§ In computing the excess profits duty of any trade or business which consists wholly or partly of the business of shipping the provisions of Sub-section (3) of Section thirty-eight of the principal Act (which relate to the repayment or setting off of duty on account of deficiencies or losses) shall not apply in relation to any deficiency or loss in any accounting period commencing on or after the first day of January nineteen hundred and seventeen, and in the case of an accounting period which has commenced before that date but ends after that date, shall not apply in relation to so much of the deficiency or loss as may be apportioned under this Act to the part commencing on that date:
§ Provided that—
- (a) where it appears to the Commissioners that the shipping business is carried on merely as ancillary to the principal trade or business, the provisions of this section shall not apply; and
- (b) where the trade or business carried on does not consist wholly of shipping, and the part which does not consist of shipping is not, in the opinion of the Commissioners, merely ancillary to the business of shipping, such apportionment of any deficiency or loss shall be made by the Commissioners as may be necessary to limit the application of this section to such part of the business as consists of shipping.
§ Mr. L. JONESI beg to move, to leave out the word "shipping" ["the business of shipping"], and to insert instead thereof the words "carrying by sea for hire, cargo, or passengers."
§ Mr. HOLTOn a point of Order. I want to ask whether this Amendment is in order. The financial Resolution on which tins Clause is founded contains the words
Excess Profits Duty on any trade or business deriving profits from shipping.It is a somewhat ambiguous form of words. The words in the Bill areExcess Profits Duty from any trade or business which consists wholly or partly of the business of shipping.942 I think there is no doubt whatever that the business of shipping is the business of an exporting merchant. I have discussed the matter with people conversant with the subject and I have not met a single person who has any doubts whatever that in ordinary commercial parlance the meaning of the words "business of shipping" is the business of the export merchant who is a shipper. His business is described as shipping and I think there can be no doubt that the business of shipping is the business of an export merchant. Under these circumstances I submit it would not be in order for the right hon. Gentleman and probably not in order for the Government to move an Amendment, the object of which is to transfer the burden from the exporting merchant, whom it is proposed to tax by this Bill, to the owner of ships, who is a trader of a totally different character. I submit that this is an Amendment which it is not competent for my hon. Friend to move. If there is a real difference of meaning between the words "business of shipping" which is introduced in this Bill, and the terms which my right hon. Friend proposes to insert, one of two results happen; either the Clause as originally drawn is not in accordance with the financial resolution, or the Amendment will not be in accordance with the financial resolution. In that case either the original Clause must be wrong or the Amendment is wrong. It is not possible to alter a Clause by way of an Amendment, even if the Amendment were within the terms of the Financial Resolution. It that case it would have to take the form of a new Clause.
§ Mr. BONAR LAWPerhaps I might assist in coming to a decision. My legal advisers tell me that my hon. Friend (Mr. Holt) is quite wrong in his definition of what shipping means.
§ The CHAIRMANI appreciate the point, which I think is this: The hon. Member claims that the words of the Clauses in the first place, and the words of the hon. Member for the Rushcliffe Division (Mr. L. Jones) in the second place, both would tax the persons who are not taxed by the Ways and Means Resolution.
§ The CHAIRMANI will take them both together, and what I have to say will deal with both. I perfectly understand the point. In commercial parlance the hon. Member states that by the business of shipping is usually meant the business of a person who exports or imports goods.
§ The CHAIRMANWho exports goods, and not a person who owns the ships on which those goods come. The point I consider it is my duty to look at is this: Was the Committee under any misapprehension when it passed the Ways and Means Resolution? If the Government have slipped into the vernacular instead of adopting a trade term I do not know that it is in my province to criticise them on that point, but I have to guard the rights of the subject in the matter, and I cannot bring myself to think the Committee, in view of the discussion which then arose, and in which the hon. Member took considerable part, was in any doubt as to who was the subject of taxation when the Ways and Means Resolution was passed. Therefore I am bound on that point, I think, to give my ruling that no point has arisen which calls for my interference.
§ The CHAIRMANIt is another kind of definition, corresponding to some extent to the words which the Government have given notice to insert.
§ Mr. L. JONESOn the point of whether the Amendment is necessary or not, I think the Government have recognised that some Amendment is necessary, and the point of Order raised shows that it is exceedingly desirable we should at any rate at this stage make perfectly clear who it is that we intend to tax. I agree, if I may venture to say so, that the House was under no misapprehension as to who the Chancellor of the Exchequer intended to tax when he produced his financial Resolution. But I do think both the Resolution and the words in the Bill have left the point exceedingly vague. It has been the custom of the trade, according to all the testimony I can get together, to treat the business of shipping as meaning the business of an exporting merchant. The people whom my right hon. Friend 944 intends to tax, and whom the House intends to tax in the Resolution, are shipowners. The hon. Member will see the meaning of the definition which I have put down. Charterers of ships must he included, and I think all the cases whom he intends to tax are covered by the words of my Amendment. "The business of carrying by sea for hire, cargo, or passengers." I think if the Chancellor of the Exchequer will look into it, that Amendment is preferable to the one he has put on the Paper. It shows that the business of shipping means the business carried on by the owners of ships. But this very Clause with which we are dealing says that more than one business may be carried on by the owners of ships. He himself points out that in some cases the business carried on by the owner of ships is merely ancillary to another business which the same person may be carrying on, and yet under the words of this definition, as far as I can make out, we shall be taxing the whole business. But perhaps the proviso would take it out. But that is putting the thing in in order to take it out again, whereas I submit the more logical and sensible way is simply to define exactly what the business is that you mean to tax. I submit that is completely done by the words which I suggest, "carrying by sea for hire, cargo, or passengers."
§ Mr. BONAR LAWI am sure my right hon. Friend does not wish either to dispute or take up time about what is simply a question of definition, but I think ours is better, and I hope he will be convinced of that by my pointing out to him one simple fact, that this definition was put down by a shipowner, and our definition is also a legal one.
Mr. RUTHERFORDIt would also leave entirely out the case of the men who have made very large sums of money by becoming the owners of ships and parting with them to other people.
§ Mr. HOLTI think this question of a definition is one that must be taken seriously. It is quite true that it is only a question of words, but it is absolutely necessary to express on the face of the Act without any possible doubt exactly who the people are upon whom the tax ought to fall. I do not think anyone would dispute that proposition; therefore the question of definition is a matter of very serious moment. I think we must 945 discuss the whole question of definition now instead of waiting to have a separate discussion later on. Let us Bee what the Government definition is.
It is the business carried on by the owner of a ship. What does that mean? What is the business carried on by the owner of a ship? There is no standard business carried on by owners of ships, and his own Clause recognises that in paragraph (a). If the definition of shipping business is the business carried on by the owner of a ship the principal trade or business is, by the definition, part of the shipowning business, because it is carried on by the owners of ships. If you take the Government's definition any single thing which an owner of one ship docs is shipping business. I really do not think it can be seriously controverted that that would be the effect of inserting the words proposed by the Government, that every single thing done by any person who owns one ship in the matter of business would be the business of shipping. I should like to point out some of the businesses which to my knowledge are carried on by owners of ships. There is marine insurance, there is acting as a shipbroker, moneylending, the ownership of docks and railways, general merchant's business, co-operative societies, ship chandlery and soap manufacture. Sunlight soap is carried on by the owner of a ship. I take it that under this definition the whole business of Sunlight soap would be affected. I think I have made good my case that the Government definition is quite a hopeless definition. It defines nothing at all. I think I am also entitled to say this is a matter of the most serious moment, and I press the Government, if they will not accept my right hon. Friend's words, to come forward with a definition which has some real meaning and sense in it.
§ Mr. HOUSTONI think this Clause ought to be redrafted. I entirely agree with the remarks of the hon. Member (Mr. Holt), and I could amplify them. The right hon. Gentleman (Mr. Leif Jones) is only going to bring in the business of carrying by sea cargo or passengers, but there is a very great business done in livestock, which is neither cargo nor passengers, and he would have to introduce the word "livestock." But I think the Amendment of the Chancellor of the Exchequer is perfectly hopeless. I should like to see them all roped in. He suggested that I was like the fox who had lost 946 his tail and wanted to see others without their tails. I should be glad to see this done.
§ Mr. BONAR LAWI hope we shall not waste time over this. No definition by the greatest draftsman who ever lived would cover every possible case. This definition is plain common sense, and it is that when we say shipowner we mean shipowner. Later on in the most careful way the meaning is defined so as to show in what respect people carrying on other businesses connected with shipowning will be dealt with. That is an entirely different thing. You cannot possibly get every single case, but for all practical purposes this is quite good enough, and it is really taking up the time of the Committee to discuss it further.
§ Mr. PRINGLEIt is a most extraordinary doctrine which has just fallen from the Chancellor of the Exchequer that it is a waste of time to consider the exact definition of the persons whom you desire to tax. The definition which the Government has put on the Paper in its absurdity only equals the looseness of the reasoning upon which this Clause is based. The arguments which have been put before the Committee by my hon. Friend (Mr. Holt) show how absurd the definition is. If it be that the business of shipping is the business carried on by an owner of ships, the whole Canadian Pacific Railway would come within the business of shipping because that is a business carried on by the owners of ships. Surely it is the duty of the Legislature m passing Acts of Parliament to see that they use words which will carry out the purposes they have in view. It is not simply a matter for the Chancellor of the Exchequer, but he has able technical advisers who should enable him to place in the Statute words which are intended to convey his meaning. In this case you began by using in the Resolution a popular term without any legal significance, and having used it in the Resolution you then use it in the Clause. Now being faced with the difficulties, the right hon. Gentleman endeavours to meet them by putting in a hopelessly absurd definition. It seems to me that the definition proposed by my right hon. Friend (Mr. Leif Jones) is far better than that of the Government. After all, carrying by sea cargo and passengers for hire is something which is known to the law at 947 present. It is the general description of the whole of this business, which is treated of in all legal text-books dealing with this branch of the law. You have, therefore, a definition of a business which is at present known to the law. That is the definition which my right hon. Friend seeks to put into the Bill. In place of that, the Chancellor of the Exchequer put forward a definition which reduces the whole thing in my opinion to an absurdity. If, indeed, the matter ever came to be decided in the Courts, it seems to me that the judge would have some very satirical observations to make upon the competence of the Legislature.
§ Mr. McKENNAUndoubtedly the Chancellor of the Exchequer will agree that the actual words proposed are not sufficiently definite to make it clear what is the particular class which is to be taxed. But in paragraph (b) he seeks, so far as it goes, to answer both the objections taken by my hon. Friend (Mr. Holt). May I therefore suggest that if, when we have discussed paragraph (b), reasons are brought to his mind to show that it does not really cover the whole case, he will keep an open mind as regards reconsidering the definition on the Report stage?
§ Mr. BONAR LAWOf course I shall be most ready to fall in with that suggestion. If it is found later on that our definition does not meet the case, I am quite ready to reconsider it.
§ Mr. LESLIE SCOTTThe use of the word "shipping" is very undesirable. Shipping is, in the minds of the commercial community, wrapped up with the idea of shippers and shipping goods. The common use in the Press of the word "shippers" to mean not what it in fact means, namely, merchants who export or import from the other side, but shipowners, is simply a misuse of language, but it is very common. The business in question which the right hon. Gentleman is taxing here is the business of shipowning. In this Clause he should use the word "shipowning" instead of the word "shipping."
§ Sir F. BANBURYI do not think that would quite meet it because of the cases of very large businesses which own a few ships, and under the definition, as I read it, the whole of the business could be taxed in addition to the ships. What is 948 really wanted is words to show that profits arising from owning ships shall be taxed in a peculiar way.
§ Mr. BONAR LAWThat is done in another Clause.
§ Mr. L. JONESI do not intend to press the Amendment in the face of what the right hon. Gentleman has said and the discussion that has taken place, but I do not think he has justified his own Amendment or has satisfied the Committee that that is really a sufficiently apt description of what is intended. It may be that my suggestion does not cover every case, but it was drafted in conjunction with men who certainly knew the shipping industry very well, having in mind, as they thought, the people whom the Chancellor intended to tax. It is more comprehensive than has been allowed. I really urge on the right hon. Gentleman that before the Report stage he should see whether he cannot find words to describe exactly the people whom he intends to tax. It would be far better to do it now than to fight the matter out in the Law Courts afterwards, when all the ingenuity of the hon. and learned Gentleman (Mr. Leslie Scott) and other lawyers will be brought to bear to determine, not what Parliament intended, but what Parliament in fact said. We know what we intend. Is it not possible that we should say it clearly so that the intervention of lawyers will not be necessary?
§ Amendment, by leave, withdrawn.
§ Mr. HOLTI beg to move to leave out the words,
(b) where the trade or business carried on does not consist wholly of shipping, and the part which does not consist of shipping is not in the opinion of the Commissioners merely ancillary to the business of shipping, such apportionment of any deficiency or loss shall be made by the Commissioners as may be necessary to limit the application of this Section to such part of the business as consists of shipping.The meaning of the paragraph is that where a person owns ships which constitute something less than half of his business this particular provision is not to affect the ships which he owns. There are one or two Argentine railway companies which own their own ships for the purpose of carrying coals to the Argentine and bringing back grain, and 949 they compete with vessels of the ordinary British tramp class. Do I understand that it is the intention of the Government that such an institution as the Buenos Aires Great Southern Railway, which owns ships sailing to and from this country, should be placed as regards taxation in a more favourable position than the ordinary Englishman who is the owner of ships pure and simple at Newcastle or Cardiff? Is that really the intention of the Government? There are Messrs. Lever Brothers, the great soap manufacturers, and there is a firm of Liverpool merchants who trade with West Africa, who both own ships and compete with regular traders. There is another set of people, and that is the Co-operative Wholesale Societies, who have their own ships, which run in competition with other traders. It seems to me that any such proposal is extremely unfair, and if this provision is to be carried into law it ought to apply equally to every one who owns a ship in respect of that ship. The distinction between a business which is ancillary, and a business which is not ancillary cannot be justified. So far, I have never heard anyone attempt to justify it, and I defy the Chancellor of the Exchequer to do it now.
§ Mr. BONAR LAWI do not think, having regard to the general difficulties of the Excess Profits Tax, that the Amendment moved by the hon. Gentleman could be accepted. In all taxation of this kind you have to take broad, general lines. It is quite obvious that in doing what we propose we cannot possibly act as the hon. Member suggests, and say that we should take every ship whatever the nature of the, business and deal with it as if it were a ship belonging to a shipowner pure and simple and treat it in this respect. Take, for instance, a big gasworks which has, perhaps, one ship, which plays an absolutely infinitesimal part in its business. No method exists of finding out what is the profit and loss on that, because it goes in with the general business. There are three classes of cases. There are cases where the shipowner carries on a ship-owning business pure and simple. There are cases where the ship employed is absolutely unimportant and an infinitesimal part of the business, and there are cases on the border-line. What we propose is that in all cases where it is really absolutely unimportant it should be left 950 out altogether, and in the latter case it should be left to the Commissioners to decide under which category it falls. I see there are Amendments down dealing with the question of the Commissioners, and if the view is taken that it is not fair to leave this decision entirely with the Commissioners, I am prepared to meet that and to say there should be an appeal to Special Commissioners in a case of that kind. Beyond that I do not think it is possible to go, and any attempt to do what my hon. Friend suggests in his Amendment would mean that we could not carry out our proposal.
§ Mr. HOUSTONI am sorry, but I am not satisfied with the explanation of the Chancellor of the Exchequer. I am afraid the right hon. Gentleman does not quite look at this matter with knowledge of these things. Take a foreign railway company which has eight or ten steamers and uses them for carrying coal for the use of their railways abroad and for cargo inwards. These ships carry foodstuffs and general cargo, and are directly in competition with other lines of steamers that are running backwards and forwards to these ports. It would be very unfair if these competing steamers were placed on an advantage over and above the ships owned by shipowners pure and simple. I do not think there can be any difficulty in excluding these ships and bringing them under the same conditions as ships belonging to other shipowners. For instance, we have Lloyd's List, in which the names of ships are entered and above the lists of the ships is the owner's name. These ships as mentioned and enumerated in Lloyd's List could be eliminated altogether from the business of a railway company or of a great soap manufactory or of a gas company, or anything of that sort. I do not think that there is any difficulty such as the right hon. Gentleman suggests, and I hope my hon. Friend will press his Amendment. I could say more on this point, but I do not wish to keep the Committee on a matter which to me is perfectly clear.
§ Amendment negatived.
951The DEPUTY-CHAIRMANThere is a manuscript Amendment by the Chancellor of the Exchequer which has exactly the came effect as the one in the name of the hon. Member (Mr. Holt). Therefore, I call upon the Chancellor of the Exchequer.
§ Mr. HOLTMay we not be informed what is the manuscript Amendment put in by the Chancellor of the Exchequer?
§ Mr. BONAR LAWI do not think there is any mystery about my manuscript Amendment.
§ Mr. BONAR LAWI beg to move, in paragraph (a), to leave out the words, "it appears to the Commissioners that."
That is exactly my hon. Friend's Amendment. It is necessary to omit these words in order to put in later the words which I said we were willing to insert.
§ Amendment agreed to.
The DEPUTY-CHAIRMANThe subsequent Amendments are covered by the decision which has been arrived at. The next Amendment is to leave out the words "in the opinion of the Commissioners."
§ Mr. HOLTI have an Amendment which is not by any means covered by the decision that has been taken. I beg to move, in paragraph (b), to leave out the words, "and the part which does not consist of shipping is not, in the opinion of the Commissioners, merely ancillary to the business of shipping."
§
The paragraph says,
Where the trade or business carried on does not consist wholly of shipping, and the part which does not consist of shipping is not in the opinion of the Commissioners merely ancillary to the business of shipping.
We have got the exact reverse of the proposition put forward before. I think these words ought to be omitted. It is very unfair that a shipowner who is
952
carrying on other businesses should be penalised as compared with his competitors who are not carrying on those businesses. A great many shipowners insure their own ships and carry their own marine insurance. If a shipowner who insures his own ships is not to be put in the same position as a shipowner who insures otherwise it will be unfair. Is he not allowed to have his marine account separated in the same way as an under-writer? The effect of this proposal is to make it to the advantage of every person to split up every business he has got into little separate watertight compartments. It hits the man who is carrying on what is the right system at his own risk, and it gives an advantage to the man who covers his own risk with someone else. It hits the man who is a shipowner and carries on the business of a shipbroker. If his broker's business is destroyed by the action of the Government he is prevented from recovering the losses on the brokerage business while his neighbour next door may be put in an advantageous position.
§ Mr. BONAR LAWThat is the reverse effect of what is really done. I think my hon. Friend has mistaken the Sub-section. The meaning of the Sub-section is, I think, to the advantage of the shipowner.
§ Mr. HOLTThe meaning of the Sub-section is quite plain—
Where the trade or business carried on does not consist wholly of shipping, and the part which does not consist of shipping is not in the opinion of the Commissioners merely ancillary to the business of shipping.There is no doubt that they will rule that it is really ancillary. Of course they will. Surely "ancillary" means something which is not wholly independent, but which is a minor operation adopted to facilitate the main business. I think the right hon. Gentleman will agree, for instance, that the business of carrying on an hotel by a railway company is ancillary to the business of carrying passengers by train. That is what people generally understand by "ancillary," and I imagine that is what is in his mind in regard to "ancillary." If that is what "ancillary" means it is very unfair, for instance, that if a shipowner possesses a dock and is not able to use that dock and his ships are prevented from going into the dock that he should not be entitled to get consideration for his losses in respect of that dock, but if that dock 953 belongs to someone else its owner would get the losses back again. Take the case fof a ship chandler—
§ Mr. BONAR LAWMy hon. Friend has not read the passage or he would not make that speech.
§ Mr. HOLTI have read it quite clearly, and I am quite satisfied that an ancillary business is a business which is generally carried on by somebody else, but which for the sake of facilitating the main business is carried on by the person who owns the main business. That is, I take it, what "ancillary business" means. If that is so, the business of carrying on the main business will be penalised when the ancillary business is carried on by a shipowner and not when it is carried on by the shipowner's rival who does not carry on that ancillary business.
§ Mr. L. JONESI think the Chancellor of the Exchequer has not quite realised my hon. Friend's object in leaving out these words. He seems to forget that in this Clause we are dealing with the making up of losses in trade. My hon. Friend's point is that a shipowner who has, say, the business of a dock ancillary to his shipping business, and he makes losses in the working of that dock owing to the action of the Government, he ought to be allowed to include those losses as part of his losses to be made up out of any funds that may be available when this Clause is passed. It is from that point of view, the making up of losses, that this Amendment does become of some importance, and I think it is an Amendment the importance of which the Chancellor of the Exchequer has not quite realised.
§ Mr. BONAR LAWI do not see it now. The position is as I explained it on the previous Amendment. There are cases where the owning of a ship is so small a part of the business that it cannot be taken into account at all. There are other cases where shipowning is not the whole but a considerable part of the business. This Section makes an arrangement whereby in the case referred to, where the shipowner also runs the business of a dock, the owner of the dock would have the right to set against the profits the losses on the dock.
§ Mr. McKENNAI think the misunderstanding, which is a very real one, arises from the similarity of the language in paragraphs (a) and (b), which refer to quite different matters. In paragraph (a) we 954 are dealing with a particular trade or business which is not a shipping business but to which shipping is ancillary. We have all got cases in our mind in which we can properly describe shipping as ancillary to the principal business. For instance, take the case of a railway company which owns a passenger steamer. There the passenger steamer is ancillary to the business of the railway company. When you get to paragraph (b) you are dealing with the principal business, which is a shipping business, and a subsidiary business which is not shipping. The wording in paragraph (b) is to be read in a sense exactly opposite to that in which it is read in paragraph (a). You get there a shipping business which has got ancillary businesses. It is quite clear in my judgment that my hon. Friend is right in thinking that those ancillary businesses ought not to be brought under this Clause. A shipowner in one case, for instance, may carry on business as a shipbroker and as an insurance broker for himself. In both those cases the insurance and the brokerage are ancillary to the ship business. Why should the shipowner in that case not get the relief which either the insurance broker or the ship-broker would get? I would ask my right hon. Friend if in further discussion of paragraph (b) he finds some ground of difference between us he will reconsider the question of differentiation under this Clause. It is so true in the case of a shipping business, where it is the principal business, that you may have a large number of subsidiary ancillary businesses which ought not to be brought under the operation of this Clause, that I am sure that upon reflection my right hon. Friend will agree that there is substance in this point, and while I am not quite sure that the Amendment proposed by my hon. Friend is the right Amendment, still there is a distinction to be drawn between the case where shipping is the principal business and the case in which something else is the principal business. I hope that, if my right hon. Friend is unable now to accept this Amendment, he will keep it in mind between this and the Report stage of the Bill and will inquire further— although he knows better than I do; still, I have had to make some inquiries in the matter—as to the large degree in which shipowners do carry on businesses which are ancillary to shipowning and which ought not in fairness come under the operation of this Clause.
§ Mr. LESLIE SCOTTI desire to support my hon. Friend's Amendment. It really raises in a rather critical form what in my opinion is the essential vice of this Clause, namely, differentiation in taxation between one industry and another. I for one, though this is not an appropriate place to go into the reasons, am strongly opposed to the form of taxation which picks out one industry and taxes it while leaving other industries untaxed. The Chancellor of the Exchequer is saying to the Committee, "I agree that the practice of averaging profits against losses which is embodied in the Finance Act of 1915 is a just practice as regards every industry except shipowning, and I do not propose, therefore, to apply this to any industry at all except shipowning." We shall hear the reason why he applies it to shipowning possibly presently. Let me assume for a moment, which I doubt, that he has good reasons for applying it to shipping, the effect of this Sub-section (b) as it stands is this: Suppose a company like the Peninsular and Oriental Company owns a very large fleet of steamers and takes all its own marine risk, the insurance on its own underwriting account of the hull and machinery of that fleet is a tremendous business, but in every grammatical sense of the word it is ancillary to the shipowning business of the Peninsular and Oriental Company. It is conceded by the Chancellor of the Exchequer that it would be wrong to take from the underwriting business as a whole the right to average its profits. But under this Clause he says, "If I find a business which is not ancillary in the proper sense of the word to the shipowning business, then however big the other business may be, however great its loss may be, I will not allow an average." I am taking the Clause as it is drafted. The result is that the shipowner, who has by this proposal taken from him the right to average for excess profits, makes, we will say in the next year, a small profit on his ships, which, as the Chancellor has told us, on account of requisitioning, will be possibly small, and on his underwriting account he makes a big loss. Then, according to the drafting of this Clause, that big loss is brought into a general account of his business. I just want to satisfy the Chancellor that that is so. As the business is ancillary, no apportionment, such as is provided for in paragraph (b), is to be made. The whole of the profits and losses of the whole business are to be put into one com- 956 mon pot, and the net result may be a loss, whereas there would be no loss if the separate business were taken separately. This is an illustration of the fundamental vice of taking a particular industry and saying, "I will tax that," because you are always up against a question of where you will draw the dividing line between that which is ancillary and that which is not, and the result will be to leave a rankling sense of injustice in everybody. I strongly oppose the Amendment.
§ Mr. HOUSTONI understood the Chancellor of the Exchequer to say that there would be a right of appeal from the Commissioners. I would ask him to put in words to that effect. I would also ask him to whom would the appeal be?
§ Mr. BONAR LAWI am not going to say anything more about this. I think it is perfectly plain, and I think that the only point as to what my hon. and learned Friend has said is that it is another method of saying that he objects to the whole principle of this Clause. But, admitting the principle, there is nothing whatever to object to.
Mr. RUTHERFORDBefore we go to a vote on this point I would like to know from the Government whether the allegations made by the various speakers are well founded, and whether the effect of the Clause if these words are left in is going to be that, say, in the case of half a dozen steamers coming into Liverpool month after month, two or three of those are going to have certain profits or certain taxes cast upon them which the others are going to escape? If the effect is going to be a differentiation between one taxpayer and another, and that because a man has got a very considerable business in ships they are not to be taxed, and if he has got a very little business and the same number of ships they are—because the word "ancillary" applies first in one direction and then in another in regard to each of these two cases—if the effect of the Clause is going to be unfair as between one owner and another, then personally I shall object strongly. It seems to me that the shipping trade ought to be all treated alike. If a big railway company happens to be running half a dozen steamers, why should the railway company escape certain taxation which the man who runs half a dozen similar steamers and does not run a railway has to pay? On the other hand, if 957 there are to be certain advantages and allowances made to the owner of half a dozen steamers provided that he has got a little insurance business, or something of that kind, and those are all going to be denied to him if he has not got such a business, then I think that a case is made out for the alteration of the Clause. What we should try to do is to satisfy the taxpayer that every taxpayer is treated fairly and squarely and given the same measure of justice and the same proportion of taxation. I have listened very carefully to this Debate, and I have not been satisfied that the Clause does that. We have had allegations from people who are in this business, the hon. Member for Hexham and others, that the effect of the Clause, if we leave these words in, is to cause unfairness and differentiation. I would like to know whether that is or is not a well-founded statement.
§ Mr. HERBERT SAMUELThe explanation given by the Chancellor of the Exchequer does not appear to me, at all events, to be very convincing. He says that this Amendment really strikes at the principle of the Clause.
§ Mr. BONAR LAWThe arguments advanced in support of it.
§ Mr. SAMUELAs I understand, this Amendment does not raise the point of differentiation as between the shipowner and the manufacturer. It only raises the point of differentiation as between one shipowner who has a business ancillary to his shipowning and another who has not. I do not see, therefore, that the right hon. Gentleman's argument is any answer at all to the case that is made. As I understand it, the case is this: You have two shipowners who have, let us say, the same number of ships of the same value which make the same profits. But one of them does a certain amount of shipbroking, which is a business ancillary to his shipowning, and the other does not. He insures his ships outside and goes to an outside shipbroker. These two men, under this Clause, will be subject to quite different taxes because the ancillary businesses are not allowed to be excluded from the shipowner's accounts when you are dealing with the excess profit under this Clause. That may be right or wrong. I do not see on the face of it how it can be right, but if it is right I think the Chancellor of the Exchequer ought to give us reasons to 958 show that it is right and not merely to declare that those who put this point are opposed to the Clause as a whole.
§ 6.0 P.M.
§ Mr. L. JONESI am convinced that there is a real misunderstanding, and I want to try to expound it. Again, the Treasury Bench has not understood the point put from this side by four or five of us, and I will try to make the point clear. No one on the Treasury Bench seems to take the point, and they absolutely seem to say that it is stupidity on the part of Members on this side to suggest that there is any point of misunderstanding at all. I am perfectly convinced that the Chancellor of the Exchequer has not understood the point which we have tried to make. We want to be allowed to distinguish between an ancillary business and the business of shipping. As pointed out by my right hon. Friend the Member for Cleveland (Mr. Herbert Samuel), two shipowners may be differently taxed because the businesses are differently managed, and because the shipowner does his own insurance. That cannot be the intention of the Government, yet we believe that is the effect of the Clause as drafted.
§ Sir F. BANBURYI said in the few words that I spoke that I desired that people making profits out of the owning of ships should be subject to this particular tax, and I suggested words to confine the tax to profits made out of the owning of ships as likely to meet the case. If this Amendment is carried the result will be exactly what I outlined. My right hon. Friend said it is met by Sub-section (b) of the Clause, which would read, if amended, "where the trade or business carried on does not consist wholly of shipping, such apportionment of any deficiency or loss shall be made by the Commissioners as may be necessary to limit the application of this Section to such part of business as consists of shipping."
§ Mr. BONAR LAWThat is the meaning of the Clause.
§ The SOLICITOR-GENERAL (Sir Gordon Hewart)I am not at all confident that I shall be able to throw further light upon this Clause, but, to the best of my ability, I will endeavour to remove what seems to me a mere misapprehension. May I first refer to the Clause itself which is to contain this proviso? The Clause provides that in computing the Excess Profits 959 Duty of any trade or business which consists wholly or partly of the business of shipping the provisions of Sub-section (3) of Section 38 of the principal Act, which relate to the repayment or setting-off of duty on account of deficiencies or losses, shall not apply in relation to any deficiency or loss in any accounting period commencing on or after the first day of January, 1917, and, in the case of an accounting period which has commenced before that date, but ends after that date, shall not apply in relation to so much of the deficiency or loss as may be apportioned under this Act to the part commencing on that date. So far, that is perfectly fair. Then comes the proviso the whole object of which is to make more certain what is the intention of the Clause itself. The proviso has to deal with two contrasted cases in which shipping may not be the only business. There may be a further business which is clearly ancillary to the shipping, but, on the other hand, the further business carried on may be such that the shipping is ancillary to that business. The Bill deals fairly as between one state of affairs and the other. First of all, the proviso says that where the shipping business itself is merely ancillary to the principal trade or business, the provisions of this Section shall not apply. Why? Because in substance and in fact the business with which you are dealing is not a shipping business.
Then comes the contrasted case. It is in proviso (b) to which the Amendment is proposed. That is the case where ex hypothesishipping is the principal business, but there is a part which is not shipping, and is not merely ancillary to the business of shipping. Accordingly proviso (b) provides that where a trade or business does not consist wholly of shipping, and the part which does not consist of shipping is not, in the opinion of the Commissioners, merely ancillary to the business of shipping, then these provisions are limited to the shipping part of the business. That implies that if the ancillary or subsidiary part of the business is really part of the business of shipping, it is to be so treated. [HON. MEMBERS: "Why?"] Because it is the business of shipping. [An HON. MEMBER: "No. That is the point!"] My hon. Friend says that is the point. If that be indeed the point, it is not a point of construction at all, it is a 960 point of fact. Be it so. But let us for one moment look a little more closely at the scheme of this Clause as a whole. What is this scheme? Its object is to take away in regard to shipping business a particular kind of relief, namely, the relief by repayment and setting-off. The question is what is a shipping business. The Clause must, if it is going to deal with all shipping business, deal with a business which is wholly shipping, and deal with a business which is partly shipping. If the business is wholly shipping, obviously no difficulty arises. If the business is partly shipping, a further question does arise; Which is the real business — the shipping part or the other part? The first proviso deals with the case where the shipping business is purely ancillary to some other business. As to that, I gather there is no complaint. The second part of the proviso deals with the case where there is a shipping business, the shipping being the principal part, and some other business is being carried on. That other business may or may not be purely ancillary to the shipping business. If it is purely ancillary to the shipping business, this Clause treats both as if they were a shipping business. If it is not purely ancillary to the shipping business, then this Clause does not apply to that separate business.
§ Mr. McKENNAMay I put a question to my hon. and learned Friend? As a matter of fact, a considerable number of shipowners insure their own ships, and a large number of other shipowners do not insure their own ships. If the shipowner insures his own ships, then is that business of insuring the ships ancillary or not? Whatever alternative the hon. and learned Gentleman takes, he gets into a difficulty. If he deals with it as ancillary, then he is acting unfairly to those shipowners who insure their own ships. If he does not, then the necessary thing to do is to accept this Amendment.
§ Mr. BONAR LAWI quite understand the right hon. Gentleman's point, and I now see that the objection is to treating a business of the kind which is referred to in the same way as other businesses. The point is, that in any case, however small the other part of the shipping business may be in relation to the shipping, we should not take any proportion on that. I think there may be something to be said for that view, but I will make inquiries 961 and see if it is possible to meet the right hon. Gentleman's point. If the Committee will accept that view, I will undertake to make inquiry into the matter.
§ Mr. LESLIE SCOTTUnder the Fourth Schedule of the principal Act of 1915, Rule 7, subsidiary companies, of which the capital is controlled by the parent company, are not to be treated as separate companies for the purpose of the pre-war standard. Will the right hon. Gentleman consider whether that does not affect this question of ancillary businesses, and whether the result may not be that, although the business is in the hands of a separate company, if that company is a separate company, yet in that case it will be treated as one business? That is a very common thing in coaling companies.
§ Mr. BONAR LAWI promise to look into the whole matter.
§ Amendment, by leave, withdrawn.
§ Amendment made: In Sub-section (b), leave out the words "in the opinion of the Commissioners."—[Mr. Bonar Law.]
§ Mr. BONAR LAWI beg to move, at the end of paragraph (b), to add the words
And (c) if in any such accounting period as aforesaid there has been a loss or the profits have not reached the point which would have involved liability to Excess Profits Duty if the percentage standard had been adopted, the same amount shall, as respects the deficiency or loss or so much thereof as is affected by this Section, be repaid or set off under Sub-section three of the said Section thirty-eight as would have been repaid or set off if the percentage standard had been adopted.I do not consider it advisable on this Amendment to make a speech dealing with the general principle, but I have no doubt I will have an opportunity of doing that. I, therefore, simply move the Amendment, the effect of which is that the arrangement which I announced, and the reasons for which I explained—I do not think I am able to add anything further to the explanation—is to deal with the trade of the shipowning business. My experience does not agree with that of my hon. and learned Friend opposite as to shipping businesses; on the contrary, my experience has always been 962 that it means persons owning ships. At all events, that is my view. The Amendment deals with cases of real hardship. There are particular cases in which the shipowner may find that owing to exceptional circumstances he is actually making a loss this year. Undoubtedly the Government never intended to apply the provisions to a case of that kind, and the Amendment has this effect—that it allows the shipowner to take the standard rate of interest of 6 per cent., and to take also any loss he has made in the current year, and, putting the two together, he would come under the arrangement by which he would get 80 per cent, of the two so put together. I think it really meets cases of hardship. I am not giving up the principle for which I contended. Though I do not expect that those who take the ground that you have no right to treat shipping or any other trade under this Finance Bill differently from other trades will be satisfied, I do feel that we are endeavouring to treat the shipowners as a class as fairly as we possibly can under the circumstances.
§ Sir F. BANBURYI do not quite follow what is the actual meaning of this. Supposing I made a profit in the year 1916–17 of £20,000 excess profits on which I paid Excess Profits Duty and in the year 1917–18 sustained a loss of some thousands, what would happen?
§ Mr. BONAR LAWYou could put 80 per cent, of that particular profit against the loss you had, and, in addition to that, you have the right to set off the duty on 6 per cent, on your capital, and that I think makes it certain that in no case will you actually have a loss.
§ Mr. L. JONESThe effect is to substitute the 6 per cent, pre-war standard for any other standard you may have.
§ Amendment agreed to.
§ Mr. HOLTI have given notice of an Amendment to add at the end of the Clause the following paragraph:
(c) applications may be made under Section forty, Sub-section (3), of the Finance (No. 2) Act, 1915, if a taxpayer to whom this Section applies in respect of any past accounting periods notwithstanding the fact that all duty has already been paid by him without any such application having been made and relief may be given to a taxpayer on any such application by way of repayment of duty already paid by him.963 I think that the Amendment made by the Chancellor of the Exchequer will meet the point. I will not now move this Amendment, but will reserve my right to bring it up later if it should be necessary to do so.
§ Further Amendments made:
§
At the end of the Clause, add the words,
In this Section the expression "business of shipping" means the business carried on by an owner of ships, and for the purposes of this definition the expression "owner" includes any charterer to whom a ship is demised.
§
After the words last inserted, add as a new Sub-section:
(2) Any appeal under Sub-section (5) of Section forty-five of the principal Act on a question arising, under this Section shall be to the Special Commissioners."— [Mr. Bonar Law.]
§ Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."
§ Mr. L. SCOTTThis raises the whole question of the proposal of the Government to take from shipowners, and from shipowners alone amongst the commercial classes in this country, a benefit that was given to all who were subject to the Excess Profits Duty under the Act of 1915. The objections to the Clause that are felt by, I believe, many in this House, and certainly by a large number of business men as well as those who are engaged in the business of shipowning themselves, are very deep. I cannot help thinking that the Clause would not have been proposed by the Government but for the amount of talk there has been in public about the profits made by shipowners, coupled with the suggestion that the shipowners' profits are a large cause of the rise of food prices in this country. I do not want to say much on that subject, but I think it is important in considering this question and the position of the shipowners of this country in relation to the national necessities to bear in mind what are the facts about those prices. Shipping freights have not led to a rise in the price of the quartern loaf of more than ¾d. and to sugar of more than ½d. per 1b. and to meat of more than 1d. per lb., and those who talk about shipowners' profits being responsible for the increase of food prices in this country are talking nonsense. [An HON. MEMBER: "Tea !"] The world does not depend, for- 964 tunately, on tea. I am reminded that I exaggerated the case against the shipowners in saying that a 1d.,¾., and a ½d., respectively, were the proportions for which shipowners might be regarded as responsible in the rise in prices. That was wrong. That is the total portion of the cost price of those articles of food attributable to the cost of carriage to this country, but out of that you must take such portion as is due to pre-war freights.
I am sure this Committee would like to consider these things not from the point of view of any popular attack against the shipowners or any popular odium against the shipowners, but from the point of view of the national interest. On that there are two main points, and the first point to which I attach importance in this way is this. The Act of 1915 was introduced in this House by the Government with a promise to the business community as to the method by which the tax would be collected during the War as a whole. When the proposal was under discussion bitter opposition to it was made on the very ground that if you took one year by itself, as was the proposal of the Bill, you might have a large Excess Profits Duty in that year followed up by large losses in the next year without any recoupment of the tax. It was pointed out that one year should be averaged with another and it was on that basis of an average for a period of years that this House accepted the proposal of the Government for Excess Profits Duty. The Committee will remember that the Section of the Finance Act of 1915 (No. 2), dealing with this matter is Section 38, and Sub-section (3) of that Section provides:
where a person proves that in any accounting period his profits have not reached the point which involves liability to Excess Profits Duty or that he has sustained a loss in his trade or business he shall be entitled to repayment of such amount paid by him as Excess Profits Duty in respect of any previous accounting period, such an amount as will make the total amount of Excess Profits Duty paid by him during the whole period accorded with his profits or losses during that period.That is the bargain. What was it that was said by the representatives of the Government at that time? The then Chancellor of the Exchequer, the right hon. Gentleman the Member for Monmouthshire (Mr. McKenna), said, speaking on the 13th of October, 1915: 965It is not proposed to take an average of the three preceding years, but it is proposed to give the subject the choice of any two out of the three preceding years. Then, again, it would not be possible that a shareholder would be deprived of the whole of his profits for a very simple reason. In the first place lie cannot be charged a tax twice in the same year, and if in the second year the company in which he is concerned makes a loss he is entitled to set off the loss against the profits and to recover the proper amount from the Treasury."—[OFFICIAL REPORT, 13th October, 1915, col. 1408, Vol. LXXIV.]That was repeated time after time by the representatives of the Government in this House, and it was upon that fact that the business community of this country submitted on the action of this House to the payment of the Excess Profits Duty. It is perfectly true, as the Chancellor of the Exchequer will tell the House, that under the Amendment he proposed this afternoon the Clause will not operate pecuniarily so severely against the shipowners as it would have in the form in which it was introduced in the Bill, not nearly so. It may be that it will not operate to any great extent, and on that point I hope the Chancellor will tell the Committee what pecuniary result he anticipates from this Clause in the way of Excess Profits Duty being paid. I want to know just how much, roughly, he expects will result to the Exchequer from the Clause as it stands. I think it will be very interesting to the Committee to know what would have been his figures had that Amendment not been accepted by the Committee. It would throw a great deal of light on the position and enable the Committee to discuss realities instead of what may be to a large extent hypothetical or theoretical questions. It might mean a large amount or little, but, whatever it means, there is one principle that I venture to think is of supreme importance, and that is that when the Government has given what is in fact a promise to the community at large or to one section, and it applies even more so where the promise is made to a section, that promise ought to be kept to the letter. The promise made in this House was put into the Act by an Amendment in the clearest possible language and accepted by the business community. Why?—Because they knew that everybody was going to be treated alike. The effect of Clause 19 unaltered is to put one class in a different position from all other business classes, and, so far as they are concerned, to withdraw the promise that was made to them as well as to others.966 I do submit that that is a principle or the highest importance to be observed in this House. Let me refer to another case to illustrate the matter. There is a case that will be coming up soon in this House—the case of a promise of the Prime Minister made in this House to the farming community of this country, upon the basis of which they proceeded to put forward their very best endeavours to increase the cultivation of grain in this country during the current season. There has been talk, though I am satisfied that the Government intend to carry out their promise, in certain quarters of the possibility of that promise not being fulfilled to the full. I know they will fulfil it. That is an illustration of the extreme importance of carrying out promises which are given. What did the shipping community do? Very shortly after the Bill became law the shipping community had an interview with the then Chancellor of the Exchequer; the right hon. Gentleman the Member or Monmouthshire, on the question of shipbuilding. We all remember at the beginning of 1916 that the common sense of this House and of the country at large was that it was of vital importance, in view of the submarine losses, that we should do as much shipbuilding of mercantile tonnage in this country as possible. A large deputation of shipowners, when the Government had invited them to do so, came to the then Chancellor of the Exchequer, and said: "Unless we know what our position is, we cannot possibly afford, at modern prices, to build ships "—the cost of building ships being something-like three times or more what it was before the War. What did the Chancellor of the Exchequer say? The reply of the right hon. Gentleman to that statement— when they said it would be impossible for them, as prudent business men, to build at the then War prices unless they could meet the extra cost out of war earnings— was a definite pledge. The Chancellor of the Exchequer said:
As soon as the value on a peace basis could be ascertained of the vessels they built or purchased at war prices they would be allowed out of their war earnings; is a whole the difference between the price so paid and such assessed value.This Amendment, if it has any substance, is an Amendment which is going to take from the shipping community a substantial part of their War earnings which the then Chancellor of the Exchequer promised they should have, subject to the then Excess Profits Duty, to pay for the 967 cost of building. How can the retractation of that promise be justified? Does it matter whether the deviation by the Government from that promise is a big or a little deviation? The honour of the Government was then pledged by what had passed in this House, and that Clause was put into the Act, and by the answer of the Chancellor of the Exchequer to the deputation. It is of primary importance for the honour of the system of government that we have in this country that the commercial community should know that the Government will meet its own Bill. That is the broad question of that principle of a pledge being given to which I ask this Committee to attach the very deepest importance. Now comes the question as to why shipowners should be differentiated against as a trade. What is there the national position? The national position in regard to the shipping industry is this: That before the War we owned 46 per cent. of the total tonnage of the world. During the War neutrals have paid no Excess Profits Duty, no Income Tax, and no Supertax; they have been running their ships at a substantially less cost than British shipowners. They have had a substantially lower percentage of losses from war risks. They have been piling up enormous reserves of capital, filling up every neutral shipbuilding yard with orders for something like eight years ahead. After the War, with all these enormous reserves of capital, with all the, orders placed, they will be in a position in which they will be a tremendous handicap against the British Empire in competition for the maritime supremacy of the world. That is the national aspect of the matter.It is perfectly plain. From the national interest point of view the moment the War is over it will be of enormous importance that the shipowners of this country should have money enough to put into new ships. It is absolutely essential, from the national point of view, to make up the losses which have taken place up to date and that may be anticipated as likely to happen during the rest of the War. That being so, it being essential— you cannot exaggerate the degree to which it is essential—for the nation to maintain the supremacy of its mercantile marine; that being so, what answer is it to say, "Oh, but some shipowners, or most shipowners, or all shipowners, have, during the War, made large profits!" It is no 968 answer at all. I submit that it is, from a national point of view, important that the shipowners should be allowed to accumulate reserves rather than that they should be singled out for special taxation. I could understand perfectly the attitude of the Government introducing the Act of 1915 into this House when all industries were to be treated alike and all were to pay Excess Profits Duty. That is intelligible. But why turn round now at this particular moment when, on account of the submarine campaign since the beginning of this year, our shipping losses have been much heavier than before, and say, "I am going to single out the shipping industry and tax you more than other people"? There is only one more point—that is this: The reason I want the figures as to the effect of this Clause is that if, from the Clause, as amended by the Chancellor of the Exchequer, the result to the Exchequer is not going to be large, I say, "Why break your promise to the shipowners for twopence?" If it is going to be large, I say, "It is grossly unjust, it is a breach of faith, and it is contrary to the national interest to deplete the reserves of the shipowners of this country."
§ Mr. L. JONESOn the Second Reading of the. Finance Bill I addressed myself very fully to the subject of discrimination against shipping and the shipowners. I do not propose to-day to repeat what I said then, except to say that nothing that has happened since has led me to change my views, and that the discussion to-day has only deepened my conviction that the Government are making a great mistake in discriminating against shipowners. It is a very easy thing for them to do. Shipowners have made, I believe, very large profits. The Government are deliberately trading upon the popular clamour in regard to those large profits to treat unjustly a particular class of traders in the community. I said on the Second Reading that the proposals of the Government were a breach of a pledge. I still think they are a breach of a pledge given by the late Chancellor of the Exchequer when he set up the Excess Profits Taxes. If there was one thing clear about the Excess Profits Tax from the beginning it was that it was to be treated as a tax running for the whole period of the War, that the losses and gains were to be balanced one against the other for that period, and that the words "excess profit" did not mean excess profit in one accounting period, or 969 single year, or even two or three years, but that it meant excess profits during the whole period for-which the tax was running. The Chancellor of the Exchequer has made no answer to that charge, and I do not think there is any answer to be made. The point is perfectly clear, and it remains that the present Government have deliberately broken a pledge which was made by the late Chancellor of the Exchequer, which was put into an Act of Parliament by the then Chancellor of the Exchequer, and by this House, and which before it became operative is taken out of this new Act of Parliament in regard to a particular class of traders. The Chancellor of the Exchequer may get his money by so doing, but I venture to say to him that he will lose more in the long run by shaking the confidence of the traders of this country in the bargains which they make with the Chancellor of the Exchequer. The right hon. Gentleman himself is very sensitive in regard to his own bargains—no man more so. There is no one whom I could more rely upon in this House once he made a bargain scrupulously to fulfil that bargain; and I say that he ought to be as scrupulous to fulfil the bargain made by his predecessor in office. It is a very ill omen for his future conduct of the finances of this country that in his first Budget he, as it seems to me, deliberately breaks a pledge very solemnly given by his predecessor. He does it, not on the facts of the case as he told them to us; it was, he told us, because the man-in-the-street thought that the shipowners had made too large profits. I have not got the words of the right hon. Gentleman, but he mentioned the man-in-the-street, talked about popular opinion, and I think he made it very clear that it was the popular opinion, the man-in-the-street, and the daily newspapers which had made a great impression upon the Government.
§ Mr. BONAR LAWWhat I said was that I was, I thought, a good judge of the man-in-the-street and of the House of Commons, and what I expected was that I should be attacked for not going far enough instead of being attacked for going too far. That is my recollection of what I said.
§ Mr. JONESI accept what the right hon. Gentleman says. Whatever his motives were he is really not going to say that it was facts on which he based his opinion or his reason for this serious de- 970 parture from the intentions of his predecessor? My hon. and learned Friend in his speech has given the figures as to the effect of freights upon high prices. I recognise as fully as anyone the great suffering in this country from high prices on common articles of consumption, but it is a popular error, and, really, the Chancellor of the Exchequer ought not to endorse it, to suggest that the greater part of those high prices, or indeed any substantial part of those high prices, are the effect of the rise in freights. The freights in practically every one of these articles of popular consumption is a very small proportion of the whole price. Even the great increase in freights which has taken place does not really produce any substantial rise in the price of the article. All the criticism practically which has come from the man-in-the-street and from the newspapers, as to the profits of the shipowners has been based upon that error, that it was the high freights which had led to the high prices. I do submit that the Chancellor of the Exchequer, of all people in this country, ought not to allow popular errors of this kind to prevail against him. I ask him to-night to endorse what has already been said by my hon. Friend, that freights, high as they are, are no substantial part of the rise in prices that have taken place in food or in articles of common consumption. The truth is that the price of food is high, and freights are high from the same cause, and that is the simple operation of the common laws of supply and demand. The Government must know that as well as anybody else.
What I feel about this tax, what really arouses my anger, and what has made me interested in the question—for I have nothing to do with shipping—is that from the beginning it seemed to me amazing that the Government of this country, of this island country, which is dependent upon shipping, should of all trades in the world discriminate against shipping. It is the very last trade that I should have expected the Government of this country would treat differentially to its disadvantage. I could have understood it if the Government had suggested special advantages for ships and shipowners, had suggested special bounties to the people who built ships, had they encouraged such people to build ships. But no! This Government, knowing what is the primary need of this country at the present moment—the building of ships, and after the War the building of ships, ships, ships, 971 ships, ships, as the Prime Minister has said—this Government, knowing that thoroughly well, having said it in public, have gone out of their way in the Budget to draw a distinction against shipping which places it in a worse position than any industry in the country. What is the meaning of the German U boat campaign? It is partly directed against our food. That is part of our supplies. That part of it, I hope, is going to fail. But it is in large measure also directed against the supremacy of our mercantile marine. I am not so sure that that part of it is failing, and I am confident that what the Government are doing in this Budget is really to help the German campaign against British shipping.
I want to read to my right hon. Friend an extract which I have here from a Danish newspaper to show what the Germans are doing in regard to shipping at the present time. A neutral, a Dane, paid a visit recently to Hamburg, and had an interview with Herr Ballin, the head of the Hamburg-America Line, and in this Danish newspaper there is an account of what Herr Ballin said to him in regard to what the Germans are doing about their ships. I do not take all he said, necessarily, for gospel truth, but, at any rate, it shows what they wish us to believe, and I think it shows, too, what is going on in Germany at the present time. It is published in the "Berlingske Tidende" of 30th June, 1916. [An HON. MEMBER: "A year ago!"] Yes, but it shows what the Germans were doing then, and I have no reason to think they are doing less now. I have no means of finding out the latest information from Germany, but this is what Herr Ballin says:
You know the German's point of view; we are fighting so that the freedom of the seas, and our position as a colonial Power, may be such that we no longer need ' to live as lodgers with England.'…We German shipping people are not sitting quietly doing nothing. The Hamburg-America Line is at present building the 'Bismarck,' the world's largest vessel, which measures 56,000 tons: further the turbine chip ' Tirpitz,' of about 30,000 tons, and three other ships, each of 22,000 tons. At the Vulcan shipyard in Bremen we have no less than nine ships under construction, of which four, with a carrying capacity of 18,000 torns each, will be the largest cargo boats in the world. At the Flensburg shipyard, where there are already three large passenger and cargo boats under construction for us, we ordered a few days ago two ships of 13,000 tons each. Two cargo boats of 17,000 tons each for traffic through the Panama Canal are being built for us by Tecklenburg in Geestemunde. The Hamburg-South America Line is building the ' Cap Polonio,' a considerably improved sister vessel of the 'Cap Trafalgar.' known as an auxiliary cruiser. The Norddentache Lloyd is building at Danzig two large fast vessels, 'Columbus' and 'Hindenburg,' of 85,000 tons each, also 'Munchen' and 'Zeppelin,' of 16,000 972 tons each, and about twelve vessels of about 12,000 tons. The Afrika Line is building six, the Mansa Line eight, and the Cosmos Line ten ships, whose size varies from 9,000 to 13,000 tons.That is the policy which the German Government are pursuing in regard to the mercantile marine of Germany, and that at the very time when our Government, instead of facilitating the building of mercantile ships, are penalising shipowners, taking from them money which ought to be expended in building new ships, though, if they chose to leave shipowners to get whatever would come to them by leaving undisturbed the bargain made by my right hon. Friend they could earmark that money for shipping purposes, and there would be no difficulty at all. What they are doing really is to cause shipowners to sell out as fast as they can and to go off with such profits as they have realised. Instead of encouraging them to remain in business and build ships, the Government action is driving them out of the business, and, though the Government take their taxes, they are really taking them from shipbuilding in the future. I believe that to be a most dangerous course, and if my hon. Friend will go to a Division I shall certainly go into the Lobby with him against this proposal. I sincerely hope we may divide against it, because I will not be a party to discriminating against the shipping industry, which I regard as the very life-blood of our commercial strength and which it ought to be the first duty of our Government to safeguard and to maintain.
§ Mr. HOUSTONI am mainly concerned in defending the reputation of the shipowner against the charges which have been made against him so freely of being a profiteer and being the principal villain in the rise in the price of the people's food. I mentioned earler in the Debate that I would endeavour later on to defend the shipowner from those charges, and I will now endeavour to do so. The shipowner has been held up in the Press—and principally in that portion of the Press which has supported the Government—as being a rapacious profiteer, and in one paper in particular—a Sunday paper, which usually expresses the views of the Government— the most offensive cartoons have constantly appeared from week to week showing the shipowner to be a sort of bloated villain. The Government know perfectly well that the shipowner is not responsible for the great rise in the price of food, and 973 yet they have done nothing during the whole of this period to tell the people of this country the truth. Questions have been asked in this House, but no satisfactory replies have been given. It was only the other day I asked a supplementary question of the Secretary of the Board of Trade, as to whether it was a fact that during the whole period of the War the total freight on meat had never risen above 1d., and in many instances was considerably less, and that the freight on wheat from the United States to this country carried in British bottoms only represented an equivalent of ¾d. on the 4-lb. loaf? He replied to me that we now have the word of a shipowner for that. The Government ought to have known perfectly well that those were facts, and that, as I pointed out, so far as meat is concerned, it is carried for a total freight of ¾d. to 1d. a lb. from the Argentine and from Australia, and yet we have seen increases to the extent of 1s. That is not due to the shipowner, who must be exonerated from that charge, and I call upon the Chancellor of the Exchequer to tell the truth on this occasion so far as the shipowner is concerned.
With regard to the freight on wheat, for some considerable time past the Government have been directing freights in all directions, or requisitioning ships at Blue Book rates, and the result is that freights in every direction have been controlled by the Government Now we have had a freight of 8s. per quarter of 480 lbs. on wheat from the States to this country, carried in British ships, and if it takes 4lbs. of wheat to make a 4-lb. loaf the freight on a 4-lb. loaf is represented by ¾d., and I hope the Committee will consider, when they talk about the enormous rise in the price of food due to freights, that a freight of £5 per ton only represents a shade over ½d. a lb. Freights have been high, and why? It is duo to the action of the Government. We know perfectly well that after the outbreak of the War there was no increase in freights for some months, and it was not until the Government embarked upon the Dardanelles Expedition and other side-shows, such as Mesopotamia and Salonika, and all that sort of thing, that freights began to advance; and it is also due to the laches of the Government, and not to the shipowner, that freights are high. The Government had neglected for years the building of light cruisers, 974 with the result that when war broke out they had no light cruisers to defend our trade routes, and they had to call upon our merchant shipping, and they took away the fast passenger steamers of great tonnage—a very wasteful and a very dangerous action for those ships. Futhermore, when tonnage became scarce, and when they had to employ British tonnage not only for our own requirements in our warlike operations, but when they handed over so much of our tonnage to our Allies, then we had a shortage of tonnage, and the Government had to fall back on neutral tonnage, and it is largely due to the chartering and the employment of neutral tonnage by the Government that the cost of food is so high. I have already said that the Government freight is 8s. per quarter by British ships from the United States to this country, but by neutrals the freight is 42s. 6d. to 45s. per quarter. It will, therefore, be seen why food is high. That money is not going into the pockets of the British shipowner, who is not responsible for those freights. Then, again, the British Government is chartering or requisitioning at Blue Book rates British tonnages, which, so far as the tramp class of steamer is concerned, works out at about 6s. per ton deadweight per month, and at the same time they are chartering neutral steamers at anything from 30s. to 55s. per ton. So you will, therefore, see what an immense amount of British money is going into the pockets of foreign shipowners, and, as my right hon. Friend said, these foreign shipowners are building up enormous reserves which they will be able to use against us at the termination of the War.
7.0 P.M
If the Chancellor of the Exchequer will turn to his speeches, he will see that when he introduced the Budget he said it was the popular opinion that the British shipowner had been making too much money, and in a later speech, I think, he will find he did refer to the man-in-the-street. Perhaps, it would be as well for the Committee to understand how British shipowners have been making profits without affecting the price of the people's food. I have already pointed out that the Government have had to employ the large, fast, passenger steamers as armed cruisers, and, taking into consideration that some of these fast, large, passenger steamers go up to 40,000 tons gross register, and that under Blue Book rates the Government pay something like £l to 25s. per ton on that gross register, and on a form of 975 charter known as the demise to the Crown form, which means that the Government have to pay all expenses of crew, coal, and stores, one can understand how some of the big passenger lines have been making very considerable profits without in any way making those profits out of the food of the people. Again, some tramp owners have done very well indeed, and those who have done well are those tramp owners whom my right hon. Friend described as owning the well-managed ships—well managed to this extent, that they have managed to evade the clutches of the Admiralty for a considerable period, or they have been able to get released, for we all know kissing goes by favour. I have no doubt the Chancellor of the Exchequer will describe the shipowner who manages to employ his ships in commercial trades instead of having them requisitioned as a very good manager, but there are cases of shipowners who have not made any excess profits at all for the simple reason that they have not earned any.
They have been running at freights which have not been raised over pre-war rates, with the result that they have not paid anything over the pre-war datum line. The Chancellor of the Exchequer has described those as badly managed because they have not made profits. I have had innumerable complaints on this subject from shipowners throughout the country. I know the case of a man owning three steamers, all of them requisitoned for the whole period of the War by the Admiralty, and he could not show any excess profits, and, as a matter of fact, he could only show losses. He complained to me that his neighbour in the same port also owned three steamers, none of which were requisitioned by the Admiralty, and I presume it will be claimed that those ships were well managed. This Clause inflicts a good many hardships and anomalies in addition to those caused by the action of the Government. Requisitioning at Blue Book rates two ships which in dimensions are exactly the same, but which in gross tonnage are not the same, makes an enormous difference. For instance, the difference between a ship with a shelter deck measured in the gross tonnage of exactly the same dimensions as another ship which has not her shelter deck included in the gross tonnage may represent a difference one over the other of £l,500 to £1,800 976 per month. That is one of the hardships of requisitioning, and that is a result which shows itself in this special Clause.
The point I want to make is that by introducing this special form of legislation against shipowners, picking them out from all others by legislation which is penal in its character, and which penalises them because they have made profits in the past, is altogether unfair, and is opposed to the sense of justice which ought to animate and actuate the Chancellor of the Exchequer. The right hon. Gentleman has not done what he might have done to make it perfectly clear to the Press and others that the British shipowner was not the harpy which he is supposed to be, and if he had done this public, opinion would not have been used and brought to bear upon the Chancellor of the Exchequer to cause him to introduce special legislation for the shipowner. It will be noted that during the period that shipowners have been paying a very heavy sum of money as excess profits those profits have been inflated by the Government themselves. For instance, shipowners, for some considerable period, have not been allowed to repair their ships or carry out their surveys, but they have been compelled by the Admiralty, under requisition, to simply execute temporary repairs and put off surveys, with the result that the ships have been worked at the highest pressure and knocked about, and consequently they have earned more profits than they would otherwise have done if they had utilised the time for repairs and surveys and if they had spent the necessary money upon those surveys. The Government have taken 60 per cent, of those inflated profits, and now they propose to take not another 20 per cent, but the whole of the profits over Blue Book rates. Having done that, the shipowner is to be left to carry out all those necessary repairs at his own cost, and he will have to bear the loss of time while those ships are being repaired.
It appears to me that the Chancellor of the Exchequer, if the shipowner is the criminal which he is treated as being by this penal legislation, is in the position of being worse than a thief because he is the receiver, for, after having collared 60 per cent, of these profits, he now puts the criminal in the dock, having given false evidence against him, and proposes to take another 20 per cent, from 1st January and afterwards practically the 977 whole of the profits. I think the right hon. Gentleman ought to stand by the shipowner and not treat him like he has done. This is not so much a question of money as a question of making it known to the public in this country that the shipowner is not the villain he has been held to be by the Press and the man in the street, and that he is not responsible for the increase in the cost of food, and I trust the Chancellor of the Exchequer will take this opportunity of saying so. The shipowners do not want to be relieved of the burden. They are only too anxious to bear their burden the same as anyone else, but they object to being selected and put upon a pedestal of discredit or put into the pillory. The right hon. Gentleman said he would like to stand in the pillory with me, but I am sure he would not like to be accused of profiteering and grinding the faces of the poor. It is not a question of paying money, because we are prepared to pay, and there is no class of the community who have done more voluntarily than the shipowners have done.
The right hon. Gentleman admits that they subscribed more freely to the War Loan than anyone else, and he must know-that much of the money they subscribed was paid to them as insurance for ships lost. That money was put aside in order to build new ships after the War and the money invested in the War Loan would be as good as cash. Another thing the Chancellor of the Exchequer must be aware of is that many shipowners have made the great sacrifice, either in their own persons or in the persons of their sons. I know several who have made the great sacrifice, and it is unfair that shipowners should be held up as harpies and villains who only think about making profits and nothing else. I ask the right hon. Gentleman to realise how vital to this- country is the shipping interest. The country would not have been able to carry on the War for one day but for the merchant shipping of this country. That shipping was provided by individual effort, and owes no thanks to the Government, in fact, the Government has done everything it could do in the past to hamper British shipping. It is remarkable that during the period when the Government is doing everything it can to hamper shipping, our Allies are doing everything in the contrary direction. Italy has exempted shipowners from all taxation during the War and for five years 978 afterwards, and she is also giving them subsidies. France has been doing the same, and everything has been done in those countries to encourage shipbuilding.
A great deal is being said about what America is doing. She is certainly building largely, but it must be borne in mind when this War is over that the whole of the shipping which escapes loss will be used for trade purposes, and used against us in trade. The same with Japan. Japan is capturing our trade in the East, and at the present moment, owing to the action of the Government, British trades with foreign countries, which have cost years of work and hundreds of thousands, in fact, millions of pounds, to build up, are being taken away from the shipowners by the action of the Government and handed over to foreigners. The Government have taken away all British ships from this foreign trade, and they are using them in the home trade to carry food to this country. All this, after the War, rather points in the direction of the loss of British maritime supremacy. This country is an island and more dependent upon her merchant shipping than any other country in the world except Japan, and everything ought to be done to increase the building of merchant ships, which we shall badly want after the War. Probably we shall want it badly before the War is over, owing to the-great losses in shipping now going on.
Where the profits made by shipowners are paid away in dividends the Chancellor of the Exchequer should tax them, heavily, but where money was being put to reserve for building ships it should not have been subject to this tax. I agree with the Chancellor of the Exchequer that if shipowners have been making a big profit and paying a big dividend they should have been heavily taxed, because that is a waste of capital, but capital which is put into a reserve fund and earmarked for building ships should not have been taxed. The Chancellor of the Exchequer cannot fail to take into consideration the position of Spain and Holland when they ceased to be great maritime powers, and if once we lose our maritime supremacy we shall sink to the level of a second-rate power. My reason for raising this subject is not that it is a question of money, but I wish to protest against the charge made against British shipowners, and I ask the 979 Chancellor of the Exchequer to do them an act of justice and relieve them from those charges.
§ Mr. BONAR LAWMy greatest regret at the moment is that there has not been a larger House to listen to the woes of the shipowners as depicted in the speech to which we have just listened. My hon. Friend (Mr. Houston) appears before us not only as a victim of injured innocence in his own person, but he represents a trade which, he declares, the Government is doing its best to destroy, and he holds us up as guilty of deeds of infamy which it seems to me to be impossible that any Government could do and survive. He does all this because, after very careful examination, the Government have concluded that the shipping trade, in the interests of the country, should be dealt with in a particular way. I have already said I am sorry that there was not a large House to listen to his speech, but I was pleased with one remark which fell from my right hon. Friend opposite, for he indicated that a Division would be taken on that point. I sincerely hope it will, for there is nothing upon which I would like more to have the sense of the House taken than the proposals of the Government upon this question.
§ Sir J. WALTONWill you allow the House to give a free vote?
§ Mr. BONAR LAWI think it will do.
§ Sir J. WALTONWithout the Government Whips being put on?
§ Mr. BONAR LAWThis is a Government proposal contained in the Finance Bill.
§ Sir J. WALTONIf you allow a free vote you will be defeated.
§ Mr. BONAR LAWI do not think so. I am going to put to the Committee the real case, and not the imaginary case to which we have just listened. In the first place, we are told that what we are doing is a breach of a pledge made by my right hon. Friend (Mr. McKenna). I do not think that what we are doing is a breach of any undertaking. It is easy to make these charges, but I shall ask the Committee to consider exactly what is the position. In the first place, it is obvious that every Finance Bill is for the year alone, and technically at least, and to a large extent in reality, no Chancellor of 980 the Exchequer can seriously bind the decision of the House of Commons in the following year. I was a Member of the same Government as my right hon. Friend, and I wish to carry out any pledge that may have been made. He was dealing with the Excess Profits Duty as a whole, and I do not believe that there is any Member of the House who doubts that if at that time the question had been put to my right hon. Friend whether he would be precluded from dealing in a particular way with any particular trade he would have given the answer that he gave. Obviously, he could not have done so, because the whole history of what has since happened shows that we do deal with particular trades differently. In letter, of course, we are dealing with the shipping trade in an exceptional manner, but in essence it is only what is done in thousands of cases where prices have been fixed for purchases by the War Office or other Departments. Supposing, for instance, there was a large boot and shoe manufacturer who at one time was selling boots to the Army at competitive rates; suppose later on the Government had stepped in and said, "No, you are to sell them at this rate," and suppose we had cut down their profits in that way. In spirit that is precisely the same thing as if you dealt with them by the taxation of excess profits.
§ Mr. HOLTMay I put the difference to the right hon. Gentleman? In spirit that is what the Government are doing with the shipowners with regard to the requisitioning of ships, but it is not the same in spirit as what they are doing in respect of the Clause under discussion.
§ Mr. BONAR LAWThat does not in the least alter the matter. The effect on the individual is the extent to which you lower his profits, and whether you do it by lowering his prices or taxing his excess profits the result to him is exactly the same.
§ Mr. PRINGLEThe Government do not requisition the boots for all the civilian population, but they do requisition the ships for all the civilian population.
§ Mr. BONAR LAWWhat difference does that make? In spirit by interfering with particular trades, or if you like particular individuals, you are dealing with them in a special way, and it does not much matter what particular form that dealing with them in a special way takes.
981 I have not here the exact words, but the pledge of my right hon. Friend the late Chancellor of the Exchequer, as read out, was that they would be entitled to set the loss of one year against the profits of another year. It was really with a view of meeting, as far as I could, this kind of objection that I put down the Amendment which appears to-day, and the result, after all, so far as lost profits are concerned, is that they are entitled to set the loss of this year against the profits—
§ Mr. L. JONESThe pledge was a perfecly clear one. My right hon. Friend definitely said that a datum line would be drawn along the whole period for which the Excess Profits Tax ran. Anything above that datum line would be treated as profits and anything below that datum line as losses, and the one would be deducted from the other.
§ Mr. BONAR LAWThe exact words really do not matter. I am dealing with the principle, and my defence is that the promise given does not preclude us from dealing with a particular trade in a particular way. The way in which you deal with it, so far as the individual affected is concerned, does not matter. According to the speeches which I have heard, we should have been perfectly entitled to deal with the shipowners much more unjustly, provided we had dealt with them in another May. As a matter of fact it was suggested to me—and it was carefully considered—that we should take the shipowners out of the Excess Profits Duty altogether, and that we should fix a definite standard and say, "You are to have no profits beyond that." I suppose that would have been keeping the pledge, but as a matter of fact it would have been dealing much more harshly with the shipowners. My whole point is that no pledge that was given or that ought to have been given in my opinion precludes us from dealing with a particular trade in a special way, if we think it is in the national interest that it should be done. I ask the Committee to consider it from that point of view. It is assumed that we are treating shipowners especially badly, largely because they have made excess profits. That is not the main reason. My hon. Friend who has just sat down said that we had pilloried them in all sorts of ways.
§ Mr. HOUSTONOppressed them.
§ Mr. BONAR LAWI certainly do not think so. I have said more than once that 982 in my opinion the Government ought not to have allowed shipowners to make the profits which they did make, and since my hon. Friend has dwelt upon it I shall give some indication of what these profits are. It was really very wrong of the Government to have allowed such profits to have been made. That is my view, but I said at the time I expressed that view before that I did not attribute the blame to the shipowners. They have done precisely as other traders have done, and the fault, if fault there be, was the fault of the Government which allowed such profits to be made. I wish the Committee to understand the real ground on which this change that we are now proposing is necessary. When this Government was formed my right hon. Friend the Prime Minister in this House, and after consulting me because as Chancellor of the Exchequer I would be affected by it, made this declaration as to the policy of the Government:
I think my right hon. Friend has already indicated to the House what we propose to do with regard to the shipping. It was never so vital to the life of the nation as it is at the present moment, during the War. It is the jugular vein, which, if severed, would destroy the life of the nation, and the Government felt that the time had come for taking ever more complete control of all the ships of this country.… so that during the War shipping will be nationalised in the real sense of the term.Then comes the other point. It is really very important, and it is not merely an appeal to prejudice:The prodigious profits which were made out of freights were contributing in no small measure to the high cost of commodities—That is true, though it is not the main cause—I always found not only that, but that they were making it difficult for us in our task with labour Whenever I met organised labour—I have had the same experience—where I would persuade them to give up privileges, I always had hurled at me phrases about the undue and extravagant profits of shipowners."—[OFFICIAL REPORT, 19th December, 1916, cols. 1345–6, Vol. LXXXVIII.]That in not merely prejudice. The fact that the Government does not allow profits of such an undue character to be made is itself an argument when you appeal to other classes to make sacrifices for the carrying on of the War. These are real facts. When we came to consider in what way we should best carry out that undertaking, it was done by requisitioning ships and by controlling freights in the few cases where the ships were not requisitioned. I suppose no special fault will be found with that. Then we came to deal with the curious fact that ship- 983 owners are in a different position from any other trade, because the standard rate of profit is very excessive compared with the normal rate of profit. It so happens that the years which come under review in estimating the standard rate were years of excessively high profits; they amounted, I think, on the average, to about 15 per cent. The high profits made have a direct bearing on our policy with regard to shipping, because on account of the high profits made in the previous years it was certain that there would be a fund to make good any deficiency in this year. The result of that, if we had allowed the usual course to be continued, would have been that it would in essence have meant that we should have guaranteed a profit of 15 per cent, to the shipping trade at the very moment that we were saying we were controlling them and preventing them from making undue profits. I say that to have allowed that would have been to have broken the promise we had made, and it would have been utterly impossible to have carried out the policy on which we had entered.It is quite true that we might have done it in another way. We could easily have made it much more harsh for the shipowners. We could have lowered the shipping rate, with the result that losses would have been made all round. I had to try to deal with it in the fairest way I could. I have done so, and I do not believe that there is any fair-minded man in the country who will contend for a moment that an arrangement with a trade which is vital to this country, which we have decided must be dealt with in a special way, an arrangement which allows them to get back all their losses this year, with the probability that at the worst they will make some profit is a bad arrangement from the point of view of equity. When we come to the other argument addressed to us, that this does not raise the cost of commodities, I am quite willing to do what my hon. Friend wishes to the extent of saying that there has been a great exaggeration as to the effect of freights on prices. But do not let the Committee suppose that it is negligible. My hon. Friend, for instance, took the case of wheat. He gave the freight from America, the nearest point, and showed what that meant in the cost of the loaf. You cannot do that. There are other markets from which wheat 984 comes, and the freight from the larger markets comes into play, too. If you take into account the freight from Australia the effect is greater than if you take merely the freight from America. There are many commodities where these excessive freights have had a direct adverse influence, particularly in cases where the freight is very high in proportion to the value. Therefore, while we must not exaggerate it in one direction we ought not to exaggerate it in another. Let us take the other argument. My hon. Friend says that other countries are offering money for the building of ships. If these excess profits are allowed to continue, what guarantee have we that they will be spent on the building of ships? We have no guarantee.
§ Mr. BONAR LAWYes, by treating shipowners much more favourably than other people! As a matter of fact, there would be no guarantee. A great deal of the shipping is owned by shareholders who have nothing to do with the management, and merely receive the dividends. They will not put money into ships unless it is going to pay. In the same way even shipowners, if they are wise, will not invest money in ships unless they think it is going to be a good investment. Therefore, what is suggested is that we should allow shipowners to keep these enormous profits in the hope that when the time comes they will be employed in the building of the ships necessary for the life of this country. At the present time they cannot build ships or the money cannot be employed in that way to any large extent. The Government themselves, in the national interest, are using the yards to build ships for the nation's need. In that way the shipowners cannot employ the profits now. I really think it is strange that I, personally, should be regarded as an enemy of shipowners, or, indeed, as an enemy of any trade whatever. I have certainly tried—I ask the Committee to believe me—to make an arrangement which I believe to be the fairest in my power in the circumstances of the case.
I am going to give the Committee the effects these excess profits have. I say it advisedly, that if we have allowed profits of this kind and on this scale to go on, the more it became known among all classes of the community the more useless it would have been to make claims upon 985 anybody to make sacrifices in carrying on the War. My hon. Friend who has just sat down asked me to tell the truth. That is not an unusual habit of mine, I hope. I am going to do it now. I rather dislike giving my own experiences in shipping, and I will tell the Committee one reason why I dislike it—I am really ashamed of it ! It is utterly disgraceful that, in a time of war, any class of the community, while others are suffering every kind of privation, should be able to make profits such as I am now going to point out. I do not say it is the fault of the shipowners—I think it was the fault of the Government —but it is absolutely disgraceful that it should have been allowed. My hon. Friend suggested- it was a curious thing, and I was surprised he made the suggestion— that perhaps my experience was duo to some special favour on the part of the shipowners with whom I have invested some of the money I have. I do not think that is true in any ease, but, at all events, it would be curious, for this reason: that I invested in fifteen different shipping companies under the management of seven different owners. I admit they are all tramp steamers, and it may be possible that they did better than liners. I am not sure, but I have no experience of liners. I have no reason to doubt from the fact that these companies were managed by seven different owners that this is a fair representation of the profits of the owners of tramp steamers during the War. Now I am going to give the Committee the figures. I gave them in percentages the other day, but I do not think the Committee quite realise what they meant. The sum of money I had invested in shipping, spread over these fifteen different shipping companies, was £8,100. Five per cent, interest on that, which in ordinary times, I should have been glad to get, would be £405. For the year 1915, instead of £405,I received £3,624, and for the year 1916 I received £3,847.
§ Mr. C. DUNCANGood Lord !
§ Mr. BONAR LAWYes.
§ Mr. BONAR LAWI said it was a risky business to bring these figures before the Committee, because I felt quite certain there would be a suggestion that I should pay Conscience Money to myself. That 986 does not end the matter. I agree it is a great advantage to the country that there should be money put into ships if necessary, but prudent managing shipowners do not divide all the profits. There is something to come to me later. One of these steamers has either been sold or sunk, I do net know which. Either way, she has been turned into money for me. In that ship I had £200, and after the very handsome dividend which I received, on liquidation I received a cheque for a little over £1,000. That is not my only experience. There was another shipping company in which I invested £350. The other day I received a letter from the managing owners of that company, saying that because the cost of building was so high and was likely to continue high, it was not probable they would wish to invest the money in ships for a long time to come; therefore, they were going to make a division out of the surplus capital. For that £350 capital, on this division, I received a cheque for £l,050. That is the trade we are ruining ! I say at once that the mere fact that the Government have allowed shipowners to make these excessive profits. is no reason for treating them unjustly now—it is not their fault—but I do say, in view of the profits they have made in the past, that for us to consent to an arrangement which would practically guarantee them 15 per cent, profit after we had taken control and after we had said we were going to limit their profits, would be unfair to other industries and to the taxpayers of this country.
§ Mr. McKENNAMy right hon. Friend has made a statement which for convincing candour I do not think I have ever known its equal. I am sure that the whole Committee will agree that, accepting his premises and assuming his objects are effected by this Clause, he has acted extremely wisely. For myself, I accept, for the sake of argument now, all his premises. I am prepared to agree with him, for the sake of argument, that it would have been wise if all shipping had been taken over at the beginning of the War, but I am not at all sure that it would have been practicable to do so. For the sake of the present argument, I am prepared to assume that we ought to have taken over all the ships, that the profits ought to have been limited from the first, that it is not the fault of the shipowners that they have made these big profits, and that we ought, if we can in reason, to take back from them a cer- 987 tain amount of the profits they have made. Assuming the whole case, therefore, as put forward by the right hon. Gentleman, in my judgment we have only two points to consider: First, are we precluded from acting as the Government proposes by any pledges that have been given—that point has been raised; and, secondly, does my right hon. Friend, by his Clause, substantially effect his object? As regards pledges, so far as I can gather, I am the person most concerned. I gave certain pledges in regard to the Excess Profits Tax. The first was that the period of the tax should, after the conclusion of the War, be treated as one taxing period, that we should then re-examine the whole of the accounts, assuming that we did not levy the tax each year, but that we took the whole of the excess profits over the whole period, and then charged to the taxpayer what he would have been liable to pay. The result of that is that if in any year lie had a loss, or did not reach his pre-war standard, in taking the whole of the profits for the whole period together the taxpayer would get an allowance for that loss. The second pledge was that any person, firm, or shipowner who ordered or built a new ship during the War at the present high war-rates, should be entitled, at the close of the War, to write down that ship to the post-war value. The effect of that writing down would be, of course, to cause him a very serious loss in the last year of the operation of the Excess Profits Duty, and he would then, under the first pledge, be entitled to set off that loss against previous profits.
Those were the two pledges I gave. If it had rested there, it would have been a mere matter of Ministerial pledge, and I should have been, and I think my colleagues would have been, bound by the pledge we had given. But those two pledges were incorporated in an Act of Parliament. They were accepted by this House, and this House took responsibility for them. From that moment the special Ministerial responsibility ceases. The responsibility for making the pledges and for keeping or varying the pledges is a responsibility which rests upon the House, and no longer rests upon Ministers. The House at that time approved the action of Ministers, and took over their pledges. As my right hon. Friend has said, it is a cardinal principle that this House can never bind itself against the future The 988 primary duty of this House is to consider every proposition anew from the point of view of public interest. Therefore, I am undoubtedly inevitably driven to the conclusion that this House is absolutely free to reconsider the Act of 1915 and to vary it, quite regardless of any Ministerial pledges which were given, provided those Ministerial pledges were adopted by Parliament. There is a great distinction between a pledge which is endorsed in an Act of Parliament and a Ministerial pledge which is not so endorsed. The Minister who has given a pledge, unless he is absolved there from by the general assent of those to whom it has been given, is bound to stand or fall by that pledge. Parliament cannot be so bound; it would be contrary to the public interest. Parliament must, therefore, approach the consideration of this question quite apart from any pledges that were given.
Now we come to the question whether it is in practice expedient for Parliament not to adhere to the provisions of the Act of 1915, or whether it is public policy that Parliament should now break its promise. The objection to quick changes in public policy is that you thereby create a great sense of insecurity in trade and industry. There is no doubt at all. I know of cases myself—that, on the faith of the Act of 1915. a number of people have invested capital, at very high prices, in building ships, with the object not of making profits, because the ships were already at the time being so largely commandeered by the State that the prospect of profit was very small, but in response to Ministerial requests that they would build the ships in order to assist the national trade. In these cases it is unwise for Parliament to break a pledge which has been given. It creates doubt as to whether hereafter Parliament can be trusted to see to the end the promises it has given. I do not, however, dwell upon that point. It is not a question of moral right or wrong; Parliament must be absolutely free. It is merely a question for the consideration of this House whether, in the circumstances, it is expedient to make the change. Now I come to my second, and much stronger, point, the real gravamen of the question—namely, does this loss affect my right hon. Friend's object? Let me put it to him. He has read to us very interesting figures of profits which he has made, and which he regrets having made—
§ Mr. BONAR LAWI do not say that.
§ Mr. McKENNARegarding which he regrets the circumstances that made it possible for him to make those profits. He has read to us certain figures, and he suggests that if this Clause becomes law he will be called upon, or may be called upon, to disgorge some of those profits. If that is not so, then I do not follow the ground for his giving us the figures.
§ Mr. BONAR LAWI will explain to my right hon. Friend. Owing to these high profits, everybody engaged in shipping has such a reserve to his credit that if Clause 19 is not put in the Bill it will mean that I and everyone else are guaranteed the pre-war standard of 15 per cent.
§ Mr. McKENNAThat is so, but always under one condition. My right hon. Friend having made these profits can immediately secure to himself the permanent benefit of those profits. How? By selling his interest in the ships. That is so. He has made his profit, and he can keep his profit. He will then say that the effect of this legislation will be to drive down the value of the ships, and that he cannot sell ships for as much as he would otherwise be able to do. What does that mean if we come to consider the operation of this Clause? It means that it will pay a shipowner not to use his ships, that if a shipowner keeps his ships in harbour and does not employ them, although that employment is absolutely essential to the State, it will pay him because he will keep all these enormous profits he has already made, and at the close of the War he will have his ships intact. My right hon. Friend may say to me, "Yes, but he will not be allowed to keep his ships in harbour; he will be directed to use them," and he is compelled to use them. But there is a very different method of using ships. I am quite sure of this, that notwithstanding this tax and notwithstanding anything that may be done, shipowners will use their ships in general to the utmost of their ability for the benefit of the State, but I put it to this Committee that it is very unwise to pass legislation which puts a premium on an inefficient, lax, management of your property; because, although shipowners may be directed to use their ships, they retain control of the management.
§ Mr. BONAR LAWIt does not do that. I am sure the right hon. Gentleman is mistaken.
§ Mr. McKENNAI hope so.
§ Mr. BONAR LAWThey have the incentive—because they can get in this year excess profits—which applies to other people.
§ Mr. McKENNANo, that is not so under the present arrangement. I am sure we are at issue on questions of fact, but under the present arrangement, at the present rate at which a ship is requisitioned, it is impossible for a shipowner to run it at a profit. When I speak of a profit, I mean a profit in excess of the standard profit. At any rate, I have understood that that is so. I have understood that, generally speaking, a requisitioned ship cannot be worked to-day at a profit in excess of the standard profit. If that be true, it must follow that all employment of a ship by a shipowner will result, if not in a loss, in a profit less than the standard rate of profit. Consequently, this Clause operates injuriously to him if he uses his ship. It is so, because if the shipowner does not use his ship—assuming that he cannot be compelled to use it— he will retain all the gross and excessive profits he has made in the past, and will at the close of the War have his property intact. If he uses his ship, and uses it at a loss, then that loss, instead of being made good to him, as was the case under the original Act of 1915, falls upon him. Consequently, if the requisitioning has the effect, which it certainly has in many cases of causing shipowners to run at a loss, there is a premium paid to shipowners not to employ their ships. I think that it is worthy of the thought of this Committee. There have been, since these profits were made in 1915 and 1916, immense sales of ships. Whole fleets, as the Committee know, have been sold. The profits, therefore, for 1915 and 1916 were made by the shipowners who then owned the ships. They have walked away with those immense profits, and have taken also with them the immense prices at which they sold their ships. They no longer have any interest in the business. If there are persons who are to be condemned for having received very high profits, those are the persons because they have not only received high profits for working their ships but they have received high profits on the sale of their ships, and those are the people who will not be touched for one penny under this Clause. Who is it then that is affected by the right hon. Gentleman's 991 proposal, and to whom his argument is directed? It is those shipowners who have refused to sell, who while they have had good times have to bear the brunt of the bad times in the future. I put it to my right hon. Friend I am not in the least refuting a single argument he has brought forward. I agree with him that it has a most pernicious public effect to see any industry making extravagant profits; I agree that you cannot keep up good feeling in the country when large numbers are losing and others are getting immense advantages out of the War; but let the right hon. Gentleman's remedy apply to the disease. He lets out all those who have sold whole fleets and he leaves the burden to be borne by those who have continued, as I think, to do their duty and run their ships efficiently.
§ Mr. McKENNANo, out-and-out sales, very largely. My right hon. Friend has said that there were other and harsher ways of dealing with shipping. If he likes, and the Government choose, to apply discriminating taxation, I have nothing to say; there is plenty of precedent for it. The land taxes and the munitions levy are both examples of discriminating taxes. Whether they will be remunerative is another matter, but at any rate we have plenty of precedents for discriminating taxation. If my right hon. Friend found himself, on the argument that he has addressed to the Committee this afternoon, choosing to deal with the shipping industry in a special way, I for one would be perfectly willing to give a general support to such proposals as he might make, but my objection to the present proposal is, first of all, that I think it unwise to allow a feeling of insecurity to arise from so quick a change in Parliamentary policy as that which is disclosed here between the Act of 1915 and the present Act; and, secondly, that my right hon. Friend's present proposal is not a remedy for the disease. My right hon. Friend intimated earlier that he would regard a vote upon this Amendment as a Vote of Confidence in the Government. So far as I am concerned, I should be most unwilling to give any vote at any time in war on a Finance Bill which the Government have put forward as their final proposals for the year, and I should not for myself think of going into the 992 Lobby against the Government on a definite proposal of this kind which they have put forward as essential for their annual finance. We may, nevertheless, make an earnest appeal to my right lion. Friend to reconsider whether the present proposal is a wise one in the whole circumstances of the case. I am sure that its general effect is going to be far more pernicious in its influence upon the shipping industry than he is going to reap benefit from the satisfaction that it may give to those who think that shipowners have enjoyed too high profits. Shipowners are not the only ones who have enjoyed high profits. We shall pass from industry to industry. We are now putting on a discriminating tax without inquiring into individual cases. There are many shipowners who have not made extravagant profits. There are those who I have already described as having cleared out and gone away with their profits. The natural desire to avoid and to take away these extravagant profits will not stop here, and I would appeal to the Chancellor of the Exchequer, if he wishes to deal specially with this trade, that it should be by a more considered scheme, which will really hit the evil at which it aims, and not by a proposal which, in my judgment, must be injurious, and which will not, in fact, raise very much revenue.
§ 8.0 P.M.
§ Mr. PRINGLEI am not much concerned with the controversy which has taken up a large part of the Debate this afternoon on the question of pledges. The hon. and learned Gentleman the Member for the Exchange Division of Liverpool (Mr. L. Scott) first raised this question as if it were a novelty for the Government to break pledges; but if he were in more frequent attendance in this House, he would have found that the complaint regarding breaches of pledges was one of the most commonplace things during the past two years. I wish, however, to deal with the case that has been put forward by the Chancellor of the Exchequer. He told as that he was going to put up the real case and not the imaginary case, but in essence the argument which he has put before us on behalf of his proposal this afternoon has been twofold: First of all, it is justified by public opinion; and, secondly, it is justified by his own investments. I think this is the first time that any Chancellor of the Exchequer in this country has justified financial proposals on such 993 strange grounds. It is true there has been a large amount of prejudice, ill-informed prejudice, as to the effect of shipping freights and the consequent profits of shipowners upon the price of commodities commonly used by the mass of the people, but the statements of fact which have been made in the course of this Debate by the hon. Member for West Toxteth (Mr. Houston) and other Members have conclusively proved that shipping freights have been a comparatively small factor in the increased prices of commodities. I think, therefore, that the Chancellor of the Exchequer's rather grudging withdrawal of the charge against shipowners—a charge made not only by the Press, but by himself and the Prime Minister—is hardly worthy of the occasion in view of the facts which have been disclosed. It is all the more strange in view of the speeches which the Prime Minister during the last week-end has been delivering in various parts of the country. We have still the same stale and exaggerated statements regarding profiteering on the part of shipowners. No doubt there has been a large amount of profiteering in this country during the War, but at the present time, when prices are highest and when the increase in price has been going on at a quickening pace, it is obvious that none of that can be laid to the charge of the shipowners. What is going to be the effect of this? The Chancellor of the Exchequer and the Prime Minister are going to find themselves in this position, that, having taken this action in regard to the shipowners as a result of a popular cry, they will be driven to do similar things and to take similar measures in relation to all other industries. We have been told that the withdrawal of the pledge, as it is called, which was given in the Finance Act, affects only one industry, because of the favoured position of that industry, and other interests have been lulled to sleep on the belief that only this specially favoured interest was concerned. If these arguments are to prevail, this principle has to be extended far and wide. We are going to see what the Government will do in regard to the fanners. My hon. and learned Friend the Member for Liverpool waxed eloquent about the pledge given to the farmers in the Corn Production Bill—a pledge covering a period of years, a guarantee which he feared would be broken.
§ Mr. L. SCOTTNo, no !
§ Mr. PRINGLEThe tone in which he spoke rather indicated he had some suspicion as to the intentions of the Government.
§ Mr. PRINGLEThe case and the figures which have been given reveal the farmers as the greatest profiteers. I do not know whether the hon. and learned Member— I hope he will spare me a little of his attention—has been paying any attention to the sales of early potatoes. I see he represents an agricultural constituency, and I have no doubt he has, but if he looks at the sales he will find that the average price for 1917 is exactly 100 per cent, per acre above the average price for 1916. One farm was quoted by the hon. Member for Altrincham (Major Hamilton), in which from 200 acres, the price per acre, represented an excess profit of £10,000. I think that was the figure. The total profit was £10,000. Nineteen hundred and sixteen was not a bad year for potatoes, and if we are going to go back to the pre-war standard, which would be the right thing to do, it would be very interesting to find out what popular opinion would be as to the exemption of farmers from Excess Profit Duties and Income Tax and from Super-tax, and last, but by no means least, as to what their opinion will be of the guarantee which is to be given to them for a series of years. When all these facts have sifted into the popular mind, when they see the basis on which this exceptional legislation is being justified in respect to shipowners, they will say, "Why give this guarantee?" and this Government which is so susceptible to popular clamour will, as they have done in other cases, bow to the storm and my hon. and learned Friend's constituency will be deprived of their guarantee.
§ Mr. PRINGLEMy humorous and Oriental Friend does not appreciate my form of humour. The farmer is not the only person who has received special favours from this Government. There is also the question of the munition firms. We all know that special terms were made in regard to these munition firms under the Munitions Act. It was represented when the original Munitions Act was being passed that a special charge was being imposed upon them in return for privileges which were being surrendered by the 995 trade unions and others. That was represented as a bargain, but now we discovered that, instead of having a special charge imposed upon them, these people during the years in which the Munitions Act has been in operation have been in a specially favoured position. It is true a compulsory charge has been imposed upon them, but the amount which has been paid into the Treasury in respect of excess profits is only a beggarly sum of four or five million pounds out of these munitions undertakings. Everybody knows that they have earned far more in excess profits than that. Some of the representatives of firms during these two years engaged in munitions have been allowed to retain sums of money in their pockets while shipowners have been paying out, and not only so—and this is an important point in view of the claims which shipowners make—that if they earmark certain of their profits for the purpose of building new ships consideration should be given to that. We have to remember in regard to the munition works that there is special provision in regard to depreciation under the rules for assessing excess profits, and, not only so. in a large majority of cases the munition makers have been enabled to put up new plant on exceptionally favourable terms. All that is taken into account, and in spite of these things they have at the same time for two years been escaping payment of excess profits. All these things will be borne in mind when the public read the justification which has been given by the Chancellor of the Exchequer of this Clause. He has told us once more, in some great detail, how tremendous a criminal he has been in exploiting the public as a shipowner. We are deeply impressed by it, but I think that his arguments from his own personal experience do not necessarily prove that the cases he quotes are representative of the industry as a whole. There are undoubtedly many cases where the profits earned do not reach anything like the figures quoted by the Chancellor of the Exchequer, and I think it extremely unfortunate, from the point of view of this particular industry, he should have been such a lucky investor. Apparently some of the ships in which he was interested have been sold, and that has also been to his individual benefit. But we must remember, as has been pointed out, that in the case of sales it is impossible to get at the beneficiary through this Clause. I remember having 996 a conversation with a high personage in the Admiralty who was a relative of a shipowner and this distinguished gentleman told me that his relative had had an offer of purchase for his ships in the early stages of the War, and his relative asked whether he should accept the offer. The answer of the distinguished Admiralty official was that it would be a most unpatriotic thing to do. Now the legislation passed in this Bill is going to have the effect of penalising the patriotic shipowner and to let off the unpatriotic shipowners, a situation which I think the Chancellor of the Exchequer, in this country in a time of war, should do everything he could to avoid. From every point of view the case of the opponents of this Clause is overwhelming. The Chancellor of the Exchequer has not shown that he is going to make any considerable profit out of it. There is going to be a small profit to the Exchequer and a loss of moral credit to the Treasury by entering upon a measure of this kind, and a loss of moral credit to the Government, if indeed the Government can lose any more moral credit than it has already lost. It is somewhat bankrupt in that respect. There is that distinct loss to the Treasury without any appreciable gain to the Exchequer. The Chancellor of the Exchequer is simply endeavouring to quiet some popular clamour. Indeed, I have heard another explanation, that this is part of the bargain which was made on the celebrated day in December when the Labour Party was bought and sold at the War Office.
§ Mr. W. THORNEWe have not been bought and sold any more than you have.
§ Mr. PRINGLEI have not been to Petrograd.
§ Mr. THORNEDo not make insinuations.
§ Mr. PRINGLEI have not made insinuations.
§ Mr. THORNEYes. you have.
§ Mr. PRINGLEThe position of the Labour Party on that occasion is known to the world. It is known that the assent of the Labour Party was essential to the formation of the present Government, and they were able to exact certain terms, and it was because those terms were exacted on that occasion that this provision now appears in the Budget. That accounts also for the poverty of the argument on the part of the Chancellor of the Exchequer in defending his case to-day.
§ Mr. HOLTI am rather surprised at the right hon. Gentleman's doctrine on the subject of pledges inserted in the Bill because it seems to me to carry him a very long way. Take the Corn Production Bill. He proposes to pay a guarantee for five years, just in the same way as the original Finance Act made the stipulation with regard to excess profits for the duration of the War. Do I understand that it would be quite right at the end of two years for a new House of Commons to say, "We cannot be bound by our predecessors. We are going to repudiate the whole of this guarantee, and having paid it for two years, there is nothing more to be paid." That appears to be an analogous case, and I really do not think anyone would regard that as a proper thing to do, and I cannot believe the farmers would consider that they had been fairly treated by the House of Commons if anyone took that action. Now the Chancellor of the Exchequer has proposed and carried an Amendment which very materially affects the operation of this Clause. I do not know how far the Committee really understands the exact effect of the Amendment, but I think I can tell it. The Treasury substitutes a percentage standard of profit for the pre-war standard when it comes to repaying losses. That is the whole effect of the Amendment. We have to see what that means. Naturally there is nothing whatever in this Clause that affects the making of large profits by shipowners. It has nothing to do with anything whatever the repaying of losses. Let the Committee and the public get that in their minds.
How did a man get a high pre-war standard of profit? First of all he must have been a man who built a very good and useful ship. He must have been a good judge, he must have put intelligence and ability into the design of the ship. Then he must have made a good bargain with the producer in the matter of prices at the time. He must have managed his ship well, he must have sailed her with safety, carried on business in an intelligent manner, been a person who got on well with his customers — attracted custom—and served the public usefully, and by all those qualities, which I believe to be good qualities, he has obtained a high percentage of profit. That is the only way in which you can obtain a high percentage of profit, andprimâ facie, and leaving out of account accidents which 998 always happen anywhere, speaking generally, the man with a high percentage of profit is a better man than one with a low percentage of profit, because he has shown more intelligence and skill in the conduct of his business. There seems to be some ridiculous idea abroad that there is something meritorious in getting a low percentage of profit on your capital. Nothing of the sort. It is the business of everyone to get as high a percentage of return on his capital as he possibly can, and it would be a very bad day for this country if anyone supposed it was the duty of anyone to coerce an industry to carry it on inefficiently. Who is the man who has a low standard? He is the man who buys a white elephant at an excessive price and then mismanages it. That is how you get a low standard of profits. The man who is going to be penalised under this provision, as the thing stands, is simply the man who before the War carried on his business with exceptional efficiency. He is to be put in a worse position than the man who carried on his business so poorly that on the whole a 6 per cent. standard was better to him than the pre-war average rate of profit. That is the effect of the Amendment. It is a very trifling one, and I think from the point of view of the Government it is a very unworthy thing to put people who manage their business well on a worse footing than people who manage it ill.
As regards the Clause as it stands even now, who are the people against whom this discrimination is made? We are discussing this Clause. We are not discussing the whole of this policy of requisitioning, which is not before the Committee at all. The man who still continues to make a profit and finds that requisition rates pay him handsomely and give him an excess profit—and in my opinion there will be many such persons—is not affected by this. The only man who is going to be affected by this is the man who carries on his business unfortunately, and, owing to the arbitrary action of the Government, makes a loss. As far as I can make out, that is not likely to happen to anyone except the man who has a small number of ships, and is therefore liable to an exceptional run of bad luck. I do not think it can happen to a person of reasonable capacity, who is in a position to average out the chances. I think it a very small and very paltry proposal to put before the Committee. It is not now 999 suggested that shipowners have done anything wrong. The Chancellor of the Exchequer himself said they had done what every business man would have done in the same position—taken an advantage and an opportunity which was thrust down their throats, and what he had done himself and benefited by. It has also been admitted that freights are not to any appreciable extent responsible for the rise in prices. That is proved up to the hilt, and is not contested.
§ Mr. HOLTThe Chancellor of the Exchequer, I think, did not contest it. He said that if ships had not been requisitioned the freight of wheat from Australia might have risen to a very high figure. What freight on wheat would it take to make the price of bread rise appreciably? Supposing you were to charge £10 a ton on wheat, which is far more than anyone is charging, you would be charging just about 1d. a lb., so that the whole amount of rise in the price of bread which could at the outside be attributed to a rise in freights which have been Id. in the lb. That is the maximum which, by any stretch of the imagination, could be attributed.
§ Sir J. WALTONFourpence a loaf.
§ Mr. HOLTFourpence on the four-pound loaf, and that is on wheat from Australia. That is the whole case which has been made out. The Government itself, having taken possession of ships, has not reduced freights, but is rather trying to keep them up in order to get the profit. What they are after is to get the profit which the shipowner was getting before.
Another consideration which has not been touched upon is the extent to which the goodwill of the shipowner's business is being taken from him. He is losing an intangible asset which, certainly as regards anyone who is running a regular line, is of the very greatest value. The whole of his business connection has been broken up and has been handed over by the Government to his most dangerous competitors our very keen and skilful Allies, the Japanese, who all over the East have been put in a position from which I do not believe for generations they will ever be removed. What the shipowner will have to pay in the way of meeting losses from competition, if he is to get back to 1000 the position he was in before, for years after the War is over, I do not think anyone has the slightest idea. I believe the Amendment proposed by the Chancellor of the Exchequer now gets rid of the bulk of the financial hardship which was imposed, but if that is true it means that the Clause ceases to have any financial value to the Treasury at all. It is an argument which cuts both ways. What remains is the insult. There is no other word for it. It is an insult on a class of traders who have done their duty as honourably and as successfully as any other section of the community, neither more nor less. They have shown as much patriotism as anyone else. That is the effect of the Clause as it stands now. It has another effect, and that is a warning to all classes of the community that they have no security that similar treatment will not be meted out to them, and that the security on which they expect to invest their money is greatly endangered. We do not propose to divide against the Clause, but I desire once again to protest in the strongest possible manner against this differential treatment.
§ Mr. J. M. ROBERTSONI understand that no estimate has been offered of the probable yield of this tax. That, I believe, is rather unusual. We are usually told what the Treasury expect the tax will yield. The arguments of my hon. Friend (Mr. Holt) seem to me to give overwhelming proof that it will yield next to nothing. Can my hon. Friend (Mr. Baldwin) tell us-whether or not that is, roughly, true? If my hon. Friend is incorrect, will he give the House something like an estimate of what the yield is expected to be? A proposition has been put to the effect that this tax, which apparently is going to yield nothing, is imposed to carry out an arrangement made between parties behind the back of this House—I do not say it in an offensive way—and on which there was no discussion in this House. Can we be told whether a worthless tax is being carried through because an undertaking of that sort has been given? I put this question very seriously, because earlier in the day the proposal to tax the excess profits of farmers was rejected on the ground that you would not get valuable results. The whole argument was not that it ought not to be done, not that there were not certain excess profits which ought to be got at, but that you would not got much result in revenue. If that is an argument against 1001 taxing the farmer, surely in the name of common sense and common honesty it is an argument against this tax. Of course, I am making certain assumptions which my hon. Friend (Mr. Baldwin) may be able to overthrow. If the Government's argument is that you must not tax the excess profits of farmers, or the profits of farmers in any way, because you cannot manage to get revenue out of it which will repay you for the trouble you have taken, how can they use that argument against taxing the farmers and throw that argument to the wind in this particular case of taxing shipowners? Is the position this, that the Government have been asked to put this kind of tax on shipowners not to get money, but simply because some previous pledge has been given, or is it that there is just another alternative?
The right hon. Gentleman suggested that there was a great deal of dissatisfaction in the country with regard to the high profits on shipping. That is perfectly true. A great deal of ignorant outcry was raised in the Press at the beginning of the War. We often read in the Press and heard in this House that the high rates of shipping accounted for the rise in food prices. I can say something on that subject from special investigation, as I happened to be associated with the Committee on Food Prices. The high rates of freight had nothing whatever to do worth mentioning with the increase in the prices of food. These high rates undoubtedly affected certain commodities, and precisely as the Government went on requisitioning more and more ships' space for given objects, they limited more and more the articles on which freight could tell. If freight told heavily on certain articles in the end, representing a small minority of imports, and if high prices were made out of that, it was in the ordinary way of business, and the Government surely could not blame the shipowner for charging high prices for the small shipping space that was left to him for carrying cargo. He must put up the freight, as it were, to public auction or else give a particular privilege to some particular person, which would be corrupt. I defy anybody to invent a way of fixing freight for the limited freight space left except by taking what the market offered. If you told the shipowner to use the remaining freight space at low rates you were telling the shipowner to make a corrupt bargain.
§ Mr. ROBERTSONIt would be inviting them to make a corrupt bargain. The shipowner has got so much space in which to carry cargo. The rest of his space is requisitioned by the Government at Blue Book rates. For that remaining space he knows that there are people who are willing to pay very high freight. How could you make a selection among those men? There is no real or honest way of settling that freight except by letting the market regulate it.
§ Mr. ROBERTSONDoes the hon. Member suggest that a bargain of that sort will be made and carried out without corrupt consideration? You are opening the way to all sorts of underhand bargains. You cannot expect the shipowner to say, "There are twenty men claiming what is left of my ship room. I am going to give it to the one who pays the lowest freight." He might do that if he thought it was something to be carried in the national interest, but if there was anything the carrying of which was clearly in the national interest it was the obvious duty of the Government to requisition space for that also. The things that were left open to be carried by the, shipowner were things upon which the Government could make no decision as to their respective value from the point of view of national interest. The whole point I am contending for is that no kind of charge rests against the shipping freights. The right hon. Gentleman did not deal fairly and squarely with the matter by leaving it open to the old reproach, against shipowners of making high profits. What I want to know is whether this tax is being imposed solely because a certain party or certain sections in the country are angry at seeing shipowners making these profits. Is the tax to be imposed to yield a return worth nothing because of discontent outside? If that is so, then in view of the attitude of the Government with regard to the farmers they cannot come forward and say that it is perfectly monstrous that shipowners should be allowed to make the profits they are making, and that you are bound to put a tax on whether it yields a result or not. You can no longer make that answer. It is quite possible that my hon. Friend will tell us that the Government have estimated the yield of 1003 this tax and that they can see it will be a good yield. If so, it will partly disarm my argument. If my hon. Friend cannot give us that assurance, will he tell us whether the tax is merely imposed by way of fulfilling some past bargain—a bargain made irrespective of the national interest and without regard to the national interest?
§ Sir J. WALTONIf a Division were taken as to leaving out Clause 19 I should certainly vote for its being left out, because it involves in the first place a gross breach of the most important principle of the equal incidence of taxation. To penalise one trade only as compared with all other trades and industries in the country is a thing which has been unheard of in our Parliamentary annals before— that is, to do it deliberately. We have been told that shipowners have made such enormous profit that we arc justified in breaking a bargain that was made with them in 1915 and to which Parliamentary sanction was given. There is another view to take of the shipping interest in this country. It is a great national interest. Our prosperity before the War was largely due to the fact that we had nearly half the carrying trade of the world. Our ships are being sent to the bottom by submarines. What will be the position of our mercantile marine at the close of the War? Shall we then be in a position to do half the carrying trade of the world 1 I am afraid that we are going to have a great blow to our commercial prosperity by the enormous depletion of our mercantile marine and our inability to carry anything like the proportion of the trade of the world that we carried before the War.
It is of the highest importance for the welfare of the whole nation that the shipping industry should be left financially in a position to replace the tonnage which has been sunk through no fault of the shipowners. To the credit of the shipowners, no steamer has ever refused to sail to or from a port by reason of the danger run through submarines, and the wisest policy of the Government would be to take care that the shipping interests are left in a position to replace lost tonnage as early as possible after the close of the War. The cost of replacing tonnage will be immensely higher—three, four or five times as much—than it was before the War. I am not a shipowner and I am only concerned for the best interests of the 1004 country commercially after the War, for the best interests of the whole mass of the people, and I believe that it is of vital importance to maintain and develop our mercantile marine, and I am afraid that this blow which the Government are giving to confidence on the part of the commercial community will be disastrous to the best interests of the nation. Well has it been asked may you not say to the farmers, possibly two years after the corn production guarantee has been in operation, that that shall no longer continue, when two years after making this distinct legislative bargain with the shipowners you break through that arrangement? It is not the amount of money involved in this tax; it is the effect that it will have upon the future commercial interests of the nation, not only the shipping industry but other industries.
I am interested in a trade that has been hit more severely than the ship-owning interests are going to be hit— that is, the coal trade. Not content with taking 80 per cent, this year of excess profits, a coal controller comes in, and, under the drastic arrangements of the Coal Controller, any question of excess profits will largely disappear. But I am not moving any Amendment in regard to the coal trade, because I do not approve of the principle of persons engaged in a particular trade advocating so largely as they do their interests in this House. I think that it is much better to leave it to other people to deal with these matters. It is only because I am not a shipowner that I am able to put my view of this serious new departure that the Government has made, because, of course, the seriousness of it comes in when we consider that the deliberate bargain made only two years ago, which has received not only the verbal promise of a Minister, but legislative Parliamentary sanction, is to be deliberately broken. I believe that it is a blow to confidence which must react disastrously on many trades. Why should such differences be made? Why should the controlled works have been allowed to go practically scot-free in the matter of Excess Profits Duty? Why should farmers, who are making higher profits than any other industry in the country, to-day be allowed to go scot-free? We had a case given of the sale of new potatoes—I believe I brought it under the notice of the House—by a farmer in Lincolnshire, who made £1,500 a year, on 1005 his sworn evidence, for the three years ending December, 1915, who also swore that he made £5,000 profit in December, 1916, because he was claiming compensation. And out of that £5,000 profit in 1916 all he paid was 3s. 6d. in the £ Income Tax on £900 a year rent—that is, £160 or £170 out of £5,000. No full Income Tax, no Excess Profits Duty, no Super-tax. How the Chancellor of the Exchequer can come forward and make the paltry proposals, so far as money is concerned, that he has made, which break the Parliamentary bargain, and yet at the same time let the farming interests go scot-free, passes my comprehension as to what is fair and just and equitable, and an approach to equal incidence of taxation ! This Committee ought to make the strongest possible protest on this occasion against this great breach of faith.
§ General Sir IVOR PHILIPPSI listened to the Debate during most of to-day, and the conclusion to which I have come is that the tax which is being proposed is one which is placed upon those who are losing money and not upon those who are making money. It is the most remarkable tax proposal that has ever been laid before this House. I never thought that I should live to see any body of Gentlemen sitting on that Front Bench who would propose to penalise shipping, and I cannot believe that the Labour party, who are supposed to have made this bargain — whether they did or not I do not know — really believed that they would benefit themselves or the country in any way whatsoever by attempting to penalise the shipping trade, on which we are dependent for our livelihood as a nation. In the past it was the shipping alone which enabled us to keep that balance of trade that has made us so prosperous and that induced a well-known Colonial Premier to say that we paid for all the wealth that came into this country by pouring out golden sovereigns. The shipping of the country is the cause of the prosperity of the country, and when the Government attempt to penalise the one industry upon which the whole prosperity of the country, whether in peace or in war, depend, it seems to me to be a most extraordinary procedure, and one which I could not at any time support were it not that we are at war and that I feel that it is every man's 1006 duty to support the Government which is in power. I am very glad, therefore, that the Movers do not propose to divide the House on this question. That does not alter the feeling which I am sure exists throughout the country, that any Government should have weakened to such an extent that it could for a moment consider the penalising of the great industry of shipping. Without shipping this country is doomed, and for the Government to encourage those ignorant persons who believe that by the destruction of shipping they can benefit this or any other country, is one of the most fatal proposals ever submitted to the House. I am very glad we are not being asked to divide on this question, for it would have been difficult for many of us to support the Government in this particular case.
§ Mr. W. THORNEI do not know that I should have intervened in this Debate had it not been for two remarks which fell from the lips of two hon. Gentlemen within the last ten minutes. One remark was made by the hon. Member for Lanarkshire, who charged the Labour party with selling themselves, bag and baggage, to this Government when it was formed. So far as I know, there was absolutely no bargain at all struck between the Labour party and the present Government. What we decided to do was to back up the Government, and if my right hon. Friend the Chancellor of the Exchequer had consented to form a Government, the whole of the Labour party, I believe, would have backed him up. 80 far as I know, the majority of our party do not care whether it is Lloyd George or any other George who is at the head of the Government, so long as that Government prosecutes to a successful termination this War. That is all that is wanted so far as the Labour party are concerned. I do not know why the hon. Member for Lanarkshire should have said that the Labour party had sold themselves, bag and baggage, any more than that 1 should say of him that he is a disappointed man because he is not a member of the Government. When he makes a charge of that kind against the Labour party, I might as well on my side make a charge against him that he is disappointed at not being roped in as a member of the Government. I have heard a number of statements about a bargain made between the late Govern- 1007 ment in 1915 and the shipowners. As I understand, Parliament is the governing body of the country, and surely one Government has a perfect right to undo what had been done by another Government if it thinks proper to do so. Bills are brought forward at various periods, but whatever clauses may be inserted in an Act of two years ago, and whatever clauses may be inserted in the present Bill, surely are subject to revision on a future occasion if the adoption of such a course seems to be necessary. I cannot see that what we are doing now should necessarily have any force after another twelve months. The position I take up is that Parliament each year may revise or undo what has been done before if it deems that to be for the benefit of the country. As to the shipowners and the profits they are making, I want to say frankly that so far as meat is concerned they cannot be charged with being the cause of the extraordinary price at which it is sold at the present time. I think it is well known to everybody that the only extra charge due to shipping, so far as meat is concerned, is not more than ¾d. a lb.; at one time it was a ½d. a lb., and it was increased to ¾d. Therefore, so far as the shipowners are concerned, they cannot be blamed in regard to that particular commodity.
What we have to consider is the total amount of profits made by someone. When the Chancellor of the Exchequer made his Budget in 1915–16 he anticipated that out of the excess war profits he would realise £82,000,000, and instead of that' he realised £840,000,000, and he realised that sum at 60 per cent. The other 40 per cent, therefore represents £95,000,000, which has been divided between somebody, which has been put into the pockets of some men, in connection with these excess profits. I am one of those who believe, and I have stated it on many public platforms, as well as in this House, that it is absolutely immoral for any man in this country to make more profits during this War than he was making in pre-war days. In the case of the mercantile marine, I do not think anybody would object for a single moment to a certain sum being set aside out of those profits for the purpose of building ships when the War is over. Everyone must know that in consequence of the submarine menace, which has been going on for a long time, and in consequence of 1008 which a very large number of ships have been sunk, there is urgent necessity for the construction of merchant ships. For myself, I think that the Government would be acting wisely if, after the War is over, they employed the people now engaged in our shipyards, and factories, and dockyards, to build ships for the mercantile marine. They could easily do that, and I think it would be of great advantage. There has been a good deal of talk about farmers' profits, and only a few days ago the working classes, at a general conference held between organisations forming what is known as the Triple Alliance—railway workers, transport workers, and miners— passed a resolution declaring that it was time to commandeer wealth. That is a very large order. But I submit that the working classes are bound to be dissatisfied so long as they see people making huge profits out of the country from various sources. So far as the farmers are concerned, I think the Government would be quite justified in commandeering a field of potatoes and selling them in the usual way to the people. They could commandeer hay and wheat, as well as ships and other things. Why not, in the name of common sense, commandeer fields of potatoes and pay the farmer for them?
§ Mr. ROBERTSONIt is the question of the Clause with which we are dealing.
§ Mr. THORNEI am not concerned about the Clause at all. What I am concerned about is the huge profits made by various people.
§ The DEPUTY-CHAIRMAN (Mr. J. W. Wilson)The hon. Member can only introduce that point as connected with this Clause, and he must bring his argument to the Clause.
§ Mr. THORNEI listened attentively for a considerable length of time to talk about the farmers and their profits, and I submit that the only way of dealing with that topic is to commandeer their potatoes, their wheat, or anything else. I think the Government will have to consider these proposals, because I am perfectly certain that there is great dissatisfaction in the minds of the workers in all parts of the country in consequence of the huge profits made by shipowners and other people out of the circulation of commodities throughout the country. Unless something is done no one knows what might happen. A strike might occur at 1009 some particular firm because of the huge profits being made, and a strike of that character might flash like lightning throughout the country, I do not want to see anything of that kind, and some of us who belong to the workers' organisations—men working under shipping companies or in munition works—are doing our level best to prevent anything like a serious outbreak taking place, because I think that would be the very worst thing that could happen to this country in the present struggle. I hope, therefore, that the Chancellor of the Exchequer will insist upon the Clause being carried out. What is going to be the effect of this Clause? I am relying on the Government, because I personally think that the Government are doing their best for the country, and I do not think the Government have any intention of either injuring the shipping companies or any other class. The Cabinet is composed of various men who have, I understand, surveyed all the interests of various concerns. Therefore, I should say without any hesitation they have thoroughly considered this Clause and what it means, and that they do not anticipate that it is going to do the injury to the shipowners that some people anticipate. I can quite understand Gentlemen interested in shipping kicking at this, and I dare say if I were a shipowner and j going to be hit in the same way as they are I should kick in exactly the same way against it, just the same as if the members of my own organisation attempted to reduce my salary I should kick against it. That is how I look at the situation. Therefore, we have got to survey not only the shipowner's profits, but all profits. I can assure the Committee, without any boast, that there is serious discontent in the minds of the wage earners in consequence of the huge profits made by shipowners and others, and in my humble judgment the Government would be wise to tackle this question and try to allay that discontent.
§ Mr. BALDWINI rise to do my best to answer two questions which were put to me some little time ago by the right hon. Gentleman the Member for Tyneside (Mr. Robertson). The first question was how much money the Government may expect to make by this tax. I do not quite understand what the right hon. Gentleman means by the word "tax."
§ Mr. ROBERTSONThe modification.
§ Mr. BALDWINA tax it is not, although the phrase has been a good deal used this evening. The Government have no estimate, and, after all, no estimate for the purpose of the Government is necessary because, as I have already said, this is not a tax. The position, as has been clearly explained by my right hon. Friend the Chancellor of the Exchequer, is simply this, that, rightly or wrongly, the Government made up their minds to say to the shipowners, "We think the time has come when you have made enough in profits, and for the rest of the War you are going to be strictly controlled," and this method was chosen, coupled with the extension of requisitioning to achieve the desired end. It was felt, and I think rightly felt, by my right hon. Friend that he would put in that Sub-section he put in to-day, which would give some alleviation to what might be a hardship to some of the least successful businesses. I would repeat here that we must not regard this at all in the light of a tax or look at what the Chancellor of the Exchequer is going to get out of it. It must be looked on as a sign that the Government are prepared when they think that the occasion arises to say that the time has come to control more strictly the profits which are being made in a given industry.
9.0 P.M
The second question of my right hon. Friend was whether this tax was imposed to fulfil some bargain, of a base kind if he will allow me to insert those words there, because if there were such a bargain it would be of a base kind, between the Labour party and the Government. I have no knowledge of such a bargain. If there had been such a bargain, I doubt very much whether I should have had knowledge of it. My right hon. Friend assures me there has been no such bargain, and I did not think that there had been. I do not know whether it is strictly germane, but a great deal has been said in the course of the Debate about the farmer. There is only one word I wish to say on this point, and I confine myself closely to the question of his taxation. I do think that there is a certain risk of injustice being done by representatives of various industries slinging insinuations against other industries that they are doing a great deal better than they themselves are, and perhaps not over particular in the way they are doing it. I do not think a charge of that kind helps us 1011 at all, and I am quite sure charges of that kind do a great deal of harm outside this House when people read some random remarks made here and take them as gospel. I think it is only fair to remember this. Whether farmers are making a great deal of money now or not, and that is beside the point of what I am going to say, remember this, that the House of Commons deliberately left farmers as well as other classes of individuals outside the Excess Profits Duty when that was first imposed. Eighteen months ago the position of the farmer was brought more into line with the position of those of other industries. Where heretofore on Schedule B he had—
§ Commander WEDGWOODEscaped.
§ Mr. BALDWINPaid on one-third of his rental as the basis for Income Tax that was changed to the whole of the rental value as the basis for Income Tax. Let me remind the House of this, that the one difficulty at this moment, the practical difficulty that exists against putting farmers into Schedule D in common with most members of the community, is the fact that during the War, when the shortage of staff throughout the taxing Departments is so severely felt, that it would have been perfectly impossible to have added under Schedule D so large a number of new members as would have been introduced had we put in the whole of the farmers of this country. I think it is only fair to mention that. I think I have answered the two points put by my right hon. Friend.
§ Commander WEDGWOODThis Debate is most illuminating. We have had political economy from all sides. What has interested me has not been so much the Debate as the proposal of the Chancellor of the Exchequer. How well do I remember, some seven years ago, the denunciation with which I, and I think even the Chancellor of the Exchequer of that day, were overwhelmed because we singled out a certain class for penalised taxation. I refer to those who advocated the taxation of land values. No words could be too violent in denunciation of us because we picked out that class of all others on which the country depends for special taxation, because we were not aware that we had got to consider not whence a man gets his money, but how much he gets when you assess him for taxation. Now we shall have a respectable precedent brought forward by this 1012 respectable Government for picking out the villains in the country and levying penalising taxation on them. This is the thin end of a very valuable wedge. As was indicated by a Labour Member who intervened so ably in the Debate, we can now watch who are the unpopular people in the country, who are the people—criminals !—who use interjections at Ministers' meetings, and then, seeing that they are unpopular, we will select them for special taxation ! The judges will come in for it on special occasions. Those over-swollen salaries will be obvious spoil for the new age to recover. Then, Mr. Wilson, the manufacturers of special smoke-bombs, or any other form of military necessity will come in—especially if they are few in number— for the genial attention of the Chancellor of the Exchequer.
Although, however, these may be valuable debating points in future days, it must not be assumed for one moment that anybody who is well-grounded in political economy can approve of such a tax as this. It is not merely that it is an unjust; we all know it is unjust to pick out one class of the community for taxation. As the hon. Member for Liverpool quite clearly said, if you pick out the shipping industry for taxation you discourage British shipowners. Ships that would be built are not built and the ship-owning industry languishes for lack of capital which goes elsewhere. If you tax any particular industry you reduce the incentive to go into that industry, and that industry is bound to languish. I think that is perfectly clear, though perhaps old-fashioned political economy. The difference in the case of the land, I feel certain, is quite obvious to most hon. Members of this House. If you tax the shipowner the fewer ships are built. If you tax the land less land is not made, because it was made before, and is there. You cannot discourage the manufacture of land because it is not manufactured, whereas you can discourage the manufacture of ships which depend upon capital and labour to produce them.
§ Commander WEDGWOODYou manufacture food from the land.
§ Commander WEDGWOODYes, by the use of capital on the land. If you put penalising taxes upon the production of food from the land you will have less 1013 food. [An HON. MEMBER: "Keep to the point!"] I think I am perfectly in order in drawing attention to the distinction between the illegitimate selection of a particular class for taxation, such as this selection of a particular industry, which is bound to suffer, which is bound to become of less importance in our national economy, to the taxation of a particular subject, such as land, which is not manufactured, and which cannot be less valuable because taxes are laid upon it. That really is the reason why I and those who thought with me ought not to have been denounced seven years ago, and why the present (Government, which did the denouncing then, ought to get it now. This is not the last we shall hear of the Government method of penalising minorities. This will not be the last occasion on which the good sense of this House, or of the majority of this House, will be up against any such taxation, though it may unfortunately be on future occasions, as on this, that those people who know that it is wrong are going to let it go through unopposed.
§ Mr. L. JONESBefore the Chancellor of the Exchequer leaves the House, I would like to put a question to him. He made a concession this afternoon in allowing the business of shipping to have a 6 per cent, standard instead of the Clause as it stands in the Bill. It is very customary to have an estimate of what such a concession made in a Finance Bill is going to cost the Exchequer. Has the right hon. Gentleman made such an estimate? If so, will he give it to the House? If such an estimate has not been made, will he have it made before the Report stage, so that we may know the result and effect of the concession which he has made? It would be a great advantage also if he would tell us what is the money value left in the discrimination which is made by Clause 19 against the shipping business. I suspect from the course of the Debate that what is left of money value of Clause 19 is very small indeed, and it would therefore, if that be so, be better to avoid this discrimination.
§ Mr. BONAR LAWThat is a very natural question but I am sure my right hon. Friend, and the Committee, will remember the circumstances of the employment of the ships. What the effect of this will be will depend upon what the ships can make under the new conditions. I did ask whether an estimate could be 1014 made and I was told that it would be quite impossible, and so I am sorry it is not in my power to give the estimate. May I now make an appeal for us to get on with the Finance Bill? This subject has been very fully discussed; I think the Committee are thoroughly agreed, and I shall be very glad to get on.
Mr. DENNISSI have sat through the whole of this Debate and have listened very carefully to what has been said, I have only risen now to answer one of the arguments which has been put forward on behalf of shipping, to the effect that the people who would escape this tax under this Clause are the people who sold their ships and got increased prices for them. It is urged, too, that the shipowner who has held on to his ships all the time is now getting very low freights, and that, therefore, he should not be subjected to this tax or this modified tax. Those shipowners who have held on all the two and a half years have had enormous profits. Those profits have been so enormous that they are still able to pay even under the modification. I should like to give the House, in two or three sentences from the "Statist," the profits of shipping in 1916 compared with 1913. The "Statist" points out that the figures are well below the mark, so far as expert criticism knows. Whereas, says the paper, in 1913 shipowners owning ships of the capital value of £200,000,000 made only £20,000,000 of profit, in 1916 the same shipowners made a profit of £250,000,000, or over eleven times the amount of 1913. These shipowners may now be working at low freights, their ships having been commandeered by the Government, but for two and a half years they have been making these enormous profits, and they, therefore, have plenty of money to pay under this Clause. I think it would be of great public interest if these figures appeared in the ordinary Press. The gross earnings for 1916 were £410,000,000, as compared with £127,000,000 for 1913. In 1916 the expenses were only £160,000,000, as compared with £107,000,000 in 1913. The result in 1916 was a net profit of £250,000,000, as against £20,000,000 in 1913. The Excess Profits Tax was then deducted—that was £115,000,000. The then Chancellor of the Exchequer (Mr. McKenna) estimated the total amount of the excess profits for the trade of the country would only be £80,000,000; he got £115,000,000 alone from shipping. Deduct that from the 1015 £250,000,000 and there was £135,000,000 left, which went straight into the pockets of the shipowners. On that they declared dividends averaging 67½ per cent, all round on a capital of £200,000,000, as against 10½ per cent, in 1913 for the same companies. The man in the street wants to know who paid that £250,000,000 of profit? Who paid the gross receipts of £410,000,000? Who paid the £250,000,000 net profits? Of course it came out of the pockets of the people of this country, who bought the goods carried by these ships. Although the Allies bought some, the great bulk came here. These shipowners, who until recently have been in receipt of these enormous profits, ought not to squeal now that the Government puts on this very moderate taxation, in order to convince the people of the country that they intend, not only as regards the shipping interest, but all interests in this country, that this gross profiteering ought not to be allowed to continue.
Mr. DUNDAS WHITEI would like to express my satisfaction that the Government have taken this line in this particular case of profits. These profits seem to me eminently suitable for special taxation because they are profits which are not due to the increased industry of the shipowners, but to matters outside their control, which have had the effect of causing a shortage of tonnage and sending up freights so enormously. Therefore, it seems to me they may well be selected for this special taxation. With reference to this as a precedent for other taxation, the case of the shipowner and that of the farmer are very closely connected, because that which has caused a shortage of tonnage has caused a shortage of food, and enabled the price of agricultural produce to be raised in the very considerable way that it has. I therefore think, if it were for that reason alone, if they raise any question of extending the provisions of this Clause, the case of the farmer should be considered, and that it should be extended to him and to the landowner as well as to the shipowner. There is one matter I should like to mention with regard to what the Financial Secretary of the Treasury said. He laid special emphasis on the fact that a couple of years ago the farmer, who was assessed for Income Tax under Schedule B, instead of being taxed on one-third of his Schedule B 1016 assessment was taxed on the whole. That statement coming alone—I do not say it was so intended for a moment;—might lead people to suppose that the farmer up to then had always been assessed on one-third of Schedule B. As a matter of fact, for many years under the Income Tax Act, he was assessed under the whole of Schedule B. It was reduced to one-third of Schedule B in 1896, at the same time as the Agricultural Rates Act was passed. I feel sure the Chancellor of the Exchequer will bear me out when I say that. It was reduced in 1896 to one-third of Schedule B because of the depression then prevailing, and it was only common-sense that when those conditions ceased he should be once more assessed on the whole of Schedule B. There is, of course, the difficulty of applying this to any taxation under Schedule B, that Schedule B is really not a business schedule like the other. I want to point out that when we consider the farmer's assessment has been raised from one-third of his valuation under Schedule B to the whole of it, that is only reinstating what used to be the practice twenty years before, when the agricultural depression of the 'nineties led to it being reduced in the way stated.
§ Mr. J. M. HENDERSONI think there has been a great deal of discussion going on over very little money. This is not a tax, which some people seem to think, but a question of abatement of tax, and what is really perplexing the minds of shipowners and others of us who are not shipowners is really why this particular trade should be selected, not for an additional tax, but to be shut out of any abatement which is given to other traders. I believe there is very little money in it at all, and therefore, I think, except as an exhibition of virtue of its kind, the whole Clause might very well have been left out. I am quite sure it will do very little to augment the income of the Treasury, and I think in some respects it is unfortunate that this particular trade is selected. We all know what we owe to the merchant marine Without the merchant marine we should not be in the position we are to-day. Only to-day I met an official of a very large shipping company, and I asked him whether they had lost any ships lately. He said, "We are doubtful about one, but the most extraordinary thing about the captain is that, if this ship is lost, this is the fifth ship that has been sunk under him, and I am quite sure he will be keen 1017 to go to sea again." That, to me, indicates as great bravery as any exhibited by a holder of a V.C., and I do not think that is the particular trade to select for animadversion in your Finance Bill. Therefore, I think it is a great pity my right hon. Friend brought the matter into it at all. The shipowners are quite entitled to feel that a sort of stigma has been placed on them in this Bill, which, for all the money that is in it, could be very well left out.
There is another reason why this trade ought to be encouraged, even if it has made these profits. We have lost 2,000,000 tons of shipping, and are losing tonnage every day. That could have been replaced very handsomely before the war at £10 a ton, but to-day it cannot be replaced under £50 a ton, so that if shipowners are to continue in the business it means that they have to find £100,000,000 out of the 20 per cent, left out of excess profits to replace them in the position they were in before the War. I think it is a very great pity that this question was raised at all, and for all that there is in it the proposal might very well have been left out. Last year this question of the shipowners came up in Section 43 of the Act of 1896, and there was an arrangement made in a Clause which was put in that Act which distinguished between the liability of the vendor of a ship and the purchaser. If this hits anybody hard it will hit the man who bought a ship at high prices last year and finds that he is not going to be entitled, as the Act would have entitled him, to succession, so that he could have averaged the profits with the previous years in which he made losses. Having regard to the amount at stake, I think it is a very great pity that this matter was touched at all. There is one other appeal I wish to make to the Chancellor of the Exchequer. He has spoken of the percentage standard, which we all know was 60 per cent., and under this Act he is raising it by 9 per cent. I think he might as a compromise make it 60 per cent.
Mr. MONTAGUE BARLOWI have the honour to represent a constituency where this subject has been very much debated, and I want to put the view of that constituency before the House. I have had the privilege, or shall I say the risk, of crossing twice to America to a port which shall be nameless, on board a troop ship, and I know something about the opinions of those who are employed on our ships. As far as those men are concerned, even if it was a question of extra taxation, I 1018 for one would always be on their side, but we are not dealing with the merchant seamen, but it is a question of the gentlemen who sit at home at ease making all these profits. This is a question of the managers and Shareholders. The argument that these shareholders and managers sitting at home employ these courageous fellows to go to sea seems to me perfectly childish. If you were devoting these large profits to paying the men who go to sea there would be something to be said for it. I have inquired whether the salaries of these stewards and seamen have been raised in consequence of the risk they are running, and I find that they have not been raised. The whole point with regard to this tax is that we are at war. We cannot apply the old reasons and economic considerations which apply-to refusing to differentiate now. As the-Chancellor of the Exchequer has assured us, and very courageously on more occasions than one, we are at war, and if those in authority in the Government find that certain members of the community have money, and that money is necessary to carry on the War, the State will take it. That is a perfectly feasible proposition to which I shall always give my hearty support. There happens to be a certain amount of money in the hands of certain parties and we are at war, and therefore the State is justified in using reasonable means to see that taxes are so adjusted to secure that that money shall pay its reasonable share. In Salford there is a large mercantile! community. We have in the centre of our constituency the docks with the whole of a large area in the North of England, and the Manchester Docks and the docks of the Manchester Ship Canal are in the centre of Salford. I have had appeals made to me from people representing capitalists and also from the artizan point of view on this question, and I have tried as carefully as I can to consider this case apart from prejudice and wholly on its merits.
Two questions are involved. One is the question of differentiation, and it is said that it is an improper thing to do, and if we were in times of peace I should agree with that contention. In times gone by I occupied a chair of political economy, and one of the first principles laid down in taxation is that in the general conflict of principles one thing is quite clear that you should attempt to be fair to all parties in the community. If we -were in peace times I should be one of those disposed to dis- 1019 agree with any attempt to differentiate between class and class, but we are not in peace times, and I shall support the Chancellor of the Exchequer when he says, in the greatest crisis of our lives, "Here is an industry making large profits, and I propose that it shall bear a fair proportion of the burden of the War from the large profits which it is making." How anybody can contest that principle at a time like this I cannot understand.
With regard to depreciation I think the arrangements made are perfectly reasonable. I agree that proper provision must be made for reserves and for depreciation, but I do not think the case made out on behalf of the owners of the industry is substantial, and therefore I propose to support the Government. It was urged by the last speaker that it was hard to tax this industry because the shipowners have to make good the losses made during the War. I have not heard it proposed that the shipowners are prepared to retain these profits to make good their losses. If they came forward with any proposal of that kind they might have been entitled to a good deal of sympathy, but as far as I have seen all the proposals from the managers of the industry concerned have taken the form of setting aside a certain amount as a reserve, and devoting the rest of the profits to paying enormous dividends. If they had come forward and said, "We are devoting these large profits, not to reserve or dividends, but to the repairing of capital losses, there might have been a good deal to be said for them, but, so far as my unaided intelligence goes I have not observed any proposal of that kind, and, therefore, under all the circumstances, and especially in view of the concession made, I hope that the Clause will be approved.
§ Clause, as amended, ordered to stand part of the Bill.