§ The changes of taxation which I am going to propose are not many in number or large in character, but such as they are I think they are supported by weighty considerations which merit the attention of the Committee, in addition 1432 to providing me with the small amount of extra revenue that I require.
§ I have received many pathetic appeals to try to alleviate the hardship which was inflicted upon the beer-drinker last September. Those appeals have been based not only upon the suffering caused to those who found their favourite beverage too dear, but also upon the disastrous results which, it is said, are likely to accrue to other industries concerned and the consequent failure of revenue in this direction. I must say that I have regarded these considerations with the sort of feelings with which an angler might regard a river that is being over-fished. In my opinion, beer is over-taxed to-day. But then what industry, what individual, is not overtaxed? In the circumstances in which I find myself, the paramount consideration must be present revenue. I am advised that if that 31s. per standard barrel were remitted, it would cost me something like £10,000,000 a year—and the Committee can see that I have not got it. Very regretfully, I have come to the conclusion that I can do nothing at present for beer.
§ There is another subject to which I have given a good deal of consideration in the last few weeks, and that is the position of the co-operative societies. Under the existing law the co-operative societies enjoy a privileged position, in that they pay Income Tax only under Schedules A and B, and not under Schedules C and D, and it has been calculated that under A and B they pay about £500,000 a year less than if there were no exemption and the profits were charged to Income Tax as in the case of an ordinary trading business. The ordinary trading company pays Income Tax at the full standard rate upon its undistributed income. The co-operative societies, in their privileged position, pay much less, and that has given rise to vigorous and growing protests on the part of the general trading community, who say that a gross injustice is being done to them in thus favouring their trade rivals.
§ Their grievance, I think, is accentuated by the fact that the principle of mutuality, upon which the privilege is based, is not being strictly observed. I am informed that some societies grant the whole, and others a part, of the privileges of members to non-members also, and no doubt that is done for the purpose of inducing the non-member to 1433 come into the fold. A part, though not the greater part, of those who came to me and advocated the taxing of cooperative societies went a good deal further. They contended that the so-called "divvy," or discount on purchases, was really in the nature of a profit, and that it ought to be taxed in the case of co-operative societies just as ordinary profits are chargeable to Income Tax in the case of trading companies.
§ On the other hand, I need perhaps hardly say that all these contentions are disputed, and disputed with some heat, by the co-operative societies. The Government approached this subject without prejudice either for or against the co-operators, but they do think it is highly undesirable that our system of taxation should give rise to a burning sense of injustice, whether ill or well founded, on the part of any section of the community, and therefore they would very much like to see this dispute cleared up once and for all. In 1919 the Royal Commission on Income Tax considered this matter, but, as perhaps you would have expected from the composition of that body, they found themselves unable to reach unanimous conclusions, and there was a majority report in favour of the taxation of the reserves of the co-operative societies and a minority report against it. Since then conditions have changed in many respects. The Government think that there ought to be a new review of the circumstances by a differently constituted body. They have, therefore, decided to set up a small, impartial committee to investigate the matter—
—and they hope that the result will be a settlement of this long drawn-out controversy, which can be embodied, if necessary, in legislation in the next Budget.
Last year my predecessor took a first step towards changing the basis of taxation on motor cycles from unladened weight to cylinder capacity of the engine. The trade organisations have pressed the adoption of the latter basis, on the ground that it would give the designer a freer hand. After consulting the Minister of Transport, I propose therefore to complete the change 'by fixing the rates of 1434 duty at 15s., 30s. and £3, according to whether the engine is of a capacity not exceeding 150 cubic centimetres, exceeding 150 and not exceeding 250 cubic centimetres, and exceeding 250 cubic centimetres, respectively. The effect of this scale, which will come into force as from the 1st January, 1933, will be to reduce the duty payable on some cycles, but to increase it on a comparatively small number of cycles now in use which conform to the present limit of 224 lbs. in weight, though their engine capacity exceeds 250 cubic centimetres. To these existing vehicles I think it would be unfair to apply the increased rate of duty. I propose, therefore, that any cycle registered for the first time before the 1st January next on which duty has been paid at the rate applicable to a cycle under 224 lbs. unladened weight shall in future continue to be liable to the lower rate of duty applicable to cycles with an engine capacity between 150 and 250 cubic centimetres. The loss of revenue under this change is negligible.
I come to another matter which has been causing great anxiety to the Government, namely, the position of the sugar industry, both at home and in the Colonies. We could not possibly contemplate with equanimity the collapse of either the beet-sugar industry at home or the cane sugar industry in our Colonial territories. On the other hand, the Committee will see that in the financial position which I have revealed to them it is absolutely necessary that any assistance which is offered to the sugar industry should be limited only to what is entirely and absolutely necessary. Taking the home industry first, the present subsidy for beet sugar is 7s. 3d. a cwt., including the molasses subsidy, and that will last for another two years, till 1934. But last year the then Labour Government, recognising that the price of sugar had fallen very substantially, undertook to give a temporary special measure of assistance to the industry in the shape of an advance of ls. 3d. a cwt., to be given for one year only to those factories which were prepared to pay a certain minimum price for beets to the growers. If you add to those two forms of assistance, making 8s. 6d. a cwt. in all, the difference between the Excise Duty and the Customs Duty on sugar, namely, 3s. 6d., you get a total maximum assistance given to 1435 the home sugar industry last year of 12s. a cwt. As the special assistance expires this year, if nothing is done that comes down to 10s. 9d.
The Government, however, have decided that they will give again in 1932 the same assistance as was given last year, namely, 12s.; and to replace the ls. 3d. special advance which was given by the Labour Government, I propose to lower the Excise Duty on sugar by that amount. As to whether this concession should be continued in a future year, or as to what is to happen when the present Subsidy Act expires in 1934, I am not at present in a position to express an opinion, but with a, view to receiving guidance on this and other matters, the Government have further decided to appoint a Committee to inquire into the conditions of the United Kingdom sugar industry as a whole, including production, refining, and distribution, and to ask this body to report to them before the present Subsidy Act expires.
I have also, in consultation with my right hon. Friend the Secretary of State for the Colonies, considered the question of assistance to the Colonial sugar industry. This Committee is aware that sugar has declined very seriously in price in the last three years. At the end of 1929, when the West Indian Commission reported, the average price of West Indian sugar was £12 per ton c.i.f. London. The Commission recommended a guaranteed price of £15 per ton. A little later Sir Francis Watts recommended a similar or equivalent price in the case of Mauritius sugar. Neither of those recommendations was accepted by the Government of the day. Since then there has been a further precipitate fall in the price, which has now come down to £8 2s. 6d. for preferential sugar c.i.f. London. I am told that to meet this fall the planters have reduced their costs to an extent which only a few years ago would have been thought impossible; but I think there is no doubt that they are in a desperate position, and that many of them are only just carrying on in the expectation that some relief will be obtained from the Mother Country.
I have come to the conclusion that that request for relief is justified. Accordingly I am proposing that during the next 1436 five years there shall be an increase of is, per cwt. in the amount of the preference on all Colonial sugar imported into the United Kingdom, the duties on foreign and Dominion sugars remaining at their present rates. In addition I propose to grant during the same period a special supplementary preference equal to a further 1s. on a limited quantity of Colonial sugar to be allocated by the Colonial Office among the several producing Colonies in proportion to their total sugar exports. The limited quantity entitled to the second shilling is fixed at 275,000 tons for 1932. Both these preferences will be liable to adjustment if during the five years the sterling wholesale price of foreign full duty sugar rises beyond 7s. 6d. per cwt. The cost of these concessions, which date from to-morrow, I estimate at £1,100,000 in the present year.
I have one small change to propose in the Silk Duties. This relates to the provision under which articles of apparel imported by a person for his own use and not for sale may, at the option of the importer, pay a specific duty on the weight instead of an ad valorem duty on the value. This concession was made in 1926, partly because in the case of a private person the retail and not the wholesale price of the imported article generally forms a basis of assessment for ad valorem duty, and partly because of the difficulty of the Customs determining values in the case of these private importations. I am not going to discuss now whether the use made of the concession has been as strictly confined to private purposes as it was at the time intended. Sufficient to say that under the Abnormal Importations Act the apparel for private use is being treated in exactly the same way as apparel for sale, and it is anomalous to follow one method under the Silk Duties and another under the new tax. In those circumstances I propose to repeal the concession as from to-morrow, so that all importations for apparel, whether paying Silk Duties or the new tariff duties, will be treated alike, that is to say, they will pay duty on the ad valorem basis. It is impossible to say what revenue is at stake, but I am taking credit for a small extra £25,000 from this source.
These changes leave me with a deficit of £2,800,000, and in seeking for the 1437 wherewithal to fill this gap I would recall to the Committee the explanation which I gave during the Debates on the Import Duties Act, as to the presence, in the free list of that Act, of tea. I said then that if the taxation of tea were to be considered it could be considered more conveniently in the Budget, where it has held a place for hundreds of years—from the epoch of Queen Elizabeth down to that of my right hon. Friend the Member for Epping (Mr. Churchill). The duty on tea has been sanctioned by a long line of Chancellors of the Exchequer belonging to all parties of the State. In 1929, when the duty was removed, it was 4d. per lb. on foreign tea, with a preference of two-thirds of a penny for tea from the Empire. The duty at that time was bringing in to the Exchequer nearly £6,000,000.
I propose to revive the duty upon foreign tea at the old rate, but the old preference of two-thirds of a penny per lb. seems to me to be totally inadequate to the present circumstances, and I propose to increase that to 50 per cent. making the duty on Empire tea 2d. a lb. This new preference will be the same as the preference originally was in the first years after the introduction of the system of preference, and it is notable that, whilst the preference was subsequently reduced in 1922 to 1⅓ pence, and then again in 1924 to two-thirds of a penny, the proportion of Empire tea to the total consumption of the country fell, first from 90 per cent. to 84 per cent., and since the preference was abolished with the removal of the duty it has gone down to 81 per cent. I am hoping that with a 50 per cent. preference we shall see the proportion of Empire tea regain its former figure in the process of time, and that meanwhile some help may be afforded to the hard-pressed tea industries of India and Ceylon.
But I must mention that there are at present large stocks of tea in the country, perhaps as much as six months' supply. If I am not to lose half a year's revenue, which I certainly cannot afford, I must bring those stocks into my net. I find myself, therefore, compelled to impose a Duty upon them, and that Duty, of course, will be an Excise Duty. But in order to avoid the complication of trying to dissect into their Empire and foreign constituents the stocks of tea in the 1438 country, I propose to make the levy at the rate of 2d. per lb. As I do not want to be called upon to make an inquisition into the affairs of every little grocer in the country, I propose also to exempt from this Excise Duty all stocks in individual ownership not exceeding 1,000 lbs. in weight. I expect to get from the Tea Duty this year £3,600,000.