§ Where a person has in any trade carried on by him, either solely or in partnership, devoted any part of his profits (not exceeding one pound per annum per head of the workpeople employed by him on the average during the year) to structural alterations or additions to meet welfare requirements, he may claim that such expenditure shall, as far as may be, be deducted or set off against the amount of profits or gains on which he is assessed under Schedule D in respect of that trade. The term "person" shall include firms, partnerships, limited liability companies, and corporations.—[Colonel Wedgwood.]
§ Brought up, and read the First time.
§ Colonel WEDGWOODI beg to move, "That the Clause be read a Second time."
This Clause is one of some substance and importance. The Committee will be aware that during the last five or six years there has been a great movement 1282 in all our factories in the direction of providing facilities and accommodation for what is known as welfare work. The building of rooms for meals and for recreation, the visiting of the houses of the various workers in the factories, and all this welfare work has been quite a recent development in England, and it has been met with great favour by the Government; in fact, a great deal of this welfare work was stipulated for during the War by the Government. So far, a certain number of factory owners and companies have taken up this welfare work with avidity, and have really done their best by it. On the other hand, certain other factory owners have not done very much in the welfare work direction. It is eminently desirable in the interests of good relations between employers and employed, as well as in the interests of the better health of the working classes, that this welfare work should be definitely encouraged in every possible way, and that those employers who really mean to do their duty should be encouraged to do it. Till now the real difficulty has been the initial expense of building dining rooms, recreation rooms, small cottage hospitals, or small buildings in the factory for treating accident cases. The Government has met us on the question of current expenses involved.
As I am informed, only the expenditure on the upkeep of welfare work in factories and workshops is at present allowed as a deduction from profits when considering Income Tax under Schedule "B." That is a step in the right direction, but hitherto there has been no allowance made for capital expenditure, and it is the capital expense which stops welfare work being started. It would really have been more in the interests of the progress of this welfare work if there had been special assistance in starting by means of allowing a deduction of capital expenditure rather than of maintenance. What we now want to do is to press on the Government the urgent necessity of treating money spent on putting up buildings for welfare work as a legitimate deduction from profits before Income Tax is calculated. There are two new Clauses on the Paper, the one I have drafted and another later on drafted by the hon. Member for Moseley (Mr. Hannon). Though both amount in practice to the same thing, his may be better drafted, and I am not at all anxious for the kudos of mine. It is true 1283 that perhaps my Clause involves a larger measure of relief to the factory owner, whereas the Amendment of the hon. Member for Moseley involves less immediate loss to the taxpayer, but I am quite indifferent as to which form of words is adopted. It is however time that the Committee and the Government considered whether this definite step ought not to be taken to assist this useful work. Practically speaking, what we suggest is on similar lines to what the House has always given to charities. It is only fair to consider that welfare work is a legitimate charity for the factory owner. It is not compulsory; it is only his charitable desire to get on well with his workers and look after their health that leads him to make this expenditure. It seems to me on all fours with charitable expenditure. Ever since 1818 charities have been exempt from Income Tax, and I submit that this is exactly a parallel case and that we have a precedent behind us in asking the Government now to consider whether welfare work should not receive the same kind of treatment as charities receive.
§ Mr. N. CHAMBERLAINI am sure every Member of the Committee will have full sympathy with the objects my hon. Friend has in view, but I hope that the Government will consider this matter rather seriously. It would be a mistake to subsidise capital expenditure of the kind suggested in the Amendment. I think the hon. Gentleman takes an entirely wrong view of the way in which expenditure of this kind should be regarded. An enlightened employer looks upon welfare work as part of the legitimate expenses of his business. He finds in it not merely scope for his philanthropic ideals, but he finds that it is good business; he gets his return from capital expenditure in a better feeling and better work. Those with whom I have been associated have spent considerable sums of money in welfare work, and they did it in that light and did not ask the Government for subsidies.
I would like to point out another danger which my hon. and gallant Friend (Colonel Wedgwood) seems to have overlooked, that when the employers have got this subsidy or relief from taxation for capital expenditure on work which was originally intended to be devoted to welfare work, there is nothing to prevent 1284 them from diverting it from that purpose hereafter and using it for other purposes. I know that during the War a firm took on a very large canteen for the benefit of their workpeople, perhaps not exactly in response to a Government suggestion, but the Government hoped that they would set up a canteen. The circumstances were rather special. It was a time of activity in munition-making, and large numbers of people migrated into the big towns in order to take part in Government work. In this particular case the directors, when they put up this canteen, were very well aware that after the War they would probably be employing fewer people, or that the people they would employ would not be the emigrants, but people living in the town and in the neighbourhood of the work. Therefore, they deliberately designed their canteen so that when the War was over it could be used as a machine shop, and to-day that building is no longer used as a canteen, but is ready to be used as a machine shop when trade justifies it.
§ Colonel WEDGWOODThat would be covered by the Clause of the hon. and gallant Member for Moseley (Mr. Hannon).
§ Mr. N. CHAMBERLAINIt would not be covered by the Clause of my hon. and gallant Friend (Colonel Wedgwood), and I am not certain that it would be covered by the Clause of the hon. and gallant Gentleman the Member for Moseley. If any relief is to be given in cases of this kind it must be made quite certain that the purposes for which the relief is given are the purposes for which the building is intended, and if you are going to give relief to such an extent I do not see how you can get it back again if the building is used for some other purpose.
§ Mr. SEDDONOn a point of Order. If this new Clause be disposed of, would it also dispose of the Clause standing in the name of the hon. Gentleman the Member for Moseley, because there are two separate points in these two Clauses.
§ The DEPUTY-CHAIRMAN (Sir E. Cornwall)Yes; that new Clause would be covered by this Motion.
§ Mr. SEDDONThen I should like to say a few words on this Clause. The hon. Gentleman who spoke last seemed to make a general attack from an isolated 1285 case. I am quite sure that, on reflection, he will not think that ought to be the guiding principle when you are giving your attention to an agency which has been admitted or which is admitted to be in the interests of the workers of the country. I would like to ask him what would happen if the companies he referred to had paid it in wages instead of putting up buildings? There would have been no question about it then. What is wanted is to level up the bad employers and to say, "Here is some little inducement for you to get with the good employers," if they have not done it of their own free will. It is recognised now that the welfare of those engaged in industry should be the concern of those who employ them. We have got beyond that stage among all employers—at all among the best employers—that workpeople are mere things to be taken on or turned off according to the exigencies of particular industries. They are beginning to understand that they are human beings and as human beings that the relationship in business should be the highest possible. No agency will conduce more favourably to harmony between capital and labour than the fact that employers are doing something towards improving the amenities and the means of recreation and all that goes to making life enjoyable by means of this welfare agency. This small relief would be no great drain on the Exchequer. It is not a subsidy, but an encouragement to employers to go on in the good work. I ask the Financial Secretary to the Treasury to take this matter into serious consideration. If he cannot give us a reply to-night, we are prepared to wait until the Report stage, but a large number of employers in this country would be encouraged in the good work, and we want to assist them in improving the relationship between capital and labour.
§ Mr. HANNONI am sure that every hon. Member is in sympathy in promoting welfare work throughout industrial organisations in this country. I have had the opportunity this evening of exchanging views on this subject with the Chancellor of the Exchequer, and I am quite satisfied that his sympathy and the sympathy of the Financial Secretary to the Treasury are just as strong as that of my hon. Friend and myself for the continued promotion of this work. 1286 They have promised that actual expenditure involved in carrying out welfare work in factories in this country will be carefully considered in assessments for Income Tax, and if a guarantee is given this evening that that practice will be continued and that the fullest consideration will be given to every application made where welfare work is concerned, I would suggest to my hon. and gallant Friend that he should withdraw his Amendment and I shall also withdraw mine.
§ Mr. PRETYMANDoes that mean that there will be administrative discretion as to whether people are to be taxed or not? Surely, this House must settle that question.
Mr. H. YOUNGWith what was said by the hon. and gallant Member for New-castle-under-Lyme (Colonel Wedgwood) as regards the benefit of this work, I imagine that no Member of the Committee will disagree. It is one of the most interesting and promising new departures in the relations between employer and employed and in the development of industrial life. I think that I am not going too far when I say that it always has been the policy of this Government, and always will be its policy, to encourage and promote the development of welfare work of this sort in every way that is consistent with the administration of the law as it exists and with the principles which underlie our system of taxation. What is the actual state of affairs? There are two possible views with regard to welfare outlay. There is the view that it is outlay for the sake of business and that in that sense capital expenditure of this sort ought to be looked upon as capital put back into business. If that is so, I do not think that my hon. and gallant Friend the Member for Newcastle-under-Lyme will disagree that it would be quite inconsistent with the whole structure of the Income Tax as at present administered, and, further, that it would be inconsistent with the principles of sound taxation, that these exemptions should be given in favour of actual capital expenditure for welfare purposes. On the other hand, you may argue that this ought not to be looked upon as capital put back into the business, but as voluntary benevolent expenditure.
I believe myself, and I am sure many Members will agree, that this is only a very partial aspect, if true. But even so, according to our recognised prin- 1287 ciples of Income Tax administration there would be no claim for any allowance for expenditure of that sort. On either ground it is, I fear, impossible to allow the allowance suggested in this Amendment in respect of capital expenditure for welfare purposes. It has been rightly said that there is no true difference in principle between this Clause and the Clause further down the paper to the same effect. It must be clear that there can be no difference between one Clause which allows actual capital deduction and another which allows a recurring reduction in respect of the interest of the same sum of capital. At the present time no ordinary principles of Income Tax law and administration of Income Tax allowances would meet, under our present system, these suggested allowances. But for all current expenditure for maintenance and upkeep in respect of welfare work—there is no question of increase or extension of Income Tax law—these expenses for upkeep and maintenance are allowed as a deduction for expenses before arriving at taxable income. This is recognised to be a useful and benevolent form of expenditure, and I certainly am of opinion that in applying the existing rules to this particular expenditure the attitude of the administration should be a sympathetic one, and should not take a hostile view of expenditure of this sort. That certainly has been the attitude of the Inland Revenue in the past. There is no difficulty in saying that the same sympathetic attitude will be maintained.
§ Colonel WEDGWOODI am afraid we have not got very much out of this Amendment. It seems to me there are different schools of thought on this. It has been said that this is really expenditure which every wise employer, looking at it from a purely financial point of view, ought to undertake. That is the view of fair thinking employers, but when you come to the get-rich-quickly employer then we have somehow to induce him to join the scheme. We must also remember that we know-that expenditure which improves the race is remunerative. We know that expenditure on education is remunerative and yet we refuse it as a nation because of the serious financial position. The second rate employer refuses to pay money for welfare work because of the serious financial position. The Financial Secretary to 1288 the Treasury says that this had the sympathy of the taxing authorities in the past. I cannot think it was so. We would never have brought this Amendment forward if the late Chancellor of the Exchequer had consented to receive a deputation from the welfare organisation. There has not been much sympathy in the past and I hope before the next Budget there will be a different spirit shown towards this welfare work. I cannot see any reason why they should not be allowed to approach the Chancellor of the Exchequer. The Amendments have been put down in the dark because it is very difficult for private Members to draft Amendments when there is no discussion between the Chancellor of the Exchequer and the organisation which wants an Amendment.
§ 2.0 A.M.
Mr. T. THOMSONI have a somewhat similar Amendment on the Paper, and I submit that there is another point of view: that of the interest of the community as a whole, and the health of the community. I submit, even from the narrow financial point of view of the Treasury, that if you encourage expenditure on these lines you improve the general health of those workers and lessen their claims under the National Health Insurance on the Ministry of Health and all these things will really benefit the public, the Treasury, and the State as well as the employer and the individual, from a chargeable point of view. Therefore he would not be making a strain if in the interest of the Treasury as a whole he gave rather extended sympathy to the proposals which have been made.
§ Mr. SEDDONThe hon. Gentleman in charge of the Bill has said that the point of view of the Treasury has always been sympathetic. That is not my experience. The difficulties have been increased and even the employers who would willingly do it have been retarded because of the Treasury. Could the hon. Gentleman give an indication that instructions will be given to the representatives of the Treasury to deal with this matter in the same sympathetic spirit that he has himself expressed? Sympathy or help is like mustard without beef. It is not sympathy that we want, but an expression of that sympathy in works and good deeds as far as his Department is concerned. The next point is that his Department refused to meet those who speak for the welfare 1289 associations. So far as I am concerned, if we get an assurance that between now and the next Budget he will receive a deputation from these people and hear their side of the case then my opposition will be withdrawn.
§ Colonel WEDGWOODCannot we get some statement? I do not want to force a Division.
Mr. YOUNGI cannot give an undertaking on behalf of my right hon. Friend, who is not in the House, but if the hon. Member will take it from me, I shall be happy to give it, and to meet the deputation.
§ Motion and Clause, by leave, withdrawn.