§ In addition to any other Income Tax or Super-tax charged under this or any other Act, there shall, subject to the provisions of this Section, be charged, levied, and paid for the year beginning on the sixth day of April, nineteen hundred and sixteen, in respect of any part of the income of any person to which this Section applies an additional duty of Income Tax at the rate of two shillings for every pound of that part of the income.
§ The income to which this Section applies is the income derived from securities which are for the time being included in the Treasury special list as defined by this Section, while those securities are so included; and the income shall, for the purposes of this Section, be deemed to be derived at the time when the interest or dividends payable in respect of the securities become payable.
§ (2) The additional duty under this Section shall not be charged on any income derived before the first day of July, nineteen hundred and sixteen.
§ (3) A person shall be entitled to relief from the additional duty imposed by this Section—
- (a) in respect of income derived between the date of the publication of the Treasury special list and a date twenty-eight days thereafter if the securities are during that period offered to the Treasury and ultimately become at the absolute disposal of the Treasury; and
- (b) in respect' of income derived from any securities included in the Treasury special list after the securities have been placed at the absolute disposal of the Treasury; and
- (c) in respect of income derived from any such securities after a person has placed the securities conditionally at the disposal of the Treasury, if the securities ultimately become at the absolute disposal of the Treasury without unreasonable delay on the part of that person; and
- (d) in respect of income derived from any such securities which ultimately become at the absolute disposal of the Treasury, if it is shown to the satisfaction of the Treasury that any delay in placing those securities at the disposal of the Treasury has arisen from circumstances beyond the control of the holders of the securities; and
- (e) in respect of income derived from any such securities held, in any country outside the United Kingdom, by persons who are not domiciled in the United Kingdom, or by trustees who are prevented by the terms of their trust from placing the securities at the disposal of the Treasury, and are not entitled to the benefit of any indemnity conferred by Act of Parliament in respect of the contravention of those terms, if the securities were so held before the twenty-ninth day of May, nineteen hundred and sixteen; and
- (f) in respect of income derived from any such securities which are deposited with persons outside the United Kingdom as a security for a loan from those persons, or have otherwise been made security for a loan from persons outside the United Kingdom, if they were so deposited or made security before the twenty-ninth day of May, nineteen hundred and sixteen, or after that date with the approval of the Treasury, and if the Treasury are satisfied that the securities cannot be released without impairing the security for the loan; and
- (g) in respect of income derived from any such securities which are proved to the special Commissioners to be held by any company or persons concerned in trade or business in any country outside the United Kingdom as a condition (imposed in that country) of carrying on that trade or business.
§ The provisions of this Sub-section shall apply to an offer of securities for deposit in the same manner as they apply to an offer of securities for sale, and securities when accepted for deposit shall, while so deposited, for the purposes of this Subsection, be deemed to be at the absolute disposal of the Treasury.
§ (4) The power under the Income Tax Acts to require a person to make returns for the purposes of those Acts shall, include power to require him to make such returns as appear to the Commissioners of Inland Revenue to be necessary for the purpose of ascertaining whether any of the income of that person (whether or not Income Tax thereon is chargeable by deduction) is income to which this Section applies, including such particulars as to that income as the Commissioners may require, and those Acts, including the provisions imposing penalties, shall apply accordingly.
§ (5) Where any income to which this Section applies is derived from securities which are held on trust by more than one trustee the securities may be placed at the disposal of the Treasury if, where there are two trustees, one trustee and the persons entitled to the income of the securities, and, where there are more than two trustees, one-half or more of the trustees and the persons entitled to the income of the securities, are willing that the securities should be so placed at the disposal of the Treasury; and any action taken by such trustees or beneficiaries for the purpose of placing any such securities at the disposal of the Treasury shall, notwithstanding anything in the terms of the trust or any rule of law to the contrary, be as valid and effectual in all respects as though all the trustees had consented thereto and had joined therein.
§ (6) A person shall not be entitled to any exemption, abatement, or relief under the Income Tax Acts (other than relief depending solely on residence or domicile) in respect of the additional Income Tax imposed by this Section, but in all other respects the provisions of the Income Tax Acts relating to persons who are to be chargeable with duty, assessments, and appeals against those assessments, and to the collection and recovery of duty, and to cases to be stated for the opinion of the High Court shall, so far 779 as they are applicable, apply to the charge, assessment, collection, and recovery of duty under this Section:
§ Provided that the Treasury may give directions that the additional duty imposed by this Section shall, instead of being charged by deduction, be charged up to the same amount by direct assessment for the period, and in the cases mentioned in those directions, and where any such directions are given, the Income Tax Acts shall have effect accordingly.
§ (7) In this Section—
§ the expression "securities" includes stocks, shares, and other securities; and
§ the expression "The Treasury Special List" means any list published by the Treasury in the "Gazette," and for the time being in force, of securities which the Treasury are willing to purchase in connection with any arrangements for the regulation and maintenance of the foreign exchanges. — [Mr. McKenna.]
§ Clause brought up, and read the first time.
§ Motion made, and Question proposed, "That the Clause be read a second time."
§ Mr. DICKINSONI do not want to quarrel at all with the principle of this Clause. I quite realise the importance of it, and also the difficulty that the Chancellor has felt in applying that principle; but I would like to say a few words upon the method which, for the first time, is now before the House. If I understand the matter aright, the income from these securities by whomsover held will be taxed at the source, and that then individuals who have any reason which would justify them in escaping that taxation will have the right to recover from the Treasury under the provisions of this Clause. It many be necessary; in fact I do not know whether it is possible to find any other way by which the Chancellor of the Exchequer can be sure that under this Clause the holders of the various shares, which include American and all shares now, and other securities, can be brought to book. But of course it is a very drastic, and in some cases, I think, it will be a very harsh method of dealing with these people. For that reason I think we ought to be particularly careful that there is nothing put into this Bill which will bring about hard cases, what everybody 780 will admit to be hard cases, which cannot be relieved by the Government Department, because they do not come within the four corners of the wording of this enactment. Of course, it is easy enough, it may be easy, to bring this into operation with people in the City, bankers and business men, who are fully cognisant of everything that is happening now and will happen in regard to these shares. But we ought to bear in mind that there are all over the country a very considerable number of holders of these securities, many persons who hold very small amounts, who will really never know what is the operation of this Act, and who will find for the first time the effect of it when the dividends are paid to them, and they find that one-tenth of the dividend is being deducted because they have not offered the shares in the way in which the Government proposed they should be compelled to offer them. They may be perfectly willing to do so. They may not have done so in ignorance, or they may not have acted in particular circumstances which rendered it difficult for them to offer these shares. What remedy will you give them should they wish to recover the money from the Treasury, provided always that they can show that they have a right to recover and that their right comes within the actual terms of the Clause which we have before us? It is always difficult to get money back from the Treasury, and I think it is extremely easy for the Treasury, if they wish, to prevent the return of this money to the holders to argue that the provisions of this Bill do not cover the particular case and that they are not entitled to repayment. It is difficult to understand precisely what is the meaning of this Clause. As I understand it, under (3) (a) a person who has been taxed and has paid this duty at the source will be able to recover under (a) provided that he can show that the income was derived between the date of the publication of the Treasury special list and a date twenty-eight days thereafter, if he has during that period offered to the Treasury the securities and the Treasury has accepted them, and they ultimately become at the absolute disposal of the Treasury.
The next case provided for is that of income derived from these securities included in the Treasury special list later on, provided they come into the absolute disposal of the Treasury. And there is a further wider Section (c) providing that 781 he can get it back if the aforesaid securities have been placed conditionally at the disposal of the Treasury and if the securities ultimately become at the absolute disposal of the Treasury without unreasonable delay on the part of that person—that is to say, that there has not been unreasonable delay provided always that they come into the possession of the Treasury. Under (d) there is also a provision that he may get this payment if he can show to the satisfaction of the Treasury that any delay in placing those securities at the disposal of the Treasury has arisen from circumstances beyond the control of the holder of securities. Here, again, that is only in the case where the securities ultimately become at the absolute disposal of the Treasury. These, I take it, are the four provisions which will enable a man to obtain repayment of this additional duty from the Treasury. I submit to the Chancellor of the Exchequer that these are not sufficiently wide; that they do not cover by any means the whole ground; and I cannot help thinking that if no wider words are put in than those that are there now we shall find that a good many people will have paid 2s. in the £ Income Tax and will not be able to recover it, although in all probability it would be reasonable that it should be repaid to them. I will give one or two cases. I understand that the Treasury up to the present have said that they will not accept securities from any holder of less value than £1,000 I would like to ask the Chancellor of the Exchequer what will happen in the case of any holder of those American securities of less value than £1,000? I want to know what will happen in regard to holders who have got securities of less amount, and who therefore do not offer them? In the wording of this Clause—I have read it very carefully—I think it is clear that they will have the Income Tax deducted at the source, and they will have great difficulty in recovering it, because I cannot see that there is anything in this Clause which would entitle the Treasury to pay back that money.
§ Mr. McKENNAThey must not sell them.
§ Mr. DICKINSONThey do not want to sell if they are perfectly willing to put them at the disposal of the Treasury. Surely it is not right, because you do not want them to be at your disposal when they are under that amount, to collect 782 the taxes upon them. I should have thought that there ought to have been a provision here that if the Treasury do not take these securities for any reason at all, then that should be a justification for the repayment of the taxes. With regard to some other securities, I understand that there are securities on the present lists which the Treasury do not want to have at their disposal. What will happen to cases of that kind? I suppose the Chancellor of the Exchequer intends that the amount of the taxes paid on these securities will be repaid. But that does not appear in the wording of this Clause at all, and so far as I can understand it, the holder of every single security in that list will be obliged to have the tax deducted, and the fact that the Treasury does not make use of the securities will not entitle him to the return of the money. I put those cases, and if the Chancellor of the Exchequer can answer these questions satisfactorily, my objection to the Clause will fail. But my point is that it would be wise to put the drafting of this Clause into a wider form and allow a wider discretion to the Treasury in regard to the payment of these additional taxes. I take one more case—I dare say the Chancellor of the Exchequer will say it is covered—where securities are pledged, and where it is perhaps impossible or very difficult for the owners to place them at the disposal of the Treasury. We know there is a Clause which says that he may remit those taxes or repay the money where it is beyond the power of the owner to hand over the securities. But it may not be absolutely beyond the power of the owner to arrange with the mortgagees, yet it may be very difficult, and in such a case it would be perfectly reasonable for the Treasury to say, "We will not enforce this particular taxation." There, again, is a case in which I suggest to the right hon. Gentleman that the wording of the Clause should be more generous and wider in its application, so that difficulties like that may be met properly. I have put down Amendments, which I propose to move and discuss later on, with the object of achieving this end. At the moment I wish to draw attention to the subject generally.
§ Mr. McKENNAThe points which have been raised by my right hon. Friend are points which can be discussed on the Amendments themselves. I do not under- 783 stand that he is taking objection to the principle of the Clause, and without going into detail on the Amendments which I understand he is going to move, I do not think I can answer the speech he has made.
§ Sir F. BANBURYI am going to attack the principle of the Clause.
§ Mr. McKENNAThen I will reply to that, but I am not going into it now.
§ The CHAIRMANI think it is desirable that we should confine ourselves to the principle of the Clause, and that Members should wait until after it has been read a second time before going into those details. On a preceding Clause we had these discussions, and we had them all over again when we came to the Amendments.
§ Mr. JAMES MASONI want to raise a point in rather more general terms than those in which his points were raised by the right hon. Gentleman opposite. It seems to me that the real difficulty of the tax, as it is proposed in this Clause, is that it is a flat Clause applying equally to number of securities in which you give different options to the holders, and I do not see how you are going to apply it equally. In certain cases for a certain class of security you give an option to lend or sell to the Treasury. In other cases you give an option only to lend and not to sell, and again in other cases you give an option to sell and not to lend. That is the case of actual holders of these securities. I can give you the name of various categories of these securities, and I cannot see any provision in this Bill for differentiation in the form of the taxes, or the amount of the tax that is going to be imposed upon the holders of these securities. It seems to me that if you give a lesser option to the holder in some cases than to others it is your duty to graduate the amount of the tax to some extent. I do not see how it can be done, and therefore I do not propose to move any definite Amendment, but you must do something to meet this difficulty unless you are prepared to take the securities equally both for purchase and loan which I know for various reasons is most undesirable. As regards the whole idea of the tax, I do not desire to attack the principle of the tax at all, because I really fail to see how else the right hon. Gentleman could have done it provided he was determined to get hold of the securities which were toeing held back. This was a choice of evils, and no 784 doubt it is a drastic expedient by the Government to get hold of securities of this nature. I think that in all probability he could not have done it better than by this sweeping course. I hope that the question of the taxes being equal will be considered in regard to the Treasury penalties. In regard to certain classes of bonds, it is very hard to force the owners to sell. Many of these bonds have not matured, and it is hard that these persons should be forced to sell and to give them no option, whereas in the case of other matured bonds they have the option to do either one thing or the other.
§ Mr. MONTAGUI do not want to reply on the main question, but in order to save time, I think I ought to say that I think the hon. Member who spoke last does not quite appreciate the effect of this tax. The owner of a security is only liable for the tax if he refuses to sell or to deposit. If a man offers to lend to the Treasury securities which he will not sell to them, he is exempted by the provisions of the Clause from taxation.
§ Sir T. WHITTAKERI am not sure that this is quite so clear as the Secretary to the Treasury has indicated. It is very important that we should know whether or not an offer to lend or to sell suffices. What we were given to understand was that as regards any security that the Government might pick, the owner should have an option either to lend or to sell. As has the hon. Member who spoke last, I have found, in communication with the authorities, that there are some securities which they will buy but will not borrow; there are others that they will borrow but will not buy. Therefore, they do not give you the option to sell or lend, and we ought to have that made quite clear; because that does mean, in the case of a security which they will buy but will not borrow, and the owner wishes to lend it, that they will make him sell it, or tax him if he does not sell it. That is not giving him an option to sell or lend as he wishes. I can assure the right hon. Gentleman that that is the practice of the Department. Further, in regard to that, I think the lists should clearly show which are the securities which the Government will borrow and which are those which they will buy, or with which they will do either. The lists do not show that, and it places people in a difficulty. They should either have different type to indicate the difference in the lists, or lists 785 showing the different securities. There is another point, and that is in regard to the notification to the public. The right hon. Gentleman must bear in mind that a large number of people holding these securities know extremely little as to what is going on here, and unless the notification is ample it "will be hard for them to be penalised if they do not happen to comply with the notice. The provision is that a notice should be published in the "Gazette." It might as well, so far as the public go, never be published at all. They never see the "Gazette," and they know nothing about it. Although I do not imagine for one moment that the Government mean to confine themselves to this, yet that is all that the Regulation requires. To publish it in the "Gazette" alone—well, you might as well publish it in the moon! Therefore the notification ought to be most ample, and one day's notification in the papers, in my judgment, is not sufficient for people who are spread all over the country. I think, too, there ought to be continuously published up-to-date and complete lists. At present a person who sees that his security is not in the lists may be unaware of the fact that after all that security appears in a subsequent list. So I say that all these lists ought to be more completely up to date. We ought to have some very clear information on these points—first, as to the borrowing and the buying. I think that persons should be free of the tax if they are willing to either lend or sell a security, whether the Government takes it then or not. The Government has had the offer.
§ Sir F. BANBURYThere is a great deal in what the right hon. Gentleman opposite has just said, but I propose to deal with it a little later. I should like to give my reason why I think this tax is wrong in principle and will not work well, and also why it may cause not only loss to a considerable number of people, but also a considerable loss to the Government. On the Report stage of the Resolution a question was asked whether those of us who opposed this proposal were aware that this country was at war. It was stated that because the country was at war it was very necessary that something of this sort should be done. May I point out to the Committee that this Clause makes no difference whatever to the War. Whether it is passed or is not passed makes no difference. The War will go on just the same. The object of 786 the Clause is to regulate the American exchanges, and nothing else. Though that may be, and is, a good thing to do, it is absurd to say that the regulation of the American exchanges is going to affect the War. It will not touch it in any way at all. What are the reasons that it is proposed to regulate the American exchanges? There are, so far as I know, two reasons, and only two reasons. The one is in order that, the Government may be able to provide at a lower price certain articles which they feel it necessary to buy—and the saving in that direction has been very seriously exaggerated. On the Committee stage of the Resolution I looked up what the saving was, and I stated it to my right hon. Friend the Chancellor of the Exchequer. I forget for the moment the exact figure. Of course, the regulation of the exchange could be dealt with in another manner, either by buying smaller purchases of articles from America or by a larger exportation of our commerce. It is necessary—as an economist I feel that it is—to buy as cheaply as we can. It is news to me, however, that the Government, as a rule, are very much concerned in saving money, or in pursuing any economy or cheapness, but perhaps they have turned over a new leaf and are really anxious to save, and I do not want to put any impediment in their way. But I say, in saving money for the benefit of the nation, any loss incurred, in order to effect that very desirable object, should be borne by the whole nation and not by a small portion of it.
The other reason is to prevent gold from leaving this country. That, also, is an excellent reason, and one which I should be most glad to support. There again, however, I do not see why to preserve the gold in this country, which is a national object, the burden should be borne by a small portion of the community. It is perfectly well known that the gold is preserved in Germany and France much better than we shall preserve the gold by the proposed means. Neither in France or Germany has any resolution of this sort been imposed. It would not be in order to go into the steps which the Bank of France and the Bank of Germany have taken to preserve their gold, but they are well known to any man who has any knowledge of the City. There is no reason why we, in a state of war, should not use some similar steps. Then comes the next question whether, supposing it necessary to have these securities, the Government are 787 doing it in the best way. I said at the beginning that I did not think the Government were proposing the best way I still adhere to that opinion. I believe that the result of taking these securities in the way the Government are going to propose today will cause loss to a small section of the nation, and may cause a considerable loss to the Government themselves. What the Government really are going to do— because they are most desirious of buying and not borrowing—is to use the slang of the City, to buy a large bull of American securities at the top price. I do not think that this is a thing to be encouraged. This is a thing from which they will not emerge without loss. We have not been told by the Government how many of these American securities they have bought, or how many they have sold. Are they large holders of American securities which they have not been able to sell, except by making loss? If so, we should be given the information. Some of the securities are at a very high price, and there is no doubt—as I said on the last occasion I spoke on this subject—while a good many people have been able to sell at a good price, and realise a profit, there are others who, from a variety of reasons, have been unable to sell for profit, and who have sold at a loss. I think those people who have got securities that they sold at a profit are different people from those who have sold to the Government. Consequently the Government have had to buy their securities at a higher price.
What have the Government done? They have made a good bargain, or they have not, by their transactions! If they have realised a profit, have they got out, or are they, to use a City phrase, "still in." If they are "still in," we must not forget that there is danger of war between the United States and Mexico. What is going to happen with the price of those securities which the Government still hold if there is a big war between the United States and Mexico, and a really considerable fall in these securities? I could give the policy which I have always advocated if necessary to do this at all. That policy is to borrow these securities. It seems to me that there is no question that that is the proper policy to pursue. May I point out to the Committee what would have resulted if the Government had confined their operations to borrowing securities. They would have got those securities, and they would have been free at once from 788 any risk of loss through depreciation of these securities in America. They would have got them and have used them as collateral security, and they would then, when the War was finished, and the necessity for the use of these securities as collateral securities was at an end, have returned them to the holders, and that would have involved them in no loss.
Why was that not done? It was not done for two reasons. I could never understand why. I may have misjudged, but there was, according to my view, a very extraordinary desire on the part of the Government not to borrow securities, but only to purchase them. There was also this difficulty, that the holders of securities did not care to lend them to the Government if there was any doubt about their receiving them back at the end of the time when the Government had finished with the use of them. But I believe that all people who hold securities of this sort would have been only too glad to assist the Government by lending them for any time within reason that the Government required, but they naturally demanded that when the Government had finished with them these securities should be returned. The Government refused to do that, because they said it might be necessary, in the case of certain securities, to have to sell them. My answer to that is this, "Very good, the holders, I am sure, will make not the slightest objection to the Government selling their securities, but they ask that the Government should replace them." It would be very unlikely that anything of that sort would occur. In the conversations I have had with the right hon. Gentleman (Mr. Montagu) and the Chancellor of the Exchequer, they have agreed that that event is very improbable, but if that improbable event had happened, and it had occurred that the Government had to make a loss in replacing these securities, I sincerely believe that that loss would have been less than the loss they may incur by being now large holders of American securities, which they have not sold, and which they may be unable to sell in the future except at a considerable loss. At the same time, if my suggestion had been carried out, I believe that no harm and no injury would have been done to the class of people who, as far as I can see, there is no reason to pick out, to make a sacrifice of that which is in the interests of the whole nation. Further, there would have been no occasion to put on this tax, which I still say is a very-novel and very wrong method—that 789 the Income Tax should be taken and used, not for the securing of revenue, but as a penalty, punishment, and threat to force certain people to do something which they do not want to do, and which the Government require them to do. The right hon. Gentleman the Member for St. Pancras, I think, made some comments upon the question of small amounts. He said that there was nothing in this Clause which would enable the holder of small amounts, $5,000 or under, lending them to the Government. I do not see that there is anything in this Clause which says that, but I understood something would be put into the Clause. I had the privilege of meeting the Chairman of the Committee sitting at the National Debt Office, and he came and attended a meeting of the London Clearing Bankers, at which I was present. I understood from him that this was under the consideration of the Government, and that in all probability—of course, he could make no pledge—some method would be adopted to meet what is undoubtedly a serious blot upon the Clause. I cannot see that and thing of the sort has been done. As to the question of the Treasury special list, there is a definition in this Clause that it "means any list published by the Treasury in the "Gazette," and for the time being in force, of securities which the Treasury are willing to purchase in connection. With any arrangement for the regulation and maintenance of the foreign exchanges." Now there have been a very large number of lists published during the last few months. What list is it to be from which the twenty-eight days are to run? Ts it to be twenty-eight days from the time the first Resolution was passed, or the second Resolution, or from the time the Clause is added to the Bill, or when the Bill becomes law?
§ Mr. MONTAGUWill the right hon. Baronet look at the words "between the date of the publication"?
§ Sir F. BANBURYBut when is the publication supposed to be? My point is that there have been so many publications that, unless a definite date is put into the Clause, nobody will know when the date of the publication is. I do not care what date it is, so long as it is put in and we know where we are. Sub-section (4) says that the Commissioners of Inland Revenue can ask people to make a return as to whether or not they have any of these securities. The dividends of practically all these securities are deducted at the 790 source. There may be a few exceptions, though I do not think so, where the dividend is not deducted at the source.
§ Sir T. WHITTAKERSome are paid direct from America.
§ Sir F. BANBURYWith those exceptions. I do not know how you are to send out to America.
§ Sir T. WHITTAKERShares on the American Register are sometimes paid by cheque from New York.
§ Sir F. BANBURYSo far as I know there are very few shares which are on the American Register in the hands of the actual holders. There may be a few isolated cases. I am not sure I am not speaking in the interests of the Commissioners of Inland Revenue themselves. They may have to ask any number of these people, "Have you, or have you not, got securities of this sort in your possession, and, if so, will you say what they are?" and this, that, and the other. Really, we have already enough forms to fill up, especially with regard to Income Tax, and I do not think we want to fill up any more unless it is absolutely necessary that it should be done. I think I may fairly say I was given an undertaking by the Chancellor of the Exchequer on the Report stage of the Resolution that he would put some words in the Clause to meet this difficulty. A security is listed as being a security which the Treasury will buy. A person owns some of those securities. He is prepared to lend them to the Treasury, but he is not prepared to sell them. He goes to the National Debt office and offers to lend those securities to the Treasury. The Treasury say "No," and he will be liable for this tax, because those securities are in the list which the Treasury have given notice they are prepared to buy, although he has offered the securities to the Treasury, and the Treasury refuse to take them. The right hon. Gentleman definitely told me he would put soma words in to meet that case. I may be wrong, but I have read the Clause very carefully and I cannot find the words to meet the case.
§ Sir F. BANBURYI do not think that the words "placed at the absolute disposal of the Treasury" are quite clear. That may be meant to cover it, but I do 791 not think it does. It is really an important question which ought to be settled. I do not know whether it is any use appealing to the right hon. Gentleman; I am afraid it is not. The last time I said anything upon this question I asked the right hon. Gentleman if he would not wait a little, because plenty of securities were coming in. I am afraid it is no use asking him to do that again, but I do earnestly say that, in my belief, having had some experience of business in the City, this proposal is wrong, the method of carrying it out is wrong, and it will result not in a gain, but in a loss to the Treasury; whereas, if the suggestion I make is carried out, the reverse will be the case.
§ Mr. BRYCEThe only objection to the method suggested by the right hon. Baronet is that a security which cannot be sold is no use as a collateral. No one will accept as collateral security a security which one cannot sell. Therefore, for the purpose of this particular operation, I fear his method would not work, but I entirely agree with him in his objection to the scheme as a whole. I do not think it will work. I think it will cause an immense amount of confusion, and I do not think the Government has any right to tax one particular class of people for the benefit of the whole. There are a number of points to which I have called attention during the last month or two in connection with this Clause. One of them is the matter alluded to by the right hon. Member for North St. Pancras (Mr. Dickinson)— that is, the question of the non-possibility of holders of less than $5,000 of security to lend. In the course of the last two or three months the Chancellor of the Exchequer has said several times that he thought it possible to meet it, and at one time it was said it could be met by allowing bankers to accumulate a number of small amounts, and then deal with them as a whole. That is not provided, and to-day we have a definite pronouncement from the Chancellor of the Exchequer that he is going to force the holders of these securities to sell, though they will not have the option of lending them. That appears to me a monstrous injustice, and it certainly ought to be remedied.
There is another point to which I have alluded several times, and that is, what is to be evidence of a security having been offered to the Government? The right hon. Baronet has referred to that point, and 792 the right hon. Gentleman who sits beside him (Mr. Lough) said it was covered by paragraph (b),but there is nothing to show how that covers it. There must be some evidence. How is a banker to know whether a person holding a security has offered it to the Government? Is there to be any kind of documentary evidence, or any form which can show that a security has been offered to the Government and refused? I wish very much the Secretary to the Treasury would tell us about that. There is an exemption in the case of certain securities deposited with persons outside the United Kingdom as securities for loans, but how about securities which have been deposited in virtue of a marriage settlement, or other arrangement outside the United Kingdom? Take the case of American ladies who have married Englishmen, and whose property is in America and under American trustees. Are they to be charged this penal 2s.? In many cases there is no power to sell. I have in my hand a letter from a gentleman whose wife is in that position. Her trustees live in America and are Americans, and the whole of the securities are American securities. They are a trust under the law of Massachusetts, and this letter states that, under the law of Massachusetts, it is not possible for trustees to sell—they have no power of varying their investments. Is this lady's income-it is a life interest—to be penalised by this 2s. tax? I believe this particular case has been put before the Chancellor of the Exchequer, and he wrote to the writer of this letter, who was a distinguished Member of the House not very long ago, that this matter was going to be considered, but he has heard nothing about it. "Going to be considered" is a synonym for being smothered, and it seems that no notice will be taken. It is a very important point, and affects a great many trusts, and I would like to know from the Treasury what the decision is to be.
The fact is, the whole of this scheme has not been properly thought out. It has been drawn up by numbers of gentlemen who are very able as regards the handling of taxation questions within this Kingdom, but when they come to deal with American and other foreign securities they are completely at sea. There is no blame to them. They have to settle an immense number of problems. I hope, therefore, that the Chancellor of the Exchequer before the Report stage will have this question thoroughly examined. He 793 has had a great deal of criticism in the House in the Debate on the Resolutions and in the Debate to-day with regard to various points. The original injustice and the false basis of the system cannot, of course, be changed, but a great many of the hardships might be remedied.
§ 6.0.p.m.
§ Sir J. WALTONI think there are several points in connection with this Clause which ought to be adjusted and made more equitable. All holders of American dollar securities, whether the amount held is less than $5,000, or more, ought to be treated on precisely the same lines; all ought to have an equal right, either to sell or to lend them to the Government at their option. As the matter stands, we have no assurance whatsoever that holders of less than $5,000 will receive equal and fair treatment. I submit that this ought to be made perfectly clear. Then, again, how on earth are a number of holders of American dollar securities to get to know whether or not their particular security is on the Government list 1 I went to the National Debt Office this morning. I was given two lists, and told that another list would probably be issued on Thursday, and that from the date of the next list, if a particular security I was inquiring about was included in it, they gave twenty-eight days, but, if the amount held was below $5,000, it could not be deposited, and the holder of that particular security would be compelled to sell. I do not think that is fair treatment at all, because it is often of much greater importance to small holders that they should not be subject to loss and hardship of this kind than it is to the larger holders who are quite able to take care of themselves. We have not had any clear and definite statement in regard to several points. I cannot understand this policy of concealment. We have been told that the Chancellor of the Exchequer was considering whether he could reduce the limit below $5,000, and we have failed to draw any definite reply from him. I think the time has come when we should have these matters cleared up in a positive and definite fashion. We are told that certain securities will not at present be bought. I offered to the Treasury New I York Central 6 per Cent. Gold Bonds and they would not buy them because it was an issue made after the beginning of the War. I call that absurd. Could anything be more suitable for our purposes than New York Central 6 per Cent. Gold Bonds 794 as a dollar security? But I was told that they were not prepared to buy these bonds. The amount happened to be only $3,000, and therefore they could not be deposited, and what is to happen in a case of that sort? The only reply I can get is "Wait and see."
We are told to see if our securities appear in subsequent lists to the published in the "London Gazette," and therefore you have got to be on the qui vice for months to come in order to see if your particular security is published in the "London Gazette." What an absurd arrangement-Why cannot the Government make up their mind which security they will admit and which they will not admit, and let the public know. To allow small holders whose interests we ought to most; jealously guard and protect only to have the option of selling when it involves a considerable loss is a discreditable transaction. We must remember that the French Government are at the present time offering two-and-a-half times the bonus which the English Government are offering for securities deposited with them, and they are offering a dividend of 25 per cent, on the total amount of dividends, not only for American dollar securities but also for Japanese, South African, Russian and all kinds of securities. If the Government are not careful a large number of securities which the otherwise might have at their disposal will not be available because the French Government are paying 2 ½ times as much as we are paying in bonus. I do not want the British Government to increase their bonus, but when we know the French Government is offering 25 per cent. as a premium or bonus on these securities it does seem that the holders of these small bonds in this country are entitled to very generous and fair treatment in all other respects.
§ Mr. MONTAGUIn the first place, let me get rid once for all of the misapprehension which exists in many quarters of the Committee that there is a distinction made between buying and depositing. We have identified the purchase list and the sale list of the Treasury, and we shall not put into the Treasury lists gazetted securities which we are not willing to buy or borrow. At present none of the cases which have been mentioned arise, and there is no necessity for any apprehension, because, unless the Treasury are willing to take these securities on deposit or purchase, they will not be subject to this 795 tax. The list appears, and it contains the securities which the Treasury are willing to purchase or borrow. Since the Resolution was passed by this House we have identified the two lists so as to get over that difficulty.
§ Mr. J. MASONAre we to understand that the Treasury are also willing to buy or borrow certain securities when in no case those two categories come into the list?
§ Mr. MONTAGUYes, and that gets rid of the difficulty of documentary proof.
§ Mr. MONTAGUWhy do you want proof if you have the securities? Let me deal with the point raised about the 5,000 dollars limit. The hon. Member for Inverness (Mr. Bryce), I do not know on what ground, said that when the Treasury states that any suggestion would be considered it simply means that it would be smothered. All I can say is that every suggestion thrown out in the House of Commons has always been carefully considered by the Treasury.
§ Mr. MONTAGUWith regard to the 5,000 dollars limit, in order that our machinery may not break down, and in order that we shall not be face to face with any delay in dealing with them, we do not want to be snowed up with thousands of small applications, and we are perfecting a scheme by which holders of smaller amounts than 5,000 dollars may invest them through the agency of banks, who will collect their securities, and then we can deal with them in bigger parcels. The scheme is not ready yet or we should have announced the details. It is, however, only a matter of days, and then this difficulty will disappear.
§ Sir G. YOUNGERIs it to be equally compulsory on smaller people?
§ Mr. MONTAGUYes. With regard to Treasury lists, the difficulty about proposals of this kind is that immediately you publish the lists you get an enormous correspondence from people who want to sell and deposit. You get offers of sale, and all these things cannot be dealt with by ordinary laymen, and unless the nation is going to suffer you must have a specially trained staff of people who are judges in dealing with stocks and shares. We have working for the Treasury a staff of patriotic 796 gentlemen whose work, night and day, has been beyond praise. The only way you can regulate the stream of offers, and the amount you get week by week, is to deal with selected lists at selected times, and not have every security of different kinds in one list. The difficulty in arranging for some securities is greater than in the case of others. If we can get rid of the bigger masses we shall get over the difficulty, and our harvest will be derived from the existing list. If we get rid of the bigger amounts by this simple process we shall be able to deal more promptly with other cases that come afterwards. That is why we cannot put in a date and why the date will have to be published from time to time. I thank my right hon. Friend for his suggestion that we cannot publish these lists too widely. It is not our intention merely to publish them in the "London Gazette," but we publish them there to make them official and in order to identify them with this provision of the Act of Parliament.
§ Sir F. BANBURYWould it not be possible to put in twenty-eight days to commence not earlier than such-and-such a date. I see the difficulty of publishing one list, but I think there should be something to show that the twenty-eight days really means after the 29th of July, and that until then they need not trouble. Something of that sort ought to be put in, because everybody does not know what the intention is.
§ Mr. MONTAGUI will consider that, and I will see if we cannot find some means of making this more plain. Another reason why we deal with this matter in this way is that we do not want to be the possessor of large amounts of securities before we can dispose of them. We are fully aware of the dangers we run to which the right hon. Gentleman opposite has drawn our attention, and every effort is made not to include in our list things that we shall not find a market for or be able to use, or which may remain on our hands for such a time as to become a danger. The point I wish to bring to the notice of the Committee is that I think the right hon. Gentleman opposite has somewhat belittled' the vital necessity of us getting these securities. I do not wish to enter into the economic part of it, but it is not simply a question of profit or loss to the Exchequer. The point is that, whether we like it or not, for the conduct of this War it is necessary to purchase enormous quantities of 797 goods both for ourselves and our Allies in America. No human being that I have ever met can devise any way of paying for these except by exporting goods that America will buy or by obtaining loans in America.
§ Mr. MONTAGUThe goods which the Americans will buy are these securities, gold, and our exported manufactures. We have not an unlimited supply of gold. There are obvious limits to the amount that we can manufacture for export, limits which grow presumably greater with every man we take into the Army or into munition work. These securities are things which the Americans will not only buy but they will lend you money on them, and therefore, unless we can, as it is so often expressed in the Press, "mobilise" our resources, the supply must stop. It is not a question of the convenience of the holder of American securities. It is the vital necessity of carrying on this War at all, and of arming ourselves with munitions that makes it absolutely essential that we should get these securities. We are discriminating between one kind of property and another, because we want this property, and we have no use for any other kind of property at the moment. If the time came when we could use any other form of property, in order to pay for goods which we must have, and in order to carry this War to a successful conclusion, the Government would come down to the House of Commons and say that we wanted them, and I am perfectly confident that the House, which has supported the Government throughout this War in finding the ways and means to carry it on, would give it those further powers, just as they are going to give us power in respect of these American securities.
§ Mr. D. MASONI will make one more dispairing appeal to the right hon. Gentleman with reference to his answer. The right hon. Gentleman put the position in a nutshell by saying that what we had to do was to meet our indebtedness to America. Every one agrees that we have to pay for our munitions and for those other necessaries we require, but what I vainly endeavoured to point out last year, and I think the Chancellor of the Exchequer agreed that my argument was a sound one, was that this policy of exporting American securities stimulates and increases this indebtedness. It surely follows that if you can reduce this in- 798 debtedness, and I think you can, by not pursuing this policy, then you will be able to pay your debts on the other side. Let me give one instance. It was stated by the Parliamentary Secretary to the Board of Trade, in answer to a question put by the hon. Member for West Ham (Mr. W. Thorne), in reference to the amount of bacon that was coming into this country, that the imports of bacon in the first five months of the present year amounted to 3,500,000 cwts., as compared with 2,200,000 cwts. in the previous year. He went on to show that the imports were likely to be increased in the immediate future, and he said that of these quantities 2,200,000 cwts. in 1916 and 700,000 cwts. in 1914 were consigned from the United States. We thus see that this debt is being increased and stimulated by this policy. There is no reason why we cannot get bacon from other sources or why we cannot increase the supply here. Under this system you are playing into the hands of the American exporter. There is also the case of motor cars and their accessories, and boots and shoes. The excess of imports is not at all confined to munitions. It will probably be found that the excess is something like £500,000,000 this year. It is stimulated by this very policy.
We have to meet this indebtedness, and, as the right hon. Gentleman has pointed out, there are three ways of doing it. A very considerable increase could be made in our exports. The right hon. Gentleman himself said that we could not increase our exports because we had a scarcity of labour. Those who have opposed this continual withdrawal of labour from industry have largely done so for that reason. We thought it unwise to jeopardise our position, and that we should be stronger if we kept more labour in industry. Our supply of American securities is not unlimited, and if we pile up this artificial position by stimulating imports and by encouraging our people to spend freely, as they are doing, what shall we do when our supplies are exhausted? We cannot then suddenly put people back into industry and suddenly expand our exports. It is absurd to tell us that it is necessary to pay for these munitions by taking American securities. By this method you are impoverishing yourself, using up your resources, and accentuating the very evil you are seeking to redress. The Chancellor of the Exchequer admitted that my argument was a 799 sound one, but said that we were at war. As the hon. Member for Hexham (Mr. Holt) pointed out when that argument was used to him, war has not altered the multiplication table or the law of exchange. We have to carry on, and we hope to carry on. I listened with great interest to the right hon. Baronet the Member for the City of London (Sir F. Banbury). I agree with the great part of his speech, but I take exception when he says that we should pursue the same policy as France and Germany.
§ Sir F. BANBURYWith regard to gold.
§ Mr. MASONThat is the very point. I am very sorry to part company with the right hon. Gentleman. We are not quite in the same position as France. They have a double standard, and prohibit gold payments. We have tried to maintain gold payments, and I am with the Government there. We have tried to maintain our position and not to sink into the position of France and Germany by prohibiting the exports of gold. Germany have not a double standard, but they prohibit the export of gold. We would like to retain the proud position of being the one free market for gold in the whole world. We are anxious that the bill on London should continue to command, as it always has done, its face value in the markets of the world, and it is because I realise that, because I realise if we pursue this spendthrift and profligate system we shall sooner or later become impoverished, and because I realise we are at war that I advance this argument. Authorities like Lord Goschen, who was a distinguished Member of this House, take this very point of an adverse and unfavourable exchange, and would go beyond the various remedies, such as loans. This is a loan and has the same effect as if we placed a loan in America. It is a mere palliative and accentuates the position by increasing the indebtedness.
§ Mr. J. SAMUELNo.
§ Mr. D. MASONI have given you one item of an enormous increase. Take the imports of motor cars.
§ Mr. SAMUELWould the hon. Member say that we are importing more food now than before the War?
§ Mr. SAMUELIn the aggregate?
§ Mr. MASONI am absolutely certain of it. I would ask the hon. Member to pay some attention to this fact. The working classes have never had such wages as they are receiving now. They are in receipt of the highest wages in their history, and they are probably eating far more than is good for them, and spending it freely. You are stimulating this extravagance. It may be necessary because you require labour, and labour is able to command its price. They ought to have a fair return for their work, but undoubtedly the consumption of food is aggravated at the present time. If you go to the Midlands and the North of England, you will find that there is a large consumption of butter and ham, and in the amount which they expend upon boots and shoes and everything that the working classes and other classes may desire. If you wish to correct the exchange, surely the way to do so would be first to stop diluting your currency by continually issuing Treasury Notes. We have now got £121,000,000 worth. Does not the Financial Secretary to the Treasury think that has some effect upon the exchange? Docs not that increase the indebtedness and make more difficult the position which he is trying to rectify of paying for this indebtedness in America? It surely has its influence. There are seven or eight causes which affect the exchange. He says that he has to meet a dollar balance in America. I have endeavoured to show how he can do so. If he reduces his imports, will not the debt which he has to meet be reduced? If he would really give some consideration to these proposals by increasing his taxation, or even by having a graduated tax on wages, he would reduce the consumption of the working classes, he would contract his exchange, and he would turn the exchange in his favour. He would do something by letting out £5,000,000 or £10,000,000 of gold.
§ Mr. CURRIEWith all deference to the hon. Member, is he not merely repeating an argument with which he has favoured us already?
§ The CHAIRMANIt seems to me to have a very familiar sound.
§ Mr. MASONI frankly admit that I am, but one cannot very well argue against the principle of this Clause without doing so. I am sorry if I weary the hon. Member. I shall certainly try to curtail my remarks, but it is very difficult to argue against this principle without necessarily repeating oneself. If the hon. Member, who is a very learned exponent of eloquence in this House, can show me any other method I shall be glad to learn from him or anybody else. I endorse the appeal made by the right hon. Gentleman the Member for the City of London to the Treasury to consider the advisability of pausing in this task of collecting securities. They have already admitted that they have a plentiful supply. Apparently they do not give very much consideration to the arguments addressed to them, but I do hope the speech of the right hon. Baronet will receive some attention, and if we cannot get them to reverse their present policy we may possibly make them pause in their riotous progress in impoverishing and destroying British resources.
§ Mr. LOUGHWhile acknowledging the fair and conciliatory tone in which the Financial Secretary answered the appeal I made to him in regard to what seems to me a very serious matter, I should like him, if he would, to deal with the point of the notices which are given with regard to these penal taxes. I have one of the notices in my hand, and I never saw a more unintelligible document to put before simple, uninstructed people. We are told that the lists are published in the "London Gazette," but whoever sees that paper?
§ Mr. LOUGHMy hon. Friend who has just interrupted me is in the habit of coming into the House for a few moments while a Debate is going on and then he intervenes in a most reprehensible manner. The point I want to put to the right hon. Gentleman is that he should see that notice is given to the holders of these securities that a penalty is to be imposed if they do not offer them to the Treasury. Surely, if a person upon whom the penalty is to be inflicted is known, it is equally possible to give him notice that he is to be made liable to the tax! If you know the holder of the security, in order to tax him you must also know him and be in a position to give him notice that unless he offers the securities he will be 802 liable to this penalty. Will my right hon. Friend agree to consider this point between now and the Report stage?
§ Sir F. BANBURYI am much obliged to the right hon. Gentleman for the assurances he has given me. But I wish to point out that, in answering my argument, he did not allude to my suggestion that the proper course to pursue is to borrow the stock or bonds and not to purchase them. I consider that a very important point. The right hon. Gentleman, however, did not allude to it, but, instead of doing so, at the end of his speech he repeated the old story that this was war, and people must be willing to sacrifice their property in consequence. Nobody denies that the State has a right when at war to take anybody's property if it is supposed to be in the national interest to do so. Indeed, it can do this whether we are at war or not. But the proceeding is subject to the proviso that the proper price shall be fixed by a proper tribunal and shall be paid for the property. The right hon. Gentleman is taking other people's property not at its proper value, but at whatever may happen to be the quotation of the day in the Stock Exchange list. Anybody who has had any experience of these prices on the Stock Exchange list knows that they are often the nominal prices and not the market value at all. The list does not give the prices which represent the real market value; it is merely a statement of what is considered to be at the moment the price at which somebody else is willing to buy or sell; in many cases there are only sellers, in other cases there are only buyers, and in no case, with the exception of comparatively small amounts, has it ever been possible except in the old days in the Consols Market, and those days no longer exist, to say that these prices represent the real value.
What is being done by the Government is not to take a man's property at its full value fixed by a responsible tribunal, but to take it at the price which somebody thinks is the value, because some transaction may have taken place on those terms a few days previously. The result is that a man may be compelled to sell his securities at a price quoted in the list in New York when there are no sellers in New York but only buyers. Great loss may therefore be imposed by this arbitrary method of taking these securities. Nobody objects to their property being taken from them in the interests of the State provided they get full value. But I for one 803 do object to property being taken in an unfair way, and I especially object, seeing that I have endeavoured to show there is another method which will inflict no hardship on the owners of these bonds and which at the same time will give every facility to the State. I understand that the right hon. Gentleman has warned the people who compose the Committee dealing with these securities not to be too venturesome and not to buy what they may not be able to resell. Many of us would be very glad indeed to be able to carry out such a policy, but we have never found it possible. Therefore, although I have great faith in this Committee, I do not think they will be able to do exactly what the right hon. Gentleman suggests. For these reasons I still oppose the Clause.
§ Mr. MONTAGUI want to apologise to the right hon. Baronet for not having answered one of his points. I may say, in justification, I spent some moments trying to read a note on my Order Paper, and now I know what it refers to. It is this very point. We cannot confine ourselves only to the borrowing of securities, and for this very obvious reason: When you borrow securities all you can do is to borrow on them. There is some limit to the amount you can borrow at any particular time. There is some limit to the length of loan you can get, and it would be a bad financial expedient to adopt to raise all your funds in America by loan and to have no free dollars to use. If you want a loan for a particular time for a particular purpose the transaction could not be carried through unless you are able to purchase and borrow at the same time. With regard to the point put by the right hon. Gentleman the Member for West Islington (Mr. Lough), I may say everybody has been circularised upon this matter to an almost unlimited extent, but I will gladly consider the right hon. Gentleman's suggestion as to whether any-further notice is possible.
§ Mr. BRYCEThe right hon. Gentleman, in his reply, did not allude to the point raised by the hon. Baronet the Member for Barnsley (Sir J. Walton), who pointed out that one could go to the National Debt Office with securities on the list of those purchaseable or borrow-able and not be able to carry out any transaction in regard to them. The right 804 hon. Gentleman says he does not want to be overburdened with a mass of securities of the same kind, and that time has to be spent in sifting them out. But, in the meantime, what is to happen to the holders of these securities, who are going to be subjected to this penal tax because they may not have offered them, or because their offer has been refused by the Treasury? What evidence will there be that they have made the offer to the Treasury? This is a very important point, and I think it ought to be dealt with at once. We all know that considerable numbers of these securities are entered on the list as being purchaseable or borrowable, when, as a matter of fact, they are neither. For instance, certain Canadian Pacific securities, mentioned on the list as being purchaseable, are not so purchaseable. Why, if you do not intend to purchase them, are they put upon the list?
§ Mr. McKENNAThe placing of those particular securities on the list was a mistake.
§ Mr. BRYCEBut there are a number of securities on the list, and if one goes to the Treasury and says he wants to lend or sell them, the Treasury will not take them. There are only three more days before these deductions will begin, and the people want to know what they are to do if the Government refuse to purchase, and what evidence will be acceptable of their offer with a view to preventing the Income Tax deduction being made.
§ Mr. McKENNAAny security which is on the list is chargeable, with the exception of the cases of small holders, in respect of whom we are making arrangements. When I opened the Parliamentary Papers this morning and saw there was no Amendment on the Clause I was extremely surprised. I fully expected Amendments were to be moved, and I am now given to understand that that is so. I am going to suggest one or two reasons for postponing the discussion. One reason, the one of least importance, is that it would be a great convenience to my right hon. Friend and myself that we should be free at the present moment, because there is a Cabinet meeting being held and we are both anxious to attend. But there is a more important reason. It would be a great advantage if we could see on the Paper the Amendments which are to be moved. It will be very difficult 805 for us to deal with them and to appreciate their full scope unless we do see them on the Paper. Therefore I would make an appeal to the Committee to allow us to take the Second Reading of this Clause and then to report Progress and continue J the discussion of the Bill to-morrow.
§ Question, "That the Clause be read a second time," put, and agreed to.
§ Clause added to the Bill.
§ Mr. McKENNAI apologise to the Committee for not having explained that, as a matter of fact, there is no other business which the House can take. I hope hon. Members, under the circumstances, will excuse our reporting Progress.
§ Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again"—[Mr. McKenna]—put, and agreed to.
§ Committee report Progress; to sit again to-morrow (Wednesday).
806§ The remaining Orders were read, and postponed.
§ Whereupon Mr. SPEAKER, pursuant to the Order of the House of the 22nd February, proposed the Question, "That this House do now adjourn."
§ Mr. BOOTHI desire to ask the Joint Parliamentary Secretary to the Treasury whether he has had any notice from any quarter that any subject would be raised on the Adjournment, and, if so, has he let Mr. Speaker know? So far as I know, hon. Members generally expected the Debate to continue, and I hope no one is being cut out inadvertently of an opportunity he wished to take.
§ The JOINT PARLIAMENTARY SECRETARY to the TREASURY (Mr. Gulland)I certainly have not heard of any subject to be raised on the Adjournment to-night. I do not know whether Mr. Speaker has.
§ Question put, and agreed to.
§ Adjourned accordingly at Twelve minutes before Seven o'clock.