HC Deb 01 July 1915 vol 72 cc2002-42

If the Minister of Munitions considers it expedient for the purpose of the successful prosecution of the War that any establishment in which munitions work is carried on should be subject to the special provisions as to limitation of employers' profits and control of persons employed and other matters contained in this Section, he may make an order declaring that establishment to be a controlled establishment, and on such order being made the following provisions shall apply thereto:—

  1. (1) Any excess of the net profits of the controlled establishment over the amount divisible under this Act, as ascertained in accordance with the provisions of this Act, shall be paid into the Exchequer.
    2. 2003
  2. (2) Any proposal for any change in the rate of wages, salary, or other emoluments of any class of persons employed in the establishment shall be submitted to the Minister of Munitions, and shall not be made without his consent:
  3. (3) Any rule, practices, or custom not having the force of law which tends to restrict production or employment shall be suspended in the establishment, and if any person incites or encourages any employer or person employed to comply, or continue to comply, with such a rule, practice, or custom, that person shall be guilty of an offence under this Act.
  4. (4) The owner of the establishment shall be deemed to have entered into an undertaking to carry out the provisions set out in the Second Schedule to this Act.
  5. (5) Any person employed in the establishment shall comply with any regulations made applicable to that establishment by the Minister of Munitions with respect to the general ordering of the work in the establishment with a view to attaining and maintaining a proper standard of efficiency and with respect to the due observance of the rules of the establishment.
    6. 2004
  6. (6) The owners of an establishment shall have power, notwithstanding anything in any Act, Order, or deed under which they are governed, to do all things necessary for compliance with any provisions of this Section, and any owner of an establishment shall comply with any reasonable requirements of the Minister of Munitions as to information or otherwise made for the purposes of this Section, and, if he fails to do so, shall be guilty of an offence under this Act.

Where in any establishment munitions work is carried on in some part of the establishment but not in other parts, the Minister of Munitions may, if he considers that it is practicable to do so, treat any part of the establishment in which munitions work is not carried on as a separate establishment, and the provisions of this Act shall take effect accordingly.

Mr. J. M. HENDERSON

I desire to ask your ruling, Sir, on what appears to be a very important question in connection with this Bill. Clauses 4 and 5 appear to be nothing less, in effect, than taxing Clauses. I know it may be said that they are not directly taxing Clauses, but I submit, with a great deal of confidence, that they come under the ruling that such Clauses cannot be entertained unless they originate by way of Resolution in Ways and Means. It is clearly laid down in the constitutional principle which vests in the Crown the sole responsibility for national expenditure, and which forbids the Commons to increase sums demanded by the Crown for the service of the State, which is strictly enforced in Committee of Supply and Ways and Means. What does Clause 4 do? This Clause increases certain Grants of money to the Crown. I think there is no getting away from that. It says that all the profits in excess of the net profits of the controlled establishment over and above the amount divisible under this Act, as ascertained in accordance with the provisions, of this Act, shall be paid into the Exchequer. That is a sum of money exigible from somebody in these trades, which is going to be taken and passed into the Exchequer. If that is not a tax, I do not know what a tax is. I know a sum of money is to be taken from A, B, C, and D, and I admit that it is not taken from E, F, G, I, J, K, but that makes it all the worse. Here, in this Bill, you have a special application of a sum of money going to be taken from certain people and paid into the Exchequer for the use of the Crown. I submit, with all confidence, that that is a mode which must originate by Resolution in Committee of Ways and Means.

The CHAIRMAN

This question, an extremely important one, was fortunately raised during the discussion of the Bill on the Second Reading. Therefore, I have had the opportunity of consulting with Mr. Speaker on the matter, not knowing which of us it might be who would have to give the decision.

Mr. HENDERSON

I myself drew the attention of Mr. Speaker to it.

The CHAIRMAN

That is so. The hon. Member drew attention to it during the Second Reading stage. I have had, therefore, fortunately, the opportunity of a conference with Mr. Speaker, as we did not know which of us it might be who would have to decide the point. The House is, and I hope also its authorities are, naturally very jealous of anything in the nature of a tax proceeding without the requisite procedure in Ways and Means. Therefore, I can assure the hon. Member and the Committee that this matter has been closely and carefully examined, and we have come to the conclusion that a Resolution in Ways and Means is not needed for the purposes of these Clauses. I think it may be described in this way: That these two Clauses contain an arrangement by which certain persons who receive certain benefits in the way of the relaxation of customs and rules will, at the same time, surrender certain financial advantages which would otherwise accrue to them, therefore, it is in the nature of a contract, in other words, a quid pro quo. Secondly, I think it may be looked at in this way: That the State proposes to give to certain establishments orders for war materials, and the limitation of the profit to be obtained by means of these orders is what in Committee of Supply we call an Appropriation-in-Aid—that is to say, that any amount beyond a certain produce shall come back to His Majesty's Government. That, I think, is the correct way of looking at the procedure of this Clause. I am very glad the hon. Member has been vigilant enough to raise this matter. I can assure him we shall jealously watch any attempt to impose any taxation without the proper procedure in Ways and Means.

Sir R. COOPER

On a point of Order. May I ask your ruling, Sir, as to whether Clauses 4 and 5 do not propose an actual tax on certain sections of the community?

The CHAIRMAN

That is the question I have just answered.

Mr. HENDERSON

I do not want to interrupt the proceedings more than is necessary. I have listened to your ruling. Sir, with great care and interest. Certain points of it will have a certain bearing, probably, and I will repeat them and refer to them when we come to deal with certain parts of the Clause. There is a certain element of contract in this matter, but there may be points at which that contract does not apply and some relief may have to be granted. I thank you for your ruling, Sir.

Mr. KING

I beg to move to leave out the words "If the Minister of Munitions considers it expedient for the purpose of the successful prosecution of the War that any establishment in which munitions work is carried on should be subject to the special provisions as to limitation of employers' profits and control of persons employed and other matters contained in this Section, he may make an order declaring that establishment," and to insert instead thereof the words "The Minister of Munitions may, if he considers it expedient in the national interest to do so, make an Order declaring any establishment in which munitions work is carried on."

This is an Amendment of a drafting nature, but I think it is rather important, because it makes the beginning of the Clause to my mind very much clearer. We had an instance just now when the Minister of Munitions informed the hon. Member (Mr. Snowden) that it was necessary to say in twenty-one words what everyone else could say in seven. But I move this because I really think it is an improvement in drafting.

Sir J. SIMON

I really do not think the change my hon. Friend proposes would improve the Clause. He recommends it as a drafting proposal and he thinks an improvement on the Bill, but really it is rather more than a drafting proposal. It differs from the Bill in two particulars. The Bill provides that this Clause for controlling establishments and limiting profits is only to be put into operation if the Minister of Munitions considers it expedient to use it to secure the successful prosecution of the War. My hon. Friend's proposal is that the power of this Clause should be used if it is expedient in the national interests to do so. That raises a very large question. Some people think it would be expedient in the national interest if the Minister of Munitions controlled everything. Other people possibly take the view that he ought not to have very wide powers. Surely he must limit this at any rate to the cases in which the Minister of Munitions considers it is necessary to use the Clause for the purpose of securing the successful prosecution of the War. There is a second difference. The Clause as drafted only applies if the Minister thinks the special provisions of the Clause ought to be applied. I do not think my hon. Friend's suggested change would introduce that limitation. While I am anxious that the Clause should apply in all proper cases it would only create needless alarm and concern if we make the Clause wider in this respect than it is as at present drafted.

Amendment, by leave, withdrawn.

Mr. G. TERRELL

I beg to move, to leave out the words "limitation of employers' profits and."

I have subsequent Amendments to leave out Sub-section (1) and to strike out the whole of Clause 5. These Amendments are all directed against the Clauses which enable the Minister of Munitions to take a share of the employer's profit. I am not moving this with any hostility to the idea that profits out of the War should be taxed. I think they should be taxed, but the method which is proposed by this Bill is very inconvenient, and may work out in a very unjust manner to different classes of people. One has to look at Clause 4 to see what first of all is a controlled establishment. A controlled establishment consists of an establishment which the Minister of Munitions has by Order declared to be a controlled establishment, and it is only to that class of factory or works that this special system of taxation will apply. Of course, there are a great many other classes of individuals in the country who do not come under that definition at all who most of us have pretty good reason to suspect are making great profits out of the War, and I do not for the life of me see why they should be let off and only these particular establishments which are doing a special service to the State should be singled out. Suggestions have been made that unholy profits are being made out of food, out of transactions in clothes for the Army, out of coals, out of horses, and also out of timber. All the people who make these profits should have an opportunity of contributing their bit to the State audit is an entirely novel method of procedure to my mind, that the Minister of Munitions may select certain establishments and say, you are controlled establishments and you alone shall contribute, because that is, as I understand it, the method in which this Bill if it becomes law in its present form will operate. It only applies to those particular businesses which the Minister of Munitions selects, and it is they alone who will have the opportunity of making their special contribution to the national Exchequer. I do not think that is altogether right. There is another class which I think should have to bear the burden of a little direct taxation—that is the wage-earning class, those men who are earning very big wages as the result of the War.

Mr. WARDLE

Is it in order to discuss taxation on this Amendment?

The DEPUTY-CHAIRMAN (Mr. Maclean)

Perhaps the hon. Member will indicate a little more particularly the point he wishes to raise.

Mr. WARDLE

The hon. Member is discussing the question whether wages should be taxed and should pay something towards this War. I submit that that is a question which is not in order on this Amendment.

The DEPUTY-CHAIRMAN

The Chairman of Ways and Means ruled a little while ago that the question whether this was taxation such as would require a Resolution in Ways and Means did not apply to this Clause. I am not inclined to restrict the remarks of the hon. Member at present, but I will listen more closely to what he says.

Mr. G. TERRELL

My point is simply this, that instead of the Minister of Munitions having the power to select this and that business for the purpose of taxation or contribution or limitation of profits—it all comes to the same—all classes should have their opportunity of contributing, and whatever system of taxation is adopted it should be universal and should apply to all. If you want to limit profits I cannot think of any fairer way than a swingeing Income Tax on all classes, and then exemptions in favour of those who can show that neither directly nor indirectly have they made any profits out of the War. That, to my mind, is a fair way of levying taxation. Certainly it is not a fair way and it is something entirely novel to give this power, and it is not a power which the House retains: It is given to a Minister to make a special levy on a special business and not only during the War, but for twelve months after the War. That, I think, requires a great deal more consideration than it has had. It does not stop at that. I want to have one discussion to deal with these different points. The Clauses as they stand mean that to ascertain what these profits are there will be a Committee or Commission of Inquiry, which will be very inconvenient and difficult. If you want to find out what profits a firm has made consequent on the War, the proper way is through the Commissioners of Inland Revenue. Although my Amendment is directed to striking the whole of these Clauses out, yet it is not for the purpose of letting anyone escape, but rather with the object that the tax or levy, or whatever you call it, should be made applicable to all classes.

Mr. STUART-WORTLEY

I am far from wishing to advocate the adoption of this Amendment being made operative in any way in the extremely extensive form in which it has been moved. I believe it has been arranged that on this Amendment something in the nature of a general discussion may be taken, and my object in rising is to elicit from the Government at as early a stage as possible a declaration of their view of what is to be the policy of the administration of this part of the Clause. I represent many thousands of working men who have their special locus standi in regard to any discussion which is now going on, and to them it is naturally a matter of concern to get some kind of prospect as to what is to be the principle of administration, both as to how the controlled industries are going to be selected and, secondly, as to what kind of principle is going to be adopted in regard to the restriction of profits. On the last of these questions we should like to know whether administration is going to proceed upon any principle more drastic than this, namely: Is more going to be done than to prevent any firm making unreasonable profits out of the War by charging extravagant prices, and is it going to be limited to profits which they might reasonably have been expected to make under normal conditions? The second question which is raised, though no doubt indirectly, upon which we wish to arrive at some kind of understanding as early as possible is this: It has been suggested in newspapers which I do not wish to advertise, but which undoubtedly get read by some of His Majesty's subjects, that when an industry comes to be controlled under this Act it will pass under some kind of discredit or stigma.

There were some words used by one of the Ministers in a previous stage of the Bill which hinted that certain firms were deliberately restricting output in order to secure enhanced prices. As the right hon. Gentleman possibly knows, there is no place engaged in the manufacture of munitions which I believe has earned a better reputation for the loyalty and energy with which they have worked good time ever since the War began than the great city I have the honour to represent. We do wish to have it made as clear as possible that the selection of industries for control will go upon the principle that the industries are industries engaged directly or indirectly in furthering our success in the War by manufacturing munitions, and that it is not to be supposed in a single instance that because an industry is taken under the control contemplated by this Bill that it is exposed in the least to the suggestion that either the employers have held back output for the purpose of getting enhanced prices or that the workmen have not loyally in all cases put forth their best effort to secure the greatest possible output under the circumstances.

Sir W. ESSEX

Although I cannot agree with the hon. Member who has put forward this Amendment, I go with him to a certain extent. He desires that all abnormal profits realised by traders during the currency of the War should be as to all or part of them transferred to the Exchequer, but he objects to the partial adoption of that idea as provided in this Clause 4. He went on to say that he could conceive that the Minister of Munitions might possibly select his friends here and there and lay upon them this embargo. He may have a closer knowledge of the right hon. Gentleman than I have, but I would suggest that the right hon. Gentleman would more probably select his enemy if he made any selection at all. Coming down to practical facts, are we not in this position? Faced with a gigantic need, the Minister of Munitions is empowered by this House to select certain firms. He is not going to deal with those firms or allow them to be dealt with on a normal basis at all. He is going to fill up their plant or add to their plant as much as possible, and enormously stimulate their production. Under those circumstances, the whole sense of the opinion of this country, I believe, vigorously supports the idea that that abnormal stimulant applied to these businesses shall not be a stimulant to the benefit of the owners, but that their profits should not be beyond what they would normally have been, or even beyond a commonplace or ordinary return for the capital they originally had in the business. That is the simple method that the Government have adopted. In a large number of cases these factories would be as to their nucleus the property of the shareholders, but as to the gigantic additions in many cases the property of the State. Large sums will be added in plant and equipment, which will represent a very great national holding.

Mr. LOUGH

(indistinctly heard): Can the hon. Gentleman point out in Clause 4 where it suggests that the State should provide the additional plant and equipment.

Sir W. ESSEX

I will make an appeal to the right hon. Gentleman's business knowledge. He has heard it from the right hon. Gentleman himself on the Treasury Bench that they intend to do everything in these businesses they take over to stimulate and augment their production. Does not that mean providing additional plant and equipment?

Mr. LOUGH

I did not understand that.

Sir W. ESSEX

If the right hon. Gentleman did not understand that, it seems to me that the rest of us have. The idea is, that we are not producing sufficient munitions. We have clothed the Government with authority to take over gigantic businesses and to augment their powers of production, and the right hon. Gentleman knows full well that the most natural course to follow a decision of that kind would be to add whatever it may be necessary to add in equipment and plant, as well as men. Under those circumstances, a difficulty will arise, unless you take the whole of these abnormal profits, of assessing what amount of profit on the aggregate capital, national and private, would remain to each of the two parties contributing. Along that line the Government have taken the wiser course, especially in view of the national opinion—I think it is no less than a national opinion—that in these times of tremendous national stress and expenditure—expenditure which is to be borne by a large number of persons who are damnified and impoverished by the War—all profits arising out of the War which are more than normal profits shall revert to the State. Therefore I cannot support the Amendment, but I claim, and the hon. Member who moved the Amendment ought to see, that in taking the whole of that abnormal profit it would be an enormous gain to us if we can enlist on our side those businesses or factories which are taken over, and the owners will be enabled to say to us, "As you have done it unto us, you must do it unto others." By doing that, we shall be walking along the road which we all seek to travel.

Sir R. COOPER

I am by no means opposed to taxing all abnormal profits in war time, and I am going to support the Amendment very cordially, because I think it is impossible for this House to contemplate giving a Minister of the Government the personal privilege of himself picking out firms in this country just as he likes and saying to one "Yes" and to another "No"; enabling him to say to one firm, "Your abnormal profits shall go into the Treasury," while his next door neighbour, engaged in an identical trade, may be putting the whole of his profits into his own pocket. The point I want to make is that to give such powers to any Minister or to any Government in times of war or in times of peace is totally unthinkable. It is a principle which has never been followed during the last hundred years of the history of this House. Secondly, it seems to me an extraordinary thing if there is any Minister in the present Cabinet who is willing to take upon himself such an extraordinary responsibility. No matter how honest or how careful that Minister may be who is clothed with these powers, he has got to pick and choose for reasons which may be good to him, but he must lay himself open to the grievous suspicion of exercising personal feeling and personal prejudice in any action which he may take. There is a more serious objection to the words as they stand in the Clause than that to which I have referred. The Hon. Member (Sir W. Essex) emphasised the fact that what we want is the production of more munitions. Yes, and the way the House proposes to get them is to penalise at once the very men you are appealing to to come forward and give up valuable work they may be doing because their machinery may be adapted for turning out some form of munitions. It is against human nature for people to do it. You may force them, and you may take their works, because you have the power to do it, but I am sure that everyone will agree that what we want to aim at now in order to get the good will of the whole country, and in order to get the immediate production of munitions, is not to use compulsion more than we can help, but to try to get the good will of these people by treating them properly and making it reasonably worth their while. But what we are going to do is to tax, presumably, the very establishment in which munition work is carried on.

It is a fact that the right hon. Gentleman cannot take the profits of any other industry unless he can reasonably show that munition work is carried on. Is the coal-owner carrying on munition work? [An HON. MEMBER: "No!"] What about the agents in this country who are making enormous sums of money—I have been accused of assisting them—and who have got enormous profits? Why should they get these enormous profits, while those who make the munitions are to be docked of any additional profits which they make? What of the other agencies and general manufacturers who are supplying the War Office with large quantities of goods? These, presumably, are excluded because they are not engaged in carrying on the manufacture of munitions of war. The point must be obvious, that first of all you are going to penalise the very firms that you want to support you at the present time, and you are going to allow others to go free. How can any individual or any firm in this country, no matter in what they are engaged, make a greater profit this year than the average of the last two or three years, unless in some form or other that increased profit has been brought about by the War? It must be. Every increased profit at the present time is a war profit, and therefore I do suggest that the Amendment my hon. Friend has moved is one of the most valuable I have heard so far on this Bill. I shall be extremely sorry if this Clause is passed as it stands. I think it is an iniquitous thing for this House of Commons to do, to penalise the additional profits of the very men who are working to make the goods you want, while you are going to allow the touts and the agents and others throughout the country to pocket large additional sums of money which they have made, and which I maintain are results of the War. I shall support this Amendment in every way I can, because while I approve of the principle in this Bill of taxing war profits, I want to make it clear that I believe in taxing war profits all round in a fair and equitable manner between all people.

Sir J. SIMON

The hon. Baronet who has just spoken says that he desires to support this Amendment, which would omit all references to the limitation of employers' profits in controlled establishments, because he is attracted by the principle that war profits over a larger range should be taxed. This Clause does not prejudice that principle in any way. There are very good reasons, which I will point out, why this Clause should not go further than it does. If we were to attempt, or if anyone in this House attempted, to turn this Clause into a general tax upon war profits, it would be grossly out of order. The Bill which the House, by general consent, has allowed us to introduce is not a Bill for the taxation of war profits, but a Bill to facilitate the production of munitions of war. I know of no means by which, within the four corners of this Bill for facilitating the production of munitions of war, you can put in a Clause which says: "By the way, while we are about it, we will see that all war profits are taxed." That is not a possible Clause. I want to state quite deliberately and quite clearly that, while we deal with the matter in the way proposed within the limits of this Bill, by doing so, we in no way prejudice the principle of the taxation of war profits.

Sir R. COOPER

Is it any part of the intention of the Government to do that?

7.0 P.M.

Sir J. SIMON

I think the hon. Baronet is an experienced Parliamentarian enough to know that that is a question which he had better put to the Chancellor of the Exchequer, and, when he puts that question to the Chancellor of the Exchequer, I think he will find that the Chancellor of the Exchequer, being himself an experienced Parliamentarian, will not give an answer until he makes his actual proposal. What I say is that the principle of the taxation of war profits is not in the least prejudiced by anything proposed in this Clause, and indeed I would go further. The hon. Member for Chippenham (Mr. G. Terrell) said just now that he felt as much as the hon. Baronet feels, that it may very well be that this Clause dealing in this way with the limitation of the profits of of employers in controlled munitions factories will be found in itself to be an argument which strengthens the contention for the more general application of the principle. All I say at the moment is that it is plainly not my duty—and it is beyond my function—that I should pronounce upon that. But I give the assurance with authority that the fact that we are now inviting the Committee to deal with the profits of this particular class of employers, in no way prejudges or prejudices the larger question, of which so many hon. Members have spoken as being one of so much importance.

A second question which arises, which was also mentioned by the hon. Baronet, is undoubtedly a very important one, and one which is very close to the consideration of this Clause. He says that the scheme of this Clause is a scheme by which you are not going to permit the proprietor of the controlled factory to keep profits, save in so far as they correspond to past average profits which his establishment has previously earned, and he says—and I think there is force in the claim that he makes—that unless you make some adjustment in applying that principle, you really are not encouraging output as you should. I think that the Committee will see that there is force in that, and perhaps it may be convenient that I should indicate how we propose to deal with it. We propose that it should be dealt with in this way. The Clause, as the Committee knows, is a Clause which provides that the maximum of profits that can be divided in a controlled establishment is to be ascertained by reference to the standard. The standard is the standard arrived at by the past history of the earnings of the establishment. The standard is arrived at by taking an average of two years' profits before the War. We propose to take the years up to which the accounts of the business are normally calculated, not taking broken periods. I will propose an Amendment to that effect. Then we say that the divisible profits are not to exceed that which the average gives, plus a certain addition, namely one-fifth. That may be, and I submit that it is, a perfectly good rule to lay down to start with, but it is quite impossible, as I pointed out on the Second Reading, that that rule should be applied like a cast-iron rule, without any reference to the special circumstances of the special case. I will give two illustrations to show that that is so.

The first is this: Suppose you have got two businesses, which, before the War, were each of them, let us say, carrying on a volume of work and producing an output represented by a turnover of £100,000 a year. Suppose that each of these businesses before the War was earning a profit which would amount to 10 per cent. on the turnover. That would be £10,000 a year. Now our standard, which is the standard with reference to past earnings, would therefore be £10,000 plus one-fifth of that, or a total of £12,000. Suppose that one of those factories, when it becomes a controlled factory, is prepared to throw itself into the work of producing munitions of war to such an extent that it doubles its shifts at work and goes in for an expenditure which may in itself not be permanently remunerative, and as a result is able to double its output and in consequence produces £200,000, instead of £100,000 of turnover. Since the divisible profits of that establishment are fixed by the rule, not by reference to future performances, but by reference to past earnings, that establishment would only be able at a maximum to keep a profit of £12,000. But after all, if it still was able to make a profit of 10 per cent. on its turnover, the profit which it would make would not be £10,000. The profit would be £20,000.

Therefore that establishment, merely because it threw itself with all its energy into the work of making munitions of war, would find that only a portion, though, it is true, a substantial portion, of its earnings would be divisible as its own profit. If the other establishment which starts at exactly the same level, and has before the War had a turnover or £100,000, and which before the War was earning £10,000 on that turnover, does not show equal energy, but only increases its output to the amount of £120,000, then a profit of 10 per cent. on that turnover will yield £12,000, neither more nor less. And since £12,000 is no greater than the amount which it has a right to keep, it will be able to keep every penny of the profit which it has made as a result of the extra work. The result is that of the two establishments side by side, starting on exactly level terms, which can produce exactly the same ratio of profits to turnover, the one that makes the slight effort is able to keep the whole of its profit and the one that makes a great effort will find that the profit which it makes is, to a very large extent, diverted. I am not saying, if the profit is large, that there should not be such a rule, but as between those two cases it is perfectly plain that some adjustment has got to be made. I do not mean to say that the adjustment should be merely proportional or arithmetical. I can well see that, when you come to a certain limit of profits, it is quite right, even in the case of a factory which has thrown its utmost energy into the work, that this Clause should apply, and that the divisible profits should be less than the profits actually made, but we must have some adjustment, and I will tell the Committee in a moment what is the adjustment proposed.

Next, let me give another example. You may have the case of an establishment which before the War did not succeed in making any profit at all, or was making only a very small profit. I remember that my right hon. Friend the Member for Islington mentioned this case on the Second Reading. You may find that, owing to that establishment being controlled and its energy being thrown into the making of munitions of war, the capital which has been invested in it, and which for years has not been able to produce a return on the investment, is now producing a large return. I do not think that it would be right to say there, simply because no profit has been earned in the past, that it therefore follows that the whole of the profit which that establishment makes under the new conditions, should be forfeited, and therefore I do ask the Committee to agree that some sort of adjustment should be regarded as possible there. I give those two illustrations to show, first, that while the rule which we lay down is as we consider a very fair rule, and I do not see any reason why it should not operate, yet it should be made plain that within proper limits adjustment on these points should be quite possible. I do not want to discuss one Amendment while we are dealing with another, but it will be convenient when we come to the end of the next Clause (Clause 5), to provide that among the rules which the Minister of Munitions will make for working out this scheme, are rules to ensure due consideration being given, in carrying out the provisions of this Section as respects any establishment, to any special circumstances, such as increase of output, the provision of new machinery or plant, the alteration of capital, or other matters which require special consideration in relation to that particular establishment. I think that words of that sort will make it plain that, having thought it over, we are anxious to endeavour to meet that sort of point.

Sir R. COOPER

Is that the new Amendment?

Sir J. SIMON

It is going to be proposed at the end of the next Clause. But that does not mean that we consider that whatever profit is earned by one of these controlled establishments belongs, as divisible profits, to the proprietors of these establishments. You must preserve as an essential part of the scheme that there should be this division between the proprietor and the Exchequer, and it may very well be, that, having made that good and shown that it works, the argument which hon. Gentlemen opposite have urged in favour of the taxation of war profits, will be thereby fortified.

Mr. G. TERRELL

May I ask whether the division of profits with the Exchequer will be arrived at after deducting Income Tax or before?

Sir J. SIMON

I do not think that I can go into that.

Mr. G. TERRELL

It is rather a big matter.

Sir J. SIMON

It is rather a big matter, and if the hon. Gentleman had his way it would be a bigger matter still. He thinks that there should be a good swinging Income Tax upon all profits, but I do not think at this particular stage that this particular point is one upon which I can be expected to rule now. What we propose to do now in this matter is to be guided by a strong, impartial, small Committee, who will constitute the Board of Referees to deal with this matter. I am authorised to announce that the chairman will be Sir Henry Babington Smith, whose name will be universally accepted as that of a man who is wholly independent in himself and qualified by his great experience and his grasp of things to deal with these matters. We propose to add two others, but I cannot yet give their names, because we have not yet had answers to the invitations which we have sent out. One will be an accountant, and the other a man of commercial experience, and we think that such a tribunal is probably the best tribunal that can be created for dealing with these particular cases.

Mr. G. TERRELL

I desire to ask a question as to the Committee which, the right hon. Gentleman suggests now, are going to officiate on this question of extra profits, instead of the Commissioners of the Income Tax. I take it, that they will not have access to all the files of the Commissioners of Income Tax, because those files, I believe, are, under Statute, secret and private?

Sir J. SIMON

Really I must ask to be excused from replying to that. After all, the hon. Gentleman moved this Amendment, to omit the whole thing, because he said that the general question was of importance. I have not considered that point. If he desires the Commissioners of Income Tax to be dealt with in this Bill, he must put down an Amendment on the point. In matters of that sort I feel certain that those with whom we are dealing will see that, in the interests of everybody, the more information that is given the better, and that, on the other hand, confidences must be properly preserved. There are two other points. The right hon. Gentleman the Member for Hallam (Mr. Stuart-Wortley) asked first what was the principle on which we should seek to determine what firms would become controlled firms. I am very glad that he raised this question, because it is a very serious misunderstanding, if it was supposed that to proclaim a firm as a controlled firm was anything to that firm's discredit; it is very much the opposite. The scheme is that you should get, on the one hand, the supplies and the control of labour, which this Bill involves, in controlled firms, and that, on the other hand, you should entrust them with the responsible work of producing munitions of war as fast as possible. Those circumstances are not to the discredit of the firm. They show that it is a firm that you rely upon to give the nation the utmost assistance at a time of great crisis and importance. Certainly it would be the exact contrary to our rule if it were supposed that wherever a firm is turned into a controlled firm that involves some stigma upon it.

Mr. STUART-WORTLEY

Or its men?

Sir J. SIMON

Or its men; and the same thing, of course, is true about the men who are employed. My right hon. Friend has a knowledge of Sheffield, and nobody disputes that Sheffield has worked splendidly in producing munitions of war—both employers and men. The very fact that we have supporting this scheme leaders of the trade union movement, the very fact that it is being assisted by a great volunteer army of munition workers, is quite sufficient to cause Part II. of this Bill not to be regarded as a stigma on anybody, whether employer or workman, The other question which the right hon. Gentleman asked was as to what are the methods by which we propose to administer this Clause for the limitation of profits.

Sir WILLIAM PEARCE

Can the right hon. and learned Gentleman say whit kind of firms are going to be controlled at the option of the Minister of Munitions—what firms he is likely to take?

Sir J. SIMON

I cannot, I am afraid, do more than say that every patriotic firm which seeks to do useful work, and would like to be controlled, has only to apply to the Minister of Munitions.

Sir W. PEARCE

Will all the firms that make munitions be controlled?

Sir J. SIMON

I do not say that is so, but inasmuch as it is highly desirable that we should get the Ministry of Munitions in close connection with the work of making munitions, it will be obvious that this is not intended to apply merely to cases here or there, but an attempt to make munitions, partly by controlling labour and partly by controlling profits, within such limits as will enable munitions to be produced as rapidly as possible. I do not think I can give an answer more specific than that. There is this second point, namely, what is the principle on which we act to ascertain the divisible profits. I do not dispute that the principle must be what the right hon. Gentleman said, namely, that we must in this matter act reasonably, and distinctly on the understanding that what we are carrying out is really something in the nature of a bargain between two sides. You cannot fairly ask the skilled workmen, whose labour is essential to the production of munitions, to put themselves under the Clauses of this Bill, as I believe they are, broadly speaking, quite willing to do, unless you make it perfectly plain that the extra exertions which they are willing to undergo shall not be simply and solely for the purpose of rolling up the profits of private individuals. That is the essence of the bargain, and we shall be just as much breaking faith with the workmen on their side if we forgot that, as we would be breaking faith with the employers if we did not see to their reasonable requirements, in view of the special circumstances. I hope that the explanation I have given will shorten discussion, seeing that there are other specific points that will arise.

Mr. LOUGH

I am very glad to see that the right hon. Gentleman finds that there is something to which to call the attention of the House in regard to the proposals which the Government have brought forward, and hon. Friends of mine in maintaining the rights of labour should be very careful indeed that they do not overstep their responsibility. The Minister invariably pleads that we could not ask labour to do this unless we ask employers to do something else—[An HON. MEMBER: "Quite right!"]—and then the Government frame the precise proposals which they submit. I am rather a heretic on this question of profits, and I hold that this House has to take a broad, national view in this emergency by looking at wages just as at profits. I have often fought the battles of labour, and upheld the rights of labour, because I represent a large labour Constituency, and have endeavoured to see that workmen are properly remunerated for all they do and that capital should not get too much out of them; but this proposal says, in effect, that the workmen and employers shall not be able to adjust matters between themselves, because the Government come in and take the whole of the surplus profits. The Government stand between the two—a shell to each and the oyster is the lawyer's fee. The Government takes the profits and leaves capital and labour to settle with one another. That is a position that ought to be carefully examined before the House approves of this proposal. It is absolutely necessary, though we are in Committee, to have a sort of Second Reading Debate on these Clauses. The Government have practically admitted that their proposals are impracticable.

The object of the Bill is to take the profits of two periods before this year and to add one-fifth to the profits of the controlled establishment during the War period. In a conference which I had the pleasure of having with the Attorney-General I pointed out to him how absurd the proposal was—I do not want to use strong language—I pointed out that the thing would not work, and I am glad to see, at any rate, that the right hon. Gentleman sees that it will not work. The right hon. Gentleman, in his speech introducing the Bill, said that the means of supplying munitions were quite inadequate and that we had to mobilise new sources of supply. How are new sources of supply to be obtained? Perhaps some firm making motor cars have no profits at all in the two years previous to the War. Under the Bill the Government come in and the firm does most useful work and makes a large profit, having had no profits in the previous two years. What are you going to do? Are you going to give them no profits at all? That is the proposal of the Bill. My right hon. Friend, however, has seen the necessity of altering it, and the Government have an Amendment to submit. I am afraid that it does not go far enough. We have only seen that Amendment in writing this afternoon and the fact that it is to be proposed shows that in this respect the Bill is unsatisfactory. That Amendment will have to be very closely studied indeed by the House before accepting it. If you do not take care you will get into difficulties of which the House has no conception.

Are the Government to have no contracts? Are the Government not going to make contracts? Is the Minister to go into an establishment as a sort of partner, and say, "I want no contract," and large orders are given for munitions. If contracts are set aside then the State is in the gravest danger of all sorts of mismanagement in the factory, and of munitions being produced at a gigantic price, and profits will be of a fictitious character, which the State will have to pay. Suppose you have no contracts and you take profits from those firms, what is to be done in regard to the men under their contracts? They have earned a certain amount of money, and are you going to say that you are going to take all that back. It is an extremely difficult situation, and you cannot solve it by the crude remedy of the Bill. I want the House to note the difficulty into which the Government has got. There are two Amendments already on the Paper modifying very much Clause 5 in the direction already indicated, and now there is to be another Amendment which I venture to state will also be found to be most unsatisfactory. I am much obliged to my right hon. Friend for referring to that Amendment, but he will not mind my looking into it, for when it was read I saw there were one or two points it did not cover. I do not take it further than that, and if I have used too strong an expression in regard to the Amendment I withdraw it. To use the mildest language, the Amendment will require to be carefully examined by the House.

I should like to make one remark on the general question. The picture which has been drawn of the extent of profits which have been made, I honestly believe to be pure romance. It is most unworthy that it should appear in any public journal as the ideal of what is going on in this country at the present time. In regard to the profits which are being made out of the War it is true that some businesses are making profits while others are not. The plain fact is that, on the whole, business is not prosperous. There are some businesses making a good deal of money, while other businesses are losing a great deal of money. Do you think that you should consider profits without considering losses? Will the Government say that if there be a profit in a controlled establishment they will take it, and if there is a loss in a controlled establishment they will not make it up? What sort of a partner is he taking the profits and does not make up the losses? It would be a case of heads I win and tails you lose. If there is a profit the Government take it; and if there is a loss they have nothing to say to it.

The Member for the Attercliffe Division asked a question about two firms the other day. He referred to John Brown and Co. as having made £200,000 extra. Has the Government noticed this? What is the Government going to do? I inquired what labour got extra out of John Brown and Co. during the year. I find, to my astonishment, that 55,000 men were employed by the firm, and I calculate that labour got 8s. per week per man extra, or £20 each more on the average during that year. That means that labour got one million one hundred thousand pounds extra owing to the War out of that one firm. The shareholders got about one hundred and fifty thousand pounds, or, I think, 12½ per cent., whereas they often got 20. Remember that the same people very often own businesses in the country, some of which are prosperous and some of which sustain losses. If you take away the profits where they are made, what are you going to do about the losses? I think the House ought also to remember that no one has to contribute to the Income Tax under £160, and all these profits pay Income Tax and Death Duties. Those may be raised still further, and, if so, that is a just line for the State to take. Tax profits openly and fairly all round, if you will; but to pick invidiously and take certain businesses is a very difficult principle to establish. I do not mean to quarrel with the Government, because I notice that some of the large firms do not object to this rate. For instance, the chairman of John Brown, Limited, said that they are quite satisfied with an extra 20 per cent. over the average.

Sir J. SIMON

I hope the right hon. Gentleman will not say "extra 20 per cent.," as that is likely to be misleading to the public. What he means, of course, is a fifth added to the profits which the firm otherwise would make.

Mr. LOUGH

I spoke to a friend of mine the other day, and he said: "Look at what will happen, a dividend of 15 per cent. will be increased to 35 per cent." I knew better, and that the 15 per cent. dividend could only be increased to 16 or 17 per cent., and that a 10 per cent. dividend could only be increased to about 12 per cent. If the firms are satisfied with the arrangement, I have no complaint to make, except this, that other businesses which have no figures to show and which are in a difficult position and may serve the State well ought to be treated well. I am afraid the Clause, as in the Bill is not watertight, and I hope the Government may be able to make it fair to all parties—a result which I believe the representatives of labour would like just as much as the representatives of capital.

Mr. ANDERSON

I do not propose to follow the speech of the right hon. Gentleman, which I think would have been far better delivered on the Second Reading of the Bill.

Mr. LOUGH

I was not called upon.

Mr. ANDERSON

The right hon. Gentleman not having been called upon has now given us a Second Reading speech. I do feel if we are going to get through with the Bill the fewer Second Reading speeches we have the better.

Mr. R. McNEILL

Will the hon. Member make some allowance for the fact that the right hon. Gentleman for the first time finds himself able to speak from the box?

Mr. ANDERSON

The speech of the Home Secretary seemed to me very largely to defeat and demolish the original proposals of the Government on this question, and when he had finished there was very little left of the original proposals in regard to the question of the limitation of profits as put forward in the Bill. He made some most damaging criticisms, in which I fully share, of the very rough and ready arrangements made in this matter. Let me call the attention of the Committee to a leading article in the "Financier" which compared the present profits of the large armament firms with the profits they would get if you had taken the average of the two years before the War and added one-fifth to them. It works out in a most astonishing fashion, and it proves that if many of those large firms two years before the War were being fed by Government orders and were being worked to the full there would practically be no interference with the profits, and, on the other hand, the firm which was doing nothing at all practically for those two years, but which had made some profits since the War, would be liable to have the whole of that profit swept away. Take the firm of Armstrong. For the past year they made £801,000. Under the limitation they would have been entitled to make £832,000. Vickers, Sons, and Maxim made £1,019,000, and with the limitation they would be entitled to make £1,066,000. Kynochs made £152,000, and with the limitation they would have been allowed to make £189,000. The Birmingham Small Arms Company made £190,000 profit, and they would have been entitled to make £226,000. Then take the other side. Thorneycrofts last year made £107,000, but if this Bill had been in operation under the limitation they could only have made £26,000. I say there is need for a better and a fairer method of settling this matter, and I entirely agree that the principle ought not to be merely concerning armament firms, but should apply generally to all profits, and should not be worked in the ridiculously unfair manner put forward in the Bill.

Mr. J. M. HENDERSON

The difficulties the Government find themselves in are not limited to those set out by the Home Secretary. We were told that there was a sort of bargain, or quasi bargain, and that the Government were giving up something, and as a quid pro quo the firms ought to give up something, too. Assuming that, I ask what are you going to do with those firms with whom you entered into binding contracts as far back as January or February or last December? Is this participation of profit to begin from the date on which they are controlled establishments or not?

Sir J. SIMON

That is so.

Mr. HENDERSON

If you read the provision further on it states that you are to take the average from the last balance-sheets prior to the War. The last balance-sheet may be six months before the War, or there may be three months of the War period in it, and what are you going to do in that case? Take a company which makes up its balance-sheet to the 31st December last, or the 31st March of this year. The profits up to those dates may include many months of war time, and those companies may have made their distribution and paid a dividend to the shareholders, and are you going to touch those profits? This shows that you are not so familiar with this sort of thing as I am, with all your clevreness.

Sir J. WALTON

It is the average of two years before the War.

Mr. HENDERSON

Many of the balance-sheets are not determined until the 31st December or the 31st March, and do you absorb the profits made in the War period?

Sir J. SIMON

I do not think we can go on by question and answer, but this is a point which I am sure my hon. Friend will allow me to clear up. I do not think that the matter has been made quite clear to him yet. There are two distinct things to be done, one is the ascertaining of what is your standard figure and the other is ascertaining what is your divisible profit. The two things are quite different. The standard figure is got by looking at the past history of the concern. The past history of the concern is to be got by taking the average of the net profits in the two years which preceded the outbreak of war. If the year does not come to an end till after the 4th August of last year, that is not the year you take, but you take the year before that and the year before that again. There is no question of taking any of those profits, which are probably distributed. In fixing what is the maximum amount of divisible profits you take as the maximum the amount of the average of the profits of those two year preceding the War, plus one-fifth, subject to the adjustments which I indicated just now.

Mr. HENDERSON

The right hon. Gentleman has not made it quite clear, at all events to me. There is an interim period between the commencement of the War and the taking of the ordinary balance-sheet. These firms cannot make balance-sheets every day, and the work of taking stock is tremendous. From August to March they may have made considerable profits, and are those profits to be reckoned in although the firms are not at present controlled?

Sir J. SIMON

No, I said so just now.

Mr. HENDERSON

The difficulties with regard to those who have not been making any profit have been pointed out, and there are other cases in which the firms may have been able to pay 3 or 4 per cent. preference dividend but nothing on the ordinary stock for perhaps ten years. They may now produce £1,000 profit and they would get nothing. There is yet another case. We know there are a great many engineering firms who from last December have contracted to supply shells to a very large extent. They have found that they required certain plant and buildings, and the Government have advanced them thousands of pounds. In one case £50,000 has been advanced. The Government have not taken the premises; they have not adopted the business; they have not taken it over; they are not responsible for the liabilities. They simply "control" the business, and the meaning of "control" is simply that they regulate any questions that may arise between the employés and the proprietors. That is practically all. They may see that things are properly delivered, kept up to time, and so forth, but the main function of control is to settle questions of dispute, if there are any. No doubt if any of these factories want any additional men they will be controlled before they get them. Suppose they spend £50,000 on plant and the War is over in twelve months, what are you going to do with that firm? How are you going to arrive in the meantime at the profit? The question bristles with difficulties. The simple plan would have been to have said nothing about it, and in your next Budget to have put a smart tax upon all profits of every kind in excess of the average of the last two or three years. My hon. Friend says that very likely that will be done. That would not be limited to armament firms, but would affect provision merchants, metal merchants, cloth manufacturers, chemical manufacturers, millers, and so forth.

The simple plan would be to drop the present proposal altogether. But I suppose there is some bargain with the trade unions. [An HON. MEMBER: "No!"] Is not the simple plan to drop this silly system, which will be very difficult to work? I suppose the Government will appoint a Committee. As soon as the Government get into trouble they appoint a Committee. They get into trouble again, they appoint another Committee. They appoint a Committee, and say, "Thank God, that is settled!" There is one other point which militates strongly against any special tax being put upon these people. These firms are giving up a great deal of their own business. They may make a good profit this year, but the moment the War ceases the reaction will come. There are staring them in the face years when they will have lessened work and depressed profits, and they have to make some sort of provision for that. All this tends to show that there is only one simple, honest, and straight-forward way of doing what ought to be done, namely, to put upon everybody such a tax as the Chancellor of the Exchequer thinks he ought to get in addition to the ordinary tax on the ordinary profits. That would meet the case. There is also this to be said. You cannot offer men any inducement to do their best if you are going to mulct them of any special profits they may make by their energy and organisation. I submit that we ought to do away with this Clause altogether, and adopt the simple expedient of exacting in the ordinary Budget a good contribution beyond the ordinary taxes from all those who have made special profits.

The CHAIRMAN

I suggest to the Committee that we might now come to the details of the Clause. It was an advantage that we should have a little wider discussion at the outset, but we ought not to go on in that way.

Sir J. WALTON

The mainspring of this Munitions of War Bill is that an arrangement has been arrived at between the Government and the organised labour of the country. Organised labour on their part have undertaken in order to avoid strikes in all the works and trades of the country, to make no increased demands in respect of their labour. At the same time it was only reasonable that they should not be willing to agree to these conditions if, by reason of the increased efforts put forward by the workers, the employers were to reap enormously increased profits. That is the simple position. Though I see that the limitation of profits in controlled establishments is very difficult indeed of application, I think that under the amended provisions which will be introduced, it is practicable. Personally, I welcome this legislative limitation of profits in controlled establishments, because, to my mind, it gives an effective guarantee that, this principle will ultimately be extended to all the trades and manufactures of the country in regard to excess profits made during the War as compared with the profits made in the two years preceding the War I have tried to draw from the Chancellor of the Exchequer a statement that this is the policy that he will pursue, but naturally he does not desire to foreshadow the extra taxation proposals of the next Finance Bill.

There is an overwhelming preponderance of opinion in the country that in no trade or industry ought the partners or shareholders to be able to enrich themselves personally owing to the War. I think that that is a principle which we can all accept, and I believe that the provisions of this Bill in relation to the limitation of profits are a beginning in that direction. The difficulty that one sees in applying that principle is that in the great majority of cases there are going to be converted into works for the production of munitions of war works which have been employed in other industries and have made different profits previously. Therefore, it appears somewhat difficult, owing to the absolute conversion of some of these business establishments, to apply that principle. But I think we have in the Bill the declaration of a sound principle and a sound policy—one that will, by the organised partnership between labour, capital, and the Government, best stimulate the increased production of munitions of war, which is so urgently needed, and help this nation in carrying to a triumphant issue the great struggle in which we are engaged.

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

Mr. KING

I beg to move, in paragraph (1), to leave out the word "controlled" ["Any excess of the net profits of the controlled establishment."]

This is merely a drafting Amendment. I think there ought to be some consistency in the way in which the expression "controlled establishment" is used. I would point out that in paragraphs (2), (3), (4), and (5) the word "controlled" is omitted, and I think it ought to be left out here.

Dr. ADDISON

This paragraph refers to the profits of the controlled establishment, and I think it is necessary that the word should be retained here.

Amendment, by leave, withdrawn.

Mr. KING

I beg to move, at the end of paragraph (1), to insert the words "and if the owner of any establishment shall wilfully fail so to pay any such excess he shall be guilty of a misdemeanour under this Act."

This Amendment raises a very important question. I know it is not the best place to raise that question, which comes up, I think, on Clause 13.

The CHAIRMAN

The hon. Member had better bring it up at the best place.

Mr. KING

But there is another point which is very important. There is no provision for punishment for failure to comply with these provisions. For instance, a large sum of money might be involved in an offence, and a very inadequate penalty, by way of a fine, is all that could be imposed. I should like to have an answer on that point.

Mr. LLOYD GEORGE

That question is dealt with in paragraph (6) and in Clause 11. I think we have amply safeguarded the point.

Amendment, by leave, withdrawn.

The following Amendment stood on the Paper in the name of Mr. King: At the end of paragraph (1), to add, (2) Every person employed shall be entitled to at least one rest-day in each week: Provided that this provision may be suspended, either generally or as regards any particular establishment, by the Minister of Munitions.

Mr. KING

This Amendment raises a very important point of principle, namely, the recognition of one rest-day in each week.

Mr. LLOYD GEORGE

That is a point for the regulations.

Mr. KING

Then I will not move it now.

Mr. SNOWDEN

I beg to move, in paragraph (2,) to leave out the word "change" ["any proposal for any change in the rate of wages"], and insert the word "reduction."

8.0 P.M.

The object of this Amendment is to prevent any reduction of wages. The word "change" in the Bill would prevent a reduction as well as an advance. In these times, considering the strenuous nature of the work in which these men are engaged, any proposal for a reduction of wages ought not to be entertained. With the object of preventing that I move the change in the words.

Mr. LLOYD GEORGE

I do not suppose that there will be any reduction of wages suggested. It is conceivable; but if anything of the sort arises, it can be dealt with especially under the first three Clauses of the Act, and not under this one.

Amendment negatived.

Mr. LLOYD GEORGE

I beg to move, in paragraph (2), after the word "establishment" ["employed in the establishment"], to insert the words "or of any persons engaged in the management or the direction of the establishment."

Amendment agreed to.

Mr. LLOYD GEORGE

I beg to move, in paragraph (2), after the word "establishment" ["or the direction of the establishment"], to insert the words "(other than a change for giving effect to any Government conditions as to fair-wages or to any agreement between the owner of the establishment and the workmen which was made before the twenty-third day of June, nineteen hundred and fifteen)"

Amendment agreed to.

Mr. R. MACDONALD

I beg to move, in paragraph (2), to leave out the words "and shall not be paid without his con- sent," in order to insert instead thereof, "who may withhold his consent within fourteen days of the date of the notice."

The object of the Amendment is, briefly, that as the Bill stands all changes shall be approved by the Minister.

Mr. LLOYD GEORGE

If the hon. Member for Leicester will move his Amendment to include the words he has handed in to the Chairman, it will not be necessary for me to move my next Amendment.

Mr. R. MACDONALD

I will move that, and will put it in that form. So long as the point is agreed to it will save the Minister a great deal of trouble, and enable things to move much more quickly. If the right hon. Gentleman will agree to the idea, I will not press the Amendment now, but if there is any doubt about it, it can be left over, considered, and put in on Report.

Mr. LLOYD GEORGE

I think the best plan would be to insert the further words now, and we can consider the matter later.

Mr. CAVE

The effect of this Amendment, as it is on the Paper, is to leave out the words "and shall not be made without his consent," but if we leave out those words, the Clause does not provide as to what happens if the consent is withheld. The proper plan would be not to leave out anything, but to insert the hon. Member's words, after the words "Minister of Munitions," and then provide on as proposed by the Minister of Munitions, that the change "shall not be made without his consent."

Mr. R. MACDONALD

My point is this: There will be a great many changes. It is quite useless to ask the Minister of Munitions to give his consent, until, as my idea is, all changes should be reported. The Minister can object to those changes to which he does not agree. I want something further than merely to object to these changes. If my words are put in it will save an enormous amount of labour, and give the right hon. Gentleman exactly what he wants.

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

Proposed words there inserted.

Mr. LLOYD GEORGE

I beg to move, in paragraph (2) at end, to insert the words, "If the owner of the establishment makes any such change, or attempts to make any such change, in contravention of this provision he shall be guilty of an offence under this Act."

Mr. HODGE

I beg to move, as an Amendment to the Proposed Amendment, after the word "establishment" ["if the owner of the establishment"], to insert the words, "or any contractor or sub-contractor employed on labour therein."

I understand the right hon. Gentleman is prepared to accept my Amendment to his Amendment, so that the sub-contractor or any contractor working in respect of any particular controlled establishment would come under these obligations as an undertaker.

Mr. LLOYD GEORGE

I accept that Amendment.

Amendment to proposed Amendment agreed to.

Proposed words, as amended, inserted.

Mr. SNOWDEN

I beg to move, in paragraph (2), to insert at the end, the words, "Provided that no change shall be approved which increases the recognised working hours before the establishment became a controlled establishment unless the additional hours are paid for at overtime rates."

Mr. LLOYD GEORGE

I take it that the effect of this Amendment would be that it would be possible to increase the hours without giving any additional pay; but the Amendment is out of place. The Clause under discussion is concerned with a change of wages and not with a change of hours. My hon. Friend might look into the matter, and if he is of the same opinion as he is now I will consider it on Report. Perhaps he will come and see me before the Report stage.

Amendment, by leave, withdrawn.

Mr. SNOWDEN

I beg to move, in paragraph (2), to insert at the end the words: "Provided further that in considering any application for an advance of rates or wages the tribunal shall take into account any increase in the prices of necessaries which may have taken place since the beginning of the War, or since the previous advance of wages or rates was made."

I am quite sure that there are no workmen who are not anxious to put forth their very best endeavours at a time like this. Only two things militate against that. They are a belief or knowledge that they are working, not for the State but for the profits of private individuals, and, secondly, that any addition that may be gained in overtime, or slightly increased wages, are taken away by a more than corresponding increase in the cost of living. The Bill proposes, with more or less success, to deal with the first of these difficulties clearly by the limitation of the profits of the employers. The Bill proposes to do nothing at all to deal with the second and, in some respects, the more important matter. Therefore, with the object of aiding the purpose of this Bill, I want these words inserted. They are not mandatory. They are a recommendation, and provide that in any application for an advance of wages those concerned should take into consideration any increase in the cost of living that may recently have taken place. I submit this Amendment to the Government with every confidence. I am quite sure that it has been an oversight on their part, and that they will be very grateful to me for having given me the opportunity of incorporating this in the Bill.

The CHAIRMAN

I have a little doubt as to this Amendment being in its proper place.

Dr. ADDISON

The effect of the Amendment, to my mind, would be rather to fetter the discretion of the tribunal than otherwise. It would obviously be one of the first considerations of any tribunal to consider the rise in the cost of necessaries of life, but, if you put terms of this kind in the Bill, you assume that other matters, which may be equally important, are not to be held as being so important by the tribunal which is considering the case. If you specially mention the cost of necessaries of life you will fetter the discretion of the tribunal in considering other things, which may be equally material, in coming to a fair judgment. The Amendment does not in any way assist the hon. Member in achieving the object which he and all of us have in view.

Mr. HODGE

Might I appeal to my hon. Friend to withdraw this Amendment? The question of the extra cost of necessaries of life since the War commenced has been taken into account in every case that has come before an arbitration tribunal.

Mr. CLYNES

If all that can be said against the Amendment has been said by the hon. Member on the Treasury Bench I would enjoin my hon. Friend not to withdraw this Amendment. I understood the only reason that could be adduced against it was that it might preclude the consideration of other reasons. I am afraid my hon. Friend has not had the experience we have had in negotiating wage claims and in meeting tribunals that have had to decide them. The consideration of these matters is too often limited to pure matters of business. They might be quite free to consider the wage claim on grounds of the worth of the work and the value of the service, and if this Amendment were inserted it would be an instruction to the tribunal also to take into account the moral element in regard to these wage claims. There is a further reason for inserting it, and it is this: when this Bill becomes an Act the masses of the workmen affected by the Act will have to be reconciled generally to its working, and if we could point to the inclusion of a human feature of this kind it would go far in convincing them of its fairness, and that the constant rise in the prices of the necessaries of life would be taken into account in considering their wage claims. I press, therefore, the acceptance of this Amendment, which cannot interfere with the general working of the Bill.

Mr. ANDERSON

I would like to add my appeal to the right hon. Gentleman to accept this Amendment. I really see no reason at all why it should not be accepted, and I think there are important reasons why it should. Any labour troubles that we have had in this country, as I think was pointed out by the President of the Board of Education the other night, have come very largely as the result of a rise in food prices. In the earlier stages of the War there were no labour troubles of any kind, and it was only when the working people began to feel the rise in wages that restiveness began to show itself. There is going to be compulsory arbitration, and the strike weapon is no longer available. We are all agreed there should be no strikes while the War lasts; at the same time we should see that this question of the rise in food prices is going to be taken into account in coming to these decisions. It does not in the least preclude other considerations, and I see no reason why it should not be accepted. I press its adoption therefore very strongly upon the right hon. Gentleman.

Mr. LLOYD GEORGE

I hope my hon. Friends below the Gangway will not interpret my hon. Friend's remarks to mean that we object to the price of food being taken into account. My hon. Friends know very well that, by rule of law, if you mention one thing you exclude others. My hon. Friends have really been arguing on the three first Clauses of the Bill, that the Arbitration Tribunal should take into account the price of food when it comes to settle the question of wages. I say frankly I should have opposed it there on the same grounds. The object of this Clause is to prevent the Slate being robbed by means of a collusive, arrangement between managers, foremen, directors, shareholders, and workmen. The moment profits get beyond a certain figure, it is possible to have a collusive arrangement among them all by which wages are increased, and I should have thought the hon. Member for Blackburn would be the last person in the world to take part in a conspiracy of that kind to rob the State. This is not the sort of Socialism in which I should have suspected him of taking a part. This Clause is an attempt to get honest Socialism, and I am surprised—the first time we are trying a real experiment—to find him against us. It is very sad to see him on the side of a predatory arrangement. I appeal to him, in the highest interests of Socialism, to support us here, and so prevent attempts to destroy an experiment in a direction to which he has devoted his life. We are going a short way with him in the direction he wishes, and I hope he will not join with those who would defeat that object. We must not fall amongst thieves on our path to the new Jerusalem to which he has been trying to lead us. I beg him not to join in these attempts to kidnap us in our attempt to put into practical operation those doctrines which I have heard him so eloquently preach in this House.

Mr. SNOWDEN

The right hon. Gentleman has given us a most entertaining speech, but I am not quite willing to accept his reasons. I am very sorry indeed that I am not able to withdraw my Amendment, and I consider it is so important that I must press it to a Division.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 11; Noes, 79.

Division No. 3.] AYES. [8.25 p.m.
Anderson, W. C. Jowett, Frederick William Wilson, W. T. (Westhoughton)
Byles, Sir William Pollard Kenyon, Barnet
Cooper, Sir Richard Ashmole King, Joseph TELLERS FOR THE AYES.—Mr.
Davies, Ellis William (Eiflon) Macdonald, J. Ramsay (Leicester) Clynes and Mr. T. Richardson
Galbraith, Samuel Snowden, Philip
NOES.
Addison, Dr. Christopher Holmes, Daniel Turner Pearce, Robert (Starts, Leek)
Agg-Gardner, James Tynte Holt, Richard Durning Pease, Rt. Hon. Joseph A. (Rotherham.)
Beate, Sir William Phipson Horne, Edgar Pollock, Ernest Murray
Booth, Frederick Handel Jones, Edgar R. (Merthyr Tydvil) Pratt, J. W.
Bowerman, Charles W. Jones, William S. Glyn- (Stepney) Radford, G. H.
Brace, William Keating, Matthew Raffan, Peter Wilson
Bridgeman, William Clive Kellaway, Frederick George Rawlinson, John Frederick Peel
Bull, Sir William James Lambert, Richard (Wilts, Cricklade) Rea, Rt. Hon. Russell (South Shields)
Chaplin, Rt. Hon. Henry Lloyd, George Butler (Shrewsbury) Rea, Walter Russell (Scarborough)
Clough, William Lough, Rt. Hon. Thomas Roberts, S. (Sheffield, Ecclesall)
Craig, Ernest (Cheshire, Crewe) Lynch, Arthur Alfred Roe, Sir Thomas
Craik, Sir Henry Macdonald, J. M. (Falkirk Burghs) Samuel, J. (Stockton-on-Tees)
Dairymple, Hon. H. H. Macnamara, Rt. Hon. Dr. T. J. Scott, A. MacCallum (Glas., Bridgeton)
Dalziel, Rt. Hon. Sir J. H. (Kirkcaldy) M'Callum, Sir John M. Shaw, Alexander
Davies, Timothy (Lincs., Louth) M'Curdy, C. A. Simon, Rt. Hon. Sir John Allsebrook
Denniss, E. R. B. M'Kean, John Spear, Sir John Ward
Duke, Henry Edward McKenna, Rt. Hon. Reginald Thorne, G. R. (Wolverhampton)
Duncan, Sir J. Hastings (Yorks, Otley) M'Neill, Ronald (Kent, St. Augustine's) Toulmin, Sir George
Essex, Sir Richard Walter Markham, Sir Arthur Basil Wadsworth, John
George, Rt. Hon. D. Lloyd Marks, Sir George Croydon Walton, Sir Joseph
Gretton, John Mason, James F. (Windsor) Watt, Henry A.
Hall, Frederick (Yorks, Normanton) Millar, James Duncan Wedgwood, Josiah C.
Harvey, A. G. C. (Rochdale) Nicholson, Sir Charles N. (Doncaster) Williams, Llewelyn (Carmarthen)
Henderson, Rt. Hon. Arthur (Durham) Nield, Herbert Yoxall, Sir James Henry
Henry, Sir Charles Nuttall, Harry
Hodge, John O'Brien, Patrick (Kilkenny) TELLERS FOR THE NOES.—Mr.
Hogge, James Myles Parkes, Ebenezer Gulland and Mr. G. Roberts
Hohler, G. F.
Mr. LLOYD GEORGE

May I now be allowed to make an appeal to hon. Members to get along as fast as we possibly can, or we shall be here till very late in the morning. It will be a great convenience if we can send the Bill up to the House of Lords to-night, in order that it may receive the Royal Assent to-morrow. I hope hon. Members will allow us to get on a little more rapidly, for at this rate we shall not get through with the Bill before four or five o'clock in the morning. I think it will be recognised that I have done my best to meet every section of the House, and I believe I have substantially met every point.

Mr. CHAPLIN

I was responsible for suggesting that the Eleven o'clock Rule should be suspended, but I should be very sorry to keep hon. Gentlemen here too long.

Mr. SNOWDEN

I would like to understand a little more clearly what the right hon. Gentleman asks the Committee to do. Although we have a considerable number of Amendments on the Paper, I think that no complaint will be made that we have spoken at any length. I have no desire or intention to obstruct for a single moment, or to say one word more than is necessary; but if the Minister of Munitions asks us not to proceed with our Amendments, I am afraid that I, for one, cannot agree to that suggestion.

Mr. LLOYD GEORGE

I would not like it to be thought I suggested that there I had been any waste of time. I think the Committee has discussed the Bill in a very reasonable spirit. There are, however, several Amendments which are not of very great importance, and which I do not think it would serve any useful purpose to discuss. If the discussion were confined to Amendments of real importance, we should be able to save time. I do not suggest that anybody has wasted I the time of the Committee—that is the I last thing which I should suggest.

Mr. ANDERSON

I beg to move, in Sub-section (3), after the word "shall" ["shall be suspended in the establishment"], to insert the words "by notice in writing effectively published throughout the establishment."

The object of the Amendment is really to maintain the old tradition of the factory laws, so that when these new regulations are being introduced the workpeople shall know exactly what they are, so as to avoid as far as possible any breach of them. The purpose of the Amendment is to secure that they shall be published on the walls of the factory and thus made known to the workpeople concerned.

Mr. LLOYD GEORGE

The hon. Member will see that the point is covered by paragraph (7) of the Second Schedule. It is there proposed that notice shall be given, and the best way of giving notice, I think, might be left to regulations.

Amendment, by leave, withdrawn.

Further Amendment made: In Subsection (3), leave out the words "incites or encourages any employer or person employed," and insert therefor the words "induces or attempts to induce any other person (whether any particular person or generally)."—[Mr. King.]

Mr. KING

I beg to move, in Sub-section (3), after the word "custom" ["with such a rule, practice or custom"], to insert the words "or threatens, annoys, insults, or molests any other person on account of the non-compliance of any person therewith."

I hope that this Amendment will be accepted. It really strengthens the Clause and is quite in line with the Amendment which the Government have already accepted. There are a good many cases which might occur and which are not really properly dealt with. There is the case, for instance, of the publication of an article or leaflet trying to induce compliance, or one might take the case of a man insulting another man's brother, wife, or some other relative because this man has refused to comply with the rules or practices. My Amendment would make the man who committed the assault guilty of an offence under this Act.

Mr. LLOYD GEORGE

I hope that my hon. Friend will not press this Amendment, because it would not conduce to the speedy passage of the Bill.

Amendment, by leave, withdrawn.

Mr. SNOWDEN

—who had upon the Paper two further Amendments to paragraph (3): In view of the appeal made by the Minister of Munitions, we will withdraw these Amendments.

Further Amendments made: In Subsection (3), leave out the word "may" ["the Board of Trade may either determine the question themselves"], and insert the word "shall."

After the word "expedient" ["if they think it expedient"] insert the words "or either party requires it."—[Mr. Lloyd George.]

Mr. ANDERSON

I beg to move, in Sub-section (4), at the end, to add the words, "and any employer failing to carry out such undertaking in any particular shall be guilty of an offence under this Act. If any question arises whether this undertaking has been carried out that question shall be referred to the Board of Trade, and the Board of Trade shall refer the question for settlement in accordance with the provision contained in the First Schedule to this Act. The decision of the arbitration tribunal shall be conclusive for all purposes."

There is just before this Sub-section a reference to the workpeople, and, if they break any part of the undertaking, they are to be deemed guilty of an offence under the Act. We want to make the penalty just as firm so far as the employer is concerned as it is in the case of the workpeople.

Mr. TYSON WILSON

On a point of Order. Does this come before the manuscript Amendment, which I have handed in?

Mr. ANDERSON

I am quite willing to withdraw my Amendment in favour of that of my hon. Friend.

Amendment, by leave, withdrawn.

Mr. T. WILSON

I beg to move, in paragraph (4), at the end, to add the words, "and any owner or contractor or sub-contractor who breaks or attempts to break such an undertaking shall be guilty of an offence under this Act."

We think that there ought to be a penalty attached to any employer, contractor, or sub-contractor who may refuse to comply with the undertaking.

Mr. LLOYD GEORGE

I accept the Amendment.

Mr. WATT

I have an Amendment on the Paper to the same effect, and I think that my Amendment should have preference over that of the hon. Member, which is not on the Paper. In another respect, however, his Amendment is preferable to mine, because he brings in the sub-contractor and my Amendment does not. A penalty should be inflicted—

Mr. LLOYD GEORGE

I have accepted the Amendment.

Question, "That those words be there inserted," put, and agreed to.

Mr. SNOWDEN

I beg to move, in paragraph (5), to leave out the word "any" ["any person employed in the establishment"], and to insert instead thereof the words, "The employer and every."

I think that this is an Amendment which the Government will be prepared to accept. I cannot imagine that it has been other than an oversight that it is not already in the Bill.

Mr. LLOYD GEORGE

I accept the Amendment.

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

Words proposed inserted.

Mr. SNOWDEN

I beg to move, at the end of paragraph (5), to insert the words, "provided that such regulations shall first have been approved by Parliament."

This Amendment has reference to the regulations which are to be made by the Minister of Munitions, and we think that they ought to be submitted to Parliament for its approval.

Mr. LLOYD GEORGE

I hope my hon. Friend will not press this Amendment, because its adoption might lead to delay. If Parliament did not happen to be sitting at the time it would be practically impossible to get its approval.

Mr. SNOWDEN

I beg to withdraw the Amendment.

Amendment, by leave, withdrawn.

Further Amendment made: In paragraph (5), after the word "If" ["If any person"] insert the words "the employer or."

Mr. KING

I beg to move, in the same paragraph, after the word "employed" ["persons so employed"], to insert the word "persistently."

This is one of a series of drafting Amendments. I venture to think that, as drafted, this Section is too stiff. A workman might be guilty of an isolated infringement, not altogether intentional, and, under such circumstances he ought not to be liable to proceedings unless it could be proved against him that he had been persistently infringing the law.

Mr. LLOYD GEORGE

I hope my hon. Friend will not press this Amendment. Its adoption would mean that it would be necessary to prove a series of refusals to comply, and it would upset the whole con- trolled establishment if we insisted upon, these words. I think that the Munitions Tribunal will afford sufficient protection.

Mr. KING

I ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. KING

I beg to move, in the same paragraph, to leave out the word "regulations," and insert instead thereof the word "regulation." I think this is really important. The Section as now framed might prove highly dangerous, and it should be sufficient if a man were to refuse to comply with one regulation.

Mr. LLOYD GEORGE

The alteration is quite unnecessary. The words are "any such regulations."

Amendment, by leave, withdrawn.

Mr. WATT

I beg to move, to leave out the last paragraph of this Clause, which gives power to the Minister of Munitions to step in and seize the most profitable portion of the work, and to take possession of the profits, without making allowance for the less profitable departments, which are not taken over.

Mr. LLOYD GEORGE

We might take over part of a business for munitions purposes, but that would not interfere with the private business. We do not want control of the private business; we only want control of that part which turns out munitions of war, and, unless we have these words in, it would be quite impossible for us to do that.

Mr. WATT

Yes, but you do not provide for a proper division of profits.

Mr. G. TERRELL

Can the right hon. Gentleman explain how, if he only takes over part of an establishment, he is going to find out what the profits of that part are? No doubt he has considered that question, but I should like him to explain exactly how it is going to be done.

Mr. LLOYD GEORGE

I hope the Committee will not insist on my doing that, and on our having a Debate on questions of book-keeping. I should say the process is quite simple.

Mr. WATT

I ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

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

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