§ I have very carefully considered whether anything can be done to alleviate the burden of this increase upon industry. I regard the burden of the standard rate on industry as being on that income which is not distributed, but which is reserved for development purposes. Of course on what is distributed the burden falls on the shareholders and not on the companies. The problem of giving some relief on sums placed to reserve, as the Committee know quite well, has often been discussed in the House of Commons, and I have on many occasions expressed sympathy, but up to now we have always found the practical difficulties to be insuperable. I do not despair of eventually finding some satisfactory solution of this problem, and it will be kept under consideration. Meanwhile, I propose to compensate industry otherwise for the additional burden placed upon it in consequence of the increase of 6d. in the standard rate of Income Tax. A relief of roughly the same amount will be given by means of a special increase of the existing allowance for depreciation of plant and machinery.
§ Where plant and machinery are used for earning profits, an allowance of a certain percentage of the value is made annually in respect of wear and tear, the percentage varying according to the expected life of the plant and machinery. This allowance will be increased by 10 per cent., and the total exclusion from taxation of the corresponding amount of profit will roughly make good to industry the additional 6d. on the taxed profits placed to development reserve. This re- 305 lief has the merit that it is related to the actual use of plant and machinery, and accordingly the bulk of it will go to the basic industries. It will apply to individuals and firms engaged in trade, as well as to companies. It will be given against the Income Tax assessments for next year, for which the profits of the current year are the basis. I think I ought to say this, that under the Rules of Procedure of the House I am prevented from including the necessary Clause in the present Finance Bill, but it will be dealt with in the next Finance Bill, and, of course, that will not delay the relief.
§ I may add also that the practice in regard to the allowance for obsolescence of plant and machinery has been for some time under consideration. Complants have been made that too narrow a, view has been taken of what constitutes replacement for the purposes of this allowance. In future, it is proposed to take a somewhat more liberal view than has been taken in the past, and in this way it is hoped to encourage the scrapping of old plant and its replacement by new.