NEW Cuuse.—(Allowance for wasting assets.) (Hansard, 6 July 1926)

§ Mr. GREAVES-LORD
I beg to move, "That the Clause he read a Second time."
I ought to point out, in moving this Clause, that the definition of wasting
1958 assets means assets which necessarily waste in the process of seeking profits. Some people on reading this Clause thought it had some relation to the Betting Duty, where the assets must necessarily waste in seeking profits. The Clause applies entirely to mining. This is a time when injustices of taxation should be removed from such an industry as mining. Every hindrance to industry should be removed, and any injustice of taxation is one which specially calls for removal. The whole idea of this Clause is to give to those who are running mines the same allowances as those who run factories. The position at the present time is that if you put up a chimney you are allowed depreciation in taking your accounts, but if you sink a shaft, which depreciates in exactly the same way, you are not allowed any depreciation. The result is, that as far as the capital which is expended in the sinking of shafts and tunnelling is concerned, no allowance is made in arriving at profits, although a shaft and a. tunnel are wasting assets and depreciate from year to year. If the Clause could be accepted, a very serious injustice would be removed. I hope the Chancellor of the Exchequer will see his way to accept it.

§ Mr. B. PETO
I beg to second the Motion.
On previous occasions I have moved a similar Clause of rather wider application. This new Clause is limited to coal and other mines. On the question of wasting 1959 assets generally, the adoption of the recommendations of the Royal Commission on Income Tax in 1920 would be a method by which the Chancellor of the Exchequer could give relief to productive industry in this country, and consequently assist in the employment of labour, in a more direct and immediate manner than in any other way that could be conceived. The Royal Commission in that section of their Report which deals with wasting assets and the present law point out that The only wasting assets for which an Income Tax allowance is now made are plant and machinery, and certain buildings that contain plant and machinery. Later on in their Report they recommend, in paragraph 200: Subject always to the limitation that their life falls short of 35 years, we recommend that an allowance shall be given in respect of all inherently wasting material assets which have been created by the expenditure of capital, such as buildings and foundations, surface works, permanent way and equipment of railways and tramways, docks and shaft-sinkings, and initial work on development. In every case the allowance should he calculated by reference not to the absolute but to the relative liability to waste. Here we have a definite recommendation of the Royal Commission that shaft sinkings should be subject to this allowance for wasting assets or depreciation. Undoubtedly, in the present state of the coalmining industry in this country there is a very strong case for giving an allowance which was recommended six years ago by the Royal Commission. Under the arrangement existing in the coalmining industry, it would not be an allowance which would fall into profit exclusively for the benefit of the owners, because any additional profit additional to the present profits are divided under the agreement as to 87 per cent. in increased wages and 13 per cent. to the owners of the mines. Therefore, there is no point to be made against the Clause from that point of view.

§ Mr. McNEILL
My hon. Friend the Member for Barnstaple (Mr. B. Peto), in seconding the Clause, said that he moved a Clause last year in similar terms. The Clause which my hon. Friend moved last year was very different from the present one, and I think it was an inadequate description of it to say that it was on somewhat wider lines. The 1960 Clause which he moved last year dealt with wasting assets generally. My hon. and learned Friend the Member for Norwood (Mr. Greaves-Lord), who has moved the present Clause, confines it solely to coal and other mines. This question of wasting assets and the equitable manner of dealing with them is a very old Budget subject. There have been a great many proposals for dealing with it, going back a great number of years. One Chancellor of the Exchequer after another has approached the problem by admitting that it requires to be dealt with and that a strong case can be made out in regard to wasting assets, but they have almost all finished up by saying that they have been unable to find the right and proper way in which to deal with it, and have admitted themselves incapable of solving the problem.
As long ago as 1912 the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George), who was at that time Chancellor of the Exchequer, said, with reference to a proposal similar to one which was made last year, that it would cost the Exchequer £2,000,000. I want particularly to call the attention of the House to the following words used by the right hon. Gentleman, which are quite true. He said that it was almost impossible to redress the grievance without a complete reconstruction of the Income Tax. That is because it is such an extraordinarily involved and difficult subject. Certainly if we were to agree to deal with the subject now, it would require a number of very controversial Clauses, every one of which would be open to very serious controversy and discussion, and rightly so, because it would be extremely difficult to draft a Clause which would satisfactorily deal with the matter. The objection is not merely based on the question of drafting, but on the fact that it would enormously add to the complexity of the Income Tax law and the complexity of Income Tax administration. I do not say that that is a conclusive reason against a proposal of this sort, but it is a very serious objection, especially at a time when my right hon. Friend is endeavouring, I think with the approval of all parties, to simplify, if possible, the administration of the Income Tax, which is becoming frightfully complex as time goes on, and in many cases almost unintelligible. That is a reform which everybody would like 1961 to see carried out, but undoubtedly if we were to deal with this subject of wasting assets, so far from simplifying the Income Tax, it would immensely add to the complexity of the subject.
My hon. Friend who seconded the Clause referred to the Report of the Royal Commission and seemed to claim the support of the recommendations of the Royal Commission for this proposal. I think he is under a complete misapprehension in that respect. The Royal Commission on Income Tax made a number of recommendations in favour of dealing with the subject of wasting assets in many of its aspects, but there was one emphatic refusal, one emphatic negative in regard to one aspect, and that was exactly the proposal which is made in this Clause. The Royal Commission, whilst saying that allowances of one sort and another might be made, said: No allowance should be granted to incomes arising from wasting assets which consist of the proprietorship of natural resources in this country. Income derived from mines is expressly excluded by the Royal Commission. They went most carefully and fully into the whole of this very complicated and difficult subject, and they expressly excluded from their recommendations the very subject which my hon. and learned Friend has singled out from the others to put forward in this new Clause. That is why I say that this new Clause differs a great deal from the proposal made by the hon. Member for Barnstaple last year. In the wider manner of dealing with this matter which he proposed, he could have claimed in many of its aspects the support of the Royal Commission; but the very aspect which has been singled out by my hon. and learned Friend in this Clause comes under the express veto of the Royal Commission. Upon that ground alone we should be justified in declining to accept the Amendment, but must, in candour, admit that, quite apart from the attitude of the Royal Commission in this respect, the difficulty and complexity of the subject and the far-reaching complexity in which we should be involved in carrying out this proposal, would make it absolutely necessary for us to say that although in principle there is a great deal to be said for dealing with wasting assets the subject is far too difficult for us to deal with it in the present Finance Bill.

§ Mr. PETO
Will the right hon. Gentleman bear in mind that the Royal Commission made a distinction between minerals in mines and the material assets which they expressly allude to and which are covered by their recommendation.

§ Mr. McNEILL
My hon. and learned Friend does not draw that distinction.

§ Mr. BARKER
I think it would take all the K. C.'s in the House to explain what this new Clause means. As a lay Member of the House, I am full of suspicion in regard to the Clause. In calculating wasting assets, I should like to know whether any calculation is to be made of the profit earned by the companies during the time that the assets have been wasting. Do the royalty owners come under this Clause? The Duke of Northumberland has stated several times in public that his estate is a wasting asset. I am full of suspicion that there is something ulterior about this Clause; something that I cannot see through. If the House goes to a Division, I shall certainly vote against the Clause. I should have liked to have had some more explanation with reference to it. A subject that is so complicated and involved as this cannot be lightly passed over in the few words the right hon. Gentleman used. I have a very strong suspicion myself that if this Clause got through the royalty owners would come into it. For that reason, if for no other, I should vote against it. I should like to know whether those wasting assets do really take into calculation the profits that are being made while the assets are wasting. Some of those colliery companies realise their capital many times over before the mines are exhausted.

Captain BENN
It would be very helpful if the hon. and learned Member for Norwood (Mr. Greaves-Lord) would tell us if the result of his Clause would be to permit relief from some part of the Mineral Rights Duty payable by the royalty owners.

§ Mr. GREAVES-LORD
It would not have any effect in relieving the royalty owner.

Captain BENN
What is meant in the definition of wasting assets in line 15? If the hon. and learned Gentleman says it could not relieve the royalty owner of 1963 a part of his Income Tax—he is an eminent legal authority—I accept his definition of his own Clause. It deserves notice, however, that at last the Conservative party have made some constructive suggestion for the solution of the coal crisis.

§ Mr. MONTAGUE
I just want to say a word or two on this Clause. It seems to me the proposal of the hon. and learned Member is one which is more subtle than appears on the surface. I can understand any proposal to assist the coal mining industry at the present time, although I might not feel inclined to agree with a proposal of this character from that standpoint. It does seem to me that the idea of making an allowance for wasting assets with regard to the coal mines might apply to any other industry, and if an industry requires to be assisted by allowances of that kind let us be straight and direct about it, and take the line that the capital of the company, the plant and the buildings of the company should, apart from waste, be relieved simply because of the necessity for relieving the industries of the country generally. The point surely is this, that the fact of the assets wasting is a proof of the advantage that has been gained by the concern. The more the assets waste, the better for the industry concerned, because it indicates there is prosperity in that industry, and it is the business surely of the industry to reclaim that waste by applying its surplus to the restoration of the capital and the plant. For those reasons I propose to oppose this Clause, particularly as it does not appear to be put forward with any great definiteness.