwise we shall all be left, and ex-Service men will be left, in a thoroughly unsatisfactory position.
I agree with the hon. Member for North Islington (Dr. Guest) that the Financial Secretary has made a statement which undoubtedly will hit the headlines, and I ask him to elaborate one point. He told us that this is a scheme which the Ministry of Pensions is considering. He has been asked when the scheme will be available, and he has said at the present it is under discussion. The point to which the Committee should address itself in this: will the scheme be promulgated within the Financial Year 1948–49, which this Bill covers and which we are now discussing, because if the scheme is not to be in operation until we are in the next financial year it seems to me that the Clause of the hon. Member for Lonsdale (Sir I. Fraser) must be considered in a new aspect. After all, there have been plenty of adjustments in the Purchase Tax during the last two years, and the right hon. Gentleman need not say it is a question of readjustment of Purchase Tax. If the Ministry of Pensions scheme is to be placed before us during the financial year it must affect our attitude towards this new Clause, but if it is something merely for the future, looking into 1950 or something of that sort, it seems to me that, as we are now discussing the position in the financial year 1948–49, we ought to press the Financial Secretary for more information.
I think we are left in a rather difficult position in this matter. It is regrettable that we should have had as much information as we have had from the Financial Secretary, if he is not in a position to give us the whole of the story. I fear he is not in a position to do that. Most of us are aware that the Minister of Pensions who, I suppose, has the most humane approach to this problem of any Minister of Pensions we have ever had, is working out a scheme on the lines which the Financial Secretary has announced, and it should occasion no surprise to the hon. Member for East Fife (Mr. Henderson Stewart), that the Government may be disposed to give a vehicle free of cost, as-they are already meeting a very appreciable cost in the provision of a three-wheeled vehicle. It will not be unusual for a Government of this description to go a little further. I want to suggest
I hope the hon. Member will see the point in my mind. At present the person who is 100 per cent. disabled gets a 100 per cent. pension on certain conditions, and one is anxious to know this. Suppose there is a free car thrown in; would that reduce the pension? That is the sort of question that obviously occurs to one.
Pensions are granted under the terms of the Royal Warrant and they could not be lowered by anything before the Committee today. I would suggest that the allotment of a vehicle, whether it be a three-wheeler or a four-wheeler, should depend solely on the medical certificate of the responsible Ministry of Pensions medical officer. Whatever the degree of the man's disablement—50 per cent., 60 per cent. or 70 per cent.—if the responsible medical officer says that a man should have a vehicle to enable him to travel either to his work or about his business, that should be sufficient authority. Nor am I one of those people who say it would be a shocking thing if the man's wife drove the vehicle. Man and wife have lost enough of the years remaining to their lives by the disability the husband has suffered and it will be only a small compensation if the wife is allowed to use the vehicle.
Nor was there very much in the argument of the Financial Secretary to the Treasury that Purchase Tax is levied at the wholesale stage. That is really no argument. We manage to deal with Customs duties which are paid by means of Customs drawbacks, and I cannot conceive that it would be impossible to have a Purchase Tax drawback to enable the wholesaler to recoup the amount of Purchase Tax paid on the vehicle. There is not much in the argument suggesting that the problem of re-sale is one of the reasons which prevents the supply of the vehicle, because it would be possible for the log books either to be retained by the Minister of Pensions or to be retained in the local tax office in which the vehicle is taxed, so as to create a position in which it would be quite impossible for the man to effect a re-sale of the vehicle. Moreover, the Clause suggests, I think, that the vehicle should remain in the custody of the British Legion, and whilst I am not suggesting that that is a wholly desirable way of dealing with it, there are ways by which it could be arranged so that it was impossible for these vehicles to change hands.
Nor is it any argument to say that the ex-Service man should not have this concession simply because large numbers of industrial workers have been similarly injured. It is not right to deny a concession to one class because it cannot be given to two or three classes. Although the injured industrial worker may have an equivalent claim—and I should be very happy to press their claim—[ Interruption ]—my hon. Friend suggests that it is an injustice—
I said there were no cheers for that, although previously there were cheers from the Opposition.
I accept that from my hon. Friend. I am not seeking cheers, but all will admit the claim of the injured industrial worker. We all of us have, and must have, I think, a very special regard for the men, mostly young men, who have had denied to them that fullness of life that ought to be theirs, and who will suffer that loss for a large number of years. If the Financial Secretary can tell us something more now about his negotiations with the Ministry of Pensions I am sure we shall be very glad to hear it. I hope we may have some assurance that speedily—I hope within the next month, before the Bill goes through all its stages—we may have the Minister of Pensions here to tell us what is in his mind in regard to the matter. If not, I shall be glad to support the new Clause.
6.0 p.m.
I am quite certain that the whole Committee is most indebted to my hon. Friend the Member for Lonsdale (Sir I. Fraser) and to those who have supported him in bringing forward this new Clause. Both sides of the Committee were very ready to support it, and I think we were all glad to hear from the Financial Secretary of the proposals which the Minister of Pensions has in mind. I am bound to say that I think it would be a great advantage to the Committee now if the Financial Secretary would fall in with the wishes that have been expressed from behind him and from this side, and give a rather fuller account of what is proposed. After all, the Financial Secretary is hoping, no doubt, that we shall withdraw this new Clause. I am sure my hon. Friend the Member for Lonsdale will be only too ready to do so if the assurances which the Financial Secretary gives are satisfactory.
Everyone who has listened to the Debate wants to know two things as far as possible. One is, when the scheme is to come into operation; and the other it, who is to benefit by it. It will be very hard if a great many people are led to believe they are to benefit by the scheme, only to find later on that they are disappointed; and it will also be very hard if it subsequently turns out that this scheme cannot come into effect for a long time. So I hope that the Financial Secretary will be good enough to say a few words on these two points.
I am not impressed by the argument he put forward about the impracticability of this new Clause. If the right hon. Gentleman still finds difficulty in meeting the points raised, I think a conference between him and some of us on this side of the Committee would very soon resolve it. I should like now to give an opportunity to the Financial Secretary to say something more, and I hope he will do so.
I am sorry if it is thought that this announcement is going to hit the headlines tomorrow. If it is presented in such a way that every disabled ex-Service man thinks he has only to apply for a motor car to have one free, many people will, I am afraid, be disappointed. I hope I said nothing that would lead anyone to believe that that is what is proposed. Nothing of the kind. What the Minister of Pensions proposes to do is to consider a scheme which will permit certain disabled men who can make use of it to have a free motor car to assist them in the business of living—in their employment, or, if their injury has been such they can get no joy out of life unless they have a vehicle, to take them out occasionally into the sunlight—or for similar reasons which will all be laid down and, I hope, not too narrowly. My right hon. Friend proposes to consider a scheme whereby a motor car might be provided under conditions of that kind.
The scheme is so far only in its early stages. We do not know whether some of the vehicles will be three-wheeled and some of them four-wheeled. We do not yet know the extent to which it will be possible quite soon to make these cars available. All I am able to tell the Committee—and I am sorry I can say no more: if I could I would —is that the Minister of Pensions is considering a scheme of this kind and hopes to make progress with it so that he can begin to implement the decision, whatever it may be, at a fairly early date.
One thing we have to remember is that most of the cars we make are being exported just now, and that there are difficulties in getting hold of them. That may prevent my right hon. Friend from implementing the scheme as quickly and as widely as he would obviously like to. But I must make it quite clear that what he has in mind is that motor cars should be free to a limited number of the most seriously disabled men and that he hopes to put the scheme into operation at the earliest possible moment. Up to the time of my speaking, the scheme has not reached a stage at which I can say anything more that would be of real use to the Committee.
The first thing that occurs to me to say is "Thank you" to the Government for having made it quite clear that finance would not have stood in the way of meeting my new Clause. I want to underline the statement made by the Financial Secretary, and to thank him for that. I presume he has in mind that that observation of his would have applied even if this scheme had been extended to civilian persons in the same categories as the military persons to whom my new Clause applies. The number would, in any event, have been a few hundred or a few thousand, and he has said that money did not stand in the way. Therefore, the only things that could stand in the way are administrative difficulty or the proposed new scheme which the Minister of Pensions has in his mind.
I do not want to detain the Committee, but I want to make some observations upon what the right hon. Gentleman has said so that they may go on record. And I want also to ascertain from him that, in case the Ministry of Pensions scheme proves to be so limited that it deals with only a very small number of men out of the many thousands who are disabled in the highest degree, and h0aving regard to his statement that it is not money he is considering, there will still be time for him, before this Bill finishes its progress through the two Houses, to come back to something like this Clause, or some modification of it, which would meet the wishes of the Committee. That is the purpose I have in mind in asking for indulgence for just a few minutes.
It is not right to turn down a scheme of this kind on the ground that we cannot apply the tax at the wholesale level. It may be that the cars would be bought by the Ministry of Pensions. Then, maybe, there would be no tax. If they were bought by the British Legion, or, in the case of civilian persons, by some other appropriate body, it would be a wholesale purchase, and the tax could well be dealt with. It is a small argument to say so important a matter, the financial aspects of which do not worry him, could possibly be turned down on the technical ground that the tax has to be paid at the wholesale point.
As to whether there are precedents for this, I want only to mention that there is a precedent for allowing Purchase Tax to accrue to the advantage of an individual under the Finance Act, 1945. The wording of this new Clause is based exactly on the wording to be found in that Act. So it cannot be said there is no precedent.
As regards the offer by the British Legion, I want to make that clear in case it still becomes necessary to supplement what the Ministry of Pensions is going to do. The British Legion would be willing to buy these cars—maybe, a thousand—and to own them. My new Clause suggests that regulations could be made; and under those regulations I would propose that the Purchase Tax—or, rather the technical Purchase Tax, which is not being charged—should run off in five instalments in five years, so that if it became necessary to sell the car outside the class of persons who are free of tax there would be a proper arrangement made in advance for bringing the tax on at the moment when the car went out into the market. That sounds very complicated, but I mention it to show we have thought out every detail. It emphasises the point that administrative difficulty should not be allowed to stand in the way in this matter, in a case where the Government are not concerned with money.
There is only one other observation which I wish to make, in case there should be any misunderstanding of my position about civilians. I have not put down this Clause for ex-Service men because I have ignored the fact that certain people are similarly disabled in industry. I have put it down because these disabled men come particularly under my notice, and because the advent of war and the incursion into the field of the disabled of a number of young, vigorous people naturally catches the attention and excites the sympathy of Members of this House and of the public. If by blazing the trail for a few men who have suffered disablement in the service of the State in the Armed Forces, we can extend this valuable concession to all industrial men in a similar position, none will be better pleased than hon. Members on these benches.
I think that the whole Committee will sympathise with the Financial Secretary in this matter. I feel sure that the hon. Member for Lonsdale (Sir I. Fraser) has made it clear that we must support this Clause, even if the Financial Secretary is right—and I accept his word—that a plan is now in progress for dealing with this problem. Obviously it will take some time. Nothing will facilitate the success of that plan, within a limited extent, more than this Clause, for it will take at least a year for the Minister of Pensions to have some satisfactory basis on which to work. In spite of the quite obvious agreement of the whole of the Committee with the desirability of the general proposition, support should be given to this Clause, because the problem is admitted It is admitted to be one of very wide scope, relating not only to ex-Service men but to disabled men in every class of industry, and this Clause will enable us to make a start in connection with what is obviously a very grievous matter. I am reminded of a couplet by Omar Khayyam:
"Ah! take the cash in hand, and waive the Rest;
Oh, the brave Music of a distant drum!"
I shall respond readily to the distant drum if the Financial Secretary will consent to the proposal of the Minister of Pensions; meanwhile I should like to give support to this Clause.
6.15 p.m.
In the event of the Ministry of Pensions' proposal being limited, will the Financial Secretary come back to this Clause at a later stage?
I do not want to mislead the Committee or the hon. Member for Lonsdale (Sir I. Fraser). Will he tell us what he means by what he has just said about the Ministry of Pensions' scheme being limited?
My proposal, if the Committee were to carry it, and it seems very much in the mood to do so, will benefit possibly 12,000 people. Not all can afford a motor car even Purchase Tax free, and not all will want one, but that is the field in which it will operate. It may be that only a few hundreds or thousands would buy a motor car Purchase Tax free. The Financial Secretary says, "Do not let us pass this Clause in case the Minister of Pensions has something up his sleeve "; but for how many men? If it is only for those who now go about in three-wheelers whom it is proposed to put into four-wheelers, that does not meet my point. If he is going to extend it to all who, in his judgment, need a vehicle because of their disability, I would be the first to accommodate the Government and help them in every possible way.
There is a great deal of difference between the proposal in the Clause to take off Purchase Tax to help ex-Service men, with the help of the British Legion, and the scheme which I have announced. What the Minister of Pensions proposes to do is to give quite freely—not to sell—a four-wheeled car to disabled ex-Service men, in selected cases in which it would be worth while. That, I think, is very different from the proposal which the hon. Gentleman makes. Therefore, I think that it would be fairer for the hon. Gentleman to press his Clause if he wants to, rather than that I should give what some people may imagine to be a promise, which quite obviously I ought not to give because we are talking about two different things.
We do not want an unnecessary Division if we can help it. I asked the Financial Secretary just now if he could indicate whether the Scheme of the Minister of Pensions would be adumbrated or operate in the financial year covered by this Bill.
That I cannot say, because I cannot bind the Minister of Pensions; but the Committee know how keen he is to do all he can for ex-Service men and women, and I think that they can rely on him to push this scheme to the utmost, bearing in mind the difficulties of obtaining motor cars at the present time. I think that I ought to make it quite plain that we cannot accept this Clause in respect of certain individual men because we have to think of other classes of disabled men, including those in the industrial field. For that reason, if for no other, I cannot accept the Clause. I was, however, pointing out to Members opposite, as well as hon. Friends behind me, who are keen that we should do all we can for the ex-Service men, that there is this scheme, in its early stages, in the mind of the Minister of Pensions.
I am very anxious that we should, if we can, avoid a Division on a matter of this kind, which would put some of us in a very difficult position. Had the Financial Secretary merely rested on his arguments against the new Clause, none of us on this side of the Committee would have had any doubt about the desirability of voting for it. The arguments which he raised against this Clause carry no weight with me. He went on to say that they did not matter, because the Government were going to offer to disabled ex-Service men something even better than the Clause would suggest. From what we have heard from him, it is better. As I gather, he was referring to all wholly disabled ex-Service men to whom the gift would be of use. Quite clearly, that is more than the limited instances in the new Clause if to all of that type a motor car will be given, and given free, by the Ministry of Pensions. That is obviously a considerably greater benefit than is proposed in the new Clause under review.
As I understand it, this proposal is not now at the stage of floating words, but is something which has been agreed in principle and which is a part of Government policy; and that all that remains to be done is, first of all, to sort out some of the details, and, secondly, under existing circumstances, to get hold of the actual vehicles. Accepting that as the position, that this is even a better scheme than that put forward by my hon. Friend, accepted by the Government in principle, that they are working as hard as they can on the details, and that we can anticipate before long the issue of the scheme, I feel that we should be wise to transfer our attention now from the Financial Secretary to the Minister of Pensions to make certain by Questions and other Parliamentary devices that this matter to which now, obviously, not only we but all ex-Service men will attach great importance, is not allowed to lag. If we are not satisfied with the progress we make, I suggest that it is with regard to the Minister of Pensions that future Parliamentary action should be taken.
Although I realise that the Minister of Pensions will do his best—indeed, I have been in touch with him about giving these men four-wheeled instead of three-wheeled vehicles—I still think we shall be left with a great many people unable to get cars, but in view of all that has been said on both sides of the Committee, I beg to ask leave to withdraw the Amendment.
Motion and Clause, by leave, withdrawn.
It will be convenient if the next new Clause in the name of the hon. Member for Altrincham (Mr. Erroll) is discussed with the two following new Clauses in his name.
On a point of Order, Mr. Beaumont. Is it your intention to call the Clause standing in my name and that of my hon. Friends dealing with rebate of duty for aircraft fuel?
We have not yet reached that Clause, but for the information of the hon. Member it has not been selected and, therefore, will not be called.
NEW CLAUSE.—(Rebate on light oils for agricultural machinery and vehicles.)
(1) As and from the first day of October, nineteen hundred and forty-eight, there shall be allowed from the customs duty imposed by Section two of the Finance Act, 1928, a rebate of ninepence per gallon on the delivery for home consumption of any light oils, which are used as fuel in a mechanically propelled vehicle used solely in agriculture.
(2) For the purposes of this Section, the expression "vehicle used solely in agriculture" means any vehicle specified in sub-paragraph ( a ) of paragraph 4 of the Second Schedule to the Finance Act, 1920.—[ Mr. Erroll. ]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
This Clause deals with the rebate of duty on light oils for agricultural machinery and vehicles, and the succeeding two Clauses in the names of my hon. Friends and myself deal with a similar rebate on light oils for industrial purposes and civil aviation. The taxation of petrol, which is the most widely used of light hydro-carbon oils, was originally introduced in the Budget of 1909 by the late Earl Lloyd George, who proposed a petrol tax of 3d. per gallon. In introducing that tax he said it was his intention that the whole of the money raised should go to the improvement of the roads of this country.
Although I know that nowadays the Treasury does not admit the principle of assigned revenues, nevertheless it is the fact that because the tax was originally intended to raise Revenue for road improvement, it has led to the creation of a number of anomalies as to the use of light hydro-carbon oils and, in particular, petrol, which have been extended over the last 40 years. The Treasury and the Government have made a start in tidying up some of the anomalies which have arisen in the last few years in regard, particularly, to the heavy oils which have hitherto borne varying rates of tax. During the lifetime of the present Government we have seen the penny a gallon tax on fuel oil and heavy hydro-carbon oils removed, and last year the tax on lighter oil, paraffin or tractor vaporising oil, was removed for the same reason.
My new Clauses now carry this tidying up process a stage further, and they are, of course, confined to the non-road use of petrol and its associated light oils. I am not making any suggestion here for any remission of tax for road uses of petrol which, of course, contribute by far the most substantial part of the revenue from the various oil duties. A large number of hon. Members on both sides of the Committee have supported my three new Clauses, but such is the practice that only the names of the first six appear on the Order Paper on the day that the Clauses are discussed. Of the order of 100 hon. Members on both sides of the Committee have supported these Clauses, and there is thus a wide interest in the matter.
I will turn to the first Clause which deals with the petrol supplied for farm tractors and agricultural machinery. Something like 200,000 tractors in this country at present use what is called tractor vaporising oil or paraffin, and these are tax free. About 5,000 use diesel oil, but 20,000 now use petrol which bears tax at the rate of 9d. per gallon. These 20,000 tractors use what is estimated to be about 28 million gallons of petrol a year, which is a yield of about £1 million in tax.
The situation will be seen to be completely anomalous. The tractor which is powered by diesel oil or parafflin goes tax free, but the tractor which burns petrol bears tax at the rate of 9d. a gallon. This has led in the past to an undesirable development which can only be described as taxation engineering, whereby a rather less efficient tractor has been developed and sold to farmers for the sole purpose of avoiding the heavy tax on petrol. Tractors which run on paraffin are not a efficient as those which run on petrol and, indeed, require small quantities of petrol to start them up. As a result they are often kept running or idling when not in use to avoid the necessity of restarting on petrol. In fact, it is fair to say that, if there had been no tax on petrol, no paraffin driven tractor would have been developed or sold to the farmers of this country. There is thus a very good case on technical grounds, as well as on the grounds of equity, for removing the taxation of petrol from farm tractors and, of course, from stationary farm machinery.
It is interesting to look at the practice in other countries in this regard. In the United States a number of States grant complete exemption from taxation for petrol used for farm tractors and machinery. In Europe, Denmark applies a similar exemption, while in New Zealand a preferential or lower rate is granted to farmers. One can find a similar situation in this country in regard to the inshore fishing industry where the owners of boats driven by petrol engines get the money expended on the tax on petrol refunded to them by sending in quarterly or half yearly statements. So that the principle of tax rebate is admitted in connection with our food supplies, and it seems only right that what is good for the harvesters of the deep should be good also for the harvesters of the field.
It has been suggested that there might be considerable opportunities for evasion if such a concession were granted, but I submit that with a properly regulated scheme the opportunity for evasion will be very small indeed. It is not suggested that there should be a cheaper petrol supply to the farmer but that the farmer should buy taxed petrol and then apply for a, rebate afterwards if he so desires. This is the practice which has been adopted in other countries and which is adopted in the inshore fishing industry. Therefore there is plenty of experience available to show that evasion is not practised. I submit to the Committee that it is one thing to make out an exaggerated claim for petrol coupons, but that it is quite a different order of dishonesty to make a claim for money to which one is not entitled, and the method of giving the relief will be to put the onus on the farmer to claim relief in respect of petrol purchased previously.
Turning briefly to my second Clause, which deals with industrial uses, there is here an equally clear case. Heavy oils used in industry are already exempt, but the light hydro-carbon oils remain taxable at the rate of 9d. per gallon. In industry the group of light hydro-carbon oils principally affected are white spirits and special boiling point spirits. The consumption is of the order of 40,000 tons a year and the duty paid in 1947 amounted to about £1,800,000. Here, again, we are dealing with relatively small sums of money when compared with revenue as a whole. The duty, however, inflates the prices of the industrial raw materials by no less than 60 per cent and so represents a serious industrial cost at a time when costs are rising and it is of fundamental importance to bring them down.
6.30 p.m.
The Government has admitted the injustice of this form of taxation because they allow already a drawback in the case of such spirits which are exported in articles in ascertainable quantities. The injustice arises where the quantity cannot be readily ascertainable or where the spirit is actually disposed of in the manufacturing process. This arises where white spirits are used as industrial solvents, particularly for rubber and allied materials. For example, in the manufacture of surgical gloves the solvent is usually allowed to evaporate off and cannot be recovered. As a result, the price of the gloves is inflated by as much as 9d. per dozen pairs. Although this figure relates only to a relatively cheap item it is, nevertheless, a serious addi- tional cost in a highly competitive export field.
With rubber-proofing the increase of cost is even more serious. The duty inflates the cost of the proofed cloth by between 4d. and 8d. per yard, depending upon the quality of the cloth. I know the right thing to do is to instal solvent recovery plant, but that is not easy to do in these days of shortages of industrial equipment of all kinds. Even with solvent recovery plant there are steady and continuous losses to be taken into account.
My case is strongly supported by all the manufacturers concerned, and no fewer than 15 trade associations have endorsed the view that the tax should be removed. I understand that a deputation—led by an hon. Member for one of the Divisions of Hull—went to the Treasury and saw, I think, the Financial Secretary. He is already well acquainted, therefore, with the strong feeling which exists and I hope that, in his reply, he will be able to remit this tax.
In other countries a rebate is given to industrial users. In the U.S.A. there is total exemption from Federal tax on white spirits; in Canada, Holland and Belgium there is similar total exemption. Belgium used to have a tax but remitted it under the terms of the Benelux Agreement. It will be seen, therefore, that some of our principal industrial competitors do not tax this industrial raw material. Thus, their manufacturers and exporters have a distinct competitive advantage over our own who are compelled to use industrial white spirits in the course of their manufacture.
The third new Clause appearing in my name deals with the tax on petrol used for civil flying over Great Britain. Aviation spirit used within the United Kingdom attracts the motor spirit tax of 9d. per gallon. Thus, we see a tax for the maintenance of roads having to be paid by aeroplane users, a situation which is about as reasonable as putting a tax on locomotive coal to maintain aerodromes—that is what it represents. A serious financial handicap is imposed upon aircraft operators and manufacturers alike. British European Airways consider that the tax costs them something like £ 100,000 in a single year. It is a severe handicap also to flying clubs, as my hon. and gallant Friend the Member for Macclesfield (Air-Commodore Harvey) intends to point out.
The tax is serious not only in actual flying but in the bench-testing of aero-engines and in test and trial flights where no less than £ 400,000 a year is uselessly expended on it. Thus, our aero-engine and aircraft manufacturers, who operate already under serious hardship, are further handicapped by the imposition of this anomalous tax. It is anomalous not only regarding their activities but from the technical point of view also, for we have the absurd position that jet and turbo-driven propeller engines, which use a low grade of fuel, pay no tax at all, whereas the ordinary petrol engine has to pay tax at the rate of 9d. per gallon. That means that the question whether one pays tax on fuel depends on the type of aircraft that is used.
Here also we have considerable trade support for the remission of tax. British European Airways have drawn attention to the matter in their annual report, and no fewer than seven trade associations have indicated what a relief to them its removal would be. In other countries a situation obtains which is similar to that prevailing in the case of the other two Clauses of which I have spoken. The United States give relief for petrol used for civil aviation, and a number of other countries do the same thing. The Chancellor has given very few concessions so far. Here is a field in which he can afford to be generous without losing very much. He can afford to give to British farmers, industry and aviators, the real fillip which they need.
I support the hon. Member for Altrincham and Sale (Mr. Erroll), particularly regarding the taxation of petrol for motor and aero-engine tests. My own constituency of Coventry has a special interest in this matter, since it lives by the manufacture of motorcars and aircraft. At the same time, the special interest of Coventry coincides in this case with the general interest of the country. The great need of our time is for larger exports. Coventry is helping to achieve this through the manufacture and sale of motorcars and is helping, also, to develop the aircraft industry which is necessary for us to achieve and maintain air supremacy.
It is quite clear that a tax of this kind —a tax on petrol which is being used in the final process of production of motor and aero-engines—is a bad tax, wrong in principle and burdensome in practice; by its very nature, it adds to the cost of production. If it were adding to the cost of producing an article sold at home for luxury purposes there would be nothing to be said against it. This tax, however, is a charge on the production of motor cars and aero-engines which are, in the one case, a major item of our national export and, in the other, a major defence item of national security.
From the national point of view, there is nothing to be said in favour of the tax. In spite of the great increase in the exports of cars from this country, it remains a fact that it is becoming increasingly more difficult to sell our cars abroad; the reason being that compared with the price of cars manufactured by our competitors, particularly by the Americans, we are at a disadvantage. It might be argued that the extra cost brought about by this taxation on petrol used for bench testing is relatively small, and that the total amount yielded by the tax is something like £100,000, which means little more when spread over than 7s. 6d. per car. Nonetheless, it remains true in principle that the tax is burdensome to the motor industry, and I hope therefore that my right hon. Friend will accept the arguments which have been advanced for its removal.
In the case of the aircraft industry, the tax is even more burdensome, because in the testing of aero-engines a large quantity of petrol is used and the tax represents a substantial item in the final costs of aircraft. When we come to the operation of aircraft, we find that in the case of B.E.A., for example, the Government, on the one hand, make a subsidy to the Corporation to help them in their operations and on the other withdraw from the Corporation something like £100,000 by way of taxation on petrol. That seems not only wrong but absurd. It merely adds to the amount of work which the accountants have to do, and it adds nothing to the efficiency of these Corporations or the administrative machine.
Finally, there is the question of private flying. It is quite clear that the initiative shown by individuals in taking to the air is something which encourages aeronautics generally and is of great value to the development of the light aircraft industry. Anything, therefore, which hinders private flying is something which should be discouraged. In this case, we have a tax which adds to the cost of private flying to the extent of 5s. an hour. That is obviously undesirable, and I hope that for these reasons my right hon. Friend will accede to the arguments which have been advanced.
6.45 p.m.
I agree entirely with what the hon. Member for West Coventry (Mr. Edelman) has said in support of the Clause moved by my hon. Friend the Member for Altrincham and Sale (Mr. Erroll). Naturally, he devoted his remarks more particularly to those branches of national life and industry which are of immediate concern to him and to his constituents. I noticed that he did not mention the chief item with which we are concerned, and that is relief of taxation on petrol used in agriculture. While the argument the hon. Member used as regards civil aviation is quite correct, it is even more correct, if that is possible, when it is applied to farming. In both these cases a substantial tax is being paid on one of the raw materials of the industry, which, having been paid, is then recovered from the Exchequer and the people of the country.
Last year, on the question of vapourising oils, we argued that it was mad to add to farming costs by maintaining a tax on these oils and then to use the food subsidies to keep down the cost of living; and that argument still holds goods. It is becoming more and more apparent that even the smallest farms are beginning to use a small type of petrol-driven tractor. Last year, it was said that the largest type of heavy tractor was not suitable for the smallest farm and for certain types of soil, but these light tractors are having a great effect in speeding up work on the land, and can also be used economically as road tractors. The same argument applies in all these cases, that if the producer has to pay this tax it merely adds to the costs of production, and having increased the costs of production, the equivalent amount of money is extracted from the pockets of the tax- payer in order to keep down the increased costs. That is completely nonsensical, and it is just as nonsensical this year as it was last year. I do not know what the right hon. Gentleman will have to say this year. I remember that the previous Chancellor of the Exchequer said last year that agriculture was the greatest dollar saver, and I suppose he still thinks that is the case. If the Government have altered their view I hope the right hon. Gentleman will let us know, but if it still holds good then I hope he will agree that this tax is completely nonsensical.
We also have this racket of the increased costs falling on the community in civil aviation. I will not detain the Committee by entering into details on that industry, but as I have a civil airport in my division which until it was almost obliterated by Government action catered for the greatest number of civilian passengers in the country, I really must put in a special plea for the removal of this tax. It is not only the petrol used by aircraft in flight which has to bear this tax, but the petrol used in testing and in trial flights. The Committee will agree that it would be the most appalling thing if we cut down testing and trial flights to save petrol. I personally would make use of aircraft even less if I thought that that were likely to happen. I should like to see the tax removed for all testing and trial flights, which we should encourage as much as we possibly can. It is on its reputation for general high service conditions that the future of our aircraft industry depends.
Unless this tax is removed, the whole of civil flying and of the aircraft industry as a whole will inevitably suffer. If the right hon. Gentleman disagrees with that rather sweeping statement, I hope he will say so. In these two cases the incidence of the tax falls, through the industry, on to the taxpayer, but when we get to the use of spirit in manufacturing industry, the incidence falls on the customer, which is rather a different matter. In these days it is of vital importance that additional costs should not fall on the customer or consumer. My hon. and gallant Friend the Member for Perth (Colonel Gomme-Duncan) represents a constituency where the effect of this tax is very serious. Everyone associates the name of Perth with a particular industry and he may refer to it. Whether it be the consumer in this country or in the export market, the absurdity of the case is just as strong, when we consider the incidence of the tax falling on the consumer and taxpayer.
In all three cases the industries affected are vital. Agriculture is the most important, as was admitted by the late Chancellor of the Exchequer. Civil aviation is a growing industry, in which we have a reputation still to build and a service still to supply, in spite of the discouragement of the Socialist Government. In manufacturing industry as a whole we not only have markets to gain, but markets to hold, and that is going to be the battle. We have customers in this country not only to be supplied, but supplied at a reasonable rate, and that has been admitted. I believe the case has been admirably proved by my hon. Friend the Member for Altrincham and Sale (Mr. Erroll), and I hope the Government will give serious consideration to these proposed new Clauses.
I am rather sorry that the proposed new Clause dealing with rebate of duty for aircraft fuel, which stands in my name and which has not been called, is being discussed with these other Clauses. I appreciate that that puts the Financial Secretary in a very strong tactical position. I had the opportunity of leading a deputation to him to put forward the case for a rebate of the tax on civil aviation fuel. He met us with his impeccable courtesy and took down the arguments with great care. But, he made the point and has repeated it on subsequent occasions, that if he gave way on one case, he would have to give way on other cases. Now, having all the cases arrayed before him, it is going to be easier for him to resist this rebate in regard to the tax on aviation fuel.
Nevertheless, I press the point on my right hon. Friend and the Chancellor because the case stands on the fact that the money very largely is being paid out from the public's purse in any case, either directly or indirectly. It would therefore be sensible and more efficient if the tax were discontinued, and we reduced the costs on the manufacturing side of aviation. The total sum of money is a matter of some £ 580,000. The amount involved on the manufacturing side in bench testing and trial flights is £ 400,000. I do not agree with the hon. Member for Weston-super-Mare (Mr. Orr-Ewing) when he says that this is an intolerable burden on the manufacturing side of the industry. It is an industry which is receiving, directly and indirectly, from the Government, sums to the extent of about £30 million, and it will not be ruined if it has to continue to pay tax of £400,000. But precisely because this sum, in relation to the other assistance given, is so small, I think the Chancellor ought to give way. In the course of manufacturing articles, impositions which in the early stages are represented by £400,000 may add considerably more to the cost of the finished article.
What I said was that if this industry is burdened with heavy taxation its produce, the aero-engine, will suffer, and our aero-engines still have to prove their name in the world on tests.
Through the Ministry of Supply contracts, work at the Farnborough Establishment and so on, we are spending £30 million a year on this industry, and considering that I do not think a tax of £400,000 a year would be fatal. However, I think it would be a matter of common sense to take the tax off aviation fuel. In this connection I put in a special plea for private flying clubs. Before the war we found that rich dividends were paid to the nation by these private clubs. It was one of the most economical and efficient methods of training potential aircrews. Since the war, subsidies which were hitherto paid have not been forthcoming. I can understand the Chancellor, with our present economic difficulties, refusing to give a subsidy, but if he cannot help them at least I do not think he should chastise them. If he cannot give them anything, please do not continue this heavy taxation. It represents about 5s. an hour on the cost of private flying. It would be administratively possible to give this rebate, it would be furthering our declared national policy, and it would not cost the Treasury nearly as much as the actual amount of taxation involved. I ask, therefore, that the Chancellor should give way at least as regards aviation fuel.
In detaining the Committee for a few minutes, I should declare my interest in aviation, which I believe is well known to the Committee. I think this a wrong tax to impose, because aviation is a young industry, which should receive all the encouragement it can be given at this stage. If an aircraft leaves England to go to the Continent, it gets a drawback of 9d. a gallon on petrol. I believe that is because we insist on getting a drawback in the same way for aircraft coming to this country. But if one takes an aircraft going to Lympne in Kent and flies over to Le Touquet and refuels one can come back with a tank almost full of petrol free of tax. I have not done that, but I can see that there are loopholes. It is quite wrong that this handicap should be imposed.
It has been stated that British European Airways Corporations have in their losses £100,000 due to the tax on petrol. This should not be emphasized when trying to show the world what British Aviation can do. Since the end of the war the aircraft industry has made a phenomenal contribution in exports of airframes, petrol engines and gas turbines. The petrol engine still has a future before it is superseded by the gas turbine. We should give all the encouragement we can to the manufacturers, because sometimes these engines have to be on test for 1,500 or 2,000 hours running, and that takes large quantities of petrol to enable these tests to be carried out. By the time overheads are added, that puts us in a difficult position when competing with foreign countries.
7.0 p.m.
The Whitney-Straight Committee sat for six months dealing with the subject of flying clubs. The Minister of Civil Aviation arranged the Committee, to no good purpose whatever. All the recommendations went to the Treasury and were turned down, after due consideration, especially on the question of subsidy. There is a strong case for giving this petrol tax concession. If the tax were taken off petrol for light aeroplanes, it would mean a relief of approximately 5s. per flying hour. As it is, many of these clubs are closing down. In a matter of months there will hardly be a flying club in the country, I believe, unless they get some assistance.
It is wrong that the finances of flying clubs should depend so much upon their catering. We do not want to encourage drinking nor do we want to subsidise flying clubs out of the receipts of selling alcohol. Flying clubs rendered great service before the war in providing a reserve of pilots, and they will continue to do so, if properly treated. There is great enthusiasm among workmen's flying clubs, like the London Passenger Transport flying club, but they are all struggling to keep their heads above water.
Now let me turn to agriculture. If inshore fishermen do not pay this petrol tax, why should farmers have to pay it on their tractors? By giving this concession to farmers we should help to bring about standardisation of tractors, and that would be invaluable, because the engines of tractors would be interchangeable. It would bring down prices not only for users at home but for export, as has already been the case with a tractor made in the Midlands. I ask the right hon. and learned Gentleman to give this matter his most sincere consideration. The concession would mean a lot to industry, as well as to aviation and to agriculture. There is a very strong case indeed for this concession, and I hope the Minister will be able to give way on this occasion.
I support the proposed new Clause, although I am not very impressed by the original argument that the petrol tax was put on only to cover road users. The right hon. Member for Woodford (Mr. Churchill) raided the Road Fund originally, and his example has been followed by Chancellors of the Exchequer ever since. I support the proposed new Clause upon grounds that the Chancellor has emphasised many times and that is that whether to counter inflation, encourage export, or to give greater incentives to industry in this country, it is vitally necessary to reduce prices. There is no doubt that this tax upon petrol for industrial use inflates prices to a considerable degree. Besides agriculture and civil aviation, those industries which manufacture articles such as linoleum, glue, polish and wallpaper are also affected, and many of those things are important in our export trade at the present time.
One of the points which has not been mentioned is that prices are raised at least twice by the operation of this tax. The price is raised when petrol is used in the manufacture of articles, and it is raised again by Purchase Tax, which is charged as a percentage of the price. Very often when goods are exported there is an import tax which again is charged as a percentage of the price. Therefore, we have a cumulative tax, owing to the fact that we have allowed petrol to be taxed in the first instance. Take the paint industry as an example. In some cases the amount of white spirit which goes to make a gallon of paint is as much as half a gallon, which means that there is a tax of 4½d. per gallon in the making of the paint. When it goes to, say Belgium, another 25 per cent. is added by way of import duty. If the tax were removed, the manufacturers would be able to reduce their prices not merely by 4½d. per gallon but possibly by 6d., and would be able to increase their exports very considerably. This is a matter which I hope the Chancellor will take into account.
The strength of the case for making this concession to the aircraft industry lies in the simple fact that 70 per cent. of the spirit used is consumed for testing. The main object of having an aircraft industry is that we might earn dollars by the export of aircraft. The home market itself could not support an aircraft industry. Now, there are two ways in which exports can be developed; the first is to produce experimental types which we hope will beat everything else in the world. That is what many firms are doing with the help of the gas turbine engine. The Chancellor may, therefore, argue that as gas turbines use kerosene, which is not subject to tax, and these are the engines he wants to encourage, there is no need to remove the tax on petrol. But it is important to emphasise that these experimental types are very precarious and no one knows how successful they will be.
The other way of beating the world in aircraft is by making in frames or engines, innumerable small improvements which render our models better than those of our competitors. Many aircraft companies in this country are making improvements of that kind, and in some cases these are piston engines. It is on these piston engines that our exports will depend. Enormous amounts of petrol are used on the bench, in these experiments. In one case I know—quite a small company— the amount of petrol consumed in this way comes to about £10,000 a year. That is a really heavy burden and makes a very great difference in the prices at which the aircraft can be sold abroad in competition. With firms like Rolls-Royce the amount must be five or six times as great.
In regard to agriculture, I should have thought that the only possible reason for keeping the tax on is that it might save dollars. I assumed that that was the reason, but upon making inquiry I was told that the question of dollars did not enter into the matter at all. If I have understood the position aright it is that 10 tons of crude oil give 2¼ tons of petrol and one ton of vapourising oil. These are not alternative fuels in the sense that you can get more of one or less of the other as you please. A given amount of crude oil gives those proportions. Basically, petrol is the more economical because it has so many more uses. The price of petrol is actually higher—1½d. per gallon higher than vapourising oil. On the other hand, vapourising oil is less efficient. If we were to change over completely from one fuel to the other at this moment, I am told that there would be practically no difference in the dollars we should have to pay. In that case I cannot understand why the tax is retained in agriculture, unless it is upon the administrative ground that there might be abuse. Any Income Tax assessor dealing with agriculture knows that it is quite a simple matter, however, to arrive at the amount actually used.
I would advance two further arguments. It is quite likely that we should save dollars if the tax on petrol used in agriculture were taken off. The Ferguson tractor, which is not suitable for every type of farm but is suitable for very many and which will be used in increasing numbers, uses very much less petrol per average hour than say, the Fordson uses vaporising oil or kerosene. I have had an estimate from my constituency which is rather striking. In that area, where land is fairly light, the Ferguson tractor uses about half a gallon of petrol an hour and the Fordson about two gallons of vaporising oil. In many cases the Ferguson would be more suitable but by and large the farmers are not putting in orders for the Ferguson because the two work out about even at the moment. If the tax were removed, the Ferguson would be better for many farmers and there would be a large saving in fuel and eventually a saving in dollars.
The tax hits the wrong type of man. The Ferguson tractor, which nobody doubts will come into increasing use, is particularly suitable for the small farmer, especially if he is on a fairly light soil. It is the small farmer who wants the handiest possible tractor, something which can be used by his child, for instance. The man who makes the Ferguson has said that it can be driven by a grandmother because it is so easy to run. As the small farmers form the bulk of our farming population, this issue is an important factor in food production. I hope that the Chancellor will seriously consider the whole question of the tax on petrol in industry and, even if he cannot do anything now, reconsider it before the Report stage.
I want to say a word or two in support of the hon. Member for Altrincham and Sale (Mr. Erroll). It would be very hard to justify these taxes at any time, but it is particularly so at present. We are dealing here with vital considerations. First, we are dealing with the largest item on our dollar bill, food. The Government have told us that we have to increase food production by a large Amount in the next few years. We have been told that "Operation Food Produce" is a vital necessity. The farmers who have to carry out that policy have many handicaps, and one of the greatest and most immediate is shortage of labour. If they are to overcome that deficiency they must have more machinery. Agriculture must become more mechanised and farmers must make the maximum use of agricultural implements of all sorts.
7.15 p.m.
It has been said that a large proportion of farmers use petrol-driven tractors. I believe it is true that the greater proportion of new tractors coming into the market are petrol-driven, which means that the future is there, and that is what we must consider. Many farmers are unable to buy tractors or agricultural implements of their own possibly, and they would be prepared to club together to buy tractors and implements, but they are prevented from doing so because of the running costs. The Financial Secretary to the Treasury may say that the administrative difficulties are insuperable but I understand that they have already been overcome in the case of motor spirit used by fishing vessels. What considerations apply in agriculture which do not apply in the case of fishing vessels? The right hon. Gentleman may also say that this will be a serious loss to the revenue which he cannot afford, but the duty payable in the case of agriculture is only about £ 1,000,000 and on all the classes about £ 3,500,000.
The hon. Member for Altrincham and Sale reminded the Committee of an admirable Budget in the early days of motoring, some of the provisions of which were more acceptable to hon. Gentlemen above the Gangway than others. It was the Budget when the first tax on motor spirit was imposed. The tax was never imposed for revenue purposes. It was meant for the improvement and the maintenance of the roads of the country. It was the Leader of the Opposition who took the first step on this slippery slope, and I am very sorry to see hon. Gentlemen opposite following the example of hon. Gentlemen on this side of the Committee. Motorists have suffered considerably as a result.
Whatever the tax was meant for, it was never meant to be a hindrance to the mechanisation of agriculture and it was never intended as a charge on industry. All the considerations which I and other hon. Members have referred to concerning agriculture also apply to other industries. Many examples have been given. The hon. Member for West Coventry (Mr. Edelman) reminded the Committee that it is becoming increasingly difficult to sell British cars abroad. In my constituency I have a factory which makes 'buses. A large number of them go for export. That factory and other factories of the kind will be greatly affected by this tax. I put it to the Chancellor of the Exchequer that this is not the moment, if ever there was one, to retain burdens on agriculture and industry, but to reduce them.
I hope the Committee will not mind if I intervene at this stage. If I indicate what my right hon. and learned Friend feels about this, it may, or it may not, shorten the discussion. We are here discussing the relief of duty on light hydrocarbon oils used in agricultural machinery or vehicles, used for industrial purposes, and used, for inland flying or for bench testing in an aircraft factory. As was stated by the hon. Member for Altrincham and Sale (Mr. Erroll), light oils, that is, petrol and similar oils, at present pay 9d. a gallon; heavy oils, unless they are used on the road, avoid tax altogether, and lubricating oil pays 1d. a gallon, and no more.
This duty dates from 1928, when it was imposed by the present Leader of the Opposition as a general duty, and not in any sense as a tax which he could use as a sort of road fund for the upkeep of roads. It was a general tax, put on largely, I think, to help him meet derating which he was then putting into operation, and he did straight away exempt two classes: one was fishing vessels round our coast; the other was lifeboats which used petrol for propulsion. The Committee will see without further argument why he exempted those two classes. The lifeboats are there to save life and not to make profit; and the fishermen round the coasts at that time would obviously have felt the impact of the duty pretty considerably.
But the right hon. Gentleman did say that he was making those concessions on the clear understanding that they were not to be used as a starting point for further concessions in other directions. True, nothing that was said in the 1928 Parliament can possibly bind its successors, much less succeeding Chancellors. Nevertheless, that is an indication of how the matter was viewed at that time, and of how difficult it is to stop making concessions once one has been made. There is always somebody who has what he believes to be a cast-iron case for consideration and who feels rather aggrieved if the Chancellor of the day does not see as he does and accept his view.
The three types of case which are dealt with in these Amendments vary considerably. Listening to the Debate, I thought that the best case was made out for assisting flying clubs. In the past, flying clubs have been of great use to the nation in its hour of need, and no Government can for long take the view that, if clubs of that kind are in difficulties, they should not be helped in some way or another. But that is a different thing, surely, from taking a particular duty off such petrol as they may be using. It is possible—now is not the time to discuss it—for flying clubs to be assisted in ways other than this.
One of the chief reasons why my right hon. and learned Friend cannot accede to the request made in at any rate one of these classes is that petrol costs dollars, and heavy oils as well as light oils are imported. Nevertheless, kerosene, or paraffin, is used very largely in tractors on the land, and kerosene is a good deal cheaper than petrol so far as dollars are concerned. In spite of what one or two hon. Members have said, it is arguable whether petrol driven tractors are, in fact, more efficient than paraffin driven tractors. I am not an expert in these matters, but I have made inquiries and I am told that the experts differ, and that it is by no means certain that the petrol driven tractor is more efficient than one driven by heavy oil or kerosene.
Surely, it was the right hon. Gentleman himself who remarked earlier that a tractor can be driven either on petrol or oil, but that both come from abroad, and that both need dollars, so there is not very much difference between the two cases.
I do not think that anything I have now said contradicts that. What I said was that petrol costs more dollars than paraffin, which is, I think, perfectly true. Another factor we have to take into account at this juncture is that the present programme for tractor construction might be dislocated if we took the tax off petrol for agricultural purposes. I understand that manufacturers are, to a certain extent at any rate, concentrating on tractors which are driven on heavy oil, that is vaporising oil or heavy fuel oil. If they were now asked to turn about and concentrate on a different type of engine which burnt light oil, it might take time. As the hon. Member for Anglesey (Lady Megan Lloyd George) very well said, it is essential that we should produce all the food we can today.
Is the Financial Secretary not aware of the great development of petrol driven tractors which is now taking place in Coventry?
Before my right hon. Friend resumes, perhaps I might point this out to him. Does he not remember an answer given in this House on 22nd April by the Parliamentary Secretary to the Ministry of Fuel and Power:
"It is, of course, true, that tractors using vapourising oil save petrol. Since, however, additional supplies for vapourising oil would have to be paid for in dollars, no less than additional supplies of petrol, the substitution of vapourising oil for petrol would not save dollars."—[OFFICIAL REPORT, 22nd April, 1948; Vol. 449, c. 1991.]
Up to now I have not said that it would. I was addressing my mind to the fact that the tractor manufacturing industry concentrates, I do not say entirely, but to a fairly large extent, on manufacturing tractors with engines that use heavy oil.
This would not hurt them.
It is quite possible that the production of tractors which use light oils may be gaining ground; I do not know. I am simply stating the situation as it exists. We must remember that petrol is in short supply, that it costs dollars, and that we ought to conserve it, and not encourage its use more than we need.
At the moment is not vapourising oil equally in short supply? One is as difficult to get as the other.
We want to conserve them all. The point I am trying to make is that we want, as far as we can, to save as much of all these oils as possible.
Surely the right hon. Gentleman is not saying that mechanisation in agriculture is not to be encouraged.
At any rate, I think it is plain that, when petrol costs dollars and when it is in short supply, we ought not to reduce the tax in order to encourage people to use it more than they need to.
Is it not true that a considerable volume of petrol which we use in this country comes over as crude oil and is refined here, and that with the refinement we get the vapourising oil?
That is quite true, and in both cases it bears the tax: in one case it is a Customs Duty and in the other an Excise Duty. It bears tax, and in each case it costs dollars. Whether it is refined here or comes over in the state in which it is used, we should conserve as much of it as we possibly can, and should not encourage waste or improper use by lightening the taxation upon it at this juncture.
Surely, the amount of petrol that is used is regulated by the amount of coupons given to the farmer. That must be borne in mind.
I did not want to go into that, because it would perhaps be unfair to do so at the moment. If the hon. Gentleman knows anything about what has been happening in the countryside recently, he will know that it has been made clear by the investigations of the Russell Vick Committee that the "black market" flourished on the petrol which it was able to get from several sources, including some of the farmers in the rural areas. If we are also going to allow farmers to get petrol without any tax upon it, the temptation to evasion and misuse would be even greater than it was before the Vick Committee was set up.
7.30 p.m.
As to the use of light hydrocarbon oil by industry generally, it is true that one or two kinds are used in paint making, seed crushing and dry cleaning. At the Treasury, we received a deputation on this matter, and from their point of view they put forward what appeared to be a very strong case. But on consideration, my right hon. and learned Friend has come to the conclusion that the burden of this tax on industry is not very great. So far as exports are concerned, the manufacturer can obtain a refund to make up what has been spent on the tax on the oil that enters into them. Imports are taxed according to their oil content, so that the home producer is not put in an inferior position vis-á-vis the manufacturer of the imported article containing oil. Seed crushers and dry cleaners can recover most of the oil they use; it can be used over and over again. If I understood the hon. Member for Altrincham and Sale aright, he indicated that the cost of recovery of the tax on the oil amounted to 9d. a dozen pairs of a certain type of glove. If it is 9d. per dozen pairs, obviously the additional expenditure of the dry cleaner, the manufacturer, or whoever it may be, cannot be very great.
Is the right hon. Gentleman suggesting that in competing with a heavy export market a difference in price of 9d. a dozen on rubber gloves and 4d. on rubber material is not a serious matter?
I have made it clear that, so far as the export market is concerned, they can and do claim a rebate.
The right hon. Gentleman is not deliberately attempting to mislead the Committee I know, but inadvertently he is doing so. The tax is only recoverable where oil content can be identified. In actual fact, no oil solution, especially as regards the treatment of rubber, can be identified, and, therefore, no rebate is possible.
It may well be and I accept that, in certain cases, it is impossible, owing to the processes employed, for the oil which has been used in exported goods to be identified. In the great majority of cases, it can be identified and a drawback can be claimed.
Without any further ado I will come to aviation. I have already indicated that I think that the arguments for tax remission are the strongest in the case of certain users of aviation spirit. Petrol used for bench testing clearly comes into the same category as petrol used by the industrialist. If we decline at this juncture to exclude the claim of industry to receive petrol duty free, we must also refuse to let the aeroplane manufacturer, who is making aero machines, have his petrol duty free. Logically, the two must go together.
The concession for overseas flying is a long-standing one. It is now both the custom and the law for ships proceeding overseas to receive all their stores free of duty, and what happens to a ship leaving these shores also happens to an aeroplane flying to foreign parts. That is why such aircraft get their petrol free of duty. But this does not apply to petrol used for inland flying. There, again, there is the difficulty that, if we allow inland flying to receive a refund of the duty which has been paid on petrol, it would not be long before we received claims from others somehow or other engaged in the transport industry. The motor coach proprietor would undoubtedly put in a claim and so would others who use petrol, particularly those who use it on a fairly large scale.
To sum up, my right hon. and learned Friend is not able to accede to the request that any of these three Clauses should be incorporated in the Bill. Apart from administrative and suchlike considerations, it is felt that this is the wrong time to be reducing the tax on petrol. We want for the time being to conserve the use of it; undoubtedly one of the ways of reminding people that this is a precious fluid is to see that the tax is pretty high and the cost of it fairly heavy.
The speech to which we have just listened from the Financial Secretary to the Treasury is one of the most reactionary I have heard from the Government Benches. In answering an Amendment on another subject quite recently, he told us with great seriousness that in his view the motorcar had come to stay. That just about shows the stage he has reached in his consideration of these matters. Not only did he tell us that the motorcar had come to stay, but he has practically told us, "Back to horses." That is the burden of his speech. There is a great deal to be said for the horse, and I would be glad on a suitable opportunity to say something about it, but I believe that "Back to horses" on the farm is not a policy which is consistent with our present agricultural programme. It is absolutely ridiculous to think that if we went back to horses in this country we would save dollars on petrol. Does the right hon. Gentleman think that we would save dollars in this country in the long run? Of course, we would not.
As we are constantly told by hon. Members opposite, that agriculture is the greatest dollar saver of all and that what we want is to have the most efficient agricultural system possible. What the right hon. Gentleman put forward was a case, with regard to agriculture, for continuing a tax on one kind of motor fuel only. There are no other motor fuel tractors in use which have to pay a tax. I have had some experience of this matter this year. I have two tractors, one of which burns petrol and the other paraffin. The one that burns petrol costs me £1 a week more than the other one that burns paraffin, and that is all tax. Is it sen- sible that one class of tractor pays a tax of £1 a week over that paid by another kind of tractor? What caused these tractors to be run on paraffin? All tractors, when I first came to know them, were run on petrol; and then this tax was put on, and we had "taxation engineering," as it has been called. A less efficient kind of tractor was invented to evade and defeat the tax. Therefore, a large number of tractors in this country, which do not consume oil pay no tax at all. But there are some people who consider that the petrol-driven tractor is more efficient and to use it they have to pay 9d. a gallon in tax.
The right hon. Gentleman tried to argue that the use of petrol was more extravagant in dollars than is the use of kerosene. He did not support that statement by any cogent argument. I believe that the truth is quite the contrary, and that in many ways the petrol engine is more efficient. Let me give a simple illustration. A kerosene engine has to be started by hand cranking, whereas a petrol engine is started by pressing a button. The average driver naturally does not want to crank his engine more than he needs to do, so he leaves it running to save himself the trouble of cranking it again. The man with a petrol engine which he can start with a press of a button switches off his engine when he goes to do something else. I am not an expert on these things, but I am told that there is a much greater thermal efficiency in the petrol engine. Whether that be true or not, it is not reasonable that agriculture should pay such an enormous tax on one kind of engine and none on the other. The Treasury may be wrong in their view and we on this side may be right in ours.
The Government have tipped the balance so enormously with the tax of 9d. a gallon on petrol that they will put the petrol-driven tractor entirely out of business very shortly. I do not know whether they want to do that. If so, they should give notice to some of the manufacturers interested in making petrol-driven tractors, and whose industry has been so well represented by speeches from the other side of the Committee. This tax will be a great blow to a certain kind of tractor production. I do not back one more than the other. I have used both kinds and both have their points. But to differen- tiate as greatly as this tax does between different kinds of tractors tips the balance so strongly in one direction as to be entirely unfair and contrary to our interests.
The Financial Secretary said something about petrol having been black-marketed by farmers. I do not know whether that is true or not. If it is, then the new arrangements for having red petrol answer the only argument which the Financial Secretary put forward in support of that particular contention. I am sure that the right hon. Gentleman has informed the Minister of Pensions of the interesting point which arose during our last Debate. I can see that both right hon. Gentlemen will have a great deal of difficulty over this in the future.
I wish to draw the right hon. Gentleman's attention to what is being done in other countries. In Denmark the tax has just been taken off petrol for petrol-driven tractors. In the U.S.A. tractor fuel is exempt in a large number of States. In New Zealand there is a lower rate of tax for tractor vehicles than for road vehicles. The right hon. Gentleman is going absolutely contrary to the modern trend and the best developments in the tractor world. I ask the right hon. Gentleman seriously whether he will consider this again with his right hon. and learned Friend?
I know the difficulty which the Financial Secretary is in when the Chancellor of the Exchequer is not present. I have been in that position myself, so I sympathise with him. I want to ask the Chancellor whether he will not think over the matter again. We on this side of the Committee feel that the arguments we have put forward are overwhelming, and I am certain that my hon. Friends intend to press the matter to a Division unless the right hon. Gentleman is able to say that between now and the Report stage he will entirely reconsider this matter and come back to the House with a much more intelligent answer.
I entirely agree with my right hon. Friend the Member for the City of London (Mr. Assheton) that the speech of the Financial Secretary to which we have just listened was not only reactionary but profoundly disappointing. It seemed to me to be a typical Treasury attitude towards a vitally important problem. When all is said and done, the biggest appeal which the present Government are quite rightly making today is for food production. I do not think that this country or hon. Members even yet realise how near disaster we are in the sphere of food production. This new Clause has been brought forward to do away—we hope—with the tax on petrol used for farming machinery. That is one of the most valuable contributions which could be made towards the increasing of food production in this country. At this time it would be the greatest possible factor in raising food production in this country to a high level.
7.45 p.m.
As for the dollar argument, I would say that there is no greater dollar saver than home-produced food, as has already been said. Therefore, whether it costs a few more dollars to get petrol does not seem to me to matter when compared with the vital saving of dollars which the increase in home food production will bring about. That seems more important than saving a few dollars on petrol.
I would like to ask the Financial Secretary what has happened to the 101 million gallons for which petrol units have been issued but not handed in for exchange for petrol? According to the Vick Report, 118 million units are going spare, except that 17 million of them have been handed in, leaving 101 million units which have not been cashed. Therefore, there must be all that petrol available, because the Government would presumably not issue coupons if there was not the petrol to meet them, or else the Government have made a profound mistake and have issued coupons for petrol which they have not got.
The hon. and gallant Member might remember that, during the winter before last, there were many weeks during which no tractor and indeed no one in the country could get very far. It is obvious that the farming community thus involuntarily saved a large volume of petrol.
I agree, but where are those units now, and where is the petrol against which they were issued? The Russell Vick Committee made it clear in their Report that they had discovered that fact, and when we are dealing with the shortage of petrol or of not being able to get petrol we should have that satisfactorily explained. I do not think that the right hon. Gentleman has done so.
To revert to the vital question of food production, the petrol-driven tractor—I have in mind the Ferguson—is the answer to farming in the future in this country. When we get the heavy edition of the Ferguson tractor to use along with the light one which we have at the moment, it will be of immense value to agriculture in this country and all over the world. I feel convinced that the Treasury, no doubt in duty bound, is not taking a proper view of what this tax means to agriculture and food production. We cannot concentrate too heavily on that point.
I would refer briefly to the industrial use of light carbon oil other than in the agricultural industry. In my constituency there is the greatest organisation for dyeing and cleaning in the world. Probably every Member in this Committee has at some time or another sent into the hands of that organisation clothes for cleaning. That industry is very disturbed on this subject of not having the tax level as between heavy and light oil. In spite of what the right hon. Gentleman has said about using the oil several times over, I feel that there is no justification for letting heavy oil off—that was right —and not letting off the light oil, which is equally important to the particular industries which use it. I hope that the Chancellor will consider that aspect again. I will not touch upon civil aviation, although that is important in my constituency. The point has been well dealt with, and I do not wish to detain the Committee. I ask the Financial Secretary not to look at food production in these desperate days through financial spectacles. It is a much bigger thing than that, and the solution lies in taking this tax off petrol which is used for farming purposes.
I had expected that my right hon. Friend would demolish this case, at least on administrative grounds, but he has certainly not demolished it on those or on any other grounds. He has shown that there are certain distinctions in the incidence of this duty, and he has pointed out that, in the case of petrol for flying purposes, flying is very heavily subsidised. It may be true that what is taken in duty is given back in another form; but the other aspects of the case which have been put forward are not in the same category. He said that petrol costs dollars, as though that were some argument against this concession. I fail to see what argument it is. I am more concerned with the industrial use of these oils, particularly for bench testing of motor engines and for agricultural purposes. The fact is that the petrol will be used in any case. Reduction or abolition of the duty will not mean any reduction in the amount of petrol which must be imported. That is certainly true in the case of bench testing.
I am entirely with those who are urging the case for agricultural machinery. The Financial Secretary said that this is the wrong time to consider these concessions. My reaction is that this is precisely the time when we should consider them. I do not want to elaborate on the excellent arguments already put forward from both sides of the Committee in that connection. Even if he can give no concession in regard to aviation spirit, even if he can give no concession in the case of the considerable amount of spirit used for the purpose of agricultural machines—for some reason which I have not gathered from his statement—I would press him and his right hon. and learned Friend to consider seriously whether some concession can be made in the industrial field. I appreciate the predicament of the Financial Secretary when the Chancellor is not here. As my hon. Friends on this side of the Committee have pointed out so effectively, in production of materials for export, particularly in the motor industry where bench testing is essential and where the oil will be used in any case, a most valuable concession could be made without any considerable sacrifice on the part of the Treasury. The Financial Secretary has not been able to rebut the arguments on the practical side, he has put forward no case—nor tried, so far as I could gather—to show that this would be impossible on the administrative side, and I plead with him to reconsider the matter before the Report stage.
I thought that it was somewhat disingenuous of the Financial Secretary to put forward the argument that what the Leader of the Opposition said 20 years ago should still be binding on this Com- mittee. Suppose he did say that any concessions then made—and he mentioned two—should not be used as a lever to get further concessions. Surely, that cannot possibly be binding now. Such an attitude is bound to result in all kinds of anomalies and distortions. Indeed, we have seen today from speeches from both sides of the Committee exactly the sort of anomalies which arise. I want to present a further general argument which has not yet been mentioned but which is extremely important. We have now other means of taxation which were not envisaged at all when this duty was originally introduced. We have also other means of using motor spirit and hydrocarbon oils which were then not envisaged. It is absurd to apply to those uses a duty which was never intended.
It seems to me quite out of date to impose taxes on ingredients. There is a special reason at present why we should not impose taxes on ingredients. The Government are asking that prices should be reduced. This would be one of the obvious ways in which we might get reductions in prices. The reductions could not be very great. The total duty in this case is not very great. The Government must apply to themselves the doctrine which they preach to others. If they can, by their own action, cause a reduction in prices then it is their duty to do so.
I urge the right hon. Gentleman to consider this matter between now and Report stage. If he cannot take the responsibility of acceding to the demand made upon him, I urge him to consider whether he cannot take off duties on white spirit and other hydrocarbon oils used for industrial purposes. I plead with him to try to remove the anomalies and the artificial protection which is put on certain types of agricultural tractors favouring them as opposed to other types of tractors. I ask him to see whether he cannot accept the recommendations of innumerable committees in the civil aviation field, all of which have urged the reconsideration of the duty on aviation spirit.
The Financial Secretary is being dealt with somewhat hardly but I feel that he has only himself to blame. In my view, he gave the right answer for the wrong reasons. The real difficulty in the way of accepting this Clause was only mentioned by him when he was rather provoked by interruptions from an hon. Member opposite. The real difficulty is obviously the opportunity which it opens up to the agricultural industry for evasion of the petrol rationing scheme. I know that the right hon. Member for the City of London (Mr. Assheton) expressed the view that the distinction between red and white petrol would solve the problem. I think that he was most optimistic, naive and somewhat ingenuous if he really thought that that would obviate the evasion that would be likely to take place. When we examine the proposition, put forward with disarming innocence by the hon. Member for Altrincham and Sale (Mr. Enroll), we find that what he is asking for is exemption from duty in the case of:
"… fuel in a mechanically propelled vehicle used solely in agriculture."
That does not necessarily limit the concession to tractors. When petrol for agricultural purposes is issued on coupons by the regional petroleum office it is not limited necessarily to use in a tractor. An agriculturalist uses petrol for pumping water, for generating electricity and for a variety of purposes.
Of course, the administrative arrangements would be such that the farmer would claim a rebate in respect of duty already paid. He would have to list the vehicles and appliances which had consumed the fuel for which a rebate was asked.
In other words, he would claim a rebate in respect of petrol which he alleged had been used in a tractor for the purpose of cultivation.
This is a system which has worked well in other countries and in several of our Dominions. Our farmers are just as honest as those in other countries.
8.0 p.m.
I cannot pretend to be an authority on what goes on in other countries. All I would say is that we have had complaints during previous discussions on other Clauses of this Bill that the oppressed agricultural community is burdened with having to make returns and inability to cope with the forms which must be completed. If this new Clause is accepted then the unfortunate farmer will be presented with more forms for the purpose of claiming rebates. Surely, if we want to help the agricultural industry, we need not enter into obscure or difficult arguments whether the tractors on a farm use petrol or kerosene? If we want to help the agricultural industry, it is much better, fiscally and in other ways, if subsidies or rebates are to be granted, that they should be granted on the basis of what the agriculturist produces and not on what he disburses. If that principle is applied, the object which hon. Members have in view will be far better served by not pressing the New Clause but by asking that, if it is necessary for further assistance to be given to agriculture, it should be given on the basis of what is produced and not on what is spent.
I did not entirely follow what the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) said, but I gathered that it would be a good thing if it could be reported in the agricultural papers, as it implies a good deal of sympathy for the agricultural cause. I am sure that his speech helped to raise the morale of the Financial Secretary, who, until a few moments ago, did not appear to have one friend in the Committee in support of the point which he tried to explain. Even the Minister of Agriculture, who considered this Debate so important that he himself came in—although he did not come in during the Debates on the important Amendments last week—presumably went out again in disgust when he heard the decision of his right hon. Friend. Various hon. Members have declared their interest in the type of tractor which they may have, but I myself have no interest in this Amendment, as I have only one tractor and it burns paraffin.
I want to say a word or two about an important branch of agriculture which has not yet been mentioned, and that is horticulture. At present, there is an increasing range of small mechanical implements useful to the horticultural industry, but they all burn petrol. The probability is that their use will become more and more widespread, particularly as that branch of the industry has been asked to step up its production. Like other industries, horticulture faces a number of labour problems, and the only way in which it can increase its production, until more houses are built in country districts, is by increasing mechanisation, and all the implements on the market at the moment burn petrol and pay this tax. I hope the Financial Secretary realises that, if he keeps to his present decision, he is making it impossible for the horticultural industry to expand.
May I intervene for a moment? This charge has been made several times. I think it is common knowledge that the annual price review takes into account what the farmer or agriculturist has had to expend by way of costs, and, that being so, the cost to him of the petrol, if he uses petrol, will be included in his costs and will be allowed for by the Minister of Agriculture when the next annual price review takes place. Therefore, it is untrue and completely misleading to assume that, in so far as this duty applies to tractors, it is making all that difference to agriculture in this country.
Would the right hon. Gentleman look at this point? He has suggested that the price review takes into account the cost of the petrol. Let us take a farmer who uses a petrol tractor, the cost of the petrol being 9d. a gallon, and compare him with the farmer next door who is using a paraffin tractor where there is no duty, and the one costs £50 more a year than the other. On what basis does the right hon. Gentleman suggest that the costs are taken into account, as what he said just now is really nonsense?
The Financial Secretary was cold and bothered about this new Clause. His hon. and gallant Friend the Member for Brixton (Lieut.-Colonel Lipton) has said that, in his view, the Financial Secretary has given the right answer but for the wrong reasons. The hon. and gallant Gentleman built up his case, so far as I can see, on the basis that the only reason why this could not be done was because a black market would arise, thereby indicting our own farming industry. Really, this will not do, and I suggest that the Financial Secretary should review this matter again altogether.
This is a very serious subject. Here we are frightfully concerned about the production of food, and the one thing which this Committee must do is to give every possible encouragement to our farming industry. Words have been used today on behalf of the Government and by their own supporters that will do no good. I support this Clause to the full, and I trust that the Government, while there is still time, will say that they will review the whole matter before the Report stage. I hope they will not leave it where it is at the moment, because they have made a very unwise decision.
The Financial Secretary quite failed to convince me by his arguments against any of these three new Clauses, either separately or collectively. Now that he has had his speech torn to pieces by my right hon. Friend the Member for the City of London (Mr. Assheton) and many hon. Members on his own side of the Committee, I feel that the right hon. Gentleman must by now be getting convinced that he is on a bad wicket, and perhaps, even at this late stage of the Debate, he may change his mind and so avoid the Division being forced upon him. If he is not prepared to do so, I would like to put to him some more forceful arguments from the agricultural point of view.
Two hon. Members have already mentioned that tractors are very often left running because of the trouble of restarting without petrol, and that there is, thereby, a waste of vaporising oil and continuous wear of the engine. Not only that, but many drivers change over from petrol to vaporising oil too soon, while the engine is still cold, with the result that they may have to start all over again. Sometimes, they change over, but the engine does not work properly, and there is oil wasted for technical reasons which I am not prepared to explain but am advised that this is the case. Thirdly, there is a point, which has not been mentioned, that many drivers of tractors deliberately run on petrol for far too long. In most cases, they do not have to pay for it themselves, as somebody else is paying for it, and also it is easier to keep going on petrol. Therefore, petrol is also wasted on that account. The changeover from the one to the other is also a great nuisance, because one has to have two different fuels and two tanks of different oil, the supply of which must be continually kept up. It would be an obvious advantage to change over gradually to petrol and get rid of the other kind of tractor. It would make farming operations much more efficient, and would help mass production of tractors and our exports of tractors as well.
Everybody knows that by far our biggest imports today are the purchase of foodstuffs, and yet with this tax on agricultural petrol we are actually putting a duty on the production of foodstuffs in this country. It is an economic proposition to buy raw materials and thereby produce the finished article, and in this case it is far cheaper to spend money on petrol for producing foodstuffs and save dollars which would otherwise be spent in purchasing foodstuffs from abroad. It may be argued that the farmers will pay the tax anyway, but farmers keep costings and they may work out that on marginal land or on a marginal proposition for food production it is just not worth while producing a particular article because of the tax on the petrol. It is those marginal forms of foodstuffs that we particularly want at the moment. Although the tax is not very large, it may just have that effect of discouraging the farmer to produce marginal foodstuffs.
We must mechanise to increase our production. We must mechanise to get cleanliness on the farms, and cleanliness is best obtained by water and electricity, both of which in many cases are produced by petrol. We must save time by having hay loaders, chaff cutters and other machines run by petrol engines to avoid extra labour costs and to make the life of the farm labourer a little less arduous. It is essential that we should mechanise the farms and bring them up to date. This tax on petrol discourages mechanisation and efficiency, is unfair and uneconomic, and I hope the Financial Secretary will change his mind.
I am prompted to intervene in this Debate because when the Financial Secretary reads in HANSARD tomorrow the answer he has given, I think he will realise that it does not make sense at all. I say that quite sincerely. He made one point, which the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) took up, that the price of the petrol must be kept up, otherwise people will waste it. That is a most illogical tegument. The amount of petrol obtained is governed by the number of coupons issued, and in fact there has been a saving. There have been more coupons issued than petrol used. Therefore, that argument is ruled out, and I hope we shall not hear any more about it.
The second argument was the interesting statement made by the Financial Secretary—and I take it that it was an official Government statement—that the price-fixing review bases its costs entirely upon the petrol. [HON. MEMBERS: "No."] Surely, nobody will say that it is possible to differentiate in that price-fixing review, and to say "We are going to fix a price of so much for people who have petrol tractors, and a price of so much for people who have paraffin tractors." Whatever basis is taken, one of them must be wrong. Which is it? Certainly one can take one of those factors as the basis. If the price is too low and it is based on paraffin, the man with the petrol tractor is penalised. If the price is too high and it is based on the price of petrol, the man with the paraffin tractor is given an advantage which he should not have. Public money is thereby wasted. One of those factors is wrong.
It is inevitable when averaging out prices, and perhaps when the hon. Gentleman is a little older he will realise that.
A "back-to-the-bullock" speech!
I had the good fortune in the Debate the other day to tell the President of the Board of Trade, who is a year younger than I am, not to worry about that sort of remark when it came from this side of the Committee I said to him that people with 20 years' experience are very often those who have had the same experience for one year multiplied by 20; they have learned nothing. The right hon. Gentleman has given me my case. He said that when I was a little older I should discover how difficult it is to average things out. How is it possible to average the thing out when we have got two steps? We have got the paraffin price and the petrol price. Whichever way we try to average it out, it is to the advantage or disadvantage either of the paraffin user or the petrol user. In fact, taking the basis of average prices, the right thing to do is either to bring the paraffin tax up to the petrol price, or to bring the petrol tax down to the paraffin price. That would make it much easier.
8.15 p.m.
If we want to do something for agriculture, the only way to do it is to reduce the petrol tax. I could have understood it if the right hon. Gentleman had said "What we really want to do is to encourage the production of the paraffin tractor because it is so much better, and therefore we are putting penal taxation on the petrol tractor." That is a principle of finance which I could understand. But we did not say that. When the right hon. Gentleman has cooled off, and when once again he is sitting pretty, and not ugly, he may perhaps be inclined to look at his answer and realise that it stands up to no test of logic or of reason. I suggest that he should give an assurance that he will look at this matter again.
I also ask the Financial Secretary to look at this matter again. A little earlier the Minister of Agriculture and the Parliamentary Secretary were present, but they had to leave us before the Financial Secretary announced that the Government's intention is to go back to the ox and the ass and the wooden plough. How can the right hon. Gentleman face the National Farmers' Union or anybody else if the argument of the Treasury is, "We must stop the farmer having his petrol or vaporising oil; we must save on everything "? Everybody present agrees that we must save dollars and produce food at home. Then the Treasury say, "Cut out the things that help to do that; get back to the old days when everything took about three times as long."We have not got the horses to enable us to do that, let alone anything else.
What will the right hon. Gentleman say to the National Farmers' Union who, on 19th February, said that in view of the need to remove all handicaps on farmers in their efforts to carry out the Governmen programme, the Government must remove his tax? They will not think very much of the Government's programme for agriculture when the Treasury say that they cannot help in this way. By using petrol we shall save on our bulk intake of oil. At present an enormous amount of vaporising oil is wasted. Tractors using vaporising oil have to be kept running at full pressure. They have to be kept hot. Go to any farm in the morning when the men are going to work; what happens? Half an hour's labour is spent cranking up and starting the vaporising oil tractor. Then they have to wait until it is warmed up. They then have half an hour for breakfast before the petrol is turned off. When they go out to the fields they may have to unload sacks of fertiliser and so forth. With a petrol engine one switches off but with the vaporising oil engine one does not, because if it is switched off another half an hour is wasted warming the engine up again.
The amount of oil that is wasted throughout the country must be terrific. It cannot be helped; it has to be, because if a farmer wants to get his work done he must keep the engine running at full pressure. Most of the vaporising oil tractors are a good deal heavier than the new type of petrol tractor. Therefore, vaporising oil tractors are uneconomic vehicles. With a light job to do on the land, if a Ferguson—one of our light tractors—is used, one uses the very minimum of petrol, whereas a much heavier vaporising oil tractor may use four times as much oil for the same job.
In addition to that, there is one thing in which we have a good name and in which we are getting a very good name, and that is the production of a good
tractor in this country. It has always been produced in America. Now we are getting a good name for it, but, of course, the Financial Secretary to the Treasury has said that is to go by the board. We must stick to vaporising oil tractors. Other countries will not have them; they want the petrol tractors, the most economical things there are. But the price is to be put up and is to be put out of the market at the present time. I ask the Financial Secretary to the Treasury to reconsider this question, and to come back and tell us he will make some concession.
I apologise to the Committee for intervening at this stage, as I was not here earlier in the Debate and did not hear the first reply of the Financial Secretary; but I must point out that the second reply of the right hon. Gentleman contained such an astonishing mis-statement that I think the Committee should be aware of it before they vote on this Clause. In reply to my hon. Friend the Member for Westmorland (Mr. Vane), who pointed out that the horticulturists were using the petrol machine to an increasing degree at the moment, and undoubtedly would have to do so in the future, the right hon. Gentleman said that horticultural products are covered by the annual review. That is certainly what many of us on this side thought he said. It is quite untrue, and I think the Committee ought to realise that before we vote on this issue.
Question put, "That the Clause be read a Second time."
The Committee divided: Ayes, 116; Noes, 238.
Division No. 180.] AYES. [8.22 p.m. Acland, Sir Richard De la Bère, R. Harvey, Air-Cmdre. A. V. Amory, D. Heathcoat Digby, S. W. Haughton, S. G. Assheton, Rt. Hon. R. Dodds-Parker, A. D Hinchingbrooke, Viscount Astor, Hon. M. Donner, P. W. Hope, Lord J. Bossom, A. C Drayson, G. B. Howard, Hon. A. Bowen, R. Drewe, C. Hulbert, Wing-Cdr. N. J. Bower, N. Eccles, D. M. Hurd, A. Boyd-Carpenter, J. A. Edelman, M. Hutchison, Lt.-Cm. Clark (E'b'rgh, W.) Braithwaite, Lt.-Comdr. J. G. Erroll, F. J. Hutchison, Col. J. R. (Glasgow, C.) Buchan-Hepburn, P. G. T. Fletcher, W. (Bury) Jeffreys, General Sir G. Butcher, H. W. Foster, J. G. (Northwich) Keeling, E. H. Byers, Frank Fraser, H. C. P. (Stone) Kendall, W. D. Carson, E. Fyfe, Rt. Hon. Sir D. P. M Kingsmill, Lt.-Col. W. H. Challen, C. Gage, C. Lancaster, Col. C. G. Channon, H. Galbraith, Cmdr. T. D. Law, Rt. Hon. R. K. Clarke, Col. R. S. Gammans, L. D. Lloyd, Selwyn (Wirral) Clifton-Brown, Lt.-Col. G. George, Maj. Rt. Hn. G. Lleyd (P'ke) Low, A. R. W. Conant, Maj. R. J. E. George, Lady M. Lloyd (Anglesey) Lucas-Tooth, Sir H. Crookshank, Capt. Rt. Hon. H. F. C Gomme-Duncan, Col. A McCorquodale, Rt. Hon. M. S. Crosthwaite-Eyre, Col. O. E Grimston, R. V. Macdonald, Sir P. (I. of Wight) Darling, Sir W. Y. Hannon, Sir P. (Moseley) Maclean, F. H. R. (Lancaster) Macpherson, N. (Dumfries) Ponsonby, Col. C E. Studholme, H. G. Maitland, Comdr. J. W Poole, O. B. S. (Oswestry) Taylor, C. S. (Eastbourne) Manningham-Buller, R. E. Raikes, H. V. Touche, G. C. Marlowe, A. A. H. Rayner, Brig. R. Turton, R. H. Marshall, O. (Bodmin) Reed, Sir S. (Aylesbury) Vane, W. M. F. Maude, J. C. Redi, Rt. Hon. J. S. C. (Hillhead) Wadsworth, G. Medlicott, Brigadier F. Roberts, Emrys (Merioneth) Wakefield, Sir W. W Mellor, Sir J. Roberts, W. (Cumberland, N.) Walker-Smith, D. Morris, Hopkin (Carmarthen) Robinson, Roland Ward, Hon. G. R. Morris-Jones, Sir H. Ropner, Col. L. Wheatley, Colonel M. J. (Dorset, E.) Morrison, Rt. Hon, W. S. (Cirencester) Ross, Sir R. D. (Londonderry) Williams, C. (Torquay) Mott-Radclyffe, C. E. Sanderson, Sir F. Willams, Gerald (Tonbridge) Nicholson, G. Shepherd, W. S. (Bucklow) Willoughby de Eresby, Lord Nield, B. (Chester) Smith, E. P. (Ashford) York, C. Odey, G. W. Smithers, Sir W. Young, Sir A. S. L. (Partick) Osborne, C. Spearman, A. C. M. Peake, Rt. Hon. O. Stanley, Rt. Hon. O. TELLERS FOR THE AYES: Pickthorn, K. Stoddart-Scott, Col. M. Commander Agnew and Pitman, I. J. Strauss, H. G. (English Universities) Brigadier Mackeson.
NOES. Adams, Richard (Balham) Durbin, E. F M Lindgren, G. S. Adams, W. T. (Hammersmith, South) Dye, S. Lipton, Lt.-Col. M. Allen, A. C. (Bosworth) Ede Rt. Hon. J. C. Longden, F. Allen, Scholefield (Crewe) Edwards, N. (Caerphilly) Lyne, A. W. Anderson, A. (Motherwell) Edwards, W. J. (Whitechapel) McAdam, W. Attewell, H. C. Evans, Albert (Islington, W.) McAllister, G. Austin, H. Lewis Evans, E. (Lowestoft) McEntee, V. La T Awbery, S. S. Ewart, R. McGhee, H. G. Ayles, W. H. Farthing, W. J. Mack, J. D. Ayrton Gould, Mrs. B. Fernyhough, E. McLeavy, F. Balfour, A. Field, Capt. W. J. Macpherson, T. (Romford) Barnes, Rt. Hon. A J Fletcher, E. G. M. (Islington, E.) Mainwaring, W. H. Barstow, P G Freeman, J. (Watford) Mallalieu, E. L. (Brigg) Barton, C. Ganley, Mrs. C. S. Mann, Mrs. J. Battley, J. R. Gibbins, J. Manning, C. (Camberwell, N.) Bechervaise, A. E. Gibson, C. W. Manning, Mrs. L. (Epping) Bellenger, Rt. Hon. F J Gilzean, A. Marquand, H. A. Benson, G Glanville, J. E. (Consett) Mathers, Rt. Hon. George Berry, H Gooch, E. G. Middleton, Mrs. L. Binns, J. Gordon-Walker, P. C. Millington, Wing-Comdr. E. R Blackburn, A. R Greenwood, A. W. J. (Heywood) Mitchison, G. R. Blyton, W. R. Grey, C. F. Moody, A. S. Bottomley, A. G. Griffiths, D. (Rother Valley) Morgan, Dr. H. B. Bowles, F. G. (Nuneaton) Griffths, W. D. (Moss Side) Morley, R. Braddock, Mrs. E. M. (L'pl, Exch'ge) Guest, Dr. L. Haden Morris, Lt.-Col. H. (Sheffield, C.) Braddock, T. (Mitcham) Gunter, R. J. Morrison, Rt. Hon. H. (Lewisham, E) Bramall, E. A. Guy, W. H. Moyle, A. Brook, D. (Halifax) Haire, John E. (Wycombe) Murray, J. D. Brooks, T. J. (Rothwell) Hale, Leslie Naylor, T. E. Brown, George (Belper) Hamilton, Lieut.-Col. R. Neal, H. (Claycross) Brown, T. J. (Ince) Hannan, W. (Maryhill) Nichol, Mrs. M. E. (Bradford, N.) Bruce, Maj. D. W. T. Hardy, E. A. Nicholls, H. R. (Stratford) Buchanan, Rt. Hon. G Harrison, J. Noel-Buxton, Lady Callaghan, James Henderson, Rt. Hon. A (Kingswinford) Oldfield, W. H. Carmichael, James Henderson, Joseph (Ardwick) Oliver, G. H. Champion, A. J. Herbison, Miss M. Paget, R. T. Chater, D. Hobson, C. R. Paling, Will T. (Dewsbury) Chetwynd, G. R. Holman, P. Pargiter, G. A. Cluse, W. S Holmes, H. E. (Hemsworth) Parkin, B. T. Cobb, F. A. House, G. Paton, J. (Norwich) Cocks, F. S. Hoy, J. Pearson, A. Coldrick, W. Hudson, Emrys (S. Ayr) Peart, T. F. Colman, Miss G. M. Hughes, Emrys (S. Ayr) Perrins, W. Comyms, Dr. L. Hughes, Hector (Aberdeen, N.) Piratin, P. Cooper, Wing-Comdr. G. Hughes, H. D. (W'lverh'pton, W.) Poole, Cecil (Lichfield) Corbet, Mrs. F. K. (Camb'well, N.W.) Hynd, H. (Hackney, C.) Popplewell, E. Cove, W. G. Hynd, J. B. (Attercliffe) Price, M. Philips Cripps, Rt. Hon. Sir S Irving, W. J. (Tottenham, N.) Proctor, W. T. Daggar, G Isaacs, Rt. Hon. G. A. Pursey, Cmdr. H Daines, P. Jay, D. P. T. Randall, H. E Davics, Edward (Burslem) Jeger, G. (Winchester) Ranger, J. Davies, Ernest (Enfield) Jenkins, R. H. Rankin, J. Davies, Harold (Leek) Johnson, Douglas Reeves, J. Davies, Haydn (St. Pancras, S.W) Jones, D. T. (Hartlepool) Reid, T. (Swindon) Davies, R. J. (Westhoughton) Jones, J. H. (Bolton) Richards, R. Davies, S. O. (Merthyr) Jones, P. Asterley (Hitchin) Ridealgh, Mrs. M. Deer, G. Keenan, W. Roberts, Goronwy (Caernarvonshire) Delargy, H.J. King, E. M Ross, William (Kilmarnock) Diamond, J. Kinley, J. Royle, C. Dodds, N. N. Lang, G. Sargood, R. Donovan, T. Lee. F. (Hulme) Scott-Elliot, W. Driberg, T. E. N Leslie, J. R. Sharp, Granville Shawcross, C. N. (Widnes) Thomas, D. E. (Aberdare) Whiteley, Rt. Hon. W. Silverman, J. (Erdington) Thomas, I. O. (Wrekin) Wilkes, L. Silverman, S. S. (Nelson) Thurtle, Ernest Williams, D. J. (Neath) Skeffington-Lodge, T. C Titterington, M. F. Williams, J. L. (Kelvingrove) Skinnard, F. W Tolley, L. Williams, R. W. (Wigan) Smith, H. N. (Nottingham, S.) Tomlinson, Rt. Hon. G. Williams, W. R. (Heston) Snow, J. W. Ungoed-Thomas, L. Willis, E. Solley, L. J. Usborne, Henry Wills, Mrs. E. A. Sorensen, R, W. Vernon, Maj. W. F. Wise, Major F. J. Soskice, Sir Frank Viant, S. P. Woodburn, Rt. Hon. A. Sparks, J. A. Walker, G H. Wyatt, W. Stewart, Michael (Fulham, E.) Wallace, G. D. (Chislehurst) Yates, V. F. Stokes, R. R. Wallace, H. W. (Walthamstow, E) Young, Sir R. (Newton) Strauss, Rt. Hon. G. R. (Lambeth, N.) Warbey, W. N. Younger, Hon. Kenneth Stross, Dr. B. Watkins, T. E. Sylvester, G. O. Wells, P. L. (Faversham) TELLERS FOR THE NOES: Taylor, H. B. (Mansfield) Wells, W. T. (Walsall) Mr. Collindridge and Taylor, R. J. (Morpeth) Wheatley, Rt. Hn. J. (Edinburgh, E.) Mr. Wilkins. Taylor, Dr S. (Barnet) White, H. (Derbyshire, N. E.)
NEW CLAUSE.—(Abolition of stamp duty on faculties for Lambeth degrees, etc.)
The stamp duty chargeable under the heading in the First Schedule to the Stamp Act, 1891, "Faculty or Dispensation of any other kind" shall cease to be chargeable.—[ Mr. Assheton. ]
Brought up, and read the First time.
8.30 p.m.
I beg to move, "That the Clause be read a Second time."
On a point of Order. May I ask if you would be kind enough to explain, Major Milner, why you are not calling the admirable and important proposed new Clause ( Amendment of Finance Act, 1944, s. 24) in the name of the hon. Member for Aston (Mr. Wyatt), with which, incidentally, I am in complete agreement?
I am afraid the new Clause referred to is out of Order, for it might impose a charge.
On a point of Order. Is it not proposed to call the proposed new Clause ( Expenses of employees in travelling to and from their place of work ) in my name and that of my hon. Friend the Member for Wimbledon (Mr. Palmer).
I am afraid I have not selected that new Clause.
The object of the short and simple new Clause, the Second Reading of which I have moved, is to abolish the stamp duty on faculties for Lambeth degrees. I have argued the case on a previous occasion in this Chamber, and I have set the new Clause down in association with the hon. Gentleman the Member for Sheffield, Park (Mr. Burden), who is, unfortunately, unable to be here at the moment. Here is an anomaly which I feel sure, the Committee will wish to remove, and in view of that I do not think it necessary to trouble the Committee with any further argument.
I am very happy to say that my right hon. and learned Friend has great pleasure in accepting this new Clause.
I am deeply grateful.
Question put, and agreed to.
Clause read a Second time, and added to the Bill.
NEW CLAUSE.—(Deduction for foreign tax on capital.)
Where investment income subject to the contribution imposed by this Part of this Act is derived from a foreign investment and that foreign investment has been subject to a foreign tax on capital or on any increment on capital levied by a foreign government since the first day of January nineteen hundred and forty-four, there shall be deducted from the contribution a sum equal to the foreign tax or a proportionate part of the contribution attributable to that investment whichever is the less.
The proportionate part of the contribution attributable to any investment shall be calculated by reference to the proportion which the income from that investment bears to the total investment income.—[ Colonel J. R. H. Hutchison. ]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
This Clause is designed to deal with capital and the special levy in respect of investments abroad. The main intention of the new Clause is to avoid the incidence of what I may term a "double capital levy." Since the war it has become fashionable in certain foreign countries to impose a form of levy on capital; some- times it takes the form of a levy on a capital increment due to war causes. Foreigners—that is to say, in their view, ourselves—who have investments in those countries are equally liable to this capital levy. Consequently, people of this country, Britishers, who have investments in those foreign countries are attacked for a capital contribution in respect of investments which they hold in those countries.
It may be—indeed, it is often the case—that that liability which the foreign country is trying to establish has not, in fact, been discharged; and consequently the national of this country holds what I may term a false value in capital investment in the country in question, in as much as the capital is liable to pay a capital levy, the payment being defrayed in one form or another. It is, therefore, clear that where the capital levy has not been discharged the income which has been received in the year 1947–48 in respect of that investment abroad might be termed to be a false income. I shall not disguise from the Committee that I believe that this new Clause, as it has been framed, may go rather further than I think is, in fact, fair and equitable, but I do contend that where income has flowed in from capital in the year 1947–48, and that capital is, in fact, liable to an undischarged capital levy, that income is exaggerated income, and not to be taken in full in the assessment of the special levy of this country.
Therefore, I ask that the amount of income from abroad, to be calculated for the purposes of the levy in this country, should be reduced by the proportion which the capital levy abroad bears to the capital abroad. Thus, for example, if one has an investment of a million francs on which there is liability for 500,000 francs, and in the year 1947–48 the income from that capital—to take very simple and rather absurd figures—has been 1,000 francs, I contend the proper sum to be paid into that individual's income for the year 1947–48 should not be 1,000 francs but 500 francs. Therefore, this new Clause, which, I think, may go rather further than that, is intended to put that inequitable position right.
If the right hon. Gentleman says it cannot be done, let us realise what we are doing. We are really subjecting British capital to a capital levy abroad and then to a further capital levy or special levy—which, in fact, has to be paid out of capital—in this country as well. The Government have gone pretty wild in the matter of taxation lately, but I cannot believe they want to be so wild as to subject British capital to a double capital levy.
This new Clause goes a great deal further than the hon. and gallant Member for Central Glasgow (Colonel Hutchison) wished to go, to judge by the argument which he has put to the Committee. It would include, of course, payments of foreign tax which have already been made. Although the hon. and gallant Member did not endeavour to support that by argument, it is, nevertheless, provided for by the wording of the new Clause, and there could be no possible case for supporting that sort of deduction, because it would already have been reflected by the diminution of income which accrued from the investment.
He went on to say that he really had in mind a debt due in respect of foreign capital tax which had not yet been paid. He argued that what he described as a false income value could be appropriately scaled down by reference to that foreign debt. This is not a recurrent tax; it is a once-for-all tax. If there were to be some kind of arrangement of that sort to scale down what is termed a false income value of the investment, it could not be done unilaterally. That is to say, in all these taxation agreements which relate to double tax there would have to be some reciprocal arrangement between this country and the foreign country which imposed the capital tax to share the loss which would accrue to each of the countries as a result of the reduction of the taxable income. There is no such agreement.
It would not be feasible within the limit of a single non-recurrent tax to negotiate such an agreement. As hon. Members know, a number of agreements of that sort have been negotiated and are operative, and the necessary legislative powers have been taken to implement them in various Finance Acts. It would not be feasible to do the same thing in regard to this tax. Without reciprocal arrangement, it would simply mean that this country would be the loser in respect of the reduction, and the loss would not in any sense be shared by the other country which, after all, enjoyed the benefit of the capital tax imposed upon the investment. That is the situation, which I do not think anyone could contemplate as being within the realms of practical possibility.
We have, in the drafting of the legislation providing for this tax, gone to some extent towards eliminating this double taxation, in providing that non-domiciled persons are not liable to be taxed unless they are ordinarily resident in this country. Conversely, as the hon. and gallant Member knows from the argument we had during last Thursday's proceedings, we have also limited the imposition of the tax on persons domiciled here on Surtax principles and thereby relieved persons domiciled here in the terms in which they are relieved for the purpose of Surtax.
With regard to unpaid debts in respect of foreign capital, I venture to make this further observation. After all, they do not really differ in that respect from other commitments in respect of unpaid foreign taxes. Investment in respect of which there is an outstanding debt does not, in a sense, produce the real return which it appears to produce. That is to say, if there is a debt which falls to be paid out of it, the income value can theoretically be scaled down by reference to any unpaid debt which attaches to the investment. This is a tax which is payable as a cash sum by a contributor. As I said on the last occasion when the Committee met, no doubt in many cases it will have to be paid, either partially or wholly out of capital, but it is not per se a capital tax, and it would not be feasible to take into account any comparable kind of tax or debts which have to be paid out of it.
By Clause 50, we have provided that interest charges and so on are payable out of the income return from the investment in assessing the net amount of the aggregate investment. We can only, in deciding what has to be taken as the aggregate investment, deduct the interest charges in that way. It would be going much further to treat this as purely capital tax and to deduct from the value, debts in respect of foreign tax and debts in respect of any other liabilities not discharged, and which, if discharged, would result in a reduction of the income. For those reasons, I advise the Committee to reject the Amendment.
Question put and negatived.
NEW CLAUSE.—(Deduction in respect of directors' remuneration.)
In paragraph II of the Fourth Schedule to the Finance Act, 1937, as amended by Section forty-five of the Finance Act, 1947 (which limits the amount of the deduction to be allowed in respect of the remuneration of certain directors in computing for the purpose of profits tax the profits arising from a trade or business carried on by a company in which the directors have a controlling interest), after the words "two thousand five hundred pounds," wherever those words occur there shall be added the words "for each director," and for the words "fifteen thousand pounds," wherever they occur there shall be substituted the words "thirty thousand pounds."—[ Major Haughton. ]
Brought up, and read the First time.
8.45 p.m.
I beg to move, "That the Clause be read a Second time."
In moving this new Clause, my mind goes back to the Debate which we had on the Finance Bill last year, and to the long discussion which took place and which terminated in Section 45 of the Finance Act, 1947. As will be recollected by those who have studied the Finance Act, 1947, directors' remuneration was raised to a total of £ 2,500, which was a global sum divided by the number of directors or 15 per cent. of the profits. The incidence of the 15 per cent., and the fact that the Chancellor has introduced it for each director is the basis for this Clause, which seeks to make the limit £ 2,500 for each director or a sum which I think is commensurate with the increase in the rate of remuneration since 1937.
My submission is that the 1947 Act should be changed so that the limit should be £ 2,500 for each director or that the income from any company should be £ 30,000 instead of £ 15,000. In submitting that, I should like to put to the Committee that the tremendous cost of the services which have to be incurred and the tremendous cost of the Budget calls for an ever rising volume of taxation, and taxation, in the main, must come from profits out of industry. In this House, over and over again, it has been argued that the remuneration of those who produce the profits in industry should be compatible with the amount that they earn for their companies. I think that the Clause is reasonable, and that it is in accord with the decision which was reached last year as regards Profits Tax that the amount should be per director.
The new Clause seeks to increase the amount which may be allowed as a deduction on account of the remuneration of directors from the profits for Profit Tax purposes. If this change were made, it would, of course, tend to increase the profits available after paying taxation, and would also be an encouragement, as I think the hon. and gallant Member for Antrim (Major Haughton) will agree, to a higher remuneration to directors of companies.
One of the arguments behind this and similar proposals that have been put forward is that prices have risen and the value of money has changed since 1937, and that, therefore, this compensating change must be made. Of course, at a time of high prices the recipients of almost any form of income can argue that their incomes ought to be raised a corresponding extent; and those with very small fixed incomes can argue it most strongly of all. But, surely, this would be the very worst possible time to accept an argument of that kind. I should have thought there was nothing which encouraged and accelerated the inflationary spiral more than accepting the argument that because prices have gone up somebody's income should be put up by a corresponding amount. We feel that in view of the White Paper on Personal Incomes, Costs and Prices, in which we explicitly encouraged the whole community not to accept that principle, this would be the very worst time to apply it to any single section of the community.
Question put, and negatived.
NEW CLAUSE.—(Relief for undistributed profits, etc.)
In Subsections (2) and (3) of Section' thirty of the Finance Act, 1947 (which grant a relief from profits tax for profits not distributed and impose a charge to profits tax on certain distributions of profits at a rate in both cases of seven and half per cent.), and in Subsection (3) of Section thirty-six (which contains an incidental reference to the said rate) for the words "seven and a half per cent.," wherever those word occur there shall be substituted the words "twenty per cent."— [Mr. Eccles.]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
The Committee will remember that in the last Budget the Profits Tax was doubled as to both its rates. If I may put it in this way, the rate upon distributed profits was raised from 2s. 6d. to 5s. in the £, and the rate upon undistributed profits was raised from is. to 2s. in the £. The object of this proposed new Clause is to restore the rate on undistributed profits to is. in the £, which it was in the days of the old National Defence Contribution. It is, therefore, quite a modest proposal. It is simply to put the rate on undistributed profits back where it was.
When the Economic Secretary to the Treasury was speaking on this subject last time, he defended the raising of the rate on undistributed profits on two grounds, if my memory serves me right. First, he said that companies were making excessive profits, and that, therefore there was no harm in taking a good deal of these profits away; secondly, he said that it did not matter whether the companies ploughed back the profits or not as there were not adequate materials or labour available to make new extensions, so they would not need the reserves if they had them. We, of course, contended that both of those arguments were entirely erroneous; and if they were erroneous then, they are certainly more so now.
It may be—and I said so on the last occasion—that some profits have been excessive. I should be the first to admit that. But those excessive profits are not to be tackled by this sort of tax. In this Session we have gone one step towards dealing with them, and that is in the Monopoly Bill. That is one of the ways of dealing with excess profits which are made when a company has a too great control over a particular market for a product which is scarce. To put a General Profits Tax of this sort upon these excessive profits is to hit all the people who are making a reasonable rate of profit as well as the few who are making excessive profits. Secondly, it may be said that it is not a good thing that very large sums of profits should find their way into the hands of very few individuals. Well, there is some argument for that, too; but then the way to tackle that is through the ordinary operations of Income Tax and Surtax, and also, although I do not like it, through a high rate of Profits Tax upon distributed profits. I am not now arguing whether a tax upon distributed profits is good or bad; that is not the subject of this proposed new Clause. This proposed new Clause simply seeks to reduce the rate of tax upon profits which are retained in the business.
I should have thought that both sides of the Committee were agreed that it was a good thing that profits should be ploughed back into industry. We may differ upon the methods by which one can stimulate boards of directors to plough back profits; but I do not think that we would disagree that it is in the interests of the nation generally, and of those employed in a business, that the maximum amount of profits should be retained in a business. Roughly speaking, there are two ways in which we could seek, through the Budget, to persuade a board of directors to retain within the company more profits than they would if they were left entirely to themselves. Either we could induce them to do it by giving large allowances for renewals and extensions of plant, which is the method of the Income Tax Act, 1945, which certainly has wholehearted approval on these benches; or we could penalise them if they did not do it, which was obviously the method adopted by the Profits Tax of the former Chancellor of the Exchequer.
If this proposed new Clause is adopted, the result will be that the margin between the tax upon distributed profits and profits retained in the business will be widened. Therefore, if there is anything in the penalty argument—and myself I do not think there is very much, but if there is—the tax on distributed profits is 5s. in the £, and if this proposed new Clause were to become part of the present Finance Bill the tax on undistributed profits would be only 1s. in the £. That is a considerable difference, and it might induce some directors to put more money back.
But I would not rest my argument upon that. I rest my argument upon quite different considerations. Today, British industry obviously requires large amounts of new capital. We also know—which we did not know when we were last discussing a Finance Act—that the voluntary savings of the community are not running at a satisfactory rate. If voluntary savings are deficient, from where can we make them up? The first and obvious source is out of corporate savings; that is, out of savings which the companies make through not distributing their profits but keeping them in the treasury of the company. As and when it is possible for them to get permits to make extensions and to renew their buildings, and things of that kind, then they will have the money available and will not come upon the all-too-deficient pool of private savings.
It seems to us that this is a Clause which the Government ought to accept on strictly production grounds. I do not think there is much of party politics in this. It is simply a question of making up our minds what it is best to do for the future equipment of British industry. I say that, although I did not think there was a case for this tax a year or six months ago, it was perhaps, arguable; but I really do not believe that it is arguable now. I think we have reached the peak of industrial profits. That appears to be the best information one can gather. I do not mean that we shall not see a number of balance sheets coming out in the next few weeks, relative to the year 1947, which will not show good profits. We shall. But I think that the year 1948 will show that the peak of industrial profits has been passed. That is a very serious thing from the point of view of capital extensions, because it was not possible in 1947, and it will not be possible in 1948, to do one-tenth of the improvements that ought to be done. On the other hand, the new Clause would give the opportunity to amass the reserve which will be available to do these things which are so much in the public interest.
9.0 p.m.
I support the new Clause because it seems to take some of the sting out of a bad tax. I am arguing not on the ground that it falls more upon one section of the community than upon another, or that it is a disincentive, but on the ground that it discourages—or reduces the amount available for—re-equipment, as has been so ably said by my hon. Friend the Member for Chippenham (Mr. Eccles). My second reason is that the tax is unfair and hits people through no fault of their own. For instance, those companies with large debenture holdings fare very much better than do those companies having only a very small issue. Shareholders in companies where the proportion of ordinary shares to preference shares is small fare much worse than those where the reverse applies. For those reasons I consider it such a bad tax that any mitigation is welcome. It may be difficult for the Chancellor to go back on as much of the policy of his predecessor as he might wish, but this is a possibility for him to mitigate the evils of his predecessor without entirely contradicting everything he has done.
I support my hon. Friends the Members for Chippenham (Mr. Eccles) and Scarborough and Whitby (Mr. Spearman) in this plea to the Chancellor. Any special tax on profits as such is a bad thing because it is bound to have two effects. First, it is bound to be inflationary in that it will encourage businesses not to manage themselves as frugally and efficiently as possible. Secondly, to use the current word, it will be a disincentive to efficiency. I think that applies to any special tax on profits, but a special tax on undistributed profits is wholly indefensible for the reason given by the hon. Member for Chippenham that the pressing need of the country is the re-equipment of industry.
The main problem facing the right hon. Gentleman and the country is, therefore, that of capital formation. There are only three sources from which that can come. First, it can some compulsorily from the Budget surplus. We on this side have already spoke with approval of the honest surplus disclosed in the Chancellor's Budget statement but I think many people now feel that that surplus was based on buoyant Revenue. Doubts are beginning to occur in the minds of a good many people whether the Revenue will be quite as buoyant in the future as apparently it has been in the past few months or more: whether these enormous sums can still be raised in taxation; and whether it is not a fact—as hon. Members on the other side also have said —that there is already rather less money about. If that is the case and the revenue will not be buoyant, it means that the right hon. Gentleman may have to fight for his surplus. It is not safe, therefore, to count too easily on the Budgetary surplus providing too much of this capital formation.
The second source, which has already been referred to, is that of private savings. I do not think that any hon. Member on either side of the Committee can possibly observe with equanimity the present course of private savings. I think the reason for this disastrous trend in small savings is that as a nation we are overtaxed. That is becoming apparent to all sections of the community. Taking direct and indirect taxation together we are overtaxed, which means that people just have not got the money for small savings. Another ingredient in the trend of savings is a distrust of the intentions of the Government. A most serious psychological blow has been struck by the provision for a Special Contribution. The Chancellor will be wise, therefore, to be cautious about the amount he will get for his capital formation from private savings.
The third main source is the undistributed profits of businesses. At present such profits bear tax at the rate of 10s. 1d. in the pound, a fantastically high rate of taxation from that particular source. I suggest, therefore, that this is a conspicuous opportunity for planning. It is thoroughly bad planning to take special taxation from undistributed profits when they are the main source from which to obtain new capital formation. Although the New Clause does not go the whole way, it does provide an opportunity for a sound piece of State planning.
What I personally would be in favour of would be a preference in taxation for the undistributed profits of businesses; that, instead of paying 9s. in the pound, they should pay less. In that way we would encourage businesses to conserve their profits and would get the new capital formation which we need so much. I have absolutely no doubt, and I think hon. Members not only on this side but also on the Benches opposite agree, that unless British industry is to be given the resources with which to refurbish and re-equip itself, to adapt itself to new processes and developments, to expand and take risks and make ventures; unless that is to happen, the industrial future of the country is very dim. The New Clause is a modest step in the right direction, and for that reason I wholeheartedly support it.
I think that some hon. Members on this side would go part of the way down the road suggested by the hon. Member for Chippenham (Mr. Eccles). It is true that as we go forward from private enterprise to Socialism we have to consider how to provide sufficient capital for re-planting British industry. If the hon. Member for Chippenham had gone the whole way, I think he would have admitted that British industry was badly under-planted between the two wars. British industry did not spend sufficient capital when it had it to re-equip itself. Due largely to the prodding from hon. Members on this side of the Committee, British industry is waking up to this and now wants to spend more on re-planting itself. [ Laughter. ] The hon. Member may laugh, but it is true. Hon. Members on this side know just as much about industry as do those opposite—in some cases, in fact, rather more. We have prodded these people in the places where they needed prodding and our actions are now beginning to bear fruit.
I would like to ask the hon. Member for Chippenham two questions which are bothering us. Does he think that his new Clause is properly timed? Will there be sufficient labour and materials available over the next 12 months or two years to carry out the re-equipment of British industry, against which he would allot this money? I wonder whether he is not really suggesting a long-term gamble by the Party opposite, to get the profits that are put to reserve at a lower rate of taxation, on the gamble that if they can keep them, and if by any unhappy chance his party gets back to power at the next Election, they can pay them out in dividends after decreasing the rate of tax? That might well be a gamble of the kind in which they like to indulge. That is why we disagree with the proposition.
The answer to the first question is that I do not suppose for a moment there will always be materials and labour available at the exact moment the reserves are built up, but they will be available one day, and a prudent business must make provision for that day. The answer to the second question is simply this: that speaking for myself and, I think, for my hon. Friends, we are concerned with the future of the national economy. It has not entered my head what will happen at the next Election. I am concerned to see the standard of living safeguarded for everyone, whoever may win the next Election.
This is obviously a matter of interest and of importance to British industry. It certainly is true that it is highly desirable we should have sufficient reserves in industry which should be utilised for the purpose of re-equipping industry on more modern lines. With a good deal of what the hon. Member for Chippenham (Mr. Eccles) said in a general way I am, therefore, in agreement. But this particular tax, which was imposed last Autumn—and, incidentally, a similar Amendment was negatived by the Committee last December—was proposed in a particular set of circumstances.
It was proposed for two reasons; first, in order to raise more revenue and, secondly, in order to diminish the amount of profits that might be distributed and to diminish the incentive to earn very high and excessive profits, which as we all know were being earned during the inflationary period. These high profits are still being declared in many cases, though it is true that industry has to a large extent complied with the request we put forward that they should not distribute more than last year, and for that we are grateful; but they are still distributing on the same basis as last year in most cases, and as far as that is concerned, therefore, the same inflationary circumstances exist as then existed, and there is also the same necessity for raising revenue if we are to show the surplus which everyone agreed should be shown.
The hon. and learned Member for Wirral (Mr. Selwyn Lloyd) warned me, quite rightly, that the buoyancy in the Revenue might not continue. Of course, that is a very good reason why we should not give up any of the receipts from the Revenue this year, because it might be that they will not be so easy to get next year. I do not feel that the present is a time when we should consider materially reducing the amount of revenue which we are drawing from this particular tax. This proposal would mean a very large reduction. It would mean a gross reduction of £ 23 million and a net reduction—that is to say, taking into account that the Profits Tax is allowable for Income Tax purposes—of £ 13 million. The inducement which was provided to put aside as large a proportion of the profits as possible for reserves was provided by the differential of 15 per cent. as between the tax on distributed profits and undistributed profits. I rather agree with what the hon. Member for Chippenham said, that to add another 5 per cent, to that would not really materially affect the inducement; in fact, the inducement, if it is to act at all, will act at the 15 per cent, level and will be quite sufficient inducement.
Therefore, there is no argument for reducing the percentage on the undistributed profits in order to increase the inducement to put aside profits rather than to distribute them. In the existing circumstances, and with the present financial and economic position of the country, we feel that we cannot afford to forego this tax on profits, and it is not necessary to make any wider differentiation in order to provide an inducement not to distribute profits. Therefore, with very much regret, I say we are not able to accept this new Clause.
9.15 p.m.
I very much regret that the right hon. and learned Gentleman has felt himself compelled to give the answer he has given on this new Clause, to which we attach very considerable importance, although we have tried to keep the discussion upon it as brief as possible. It is quite true, as the right hon. and learned Gentleman said, that we discussed this matter only last winter. We can at any rate say that all the events that have since taken place appear to strengthen our arguments rather than the arguments advanced against us. The right hon. and learned Gentleman will concede to us that we have been moderate. We have expressed on many occasions our opposition to the Profits Tax as such, and we have sought to try to demonstrate to the Committee that it is a bad tax, but we realise that in the present financial position of the country to ask the Chancellor to forego the whole of the revenue now derived from the increased Profits Tax would be impossible, unless we were able to suggest some alternative form of revenue.
Therefore, we have confined our new Clause wholly to what we regard as by far the worst part of a bad tax, and that is the increase put on the profits which are not distributed as dividends but retained in the business. We feel that the revenue raised from that source has, in fact, no effect on the inflationary situation whatsoever. We are merely transferring from one blocked account to another a certain sum of money. The reserves of a company where expended in the form of dividends are guarded under the taxes on the distribution side, and the expenditure in the form of work in the company is safeguarded by the physical controls which are imposed. Thus we are merely transforming from one blocked account to another blocked account a surplus which, in itself, has no effect whatsoever on the problem of inflation.
The right hon. and learned Gentleman pointed to the necessity to maintain a surplus, with which everyone agrees, so long as it is genuine, but a transfer of this kind, as in the case of the Special Contribution, which is money transferred from one capital account to the other, although it may apparently swell the surplus in fact has no anti-inflationary effect whatsoever. We feel that this part of this tax at any rate is no good to us now, and it may be harmful to us in the future when by it we are reducing the amount of capital that the industry of this country will have for re-equipment when the physical opportunities for re-equipment are open to it once more.
I am sure the Chancellor of the Exchequer would not say for one moment that the existing reserves of companies are sufficient, not for the opportunities that are open now, because they are very limited, but for what will be required for the technical standards of industry in this country if industry is to be brought to the level which intense world competition in the future will demand. We shall want at least all that companies at the moment have in their reserves—indeed I would say much more. I do not know from where they are going to get it, but it is quite clear, according to the present trend, that we are unlikely to get it from private savings. If industry has to get the additional amount by borrowing from the Government, what is the purpose of taking away this reserve from industry first of all, in the knowledge that before long some of it will have to be lent back, in order to re-equip industry? We feel that the tax is of no effect in the Chancellor's fight against inflation and that it may have the most damaging effects in the future upon the re-equipment of British industry. For that reason we shall certainly carry this new Clause to a Division.
Question put, "That the Clause be read a Second time."
The Committee divided: Ayes, 113; Noes, 264.
Division No. 181.] AYES. [9.21 p.m. Agnew, Cmdr. P. G. Hare, Hon. J. H. (Woodbridge) Odey, G. W Amory, D. Heathcoat Harvey, Air-Cmdre. A. V. Osborne, C. Assheton, Rt. Hon. R. Haughton, S. G Peto, Brig, C. H M Astor, Hon. M. Hinchingbrooke, Viscount Pickthorn, K. Birch, Nigel Hope, Lord J. Pitman, I. J. Bossom, A. C. Howard, Hon. A. Ponsonby, Col. C. E Bower, N. Hulbert, Wing-Cdr. N. J. Poole, O. B. S. (Oswestry) Boyd-Carpenter, J. A. Hurd, A Raikes, H. V. Bracken, Rt. Hon. Brendan Hutchison, Lt.-Cm. Clark (E'b'rgh, W.) Rayner, Brig R. Braithwaite, Lt.-Comdr. J. G. Hutchison, Col. J. R. (Glasgow, C.) Reed, Sir S. (Aylesbury) Buchan-Hepburn, P. G. T. Jeffreys, General Sir G. Reid, Rt. Hon. J. S. C. (Hillhead) Butcher, H. W. Kelling, E. H. Robinson, Roland Carson, E. Kingsmill, Lt.-Col. W. H. Ropner, Col L. Challen, C. Lancaster, Col. C. G. Ross, Sir R. D. (Londonderry) Channon, H. Law, Rt. Hon. R. K. Sanderson, Sir F. Clarke, Col. R. S. Lennox-Boyd, A. T. Shepherd, W. S.(Bucklow) Clifton-Brown, Lt.-Col. G. Lloyd, Selwyn (Wirral) Smith, E. P. (Ashford) Crosthwaite-Eyre, Col. O. E Lucas-Tooth, Sir H. Smithers, Sir W. Crowder, Capt. John E MacAndrew, Col. Sir C. Spearman, A. C. M. Darling, Sir W. Y. McCorquodale, Rt. Hon. M. S. Stanley, Rt. Hon. O. Digby, S. W. Macdonald. Sir P. (I. of Wight) Stoddart-Scott, Col. M Dodds-Parker, A. D. Mackeson, Brig. H. R. Strauss, H. G. (English Universities) Donner, P. W. McKie, J. H. (Galloway) Taylor, C. S. (Eastbourne) Drayson, G. B Maclean, F. H. R. (Lancaster) Thorneycroft, G. E. P. (Monmouth) Drewe, C. Macpherson, N. (Dumfries) Touche, G. C. Eccles, D. M. Maitland, Comdr. J. W. Turton, R. H. Elliot, Rt. Hon. Walter Manningham-Buller, R. E. Vane, W. M. F. Erroll, F. J. Marlowe, A. A. H. Wakefield, Sir W. W. Fletcher, W. (Bury) Marples, A. E. Ward, Hon. G. R. Foster, J. G. (Northwich) Marshall, D. (Bodmin) Wheatley, Colonel M. J. (Dorset, E.) Fraser, H. C. P. (Stone) Maude, J. C. Williams, C. (Torquay) Fyfe, Rt. Hon. Sir D. P. M. Medlicott, Brigadier F. Williams, Gerald (Tonbridge) Gage, C. Mellor, Sir J. Willoughby de Eresby, Lord Galbraith, Cmdr. T. D. Molson, A. H. E. York, C Gammans, L. D. Morris-Jones, Sir H. Young, Sir A. S. L. (Partick) George, Maj. Rt. Hn. G. Lloyd (P'ke) Morrison, Rt. Hon. W. S. (Cirencester) Gomme-Duncan, Col. A. Mott-Radeclyffe, C. E. TELLERS FOR THE AYES: Grimston, R. V. Nicholson, G. Mr. Studholme and Hannon, Sir P. (Moseley) Nield, B. (Chester) Major Conant.
NOES. Acland, Sir Richard Byers, Frank Edelman, M. Adams, Richard (Balham) Callaghan, James Edwards, N. (Caerphilly) Adams, W. T. (Hammersmith, South) Carmichael, James Edwards, W. J. (Whitechapel) Allen, A. C. (Bosworth) Chamberlain, R. A. Evans, Albert (Islington, W.) Allen, Scholefield (Crewe) Champion, A. J. Evans, E. (Lowestoft) Anderson, A. (Motherwell) Chewynd, G. R. Ewart, R. Attewell, H. C. Cluse, W. S. Farthing, W. J. Austin, H. Lewis Cobb, F. A. Fernyhough, E. Awbery, S. S. Cocks, F. S. Field, Capt. W. J. Ayles, W. H. Coldrick, W. Fletcher, E. G. M (Islington, E.) Ayrton Gould, Mrs. B. Collindridge, F. Follick, M. Baird, J. Collins, V. J. Freeman, J. (Watford) Balfour, A. Colman, Miss G. M. Ganley, Mrs. C. S. Barnes, Rt. Hon. A. J. Comyns, Dr. L. George, Lady M. Lloyed (Anglesey) Barstow, P. G. Cooper, Wing-Comdr. G. Gibbins, J. Barton, C Corbet, Mrs. F. K. (Camb'well, N. W.) Gibson, C. W. Battley, J. R. Cove, W. G. Gilzean, A. Bechervaise, A. E Cripps, Rt. Hon. Sir S. Glanville, J. E (Consett) Bellenger, Rt. Hon. F. J. Daggar, G. Gooch, E. G. Benson, G. Daines, P. Gordon-Walker, P. C. Berry, H. Davies, Rt. Hn. Clement (Montgomery) Greewood, A. W. J. (Heywood) Beswick, F. Davies, Edward (Burslem) Grey, C. F. Binns, J. Davies, Ernest (Enfield) Grifiths, D. (Rother Valley) Blackburn, A. R. Davies, Harold (Leek) Griffiths, W. D. (Moss Side) Blyton, W. R. Davies, Haydn (St. Pancras, S.W.) Guest, Dr. L. Haden Bottomley, A. G. Davies, R. J. (Westhoughton) Gunter, R. J. Bowden, Fig. Offr. H. W. Davies, S. O. (Merthyr) Guy, W. H. Braddock, Mrs. E. M. (L'pl, Exch'ge) Deer, G. Haire, John E. (Wycombe) Braddock, T. (Mitcham) Delargy, H. J. Hale, Leslie Bramall, E. A. Diamond, J. Hall, Rt. Hon. Glenvil Brook, D. (Halifax) Dodds, N. N. Hamilton, Lieut.-Col. R. Brooks, T. J. (Rothwell) Donovan, T. Hannan, W. (Maryhill) Brown, George (Belper) Driberg, T. E. N. Hardy, E. A. Brown, T. J. (Ince) Dumpleton, C. W. Harrison, J. Bruce, Maj. D. W. T. Durbin, E. F. M. Henderson, Rt. Hon. A. (Kingswinford) Buchanan, Rt. Hon. G. Ede, Rt. Hon. J. C. Henderson, Joseph (Ardwick) Herbison, Miss M Morley, R. Sparks, J. A. Hobson, C R Morris, Lt.-Col. H. (Sheffield, C.) Stewart, Michael (Fulham, E.) Holman, P Morris, Hopkin (Carmarthen) Stockes, R. R. Holmes, H. E. (Hemsworth) Morris, Rt. Hon. H. (Lewisham, E) Strauss, Rt. Hon G. R. (Lambeth, N.) House, G Moyle, A. Stross, Dr. B. Hoy, J. Murray, J. D Stubbs, A. E Hudson, J. H. (Ealing, W.) Naylor, T. E Swingler, S Hughes, Entrys (S. Ayr) Neal, H. (Claycross) Sylvester, G. O Hughes, Hector (Aberdeen, N.) Nichol, Mrs M. E. (Bradford, N.) Symonds, A. L. Hughes, H D. (W'lverh'pton, W) Nicholls, H. R. (Stratford) Taylor, H. B. (Mansfield) Hynd, H. (Hackney, C.) Noel-Buxton, Lady Taylor, R. J. (Morpeth) Hynd, J. B. (Attercliffe) Oldfield, W H Taylor, Dr. S. (Barnet) Irvine, A. J. (Liverpool) Oliver, G. H Thomas, D. E. (Aberdare) Irving, W J. (Tottenham, N.) Paget, R T Thomas, Ivor (Keighley) Isaacs, Rt. Hon. G. A Paling, Rt. Hon. Wilfred (Wentworth) Thomas, I. O. (Wrekin) Jay, D. P. T. Paling, Will T. (Dewsbury) Thomas, George (Cardiff) Jeger, G. (Winchester) Pargiter, G. A Thurtle, Ernest Jenkins, R. H. Parkin, B. T. Titterington, M. F Johnston, Douglas Paton, J. (Norwich) Tolley, L. Jones, D. T. (Hartlepool) Pearson, A. Tomlinson, Rt. Hon. G Jones, J. H (Bolton) Peart, T. F Ungoed-Thomas, L. Jones, P. Asterley (Hitchin) Perrins, W. Usborne, Henry Keenan, W. Piratin, P. Vernon, Maj. W. F. Kendall, W. D Platts-Mills, J. F. F. Viant, S. P. King, E. M Poole, Cecil (Lichfield) Wadsworth, G. Kinley, J Popplewell, E. Walker, G. H. Lang, G Price, M. Philips Wallace, H. W. (Walthamstow E) Lee, F. (Hulme) Prector, W T. Warbey, W. N. Leslie, J. R. Pursey, Cmdr. H Watkins, T. E Levy, B. W. Randall, H. E Weltzman, D. Lindgren, G. S. Ranger, J Wells, P. L. (Faversham) Lipton, Lt.-Col M Rankin, J Wells, W. T. (Walsall) Longden, F. Reeves, J. Wheatley, Rt. Hn. J. (Edinburgh, E.) Lyne, A. W. Reid, T. (Swindon) White, H. (Derbyshire, N.E.) McAdam, W. Richards, R. Whiteley, Rt. Hon. W. McAllister, G Ridealgh, Mrs. M. Wilkes, L. McEntee, V La T Roberts, Emrys (Merioneth) Wilkins, W. A. McGhee, H. G. Roberts, Goronwy (Caernarvonshire) Williams, D. J (Neath) Mack, J. D Ross, William (Kilmarnock) Williams, J. L. (Kelvingrove) MoLeavy, F. Royle, C. Williams, R. W. (Wigan) Macpherson, T. (Romford) Sargood, R Williams, W R. (Heston) Mainwaring, W H. Scott-Elliot, W. Willis, E. Mallalieu, E. L, (Brigg) Sharp, Granville Wills, Mrs. E. A. Mann, Mrs. J Shawcross, C. N. (Widnes) Wise, Major F. J. Manning, C. (Camberwell, N.) Silverman, J (Erdington) Woodburn, Rt. Hon. A Manning, Mrs. L (Epping) Silverman, S. S. (Nelson) Wyatt, W. Mathers, Rt. Hon. George Simmons, C J. Yates, V. F. Mellish, R. J. Skeffington, A M. Young, Sir R (Newton) Middleton, Mrs. L. Skeffington-Lodge, T. C Younger, Hon. Kenneth Millington, Wing-Comdr. E. R. Skinnard, F. W. Mitchison, G. R Smith, H. N. (Nottingham, S.) TELLERS FOR THE NOES: Monslow, W. Solley, L. J. Mr. Snow and Moody, A. S. Sorensen, R. W. Mr. George Wallace. Morgan, Dr. H. B. Soskice, Sir Frank
NEW.—CLAUSE.—(Preference dividends to be excluded in certain cases.)
The reference to dividends in Sections thirty-five and thirty-six of the Finance Act, 1947 (which define the meaning of gross relevant distributions to proprietors and the meaning of a distribution respectively), shall be construed so as to exclude from the meaning of dividends any preference dividend as defined in Subsection (4) of Section twelve of the Finance Act, 1930.— [Colonel J. R. H. Hutchison.]
Brought up, and read the First time.
9.30 p.m.
I beg to move, "That the Clause be read a Second time."
This and the next proposed new Clause (Reduction where preference dividend paid) appear to be alternatives. I do not know whether the discussion could take place on both at the same time.'
Although they are analogous, they are certainly different and, if I may put it like this, we should prefer what we are advocating in the first new Clause. If that were not accepted, then we suggest the second as an alternative.
Perhaps both alternatives might be discussed together.
As you decide. Major Milner. I will proceed to deal with the first new Clause. This is a proposal for which I hope that we shall have more success than we have had for those which we have been advancing over the last hour or two. As it can scarcely be argued that there is any sort of political or party partisanship in the matter, I am hopeful that we shall have rather more success. It is a question of companies which are known as "highly-geared," that is to say, companies which have a very high ratio of preference share capital issued, compared with the amount of ordinary share capital which they have issued. I think that the easiest way to make the situation clear would be to take a hypothetical case of a certain company and to examine the effect which the present taxation system has upon it and the effect which our proposed alteration would have upon it.
Therefore, I should like to instance to the Committee the case of a company with a capital of, let us say, £ 1 million divided into £ 750,000 worth of 5 per cent. preference shares and £ 250,000 worth of ordinary shares. That is a not uncommon distribution of the two types of capital. Let us assume that this company is reasonably successful, not making exaggerated profits which would raise the criticism and the ire of hon. Members opposite, but at the same time being moderately successful, and that it is in fact earning profits of 10 per cent. on its capital. It would, therefore, make a profit of £ 100,000. Let us decide that it is also a prudent company which decides that it will not distribute the whole of the £ 100,000, thereby I have no doubt earning the approval of the right hon. and learned Gentleman. It decides to put £ 25,000 to reserve and to distribute £ 75,000 out of the £ 100,000 profits.
It decides to do that and it finds that it has to meet a tax of 25 per cent. on its 5 per cent. preference capital which absorbs £ 18,750, also 25 per cent. on such ordinary dividends as it pays, and 10 per cent. on the £ 25,000 which it is putting to reserve—a total of £ 21,256 in Profits Tax. That leaves them, out of the £ 75,000, £ 53,750 for dividends. Preference dividends take £ 37,500, which leaves them £ 16,250 for the ordinary shareholders, or about 6½ per cent. If there had been no Profits Tax, the ordinary shareholder would have had something like 15 per cent. on his money, and, therefore, we shall have the ordinary shareholders being asked to carry upon their backs the Profits Tax which applies to the preference shareholders' share of the profits. Indeed, if that company was more highly geared, we should find that the ordinary shareholders' profit would disappear entirely.
It will be admitted on all sides that it is the ordinary shareholder who ultimately takes the risk in the success of a venture, and, consequently, if he is to run the risk of the failure of the concern, he should be left a more reasonable chance of getting some reward if the venture and the company is a success. We accordingly have suggested that the amount of tax which should be levied on the distributed dividends of preference share capital, instead of being 25 per cent., should be limited to 10 per cent., and that is the purpose of the first of these new Clauses. Nevertheless, as it has been decided that these two should be taken together, we say that, if that case is not acceptable, after the tax on the distributed profits on the preference capital has been made, there should be some reasonable limit put upon the tax on distributed profits which the ordinary share capital is called upon to meet, and so we are asking the Government to agree that, in any case, the percentage of dividend payable to the ordinary shareholder shall in no circumstances exceed 30 per cent.
I hope I have not clouded the issue in the mind of the right hon. Gentleman by discussing these two new Clauses together, as was suggested by your predecessor in the Chair, Mr. Beaumont. What we consider to be the proper way of dealing with the situation is that contained in the first alternative which I have outlined, and I hope the right hon. Gentleman will accept it.
In supporting the Motion, I would like to say that those hon. Members who have been listening to the Debate for the last three-quarters of an hour might very well be excused for wondering where we stand in these matters. The Chancellor of the Exchequer, in reply to the speeches of my hon. Friends on the last new Clause, argued that it was essential that the revenue from the tax on profits should continue because it was needed by the Treasury. That was applauded by his hon. Friends behind him. Then, when the suggestion was made that those profits might not be payable next year, we were treated to the same derisive applause as if that was a desirable objective. While one of my hon. Friends was arguing that we had to provide in industry the wherewithal to re-equip it and provide new plant, that view met with very considerable approval from hon. Members opposite, and. so we are left, in debating this new Clause, in a position in which we have to decide whether or not we want profits.
Subsequently, having decided that question, it will be for the Chancellor to decide how much of these profits will be taxed. I think the general consensus of opinion is that, out of the profits derived from industry, there must be a certain amount ploughed back—that is the common term now, although many people do not know what it means—into the industry, which means re-investing in industry the wherewithal to put down sufficient plant to expand, in order to make sufficient profits to provide fresh revenue to the State in accordance with what taxation might be decided.
These two Clauses are perfectly simple. They suggest that when capital is invested in industry, it is accepted on the basis that there will be a preference dividend or, in the case of debentures, that there will be a certain interest charged. The argument put forward in support of these two Clauses is that the taxation on preference dividends or on debenture dividends should be treated in the same way as undistributed profits, and I think that is very reasonable.
The proposal here is alternative—either to eliminate payments in respect of preference shares from the scope of the 25 per cent, distributed Profits Tax, or to impose a 30 per cent, limit after deduction of the dividends distributed on preference shares. It is supported by the argument that the Profits Tax operates unfairly against the equity shareholder.
If one accepted the first of the two alternative new Clauses, the tax would then operate inequitably as between different companies. It would greatly favour a company with a large preference share issue, because in the case of two companies one of which had a large ordinary share issue and one of which had a large preference share issue, it is perfectly obvious that the tax would fall much more heavily on the former than on the latter. That is an inequity and it could not be justified. Not only that, but it would afford a very great temptation in the case of future issues for companies to make very large preference issues.
If that were so the result might be a serious loss of revenue from the imposition of this Profits Tax, because whenever a company made large issues of preference shares it would thereby exclude from the scope of the tax the dividends which it paid upon those preference shares. That might lead to a very serious abuse, and it is a position which the revenue could not contemplate. It is estimated that if the proposal were accepted, and even discounting the possibility of any such change in companies, the cost in a full year would be £18 million or, taking into account the fact that Profits Tax ranks as a deduction for purposes of Income Tax, the net loss would be something in the region of £10 million.
With regard to the alternative proposal, which would omit dividends on preference shares and limit the tax to 30 per cent, of the profits calculated after making that deduction, when Lord Simon was Chancellor of the Exchequer and he was introducing the predecessor to this tax, namely, the National Defence Contribution in 1937—as hon. Members know, this tax is framed upon the model of that tax—he considered this possibility of imposing some such limit. He discarded it for the very same reason which I would now urge upon the Committee; that is, that this alternative proposal, in the same way as the former proposal to which I have just referred, would operate inequitably as between companies having different proportions of preference and ordinary shareholding issues. The company with a substantial preference issue would in all cases benefit by contrast with the company with a large ordinary issue. It is very easy to take figures and say that by working out certain computations by reference to the tax, an apparent disparity can be produced.
9.45 p.m.
One of the objections to the alternative proposal is that that would bring about the most haphazard consequences as between companies with large preference issues and those with small preference issues. One would benefit immeasurably in comparison with the other, and the most freakish results would be produced. I could illustrate that if necessary with comparatively simple figures, but without going into figures I think the Committee should contrast the position between a company with a large preference issue and a company with a large ordinary issue, and should appreciate the unjustifiable disparity in results which would be realised.
Another objection to the second proposal is that when the 30 per cent. ceiling operated no distinction would be made between distributed and undistributed profits. It would not make any difference whether the dividends on other than preference shares were large or small, once the ceiling operated. For those reasons, whatever may be said in favour of the proposals, I would submit to the Committee that there are much weightier reasons against them, the reasons being that it would produce an unfair treatment as between different types of companies, and, not only that, it would produce a temptation to create large preference issues which might result in a serious loss to the revenue. I have already given an estimate of the cost of the former proposal, even on the basis that there is no wholesale attempt to avoid payment of tax by large preference issues. For those reasons I ask the Committee to say that neither of those two new Clauses can be accepted.
I am inclined to agree with the Solicitor-General in his objections to the Clauses as drafted. He pointed out—and here I agree—that they would weight the scales in favour of preference shares as against ordinary shares. I think that would be thoroughly bad, but having said that, I think the Government ought to consider the effect of the Profits Tax upon the capital structure of companies because, as the tax is now drawn, it penalises the risk-bearing ordinary shares.
It is not in the interest of British business that capital should be raised on prior charge if if can be raised on ordinary shares. I will give only one reason, which I gave a year ago, and that is that, in times of unemployment it is of the greatest use that capital should be in the form of ordinary shares, because the ordinary shareholder knows quite well that he can get a good reward in good times, but in bad times he gets nothing. It is, therefore, of immense value to management and labour that they should have this cushion of ordinary shares which go without dividends, or receive greatly reduced dividends in bad times. It enables business to do what I am firmly convinced modern business should do, and that is put the consuming public and their labour first and their shareholders second. They cannot do that if in future capital is raised in the form of fixed interest bearing securities, because, come good weather come bad weather, a business must pay out on its prior charges.
For that reason—and there are many others, but that is the only one with which I will trouble the Committee tonight—it is wrong that we should have a Profits Tax which makes it attractive to raise money in the form of prior charges and not in ordinary shares. We have got to the stage in the development of private capitalism, which is by no means dead—it can serve an exceedingly useful purpose for many years to come—when it is of the greatest importance that the Budget should be used to encourage ordinary shares as the main form in which capital is raised, and for that reason I hope that before we have another Finance Bill the Government will look into the whole question of the relationship between the Profits Tax and the structure of business. The late Chancellor of the Exchequer was a purely destructive Chancellor; he had no constructive ideas about business. He looked upon industry as something to be cut up and redistributed. We look upon industry as something to produce goods for the future, and I hope that view will be shared by the new Chancellor.
I think the point made by my hon. Friend the Member for Chippenham (Mr. Eccles) is a most important one. We are seriously influencing the capital structure of companies in the future. The Solicitor-General said that the tendency, if the new Clause were carried, would be for firms to go in for large preferences and very small equities. Surely, however, that matter could be taken care of by the Capital Issues Committee, which would be able to regulate the form in which capital was issued. It is no good the Solicitor-General's saying our new Clauses would mean injustice when the present state of affairs leads to far greater injustice. Our new Clauses may not be perfect but, at least, they are a step along the right road.
Preference shares are the halfway house between debentures and ordinary shares, and as such are a prior charge on busi- ness. They do not share the ups and downs of business as equities do. It seems particularly unfortunate, therefore, that the whole burden of Profits Tax should be borne by the equity shareholders. This becomes a doubly onerous burden at a time of falling profits, which time may not be far away. We have to remember, also, that a number of companies are contemplating fresh capital issues. It is small inducement to the would-be equity shareholder to know that the money he contributes to a company will have to bear all the Profits Tax. I suggest the Government are taking an unwise course at the present time in insisting on equity shareholders bearing full Profits Tax and in not ensuring either that the preference shareholders are excluded or that some more equitable arrangement is introduced.
I am much obliged to the hon. Members who have spoken for their suggestion that this matter should be reconsidered. It is obvious, I think, to all of us that a tax which may be in a suitable form during an inflationary period may not be in a suitable form in another period. We should, anyway, intend to reconsider this—among many other matters—before the Budget of next year. It is quite obvious, as the hon. Member for Chippenham (Mr. Eccles) said, that there should be some degree of inter-relation between the planning of the structure of companies which is desirable and the taxation which is inflicted upon them. I can, therefore, assure hon. Members that this is one of the matters that we shall be bringing under consideration during the course of this year.
I am much obliged to the Chancellor of the Exchequer for what he has just said. The Solicitor-General, when he was addressing himself to this subject, suggested that if the new Clause were adopted it would encourage large issues of preference shares. I fully appreciate that point. However, I should like to draw the attention of the Chancellor to the fact that exactly the same consequence is following in connection with debenture stock issue and note issue. Exactly the same unfortunate effect on the structure of capital, as the Chancellor appreciates, is being brought about by the law as it stands at present. Although I agree that what the Solicitor-General said is quite true, nevertheless, just as strong arguments exist against the law as it is at present.
I appreciate what the right hon. and learned Gentleman has said. When I moved the new Clause originally I did not feel we should get it accepted in its present condition. What, however, has this short Debate shown up? The Solicitor-General points out that if effect were given to these new Clauses as suggested, we should get into an unfair and topsy-turvy position. But my hon. Friends and I have shown that at the present time we are in a topsy-turvy and unfair position. It is one in justice versus another. The only way out of it, as the Chancellor has said, is to devise something which will be equitable as between the ordinary and the preference shareholders. That being so, I shall ask leave to
I want to say how glad I am that the Chancellor of the Exchequer showed himself so considerate on this matter
On a point of Order. Did not the hon. and gallant Member for Central Glasgow (Colonel Hutchison) ask leave to withdraw the Amendment?
I think that the hon. and gallant Member was preparing to do so, but that he did not do so.
I would ask the Chancellor of the Exchequer whether he could qualify one point in his previous reply referred to by my hon. and gallant Friend the Member for Antrim (Major Haughton). I understood the Chancellor to say that he very much deprecated the making, of large profits. I could hardly believe my ears. If he had said that what he minded was large profit margins then, of course, I could quite understand it. I should have thought that it was an admirable thing to make as large profits as possible nothing could be more anti-inflationary; provided the profit margins are small—and competition will see to that if we can get rid of inflation and monopolies—because it means large production. I would remind the Chancellor that the Ford Motor Co. is an instance of a company making record profits, paying higher wages, and selling articles at the lowest price. I would ask the Chancellor if he Cannot clear up that matter and not discourage industrialists by telling them that he wants them to make as small profits as they can. [ Interruption. ]
I am not certain whether the hon. and gallant Member for Central Glasgow (Colonel Hutchison) desires to press the matter to a Division.
We have a perfect right not to accept the desire of the hon. and gallant Member for Glasgow (Colonel Hutchison) to withdraw.
Can we have some clarification from the hon. and gallant Member for Central Glasgow?
As I am called upon to explain, I thought when I was speaking that the Debate had finished, and I started to ask for leave to withdraw the new Clause. Before that had happened however hon. Members rose in their places and I failed to finish the sentence, so the technical position I leave to you, Mr. Beaumont.
I did not hear the hon. and gallant Member ask leave to withdraw. Not having heard that, the Debate is in Order.
May I ask for an explanation from the Chancellor of the Exchequer? I understood him to say that a tax that was good in a time of inflation would not necessarily be good when deflation came, and that he promised to look at that matter again before the next Budget. Is that an admission that, in his opinion, between now and the next Budget, the situation will have changed so much that we shall definitely be in a deflationary period?
It is nothing of the sort. It is that we shall be reconsidering this tax in relation to the structure of companies. I also stated that some taxation suitable in one form in inflationary circumstances would be suitable in another form in deflationary circumstances.
I hope that neither I nor other hon. Members, nor the Chancellor of the Exchequer, will regard this tax solely in relation to the question of the class of shareholders on which it will bear most heavily. It is not the preference holders who would in themselves benefit if this new Clause were accepted. It is the company as a whole, which would be enabled to put more money to reserves with a view to reinvestment in business and capital equipment. The evil of the Profits Tax is not that it bears more heavily upon one class of shareholder than upon another, but that it deprives industry of capital, which is doubly necessary in this time of need for capital re-equipment. Therefore, I hope that the Chancellor, in fulfilling his welcome indication to reconsider this next year, will not allow himself to forget that the real point at issue is that industry is being starved of capital, and the argument that one class of shareholder should suffer rather than another class is purely illusory.
Question put, and negatived.
NEW CLAUSE.—(Stamp tax on bonus issues of securities, &c.)
Sections sixty, sixty-one and sixty-two of the Finance Act, 1947 (which impose an ad valorem stamp duty of ten pounds for every one hundred pounds and any fraction of one hundred pounds over any multiple of one hundred pounds of the value of the bonus in respect of the securities defined in these sections), shall be repealed with effect from the first day of July, nineteen hundred and forty-eight, without prejudice to the payment of the duty or the making of the statement required by Section sixty in respect of issues of securities made before the first day of July, nineteen hundred and forty-eight.—[ Mr. Assheton. ]
Brought up, and read the First time.
10.0 p.m.
I beg to move, "That the Clause be read a Second time."
Last year the right hon. and learned Gentleman was not present when, in the very early hours of the morning, we discussed the whole question of the tax on bonus issues, so I hope that he will give the most careful consideration to the points that we want to put before him on this occasion. I suggest to the Committee that the decision we came to last year was really based on a misunderstanding of the true facts, and I hope to be able to convince the Chancellor in particular and the Committee in general that that was so.
There are two sorts of bonus share issues. There may be more, but so far as I know there are two main sorts. One is the free distribution of stock, and the other is the distribution of stock for which the prospective shareholder pays some price less than the current market price of the shares. I think it is quite clear to everybody that a bonus issue of the first type, which is merely a splitting of the shares, cannot possibly give any additional property or interest in the company to any of its shareholders. Supposing there were an issue of one share for one in a company which had 500,000 ordinary shares, the only result of the bonus issue of free bonus shares would be that each shareholder would hold two shares instead of one, those two shares representing the same interest in the equity of the company as he held before.
The other class of bonus issue is used as a means of raising new capital for the company; a means of raising new capital which has been adopted in the past by a very large number of the most progressive and successful concerns in this country. It is the method which was adopted by Courtauld's, the Imperial Tobacco Company, Woolworth's, and a number of other leading companies who sought to raise capital by giving their own shareholders an opportunity to subscribe further amounts of capital to the company.
I think that a good deal of the misconception which arose last year was due to the fact that not everyone had quite clearly in his mind the difference between nominal capital and real capital in the company. Let me give the Committee a simple illustration. Suppose a company is formed with a capital of, say, £10,000; suppose that company's capital remains at £10,000 for many years, during which period the company is successful and, as a result of its success, is able, year by year, to put aside money to reserve, so that when a certain number of years have passed the reserves of that company have been built up to, say, £10,000, a sum equal to the original capital. Now, the nominal capital of that company is still £10,000, but the real capital of that company is £20,000, because in addition to the original capital there are all the savings which have been built up over these years.
When the reserve of the company amounts to £20,000 it may be considered by the directors good policy that the reality of the situation—that is, the fact of there being £20,000 of capial in the business— should be appreciated and realised. The company, therefore, decides to make what is called a bonus issue. They give to each shareholder one share for every share he already holds. As a result, of course, no shareholder is any better off than before. The fact that he holds two shares instead of one merely means that he holds two shares which are each worth half what the one share was worth before.
Would not the right hon. Gentleman agree that the price of the individual shares had, in fact, gone up owing to their being more marketable as a consequence?
That is not necessarily the case. At the time when such a bonus is issued there may be a tendency for a rise to take place in the market in the price of those shares, because it may be an indication—and generally is taken to be an indication—that the company is not only successful, but that it is expected by the directors that the success will continue and that profits will continue to be earned. It is also the case that, when shares are split like that in the market, the fact of their becoming more numerous than before provides a somewhat freer market. In consequence there is perhaps a slight rise in the price of the shares.
Let us imagine a share worth £2 at the time this splitting had taken place. One might imagine each half immediately to be worth £1 each, but, instead, they might be worth 2Is., or 2Is. 6d., or some such figure in the market. Let us see what the Sections in last year's Finance Bill would do in such a case. The share which was worth 40s. and has been split into two gives what is called a bonus share to the shareholder, who receives a new share. Now he is taxed on the bonus he receives, not on the little increase which may have taken place in the true value of his holding —that is, the Is. or Is. 6d. represented by the additional market price; he pays tax not merely on that but on the basis that the new share is of a very great deal more. That is how the tax works out.
I do not know whether all hon. Members appreciate what a bonus issue really means. It means that reserves are being capitalised; that the reserves which are being capitalised cannot, therefore, in future be distributed as profits. But I would have thought that the right hon. Gentleman and hon. Members opposite would have regarded that as a good, and not a bad, thing. As long as the reserves are freely available they can be distributed to shareholders, but, once they have been put into the capital structure of the company and have been capitalised, they can no longer be distributed as profit. Therefore, I would have thought that a bonus issue was a good thing from the point of view of the nation rather than something bad.
I want to show to the Committee how greatly the late Chancellor of the Exchequer misunderstood the position by quoting, if I may, to the present Chancellor, from HANSARD of 11th June, 1947. When discussing this particular subject the Chancellor of the Duchy of Lancaster, as he now is, said:
We do.
The words the ex-Chancellor used were:
In the case of a company paying a dividend of 10 per cent. on its original capital, it might have happened that the original capital has been at least doubled over a period of years, with the result, in the case I have illustrated, that the company is earning only five per cent. and not 10 per cent. on its real capital. A very good illustration of this sort of thing are the joint stock banks. If you take any of the big joint stock banks it will be seen that the normal dividends are somewhat high, but if the reserve position is taken into account it will be found that these banks are now earning on the capital and reserves they have built up something like four per cent., which cannot be considered a high rate of interest. It is the capital and reserves together which represent the true and real capital in a business.
There is no amendment which could be made to this tax which would be of any avail. The only satisfactory thing would be the complete withdrawal of the tax, and I suggest that that is the only sensible plan. It has already had very serious consequences in many cases. Those who follow these things in the financial columns of the papers will have seen that important companies, like the Imperial Tobacco Company, have, for reasons very well known to the Chancellor of the Exchequer, been unable, on account of this tax, to make issues of capital they would have desired to make. There are many other cases of the same kind where the business of the country is being impeded by this heavy, quite unnecessary and undesirable tax. I suggest that this tax was introduced in ignorance, and that it was based very largely on prejudice. I sincerely hope that the Chancellor of the Exchequer will consider this matter carefully and be able to see his way to withdraw the tax.
10.15 p.m.
It was a very distressing day when the present Chancellor of the Duchy of Lancaster made the speech to which my right hon. Friend the Member for the City of London (Mr. Assheton) referred, because the deduction from what he said was that he—that is to say, the then Chancellor of the Exchequer, the present Chancellor of the Duchy of Lancaster—thought making a free bonus issue to the shareholders was the same thing as paying money out of a company. I do not know which he would prefer—to be called ignorant or to be charged with deceiving the Committee—but certainly the case was taken up by many Members of this Committee and by the papers. They all pointed out what total nonsense it was. Surely, the whole point was that to make a bonus issue puts a premium on the reserves of a company—in fact, encourages people to do what is the right thing.
A point which was not made by my right hon. Friend was that it is impossible to make an issue of any sort whatsoever without the concurrence of the Capital Issues Committee. Therefore, the idea that this is particularly unethical or that we are cutting the ethical corners rather fine in these matters is nonsense, because nothing of the sort can be done without the approval of the Government's agents. The effect of capitalising reserves is simply to tell the truth, to show what the real capital employed in a business is, and not what the nominal capital is, which may be very different indeed. It may be too much or it may be too little, therefore, the writing down or up of the shares—as that is what bonus issues are—is necessary in order that the truth may be told. It is impossible for someone to tell a lie in these matters, because it has to go through his accountants and the Capital Issues Committee. Therefore, there is a double check on whether or not the truth is being told. It seems to me to be in the interests of the country that the truth should be known as to the real capital employed in any particular business.
The next point is the question of the issue of ordinary shares below the market price of the existing shares. The issue of new shares at a different price at the date of issue involves a bonus. The hon. and gallant Member for North Portsmouth (Major Bruce) indicated just now that there is always a profit, always a financial bonanza, when a bonus is issued, but that is not so at all. It all depends on the type of market on which one is operating. Under the dispensation of the present Chancellor of the Duchy of Lancaster, everyone in the world was on a good thing. Prices went straight through the roof, simply because of the unlimited inflation imposed upon this country by the right hon. Gentleman's policy.
Would the hon. Gentleman deny that the result of bonus issues on shares is that the shares are put into more marketable units and as a result of that the price of these shares tends to go up?
That could be said of a company which has a very small capital. The bonus issue may so increase the market position that there may tend to be a slight increase in the relative price after that issue has taken place, but it simply is not so in the case of a big company like the Imperial Tobacco Company. The marketability of its shares is not in any way increased by a bonus issue. There are certain companies to which it might apply, but I should say they are a small number of companies dealing on the Stock Exchange. I do not know if that is the experience of the hon. and gallant Member for North Portsmouth, but that is my experience.
We have now a rather different regime. I do not think that the "bulls" are likely to put any statues up to the present Chancellor of the Exchequer. The "bears" may do so, but it will be found that on a market like this a new issue of ordinary shares below the market price will very often pull the existing market price not only down to the price of the new issue but below it. It all depends on what way the market is going.
The effect of the tax is bad, for two reasons. The first is that it is wholly uncertain in its incidence. It offends against the canons of taxation laid down by Adam Smith, one of which was that we must be certain of the incidence of the tax. In this case the amount we have to pay depends entirely upon the movement of the market, which we cannot ourselves predict. Therefore, when we are making our plans, it is extremely difficult to know how much we shall have to pay. That is the first objection.
The second objection is that the tax makes the issue of new ordinary share capital difficult and expensive and therefore it clearly encourages finance by bank loan, debenture and preference. Loan finance, encouraged in this way, is a very retrograde step. The ideal company structure is one where the ordinary share capital is large in proportion to the preference share capital and particularly large in proportion to the loan capital. There is nothing so unsteady and so liable to go wrong in difficult times as a company which is overloaded with debt as opposed to share capital. It is clear that if we make it hard for people to issue bonus shares, as we do by taxing them heavily, we put a premium upon their financing themselves in the ways which I have described. That is improvident finance.
Almost every action of this Government since it got into power has put a premium upon improvidence, whether it has been the compensation for industries that were nationalised or in connection with local authorities—[AN HON. MEMBER: "Hear, hear!"]—I am glad to hear that an hon. Member agrees with what I say. In every case the person who has overdistributed, or the person who has had too much loan finance, and so on, has been preferred to the person who has been prudent, has tucked his money away and has done what was not only in the interest of himself but specifically in the interests of his country. Every single time that has happened. It is one of the minor ways in which the Government are degrading the general moral standard of this country. [ Laughter. ] Hon. Gentlemen laugh. Of course, if hon. Gentlemen do not understand what is going on, it is high time they did. I repeat that this is one of the minor ways in which the finance of our industry is being degraded and put upon a less good level than it should be.
This process was defended by the right hon. Member for Bishop Auckland with arguments which nobody with any knowledge at all should have put forward. I very much hope that the present Chancellor will repudiate those arguments, and if he can think of any respectable arguments with which to defend this tax I hope that he will put them forward.
I am inclined to think that the conception which occupied the mind of the former Chancellor of the Exchequer and which appears to be in the minds of a good many hon. Gentlemen opposite, has risen largely from the use of the word "bonus." I think the argument they use is that the wicked directors of the particular companies are trying to do something to the advantage of the rentiers, who are the shareholders of the company. The word "bonus" has engendered in their minds the idea that the shareholders are getting something for nothing. Of course, that is absolute nonsense. The directors are not giving them anything at all. The word "bonus" is a deception from that point of view. They are altering the structure of the share capital to fit in with the real assets of the company. During the past year the Government have passed the Companies Act, the so-called Cohen Act. The idea behind that was that a company should show to the public the exact position in its balance sheet and, therefore, in its shares. The correct step is to adjust the issue capital of a company as far as possible to fit in with the true assets of a company. If that could possibly slip past the motes and the beams in the eyes of hon. Gentlemen opposite, their objection to this, the idea that something is being given for nothing, might fade away.
I support every word of my hon. Friend the Member for Flint (Mr. Birch). It would do more to encourage the correct capital structure of companies if the great prejudice based on the form of ignorance which I have described were dropped, and I appeal to the Chancellor of the Exchequer to take a bold line on this, to say that an error was made, that he does not wish to continue it, and that he will accept this Clause.
This matter, of course, has a good deal longer history than back to last year. I would remind hon. Members opposite that it was the Coalition Government in April. 1940, which took the first steps on this question of bonus issues, and continued those steps in operation till the time they went out of office. In April, 1940, there was a strict ban imposed on all bonus issues proper, that is to say, the full bonus issue, and in May, 1940, there was instituted a control of those issues which had elements of bonus in them, the second class to which the right hon. Gentleman the Member for the City of London (Mr. Assheton) referred. The Capital Issues Committee were then requested to ensure that, as far as practicable, cash issues recommended by them should be made on terms not involving any element of bonus greater than that required to secure the successful flotation of the issue. Those restrictions, which prevented all these desirable ends which hon. and right hon. Gentlemen' opposite say are obtained by the issue of bonus shares, were maintained in force throughout the life of the Coalition Government, so that I am afraid they must take their share of responsibility so far as this doctrine is concerned.
It was when this matter was raised on the Debate on the Borrowing (Control and Guarantees Bill that my predecessor said that he would have it looked into with a view to seeing whether some amelioration of the then existing circumstances, the ban on bonus issues, could be brought about. As the Committee know, the solution which he produced in his Budget of April, 1947, was to relax the ban but at the same time to impose a tax. I gather that it is not the relaxation of the ban which is objected to but the imposition of the tax. As I have already said, these questions of taxation which affect the structure of companies are of necessity matters which have to be considered from time to time in the light of the circumstances which then prevail. I am quite prepared to admit that the ban on bonus issues imposed in 1940 and maintained until 1947 might under changed circumstances have become an evil and not a good thing.
It might quite well have been suitable right through the period of potential inflation, which was then being experienced, and it might be suitable if we emerged from that period—as we have not yet done—to discontinue the measures, which were then appropriate, in favour perhaps of some other measures which would be more appropriate. I am quite sure that my predecessor in office had no intention of making this tax necessarily permanent if the financial circumstances were to alter in relation to the matter with which it dealt. It may be that at some future date, sooner or later, the objections which are taken to the issue of bonus shares—objections which I will not repeat because they have been stated, both in connection with the ban and in connection with the taxation—will be able to be overcome, and some modified system of controlling the issue of bonus shares will be able to be introduced which might well entail removal of the tax as part of the modification of that system.
Just as I have said that we will look into the matters raised on earlier New Clauses, this is one of the matters which we will look into in the course of the next year, and if we found that the circumstances which justified imposition of the tax by my predecessor no longer existed, we would then be perfectly prepared to consider whether we could make some better regulation as regards the issue of bonus shares which might, or might not, entail some measure of taxation. It is quite true that the actual cash raised by this tax upon bonus issues has been a very small affair. It has been a small affair, no doubt, because it has stopped the issue of a number of bonus issues, as indeed the ban was always intended to stop them. Therefore, while it is impossible for me to accept the Clause now before the Committee, I shall be reconsidering the matter, though what the results of that reconsideration will be, next year, it is impossible to forecast without being able to forecast the circumstances which will then exist.
10.30 p.m.
We again welcome what the Chancellor of the Exchequer has said. Quite obviously during the next 12 months there is going to be a careful analytical study of the taxes which the right hon. and learned Gentleman has inherited from his predecessor, and we shall be extremely interested and hopeful as to what the outcome may be. I was almost tempted to ask him in the course of his speech once more to state the arguments in favour of the duty which was imposed. I thought it would have been interesting to have an up-to-date and authoritative explanation of the purpose of this duty; but as he had already indicated that he was going to look info the matter again, I thought it would be better not to embarrass him this year.
There is one argument which I would like to put to the right hon. and learned Gentleman. Since he has been Chancellor of the Exchequer, he has made a special appeal to industry not to increase its distribution of profits in the form of dividends, and everything that he said when he was President of the Board of Trade, and since, he has urged companies to put as much money as possible to reserve in order to expend it upon bringing their industrial equipment completely and entirely up-to-date. But, if they respond, that is going to mean that, out of legitimate profits made, a large proportion is going to be put to reserve, and that as the present Chancellor understands, is not kept in the form of cash, but is invested in the form of new equipment. If the shareholders of that particular company have abstained from consuming and enjoying the profits which have been made from the activities of the company, but instead have done what the Chancellor has asked them to do, there will have resulted an increase in the real total capital of the company.
May I take as an illustration the simplest example? After a certain time, the actual equipment of the company may amount to twice the nominal amount of the issued capital. The Chancellor will realise that many of his supporters readily complain if there is a comparatively large rate of profit made upon a nominal capital; but if, in fact, owing to profits being ploughed back, the equipment of that company is worth double the nominal issued capital, it will give an entirely false and unfair picture of the real situation because the profit has been made on equipment worth double the nominal capital of the company. That will result if profits are ploughed back.
The phrase is used so much now that I think it has really begun to lose any real meaning, and in these circumstances, and in accordance with the principles of the new Companies' Act, it is desirable that there should be an issue of bonus shares which would only have the effect of making the issued capital of the company equal to what the real value of the company is. I do feel that, in view of the appeal which has been made by the Chancellor to companies to restrict, and indeed even to diminish, their distribution of profits—he has said today that there has been a good response on the part of in- dustry—surely next year there should be an abandonment of this tax and the issue of bonus shares against the real and concrete assets. This, we claim, should be regarded as a proper and, indeed, a desirable policy.
This new Clause, we claim, raises a matter of considerable importance, but the case has been so clearly stated by my hon. Friends behind me that I will not take the time of the Committee in repeating their arguments. I am compelled to say that the answer which we have received this evening is far in advance of anything which we have ever heard from the right hon. and learned Gentleman's predecessor; but saying it is far in advance of that standard does not mean that it reaches the standard which we should like to see. He has thrown away entirely the idea which pervaded the whole of the thought of his predecessor that in this bonus issue policy there was some original sin and that it was a principle which was bad and wrong in all circumstances and at all times.
The right hon. and learned Gentleman has adopted the much more sensible attitude that there may be occasions on which this particular financial device is in the national interest, but that there may be occasions when in the national interest it should be prevented or reduced. I would not quarrel with that. What I would quarrel with is whether conditions today are such as to make it desirable or undesirable. We believe very strongly that in the conditions today no harm would result from the freeing of this type of issue. A great deal of rather urgent and in some cases essential re-financing could be done. Although the right hon. Gentleman has promised he will look at it again in the next year, he has not given us any indication where that is likely to lead. We feel that he could look at it now and inform us that his consideration would lead to the acceptance of this Clause. It is because we do not think this method of financing should be held up for at least another year, with no certainty that even then it will be permitted again on an equitable basis, that we feel we should press the Clause to a Division.
Question put, "That the Clause be read a Second time."
The Committee divided: Ayes, 107; Noes, 254.
Division No. 182.] AYES. [10.42 p.m. Agnew, Cmdr. P. G. Gomme-Duncan, Col. A. Osborne, C. Amory, D. Heathcoat Hannon, Sir P. (Moseley) Peto, Brig. C. H. M. Assheton, Rt. Hon. R, Hare, Hon. J. H. (Woodbridge) Pickthorn, K. Astor, Hon. M. Harris, F. W (Croydon, N.)` Pitman, I J. Birch, Nigel Harvey, Air-Cmdre.A.V. Raikes, H. V. Bossom, A. C Haughton, S. G. Rayner, Brig. R. Bowen, R. Hinchingbrooke, Viscount Reed, Sir S. (Aylesbury) Bower, N. Hogg, Hon. Q. Reid, Rt. Hon. J S. C. (Hillhead) Boyd-Carpenter, J. A. Hope, Lord J. Robinson, Roland Bracken, Rt. Hon. Brendan Howard, Hon. A. Ropner, Col. L. Braithwaite, Lt.-Comdr. J. G. Hulbert, Wing-Cdr. N. J. Ross, Sir R. D. (Londonderry) Butcher, H. W. Hutchison, Lt.-Cm. Clark (E'b'rgh, W.) Sanderson, Sir F. Carson, E. Hutchison, Col. J. R. (Glasgow, C.) Shepherd, W. S. (Bucklow) Challen, C. Keeling, E. H. Smith, E. P. (Ashford) Channon, H Kingsmill, Lt.-Col. W. H Smithers, Sir W. Clarke, Col. R. S. Lambert, Hon. G. Spearman, A. C. M, Clifton-Brown, Lt.-Col. G. Lancaster, Col. C. G. Stanley, Rt. Hon. 0. Crosthwaite-Eyre, Col. 0. E Law, Rt. Hon. R. K. Stoddart-Scott, Col. M. Crowder, Capt. John E. Lennox-Boyd, A. T. Strauss, H. G. (English Universities) Darling, Sir W. Y. Lioyd, Selwyn (Wirral) Studholme, H. G. Digby, S. W. Low, A. R. W Taylor, C. S. (Eastbourne) Dodds-Parker, A. D Lucas-Tooth, Sir H. Thomas, J. P. L. (Hereford) Drayson, G. B. McCorquodale, Rt. Hon. M. S. Thorneycroft, G. E. P. (Monmouth) Drewe, C. Mackeson, Brig. H. R. Touche, G. C Dugdale, Maj. Sir T (Richmond) McKie, J. H. (Galloway) Turton, R. H. Eccles, D. M. Maclean, F. H. R. (Lancaster) Vane, W. M. F. Elliot, Lieut.-Col. Rt. Hon. W Macpherson, N. (Dumfries) Wakefield, Sir W. W Erroll, F. J. Manningham-Buller, R. E Ward, Hon G. R. Fletcher, W. (Bury) Marlowe, A. A. H Wheatley, Colonel M. J. (Dorset, E) Foster, J. G. (Northwich) Marples, A. E. Williams, C. (Torquay) Fraser, H. C. P. (Stone) Marshall, D. (Bodmin) Williams, Gerald (Tonbridge) Fyfe, Rt. Hon. Sir D. P. M Maude, J. C. Willoughby de Eresby, Lord Gage, C. Medlicott, Brigadier F. York, C. Galbraith, Cmdr. T. D. Mellor, Sir J. Gammans, L. D. Molson, A. H. E. TELLERS FOR THE AYES: George, Maj. Rt. Hn. G. Lloyd (P'ke) Nicholson, G. Major Conant and Glyn, Sir R. Nield, B. (Chester) Major Ramsay.
NOES. Acland, Sir Richard Collindridge, F Gilzean. A Adams, W T. (Hammersmith, South) Collins, V. J. Gooch, E. G Allen, A. C (Bosworth) Colman, Miss G. M Gordon-Walker, P. C. Allen, Scholefield (Crewe) Comyns, Dr. L. Greenwood, A. W J. (Heywood) Alpass, J. H Cooper, Wing-Comdr. G. Grey, C. F. Anderson, A. (Motherwell) Corbet, Mrs. F. K. (Camb'well, N.W) Griffiths, W. D. (Moss Side) Attewell, H. C. Cove, W. G Gunter, R. J Austin, H. Lewis Crawley, A. Guy, W. H. Awbery, S. S Cripps, Rt. Hon Sir S Haire, John E. (Wycombe) Ayles, W. H Daggar, G. Hall, Rt. Hon. Glenvil Baird, J. Daines, P. Hamilton, Lieut.-Col. R. Barnes, Rt. Hon. A J Davies, Edward (Burslem) Hannan, W. (Maryhill) Barstow, P G Davies, Harold (Leek) Hardy, E. A. Barton, C. Davies, Haydn (St. Pancras, S.W.) Harrison, J. Battley, J. R. Davies, R. J (Westhoughton) Henderson, Rt Hn. A. (Kingswinford) Bechervaise, A. E. Davies, S 0. (Merthyr) Henderson, Joseph (Ardwick) Bellenger, Rt. Hon. F. J Deer, G. Herbison, Miss M Berry, H. de Freitas, Geoffrey Hobson, C. R. Beswick, F. Delargy, H. J Holman, P. Bing, G. H. C Diamond, J Holmes, H. E (Hemsworth) Binns, J. Dodds, N. N House, G. Blenkinsop, A. Donovan, T Hoy, J. Blyton, W R Driberg, T. E. N Hudson, J. H. (Ealing, W.) Bowden, Flg. Offr. H. W. Durbin, E. F. M. Hughes, Hector (Aberdeen, N.) Bowles, F. G. (Nuneaton) Ede, Rt. Hon. J. C. Hughes, H. D. (W'lverh'pton, W.) Braddock, Mrs. E. M. (L'pl, Exch'ge) Edwards, N. (Caerphilly) Hynd, H. (Hackney, C.) Braddock, T. (Mitcham) Edwards, W. J. (Whitechapel) Hynd, J. B. (Attercliffe) Bramall, E A. Evans, Albert (Islington, W.) Irving, W. J. (Tottenham, N.) Brook, D. (Halifax) Evans, E. (Lowestoft) Isaacs, Rt. Hon. G. A. Brooks, T. J. (Rothwell) Ewart, R. Jay, D. P. T. Brown, George (Belper) Farthing, W J Jeger, G (Winchester) Brown, T. J. Ince) Fernyhough, E. Jeger, Dr. S. W. (St. Pancras, S.E.) Bruce, Maj. D. W. T. Field, Capt. W. J. Jenkins, R. H Buchanan, Rt. Hon. G. Fletcher, E. G. M. (Islington, E.) Johnston, Douglas Burden, T. W Follick, M. Jones, D. T. (Hartlepool) Byers, Frank Foot, M. M. Jones, J. H. (Bolton) Callaghan, James Freeman, J. (Watford) Jones, P. Asterley (Hitchin) Carmichael, James Ganley, Mrs. C. S. Keenan, W Champion, A. J. George, Lady M. Lloyd (Anglesey) Kendall, W. D. Chetwymd, G. R Gibbins, J. King, E. M Coldrick, W Gibson, C. W. Kinley, J. Lang, G. Perrins, W Symonds, A. L. Lee, F. (Hulme) Platts-Mills, J. F. F. Taylor, H. B. (Mansfield) Levy, B. W. Poole, Cecil (Lichfield) Taylor, R. J. (Morpeth) Lindgren, G. S. Porter, G. (Leeds) Taylor, Dr. S. (Barnet) Lipton, Lt.-Col. M Price, M. Philips Thomas, D. E. (Aberdare) Longden, F. Pritt, D. N. Thomas, Ivor (Keighley) Lyne, A. W. Proctor, W. T. Thomas, I. O. (Wrekin) McAdam, W. Pursey, Cmdr. H. Thomas, George (Cardiff) McAllister, G. Randall, H. E. Thurtle, Ernest McEntee, V. La T Ranger, J. Tolley, L. McGhee, H. G. Rankin, J. Tomlinson, Rt. Hon. G Mack, J. D. Rees-Williams, D. R. Ungoed-Thomas, L. McLeavy, F. Reeves, J. Usborne, Henry Macpherson, T. (Romford) Reid, T. (Swindon) Vernon, Maj. W. F Mainwaring, W. H. Richards, R. Viant, S. P. Mallalieu, E. L (Brigg) Ridealgh, Mrs. M. Wadsworth, G. Mann, Mrs. J. Robens, A Wallace, G. D. (Chislehurst) Manning, C (Camberwell, N.) Roberts, Emrys (Merioneth) Wallace, H. W. (Walthamstow, E.) Manning, Mrs. L. (Epping) Roberts, Goronwy (Caernarvonshire) Warbey, W. N. Mathers, Rt. Hon. George Ross, William (Kilmarnock) Watkins, T. E. Mellish, R. J. Royle, C. Weitzman, D. Middleton, Mrs. L. Sargood, R. Wells, P. L. (Faversham) Millington, Wing-Comdr. E. R Scollan, T. Wells, W. T. (Walsall) Mitchison, G. R Scott-Elliot, W Wheatley, Rt. Hn. J. T. (Edinb'gh, E.) Monslow, W. Sharp, Granville White, H. (Derbyshire, N. E.) Morgan, Dr. H. B. Shawcross, C. N. (Widnes) Whiteley, Rt. Hon. W. Morris, Lt.-Col. H. (Sheffield, C.) Silverman, J. (Erdington) Wigg, George Morris, Hopkin (Carmarthen) Silverman, S. S. (Nelson) Wilkes, L. Moyle, A. Simmons, C. J. Wilkins, W. A. Murray, J. D. Skeffington, A. M. Williams, D. J. (Neath) Neal, H. (Claycross) Skeffington-Lodge, T. C Williams, J. L. (Kelvingrove) Nicholls, H. R. (Stratford) Skinnard, F. W. Williams, R. W. (Wigan) O'Brien, T. Smith, H. N. (Nottingham, S.) Williams, W. R. (Heston) Oldfield, W. H. Snow, J. W. Willis, E. Oliver, G. H Sorensen, R. W. Wills, Mrs. E. A. Paget, R. T. Soskice, Sir Frank Wise, Major F. J Paling, Will T. (Dewsbury) Sparks, J. A. Woodburn, Rt. Hon A Palmer, A. M. F Steele, T. Wyatt, W. Pargiter, G. A. Stewart, Michael (Fulham, E.) Yates, V. F. Parker, J. Stokes, R. R. Young, Sir R. (Newton) Parkin, B. T. Stross, Dr. B. Younger, Hon. Kenneth Paton, J. (Norwich) Stubbs, A. E Pearson, A. Swingler, S. TELLERS FOR THE NOES: Peart, T. F. Sylvester, G. O. Mr. Popplewell and Mr. Richard Adams.
NEW CLAUSE.—(Development charge to be included as capital expenditure for certain purposes.)
Section sixty-eight of the Income Tax Act, 1945 (which defines certain expressions used in that Act), shall be amended by adding the following Subsection:
"(7) Any reference in this Part or in Part IV of the Finance Act, 1944, to capital expenditure on the construction of a building or structure, on the provision of machinery or plant, in connection with the working of a mine, oil well, or other source of mineral deposits of a wasting nature, on the construction of farm houses, farm or forestry buildings, cottages, fences or other works, or on scientific research, shall be construed to include any development charge payable to the Central Land Board under Section sixty-nine of the Town and Country Planning Act, 1947, by virtue of such capital expenditure which is not otherwise allowable to be deducted from income by virtue of the Income Tax Acts."—[ Colonel Hutchison. ]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
This new Clause is really exploratory, and designed to try to remove doubt in a situation which at present gives rise to considerable doubt. When an industrialist purchases land with or without some construction on it already, the Town and Country Planning Act imposes upon him the necessity of paying the owner of the land and buildings for what he has bought, and paying to the Government a development charge in as much as the use of the land may be changed. He, therefore, has to provide, in the enterprise which he is setting up on this land and in these buildings, for three costs: first, the cost of the land to the previous owner; second, the development charge to the Government; and third, the expenditure on erecting his works.
As matters stand now it does not appear to be clear what capital value he will be entitled to claim as being the cost of erecting these works or this industrial concern. Our contention is that, in as much as the development charge relates to the function which is carried out on that particular land, therefore the development charge should be allowed as part of the capital cost of the construction of the premises in which he is to carry out his enterprise. That is the purpose of this new Clause, in order that there should be no doubt in the future as to what figure of depreciation and obsolescence should be allowed.
The hon. and gallant Gentleman said his object was really exploratory, and that he wanted to ascertain to what extent the development charge should be included for the purpose of the initial and annual allowances provided for by the Income Tax Act, 1945. The answer to that is, that development charge is part of the cost of the land, and the land is expressly excluded from the scope of the 1945 Act. After all, the effect of the Town and Country Planning Act really is, that one pays to the owner the existing value, and one pays the development charge to the State; but both represent, in fact, part of the purchase value of the land one pays to acquire the land and the rights in the land. Land is expressly excluded from the scope of the 1945 Act. So are the site and mineral deposits. They are also expressly excluded.
The Act is simply designed to apply to the buildings and structures. It is designed to be limited to that. In answer to the hon. and gallant Gentleman's question, I would say there can be no doubt that, as the 1945 Act stands, it would not include, for the purpose of the initial and annual allowances, any part of the development charge. That intention of the 1945 Act was made very clear by the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) in 1945. It was designed to attach to buildings and so on used for the purpose of productive industry, and it was expressly not designed to apply to the cost of acquiring the land on which the buildings were erected.
For this reason the answer I have to give is, that the development charge is certainly not included. But the hon. and gallant Gentleman did not adduce any arguments in favour of the change he would make in the law—because his new Clause would certainly change the law. That is not what the law is at present. He did not pretend that he wanted to change the law, and, indeed, expressly said his object was merely to ascertain the position. I have given the answer to that, as to which, I think, there can be very little doubt, and I hope, in those circumstances, the Committee will agree with me that the new Clause should not be accepted.
I appreciate that the law as it now stands does not allow these allowances to apply upon the cost of the land. What really is at issue here is, whether the development charge should properly adhere to the land or should properly adhere to the buildings and the enterprise. The hon. and learned Gentleman says that under the 1945 Act as it stands the development charge would adhere to the land. Then I suggest that some alteration in the 1945 Act should be brought about, if it is agreed that the development charge properly should belong to the buildings and not to the land. I do not think the hon. and learned Gentleman has argued that. I think he has simply said that the law as it stands just now applies the development charge to the land and not to the buildings. Our contention is that it should apply to the buildings and not to the land. If an alteration of the law is required, then I suggest the law should be altered.
Question put, and negatived.
NEW CLAUSE.—(Relief from profits tax where franked investment income not exceeded.)
Section thirty of the Finance Act, 1947 which imposes a charge to profits tax and grants relief in respect of certain profits not distributed) shall be amended by adding the following Subsection:
"(5) Notwithstanding anything in Subsection (2) of this section, where in the case of any trade or business the gross relevant distributions to proprietors (as defined in the subsequent provisions of this Part of this Act) for any chargeable accounting period do not exceed the franked investment income for that period, relief for non-distribution shall be allowed upon the whole of the profits chargeable to profits tax."— [Sir J. Mellor.]
Brought up, and read the First time.
11.0 p.m.
I beg to move, "That the Clause be read a Second time."
This Clause proposes to amend Section 30 of the Finance Act, 1947. I do not think hon. Members will wish me to refer specially to that Section. The purpose of the new Clause is to secure that where the gross relevant distributions do not exceed the franked investment income, the relief for non-distribution shall be allowed upon the whole of the profits chargeable to Profits Tax. I think that, really, this is quite a simple proposal. It seems to me to be reasonable that where the gross relevant distributions—in other words, the amount paid out by a company in dividends to the shareholders—is covered, or more than covered, by its franked investment income which has already borne Profits Tax at the rate of 25 per cent., the remaining income should bear the lower rate of 10 per cent., the undistributed rate.
That would mean that the company would be entitled to appropriate its payments to such part of its income as suited it best, and I do not think that is at all a novel proposition. The Solicitor-General will recognise that it is quite a normal proceeding. In my submission this is a commonsense Amendment, and I cannot understand why the 1947 Finance Act did not make this provision. If one looks at the net relevant distribution, which is that part of the profits which has to bear the higher rate at 25 per cent., one finds that in Section 34 (2) of that Act, net relevant distributions are defined in this extraordinarily complicated way—I am not going to read the whole of the Section, but only the relevant words:
I feel that the hon. Gentleman has not appreciated the purpose of Section 34 (2) of the 1947 Finance Act. This is designed to ensure that the distribution tax is payable proportionately out of the various categories of income.
I had appreciated that that is what it did. What I wanted the hon. and learned Gentleman to explain was, what was the purpose of making it do such a thing? It seems most extraordinary.
It seems to me the obvious thing that when there are two categories of income, franked and non-franked, one assumes, what is the likely state, that when a company distributes any part of its profits it distributes proportionately out of all sources of income—a proportion of its franked income and a proportion of its non-franked income. On that basis a company is taxed: that only a proportion of its distribution can be fairly attributed to its franked investments, and therefore only a proportion is excluded.
Would it not be much more reasonable to assume that the company would distribute that proportion of its profits which was more advantageous to it? Surely, that is the answer?
It might be more advantageous to it, but it clearly is not reasonable to attribute income solely in that sense: The Act does attribute income rateably. It takes account of a company's two sources of income—income previously subject to tax and therefore franked income and income not subject to tax, and it says that the proportion of its distribution shall be allocated separately to each category of income rateably and that it shall be taxed upon that proportion which can be rateably attributed. The proportion attributable to franked investment income already bears a tax and can be excluded from the scope of the charge. That seems to be a fair way of doing it.
What the Amendment would seek to provide is that a company should only be charged upon the basis that the distribution which it makes has been made solely out of the franked investment income. That would be most unfair to the Revenue. The only fair way is to take the thing rateably and to assume that out of every pound of revenue which the company has got, a proportion has been attributed to this distribution. In deciding the tax to be paid, we take a proportion of the gross relevant distribution and convert it to a net relevant distribution and, therefore have a distribution subject to the charge and eliminate from it a fair proportion representative of the amount attributable to this franked investment income. We could not possibly accept that, in relation to the basis of taxation, this proposal would be fair. As the new Clause does substitute for the basis I have indicated the whole distribution as originating from the franked investment income, and as that would not possibly be fair to the Revenue, I would ask the Committee to reject the Clause.
I do not feel entirely satisfied by the reply of the hon. and learned Gentleman. As I understand the matter, franked investment income means investment income which has already sustained a higher rate, the distributed rate. If that is the case, the logical result of doing what he suggests is fair is to appropriate part of this franked investment income to that part of the company's income which is not distributed. Suppose that half the income of a company is franked and half is not franked and that the company decided to make a 60 per cent, distribution, then the position would be what the Solicitor-General has described as "fair"—to appropriate 50 per cent, of the franked in proportion owing to the particular distributed and non-distributed parts of the company's revenue.
Take the case of a 6 per cent, distribution, 3 per cent, franked and 3 per cent, non-franked, assuming that the company's income is 50 per cent, non-franked
I said "60," but I will take this, which is a better figure for this purpose. If one does that one contributes to the undistributed part of the company's income a substantial part of the franked income of the company. In other words, one is going to charge a substantial part of the company's income as if it were distributed. That is in effect doing what the Solicitor-General is fair. "Fair" for this purpose means 'simply that it maintains the revenue. That seems to be his interpretation of the word "fair" for his purpose. Clearly to charge a company in respect of part of its revenue on the basis that it is distributed when it is not, is unfair, and the Government should look at this matter again, and even if they do not accept this new Clause now, at any rate, give consideration to the matter at another stage.
The hon. Baronet has put the point which arose out of the reply of the Solicitor-General so clearly that I do not need to say more except to say that I regard the answer with great dissatisfaction. I cannot see why the Government are objecting to a company appropriating the payments it makes to that portion of the income which suits it best. Surely, that is done in commercial transactions and is sanctioned by the law? Therefore, I express great disappointment with the reply.
Question put, and negatived.
NEW CLAUSE.—(Surrender of postwar refunds of income tax in satisfaction of estate duty.)
The executor or administrator of the estate of a deceased person shall be entitled to surrender in satisfaction or part satisfaction of estate duty payable on the estate post-war Income Tax Certificates forming part of the assets of the estate.— [Colonel Hutchison.]
Brought up, and read the First time.
I beg to move, "The Clause be read a Second time."
This is a short Clause, a simple Clause, and, in contra-distinction to a great many of the abstruse points we have been considering this evening, meaning exactly what it appears to say. As is known, a number of individuals in the country are still owed refunds of Income Tax by the Government. They may die and their estates may become liable to the payment of Estate Duty. What this Clause asks is that that refund of taxation due to them should be accepted in payment or part payment of the liability of Estate Duty. I am fortified in thinking that the right hon. Gentleman will find no difficulty in accepting this Clause, which indeed bears the imprint of reasonableness upon it, because I understand that these refunds are already accepted in payment of arrears of Income Tax. We know that land is already accepted in payment or part payment of Estate Duty, and nothing could be more reasonable that these credits, which are the equivalent of cash in the hands of the Government—or we hope so—should be accepted in lieu of cash.
I hope that the Government will look with favour upon this new Clause which touches, I think the Financial Secretary will agree, only the fringe of a very vexed question. We have had more than one Debate during the last three years about postwar credits, including one which the Financial Secretary will recall on the Christmas Adjournment this Session, when it was discussed in a different aspect. This is a very small concession to ask, and I would reinforce the arguments that there is a perfectly good precedent for the acceptance of this Clause, because the Financial Secretary well knows these postwar credits are accepted as a set-off of Income Tax claims, notably in the case of ex-officers. I happen to have a Question down about this tomorrow, and over and over again the Departmental Claims Branch at Cardiff have accepted these claims.
What my hon. and gallant Friend is asking is that the concession made to the living shall be extended to the deceased. That does not seem unreasonable. Surely, the Financial Secretary to the Treasury will not tell us that there are administrative difficulties. I should have thought that this matter would be acceptable. We are all getting a good deal of correspondence on this subject of postwar credits as time goes on and the credit is not paid. It would create a good impression if the Government made this small concession that, where Death Duties are due, at least, postwar credits could be used to meet those Death Duty liabilities. In accepting this, the Government would be doing a reasonable thing.
11.15 p.m.
I hope the Treasury is going to see its way to accept this new Clause. I find it very difficult to appreciate any argument which could be advanced against it. These postwar credits are due to those who will at a certain age, namely, 65 for men and 60 in the case of women, receive those credits. I am one of those who have been fortunate in having already received their credits. I cannot see why, merely because people have not lived to the age of 65 years, they should be denied at the last hour, or after the last hour, when they are dead, the amount due to them in the form of payment of Death Duties.
I see another sound reason why they should be allowed this; namely, that postwar credits are, when paid, not regarded as part of the recipient's income, whether for Income Tax or Surtax. Indeed, it is a part of the recipient's capital which is repaid at a certain period of his life. That being so, I can see no argument which can be advanced against the estate of a deceased person being credited with this amount. I hope that the Chancellor is going to see his way to agree to the acceptance of this new Clause. If he does not do so, I can assure him that it will leave a feeling in the country that the Chancellor of the Exchequer has made up his mind that he is going to wade through these new Clauses. For all practical purposes, we are wasting our time remaining here until the early hours of the morning if he does not put forward a really reasoned argument. With regard to this new Clause, I can assure him that it accords with the feeling of the great majority of people. Even hon. Members opposite would agree that this is a reasonable Clause which should be accepted by the Treasury.
The object sought in this Clause is to enable Income Tax postwar credits of those who have died to be taken in satisfaction, or in part satisfaction, of Estate Duty. I have, and my right hon. and learned Friend the Chancellor of the Exchequer has on many occasions, had to resist suggestions that the present law, which limits payment of postwar credits to men of 65 and women of 60, should be extended on various grounds. Normally the grounds suggested are those of hardship, and, as the Committee knows very well, any argument in favour of paying the credits on grounds of hardship is very difficult to resist.
Nevertheless, up to now, my right hon. and learned Friend and his predecessor have felt that they could not "open the floodgates" by giving ground in this direction. Plausible though this Clause may seem, it would in fact do the same. If the credits were paid in satisfaction or in part satisfaction of Estate Duty, there would be more left for division among the beneficiaries, who would probably not be people entitled to the credits on grounds of age and who would probably have no claim on the grounds of hardship.
If, as I had half-expected, the hon. and gallant Member who moved this Clause had indicated difficulties on the part of the personal representative of the person who had died, I might have been able to understand his point better. But he should know, and the Committee should know, that when people die with post-war credits outstanding, some sort of provision is made in order that the estate may be wound up. The Inland Revenue authorities are always very willing to assist executors to see that those entitled to post-war credits do get them. They will arrange a change of name on the certificate, or the issue of several certificates if the estate has to be divided among several beneficiaries.
Reverting to what the Committee was told earlier, let us suppose that a beneficiary was, say, 17 years of age when the estate was wound up; would he have to wait 48 years before receiving benefit?
The hon. Member can take it that, as we have a Labour Government, and one which is likely to stay for some time to come, our general position will have righted itself and postwar credits will have been paid out long before those who are now young reach the present qualifying age. The Committee knows that the only reason why they have not yet been paid out is that there is a risk of inflation. It is therefore essential that this money, amounting now to £700 million, should not be paid out all at once.
Furthermore, the Income Tax authorities could not cope with the payment of everybody's post-war credits at any one time; indeed it is likely that they will have to be paid out in stages. To return to Estate Duty, I have to tell the Committee that, so far as the executors of the deceased person are concerned, there is no difficulty. The estate can be wound up and the Inland Revenue authorities are only too anxious to see that certificates which have fallen to the estate are distributed to properly established beneficiaries.
I found it a little difficult to follow the argument put by the right hon. Gentleman but he has given one good assurance in that he tells us that these postwar credits are going to be paid during the life-time of the Socialist Government. But I do ask him what is the reason why the Government are "standing pat" on this matter when they have already gone beyond it?
The right hon. Gentleman knows that postwar credits are already being used for those far below the statutory age when faced with Income Tax claims. What is the objection to extending this to these deceased accounts? Has he considered this? He has told us that there is no difficulty when the estate is wound up and that the Inland Revenue are very obliging in exchanging one piece of paper for another or in changing the name on a certificate, neither of which gives very much comfort to the beneficiary in cash. But supposing the beneficiary in his turn dies at the age of 64 and that process is repeated, as it might with some families?
This could go on for generation after generation without the postwar credit being drawn by anyone at all. I imagine, if I have not misinterpreted the Government's intention, and in fact the late Chancellor, now the Chancellor of the Duchy of Lancaster, once said so, that the Government hope in time to lower the age limits and to proceed along those lines, that instead of 65 and 60 it would become 60 and 55. The Parliamentary Secretary to the Ministry of Transport shakes his head but I am quite clear in my recollection on that. That was the way it would be dealt with, but we might have the extraordinary situation of the postwar credits of the father descending to the children for three or four generations. Cannot he see that a very much tidier method would be for the accounts of the deceased to be merged? It would be just as easy for the Inland Revenue to issue that as to issue fresh certificates to beneficiaries. I hope he will take that point of view. I do not know whether my hon. and gallant Friend who moved the Clause intends to take it to a Division. If he does, I shall have pleasure in supporting him.
May we take it from what the Financial Secretary has said that the Inland Revenue is exercising in effect very considerable licence in connection with the surrender of these postwar credits in settlement of Estate Duties? I gather that, as an administrative prob- lem, the Inland Revenue was exercising its own discretion and in certain cases utilising the surrender of these credits in settlement of Estates Duties. Is that so?
I am afraid I cannot regard the explanation of the right hon. Gentleman as satisfactory. What he has in fact said is that if he gave way in one single instance of repayment before the date—which has quite arbitrarily been imposed on repayment because it was originally intended to be repaid immediately after the war—it would, to use his own words, open the flood gates to a tremendous mass of demands of a similar nature. There can be no analogy between a man who has died and a man who is living and I can imagine no greater case of hardship at the present moment than to die. Consequently, I do not admit for one moment that because, in the case of payment of Estate Duty, this concession might be made—and it cannot cost the Government very much—it would put him and the Government in a very difficult position as regards claims from other individuals. Therefore I do not regard his
reply as satisfactory and I press for the incorporation of these words.
11.30 p.m.
The hon. and gallant Member has suggested that the Chancellor of the Exchequer can return the money due for postwar credits to someone who is dead. Such people are out of his reach, either to benefit them or harm them. The person concerned is the son and heir, the one left alive, or the widow. Is it not more or less right to say that Estate Duty does not begin to be payable unless this son and heir is receiving a considerable sum of money through the will. It is in these cases the Opposition are suggesting that the postwar credits should be convertible into cash, for the benefit of somebody who is not the original payee or contributor. But there are other cases of people who are ill or who have not got £ 2,000 to leave to anybody. I think the Financial Secretary is quite right in not granting the concession in this case.
Question put, "That the Clause be read a Second time."
The Committee divided: Ayes, 91; Noes, 229.
Division No. 183.] AYES. [11.32 p.m. Amory, D. Heathcoat Harris, F. W. (Croydon, N.) Osborne, C. Assheton, Rt. Hon. R. Harvey, Air-Cmdre. A. V. Peto, Brig. C. H. M. Astor, Hon. M. Haughton, S. G. Pitman, I. J. Birch, Nigel Hinchingbrooke, Viscount Raikes, H. V. Bossom, A. C. Hogg, Hon. Q. Rayner. Brig. R Boyd-Carpenter, J. A. Hope, Lord J. Ropner, Col, L. Braithwaite, Lt.-Comdr. J. G Howard, Hon. A. Ross, Sir R. D. (Londonderry) Butcher, H. W. Hutchison, Lt.-Cm. Clark (E'b'rgh, W.) Sanderson, Sir F. Challen, C. Hutchison, Col. J. R. (Glasgow, C.) Shepherd, W. S (Bucklow) Conant, Maj. R. J. E. Lambert, Hon. G. Smith, E. P. (Ashford) Crosthwaite-Eyre, Col. O. E Lancaster, Col. C. G. Smithers, Sir W. Crowder, Capt. John E. Law, Rt. Hon. R. K. Spearman, A. C. M. Darling, Sir W. Y. Lennox-Boyd, A. T. Stanley, Rt. Hon. O. Digby, S. W. Lloyd, Selwyn (Wirral) Stoddart-Scott, Col. M. Dodds-Parker, A. D. Low, A. R. W. Studholme, H. G. Drayson, G. B. Lucas-Tooth, Sir H. Taylor, C. S. (Eastbourne) Drewe, C. McCorquodale, Rt. Hon. M. S. Thomas, J. P. L. (Hereford) Dugdale, Maj. Sir T. (Richmond) Mackeson, Brig. H. R. Thorneycroft, G. E. P. (Monmouth) Eccles, D. M. McKie, J. H. (Galloway) Touche, G. C Eden, Rt. Hon. A. Maitland, Comdr. J. W. Turton, R. H. Elliot, Lieut.-Col. Rt. Hon. W. Manningham-Buller, R. E. Vane, W. M. F. Fletcher, W. (Bury) Marlowe, A. A. H. Wakefield, Sir W. W. Foster, J. G. (Northwich) Marples, A. E. Ward, Hon. G. R. Fraser, H. C. P. (Stone) Marshall, D. (Bodmin) Wheatley, Colonel M. J. (Dorset, E.) Fraser, Sir I. (Lonsdale) Maude, J. C. Williams, Gerald (Tonbridge) Fyfe, Rt. Hon. Sir D. P. M. Medlicott, Brigadier F. Willoughby de Eresby, Lord Gage, C. Mellor, Sir J. York, C. George, Maj. Rt. Hn. G. Lloyd (P'ke) Molson, A. H. E. Glyn, Sir R. Morrison, Maj. J. G. (Salisbury) TELLERS FOR THE AYES: Gomme-Duncan, Col. A. Nicholson, G. Commander Agnew and Harmon, Sir P. (Moseley) Nield, B. (Chester) Major Ramsay. Hare, Hon. J. H. (Woodbridge) Orr-Ewing, I. L
NOES. Acland, Sir Richard Grey, C. F. Perrins, W. Adams, Richard (Balham) Griffiths, W. D. (Moss Side) Platts-Mills, J. F. F. Adams, W. T. (Hammersmith, South) Gunter, R. J. Poole, Cecil (Lichfield) Allen, A. C. (Bosworth) Guy, W H. Popplewell, E. Allen, Scholefield (Crewe) Haire, John E. (Wycombe) Porter, G. (Leeds) Alpass, J. H. Hall, Rt. Hon. Glenvil Price, M. Philips Anderson, A. (Motherwell) Hamilton, Lieut.-Col. R. Pritt, D. N. Attewell, H. C. Hannan, W (Maryhill) Proctor, W. T. Austin, H. Lewis Hardy, E. A. Pursey, Cmdr. H. Awbery, S. S. Henderson, Joseph (Ardwick) Randall, H. E Ayles, W. H. Harbison, Miss M Ranger, J. Baird, J. Hobson, C. R. Rankin, J. Barton, C. Holman, P Rees-Williams, D. R. Bechervaise A. E. Holmes, H. E. (Hemsworth) Reid, T. (Swindon) Bellenger, Rt. Hon. F. J. House, G. Richards, R. Beswick, F. Hoy, J. Ridealgh, Mrs. M. Bing, G. H C. Hudson, J. H. (Ealing, W.) Roberts, Emrys (Merioneth) Blackburn, A. R. Hughes, Hector (Aberdeen, N.) Robens, A. Blenkinsop, A. Hughes, H. D. (W'lverh'pton, W) Roberts, Goronwy (Caernarvonshire) Blyton, W. R. Hynd, H. (Hackney, C.) Rogers, G. H. R. Bowden, Fig. Offr. H. W. Hynd, J. B. (Attercliffe) Ross, William (Kilmarnock) Bowen, R. Jay, D. P. T. Royle, C. Bowles, F. G. (Nuneaton) Jeger, G. (Winchester) Sargood, R. Braddock, Mrs. E. M. (L'pl, Exch'ge) Jeger, Dr. S. W. (St. Pancras, S.E.) Scollan, T. Braddock, T. (Mitcham) Jenkins, R H. Scott-Elliot, W. Bramall, E. A. Johnston, Douglas Sharp, Granville Brook, D. (Halifax) Jones, D. T. (Hartlepool) Shawcross, C. N. (Widnes) Brooks, T. J. (Rothwell) Jones, J. H. (Bolton) Silverman, J. (Erdington) Blown, George (Belper) Jones, P. Asterley (Hitchin) Skeffington, A. M Brown, T. J. (Ince) Keenan, W. Skinnard, F. W. Bruce, Maj. D. W. T. Kendall, W. D. Snow, J, W. Buchanan, Rt. Hon. G King, E. M. Sorensen, R. W Byers, Frank Kinley, J. Soskice, Sir Frank Callaghan, James Lang, G. Sparks, J. A. Carmichael, James Lee, F. (Hulme) Steele, T. Chamberlain, R. A Levy, B. W. Stewart, Michael (Fulham, E.) Champion, A. J. Lindgren., G S. Stokes, R. R. Chetwynd, G. R. Lipton, Lt.-Col. M. Stross, Dr. B. Coldrick, W. Longden, F. Stubbs, A. E. Collindridge, F. Lyne, A. W. Swingler, S. Collins, V. J. McAdam, W Sylvester, G. 0 Colman, Miss G. M. McAllister, G. Symonds, A. L. Comyns, Dr. L. McEmtee, V. La T. Taylor, H. B. (Mansfield) Cooper, Wing-Comdr. G. McGhee, H G. Taylor.'R. J. (Morpeth) Corbel, Mrs. F. K. (Camb'well, N.W.) Mack, J. D. Taylor, Dr. S. (Barnel) Cove, W G. McLeavy, F. Thomas, D. E. (Aberdare) Crawley, A. Macpherson, T. (Romford) Thomas, I. 0. (Wrekin) Cripps, Rt. Hon. Sir S. Mainwaring, W. H Thomas, George (Cardiff) Daggar, G. Mallalieu, E. L. (Brigg) Thurfie, Ernest Dalton, Rt. Hon. H. Mallatieu, J. P. W. (Huddersficld) Ungoed-Thomas, L. Davies, Edward (Burslem) Mann, Mrs. J. Vernon, Maj. W. F. Davies, Harold (Leek) Manning, C. (Camberwell, N.) WadsworCh, G. Davies, S. 0. (Merthyr) Manning, Mrs. L. (Epping) Wallace, G. D. (Chislehurst) Deer, G. Mathers, Rt. Hon. George Wallace, H. W. (Walthamstow, E.) de Freitas, Geoffrey Mellish, R. J. Warbey, W. N. Delargy, H. J Middleton, Mrs. L. Watkins, T. E. Diamond, J Miflington, Wing^omdr. E. R. Weitzman, D. Dodds, N. N. Mitchison, G. R. Wells, P. L. (Faversham) Donovan, T. Monslow, W. Wells, W. T. (Walsall) Driberg, T. E. N. Morgan, Dr. H. B. Wheatley, Rt. Hn. J. (Edinburgh, E.) Durbin, E. F. M. Morris, Lt.-Col. H. (Sheffield, C.) White, H. ((Derbyshire, N.E.) Ede, Rt. Hon. J. C. Moyle, A. Whiteley, Rt. Hon. W. Edwards, John (Blackburn) Murray, J. D. Wigg, George Evans, Albert (Islington, W.) Neal, H. (Claycross) Wilkes, L, Evans, E. (Lowestoft) Nichotls, H. R. (Stratford) Williams, D. J. (Neath) Ewart, R. O'Brien, T. Williams, J. L. (Kelvingrove) Farthing, W. J. Oliver, G. H. Williams, R. W. (Wigan) Fernyhough, E. Paget, R. T. Williams, W. R. (Hestotr) Fletcher, E. G. M. (Islington, E.) Paling, Will T. (Dewsbury) Willis, E. Foot, M. M. Palmer, A. M. F. Wills, Mrs. E. A. Ganley, Mrs. C. S. Pargiter, G. A. Wise, Major F. J. Gibbins, J. Parker, J. Woodburn, Rt. Hon. A. Gibson, C. W. Parkin, B. T. Wyatt, W. Gilzean, A. Paton, Mrs. F. (Rushcliffe) Yates, V. F. Glanville, J. E. (Consett) Paton, J. (Norwich) (Norwich) Younger, Hon. Kenneth Gordon-Walker, P. C. Pearson., A. TELLERS FOR THE NOES: Greenwood, A. W. J. (Heywood) Peart, T. F. Mr. Simmons and Mr. Wilkins.
NEW CLAUSE.—(Amendment of Finance Act, 1947, s. 4 (6).)
Subsection (6) of Section four of the Finance Act, 1947 (which defines the expression "pensioner"), shall be amended by the insertion after the words "National Insurance Act, 1946," of the words "and ex-Service men and women having an eighty per cent. or higher disability pension."—[ Mr. Gage. ]
Brought up, and read the First time.
11.45 p.m.
I beg to move, "That the Clause be read a Second time."
The purpose of this Clause is to include ex-Service men and women, who have a disability pension for which they receive a pension at the rate of 80 per cent., amongst those persons already obtaining relief in the purchase of their tobacco. As the Committee knows, under Section 4 (1, a ) of the 1947 Act, relief is given to certain pensioners in the retail price of their tobacco, and by Subsection (6) of that Section pensioners who receive the relief are set out as persons to whom a pension has been awarded under the Old Age Pensions Act, 1936, the Widows, Orphans and Contributory Pensions Act, 1936, and the National Insurance Act, 1946. Nobody will deny that that is a fair and generous measure, and the only object of this Clause is to include in those generous provisions people who have a disability through their war service.
Like the pensioners who have had their earning ability impaired through old age, these people have their earning ability impaired by the most meritorious service of all through no fault of their own, that in the service of their country. Many of them are in poor circumstances. I understand that many of them find difficulty in buying their modest allowance of tobacco or cigarettes. We have taken the measure of 80 per cent. because that seems a fair assessment at which a man or woman might properly find that he or she was in the same position as the old age pensioner in regard to earning ability. Of course, some of them will be able to earn a little but a good many old age pensioners can earn, too. There is not a great number of these people. In advancing that argument I know that one is always liable to the counter-attack: "If there is not a great number of them it really does not matter so much." I am sure that that is not an argument which commends itself to the Committee, and I hope it is one that will not be put forward.
There is the great advantage here that a considerable sum of money is not involved. In fact, I understand that the additional sum would be somewhere in the region of £ 3 million. The answer that was given when this was put forward before was that there were administrative difficulties. Every impost that is levied causes administrative difficulties, but so far as I know it has never deterred a Chancellor of the Exchequer from levying a new tax. Of course, this administrative difficulty arises where a certain class of persons are excepted, as in the case of the old age pensioners. If that argument is seriously put forward I should like to know what is the nature of the administrative difficulty that makes it impossible to allow these unfortunate people the rebate which another class of person, who are equally meritorious, already have. It cannot be that they are difficult to ascertain, because everyone knows that these disability rates are well set out. The Ministry of Pensions knows them all. They take a little time to alter, and in those circumstances they must be easily ascertainable and there cannot be any difficulty nor any great possibility of fraud of any sort upon the Treasury. The arguments in favour of this Clause are so cogent that they do not need any great elaboration by me. I hope they will commend themselves to the majority of this Committee and that the Financial Secretary will say that he accepts the Clause.
As I said earlier this evening when we were debating the repeal of the Purchase Tax on vehicles or motor cars for ex-Service men, this is the kind of subject about which it is easy to be sloppy. That would be resented by the people for whom my hon. Friend the Member for South Belfast (Mr. Gage) is pleading, and it is certainly not the line of argument I am going to adopt. This is not a party matter. I make a most urgent plea to Members in all parts of the Committee to consider this matter and to give my hon. Friend support in an Amendment which I have great pleasure in supporting.
I am pleased to be associated with my hon. Friends from Ulster in this new Clause. When my hon. Friends from Ulster fight for a principle, it is an old adage that they are nearly always right. Perhaps the Financial Secretary, who is somewhat new to politics—I do not say that in any offensive way—may not have heard a saying that was current before the 1914–18 War: "Ulster will fight and Ulster will be right." If ever there was an occasion when that principle was borne out it is tonight. I am very glad that my hon. and gallant Friend the Member for Antrim (Major Haughton) said that he did not intend to make an appeal to sloppy sentiment on this matter. That would be quite unnecessary, because the Debate on Clause 1 of this Finance Bill, which deals with tobacco and with which this new Clause is directly associated, made very plain the general opinion in the whole Committee regarding the hardship which many people in Great Britain and Northern Ireland are experiencing today in purchasing what has become almost a necessity of life.
The Amendments proposed to Clause 1 were turned down, but in this new Clause the Financial. Secretary has an opportunity, if he so desires, of relieving this hardship on many people in this country, who are finding the increased price of tobacco a great burden. My hon. Friend the Member for South Belfast (Mr. Gage), who moved this new Clause, said that the amount involved was not great, a mere £3 million. As is known in the Committee, on the other side of the Committee pounds, shillings and pence are not rated as highly as they are by us on this side. There is nothing to prevent the Financial Secretary from realising that in losing this £3 million through this concession, he will make a section of the people in this country a lot happier, because they are feeling very hardly the increased price of tobacco.
I hope the right hon. Gentleman will see his way to extend the scope of the 1947 Act by adding this new Clause, which ensures that ex-Service men having a disability of 80 per cent, or more shall have the same benefits granted them as the pensioners to whom the relevant Clause refers. If he does so, he will receive not only the plaudits of hon. Members on this side—and even perhaps on the other—but he will earn the praise, approval and maybe the support of these people. I do not think we have had one real concession throughout the Committee stage of this Bill. Why should not the Financial Secretary get up now and declare that the Government will accept this Clause.
The hon. Gentleman who moved the new Clause said that its object was to extend the tobacco concession now given to certain types of old age pensioners to ex-Service men and women with a disability of 80 per cent, or higher. May I say straight away that the extent to which this concession could be spread was seriously considered when my right hon. Friend the present Chancellor of the Duchy of Lancaster first contemplated making it. It was his desire, as I am sure it is the desire of everyone in the Committee, if possible to extend this aid to tobacco smokers whether they are old age pensioners or disabled. He found, however, that it was administratively impossible to widen the scope of this concession very far, and in the end he decided that it would have to be limited by the ease with which those entitled to the concession could be identified at the Post Office counter. Unfortunately for many deserving classes, that meant that it had to be confined to certain old age pensioners who carry an old age pension book which can be itself identified and used to identify its owner.
It is not the cost of this extension of the concession which deters us from accepting it: so far as we can estimate, the cost would be relatively small. It is the administrative difficulty inherent in any extension to other classes. I should perhaps add that the fact that a person is 100 per cent, disabled does not necessarily mean that he is unemployable. It may well be that some ex-Service men and women who have a pension of 80 per cent, or more are earning a relatively high income—I am glad to think it is so. There is also the problem of the disabled person who does not happen to be an ex-Service man or woman, but who was none the less disabled during the war, or in industry. As this would be a concession on the ground of disablement, there is no logical reason why it should be withheld from others who are also disabled.
These considerations do enter into it, but the main reason why my right hon. Friend has to reject the extension of the scope of these concessions is the difficulty of administration and identification. Even if the ex-Service man took his book with him, the Post Office clerk would see nothing to indicate that the disability suffered was 80 per cent. or higher. We have to realise those difficulties; because of them, I am unfortunately unable to invite the Committee to accept the new Clause.
I have two points to make. The first is with regard to the cost of the concession. I would ask the Committee to note that the right hon. Gentleman did mention the cost of the concession as £ 3 million, that is, for all the persons concerned. My second point is that I am completely unable to accept the explanation that this is administratively impossible. The pensioner could bring his pension book to the Post Office together with a certificate from the Ministry of Pensions that he has an 80 per cent. or other disability. I am sure that the Ministry of Pensions would be very ready and willing to give such a certificate. I cannot see that there would
be any difficulty about that, and I am completely dissatisfied with the Financial Secretary's answer.
There are two other main points in regard to which the Financial Secretary's speech was equally feeble. He said that some of these men have a disability of 100 per cent. That is also true of some old age pensioners. Account might also be taken of those who suffer from industrial accidents being included in the provisions of this Clause. They ought to be included, and that would not cost a great deal. I have not the figure with me, but the number of industrial cases covered by 80 per cent. disability pension is, I think, even more than the number of ex-Service men so covered. Why not include both cases?
Question put, "That the Clause be read a Second time."
The Committee divided: Ayes, 90; Noes, 201.
Division No. 184.] AYES [11.58 p.m Agnew, Cmdr. P. G Harvey, Air-Cmdre. A. V Peto, Brig. C H M Amory, D. Heathcoat Haughton, S. G Pitman, I. J. Assheton, Rt. Hon. R. Hinchingbrooke, Viscount Raikes, H. V. Astor, Hon. M. Hogg, Hon. Q. Ramsay, Maj. S Barlow, Sir J Hope, Lord J. Rayner, Brig. R Birch, Nigel Howard, Hon. A. Roberts, Emrys (Merioneth) Bossom, A. C. Hutchison, Lt.-Cm. Clark (E'b'rgh, W.) Ropner, Col. L. Braithwaite, Lt.-Comdr, J. G Hutchison, Col. J. R. (Glasgow, C.) Ross, Sir R. D. (Londonderry) Buchan-Hepburn, P. G. T Kendall, W. D. Sanderson, Sir F. Butcher, H. W Lambert, Hon. G. Shepherd, W. S. (Bucklow) Byers, Frank Lancaster, Col. C. G Smith, E. P. (Ashford) Channon, H. Law, Rt. Hon R. K. Smithers, Sir W. Crosthwaite-Eyre, Col. O. E Lloyd, Selwyn (Wirral) Spearman, A. C. M. Crowder, Capt. John E Low, A. R. W. Stanley, Rt. Hon. O. Darling, Sir W. Y. Lucas-Tooth, Sir H. Stoddart-Scott, Col. M. Digby, S. W. McCorquodale, Rt. Hon. M S Taylor, C. S. (Eastbourne) Dodds-Parker, A. D Mackeson, Brig. H. R Thomas, J. P. L. (Hereford) Drayson, G. B McKie, J H. (Galloway) Thorneycroft, G. E. P (Monmouth) Drewe, C. Manningham-Buller, R. E Touche, G. C Dugdale, Maj. Sir T. (Richmond) Marlowe, A. A. H. Turton, R. H. Eccles, D. M. Marples, A. E. Vane, W. M. F Eden, Rt. Hon. A Marshall, D (Bodmin) Wadsworth, G Fletcher, W. (Bury) Maude, J. C. Wakefield, Sir W W Foster, J. G. (Northwich) Medlicott, Brigadier F Ward, Hon. G R. Fraser, H. C. P. (Stone) Mellor, Sir J. Wheatley, Colonel M. J. (Dorset, E.) Fraser, Sir I. (Lonsdale) Molson, A. H E Williams, Gerald (Tonbridge) Gage, C. Morrison, Maj. J G. (Salisbury) Willoughby de Eresby, Lord George, Maj. Rt. Hn. G. Lloyd (P'ke) Nicholson, G. York, C. Gomme-Duncan, Col. A Nield, B. (Chester) Hare, Hon. J. H. (Woodbridge) Orr-Ewing, I L TELLERS FOR THE AYES: Harris, F. W. (Croydon, N.) Osborne, C Mr. Studholme and Major Conant
NOES Acland, Sir Richard Bechervaise, A. E Brown, T. J. (Ince) Adams, Richard (Balham) Beswick, F. Bruce, Maj. D. W. T. Adams, W. T. (Hammersmith, South) Bing, G. H. C Buchanan, Rt. Hon. G Alexander, Rt. Hon. A. V Blyton, W. R Carmichael, James Allen, A C. (Bosworth) Bowden, Fig. Offr. H. W. Chamberlain, R. A. Anderson, A (Motherwell) Bowles, F. G. (Nuneaton) Champion, A. J Attewell, H. C. Braddock, Mrs. E. M. (L'pl, Exch'ge) Coldrick, W. Austin, H. Lewis Braddock, T. (Mitcham) Collindridge, F Awbery, S. S. Bramall, E. A. Collins, V. J. Baird, J. Brook, D. (Halifax) Colman, Miss G. M Barton, C. Brown, George (Belper) Comyns, Dr. L. Cooper, Wing-Comdr. G. Jones, P. Asterley (Hitchin) Rogers, G. H. R. Corbet, Mrs. F K. (Camb'well, N.W) Keenan, W. Ross, William (Kilmarnock) Cove, W. G. King, E. M Royle, C. Cripps, Rt Hon Sir S Kinley, J. Sargood, R Daggar, G Lang, G. Scollan, T. Dalton, Rt. Hon H. Lee, F. (Hulme) Scott-Elliot, W. Davies, Edward (Burslem) Levy, B. W. Sharp, Granville Davies, Harold (Leek) Lindgren, G. S Shawcross, C. N (Widnes) Davies, S. 0. (Merthyr) Lipton, Lt.-Col M Silverman, J (Erdington) Deer, G. Longden, F Skeffington, A M de Freitas, Geoffrey Lyne, A. W Skinnard, F. W Delargy, H. J. McAllister, G Snow, J. W Diamond, J. McGhee, H G Sorensen, R. W Dodds, N. N Mack, J. D. Soskice, Sir Frank Donovan, T. McLeavy, F Sparks, J. A Driberg, T. E. N. Macpherson, T (Romford) Steele, T. Durbin, E. F. M. Mallalieu, E. L. (Brigg) Stewart, Michael (Fulham, E.) Ede, Rt. Hon. J. C. Mallalieu, J. P W (Huddersfield) Stokes, R. R. Edwards, John (Blackburn) Mann, Mrs. J. Stross, Dr. B. Evans, Albert (Islington, W.) Manning, C. (Camberwell, N) Stubbs, A. E Ewart, R. Manning, Mrs. L (Epping) Swingler, S. Farthing, W. J Mathers, Rt. Hon George Sylvester, G O Fernyhough, E. Mellish, R. J. Symonds, A. L Fletcher, E. G. M (Islington, E) Middleton, Mrs. L. Taylor, H. B (Mansfield) Foot, M. M. Millington, Wing-Comdr E R Taylor, R. J. (Morpeth) Ganley, Mrs. C. S Mitchison, G. R Taylor, Dr S. (Barnet) Gibbins, J Monslow, W Thomas, D. E. (Aberdare) Gibson, C. W. Morgan, Dr. H. B Thomas, I. 0. (Wrekin) Gilzean, A Morris, Lt.-Col. H. (Sheffield, C.) Thomas, George (Cardiff) Glanville, J. E. (Consett) Moyle, A. Ungoed-Thomas, L. Gordon-Walker, P. C. Neal, H. (Claycross) Vernon, Maj. W. F. Greenwood, A W. J. (Heywood) Nicholls. H R (Stratford) Wallace, G D. (Chislehurst) Griffiths, W. D. (Moss Side) O'Brien, T. Wallace, H. W. (Wallhamstow, E) Gunter, R. J Oliver, G. H. Warbey, W. N Guy, W. H Paget, R. T. Watkins, T. E Haire, John E. (Wycombe) Paling, Will T. (Dewsbury) Weitzman, D Hall, Rt. Hon. Glenvil Palmer, A. M. F Wells, P. L. (Faversham) Hamilton, Lieut.-Col. R Pargiter, G. A Wells, W. T. (Walsall) Hannan, W. (Maryhill) Parker, J Wheatley, Rt. Hn. J. (Edinburgh, E.) Hardy, E. A Paton, Mrs. F. (Rushcliffe) White, H. (Derbyshire, N.E.) Henderson, Joseph (Ardwick) Paton, J. (Norwich) Whitceley, Rt. Hon. W. Herbison, Miss M Pearson, A. Wigg, George Hobson C R Peart, T. F. Wilcock, Group-Capt. C. A. B Holman, P Perrins, W. Wilkes, L House, G Popplewell, E. Williams, D. J. (Neath) Hoy, J. Porter, G (Leeds) Williams, J. L. (Kelvingrove) Hudson, J. H. (Ealing, W.) Price, M. Philips Williams, R. W. (Wigan) Hughes, Hector (Aberdeen, N.) Prill, D. N Williams, W. R. (Heston) Hynd, H. (Hackney, C.) Proctor, W. T. Willis, E. Hynd, J. B. (Attercliffe) Pursey, Cmdr. H Wills, Mrs. E A. Jay, D. P. T. Randall. H E. Woodburn, Rt. Hon. A Jeger, G. (Winchester) Ranger, J. Wyatt, W. Jeger, Dr. S. W (St Pancras, S.E.) Rankin, J. Yates, V. F. Jenkins, R. H. Rees-Williams, D. R. Younger, Hon. Kenneth Johnston, Douglas Reid, T. (Swindon) TELLERS FOR THE NOES Jones, D. T (Hartlepool) Robens, A. Mr. Simmons and Mr. Wilkim Jones, J. H. (Bolton) Roberts, Goronwy (Caernarvonshire)
NEW CLAUSE.—(Relief from balancing charges for certain cotton spinning concerns.)
Subsection (1) of section eighteen of the Finance Act, 1947, shall be amended by omitting from the words "the rate of tax," to the end of the subsection and substituting the words "such balancing charge shall cease to be made and any such charge as shall have been paid since the third day of December, nineteen hundred and forty-six shall be repaid by the Commissioners.— [Mr. Scott-Elliot.]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
Hon. Members will be aware that under the Cotton Spinning Industry Rehabilita- tion Subsidy Bill the Government can grant 25 per cent, of the cost of the purchase of new machinery to concerns having a total of spindles amounting to 400,000. There are, so far as I am aware, about one dozen of these large groups, representing perhaps some 50 per cent, of the total spinning capacity of Lancashire. It is desirable to increase the number of amalgamations in order that further concerns may be able to take advantage of the grant and improve their industrial equipment.
Broadly speaking, amalgamations which are needed can only be achieved by two means. First, they can be achieved by means of acquiring the shares. I am not proposing to enter into that this evening; it would be out of Order for me to do so. I will merely say that there are great difficulties in doing this in view of the small minority of distant shareholders who are generally found in these cases. The other way is the purchase of the assets. Generally speaking, in Lancashire, cotton spinning concerns allow for the purchase of assets in their articles of association, but this balancing charge which my Clause seeks to abolish is a great drawback. I shall explain how it works.
Hon. Members will be aware where the value of machinery has been written down and machinery has then been sold for a higher price than the written down price, the balancing charge operates as a charge upon the difference between these two figures. It is a perfectly reasonable and proper procedure where there is a genuine sale of machinery, but in the case of amalgamations there is no such sale. It is purely a taking over of assets and the putting of them into one common pool. This was recognised, I think, by the present Chancellor of the Duchy of Lancaster who, in the Finance Bill last year, made provision for this and halved the balancing charge. What I now seek to suggest is that this balancing charge should be done away with once and for all.
May I interrupt the hon. Member? I think I am right in saying that it does not always work in that way. He has given one instance of concerns whose assets were written down in the balance sheet and rose to a larger sum of money than the amount in the balance sheet. But it can work the other way round. To put the case fairly, that point should be stated.
In those circumstances, the balancing charge would be unlikely to operate. As I was saying, in the case of amalgamations there is no sale of assets at all. It is purely a merging of assets to provide an amalgamation. I do not think that there will be any repercussions on any other industry, and I cannot say what the additional charge will be, but I hope that it will not be very great. So far as the retrospective effect of this Clause is concerned, there may be a greater effect than I think, but I should be glad to hear what my right hon. Friend has to say about that. Cannot the Gov- ernment offer some olive branch to the cotton spinning industry in order to encourage it to form amalgamations more readily and to take advantage of the benefits under the rehabilitation Bill? I am perfectly prepared, if the wording is not acceptable, to adopt any form of phraseology, and I commend the Clause to my right hon. Friend.
It is not a question of wording in this new Clause. The answer which I have to make is that the Government have already done enough, and we cannot really be expected to go farther. The cost would not be considerable—in the area of £ 2,500,000—although substantial in a case of this sort. It will be agreed, I think, that that would have to be carefully thought over before it was conceded. I have already said that the Government have gone a long way; under Section 18 of the Finance Act, 1947, we have halved the balancing charge, and that has cost £ 2,500,000. If we did away completely with it, another £ 2,500,000 would have to be found.
This is not the only concession which we have already made. It has to be borne in mind that the Government are making a direct grant of 25 per cent. towards the cost of new equipment. That is the second measure of assistance. We have also to bear in mind that in Clause 68 of this Bill, in order further to assist these amalgamations, the industry has been relieved of the capital and transfer stamp duty to which they would otherwise have been subject. There are, therefore, three separate directions in which the Government have assisted these amalgamations financially, and it must be realised that, to ask for the additional expenditure which would be caused by totally doing away with the 50 per cent. balancing charge at this moment is really asking something which the Government cannot concede.
If I understood the Solicitor-General aright, he said that the Government anticipated certain amalgamations in the cotton industry, which will have the effect of regrouping certain units into larger firms and that, in the process, £ 2,500,000 in cash will have to come out of the industry and go into the Treasury to meet this balancing charge, while the Government are paying 25 per cent. into the industry. But is not that a roundabout way? Where is the £ 2,500,000 coming from? Must it not come from the working capital of these firms? Does the hon. and learned Gentleman think the cotton industry, at this time, can well afford £2,500,000 of working capital?
12.15 a.m.
I have not the papers I had with me last week, but my mind goes back to the Debate on Clause 33. In supporting almost everything that has been said in support of the new Clause tonight I would draw attention to the fact that not one Member then made any attempt to support me in using the same arguments that the hon. Member for Accrington (Mr. Scott-Elliot) has been using tonight. The thing I deplore, and I suppose it is wrong that I should say this, is that from the business point of view some of us who come to the Committee stage of the Finance Bill to argue factually get no support from Members on the other side of the Committee, because they belong to another party. We troop into the Lobbies and our vote is
not true and not sincere. I will go into the Lobby tonight with the hon. Member for Accrington because he is talking sense. I raised the same points in. connection with these balancing changes—I admit I had not the same ability but I did the best I could—but I got a very scant hearing. I drew attention to these charges in connection with other industries, nationalised industries as well as the cotton industry, and the whole thing was laughed out of court.
The hon. and gallant Gentleman will surely admit that the two things are not comparable at all. One is a case of balancing charges in nationalised industries and the other is to facilitate amalgamation.
I quite agree with that.
Question put: "That the Clause be read a Second time."
The Committee divided: Ayes, 76; Noes, 185.
Division No. 185. AYES. [12.17 a.m. Agnew, Cmdr. P. G Haughton, S. G Ramsay, Maj. S Amory, D. Heathcoat Hogg, Hon. Q. Rayner, Brig. R Assheton, Rt. Hon. R Hutchison, Lt.-Cm. Clark (E'b'rgh, W.) Roberts, Emrys (Merioneth) Astor, Hon. M. Hutchison, Col. J. R. (Glasgow, C.) Ropner, Col L. Barlow, Sir J. Kendall, W. D. Ross, Sir R. D. (Londonderry) Birch, Nigel Lambert, Hon. G. Sanderson, Sir F. Bossom, A. C. Law, Rt. Hon. R. K. Shepherd, W. S. (Bucklow) Buchan-Hepburn, P. G. T Lioyd, Selwyn (Wirral) Smithers, Sir W. Butcher, H. W. Low, A. R. W. Spearman, A. C. M. Byers, Frank Lucas-Tooth, Sir H Stanley, Rt. Hon. 0. Channon, H. McCorquodale, Rt. Hon. M. S Stoddart-Scott, Col. M Crosthwaite-Eyre, Col. 0 E Mackeson, Brig. H. R. Taylor, C. S. (Eastbourne) Darling, Sir W. Y. McKie, J H (Galloway) Thomas, J. P. L. (Hereford) Digby, S. W. Manningham-Buller, R. E. Thorneycroft, G. E. P (Monmouth) Dodds-Parker, A. D Marlowe, A. A. H. Touche, G. C. Drayson, G. B Marples, A. E. Turton, R. H. Drewe, C. Marshall, D. (Bodmin) Vane,W. M. F. Dugdale, Maj. Sir T. (Richmond) Mellor, Sir J. Wadsworth, G. Eccles, D. M. Molson, A. H E. Wakefield, Sir W. W Foster, J. G. (Northwich) Morrison, Maj. J. G (Salisbury) Ward, Hon. G. R. Fraser, H. C. P. (Stone) Nicholson, G Wheatley, Colonel M. J. (Dorset, E.) Fraser, Sir I. (Lonsdale) Nield, B. (Chester) Williams, Gerald (Tonbridge) Gomme-Duncan, Col. A. Orr-Ewing, I. L Witloughby de Eresby, Lord Hare, Hon. J. H. (Woodbridge) Osborne; C York, C. Harris, F. W. (Croydon, N.) Peto, Brig. C H M TELLERS FOR THE AYES: Harvey, Air-Cmdre. A. V Pitman, I. J. Mr. Studholme and Major Conant.
NOES. Acland, Sir Richard Bowles, F. G. (Nuneaton) Cooper, Wing-Comdr. G. Adams, Richard (Balham) Braddock, Mrs. E. M. (L'pl, Exch'ge) Corbet, Mrs. F. K. (Camb'well, N.W.) Adams, W T (Hammersmith, South) Braddock, T. (Mitcham) Cripps, Rt. Hon. Sir S Alexander, Rt Hon. A. V. Bramall, E. A. Daggar, G. Anderson, A. (Motherwell) Brown, George (Belper) Dalton, Rt. Hon. H. Attewell, H. C. Brown, T. J. (Ince) Davies, Edward (Burslem) Austin, H. Lewis Bruce, Maj. D. W. T. Davies, Harold (Leek) Baird, J Buchanan, Rt. Hon. G. Deer, G. Barton, C. Carmichael, James de Freitas, Geoffrey Bechervaise, A. E Chamberlain, R. A Delargy, H. J. Beswick, F. Champion, A. J Diamond, J. Bing, G. H. C. Coidrick, W. Dodds, N. N. Blackburn, A. R Collindridge, F. Donovan, T. Blyton, W. R. Collins, V. J. Driberg, T. E. N. Bowden, Fig. Offr. H. W. Comyns, Dr. L. Durbin, E. F. M. Ede, Rt. Hon. J. C. McGhee, H. G Shawcross, C. N. (Widnes) Edwards, John (Blackburn) Mack, J. D. Silverman, J. (Erdington) Evans, Albert (Islington, W.) McLeavy, F Simmons, C. J. Ewart, R. Macpherson, T. (Romford) Skeffington, A. M Farthing, W. J. Mallalieu, E. L. (Brigg) Skinnard, F. W Fernyhough, E. Mallalieu, J. P. W. (Huddersfield) Snow, J. W. Fletcher, E. G. M (Islington E.) Mann, Mrs. J Sorensen, R. W Foot, M. M. Manning, C. (Camberwell, N.) Soskice, Sir Frank Ganley, Mrs. C S Manning, Mrs. L. (Epping) Sparks, J. A. Gibbins, J. Mathers, Rt. Hon. George Steele, T. Gibson, C. W Mellish, R. J. Stewart, Michael (Fulham, E.) Gilzean, A. Middleton, Mrs. L. Stokes, R. R Glanville, J E (Consett) Millington, Wing-Comdr E R Stubbs, A. E. Greenwood, A. W. J. (Heywood) Mitchison, G. R Swingler, S Griffiths, W. D. (Moss Side) Monslow, W. Sylvester, G. O Gunter, R. J Morgan, Dr. H. B Symonds, A. L. Guy, W. H. Morris, Lt.-Col. H (Sheffield, C.) Taylor, H. B. (Mansfield) Haire, John E (Wycombe) Moyle, A. Taylor, R. J. (Morpeth) Hall, Rt. Hon. Glenvil Neal, H. (Claycross) Thomas, D. E. (Aberdare) Hamilton, Lieut.-Col. R Nicholls, H. R. (Stratford) Thomas, I. O. (Wrekin) Hannan, W. (Maryhill) O'Brien, T. Thomas, George (Cardiff) Hardy, E. A. Oliver, G. H Ungoed-Thomas, L. Henderson, Joseph (Ardwick) Paget, R. T Wallace, G. D. (Chislehurst) Harbison, Miss M Paling, Will T. (Dewsbury) Wallace, H. W. (Walthamstow, E.) Holman, P. Palmer, A. M. F Warbey, W. N. House, G. Pargiter, G. A Watkins, T. E Hoy, J. Parker, J. Weitzman, D. Hudson, J. H. (Ealing, W.) Paton, Mrs. F. (Rushcliffe) Wells, P. L. (Faversham) Hughes, Hector (Aberdeen, N.) Paton, J. (Norwich) Wells, W. T. (Walsall) Hynd, H. (Hackney, C.) Peart, T. F Wheatley, Rt. Hn. J. (Edinburgh, E Hynd, J. B. (Attercliffe) Perrins, W. White, H. (Derbyshire, N. E.) Jay, D. P. T. Popplewell, E Whiteley, Rt. Hon. W. Jeger, G. (Winchester) Price, M Philips Wigg, George Jeger, Dr. S. W. (St. Pancras, S. E.) Pritt, D. N Wilcock, Group-Capt C. A. B Jenkins, R. H. Proctor, W. T. Wilkes, L. Johnston, Douglas Pursey, Cmdr. H Williams, J. L. (Kelvingrove) Jones, D. T. (Hartlepool) Randall, H. E Williams, R. W. (Wigan) Jones, J. H. (Bolton) Ranger, J. Williams, W R. (Heston) Jones, P. Asterley (Hitchin) Rankin, J Willis, E. Keenan, W. Rees-Williams, D. R Wills, Mrs. E. A. Kinley, J. Reid, T. (Swindon) Woodburn, Rt. Hon. A Lang, G. Robens, A. Wyatt, W. Lee, F. (Hulme) Roberts, Goronwy (Caernarvonshire) Yates, V. F. Levy, B. W. Rogers, G. H. R. Younger, Hon. Kenneth Lipton, Lt.-Col. M Ross, William (Kilmarnock) Longden, F Royle, C. TELLERS FOR THE NOES Lyne, A. W Sargood, R. Mr. Pearson and Mr. Wilkins McAllister, G. Sharp, Granville
NEW CLAUSE.—(Constant attendant allowance.)
Where a taxpayer through any physical disability is compelled to employ the services of a constant attendant, the taxpayer shall be entitled to a tax allowance of fifty pounds.—[ Lieut.-Commander Clarke Hutchison. ]
Brought up, and read the First time.
I beg to move "That the Clause be read a Second time."
This is the third occasion on which I have raised this matter in the present Parliament, and I hope it may be a case of "third time lucky." I am encouraged to bring forward this proposal on the present occasion for the reason that when this subject was discussed last June, the then Chancellor of the Exchequer, who is now the Chancellor of the Duchy of Lancaster, gave the Committee an assurance that he would look into the whole question of granting some form of relief to people suffering from personal disability. In order to refresh the memories of the hon. Members, I would like to quote from part of the speech of the then Chancellor on 16th June, 1947. This is what he said in reply to the general Debate on that occasion:
It is also worth while reminding the Committee that in the discussion on this subject last June both the former Chancellor and the present Financial Secre- tary admitted that the existing law governing Income Tax allowances is in a somewhat confused condition. I hope, therefore, that the Financial Secretary will on this occasion be able to report that some progress has been made on this important matter. In view of the fact that the Government, and most members of the Committee, must now be aware of the arguments in favour of this Clause, I do not propose to deal with it at any length tonight. All I need say is that the sole object is to confer some badly needed assistance on a small—I emphasise the word "small"—category of persons who are so afflicted as to require the services of someone to look after them more or less continually.
The people I have in mind are those who have been the victims of, say, a railway accident or a motor accident or some disaster of that kind and who have become completely incapacitated as a result; or, alternatively, those unfortunate people who have become victims of some form of chronic disease and are unable to fend for themselves. I stress that this category of persons is very limited because most injured people will be eligible already for assistance, or will shortly be eligible for assistance, under the National Insurance (Industrial Injuries) Act; or, alternatively, if they have sustained injury whilst in the service of the forces of the Crown, they will come within Article 14 of the Royal Warrant.
Therefore, this Clause cannot put a very heavy charge upon the Exchequer but it will serve to cover a small gap in our present system of social services which has not yet been bridged. For that reason I hope that on this third occasion on which this matter has been raised in the present Parliament the Government will see fit to accept this Clause, or, failing that, if the wording is not quite suitable, that they will undertake to bring forward an amendment of their own on the Report stage embodying the principle of the Clause.
12.30 a.m.
This is a new Clause which, I feel certain, will attract support from many parts of the Committee, and which, I hope, will receive the sympathetic consideration of the Government. As my hon. and gallant Friend the Member for West Edinburgh (Lieut. - Commander Hutchison) has pointed out, the matter has been raised on more than one occasion, and last year the late Chancellor of the Exchequer promised to give careful thought to it. What is asked for here is something, in my view, which is really very well merited, namely, that those who are so physically disabled as to be compelled to have a constant attendant should have some tax relief. In another new Clause which was not called, the categories of persons affected were more clearly specified—the blind, the crippled, and the otherwise physically incapacitated. For all those categories, I support the plea.
I want to say a special word for those who are crippled. Such persons have not only to bear their physical burden, but they have financial burdens to bear which do not fall upon ordinary, normal people—for example, those who have to have electric chairs, which initially cost a lot and must be maintained; and those who have artificial limbs which are a considerable cost and cost a great deal to maintain. If to those burden there is added the need of an attendant to look after the physically incapacitated, it does seem to me that that necessary cost should be treated as an expense subject to the relief which is here sought.
I sincerely trust that the Chancellor will look at this again. After all, though this request may be a hardy annual, it does not thereby become a less worthy one. This is a matter which arouses sentiment. I think it is good and proper. There is no doubt whatever that, as my hon. Friends have said, the Chancellor last year looked at the proposal sympathetically; and although the Chancellor now is not the same Chancellor, there is no reason, at the dawn of a new day, why there should be any such argument against the proposal as that it would be administratively impossible, or something of that sort. I hope the Chancellor will change his heart on this occasion.
Many times in the last 20 years pleas have been made to successive Chancellors to admit relief for what is termed the "blind person's housekeeper." They have been rejected hitherto. A new Clause with that particular provision in mind was not moved tonight. Now we have this new Clause. If the proposal it contains could be conceded, it would go a long way towards meeting an undoubted necessity. There are lonely blind people who have no wives or families with whom to live, and who yet must have someone to look after them. In such a case I do not doubt a housekeeper would be the constant attendant referred to in this new Clause. I want to add my plea for that case to the eloquent pleas made by my hon. Friends.
It is quite true that the Chancellor of the Duchy of Lancaster last year did indicate that he would try to review the whole of this field and see if anything could be done to help those concerned in this matter. It is obvious that concessions made in the past have led to anomalies, and the question which now arises is whether those anomalies should be increased. It is rather like some of the other matters we have been discussing tonight. A concession is asked and it is given. Then, almost immediately, the whole pack is in full cry to know why the concession given to A should not be extended to B.
What does the right hon. Gentleman mean by the "whole pack"? Does he mean hon. Members of this Committee?
I think that the right hon. Gentleman should have known very well exactly what I mean when I use a hunting phrase.
The right hon. Gentleman is not accusing us of blood sports?
What I was trying to say—I may have been unfortunate in the phrase I used—was that when a case is put to the Chancellor and there is a concession, as, for example, the tobacco rebate for old age pensioners or the payment of post-war credits to old people, immediately his life becomes very miserable, because, week after week and month after month, he is urged to extend the concession. Here it is the housekeeping allowance, and he has for some time been pressed to extend the allowance to those who are disabled and who have to employ a housekeeper to look after them.
The present situation is that widows and widowers, irrespective of whether they have any young children or not, are allowed a housekeeping allowance if they employ a housekeeper. It is sometimes considered that that in itself is an anomaly. It is also given to bachelors and spinsters who have in the home young children for whom the adopted child allowance is given, and if the bachelor or spinster is incapacitated—[ Laughter. ] I do not see anything funny in that. It frequently happens that a bachelor or spinster has brothers or sisters who have had children and, when the parents die, the uncles or aunts take the children into their homes. I know of several such cases. If a married man whose wife is completely incapacitated, and unable to look after the home, has to get someone to do so, then he is entitled to an allowance.
The question now arises whether the allowance should be extended. The hon. and gallant Member for West Edinburgh (Lieut.-Commander Hutchison) was fair in the quotation he made from the former Chancellor. In that quotation my right hon. Friend indicated that he would look at this, but he went on to say that we were bringing into force new schemes of national insurance, and that it might well be that, when those schemes got into their stride, many of the problems and causes of hardship which have arisen would be covered.
I should like to give one or two instances of how really hard cases, which are known to Members on both sides of the Committee, will now be covered, and where, therefore, the case for the housekeeper allowance does not arise. For instance, a disabled ex-Service man or woman who requires a constant attendant already receives from the Ministry of Pensions, under the Royal Warrant, an allowance of 20s. a week, or in some cases 10s. He or she is, therefore, able to employ a housekeeper if he wants to. Under the Industrial Insurance Scheme, a workman may receive, in addition to benefits of 45s., a constant attendance allowance up to 20s., which may in special cases be increased to 40s. That is much better than an allowance of £ 50 on the Income Tax.
After the appointed day under the National Health Service Act, which is 5th July next, local health authorities, that is county and county borough councils, will be empowered, subject to the approval of the Minister of Health, to make arrangements for supplying domestic help to households in which there is an expectant mother, mental defective, child under five, or aged person; and there are other categories. All this shows that, under legislation now coming into force, many of the cases that hon. Members have in mind will be covered. There is also the blind person, whose case appeals to all of us. He requires someone to help him. He is covered under the National Assistance Act, 1948. Visitors are empowered by the appropriate local authority to assist, to visit, to teach, and to help blind people in their homes.
When he realises that many of these cases are covered by legislation now on the Statute Book and about to come into operation, and that we want, if we can, not to increase the anomalies of this allowance, I hope the hon. and gallant Member will agree that the need for this Clause is less than it was, and that he will be willing to withdraw it.
I have listened in the last few years to many curious speeches from the right hon. Gentleman, but this is the most curious of all. He opened his remarks not only by indicating his resistance to this Clause, but by more or less condemning us for having the effrontery to bring it forward. His reproof was cast in rather harsh, rude, sporting terms, which no doubt would be appropriate in some of the circles he frequents—those circles where he learned his intimate knowledge of the Betting Tax maybe—but which were singularly out of place here. That we should be reproved for bringing forward a Clause which, when it was moved last year the Chancellor promised to consider, is really an abuse of the processes of the Committee. We are surely entitled to know what is the result of the consideration by this Chancellor after the promise given by the last Chancellor.
Surely the right hon. Gentleman said most specifically that the quotation by the hon. and gallant Member who moved this Clause from the then Chancellor's speech was most fair.
12.45 a.m.
I am dealing now with the first part of the right hon. Gentleman's speech, which implied a reproof of those who brought forward this Clause once again. We are entitled, in view of the former Chancellor's statement, to know what is the result of his consideration. I am sure that no one who has listened, as I did, to the Chancellor of the Duchy speaking on this Clause last year would have thought for one moment that consideration of what he promised then would in fact have resulted this year in nothing at all being done, because our experience is that what is usually lacking in the Treasury on a new Clause of this kind is not the way but the will. When a Chancellor of the Exchequer has once said that he agrees with a thing in principle and will see how it can be done, then we can be pretty certain that he will not have very much difficulty in finding a way to do it.
The right hon. Gentleman's only excuse at the end was that one or two things had been done in other ways which would reduce this problem. It is quite true that there will be fewer people who will be affected by this proposal, but if there are fewer people, the problem and the anomalies created will be fewer. The right hon. Gentleman could not claim—and he did not attempt to claim—that in fact all the measures to which he referred would deal with all the cases. All he was saying was that there would be fewer not dealt with than hitherto. That did not seem to me at all carrying out the pledge of the right hon. Gentleman last year; and although I am a hearty supporter of the right hon. Gentleman and his chief when he throws over, as he does now on every occasion, the policy of his predecessor, I do say that even that can be carried too far. This was a case—maybe the one case—in which it would have been advantageous if the policy of the late Chancellor had been carried out. To mark our disappointment over the way the pledge to which we attached very considerable importance last year has been treated, we shall take this matter into the Lobby.
It is quite clear that it is a matter of general regret that it should have been necessary to bring forward this matter again after its having been raised on two previous occasions. I think it even more a matter for regret that the examination which the Chancellor of the Duchy promised last year should have produced such an extremely disappointing result. The Financial Secretary referred to anomalies which may arise. His argument was that if we put an end to one anomaly we are then pressed to remove further anomalies. That means, "Do not let us put an end to one injustice, because we may be asked to put an end to other injustices." That is an argument which I find myself unable to accept.
My right hon. Friend's reference to anomalies merely strengthens the case which has been advanced in support of this new Clause. He referred to a large number of people who are now covered by recent legislation, but that is not the point. I appreciate that most people are covered either by the Royal Warrant or by the Industrial Injuries Act, but we cannot assess injustice by the number of people suffering from it. It is the degree of
injustice which any individual is suffering that we have to take into account, and if there is one argument that one can adduce from the number of people involved it is that the amount of money involved to the Exchequer is remarkably small. The amount of money is small but the moral importance of this issue is very important. Therefore, I do hope that my right hon. Friend will look at it more fully than has been done in the last two years and see if something can be done between now and the Report stage.
Question put, "That the Clause be read a Second time."
The Committee divided: Ayes, 76; Noes, 156.
Division No. 186.] AYES. [12.50 a.m. Agnew, Cmdr P. G. Hutchison, Lt.-Cm. Clark (E'b'rgh, W.) Ropner, Col L. Amory, D. Heathcoat Hutchison, Col. J. R. (Glasgow, C.) Ross, Sir R. D. (Londonderry) Assheton, Rt. Hon. R. Kendall, W. D. Sanderson, Sir F. Astor, Han. M. Lambert, Hon. G. Shepherd, W. S. (Bucklow) Barlow, Sir J. Law, Rt. Hon. R. K. Smithers, Sir W. Birch, Nigel Lloyd, Selwyn (Wirral) Spearman, A. C. M. Bossom, A. C. Low, A. R. W. Stanley, Rt. Hon. O. Buchan-Hepburn, P. G. T. Lucas-Tooth, Sir H. Stoddart-Scott, Col. M. Butcher, H. W. McCorquodale, Rt. Hon. M. S Taylor, C. S. (Eastbourne) Byers, Frank Manning, Mrs. L. (Epping) Thomas, J. P. L. (Hereford) Channon, H. Manningham-Buller, R. E. Thomas, George (Cardiff) Conant, Maj. R. J. E. Marples, A. E. Thorneycroft, G. E. P. (Monmouth) Crosthwaite-Eyre, Col. O. E Marshall, D. (Bodmin) Touche, G. C. Daggar, G. Mellor, Sir J. Turton, R. H. Darling, Sir W. Y. Molson, A. H. E Vane, W. M. F. Dodds-Parker, A. D. Morrison, Maj. J. G. (Salisbury) Wadsworth, G Drewe, C. Nally, W. Wakefield, Sir W. W Dugdale, Maj. Sir T. (Richmond) Nicholson, G. Ward, Hon G. R. Eccles, D. M. Nield, B. (Chester) Wheatley, Colonel M. J. (Dorset, E.) Foster, J. G. (Northwish) Orr-Ewing, I. L Williams, Gerald (Tonbridge) Fraser, H C. P. (Stone) Osborne, C. Willoughby de Eresby, Lord Fraser, Sir I. (Lonsdale) Peto, Brig. C. H. M. York, C Gomme-Duncan, Col. A. Pitman, I. J. Greenwood, A. W. J. (Heywood) Prior-Palmer, Brig. O. TELLERS FOR THE AYES Hare, Hon. J. H. (Woodbridge) Pritt, D. N. Mr. Studholme and Brigadier Harris, F. W. (Croydon, N.) Ramsay, Maj. S. Mackeson Haughton, S. G. Rayner, Brig. R.
NOES. Acland, Sir Richard Cripps, Rt. Hon. Sir S. Guy, W. H. Adams, W. T. (Hammersmith, South) Dalton, Rt. Hon. H. Hall, Rt. Hon. Glenvil Alexander, Rt. Hon. A. V. Davies, Edward (Burslem) Hamilton, Lieut.-Col. R. Anderson, A (Motherwell) Davies, Harold (Leek) Hannan, W. (Maryhill) Austin, H. Lewis Deer, G. Hardy, E. A. Baird, J. Delargy, H. J. Henderson, Joseph (Ardwick) Barton, C. Diamond, J. Herbison, Miss M Bechervaise, A. E. Dodds, N. N. Holman, P. Beswick, F. Donovan, T. House, G. Bing, G. H. C Driberg, T. E. M Hudson, J. H. (Ealing, W.) Blyton, W. R. Ede, Rt. Hon. J. C. Hughes, Hector (Aberdeen, N.) Bowden, Fig. Offr. H. W. Edwards, John (Blackburn) Hynd, J. B. (Attercliffe) Bowles, F. G. (Nuneaton) Evans, Albert (Islington, W.) Jay, D. P. T. Braddock, Mrs. E. M. (L'pl, Exch'ge) Ewart, R. Jeger, G. (Winchester) Braddock, T. (Mitcham) Farthing, W. J. Jeger, Dr. S. W. (St Pancras, S. E.) Bramall, E. A. Fernyhough, Jenkins, R. H. Brown, George (Belper) Fletcher, E. G. M. (Islington, E.) Johnston, Douglas Brown, T. J. (Ince) Foot, M. M. Jones, D. T. (Hartlepool) Bruce, Maj. D. W. T. Ganley, Mrs. C. S. Jones, J. H. (Bolton) Buchanan, Rt. Hon. G Gibbins, J. Jones, P. Asterley (Hitchin) Chamberlain, R. A Gibson, C. W. Keenan, W Champion, A. J Gilzean, A. King, E. M Collindridge, F. Glanville, J. E. (Consett) Kinley, J. Comyns, Dr. L. Griffiths, W. D. (Moss Side) Lee, F. (Hulme) Cooper, Wing-Comdr. G Gunter, R. J. Levy, B. W. Lipton, Lt.-Col M Paton, J. (Norwich) Symonds, A. L. Longden, F Peart, T. F Taylor, H. B. (Mansfield) Lyne, A. W. Perrins, W. Taylor, R. J. (Morpeth) McAllister, G Popplewell, E. Thomas, D. E. (Aberdare) McGhee, H G Price, M Philips Thomas, I. 0. (Wrekin) Mack, J D Proctor, W. T Wallace, G. D. (Chislehurst) McLeavy, F. Randall, H E Wallace, H. W (Walthamstow. E) Macpherson, T (Romford) Rankin, J. Warbey, W. N Mallalieu, E. L. (Brigg) Rees-Williams, D R Watkins, T. E. Mallalieu, J. P. W (Huddersfield) Roberts, Goronwy (Caernarvonshire) Wells, P. L. (Faversham) Mann, Mrs. J. Rogers, G. H R Wells, W. T (Walsall) Manning, C. (Camberwell, N.) Ross, William (Kilmarnock) Wheatley, Rt Hn. J. (Edinburgh. E.) Middleton, Mrs. L. Royle, C. White, H. -(Derbyshire, N.E) Millington, Wing-Comdr E R Sargood, R Whiteley, Rt. Hon. W Mitchison, G R Shackleton, E. A. A Wigg, George Monslow, W. Sharp, Granville Wilcock, Group-Capt. C. A. B Morgan, Dr. H. B. Shawcross, C. N. (Widnes) Wilkes, L. Morris, Lt.-Col. H (Sheffield. C) Silverman, J. (Erdington) Wilkins, W A Moyle, A. Simmons, C. J. Williams, J L. (Kelvingrove) Neal, H. (Claycross) Skeffington, A. M Williams, R. W (Wigan) Nicholls, H R. (Stratford) Skinnard, F. W. Williams, W R. (Heston) O'Brien, T. Snow, J. W Willis, E. Oliver, G. H Sorensen, R W Wills, Mrs E. A Paget, R. T Soskice, Sir Frank Woodburn, Rt Hon. A Paling, Will T. (Dewsbury) Stewart, Michael (Fulham. E) Yates, V F Palmer, A. M. F Stokes, R. R Pargiter, G. A Stubbs, A. E TELLERS FOR THE NOES Parker, J. Sylvester, G. 0 Mr. Pearson and Mr Richard Adamn.
NEW CLAUSE.—(Profits tax on distribution in co-partnership schemes.)
Where any portion of a company's profits is distributed as a dividend on any shares held by or on behalf of employees in a co-partnership scheme or on any special class of shares restricted to employees, the profits tax payable by the company on that portion of its profits shall be computed as if no net relevant distribution to proprietors had been made in the case of the said portion of its profits for any chargeable accounting period.— [Mr. Amory.]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
The object of this Clause is to limit the incidence of Profits Tax upon that part of a company's profits which are represented by a dividend paid directly 01 indirectly to employees under a co-partnership or employees' shareholding scheme. It is intended to cover dividends, whether paid directly to the individual employed under such a scheme or to, for instance, a trust for employees. It does not refer to ordinary shares of profits distributed as a cash bonus distribution, because I understand that these are a charge in all respects. If it is not so, I should be glad if the Financial Secretary will tell me so. The object of the higher rate of Profits Tax is anti-inflationary. I personally think it is a bad tax, because it is a tax upon enterprise. But whatever the argument for the higher rate of Profits Tax as applicable to other dividends than those with which I am dealing, I think there is much less argument for it when the dividend is paid to employees and it is a dividend paid from the company in which they work.
1.0 a.m.
The Government and the Chancellor have repeatedly made it known that they are in favour of incentive schemes. Copartnership and employee-shareholding are systems which have two objects. First, to promote a spirit of harmony and co-operation between the partners in industry and, secondly, the provision of practical incentives. If a concern, by greater production or increased efficiency increases its profits, I think it a good thing that the employees should share the increased profits. If that is so, then it is surely wrong that other shareholders should be penalised because there is such a scheme by having to bear a heavier burden of Profits Tax. The other shareholders should be encouraged to go ahead with such a scheme and encourage the employees to acquire, if they wish, a share in the ownership of the business.
If the Chancellor does not like the Clause, he will probably say that it is because there is no precedent but, in last year's Finance Act a substantial relief was given to the industrial provident societies and particularly to the Co-operative societies in regard to the Profits Tax. These cases, I agree, are not exactly analogous, but the case for employee shareholders is at least as strong. The main argument I am putting forward is that these schemes are really incentive schemes and that they should not, therefore, be penalised by the higher rate of tax. The number of shareholders is always large and the individual shareholding is, of course, small, and if the Committee thinks as I do that these schemes are good and valuable, here is a practical way of expressing approval. I hope the Chancellor will accept this Clause or, if the drafting is faulty, produce something to give effect to the idea which I want to commend to the Committee.
We must all have some sympathy with the objectives of the hon. Member. He argued that co-partnership schemes are desirable from the point of view of incentive provided to employees and we do not quarrel with that argument. At the same time, we do not feel that that establishes a case for a change in taxation, which is what he advocates. After all, just because these co-partnership schemes may be beneficial in themselves and desirable, we cannot say that that, of itself, furnishes a case against taxing them. If we did not place a tax on those things which we consider desirable and beneficial activities, I fear that we should not raise very much revenue. This Profits Tax is a tax on distributed profits. We have given a remission because it is desirable to encourage saving from profits and to discourage distribution of them, but whoever the recipient may happen to be, the fact remains that these profits are distributed and there is no case arising from that fact that they ought to pay any but the rate appropriate for distributed profits.
When did they get a concession? When was any preference given to undistributed profits? I do not remember it.
I think it was in the first Budget of 1947.
What the hon. Gentleman means is that Profits Tax on undistributed profits was half as much as on distributed profits.
I think there is one important point that the Economic Secretary has not appreciated and that is in regard to the profit-sharing schemes. Allowance is made for a reduction of Profits Tax in all these cases. In an incentive scheme which operates through profit-sharing the Government do give what we are asking for in this Amendment, but in an incentive scheme in the form of a co-partnership they do not. It is largely because of that anomaly that we are seeking in this Clause to improve the situation. Very little tax will be involved in this because this is one of the concessions which would cost extremely little. If the view of the Government is—and I am delighted to hear that it is the view—that this is in principle a highly commendable objective, and since all such schemes are clearly definable, the administrative problems of carrying them out in practice ought not to be difficult and the sum likely to be involved will be small.
For that reason I am asking the right hon. Gentleman to think again on this issue because the identification of workpeople with the undertaking for which they are working is far better achieved through some co-partnership scheme and the share of ownership it involves, even more than in the case of profit sharing and the no share of ownership which that involves. Of the two I think that where they are appropriate—and they are not appropriate in every case—I am sure that co-partnership is a stronger incentive and that it is an incentive which creates the happiest atmosphere. For that reason I hope he will give us the maximum encouragement to this very desirable end.
Question put: "That the Clause be read a Second time."
The Committee divided: Ayes. 62; Noes, 166.
Division No. 187.] AYES. [1.8 a.m. Amory, D. Heathcoat Crosthwaite-Eyre, Col. O. E Hare, Hon. J. H. (Woodbridge) Assheton, Rt. Hon. R. Darling, Sir W. Y. Harris, F. W. (Croydon, N.) Barlow, Sir J. Dodds-Parker, A. D Haughton, S. G. Birch, Nigel Drewe, C. Hutchison, Lt.-Cm. Clark (E'b'rgh, W) Bossom, A. C. Eccles, D. M. Hutchison, Col. J. R. (Glasgow, C) Buchan-Hepburn, P. G. T Foster, J. G. (Northwich) Lambert, Hon. G. Butcher, H. W. Fraser, H. C. P. (Stone) Law, Rt. Hon. R. K. Channon, H. Fraser, Sir I. (Lonsdale) Lloyd, Selwyn (Wirral) Conant, Maj. R. J. E. Gomme-Duncan, Col. A. Lucas-Tooth, Sir H. McCorquodale, Rt. Hon. M S Ramsay, Maj. S Touche, G. C. Mackeson, Brig. H R. Rayner, Brig. R Turton, R. H. Marshall, D. (Bodmin) Ropner, Col. L. Vane, W. M. F. Mellor, Sir J. Ross, Sir R. D (Londonderry) Wakefield, Sir W. W Molson, A. H E Sanderson, Sir F. Ward, Hon. G. R. Morrison, Maj J G. (Salisbury) Shepherd, W. S. (Bucklow) Wheatley, Colonel M. J. (Dorset, E) Nicholson, G. Smithers, Sir W. Williams, Gerald (Tonbridge) Nield, B. (Chester) Spearman, A. C. M. Willoughby de Eresby, Lord Orr-Ewing, I. L Stanley, Rt. Hon. O. York, C Osborne, C Stoddart-Scott, Col. M peto, Brig. C. H M Taylor, C. S. (Eastbourne) TELLERS FOR THE AYES: Pitman, I. J. Thomas, J. P. L. (Hereford) Commander Agnew and Prior-Palmer, Brig O Thorneycroft, G. E. P (Monmouth) Mr. Studholme.
NOES. Acland, Sir Richard Hannan, W. (Maryhill) Prill, D. N Adams, Richard (Balham) Herbison, Miss M Proctor, W. T Alexander, Rt. Hon. A. V Holman, P Randall, H E Anderson, A. (Motherwell) House, G. Ranger, J. Austin, H. Lewis Hoy, J. Rankin, J Baird, J. Hudson, J H. (Ealing, WO Rees-Williams, D. R. Barton, C. Hughes, Hector (Aberdeen, N.) Roberts, Goronwy (Caernarvonshire) Bechervaise, A. E Bynd, J. B. (Attercliffe) Rogers, G. H. R. Beswick, F. Jay, D. P. T. Ross, William (Kilmarnock) Bing, G. H. C. Jeger, G. '(Winchester) Royle, C. Blyton, W. R. Jenkins, R. H. Sargood, R. Bowles, F. G. (Nuneaton) Johnston, Douglas Shackleton, E. A A Braddock, Mrs. E. M. (L'pl, Exch'ge) Jones, D. T. (Hartlepool) Sharp, Granville Braddock, T. (Mitcham) Jones, P. Aster ley (Hitchin) Shawcross, C. N. (Widnes) Bramall, E. A. Keenan, W. Silverman, J. (Erdington) Brown, George (Belper) Kendall, W. D Simmons, C. J Brown, T. J. (Ince) King, E. M Skeffington, A M Bruce, Maj. D. W. T. Kinley, J. Skinnard, F. W. Carmichael, James Lee, F. (Hulme) Snow, J. W. Chamberlain, R. A Levy, B. W. Sorensen, R. W. Champion, A. J. Lipton, Lt.-Col. M Soskice, Sir Frank Collindridge, F. Longden, F Stewart, Michael (Fulham, E.) Collins, V. J. Lyne, A W. Stokes, R. R Comyns, Dr. L. McAllister, G. Stubbs, A. E. Cooper, Wing-Comdr. G. McGhee, H. G. Swingler, S. Corbet, Mrs. F. K. (Camb'well, N.W.) Mack, J. D Sylvester, G. 0 Cripps, Rt. Hon. Sir S. MoLeavy, F. Symonds, A. L. Daggar, G. Macpherson, T (Romford) Taylor, H B. (Mansfield) Dalton, Rt. Hon. H. Mallalieu, E. L. (Brigg) Taylor, R. J. (Morpeth) Davies, Edward (Burslem) Mailalieu, J. P. W (Huddersfield) Thomas, D. E. (Aberdare) Davies, Harold (Leek) Mann, Mrs. J. Thomas, I. 0. (Wrekin) Deer, G. Manning, C. (Camberweil, N.) Thomas, George (Cardiff) Delargy, H. J. Manning, Mrs. L. (Epping) Ungoed-Thomas, L Diamond., J. Middleton, Mrs. L. Wadsworth, G. Dodds, N. N. Milimgton, Wing-Comdr E R Wallace, G. D. (Chislehurst) Donovan, T. Mitchison, G. R Wallace, H. W (Walthamstew. E) Driberg, T. E. N Monslow, W. Walkins, T E Dugdale, J. (W. Bromwich) Morgan, Dr. H. B. Wells, P. L (Faversham) Ede, Rt. Hon. J C. Morris, Lt.-Col. H (Sheffield, C) Wells, W. T (Walsall) Edwards, John (Blackburn) Moyle, A. Wheatley, Rt. Hn. J (Edinburgh, E) Evans,Albert (Islington, W.) Nally, W. While, H. (Derbyshire, N.E.) Ewart, R. Neal, H (Claycross) Whiteley, Rt Hon W. Farthing, W. J. Nicholls, H. R. (Stratford) Wigg, George Fernyhough, E. O'Brien, T. Wilcock, Group-Capt C. A. B Fletcher, E. G M. (Islington, E.) Oliver, G. H. Wilkes, L. Foot, M. M Paget, R. T. Williams, J. L. (Kelvtngrove) Ganley, Mrs. C. S Paling, Will T. (Dewsbury) Williams, R. W. (Wigan) Gibbins, J. Palmer, A. M. F Williams, W R. (Heston) Gibson, C. W Pargiter, G. A. Willis, E. Gilzean, A. Parker, J. Wills, Mrs. E. A. Glanville, J. E (Consett) Paton, Mrs. F. (Rushcliffe) Woodburn, Rt. Hon. A Greenwood, A W. J. (Heywood) Paton, J. (Norwich) Yates, V. F Griffiths, W. D (Moss Side) Pearson, A. Gunter, R. J Peart, T F TELLERS FOR THE NOES: Guy, W. H. Perrins, W Mr. Joseph Henderson and Hall, Rt. Hon. Glenvil Popplewell, E. Mr. Wilkins. Hamilton, Lieut.-Col. R Price, M. Philips
NEW CLAUSE.—(Allowance for capital expenditure in connection with certain buildings subject to war damage.)
(1) Where on or after the third day of September, nineteen hundred and thirty-nine, a person has incurred capital expenditure on the construction of a building occupied by him for the purposes of a trade carried on by him and the following conditions are fulfilled—
(a) the building was constructed for the-purpose of temporarily meeting the circumstances created by war damage to a building which immediately prior to the occurrence of such damage was occupied by that person for the purposes of the same trade; and
( b ) the said capital expenditure exceeds the temporary works payment payable under Section six of the War Damage Act, 1943; and
( c ) the construction of the said building was authorised by a permission granted under a planning scheme subject to a condition restricting the period for which the building might be continued upon the site thereof under the Town and Country Planning Acts, 1944 and 1947, and the Town and Country Planning (Scotland) Acts, 1945 and 1947,
there shall be allowed in charging the profits or gains of the trade under Schedule D for the year 1948–49, and every subsequent year during which the building is so occupied or until the expiry of the said restricted period, whichever is the shorter period, such proportion of the excess reduced by the value of the said building or the remains thereof at the termination of its occupation or the expiry of the said period, as the case may be, as is properly attributable to the year in question.
(2) Pending an ascertainment whether any allowance falls to be made under Subsection (1) of this Section in respect of a building, the Commissioners of Inland Revenue, if they are satisfied that any building, provided as aforesaid is of such a character that it is likely that the conditions specified in that Subsection will be fulfilled in the case thereof, may direct that there shall be allowed in any such year of assessment as aforesaid such sums as they think fit, not exceeding ten per cent. of the net cost of the building less any temporary works payment payable in respect thereof, but any such allowance shall be provisional only, and on the termination of the said occupation or the expiry of the said period as the case may be, the amount thereof shall be adjusted so as to accord with the provisions of the said Subsection.—[ Mr. I. Hudson. ]
Brought up, and read the First time.
1.15 a.m.
I beg to move that the Clause be read a Second time.
At this hour of the morning I regret that I cannot give the time to introducing this Clause which its importance deserves. I wish to say only that I bring this Clause forward because of my concern with the Co-operative movement in which, of course, I declare my interest. The Co-operative movement is deeply concerned that in many parts of the country where there are blitzed areas and it puts up temporary premises in order to enable it to carry on its business, it cannot take advantage of provisions which are allowed under the law with regard to allowance of Income Tax to premises classified as industrial premises.
Apparently during the war a number of Acts were passed with regard to Ex- cess Profits Tax and Income Tax—with which I will not trouble the Committee now—by which an arrangement was made that a ten per cent. allowance would be permitted by the Inland Revenue Commissioners for premises that came under these provisions. It is sufficient for me to say that in 1945, under the Income Tax law, it was explicitly provided that where there were premises of an industrial character, an allowance of ten per cent. would be permitted with various other supplementary advantageous provisions. It is unfortunate that the Co-operative Society—and I admit that there are others beside the Co-operative Society who would be advantaged by this proposal, but I am speaking particularly of the Co-operative movement—cannot secure an advantage already accorded to industrial premises.
It may be replied by the Chancellor of the Exchequer, or whoever is to speak for the Treasury, that I should be letting in too large a number of beneficiaries if this provision were accorded, but, as hon. Members will see, it is carefully provided in this Clause that only those premises shall be considered that conform to the provisions laid down in the Clause, one of which is that they shall be permitted only by the authority in connection with town planning and that they shall be permitted only for a limited period of time definitely laid down. There are, therefore, comparatively, only a few types of premises that would secure advantage if this provision were passed.
I hope that the Chancellor of the Exchequer will be able to do this and that he will not seek to excuse himself from doing it in the way that the Inland Revenue Department sought to excuse themselves recently when the Co-operative movement wrote to them on the matter hoping that they might secure an advantage under the law as it was. The Co-operative movement received on 3rd April a reply saying that there had been discussion on this question in the House in 1947, when the hon. Member for Sutton Coldfield (Sir J. Mellor) raised a very much wider issue dealing with obsolescent premises. I emphasise that it was a very much wider issue, and that it really covered a sufficient number of premises as would have cost the Chancellor the sum of £ 20 million. It is nothing of that sort that I am proposing on this occasion. I really am making only a moderate proposal, and I hope, therefore, in view of the interest which many others have in the proposal, and because of the genuine interest of the Co-operative movement, that the Chancellor will find it possible to accord that for which I am asking.
I am very sorry to say I feel I must advise the Committee not to accept this new Clause. It would constitute a departure from the principles on which this sort of allowance has hitherto been granted. The allowances have been carefully formulated in terms hitherto of the Income Tax Act, 1945. What is now sought to be done is to bring within the scope of that Act an entirely new category of building which at present is outside its scope. Before actually dealing with that point I would, however, remind the Committee that, to some extent, in the provisions dealing with exceptional depreciation, a certain measure of relief is accorded in respect of all buildings, in certain respects to a certain extent incurred between 1945 and 1946. However, the more generous allowances with which the Income Tax Act, 1945, deals are limited to buildings of an industrial character.
It has often been considered whether the scope of that Act should be enlarged to cover, for example, offices and shops. That Act was framed upon a very conscious expression of policy. When the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) was moving it in 1945 he made perfectly clear the object of that Act. It was to forward and assist in their postwar reconstruction the productive industries, and they came first in order of priority in rebuilding the nation's wealth and strength. It was in order to assist them in getting back on to their feet that the allowances accorded by the 1945 Act were devised. It really becomes a matter of priorities, and the question raised by the proposals in this new Clause is, whether it can be said that there is any special reason applying to shop premises and offices, and other buildings not being buildings of an industrial character, to entitle them to reliefs which were designed for an entirely different type of building for a specific purpose, namely, to rebuild our industrial strength.
I have listened very carefully to the arguments of my hon. Friend. I have not heard any such exceptional reason advanced by him. He did point out that the buildings were temporary buildings, but I do not think that can be regarded as such an exceptional reason. If it were regarded as an exceptional reason, then equivalent reliefs would have to be accorded in the case of all other temporary buildings. Take the case of a soldier returning to civilian life. In order to build up his prewar business he takes temporary shop premises. He would have just as strong a case. Then one would have to consider all the other similar circumstances in which buildings are erected, not being industrial buildings, but designed to exist only for a limited period of time and then to be abandoned or replaced. Bearing in mind the urgent necessity for rebuilding our industrial strength and that the Act of 1945 does afford relief to these temporary offices and shop premises which are designed for a specific purpose to which I have referred, I would ask the Committee to reject the new Clause. To some extent relief is already afforded by depreciation allowances for buildings for industrial purposes, and I would urge upon the Committee that no case has been made out for the enlargement of the allowances of the 1945 Act.
Question put, and negatived.
NEW CLAUSE.—(Deduction for excess cost of repairing buildings, etc.)
(1) Where any buildings, machinery, or plant have been provided for the purposes of a trade by a person carrying on that trade, the profits of which are chargeable to income tax under Cases I,II, and VI of Schedule D, or to the profits tax, and the cost of replacing the said buildings, machinery, or plant or any part of them at the end of the accounting period the profits of which are so chargeable is estimated to be greater than the cost of them to the person carrying on the trade, there shall be deducted from the profits of that accounting period for the purpose of charging income tax or profits tax a sum which is equal to that proportion of the excess which is produced by dividing the excess over the remaining years for which the buildings, machinery, or plant are estimated to be serviceable. Where the estimated future cost of replacing the buildings, machinery, or plant at the end of any succeeding accounting period is greater or less by ten per cent, than the estimated future cost of replacement used at the end of the first accounting period to which this section applies, the sum to be deducted from the profits of that succeeding accounting period shall be calculated by reference to the revised estimate and to the sums previously deducted from profits under this section so as to secure that the revised excess after deducting the sums previously deducted is apportioned equally over the remaining years for which the buildings, machinery or plant are estimated to be serviceable including the said succeeding accounting period.
(2) The sums so deducted from profits shall be credited to a reserve in the accounts of the trade and the funds representing the reserve shall be re-invested in the replacement of the buildings, machinery or plant or any part of them in respect of which the reserve was provided when they are no longer serviceable.
(3) Where the person providing the reserve is a company having a share capital the reserve or any part of it may be added to the share capital by a modification of the rights of the shareholders. If the reserve or any part of it is credited to profits or used for the purpose of a distribution to the proprietors or employees of the trade other than a modification of the rights of shareholders as is mentioned above, the sum so credited to profits or so used shall be included in the chargeable profits of the trade for the accounting period in which the sum is so credited or used and be charged to income tax and profits tax as part of the trading profits of that period.—[ Mr. Spearman. ]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
The object of this new Clause is that the depreciation allowances for the purpose of calculating profits should be on the estimated replacement cost instead of on the original cost. I should like to stress that the object we have in bringing forward this new Clause is not to favour any particular section of the community, because my hon. Friends and I believe that it is for the good of the economy of the country as a whole. I think that we all realise that if we are to maintain our present standard of living without external aid, let alone improve it, we have to produce more. I hope we all know now, especially after listening to the speech of my hon. Friend the Member for Chippenham (Mr. Eccles), that we are not likely to produce more unless we vastly improve our capital equipment. I do not want to stress the point or take up time with any quotations. I will confine myself to one sentence from the President of the U.S.A. Scientific Board which shows what is being realised in the United States. It says: the present rates of taxation, they would admit that those rates do not leave much room for private saving and, therefore, saving has to come from business. I hope the Chancellor of the Exchequer will bear in mind the advice that was given to him by his Pottery Working Party. I will quote one sentence:
I think it was the hon. Member for Elland (Mr. Cobb) who made the rather astonishing statement earlier in the day that the facilities should be denied because before the war savings had exceeded expenditure. We must all admit that savings were in excess of expenditure. It may be that neither Socialist nor Conservative Governments had adequately realised the modem economic theories. It might be attributed to lack of enterprise on the part of industrialists. But hon. Members must also attribute a good deal of the blame to the trade unions, because they frequently vetoed new inventions and insisted on them not being used in such a way as to save labour. I will not take up the time of the Committee by quoting the evidence unless I am compelled to do so, but I have a good deal with me. I will make one quotation only, which is: unions. But we are not historians. Our job is the future. We would do much better by the country if we gave up that controversy and concentrated in getting on with the job of dealing with the future. If this new Clause were accepted the effect would not be inflationary. It is not permitted for industry to expend money on equipment without permits. Even if it were, the accumulation of these funds would take a long time, and it could have no immediate effect this year. On the other hand, the fact that there was an inducement to put larger sums to reserve would mean a reduction of dividends, and that would be definitely anti-inflationary. Further, in times of boom, when prices are rising, it would have the effect of bringing down profits, and of stimulating them during a slump. It would also help the Revenue during a slump and take money from the Revenue during a period of boom.
There are two objections which might be made—first, the cost to the Revenue. That I suggest is not material even if it is large, because today the Chancellor is not collecting a large surplus in order to spend it, but in order to sterilise purchasing power. If we could sterilise it in another way without any inflationary effect, it would be helpful. Those of us who know the Chancellor realise that he is not the hard and austere man that the caricaturists like to represent, and we realise that he would be embarrassed by having such a large surplus that he would be surrounded by claimants like a man who had won the Calcutta sweepstake.
The second and only other objection that I think might be raised is the administrative difficulty. I suggest that though this could not be done with mathematical exactitude, it could be done by a general rule from the Treasury, and I would remind the Chancellor of the Exchequer that it has been done in many— I think in most—other industrial countries, particularly in France, where they have an ingenious plan. In that country, businesses have been allowed to write up the original cost by the present percentage rise in the official index. The previous depreciation is also increased by a similar percentage. Depreciation is thus calculated on the actual cost of replacement. What can be done in France and other countries can surely be done here. Therefore, I ask the Chancellor to consider whether he could not do this, which would help industry so much and cost so little. Could he not see his way to allow industrialists this concession? If he cannot grant it now, will he set up a committee to examine all aspects of this question before the next financial year?
The hon. Member has moved this Clause with a wealth of argument and I shall endeavour to deploy the objections which we see to its adoption. He concluded his arguments by referring to the administrative difficulty. Precisely how they work the matter in France, I do not know, and what degree of success they have had in doing so, I cannot say, but let us start off with the administrative position first. If at the end of every accounting year, we had to consider the cost of replacements and the question of allowances on a cumulative basis, that would result in an enormous amount of work. It would be a most complicated business to do.
I do not suggest that that would be possible, but it would be possible to have a general ruling that prices had gone up, say, 20, 50 or 100 per cent, and consequently that would apply to depreciation.
We must endeavour to impose taxes with a reasonable degree of exactitude. I do not see that it is possible to assess a tax by any rule of thumb of that sort. The administrative difficulty does constitute an insurmountable obstacle.
Then there is the cost of this proposal. The cost to the Exchequer would be an immediate annual sum of between £100 million and £150 million, which would be a really revolutionary proposal. May I explain the way in which this particular problem may be met and may I borrow some of the arguments raised by the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) when he considered this precise problem during the course of the Debate which preceded the Income Tax Act, 1945. I would like to cite a passage from his speech. He made it in April, 1944, and this was what he said when he was considering the same kind of point: —
If it could be shown that prices were quadrupled, would the Solicitor-General still maintain depreciation at the cost price?
We have no guide. I will not give hypothetical answers to hypothetical questions. The actual position the then Chancellor of the Exchequer met in that way, and that is the way we still think it should be met. Administratively the proposal will be next to impossible. It will involve a great deal of staff, and almost an infinity of complicated calculations in relation to each business year by year. Its cost would be absolutely prohibitive in present day circumstances, and as the right hon. Gentleman said, the appropriate method is the allowances deducted under the Income Tax Act, 1945. For these reasons I ask the Committee to say these proposals could not be accepted in present day circumstances.
The point which we have in mind is itself fairly easily explained. It is that whereas these replacement deductions are at present based upon the cost price of capital equipment, the position has arisen where the cost of replacement is a good deal higher. Firms which are putting sums to reserve will find that unless these sums are considerably greater than the allowances, they are incapable of replacing their capital equipment. I think that is common ground. One of my hon. Friends referred to quadrupled prices. Although I will not ask the Solicitor-General to meet such cases, I think he will agree that some special measures ought to be taken. But things have not gone as far as that, though they have gone a pretty long way. I do not think that at present anyone would suggest that it would be possible to replace capital equipment at anything like what it cost.
1.45 a.m.
The thing that strikes me about the Solicitor-General's reply is that the Government cannot have it all ways on each successive Clause. We were debating a Clause just now of which, at this late hour of the night, I have forgotten the particular point. I recall, now, that it was the question of co-partnership schemes. "No," said the Government, "it would be quite improper to use taxation policy to encourage co-partnership schemes. The right thing to which taxation policy should be directed is whether profits should be ploughed back into industry or be distributed as dividends." Yet, when we come to this Clause, which invites the Government to that kind of thing, we are met with a whole series of objections. I should have thought that the short-term advantage of adopting such a method as this would be that it would encourage saving.
I could not quite follow what the Solicitor-General said about saving. It seemed to me that in one part of his speech he was saying that the mere act of saving did not really matter. I must say that that seems to me to be rather a novel argument from the Government. I should have thought that one purpose of encouraging firms not to distribute the profits they may make, but to increase the amount of their reserves is so that at the earliest opportunity they can improve their capital equipment. I should have thought that the long-term advantage of this was that British industry could go in for a great deal more renovation of capital equipment than took place-in the years before the war.
Unless some such method as is suggested in this new Clause is adopted, we shall find that with the increase in prices British industry will increasingly find it difficult to build up its capital equipment to the level of its competitors abroad. Then someone, seeing that it is finding difficulty in doing this, will turn round and say that industry should be nationalised. This is not a sensible way to approach this matter. I think we are entitled to rather more sympathetic consideration than we have had so far.
I take the argument of the Solicitor-General. He says it will be difficult to assess the kind of co-efficient which would have to be applied to show the increase in cost. I do not believe that that is going to be an insuperable difficulty. The Solicitor-General says we must have some kind of particular accuracy about this matter. I have not noticed that the Government are so desperately keen to get meticulous accuracy in other assessments in regard to taxation. I should have thought it would be possible, recognising that there has been a certain definite increase in the cost of capital equipment, to arrive at some figure in this matter and to apply it to industry generally as to the increased cost.
The second point which the Solicitor-General made was the cost. He said the cost was prohibitive at present. I think that shows a misapprehension. After all, the purpose of the Budget is not simply to get a large surplus. Its purpose is to deal with the economic position of the country. If we are going to have a surplus, it is as good to have reserves inside industry as in the national Exchequer. The Chancellor seems to look doubtful but there may be some substantial advantage in having them inside the industry because they have then to be used for the very purpose for which they were built up. It seems to me, therefore, that the argument of the Solicitor-General is inadequate. What is wanted is saving, and some such Clause as this would encourage it. Furthermore, if British industry is to stand on its own feet and compete with the highly organised and very well-equipped industries of foreign countries, it should be given the opportunity to re-equip itself and reach the same standard which our manufacturing competitors abroad enjoy.
I do not think that the hon. Gentleman really could have understood me. What I quoted was from the speech of the then Chancellor of the Exchequer, the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) and he said the remedy for the same problem, which I commend to the Committee tonight, was the right one. The hon. Gentleman who has just spoken was, I fear, under a misconception; he failed to bear in mind, so it appeared to me, that the initial and annual allowances accorded in respect of buildings and machinery and all other categories of expenditure which are provided for by the 1945 Act, are assessed by reference to the actual cost, and if the cost of the machinery which one has to buy has increased so will the initial and annual allowances also increase. The position is the same for expenditure on buildings.
The hon. Gentleman's argument seemed to me to be based on the supposition that the allowances which one got did not rise in accordance with the rise in the cost of the asset one has to supply. If he did not mean that I am afraid I do not see the point of his argument at all and with great humility I claim that the answer which I gave is an adequate answer. The remedy propounded by the right hon. Member for the Scottish Universities is a feasible one within the possible limits of expenditure, and for that, and other reasons, I cannot accept the Clause.
The Solicitor-General does not seem to appreciate that we have passed through a period of years in which the price of replacement of equipment has risen phenomenally. Machine tools and equipment cost much more than they did five or six years ago and that, I submit, is the whole essence of the matter. It is of no use to say that the allowances will be based on the new value; we know that. But the manufacturer can only replace the machinery he got seven years ago if it is no more use. He cannot buy it from the reserve running in those seven years. I only want to make that point, and one other. When one is taxing undistributed profits, one is hampering the building up of the reserve with which industry has to re-equip itself, and one should increase the possibility of the manufacturer being able to build up a reserve to enable him to replace worn-out machinery.
The Solicitor-General says that no estimate is before the Committee. He said the sum might be £ 120 million or £ 150 million a year. That means that the Government know that there is this gap between the amount of the present allowance and that which they calculate they would have to give if my hon. Friend's Clause were accepted. It is a most important fact that there is an estimate before the Committee of, say, £ 150 million a year. It is precisely because that amount of new money will be needed in order to start off with the new items of equipment. On a previous Clause we have been arguing against a tax on undistributed profits. I cannot think that the Government should have it both ways. Their arguments on this point prove that we were right when we said that industry had not enough resources to meet added costs.
Take the case of shipping. I believe that the cost of building a British merchant ship today is about three times what it was before the war. We see the effect in the shipping companies today. I believe that the Cunard Line are having to come to the public for very large new issues of money. Why do they do that? Because the cost of replacing vessels is so enormous compared with the sums required pre-war. It would be better that this money should be accumulated through the retention of profits for replacing the fleets rather than that it should be sought out of the savings of the people through new issues. The Government ought to think about it. Sooner or later we shall have to have such a formula.
The hon. Member for Chippenham (Mr. Eccles) has misinterpreted—I am not saying wilfully—the argument which my hon. and learned Friend put forward. What this would mean, in effect, would be the freeing of all reserves from Income Tax and Profits Tax. What, in fact, the Act of 1945 does is to give a remission as regards that same factor but it does that when it is spent and not at the time when it is put to reserve. If this were added to the 1945 procedure, it would be doing the same thing by an alternative and rather more extravagant way. That is why the then Chancellor of the Exchequer turned it down decisively at that date and adopted the alternative method of arriving at the same end.
If a new ship is required next year, under the 1945 Act the initial 25 per cent. of what is paid can be written off next year and thereafter 5 per cent. of that price over a year. There would not be any more money to start, supposing that the ship were bought next year, if this proposal were adopted. It does not suggest that we should go back and refund as regards past reserves. This is a suggestion as regards future reserves, and as regards future reserves the matter is dealt with already by remissions given annually on any capital expenditure which takes place from 1945 onwards. If this were done, it would be duplicating the allowance for exactly the same replacement. I am sure the hon. Member will see that it is quite impossible.
Question put, and negatived.
NEW CLAUSE.—(Deficiency of profits during war period.)
Where the total profits of the chargeable accounting periods falling within the five years beginning on the first day of April, nineteen hundred and forty, from any trade or business are less than the total profits of that trade or business for the five accounting periods thereof falling within the five years beginning on the first day of April, nineteen hundred and thirty-five, the amount of the difference (in this section referred to as the "allowable deficiency") shall be carried forward and the amount chargeable by way of the profits tax in respect of any chargeable accounting period any part of which falls after the end of the year nineteen hundred and forty-six shall be reduced by an amount equal to fifteen per cent. of the profits for each such chargeable accounting period until the total amount of the profits of the said trade or business for the said chargeable accounting periods upon which such reduced charge for profits tax has been made shall be equal to the allowable deficiency.
The word "profits" as used in this section shall be taken to mean profits as computed for the purposes of National Defence Contribution or profits tax or in respect of the years prior to the introduction of such taxes profits computed on the same basis.— [Sir J. Mellor.]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."
This is a simple but important proposal, which is that where the profits of a business during the five years beginning 1940 were less than the profits of the five years immediately preceding 1940, then the deficiency shall be carried forward until absorbed in the current profits, and that meanwhile the profits of the business until the deficiency is so absorbed shall bear only the 10 per cent, rates. I think that possibly simplifies it and sufficiently describes the proposal. It is intended to assist those companies which fared badly during the war and either made insufficient profits to pay dividends or made losses and since then have been burdened with paying arrears on preference dividends. I think that, bearing in mind that in these cases such companies have to pay arrears on the preference dividends out of profits which have already borne the 25 per cent, tax on distributed profits, many of them do need consideration.
2.0 a.m.
I do not see that there is a case for this relief. If we are talking about Excess Profits Tax, the situation might be different. There we are dealing with a tax imposed on profits over a standard amount and it well may be that when receipts fall below the standard, the difference should be carried forward in order to keep the standard constantly maintained; indeed, the Excess Profits Tax provides for that. But the proposal is that in respect of a Profits Tax which is not levied by reference to any standard, the same measure of relief should be afforded.
Putting the matter quite broadly, suppose in the first five years you get £x profit and in the second five years you get £½x profit, why should you be allowed to reduce the amount you have to pay by reference to that difference or any proportion of that difference? You are really earning a constant figure, something less than £x and something more than £½x, and on that constant figure you should be taxed.
If the proposal were accepted, the taxpayer would be taxed on less than the profits he actually makes. I submit that there is absolutely no case for that kind of relief. A company makes its profits and it is on those that it pays Profits Tax. Fluctuation in profits surely cannot be said to be any ground for diminution of tax, as it might be if the tax were imposed by reference to some constant figure of standard profits, above which the tax was imposed and not below.
I think the argument of the hon. and learned Gentleman the Solicitor-General is perfectly sound in theory, but I do not think it takes account of the realities of the situation, which are these. You have a certain number of companies which happen, through no fault of their own, through the circumstances of the war, to have had a very bad time between 1940 and 1945. Excess Profits Tax was intended to apply to companies which were doing well. The suggestion put forward by the hon. baronet seems reasonable, that we should take into account those bad years in considering what weight of taxation they should bear now. They require to build up their business. Probably they have been getting into arrears with preference dividends and are likely to be taxed in a way which these companies cannot possibly stand. I have had certain examples brought to my notice. I do not think it is in the interests of the country that profits should be taxed to a degree which seriously weakens the companies concerned. I do not know whether my hon. Friend will press this to a Division, but I hope the Chancellor will think about it again between now and a later stage.
Question put, and negatived.
First and Second Schedules agreed to.
THIRD SCHEDULE.—(Spirits—Rates of ordinary customs duty.)
I beg to move in page 57, line 26, column 2, to leave out "£10 11s. 2d.," and insert " £9 11s. 2d."
Perhaps it would be in order if the Committee also considered the amendment in line 26, column 3, leave out "£10 12s. 2d.," and insert " £9 12s. 2d." On first hearing this is a somewhat obscure but it is a very simple point. It means that we are going back to Imperial Preference. Since we discussed the main arguments on Imperial Preference last week, I do not intend at this hour to repeat them, but I do ask the Chancellor to try to make Imperial Preference a reality in respect of brandy and rum, and more particularly brandy. Under the Bill the preference is merely 2s. 6d. per proof gallon, and if that is translated into everyday language it means about 3½d. per bottle retail price. I submit that when the retail price is about £ 2 a bottle a preference of 3d. is too trivial even to be considered a preference at all.
The aim of the Amendment is to raise it from 2s. 6d. to £ 1 2s. 6d. per proof gallon, which will allow a preference at a retail level of only 2s. 3d. a bottle, which is far from excessive. Since the Chancellor explained that Empire wines had a good case, I do not see how he can reject this Amendment as he has rejected earlier ones. Neither of the two main arguments which the Financial Secretary has brought out time after time, that there is administrative difficulty, or that it will cost the Revenue a great deal of money, applies in this case. Another point is that the recent devaluation of the French franc has given the French producer, who is the main rival of the Empire producer, an advantage of 2s. a bottle over the value of what he had last year. I suggest that this Amendment deserves more consideration since some brandy—I would not pretend all brandy—has a medicinal value.
In spite of great sympathy both for brandy and rum, I am afraid that this Amendment cannot possibly be accepted. It is sufficient to say that it would be a breach of the agreement entered into at Geneva and approved by the House if we were to do this. That was an agreement arrived at with the countries who export this liquor to us and they passed on advantages in other matters to offset any disadvantage suffered from this. If this change were made, it would mean that the excise rates on home produced spirits would also have to be reduced because they are at present only 4d. per proof gallon less than the preference rate and that would deprive us of the whole of the increased duty put on by the present Budget. I hope that the hon. Member will see that there are two very good reasons why we cannot accept the Amendment.
Amendment negatived.
Schedule agreed to.
Schedules 4 to 7 agreed to.
Committee report Progress; to sit again this day.
Resolved, "That this House do now adjourn."—[ Mr. Collindridge. ]
Adjourned accordingly at Twelve Minutes past Two o'Clock.