Excess Profits Duty. (Hansard, 28 April 1920)

HC Deb 28 April 1920 vol 128 cc1275-336 1275

§ "20. That—

(a) Excess profits duty under Part III of the Finance (No. 2) Act, 1915, as amended or extended by any subsequent enactment, shall, unless Parliament otherwise determines, be charged for any accounting period ending on or after the fifth day of August, nineteen hundred and twenty, and before the fifth day of August, nineteen hundred and twenty-one; and
(b) Excess Profits Duty shall be an amount equal to sixty per centum, instead of forty per centum, of the excess profits for any accounting period commencing on or after the first day of January, nineteen hundred and twenty, or in the case of an accounting period which has commenced before that date but ends after that date sixty per centum instead of forty per centum of so much of the excess profits as are apportioned to the part of the period commencing on that date; and
(c) the Excess Mineral Rights Duty under Section Forty-three of the Finance (No. 2) Act, 1915, as amended or extended by any subsequent enactment, shall be an amount equal to sixty per centum instead of forty per centum of the excess rent for any accounting year commencing on or after the first day of January, nineteen hundred and twenty, or in the case of an accounting year which has commenced before that date but ends after that date sixty per centum instead of forty per centum of so much of the excess rent as is apportioned to the part of the year commencing on that date."

§ Corporation Profits Tax. 21. That there shall be charged on the profits or gains arising in any period of account which includes any time after the thirty-first day of December, nineteen hundred and nineteen, from any trade, manufacture, concern in the nature of trade, or business carried on in any place whatsoever by a corporate body incorporated by or under the laws of the United Kingdom, or carried on in the United Kingdom by a corporate body incorporated otherwise than as aforesaid and on any income (other than any 1276 such profits or gains as aforesaid) accruing from sources in any place whatsoever in any such period of account as aforesaid to a corporate body incorporated by or under the laws of the United Kingdom, or any such income accruing from sources in the United Kingdom in any such period of account as aforesaid to a corporate body incorporated otherwise than as aforesaid, a tax of five per cent. of the profits, gains, or income.

§ Twentieth Resolution read a Second time.

§ Mr. G. TERRELL
I beg to move to leave out Paragraphs (a) and (b).
If my Amendment be carried, the effect will be to strike out completely the Excess Profits Duty from the present year's Budget. This duty was introduced at a time of great emergency.

§ Sir F. BANBURY
On a point of Order. I understand that the hon. Member is moving to leave out Paragraphs (a) and (b). I have an Amendment in Paragraph (6), and I desire to ask you to put the question so as to safeguard my Amendment.

§ Mr. SPEAKER
I will consider that matter before I put the question. I do not think that it is necessary to safeguard Amendments at this stage. Of course, in Committee the Chairman would naturally do so, but this is not the Committee Stage. It is the Report Stage of certain Resolutions upon which the Bill is founded, and the procedure is different.

§ Sir F. BANBURY
My Amendment is an important one, because, while not doing away absolutely with the Excess Profits Duty, it does do away with the proposed increase. If it should happen that the House should prefer going on, at any rate for a year, with the duty as it was, and if the Amendment of the hon. Gentleman opposite were put " that Paragraphs (a) and (b) stand part of the Resolution," it would make it impossible to raise the question whether the increase should be payable or not.

§ Mr. SPEAKER
The right hon. Gentleman must remember that what we do now is not effective. The time for taking effective action is in Committee on the Bill. We have not yet even had the Bill introduced. This is a purely preliminary stage.

§ Mr. TERRELL
I was about to explain that, when this duty was originally introduced, it was stated by the then Chancel- 1277 lor of the Exchequer to be necessary for the successful prosecution of the War. It was purely a War tax, and it was submitted to and accepted as a War tax by a class of the community who have been second to none in making every sacrifice that was necessary for the prosecution of the War. The War is over, and the time has come when the tax should be discontinued. The real objection to the tax is that it is so unfair, so unjust, and so oppressive. One would have thought that by this time everyone would have understood exactly how the tax operates, but I find, even since I put my Motion down, that among hon. Members there is a good deal of doubt how the tax is really levied. I think it necessary therefore to place on record exactly what the tax is and what is meant by the standard. The standard is the average profits which a firm or business earned two years prior to the war. That is taken as the datum line, and all profits over that standard are subject to the tax. It is very easy to see that a standard of that kind imposed at a time of great emergency, when it was expected that the war would last another year or two years at the very outside, could only prove to be a very rough-and-ready method of arriving at a datum line for the purpose of levying a tax. It has so proved, and, taking two firms with equal business and equal capital, one, which has the misfortune to have a bad standard is put at an enormous disadvantage as compared with the other, which has a good standard, and is liable for an enormous amount of taxation. I have some figures to illustrate my meaning, and I think it is necessary to quote them to the House. They are the figures of two firms each with £20,000 capital, one with a pre-war standard of £10,000 per year and the other with a pre-war standard of £2,200 per year. The firm with the big pre-war standard will pay in Excess Profits Duty £20,600 and the other firm with the low pre-war standard will pay £54,000. The firms in every respect may be of equal importance, doing an equal business, and yet one will be penalised by a total taxation of £33,500 over the period of the War. We all know that the cry of the trade unions and labour leaders throughout the War was for equality of sacrifice and equality of treatment. It was a very genuine cry, and I hope hon. Members will realise 1278 now that there is a very genuine cry among producers and people engaged in commerce and business that they similarly should have equality of treatment.
I have some very simple figures as to how this tax hits a new business or a business without a pre-war standard which may have been bought by a man who has been demobilised from the Army. I take two businesses, each with £10,000 capital, and one with a pre-War standard of £5,000 and the other with no pre-War standard. We will assume that both businesses during the present year make £6,000 profit. The one with the pre-War standard of £5,000 will pay £480 Excess Profits Duty this year and the other without a pre-War standard will pay £2,800. That is most oppressive, most unfair, and it requires to be very drastically remedied. Many Members are in doubt about another matter. A manager or a director who is also a partner and happens to be in receipt of a commission as part of his remuneration, is personally held subject to the Excess Profits Duty; so that to-day a manager is tied down by his earnings in 1913. That also is most unfair. If you have a good pre-War standard, you are not so badly off, but if you have no pre-War standard or a bad pre-War standard, then you are treated must unjustly and most unfairly. I have received an enormous number of letters and telegrams from firms all over the country, many of them explaining in great detail their grievances to me, and all of them full of protest against any continuance of the tax. Some people imagine that all these firms are big financial people. That is not the case. Many of them are little men, who are struggling to make both ends meet, and some of the letters which I have received are really almost pathetic in their sense of grievance and injustice. Here is one man in a small business who says that in 1910 he put all his savings into purchasing a business. The first three years were difficult, and he scarcely knew whether he would sink or swim, but in 1913 he was just beginning to make headway. He worked continuously from 7.30 a.m. to 9.30 p.m., and he says he feels the pinch most that his competitor is working side by side with him, an old-established business, with two or three good pre-War years and a good pre-War standard, and that he is abso- 1279 lutely free from Excess Profits Duty, while the writer is heavily oppressed. He says: "I bore it with patience when our country was in danger, but it knocks the heart out of one altogether now." That is one class of case, and here is another, and the two are a fair sample of a great number which I have had brought to my notice. This man says his pre-War standard was nil, and he has a cabinet works. He entered into contracts for hospital furnishing, and he made a profit which made him liable for £600 Excess Profits Duty. He put the whole of that profit into his business to enable him to carry on Army contracts. He has only been able to pay the Treasury £100 out of the £600, and he is being pressed by the Treasury for payment of the balance. He says: I have worked like a slave during the War. My eldest boy gave his life, my second boy is permamently wounded, to say nothing of the third, who was a flying officer, and now the War is over, the only recompense I get is to be driven into the bankruptcy court. Those two letters show the injustice of continuing this tax, and they also show that it requires either complete repeal or very drastic amendment. The injustice of it is further shown by the speech which was made the other day by the Chairman of the Textile Corporation at their statutory meeting. Here is an extract from that speech, and it has reference to the present Budget: The current Budget proposals, with the increased Excess Profits Duty, have made it safe for old-established firms like ourselves and made it almost impossible for younger firms to exist and futile for new firms to commence, and as the Excess Profits Duty has the effect of raising prices of all commodities, we as a merchant firm will have to pay more for our products and sell them for more, which will have the effect of increasing our profits per quantity of material handled. In a few words perhaps I may be allowed to give the House some little explanation as to how the duty operates, and to show that a firm which has once earned its standard, if that standard is a good standard, is in a very superior position compared with a firm which is struggling perhaps with a low standard and with difficulties. Directly you have earned your standard, you can spend money freely, because, whatever you spend, 60 per cent. of it comes out of the pockets of the Government. You can indulge in 1280 repairs, you can develop your business by advertising, you can prepare expensive catalogues, and if your employés want more money, well, the Government pays 60 per cent., and why quarrel with your employés for the sake of the 40 per cent.? You have also this advantage, that you can defeat your competitors by selling at less than cost. That is one of the operations of the Excess Profits Duty which very few people understand. A case came to my notice some time ago of a firm who wanted to extend their trade in a particular market. They had earned their standard— and it was at the time when the tax was 80 per cent.—and they sold a large quantity of instruments at less than cost price. They got into the market against their competitors, who were perhaps not so favourably placed. The Government paid 80 per cent. of that loss. Is that fair competition? Then people wonder why the Excess Profits Duty adds to the cost of production, but it must. If you are tendering, in the ordinary way you would tender, perhaps, for 10 per cent. or 15 per cent. profit, but now you say, "The Government want 60 per cent. of that, so we had better make a profit, instead of 10 per cent. or 15 per cent., of 20 per cent. or 30 per cent," and in that way the cost goes on to the goods, and the consumer pays the tax, and pays it in the most wasteful and extravagant form. We claim that the time has come when that tax should be stopped. I might quote one other instance, which was referred to in a speech by a former Member of this House, Sir John Simon, who said the tax had been of the greatest benefit to lawyers, and he knew it. He had benefited by it, because amongst his clients there were people who had gone to law when they had got doubtful cases, and they said they could take the risk because if they lost their case the Government paid 80 per cent. of the loss. I should have thought that that was almost sufficient evidence in itself to show the House that this tax is most undesirable.
You have the position to-day that the country is crying out for lower prices, but when the Government continue a tax of this kind it means that they are keeping up prices. It may be their policy to keep up prices. It is easy to see that by keeping up prices the grand debt is easier to handle, but if high prices ease the task of the Government, why stop profiteering? We know, of course, that 1281 prices must be kept down, and the first step towards getting prices to anything like their proper level, in my judgment, is to get rid of this taxation, which is not direct taxation, and which is not certain; you do not know exactly how much you are liable for, and you have to cover yourself by putting on a very large sum to cover all possible contingencies. The tax has excited throughout the whole country the greatest feeling of hostility. The term "excess profits" is suggestive that a man has been profiteering. In some cases he has been profiteering, perhaps. To pay a large sum in Income Tax, I suppose, is regarded as being meritorious, but to pay a large sum in Excess Profits Duty, I should imagine as a rule people would prefer to say nothing about it. At any rate, a great deal of hostility is felt to the tax, and it is safe to say that there never was a more unpopular tax. Manufacturers were called upon in the stress of the War to make sacrifices. They surrendered their workshops, they submitted to Government control, they did everything which they were asked to do to help the nation in its emergency, and there was no quibbling such as we have heard from some of the trade union leaders who stayed at home. The moment the Armistice was signed, the trade union leaders wanted their pre-war practices restored to them, and they got them restored, but the Government now want to continue the War sacrifices as against the manufacturing and trading community. Let me remind the House of the statement the Chancellor of the Exchequer made last year when he was introducing the Budget. He said the Excess Profits Duty was a War tax— It was imposed under the stress of War …It is open to many objections, but it was a rough and ready method of justice which Parliament, in its then, happily, not very critical mood, accepted with out too much difficulty.… There are great objections to it.… It operates with unfairness and inequality as between firms with a good pre-War standard of profit and firms with a poor pre-War standard.… It has encouraged wasteful expenditure.… A flat rate tax of 80 per cent.… acts as a great deterrent to enterprise and … to new development. I do not wish under these circumstances to continue the tax a moment beyond what is necessary."—[OFFICIAL REPORT, 30th April, 1919; Cols. 204 and 205, Vol. 115.]

§ The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)
Hear, 1282 hear. I do not depart from a word of that.

§ Mr. TERRELL
There could be no greater condemnation of the tax than the words which my right hon. Friend then used. We are now considering the Budget for the year 1920–21, and in his statement the other day he stated that he was to get £220,000,000 from the Excess Profits Duty, and that of that sum £10,000,000 would be the increased revenue by raising the rate from 40 per cent. to 60 per cent. Therefore, I suggest to the House that the total amount the Chancellor will get by the continuance of this tax is only £30,000,000. The other £190,000,000 are the arrears from last year and previous years, which will come to him without any renewal of this tax whatever. I do trust that that point will be made clear, because from the Budget Statement as it stands, I venture to think the House considers that these Resolutions have to be passed, otherwise there will be a shortage of £220,000,000 in the Revenue for the year. Nothing of the sort. The shortage will be £30,000,000, and no more. Are we going to re-impose a thoroughly bad tax for the sake of £30,000,000? It is less than £30,000,000, because the new Corporations Tax is estimated to produce £50,000,000, but £15,000,000 less during the period that the Excess Profits Tax is in operation. Therefore, the £30,000,000, unless I am mistaken in this, will, on the imposition of the Corporations Tax, be reduced to £15,000,000. A surplus is estimated of £234,000,000, which will be available for the general reduction of Debt this year. That is on the basis again, I understand, that the debt is wiped off in 26 years. Are we obliged to wipe it off in 26 years? There is no necessity for raising this money at all. Striking out the Excess Profits Tax will reduce by £15,000,000 or £20,000,000 the balance which is available for the general reduction of Debt, and, as against that, you have got the margins on the Treasury Estimates. We are accustomed year after year to finding that the Treasury have underestimated. We find year after year a surplus on all Treasury figures, and it is likely that this year we shall have a surplus on Treasury figures.
I do urge, for the reasons I have given, that the time has come when this tax should be completely dropped. There are some who say that you cannot drop it 1283 completely; they are shivering in their shoes about the War Profits Tax. I am not thinking about those people. I am thinking of the small trader, the small manufacturer, who is to-day oppressed with this tax. I am not thinking of the man who has made his profit and banked his money. If that man wants to continue to put the burden on my back by this Excess Profits Tax, then, in my turn, I shall help others to put the burden of the War Profits Tax, if such a tax is introduced, on his back. We will have equality of treatment; we will have equality of sacrifice. I do trust that my right hon. Friend will turn a sympathetic ear to the appeal which I have made to him. I am told that in his Statement the other day he said that he would stand or fall by this tax. I do not really think that he can have taken that sort of obstinate determination. I have watched my right hon. Friend's career for many years with the greatest interest, and, I might almost say, affection. I have followed him in his policy, and I look upon him to-day as the head of the Exchequer, as the head of the business part of our Government. It is not a business proposition to say, "Here are my proposals. Before they are discussed in detail, I will stand or fall by them." I am perfectly certain that my right hon. Friend had no thought of that kind in his mind. I look upon him as one with a great name who has done in the past much valuable work for the country, and I am sure he will continue to serve the country in the future. But I do hope he has not made up his mind that whether this tax is sound or unsound, whether it is just or unjust, he will stand or fall by it. I do not think that was his intentions, and I do think I have shown that it is an unjust tax, that it excites the greatest amount of hostility from every part of the country, and I hope he will see his way to withdraw the tax entirely in the terms of my Amendment.

Lieut.-Colonel Sir J. NORTONGRIFFITHS
I rise to support my hon. Friend's Amendment, and, in doing so, it is my intention to be very brief, as I understand a great number of hon. Members wish to speak on this question. I support my hon. Friend's Amendment because I believe, and I think I believe as whole-heartedly as the Chancellor of 1284 the Exchequer himself, that the tax is an unsound one, that it is not the best method of obtaining or collecting the revenue, that it is a tax which we had to resort to owing to the War, and I am perfectly convinced that in his mind, as it must be in the minds of all hon. Members, a better means can be found of collecting the revenue required. On Wednesday last I made four main points against this Excess Profits Tax. The first point I made—and in looking through the OFFICIAL REPORT one sees in almost every speech the same point—was the inequality of the tax as between old businesses and new ones. We have all received hundreds, and many, I believe, thousands, of letters on the subject. I do not propose to read them, because nothing bores the House more than the reading of letters; but I will read one, because it is a typical case of the small man and how unjust the tax is to him. I have a case here which I have investigated, and early this morning went down to see the works myself It is a business of three partners, with a combined capital of £9,000. The three partners—and all served in the War in one way or another—put in their whole time at this business, and the total income, after paying their staff, rents and expenses, is £3,000, of which this year there will be paid £1,200 in Excess Profits Tax, leaving £1,800 to be divided among three men with families, and out of that sum each has to pay a considerable amount of Income Tax. The business was started in 1913, and with the combined efforts of the partners could be increased. Three of the staff are paid in salaries £500 each, while each partner draws £600, and they do all the principal work. When going into that business, if they had had a little more freedom— not to squander the money, but to put it into their business so that it might develop— they would have been able to ship goods out of this country; whereas, at the present time, it is all they can do to keep their customers in this country going.
The next point I made was the restriction it imposes on trade and its expansion. I have had a resolution sent me, among others, by the Master Bookbinders' Asso ciation, as follows: That this meeting of the Master Bookbinders' Association protests against the continuation of the Excess Profits Duty in its present form, owing to its incidence being 1285 particularly severe upon the progress of an industry such as book-binding, which has a low pre-War standard. The association suggests that a development of the Corporations Tax is far preferable to a continuance of the Excess Profits Tax. I think I am right in stating that most hon. Members of this House have been swamped with letters and telegrams from their own constituents, and it is their duty to represent truly the interests of their constituents. If there are Members representing industrial constituencies, it is their duty to do what they really conscientiously feel in regard to this particular measure. If they feel there is another and a better method of obtaining the money, and they really, after close study, believe that this tax is bad for trade and industry, that it is a corrupt method of taxation, then I say, without hesitation, it is our duty, whether we like it or not— and personally I loathe doing it—to press this Division in the lobbies.
My third point was its incentive to extravagance, and I dealt with that very fully. My fourth point was the liability of it being passed on to the consumer. In that respect I desire, if I may, to give what has actually happened in my own case. We invited tenders for a very close competitive work in South America, and in getting quotations, which all public works' contractors have to do, it is our business to test the market. We got quotations for something like seventy-four different articles connected with railway-development work in particular. Since the Budget speech was made by the Chancellor of the Exchequer, in the case of more than 40 per cent. of those tenders we have had a supplementary letter informing us that, in view of that statement, they must add 10 per cent., or whatever it is, to their previous offer. We cannot, of course, until we get a tender, book definitely the material we want, which we should like to do, to cover the period of two or three years' work. Our business is not to speculate in the markets, but simply to secure ourselves by fair prices, and not to take any risks. I do not think I am overstating the case when I say that this proposal is causing the gravest anxiety throughout the country in trade and industry. I am perfectly sure that the Chancellor of the Exchequer, who comes from an industrial centre, a portion of which I for some time represented— I refer to Birmingham—will appreciate that point. Doubtless he has had all sorts of representations made to 1286 him like the rest of us. It is not overstating in the case— and after all, the proof of the pudding is in the eating— by saying, and it is proved, that this proposal is an absolutely unsound method of taxation and against the best interests of the country. One might talk for an hour or for a couple of days and not sum up the case more briefly or accurately than in these few words. I most earnestly appeal to the right hon. Gentleman in this matter. I know men who are struggling to get back to pre-War conditions, who hate profiteering, and dislike having to add things on to the cost of production; and I do beg the right hon. Gentleman to do his utmost to meet the views shown to exist, not only in this House, but in the country.
May I add a statement from a gentleman who I believe is still a Member of the Government? I refer to Sir Joseph Maclay, head of the Ministry of Shipping. He was speaking at the launch of a big vessel quite recently—and it was quite by accident that I picked up this paragraph from the " Shipping World "—and Sir Joseph, we all know, is one of the leading business men of the country, one of the magnates of industry, and of the commercial life of the country—speaking on 21st April, he said—and I will give the most important points, for they go to the root of the case: He believed that this tax would have a very serious effect upon industry in this country. Instead of seeing a reduction of the tax as they had anticipated, it had been increased. It would materially hamper the trade of the country. He did not think that it was too late for serious reconsideration by the Chancellor to be given to the matter. Then Sir Joseph got to the bedrock of the matter— He did not expect any great improvement in the trade of the country unless they replaced a condition of uncertainty by a state of absolute certainty. It is this uncertainty which is trying everybody and makes the position difficult. I know one particular case in which an order for two ships was on the point of being signed: it was cancelled in view of the Budget. This thing is disturbing everybody. It is my business to go down to one of the biggest shipyards in the country. I was there recently, since the Budget speech. It was almost agony to see so much uncertainty and uneasiness The feeling is, " What is the good of trying; what is the good of trying to get back to normal conditions under the 1287 circumstances?" And this at a time when we could if we would get that degree of certainty in this country which is desirable and, by greater strides with that certainty, go ahead in a way better than anyone can conceive towards pre-war conditions and to that pre-eminent position which we held in the world before the War. Virtually we have no competitors. The world is demanding our goods I submit that if the Chancellor would only look at the matter from this point of view, then by encouraging the trade and industry of this country you could get from the foreigner half, if not more, by profits on our goods—perhaps almost enough—to redeem the whole of the War debt!
There are many alternatives. I am not going to suggest them. All I would say is you have only to study United States or Canada and find alternatives there which would do away with the Excess Profits Tax. Again, it is certain if the Excess Profits Tax were abolished the whole tax would not be lost, as many people imagine. Income Tax and Super-tax would be payable on a much larger sum, and any difference would thus be made up. I am not that sort of optimist recently described and said to be a Scotsman wandering through the United States with a corkscrew. But I am certain of one thing, that if the Chancellor will give the country some statement on this particular point, so as not to make us who loath doing it press this matter to a Division, then he will not spoil that which otherwise will be a brilliant career, and the record of one of the most wonderful Governments this country has ever had in its history. Compared to the Governments of other countries, the Government has turned out a wonderful amount of legislative and other work. We all admit the wonder of it. This proposal is a big, black, blot on the Budget, and on that record. I ask the right hon. Gentleman not to turn down our proposal, but to give the matter one further consideration, and try to relieve some of us of the unpleasantness of having to go into the Lobby against the Government, who, I believe, desire the general development as well as any Member of this House.

§ Mr. FILDES
I believe in circumstances like this it is usual for a new Member to claim the indulgence of the House, and I may say that such indulgence was 1288 never more necessary than at this moment. For the first time in my life, I appreciate to the full the true pathos of a letter which a soldier-boy in Palestine wrote to his mother in Wigan. He said: Dear mother,—I am in Bethlehem, where Christ was born; and I wish to heaven I was in Wigan, where I was born. May I, as a new Member, say how much I was impressed by the very admirable and lucid way in which the Chancellor of the Exchequer presented his statement to the House. Of course when you come to think of it, it is an obvious thing, and a thing which we have a right to expect, because if there is a gentleman who by birth and tradition who should be expert in the production and application of this screw it is the right hon. Gentleman. It was a great surprise to me when the right hon. Gentleman at the beginning of the Debate came to the House consisting of over 700 Members, and without hearing any possible suggestions from his colleagues in the House, intimated that he was about to stand or fall by his proposition. Standing, Mr. Speaker, as I understand it, is a very wearying performance, and I was surprised, in view of the Indian experience of the right hon. Gentleman, to hear the word "fall" come so glibly from his lips. I would like to address my remarks to the right hon. Gentleman in the capacity with which he has endeared himself to this House—that of a sitting Member.
The origin of this tax, he will, I think, agree is a wrong one. There have been too many objectionable interpretations. What does it mean? It means this: when War was declared the Chancellor of that day intimated that the wealthy plutocrats of this country were going to be placed in a stronger position than their poorer brethren. The position appears to me to be one of this kind: hon. Members will recollect that the theory on which this tax was based was that we were anxious to get money out of the men who had made money out of the War. The position that the Chancellor takes up is, that taking our wealthy plutocrats, take Messrs. Coats, say, they are at liberty, before they are called upon to pay a penny of Excess Profits Tax, to make at least something like £3,000,000. Is it fair, I ask? Supposing in 1917 or 1918 some opposition to that great combine had been contemplated? What is the position? 1289 We find that the newly competing business is allowed a certain vague amount on its capital only, and after that is liable to this very serious tax. There is a point I would like him to make in that connection, and it is this: We are all out, so far as possible, to get rid of— shall I say?—the overbearing power of the trusts. It is as certain as the sun rises, and I believe the right hon. Gentleman will agree, that sooner or later the very inflated values attaching to every commodity in use in the world will fall. In the cotton trade, at the Armistice, yarns fell inside of two months something like 2s. 6d. a lb. The point I wish to make is this: unless firms who are restarting business to-day are allowed to accumulate some reserve to be ready for this drop, the final result of this legislation is going to be that the wealthy firms, the firms with a big pre-war standard, will be in a more strongly entrenched position than ever, and their competitors of more recent date will be wiped out and snowed under by the loss that is certain to ensue.
5.0 P.M.
I am not concerned with the big men, and, like everybody else I suppose in this House, I have been inundated with details of hard cases. I have one case which is typical of many. An officer received a gratuity of £850 from the War Office, and he was a wounded man. His father lent him £1,000, and on the joint guarantee of his father and himself he obtained a further sum of £500 from the bank and started business. I appeal to the right hon. Gentleman that it is unfair under circumstances like those that men who have come back from the War, where they have been largely engaged in defending the property of men with a high pre-war standard, and the only message of comfort the right hon. Gentleman has to give them is to say that he will stand or fall by taking 60 per cent. of anything they make over and above the beggarly allowance the Treasury allow!
There is just one other point and it is this. There was a warehouse destroyed in Wood Street, London, and I think this case is within the cognisance of most hon. Members. A Zeppelin raid destroyed a large warehouse, and the firm occupying that warehouse did not go on with the business, but two of the managers started business. They had been in business only 12 months when one of them was taken into the Army and the other into the 1290 Navy. Last year they came back to start business and they are faced with the welcome news in the right hon. Gentleman's Budget that after the whole series of disasters they have suffered they are met with this beggarly allowance and above that the Chancellor of the Exchequer will claim 60 per cent. to help to pay the cost of defending the gentlemen with the huge pre-War standards. When this War was declared in 1914 the people whose interests had to be largely. defended, apart from personal considerations such as ourselves, our wives and children, were that landowners of this country and the pre-War plutocrats. I say that it is unfair to throw on returned soldiers and the men who have recently started business the additional cost of paying the debts which might legitimately be charged to the firms with large pre-War standards.
I would like to be allowed to make two suggestions. I understand there is a Motion coming along to the effect that it shall be permissible to the Treasury to make an arrangement for extended payments of this tax, but that will not meet the situation. It may meet it with regard to the past, but what about the man who cannot possibly pay to-day if under this tax he is simply incurring fresh liability for the Treasury? I appeal to the right hon. Gentleman most earnestly, and with all the intensity at my command, and I ask him if he can see his way to alter at least the standard, that is, the datum line of this tax. Why not start it at £2,000 a year and say that if a man or a firm had only made £2,000 they, at any rate, should only be liable for the ordinary tax and Super-tax? Above that I would like to see the right hon. Gentleman make a further concession, and make them liable for the ordinary tax.
In view of the increased cost of living it is within my own knowledge that there are thousands of perfectly heart-breaking cases of men who have had the heart knocked out of them altogether because they feel it is hopeless. I am speaking of the little man with only £1,000 or less. He is the man who is very hardly hit by this proposed legislation. No man has condemned this kind of legislation more than the Chancellor of the Exchequer, and when he replies I should be extremely grateful if he could give us some information on this point. I may have misunderstood the right hon. Gentleman, but, as 1291 I gathered, he seemed to state that had he known that the reduction from 80 per cent. to 40 per cent. would not lead to increased trade and prosperity in this country, he would not have made that reduction. I fail to follow that argument. I thank the House very sincerely for listening to these imperfect remarks. I am afraid that I have not expressed myself very admirably, but I am intensely anxious that the poorer section of the community should be protected from the very harsh incidence of this taxation.

§ Mr. A. GREEN
I have listened with much interest to the speeches of the Mover and Seconder of this Amendment, but I fail to see any reasonable grounds why the House should accept the proposition which has been put forward for a reduction of this duty because we have not so far had presented to the House any alternative proposition which would raise that sum of money, which is so urgently needed at the present time, and, in my opinion, there is no time so opportune in our commercial life as the present moment for raising money which is so urgently required for the reduction of the Debt upon this country. I listened with admiration to the speech in which the Chancellor of the Exchequer introduced his Budget to the House, and it seemed to me to be a matter of great congratulation on the part of hon. Members that in the second year after the War the Chancellor of the Exchequer was able to budget for £1,300,000,000 in a manner which, in my opinion, is well within the capacity of this nation to pay if we, as a nation, realise our responsibilities, and masters and men pull together, and work together in that spirit which is so desirable in order that we may, as a nation, produce more and export more, and thus produce that wealth which is so essential to pay off this great debt. What are the suggestions put forward and the criticisms which have been made upon the Budget? One was that the Chancellor of the Exchequer need not this year budget for a reduction of the Debt by £230,000,000, and that he could very well afford to wait a few years longer before he need attempt any reduction of the Debt.

§ Mr. TERRELL
I do not wish to interrupt my hon. Friend, but that is not my 1292 case. I did not say that the Chancellor of the Exchequer should not budget for a reduction of the Debt, but my point was that the amount was excessive. The Chancellor of the Exchequer should certainly budget for a considerable reduction of debt, say £200,000,000 or £210,000,000, but £230,000,000 is excessive.

§ Mr. GREEN
That comes to the same thing. With great respect I submit that the Chancellor of the Exchequer might very well, having regard to commercial considerations and the condition of this country and the Continent, have budgetted for a still further reduction without seriously interfering with the commercial prosperity of this country. I have recently returned from a commercial tour in France, Switzerland, Germany, and Austria, and I have had my agents there, and one is still out in Belgium and another in Germany. I have had their reports, and I have seen a lot of things myself. I have been in communication and in touch with the leaders of commerce in those areas, and from what I have seen, and from the reports which have been made to me, I am satisfied that those countries are not commercially in a position to compete with this nation at present, and if as a nation we pull together in the right and proper manner, we have an opportunity of building up our commerce and trade and industry in such a manner that it will be the greatest and most glorious trade that this nation has ever had. But if we fail to take that opportunity; if by strikes, on the one hand, or by differences of opinion on the other hand, we have quarrels between masters and men, then a proposal of this character is calculated to bring forth agitation from the workers, who are not satisfied with the present condition of things; and if we fail as masters and men to work together and take advantage of the opportunity which presents itself, then we, as a nation, will be lacking, and as a House we shall be lacking, in our duty if we support this Amendment to-day.
Our opportunity is to-day, and each day that goes by that opportunity, as years go on, will get less and less. We can budget to-day for the payment of £230,000,000, but if that amount is left for another five years we could not pay off the same amount. Hon. Members recognise that we can pay off £230,000,000 this 1293 year, but if we do not pay it this year, and if we leave any portion of it for another five years, then it would take considerably more to redeem the same amount of our national indebtedness. Further than that, in another five years it is quite possible that those areas which are now so devastated, and those nations which are not yet commercially in a position to compete with us, will then be competing very severely, and we shall be in a much worse position for reducing our National Debt, because we shall then be up against competition much more severe than that which exists to-day. The hon. Member who seconded this Amendment put forward cases of great hardship, and yet, in the same speech, he said that this tax was pressing upon the consumer because the manufacturer had to pay more for his materials, and prices had to be increased by 10 per cent. on account of the tax. While he speaks of cases of hardship and handicap to the manufacturers because the duty does not allow them to make that standard of profit which they used to make, he tells us that prices have increased by 10 per cent. on account of the duty! He referred also to the firm with a huge pre-war standard, and to their extravagant expenditure. I think that such a statement is a reflection upon our Income Tax surveyors. There may be isolated instances of the kind which the hon. Gentleman has named, but, speaking generally, I think we should find throughout the country that the Income Tax surveyors take careful account of the firms with which they have to deal; they compare the items which are contained in their books year by year, and if they find any extraordinary difference between one year and a previous year, then they naturally make further inquiry as to why it comes in. It is perfectly certain that, unless there is a reasonable explanation, these differences are not allowed, and that they are subject to the Excess Profits Duty. Then we have had the case of three partners who started in 1913, and also of those who served in the War. But what are the facts with regard to new businesses? The new business started to-day is entitled, before becoming liable to the Excess Profits Duty, to make 11 per cent., plus the directors' salaries, and so on. [HON. MEMBERS: "No, no!"] And, having regard to the difficulties in which 1294 we find ourselves as a nation, I submit that the possibility of making 11 per cent. before becoming liable to the Excess Profits Duty, and then sharing with the Government what may remain to the extent of 40 per cent., is a matter upon which we ought to congratulate ourselves, having regard to the trials and troubles through which we have passed. We must be prepared to make sacrifices to help the nation, and the Chancellor of the Exchequer, in carrying through this Budget in a right and proper spirit, in order that we may generate a spirit of contentment right throughout the country, and enable us as a nation to recover our position financially. This is a Budget for posterity. We must budget for posterity. We must take our share of the burden which exists to-day, and we must take it in a proper and reasonable spirit, prepared to make the sacrifices for the sake of our children. We ought not to shirk our burdens in any way at this particular moment. We should not seek to shelve our burdens on to future generations, and on these grounds I hope this House will support the Chancellor of the Exchequer.

§ The FINANCIAL SECRETARY to the TREASURY (Mr. Baldwin)
I do not suppose for a moment that those who support this Amendment would be prepared to see the abolition of the Excess Profits Duty as a whole. But it makes a very useful peg on which to hang a discussion which enables those who feel that the raising of the limit from 40 to 60 per cent. is something which should not be attempted, to bring into the discussion the questions of the small business man and the new business man, and to put it to the Government whether it is prepared to do anything to help them. I, for one, welcome this discussion to-day, because I think the more general the lines of our Debate on the Report stage of these Resolutions the better, reserving, as we should do, all points and all details regarding the Amendment of the law for the Committee stage of the Finance Bill which will come on later. I do not propose to speak at any great length this afternoon, but I think it may clear our minds if we consider for a moment what the Excess Profits Duty is, and why it was put on. It was put on at a time when the country needed money, when the necessity for money was really vital, and when it was felt throughout the country 1295 that it was somewhat unreasonable, at such a time, for people to make more money than they had done in times of peace. That was the underlying feeling at the time the duty was put on. It was put on to serve the financial necessities of the nation. Some people speak as though the moment the War stopped, this duty ought also to have stopped. But suppose that the Excess Profits Duty actually lasted for a period of ten years, could anyone, looking back, and reflecting that we had been fighting for our lives during more than half that time, say that the statesmen of this age had treated the community unjustly in this country, because they had made a specific War tax last in such circumstances for a period of ten years? I do not believe it for a moment.
But it has not run for nearly ten years. This tax, if this Amendment be defeated, will be running into its seventh year. During the whole period when we were fighting, the average burden was 66 per cent. If the Chancellor of the Exchequer's scheme become law, the average burden since fighting ceased will have been 50 per cent. Last year the Chancellor of the Exchequer spoke about it being a "temporary duty," and much play has been made with those words, people talking as if the use of the word "temporary" meant that he was going to withdraw the tax at once. Of course, all would like to see the tax come off, and no one more than the right hon. Gentleman and myself. When, however, one is speaking of a temporary period during which a tax lasts, he can be held to refer to so short a period as, say, twelve months. Although it comes as a temporary tax, it is a temporary tax for a few years, and each year is bringing us nearer to the end of it. Hon. Members laugh, but we all know perfectly well that what is meant by a temporary period is the period during which the circumstances created by the War lasts, and we can all agree that this temporary period will come to an end when these circumstances disappear, and the tax itself can also then be ended. Why did my right hon. Friend reduce the duty last year instead of keeping it at 80 per cent.? Had he reduced it to 60 per cent. there would not have been any quarrel with the 60 per cent. this year, but, because he reduced it to 40 per cent.. people jumped 1296 to the conclusion that the tax was coming to an end, and that all the profits they might in the future make would accrue to themselves. They are, therefore, suffering from a very natural reaction of disappointment. My right hon. Friend reduced the duty for two reasons. The first was that at the time it looked as if industry in this country was going through an extraordinarily difficult state of things. The conditions had been difficult, but it then looked as if they would be still more difficult, but he had no conception at the time he made the reduction of what the actual state of things in the commercial world would in fact be. He was also moved by the fact that the 80 per cent. rate had been in force for two years and had, quite apart from the onerous incidence of the tax, pressed with very great severity on all the businesses of this country, because they were needing at the time more money for working capital. We in the Government held that this reduction of the duty from 80 per cent. to 40 per cent. would relieve what we believed to be business difficulties immediately in front of us, and would also enable business men to do what many of us had found much difficulty in doing in the two years immediately preceding—it would enable them to increase the amount of working capital, to increase the amount of reserves, and also make it more easy for them to face the conditions into which they were running.
Before I come to the present position of the duty, I will remind hon. Members what happened when the duty had been running for two or three years in this country. It was seen then that the tax could not be a tax for only a year or two. It was seen that there were great inequalities of incidence, that there were a great many cases of real hardship. There are a great many cases of real hardship now, which it may pass the wit of man to remove, but there are also a great many which can be removed. I would remind hon. Members that in 1917, when the present Lord Privy Seal (Mr. Bonar Law) brought in his Budget, in which I was privileged to help him, a good many substantial concessions were made to meet the difficulties which had up to that time arisen, and the concessions made in the Budget have eased the situation even down to the present day. The two subjects that were tackled then were the question of the small busi- 1297 ness man and the incidence of the duty on the new business man. The new man and the small man alike were helped by raising the percentage standard by 1 per cent., and then putting on 3 per cent. for the new capital subscribed. At the same time my right hon. Friend tackled the question of the small man, by giving additional relief to people whose pre-War standard was not more than £500, and where the profits involved were not more than £2,000. It was a very ingenious scheme, and it proved of the greatest benefit both to the new man and to the small man. As a result the small business man finds himself to-day in the position of being able to pay 60 per cent. Excess Profits Duty while retaining reductions considerably in excess of the pre-War standard. Since 1917 another three years have elapsed. That has brought into prominence fresh anomalies and the increasing strain to which some of the small and new businesses have been subjected by the great rise in prices, which makes it more difficult to find working capital, and makes more working capital necessary, and by the higher rate of interest for loans, and so forth. I have discussed this with my right hon. Friend the Chancellor of the Exchequer, and he is fully prepared in the Finance Bill to make substantial concessions to the small man and the new man. The House cannot, and I am sure will not, expect me to go more into detail at this moment, because we are discussing the principle. We are asked to vote now whether the Excess Profits Duty shall be abolished, and we may be asked to vote later on that the rate shall be reduced to 40 per cent. Such concessions as my right hon. Friend has in mind will require a great deal of working out, and will probably require interviews with the people chiefly interested. As hon. Members of experience know, it is no easy matter, in the first place, to arrive at a sound decision, and in the second place to get that sound decision embodied in a simple and easily understood form in an Act of Parliament.
I thought it well to follow the history of the Excess Profits Duty from the beginning, because I wanted to show that what is in my right hon. Friend's mind is on all fours with what has been done by the Government before, when the tax had been running two or three years. If it be possible to see where the shoe 1298 pinches so as to cripple, then we try and relieve the pressure. The position to-day is that we ask this House for one more year, certainly—and beyond that we can give no pledge; no Government could— for one more year to continue the Excess Profits Duty at the rate of 60 per cent. We ask the House, in the Division that is coming, to vote against the Amendment which has been moved, and to continue for another year the Excess Profits Duty. No reason, to my mind, has been given why this year the tax should be given up. I admit at once that a great many people in the country are at this moment very vocal. Hon. Members' letter-bags may be full of letters on this subject. My letter-bag has not been, but, perhaps, I shall get them after this Debate. I would, however, remind all my hon. Friends that the art of propaganda is improving very much. Whenever anything is proposed in this House that hits anybody or any group of people in the country, we hear about it very quickly, and the methods that are adopted are very skilful. The Press very often plays its part, anxious not to be behindhand, and in order to maintain our view we have sometimes to stand up to a very severe storm of criticism. When, however, you eliminate the very sources of complaint that we are going to try and eliminate, I am certain that the feeling is not either as unanimous or as deep-seated as hon. Members would have us believe.
Trade in this country to-day is in a very curious condition. People in business today are paying the most extraordinary prices for their raw materials and semi manufactured stuff. They are paying higher wages than ever they paid before, and they are selling their goods at incomparably higher prices—there may be exceptions, but I am speaking of the general run of business—and extraordinarily large profits are being made. That could not have been foreseen last year. A great many elements which have caused it were present, but there were other elements. The elements that might have interfered did not interfere to the extent anticipated. There is still a practical monopoly in many goods. It is not a normal condition of trade. It has arisen directly out of the state of war, nothing else, and, as such, it ought to bear its share of taxation, as I hope it will. I do not believe the business men of this country are going to 1299 protest against this tax, to the extent of being desirous of seeing their protest carried into action in this House, and the Excess Profits Duty beaten.
An alternative tax takes a long time to work out, and when my right hon. Friend comes to speak of the Corporation Profits Tax he will be able to explain to the House at what a high rate that tax would have to be levied to get a yield which would bring anything into the scale to weigh against the Excess Profits Duty. There has been a great deal said, not to-day, but in some debates, about "killing the goose that lays the golden eggs." I am very tired of that, and I am glad that it has not been mentioned to-day. There are, however, more ways than one of killing a goose. Although it may be a very sad thing if a goose lays rather smaller golden eggs, or if people think we take too many of those golden eggs, there is one very bad effect to which I have not seen attention called. If the goose tries to lay too large a golden egg, she will burst, and there is nothing more dangerous for a goose.
I will leave that point—my points are generally very simple ones—and say just one thing in conclusion. I would say it both as a Minister standing here and also as a man the whole of whose life has been spent in competitive business, from which he has suceeded in emerging, and whose firm has also done its share in paying Excess Profits Duty. I do not see how any business man can look round to-day at the financial condition of this country, examine the Budget of my right hon. Friend, and see how he has spread his taxes over every class in the country, calling upon all to pay according to their capacity; seeing how this year he has increased the price of beer, which touches nearly everyone in the country, and how he has been unable, although urged to do so, to make any remission on things like tea and sugar, which hit the very poorest people in the country—I cannot see how, in the face of all that, my friends in business can come to this House and say to the Chancellor of the Exchequer, "No; keep your beer tax, your tea and sugar tax, and all those taxes on; but our excess profits—No, we are going to vote against you, and we will turn you out rather than pay it." I am quite sure that, on consideration, many a man 1300 who may feel that he is being hit, or may think he is being unduly hit, by this tax, will think once, twice, and three times before he votes against it in this House.

§ Sir DONALD MACLEAN
I think the House is entitled to congratulate itself that it has had the opportunity of listening to a speech so distinguished by its honesty of purpose and frankness of expression, and that we are very much indebted to my hon. Friend. I would further say that, both in him and in my right hon. Friend the Chancellor of the Exchequer, the House is fortunate in having two Members who do not hesitate to say what they think. In these financial questions nothing is quite so important as that, so that we may know really where we are. With regard to the stage to which the House is now addressing itself on this very important question, I think it should be recollected that we are dealing simply with the Resolution stage, and that this is quite the right time to ventilate the subject in a general way. The real time for fighting out the objections to any tax arises, after the further preliminary stage of the Second Reading of the Finance Bill—which is another opportunity for general discussion—in the Committee stage of the Finance Bill. The time that the House has spent in discussing this tax has not been without its utility, but I would impress upon my right hon. Friend the Chancellor of the Exchequer that, in his approach to the Committee stage, which cannot be very long deferred, he should have careful regard to the objections which have been stated, not only in the House, but outside it, to this tax. We have had several years' experience of its working, and during a large portion of that time very genuine and legitimate grievances were not expressed by the business community, owing to the fact that we were at war. I think that is a point which should be properly borne in mind by those who are responsible for the taxation of the country. Since we have arrived at a stage at which there are, at any rate, no active military operations, due regard should be paid to the business objections to such a tax. I want to say at once that I entirely agree with the view of my right hon. Friend that there is no way of avoiding this tax this year. You have to provide the alternative, and I have not heard it yet. [AN HON. MEMBER: "The Corporation Tax! "] 1301 That may be one alternative, and I have heard some of the arguments about it, but it does not seem to me, with the profound changes in our fiscal system which will be necessary, that we can raise the money by that proposal in this financial year; and the money must be raised.
The tax, in my view, is a bad one. I have never hesitated to express that opinion, and indeed my own personal knowledge and experience of its working are amply confirmed in that view. I hope the Government will seize the earliest opportunity of devising a proper substitute for such a tax as this. It destroys inititive, it leads to dishonesty and is fruitful of extravagance—three bad points at any time, but never quite so bad as under present conditions. I shall not feel justified in voting against the Government on this Resolution. I appeal to a large number of Members, whom I do not charge with purely interested motives in the matter at all. They are taking a public view, and the fact that a man is engaged in business does not necessarily disqualify him from taking a disinterested public view. I really think that kind of charge is made much too carelessly and most unjustly. No one suggests that a member of the Labour party is seeking a purely personal end when he discusses questions of wages and hours. The assumption, and a very sound assumption it is, is that he is acting from his point of view in the public interest. If we let go of that assumption that hon. Members taking part in our Debates are not actuated in the main by public motives this House becomes unbearable. You must assume that. I am very proud of being a Member of the House of Commons, and I am very much attached to its great traditions, and that is one of the best of them. I press upon the Chancellor of the Exchequer, believing, as I do, that this tax must remain for this year, that in the Committee stage, which we shall approach with disinterested public motives, he will give the most careful regard to recommendations which may then be made to him, after the collated experience of five years' working of this tax, and see whether he cannot give such ameliorative provisions in the new Statute as will remove, not all, but as many as possible, of the legitimate business grievances against this tax which operates not only, as I believe, harshly on the individual, but in a really detrimental 1302 sense to the business community, and therefore to the nation as a whole.

§ Mr. RENWICK
I wish to impress upon the Chancellor of the Exchequer that one of the great needs of the country at present is new industries. We have been told of the enormous profits which are being made in certain industries. Those profits are being made largely owing to monopolies and to trusts, and therefore it is of the utmost importance that new industries should be encouraged and not discouraged. On the Debate on the Budget last year I told the House I knew of certain capitalists who were prepared to invest a large sum of money in new industries if there was a reduction in the Excess Profits Duty. The Excess Profits Duty was reduced to 40 per cent., and almost immediately those new industries were commenced in the hope that the duty would disappear altogether. We hardly dared hope it would disappear altogether, but we never expected it would be increased. Therefore I hope the right hon. Gentleman, in his concessions to new industries, will treat them with no niggardly hand. I wish to point out to him some of the difficulties from which we who form these new industries are suffering at present. We have competition from the Government, who are giving 5 per cent. to 5½ per cent, for their loans, we have a 7 per cent. bank rate, and we have trusts offering 8 per cent. cumulative preference shares; and, unless we who want to form these new industries can show that we are going to pay an equally high rate on preference shares, plus a fair rate upon the ordinary shares, it is impossible for us to get the necessary capital. I have recently been engaged in the formation of a very large industry, and when it was heard that the Excess Profits Duty was going to be raised to 60 per cent. there were meetings of those interested and orders were given to curtail all further expenditure upon that industry, which is a very serious matter. I hope and believe if the right hon. Gentleman will treat these new industries as liberally as he ought to treat them, resolutions of that description will be cancelled and the new industries will proceed. I hope Labour Members will recognise the importance of these industries. They seem to be in favour of these high Excess Profits Duties. If there is a factory wanting three men and there are only two at the factory gates, the men are 1303 the masters, and therefore you want to increase the number of the factories. If you do, the enterprise of the promoters of those new industries will find more employment for the men. Therefore, I hope we shall have words of encouragement from the Labour party to those who meditate carrying on new industries. I thank the right hon. Gentleman for the concessions he has foreshadowed, and I hope they will be of a most liberal character.

§ Lieut.-Colonel POWNALL
The Financial Secretary to the Treasury told us he had emerged from competitive business. I could not help wondering when he said that whether, had he had a 60 per cent. or 80 per cent. Excess Profits Duty, he would have been so successful in emerging as we are very glad he was. I think very few people realise how very heavy is the incidence of the Excess Profits Duty and Income Tax on relatively small men who were in business before the War. There were some figures given in the "Times" in 1918, which showed that a man then in business had to make £25,000 a year to be as well off as he had been before the War with £5,000. The figures are not so bad now, but the man who had £l,000 before the War has to make £4,000 a year now, after allowing for 60 per cent. Excess Profits Duty, Income Tax and Super-tax, to be as well off as he was before the War. His neighbours are rather liable to say, "So-and-so must be making four times what he was in 1914. He is doing jolly well. He is profiteering." As a matter of fact, he is not a penny better off than he was in 1914, and he has not got any of the money that every man who is in business requires in order to carry stocks at twice and three times the old prices, and when he invoices goods to his customers, he has to invoice them at twice and three times the amount in consequence, which means that much more capital is required in the business.
Another point I rather think the Chancellor has missed in the proposal. War Bonds, as long as they have been held consecutively for six months, can be taken in payment of Excess Profits Duty. Any man who this autumn foresees that next spring, 1920 having been a good year, he will require to pay considerable sums in 1304 Excess Profits Duty, can buy this autumn, in order to hold for six months, War Bonds 1928–29, which now stand at about 93. They will be taken at 100 next spring. The Chancellor of the Exchequer in that way does not get any sum at all for the liquidation of floating debt. These maturities only come on in eight or nine years; whereas if he were to keep Income Tax at the present figure, and all these sums which have to be paid away in Excess Profits Duty, were liable for assessment to Income Tax, he would receive next year qua Income Tax one-third, or thereabouts, of the sums he will not otherwise receive, because they are being surrendered in War Bonds in 1928 and 1929. He mentioned himself that many millions — I think £50,000,000 to £100,000,000—of the Excess Profits Duty are being paid off in War Bonds. As regards the scheme I have mentioned, many firms will be able to avoid paying anything in the form of Income Tax. They are paying a larger sum in War Bonds, but the Exchequer will not get the money next spring as it otherwise would. If the right hon. Gentleman thinks it absolutely necessary to keep some form of Excess Profits Duty for next year, I earnestly hope he will be able to cut it down to the 40 per cent. I also suggest consideration of the following facts. When the £200 statutory allowance was originally granted £200 was far more than it is to-day. If £200 was a fair sum in 1915, you ought to increase the statutory allowance anyhow to £300, and possibly to £400, to-day. At the time, five years ago, when the Excess Profits Duty was brought in the Bank rate was 5 per cent. It is now 7 per cent. The statutory advances on fresh capital were then from 9 to 11 per cent. I suggest that 9 to 11 per cent. five years ago was a much lower rate, relatively, than 9 to 11 per cent. now. If they were a fair sum, then the right hon. Gentleman ought to increase the allowances on extra capital to, say, 14 to 16 per cent. in view of the increased Bank rate. I hope this is the last year we shall have the Excess Profits Duty at all, but if we have to have it this year I hope he will be able to make the concessions I have indicated.

§ 6.0 P.M.

§ Mr. REMER
The Chancellor of the Exchequer said in his Budget speech that if he had known how good trade was going 1305 to be he would not have reduced the tax from 80 per cent. to 40 per cent. last year. I think it is equally true to say if he had not reduced the tax from 80 per cent. to 40 per cent. last year, trade would not have been so good as it has been during the past twelve months. The right hon. Gentleman also referred to the fact that some hon. Members have stated that high prices were the result of the increase of the Excess Profits Duty. When some of us stated that that was our view, he turned round to us and asked whether the converse was true, that prices had been reduced when the Excess Profits Duty was reduced last year. I think it is true. Prices would have gone much higher than they have during the last twelve months if he had not reduced the Excess Profits Duty from 80 to 40 per cent. He has also given us to understand that the only alternative which he is prepared to consider is the War Profits Tax, which a Committee is now considering. If he would abolish the Excess Profits Duty and give up any idea of a War Wealth Tax, and would adopt the principle of getting his money from Income Tax and Super-tax, and an extension of the Corporation Tax from 1s. to 2s., he would get more money than from the Excess Profits Duty, and he would by that means secure the confidence of the business community. I should like to refer the right hon. Gentleman to a letter which appeared in the "Liverpool Daily Post" of last Friday, signed by Mr. Sydney Dawson, an eminent Liverpool accountant, in which he gives figures of exceptional interest. He said that if a business man makes an excess profit of 10 per cent. he actually pays in taxation an amount of 21s. 8d. in the £ on the excess. If, on the other hand, he makes a bigger excess, an excess of 50 per cent., the amount that he pays in Excess Profits Duty is 14s. 8d. in the £ on the excess, showing that if a man is profiteering, and decides to charge exhorbitant prices, he is not taxed so heavily as the man who decides that he will be reasonable and will put forward reasonable prices.
I should like to refer to what the Financial Secretary has said about the business community. He said he did not think that the business community Would protest against this tax. Before coming into this House to-day, I attended a trade luncheon, and although I had no intention 1306 of speaking, I was asked by the chairman to say what I thought about the Excess Profits Duty. I only mention that to show that the traders of this country are deeply concerned about this tax, not because they have to pay it, but because it does not fall equally upon all classes. The business people of this country are quite prepared to pay so long as the tax falls equally upon all people, including the big trusts. The people who avoid taxation are the big trusts, and it is by the Corporation Tax that the tax would fall equally upon all sections of the community. A further reason why I am strongly opposed to this form of taxation is that it is so contrary to the best interests of enterprise. It cripples all new developments. During the past week I was in consultation with a very eminent banker, and he told me that two propositions had been put to him by concerns who wanted to make extensive additions to their works for the purpose of export trade; but in both cases the managing directors of those concerns had come forward and stated that they did not now want facilities, because, owing to the Excess Profits Duty, they were not going to proceed with these particular developments. The Chancellor of the Exchequer will agree that it is a very bad thing that such enterprise is not to go on, in view of the fact that the development of our export trade will have a very considerable effect upon the exchange problem.
A further reason why I am strongly opposed to the Excess Profits Duty is that it leads to wild speculation. The trader goes into the market with the knowledge that if it comes right he will make some small profit, but if the speculation goes wrong the Government makes up the loss. That is bad from every point of view. Powerful concerns and big trusts are placed in an entrenched position. I ask hon. Members to think of one of the biggest trusts in this country, Messrs. Lever Bros. Supposing anyone was attempting to compete with Messrs. Lever Bros. in soap manufacture. They would find it very difficult in any case, but owing to the existence of the Excess Profits Duty it would be practically impossible. Messrs. Lever Bros. would be able to under-sell them at every turn, simply because they know that they have a big pre-war standard and would be able to claim back from the Government the 1307 very large profits which they have made. The only chance for new concerns would be to build up reserves out of their profits, and take a very small sum out of their business, but that would be impossible if the Excess Profits Duty takes from those concerns the money which they -want for building up a reserve.
There is also the question of evasion. One hon. Member stated that this was a reflection on the surveyors. I do not think he would say that, if be knew some of the Surveyors of Taxes. I have a relative who is a Surveyor of Taxes, and I have discussed this question with him very often, and he tells me that evasion is one of the greatest difficulties they have. They know that evasion is going on, but the difficulty of checking evasion is one of the problems with which they have to contend all the time. There is evasion which is quite legitimate. There is an evasion of taxation by a firm which everybody has heard of, Messrs. Courtauld's, the well-known artificial soap manufacturers. They have in their assets a very large amount of property in the United States, which they have declined to bring over to this country until the Excess Profits Duty is reduced. I am told that the profits from that particular concern amounts to £5,000,000 Therefore, on that head alone, the Chancellor of the Exchequer is losing nearly £2,000,000 in taxation. There is a further way in which the Excess Profits Duty is evaded. I was told to-day of a concern with two partners. Instead of having two partners now they have only one partner. The other partner receives a salary as a salaried official. By that means the Excess Profits Duty is being evaded. The hon. Member who moved this Amendment has mentioned advertising. Every business man who has studied this question knows that the Excess Profits Duty leads to bad trading and loose methods. You have the office boy asking for a rise, because the Excess Profits Duty will have to pay for it. Everybody thinks that the Government is going to pay for extravagance.
There is another bad point which is bound to arise. I was travelling last week in the train with a friend, and he told me he was going to the south of France. He stated that he had made his pre-war standard and he added: "If the 1308 Government think that I am going to slave my soul-case out working for them they are mistaken. I am not going to do it. I am going to the south of France to enjoy myself on the profits which I have made." That is a very bad thing for the country. The country would be very much better off if everybody would put their back into the work and see that the best was done. I am satisfied that this tax will lead to less revenue being secured, and that if the Chancellor of the Exchequer would abolish it, he would secure more revenue. It is only by having a sound, equitable system of taxation that the country can be placed on a sound, business-like footing.

§ Mr. LAWSON
In view of the challenges which have been thrown out to the Labour party, I wish to say that I am speaking for the party as a whole. The Mover of this Amendment made a statement towards the end of his speech which will be marked, noted and underlined by the workers of this country. He threatened the Labour party that, if they went into the Lobby against his Amendment, the section which he represented would in their turn see, and he would see to the best of his ability, that the incidence of the Excess Profits Duty would ultimately be placed upon the workers.

§ Mr. TERRELL
The hon. Member is entirely mistaken. I never said anything of the sort.

§ Mr. LAWS0N
I am very pleased to hear that I misunderstood the hon. Gentleman. That was the impression that was conveyed not only to me but to gentlemen representing the party sitting beside me. In opening out his remarks the hon. Member talked about this tax having been accepted by the business men of this country as a war sacrifice. Some of us want to know what the sacrifice is or has been. We have been told by the Inland Revenue that no less than £4,000,000,000 have gone into the pockets of certain sections of society as war wealth. Of that £4,000,000,000, 70 per cent. has gone into the pockets of one per cent of the population. It seems to me that there has not been very much sacrifice on the part of the interests who accepted this particular principle during the War. We all know that business interests as a whole have not only extended their interests, but have increased their bank balance. For the first three 1309 months of this year the new capital subscribed was equal to the amount subscribed in the whole of 1913. The amount subscribed in 1919 was five times what it was in 1913. Therefore, it does seem as if business interests have not suffered very much from the Excess Profits Duty.
I do not believe that the people who have moved this Amendment are even helping the business interests of this country as a whole. As a business proposition, business men facing the nation's financial affairs, as they are at present, must accept some financial responsibility towards meeting the national need. But I place it higher. It may be an illusion, but I do believe there are people among the wealthy classes of this country who believe that the mass of the people have a right to a greater share of the good things of this country than they get at present. That may be an illusion, but I ask hon. Gentlemen at any rate to leave me the one illusion left to me since I came into the House of Commons. I came here as a fairly moderate trade union representative, but since I have come in contact with some of the interests that sit on those Benches I am rapidly becoming something that is not exactly a Conservative. Of course, we understand what hon. Gentlemen do not seem to understand, that there is something like a subdued insurrectionary feeling in this country among the workers.

§ Mr. TERRELL
No.

§ Mr. LAWSON
My hon. Friend says no, and I am sure that he believes no, but it is so. Amendments of this kind add considerably to the volume and the force of that feeling which is predominant in the country to-day. With the hon. Gentleman, we, of course, do not believe that this is an ideal method of raising money. The Chancellor of the Exchequer does not believe it. We believe, as the hon. Gentleman has said, that it leads to evasion. Someone has said that it leads to dishonesty, and Members of this House cheered with such feeling that one assumes they must know something about it. We do not believe that it is fair in its incidence, but it is a remarkable thing that the same section of the House that fights the Excess Profits Duty is equally stern in its opposition to any other impost upon the War wealth which it owns and is unwilling to face the national burden. [HON. MEMBERS:] 1310 "No! "] Hon. Gentlemen say no. They talk about the Corporation Profits Tax. They know very well that it cannot be met from that source, this year at any rate. When Members of our party say that the National Debt, for instance, ought to be met by a capital levy, we are told that it is unfair. When the War Wealth Tax becomes a matter of serious consideration we are told that it is not practicable, and we are told this by the same gentleman who moved this Amendment.

§ Mr. TERRELL
The hon. Member entirely misrepresents me. I never said one single word against the Corporation Tax. In my opinion it is a perfectly fair system of taxation.

§ Mr. LAWSON
My hon. Friend knows very well that I was alluding to the Capital Levy and the War Wealth Tax. It is a well-known fact that had the Chancellor of the Exchequer received any encouragement from certain sections of this House he would have preferred a War wealth tax to an increase of the Excess Profits Duty; but it is well known that hon. Gentlemen do not accept that as a method of taxation. When it comes to Excess Profits Duty they say that it is unfair altogether. I think that we are right in assuming that all the art that has been used this afternoon cannot cover the fact that the section behind this Amendment are prepared to shove the financial burden of the nation on to the big shoulders of the masses of the people, if they get an opportunity. They are prepared to face anything rather than face the financial situation of the present time.
This Amendment raises a larger question than the mere incidence of taxation upon a certain section. It raises the question of the ultimate incidence of the War from a financial point of view. Whether this House likes it or not, this matter has resolved itself into a discussion as to whether the people have the ability financially to pay for the War, and to meet the needs for national development, or whether the masses of the people ultimately are going to be compelled to pay in money as they have paid largely in blood and tears. [HON. MEMBERS: "NO!"] Hon. Gentlemen say "No," but with the best intent I have been driven to that conclusion. 1311 You cannot persuade this country that we are not able to meet this tax. I have given some of the general financial results. We see them on every hand. What about the manifest luxury and extravagance that are flaunting themselves in every part of the country as a result of War profits? Of course, it may be said that that is a general assertion, but this House should be reminded that these things are taking place, and that the masses of the people know that they are taking place. I remember not long ago there was before a Court a young Gentleman, who informed a Judge and jury that he was spending £10,000 a year in collecting butterflies. I remember seeing a case not long ago in which an amiable lady had spent on china something like £30,000, and counsel informed the Judge that those who had wealth at least had the right to expensive tastes. When we consider things of that type the masses of the people are right in assuming, at any rate, that the classes which can do those things, multiplied by a thousand instances, have at least the ability to meet this increase of tax.
It seems to me that this Amendment shows a singular disregard of War-time professions. We all know the kind of thing that was promised to the masses of this country. I have heard in this House sometimes discussions about War medals for the services rendered. I want to inform the House that, according to the prevalent feeling of the country, War medals are rapidly having the same value in the minds of the soldiers as War-time professions, and for a very simple reason. Men have come back to this country, and you cannot get the necessary wealth, as the result of the stiff-backed attitude of Members of the House on that side, for the purpose of creating employment and meeting the general situation. I know that these things are not pleasant to hear, but I am telling the House the kind of thing which men in the street and in the workshop are saying at the present time. It may appear all right from the point of view of the gentlemen who pay Excess Profits Duty. Not long ago I stood in a house of one room. In that room there were a mother and four children living. I do not know how they lived there. It seems to me that half of them must have made arrangements to be out during the day while the 1312 other half were in, in order to live there I was born in that house and I know something of what the average member of the working class thinks at the present time because of bitter experience. But the thing that came back to me with all its force was this: that there are still people living in that house. There are millions of people living in such houses. There are millions of people finding it very difficult even to meet the most ordinary needs of the day.
I appeal to the best instincts of hon. Members. I have the illusion that there is a better instinct even in the men who are backing Amendments of this kind. I appeal to their better instincts. They sometimes tell us that our people, the working classes, are showing signs of extravagance because there is a little ripple upon the surface here and there. If they knew something of the sacrifice of the average working class family at present they would not pay much attention to the small negligible things that they sometimes see. I appeal to the Chancellor of the Exchequer to stand firm on this question. We agree that there is room for consideration for the small man, and the new businesses, but we want the Chancellor of the Exchequer to be very careful of the ground when he makes that concession. Generally speaking, we hope that he will keep a stiff back while within certain limits we agree. I do not know whether it is a matter of courage or because he has been driven by the irresistible facts of the situation, but we hope that he will hold firm, and he will have the strange sight of the Labour party following the Government into the Lobby against this Amendment.

§ Mr. CHAMBERLAIN
I rise only to make an appeal to hon. Members. The Amendment is an Amendment for the total repeal of the Excess Profits Duty. My hon. Friend, the Member for the City of London, has a further Amendment proposing to continue the duty at 40 per cent. instead of raising it to 60 per cent. May I beg the House to take the decision now on the question of the total repeal of the duty, so that we may have a little time before 8.15 to deal with the further Amendment and dispose of any other questions?

§ Question, "That paragraph (a) stand part of the said Resolution," put, and agreed to.

1313

§ Sir F. BANBURY
I beg to move, in paragraph (b) to leave out the words "sixty per centum, instead of" ["equal to sixty per centum'].
The purpose of this Amendment is to reduce the Excess Profits Duty from the proposed amount of 60 per cent. to 40 per cent. If it is carried, the result will be that during the financial year ending March, 1921, the Government would lose a revenue of £10,000,000. With a surplus of £234,000,000 the loss of £10,000,000 is of very little importance. We are going, I believe, to use that £234,000,000 to pay off debt. I suggest that before we consider whether or not that sum of £234,000,000, or, as it would be with my Amendment carried, £224,000,000, is not sufficient, we should wait a year to see whether or not during that time some sort of tax might be devised which would take the place of the Excess Profits Duty. I do not think there can be any doubt that a tax which imposes a penalty on industry is a very bad tax at the present time. I will not go into the inequalities of the tax. While during the War it might have been necessary—I think to a great extent it was necessary—to have a tax of this sort, the House will remember that when it was originally proposed it was to be a tax on excess profits obtained by people owing to the War. Now that the War is over, anything which prevents people accumulating capital—I would commend this to the Labour party —as this duty does, is detrimental not only to the interests of the manufacturers and business people generally, but detrimental to the working classes themselves, because it takes away from them the opportunity of employment. It will be asked, What will take the place of this tax if the Amendment is carried? I say that during the year which will elapse there will be plenty of opportunity for the Government to consider whether or not they can devise some other tax which will not operate so unfairly.
There is another alternative, and it is this. I hold in my hand a return which was given by the Financial Secretary to the Treasury on the 7th of August of last year. I find from it that in 1910–1911 the expenditure on the Civil Service in Ireland and on the Civil Service in England amounted in all to £70,000,000. I turn to the financial paper which was given to us when the Budget was introduced, and I find on page 5 that 1314 these similar services are put down at £497,000,000. That is an enormous increase. I see also that last year these services were put down at £505,000,000, so that, on the face of it, it would appear that there has been a reduction of £8,000,000 for those services during the last year. It is not a very large reduction upon such an enormous item. If hon. Members will take the trouble to analyse the details, they will find that instead of there being a decrease there has been a very large increase, and I will explain it. In 1919–1920, included in the Civil Services was a sum of £115,500,000 advanced as loans to the Dominions and Allies, but in this year the sum advanced in that way was only £36,000,000. I do not know how advances to Dominions and Allies get into the Civil Service Estimates; I should have thought they had nothing, whatever to do with the Civil Service If you deduct £36,000,000 from £115,500,00 you have £79,000,000 left, and therefore, what you have to do is to add that £79,000,000 to the £497,000,000. There is therefore actually an increase this year in the Civil Service of £60,000,000. That seems to me to afford a; very great opportunity for economy. It may ' be said that owing to the rise in prices it is necessary to give larger salaries to Civil servants. If you go so far as to say that salaries should be doubled, you would only get the figure of £140,000,000. If you subtract that £140,000,000 from £500,000,000 you will find that you have something like £360,000,000 on which to effect economy.
I would suggest that the better way to-deal with this large expenditure is not to give any more money to the Government. What you ought to do is to insist upon increased saving. The more money you give to the Government the more they will spend. You must impress upon the Government that it is not possible to obtain more money if it is desired to maintain the commercial supremacy of the country. I have great faith in my country, and I believe that if the Government will only set the example, and will take the matter boldly in hand, pointing out to all classes that what we have to do is to-work hard and save money, we shall in time return to the prosperity which we enjoyed before the War. If they will do that they will do something to relieve the enormous burdens which are weighing upon every class, and which the working 1315 class will feel later on. I am sorry to say I believe that will become true.

§ Mr. MILLS
It is already true.

§ Sir F. BANBURY
Unless they will do that I feel quite certain we shall continue to descend the slippery plane which we entered upon, I think foolishly, when last year, instead of making economies, we attempted to make a new world, instead of endeavouring to restore the old world to the position in which it was before the War. I would appeal to the House to support me in this Amendment. If there is a good minority for my Amendment, I think it would have a great effect, and I do not think it would do the Finance Bill any harm. I believe the only solution of the position in which we are is increased economy and increased production. I beg to move.

§ Mr. GRIFFITHS
I hope the Chancellor of the Exchequer will not accept this Amendment. The right hon. Baronet has tried to deliver a lecture to the Labour Members, but that right hon. Member does not look at this question from the same economic point of view as the Members of the Labour party. He talked about saving. I do not know whether he meant saving Treasury Notes or saving useful commodities produced by the workers of the country by hands and by brains. What the Labour party believe in is that the national pool should be filled with useful commodities and that those commodities should be scientifically distributed amongst the people of the country. It is useless filling the national pool with Treasury Notes. Last year when I spoke upon the question of excess profits I pointed out to the Chancellor that, in so far as the most important trades in the country were concerned, no capital was required in order to revive trade. I believe the Chancellor on that occasion pointed out that he was reducing the Excess Profits Duty with a view to reviving the industry of the country in order that we might get back to pre-war conditions. I think, if we take the four most important industries of this country, namely, steel, galvanising, cotton, and the ports and harbours of our country I do not believe that the Chancellor can show that a single penny of new capital has been invested in those industries during the last year. If hon. Members 1316 do not agree with the facts I have placed before them let them repudiate them. I am sure that the Financial Secretary knows that what I am saying is correct. Take the galvanising industry, and you will find there are more than 25 per cent. of the modern mills idle to-day. I will explain why later. In the steel industry there are several furnaces and section mills and bar mills and other kinds of mills idle to-day on account of the transition from producing shells to the production of steel used for purposes as in prewar days. If you go to Lancashire you have hundreds of mills idle in the cotton trade. [HON. MEMBERS: "No, no !"]

§ Mr. SUGDEN
Where?

§ Mr. GRIFFITHS
In Lancashire to-day, owing to shortage of labour.

§ Lieut.-Commander ASTBURY
Will the hon. Member name one? I may say I am a Lancashire Member.

§ Mr. GRIFFITHS
In Preston.

§ Lieut.-Commander ASTBURY
Would the hon. Member tell me what mills are closed in Preston through lack of labour?

§ Mr. GRIFFITHS
I am giving you the information contained in the report we received from the members of the cotton industry—that there are mills idle in Lancashire to-day.

§ Mr. BARTLEY DENNISS
Spindles, not mills.

§ Mr. GRIFFITHS
Very well, spindles, but spindles make a mill. Let me come back to the galvanising trade. We pointed out last year that the working men in these trades go to their libraries and get hold of the journals and find out exactly the returns and profits made in those trades by the employers, and that causes more unrest than anything that I know of, so far as the trade unionists of the country are concerned. What do we find? Last year as a result of the reduction of the Excess Profits Duty from 80 to 40 per cent. you presented the employers with at least £250,000,000, I think that is an under-estimate, but I want to be on the right side. That means, that with a few millions pounds more, the Chancellor of the Exchequer would have had no deficit to meet this year. Furthermore, the employers in these industries have been making bigger profits 1317 during the last year, although he reduced the Excess Profits Tax than during the period of the War. In 1914 steel, tin-plate, bars, and other sections were sold at £5 per hon. During the period of the War, when these industries were controlled, the Government fixed the price-at £15 per hon. The employers made huge profits out of that £15 per hon. Immediately steel was decontrolled, although the sliding scale in the steel industries only stood at something like 105 per cent. above pre-War rates, to-day it stands at 200 per cent. above pre-War rates.

§ Major-General Sir NEWTON MOORE
What did coal cost?

§ 7.0 P.M.

§ Mr. GRIFFITHS
As soon as decontrol took place the employers took advantage of supply and demand, and have been fixing prices at such a rate that they are having a serious effect on other industries as well. I have a case here which was in Court, and the evidence given by a Mr. Taylor, a chartered accountant, on behalf of the Inland Revenue Department. He produced a synopsis of the balance sheet of a particular works. I do not want to name the works, because there was a charge of falsifying the accounts, and the manager was acquitted. Mr. Taylor's synopsis showed that the basis figure of the pre-war profits for the purpose of control was £30,000, and in 1916 the proprietor was entitled to £48,200. In four months the profits were £67,000, but the proprietor had no interest beyond the £48,000. The profits for the works that, year amounted to £203,991, subject to the Munitions Levy, so you see that in pre-war times this firm had an income of £30,000, and during the period of the War, with steel at £15 per ton, it made a profit of £203,991. What is the position to-day? Steel is not at £15, but at £24 a. hon. [HON. MEMBERS: "What is the cost of labour and coal?"] It is for you to reply later on, and to upset these facts if you can. If these employers made this enormous profit, when the trade was controlled, in steel sold at £15 a ton, what are they making to-day, selling steel at £24 a ton? The fact of the matter is that the employers have abused their privileges by increasing prices and taking advantage of the demand being greater than the supply, and that does not only affect the steel industry, but all the industries in the 1318 country, and it goes right round, so that you have not only a circle of employers getting the greatest advantage they possibly can, but you cannot blame the workmen for going after a share of these enormous profits that the employers are making. We believe our way of imposing a capital levy would be the best method of raising revenue, but while we do not think the Government's is an ideal method, we accept it because the Chancellor is compelled to get this money, and we hope that before 12 months are over prices will come down. The wave of high prices to-day is not receding, but rapidly advancing, and we want to see them coming down to normal conditions, the same as in pre-War days, and seeing that the Chancellor of the Exchequer has no other source from which to draw and will not accept our proposal for a capital levy, we are supporting the increase of the Excess Profits Duty from 40 per cent. to 60 per cent. I myself wish he had increased it to 100 per cent. to prevent the employers profiteering any more.

§ Mr. R. CARTER
I wish to support the Amendment. Coming from one of the particular areas that has just been spoken of when the matter of spindles came up, I wish to say that, in our county and round about there, there was a pious hope, and more than a pious hope, that this particular duty would be dropped altogether this year. It was really believed in, so that when the additional 20 per cent. was put on it came as a very unpleasant shock. I too have had sheaves of letters, and I want the Financial Secretary to the Treasury to understand that the art of propaganda has not been really worked with regard to the correspondence that I have had on this subject, for the letters that have reached me have been written from firms really and truly who will suffer from this tax. I am speaking of the younger firms. We will take the case of a man who started business in 1912 and who very likely for the first year was absolutely at a loss, building up his business. The second year he may only just have paid expenses, and the third year he was making a small profit. He has left his old firm, and is working on his own because he thinks he can do better by so doing. Across the road there is his old firm, who were making their tens of thousands the year before the War and he 1319 on his very little return has to pay immensely more in proportion than does the wealthier firm in Excess Profits Duty. I was very glad to hear that the policy of mercy is going to be shown, and I hope in a large degree, to these young firms and these young people who are struggling to do what we are all told to do, namely, to try to increase production, as being the only salvation for the country. I consider the putting on of this 20 per cent. will not increase production, but will have the opposite effect. If the taking off last year of 40 per cent. of the duty increased production, will the putting on of 20 per cent. this year increase or decrease production? To my mind there is no doubt that, as long as this tax has to be paid in practically liquid assets, the putting on of another 20 per cent. will seriously cripple even the largest firms.
Prices have gone up in every way, and even profits, as we know, are not what profits were, and I would very much like to accentuate this fact, that I think it is undesirable even to continue this tax. After decreasing it from 80 per cent. to 40 per cent. last year, to increase it now to 60 per cent., after we are told that the financial condition of the country is more satisfactory than it was last year, is bound to cause irritation and unrest in all business circles. What I would like to do would be rather to encourage the development of trade than to hamper it, and I appeal to the Chancellor of the Exchequer to take the matter very seriously into consideration, especially, as I say, with regard to the younger firms. The very wealthy firms may stand it without much trouble, but for the young ones it means in many cases either bankruptcy or penury, or driving out some of the rising young business men of our country and making their hearts sad when they ought to be bucking themselves up and doing their best to pull things through. There are many cases of men who have put in one or two years in the War and have come back and started in business on their own, and is it fair, after they have done their bit for their country, that they should have this very heavy burden put on their shoulders? I may be asked to suggest an alternative in order to make up the loss which would be caused by not increasing the duty, but I do not think the difference is so very great to be made up by the Treasury. I do wish the 1320 Chancellor could take away the burdens from the persons who are producing. We are told that production alone will save us from bankruptcy, and yet on the other hand we are told, "If you do produce, we will take so much off you." Where is the incentive for striving to do better? I think it is a mistake, and I hope it will not be persisted in. I know very well the money must come from somewhere, and I am not asking for the abolition of the tax, but for no increase. If the tax is kept at 40 per cent., it is a heavy enough burden for any young firm to start with, and a heavy burden on the best established firms. I hope the Chancellor will go fully into the question whether this extra 20 per cent. which he is going to get is worth the candle. I do not think it is, and I think that by imposing it you will be keeping down extension, expansion, and production.

§ Mr. CHAMBERLAIN
The course of the Debate this afternoon has, I think, been instructive and interesting. We were deprived, by some reason which I do not entirely explain to myself, of the prospect of a Division a few moments ago, and I think the House wants to come to a decision pretty quickly now, but I do not think I ought to refrain from making some observations. I must say, whilst acknowledging the moderation and friendliness, if I may say so, of the speech of my right hon. Friend (Sir F. Banbury) who moved this Amendment, that it is one which it is quite impossible for the Government to accept. As already stated by my hon. Friend the Financial Secretary, I am prepared to consider, and indeed I am not only prepared to consider, but I have for some time past been considering, what alleviation I can make in the burden which falls on such small or new businesses as the hon. Member who has just sat down has spoken of; and I will call the attention of the House to this, that as a result of this afternoon's Debate it is on those small businesses that the objections have been concentrated, that there have been several admissions from hon. Members who have spoken against my proposals that they are not concerned for the big businesses, which can afford to pay the tax, but that they are thinking of these little businesses or of men who are just now trying to establish themselves in business after serving their country in the 1321 War. Let me say in regard to what has been stated about the great amount of correspondence received by hon. Members on the subject, that speaking from my own experience I have been quite as much struck by the letters I have received from men who said, "You will hit me very hard, but you are right, and I beg you to stick to your guns," as I have been by telegrams sent to order, bearing an extraordinary similarity of expression, indicating to me, as to anyone who has been a short time in this House, a common origin for all. I say it is impossible to accept this Amendment to reduce the tax for this year to 40 per cent. If last year, instead of proposing to reduce it to 40 per cent., I had proposed to reduce it only to 60 per cent., I should have got as much gratitude from the payers of Excess Profits Duty as I got for the reduction to 40 per cent., and had I foreseen the conditions that would prevail in the last 12 months that is the proposal which I should have made on the part of His Majesty's Government.
An hon. Gentleman has spoken as if in what I said the other day I had treated the good trade of this country as a reason for now returning to the 60 per cent. rate. That was not so. It was the abnormal and exceptional conditions of trade, producing wholly abnormal, exceptional and extravagant rates of profit. That is a quite different thing. It is not a necessary correlative or concomitant of good trade, but it is an inevitable concomitant of the scarcity that now prevails in the world, and of the immense excess of demand over supply. I say, therefore, that if I could have foreseen I would not have reduced the duty below 60 per cent. last year. I did not foresee the circumstances. You may blame me; you may say I was blind. But who was clearersighted at the moment when I and the Government had to take the decision? Now I find that the circumstances are wholly different from what were then con templated, that the abnormality of the conditions not merely remains, but has increased in the twelve months which have passed. Prices, instead of falling, have risen further. I am always told that prices will rise if I put on a tax, but nobody has ever pointed out that prices fell when I reduced it. Then my hon. Friend goes into the region of prophecy 1322 and says that if I had not reduced it, prices would have been still higher. My own impression is that they were about as high as they could go. I find prices rise, and I find that, with the rise in prices, profits are higher than before, though we all supposed they would become less. Under those circumstances, if we could have foreseen this last year, we would not have reduced the tax so much, and we are entitled to put the duty back— not to the 80 per cent., which I think under any circumstances, except those of extreme necessity is too high—but to the 60 per cent.
I have asked for alternatives, but they are not so easy to find, and when you do find them they are not so free from objection that they are universally acceptable. I have had suggestions put to me. Curiously enough, they have generally been suggestions which I have already examined with my advisers, and some of which I have put to those representatives of commerce and industry who have waited upon me with their objections to the Excess Profits Duty. I have heard a good deal to-day in the discussion about the inequality of a flat rate of Excess Profits Duty. I have suggested as an alternatitve to the representatives of commerce and industry that this tax should be graduated like the Super-tax. [HON. MEMBERS: "Hear, hear!"] Does the House like that? [HON. MEMBERS: "Hear, hear!"] Well, representatives of commerce and industry did not. They declined the suggestion. I invited them to find me an alternative. In conversation across the Table the suggestion was immediately thrown out that somebody else should be taxed. I said that that was not the alternative for which I sought. I asked them to raise a similar sum of money from approximately the same people with greater fairness and without the inconvenience of which they complained. They went away to consider, and approached me again in January. I said I should be very glad to see the alternative, and they really had no alternative.

§ Mr. BILLING
May I ask who were these people?

§ Mr. CHAMBERLAIN
The Federation of British Industries.

§ Mr. TERRELL
They are not the only people.

1323

§ Mr. CHAMBERLAIN
My hon. Friend has never suggested any alternative. Bather later this year, before the Budget was introduced, the Federation made a proposal. Did it comply with my conditions? Was it a proposal for a graduated tax on profits, which commends itself to some Members of the House, at any rate? No, Sir, it was for a flat rate of tax on profits, regardless of the rate at which they were earned, and not on the profits of industry assessed to the Excess Profits Duty only, but on all earnings from trade, agriculture and the professions. That was not an alternative. That was shifting the burden on to other shoulders. I should add that they were specifically and vehemently opposed to anything in the nature of a graduated tax which involved a valuation of the capital in the business. It is not an easy matter; I do not like it for Revenue purposes, and they did not like it as taxpayers, and they were not prepared to encourage it. I must not at this stage go into the difficulties of a graduated profits tax. The treatment of goodwill, as I heard an hon. Gentleman mention a moment ago, is one of those things. There is the treatment of oldestablished businesses whose shares have for many years changed hands on the basis of their having long continued to pay very high dividends, so that they are purchased to return, say, 10 per cent. I only mention these matters to show that I am not so wedded to the Excess Profits Duty that I would not gladly accept a better alternative if you could find it. I have sought an alternative myself. I have enlisted the help of some of those most interested and desired them really to bring their minds to bear on this problem with a view to fulfilling conditions that are essential conditions. My right hon. Friend says that this year it brings in only £10,000,000, but, after all, if you do not get that this year you will leave the matter open till next year and then have to do something else. I cannot do that. I will do everything I can to promote economy and to cut down unnecessary expenditure. I recognise that at this moment—I was going to say the first duty—but, at any rate, I agree it is one of the primary duties. I beg the House to help me. Their neglect does not excuse us, but, if they do not help, they make our task much more difficult. I recognise the primary importance of economy.

1324

§ Sir F. BANBURY
I think I have helped.

§ Mr. CHAMBERLAIN
My right hon. Friend and I are such old friends that we must not bandy compliments. I recognise that the more economies we can make the greater will be the sum of money available for the reduction of the Debt. In levying this tax for twelve months at 60 per cent. I am looking, as I said in my Budget Statement, not so much to the £10,000,000 I get this year as to the full year's product of the tax, which is £100,000,000. That is a sum which, even in these days, counts, and with which I cannot afford to dispense. My first duty is to make a real effort, and to persuade the House and the country, if I can, to make a real effort now, while prices are still high, while taxes still give a large return, while trade is still prosperous, to reduce that vast load of debt which we have to carry as a result of the War, and thereby to reduce as fast as we can, and within the limits which our obligations impose upon us, the Floating Debt, which is an embarrassment to commerce, which endangers from day to day, as it were— I do not want to use alarming words, but it is a little difficult to find exactly suitable terms when speaking in this way —which I do not say is dangerous from day to day, but might easily, in circumstances which we could foresee, endanger the credit of the country, and with it the credit of every business in the country and every man in the country. After all, individual credit is bounded by the limits of national credit, and if we do not get our national credit on a secure foundation, and do not show we are in earnest about it, and about doing it at once, individual credit will suffer to the loss of national prestige.
I say but one word more before I leave this subject. Details, I hope, the House will consent to leave to the discussion of the actual terms of the Finance Bill in Committee, when I shall hope to make proposals to carry out the pledges I have given to-day and to meet the wishes of the House at large. But do consider, in connection with the question of credit, that we are talking not only for our own people, that we are acting not only for our own people, but we are talking here and we are acting before all the world. There is nothing more important to us at this moment, with our dependence 1325 upon overseas supplies of food and raw material, than that our international credit should stand high. There is no other place where it is more important that our credit should hold good than in America. I am quite content to be judged for my part of the responsibility in this Budget, and of the proposals which have been made, by the verdict of informed American opinion upon the effort and the determination which the Budget shows of this country and this people to set its house in order, to stand once again, as we have stood for so long, in the very front rank as a great financial, commercial and industrial nation.

§ Mr. TERRELL
[HON. MEMBEES: "Divide!"] I will not take up the time of the House, except to ask the Chancellor of the Exchequer one question, and that is in connection with the standard of profit, the datum line. It has been pointed out in the course of the Debate to-day that a great many firms are in a very unfavourable position. Will the right hon. Gentleman, when he comes to the Finance Bill, give these firms substantial relief—these firms which, through no fault of their own, stand in this unfavourable position? Will he give them relief so that their standard may be raised to a level with other firms of equal position and of equal earning power? This is one of the great grievances which is rankling in the people's minds. [HON.

1326

§ MEMBERS: "Divide, divide!"] I do not want to keep the House unduly, but I would ask, will the right hon. Gentleman give consideration to the question of raising the standard of firms who are in a bad positon to pre-War standards, because not only does this apply to firms, but also to partners, and so on, who are affected by the tax at present.

§ Mr. CHAMBERLAIN
Very briefly let me say I do not think my hon. Friend must press me to go beyond the statement made on my behalf by the Financial Secretary and repeated in my own speech. My hon. Friend the Financial Secretary recited to the House the various expedients by which, at the inception of the tax, and still more later in the course of the tax, efforts were made to alleviate hard cases. I am reviewing every one of those cases to see what I can do, with a view to bringing further alleviation under the circumstances of to-day. I am not prepared to pledge myself to any particular course more than I have said. I want to consult, amongst others, the Board of Directors of the Manchester Chamber of Commerce, who have sent me the best Resolution I have had on the subject.

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

§ The House divided: Ayes, 287; Noes, 75.

1329

Division No.95.]	AYES.	[7.35 p.m.
Acland, Rt. Hon. F. D.	Breese, Major Charles E.	Cowan, D. M. (Scottish Universities)
Adair, Rear-Admiral Thomas B. S.	Bridgeman, William Clive	Craig, Colonel Sir J. (Down, Mid)
Agg-Gardner, Sir James Tynte	Briggs, Harold	Craik, Rt. Hon. Sir Henry
Amery, Lieut.-Col. Leopold C. M. S.	Britton, G. B.	Davidson, Major-General Sir J. H.
Archdale, Edward Mervyn	Brown, Captain D. C.	Davies, A. (Lancaster, Clitheroe)
Armitage, Robert	Bruton, Sir James	Davies, Major D. (Montgomery)
Astbury, Lieut.-Commander F. W.	Buchanan, Lieut.-Colonel A. L. H.	Davies, Thomas (Cirencester)
Astor, Viscountess	Buckley, Lieut.-Colonel A.	Davies, Sir William H. (Bristol, S.)
Baird, John Lawrence	Bull, Rt. Hon. Sir William James	Davies, M. Vaughan- (Cardigan)
Baldwin, Stanley	Burdon, Colonel Rowland	Davison, J. E. (Smethwick)
Balfour, Sir R. (Glasgow, Partick)	Burn, Col. C. R. (Devon, Torquay)	Dawes, James Arthur
Barlow, Sir Montague	Butcher, Sir John George	Denniss, Edmund R. B. (Oldham)
Barnes, Major H. (Newcastle, E.)	Campion. Lieut.-Colonel W. R.	Du Pre, Colonel William Baring
Barnett, Major R. W	Cape, Thomas	Edge, Captain William
Barnston, Major Harry	Carr, W. Theodore	Edwards, C. (Monmouth, Bedwellty)
Barrie, Charles Coupar	Carson, Rt. Hon. Sir Edward H.	Edwards, Major J. (Aberavon)
Barrie, Hugh Thorn (Lon'derry, N.)	Carter, W. (Nottingham, Mansfield)	Edwards, John H. (Glam., Neath)
Barton, R. C. (Wicklow. W.)	Cautley, Henry S.	Elliot, Capt. Walter E. (Lanark)
Beauchamp, Sir Edward	Cayzer, Major Herbert Robin	Eyres-Monsell, Commander B. M.
Beckett, Hon. Gervase	Cecil, Rt. Hon. Evelyn (Birm., Aston)	Farquharson, Major A. C.
Bell, James (Lancaster, Ormskirk)	Cecil, Rt. Hon. Lord H. (Ox. Univ.)	Fell, Sir Arthur
Benn, Sir A. S. (Plymouth, Drake)	Cecil, Rt. Hon. Lord R. (Hitchin)	Fisher, Rt. Hon. Herbert A. L.
Bethell, Sir John Henry	Chamberlain, Rt. Hn. J. A. (Birm., W.)	FitzRoy, Captain Hon. E. A.
Bigland, Alfred	Chamberlain, N. (Birm., Ladywood)	Flannery, Sir James Fortescue
Birchall, Major J. Dearman	Cheyne, Sir William Watson	Forestier-Walker, L.
Bird, Sir A. (Wolverhampton, West)	Clay, Lieut.-Colonel H. H. Spender	Forrest, Walter
Borwick, Major G. O.	Clynes, Rt. Hon. J. R.	France, Gerald Ashburner
Boscawen, Rt. Hon. Sir A. Griffith-	Cockerill, Brigadier-General G. K.	Fremantle, Lieut.-Colonel Francis E.
Bowerman, Rt. Hon. Charles W.	Cohen, Major J. Brunel	Galbraith, Samuel
Boyd-Carpenter, Major A.	Coote, Colin Reith (Isle of Ely)	Gardiner, James
Brace, Rt. Hon. William	Courthope, Major George L.	Gibbs, Colonel George Abraham
Gilbert, James Daniel	M'Curdy, Charles Albert	Seager, Sir William
Gilmour, Lieut.-Colonel John	M'Donald, Dr. Bouverie F. P.	Seely, Major-General Rt. Hon. John
Glanville, Harold James	Mackinder, Sir H. J. (Camlachie)	Sexton, James
Glyn, Major Ralph	M'Lean, Lieut.-Col. Charles W. W.	Shaw, Hon. Alex. (Kilmarnock)
Goff, Sir R. Park	Macleod, J. Mackintosh	Shaw, William T. (Forfar)
Graham, W. (Edinburgh, Central)	M'Micking, Major Gilbert	Short, Alfred (Wednesbury)
Grayson, Lieut.-Colonel H. M.	Macnamara, Rt. Hon. Dr. T. J.	Shortt, Rt. Hon E. (N'castle-on-T.)
Green, Albert (Derby)	McNeill, Ronald (Kent, Canterbury)	Simm, M. T.
Green, Joseph F. (Leicester, W.)	Macpherson, Rt. Hon. James I.	Smith, Harold (Warrington)
Gregory, Holman	Macquisten, F. A.	Smith, W. R. (Wellingborough)
Greig, Colonel James William	Maddocks, Henry	Smithers, Sir Alfred W.
Griffiths, T. (Monmouth, Pontypool)	Magnus, Sir Philip	Spoor, B. G.
Grundy, T. W.	Mallalieu, F. W.	Stanier, Captain Sir Beville
Guest, Major O. (Leic, Loughboro')	Malone, Major P. B. (Tottenham, S.)	Stanley, Lieut.-Colonel Hon. G. F.
Hallas, Eldred	Marks, Sir George Croydon	Stanton, Charles B.
Hamilton, Major C. G. C.	Matthews, David	Starkey, Captain John R.
Hanson, Sir Charles Augustin	Mills, John Edmund	Steel, Major S. Strang
Harmsworth, C. B. (Bed., Luton)	Moles, Thomas	Stephenson, Colonel H. K.
Harris, Sir Henry Percy	Molson, Major John Elsdale	Stewart, Gershom
Hartshorn, Vernon	Mond, Rt. Hon. Sir Alfred M.	Strauss, Edward Anthony
Hayday, Arthur	Montagu, Rt. Hon. E. S.	Sturrock, J. Leng
Henderson, Major V. L. (Tradeston)	Moreing, Captain Algernon H.	Surtees, Brigadier-General H. C.
Hennessy, Major J. R. G.	Morgan, Major D. Watts	Sutherland, Sir William
Henry, Denis S. (Londonderry, S.)	Morrison, Hugh	Swan, J. E.
Hewart, Rt. Hon. Sir Gordon	Morrison-Bell, Major A. C.	Taylor, J.
Hilder, Lieut.-Colonel Frank	Munro, Rt. Hon. Robert	Thomas, Rt. Hon. James H. (Derby)
Hirst, G. H.	Murray, Lt.-Col. Hon. A. (Aberdeen)	Thomas-Stanford, Charles
Hoare, Lieut.-Colonel Sir S. J. G.	Murray, John (Leeds, West)	Thomson, F. C. (Aberdeen, South)
Holbrook, Sir Arthur Richard	Murray, Major William (Dumfries)	Thomson, T. (Middlesbrough, West)
Hope, James F. (Sheffield, Central)	Myers, Thomas	Thomson, Sir W. Mitchell- (Maryhill)
Hope, Lt.-Col. Sir J. A. (Midlothian)	Nail, Major Joseph	Thorpe, Captain John Henry
Hope, J. D. (Berwick & Haddington)	Neal, Arthur	Townley, Maximilian G.
Hopkinson, A. (Lancaster, Mossley)	Newman, Sir R. H. S. D. L. (Exeter)	Tryon, Major George Clement
Horne, Sir R. S. (Glasgow, Hillhead)	Nicholson, Reginald (Doncaster)	Vickers, Douglas
Hotchkin, Captain Stafford Vere	O'Grady, Captain James	Walsh, Stephen (Lancaster, Ince)
Howard, Major S. G.	Oman, Charles William C.	Walters, Sir John Tudor
Hunter, General Sir A. (Lancaster)	Ormsby-Gore, Captain Hon. W.	Walton, J. (York, W. R., Don Valley)
Hunter-Weston, Lieut.-Gen. Sir A. G.	Palmer, Major Godfrey Mark	Warner, Sir T. Courtenay T.
Hurst, Lieut.-Colonel Gerald B.	Palmer, Brigadier-General G. L.	Waterson, A. E.
Irving, Dan	Parkinson, John Allen (Wigan)	Weston, Colonel John W.
James, Lieut.-Colonel Hon. Cuthbert	Parry, Lieut.-Colonel Thomas Henry	Whitla, Sir William
Jameson, J. Gordon	Pease, Rt. Hon. Herbert Pike	Wignall, James
Jesson, C.	Peel, Lieut.-Col. R. F. (Woodbridge)	Wild, Sir Ernest Edward
Jodreil, Neville Paul	Peel, Col. Hn. S. (Uxbridge, Mddx.)	Wilkie, Alexander
Johnson, L. S.	Philipps, Sir Owen C. (Chester, City)	Williams, Aneurin (Durham, Consett)
Jones, Sir Edgar R. (Merthyr Tydvil)	Pollock, Sir Ernest M.	Williams, Lt.-Com. C. (Tavistock)
Jones, Sir Evan (Pembroke)	Prescott, Major W. H.	Williams, Col. P. (Middlesbrough, E.)
Jones, G. W. H. (Stoke Newington)	Pretyman, Rt. Hon. Ernest G.	Williams, Col. Sir R. (Dorset, W.)
Jones, Henry Haydn (Merioneth)	Purchase, H. G.	Williamson, Rt. Hon. Sir Archibald
Jones, J. J. (West Ham, Silvertown)	Rae, H. Norman	Wilson, Colonel Leslie O. (Reading)
Jones, J. T. (Carmarthen, Llanelly)	Raeburn, Sir William H.	Wilson, Lt.-Col. Sir M. (Bethnal Gn.)
Kenyon, Barnet	Ratcliffe, Henry Butler	Wilson, Lieut.-Col. M. J. (Richmond)
Kidd, James	Reid, D. D.	Wilson, W. Tyson (Westhoughton)
Lambert, Rt. Hon. George	Rendall, Athelstan	Wood, Hon. Edward F. L. (Ripon)
Lane-Fox, G. R.	Richardson, R. (Houghton-le-Spring)	Wood, Major S. Hill- (High Peak)
Law, Rt. Hon. A. B. (Glasgow, C.)	Roberts, Frederick O. (W. Bromwich)	Woolcock, William James U.
Lawson, John J.	Roberts, Sir S. (Sheffield, Ecclesall)	Worthington-Evans, Rt. Hon. Sir L.
Lewis, Rt. Hon. J. H. (Univ., Wales)	Robinson, S. (Brecon and Radnor)	Yate, Colonel Charles Edward
Lewis, T. A. (Glam., Pontypridd)	Robinson, Sir T. (Lanes., Stretford)	Yeo, Sir Alfred William
Lister, Sir R. Ashton	Rodger, A. K.	Young, Lieut.-Com. E. H. (Norwich)
Locker-Lampson, Com. O. (H'tingd'n)	Roundell, Colonel R. F.	Young, Robert (Lancaster, Newton)
Long, Rt. Hon. Walter	Royds, Lieut.-Colonel Edmund	Young, W. (Perth & Kinross, Perth)
Lorden, John William	Samuel, A. M. (Surrey, Farnham)
Loseby, Captain C. E.	Sanders, Colonel Sir Robert A.	TELLERS FOR THE AYES.—
Lunn, William	Scott, A. M. (Glasgow, Bridgeton)	Lord E. Talbot and Mr. James Parker.
Lynn, R. J.	Scott, Leslie (Liverpool Exchange)
NOES
Allen, Lieut.-Colonel William James	Cory, Sir J. H. (Cardiff, South)	Hailwood, Augustine
Archer-Shee, Lieut.-Colonel Martin	Davies, Alfred Thomas (Lincoln)	Harmsworth, Hon. E. C. (Kent)
Atkey, A. R.	Davies, Sir David Sanders (Denbigh)	Harmsworth, Sir R. L. (Caithness)
Balfour, George (Hampstead)	Davison, Sir W. H. (Kensington, S.)	Herbert, Dennis (Hertford, Watford)
Benn, Com. Ian H. (Greenwich)	Doyle, N. Grattan	Hinds, John
Billing, Noel Pemberton-	Entwistle, Major C. F.	Jackson, Lieut.-Colonel Hon. F. S.
Bowyer, Captain G. E. W.	Fildes, Henry	Jephcott, A. R.
Burgoyne, Lieut.-Colonel A. H.	Freece, Sir Walter de	Jones, William Kennedy (Hornsey)
Campbell, J. D. G.	Gange, E. Stanley	Kelley, Major Fred (Rotherham)
Carter, R. A- D. (Man., Withington)	Ganzoni, Captain Francis John C.	Kenworthy, Lieut.-Commander J. M.
Casey, T. W.	Gould, James C.	Knights, Capt. H. N. (C'berwell, N.)
Child, Brigadier-General Sir Hill	Goulding, Rt. Hon. Sir Edward A.	Law, Alfred J. (Rochdale)
Cobb, Sir Cyril	Gray, Major Ernest (Accrington)	Lloyd, George Butler
Colfox, Major Wm. Phillips	Greenwood, William (Stockport)	Lloyd-Greame, Major P.
Coote, William (Tyrone, South)	Guinness, Lieut.-Col. Hon. W. E.	Lyle-Samuel, Alexander
Cory, Sir C. J. (Cornwall, St. Ives)	Gwynne Rupert S.	McLaren, Robert (Lanark, Northern)

1328

1329

MacVeagh, Jeremiah	Pickering, Lieut.-Colonel Emil W.	Terrell, George (Wilts, Chippenham)
Marriott, John Arthur Ransome	Pownall, Lieut.-Colonel Assheton	Terrell, Captain R. (Oxford, Henley)
Martin, Captain A. E.	Pulley, Charles Thornton	Tickler, Thomas George
Mitchell, William Lane	Rees, Capt. J. Tudor- (Barnstaple)	Waddington, R.
Moore, Major-General Sir Newton J.	Remnant, Colonel Sir James F.	Willey, Lieut.-Colonel F. V.
Murchison, C. K.	Renwick, George	Winterton, Major Earl
Nicholson, William G. (Petersfield)	Samuel, Samuel (W'dsworth, Putney)	Worsfold, Dr. T. Cato
Norton-Griffiths, Lieut.-Col. Sir John	Sprot, Colonel Sir Alexander
Palmer, Charles Frederick (Wrekin)	Sugden, W. H.	TELLERS FOR THE NOES.—
Perkins, Waiter Frank	Talbot, G. A. (Hemel Hempstead)	Sir F. Banbury and Mr. Remer.

Question put, and agreed to.

§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

§ Mr. CHAMBERLAIN
May I make an appeal to hon. Members not to move the further Amendments on the paper, in order to leave us a little time before a Quarter past Eight to discuss the Corporation Profits Tax. All those subjects may be raised in Committee on the Finance Bill, and I think they can be much better dealt with at that stage.

§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

§ Sir ARTHUR FELL
I rise to oppose this Resolution, and I do so on behalf of the business community in the City of London. This is a new tax and the only one imposed in the Budget. On that ground alone I think it requires from this House greater consideration than those taxes which are only increases, although they may represent substantial sums. I think a proposal of this kind should be very carefully considered, and I hope it will receive from this House the consideration that it deserves. I agree with the right hon. Gentleman that Amendments can be better dealt with during the Committee stage of the Finance Bill than on the initiation of the tax in this Resolution. I think, however, that it has already been proved in the discussions which have taken place, that it is a favourable time when the Resolutions are before us to make suggestions to the Chancellor of the Exchequer, so that when the Finance Bill comes forward he may meet the difficulties and suggestions which may be made.
This is the first tax directed against the principle of limited liability companies in this country. I have heard the statement made many times in past years that the prosperity of this country and this great Empire is very largely due to 1330 and is bound up with the principles of the Limited Liability Companies Acts, under which so many great and flourishing companies have been organised and carried on. Our Companies Acts have formed the basis of nearly all company law throughout the world. They have been adopted in most of the Colonies and have been admirably administered by our Courts, and the company laws which have grown up under them have been effective to such an extent that they have proved to be a most useful method of carrying on business, and they have teen an enormous benefit to this country. Those great new possessions which we have acquired, and for which we have mandates now, all need the assistance of the Companies Acts to enable them to re-develop. Companies will be formed under the Limited Liability Companies Acts, and they will be the means not only of opening up those countries to civilisation, but they will have a good effect on this country, not only in the case of the persons who make investments in those companies but also in regard to the amount of money which will be spent through them with manufacturers supplying rails and machinery and all those things which follow the development of a new country. The Limited Liabilities Acts will tend to help in this direction more than anything else that can be suggested.
The Chancellor of the Exchequer expects to get £50,000,000 from this tax, and that represents a tax upon £1,000,000,000 of profits which will fall within the purview of this tax. When the tax was suggested last week, we really did not understand what it meant, and we did not realise the enormous number of concerns which it would cover. It was described by the right hon. Gentleman as a Corporation Tax upon profits and concerns with a limited liability engaged in trade and similar transactions, and from other remarks which the right hon. Gentleman made we gathered that it was a tax on companies which were engaged in trade in this country, such as cotton mills, iron mills, drapery stores in 1331 London, and that kind of business. We now find that it extends to much more than those I have mentioned. Later on, the Chancellor of the Exchequer announced that it would apply to corporations under the Statute, and that covers the whole of the railway companies, lighting companies, tramway companies and the enormous number of waterworks and other companies with immense capital and very large revenues, and all these would come under the new tax.
It has been explained that it also covers all investment and mortgage companies, trust companies, and businesses of that kind, and, in fact, any trade or business in this country. Investment and mortgage companies invest their money in Canada, New Zealand and other countries; they are well managed and draw handsome and substantial profits from their investments in other countries, and they will come within the purview of this Act. The Chancelleor went on to say The prosperous concerns with large pre-War profits escape liability to Excess Profits Duty and they pay on what all of us believe is an unduly low scale. If they were prosperous before the War and have made no further profits during the War, there is no reason why they should be taxed at all for Excess Profits. I should be glad if the Chancellor of the Exchequer would explain why he considers concerns of the kind I have described have not been taxed sufficiently in the past. They pay 6s. in the £ on their profits, and if they earn Excess Profits they pay like any other concern. I think if we have prosperous concerns that is a matter the country should congratulate itself upon, and I do not think that they should be subjected to any tax of this kind.
8 P.M.
The right hon. Gentleman said that these companies enjoy special privileges by law for which they may well be asked to pay some acknowledgment. It is true that they have a limited liability, but they also have disadvantages. They have not only to publish the whole list of their partners every year at Somerset House, but they have to file their balance sheets, which ordinary private concerns do not. Consequently they have disadvantages as well as advantages and they should not on this account be liable to a further tax beyond those paid by private individuals. The right hon. Gentleman says that the undivided profits of the companies pay 1332 no Super-tax. I remember that this point was brought forward by the right hon. Gentleman the Member for Paisley (Mr. Asquith) who was under the impression that they did not pay the ordinary Income Tax of 6s. in the £, but they do pay that tax. It is true that money may be distributed that might be put to' reserve, and it might have the effect of bringing some of the shareholders under the Super-tax, and they would then have to pay upon that money. Surely it is not for the sake of taxing a few people who may be escaping the Super-tax that the undivided profits of a limited liability company, which already pay 6s. in the £, are to be thus further taxed. Why should all the shareholders suffer, because there may be a few who, owing to Treasury Regulations, escape payment of Super-tax. I believe it would be possible for the Treasury, by a very small alteration of the Finance Act, to make such people liable for undivided profits put to reserve. The Surveyors of Taxes, when they go through the balance sheets of the company, could easily ascertain how much is put to reserve and how, if it had been divided, shareholders would be affected so far as the Super-tax is concerned. I am sure it is not beyond the ability of Treasury officials to carry out such an inquiry, and I think it would be much better than taxing everybody in the company because some few may escape the Super-tax. One of the financial papers described this Corporation Tax as a Super-tax on companies. Were they quite sure what they were writing about when they said that? The Chancellor of the Exchequer told us he had sent out to some of the colonies to make inquiries as to the nature of the taxes which those colonies have put on. Some of them have put a Super-tax on companies where the profits have exceeded 10 per cent., but this tax will fall upon companies which pay only 2 per cent. or even less, and it will be at exactly the same rate as upon the companies which pay 10 per cent. and more. I cannot see, therefore, that it is a Super-tax when it is so levied. The right hon. Gentleman told us that the experts he had sent out to make inquiries had not been able to suggest any form which would be acceptable. I believe the Canadian plan works out pretty well. It is a charge on profits above 10 per cent. with a rising scale. In South Africa it is 1333 the same. There they tried to establish a sort of Super-tax. They put a tax of 10 per cent. on companies earning profits exceeding £25,000 per annum, utterly regardless of the amount of their capital, so that a company which earned £25,000 had to pay the extra tax while another company earning just under £25,000 paid nothing.
There is another point I wish to bring before the Chancellor of Exchequer. He has called it a tax of 1s. in the £l, but it represents a great deal more than that. Debenture holders and preference shareholders will not pay this tax; it is to fall entirely on the ordinary shareholders. In order to see the way in which it would operate,. I turned up in the library the accounts of two of the biggest railways in the River Plate, the capital for which had been found by Englishmen, and which undertakings, too, were managed by Englishmen. The first of the companies had an ordinary share capital of £30,000,000, and it had raised somewhere about the same amount in debentures and preference shares. The second company had a capital of £28,000,000 in ordinary shares and had raised just about the same amount in preference shares and debentures. I gather, therefore, that they were limited in regard to the amount of debentures and preference shares by the extent of their ordinary shareholding. In each case this tax will fall upon the ordinary shareholder to the extent of 2s. in the £l. It will have to be deducted from the profits, and consequently the profits divided among the ordinary shareholders will be subject to a deduction of 8s. in the £1, while the debenture and preference shareholders will only suffer a deduction of 6s. in the £1. That is a very serious matter for many people, and I heard one large investor in English railway stock say that he pays 6s. in the £l on the dividends from his ordinary shares; he pays another 6s. as Super-tax and now he is to be called upon to pay a further 2s., making the total burden 14s. in the £1. Assuming that his income is £30,000 a year he would be £2,000 or £3,000 a year richer if his money were invested in debentures or preference shares rather than in ordinary stock. I submit that the man who has put his money in the ordinary shares has done far more than the debenture holder or the preference shareholder, and therefore has 1334 a greater claim for consideration in this matter.
There is one other point to which I wish to draw the right hon. Gentleman's attention, because it seems to me in contradiction of the Report of the Commission on the Income Tax. They have decided, as, I understand, that persons whose joint incomes do not exceed £300 a year shall not pay Income Tax, whereas, under this proposal, they will be called upon to pay Income Tax in another form to the extent of 2s. in the £l. People living on small incomes derived from shares of this kind will in future have a deduction of 2s. in the £1, even although their incomes do not exceed £300. I do not think that the Income Tax Commissioners, when they made their recommendation, ever intended that they should be so subject. I therefore hope that the Chancellor of the Exchequer will give relief on that point.

§ Mr. WATERSON
The few moments that are left at my disposal, if the Chancellor of the Exchequer is to speak, are quite inadequate for the important matter to which I desire to draw his attention, namely, the position of the cooperative societies with regard to this tax. When the right hon. Gentleman made his Budget statement, I noticed that he said, with regard to the Royal Commission on Income Tax that he would reserve his judgment, as hon. Members would doubtless wish to reserve theirs. Not a word was said about the Corporation Profits Tax being applied to the co-operative movement, but on the Wednesday it was drawn out in the discussion, in answer to certain statements made by my right hon. Friend the Member for Peebles (Sir D. Maclean), and we found for the first time, much to our surprise, that the co-operative movement would come within the scope of this tax. I want to ask the Chancellor of the Exchequer how he intends to apply this tax to the co-operative movement. There is an extremely keen feeling in the country against his attutude on this question. It will affect more than 4,000,000 men and women in this country, who are poor people from the beginning, and do not come within the scope of Income Tax. We are anxious to know whether the tax is to be levied on gross profits, on net profits, or on the amount allocated to members in the shape of repayment of 1335 the enhanced charges on commodities, or whether it will be levied on the amount allocated to reserve in the shape of grants for educational or even charitable purposes. Paying, as we do, hundreds of pounds towards charities in practically every town and village of the country, it seems a crying shame that we should be called upon to pay a tax for carrying out a duty of that character.
I admit that it is a complex problem, and I am anxious that the right hon. Gentleman should explain how he intends to deal with it I am sorry that so much time has been taken up already, because it is a most important matter, affecting, as I have said, 4,000,000 working people in this country. The hon. Member opposite (Sir A. Fell) spoke at considerable length in the interests of what he declared to be a few people in the City of London. His own words were, "a few friends in the City of London." Here is a matter which affects practically the destiny of 4,000,000 of the people of this country, and it is simply to be put on one side and ignored. It is exceedingly unfair, and I want to enter my emphatic protest against this procedure, and, if possible, to secure from the Chancellor of the Exchequer some explanation as to how he intends to apply the tax, so that we may know where we are and what we are to do in the future. The development of our movement is as important as that of any limited liability company, and we have a right to know where we are. It is exceedingly unjust, and I question the legality of it. It would be interesting to know if the right hon. Gentleman has taken a legal opinion with regard to it.

§ Lieut.-Commander KENWORTHY
I desire to move, "That the further consideration of the Resolution be now adjourned."

§ Mr. CHAMBERLAIN
If it is the desire of the House that the Debate should be resumed at eleven o'clock, I cannot resist it, but it would be very awkward.

§ Lieut. - Commander KENWORTHY
Need it be taken at eleven o'clock? In view of the very great importance of this Corporation Profits Tax, I appeal to the Government for further time.

§ Mr. CHAMBERLAIN
When I requested hon. Members not to continue 1336 yesterday, the understanding was that we should try and finish by a quarter past eight, but that, if that was not possible, we should resume at eleven. In the moment or two that are left, may I say, in reply to the hon. Member for Kettering (Mr. Waterson), that I do not propose to levy the tax on that part of the so-called profits of co-operative societies which is returned to purchasers as a dividend or bonus in proportion to their purchases. That would be excluded before the basis of assessment is fixed.

§ Mr. WATERSON
Am I to understand that the right hon. Gentleman will not bring within the scope of this tax money that is devoted to educational or charitable purposes?

§ Mr. CHAMBERLAIN
I cannot say that. The law does not exempt charitable donations from taxation.

§ Bill ordered to be brought in upon the said Resolutions, and upon the Resolutions reported from the Committee of Ways and Means upon the 19th and 21st days of April, and agreed to by the House upon the 27th April by the Chairman of Ways and Means, Mr. Chamberlain, Sir Laming Worthington-Evans, Sir Eric Geddes and Mr. Baldwin.