§ 3.39 p.m.
§ Mr. T. WILLIAMSI beg to move, in page 18, line 30, after the word "surplus," to insert the words:
(other than any profit or surplus specifically assigned to a dividend or discount equalisation fund).The object of the Amendment will be perfectly clear to the Treasury and to all hon. Members of the House. There has been a good deal of controversy as to whether the Prime Minister made a pledge relating to dividends or to reserves. This Amendment will enable the Treasury to save the Prime Minister from himself, for unless it is accepted dividends, as distinct from reserves, will be taxed, and no amount of shuffling or wriggling will allow the Prime Minister to escape from the charge that his definite specific election pledge has been broken and the confidence of the electors destroyed.The object of the Amendment, apart from the political honesty or dishonesty implied, is clear. There are large and small co-operative societies. In small industrial areas, where you have miners working three or four days one week and then two days the next week, the prosperity of the co-operative society is more or less determined by circumstances beyond their control. Then we have the manipulation of currencies and the flotsam and jetsam of the price list, and no body of co-operators can determine what the situation is going to be at the end of a dividend period. Therefore, it is the habit in many areas for the directors, if they have enjoyed a good half year, not to pay the maximum dividend available for that period but to set aside a sum as an emergency or equalisation fund to insure, should the following six months be less successful than the last, that with the aid of this additional su mthey will be able to maintain the normal dividend determined by the directors. Therefore any such sum set apart for that special purpose is something apart from the normal 656 reserve. It would in no way be dodging payment so far as the Department is concerned, but it would enable co-operative societies to cater for the needs of their industrial members as they have in the past without any interference from the Treasury. It may involve little or nothing, so far as the Treasury is concerned.
Those who reside in the City of London area or in large residential areas are unable to appreciate the value of the cooperative dividend to the average working class home. It has been my good or ill fortune to have had to reside for the whole of my life in an industrial area where, sometimes due to mischievousness on the part of employers or employés, the working people become involved in a trade dispute, a strike to-day, a lock-out tomorrow. Mothers of children in these areas have come to expect, almost to depend on, the small surplus in the cooperative society during these periods. No one can estimate the value of the co-operative dividend to a working class home. It enables thousands of families to avoid having recourse to the Poor Law. Many working-class mothers, who have always to carry on on a small miserable wage, look forward to the dividend of the co-operative society, as the ex-service man does to his pension, or the timeserving soldier to (his £3 per quarter, for the purpose of providing boots and clothing for the children; the social value of it cannot be over-estimated. The Amendment merely invites the Treasury to leave things as they are, so far as a dividend equalisation fund is concerned.
I may be asked by the Financial Secretary whether this sum is to apply for a period of five years or 10 years, or what number of years? I may toe asked how will the Revenue Department know that the sum allocated in 1933 is going to be used before 1953? That argument cannot be advanced with any success because the Amendment specifies that the surplus must be assigned to the equalisation fund and used as and when prosperity or depression falls upon the individual cooperative society. A few days ago the hon. Member for Aberdare (Mr. G. Hall) mentioned a case in the Aberdare Division where one co-operative society came to the rescue of another. They are now repaying the money. In such a case as that the proposed tax will constitute a tremendous, almost a too formidable liability to the co-operative society which 657 took over the depressed society. We do not want that sort of thing to apply in the case of smaller co-operative organisations, where they are trying to arrange their business in such a way that it is not a shilling dividend this year and a half-crown dividend next year, but something subtantial, something regular, something upon which the wives of the members can depend. This money, once it is received from the co-operative society, is immediately expended in consumable goods, the same day. That is the sort of fund which the Chancellor instead of robbing should help to stabilise. If there is one thing from which this country is suffering it is not a lack of foreign speculators in capital goods, but a lack of spending power for immediately consumable goods.
The broad general discussion has already taken place and we know and appreciate the view of the Financial Secretary with regard to the co-operative movement as a whole. He told us that there must be some limit to the idea of mutuality, and he said that it was the function of the House of Commons to limit it. He would limit the co-operative movement within small confines. He talked about 10 men buying a bag of potatoes and then making a profit of one penny, and he said that that was mutuality, but to extend it beyond that was no longer mutuality. We know the real feeling of the Financial Secretary and the Chancellor of the Exchequer on the general question of co-operative taxation and mutuality, and we know that they have responded nobly to vested interests throughout. The Amendment does not ask them to change the decision they have taken, but it appeals to them, even if they rob co-operative members, not to unduly embarrass them in the future. I hope that the Amendment, so modest and so useful to those to whom it applies, which enables the Prime Minister to escape from the taxation of dividends and gives him some chance of going back to Seaham Harbour and telling his constituents that he has not failed to carry out all the statements he has made to them, will be accepted.
§ 3.50 p.m.
§ Mr. TINKERI wish to support the Amendment, and I would point out to the House the principle involved in this discussion. The question is shall any part of the surplus of these societies be taxed? 658 The Raeburn Committee said that dividends should be treated as trade accounts and should not be taxed, and hon. Members on all sides who say that dividends ought not to be taxed must agree with this Amendment. The dividend accrues from the money which is made, after paying overhead charges, on the whole of the trading account of the society. Whatever is over goes in the form of dividend, but that dividend is not uniform. It may amount to 9d. in the £ in one quarter and to 2s. 3d. in the £ in the next quarter. The managements of the societies try to equalise it by striking an average over a period. For instance, I belong to a co-operative society with over 20,000 members. Sometimes the amount available would run to 1s. 6d. in the £; at other times it would run to more than that, but for a number of years that society has paid a uniform rate of 2s. 2d. in the £, which gives greater satisfaction to the body of members than the payment of say 1s. 6d. in one quarter and 2s. 6d. in another quarter.
It is all profit or surplus and if we decided at a general meeting to take say, the whole 2s. 5d. in a quarter we should very easily overcome the difficulty out of which the Chancellor of the Exchequer expects to make some taxation. The societies will probably attempt to do that if our Amendment is not carried. You are not going to stop the co-operative societies, by passing some Resolution in this House, from getting the full benefit of their mutual trading but you are creating a position that will make it very difficult for us in those societies by compelling the societies to pay a greater amount one time than they pay another. In all fairness to people who have joined together for the purpose of getting this benefit the House ought not attempt to defeat that purpose. As it is, Parliament is attempting to give private traders an advantage to which they are not entitled. We have been driven to co-operative trading because of what private traders have done in the past and the co-operative movement has now a great hold in the country as is shown by the fact that there are nearly 7,000,000 co-operators. It is no use attempting to stop the work that they are doing.
I had hoped that the Prime Minister would have spared the time to come here to-day. I know that he is busy but his 659 own good name is involved in this matter. The Prime Minister made a definite pledge that dividends would not be taxed. He has tried to get out of it and he defended his action when he spoke here not long ago, but he ought to be present to-day to meet our arguments which prove conclusively that the tax will go directly on to the dividends unless this Amendment is passed. The Lord President of the Council who is acting in place of the Prime Minister and doing that work ably, will, I hope, try to clear up the position and try to defend the Prime Minister. I know that the Financial Secretary has no power in this matter. He has come here with everything cut and dried and every point and argument has been put before him and as far as he is concerned our representations on this matter might as well be the wind blowing in the street. But the Lord President of the Council has great power and as one who attends regularly and pays close attention to our Debates I am sure he will weigh up the pros and cons on this question. I hope he will realise the force of the arguments which we are putting forward and will tell the Financial Secretary that this is a case in which he ought to give way.
§ 3.55 p.m.
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Hore-Belisha)I have put the hon. Member's request to the Lord President of the Council who authorises me to say that the arguments used have not convinced him.
§ Mr. HORE-BELISHAThe hon. Member for Don Valley (Mr. T. Williams) and the hon. Member for Leigh (Mr. Tinker) seek to put co-operative societies in a privileged position. [HON. MEMBERS: "No !"] That is what their Amendment proposes to do. We, on the other hand, have laid down the principle that the treatment given to co-operative societies in relation to Income Tax shall be exactly the same as the treatment given to companies. They are indistinguishable in the trade which they do and, in so far as they make profits, those profits will be taxed. We have, however, exempted what is known as the dividend from taxation. No tax of any kind will be placed upon the dividend which will be allowed as an 660 ordinary trading expense. In so far, therefore, as a co-operative society returns money to its customers in the form of a dividend, no tax will fall either on the society or on the customers. What hon. Members are seeking to do by this Amendment is to say that if the society puts money to reserve and calls that reserve a dividend equalisation account that shall be exempt from taxation. [HON. MEMBERS: "No!"] Hon. Gentlemen cannot dispute that proposition.
§ Mr. T. WILLIAMSSurely the Amendment speaks for itself. The sum referred to in the Amendment is any sum not put to reserve but specifically assigned to a dividend equalisation fund which must be distributed.
§ Mr. HORE-BELISHANo, what the Amendment says is that any sums put to a dividend or discount equalisation fund shall be exempt from taxation and you would only have to call your reserve a dividend equalisation account or fund in order to exempt it from taxation. The Amendment says nothing about distribution. I beg of the hon. Member to read his own Amendment. It says, in effect, that when the money is assigned to a fund, which is to be called a dividend equalisation fund instead of by some other name, from that moment the money shall be free from tax. All a society has to do is to describe its reserve in this manner. No question of distribution is raised in the Amendment. To carry out that proposal would be to put the societies in a privileged position and therefore we are not prepared to assent to the Amendment. No limit is placed on the sum which can be put to this equalisation fund. Therefore, the whole of the reserves could be exempted from taxation and the whole of our proposals would fall to the ground. We have gone a long way to meet hon. Gentlemen opposite by putting specifically into the law at their request a provision that the dividend shall be exempt from taxation. In so far as sums are distributed as dividend those sums will be exempt from taxation. In so far as they are used for another purpose, namely, that of being put to reserve they will be taxed, and when this law is carried into effect there will be no distinction whatever between the treatment afforded to the co-operative societies on the one hand and to companies on the other.
§ 4 p.m.
§ Sir STAFFORD CRIPPSThe hon. Gentleman's argument is hardly convincing when he says that this is an attempt to get preferential treatment for the co-operative societies. The Government themselves have inserted Subsection (3, a), which exempts discounts, rebates, dividends and bonuses granted by the company or society to members. Therefore, they have acknowledged the principle that it is not right to tax moneys, the purpose of which is to provide dividends, rebates or bonuses. Now they come forward and say that if you delay the distribution of that money for six months, it alters in character, and therefore becames taxable. That seems to be a most extraordinary argument.
§ Mr. HORE-BELISHAThe hon. and learned Member is dealing with the point where he wishes to put the society in a privileged position. This is exactly the position in which ordinary companies are; if they give a trading discount it is allowed; if they put it to reserve, and call it a dividend equalisation fund, it is not allowed.
§ Sir S. CRIPPSThe hon. Member does not realise that, owing to the manner of conducting the business of co-operative societies, it is desirable for them to have an equalisation account for discounts which would be unsuitable in an ordinary businessfirm. [HON.MEMBERS: "Why?"] I can hardly imagine any firm which is trading not substantially with the same public and its own members, setting aside all its discounts in a pool and pooling those discounts among its customers at the end of the year. A man who buys £1,000 worth of goods wants his discount as part of his single transaction. When you deal with co-operative societies, you are, of course, dealing with the matter on a totally different basis. You are dealing with bodies which even-out discounts over the whole of their membership, and do not give a discount upon each purchase. That is an essential difference, to start with, between co-operative and ordinary trading by ordinary firms. All that this Amendment asks is that precisely that process should be allowed to be carried out by co-operative societies over not only members, but over a period of time as well.
If the hon. Member thinks that this is a mere device to get out of the payment of 662 Income Tax on reserves, he can put in any words he likes to make it perfectly clear that these moneys so specifically assigned must always be distributed as dividends, and in no other way. This is an Amendment to serve the convenience of millions of people in this country. It is not a question of trying to get out of taxation or anything else, but it would be most inconvenient if this method of taxation forces every co-operative society into the payment of unequal "divis" at unequal periods of time in order not to have taxed that which is expressly not to be taxed under the Act. It is an important matter of convenience of accountancy and distribution, and I suggest to the hon. Member that it is no answer to this to say that it would allow of the reserves being put aside under the cloak of being intended eventually for a dividend or discount equalisation fund. This is a real point of administration by the co-operative societies. Let the hon. Member put in what words he likes, but surely there can be no doubt about the principle, that if the money is, in fact, going to be spent for the purposes set out in Sub-section (3, a), the fact that it is delayed six months, which is about the period it would be delayed in the equalisation account, cannot make any difference whether it ought to be taxed or not. It cannot make any difference, and to slide out on the assumption that this is merely something to evade taxation is to miss the whole point of what is really a serious matter in the administration of co-operative societies.
I am quite sure that neither the right hon. Gentleman nor the Government want unduly to embarrass the co-operative societies by this form of taxation. They have taxed them, and there is an end of it, but, having taxed them, I am sure they do not want to upset their organisation more than is necessary; but unless something of this sort is inserted, it will upset their organisation. It will make it very difficult for them, because it will mean that each half year all the surplus that is ever going to be distributed as dividend must at that moment be distributed, or otherwise it will be classed under the head of reserve. It is in order to avoid that, which is the real difficulty, that we ask the Government, the hon. Gentleman and the Lord President of the Council, who has been appealed to by my hon. Friend, really to consider this problem, 663 and to see whether there is not some means of getting over this difficulty. I do not believe that it can be done by-administrative order. It will have to be done in some form, and if the Government cannot now accept these words, will they give us an undertaking that in another place words will be inserted to cover this specific point? They may tighten it up as tight as they like so that it can only cover moneys put aside for the purpose of subsequently paying dividends, but we do ask them to consider it, not from the point of view of some attempt to evade the tax, but from the point of view of an attempt to get over a real administrative difficulty of the co-operative societies.
§ 4.8 p.m.
§ Sir GERALD HURSTThe hon. and learned Member has thrown the full force of his great legal authority in support of what I venture to describe as complete fallacies put forward by hon. Members opposite. I think that the main fallacy was disclosed in the speech of the hon. Member who seconded the Amendment. He said that the difference between the outgoings and the earnings of a cooperative society in any period represented "divi." Of course, from a lawyer's point of view, that is quite wrong. The difference between earnings and outgoings represents profits, and no part of the profits can be described as dividend unless, in fact, a dividend is declared and paid. The difference may be £100,000, but if you divide only £80,000, it is impossible to describe the whole £100,000 as dividend, and that is, in fact, the fallacy of this Amendment.
The hon. and learned Member who has just spoken referred to the great embarrassment and difficulties that these proposals inflicted upon co-operative societies. There are no embarrassments and no difficulties at all. If a co-operative society makes a profit of X pounds, at the end of the period the society has an absolute option. It can elect whether it is going to divide the whole of that profit among its members by way of dividends, or whether it is going to place it to reserve. If it wants to avoid taxation and distribute it as dividends, it does not bear the common burden of taxation. If the profit is carried to reserve, it is taxable. The whole Amend- 664 ment is based on a fallacy. The hon. and learned Member said that what was assigned to the dividend or discount equalisation fund must at some time be distributed as dividend, and therefore must always be regarded as dividend. That is, of course, wrong. The hon. Member who moved the Amendment realised that, because he said that this fund would be utilised for paying dividends as and when occasion presented itself. That is quite true. It may be that this fund will never be used for dividends at all. If bad times come upon the society, and these funds have to be utilised for capital losses, they never will be available.
I agree with the Financial Secretary that this is a device by which co-operative societies may find it easy to avoid their share of the common burden of taxation. I hope the Government will keep their eyes open to the liability to devices of this sort. There is no doubt co-operative societies are very anxious to avoid paying taxes, and they will stick at nothing. This is one of the devices, and I think it is one against which we ought to set our faces. When I say that co-operative societies will stick at nothing, I do not mean the ordinary members of societies, but those who are responsible for propaganda. My Division and the city which I represent abound in co-operators. There are so many members of co-operative societies in my Division that at one time they ran a co-operative candidate, but although my views on this subject were known to all the members of these societies, they have always voted, and I hope will always vote for me: for, while very willing to have the largest possible dividend, they recognise that what passes to reserve is in no way different from what passes to reserve in ordinary trading companies. The reserve funds in ordinary trading companies might be utilised to pay dividends at some future time, but that is no defence for immunity from Income Tax, and I think we are rather apt to be unjust to members of co-operative societies when we imagine that they support the propaganda which is being brought to bear on us. There are hundreds of thousands of co-operators all over the country who are only too glad to bear their part as citizens in a time of national need. Do not let us identify them with those who make use of this 665 kind of thing to avoid taxation, and I am very glad the Government intend to resist the Amendment.
§ 4.13 p.m.
§ Mr. MAINWARINGI think there is one thing to which Members of this House, without distinction of party, and without exception, could plead guilty, and that is that none of them are desirous of paying taxes. That is an attitude which is not, as the hon. Member who has just spoken seems to think, exclusively a peculiar quality of co-operators. There seems to be in regard to this Amendment a fear in the mind of the Financial Secretary that the co-operators are seeking to find for themselves a privileged position, but is it not necessary in this connection to bear in mind clearly the basic relation or distinction which exists between a co-operative society and a private trading concern?
Let us imagine a co-operative society on one hand and a private trading company on the other operating in exactly the same area, and that both of them succeed in showing, at the end of a given trading period, a surplus of £l,000. It is clearly admitted in law and in theory, and, in fact, by the Government of the day, that a co-operative society cannot make a profit. The £1,000 in their case is admittedly not a profit. [HON. MEMBERS: "Why not?"] It has been stated in the course of the discussion of this Bill that, so far as people unite together in a society for mutual trading, they cannot make a profit at each other's expense. Therefore, this £1,000 surplus by a co-operative society cannot be regarded as profit. It is £l,000 they have economised in expenses. In the case of the private trading company, they are engaged not in mutual trading with themselves, but in the exploitation of other people, and therefore they make a profit.
The fallacy which fills the mind of the Financial Secretary is that somehow, by some mysterious process, when the members of the co-operative society come to the point of deciding what they can do with this £1,000 surplus, somehow it has become a profit. It is admitted that in its origin it cannot be a profit. If they distribute it immediately to themselves, either per week or per month, it never becomes a profit. But the Financial Secretary says, "If you delay the distribution, then it will be a profit." How 666 can it be? No amount of delay can make it a profit. By what mysterious process can it become a profit?
All that is suggested in the Amendment is—as has been suggested, you can tie it up as stringently as you like, and make whatever regulations you like to see that it is not devoted to some other purpose—that if a Co-operative Society finds itself able to put one half of that £1,000 on one side, it may be for six months, it shall be permitted to do so for that period, or even for 12 months. In fact the Government have been invited in effect to decide for themselves for how long a period that sum can be laid aside for the purposes mentioned in the Amendment. The real fear that the Government might justifiably hold up for members to consider would be this: Suppose that a portion of that £1,000 were laid on one side for capital purposes. Then we should be compelled to admit that that portion so laid aside had in point of fact changed its character, because it had been devoted to some other purpose. The Government might justifiably argue on those lines, but in so far as distribution is merely delayed there is no possible argument as to a change of character. In fact the money remains what it was from the beginning, an amount that can be devoted to the purposes of distribution among its members as dividend.
§ 4.17 p.m.
§ Mr. KINGSLEY GRIFFITHI should like to say a few words in answer to the argument put forward by the hon. and learned Member for Moss Side (Sir G. Hurst), because he spoke as one delivering a legal opinion, which would necessarily carry a good deal of weight in this House or anywhere. I think the hon. and learned Gentleman really put the case for the Amendment as well as anyone has put it. When he was discussing the position in which a co-operative society would find itself when it was deciding what it was to do with the balance between earnings and outgoings for a given year, he said quite truly that it could do one of two things: It could decide either to distribute it as dividends and so avoid taxation, or to put it to reserves and pay taxation. I quite agree that the money in question under this Amendment would be money which would fall under the first of the two alternatives; it would 667 be money which the co-operative society had definitely decided to distribute as dividend and not to put to reserve.
That being the case; by the argument of the hon. and learned Gentleman the Government really have no case on which to resist the Amendment. Further, in its practical effect what does it mean? It means, I do not say of malice aforethought but as a necessary result, that co-operative societies would be encouraged to adopt unsound methods in the management of their money. It is surely a reasonable business thing to do, and a thing which one would like to see in any business in which one was interested, that the business should not live from hand to mouth, and should not be always distributing everything that fell into its hands, well knowing that the situation in a few months time might make a very different prospect for the next occasion of distribution. A system of taxation which will deliberately encourage unsound methods in a very large business community, with which millions of our fellow countrymen are concerned, is a thing that I should be very loath to see. Therefore, I hope that the Government will give more serious attention to the Amendment. It does not by any means cut at the root of the policy that they have adopted. We are bound to take it as the will of this House that the part of the earnings of co-operative societies to be exempt is the part devoted to dividends and nothing more. On that basis the Government can still give this concession quite logically, I think without great loss to the Treasury and certainly with beneficial effects to a very large trading community.
§ 4.20 p.m.
§ Sir REGINALD BANKSI should have thought that there might be something to be said for this Amendment if hon. Members on the Labour Benches could explain what there is in the business of a co-operative society which makes it impossible for the society during the 12 months of its trading to make up its mind what dividend it is to declare. Is there some special technical difficulty in the accountancy of societies that makes it necessary to postpone the decision about the dividend? "This year, next year some time, never." If hon. Members can show that, as the hon. and 668 learned Member for East Bristol (Sir S. Cripps) said, there really is a practical business difficulty in the way of sharing out profits by way of dividends before the end of the 12 months, there might be some reason for the Treasury considering whether they could not accept this Amendment in a modified form.
The hon. Member for East Rhondda (Mr. Mainwaring) seemed to me to give the whole show away. He went back to a very old theory which I thought we had completely abandoned. He argued that whatever money you make out of your co-operative trading, whether you share it out by way of dividends or put it to reserve, or whether you invest it in funds which are to accumulate, it can in no circumstances whatever be described as profit. That observation, of which we are rather tired by now, drew a good deal of cheering from the Labour benches, and it seemed to me that the observation and the cheers amply justify the suspicion of the Financial Secretary when he said that this Amendment is only a pretext for marking down certain money under a holy and sacred name, and saying that "Some of these days, in certain contingencies and subject to certain possibilities we may or may not use this as dividends, but in the meantime we shall escape taxation."
The hon. Member who has just spoken made one observation which seemed to me to be entirely irrelevant. He said that, of course, co-operative societies might not find it wise in a year of great prosperity to declare a very large dividend, because that year might be succeeded by a lean year. He said that one would consider it reasonable in one's own business to put aside some provision for a rainy day. One might consider that reasonable in the case of one's business, but then one has to pay-Income Tax upon it.
§ 4.24 p.m.
§ Mr. LEWISThe Amendment must have been moved for one of two purposes; either it is, as the Financial Secretary assumes, a purely tax-dodging Amendment, or it is a genuine attempt to make it easy for co-operative societies to use part of the profits earned in one year for distribution as dividend in another year. If that is the view that is to be taken, this would seem to be an attempt to destroy still further such 669 traces of mutuality as may remain in modern co-operative trading, because even the ingenuity of the hon. and learned Member for East Bristol (Sir S. Cripps) would be taxed to show that if a number of persons in this year trade and create a profit, and that profit is given to another number of persons trading in a future year, there is any mutuality in the transaction. It is quite evident that those who are arguing for this Amendment are arguing solely in the interests of those who manage and direct no-operative undertakings; they are not arguing at all in the interests of the great mass of persons who make this trading possible by dealing with co-operative stores.
Does anyone suppose that if this Amendment were explained to the great mass of co-operators in this country they would vote for it? Would any man vote for a proposition that if he deals with a co-operative society this year, and thereby assists it to make a profit, part of that profit which would otherwise come back to him is not to come back to him but is to be kept for the benefit of other persons dealing with the stores in future years? I do not think that the average co-operator is so perfect an altruist that he would agree to that proposition. Speaking for a division in which there are many co-operators, I have no hesitation whatever in opposing the Amendment.
§ 4.26 p.m.
§ Mr. LANSBURYI would like to say a few words, because I am not a lawyer, and because I was amazed when I listened to the hon. and learned Members for Swindon (Sir R. Banks) and for Moss Side (Sir G. Hurst). Apparently they agree that there is some reason why dividends should not be taxed. What I cannot for the life of me understand is why, if £80 out of £100 of profit is not taxable, the £20 should be taxable. Where is the reason? No one has yet told us. Apparently the £80 is dividend that is not taxable because it is gained by mutual trading, which the lawyers say cannot be looked upon as profit. Usually profit is dividend in another form; it is only another way of saying the same thing. As a private person, if I make 10 per cent. out of a company and I get the 10 per cent., I say that I make that profit out of the money that I invested. One person would call it dividend and 670 another profit, but in one's pocket it would be the same thing.
The Government have admitted that up to a certain point an amount of this money is not taxable. All that is agreed. It is agreed even by the hon. and learned Member for Swindon. But by what legerdemain does the balance become something else? No one attempts to answer that question. Even the Financial Secretary, who is very clever and able in carrying on these discussions, has not attempted to answer it. All that he says is, "Oh, it may be used for some other purposes." But the persons who get the part that is paid as dividend use it for a variety of purposes. I will tell the House one way in which some of this money is used. It is a way that I discovered only the other day. Many societies now pay out from their funds a sort of gratuity on the death of a member. It is not insurance and has nothing to do with insurance. It amounts very often to a fair sum of money and is of very considerable value to poor people. Yon are going to tax that. [HON. MEMBEES: "No."] Yes. The co-operative societies, out of their reserve funds, pay on the death of a member certain sums to their relatives or heirs, and that money is of considerable value to poor people. You are going to tax that because it has not been distributed as a dividend. I should like the hon. and learned Member for Swindon to explain the difference between having the money on one particular day or having it on another day.
§ Sir R. BANKSI was not arguing whether the distinction between divi, and surplus was right or wrong. I was assuming that that had been decided. I was only saying that there might be some substance in the Amendment if my hon. Friend or anyone else could show me some substantial reason why co-operative societies should not be able, like other people, to make up their minds during the 12 months how they were going to share out dividends.
§ Mr. LANSBURYThe hon. and learned Member does not do justice to himself. He said quite distinctly that the doctrine of mutuality had gone by the board long ago.
§ Sir R. BANKSNo.
§ Mr. LANSBURYI listened very carefully and although the hon. and learned Member did not use the word "mutuality" he did say that the question of co-operative societies being free from Income Tax had gone by the board. The Government have admitted in this Bill the principle of mutuality, but no one has faced up to the fact why a certain portion of money cannot be taxed and another portion of money can be taxed. The hon. and learned Member has not attempted to answer that question but he falls back upon an extraordinary line of argument. He asked why cooperative societies cannot make up their minds what dividends they are going to pay before their accounts are made up. No business firm ever does that and you have no right to expect co-operative societies to do it. I will put a perfectly simple point and that is, by what legerdemain does a certain portion of a surplus become taxable? If £80 out of £100 which is distributed is sacrosanct because that comes under the definition of mutual trading, why is not the remainder of, the money exempt? I understand that dividends are not taxed because you cannot tax people who are mutually trading, because they do not make profit in the ordinary sense.
It may be that the Government have since invented some new word, but in this Bill the principle laid down was that mutual trading could not be taxed. If the Financial Secretary, the Lord President of the Council and myself decided to buy tea together in bulk and to share it out, we could not be taxed on that, because it has been always held that that is not ordinary trading but is a mutual arrangement. That is the principle that has saved co-operators from being taxed in the way proposed up to now. Now, the Government talk about trade expenses and one thing and another in order to satisfy the demands of the private traders. We have not accepted and we do not accept that. We take our stand on the principle of mutual trading. I want the Financial Secretary to tell us how he differentiates between one sum of money and another. That question has not been answered, and I put it as a perfectly simple question.
§ 4.38 p.m.
§ Mr. H0RE-BELISHAI will answer that question at once. The divi. that is distributed is allowed as a trading ex- 672 pense. It is not allowed on the grounds of mutuality. It is allowed even to private enterprise. A company which distributes the equivalent of a divi. is allowed it as a trading expense. There is no idea of mutuality in it at all. Reserves are taxed, that is, the sums that are not so distributed are taxed, and they will be taxed in a co-operative society as in a company because they are the profits of an incorporated society or company. If a company is incorporated it is a separate entity, it is making profits and those profits must pay their proper contribution towards maintaining the services of the State. That is the whole of the principle. The right hon. Gentleman asked me another question. He said that he had just heard of a particular society distributing money as funeral expenses.
§ Mr. LANSBURYI did not put it in that way.
§ Mr. HORE-BEL1SHAWell, as a gratuity on the death of one of its purchasers.
§ Mr. LANSBURYOne of its members.
§ Mr. HORE-BELISHAOne of its members purchasing from the society. I am advised—I am not speaking of this particular case, because I have not the details before me—that there is nothing in what the right hon. Gentleman has said to disentitle that society from taking that sum into account for the purposes of Income Tax. There is nothing that is going to put these societies in any way in a different position from that of an incorporated company. If the right hon. Gentleman contends that there should be something differentiating the co-operative societies from incorporated companies he is claiming for them a privileged position. That is the answer to him and the answer to the hon. Member for West Middlesbrough (Mr. K. Griffith). Hon. Members cannot support this Amendment or claim any concession for these societies unless they claim to put them in a privileged position. They will be on exactly the same footing as any other incorporated companies.
§ Mr. LANSBURYIt is perfectly certain that the societies will have £1,200,000 less to use in bonuses such as those I have mentioned.
Mr. MAINW1ARINGI should like to know whether the Financial Secretary states definitely and clearly on behalf of the Government that any amount of surplus that may be realised by mutual trading by any number of persons cannot in any circumstances be regarded as other than profit. That is clearly involved in his statement.
§ 4.39 p.m.
§ Mr. DENMANOn a point of Order. The Amendment deals purely with the limited point of setting up an equalisation fund, but the occupants of the front benches on both sides have somewhat enlarged the scope of the discussion. I should be glad to know whether the House will also be allowed to range over the whole question on the merits of mutuality.
§ Mr. SPEAKERThe hon. Member asks me on a point of Order whether I shall allow equal latitude to other hon. Members that I have allowed to speakers from the front benches. My reply is that I shall do so.
§ 4.40 p.m.
§ Mr. LOGANI am interested in the statement made by the Financial Secretary in regard to what are known as surpluses, I call them profits, made by a mutual society. He definitely assures the House that there will be no taxation of dividends. Therefore, it follows that, if in any year any profit or surplus may accrue to a mutual trading society, that society, if they feel inclined at the annual meeting, can declare that the surplus must be distributed in the form of dividends. It would be right for the whole of the amount to be so distributed and therefore it would escape the payment of any tax. If that can be accepted as the definite policy of the Government in regard to the trading of a co-operative society, what is there wrong in a society, having decided to allocate that money for the purpose of dividends, coming forward and saying that they have declared a dividend but they would like an equalisation fund for the benefit of their members in order to secure an equal dividend for a number of years. Is there anything wrong in such a principle? Is it not fair and honest trading that if a dividend cannot be taxed and you have allocated money for the specific purpose of dividends there should be the domestic right to say that a particular dividend, which the members 674 of the Government admit they have no right to tax, should be held over for the purposes of an equalisation fund? If it was a quibble to get out of taxation it would be a different matter, but we have been told that there can be inserted a protective clause so that if the money was being wrongly used the right of taxation would be effective. I do not see why any opposition can be raised to the Amendment. It is only reasonable that the society ought to be able from the point of view of equalisation to accumulate profits ranging over a number of years in order to bring about something like equality of dividends.
§ 4.44 p.m.
§ Mr. HARCOURT JOHNSTONEThe argument has been brought back by the hon. Member for the Scotland Division (Mr. Logan) from the wider range. I am not a lawyer and I have listened with some puzzlement to the verbal felicities of lawyers in regard to the three or four sides of this question. The matter reduces itself, I should have thought, to something very simple. One hon. Member behind me adduced an argument which in certain circumstances would have had great weight. He said that if the Amendment were incorporated in the Bill it would destroy what little there was of mutuality in the operation of co-operative societies. I may not agree with that argument, but I would point out that the Government have abandoned the principle which Governments held for many years that mutuality does enter into the trading of co-operative societies. If that be the case, the question of mutuality no longer arises, and, therefore, with the offer of the Opposition to accept any words which may enforce the payment of any sums set aside in dividends within a specific time, I am frankly unable to understand on what ground the Financial Secretary can continue to resist the Amendment. He has not yet addressed any argument to the House rebutting the general position which the Movers of the Amendment assume, that this money which they propose to set aside will be paid out in dividend and, if he likes to put in words to that effect, will be paid out under Statute within a specific time.
§ Mr. HORE-BELISHAWould the hon. Member apply that to private companies?
§ Mr. JOHNSTONEThat is not a proposal which I am bringing forward on this occasion, but if the Financial Secretary thinks it is just, he may insert it in the Bill, if he so wishes. As far as this Amendment is concerned, I am unable to see—and I do not believe the hon. and learned Member for Swindon (Sir R. Banks) really disagrees—how, if the money is going to be paid out in dividend and is withheld for six months, it therefore becomes taxable, though in the meantime it has not been used for the ordinary purposes for which trading reserves are used. Unless the Financial Secretary can produce some fresh argument, I cannot understand how those who believe that co-operative societies should not be penalised, but should be treated with fairness, can do other than vote for the Amendment. It is very strongly held in many parts of the country that this portion of the Government's legislation is not aimed directly towards the acquisition of revenue for their own purposes, but rather towards penalising political organisations which they think are in opposition to them. That suspicion exists, whether it be well founded or not, and to reject an Amendment of this description on grounds which it is difficult to understand would only give added weight to that suspicion and, in my opinion, do the Government more harm than good. I would ask the Financial Secretary to consider the Amendment afresh, and to see if, before the final stage of the Bill is reached, he cannot agree upon some form of words that will allow sums which are set aside to remain free from taxation, as he proposes to allow dividends which are paid out immediately to be free from taxation.
§ 4.50 p.m.
§ Mr. DAVID REIDI understand that the Financial Secretary to the Treasury does not rely upon the principle of mutuality, but the Oposition view is that the principle of mutuality is simply that of people trading among themselves, and that such people cannot make profits, because what they pay and what they get is all their own money. In a discussion with some co-operators, I have been told that that is the serious distinction between a limited liability company and a co-operative society, both of which are legal entities. The distinction 676 is that in the co-operative society the surplus goes to the members, and in the limited company it may go to the members if it happens to go to the shareholders, but it may go outside. It seems to me that that is the whole distinction between taxing dividends and taxing reserves. What is distributed in dividends is distributed to the actual members of the society at the time or immediately afterwards, but what is carried to reserve becomes really part of the trading capital of the society, or at any rate it will in fact be distributed to people from whose trading it did not arise. Members come and go, the membership fluctuates, and sums carried to reserve may often go to people who had no part in the transaction from which the profits arose. Consequently, the principle of mutuality does not apply at all in the case of these sums which are carried to reserve for the purpose of distribution as future dividends.
§ 4.52 p.m.
§ Mr. J. JONESI cannot claim to be an expert in the financial arrangements of these societies. I only happen to be a member of two co-operative societies, one of which is a non-dividend-paying society on principle, and the other of which is a dividend-paying society. One, of course, there is no trouble about, and the right hon. Gentleman cannot get his hands on us, because our money goes towards maintaining a fund to win seats for labour. I suppose the profits that we make in that particular society will eventually be sequestrated by Order-in-Council, but I am not afraid of that possibility, because we shall find other ways and means of dealing with them, and if I were an orthodox co-operator, I would soon find a way out of this difficulty. I should not have any dividends or balances, but I should hand the surplus all back to the members direct, in the form of reduced prices for the goods which they buy. Then we should give the private traders who have been up against us such a blow that they would never recover.
Hon. Members must remember that we have gone through a bad period of trade depression, and some of the strongest co-operative societies have suffered materially from that depression. Where would those societies have been now if they had not been careful in the days 677 when they were prosperous? There would have been no money at all for any dividends. Take the men in South Wales, Durham, and Northumberland. Where would they have been during the depression if the co-operative societies had not been careful in the days of prosperity, so as to enable them to have something to fall back upon? What are the Government going to get out of this tax? Will it amount to anything? It will not amount to the value of a jingle on a tombstone. For the sake of a few thousand pounds, more or less, you are going to sacrifice a principle which has been admitted by all to be a sound principle. I have heard hon. Members opposite in the days gone by, though, of course, we do not expect them to be as honest as they used to be, praising thrift among the working classes.
Where is this policy of the Government going to end? The co-operative societies are probably among the most thrifty people in the country. They have been built up by great sacrifices. In my own district they have built up a society which is one of the biggest trading concerns in the country, as a result of the sacrifices of those who were the early pioneers and who educated their fellows to follow their example. Is this policy of the Government's going to stop at the co-operative societies? There are other thrift organisations in the country as well as the cooperative societies. Where will our friendly societies be?
§ Mr. SPEAKERThe hon. Member must keep to the Amendment.
§ Mr. JONESWell, the principle may be extended considerably. We have small local organisations dealing with their own members; we have shop societies, which are similar organisations. Are they all to find themselves—
§ Mr. SPEAKERThe hon. Member is again straying from the Amendment.
§ Mr. JONESI will not say anything more about it. I am a member of two kinds of co-operative society, one, as I say, dividend-paying and the other non-dividend-paying, and I cannot understand the philosophy which says that one part of our money is taxable and the other is not. Up to now I have had no real explanation of it. The money all comes out of the member who buy the goods from the stores. A part of it is used to pay dividend back to the members 678 direct, and the other is used for a reserve fund to guarantee the preservation of future possibilities. Private companies do the same thing. [An HON. MEMBER: "They are taxed on it!"] Yes, but there is a difference. The co-operative societies consist of people who are banded together for mutual trading. There are no foreign shareholders in cooperative societies. They are all living together in the same community, buying their goods mutually, to the common advantage, whereas to-morrow morning I could take up any London newspaper, and I could find a wholesale invitation to anybody, from Land's End to John o' Groats, and from John o' Groats to California, to subscribe to the financial responsibilities of particular companies. They all come in, but here in England we have our co-operative movement, which is a purely British movement. There is no question of foreign control or influence. I saw a directorship list this morning of a new company about to be formed, and half of them are foreigners. The chairman is a Britisher. Naturally, he would be, because waving the Union Jack will bring in the money.
We say that this is not only a question of finance, but a matter of trying to cripple those whom the Government think will be their political opponents in the future. This Amendment ought to be carried as a compromise between two positions. We as a Labour party have no interest merely in co-operation in the ordinary trading sense of the term, but we desire to preserve the principle of co-operation in so far as the workers banded together have a right to distribute their money among themselves.
§ 5.0 p.m.
§ Mr. McCORQUODALEI do not propose to follow the last speaker into arguments about Socialism or the foreign ownership of capital. I want to explain why I who opposed the whole principle of the taxation of co-operative societies which the Government have introduced feel that the proposal in the Amendment cannot be justified from the point of view of those of us who believe in the mutuality principle and cannot be justified from the other side by those who believe that the dividend is merely a trade discount or expense. If money is going to be put into a dividend equalisation fund for dividends in future years it defies the law of mutuality as it will 679 go to people who do not earn it by mutual trading. It will go to other people, because obviously no member trades in exactly the same amount for two or more years together. If, on the other hand, it is to be regarded as a discount, it is absurd that a discount should be paid to a man not trading that year with the society. A discount is obviously granted on account of actual goods sold, and therefore I think that on every principle this proposal does not hold water.
§ 5.2 p.m.
Mr. PRICEThere seems to be some dishonesty in the attitude of the Financial Secretary who is defending this Bill in stating the position as he has done this afternoon. The Prime Minister made a statement about a fortnight ago in which he made the position clear. He denied a statement that had been made in the Press as to his pledge in the General Election, and said that he had agreed that he would take no part in the taxation of dividends of co-operative societies. This Amendment has no reference to reserves such as are envisaged by the Government in the Bill, but it asks that a fund which is formed for the equalisation of dividends should be exempt from taxation. I am a member of a co-operative society which pays part of the benefits to which I am entitled at death. It is a very good proposal. In order to provide for that they withhold from me a part of my dividend. Is it suggested that this House is entitled to tax that fund? If, as the Financial Secretary endeavoured to make out to-day, the co-operative societies are in some privileged position, why were not Members of the Government men enough to tell them so at the General Election? If the Government intended to take this attitude towards them, why did they not make it part of the political propaganda in the General Election? Scores of Members opposite would not have been here if they had done that. We say in this Amendment that if we set aside a reserve to equalise dividends year by year it should not be taxed. When there is so much depression it is a good thing that co-operative societies should put money to reserves, not because they want money to invest, but in order to make sure that there will be an assured income for co-operative members in bad times. That is all that this Amendment is ask- 680 ing, and, if hon. Members want to be true to the undertaking given by the Prime Minister, they will vote for it. I wish he were here so that we should know what he thinks about the Amendment.
This Amendment simply asks what the Government said they would do when the Finance Bill was discussed on Second Reading, and we appeal to them to be fair to co-operative members. If this attitude is maintained when we are endeavouring to bring in an Amendment which complies with the request made from the Front Bench when the Bill was being discussed on Second Reading, we shall be able to form only one conclusion, namely, that this is a definite attempt while the Government are in power to take advantage of the opportunity to impose a form of taxation that was never mentioned in the General Election, and which they dared not even mention. No Government has a right to alter the form of taxation unless they have given the electorate to understand that they propose to do it, so that democracy can have an opportunity of saying whether it shall be done. The Government were not men enough to take that position. They first say that they will not tax dividends, and when we ask that a reserve to equalise dividends year by year should not be taxed, they say, "We are going to tax the lot." We ask the Government to be fair in this issue and to carry out the undertaking of the Prime Minister. He has given many undertakings that have not been carried out. This undertaking was given a fortnight ago, and we ask the Government to keep it.
§ 5.8 p.m.
§ Mr. BUCHANANThe hon. Member for Sowerby (Mr. McCorquodale) said that he had always been opposed to any encroachment on the principle of mutuality but that he could not see how this proposal could be justified. I think that it can be justified on a number of grounds. We must bear in mind that the co-operative- societies have built up their business over a long period of years by a loyal observance of strict business methods. If they are to be given a chance to build up their business they must within the realm of present-day society, be allowed to do so with an eye to the future. Among other things, cooperative societies have been faced over a period of years with violent fluctua- 681 tions in trade. Nowhere has that happened more than in many of the big cities and industrial centres, and for many years co-operative societies in most of those centres have formed what they call a dividend equalisation fund. The purpose of that fund was to save them from violent fluctuations. It may be true that a member helps to build up the dividend for a particular year, but it is not true in actual fact. A society's business is built up by members over long periods of years. For instance, a member who buys goods from a society when it is paying a small dividend may make a far greater contribution to the future well-being of that society than a member who merely purchases from the society when it becomes popular.
Everyone who knows friendly society and trade union work knows that their funds cannot be allocated every 12 months or even every few years. These funds have been formed by the efforts of members, possibly in a period when the society was being built up and when practically no dividend was available at all. You cannot merely take the dividend which is built up over 12 months' period. Societies save themselves from violent fluctuations by putting by reserves. I was a member of a board which was faced with this position. A great number of their members were thrown out of work and their purchasing power greatly depreciated in consequence. If alongside that the dividend, which was 2s. 2d. in the £, had been decreased to 1s. 4d., large numbers of members would have thought that the society was going wrong and would have withdrawn not merely their trade but their capital. The first plight was bad -enough, but the second would have been almost beyond resistance. In order to avoid violent fluctuations of that kind the co-operative societies have over a period of years formed an equalisation fund, and in good times have never allowed the dividend to go too high. In Glasgow from 1915 to 1920 trade expanded out of all knowledge. Everybody was working and wages were high. It would have been possible in those years for dividend paying societies to pay extremely high dividends, but the societies were wise and formed a fund which would save violent fluctuations in future and avoid the necessity of decreasing dividends, and thus not merely losing members but capital as well during bad times.
682 The principle has been settled in this House that dividends are not to be touched. That is not now argued. The Amendment says that in order to allow co-operative societies to equalise their dividends and not to throw the amount of dividend open to violent attacks of changes in trade and other factors, they shall be able to form a fund to be used for no other purpose than the equalisation of dividends. The Amendment says that these funds shall be immune from any taxation. To that principle I can see no answer at all. It is a common-sense principle once you have agreed not to tax dividends. The Opposition would have liked no tax on reserves at all. Like wise men in opposition, they are seeking to modify the brunt of the attack on the cooperative societies. I have no desire to go into the question of the Prime Minister's pledges, but this is not the first time he has broken a pledge, only on other occasions he was in a different Government and consequently he was allowed to do it. All I say is that what is being asked for by the Opposition in this Amendment is an elementary fair principle, which ought to be accepted in order to allow the co-operative societies to carry on in a businesslike fashion. The cost of conceding this Amendment must be very small, and could not cost the Exchequer much. It would allow the societies to function decently and I hope the Government will accept it.
§ 5.16 p.m.
§ Mr. PEATI only rise because although I, like previous speakers, am rather uncertain of the effectiveness of the Government's policy in regard to taxing co-operative societies, I feel that this Amendment is certainly unnecessary. If a dividend is to be treated as a trade expense, whenever a dividend is paid it will escape taxation. Let us assume that in 1934 a co-operative society puts an amount to reserve for the purpose of equalising dividends, and that 1935 turns out to be a bad year and they use a certain amount of that reserve to equalise the dividend. The amount of that dividend paid in 1935 will either increase the loss for that year or will turn an assessable profit into a loss for that period. In other words, dividends, when they are paid, will escape taxation under the present law, which allows losses to be carried forward for six years, or under a claim under Section 34. I would ask the Financial Secretary 683 whether I am not right in making this statement that the Government's proposals, quite apart from this Amendment, will always ensure that dividends, whether paid out of current profits or
§ out of amounts put to reserve in the past, will he free of tax.
§ Question put, "That those words be there inserted in the Bill."
§ The House divided: Ayes, 72; Noes, 268.
685| Division No. 228.] | AYES. | [5.19 p.m. |
| Adam, D. M. (Poplar, South) | George, Megan A. Lloyd (Anglesea) | Maclean, Nell (Glasgow, Govan) |
| Aske, Sir Robert William | Granville, Edgar | Mainwaring, William Henry |
| Attlee Clement Richard | Grenfell, David Rees (Glamorgan) | Mallalieu, Edward Lancelot |
| Banfield, John William | Griffith, F. Kingsley (Middlesbro'.W.) | Mander, Geoffrey le M. |
| Batey, Joseph | Griffiths, T. (Monmouth, Pontypool) | Mason, David M. (Edinburgh, E.) |
| Bernays, Robert | Grundy, Thomas W. | Owen, Major Goronwy |
| Bevan, Aneurin (Ebbw Vale) | Hamilton, Sir R. W.(Orkney & Zetl'nd) | Parkinson, John Allen |
| Brown, C. W. E. (Notts., Mansfield) | Harris, Sir Percy | Pickering, Ernest H. |
| Buchanan, George | Hirst, George Henry | Price, Gabriel |
| Cape, Thomas | Holdsworth, Herbert | Rea, Walter Russell |
| Cocks, Frederick Seymour | Janner, Barnett | Roberts, Aled (Wrexham) |
| Cove, William G. | Jenkins, Sir William | Salter, Dr. Alfred |
| Cowan, D. M. | Johnstone, Harcourt (S. Shields) | Samuel, Rt. Hon. Sir H. (Darwen) |
| Cripps, Sir Stafford | Jones, Henry Haydn (Merioneth) | Sinclair, Maj. Rt. Hn. Sir A.(C'thness) |
| Curry, A. C. | Jones, J. J. (West Ham, Silvertown) | Smith, Tom (Normanton) |
| Daggar, George | Jones, Morgan (Caerphilly) | Tinker, John Joseph |
| Davies, David L. (Pontypridd) | Kirkwood, David | Wedgwood, Rt. Hon. Josiah |
| Davies, Rhye John (Westhoughton) | Lansbury, Rt. Hon. George | White, Henry Graham |
| Dobble, William | Lawson, John James | Williams, Edward John (Ogmore) |
| Edwards, Charles | Leonard, William | Williams, Dr. John H. (Lianelly) |
| Evans, David Owen (Cardigan) | Logan, David Gilbert | Williams, Thomas (York, Don Valley) |
| Evans, R. T. (Carmarthen) | Lunn, William | Wood, Sir Murdoch McKenzie (Banff) |
| Foot, Dingle (Dundee) | Macdonald, Gordon (Ince) | |
| Foot, Isaac (Cornwall, Bodmin) | McEntee, Valentine L. | TELLERS FOR THE AYES.— |
| George, Major G. Lloyd (Pembroke) | Maclay, Hon. Joseph Paton | Mr. John and Mr. Groves. |
| NOES. | ||
| Acland-Troyte, Lieut.-Colonel | Caporn, Arthur Cecil | Ford, Sir Patrick J. |
| Adams, Samuel Vyvyan T. (Leeds, W.) | Castlereagh, Viscount | Forestier-Walker, Sir Leolln |
| Aitchison, Rt. Hon. Craigle M. | Cayzer, Maj. Sir H. R. (Prtsmth., S.) | Fox, Sir Gifford |
| Albery, Irving James | Chamberlain, Rt.Hn.Sir J. A. (Birm.,W) | Fraser, Captain Ian |
| Allen, Sir J. Sandeman (Liverp'l. W.) | Chapman, Col. R. (Houghton-le-Spring) | Fuller, Captain A. G. |
| Amery, Rt. Hon. Leopold C. M. S. | Chapman, Sir Samuel (Edinburgh, S.) | Gault, Lieut.-Col. A. Hamilton |
| Anstruther-Gray, W. J. | Chorlton, Alan Ernest Leofric | Gibson, Charles Granville |
| Apsley, Lord | Christie, James Archibald | Gilmour, Lt.-Col. Rt. Hon. Sir John |
| Astbury, Lieut.-Com. Frederick Wolfe | Clarke, Frank | Gluckstein, Louis Halle |
| Astor, Maj. Hn. John J. (Kent, Dover) | Clarry, Reginald George | Goff, Sir Park |
| Atholl, Duchess of | Clayton, Sir Christopher | Goodman, Colonel Albert W. |
| Bailey, Eric Alfred George | Colville, Lieut.-Colonel J. | Gower, Sir Robert |
| Baldwin, Rt. Hon. Stanley | Conant, R. J. E. | Graham, Sir F. Fergus (C'mb'rl'd, N.) |
| Balniel, Lord | Cook, Thomas A. | Grattan-Doyle, Sir Nicholas |
| Banks, Sir Reginald Mitchell | Cooke, Douglas | Gretton, Colonel Rt. Hon. John |
| Barclay-Harvey, C. M. | Cooper, A. Duff | Grigg, Sir Edward |
| Barrle, Sir Charles Coupar | Copeland, Ida | Grimston, R. V. |
| Beauchamp, Sir Brograve Campbell | Craddock, Sir Reginald Henry | Guest, Capt. Rt. Hon. F. E. |
| Beaumont, M. W. (Bucks., Aylesbury) | Crooke, J. Smedley | Gunston, Captain D. W. |
| Beaumont, Hon. R.E.B. (Portsm'th, C.) | Crookshank, Col. C. de Windt (Bootle) | Hacking, Rt. Hon. Douglas H. |
| Belt, Sir Alfred L. | Cross, R. H. | Hales, Harold K. |
| Benn, Sir Arthur Shirley | Cruddas, Lieut.-Colonel Bernard | Hamilton, Sir George (llford) |
| Bennett, Capt. Sir Ernest Nathaniel | Dalkeith, Earl of | Hanbury, Cecil |
| Betterton, Rt. Hon. Sir Henry B. | Davidson, Rt. Hon. J. C. C. | Hanley, Dennis A. |
| Birchall, Major Sir John Dearman | Dawson, Sir Philip | Hannon, Patrick Joseph Henry |
| Borodale, Viscount | Denman, Hon. R. D. | Hartington, Marquess of |
| Boulton, W. W. | Despencer-Robertson, Major J. A. F. | Hartland, George A. |
| Bowyer, Capt. Sir George E. W. | Dixon, Rt. Hon. Herbert | Harvey, George (Lambeth, Kenningt'n) |
| Boyce, H. Leslie | Donner, P. W. | Haslam, Henry (Horncastle) |
| Bracken, Brendan | Doran, Edward | Headlam, Lieut.-Col. Cuthbert M. |
| Braithwaite, Maj. A. N. (Yorks, E.R.) | Dower, Captain A. V. G. | Hellgers, Captain F. F. A. |
| Braithwaite, J. G. (Hillsborough) | Drewe, Cedric | Henderson, Sir Vivian L. (Chelmsford) |
| Briscoe, Capt. Richard George | Duckworth, George A. V. | Heneage, Lieut.-Colonel Arthur P. |
| Broadbent, Colonel John | Duggan, Hubert John | Herbert, Capt. S. (Abbey Division) |
| Brocklebank, C. E. R. | Eady, George H. | Hills, Major Rt. Hon. John Waller |
| Brown, Col. D. C. (N'th'l'd, Hexham) | Edmondson, Major A. J. | Hore-Belisha, Leslie |
| Brown, Brig.-Gen. H.C. (Berks., Newb'y) | Ellis, Sir R. Geoffrey | Hornby, Frank |
| Browns, Captain A. C. | Eimley, Viscount | Horobin, Ian M. |
| Buchan, John | Emmott, Charles E. G. C. | Horsbrugh, Florence |
| Buchan-Hepburn, P. G. T. | Emrys-Evans, P. V. | Howitt, Dr. Alfred B. |
| Burgin, Dr. Edward Leslie | Erskine, Lord (Weston-super-Mare) | Hudson, Capt. A. U. M. (Hackney, N.) |
| Burnett, John George | Essenhigh, Reginald Clare | Hudson, Robert Spear (Southport) |
| Cadogan, Hop. Edward | Everard, W. Lindsay | Hume, Sir George Hopwood |
| Campbell, Sir Edward Taswell (Brmiy) | Fielden, Edward Brockiehurst | Hunter-Weston, Lt.-Gen. Sir Aylmer |
| Hunt, Sir Gerald B. | Newton, Sir Douglas George C. | Somerville, Annesley A. (Windsor) |
| Jackson, Sir Henry (Wandsworth, C.) | Nicholson, Rt. Hn. W. G. (Petersf'ld) | Sotheron-Estcourt, Captain T. E. |
| Jamieson, Douglas | Normand, Wilfrid Guild | Southby, Commander Archibald R. J. |
| Jesson, Major Thomas E. | Nunn, William | Spears, Brigadier-General Edward L. |
| Joel, Dudley J. Barnato | Ormsby-Gore, Rt. Hon. William G. A. | Spencer, Captain Richard A. |
| Johnston, J. W (Clackmannan) | Patrick, Colin M. | Spender-Clay, Rt. Hon. Herbert H. |
| Jones, Lewis (Swansea, West) | Peake, Captain Osbert | Stanley, Lord (Lancaster, Fylde) |
| Ker, J. Campbell | Peat, Charles U. | Stanley, Hon. O. F. G. (Westmorland) |
| Kerr, Hamilton W. | Percy, Lord Eustace | Steel-Maitland, Rt. Hon. Sir Arthur |
| Kimball, Lawrence | Perkins, Walter R. D. | Storey, Samuel |
| Knox, Sir Alfred | Petherick, M. | Strauss, Edward A. |
| Lamb, Sir Joseph Quinton | Peto, Sir Basil E. (Devon, Barnstaple) | Strickland, Captain W. F. |
| Law, Richard K. (Hull, S.W.) | Peto, Geoffrey K(W'verh'pt'n, Bllst'n,) | Stuart, Lord C. Crichton- |
| Leech, Dr. J. w. | Pickford, Hon. Mary Ada | sueter, Rear-Admiral Murray F. |
| Lees-Jones, John | Pike, Cecil P. | Thompson, Luke |
| Leighton, Major B. E. P. | Power, Sir John Cecil | Thorp, Linton Theodore |
| Lewis, Oswald | Pownall, Sir Assheton | Todd, A. L. S. (Kingswinford) |
| Liddall, Walter S. | Ramsay, Alexander (W. Bromwich) | Train, John |
| Loeker-Lampeon, Rt. Hn. G. (Wd.Gr'n) | Ramsay, Capt. A. H. M. (Midlothian) | Tryon, Rt. Hon. George Clement |
| Lockwood, John C. (Hackney, C.) | Ramsay. T. B. W. (Western Isles) | Turton, Robert Hugh |
| Lumley, Captain Lawrence R. | Ramsbotham, Herwald | Vaughan-Morgan, Sir Kenyon |
| Lymington, viscount | Ramsden, Sir Eugene | Wallace, Captain D. E. (Hornsey) |
| Lyons, Abraham Montagu | Rawson, Sir Cooper | Ward, Irene Mary Bewick (Wallsend) |
| MacAndrew, Lieut.-Col. C. G.(Partick) | Reld, David D. (County Down) | Ward, Sarah Adelaide (Cannock) |
| MacAndrew, Capt. J, O. (Ayr) | Reld, William Allan (Derby) | Wardlaw-Milne, Sir John S. |
| McCorqucdale, M. S. | Rhys, Hon. Charles Arthur U. | Warrender, Sir victor A. G. |
| Macdonald, Sir Murdoch (Inverness) | Ropner, Colonel L. | Waterhouse, Captain Charles |
| McKie, John Hamilton | Rosbotham, Sir Samuel | Watt, Captain George Steven H. |
| Macquisten, Frederick Alexander | Ross Taylor, Walter (Woodbridge) | Wayland, Sir William A. |
| Maitland, Adam | Ruggles-Brise, Colonel E. A. | Wells, Sydney Richard |
| Manningham-Buller, Lt.-Col. Sir M. | Runge, Norah Cecil | Weymouth, Viscount |
| Margesson, Capt. Rt. Hon. H. D. R. | Russell, Alexander West (Tynemouth) | Whyte, Jardine Bell |
| Marsden, Commander Arthur | Russell, Hamer Field (Sheffield, B'talde) | Williams, Herbert G. (Croydon, S.) |
| Mayhew, Lieut.-Colonel John | Russell, R. J. (Eddlsbury) | Wills, Wilfrid D. |
| Meller, sir Richard James | Rutherford, Sir John Hugo (Liverp'l) | Wilson, Lt.-Col. Sir Arnold (Hertf'd) |
| Merrlman, Sir F. Boyd | Salt, Edward W. | Wilson, Clyde T. (West Toxteth) |
| Mills, Sir Frederick (Leyton, E.) | Samuel, Sir Arthur Michael (F'nham) | Windsor-Cive, Lieut-Colonel George |
| Mills, Major J. D. (New Forest) | Sandeman, Sir A. N. Stewart | Winterton, Rt. Hon. Earl |
| Mitchell, Harold P.(Br'tf'd & Chisw'k) | Sanderson, Sir Frank Barnard | Womersley, Walter James |
| Mitchell, Sir W. Lane (Streatham) | Shaw, Helen B. (Lanark, Bothwell) | Wood, Rt. Hon. Sir H. Kingsley |
| Monsell, Rt. Hon. Sir B. Eyres | Slater, John | Worthington, Dr. John V. |
| Morgan, Robert H. | Smiles, Lieut.-Col. Sir Walter D. | Young, Rt. Hon. Sir Hilton (S'v'noaks) |
| Morris, John Patrick (Salford, N.) | Smith, Louis W. (Sheffield, Hallam) | |
| Morris-Jones, Dr. J. H. (Denbigh) | Smith, R. W. (Ab'rd'n & Kinc'dlne, C.) | TELLERS FOR THE NOES.— |
| Morrison, William Shephard | Smith-Carlngton, Neville W. | Lieut.-Colonel Sir A. Lambert Ward |
| Munro, Patrick | Smithers, Waldron | and Mr.Blindell. |
| Nation, Brigadier-General J. J. H. | Somervell, Donald Bradley |
§ 5.29 p.m.
§ Mr. LEONARDI beg to move, in page 18, line 30, after the word "surplus," to insert the words:
(other than any profit or surplus allocated by a society towards the reduction of a suspense account existing on the first day of April, nineteen hundred and thirty-three, and arising out of losses sustained prior to that date).This point is different from that which has been discussed already, and in order to get it into its proper perspective I would like to refer to the position which unemployment occupies in the country. We know that certain parts of the country are affected by it to a greater degree than others, and a number of hon. Members have laboured for quite a while in this House in an endeavour to get special recognition for what are called "the depressed areas." They have discussed various proposals which they have felt would be of advantage to them, and the position of those depressed areas has been brought under review. In general, business there has been bad. Those who 686 have travelled through them must have been impressed with the aspect presented by many of the shopping centres there. Many of those shopping centres are not confined to one class of person. They have a varied clientele from which they do their trade. Co-operative societies practically depend upon working-class people coming into their shops to trade, people who to an amazing degree have been the victims of reduced purchasing power. Because of that, some co-operative societies in those areas have been involved in substantial losses. In the depressed areas, many societies have granted credit to the unemployed, and it is now recognised that recovery of the money is practically impossible—if any hope exists, it is very slight. Some of the societies have therefore carried those losses to a suspense account, to which it has been the practice to allocate a portion of trading surplus for the reduction of that suspense account.We suggest in this Amendment that it is reasonable to ask that tax should not 687 be levied upon sums so allocated. J want to keep this argument as simple as I can, and I think that what I have said covers the attitude which we desire the House to adopt in regard to these suspense accounts. I am well within the truth in stating that any losses that were incurred by the revenue would be negligible in comparison with the advantages that have been gained through the work which has been done by co-operative societies in the past. In order to strengthen that contention, I propose to give one quotation from the evidence before the Committee of Inquiry to show that some consideration should be placed in the balance against any loss which may be suffered by the national revenue as a result of the adoption of this Amendment. I shall read part of the evidence that was submitted on behalf of the Parliamentary Committee by Mr. Alexander who referred to Sheffield and who said in paragraph 1033:
If I may revert to Sheffield for a particular period in illustration of what I have in mind, in 1921 we had roughly 60,000 unemployed. We had exhausted the whole of our possible rate revenue"—he is speaking for the City of Sheffield—for Poor Law purposes, we were forced to borrow from the Ministry of Health, not for capital expenditure but for the current expenditure of relief of the able-bodied unemployed, and in the course of 1921–1922 we had to borrow £1¼ million sterling. We are to-day in 1932 paying a 6d. rate for the liquidation for that debt for current expenditure on Poor Law in 1921-1922.That was the position he displayed that the City of Sheffield was placed in.In that same period we paid out in the City of Sheffield in the co-operative societies, to the very great damage at the time of their financial stability, something approaching £1,000,000. The extra charge upon the locality"—I suggest that this is well put—would undoubtedly have been almost double but for the existence of the thrift results of the Co-operative members in that distressed area.That is the only part of the country to which I am going to refer. Similar activities on the part of co-operative societies throughout Great Britain in the last 11 years have been responsible for relief in this form of well over £400,000,000. I respectfully submit that that is an excellent contribution to put aaginst any loss that might be sustained by the Revenue Department in granting 688 a recognition for suspense accounts such as I have asked for in this Amendment.
§ 5.36 p.m.
§ Mr. CHARLES BROWNI beg to second the Amendment. I do not think that it is necessary to add very much to the admirable speech which has been made by the hon. Member for St. Rollox (Mr. Leonard) in moving it, and I hope that the Financial Secretary to the Treasury will be able to tell us that the Government are prepared to make a concession. They have made no concession whatever in regard to the co-operative tax. The case which has just been stated merits very serious consideration by the Financial Secretary to the Treasury. Everybody knows that the vast mass of the membership of the co-operative societies consists of the working-class, that in times of trade depression the purchasing power of the working-class declines, and, in certain areas, owing to exceptional circumstances—take mining areas as an illustration—it has been necessary for societies to give credit to their members. The long-continued economic depression has made it impossible for members of societies to meet their obligations, and consequently the societies have set up a suspense account out of their surpluses, hoping to liquidate their liabilities in the end. The Government might very well make this concession by not taxing any part of the surplus which is allocated for that purpose.
§ 5.39 p.m.
§ Mr. HORE-BELISHAI gather that the case put forward by the hon. Member for St. Rollox (Mr. Leonard) who moved the Amendment is that, in the past, certain societies have made bad debts and have written them off and, instead of charging them against the profits of the year, have carried them to suspense accounts which are being gradually liquidated out of current profits. If I understood the hon. Gentleman aright, that was his case, and he desires that those past losses should be allowed as deductions in computing present Income Tax liability. The proposal, on the face of it, seems quite reasonable. Under the Income Tax law, losses are allowed to be carried forward in certain instances. The State can well afford to allow that, because it receives a tax upon the profits. Here, however, we are not looking into the past at all. The societies have paid 689 no tax on their profits in the past, and it would be quite impossible to examine the books of every society for an unlimited period or even for a limited period backwards in order to ascertain what society, if any, had a right to carry forward certain losses.
It would be an impossible proposal to carry into effect administratively. The hon. Gentleman is asking that we should apply proposals retroactively where they suit him but not where they suit us. In other words, we are not to get any Income Tax on profits which were made in the past, but we are to bear the brunt of the losses by allowing them to be carried forward. While I have every sympathy with what the hon. Gentleman has said, and do not in the least deny that certain societies have acted with great public spirit, he cannot expect a special provision to be put upon the Statute Book which would mulct the State in certain sums which might be due to it in the future, but which would give it no advantage in respect of profits made in the past.
§ 5.42 p.m.
§ Mr. TINKERDo I take it, from the reply of the Financial Secretary to the
§ Treasury, that in future this provision would be allowed by the Treasury, and that it would apply to co-operative societies as to any other societies. The hon. Member for Mansfield (Mr. C. Brown) referred to the mining areas. Suppose that in 1934 the miners are involved in another lock-out, that the same thing happens in the way of help given by co-operative societies and bad debts are created and that, owing to the unfortunate circumstances, redemption cannot be made. Do I take it that the Treasury will be prepared to meet us on the lines suggested in the Amendment? If the hon. Gentleman can come to that understanding, we might very well withdraw the Amendment.
§ Mr. HORE-BELISHAYes, Sir. The position in future will be exactly the same for co-operative societies as for incorporated companies, and it will be possible to carry forward losses on exactly the same principle.
§ Question put, "That those words be there inserted in the Bill."
§ The House divided: Ayes, 65; Noes, 263.
691| Division No. 229.] | AYES. | [5.44 p.m. |
| Adams, D. M. (Poplar, South) | George, Major G. Lloyd (Pembroke) | Mallalieu, Edward Lancelot |
| Attlee, Ciement Richard | Grenfell, David Rees (Glamorgan) | Mander, Geoffrey le M. |
| Sanfield, John William | Griffith, F. Kingeley (Middlesbro',W). | Mason, David M. (Edinburgh, E.) |
| Batey, Joseph | Grundy, Thomas W. | Owen, Major Goronwy |
| Bernays, Robert | Hamilton, Sir R. W.(Orkney & Zetl'nd) | Parkinson, John Allen |
| Bevan, Aneurin (Ebbw Vale) | Harris, Sir Percy | Pickering, Ernest H. |
| Brown, C. W. E. (Nottt., Manifield) | Hirst, George Henry | Price, Gabriel |
| Buchanan, George | Holdsworth, Herbert | Rea, Walter Russell |
| Cape, Thomas | Janner, Barnett | Roberts, Aled (Wrexham) |
| Cocks, Frederick Seymour | Jenkins, Sir William | Salter, Dr. Alfred |
| Cove, William G. | Johnstone, Harcourt (S. Shields) | Samuel, Rt. Hon. Sir H. (Darwen) |
| Cowan, D. M. | Jones, Henry Haydn (Merioneth) | Sinclair, Maj. Hi. Hn. Sir A. (C'thness) |
| Cripps, Sir Stafford | Jones, Morgan (Caerphilly) | Smith, Tom (Normanton) |
| Curry, A. C. | Kirkwood, David | Tinker, John Joseph |
| Daggar, George | Lansbury, Rt. Hon. George | White, Henry Graham |
| Davies, David L. (Pontypridd) | Lawson, John James | Williams, Edward John (Ogmore) |
| Davles, Rhys John (Westhoughton) | Leonard, William | Williams, Dr. John H. (Llanelly) |
| Dobble, William | Logan, David Gilbert | Williams, Thomas (York, Don Valley) |
| Edwards, Charles | Lunn, William | Wood, Sir Murdoch McKenzle (Banff) |
| Evans, David Owen (Cardigan) | McEntee, Valentine L. | |
| Evans, R. T. (Carmarthen) | Maclay, Hon. Joseph Paton | TELLERS FOR THE AYES.— |
| Foot, Dingle (Dundee) | Maclean, Nell (Glasgow, Govan) | Mr. John and Mr. C. Macdonald. |
| Foot, Isaac (Cornwall, Bodmin) | Mainwaring, William Henry | |
| NOES | ||
| Acland-Troyte, Lieut.-Colonel | Balley, Eric Alfred George | Bennett, Capt. Sir Ernest Nathaniel |
| Adams, Samuel Vyvyan T. (Leeds, W.) | Baldwin, Rt. Hon. Stanley | Birchall, Major Sir John Dearman |
| Albery, Irving James | Balniel, Lord | Borodale, Viscount |
| Allen, Sir J. Sandeman (Llverp'l, W.) | Banks, Sir Reginald Mitchell | Boulton, W, W. |
| Amery, Rt. Hon. Leopold C. M. S. | Barclay Harvey, C. M. | Bowyer, Capt. Sir George E. W. |
| Anstruthar-Gray, W. J. | Barrle, Sir Charles Coupar | Boyce, H. Leslle |
| Applin, Lieut.-Col. Reginald V. K. | Beauchamp, Sir Brograve Campbell | Bracken, Brendan |
| Apsley, Lord | Beaumont, M. W. (Bucks., Aylesbury) | Braithwaite, Maj. A. N. (Yorks, E.R.) |
| Astbury, Lieut-Com. Frederick Wolfe | Beaumont, Hon. R.E.B. (Portsm'th.c.) | Braithwaite, J. G. (Hillsborough) |
| Astor, Maj. Hn. John J. (Kent, Dover) | Belt, Sir Alfred L. | Briscoe, Capt. Richard George |
| Atholl, Duchess of | Benn, Sir Arthur Shirley | Broadbent, Colonel John |
| Brockiebank, C. E. R. | Hales, Harold K. | Percy, Lord Eustace |
| Brown, Col. D. C. (N'th'I'd., Hexham) | Hamilton, Sir George (Word) | Perkins, Walter R. D. |
| Brown, Brig.-Gen. H.C. (Berks., Newb'y) | Hammersley, Samuel S. | Petherick, M. |
| Browne, Captain A. C. | Hanbury, Cecil | Peto, Sir Basil E. (Devon, Barnstaple) |
| Buchan, John | Hanley, Dennis A. | Peto, Geoffrey K.(W'verh'pt'n, Bllst' n) |
| Buchan-Hepburn, P. G. T. | Hartington, Marquess of | Pickford, Hon. Mary Ada |
| Burgin, Dr. Edward Leslie | Hartland, George A. | Pike, Cecil F. |
| Burnett, John George | Haslam, Henry (Horncastle) | Power, Sir John Cecil |
| Cadogan, Hon. Edward | Headlam, Lieut.-Col. Cuthbert M. | Pownall, Sir Assheton |
| Campbell, Sir Edward Taswell (Brmly) | Hellgers, Captain F. F. A. | Ramsay, Alexander (W. Bromwich) |
| Caporn, Arthur Cecil | Henderson, Sir Vivian L. (Chelmsford) | Ramsay, Capt. A. H. M. (Midlothian) |
| Castlereagh, Viscount | Heneage, Lieut.-Colonel Arthur P. | Ramsay, T. B. W. (Western Isles) |
| Cayzer, Sir Charles (Chester, City) | Herbert, Capt. S. (Abbey Division) | Ramsbotham, Herwald |
| Cayzer, Maj. Sir H. R. (Prtsmth., S.) | Hills, Major Rt. Hon. John Waller | Ramsden, Sir Eugene |
| Chamberlain, Rt. Hon. Sir J.A. (Blrm.,W) | Hope, Capt. Hon. A. O. J. (Aston) | Rawson, Sir Cooper |
| Chapman, Col. R. (Houghton-le-Spring) | Hope, Sydney (Chester, Stalybridge) | Reld, David D. (County Down) |
| Chapman, Sir Samuel (Edinburgh, S.) | Hore-Belisha, Leslie | Reld, William Allan (Derby) |
| Choriton, Alan Ernest Leofric | Hornby, Frank | Rhys, Hon. Charles Arthur U. |
| Christie, James Archibald | Horne, Rt. Hon. Sir Robert S | Roberts, Sir Samuel (Ecclesall) |
| Clarke, Frank | Horobin, Ian M. | Ropner, Colonel L. |
| Clarry, Reginald George | Horsbrugh, Florence | Rosbotnam, Sir Samuel |
| Clayton, Sir Christopher | Howitt, Dr. Alfred S. | Ross Taylor, Walter (Woodbridge) |
| Colville, Lieut.-Colonel J. | Hudson, Capt. A. U. M. (Hackney, N.) | Ruggles-Brise, Colonel E. A. |
| Conant, R. J. E. | Hudson, Robert Spear (Southport) | Runge, Norah Cecil |
| Cook, Thomas A. | Hume, Sir George Hopwood | Russell, Alexander West (Tynemouth) |
| Cooke, Douglas | Hunter-Weston, Lt.-Gen. Sir Aylmer | Russell, Hamer Field (Sheffield, B'tslde) |
| Cooper, A. Duff | Hurst, Sir Gerald B. | Rutherford, Sir John Hugo (Liverp'l) |
| Copeland, Ida | Jackson, Sir Henry (Wandsworth, C.) | Salt, Edward W. |
| Courthope, Colonel Sir George L. | Jamleson, Douglas | Samuel, Sir Arthur Michael (F'nham) |
| Craddock, Sir Reginald Henry | jesson, Major Thomas E. | Sandeman, Sir A. N. Stewart |
| Croft, Brigadier-General Sir H. | Joel, Dudley J. Barnato | Sanderson, Sir Frank Barnard |
| Crooke, J. Smedley | Johnston, J. W. (Clackmannan) | Shaw, Helen B. (Lanark, Bothwell) |
| Crookshtank, Col. C. de Windt (Bootle) | Ker, J. Campbell | Slater, John |
| Cross, R. H. | Kerr, Hamilton W. | Smiles, Liut.-Col. Sir Walter D. |
| Cruddas, Lieut.-Colonel Bernard | Kimball, Lawrence | Smith, Louis W. (Sheffield, Hallam) |
| Dalkeith, Earl of | Lamb, Sir Joseph Quinton | Smith, R. W. (Ab'rd'n & Kic'dlne, C.) |
| Davidson, Rt. Hon. J. C. C. | Law, Richard K. (Hull, S.W.) | Smith-Carington, Neville w. |
| Dawson, Sir Philip | Leech, Dr. J. W. | Smithers, Waldron |
| Denman, Hon. R. D. | Lees-Jones, John | Somervell, Donald Bradley |
| Despencer-Robertson, Major J. A. F. | Leighton, Major B. E. P. | Somerville, Annesley A. (Windsor) |
| Dixon, Rt. Hon. Herbert | Lewis, Oswald | Sotheron-Estcourt, Captain T. E. |
| Donner, P. W. | Llddall, Walter S. | Spears, Brigadier-General Edward L. |
| Doran, Edward | Lloyd, Geoffrey | Spencer, Captain Richard A. |
| Dower, Captain A. V. G. | Locker-Lampson, Rt. Hn. G. (Wd.Gr'n) | Spender-Clay, Rt. Hon. Herbert H. |
| Drewe, Cedric | Lockwood, John C. (Hackney, C.) | Stanley, Lord (Lancaster, Fyide) |
| Duckworth, George A. V. | Lumley, Captain Lawrence R. | Stanley, Hon. O. F. G. (Westmorland) |
| Duggan, Hubert John | Lyons, Abraham Montagu | Strickland, Captain W. F. |
| Eady, George H. | MacAndrew, Lt.-Col. C. G. (Partick) | Stuart, Lord C. Crichton- |
| Edmondson, Major A. J. | Mac Andrew, Capt. J. O. (Ayr) | Sueter, Rear-Admiral Murray F. |
| Ellis, Sir R. Geoffrey | McCorquodale, M. S. | Thompson, Luke |
| Elmley, Viscount | McKie, John Hamilton | Thorp, Linton Theodore |
| Emmott, Charles E. G. C. | Macmillan, Maurice Harold | Todd, A. L. S. (Kingswinford) |
| Emrys-Evans, P. V. | Macquisten, Frederick Alexander | Train, John |
| Erskine, Lord (Weston-super-Mare) | Maitland, Adam | Tryon, Rt. Hon. George Clement |
| Essenhigh, Reginald Clare | Manningham-Buller, Lt.-Col. Sir M. | Turton, Robert Hugh |
| Everard, W. Lindsay | Margesson, Capt. Rt. Hon. H. D. R. | Vaughan-Morgan, Sir Kenyon |
| Fielden, Edward Brockiehurst | Marsden, Commander Arthur | Wallace, Captain D. E. (Hornsey) |
| Ford, Sir Patrick J. | Mayhew, Lieut.-Colonel John | Ward, Irene Mary Bewick (Wallsend) |
| Forestler-Walker, Sir Leolln | Meller, Sir Richard James | Ward, Sarah Adelaide (Cannock) |
| Fox, Sir Gifford | Merriman, Sir F. Boyd | Wardlaw-Milne, Sir John S. |
| Fraser, Captain Ian | Mills, Sir Frederick (Leyton, E.) | Warrender, Sir Victor A. G. |
| Fuller, Captain A. G. | Mills, Major J. D. (New Forest) | Waterhouse, Captain Charles |
| Gauit, Lieut.-Col. A. Hamilton | Mitchell, Harold P.(Br'tfd & Chisw'k) | Watt, Captain George Steven H. |
| Gibson, Charles Granville | Mitchell, Sir W. Lane (Streatham) | Wayland, Sir William A. |
| Gillett, Sir George Masterman | Monsell, Rt. Hon. Sir B. Eyres | Wells, Sydney Richard |
| Gilmour, Lt.-Col. Rt. Hon. Sir John | Morgan, Robert H. | Weymouth, Viscount |
| Gluckstein, Louis Halle | Morris, John Patrick (Salford, N.) | Whyte, Jardine Bell |
| Goff, Sir Park | Morrison, William Shephard | Williams, Herbert G. (Croydon, S.) |
| Goodman, Colonel Albert W. | Munro, Patrick | Wills, Wilfrid D. |
| Gower, Sir Robert | Nation, Brigadier-General J. J. H. | Wilson, Lt.-Col. Sir Arnold (Hertf'd) |
| Graham, Sir F. Fergus (C'mb'rl'd, N.) | Newton, Sir Douglas George C. | Windsor, Clive, Lieut-Colonel George |
| Grattan-Doyle, Sir Nicholas | Normand, Wilfrid Guild | Womersley, Walter James |
| Greaves-Lord, Sir Walter | Nunn, William | Wood, Rt. Hon. Sir H. Kingstey |
| Gretton, Colonel Rt. Hon. John | O'Neill, Rt. Hon. Sir Hugh | Worthington, Dr. John V. |
| Grigg, Sir Edward | Ormsby-Gore, Rt. Hon. William G.A. | |
| Grimston, R. V. | Patrick, Colin M. | TELLERS FOR THE NOES.— |
| Gunston, Captain D. W. | Peake, Captain Osbert | Lieut-Colonel Sir A. Lambert Ward |
| Hacking, Rt. Hon. Douglas H. | Peat, Charles U. | and Commander Southby. |
§ 5.54 p.m.
§ Mr. DAVID GRENFELLI beg to move, in page 18, line 30, after the word "surplus," to insert the words: 692
(other than any profit or surplus allocated by a society towards the restoration of members' share capital to its par value).693 I regret that I was not here when the last Amendment was being discussed, to join with my colleagues on these benches in their appreciation of the kindly spirit which is now beginning to manifest itself on the opposite side of the House. I hope that I shall say nothing which will detract from or diminish that kindly spirit, and that I may' be successful in eliciting a still warmer response to the request that I am now making. I believe that every Member of the House, if he were to adjudicate on his own initiative, without any party prejudice or sense of loyalty to the Chancellor of the Exchequer or the Financial Secretary, would be disposed to say that this is a reasonable Amendment which ought to be accepted.We have no desire to add to the value of the shares held by any individual member, or to the total value of the shares held by societies. As the House knows, the shares of co-operative societies are held in values of £l, in small blocks, never exceeding £200 per shareholder, 200 £l shares being the maximum allowed to an individual shareholder in any society. In the co-operative movement the shares as a rule do not fluctuate; each share is a £l share, and there is no creation of fictitious value. The intention is to give to the shareholder the value of the investment he makes, and there is no attempt to traffic in shares or to exploit either the shareholder, the members in general, or the public who may be invited to acquire these shares. These £l shares are really the result of slender savings carried on over a long period under very great difficulty, and built up in some cases in very small amounts like Is. at a time. Hon. Members will know how the shillings are put one on the top of the other in the savings bank, and, when a sum of 20s. has been acquired, another share is allotted to the member. In that way the holdings mount up gradually, but, as I have said, an individual shareholder can never acquire a very large holding or take advantage of any speculation or traffic in the shares.
These £l shares are a most stable investment, and we find, generally speaking, that there is no necessity to ask for any assistance to maintain the value of the shares. But even co-operative societies are subject to the same strains 694 and stresses as contemporary institutions, and we find that, because of the condition of industry in the neighbourhood in which a society operates, or because of the difficulties of trade and commerce, which are sometimes responsible for a complete breakdown of the local industry, our societies do not always emerge unscathed from the industrial storm which surrounds them, and by which they are sometimes in danger of being overwhelmed. Occasionally there is damage, and the need for re-equipment and repair. This is taken in hand in the interests of the shareholders of the society which has become subject to loss in this way, and it is brought back to solvency by the assistance of a stronger society, which takes the weaker and damaged society under its wing and carries it forward again, or, to use a nautical simile, takes it in tow until the stormy weather has passed and it is safe in harbour again.
The stronger society usually takes over the smaller one and runs the business. In the meantime, in many cases, the value of the shares has run down, so that, if an attempt were made to realise them, they would not realise anything like their original value. The society which takes over the business and assists the original society sees that the business is well managed, and when local industries revive, purchasing power begins to expand, and business increases, the earnings of the society are directed to making the society solvent and restoring the value of its shares. But there is never, in these or any other circumstances, any attempt to raise the value of the shares above the original £l; societies are always satisfied to maintain the share capital at its par value.
In these cases, while some societies sacrifice a great deal in order to help other societies to regain their par value, they never attempt to boost the shares beyond the value of 20s. Sometimes it is the Go-operative Wholesale Society that takes over the care of the weaker society and assumes responsibility for its shares. Occasionally the restoration of value takes a considerable time. I know of several instances in which local societies have been damaged almost beyond any hope of redemption, indeed to such an extent that, if they were private companies, they would disappear in the Bankruptcy Court and would never 695 be heard of again. Because of the fortitude and wonderful capacity for mutuality posessed by our people, the societies are nursed to a solvent condition again. But no one has profited by this. The earnings of the society directed towards the restoration of the share value do not go into anyone's pocket. They simply make good that which has been lost in mutual trading and should, I believe, be regarded as much as the dividends as a proper subject for relief from taxation even under the present proposals of the Chancellor.
My hon. Friend the Member for Aberdare (Mr. G. Hall) called attention to a society in his own division where men and women 30 or 40 years ago had commenced in a small way to. supply themselves with commodities in a mining district, where there are no large establishments and where the variety of purchasable commodities is always very small. After many years of effort, and of considerable advantage to the community, the society fell upon evil days, not because of any mismanagement but because the depression which has so seriously damaged the mining industry and its workpeople equally damaged the institutions for which they are responsible. The society had to be taken over by a larger society. Those who put in 20s. and expected to find 20s. when they came to the end of their working days unhappily find that their expectations are not to be realised. I believe the Financial Secretary and the Chancellor of the Exchequer are sympathetic in a case of this kind, and, while I utterly fail to understand why they have chosen to launch what we regard as an attack upon the principle of mutuality and thrift, we think there is a special case and that it would be no variation even of the intentions of the Government if they meet it. I hope the Financial Secretary will give us a word of encouragement and show by a gesture that he is not deaf to the wishes and ambitions of modest people all over the country who are, after all, the salt of the earth and the very best people in our land. I hope he will give us the concession that we ask for.
§ 6.5 p.m.
§ Mr. HORE-BELISHAI thank the hon. Gentleman for referring to my kindly spirit, but that kindly spirit cannot 696 deflect me from my sense of justice. As I have said many times to-day, because I have been compelled to say it, our purpose is to treat co-operative societies and incorporated companies on exactly the same basis, and that we shall do. If I followed the hon. Gentleman correctly, the case that he was putting before the House was this. A society, which we will call Society "B," is in difficulties. Society "A" wishes to assist Society "B" and takes over its shares, nominally worth a sovereign, at 7s. In order that the shareholders in Society "B" may not suffer loss, Society "A" proceeds to accumulate a redemption fund out of its current profits for the purpose of increasing the 7s. which it has originally given up to a sovereign. Society "A," which has done this kindly, altruistic thing, is worthy of the very highest praise. Plainly, it did not do it for gain. It did it out of what I may term a co-operative spirit, but, if Society "A" wishes to utilise its profits for the purpose of assisting shareholders in Society "B," it must be borne in mind that it is utilising its profits. It is not utilising sums incurred in making those profits. All that you can set off for Income Tax purposes are sums which you have incurred in making your profits.
§ Mr. GRENFELLI do not wish that any investment should be allocated for this purpose. I want the earnings of Society "B" to be allowed to remain for the benefit of the shareholders of Society "B."
§ Mr. HORE-BELISHAI am not sure that I clearly follow what the hon. Gentleman now says, but I thought I followed him originally, and I thought I was carrying him with me when I described step by step the benevolent action of Society "A" towards Society "B." I understood him to wish that Society "A," in making up the value of the shares in Society "B" from 7s. to £l, should be allowed to treat the expenditure so involved as an expense against Income Tax though it is the utilisation of profits.
Let us look at the matter from another angle. An ordinary trading company can increase its share capital, but it does so out of its profits, and those profits are assessable to tax. Suppose it wishes to give its shareholder a bonus of 10s. It 697 gives that bonus out of profits which are liable to tax. If one applies this analogy in the case of a co-operative society, one sees that what the society is doing is giving a bonus to the shareholders of Society "B." We cannot depart from ordinary Income Tax principles. We wish to avoid any charge of discrimination or unfairness being brought against us by putting the co-operative society on exactly the same footing as the ordinary trading company. I am sorry not to be able to do what the hon. Gentleman desires, but
§ what he desires is to place the co-operative society in this respect in a privileged position. I have admitted that the activities of Society "A" as he described them, were magnanimous, but, nevertheless, though Society "A" can utilise its profits in whatever way it desires, you cannot get rid of the fact that they are profits.
§ Question put, "That those words be there inserted in the Bill."
§ The House divided: Ayes, 72; Noes, 240.
699| Division No. 230.] | AYES. | [6.13 p.m. |
| Adams, D. M. (Poplar, South) | Graham, D. M. (Lanark, Hamilton) | Mander, Geoffrey le M. |
| Aske, Sir Robert William | Grenfell, David Rees (Glamorgan) | Mason, David M. (Edinburgh, E.) |
| Attlee, Clement Richard | Griffith, F. Kingsley (Middlesbro',W.) | Maxton, James |
| Banfield, John William | Griffiths, T. (Monmouth, Pontypool) | Owen, Major Goronwy |
| Batty, Joseph | Grundy, Thomas W. | Parkinson, John Allen |
| Bernays, Robert | Hamilton, Sir R. W.(Orkney & Zetl'nd) | Pickering, Ernest H. |
| Bevan, Aneurin (Ebbw Vale) | Harris, Sir Percy | Price, Gabriel |
| Brown, C. W. E. (Notts., Mansfield) | Hirst, George Henry | Rea, Walter Russell |
| Buchanan, George | Holdsworth, Herbert | Roberts, Aled (Wrexham) |
| Cape, Thomas | Janner, Barnett | Salter, Dr. Alfred |
| Cocks, Frederick Seymour | Jenkins, Sir William | Samuel, Rt. Hon. Sir H. (Darwen) |
| Cove, William G. | Johnstone, Harcourt (S. Shields) | Shaw, Captain William T. (Forfar) |
| Cripps, Sir Stafford | Jones, Henry Haydn (Merioneth) | Sinclair, Maj. Rt. Hn. Sir A. (C'thness) |
| Curry, A. C. | Jones, Morgan (Caerphilly) | Smith, Tom (Normanton) |
| Daggar, George | Kirkwood, David | Tinker, John Joseph |
| Davies, David L. (Pontypridd) | Lansbury, Rt. Hon. George | Wallace, John (Dunfermline) |
| Davies, Rhys John (Westhoughton) | Lawson, John James | Wedgwood, Rt. Hon. Joslah |
| Dobble, William | Leonard, William | White, Henry Graham |
| Edwards, Charles | Logan, David Gilbert | Williams, Edward John (Ogmore) |
| Evans, David Owen (Cardigan) | Lunn, William | Williams, Dr. John H. (Lianelly) |
| Evans, R. T. (Carmarthen) | M c Entee, Valentine L. | Williams, Thomas (York., Don Valley) |
| Foot, Dingle (Dundee) | Maclay, Hon. Joseph Paton | Wood, Sir Murdoch McKenzie (Banff) |
| Foot. Isaac (Cornwall, Bodmin) | Maclean, Nell (Glasgow, Govan) | |
| George, Major G. Lloyd (Pembroke) | Mainwaring, William Henry | TELLERS FOR THE AYES.— |
| George, Megan A. Lloyd (Anglesea) | Mallalieu, Edward Lancelot | Mr. John and Mr. G. Macdonald. |
| NOES. | ||
| Acland-Troyte, Lieut.-Colonel | Cadogan, Hon. Edward | Doran, Edward |
| Adams, Samuel Vyvyan T. (Leeds, W.) | Campbell, Sir Edward Taswell (Brmiy) | Dower, Captain A. V. G. |
| Altchison, Rt. Hon. Craigle M. | Caporn, Arthur Cecil | Drewe, Cedric |
| Albery, Irving James | Carver, Major William H. | Duckworth, George A. V. |
| Anstruther-Gray, W. J. | Castiereagh, Viscount | Duggan, Hubert John |
| Applin, Lieut.-Col. Reginald V. K. | Cayzer, Sir Charles (Chester, City) | Eady, George H. |
| Astor, Maj. Hn. John J. (Kent, Dover) | Cayzer, Maj. Sir H. R. (Prtsmth., S.) | Edmondson, Major A. J. |
| Atholl, Duchess of | Chamberlain, Rt. Hon. Sir J.A. (Birm.,W) | Ellis, Sir R. Geoffrey |
| Bailey, Erie Alfred George | Chapman, Col. R.(Houghton-le-Spring). | Eimlsy, Viscount |
| Baldwin, Rt. Hon. Stanley | Chapman, Sir Samuel (Edlnburgh,S.) | Emrys-Evans, P. V. |
| Balfour, Capt. Harold (I. of Thanet) | Christie, James Archibald | Erskine, Lord (Weston-super-Mare) |
| Bainlel, Lord | Clarke, Frank | Essenhigh, Reginald Clara |
| Banks, Sir Reginald Mitchell | Clarry, Reginald George | Everard, W. Lindsay |
| Barclay-Harvey, C M. | Clayton, Sir Christopher | Fielden, Edward Brockiehurst |
| Barrle, Sir Charles Coupar | Cobb, Sir Cyril | Ford, Sir Patrick J. |
| Beauchamp, Sir Brograve Campbell | Conant, R. J. E. | Forestler-Walker, Sir Leolln |
| Beaumont, Hon. R.E.B. (Portsm'th.C.) | Cook, Thomas A. | Fox, Sir Glfford |
| Belt, Sir Alfred L. | Cooke, Douglas | Fraser, Captain Ian |
| Bennett, Capt. Sir Ernest Nathaniel | Cooper, A. Duff | Fuller, Captain A. G. |
| Birchall, Major Sir John Dearman | Copeland, Ida | Gautt, Lieut.-Col. A. Hamilton |
| Blindell, James | Courthope, Colonel Sir George L. | Gibson, Charles Granville |
| Borodale, Viscount | Cowan, D. M. | Gillett, Sir George Masterman |
| Boulton, W. W, | Craddock, Sir Reginald Henry | Gluckstein, Louis Halle |
| Bowyer, Capt. Sir George E. W. | Cranborne, Viscount | Goff, Sir Park |
| Boyce, H. Leslle | Crooke, J. Smedley | Goodman, Colonel Albert W |
| Braithwalte, J. G. (Hillsborough) | Crookshank, Col. C. de windt (Bootle) | Gower, Sir Robert |
| Broadbent, Colonel John | Cross, R. H. | Graham, Sir F. Fergus (C'mb'rl'd, N.) |
| Brocklebank, C. E. R. | Dalkeith, Earl of | Grattan-Doyle, Sir Nicholas |
| Brown, Col. D. C. (N'thTd, Hexham) | Davidson, Rt. Hon. J. C. C. | Greaves-Lord, Sir Walter |
| Brown, Brig.-Gen. H.C. (Berks., Newb'y) | Dawson, Sir Philip | Gretton, Colonel Rt. Hon. John |
| Browns, Captain A. C. | Denman, Hon. R. D. | Grimston, R. V. |
| Buchan, John | Despencer-Robertson, Major J. A. F. | Gunston, Captain D, W. |
| Buchan-Hepburn, P. G. T, | Dixon, Rt. Hon. Herbert | Hacking, Rt. Hon. Douglas H. |
| Burnett, John George | Donner, P. W, | Hales, Harold K. |
| Hammersley, Samuel S. | Mayhew, Lieut.-Colonel John | Salt, Edward W. |
| Hanbury, Cecil | Merriman, Sir F. Boyd | Samuel, Sir Arthur Michael (F'nham) |
| Haniy, Dennis A. | Mills, Sir Frederick (Leyton, E.) | Sandeman, Sir A. N. Stewart |
| Harbord, Arthur | Mills, Major J. D. (New Forest) | Sanderson, Sir Frank Barnard |
| Hartland, George A. | Mitchell, Harold P.(Br'tt'd & Chisw'k) | Shaw, Helen B. (Lanark, Bothwell) |
| Haslam, Henry (Horncastle) | Mitchell, Sir W. Lane (Streatham) | Slater, John |
| Headlam, Lieut.-Col. Cuthbert M. | Molson, A. Hugh Eisdale | Smith, Louie W. (Sheffield, Hallam) |
| Hellgers, Captain F. F. A. | Monsell, Rt. Hon. Sir B. Eyree | Smith, R. W. (Ab'rd'n & Kinc'dine, C.) |
| Henderson, Sir Vivlan L. (Cheimsford) | Morgan, Robert H. | Smith-Carington, Neville W. |
| Hope, Capt. Hon. A. O. J. (Aston) | Morris, John Patrick (Salford, N.) | Smithers, Waldron |
| Hope, Sydney (Chester, Stalybridge) | Morris-Jones, Dr. J. H. (Denbigh) | Somervell, Donald Bradley |
| Hore-Belisha, Lesiie | Morrison, William Shepherd | Somerville, Annesley A. (Windsor) |
| Hornby, Frank | Munro, Patrick | Sotheron-Estcourt, Captain T. E. |
| Horne, Rt. Hon. Sir Robert S. | Nation, Brigadier-General J. J. H. | Southby, Commander Archibald R. J. |
| Horobin, Ian M. | Newton, Sir Douglas George C. | Spears, Brigadier-General Edward L. |
| Horsbrugh, Florence | Normand, Wilfrid Guild | Spencer, Captain Richard A. |
| Hudson, Capt. A. U. M. (Hackney,N.) | O'Neill, Rt. Hon. Sir Hugh | Spender-Clay, Rt. Hon. Herbert H. |
| Hume, Sir George Hopwood | Ormsby-Gore, Rt. Hon. William G. A. | Stanley, Lord (Lancaster, Fylde) |
| Hunter-Weston, Lt.-Gen. Sir Aylmer | Patrick, Colin M. | Stanley, Hon. O. F. G. (Westmorland) |
| Jackson, Sir Henry (Wandsworth, C.) | Peake, Captain Osbert | Strauss, Edward A. |
| Jamleson, Douglas | Percy, Lord Eustace | Strickland, Captain W. F. |
| Jesson, Major Thomas E. | Petherick, M. | Stuart, Lord C. Crichton- |
| Joel, Dudley J. Barnato | Peto, Sir Basil E. (Devon, Barnstaple) | Sugden, Sir Wilfrid Hart |
| Johnston, J. W. (Clackmannan) | Peto, Geoffrey K.(W'verh'pt'n, Bilston) | Thomson, Sir Frederick Charles |
| Jones, Lewis (Swansea, West) | Pike, Cecil F. | Thorp, Linton Theodore |
| Ker, J. Campbell | Power, Sir John Cecil | Todd, A. L. S. (Kingswinford) |
| Kerr, Hamilton W. | Pownall, Sir Assheton | Train, John |
| Kimball, Lawrence | Raikes, Henry V. A. M. | Tryon, Rt. Hon. George Clement |
| Lamb, Sir Joseph Quinton | Ramsay, Alexander (W. Bromwich) | Turton, Robert Hugh |
| Law, Richard K. (Hull, S.W.) | Ramsay, Capt. A.H. M. (Midlothian) | Vaughan-Morgan, Sir Kenyon |
| Leech, Dr. J. W. | Ramsay, T. B. W. (Western Isles) | Wallace, Captain D. E. (Hornsey) |
| Leighton, Major B. E. P. | Ramsden, Sir Eugene | Ward, Lt.-Col. Sir A. L. (Hull) |
| Lennox-Boyd, A. T. | Rawson, Sir Cooper | Ward, Sarah Adelaide (Cannock) |
| Lewis, Oswald | Reld, David D. (County Down) | Wardlaw-Milne, Sir John S. |
| Liddall, Walter S. | Reld, William Allan (Derby) | Warrender, Sir Victor A. G. |
| Lloyd, Geoffrey | Rhys, Hon. Charles Arthur U. | Waterhouse, Captain Charles |
| Lockwood, John C. (Hackney, C.) | Roberts, Sir Samuel (Ecclesall) | Wells, Sydney Richard |
| Lumley, Captain Lawrence R. | Ropner, Colonel L. | Weymouth, Viscount |
| Lyons, Abraham Montagu | Rosbotham, Sir Samuel | Whyte, Jardine Bell |
| McCorquodale, M. S. | Ross Taylor, Walter (Woodbridge) | Williams, Herbert G. (Croydon, S.) |
| McKie, John Hamilton | Ruggles-Brise, Colonel E. A. | Wills, Willfrid D. |
| Macmillan, Maurice Harold | Runge, Norah Cecil | Wilson, Lt.-Col. Sir Arnold (Hertf'd) |
| Macquisten, Frederick Alexander | Russell, Alexander West (Tynemouth) | Windsor-Clive, Lieut.-Colonel George |
| Manningham-Buller, Lt.-Col. Sir M. | Russell, Hamer Field (Sheffield, B'tslde) | Wood, Rt. Hon. Sir H. Kingsley |
| Margesson, Capt. Rt. Hon. H. D. R. | Russell, R. J. (Eddlsbury) | |
| Marsden, Commander Arthur | Rutherford, Sir John Hugo (Llverp'l) | TELLERS FOR THE NOES.— |
| Mason, Col. Glyn K. (Croydon, N.) | Salmon, Sir Isldore | Sir George Penny and Mr. |
| Womersley. |
§ Mr. SPEAKERI do not select the next two Amendments, that in the name of the hon. Member for Govan (Mr. Maclean)—in page 18, line 30, after the word "surplus," to insert the words,
(other than any profit or surplus allocated by a society for promoting the health and social welfare of its members).—and that in the name of the hon. Member for Gower (Mr. D. Grenfell)—in page 18, line 38, at the end, to insert the words:Provided that in the case of registered societies the charge to tax in respect of such profits or surplus shall not exceed one-eighth of the standard rate.The next Amendment on the Paper in the name of the hon. Member for Roth-well (Mr. Lunn)—in page 18, line 38, at the end, to insert the words:Provided that for the year 1933–34 allowances for depreciation in respect of any society shall be based upon the provisions for depreciation laid down in any rules of the society in force on the first day of April, nineteen hundred and thirty-three.700 —is not in order, because it might entail a charge.
§ Mr. LEONARDThis Amendment is of immense importance in view of the number of people involved. Co-operative societies are, as you are aware, Mr. Speaker, tied by rules to depreciation and they have no alternative but to apply the rules of 1932, and the assessment for the year 1933–34 will be based upon those rules. They will have no opportunity of modifying them to meet the changed circumstances, and I ask whether it is not possible to have the matter taken?
§ Mr. SPEAKERNo. I am afraid that I cannot take the Amendment, because it clearly would be out of order. In considering these questions I do not have only to consider whether the effect of some Amendment will necessarily be that a higher rate of taxation is imposed than if the Bill was left as it was originally. I have to think whether it might possibly in any circumstances have that 701 effect, and I came to the conclusion, after studying the Amendment, that in this case it might have that effect. It is possible that in some cases the rules of the society as to allowances for depreciation would prove more onerous than the ordinary provision of the Income Tax Acts, and, if so, the Amendment would result in the society having to pay more tax than it would have to pay under the Clause as it stands at present.
§ Mr. LEONARDThank you very much. I appreciate the position.
§ 6.23 p.m.
§ Mr. CHARLES BROWNI beg to move, in page 19, line 17, at the end, to insert the words:
and where any sum which has been assessed for tax in accordance with the provisions of this section is subsequently granted by the company or society to members or other persons as a discount, rebate, dividend, or bonus within the meaning of this Sub-section, the company or society shall be entitled to a refund of any tax which may have been paid thereon.It is obvious that under the Clause sums put to reserve will be depleted by the amount of the tax which will have to be paid. If at some future time it becomes necessary to withdraw funds from the taxed reserve fund in order to maintain dividend on purchases which is not taxable, it is reasonable to ask that the tax upon the amount withdrawn for the purpose shall be refunded in order to replace into the reserve fund the amount of tax by which it has been depleted. From the arguments which have been advanced in connection with this tax from stage to stage by the Chancellor of the Exchequer and by the Financial Secretary to the Treasury, there is no intention, we are assured, on the part of the Government to tax what is usually called "divi," and obviously it must follow from that that there can be no intention on the part of the Government to tax any moneys used in any circumstances for the payment of dividend. Consequently I feel encouraged in bringing forward the Amendment. At any rate, I hope that the Financial Secretary to the Treasury will tell us that this is the one Amendment which at least can be accepted.We are simply seeking to ensure by the Amendment that the amounts which are actually used for the purposes of paying dividend on purchases, whether they come 702 out of the current year's surplus or out of the previous year's reserves, shall not be subject to tax. It will be extremely interesting to see how the Financial Secretary to the Treasury gets out of what I consider to be a dilemma if he does not accept the Amendment. The Government have repeatedly assured the House that in no circumstances do they wish to tax "divi." Therefore, if in any one year certain moneys are put aside into a fund which in a subsequent year have to be taken out solely for the purpose of paying "divi", we are entitled to ask that on such sums a rebate should be granted. I am encouraged to hope that, at any rate, in connection with the Amendment the Financial Secretary to the Treasury will tell us that he will make this one concession. It will be the only concession the Government have made, if they make it, in regard to the co-operative tax, and I very much hope that the hon. Gentleman will announce a concession on this occasion.
§ Mr. LEONARDI beg to second the Amendment.
§ 6.27 p.m.
§ Mr. HORE-BELISHAWe allowed the "divi" to be treated as a trade expense. That is clear. If money is put to reserve it pays the tax. The hon. Gentleman who moved the Amendment wants this position to arise. If they take the money out of reserve at a subsequent period they shall get back the tax. But we allow the same sum of money in effect by allowing the money to be treated as a trade expense. If it be taken out of the reserve and used to pay "divi", we treat it as a trade expense. The effect of the proposal of the hon. Gentleman would be that, not only would the Inland Revenue have to pay back the Income Tax or allow the Income Tax on it, but also to treat it as a trade expense. Therefore, the society, far from being taxed, would be making a profit. It is a very calm request, and I can hardly think that the hon. Gentleman was serious when he argued that the tax should be recouped and the same sum of money allowed again as a trade expense.
§ Question put, "That those words be there inserted in the Bill."
§ The House divided: Ayes, 67; Noes 240.
705| Division No. 231.] | AYES. | [6.29 p.m. |
| Adams, D. M. (Poplar, South) | George, Major G. Lloyd (Pembroke) | Mainwaring, William Henry |
| Aske, Sir Robert William | George, Megan A. Lloyd (Anglesea) | Mallalieu, Edward Lancelot |
| Attlee, Clement Richard | Graham, D. M. (Lanark, Hamilton) | Mander, Geoffrey le M. |
| Banfield, John William | Greenwood, Rt. Hon. Arthur | Maxton, James |
| Batey, Joseph | Grenfell, David Rees (Glamorgan) | Owen, Major Goronwy |
| Bernays, Robert | Griffith, F. Kingsley (Middlesbro'.W.) | Parkinson, John Allen |
| Sevan, Aneurin (Ebbw Vale) | Griffiths, T. (Monmouth, Pontypool) | Pickering, Ernest H. |
| Brown, C. W. E. (Notts., Mansfield) | Grundy, Thomas W. | Price, Gabriel |
| Buchanan, George | Hamilton, Sir R. W.(Orkney & Zetl'nd) | Rea, Walter Russell |
| Cape, Thomas | Harris, Sir Percy | Roberts, Aled (Wrexham) |
| Cove, William G. | Hirst, George Henry | Salter, Dr. Alfred |
| Cowan, D. M. | Holdsworth, Herbert | Samuel, Rt. Hon. Sir H. (Darwen) |
| Cripps, Sir Stafford | Janner, Barnett | Sinclair, Maj. Rt. Hn. Sir A. (C'thness) |
| Curry, A. C. | Jenkins, Sir William | Smith, Tom (Normanton) |
| Daggar, George | Jones, Henry Haydn (Merioneth) | Tinker, John Joseph |
| Davies, David L. (Pontypridd) | Jones, Morgan (Caerphilly) | Wedgwood, Rt. Hon. Josiah |
| Davies, Rhys John (Westhoughton) | Kirkwood, David | White, Henry Graham |
| Dobble, William | Lansbury, Rt. Hon. George | Williams, Edward John (Ogmore) |
| Edwards, Charles | Lawson, John James | Williams, Dr. John H. (Lianelly) |
| Evans, David Owen (Cardigan) | Leonard, William | Williams. Thomas (York, Don Valley) |
| Evans, R. T. (Carmarthen) | Lunn, William | Wood, Sir Murdoch McKenzie (Banff) |
| Foot, Dingle (Dundee) | McEntee, Valentine L. | |
| Foot, Isaac (Cornwall, Bodmin) | Maclean, Nell (Glasgow, Govan) | TELLERS FOR THE AYES.— |
| Mr. John and Mr. G. Macdonald |
| NOES. | ||
| Acland-Troyte, Lieut.-Colonel | Craddock, Sir Reginald Henry | Hornby, Frank |
| Adams, Samuel Vyvyan T. (Leeds, W.) | Cranborne, Viscount | Home, Rt. Hon. Sir Robert S. |
| Albery, Irving James | Crooke, J. Smedley | Horobin, Ian M. |
| Anstruther-Gray, W. J. | Crookshank, Col. C. de Windt (Bootle) | Horsbrugh, Florence |
| Astor, Maj. Hn. John J. (Kent, Dover) | Cross, R. H. | Hudson, Capt. A. U. M. (Hackney, N.) |
| Atholl, Duchess of | Dalkeith, Earl of | Jackson, Sir Henry (Wandsworth, C.) |
| Bailey, Eric Alfred George | Davidson, Rt. Hon. J. C. C. | Jamieson, Douglas |
| Baldwin, Rt. Hon. Stanley | Dawson, Sir Philip | Jesson, Major Thomas E. |
| Balfour, George (Hampstead) | Denman, Hon. R. D. | Joel, Dudley J. Barnato |
| Balfour, Capt. Harold (I. of Thanet) | Despencer-Robertson, Major J. A. F. | Johnston, J. W. (Clackmannan) |
| Balniel, Lord | Dixon, Rt. Hon. Herbert | Jones, Lewis (Swansea, West) |
| Banks, Sir Reginald Mitchell | Donner, P. W. | Ker, J. Campbell |
| Barclay-Harvey, C, M. | Doran, Edward | Kerr, Hamilton W. |
| Beauchamp, Sir Brograve Campbell | Drewe, Cedric | Kimball, Lawrence |
| Beaumont, Hon. R.E.B. (Portsm'th.C.) | Duckworth, George A. V. | Knox, Sir Alfred |
| Beit, Sir Alfred L. | Duggan, Hubert John | Lamb, Sir Joseph Quinton |
| Bennett, Capt. Sir Ernest Nathaniel | Eady, George H. | Law, Richard K. (Hull, S.W.) |
| Birchall, Major Sir John Dearman | Edmondson, Major A. J. | Leech, Dr. J. W. |
| Bird, Ernest Roy (Yorks., Skipton) | Ellis, Sir R. Geoffrey | Leighton, Major B. E. P. |
| Blindell, James | Eimley, Viscount | Lewis, Oswald |
| Borodale, Viscount | Emrys-Evans, P. V. | Liddall, Walter S. |
| Boulton, W. W. | Erskine, Lord (Weston-super-Mare) | Lloyd, Geoffrey |
| Bowyer, Capt. Sir George E. W. | Essenhigh, Reginald Clare | Lockwood, John C. (Hackney, C.) |
| Boyce, H. Leslie | Everard, W. Lindsay | Lumley, Captain Lawrence R. |
| Braithwaite, J. G. (Hillsborough) | Fielden, Edward Brockiehurst | Lyons, Abraham Montagu |
| Broadbent, Colonel John | Ford, Sir Patrick J. | McCorquodale, M. S. |
| Brocklebank, C. E. R. | Forcstler-Walker, Sir Leolln | McKie, John Hamilton |
| Brown, Col. D. C. (N'th'l'd., Hexham) | Fox, Sir Gifford | Macmillan, Maurice Harold |
| Brown, Brig.-Gen. H.C.(Berks.,Newb'y) | Fraser, Captain Ian | Macquisten, Frederick Alexander |
| Browne, Captain A. C. | Fuller, Captain A. G. | Manningham-Buller, Lt.-Col. Sir M. |
| Buchan, John | Ganzonl, Sir John | Margesson, Capt. Rt. Hon. H. D. R. |
| Buchan-Hepburn, P. G. T. | Gibson, Charles Granville | Marsden, Commander Arthur |
| Burghley, Lord | Gillett, Sir George Masterman | Mason, Col. Glyn K. (Croydon, N.) |
| Burnett, John George | Gluckstein, Louis Halle | Mayhew, Lieut.-Colonel John |
| Cadogan, Hon. Edward | Goff, Sir Park | Merriman, Sir F. Boyd |
| Campbell, Sir Edward Taswell (Brmly) | Goodman, Colonel Albert W. | Mills, Sir Frederick (Leyton, E.) |
| Caporn, Arthur Cecil | Gower, Sir Robert | Mills, Major J. D. (New Forest) |
| Carver, Major William H. | Graham, Sir F. Fergus (C'mb'rl'd, N.) | Mitchell, Harold P.(Br'tf'd & Chlsw'k) |
| Castlereagh, Viscount | Grattan-Doyle, Sir Nicholas | Mitchell, Sir W. Lane (Streatham) |
| Cayzer, Sir Charles (Chester, City) | Greaves-Lord, Sir Walter | Molson, A. Hugh Elsdale |
| Cayzer, Maj. Sir H. R. (Prtsmth., S.) | Gretton, Colonel Rt. Hon. John | Monsell, Rt. Hon. Sir B. Eyres |
| Chamberlain, Rt. Hn. Sir J.A. (Blrm.,W.) | Grimston, R. V. | Morgan, Robert H. |
| Chapman, Col. R.(Houghton-le-Spring) | Gunston, Captain D. W. | Morrison, William Shephard |
| Chapman, Sir Samuel (Edinburgh, S.) | Hacking, Rt. Hon. Douglas H. | Munro, Patrick |
| Christie, James Archibald | Hales, Harold K. | Nail, Sir Joseph |
| Churchill, Rt. Hon. Winston Spencer | Hanbury, Cecil | Nation, Brigadier-General J. J. H. |
| Clarke, Frank | Hanley, Dennis A. | Newton, Sir Douglas George C. |
| Clayton, Sir Christopher | Harbord, Arthur | Normand, Wilfrid Guild |
| Clydesdale, Marquess of | Hartington, Marquess of | O'Neill, Rt. Hon. Sir Hugh |
| Cobb, Sir Cyril | Hartland, George A. | Ormsby-Gore, Rt. Hon. William G.A. |
| Conant, R. J. E. | Haslam, Henry (Horncastle) | Patrick, Colin M. |
| Cook, Thomas A. | Hellgers, Captain F. F. A. | Peake, Captain Osbert |
| Cooke, Douglas | Henderson, Sir Vivian L. (Chelmsf'd) | Penny, Sir George |
| Cooper, A. Duff | Hope,. Capt. Hon. A. O. J. (Aston) | Percy, Lord Eustace |
| Copeland, Ida | Hope, Sydney (Chester, Stalybridge) | Petherick, M. |
| Courthope, Colonel Sir George L. | Hore-Bellsha, Leslie | Peto, Sir Basil E. (Devon, Barnstaple) |
| Peto, Geoffrey K. (W'verh'pt'n, Bllst'n) | Samuel, Samuel (W'dsworth, Putney) | Sugden, Sir Wilfrid Hart |
| Pike, Cecil F, | Sandeman, Sir A. N. Stewart | Thompson, Luke |
| Power, Sir John Cecil | Sanderson, sir Frank Barnard | Thomson, Sir Frederick Charles |
| Pownall, Sir Assheton | Shaw, Helen B. (Lanark, Bothwell) | Thorp, Linton Theodore |
| Raikes, Henry V. A. M. | Slater, John | Todd, A. L. S. (Kingswinford) |
| Ramsay, Capt. A. H. M. (Midlothian) | Smiles, Lieut.-Col. Sir Walter D. | Train, John |
| Ramsay, T. a. W. (Western Isles) | Smith, Louis W. (Sheffield, Hallam) | Tryon, Rt. Hon. George Clement |
| Ramsden, Sir Eugene | Smith, R. w. (Aberd'n & Kinc'dine, C.) | Turton, Robert Hugh |
| Rawson, Sir Cooper | Smith-Carington, Neville W. | Vaughan-Morgan, Sir Kenyon |
| Reld, David D. (County Down) | Smithers, Waldron | Wallace, Captain D. E. (Hornsey) |
| Reld, William Allan (Derby) | Somervell, Donald Bradley | Ward, Lt.-Col. Sir A. L. (Hull) |
| Rhys, Hon. Charles Arthur U, | Somerville, Annesley A. (Windsor) | Ward, Sarah Adelaide (Cannock) |
| Roberts, Sir Samuel (Ecclesall) | Somerville, D, G. (Willesden, East) | Warrender, Sir Victor A. G. |
| Ropner, Colonel L. | Sotheron-Estcourt, Captain T. E. | Waterhouse, Captain Charles |
| Rosbotham, Sir Samuel | Southby, Commander Archibald R. J, | Wells, Sydney Richard |
| Ross Taylor, Walter (Woodbridge) | Spears, Brigadler-General Edward L | Weymouth, Viscount |
| Ruggles-Brise, Colonel E. A. | Spencer, Captain Richard A. | Whyte, Jardine Bell |
| Runge, Norah Cecil | Spender-Clay, Rt. Hon. Herbert H. | Williams, Herbert G. (Croydon, S.) |
| Russell, Alexander West (Tynemouth) | Stanley, Lord (Lancaster, Fylde) | Wills, Wilfrid D. |
| Russell, Hamer Field (Sheffield,B'tslde) | Stanley, Hon. O. F. C. (Westmorland) | Wilson, Lt.-Col. Sir Arnold (Hertf'd) |
| Russell, R. J. (Eddisbury) | Steel-Maitland, Rt. Hon. Sir Arthur | Windsor-Clive, Lieut.-Colonel George |
| Rutherford, Sir John Hugo (Liverp'l) | Strauss, Edward A. | Wood, Rt. Hon. Sir H. Kingsley |
| Salmon, sir Isldore | Strickland, Captain W. F. | |
| Salt, Edward W. | Stuart, Hon. 1. (Moray and Nairn) | TELLERS FOR THE NOES— |
| Samuel, Sir Arthur Michael (F'nham) | Stuart, Lord C. Crichton- | Mr. Womersley and Dr. Morlis Jones. |