§ In the application of Part III of the principal Act to excess profits duty for any accounting period ending after the thirty-first day of December, nineteen hundred and nineteen, section twenty-six of The Finance Act, 1917, shall have effect as though in paragraph (1) "four per cent." were substituted for "three per cent.," and as though in paragraph (4) for the words "five hundred pounds and" two thousand pounds," respectively, wherever those words occur, there were substituted the words "two thousand pounds "and" four thousand pounds," respectively.—[Mr. Chamberlain.]
§ Brought up, and read the First and Second time.
§ Sir P. LLOYD-GREAMEI beg to move to leave out in paragraph (1) the word "four" ["four per cent."] and to insert instead thereof the word "six."
The Chancellor of the Exchequer has gone so far as to agree that some concession is needed or the percentage to be allowed on new capital in a business. It is, therefore, not a question of principle but if arriving at a fair and convenient sum to be allowed. The Chancellor of the Exchequer is giving an extra one per cent., which makes it 10 per cent. The suggestion of this Amendment is to 2545 give an extra 3 per cent., so making it 12 per cent. I think that 12 per cent. is a fair percentage to take. At such a time as the present, the prudent man would put at least one-third of his profits to reserve. I think it will be agreed that a rate of 7 per cent. is a reasonable rate in preference shares at present. Taking these two circumstances into account, if you allow 8 per cent. on the interest of the new capital raised, and the further 4 per cent. as a reasonable amount to put to reserve, I suggest that 12 per cent. is a reasonable limit to be put on this new capital, after which the Excess Profits Duty is to operate. The Chancellor of the Exchequer must know that there are a great many businesses which have been carrying on very largely on Excess Profits Duty which has been held over, and if the Excess Profits Duty is to be paid out as due, then it is all the more essential that a fair free rate should be allowed upon the new capital in the business. This is entirely a matter of agreement, and I do not think it is asking the Chancellor of the Exchequer to give up a large sum of money. I gathered that the proposal he was making, of allowing an extra 1 per cent., would cost the Exchequer about £4,000,000. I presume that, as it rises, the rate would be somewhat less, but let me take it against myself. I will assume that for each one per cent the loss to the revenue would be £4,000,000. If so, this proposal only means a loss of £8,000,000 as against the loss on the Chancellor's proposal of £4,000,000.
§ Mr. SUGDENIt must be well known that during the last two years there have been more new businesses financed through the sources of reserved profits than in any two years in the history of the country. I have in my hand particulars of 165 firms—manufacturers, storekeepers, shopkeepers, and others (more particularly the hard-worked small shopkeeper and tradesman)—who, by the reserve they have been husbanding during the very recent period of the War, have been preparing for the advance in trade and industry which has been so much anticipated throughout the country. When we consider the market price of money to-day, and the figures which have been offered for municipal, housing and national loans, it is absolutely impossible for the concession which the right hon. Gentleman has made to businesses of 2546 1 per cent. to be of any use whatever to, the general trading community. That concession is of no practical use unless. it is increased to a figure of, say, 3 per cent., and I venture to appeal to the right hon. Gentleman to enlarge that concession, and thus assist materially the small shopkeeping type of the community more particularly, as also the great. industries of our land.
§ Mr. L. SCOTTThis Amendment is one of really very great importance. At the present time a very large amount of capital that would be put into businesses in this country is being deterred simply and solely because they cannot get a reasonable datum line for the purpose of Excess. Profits Duty. I have had a long conversation with a friend of mine in the Temple, who probably advises a larger number of commercial and industrial concerns on questions of Excess Profits Duty and Income Tax than any other man living. lie advises vast numbers, and he has told me that he has advised firms and companies. from the United States, France, Italy and also in this country on this very question as to whether, if they had to start here, their payments of the duty would be as. heavy as they think by reason of the poor datum line they think they would have. He has had to tell them they are right and that under present circumstances they cannot get anything approaching to a reasonable datum line, and in every single case, as a result of his advice, those new enterprises have been deterred from starting in this country. One of the raisons d'être of the Excess Profits Duty, from the point of view of the Chancellor of the Exchequer, is that much of the profits of the last few years are still earned out of monopoly conditions, but in attacking monopoly in that way the Chancellor of the Exchequer is really giving monopoly a weapon with which to defend itself. By preventing these new concerns from starting, you are preventing competition and perpetuating monopoly and, of course, high prices, and really this particular proposal to give to capital a statutory percentage at a higher rate substantially than hitherto is a proposal which as much as any other will induce new competition, bring in new money, and help therefore to bring down prices generally, and indirectly to bring, through Income Tax, a large substantial return to the National Exchequer. 2547 At the present time I venture most earnestly to submit to the Chancellor of the Exchequer that if this proposal is coupled with an extension of his other proposal, which comes up on the next Amendment in regard to Sub-section (4) of Section 26 of the Act of 1917, which allows an addition to the £200 datum line, if the two are added together on more liberal lines than the Chancellor of the Exchequer is proposing, my own view is that the great part of the serious grievance that new businesses and businesses with a very small pre-War standard feel would be met, and if that is met I for one believe a large part of the serious troubles caused by the Excess Profits Duty this year will be avoided and remedied. I appeal to the right hon. Gentleman on this particular point to meet us. I have the privilege of representing one of the very big business communities of the country, and I can assure him that I have had genuine letters and interviewed men in the constituency in an extraordinary number of cases where one and all said that new businesses are being cruelly prevented from starting, and if he will only do this we shall be satisfied.
Mr. CHAMBERLAINMy hon. and learned Friend and others have made an appeal, to me. I know nothing more disagreeable than sitting here listening to Amendment after Amendment and meeting them with a refusal. It is an odious task, and I do not do it for my own pleasure, and I hope I do not do it without good reason, but I beg my hon. Friends to consider a little whether they are meeting me quite fairly. They made an appeal at the earlier stage especially for new capital and for the small businesses, and I said I would meet them. It may have softened the temper of our Debates, but it did not prevent the opposition being persisted in till the last moment. They now come to my concessions with scarcely a word of thanks and they take them as a jumping-off ground to ask for more. There must be a limit. These standards must be arbitrary figures which cannot be fixed on any strictly logical basis, but I have sought to fulfil to the letter and in the spirit the pledges which my right hon. Friend the Secretary to the Treasury and I gave at an earlier time. The cost of the concessions which I am making—and you 2548 must look at them together, because my hon. and learned Friend bids for £8,000,000 here and for many more millions in another place in the same speech—is £14,250,000 on the £100,000,000 which I hope to get.
This is a very large concession. I have endeavoured with an open mind, and with a conciliatory spirit, to listen to the arguments that have been addressed to me. Under these circumstances, I do appeal to hon. Members not merely to take my concession as a starting point for demanding that it should be doubled or trebled, but to accept it in the spirit in which it is offered, which is the spirit of the original Debate, at any rate, as regards the great majority of hon. Members.
§ Major ENTWISTLEThe other night the Chancellor of the Exchequer said he had to be adamant in respect to the demand for the reduction of the Excess Profits Duty. But he held out the hope that he was not going to be adamant as regards concessions in relation to the other proposals on the Paper, some of them his own. He led us to believe that there would be room for expansion as regards the particular proposals that he himself had put on the Paper. The public, or, at all events, the House, was led to believe that the Chancellor would see his way, although he could not alter the fundamental 20 per cent. increase, that he said he would stand or fall upon, to consider and make the concessions on the proposals he put forward. I submit to him, after all, that of all the Amendments he has on the Paper that there is not one on which a concession ought to be made, or on which he ought to expand, or on which he might be amenable to argument and persuasion than on this proposal. It is the one exception to the Excess Profits Duty to which the strong objection is taken that it interferes with enterprise and restricts production—that it tends to prevent new industries being started. In this matter it is most important that the percentage allowed should be sufficient to attract capital. I do suggest to the Chancellor of the Exchequer that if he adheres to the words he used that he would be prepared to make some further concession, that this is the one Amendment on which he ought to do so. He said it would cost the revenue £4,000,000 2549 for the additional 1 per cent. I would ask him to let us know what he proposes to do with the£310,000,000 of arrears which he himself, in one of the White Papers issued dealing with financial assets, said existed on 31st March of this year. Has he taken that sum into consideration. Any arrears there are will not come into this year, but into future years, for the reduction of debt. This is so important that I would suggest to the Chancellor that a much fairer proposal would be to charge interest on arrears, so that those firms which pay Excess Profits Duty promptly should not be penalised as those which are in arrears. Some firms have not made up their accounts for the last three years and have never published any balance sheet and have paid no Excess Profits Duty at all, although it is acknowledged that they have made huge profits. Why should not some proposal be made so as to get in that money that is needed? As regards this vital matter of increased production—
§ The DEPUTY-CHAIRMANThe hon. Member is now speaking on the Bill. We are dealing with the Amendment.
§ Major ENTWISTLEI submit that what I have been saying is very material, because I am appealing for this concession on the grounds that it would encourage new industries and encourage production, and that the danger of this tax is that it would decrease production and so decrease revenue.
§ The DEPUTY-CHAIRMANThat is a general proposal.
§ Major ENTWISTLEI think that this question of the 60 per cent. not producing as much as the 40 per cent. has an effect on new industries. Any concession that the Chancellor of the Exchequer gives on this point of increasing the percentage standard will come back to him, so that he will not lose £4,000,000 or £8,000,000, but, in the encouragement given to production, he will get that back in revenue. Hopes have been held out, and this is the one important Amendment, and I do ask the Chancellor of the Exchequer to reconsider the matter and give us a more favourable answer.
Mr. CHAMBERLAINThe opening words of the hon. and gallant Member particularly appealed to me, and had he 2550 sat down at once I was ready to respond. But I confess that my sympathy got thinner and thinner, and had almost vanished by the time he had concluded!
§ Major ENTWISTLEI wish that the right hon. Gentleman had interrupted me!
Mr. CHAMBERLAINThe hon. and gallant Member says truly that I indicated that I had not said my last word. That is so. I will lay my cards on the table if the Committee will be fair with me. But if this is to be made the starting-off point fel beginning over again, I do not see why I should make the concession. I cannot go to the length suggested by my hon. and gallant Friend, Sir P. Lloyd-Greame, but instead of making the rise he suggests of 3 per cent., I am willing to make a rise of 2 per cent. That will cost an additional £4,000,000. It is really an inroad on the revenue which I hoped to get. I make it with great reluctance. That is what I had in my mind of what I was prepared to do. I was only deterred from saying so at once, because I felt the hopelessness of ever arriving at any agreement by any concession I might make.
§ Sir P. LLOYD-GREAMEI am very much obliged to the Chancellor of the Exchequer. I think his suggestion is not only extremely reasonable, but also the object of this moving this Amendment was not to start a ball rolling which was never going to stop. We felt that some advantage ought to be given where it was so much needed. The only thing was what was the right figure to give to the trading community? I think the 2 per cent. most reasonable, and I beg leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ Mr. L. SCOTTIn view of the concession that the Chancellor of the Exchequer has just made, I do not propose to move the Amendment that stands in my name. But I do want to put one point on it to the Chancellor for his consideration before the Report stage. There are a large number of men in the business as brokers where no large capital is employed. I know as a fact that, since the War, a large number of officers have started in businesses of that type. A number of them are finding it very hard to get on. Would the Chancellor of 2551 the Exchequer, in that type of case, before the Report stage, consider whether he could make any kind of concession that would not cost the revenue too much and that would be comparable to the kind of concession made in cases where a large amount of capital is involved. If he could, I can assure him, from my own knowledge, it would remove a large number of very grave hardships.
§ Motion made, and Question proposed, "That the Clause be added to the Bill."
§ Captain W. BENNI should like to ask the Chancellor of the Exchequer this. We understand that he has made a concession which, he says, will cost him £4,000,000. Does he mean to say that, out of the available margin allowed by the Chancellor when making his Budget, £4,000,000 has been given away? That is rather a serious thing to say.
§ The DEPUTY-CHAIRMANThe only Question now before the Committee is "that the Clause be added to the Bill." If the hon. and gallant Member objects to the Clause being added he must speak on that. He cannot speak on what the Chancellor of the Exchequer proposes to do in the Report stage, nor can he speak on a future Amendment on the Paper.
§ Captain BENNI submit that I was quite in Order.
§ The DEPUTY-CHAIRMANI have just pointed out that what the hon. and gallant Member said was not in Order.
§ Captain BENNOn a point of Order. Surely the discussion of what the financial effect of the new Clause is, is perfectly in Order?
§ The DEPUTY-CHAIRMANYes, if the hon. and gallant Member would confine his remarks to that he would be in Order.
§ Captain BENNI propose to do so. I think it is a very serious thing for those of us who have other Amendments on the Paper which only involve comparatively trifling concesions to people who may be particularly deserving, when an Amendment is accepted on a new Clause to be added to the Bill, by which the Chancellor of the Exchequer says he will lose £4,000,000 out of the available margin. 2552 I think it is right to draw attention to that, because we shall have to put our case later on.
Mr. CHAMBERLAINIf the hon. and gallant Member is going to urge the same point later on, perhaps it would be for the convenience of himself and everybody else at this late hour if I reserved my arguments. I am entirely at the service of himself and the Committee. I estimated that the increase of the duty would bring in an additional £100,000,000 as the result of it being imposed at that rate for 12 months, and not that it would bring in another £100,000,000 each year I estimated that the £100,000,000 would be reduced by another £4,000,000 in respect of the concession which has just been made
§ Captain BENNI make no apology for venturing to ask a question on a point about which we have a doubt. Does the Chancellor of the Exchequer say that £4,000,000 is net loss, or does he say that he anticipates, in consequence of the stimulus to production which this concession will involve, that the loss of £4,000,000 will be made up?
Mr. CHAMBERLAINWhen I said I expected to lose £4,000,000, I meant that I expected to lose £4,000,000.
§ Clause added to the Bill.