HC Deb 17 July 1930 vol 241 cc1531-69

For the purpose of calculating the annual profits or gains arising or accruing from any trade, profession, employment, or vocation, there shall be deducted in each of the three accounting periods following the sixth day of April, nineteen hundred and thirty, any sums which, to the satisfaction of the Commissioners by whom the assessment is made, can be proved to have been expended upon the purchase, installation, erection, or improvement of plant or machinery with a view to the reconditioning, re-equipment, modernisation, or improvement of such plant or machinery: Provided always that if recourse is had to the benefits conferred by this section, no claim shall be entertained by the Commissioners in respect of the diminished value by reason of wear and tear of the said plant and machinery to the extent of any deduction allowed hereunder.—[Mr. Churchill.]

Brought up, and read the First time.


I beg to move, "That the Clause be read a Second time."

I do not observe the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) in his place on this occasion. I had hoped that he would have been present again to support by his powerful and picturesque oratory the important proposal contained in this new Clause. It may not have escaped your notice, Mr. Deputy Speaker, that a considerable amount of excitement was caused when this matter came before the House on the last occasion, and the proposal received a remarkable measure of support on this side of the House—in fact one may say that it very nearly commanded a majority of the present House of Commons. The Chancellor of the Exchequer, when speaking upon this proposal on that occasion, hold out hopes to the right hon. Gentleman the Member for Carnarvon Boroughs that he would consider some proposal based on the lines of this new Clause although expressed in a different way. The principle of this proposal is that we should endeavour to give the strongest encouragement to industry by relieving it of the heavy burdens which press upon it to-day, and which have such a disastrous effect upon employment.

I was very much impressed with the argument used by the right hon. Gentleman the Member for Carnarvon Boroughs when he pointed out how many experiments were being tried to relieve unemployment, and how large sums of money were being disbursed with that object without much chance of success. The right hon. Gentleman pointed out that the assent of the majority of the Liberal party had been obtained for such a proposal as that contained in this new Clause. I know there were some formidable dissentients, but I think I may claim that this proposal had the assent of 65 per cent. of the Members sitting on the Liberal benches, which, I think, is an unprecedented measure of assent. The right hon. Gentleman the Member for Carnarvon Boroughs also pointed out that if the expenditure of this money did not produce the proportionate amount of new employment claimed for it, no money would be spent at all, and there would be no loss to the Exchequer. Therefore, this proposal is as reasonable as it could possibly be made. On these benches, on the last occasion when this subject was considered, we followed the lead of the Liberal party in view of the careful study which it has given to financial matters of all kinds. We have learned something of their diligence and their high authority from the many Yellow Books and other coloured books which they have prepared, and which from time to time they have used to illuminate public discussions on these matters. [Interruption.] There is no reason why any hon. Member should object to that. On the contrary I think he ought to be delighted that any contributions to the solution of this problem by the Liberal party should gain such a wide measure of support.

We took the plan of the Liberal party and supported it. We relied on their authority, and on the earnestness and diligence with which they studied this subject. I want to know whether the Chancellor of the Exchequer is going in any way to defer to the speech made by the right hon. Gentleman the Member for Carnarvon Boroughs and his arguments, and whether he is going to defer to the strong expression of opinion in the House which was, in fact, so strong that it almost effected the translation of the Chancellor of the Exchequer to a position of greater freedom and less responsibility. I do not know whether the right hon. Gentleman is going to defer in any way to that expression of opinion. It may be that the right hon. Gentleman does not feel that he is in any danger this afternoon, and that he is on this occasion under no obligation to the Liberal party. But perhaps the Chancellor of the Exchequer will say Ease would retract vows made in pain; As violent and void. The Chancellor of the Exchequer may not feel disposed to pay any attention to his words, but he told the party below the Gangway that he had the same object at heart as that which was contained in their Amendment, and he hoped to be able to find words, probably couched in different language, to give effect to it. At any rate, in moving this Clause, I offer the Chancellor of the Exchequer, in the first place, an opportunity of letting us know Where he stands with regard to this proposal, and what value we are now to attach to the assurances which, I think with a somewhat wry face, but nevertheless quite unequivocally, he gave to the right hon. Gentleman the Member for Carnarvon Boroughs in the hope of averting his ire.

6.0 p.m.

That is the first reason why I felt it to be my duty to put down this Clause. The second was that I thought that it would be a very great pity if a matter which has excited to much interest, and which was the result of so much careful thought and study by the Liberal party, should, as it were, slip aside from our discussions unnoticed, and not be brought forward with all proper formality upon the Report stage. I watched for some days, and studied the Order Paper each morning with anxious care, to see which Members of the Liberal party would set this Clause down on the Paper, and what support it would receive from them. But when, yesterday, some of my hon. Friends who take an interest in this matter drew my attention to the fact that, although the days, and even the hours, were slipping by, towards the time when the Report stage must inevitably be taken, the Order Paper was blank in respect of this important proposal, upon which, as I have said, the Government were almost hurled from power, and upon which within two of a majority of this House have already expressed a favourable opinion, I felt it to be my duty to step into the breach and to place this Clause upon the Paper, in order to enable the party below the Gangway once again to show that, whatever may have been said or done here or outdoors, there are at any rate some important topics upon which the Gangway is narrower than the Floor.

I make no sort of reproach, I say candidly, to the Liberal party on this subject, I should never think of reproaching those whose votes I am anxious to obtain in the Division Lobby; and, therefore, I am in no way commenting upon their neglect to place this Clause on the Paper. Indeed, I know that they have had quite a lot to think about lately, and have been very busy on one thing and another, and doubt this was an oversight. I have repaired the oversight. I have not only enabled them to renew their support of this proposal, but I have given an opportunity to the Chancellor of the Exchequer to make concessions which will, perhaps, reunite the House of Commons on a matter on which it was so acutely and narrowly divided.

As to the merits of the proposal, there really can be very little doubt that to spend the sum of money which this Clause would involve upon increasing and improving the plant of all our great productive works throughout the country would be an incomparably more fruitful and more prudent employment of our limited resources than any of those other schemes upon which millions are being poured out. Still more would it be an improvement upon that immense outflow of public money which has already ruined the Unemployment Insurance Fund, and for which further immense demands are to be made upon us tomorrow. For these reasons—firstly, the merits of the proposal; secondly, to afford an opportunity to the Chancellor of the Exchequer of making a concession; and, thirdly, to express my gratitude and regard for the Liberal party for the care which they have taken in illuminating our discussions on this subject, and the stout-hearted manner in which they have testified to their conviction in the Lobby—I desire, with great respect, to move this Clause.


I am afraid that the right hon. Gentleman has exposed too clearly the purpose that he had in view in moving this new Clause to achieve his purpose. It has been discussed in an atmosphere much less keen than that in which a similar Clause was debated a few days ago. It would have been interesting if the right hon. Gentleman had carried his account of the origin of this Clause, and the circumstances in which the critical Division took place last week, a little further, but I suppose that that is one of the secrets that will remain locked in the breast of the right hon. Gentleman. It will have been noted by the House that the right hon. Gentleman said hardly a word about the proposed new Clause, and, indeed, no word at all of explanation or exposition of its merits. He appears to be quite satisfied with the origin of the Clause. He has the most perfect confidence in the party of which he once was a very brilliant member, and, although he has left it now for a good many years, he has evidently retained a good deal of his old Admiration for it.

The right hon. Gentleman said, without quoting words, that I had given encouragement and hope, in the concluding part of my speech last week, that I might be able to accept, in a somewhat changed form, the Clause which was then moved and which was rejected by a narrow majority. The right hon. Gentleman was wise not to quote my exact words. What I did say was—I am not, using the words that I used on that occasion, but the substance of what I said was—that I would be prepared to consider any practical proposal calculated to stimulate industry; but I certainly never said that I should be prepared, on the Report stage of the Finance Bill, to submit proposals such as this.

It is unnecessary for me to deal with what the right hon. Gentleman called the merits of the Clause. I dealt at considerable length a week ago with what the Clause actually proposes. I pointed out its comprehensive character—its unlimited character; the way in which, if it were adopted, it would spread its blessings broadcast without any discrimination whatever; and the fact that companies needing no financial assistance whatever to carry out schemes of improvement would be the largest recipients of the bounty that would be given. After further consideration of the whole matter, I should not be prepared to say that this is the best way in which a given amount of money can be spent. I think that those schemes which we have approved, amounting in the aggregate to a sum running into tens of millions, under the Development Act, are a far better way, because then you get the assurance that the money will be spent upon schemes which have been previously examined, thoroughly investigated, and approved. There would be no control whatever in the spending of the money by any previous consideration if we were to adopt this method.

I stated, when I spoke a week ago, what the cost of this unlimited proposal would be. My figures were brushed aside by the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) with the remark that they were simply fantastic. As a matter of fact, my estimate is perfectly accurate, that is to say, as accurate as such an estimate possibly could be. The difference between what the right hon. Gentleman the Member for Carnarvon Boroughs had in his mind as the cost, and the cost of such a Clause as the one now proposed, lies in this: The right hon. Gentleman submitted to the Inland Revenue authorities a question as to what the cost of a certain proposal would be, but his proposal was of a very limited character, amounting practically to what was suggested by the hon. Member who moved the Clause a week ago, that is to say, not an allowance on the whole sum that was spent upon renewals, but on the amount of expenditure in excess of what might be regarded as replacement, That is the explanation of the difference in the estimate of £5,000,000 to £7,000,000 which the right hon. Gentleman the Member for Caruarvon Boroughs gave, and the actual cost. This Clause, which is identical with the Clause moved a week ago, would give relief to the whole of the sum that was spent upon replacements, improvements, and ail the rest of it. I do not think it is necessary that I should say more on the subject now.

The right hon. Gentleman suggested that I might do something in the way of accepting the principle, but we are not dealing, at this stage of the Finance Bill, with principles; we are dealing with actual proposals, and the only matters that the House has to consider now are this Clause, the terms of the Clause, what it will do, its effectiveness if it were carried, and its cost if it were carried. I cannot imagine that the House of Commons, in possession of the knowledge of what the Clause involves, could give that support to it which a large number of Members gave a week ago.

May I just add this one word? I cannot imagine that the party below the Gangway opposite could on this occasion support this Amendment, and for this reason. As I pointed out at the time, the hon. Member who moved the Clause a week ago abandoned the Clause altogether. He never attempted to defend it, but suggested something entirely new and different in every detail from the terms of the Clause which was on the Paper. I cannot, of course, accept an Amendment Which would involve the sum of money that I have named, and which, I am quite certain, would be spent in a way far less effective than other means for assisting industry. A sound business to-day has no difficulty at all in getting the money that it needs for reconditioning. There are practically—if I may use the word with limitations—unlimited resources at the disposal of industries to-day which are in a position to show that they would pay for reconditioning, reorganisation and re-equipment; and it is far better, in my view, that whatever resources we should be able to offer to help industry should be spent in ways that would ensure bringing about the results that we desire. For that, among other reasons, I cannot accept the Clause.


I do not want to delay the House by fighting over again a battle which has already been concluded, but my excuse for intervening in this debate is that, on the Money Resolution, I moved an Amendment which raised the important question, which is implicit in this proposed new Clause, that some form of encouragement should be given in one way or another to the reconditioning and re-equipment of our trade and industry. It is true that, owing to the fact that I was called upon to move my Amendment at a time when most Members of the House were absent, with a view, no doubt, to reconditioning and re-equipping, but not necessarily improving, their own plant and machinery, there were not many Members in the House who had the advantage of my explanation. I urge on the Chancellor of the Exchequer that he should give it some encouragement, not in this Clause and not necessarily in this way, but that he should give us some hope that at some future time arrangements may be made to encourage expenditure on the re-equipment of their machinery.

The right hon. Gentleman has said, I think rightly, in view of the actual terms of the Clause, that he is spending many more millions in much more useful ways. Those millions that are spent under the Development loan are concerned entirely with public utility companies, and they do not touch in any way the necessary re-equipment of modern industry. Although undoubtedly the right hon. Gentleman's answer to-day has been much kinder than before, the sort of answer I gather which was expected if, unfortunately, that telephone conversation had not gone wrong, I cannot help wishing that he had been a little kinder still and given some indication that at a future date he would at least consider the principle that underlies the Clause.


The right hon. Gentleman the Member for Epping (Mr. Churchill) has moved this Clause in an amiable spirit of geniality, with a smile on his face, but it seemed to be rather a wry smile, somewhat the smile of a tiger that has missed its spring, if one can imagine such a thing in connection with such an animal. He complimented us too much when he said the Clause was put forward in Committee as a carefully-framed, elaborately devised, fully considered proposal, perfected to its last point and intended as a definite legislative proposition. It was made quite clear by my hon. Friend who moved it that any proposal dealing with a matter so complex and so technical ought properly to be prepared in consultation with, if not by, the Government of the day, and that it was put forward really for the consideration of the Chancellor of the Exchequer in the hope that he would agree to devise a watertight, practical proposal at a later stage of the Bill. Frankly, we were exceedingly disappointed that he gave a reply which was not of that sympathetic character that we should have desired, for it is a question of great public importance whether or not our fiscal system should be so devised as to apply the full weight of taxation upon savings which are to be used for industrial development. It seems to me to be open to much criticism that our fiscal system as a whole does not seek to discriminate in that manner.

I quite agree with what the right hon. Gentleman said that, if you admit the principle at all, it carries you a long way, and that you may have to take into account, not only those investments for industrial development and equipment which are derived from the savings of the year, but also those that are derived from other sources, and you have to consider whether you can discriminate and, if so, where you should draw the line. That the matter is one of importance, and should command the very earnest attention of the Government and the House, seems to me to be beyond dispute. I agree with the right hon. Gentleman that one important consideration in the question whether the relief that is given, if any, should be on all moneys used for this purpose or only on moneys that are used in excess of the normal in a time of emergency, such as this. That was the intention that my hon. Friend who moved the Amendment in Committee had in view, that it should be an inducement, by means of a lightening of taxation, to people to take in hand works now which might otherwise be postponed, and so offer some relief to the terrible problem of unemployment which now vexes the minds and oppresses the homes of so large a proportion of the nation, and our appeal was that the Chancellor should go into this matter in that spirit. If there was a discrepancy between his estimates and those of my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George), he has explained how that came about: that my right hon. Friend was thinking all the time of relief that would be given to moneys invested in excess of the normal, and the Chancellor gave a much larger estimate assuming that relief would be given to all moneys—so I understood him.


I do not think that applies to the right hon. Gentleman the Member for Carnarvon Boroughs. He so expressed his question to the revenue authorities that that was the construction they put upon it, but I think he had in his mind the assumption that it covered the whole field.


We discussed this very fully, and our intention was to give relief to the surplus. I agree that the Amendment as originally proposed did not clearly express that. I forget whether my hon. Friend the Member for Luton (Dr. Burgin) brought out this point in moving the Clause, but, in any case, what the Chancellor might have done was to say that, if this meant to relieve from taxation all expenditure, normal and special, it would cost £30,000,000, but if it was to cover a more restricted field, it might be a sum in the neighbourhood of £7,000,000. If he had given a reply in those terms, it would have been regarded as a more conciliatory answer than one that brushed aside the whole suggestion by taking the maximum of objection and admitting the minimum of advantage. However that may be, we are now in the Report stage and not in Committee, and it is customary in Committee to put forward proposals, which those who make them may admit are not in the right form, as a means of evoking the assistance of the Government if they can do so. Frequently the Government will reply that the Amendment as proposed is not workable but, if they feel so, they regard it as one that is just in principle and they will consider it at a later stage. That is the reason why we moved the Clause, and that is the answer that we expected. Greatly to our regret the right hon. Gentleman has not given it. This being a legislative proposal now on the Report stage, I should feel some doubt as to voting for it. As a matter of fact, I abstained on the previous occasion, and I should in any case have done so again to-day, but my hon. Friends who voted for it are, of course, free to do so again, and I have no doubt many of them will, but I see no reason why, because the right hon. Gentleman the Member for Epping assured us that he had been so glad to vote with us on the previous occasion, I and others should respond to his invitation when he desires us to vote with him.


It appears that, whatever the attitude of the Liberal party was on the last occasion, they have reached some sort of unanimity now. It has been advanced that the Chancellor ought to give the Clause more serious attention than he has given it on account of the very close vote when the Government escaped with a majority of two, but I do not think that is putting the case as strongly as it ought to have been. It is clear that, when we last divided on the Clause, there was a majority for it, because there were 12 or 13 members of the Liberal party who, we have every reason to believe, were in favour of it—and that is reinforced by the speech just delivered—who bad such great regard for the valuable services of the Chancellor of the Exchequer that, finding themselves in the difficult position of either having to let the Clause go or to let him go, decided that of two evils the Chancellor was not the greater. Therefore, I think the right hon. Gentleman should bear in mind that there is a majority in favour of the Clause which has now been moved again.


I think we ought to press the Clause, because it is based on sound principles. We do not seem to mind how many millions we spend on works which are mere palliatives. We do not care how many millions we spend on maintaining people who are out of work, but the moment there is a proposal which will make industry better able to employ people and find work, the Government kick against it and nothing is done. I protest altogether against the idea that so-called profits are real profits until buildings, plant and machinery have been kept abreast of the times. They are wasting assets. Let me give one or two illustrations of what I mean. The report on the cotton industry pointed out that the mule spinning machines ought to be changed for ring spinning machines, and that the ordinary loom ought to give way to the automatic loom. In other words their plant has ceased to be moneymaking plant under present conditions. How can it be said that, if they were making so-called profits, those were really to be treated and taxed as profits until the plant had been kept abreast of the times and made a money-making plant? Take another illustration. People will not take rooms in hotels unless there are bathrooms and running water. Hotels have constantly to be spending money out of their pockets in this way. They are treated as if they were profits but, until the money has been spent on maintaining the property and keeping it abreast of the times, you do not begin really to talk of profits that ought to be taxed or divided among the shareholders. If your plant is not renewed, in a few years it is worn out and your capital has disappeared. You are living on a wasting security, and that which you have been treating as profit was not really profit, but represented a part of your capital.

I am convinced that it is a sound principle for every concern to treat a certain proportion of their so-called profits as really representing wasting capital, and that they ought to be permitted to treat that fair proportion as if it were not taxable income but income in respect of which they ought to be relieved of taxation. Until that principle is recognised, I am certain we shall be going on wrong lines. This Amendment provides for the case in which money is actually spent. Every penny of the money would be spent on finding work for someone and upon making the concern in question more efficient for employing people. I can scarcely imagine a better way in which to spend money for the purpose of providing employment than this proposal. Quite apart from that fact, it is right in principle that money spent in that way should not be treated as taxable profits, but should be treated as money expended on making good wasting capital.


From what the right hon. Gentleman the Chancellor of the Exchequer said when he interrupted the right hon. Gentleman the Member for Darwen (Sir H. Samuel), it appears that he must have been under a misapprehension as to the purport of this Clause which has been moved by my right hon. Friend the Member for Epping (Mr. Churchill). It is clear that he imagined that the intention of the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) was, that all new plant should be exempted from Income Tax during the next two or three years, whereas the right hon. Gentleman the Member for Darwen has made it perfectly clear this afternoon that the intention of the Liberal party when they moved the Amendment was that the relief should apply only to surplus new plant over and above an average which might be taken for the last two or three years. In those circumstances the Chancellor of the Exchequer would require very radically to revise the astonishing estimate which he gave on the Committee stage, when he said that this proposal might cost something like £30,000,000 a year. In point of fact, it would not cost anything like that sum of money. I am sure that the House will note with interest the attitude of the Liberal party to-day, as it did their action the other day, on the very great constructive proposal which they put forward, after, as the right hon. Gentleman the Member for Darwen pointed out, a great deal of discussion and after having been given infinite trouble in drafting the Clause. They could not have received a more devastating and destructive reply than that received from the Chancellor of the Exchequer on the Committee stage. He held out no hope whatever that he would even consider any more suggestions along those lines. And here they are this afternoon not even going to vote for the. Clause which they themselves put down. [An HON. MEMBER: "Wait and see!"] I must say that I am delighted to hear that remark. I was under the mistaken impression for the moment that the Liberal party were being led from their Front Bench, but I see that it is a mistake to-day, as it has been a mistake on other occasions.

There is another point which arises in connection with this Clause, which, I think, deserves consideration. It would, no doubt, help the industries of this country to speed up the vital processes of reconstruction or rationalisation. A very vivid proof of the advantages of rationalisation has been afforded by the export trade figures of Germany which were published the day before yesterday. The industries of Germany are rationalised and reconstructed to a far greater extent than the industries in this country, and the critics of rationalisation in this country would do well to ponder over the fact that for the first time since the War, and for the first time in her industrial history, Germany's export trade is larger than ours. I believe it is the re-equipment and reconstruction of Germany during the last three or four years which are principally responsible for this state of things.

The Chancellor of the Exchequer on the Committee stage and again this afternoon used an argument which I do not think will hold water for a moment. It was the same senseless argument against the de-rating proposals put forward by the late Government, namely, that sonic of the benefits would go to prosperous industries in this country. It is upon the greater prosperity of prosperous industries in this country that our whole hope for the future will depend. The Chancellor of the Exchequer has not produced a single constructive proposal in his Budget to assist British industry in any form whatever. Every single Clause which he has advanced is going to act to the detriment of British industry and it is going to make it more difficult for us to reconstruct, rationalise and compete successfully in the markets of the world. At the same time, anybody who has the future of British industry at heart would, at any rate, do well to make a gesture this afternoon by voting for at least one constructive proposal put forward in the course of this Budget.


I rise to state the reasons why I do not think the Government should accept the Amendment. In the first place, there is, probably, no field of Income Tax in which tax evasion is carried to a further point than it is in regard to the returns furnished by limited liability companies in this country. This Amendment would carry on to a very much greater extent the tax evasion which exists in regard to limited liability companies, and on that ground alone it ought to be resisted by this House. I also object to it on the ground that it suggests a subsidy from public funds to private industry in this country. I am not an opponent of all forms of subsidy, and I can conceive occasions where even a Labour Government would be justified for public reasons in making a subsidy to a particular industry. But it seems to me to be a cardinal article of faith that whenever the Labour Government make a subsidy to any form of private industry, that subsidy should be accompanied by conditions which operate in a Socialist sense. I can see no justification for a form of subsidy from a Labour Government to private industry in this country unaccompanied by any kind of conditions whatever operating in a Socialist sense. On those two grounds alone, the Government ought to resist this Amendment. Some of us have watched with a good deal of concern the progress through this House at an earlier stage of a home development Bill and the Colonial Development Bill. Both of these Bills in effect provided subsidies from public funds for private industry in this country and in the mandated countries, and I am very glad that the Government have learnt sufficient from their experiences of those two Bills as to resist this proposal for a further unconditional subsidy to private enterprise in this country at the public expense. On those grounds, I hope that the Government will resist the Amendment, and, if necessary, go into the Division Lobby against it.


It must, indeed, be a happy day for the Government to find themselves reinforced not merely from below the Gangway, on this side, but from the hon. Member from the mountains—the back bench opposite. It is, indeed, interesting to see supporters of the Government, owing to the narrowness of the Division on the previous occasion, hastening to their aid, especially those who do not usually go to such trouble to support them. The Government have seen their majority go down by reason of the two expulsions which have been carried out to-day, and thus the majority of two on the last occasion has disappeared. The Government may well consider the desirability of being saved from their friends. The support which has been brought to them by the hon. Member is typical of the arguments which must weaken the case he has at heart. What is being brought before the House? It is a proposal in the first place adumbrated by hon. and right hon. Gentlemen below the Gangway by whom, we have just been told by the right hon. Gentleman the Member for Darwen (Sir H. Samuel), it was long and anxiously considered, closely debated and thoroughly examined and put down upon the Order Paper with the full weight of responsibility. It was not put down merely to obtain an indication of the attitude of the Government of the day. The chief Liberal Whip and the second Whip told in the Division, and we were told that it was with the object of obtaining an indication of the attitude of the Government. We were told by the Chancellor of the Exchequer at the week-end that if they had been defeated on that occasion, he would have turned the meeting which he was addressing into an election meeting. All this was to obtain an indication of the views of the Government of the day. What an absurd proposal to bring before the House of Commons at this time of day.

Now we are told that, of course, you could not defeat the Government on the Report stage of the Bill. You can carry a proposal against the Government, you can put on the Chief Whip to tell, and you can bring down the Government of the day by an Amendment carried on the Finance Bill in Committee, but now on the Report stage of the Bill things are not the same. There is the Naval Conference which has just concluded, and the Imperial Conference which is about due to start, and the Indian Conference which is now proposed, and all these things being considered, it is quite impossible that the proposal which was rejected by the Government by two votes should seriously be pressed by hon. and right hon. Gentleman below the Gangway even after such close consideration was given to the matter before they passed into the Lobby to record their votes on the last occasion. Why was it necessary for the right hon. Gentleman to bring forward the proposal Surely, as the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) said, you have to do something. It is useless for the Chancellor of the Exchequer merely to adopt the "No, no" attitude, and then to stalk contemptuously out of the House, leaving the debate to be carried on by the Financial Secretary to the Treasury who, no doubt, at a later stage will rise to report Progress as he did on the last occasion when he was deserted by his right hon. Friend. I have no doubt that it will be agreed on all sides of the House that unless something constructive is done, there is a danger of panic methods being adopted.

The Chancellor of the Exchequer said that this is a very expensive proposal, and that it might cost £30,000,000. The smaller proposal might cost even £7,000,000. What about the proposals he is about to commend to the House to-morrow, and what is likely to be the financial condition of the country just now with the cost of transitional benefit being thrown wholly upon the Exchequer? The sum required in this respect was £8,500,000 on the introduction of the Employment Bill, and it had gone up to £10,500,000 when the Bill passed through the House. We were told in this House not more than a week or so ago by the right hon. Lady the Minister of Labour that the burden falling wholly on the Exchequer had risen to £18,000,000. If the figures of unemployment increase, the sum to be carried wholly and entirely by the Exchequer will reach £20,000,000. Far more than the sum which would be required to make this concession will be swallowed up in the unremunerative payment of the dole to which no contribution has been made, which has to be carried wholly and entirely by the Exchequer, and for which provision has to be made in the Finance Bill either this year or the year to follow. A sum of £20,000,000 in respect of an unemployment total of 1,900,000, but I am afraid that the unemployment figures are not going to stop there.

That is the figure which will fall on the taxes of the year, but what is the figure which will fall on the borrowings of the year? A sum of £15,000,000 will, we are told, have to be borrowed over and above that which the Government expected to have to borrow. A sum of £20,000,000 will have to be borrowed to carry 1,900,000 unemployed. If the unemployment figure reaches 2,000,000 or 2,500,000, the sum will rise to over £60,000,000 sterling to be financed by borrowing and taxes. And yet at this moment the Chancellor of the Exchequer is boggling over a sum of £7,000,000 which would be required to meet the concession in regard to plant! The Budget is shattered, ruined and completely destroyed by the sum it will be necessary for him to find this year, or for his predecessor to find next year, for unemployment insurance, the borrowings of the Fund and the transition period. In those circumstances, with the unemployment figures rising every day—an increase of 40,000 upon last week—the Chancellor of the Exchequer turns an absolutely deaf ear to a proposal brought forward by both sections of the Opposition. As he is ruling out tariffs altogether, he should consider some other method of dealing with the crisis in which the country finds, itself to-day.

The right hon. Member for Carnarvon Boroughs was right, a thousand times right, to bring forward this proposal and to back it in the Lobby with all the votes that he could command. The only people to blame are those people who, after their party had met and decided its course of action, and after the chief Whips of the party had been put on, in support of an unshakable and unanswerable case, ran away in a cowardly fashion because they were afraid to face a General Election. I will not say that the Chancellor of the Exchequer has run away. It is not a very great loss when he leaves the House, because his mind is as much made up at the beginning of an argument as at the end of it. We do not gain anything in having him here, because it is hopeless to convince him or to give figures which will be any sort of information to him. The Chancellor of the Exchequer is nearly always wrong when he quotes figures, and he turns a deaf ear to the figures of other people, however accurate they may be. He is always inaccurate in the figures which he quotes. He has had to apologise publicly in this House for inaccuracy in the quotation of figures during the conduct of this Finance Bill, a thing that has never happened to any Chancellor of the Exchequer in my recollection.

The estimate of £8,500,000 has gone up to £10,000,000, the £10,000,000 that was estimated has gone up to £18,000,000, the £18,000,000 has gone up to £20,000,000. The figures are still rising, and they have to be borne up by the taxes. The Chancellor of the Exchequer has given no indication how he proposes that these huge sums are to be met. Here was a Proposal that would have met the position. True, it was accompanied by no condition. The time is too, short for that, the crisis is too urgent for that, the mounting figures of unemployment are too awe-inspiring for that. The situation calls for action, but the Chancellor of the Exchequer votes for inaction. When the mountain behind him calls for inaction, then the Chancellor of the Exchequer will be rooted to his place, and will absolutely fail to make any forward move of any description. The hon. Member for Smethwick (Sir O. Mosley) yesterday made a most eloquent plea for action of some kind, but it was no use. The hon. Member for West Wolverhampton (Mr. W. J. Brown) has spoken. The mountain has thrown over the mountain. It is a very serious thing for the whole progressive movement within the Labour party, all too small, when that progressive movement turns upon itself and denies its own leader. The proposal which has been brought forward is one on which we intend to vote, and one which hon. Members below the Gangway on this side supported on the previous occasion. If they support us whole-heartedly on this, occasion, we may bring the Chancellor of the Exchequer to reason, and to bring him to reason on this subject would be a task well worthy of the utmost efforts of the House of Commons.


The Chancellor of the Exchequer has supported his rejection of this Clause by an argument so unsound that it ought not to go unchallenged. He told us that it would make no difference to the funds available for and the amount of work done in the way of reconditioning, re-equipment, modernisation and improvement of plant and machinery, if this Clause were to be passed. He said that there were unlimited funds already available for this purpose. I believe that to be totally untrue. In the first place, it is not a very appealing argument to a business man when you take away his own money, that ought to be available for the modernisation of his business, through the tax collector, to tell him, "You can borrow more money from someone else." It is conspicuously untrue in the practical world in which we live that unlimited funds are available for this purpose, and I think the contention shows what a danger a Chancellor of the Exchequer can be who pins his faith too firmly to the academic aspect of finance and is too little interested in the practical aspect.

Take the small business. Take the hotel business, which has been referred to. Does the Chancellor of the Exchequer really suppose that it makes no difference to the small business whether its own saved money is left available for re-investment in its business or whether it is taken away by the tax collector, and it is turned on to the money market to borrow as best it can? It may make all the difference in the world to that business. That argument of the right hon. Gentleman can only be advanced by a man who allows himself to be misled by concentrating himself too much on that species of high finance which is very often only the sort that comes through to the Chancellor of the Exchequer. There are countless small businesses in the country which if you deprive them of their own resources, which are available for investment in their business, are quite unable, owing to the general credit, to obtain the resources elsewhere, except at prohibitive rates. It is the opinion of practical business men that the best thing you can do for the business of the country is to leave the money which has been earned in the business to be re-invested by those business people in the business which they understand.

It is untrue from the practical point of view that there are unlimited resources and it is untrue from the point of view of general academic economics. It is not the case that in any year there is an unlimited fund of the savings of the country available for re-investment in these essential purposes. There is only a limited fund available, and it is the case that if you take the country as a whole, and if you integrate the whole business world for all the purposes for which money is required, in so far as you reduce the funds available in the first place in the businesses for re-investment, by so much do you reduce the actual amount of work done in the reconditioning of the businesses. You can only obtain support for the point of view put forward by the Chancellor of the Exchequer if you concentrate your attention, as those in the administration of general finance are always apt to do, solely upon the biggest businesses, which have the highest credit.

The other argument with which the Chancellor of the Exchequer supports his case is that much of the money that is taken away by the tax collector is put back into business in the form of assistance given by the Treasury. There, we come to the most fundamental basis on which we join issue with the party opposite, and we need only to restate it in order to show how essential it is for us on this side of the House to support this Amendment, and I should have thought that the same argument would appeal to hon. Members below the Gangway. It is a matter of grave contention whether the businesses of the country are likely to be more vitally and more efficiently conducted if the control, the direction and the future development of the businesses is left in the hands of an official of the State, or in the hands of the people who have earned the money in the business and who are themselves practical business men. I have long thought that this particular feature in our revenue system is the biggest enemy almost that we have in our competition with foreign countries. We shall never do ourselves justice in the bitter competition with which we are confronted until we have the elementary common sense to make a distinction in our revenue system between the essential purposes to which money is devoted and the less essential purposes. On these grounds, we shall register our votes in the Division Lobby.


There are one or two points in connection with the proposal that I should like to put before the Treasury and the House. It is almost inevitable, somehow, in our discussion of these matters that we always seem to speak in the terms of large corporations. With the solitary exception of the reference to hotels, one has felt that what the House is considering mostly are the big corporations, which has vast sums of money at their command. Probably the greater bulk of the trade of this country and of the production of businesses in this country is done by the small firms, firms which do not spend money in the terms of thousands of pounds—garage proprietors, small repair shops, and all kinds of businesses which would not spend thousands of pounds but might put in a new lathe, a new drilling machine, or might extend their plant a bit to bring it more up to date, whether their business happens to be that of production or distribution.

I would like the Treasury to face up to what would be the effect of the Clause. It is a mistake to regard this Clause as a subsidy to industry. It is really nothing of the sort. The conditions to which the Clause apply are those of plant and machinery, which are those portions of capital expenditure which come under the claim for depreciation. As a matter of fact the Treasury does allow practically the whole of the money that we are asking them to allow, only they do not allow it at the time of expenditure. Anyone who expended money on plant or machinery would receive, according to the rate of depreciation, something probably between 7½ or 12 per cent. From the first year they would receive for depreciation that 7½ or 10 per cent., and they would go on receiving that year after year until the whole was wiped out. Therefore, what the Treasury would be doing by this Clause would not be to make a grant of a complete subsidy to industry; they would be asking industry to accelerate their expenditure upon plant and machinery, and at the same time the Treasury would be accelerating the depreciation that they would ultimately allow.

I would ask the Treasury to consider this matter in the terms of percentage. Take a case where £100 is expended by a business on new plant. Under this Clause they would be allowed to write off that £100 in the calculation of profit. That would cost the Treasury this year £22 10s., which is 4s. 6d. multiplied by 100. If you take the depreciation which has been allowed, say, at 10 per cent., the Treasury would have to allow them in any case £2 5s., which would mean £10 at 4s. 6d. in the pound, so that on an expenditure of £100 they would have to allow on this year's Budget £20 5s. When £100 is spent through a local authority or a public utility society, we do not advance from the Treasury £20, but at least £50, perhaps £75, perhaps £85. Therefore, the amount provided by the Treasury would be infinitely less under our suggestion than the amount that is provided when various public works are carried out.

7.0 p.m.

Let me carry the proposition a little further. It is safe to say that an expenditure of £100 would employ a man for at least 13 weeks, probably more. In the case of a man who is receiving unemployment insurance pay for 13 weeks, and we assume that he has a wife and three children, he would be drawing over 30s. a week for doing nothing. A payment of 30s. a week for 13 weeks represents £19 10s. which would be saved to the Treasury on unemployment insurance against the £20 5s. allowed to the private trader for the development of his plant. Following it a little further, and assuming that you are only paying on the addition to the normal expenditure, you come to the point where nearly everybody on these benches is in a difficulty on this particular discussion, because, fortunately or unfortunately, the Clause, as put upon the Order Paper, does do more than we really intended. As drafted, the Clause will allow not only 4s. 6d. on the pound to be allowed, but, in the case of a private individual carrying on a very big business and spending £10,000, £20,000 or £30,000, it will allow him to get not only his 4s. 6d. but his Surtax as well, and bring the amount given to him up to 10s. in the pound or more of his expenditure. So far as I and many on these benches are concerned, that is not what we desire or intend. Carrying on the little sum I was putting, that expenditure of £100, if you increase your expenditure by twice the normal, would thus give employment to a very large number of people, and, at the same time, the Treasury, having made that allowance this year, would receive year by year an increased amount of revenue from Income Tax owing to the fact that they would not have to allow the successive depreciation year after year, having allowed it in the single payment.

What I would put to the House and Treasury is this. Under the conditions in which we are placed, recognising that we have got to do something to stem this great tide of unemployment, you are not to-day by virtue of your great schemes of public expenditure—not even if you carry out that policy which we put distinctly before the country and embark on a vast expenditure on roads, bridges or any other public works—going to help back into industry the tremendous number of unemployed the burden of whom we are carrying to-day. If you want to do that and if it is the desire of the House to do something effective towards that, you have got to find some means of giving definite encouragement to industry. I do not mean the great corporations; I rule them out altogether, because I do not think they need it very much. The large corporation with plenty of money has already got its plant efficient, and no one is going to spend £5 in order to save £1 under this Clause. No business man is going to spend a pound which he does not need to spend and which will not bring him a return, in order to get 4s. 6d. off the Income Tax. The big corporations will not spend money under this Clause, but its great advantage is that it will give an inducement to the hundreds of thousands of small producers, who do not think in thousands, and will make them feel, if they want a new machine, that they will not have to put down a pound or 18s. but only 15s. 6d. in the £. The Chancellor and the Treasury have not given quite the consideration they might have given to the Clause. At the same time the Clause, as it stands, without any alteration or limitation, is a very difficult case because it will give relief to Surtax as well as Income Tax. I am one of those who are not disturbed in the least by the witty, clever, pungent remarks that may fall from Members on those benches. It is their business if they can to give us and hon. Members opposite as much trouble as they can. We can, in turn, make witty remarks on the divisions of their party and on the party opposite. As far as I am concerned, the whole of those things leave me entirely unmoved. We should do what we can in this House by any measures that are practicable and possible to give some encouragement to the great mass of producers and business men in this country, who are facing a very difficult situation, to pay their way and meet their obligations. If it is possible for us in any way to assist them, it is the duty of this House to do so.


I wish to intervene because of the speech of the hon. and gallant Member for Kelvingrove (Major Elliott). I entirely agree with almost every word in his speech, except, of course, his reflections on the political views of this side of the House. There is one thing I cannot understand, and that is his indignation at the rising amount of money, namely, £20,000,000, that will be required for the stabilisation of the Unemployment Fund. Nor can I understand the enthusiasm of my Liberal colleagues on the other side of the House. Let me say at the outset that, perhaps at the point of being suspect, I have in and out of season in this House always argued for the untaxing of industry. I believe, and hold as a cardinal principle, that all taxation levied upon industry is a hindrance to the development of industry in this country. I also believe that one of the greatest contributions towards the stopping of your international trade to-day is the inflation of your export prices, which is a reflection of your heavy taxation on industry in this country. Something must be done to remove the taxation levied upon the industry of this country if you are to allow the wheels of industry to free themselves and to get into full operation.

I ask my Liberal friends opposite: Do they really believe—and I address this particularly to the right hon. Member for Darwen (Sir H. Samuel)—that the remission of £7,000,000 a year for three years is going to rehabilitate industry and obviate all that is likely to come from this menace of unemployment? Surely not. I think I know sufficient of the Liberal party and its policy of recent years to know that no Liberal would ever suggest that for a moment. If a paltry £21,000,000, which is the three years spread-over of £7,000,000, is going to rehabilitate the industry of this country, then I can understand the enthusiasm and pressure for this Clause, but no serious Member of this House could argue and prove such a proposition. It cannot be done. I rather agree with the hon. and gallant Member for Kelvingrove about this increase of unemployed which is inevitable. We shall see 2,500,000 this winter. There will be an increase of the money necessary to stabilise the Unemployment Insurance Fund, which the hon. Member says will run up to £20,000,000. That is so. He rightly says that that will wipe away all the advantages that the Government are going to get by resisting this Amendment. I entirely agree with that also. I am not so sure that, if I were Chancellor, I would not give £7,000,000 if I knew where I would get the £7,000,000 which I would lose by agreeing to the Clause. Now as to the £20,000,000 for unemployment, even annual amounts of £20,000,000 for unemployment—


We are getting a long way from the Clause.


I was only referring to it in passing. I was trying to draw a parallel.


It is a different matter entirely. It has nothing to do with the Clause.


It was tolerated in the one case, and I thought I was entitled to refer to it in passing. The £20,000,000 was also used in another direction. The House has continued to squander millions in this way. There was the expenditure on de-rating. We were told that that would help industry and give it a step forward. That scheme involved much more than £7,000,000 a year. I do not believe that the remission given in respect of rating, involving a heavy expenditure annually, is going to help this country very much for a simple reason that might have been self-evident even to those pressing for de-rating proposals at the time. The point, which should be self-evident to those who enjoy these proposals now, is that any remission given in rating or given with regard to money put back into industry will have to be met by increased taxation in some other direction. I know that when I rise, you, Mr. Speaker, always become apprehensive lest I should bring in a favouriate theme. One advantage I have is that even when I do not mention it the House always thinks of it. I have the advantage over you, Mr. Speaker, that I can still be extremely eloquent without mentioning it, and still be in order.

The difficulty that the Chancellor of the Exchequer finds himself in now is the old difficulty of all Chancellors of the Exchequer. I dare say the present Chancellor of the Exchequer, still having reminiscences of his own Radicalism at the back of his mind, would be willing to give all the remssions asked for for the industry of this country, to remove all taxation on industrial reserves and on money put into industry, but he is in the difficulty of all Chancellors that this will open the door to all sorts of evasions of Income Tax. That would not worry me because, as Income Tax is an immoral impulse, I always admire the man who evades Income Tax. The important fact is that Chancellors one after the other, whether Labour, Tory or any other kind, are always afraid to make concessions because they say that the moment you make these concessions you open the door to evasion and then, where are you? I should have admired my Liberal friends opposite if, when they were asking for this remission and supporting it with such eloquent arguments they would run the risk I have run by suggesting an alternative method of taxation that would raise the money and give the country all it desires. Taking the money to make a remission always means an extension of taxation in some other direction. For my own part, I agree with my hon. Friends opposite that unemployment will go up, even if you given £7,000,000 or £30,000,000 in remission, and will continue to rise until you do something much more radical than giving £7,000,000 per annum or a remission on capital reserves and on the money you can prove you have put into industry.


We have had an extremely interesting discussion and we are always pleased to hear the hon. Member opposite even though he does not mention the subject closest to his heart. The speech of the hon. Member on the Liberal benches, well documented and carefully weighed, left us in doubt at the end as to whether or not he was going to support the Clause. The right hon. Member for Darwen (Sir H. Samuel) is having a field day because he with great difficulty disguised from us his disappointment about the speech the Chancellor of the Exchequer did not make last week. He was so disappointed that he did not take part in the Division last week, and to-day he reconstructs what the Chancellor of the Exchequer ought to have said. It indicates the state of mind of the right hon. Member for Darwen. Last week he was in the same position as his distinguished prototype, waiting to hear what the Chancellor of the Exchequer would say, and saying, "Speak Lord, for thy servant heareth." Unfortunately, the Lord of the Treasury had nothing to say. To-day the right hon. Gentleman the Member for Darwen is not going to vote. He is making a habit of it and I hope his constituents will be satisfied that he is earning his salary, a matter which is often thrown up against us at election meetings, by not attempting voting at all.

This is a good Clause as far as it goes, and I should have thought that the Government would have been only too anxious to clutch at any straw which might have any beneficial effect on the terrible problem of unemployment. The Chancellor of the Exchequer says that there is plenty of money lying about for people to borrow in order to renew their plant and machinery, but that point was completely disposed of by the right hon. Member for Sevenoaks (Sir H. Young). I do not know what the Chancellor of the Exchequer thought he was trying to convey to the House by that statement. Neither is this a form of subsidy of industry. You have to prove that money has been spent on such things as the installation and erection of plant and machinery for reconditioning. Nothing less like a subsidy could be imagined. A subsidy is putting money into people's pockets to spend as they wish for their own pleasure. In this case it is only to be paid after definite proof that certain things have been done. With the figure of unemployed round about 2,000,000, the Chancellor of the Exchequer says that it is much better to deal with that problem by funds arising out of the Development Acts. They are very useful but very limited, and no amount of money spent on the lines of the Development Acts is going to recondition industry. It may help transport, and roads, and railways and harbours, but these Acts have nothing in the world to do with the actual reconditioning of industry and making it possible to provide goods at a cheaper rate.

Before we break up we are to be asked to provide a further sum of money from the Treasury for paying uncovenanted benefit, or doles, to a great number of people who contribute nothing. Even this Government must see that, £7,000,000 is going to do something to bring industry up to date, and if it is going to put a few thousands of men working at their own trade and industry, surely it will be some contribution on the part of the Government towards a solution of the problem. Members of the Government sit with a look of blank negation on their faces when unemployment is mentioned, and I have no doubt that the Minister of Labour will take up the same attitude when we have another debate on unemployment. This is a proposal, made in all sincerity by the Liberal party and supported by the whole Conservative party, which can be put into operation without any lavish expenditure of public money, indeed, without any expenditure of public money at all.

I suppose the Financial Secretary reads the "Times," and, if so, he will find day after day letters from correspondents in all parts of the country with regard to the Unemployment Insurance Fund and stressing the opinion that something should be done to get more people back to work. Here is an obvious opportunity. Surely, it is much better to spend, or to refrain from taking back into the Treasury, a sum of £7,000,000 than to have to go on paying £10,000,000, £20,000,000, and more, for the relief or assistance of people out of work. These are considerations which should weight with a so-called Labour Government more than with anyone else, and yet they sit there adamant. I hope the country will take note of the completely unconstructive and hopeless attitude of the Chancellor of the Exchequer and his Financial Secretary.


I intervene in this debate because, like many of my hon. Friends, I feel that the Chancellor of the Exchequer is paying no attention whatever to any constructive suggestions to help industry by means of this Budget, and I should like to express my gratitude to the Liberal party for having introduced this new Clause and for having addressed arguments so strong in favour of it. It is a Clause which has received the support of a majority of Members of the House and I should have thought that the Chancellor of the Exchequer would have paid more attention to it. He should have treated it with greater seriousness. It is the more desirable that he should pay some attention to this new Clause because during the whole course of the Budget he has done nothing whatsoever to assist industry in any way. Instead of lightening the burdens upon industry the Chancellor of the Exchequer has added to them. I admit that force of circumstances, pressure from his own back benches, has compelled him to make some concessions to the programme upon which his party won the Election, and we cannot altogether blame him if he gave way to some extent to the demands which were made upon him.

Having gone to these lengths to satisfy the back benchers of his own party one would have thought that having put these extra burdens upon industry in one direction he would have done something to have lightened them in another. The hon. Member for Burslem (Mr. MacLaren) said that the taxation of industry is very harmful and not in the best interests of the country as a whole, but that he could not possibly support this new Clause because there is no means of finding the money to pay for it. That is not so at all. It has been pointed out, and suggested to the Chancellor of the Exchequer that the £7,000,000 which this will cost can quite easily be paid for by postponing the redemption of Debt. There is no necessity in these parlous times, when industry is struggling and unemployment is mounting, to adhere rigidly to the policy of Debt Redemption, and the Chancellor of the Exchequer might well pay for this by postponing the amortisation of Debt until the country is better able to afford what to my mind is something of a luxury.

The Government have prided themselves on the fact that such is the emergency, so terrible is the condition of industry and unemployment, that they mast adopt not only a long-term policy to assist industry, but a short-term policy as well, and for that purpose they are increasing their expenditure upon works of national development, which I prefer to call relief works, and they do not hesitate to spend this money and add to the debt by so doing. If a suggestion is put forward which will provide a considerable number of workers with permanent, not temporary, employment it is idle for the Government to suggest that they cannot find the money to pay for it. This is an emergency, but hon. Members opposite do not seem to appreciate it. They do not seem to take any notice of the rising volume of unemployment. They sit there producing no constructive proposals at all except for the distribution of public funds in doles and increased benefits. The Chancellor of the Exchequer refuses to listen to our requests to assist industry by keeping out our competitors by refusing to adopt tariffs, which would prevent some of the competition from which our industries are suffering.

Having ruled that out, there is only one other way in which the Government can assist industry, and that is by relieving its burdens and lowering its costs of production to the same conditions which prevail in countries which are our competitors. The right hon. Gentleman refuses to take either of these courses. He will neither bring the goods of our competitors up to the level of prices in this country nor will he allow industries in this country to bring their prices to the level of our competitors. He must do one or the other. I hope he will treat this new Clause more seriously and not attempt to ride off by misleading the House as to the total cost of this proposal. All we ask the Chancellor of the Exchequer to do is to make an attempt to lighten the burdens upon industry, not to resist every demand in this direction and at the same time, in this Budget, to increase these burdens by the distribution of money upon unremunerative purposes or purposes which are purely temporary in character. He is not assisting industry in any way or reducing unemployment, on which this Government was elected at the last election.


The Chancellor of the Exchequer said that my right hon. Friend the Member for Epping (Mr. Churchill) had not introduced into his speech any serious arguments in support of this new Clause, and almost immediately the Chancellor of the Exchequer left the House and has not listened to the many speeches from all quarters of the House producing argument after argument largely in favour of the new Clause as it stands. The speech of the hon. and gallant Member for Kelvingrove (Major Elliot) was in refreshing contrast to the speech of the right hon. Member for Darwen (Sir H. Samuel), who condemned this new Clause with the faintest possible praise and claimed that all it did was to free from Income Tax only the surplus of money applied to the replacement of industrial machinery that is the amount over and above what is normally used for that purpose.

I shall add some arguments in favour of the Clause as it stands. Personally I regret that in present circumstances the Clause does not go further. Five years ago Sir Leslie Scott, then a Member of this House, moved a similar Clause to this on the Finance Bill, and showed clearly that every one of our principal Continental competitors and the United States gave to their industries advantages of the kind that are asked for in this Clause. Even the Chancellor of the Exchequer does not carry his fiscal views so far as to wish to handicap the industries of the country by additional taxation, charged, not upon profits, but upon money which is necessary for the maintenance and improvement of industry. I suggest that the right hon. Gentleman should look very carefully into this question. In condemning the Clause, the right hon. Gentleman indicated that he preferred the spending of money directly under the various schemes for the relief of unemployment. There are two ways in which that differs profoundly from the method of spending Treasury money—if the right hon. Gentleman calls it spending—proposed in this Clause.

This proposal is confined to money actually expended for the purchase, installation, erection and improvement of plant or machinery. That does two things. First of all it provides further jobs for the people who work the improved machinery. Before reaching that point it provides work for men in their own industries in making these machines and this plant. Therefore, the whole of this money, big or little, is spent directly in employing people in their own industries. But that is not all. What is proposed in the Clause is an exemption from Income Tax at 4s. 6d. in the £. That means that the industrialist would be able to spend the whole of his fund on new machinery and plant, and not only 15s. 6d. in the £ of it. But what are the contributions of the Chancellor of the Exchequer to these relief works in various parts of the country? They are up to 50, 60, 70 and even 100 per cent. of the expenditure. That money has to be found by the Treasury. In this Clause we are asking only for 4s. 6d. in the £, or less than 25 per cent. Although it may be true that big industries have been able to spend money in the past few years in rehabilitating their factories and the like, yet it has been an extraordinary drain upon their resources, and there are many other industrialists who have not been able to find the money for the purpose. I ask the House to consider what Sir Eric Geddes said at a meeting of the Dunlop Tyre Company, as reported in the "Times" of 10th May: Sir Eric was very critical of the methods of the Inland Revenue in assessing profits for Income Tax. The company was taxed on hypothetical profits. In the years 1924 to 1929 the Inland Revenue had levied taxes upon £3,700,000 over and above the dividends paid in respect of those years. The whole of the £3,700,000 had in fact been put back into the business for this development. If there were many out-of-date plants in this country, it was largely due to the fact that the State had taken from industry the funds that would otherwise have been available for the replacement of plant. That is a perfectly definite opinion given by an eminent industrialist who was a very well-known and respected Member of this House and occupied high Government office during and just after the War. Let me give the Chancellor of the Exchequer two other solid arguments which should appeal to any Chancellor of the Exchequer. First of all, if the principle is admitted and relief from Income Tax given in respect of sums actually expended on the replacement of plant, it goes a very long way to meet what has been constantly urged in this House to my knowledge for over 20 years, and that is in relation to wasting assets. If all replacements of assets of that type, machinery and plant and the other things mentioned in the Clause, were freed from Income Tax, that would clearly go a long way to meet the claims of those who have constantly advocated similar remission in respect of all wasting assets.

There is another question which has been raised again and again in this House. A large amount of the industry in this country's carried on by co-operative enterprises, which pay no Income Tax upon the huge sums placed to their reserves. Instead of urging successive Chancellors of the Exchequer to meet that discrepancy between co-operative enterprise and other enterprises, we support this Clause because it would go a long way to remove the grievance. In the year 1928, the latest for which I have figures, over £3,000,000 was placed to the reserve of co-operative enterprises. It is obviously very unfair that they should escape in that way and that there should be no remission in respect of sums placed to reserve for the installation and improvement of plant and machinery in the other industries of the country. To encourage the re-equipment of industry is clearly the most important thing that we can do at, the moment. It would find employment twice over, both to the man who works the machine when it is installed and to the man who makes the machine.

Eight days ago, when the Bill was in Committee, the Chancellor of the Exchequer said that our proposal would help the man who had made a profit and not the man who had not made a profit. That is a mistaken idea altogether. It would help the man who had not made a profit by improving the other industries which are enabled to re-equip themselves, and would undoubtedly create an increased demand generally throughout the country. The man who had not mule a profit might be the very man who was in the machinery trade and was able to make the machines required. It is impossible to have watertight sections of people and to say that you are not going to do a thing because it will help only one section. The complaint of the Chancellor of the Exchequer last week was twofold. He complained that the Clause as drafted was so wide that it would help even a man like an ice cream

vendor. Why not? The ice cream vendor is at one end of the gamut of industry, but if he has a dilapidated ice cream barrow, with no brass fittings or nicely plated name on it, and is doing bad business because he has unattractive plant, why should you not encourage even the replacement of that plant more rapidly than otherwise would be the case by not charging him Income Tax on it?

The right hon. Gentleman's other complaint was that the Clause would help only prosperous industries. The proposal is wide, I admit, and I am glad that it is wide. It is intended, broadly, over three years to relieve from Income Tax all sums actually expended in any industry in taking the most practical steps to give further employment to people. I cannot conceive how it could be possible to spend money from the Treasury more advantageously. The Chancellor of the Exchequer positively prefers to pay out enormous sums direct from the Treasury for the making of new roads and the like all over the country. From the Chancellor's own point of view, all the arguments that he has used in defence of his increase of Income Tax fall to the ground if it is a tax charged directly upon the needs of industry as well as upon the incomes of rich people. The right hon. Gentleman says that an increase in Income Tax from time to time is good for people rather than otherwise. He told us in another speech that the sort of industries he intended to hand over to national control were going concerns. This Clause asks that some provision shall be made to get industries going in the full sense of the word and to have them improved. From the point of view of fattening a goose before you kill it, I should have thought that the Chancellor of the Exchequer would have been delighted to spend money on the improvement of industries which some day or other he and his party hope to take under their full control.

Question put, "That the Clause be read a Second time."

The House divided: Ayes, 142; Noes, 246.

Division No. 440.] AYES. [7.44 p.m.
Acland-Troyte, Lieut.-Colonel Allen, Sir J. Sandeman (Liverp'l., W.) Atkinson, C.
Albery, Irving James Allen, Lt.-Col. Sir William (Armagh) Balfour, George (Hampstead)
Balfour, Captain H. H. (I. of Thanet) Graham, Fergus (Cumberland, N.) Remer, John R.
Beamish, Rear-Admiral T. P. H. Grattan-Doyis, Sir N. Reynolds, Col. Sir James
Bevan, S. J. (Holborn) Grenfell, Edward C. (City of London) Rodd, Rt. Hon. Sir James Rennell
Birchall, Major Sir John Dearman Gretton, Colonel Rt. Hon. John Ross, Major Ronald D.
Bird, Ernest Roy Guinness, Rt. Hon. Walter E. Ruggles-Brise, Lieut.-Colonel E. A.
Bourne, Captain Robert Croft Hacking, Rt. Hon. Douglas H. Russell, Alexander West (Tynemouth)
Bowyer, Captain Sir George E. W. Hall, Lieut.-Col. Sir F. (Dulwich) Salmon, Major I.
Boyce, H. L. Hartington, Marquess of Samuel, A. M. (Surrey, Farnham)
Bracken, B. Harvey, Major S. E. (Devon, Totnes) Samuel, Samuel (W'dsworth, Putney)
Brass, Captain Sir William Henderson, Capt. R. R. (Oxf'd, Henley) Sandeman, Sir N. Stewart
Briscoe, Richard George Herbert, Sir Dennis (Hertford) Savery, S. S.
Brown, Col. D. C. (N'th'l'd., Hexham) Hills, Major Rt. Hon. John Waller Shepperson, Sir Ernest Whittome
Brown, Ernest (Leith) Howard-Bury, Colonel C. K. Sinclair, Col. T. (Queen's U., Belfst)
Buckingham, Sir H. Hurd, Percy A. Smith, R. W. (Aberd'n & Kinc'dine, C.)
Burgin, Dr. E. L. Hurst, Sir Gerald B. Smith-Carington, Neville W.
Butler, R. A. Iveagh, Countess of Smithers, Waldron
Cadogan, Major Hon. Edward Kindersley, Major G. M. Somerville, A. A. (Windsor)
Cayzer, Sir C. (Chester, City) King, Commodore Rt. Hon. Henry D. Somerville, D. G. (Willesden, East)
Cayzer, Maj. Sir Herbt. R. (Prtsmth, S.) Knox, Sir Alfred Southby, Commander A. R. J.
Chapman, Sir S. Lamb, Sir J. Q. Spender-Clay, Colonel H.
Christie, J. A. Lane Fox, Col. Rt. Hon. George R. Stanley, Lord (Fyide)
Cobb, Sir Cyril Law, Sir Alfred (Derby, High Peak) Stanley, Maj. Hon. O. (W'morland)
Colfox, Major William Philip Leighton, Major B. E. P. Steel-Maitland, Rt. Hon. Sir Arthur
Colman, N. C. D. Lewis, Oswald (Colchester) Stuart, Hon. J. (Moray and Nairn)
Courtauld, Major J. S. Little, Dr. E. Graham Thomas, Major L. B. (King's Norton)
Cowan, D. M. Llewellin, Major J. J. Thomson, Sir F.
Cranborne, Viscount Locker-Lampson, Rt. Hon. Godfrey Titchfield, Major the Marquess of
Crookshank, Capt, H. C. Long, Major Eric Todd, Capt. A. J.
Culverwell, C. T. (Bristol, West) McConnell, Sir Joseph Train, J.
Dalkeith, Earl of Macquisten, F. A. Tryon, Rt. Hon. George Clement.
Dalrymple-White, Lt.-Col. Sir Godfrey MacRobert, Rt. Hon. Alexander M. Wallace, Capt. D. E. (Hornsey)
Davies, Dr. Veruon Maitland, A. (Kent, Faversham) Ward, Lieut.-Col. Sir A. Lambert
Davies, Maj. Geo. F. (Somerset, Yeovil) Makins, Brigadier-General E. Wardlaw-Milne, J. S.
Dawson, Sir Philip Marjoribanks, E. C. Waterhouse, Captain Charles
Duckworth, G. A. V. Meller, R. J. Wayland, Sir William A.
Dugdale, Capt. T. L. Merriman, Sir F. Boyd Wells, Sydney R.
Eden, Captain Anthony Mitchell, Sir W. Lane (Streatham) Williams, Charles (Devon, Torquay)
Edmondson, Major A. J. Monsell, Eyres, Com. Rt. Hon. Sir B. Wilson, G. H. A. (Cambridge U.)
Elliot, Major Walter E. Moore, Sir Newton J. (Richmond) Windsor-Clive, Lieut.-Colonel George
Erskine, Lord (Somerset, Weston-s-M.) Morrison, W. S. (Glos., Cirencester) Wolmer, Rt. Hon. Viscount
Everard, W. Lindsay Nicholson, O. (Westminster) Womersley, W. J.
Falle, Sir Bertram G. Peake, Captain Osbert Young, Rt. Hon. Sir Hilton
Ferguson, Sir John Peto, Sir Basil E. (Devon, Barnstaple)
Ford, Sir P. J. Power, Sir John Cecil TELLERS FOR THE AYES.—
Ganzoni, Sir John Pownall, Sir Assheton Captain Margesson and Sir
Gibson, C. G. (Pudsey & Otley) Ramsbotham, H. George Penny.
Grace, John Reid, David D. (County Down)
Adamson, Rt. Hon. W. (Fife, West) Cameron, A. G. Gould, F.
Adamson, W. M. (Staff., Cannock) Cape, Thomas Graham, D. M. (Lanark, Hamilton)
Addison, Rt. Hon. Dr. Christopher Carter, W. (St. Pancras, S. W.) Graham, Rt. Hon. Wm. (Edin., Cent.)
Altchison, Rt. Hon. Craigle M. Charleton, H. C. Grenfell, D. R. (Glamorgan)
Alpass, J. H. Chater, Daniel Griffiths, T. (Monmouth, Pontypool)
Ammon, Charles George Church, Major A. G. Groves, Thomas E.
Arnott, John Clarke, J. S. Grundy, Thomas W.
Aske, Sir Robert Cluse, W. S. Hall, F. (York, W. R., Normanton)
Attlee, Clement Richard Cocks, Frederick Seymour Hall, G. H. (Merthyr Tydvil)
Ayles, Walter Compton, Joseph Hall, Capt. W. G. (Portsmouth, C.)
Baker, John (Wolverhampton, Bilston) Cove, William G. Hamilton, Mary Agnes (Blackburn)
Baldwin, Oliver (Dudley) Daggar, George Hardie, George D.
Barnes, Alfred John Dallas, George Harris, Percy A.
Batey, Joseph Dalton, Hugh Hartshorn, Rt. Hon. Vernon
Bellamy, Albert Davies, Rhys John (Westhoughton) Hastings, Dr. Somerville
Benn, Rt. Hon. Wedgwood Day, Harry Haycock, A. W.
Bennett, Capt. Sir E. N. (Cardiff C.) Denman, Hon. R. D. Hayday, Arthur
Bennett, William (Battersea, South) Dickson, T. Hayes, John Henry
Bentham, Dr. Ethel Dudgeon, Major C. R. Henderson, Arthur, Junr. (Cardiff, S.)
Bondfield, Rt. Hon. Margaret Dukes, C. Henderson, Thomas (Glasgow)
Bowen, J. W. Duncan, Charles Henderson, W. W. (Middx., Enfield)
Bower man, Rt. Hon. Charles W. Ede, James Chuter Herriotts, J.
Broad, Francis Alfred Edmunds, J. E. Hirst, G. H. (York W. R. Wentworth)
Bromfield, William Edwards, C. (Monmouth, Bedwellty) Hirst, W. (Bradford, South)
Bromley, J. Edwards, E. (Morpeth) Hoffman, P. C.
Brooke, W. Egan, W. H. Hopkin, Daniel
Brothers, M. Forqan, Dr. Robert Horrabin, J. F.
Brown, C. W. E. (Notts, Mansfield) Freeman, Peter Hudson, James H. (Huddersfield)
Brown, Rt. Hon. J. (South Ayrshire) Gardner, B. W. (West Ham, Upton) Isaacs, George
Brown, W. J. (Wolverhampton, West) Gardner, J. P. (Hammersmith, N.) John, William (Rhondda, West)
Buchanan, G. Gibbins, Joseph Johnston, Thomas
Burgess, F. G. Gibson, H. M. (Lancs, Mossley) Jones, F. Llewellyn- (Flint)
Buxton, C. R. (Yorks. W. R. Elland) Gill, T. H. Jones, Morgan (Caerphilly)
Caine, Derwent Hall- Gossling, A. G. Jones, T. I. Mardy (Pontypridd)
Jowett, Rt. Hon. F. W. Morley, Ralph Smith, Ben (Bermondsey, Rotherhithe)
Jowitt, Sir W. A. (Preston) Morris, Rhys Hopkins Smith, Frank (Nuneaton)
Kelly, W. T. Morrison, Robert C. (Tottenham, N.) Smith, H. B. Lees- (Keighley)
Kennedy, Thomas Mort, D. L. Smith, Rennie (Penistone)
Kenworthy, Lt.-Com. Hon. Joseph M. Moses, J. J. H. Smith, Tom (Pontefract)
Knight, Holford Murnin, Hugh Snell, Harry
Lang, Gordon Naylor, T. E. Snowden, Rt. Hon. Philip
Lansbury, Rt. Hon. George Newman, Sir R. H. S. D. L. (Exeter) Snowden, Thomas (Accrington)
Lathan, G. Noel Baker, P. J. Stamford, Thomas W.
Law, Albert (Bolton) Oldfield, J. R. Stephen, Campbell
Law, A. (Rosendale) Oliver, George Harold (Ilkeston) Stewart, J. (St. Rollox)
Lawrence, Susan Palin, John Henry Strauss, G. R.
Lawrie, Hugh Hartley (Stalybridge) Paling, Wilfrid Sullivan, J.
Lawther, W. (Barnard Castle) Palmer, E. T. Sutton, J. E.
Leach, W. Perry, S. F. Taylor, R. A. (Lincoln)
Lee, Frank (Derby, N. E.) Pethick-Lawrence, F. W. Taylor, W. B. (Norfolk, S. W.)
Lee, Jennie (Lanark, Northern) Phillips, Dr. Marion Thomas, Rt. Hon. J. H. (Derby)
Lindley, Fred W. Picton-Turbervill, Edith Thorne, W. (West Ham, Plaistow)
Lloyd, C. Ellis Potts, John S. Tinker, John Joseph
Logan, David Gilbert Price, M. P. Toole, Joseph
Longbottom, A. W. Quibell, D. J. K. Tout, W. J.
Longden, F. Rathbone, Eleanor Townend, A. E.
Lovat-Fraser, J. A. Raynes, W. R. Trevelyan, Rt. Hon. Sir Charles
Lowth, Thomas Richards, R. Viant, S. P.
Lunn, William Richardson, R. (Houghton-le-Spring) Walkden, A. G.
Macdonald, Gordon (Ince) Riley, Ben (Dewsbury) Walker, J.
MacDonald, Malcolm (Bassetlaw) Riley, F. F. (Stockton-on-Tees) Wallace, H. W.
McElwee, A. Ritson, J. Wallhead, Richard C.
McEntee, V. L. Roberts, Rt. Hon. F. O. (W. Bromwich) Watkins, F. C.
MacLaren, Andrew Romerll, H. G. Watson, W. M. (Dunfermline)
Maclean, Sir Donald (Cornwall, N.) Rosbotham, D. S. T. Wellock, Wilfred
Maclean, Neil (Glasgow, Govan) Rowson, Guy Welsh, James (Paisley)
McShane, John James Salter, Dr. Alfred West, F. R.
Mander, Geoffrey le M. Samuel, H. Walter (Swansea, West) Westwood, Joseph
Mansfield, W. Sanders, W. S. Whiteley, Wilfrid (Birm., Ladywood)
March, S. Sawyer, G. F. Williams, David (Swansea, East)
Marcus, M. Scrymgeour, E. Williams, Dr. J. H. (Lianelly)
Markham, S. F. Scurr, John Williams, T. (York, Don Valley)
Marley, J. Sexton, James Wilson, C. H. (Sheffield, Attercliffe)
Marshall, Fred Shepherd, Arthur Lewis Wilson, J. (Oldham)
Mathers, George Sherwood, G. H. Wilson, R. J. (Jarrow)
Matters, L. W. Shield, George William Winterton, G. E. (Leicester, Loughb'gh)
Melville, Sir James Shiels, Dr. Drummond Wise, E. F.
Messer, Fred Shillaker, J. F. Wood, Major McKenzie (Banff)
Middleton, G. Shinwell, E. Wright, W. (Rutherglen)
Mills, J. E. Short, Alfred (Wednesbury) Young, R. S. (Islington, North)
Milner, Major J. Simmons, C. J.
Montague, Frederick Sinkinson, George TELLERS FOR THE NOES.—
Morgan, Dr. H. B. Sitch, Charles H. Mr. Allen Parkinson and Mr.
William Whiteley.