HC Deb 13 April 1926 vol 194 cc103-15

Considered in Committee.

[Captain FITZROY in the Chair.]

Motion made, and Question put,

"That the sum of one million one hundred thousand pounds shall be transferred to the Exchequer from the Navy, Army, and Air Force Insurance Fund."—[Sir L. Worthington-Evans.]

The Committee divided: Ayes, 231; Noes, 142.

Motion made, and. Question proposed, That in the event of the constitution of an account to be called the Bankruptcy and Companies' Winding-up (Fees) Account':

  1. (a) The Treasury shall be empowered in each financial year to pay into the Exchequer out of the moneys standing to the credit of that account a sum equal to the amount which in the last preceding financial year fell to be defrayed out of any Votes of Parliament, other than Votes for the Board of Trade, in respect of salaries and expenses under the Bankruptcy Act, 1914, or under the Companies (Consolidation) Act, 1908, in relation to the winding-up of companies in England;
  2. (b) There shall he paid out of the account into the Exchequer—
    1. (i) as soon as may be after the passing of an Act giving effect to this 106 Resolution, an amount equal to the sums transferred to the said account from the accounts to which there have respectively been paid the bankruptcy investments dividends, the bankruptcy fees, the companies investments dividends, and the companies winding-up fees, less a sum of one hundred thousand pounds; and
    2. (ii) thereafter, the amount standing to the credit of the said account on the thirty-first day of March in each financial year, less an amount equal to one-third of the aggregate amount issued out of the said account in that year for the purpose of meeting the charges in respect of salaries and expenses under the Bankruptcy Act, 1914, or under the Companies (Consolidation) Act, 1908, in relation to the winding-up of companies in England." —[Sir Burton Chadwick.]


Surely this Resolution requires some explanation?


I am very glad of the opportunity of giving an explanation. I am sure the Committee will receive what I have to say with some relief when they find that this is a question of taking money which belongs to nobody at present and of giving it to somebody. It will be known to hon. Members that the Companies Liquidation Fees Account and the Bankruptcy Fees Account are kept separately, and at a later stage in the Economy Bill provision is made for the amalgamation of these two accounts under an account to be known as the "Bankruptcy and Companies' Winding-up (Fees) Account." At present there is a surplus in the Companies' Fees Account of approximately £450,000. This surplus has been gradually accumulating for many years, but under the Companies (Consolidation) Act the Treasury has no power to use the surplus in any way. In the Economy Bill provision is made to give the Treasury the power to pay the surplus over to the Exchequer. It is not proposed to pay over the whole of the surplus at present, but to retain of that £450,000 the sum of £100,000 as a reserve for capital expenditure and the cost of running these two Departments. There is a deficiency of £20,000 on the Bankruptcy Fees Account.

Paragraph (a) of this Resolution relates to the payment to the Exchequer from the Fees Account of the cost of the service of Departments other than the Board of Trade, such as the Office of Works, the Post Office, and the Stationery Office. Paragraph (bi) of the Resolution relates to payments to the Exchequer of the surplus of £450,000, less the £100,000 reserve of which I have spoken. Paragraph (bii) relates to the payment to the Exchequer of the balance standing to the Account in future years, less a sum equal to one-third of the annual expenses of the Companies and Bankruptcy Departments, which will be retained as working capital for the next year. I do not think I need trouble the Committee with a very much longer explanation than this.


Is this an annual surplus or is it simply an amount that has accumulated and which will be available to the Treasury this year? Will there be an annual surplus?


There will be an annual surplus, but this £450,000 is a surplus which has accumulated over a number of years. The Resolution —and this is why I commend it to the Committee—deals with a sum of money which is available to nobody at the present moment, and it makes it possible by the Economy Bill to bring this sum into the hands of the Treasury.


The hon. Member has explained this very complicated Resolution in a manner which, I am sure, will enable every Member of the House to understand it. I gather that there are two funds, the fund which arises in respect of bankruptcy fees and the fund which arises from fees payable in regard to the winding-up of companies. I gather, also, that there is a deficit on the Bankruptcy Fees Account and a surplus on the Companies' Fees Account. It appears as if the number of people who become bankrupt is growing progressively smaller, while the number of companies to be wound up is growing progressively larger. No provision has been made for meeting the position which at present exists on the winding-up of the bankruptcy proceedings and the surplus which at the same time is accruing from the very large number of joint stock companies which have to be wound up. The fees on those proceedings will yield a surplus. Consequently, the Treasury have to face a deficit on the Bankruptcy Account while there is a surplus on the Winding-up of Companies' Account. At least, that is what I understand from the hon. Gentleman's explanation to be the objects of this complicated Resolution and the complicated Clause which has emerged in the Bill.

In regard to these two accounts, what the Treasury has been losing on the swings it is now going to gain on the roundabouts. There will he a surplus of£450,000, and the Exchequer will allow £100,000 to be kept, leaving a sum of £350,000. What I do not understand is the statement that this £100,000, which is to be left in the amalgamated fund is to be left in order that it may be devoted to capital expenditure. I think we are entitled to ask what capital expenditure it is going to be devoted to.

The object of the scheme is, I suppose, to cover the expenses of the operations of the Government in bankruptcy or in the winding-up of companies. But I do not quite see what capital expenditure the Government can require to lay out unless they are going to pension off the officials of the Government Department or give them gratuities for loss of office, or something of that kind. The mere fact that the Chancellor of the Exchequer is going to turn into revenue a sum of £350,000 which has been in the nature of capital is perhaps only to be expected in the present stress of the Chancellor of the Exchequer, but I do think we are entitled to ask what capital expenditure this £100,000 is required for. If it is nobody's money why should the Income Tax payer have to bear the expense of the £100,000? Why does not the Chancellor of the Exchequer take the lot? I am not suggesting that that would be a wise thing to do, but it is just as well to be hanged for a sheep as for a lamb, and after the larger sum which we have been discussing this little ewe lamb of £450,000 is nothing to an omnivorous Chancellor of the Exchequer.

But what is the capital expenditure for which this £100,000 is required? Hitherto, I understand, there has been no capital expenditure in regard to either of these funds, and I think it is a little improper to incur capital expenditure on these, funds. The fees ought not to be diverted to any other purpose than that for which they were originally intended. If the fees are in excess of what is wanted and there is a surplus, surely it is not legitimate to divert that surplus to any other purpose than that of the maintenance of those officials for whose maintenance the fees were actually imposed.

I cannot quite understand the bearing of these two paragraphs. Paragraph (b, ii) seems to be something entirely different from paragraph (b, i). It looks like the appropriation year by year of the surplus of income over expenditure of that year. Does it not mean that the Chancellor of the Exchequer will obtain next year and the year after, and every year, the whole of the surplus of the preceding year less u third, which is magnanimously left in order that it may he possible to pay the salaries for April, May and June before the fees for the current year have come in? As far as I can make out, the whole of the balance of receipts over the expenditure of each year is to be automatically appropriated to the Exchequer, minus one-third, which is to form the working capital. It is not one steal; it is a continuous annual steal. If I am not mistaken there is a continual appropriation year after year of the balance of the year's working of the combined account, less one-third, which is retained as working capital. It is not merely one appropriation Clause, but a telescoping into one of a series of appropriation Clauses to last indefinitely until, possibly, bankruptcy ceases to exist or joint stock companies cease to be wound up, or until we have a Chancellor of the Exchequer who is able to balance his Budget without the methods which the present Chancellor sees fit to pursue.

I ask for some explanation of paragraph (b, ii) because it seems to me as if the Chancellor of the Exchequer is looking at this as an annual contribution. Year after year, he is going to take out of these fees something in aid of his wanton, luxurious, extravagant expenditure instead of meeting the deficit in the usual manner to which we have been accustomed by past Chancellors in this country. Some will say that does not come to much, but it shows to what straits the Chancellor of the Exchequer is reduced when he raids even such cigar ends as this.

There is a serious side to this matter. These fees are actually levied upon the creditors of the company or of the bankrupt. Whatever amount is available for the creditors and whatever dividends may be paid, are reduced by the exactions of the Government, so much so that it is practically impossible for a poor man to indulge in the luxury of a bankruptcy. Fees are demanded from him, and if he has no money he cannot enjoy the luxury of bankruptcy proceedings and having his debts wiped out so that he may be protected from his creditors. The whole of these fees represent a tax levied on the bankrupt estate or on the creditors of the company that is wound up. It is a tax that is not justified. It has so far been justified by the State performing a service in respect of the bankruptcy or winding-up, and the State is then entitled to recoup itself for its expenses by fees which should be just enough to pay for these services.

There is a very great reason why the State should not make a profit out of this business. The State ought not to levy fees for a winding up or bankruptcy which are permanently in excess of the expense to which the State is put. There is no reason why, because this surplus has been piled up, fees should continue to he levied at a rate which is more than enough to pay the expenses of the State with a little turn to prevent the State being put to any loss. The Government have discovered that these fees have been normally more than is required to meet the expenditure, and they are nevertheless going to maintain these unnecessary fees and to provide that the profit of this mean business shall he transferred to the Chancellor of the Exchequer. I remember reading that when Henry Fielding was made Police Magistrate at Bow Street he said that he managed to make £300 or £400 a year out of it by the meanest of business. If the Government are going to make such a surplus, the Chancellor of the Exchequer is acting in what Henry Fielding denounced as the meanest of business. It is taxing the creditor who has already lost his money, and taxing the man in his time of difficulty with a tax which the Government is not morally entitled to levy, for it is in excess of the cost of its actual services.

It may be that I have misunderstood this document, and the lucid explanation of the hon. Gentleman who represents this Department, but, if I have not, I ask the Government whether they will not be content with looting the existing surplus. It is a happy accident which has placed this surplus at the disposal of the Chancellor of the Exchequer. I had discovered it myself when I was at the Board of Trade, and, but for the abhorred shears which cut short the thread of that Government, we might have used this surplus. I hope the Chancellor of the Exchequer will not be guilty of the sin of converting this capital windfall- into annual revenue. Again, I ask seriously what capital expenditure there is that needs this reserve of £100,000? It does not seem to me that these fees were intended to provide for capital expenditure. These fees ought not to be continued at an unnecessary high rate. I hope that the Government will explain how they justify the continuance of this taxation, and why the Chancellor of the Exchequer cannot be content with raiding the surplus that now exists, and why the fees cannot then be reduced down to a level which is only just sufficient to meet the expenses.


I want to make a point which may be the same as that of the right hon. Gentleman who has just sat down. If so, then, following the custom of fewer words on this side of the House about which hon. Members opposite have complained, I can put it into as many lines of the Official Report as he has put it into pages. I want the Chancellor of the Exchequer to announce that these funds, which are created out of fees, are not intended to be funds which ever should have a surplus. The point is one of some little importance, because it has to do indirectly with the question of the control of this House over taxation. It is a very good thing when we have a surplus for the House to vote it to the National Exchequer, particularly under present circumstances when it is in some need. But the Chancellor of the Exchequer must understand that in future some of us will watch very carefully whether the fees charged in respect of some of these services are not too large, and, if so, we shall ask that the fees shall be reduced to such a sum as is not likely to produce a large surplus in future, because money obtained by overcharging for services rendered forms one of the most improper forms of taxation. As to the right hon. Member for Seaham (Mr. Webb). I think he misunderstood the Parliamentary Secretary's words when he spoke about capital expenditure. If I am not mistaken, he said it would be used for working capital. It is a perfectly proper thing that there should he certain moneys kept in the Fund.


Bankruptcy was at one time described as that state of affairs which exists when, a man being unable to pay his debts, his solicitor and accountant share the profits between them. Apparently, under this Resolution the Chancellor of the Exchequer is to come in and share with the solicitor and accountant. The Parliamentary Secretary said that the surplus which existed in one of these accounts at present was an abnormal one, and that he did not expect that it would appear again. If that be the case, I should like to know the meaning of Clause 15 of the Economy Bill which provides for the taking yearly by the Treasury such surplus as they may have in the account and devoting it, not to the relief of taxation, but using it in aid of the salaries and expenses of the Board of Trade. If no surplus be expected, why insert this provision in the Bill? On the other hand, if there be a surplus expected, I suggest that the principle embodied in this Sub-section is a very bad one, because you are really imposing taxation without this House having an opportunity of saying how. it should be levied and the purpose for which it should be used. Moreover, the Company's Winding-up Department and the Bankruptcy Department are part of the administration of justice, and I hold very strongly that everybody should have justice in this country administered as cheaply as possible. It is not right that the taxpayers should be relieved at the expense of the fees received for the administration of justice if they are not actually required for the carrying out of the law. I notice that there is a balance of £450,000 in one Department and a deficit of. £20,000 in another. The Exchequer is leaving a large sum of £100,000 for what the Parliamentary Secretary called "capital expenditure." if by this he means what the hon. Member for Watford (Mr. D. Herbert.) said he meant, then I have no more to say upon that point.


With regard to the point which has just been raised, if I said "capital expenditure" I meant "working expenses." Obviously, it, is necessary to have a sum set, aside for working expenses. Just imagine the case of this Department in the process of winding up certain companies and the Official Receiver having to pay interim dividends to creditors. Of course, he must have a sum of money available for such a purpose as that. [HON. MEMBERS: "Oh !"] I may be wrong in that, but, whether that be so or not, I do not think it is unreasonable that we should ask for a reserve fund for this purpose. With regard to what has been said about the one-third appropriation, it will be an appropriation annually. As for the reduction of fees, I do not think it can be said that the bankruptcy fees are too high.

With reference to the company fees fixed by the Board of Trade, they are considered to be very much lower than the fees of the private practising liquidator, and, if we were to reduce those fees very much, they might injure the practice and profession of the practising private interest, and that is a reason for not reducing them. The hon. Member for the Welsh University (Mr. E. Evans) said I had spoken about this surplus being abnormal, and that it would not recur again. I did not say that there would be a recurrence of the surplus, but I said there would be no recurrence of the £450,000 surplus which is available at the present time. I think I have now dealt with all the questions which have been raised, and I hope the Committee will agree to pass the Resolution.


I think one or two more explanations of this proposal are still required. I want to say a word or two about the phrase used by the Parliamentary Secretary, "working capital." That suggests the capital necessary to carry on a business. The hon. Member referred to the process of winding up certain companies, and the Official Receiver having to pay interim dividends to creditors. I want a little more explanation on that point, because this seems to me to be a new form of Socialism. It means that, if a company goes bankrupt, instead of waiting for the assets to appear, the Government are going to use the surplus fees to pay the dividends in anticipation of possible assets, and that is a very remarkable doctrine. That is what hon. Members gathered from the statement made by the Parliamentary Secretary, but I think we should have some elucidation of this point from the Solicitor-General.

I am also very much concerned about the hon. Member's great anxiety to protect the interests of private enterprise and the private liquidator. He seems satisfied that a case had been made out for a reduction of fees, and yet he said that although it might be in the public interest to reduce the fees he could not do so, because it might interfere with the private industry of the liquidator. As a matter of fact, we have a precedent with regard to a reduction of fees, and it is to be found in the case of the Land Registry, which was able to reduce its fees because of the surplus that accrued from the existing scale of fees Notice taken that 40 Members were not present; Committee counted; and, 40 Members being present—


In the case of the land registry they were able, with the surplus, not only to reduce the fees, but also to wipe out the capital cost of the building. Therefore, that is a utilisation of a surplus which can be justified, but the proposals put forward on this occasion are thoroughly unsound, and you cannot use a surplus in order to pay interim dividends to creditors.


I was wrong about that.


Then my intervention in this Debate has served a useful purpose, for I have obtained an admission that the Parliamentary Secretary was wrong, and I hope other Ministers will follow the hon. Gentleman's example in admitting it.

Resolutions to be reported To-morrow.

Committee to sit again To-morrow.