HC Deb 27 April 1936 vol 311 cc575-699

19. "That so much of the dividends received by the National Debt Commissioners on securities held by them for the purpose of Part VI of the Supreme Court of Judicature (Consolidation) Act, 1925, as in the opinion of the Treasury is not required for paying the sums payable by the Commissioners under that Part of that Act and for providing against depreciation in the value of those securities shall he paid into the Exchequer from time to time as the Treasury may direct."

First Resolution read a Second time.

3.40 p.m.


I beg to move, in line 2, after "thirty-six," to insert: until the twenty-first day of April, nineteen hundred and thirty-seven. The object of this Amendment is to restore the Tea Duty to its old historic position of being an annual tax. It is moved for two main reasons. The first is quite definitely an economic reason, and the second we will call a constitutional reason. Let me deal briefly with the economic reason. On this side of the House we regard the Tea Duty as essentially a mean and indefensible tax. I do not think the incidence of the Tea Duty can be described better than in the words of the right hon. Member for Epping (Mr. Churchill) when he said in his Budget statement in 1929—the Budget which, hon. Members will recall, repealed this longstanding duty— There is no other comfort which enters so largely into the budget of the cottage home or the still humbler budgets of the old, the weak and the poor."—[OFFICIAL REPORT, 15th April, 1929; col. 63, Vol. 227.] That was the right hon. Gentleman's description of tea, and-it seems to me it is hardly the type of commodity upon which the Chancellor should seek to impose a permanent tax. His argument was that everybody ought to pay. If this were a period of emergency that argument might have some validity, but no one suggests that at the present time, in a period of rising incomes and expanding revenue, we are in a state of financial emergency which demands the permanent impost of the Tea Duty. We on this side do not accept the suggestion that everybody in the country should pay his part, or any part, of the revenue of the country. There are certain old canons of taxation, and one is that taxation should be imposed so as to produce the least possible harm to the taxpayer, and by no stretch of the imagination can it be said that a tax which falls upon food is a tax which bears in the least harmful way upon the taxpayer. Taxation must not be allowed to become a menace to health. Indirect taxation, falling upon the poorest of the poor, is unquestionably a menace to health, because, as I have recently pointed out to the House, 50 per cent. of our population show signs of malnutrition. The standard of health of a very large proportion of our people is far too low to ask them to bear any of the burdens of taxation.

Another reason why we consider that the Tea Duty should be an annual tax is that it should be defended each year, and that any Minister who imposes so mean and petty a tax, who puts a tax upon the comforts of the poorest of the poor, should face the odium every year of imposing that tax, and not succeed in pushing the tax into the category of permanent imposts. For that reason we intend to go to a Division, in order that the Chancellor if he insists upon this tax, shall have the odium of imposing it year by year. So much for the economic side.

With regard to the constitutional position, for very many years—over a century, I believe—it has been the custom to have two important taxes of an annual character, one a direct tax, represented by Income Tax, and the other an indirect tax. In 1863 certain changes were made by Mr. Gladstone, and he decided that the indirect tax which should be the annual tax and debatable should be the Tea Duty, and from 1863 to 1929, when the right hon. Member for Epping abolished it, the Tea Duty was always the annual tax which was the symbol of indirect taxation. When it was abolished in 1929 no steps were taken, unfortunately, to provide another annual tax in substitution for it with the result that this House has been precluded to some 'extent from debating the constitutional point of direct versus indirect taxation. I think it is highly desirable that this problem should be debated.

In winding up the Budget Debate the Chancellor, in a reference to the Tea Duty said, "It will soon be forgotten." Exactly. That is the reason why it should not be a permanent impost. That is the very best reason, and the reason which we on these benches adduce, why it should become an annual tax, that it may not be forgotten. It is highly important that year by year this problem of indirect versus direct taxation should be debated and kept before the House and before the country. For a century this problem has been kept before us. The Tea Duty in the past was chosen as a symbol. That tax has been resurrected, and I think it highly desirable that, as it has been reintroduced into our Budgets, it should also be re-established in its old position as the symbol of indirect taxation, for it is "by merit raised to that bad eminence."

3.48 p.m.


I beg to second the Amendment.

We on this side felt that a mistake had been made when the Tea Duty was reintroduced in 1932. We are against indirect taxation. We believe that all taxes ought to come from a direct source, but if indirect taxation has to be resorted to it ought not to be taxation on cheap commodities which the people consume but in the form of what one may call a leisure tax—theatres and all that kind of thing. It may be said that this increased duty will bring about a reduction in the use of tea, but it is difficult to argue that, because in the households of the poor the last thing they will forego is their cup of tea. It is almost a symbol of friendship. Whenever I call on any of my constituents the first thing I am asked is "Will you have a cup of tea?" That is a common thing in Lancashire. It is an offering of friendship; it eases the way; it is almost one of the essential preliminaries to having a chat. It is a common necessity. The Labour party are justified in raising the matter on every Budget in order to bring to the notice of the people how money is raised out of their pockets.

The Chancellor of the Exchequer said the other night that although this tax might cause a stir at the moment, people would soon forget it. That has always been the theory behind indirect taxes. There is talk for a week or two, but few people are afterwards aware what is being paid, and everybody goes on paying. The increase in the Tea Duty should be made a straight issue, and we should vote upon it. We could then see what hon. Members on the other side think about it. If they are the friends of the working classes they should go with us into the Lobby and try to abolish this form of tax. If they did that, they would get my help in raising the money in some other way. I shall speak later on the question of Income Tax, which I am quite willing to put a bit higher. We should get this money back in some way.

3.52 p.m.


I do not dissent from the observations which were made by the hon. Gentleman above the Gangway in support of this Amendment, which I also wish to support. The word "symbol" has acquired in recent months a different meaning from that which we were accustomed to give to it, but this Tax is not a symbolic one, so far as concerns the amount of money which it is proposed to collect by it. The Tax is commended to the House on the ground that it is a means by which people in general may make a contribution to the sums which are necessary for defence, but whatever effect the tax may have, that is the effect which it will not have. The proposal to raise the duty on Empire and foreign teas by 2d. per pound has a much wider implication than an attempt to raise that money from all the users of tea. Since 1932, tea has been produced under a scheme of restriction and until, I think, April next year, that production is on the basis of 82½ per cent. of the average production between 1929 and 1932. As a consequence of that restriction—I am not saying anything at the moment as to the value or the merits of that restriction, because they are not relevant to this discussion—the prices of tea have risen very considerably. The price of common tea in the wholesale market at Mincing Lane was 5d. per pound in 1932. At one time it was down to about 4d. At the present time it is impossible to buy drinkable tea at less than 9½d. or 11½d. per pound, or some price of that order. I do not think that if tea bought in Mincing Lane at 1s. per pound were served in this House, hon. Members would appreciate its quality very highly. It is important to remember that the increased tax will have to be superimposed on the risen price of tea. I am looking at the matter merely as a consumer of tea who is already paying an artificial price.

It is assumed that the effect of the increased duty would be to raise by 2d. per pound the price of tea to all the consumers, but that is not what will happen. What most assuredly will happen is that those who use the cheaper kinds of tea will inevitably pay the 2d. People who are accustomed to buy tea by price cannot get anything like the quality for 1s. 6d. per pound that they got years ago. The poorest members of the community who pay 1s. 6d. or 1s. 8d. per pound must inevitably pay the additional 2d. because there is no margin of profit at the present time to allow for the increase. What is most likely to happen in respect of the higher qualities of tea of about 2s. 4d. to 3s. per pound is that it will be difficult for people to raise their price from 2s. 4d. to, say, 3s., and they will be inevitably driven to buying tea of a different type and of a lower quality. Those users of tea will not pay the 2d. for defence purposes. That money will be found in some other way.As to the higher priced, luxury teas, there is a margin of profit which will, in many cases, make it possible for the sellers to continue to retail the tea at the present price. Therefore, the general community will not contribute equally an additional 2d. per pound to the Exchequer for each pound of tea which they consume. Those who buy the cheapest and poorest tea will have to shoulder the burden of the tax.

We are told that there will not be any considerable hardship, but that is a matter of opinion. Pence mean different things to different people, and different things at different times. Three weeks ago we were conducting a financial discussion in this House as to whether there should be a reduction in the rates of contribution to the Unemployment Insurance Fund. On that occasion we were assured that the tax of 1d. or 2d. per week was a matter of the very greatest importance to those who were under the necessity of making that contribution. To-day it is said to be a matter of insignificance. It is a considerable hardship.

The planters of British tea in India and Ceylon have realised that there is no future for their industry as long as they are restricted to working on the basis of 82½ per cent. They need to increase their consumption and they have, therefore, very wisely come together and have brought into their scheme planters in Java, the East Indies and Sumatra; and, in fact, most of the planters, except those in Formosa and the French Colonies. The French tea really does not matter, because the quality is such that nobody will drink it. Those tea planters have devised a campaign which is in operation, and in connection with which they are spending considerable sums of money in advertisements to try to popularise tea and to induce people to drink a better quality. They realise that it is only by their producing a better quality of tea on their estates that tea can hold its own with other beverages. The proposal to increase the tax on tea cuts right across the interests of those planters.


The purpose of the Amendment is to limit the date of the operation of the increase in the duty. The hon. Member has got rather away from that point. We had better confine our discussion to the Amendment.


I am the last person in the world to wish to trespass beyond your ruling. I will conclude by repeating my main contentions: The tax does not carry out the purpose for which it is recommended to the House; it will not enable the general sum of 2d. to be paid to the Exchequer by all the buyers of tea; it is partial in its effect and will hit with full severity only the poorest of the poor, the people whom we in this House should be anxious to protect from any hardship.

4.1. p.m.


The hon. Member for East Birkenhead (Mr. White) will excuse me if I do not follow him into the greater part of his remarks, which seemed to me to be directed more against the Tea Duty as a whole than to the specific point raised in the Amendment. As I understood the hon. Member, the object of the Amendment is to secure that this duty shall lapse at the end of 12 months so that, in order to have it perpetuated, it would be necessary for the Government to propose a resolution each year; and the main ground of the hon. Member's objection is that that course is not followed here, but that instead the duty is made a statutory duty which does not require renewal. There are Amendments to follow in the name of the hon. Member for Jarrow (Miss Wilkinson), which will permit the House to discuss the value or the iniquity of any duty on tea, whether viewed from the nutritional, the educational or the merely, luxury point of view. It will be for the convenience of the House, therefore, if I now confine myself, on this Amendment, strictly to the subject-matter of it.

It is true that up to 1929, when the Tea Duty was abolished, from the era of Mr. Gladstone this duty was an annual duty, and the hon. Member for Chesterfield (Mr. Benson) was correct in harking back to that great authority in support of his argument that that system should be continued now. But in the view of the Government the situation to-day is entirely different. In, Mr. Gladstone's time and up to 1929 the Tea Duty was one of the very few indirect taxes levied, and the custom that was followed then bears no relation to the present position when the Government has, rightly or wrongly—I maintain, absolutely rightly and with great benefit to the people—broken away from the old system of absolutely free imports. I submit in the first place that what was inaugurated under the old and now discarded system of free imports, provides no adequate argument for perpetuating the details of that system now.

The hon. Member's argument was founded upon the substantial point that if we adopted his Amendment and made this a duty which had to be renewed annually, that would provide the House of Commons with an additional opportunity of discussing its desirability and of discussing the general question of the relative burdens of direct and indirect taxation. The case for that argument would be stronger if there were any lack of opportunity for discussing the two points which the hon. Member mentioned. The mere fact that this is made in form a. statutory duty, not terminable annually, does not mean that the House of Commons in any way relaxes its authority over the tax; it can at any time repeal the part of the Statute which imposes it, and the general question of direct and indirect taxation and the relative balance of those burdens can be and have been debated at great length on the Budget Resolutions in general, and it is a subject of general fiscal policy which is strictly in order in any Debate relating to the distribution of the burden of taxation.

For these reasons I ask the House to say that there is really no weight in the argument that this House is losing control over this duty. It has as much control now as it ever had, both of the tax itself, and on the great question of the relative burdens of direct and indirect taxation. The hon. Member for Leigh (Mr. Tinker) said that this was the sort of tax which, if allowed to go on, people would forget.


The Chancellor said that.


If my right hon. Friend did say it, he is more entitled to say it than the hon. Member for Leigh, because the hon. Member assumes, at the same time as he assumes forgetfulness on the part of the public, that this is a serious and iniquitous tax which is not likely to be forgotten by the public. It imposes a very light burden on the public generally, and it may be forgotten, but if hon. Members hold that it is a tax of an iniquitous kind which the public is not likely to forget, in subsequent years hon. Members will have as ample an opportunity of raising the question of repealing the tax as if we had now taken the advice of the hon. Member for Chesterfield. I do not think that any good purpose would be served by the Amendment.

4.8 p.m.


This Amendment is a minor Amendment compared with that which follows. When the Financial Secretary to the Treasury spoke about forgetfulness, I could not help thinking of a broadcast film, a sort of serial comment by the Chancellor of the Exchequer last Friday evening in the cinema. I noticed that he forgot. At any rate he said nothing about the Tea Duty.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

indicated dissent.


If the right hon. Gentleman mentioned it when posing before the camera, I can only say that it was severely cut from the version which I heard.


Is the right hon. Gentleman quite sure that he himself has not forgotten?


I have not forgotten, because I took very careful note. The Financial Secretary said that he did

Division No. 149.] AYES. [4.13 p.m.
Adams, D. (Consett) Griffith, F. Kingsley (M'ddl'sbro, W.) Marshall. F.
Adams, D. M. (Poplar, S.) Griffiths, G. A. (Hemsworth) Maxton, J.
Adamson, W. M. Griffiths, J. (Llanelly) Messer, F.
Alexander, Rt. Hon. A. V. (H'Isbr.) Groves, T. E. Montague, F.
Ammon, C. G. Hall, G. H. (Aberdare) Morrison, R. C. (Tottenham. N.)
Attlee, Rt. Hon. C. R. Hall, J. H. (Whitechapel) Naylor, T. E.
Banfield, J. W. Hardle, G. D. Pallng, W.
Barnes, A. J. Harris, Sir P. A. Parker, H. J. H.
Barr, J. Henderson, T. (Tradeston) Pethick-Lawrence, F. W.
Batey, Holdsworth, H. Potts, J.
Benson, G. Holland, A. Price, M. P.
Broad, F. A. Hopkin, D. Pritt, D. N.
Brooke, W. Jagger. J. Ritson, J.
Burke, W. A. Jenkins, A. (Pontypool) Roberts, Rt. Hon. F. O. (W. Brom.)
Chater, D. John, W. Roberts, W. (Cumberland, N.)
Cluse, W. S. Jones, A. C. (Shipley) Robinson, W. A. (St. Helens)
Cocks, F. S. Jones, J. J. (Silvertown) Rowson, G.
Compton, J. Jones, Morgan (Caerphilly) Seely, Sir H. M.
Cove, W. G. Kelly, W. T. Sexton, T. M.
Daggar, G. Kennedy, Rt. Hon. T. Shinwell, E.
Dalton, H. Kirby, B. V. Silverman, S. S.
Davies, R. J. (Westhoughton) Lathan, G. Sinclair, Rt. Hon. Sir A. (C'thn's)
Day, H. Leach, W. Smith, Ben (Rotherhithe)
Ede, J. C. Leslie, J. R. Smith, E. (Stoke)
Edwards, A. (Middlesbrough E.) Logan, D. G. Stewart, W. J. (H'ght'n-le-Sp'ng)
Fletcher, Lt.-Comdr. R. T. H. Lunn, W. Strauss, G. R. (Lambeth, N.)
Gardner, B. W. McGhee, H. G. Taylor, R. J. (Morpeth)
Green, W. H. (Deptford) Mac Laren, A. Thorne, W.
Greenwood, Rt. Hon. A. Mainwaring, W. H. Thurtle, E.
Grentell, D. R. Marklew, E. Tinker, J. J,

not attach much weight to the argument of my hon. Friend the Member for Chesterfield (Mr. Benson). He said that the position with regard to this duty was safeguarded, because as it was a revenue duty it was within the competence of an hon. Member to move an Amendment for repeal year by year. The Financial Secretary relied upon the fact that conditions have changed entirely since the days of Mr. Gladstone. That may be so, but the Financial Secretary did not say that while, under the general fiscal system now adopted, and worked under the Import Duties Act, any citizen is entitled to go to the Import Duties Advisory Committee and ask either for an increase or a reduction of the amount of a duty, that is not so with regard to a revenue duty. In this case the citizens will have to rely upon the fact that Members of Parliament are not as forgetful as some people think, and that year by year they have an opportunity to move a reduction or variation or repeal of the duty. We feel that it would be a very much better thing, in the interests of the poorer classes, if all taxes which bear so heavily upon their daily life were more subject to review than will be the case if they are made of a permanent character.

Question put, "That those words be there inserted."

The House divided: Ayes, 97; Noes, 194.

Vlant, S. P. Wilkinson, Ellen
Walker, J. Wilson, C. H. (Attercliffe) TELLERS FOR THE AYES—
Watkins. F. C Windsor, W. (Hull, C.) Mr. Charleton and Mr. Mathers.
White, H. Graham Young, Sir R. (Newton)
Acland-Troyte, Lt.-Col. G. J. Gilmour, Lt.-Col. Rt. Hon. Sir J. Neven-Spence, Mal, B. H. H.
Adams. S. V. T. (Leeds, W.) Gluckstein, L. H. Nicolson, Hon. H. G.
Agnew. Lieut.-Comdr. P. G. Goldle, N. B. O'Neill, Major Rt. Hon. Sir Hugh
Allen, Lt.-Col. J. Sandeman (B'kn'hd) Goodman, Col. A. W. Orr-Ewing, I. L.
Amery, Rt. Hon. L. C. M. S. Gower, Sir R. V. Palmer, G. E. H.
Anstruther-Gray, W. J. Grattan-Doyle, Sir N. Penny, Sir G.
Apsley, Lord Grlmston, R. V. Petherick, M.
Assheton, R. Guest, Capt. Rt. Hon. F. E. (Drake) Pickthorn, K. W. M.
Astor, Major Hon. J. J. (Dover) Guest, Hon. I. (Brecon and Radnor) Ponsonby, Col. C. E.
Baldwin, Rt. Hon. Stanley Gunston, Capt. D. W. Pownall, Sir Assheton
Balfour, Capt. H. H. (Isle of Thanet) Hacking, Rt. Hon. D. H. Procter, Major H. A.
Barclay-Harvey, C. M. Hamilton, Sir G. C. Ramsay, Captain A. H. M.
Baxter, A. Beverley Hannah, I. C. Rathbone, J. R. (Bodmin)
Beauchamp, Sir B. C. Hannon, Sir P. J. H. Reed, A. C. (Exeter)
Belt, Sir A. L. Harvey, G. Reid, Sir D. D. (Down)
Bernays, R. H. Heilgers, Captain F. F. A. Reid, W Allan (Derby)
Blair, Sir R. Heneage, Lieut.-Colonel A. P. Remer, J. R.
Bossom, A. C. Herbert, A. P. (Oxford U.) Rickards, G. W. (Skipton)
Boulton. W. W. Herbert, Major J. A. (Monmouth) Ropner, Colonel L.
Bowater, Col. Sir T. Vansittart Hills, Major Rt. Hon. J. W. (Ripon) Ross, Major Sir R. D. (L'nderry)
Boyce. H. Leslie Holmes, J. S. Ross Taylor, W. (Woodbridge)
Brass, Sir W. Hope, Captain Hon. A. O. J. Russell, A. West (Tynemouth)
Briscoe, Capt. R. G. Hopkinson, A. Russell, S. H. M. (Darwen)
Brocklebank, C. E. R. Hore-Bellsha, Rt. Hon. L. Samuel, Sir A, M. (Farnham)
Bull, B. B. Horsbrugh, Florence Samuel, M. R. A. (Putney)
Campbell, Sir E. T. Howltt, Dr. A. B. Sandeman, Sir N. S.
Cartland, J. R. H. Hudson, Capt. A. U. M. (Hack., M) Sanderson, Sir F. B.
Cary, R. A. Hulbert, N. J. Sandys, E. D.
Cautley, Sir H. S. Hurd, Sir P. A. Sassoon, Rt. Hon. Sir P
Cazalet, Thelma (Islington, E.) Inskip, Rt. Hon. Sir T. W. H. Scott, Lord William
Cazalet, Capt. V. A. (Chippenham) Jackson, Sir H. Selley, H. R.
Chamberlain, Rt. Hn. N. (Edgb't'n) James, Wing-Commander A. W. Simon, Rt. Hon. Sir J. A.
Channon, H. Jarvis, Sir.J. J. Sinclair, Col. T. (Queen's U. B'lf'st),
Chapman, A. (Rutherglen) Keeling, E. H. Smith, Bracewell (Dulwich)
Chapman, Sir S. (Edinburgh, S.) Kerr, H. W. (Oldham) Smith, Sir R. W. (Aberdeen)
Chariton, A. E. L. Keyes, Admiral of the Fleet Sir R. Smithers, Sir W.
Clarry, Sir Reginald Kirkpatrick, W. M. Somerville, A. A. (Windsor)
Clydesdale, Marquess of Knox, Major-General Sir A. W. F. Southby, Comdr. A. R. J.
Cook, T. R. A. M. (Norfolk, N.) Lambert, Rt. Hon. G. Stanley, Rt. Hon. Lord (Fylde)
Cooke, J. D. (Hammersmith, S.) Law, R. K. (Hull, S.W.) Stanley, Rt. Hon. Oliver (W'm'I'd)
Cooper, Rt. Hn. A. Duff(W'st'r S.G'gs) Leech, Dr. J. W. Storey, S.
Cooper. Rt. Hn. T. M. (E'nburgh, W.) Leighton, Major B. E. P. Stourton, Hon. J. J.
Courthope, Col. Sir G. L. Lewis, O. Strauss, H. G. (Norwich)
Craddock, Sir R. H. Lloyd, G. W. Stuart, Lord C. Crichton- (N'thw'h)
Cross, R. H. Loder, Captain Hon. J. de V. Sueter, Rear-Admiral Sir M. F.
Crowder, J. F. E. Lovat-Fraser, J, A. Tate, Mavis C.
Davies, Major G. F. (Yeovil) Lyons, A. M. Taylor, Vice-Adm. E. A. (Padd., S.)
Davison, Sir W. H. Mabane, W. (Huddersfield) Thomas, Rt. Hon. J. H. (Derby)
Dawson, Sir P. MacAndrew, Lt.-Col. Sir C. G. Thomas, J. P. L. (Hereford)
De la Bère, R. McCorquodale, M. S. Titchfield, Marquess of
Denman, Hon. R. D. McKie, J. H. Wakefield, W. W.
Denville, Alfred Macnamara, Capt. J. R. J. Wallace, Captain Euan
Donner, P. W. Makins, Brig. Gen. E. Ward, Lieut.-Col. Sir A. L. (Hull)
Duckworth, G. A. V. (Salop) Manningham-Buller, Sir M. Ward, Irene (Walisend)
Dugdale, Major T. L. Margesson, Capt. Rt. Hon. H, D. R. Wardlaw Mllne. Sir J. S.
Duggan, H. J. Markham, S. F. Warrender, Sir V.
Dunglass, Lord Mayhew, Lt.-Col. J. Waterhouse, Captain C.
Eckersley, P. T. Mills, Sir F. (Leyton, E.) Wedderburn, H. J. S.
Elliot, Rt. Hon. W. E. Mills, Major J. D. (New Forest) Williams, H. G. (Croydon, S.)
Elliston, G. S. Moreing, A. C. Wilson, Lt.-Col. Sir A. T. (Hitchin)
Emmott, C. E. G. C. Morris, O. T. (Cardiff, E.) Wise, A. R.
Emrys-Evans, P. V. Morris-Jones, Dr J. H. Womersley, Sir W. J.
Erskine Hill, A. G. Morrison, G. A. (Scottish Univ's.)
Evans, Capt. A. (Cardiff, S.) Morrison, W. S. (Cirencester) TELLERS FOR THE NOES —
Fraser, Capt. Sir I. Mulrhead, Lt.-Cot. A. J. Lieut.-Colonel Liewellin and Mr. James Stuart.
Furness, S. N. Munro, P.

4.20 p.m.


I beg to move, in line 6, to leave out "6d.," and to insert "2d."

I want at the outset to make it clear that I should prefer to move that the whole of the Tea Duty be removed. In the last Budget that the Labour party brought forward in this House, that was done, but for various reasons the Duty was reimposed, and I now move that it be reduced by 2d. I want to ask the Chancellor of the Exchequer, who in this House has been for so long the apostle of Imperialism, to give us some reason for this Empire preference on tea, and to say whether he considers that the fiscal preference on Empire tea as against foreign tea that comes into this country has worked on the lines that he expected. It was in 1919 that the fiscal preference of 2d. in favour of Empire tea was put on. Australia remained duty-free, and the net result was that Dutch East Indian tea was able at first very largely to capture the Australian market. As a result of that first fiscal preference, the proportion of Empire tea fell from 55 per cent. to 31 per cent. of the Australian trade, while the proportion of Dutch East Indian tea rose from 42 per cent. to 60 per cent. It was not until the year 1929–30, when all the duties were taken off and the preference against foreign tea removed, that in one year Empire tea again captured 60 per cent. of this market, while foreign tea from Java and Sumatra fell to 40 per cent. The differential treatment has now been reimposed. I want to call the attention of the House to two very important statements that have been made. The "Times," on 1st February, 1933, said: This tax, with a 50 per cent. Empire preference, was hailed as the salvation of growers within the Empire, but the sole result has been a weakening of the market for all growths. In the following year, dealing with this question of differential treatment, the "Manchester Guardian" in a leading article said: The import of British grown tea into the United States fell by 7¾ million pounds during 1933, while that of Dutch grown increased by 7½ million pounds. The falling off was due to the fact that, owing to Empire preference, Java tea can be bought at much more attractive prices by United States of America importers. It is now recognised that Imperial preference was not the blessing it was anticipated it would be. It has merely resulted in handing over a large proportion of the foreign trade in tea to Dutch growers. The production of British grown tea during the year fell by 108¾ million pounds. I suggest that, if the Chancellor is going to maintain this preferential duty, these figures need an answer. It is not sufficient just to say that the market in this country is the only one that counts, because, if these are the figures, and I presume that the financial editors of the "Manchester Guardian" and the "Times" know what they are talking about, I suggest that this differentiation between foreign and Empire grown tea is not acting in the best interests of Empire growers. What happens is obvious. The Dutch growers cannot quote a higher price than they quote in the London market, which is the tea market of the world, because, if they did, Australia or the United States would simply get tea out of London in bond, and, because of this, the preference that was supposed to be in the interests of Empire growers has so worked out that their markets in the United States and Australia have been very largely captured by the growers of Java and Sumatra tea. When we come to the present tax, we find that, after some years of experience of how Empire preference has worked out against the growers, the Chancellor is increasing the duty on Empire tea by 50 per cent., while the duty on foreign tea is only increased by 33⅓ per cent., that is to say, the difference in percentage very largely favours foreign growers. I would suggest, with all due respect, that, if the right hon. Gentleman's father were in the House at this present time, he would have something very stern to say to his erring son who has not learned the Imperial lessons he taught him.

Leaving that point for the moment, I want to draw the attention of the House to another phase of the same question, and that is the effect on the planning and restriction schemes of this increased duty. The Chancellor has spoken in this House as though the 4d. and 2d. were the only things that mattered. He has given the impression that it is only the 2d. that matters, and that, if it is worked out on the number of cups of tea drunk in any one year, it is only an infinitesimal fraction of a penny—a mere nothing. But it does not work out in that way. In 1932 the retail price of cheap tea fell as low as 8d. a pound. The co-operative societies of this country were putting packet tea on the market at 8d. a pound, and Woolworths were selling it at 6d. a pound. I am not considering the quality; the point is that it was possible for the old age pensioner who likes his tea black to get this 6d. tea, which, I can assure hon. Members, whatever else it was, was certainly black. People could get tea at 6d. a pound, or a better quality from the co-operative society at 8d. [HON. MEMBERS: "Ah!"] If I am challenged as to the quality of the tea, I would point out that the co-operative societies were much more patriotic, and the reason for the extra 2d. in the case of their tea was that it included a. higher proportion of best quality Empire tea, whereas the 6d. tea was, of course, almost entirely Java and Sumatra tea. I am willing to admit what the Chancellor will no doubt say, namely, that the 6d. or 8d. was a completely uneconomic price for the grower. At any rate, the consumers were able to get it at that. Since this Government came into power a restriction scheme has come into operation and prices have been forced up. The price of that sixpenny and eightpenny tea has been progressively forced up to 1s. 4d. and 1s. 6d., and that is practically the cheapest that can be obtained to-day.

In view of the weakening of the demand, a Tea Propaganda Board was set up, and I have some copies of their literature, from which it appears that there are no fewer than eight tea times. This sort of thing costs money. These widely distributed circulars, which I call to the attention of hon. Members who are not in the habit of drinking tea eight times a day, have to be paid for by the trade, together with the advertisements on the tube railways. Just at the time when propaganda is having this effect and the papers are calling attention to the result of the Tea Propaganda Board's efforts in trying to increase consumption, the Chancellor comes along to check these well-meant efforts. The "Daily Mail"— I am not quoting the excellent "Daily Herald"; I am giving the right hon. Gentleman his own paper—announces that the increase comes at a most unfortunate time. It says that the producing side of the trade was just getting on to its feet again and the tendency will now be. to increase the use of lower-priced teas, the very thing it was wanted to avoid. The Chancellor said that the restoration of our defences was in the interest of all, and it was only right and fair that all should contribute to it. That is one of those sentiments which might almost be made a text and hung over the bedhead. But surely there ought to be some standard of bare existence before any citizen should be asked to pay to protect that standard.

This is really a bad tax, because it hits the poor. We are not only dealing with this 2d. We are dealing with the whole of the increase that has been brought about by the restriction scheme. I am informed that 50 per cent. of the whole trade of co-operative societies is now down in teas at 1s. 6d. and 1s. 8d. a pound, which used to be 8d., 10d. and 1s. three years ago. On is. 4d. tea a twopenny tax is 12½ per cent., on 1s. 6d. tea it is 11 per cent., and on 2s. 4d. tea it is 7 per cent. But that is only one side of the picture. I telephoned to Fortnum and Mason's, which is not a shop dealing with working-class tea, and their manager was kind enough to give me their catalogue. None of my remarks are intended as free advertisements for Fortnum and Mason's or for the cooperative societies, but one has to take the statements of the people in the trade. They sell unblended Ceylon and Indian teas, guaranteed all Empire, which will pay only on the twopenny scale, at prices from 3s. 10d. to 18s. a pound. One of my mining friends seems to be surprised to hear of tea at those prices. To ease the shock to him, I may inform him that 18s. is not the highest price that can be paid for tea. You can buy tea at 25s. a pound. A tax of 2d. on 25s. is less than 1 per cent. On 12s., which is a medium priced tea in a very high class shop, it is 1.35 per cent. I ask the Chancellor to compare a tax of 64 per cent. on the millionaire's tea with 12½ per cent. on the tea of the old age pensioner. As a matter of fact, the millionaire has no need to pay the 2d., because I am informed that the 25s. tea will not be raised by the amount of the tax. [Interruption.] The highest-priced tea that can be obtained from the cooperative society is 3s. 8d., but the manager of the London Co-operative Society can order the hon. Member some specially at 4s. if he really wants it.

On this question of indirect taxation the Chancellor's record is about as bad as it possibly can be. In the last Labour Budget the estimate of the yield of indirect taxes for 1931–32 was £238,000,000. The similar figure in the White Paper for this year is £314,000,000. That does not taken into account this new tax on tea, which is expected to be £3,500,000 this year and £7,000,000 in an ordinary year. That is an increase of £76,000,000. The Chancellor has said that the effect on the cost-of-living is negligible. He is continually bringing the cost-of-living figures to the House and saying that, owing to the reduction in world prices, these things are not, in fact, affecting our people, but an answer to a question last week admitted that the cost-of-living figures are now so hopelessly out-of-date that a new survey has to be made. Most of these taxes are on bare necessities—tea, bread, eggs, bacon and so on.


The hon. Lady referred to a tax on bacon. Will she say how much?


If I went on to the alluring sideline of the whole of the quota system, which in fact constitutes a tax, Mr. Speaker would soon call me to order. Most of the £7,000,000 that will be raised by this tax comes from people below the Income Tax level, and it represents a reduction of £7,000,000 in their purchasing power.


Do I understand the hon. Lady to say that the increase in the tax will bring in £7,000,000 in a full year?




That is the total.


I beg pardon. The total tax on tea will be £7,450,000 and that amount, which, of course, includes the £3,500,000 increase, represents a large reduction in purchasing power, of which a great deal is the purchasing power of the working classes. The Colwyn Committee gave some interesting figures of the incidence of a fourpenny tax on a married man with three children. On an income of £100 a year they estimated that it would be 11s., and on an income of £150 a year, 12s. They also estimated that, in the case of a man with an income of £50,000 a year, it would only amount to 12s. 9d. That is to say, a man with £1,000 a week would pay 1s. 9d. a year more than a man with three children whose total income was £100 a year.

May I direct attention to another section of the community on whom this tax will fall extraordinarily hardly?. I know, in my other work, of a large factory of girls where the average wage works out at 25s. a week. There is an admirably run canteen which tries as far as it can to provide meals at as near cost price as possible. A cup of tea is sold to these girls for 1d., and the manageress has informed them that from next week the cost will be 1¼d per cup. The canteen cannot stand an increase of 2d. per 1b. on the normal working expenses, although an additional farthing a cup represents a very handsome profit to the canteen. A farthing is the smallest amount that can be put on to the cost, as there is no smaller fraction of the currency by which the amount could be charged. That represents an increase of 25 per cent. For six penny cups of tea, these girls will be paying 7½d. instead of 6d. Assuming that these girls drink no other tea at all during the day, which, of course, is absurd, it means a tax of 6s. 6d. a year.

It is to these little ways, which mean so little to Members of this House, but so much to those who are on the very poorest level of subsistence, that I want to call the attention of the Chancellor of the Exchequer. I have deliberately not tried to exaggerate the poverty aspect of the question. The proposal of the Chancellor of the Exchequer can be demolished by his own supporters, as I understand he is going to receive considerable opposition from them. I invite them to follow their admirable example on a previous occasion and vote against the Government with me on this occasion.

Leaving for a moment the business side of the matter altogether, I want to urge these facts upon the House. Here is a book by Sir John Orr, dealing with food, health and income. It is a very carefully compiled and official report surveying the adequacy of diet in relation to income. I recommend this book to hon. Members, particularly the tables of statistics, in which the writer points out that 10 per cent. of the people spend less than 4s. a week a head on food, and that 60 per cent. spend less than 10s. a head on food. The 10 per cent. who spend less than 4s. a week on food will include the old age pensioners, the widows with pensions of 10s. a week and what little they get from the Poor Law, It will include a lot of old people, and women with young children, who have not sufficient income and cannot afford to spend any more than 4s. a head per week. These are the people to whom tea is an absolute necessity. In the average comfortable, middle-class household tea is only one of a very large number of possible drinks. The hon. Member below the Gangway will be able to supply a list of substitutes if required.


As the hon. Lady has dragged me into her interesting speech, may I ask her whether she thinks that tea is a food in comparison with other liquids? Beer of course, has very high food value; tea, in itself, nothing at all.


I think that the hon. Member is prejudiced entirely in favour of beer, because I would point out, again referring to the very excellent report recently published on the presence of vitamins in food, that tea is regarded as a useful source of vitamin. I do not know whether there are any vitamins in beer. I have not tried it, so I do not know. [An HON. MEMBER: "It is full of them."] But it is quite officially laid down that there are vitamins in tea, and, in any case, tea is an extremely valuable stimulant. I understand that beer has certain properties in that direction, but it is not desirable for the mother with young children to be a beer drinker. The whole medical opinion in that case would be against the hon. Gentleman. For the people to whom tea, bread and margarine are so very largely their diet—it is very unfortunate, but still it is so—tea has become a real necessity.

This is a mean tax. There are plenty of ways in which the Chancellor of the Exchequer could have obtained his £3,500,000. He has chosen a way which falls hardest on the poor people and those who can hit back the least. When a successor of his put taxes on motor cars, petrol and luxuries of that kind he had to face an enormously entrenched and financed opposition. The old age pensioners and the widows cannot finance opposition to a mean tax like the Tea Duty. All they can do is to pay and suffer. They have to buy tea in such extravagant ways. It is not only the 2d. which is the difficulty, even if retailers and wholesalers were anxious that only that bare amount should actually be taxed on the consumer. These old age pensioners, widows and poor have to buy it by the ounce and two ounces, little screws of tea, very often, and by what conceivable mathematical formula can only the 2d. be passed on to the consumer? The price will be based on something like an extra farthing upon an ounce or two ounce packet. Perhaps it will be much more likely to be one farthing an ounce.

I would remind the Chancellor that there is a difference of 10d. now between the Mincing Lane and the retail price of tea, largely due to the fact that arrangements have to be made for a very large number of retailers to sell small quantities of tea. Therefore, the 2d. does not represent the amount that. will actually go on, and to the poorest more will go on. The Chancellor has proposed a duty upon which some people will make a very large profit out of the poorest of the community. I admit that in the case of the middle classes, the better off working-class people, and the rich, the 2d. will mean practically nothing, but to a very large number of people living on small wages, with food values already below the standard, it will mean a very considerable increase. I would ask the right hon. Gentleman to consider further whether, even if this duty is put on, it shall only remain on for one year.


May I ask you, Mr. Speaker, for the guidance of the House, whether you intend to take the four remaining Amendments bearing upon tea together and allow a general discussion, so that there will be no need to discuss each one separately? They are all on similar lines.


The only Amendments that I can take now are the Amendment moved by the hon. Lady and the next Amendment in her name. Having disposed of those Amendments, in the first case, "That 6d. stand part," and in the second case, "That 4d. stand part," I think it will be best to confine this Amendment to the merits of the Tea Duty, and the second Amendment to the merits of giving a preference to Empire Tea.

4.55 p.m.


I beg to second the Amendment.

I shall not attempt in any way to follow any hon. Friend the Member for Jarrow (Miss Wilkinson) into an examination of the figures, for the very good reason that she has already covered most of the ground. There are one or two considerations of a more general character to which I should like to draw the attention of the House. In one part of her speech, my hon. Friend referred to the fact that, if the Chancellor of the Exchequer required to raise this money at all along these lines, there were other ways in which he might have done it, which would have had the same advantage or even a greater advantage to the Revenue, without imposing upon a large mass of the poorest people hardships, which the Chancellor of the Exchequer has considerably underestimated. I have in my hands a letter which has been sent to me. It bears a, simple signature, and has nothing except its contents to indicate its origin, and it is addressed from Berkeley Square. I will read the first paragraph to the House: A time when expenditure on armaments has to he increased vastly, if this country is to achieve any degree of safety in an unsettled world, is not one in which we can afford to lose any source of revenue, yet the crushing tax on whisky is having precisely this effect, which is a serious one and is becoming more serious each year. No argument more subtle in its method of approach was ever conceived. That is what was written before the Chancellor of the Exchequer opened his Budget. I understood from his speech that the argument contained in that paragraph was based on a complete misconception of the facts. I understood him to say that, so far from the revenue on whisky having fallen, the consumption of whisky had increased, and that the revenue derived from it had also increased in like degree. If that is so, the argument which is contained in that document towards a, reduction of the duty on whisky, might be just as fairly transposed and be used in order to justify an increase in that duty. One can understand the reason why an added tax on whisky would always have the effect of increasing the consumption of whisky— Another and another glass to drown the memory of this impertinence, one can imagine, being recited in the clubs, and even at the address from which this letter was written. I would commend to the right hon. Gentleman that that is a valuable principle which he could add to that which we were told by the Financial Secretary is to be a revolution in the principles of taxation in this country. Let him increase the duty on whisky and it would satisfy everybody. The whisky sellers would sell more of it, the Revenue would get a greater amount, and the drinkers of it would be equally satisfied, because they would need more whisky in order to comfort them and to drown their sorrows without there being any appreciable effect.

Tea is quite another matter. I am glad to see the right hon. Gentleman the Minister of Health present in the House. I am sure that he will support me when I say that whatever controversy there may be as to the comparative food values of beer and tea, there is no food value in whisky. Even if the duty had the opposite result to the one suggested and reduced the amount consumed, there might be a loss of revenue, but the improvement in the general health of the community would more than compensate for it, and perhaps his friends—I know that the drinkers of whisky in the clubs are usually the friends of that side of the House rather than of this—would have time, in calm and equitable minds, to address themselves to the vital questions of the day.

Tea is the beverage of the workers. Something has been said about bad tea. There is no bad tea. Tea is either good, better or best. To put a tax upon it, is very undesirable. Hon. and right hon. Members opposite have not learned from the lessons of history. Is it not true that tea is the only advantage which the great mass of the working population of this country has ever derived from the possession of our Indian Empire? If that is not true, perhaps, they will tell us of some other advantage which the working class has derived from the possession of the Indian Empire. It the right hon. Gentleman going to put a tax upon tea and deprive the working classes even of that solace for the cost of maintaining the Empire? In former days a tax was put upon tea which had a most fundamental and far-reaching effect on the British Empire. But for the tax upon tea which was put on within the last two centuries the problem of the weakening of the League of Nations through the absence of the United States of America would not exist, because that country would still be part of the British Empire. It was the tax on tea which produced the American revolution and directed the minds of people towards all sorts of questions of Empire and democracy. In Russia the Samovar is coupled with a picture of Lenin among the household gods.

The drinking of tea should be encouraged. It produces a calm and equable spirit. It permits people to think wisely and deeply over things. It produces a frame of mind in which questions are rightly approached. It may well be that the Chancellor of the Exchequer is subtler than we know. He may have considered all these things and is afraid that the widespread drinking of tea rather than whisky or beer might produce such an effect upon the minds of the electorate as to displace him and his colleagues from the offices of authority and power that they now occupy. The hon. Lady said that the reputation of the right hon. Gentleman was as bad as it could possibly be. That it is bad, I agree, but that it is as bad as it could possibly be is, I think, an optimistic estimate. I am fully satisfied from his speech in opening the Budget and the speech that he made on the wireless the same evening, that, bad as his reputation is it will be far worse next year.

It might well be that we should consider whether in the process of attracting to this country a greater and greater share of world trade, so as to leave for other industrial countries a smaller share of world trade, we are not thereby increasing the problem of the economic pressure in Germany and Italy and of the starving populations; the very troubles which necessitate that we should expend the whole profit of this alleged prosperity in expenditure upon so-called security. Perhaps the right hon. Gentleman will consider how far that process ought to go and how far he ought to lay upon the mass of the poorest of the people a burden which may cause them to think a little more clearly and deeply than they were permitted during the last General Election. We are living in times when even small or apparently small questions of this kind may have wider consequences than one realises. How far is this deprivation of the working classes to continue The Budget is vaunted as being a Budget of national prosperity, yet it leaves the burdens on the working class unrelieved. A device of this kind is really an endeavour to derive Income Tax from people who, ex hypothesi, have no income.

Is it not possible for the Chancellor of the Exchequer to find from some other source the £3,500,000 that he proposes to take in addition to what is taken already from the pockets and comforts of the very poor? Will his Budget really collapse if he renounces this £3,500,000? Has the country come to such a pass that the old age pensioner, the widow, the people without means, friends, or comfort, are to have these small comforts which remain impinged upon, reduced, limited, in order that the Chancellor of the Exchequer may pay for more and more armaments? If the £3,500,000 must be raised, let him look around for some other source. He says that the country is well-to-do, that we have recovered in the last four years, that prosperity is showing an upward curve If that be so it ought to be possible to raise this paltry sum in some other way than in the mean, despicable way in which it is proposed to raise it.

5.8 p.m.


I support the Amendment, the effect of which would be not to increase the charge upon tea by 2d. but to reduce it by 2d. If hon. Members were able to choose freely on this matter they would be almost unanimously with us in the Lobby in support of the Amendment. In saying that, I have in mind seven years ago, when the right hon. Member for Epping (Mr. Churchill), who then occupied the position of Chancellor of the Exchequer, abolished the tax on tea, with the full approval of everybody in the House, and much to his credit. These are the words that he used: There is no other comfort which enters more largely into the budget of the cottage home, or the still humbler budgets of the old, the weak, and the poor, than a tax on tea."—[OFFICIAL REPORT, 15th April, 1929; col. 63, Vol. 227.] For the first time since the reign of Queen Elizabeth we were then without a tax on tea. It was realised that tea had become the last comfort of the very poorest people. Unfortunately, the right hon. Gentleman's other actions were not so beneficent. His desire for the spectacular led us to return to the Gold Standard. That led on to a crisis. Then there came a time of emergency, and we were told that we must have a tax on tea, so that even the poor had to tighten their belts. Now, in a time of prosperity, when there is no question of economies, when the Chancellor of the Exchequer speaks of the return of prosperity, when cuts have been restored, he makes this cut into the incomes of poor people by a tax on tea.

The Chancellor of the Exchequer has not been spectacular. He has searched his fertile mind, not for spectacular things, but for the meanest things. If he had specially sought for a tax which would hit the poorest people the hardest, he could not have found a better tax than this increased impost on tea. It is the widow's mite for armaments. I have heard the meanest act described as that of a man pinching a halfpenny from the blind man's tin. Here is the Chancellor of the Exchequer pinching a portion of tea from the old widow's cup. Perhaps he does not realise what he is doing. If he would go round the little general shops or into the homes of the poor people he would know what it means for poor old women and men who are trying to eke out an existence on their 10s. a week pension. Many of them have to drink their tea without having even a little drop of milk in it. These people will have to pay more for their tea. Tea, bread and magarine are about all that are left to them.

There are many other ways in which the right hon. Gentleman could have raised the money without imposing this mean tax. The Income Tax has been bigger than it is to-day. It might be a very good thing for the financial interests of the country if the direct taxes of the Supertax payer and the Income Tax payer were increased. That might go a little way towards dealing with the plethora of money which is concerning people so much that they welcome with open arms the idea of great loans for armaments. Surplus capital is to be taken in that way. It is to be blown from the mouth of the guns, blown into the sea in order to maintain the rates of interest. It would have been better if another penny had gone on to the Income Tax instead of the tax of 2d. being put upon tea. It would hardly have affected those who pay Income Tax and Supertax. It is not alone the widow and the orphan and the old people who are affected.

There may be talk about sob stuff. That is why I quoted the words of the right hon. Member for Epping, so that if there is to be any suggestion of sob stuff it can be attributed to him rather than myself. There are the agricultural workers to be considered, who on 30s. a week have to keep their wives and families. There are mechanics in many parts of the country who are only earning, on the average, £2 a week. If we take the estimate of the Colwyn Committee of 10 years ago, that the consumption of tea in the average working-class family with an income of £2 a week is 39 lbs. of tea a year, the proposed tax of 2d. means an additional burden of 6s. 6d. a year. That may not sound much. It may be only the price of a decent cigar to some hon. Members opposite. but it is a great thing for poor families.

The Financial Secretary has spoken about the changes in our financial system. These changes have not only brought about a great increase in taxes on goods which people purchase, the proceeds of which go into the national Exchequer, but have also introduced increased taxation the proceeds of which go into private pockets. On every loaf of bread which is now purchased a halfpenny per quartern goes not to the national Exchequer but into the pockets of the farmers, and more particularly of the landlords. It is the same with bacon. The restrictions on bacon have nearly doubled the price of the cheapest bit of meat which the poorest are able to buy. There are also restrictions on butter and cheese, which have raised the price, and in the case of potatoes, the last and the cheapest food of the poorest of the people in this happy country, we hear of people who have been fined £5 for daring to grow potatoes. The price of potatoes is nearly double. All this indirect taxation, which goes to benefit the Exchequer and private interests, hits the poorest of the people hardest, and now we have this meanest tax of all, on the cup which cheers but does not inebriate, on the cup of tea of the poor old lady living on her pension.

The Chancellor of the Exchequer could easily have found a more decent and worthy way of raising this revenue, but this is the way he chooses in order to make sure that the poor widow pays her share towards the cost of armaments, which are going to restore to Britain her prestige of being the ruler of the seas and in control of the greatest Empire the world has even known. To do that the dear old lady has to pay an extra tax on her pound of tea. I hope the House will reject the Minister's proposal and accept the Amendment.

5.19 p.m.


I do not want to use the language of exaggeration in regard to the Tea Duty or to represent it as being a crushing burden, but at the same time it is a very appreciable burden and in the circumstances will be regarded as an unnecessary burden. On the previous Amendment the Financial Secretary reminded us of the difference between these days and Gladstone's days; and it is right that we should be reminded of the difference. If we had in that period to meet the burden of armaments under a normal Free Trade system it might have been said that the great bulk of the people were not contributing and that we ought to find some means of taxation whereby it would be shared generally, so that everyone would know that if they desired armaments they must pay for them. But we are now living under a protective system, when so much of our revenue is raised by indirect taxation. There is a good deal to be said for keeping a balance between direct and indirect taxation, but, at the same time, there has been a big sweep in the direction of indirect taxation, which takes away all the force of the argument about spreading the burden over every section of the community. We are doing that already, and there is no need to take this new step, which is bound to be desperately unpopular.

I am almost tempted to think that the Chancellor of the Exchequer has chosen this uncomfortable course because of some puritanism in his temperament, which makes him believe that that which is unpleasant is bound to be wholesome. If lie desired to remind people of this burden as often as possible he could not have chosen a more effective way. Tea is taken so much to-day, and it is such a real solace, that people will be reminded of this tax whenever they have to buy another pound of tea. And comparatively little money is being extracted from the people compared with the amount of irritation it will cause.

The Government should bear in mind that while they are putting the case that these new armaments are necessary, and are getting many people who a few years ago would have voted against armaments to appreciate the fact that in the face of new circumstances a great deal more has to be done, there is a feeling that possibly it is the Government's own fault that we are in this position, and they are not prepared to take the burden as something which has come purely from outside. In these circumstances the burden should have been eased as far as possible. It would have been better policy to have given the country time to appreciate the necessities of the situation. Instead, the Government have begun by making the pinch come as often as possible, on as many people as possibie, and for what is a very poor return. It is on those people who buy the cheapest kind of tea—and price is the dictating factor—that the duty will fall heaviest. As you go up in the scale and buy the more expensive teas people are able to dodge the burden by reducing the quality of tea they purchase. It is the poorest who will feel this duty most, those who buy the worst quality of tea. I suggest that this additional burden is not going to pay anything like its full value in revenue compared with the irritation and the quite genuine suffering it will cause among large classes of the people.

5.26 p.m.


I want to ask the Chancellor how he is going to control this duty, because he must know that many people do not buy tea by the pound or by the half-pound. How is he going to adjust the duty on small purchases of one ounce of tea or half-an-ounce of tea? The retailer is not going to lose and, therefore, it seems to me that poor people who buy in small quantities will pay double the amount of the duty. I hope the Chancellor of the Exchequer will go into this matter and will not allow the poorest of our people to be fleeced still more. In working-class districts people buy in very small quantities, and the application of this duty will have to be very carefully watched. Then, again, what are we going to pay for a cup of tea at a railway station? Are the railway companies going to get bigger prices than are intended? Shall we have to pay the addition of the smallest coin of the realm, one halfpenny? [An HON. MEMBER: "A farthing !"] No one carries farthings about with him. I have not got a farthing on me, and I doubt whether any hon. Member in the House has a farthing on him at the moment. If I am charged 3¼d. for a cup of tea, am I to put down 3d. and say that "I will owe the farthing," or put down 3½d. and be owed a farthing? This duty will have to be watched in order to see that it does not become a greater burden than is intended.

I claim that the Chancellor of the Exchequer could have got his money in a much better way. Threepence on the Income Tax brings in £12,000,000; a penny on the Income Tax brings in £4,000,000. This duty on tea is to bring in £3,500,000. Therefore an additional penny on the Income Tax would have given the Chancellor all the money he wants. The right hon. Gentleman says that he is imposing it in order that people will realise that they must pay something for armaments. The few words he has uttered in defence of this duty are hardly worthy of the right hon. Gentleman. In his Budget speech he tripped very lightly over this unpopular tax, but in his second speech he seemed to think that as he had put it on he must say something in its defence, and he said that it was intended to make people realise that they must pay for the defences of the country.

We say that this duty, although it may hit every one, will hit people in different ways. In the poorest homes tea is served with at least three meals every day. In rich homes I question whether it is ever served more than once. It may be served at breakfast, but for what is called lunch and at dinner it is not drunk. The poor families which drink tea with three meals a day will pay a much greater proportion of the tax than will the rich people. I am speaking of the ordinary household in which the wage-earner is at work, but let me go further and take the case of an unemployed man, who has less income. Out of his small income tea has to be provided for three meals a day. Moreover, in the case of old persons receiving the old age pension, the only thing they can hope to have with their meals is tea or cold water, and they also will have to bear this extra tax.

If the Chancellor had examined this question carefully, he would have realised that this tax will be a great hardship to those people. In saying that they would be prepared to give towards the defence of the country, I do not think he was judging them properly. They will not think in that way. These people have the same loyalty as has the Chancellor in regard to the defence of the country, but I think he has been unjust in putting this tax on tea. These are points which weigh heavily in every household in the country, and they ought to be considered by hon. Members. It is not fair to pass the matter over lightly, and to say that it is only a question of 3½ million pounds and that as it is spread over so many families, it will not hit them very hardly. It does hit them hardly, and it is for that reason that I think the House ought to consider whether it is wise to continue with this tax.

5.32 p.m.


I understood from you, Sir, that you only intended to call the two Amendments of the hon. Member for Jarrow (Miss Wilkinson) to the Resolution on tea, and you suggested that the discussion on the first Amendment should range on the merits of the Tea Duty and that the question of the Imperial Preference, which is included in the duty, should be reserved for the second Amendment. For that reason I do not propose to deal with the observations made by the hon. Lady concerning Imperial Preference, but will reserve my observations on that until the second Amendment is taken. On the merits of this tax, the arguments which have been addressed to me by hon. Members opposite are not likely to weigh with me, because they take no account at all of the reason I have given for imposing the tax. The hon. Member for Leigh (Mr. Tinker) has given a highly imaginative account of the reason why I used certain expressions in winding up the Debate on the Budget Resolutions last week. There is really a much simpler explanation. In all that I have said on this subject, in my opening speech and in the later observations I made during the general discussion, I was simply telling the truth.

It is no use telling me that people will feel this tax and that therefore I ought not to impose it, when I have explained that in fixing upon this particular tax I was looking for one that people would feel, because when the the country was asked to undertake the huge programme of defence, which is for everybody, I thought that everybody ought to make some contribution towards it. The hon. Member for Leigh thinks that the mass of the people will say that they approve of making the country safe and providing whatever defence is necessary for the country, that they are as loyal to the country as I am, but that when it comes to paying they will say they think it most unjust that they should be asked to contribute anything. I believe the hon. Member is entirely unjust to the great majority of the people in this country in attributing to them any such sentiments. It is perfectly true that nobody likes to pay any taxation, and that goes for the poorest of the poor or the old widow. Nobody wants to pay; but after all, every one of us, old widow as well as millionaire, has an interest in preserving the safety of this country.


Even the destitute.


Certainly, even the destitute. The only question, to my mind, is not whether everybody should be asked to contribute, but whether the amount of contribution taken from any particular section of the people is or is not unfair. The hon. Lady who moved the Amendment brought in the old question of the relation between direct and indirect taxation, and the hon. Member for West Middlesbrough (Mr. Griffith) who, like all Liberals, always takes an interest in rather theoretical questions, called attention to the fact that he thought there had been a great swing in the direction of indirect taxation. Of course there has been a great swing in that direction from the moment we ceased to be what is called a Free Trade country—although we never were that—and became a Protectionist country; but it is simply astonishing to me that an hon. Member can still talk as though the question of the relation between direct and indirect taxation had the same importance now, when we are dealing with this vast range of imported articles, as it had at a time when indirect taxation was almost entirely concerned with articles of food and drink and tobacco. How can you say that you are dealing with the same set of conditions when you are speaking about duties on, say, steel billets or motor ears or silk dresses? These are matters which do not affect the cost of living in the case of the poorest of the poor, and you have to take now an entirely different view of the relation between direct and indirect taxation than in the days of Mr. Gladstone. In fact, I think it is quite impossible to establish any relation to-day in the altered circumstances of the case, and to my mind the whole question of direct and indirect taxation has become purely academic. At the same time, I quite agree that when deciding how a particular burden shall be borne by the country, one ought to take account to some extent of the ability of the various classes to bear that burden. The hon. Member for Edmonton (Mr. Broad) made a bitter attack upon me. He said not only that this was the meanest tax that ever was—


I said it is a penal tax.


—but he went on to say that I had searched for the meanest tax, for one that would press more hardly than any other tax upon the poorest of the poor. Apparently the hon. Member takes no account at all of the. fact that out of £15,000,000 of taxation, I am raising £12,000,000 from other classes and only £3,500,000 from this particular tax. That, of course, is not by any means the whole of the story, for we have to consider the number of those who will be called upon to pay the £3,500,000 and the number of those who will pay the additional Income Tax, which is to be £12,000,000. Let me remind hon. Members that there are only 3,500,000 people among whom £12,000,000 has to be distributed, whereas I suppose there are from 35,000,000 to 40,000,000 who drink tea. I think it will be seen that I have given very careful consideration to the question of ability to pay and that I have confined myself in this tax to an imposition which is small in amount, and which I do not believe can be considered really as a very serious hardship.

I do not deny for a moment that people will feel this tax, and that they will have to choose between either drinking less or buying cheaper tea or paying more than before. That is the raison d'être of the tax, that people shall make that contribution. The hon. Member said it will be a crushing burden on them, but I say that is a gross exaggeration. What are the facts about the consumption of tea? We know the average consumption of tea is about a ¼ lb. per week per head. If the whole of the 2d. is paid by the consumer, then the consumer will have to pay something in the order of 9s. in the. year.


Was it 9s. per head' a year?


I ought to have said 9s. per household a year. Nobody can pretend that is an overwhelming burden. Although hon. Members opposite always, for their own purposes and when it suits them, throw doubt upon the cost of living index, yet the cost of living index is still accepted as a measure in a great number of cases, and although it may not be an absolutely correct and perfect index of the weekly budget of a working man's household, it is a rough-and-ready approximation which cannot be left out of account altogether. The cost of living index gives some sort of measure of what relation this extra tax on tea may bear to the ordinary burden of expenditure which the housewife has to brave in the week. Now, the cost-of-living index varies from month to month. It so happens that at the beginning of this month, compared with the beginning of the month before, it had gone down by two points; at the beginning of this month it was 44 and at the beginning of last month it was 46. Did we hear that a huge load and burden had been lifted from the housewife and that the old widow would be able to buy a great many more cups of tea than in the month before? There was not a word of that from hon. Members opposite.

What difference will this extra tax on tea make to the cost-of-living index? The difference will be less than half a point; that is to say, less than a quarter of the amount by which the cost of living actually went down as between one month and another. I am not attaching undue importance or accuracy to any of these figures, but they do give some measure of the actual amount of hardship which an imposition of this kind will cause. We must take into account the variations which are constantly taking place in the prices of various commodities for market reasons. The alteration in the price of tea on this occasion is not nearly so much as the sort of alteration that is going on all the time owing to ordinary fluctuations in the market, and it is really only because the tax on tea gives hon. Members an opportunity of denouncing the Government, that they are so anxious to stir up and to keep alive that irritation which, if it were not for them, would very soon cease to exist.

5.43 p.m.


The speech to which we have just listened is of the usual type of clever speech which we all know the Chancellor of the Exchequer is capable of making and which carefully puts a point of view in such a way that hon. Members will be calculated not to understand the real facts of the situation. In listening to that, speech, one might have thought it had become almost a virtue on the part of the Chancellor of the Exchequer to increase this indirect taxation of the working classes, which constitute four-fifths of the population. The Chancellor made one or two observations that react against himself. He said, in the first place, that we had overlooked his real reason for imposing the tax, and he went on to explain that the reason was that he wanted people to feel that they were paying. That is a splendid admission from a Protectionist Chancellor that, after all, the tax on the commodity is paid by the consumer.


A commodity which is not produced in this country.


It is a commodity upon which, however, the right hon. Gentleman exercises Protectionist influences by having a preferential duty. I put it to him quite directly that he admits that the imposition of this duty is something the consumer will feel. He then went on to say that one could not relate that argument to the general position of indirect and direct taxation. That, he says, has become a purely academic question. He says that we have passed from the old Free Trade position to one in which we have taxes upon all kinds of commodities. One would have thought from listening to him, that what he said about tea and the cost to the consumers did not apply to anything else.

He asked us to imagine attempting to relate such an argument to steel billets or silk dresses. Why not? I attend over and over again at the Import Duties Advisory Committee. on whose recommendations the right hon. Gentleman appears to act so faithfully, in order to oppose applications for duties on certain articles. Over and over again, the case of the applicants is that they have to meet foreign competition; that it is a question of price and that if they could only get a duty on the articles in question to keep out foreign manufacturers, they would be able to maintain their own trade. In the ultimate it is a question of the price which the consumer in this market can pay. It does not matter whether it is a case of steel billets or silk dresses or anything else used by the community. The Chancellor cannot "get away with it" by suggesting that in those cases the price does not affect the consumer. The admission which he has made about tea is equally applicable to any other duty upon commodities which are used by the community. Then, the right Lon. Gentleman made an extraordinary admission, in reply to an interruption by an hon. Friend of mine on this side, when he said that he believed that even the destitute should be required to contribute to the defence of the country.


That is not in the least what I said. The question which was put to me was whether the destitute were interested in or had anything to gain by the defence of the country.


I do not wish to misrepresent the right hon. Gentleman. I have only taken down three words which he used in reply to the interpellation, because I had to do it very hurriedly and the three words are "even the destitute." If we take those words, in the light of the question which was put to the right hon. Gentleman, I do not think any other construction can be placed upon his statement than that which I have placed upon it. The right hon. Gentleman may say in explanation that the destitute are also interested in saving their country. [HON. MEMBERS: Hear, hear.] Yes, and I think it is true, but that is not the point which my hon. Friend on this side was putting in his interpellation. His point was whether the destitute could afford to pay.


indicated dissent.


That was the implication of the question.


The right hon. Gentleman must not put that interpretation upon it. The question was whether the destitute had any interest in the protection of the country and I said, "Yes they had." The question of whether they should pay or not is quite a different one. It is obvious that if a man is destitute he cannot pay.


All I have to say to that is that if a person receives a cash payment from the assistance committee in relief of his destitution, he has to spend that cash on household commodities and he is being asked to pay this taxation out of the grant made to him in relief of his destitution. It is, therefore, true to say that it is as much a tax upon the destitute as upon any other class of the community.


I think I ought to have an opportunity of clearing up any misunderstanding which has arisen on this point. The question which I put to the right hon. Gentleman was not whether the destitute were interested or uninterested in the defence of the country. My question had reference to what the Chancellor was then saying, to the effect that he had deliberately imposed this tax in order to make everyone realise that they must contribute to the extra expenditure upon armaments. I intervened with the words "Even the destitute," implying that I wanted the Chancellor to say whether it was his view that even the destitute, even those people whose incomes were fixed by public assistance committees and the Unemployment Assistance Board, on the basis of the relief of destitution, should be called upon to contribute, and his answer was, "Certainly, even the destitute."


I wish to deal with one or two further points. The right hon. Gentleman also admitted that the result of the duty would be that people would either have to drink a cheaper quality of tea or pay more for their tea. He said he did not think that the burden would be as crushing as had been indicated, because it would not amount to more than 9s. per household per annum. But the right hon. Gentleman does not suggest that that would be the total incidence of the Tea Duty. He knows that we on these benches have always opposed duties of this kind. My colleagues who were in the House at the time opposed the duty of 1932 as strongly as we oppose this duty to-day. If you work out the incidence of the Tea Duty per household per annum, now that the extra 2d. has been put on, you will find that it is at least 26s. to 28s.




I am taking the basis adopted by the Chancellor for his own estimate, but I am perfectly willing to deal with this matter on the basis of our own experience, and I think we know a little about it. I contend that on the basis of the estimate which the Chancellor himself has made of the extra imposition, the cost, taking the general duty, will be three times the amount which has been mentioned, or something like 27s. or 28s. per household per annum. My hon. Friends are right in contending that that is a tax which is outside the means of the working class and which ought not to have been imposed. It is on top of continuous increases in other respects which the right hon. Gentleman did not mention when dealing with his general argument. My hon. Friend the Member for Jarrow (Miss Wilkinson) pointed out that we recently passed an increased duty on dressed leathers and that within three weeks the retail price of boots and shoes went up by from 6d. to 1s. It is the cumulative effect on the working-class household of duties upon duties that counts with us.

As to the general value of the cost-of-living index figure, I was rather surprised at the right hon. Gentleman quoting monthly changes in dealing with a tax in an annual Budget. I am sure he knows that the cost-of-living index prepared by the Ministry of Labour is bound to be affected from month to month by seasonal fluctuations. With the cheaper cost of eggs and items of that kind, for instance, there is bound to be, in April and May, a fairly substantial fall for the time being in the cost of living. If he takes the real annual average cost-of-living figure, even if he is satisfied with the basis now adopted by the Ministry of Labour in the preparation of that index, I do not think he will get much satisfaction out of the figures of the last two years. He might go back to the period of the deepest depression and he would find that we had not advanced much since that date. We have certainly advanced 5 per cent. in the last 18 months.

Division No. 150.] AYES. [5.59 p.m.
Acland-Troyte, Lt.-Col. G. J. Barclay-Harvey, C. M. Bowater, Col. Sir T. Vansittart
Adams, S. V. T. (Leeds, W.) Baxter, A. Beverley Bower, Comdr. R. T.
Agnew, Lieut.-Comdr. P. G. Beaumont, Hon. R. E. B.(Portsm'h) Bowyer, Capt. Sir G. E. W.
Aibery, I. J. Belt, Sir A. L. Brass, Sir W.
Allen, Lt.-Col J. Sandeman (B'kn'hd) Bernays, R. H. Briscoe, Capt. R. G.
Amery, Rt. Hon. L. C. M. S. Birchen, Sir J. D. Brown, Brig.-Gen. H. C. (Newbury)
Anstruther-Gray, W. J. Blair, Sir R. Bull, B. B.
Apsley, Lord Blindell, Sir J. Butler, R. A.
Assheton, R Bossom, A. C. Campbell. Sir E. T.
Balfour, Capt. H. H. (Isle of Thanet) Boulton, W. W. Cartland, J. R. H.

Since the right hon. Gentleman argues that we ought to take these things on an annual basis, why is he selecting a pericd of 18 months?


For the simple reason that I was continuing the argument which I put to the Chancellor on the comparison which he used. I said that if he compared the present position with the position in the deepest period of depression in 1932, he would find that there had not been much advance in the price level, and I went on to say that in the last 18 months there had been an advance of from 5 per cent. to 6 per cent. I keep a careful record of these matters in my own office, and I know the position very well, although I am aware that the hon. Member for South Croydon (Mr. H. G. Williams) thinks that he also knows a great deal about it. It is no good putting forward this argument of a. change in the cost-of-living index figure from one month to another. This duty like so many of the other duties, is performing to-day the very function that William Pitt claimed all these duties would perform when he said that he had discovered a way of taxing the coats off the backs and the shoes off the feet of the poorest of the poor for national defence and that they would not recognise that it was being done. That is why we oppose it.


Will the right hon. Gentleman reply to the question which I put to him? What steps will he take to see that there is not too much imposition on the small consumers? Is there any means of checking that?


The only means of checking that would be competition between the retailers, including the co-operative societies.

Question put, "That 6d. stand part of the Resolution."

The House divided: Ayes, 227; Noes, 111.

Cary, R. A. Hills, Major Rt. Hon. J. W. (Ripon) Ramsbotham, H.
Cautley, Sir H. S. Holmes. J. S. Rathbone, J. R. (Bodmin)
Cazalet, Thelma (Islington, E.) Hope, Captain Hon. A. O. J. Reed, A. C. (Exeter)
Cazalet, Capt. V. A. (Chippenham) Hopkinson, A. Reid, Sir D. D. (Down)
Chamberlain, Rt. Hn. N. (Edgb't'n) Hore-Belisha, Rt. Hon. L. Reid, W. Allan (Derby)
Chapman, A. (Rutherglen) Horsbrugh, Florence Remer, J. R.
Chapman, Sir S. (Edinburgh, S.) Howitt, Dr. A. B. Rickards, G. W. (Skipton)
Chorlton, A. E. L. Hudson, Capt. A. U. M. (Hack., N.) Ropner, Colonel L.
Clarry, Sir Reginald Hulbert, N. J. Ross Taylor, W. (Woodbridge)
Clydesdale, Marquess of Hume, Sir G. H. Russell, A. West (Tynemouth)
Cobb, Sir C. S. Hurd, Sir P. A. Russell, S. H. M. (Darwen)
Collins, Rt. Hon. Sir G. P. Jackson, Sir H. Salmon, Sir I.
Colville, Lt.-Col. D. J. James, Wing-Commander A. W. Salt, E. W.
Cook, T. R. A. M. (Norfolk, N.) Jarvis, Sir J.J. Samuel, Sir A. M. (Farnham)
Cooke, J. D. (Hammersmith, S.) Keeling, E. H. Samuel, M. R. A. (Putney)
Cooper, Rt. Hon. T. M. (E'nburgh, W.) Kerr, H. W. (Oldham) Sanderson, Sir F. B.
Courthope, Col. Sir G. L. Keyes, Admiral of the Fleet Sir R. Sassoon, Rt. Hon. Sir P.
Craddock, Sir R. H. Knox, Major-General Sir A. W. F. Scott, Lord William
Craven-Ellis, W. Lambert, Rt. Hon. G. Selley, H. R.
Croft, Brig.-Gen. Sir H. Page Law, R. K. (Hull, S.W.) Shakespeare, G. H.
Crookshank, Capt. H. F. C. Leech, Dr. J. W. Simmonds, O. E.
Cross, R. H. Leighton, Major B. E. P. Sinclair, Col. T. (Queen's U. B'll'st).
Crowder, J. F. E. Lewis, O. Smiles, Lieut.-Colonel Sir W. D.
Culverwell, C. T. Lindsay, K. M. Smith, Bracewell (Dulwich)
Davies, Major G. F. (Yeovil) Lloyd, G. W. Smith, L. W. (Hallam)
Davison, Sir W. H. Loder, Captain Hon. J. de V. Smith, Sir R. W. (Aberdeen)
Dawson, Sir P. Lovat-Fraser, J. A. Smithers, Sir W.
De la Bare, R. Lumley, Capt. L. R. Somervell, Sir D. B. (Crewe)
Denman, Hon. R. D. Lyons, A. M. Somerville, A. A. (Windsor)
Donner, P. W. MacAndrew, Lt.-Col. Sir C. G. Southby, Comdr. A. R. J.
Dorman-Smith, Major R. H. McCorquodale, M. S. Spears, Brig.-Gen. E. L.
Drewe, C. MacDonald, Sir Murdoch (Inverness) Spens, W. P.
Duckworth, G. A. V. (Salop) Macdonald, Capt. P. (Isle of Wight) Stanley, Rt. Hon. Lord (Fylde)
Dugdale, Major T. L. McKle, J. H. Stanley, Rt. Hon. Oliver (W'm'l'd)
Duggan, H. J. Macnamara, Capt. J. R. J. Stewart, J. Henderson (Fife, E.)
Duncan, J. A. L. Makins, Brig.-Gen. E. Stourton, Hon. J. J.
Dunglass, Lord Manningham, Buller, Slr M. Srauss, H. G. (Norwich)
Eastwood, J. F. Margesson, Capt. Rt. Hon H. D. R. Stuart, Lord C. Crichton- (N'thw'h)
Eckersley, P. T. Markham, S. F. Stuart, Hon. J. (Moray and Nairn)
Elliston, G. S. Mason, Lt.-Col. Hon. G. K. M. Sueter, Rear-Admiral Sir M. F.
Emmott, C. E. G. C. Mayhew, Lt.-Col. J. Sutcliffe, H.
Emrys-Evans, P. V. Meller, Sir R. J. (Mitcham) Tate, Mavis C.
Erskine Hill, A. G. Mellor. Sir J, S. P. (Tamworth) Taylor, C. S. (Eastbourne)
Evans, Capt. A. (Cardiff, S.) Mills, Sir F. (Leyton, E.) Taylor, Vice-Adm. E. A. (Padd., S.)
Everard, W. L. Mills, Major J. D. (New Forest) Thomas, J. P. L. (Hereford)
Fyfe, D. P. M. Moore-Brabazon, Lt.-Col. J. T. C. Titchfield, Marquess of
Ganzoni, Sir J. Morris, O. T. (Cardiff, E.) Touche, G. C.
Gilmour, Lt.-Col. Rt. Hon. Sir J. Morris-Jones, Dr. J. H Tufnell, Lieut.-Com. R. L.
Glucksteln, L. H. Morrison, W. S. (Cirencester) Wakefield, W. W.
Glyn, Major Sir R. G. C. Muirhead, Lt.-Col. A. J. Wallace, Captain Euan
Goldle, N. B. Munro, P. Ward, Lieut.-Col. Sir A. L. (Hull)
Goodman, Col. A. W. Neven-Spence, Maj. B. H. H. Ward, Irene (Walisend)
Grattan-Doyle, Sir N. Nicolson, Hon. H. G. Wardlaw-Mllne, Sir J. S.
Gretton, Col. Rt. Hon. J. O'Neill, Major Rt. Hon. Sir Hugh Warrender, Sir V.
Gridley, Sir A. B. Orr-Ewing, I. L. Wayland, Sir W. A.
Grimston, R. V. Palmer, G. E. H. Wedderburn, H. J. S.
Guest, Hon. I. (Brecon and Radnor) Penny, Sir G. Wickham, Lt.-Col. E. T. R.
Guest, Maj. Hon. O.(C'mb'rw'll, N.W.) Peters, Dr. S. J. Williams, H. G. (Croydon, S.)
Gunston, Capt. D. W. Petherick, M. Wilson, Lt.-Col. Sir A. T. (Hitchin)
Hamilton, Sir G. C. Pickthorn, K. W. M. Winterton, Rt. Hon. Earl
Hanbury, Sir C. Pilkington, R. Withers, Sir J. J.
Hannah, I. C. Piugge, L. F. Womersley, Sir W. J.
Hannon, Sir P. J. H. Ponsonby, Col. C. E. Wood, Rt. Hon. Sir Kingsley
Heilgers, Captain F. F. A. Pownall, Sir Assheton
Heneage, Lieut.-Colonel A. P. Procter, Major H. A. TELLERS FOR THE AYES.—
Herbert, A. P. (Oxford U.) Raikes, H. V. A. M. Lieut.-Colonel Llewellin and Captain Waterhouse.
Herbert, Major J. A. (Monmouth) Ramsay, Captain A. H. M.
Adams, D. (Consett) Chater, D. Gardner, B. W.
Adams, D, M. (Poplar, S.) Cluse, W S. Garro-Jones, G. M.
Adamson, W. M. Clynes, Rt. Hon. J. R. George, Major G. Lloyd (Pembroke)
Alexander, Rt. Hon. A. V. (H'isbr. Cocks, F. S. Green, W. H. (Deptford)
Anderson, F. (Whitehaven) Compton, J. Greenwood, Rt. Hon. A.
Attlee, Rt. Hon. C. R. Cove, W. G. Griffith, F. Kingsley (M'ddl'sbro, W.)
Bonfield, J. W. Daggar, G. Griffiths, G. A. (Hemsworth)
Barnes, A. J. Dalton, H. Griffiths, J. (Lianelly)
Barr, J. Davies, R. J. (Westhoughton) Groves, T. E.
Batey, J. Day, H. Hall, G. H. (Aberdare)
Bellenger, F. Ede, J. C. Hall, J. H. (Whitechapel)
Benson, G. Edwards, Sir C. (Bedwelity) Hardie, G. D.
Broad, F. A. Fletcher, Lt.-Comdr. R. T. H. Harris, Sir P. A.
Brooke, W. Foot, D. M. Henderson, A. (Kingswinford)
Burke, W. A. Frankel, D. Henderson, T. (Tradeston)
Holdsworth, H. Maclean, N. Shinwell, E.
Hollins, A. Mainwaring, W. H. Silverman, S. S.
Hopkin, D. Marklew, E. Simpson, F. B.
Jagger, J. Marshall, F. Sinclair, Rt. Hon. Sir A. (C'thn'S)
Jenkins, A. (Pontypool) Maxton, J. Smith, Ben (Rotherhithe)
John, W. Messer, F. Smith, Rt. Hon. H. B. Lees- (K'ly)
Johnston, Rt. Hon. T. Montague, F. Stewart, W. J. (H'ght'n-le-Sp'ng)
Jones, A. C. (Shipley) Morrison, R. C. (Tottenham, N.) Strauss, G. R. (Lambeth, N.)
Jones, H. Haydn (Merloneth) Naylor, T. E. Taylor, R. J. (Morpeth)
Jones, J. J. (Silvertown) Oliver, G. H. Thurtle, E.
Jones, Morgan (Caerphilly) Paling, W. Tinker, J. J.
Kelly, W. T. Parker, H. J. H. Viant, S. P.
Kennedy, Rt. Hon. T. Potts, J. Walkden, A. G.
Kirby, B. V. Price, M. P. Walker, J.
Kirkwood, D. Pritt, D. N. Watkins, F. C.
Lathan, G. Rathbone. Eleanor (English Univ's.) White, H. Graham
Lawson, J. J. Ritson, J. Wilkinson, Ellen
Leach, W. Roberts, Rt. Hon. F. O. (W. Brom.) Wilson, C. H. (Attercliffe)
Leslie, J. R. Roberts, W. (Cumberland, N.) Windsor, W. (Hull, C.)
Logan, D. G. Robinson, W. A. (St. Helens) Young, Sir R. (Newton)
Lunn, W. Rowson, G.
McGhee, H. G. Seely, Sir H. M. TELLERS FOR THE NOES.—
Mac Laren, A. Sexton, T. M. Mr. Mathers and Mr. Charleton.
Mr. DEPUTY-SPEAKER (Sir Dennis Herbert)

Miss Wilkinson.


I presume, Mr. Deputy-Speaker, you are calling upon me to move the Amendment in line 7, to leave out "4d.," and to insert "ld." We regard this as consequential on the previous Amendment, and I do not, therefore, propose to move it.

6.8 p.m.


I beg to move, in line 7, to leave out "4d.," and to insert "3d."

In moving this Amendment, I think I ought to state that I was a planter in Assam myself, and I am still interested in tea planting in Assam. I understand that in this House, before a Member debates any subject in which he is interested, it is up to him to advise the House of his position, so somewhat diffidently I speak now on behalf of some of the tea planters in Assam, in India, in Ceylon, and elsewhere in the British Empire where tea is grown. When, a few years ago, the Chancellor of the Exchequer did give a preferential duty of 50 per cent. on tea grown within the British Empire, I can assure him that it was very much appreciated by the planters all over the Empire, and I know that they are disappointed and distressed to see that the right hon. Gentleman is introducing a new principle in his Budget this year by reducing his preference from 50 per cent. to 33⅓ per cent. At the same time, I would point out to him that tea competes with coffee, and while the Chancellor gives a preferential duty of 66⅔ per cent, to coffee grown within the British Empire, he gives a preference of only 33⅓ per cent. to tea.

There are no more loyal citizens of the British Empire than the tea planters, and they realise that the Chancellor has to have some money. I do not suppose that many of them were surprised. It is not they, at any rate, who were insured against this duty, because I think they were as surprised as anybody else, but they realise, as I say, that the Chancellor has to have money, and they only object to the principle of his reducing this preference. Tea is a commodity that has gone through a lot of vicissitudes during the last seven or eight years. At one time it was being sold in this country for less than it cost to produce in India, so the tea planters of Assam, Ceylon, and the Dutch East Indies got together to start a big campaign all over the world for the purpose of advertising tea. They always had a small tax on themselves for the purpose of advertising propaganda, but they had to double this tax, and they raise about £400,000 a year for the purpose of spending it in advertisement. About £300,000 of that is raised in the British Empire and £100,000 in the Dutch East Indies.

Due to the fact that they have spent this large sum of money, the sale of tea has improved in the last two or three years as I daresay the Chancellor himself must have noticed from his receipts from Income Tax on companies which are registered in the United Kingdom and which produce their tea in India Ceylon, Assam, and Bengal. By the Chancellor reducing this preference it seems extremely likely that he will reduce his Income Tax from these companies at the same time, for, of course, the companies which produce in Java are registered in Holland, and they contribute nothing in the way of Income Tax to the Exchequer of this country. I must admit that there are a few companies which produce in the Netherlands and are registered in this country, but I think the percentage is a small one.

We look upon this reduction in the preference as an unkind cut, and we feel that the Chancellor of the Exchequer might have found some other means of raising the money—for instance, on wine corning into this country, or on foreign cosmetics, lipstick, or something like that. The Chancellor said that he wanted to put on a tax which would definitely be felt by the people in this country who paid it. Well, it will certainly be felt very severely by the consumers in this country, and it will be felt far more severely by the producers of British Empire tea.

6.13 p.m.


I beg to second the Amendment.

I must apologise for not being in my place when the Amendment was called. I was under the impression that the earlier Amendment would have been moved, but I understand that it was regarded as consequential and not moved. I was at the time actually obtaining a little information, having regard to the rather extraordinary statement made by the late First Lord of the Admiralty during the discussion on the last Amendment about the increase in the cost of living in the last 18 months. I thought I would look up the figures, and I find that they are of some interest. On the 1st April of this year foodstuffs generally were 26 per cent. above pre-war, and on the 1st September, 1934, 18 months ago, they were also 26 per cent. above prewar, so that the rise in footstuffs is precisely nothing, which is also the value of the right hon. Gentleman's speech, having regard to his misstatement of fact.


The hon. Member is quite wrong in his last statement anyway, because I had already said in my speech that I did not attach very much value, as did some people, to the cost-of-living index, and I also said that in the movement with which I am connected we keep our record of food prices. I say categorically that on the wholesale and retail sides in the last 18 months food prices have advanced on the whole from 4 to 6 per cent. on the general market position. I keep that record. It is sent to me, to my headquarters, into my office, and those figures are right, whereas those given by the hon. Member are not worth the paper on which they are written.


I am sorry to hear the Co-operative societies are shoving up prices so much more than private enterprise. If the right hon. Gentleman will consult his former colleagues who held office in the Ministry of Labour, he will find that these figures are obtained by the simple device of sending out inquiries to 5,000 shops selling food, a number of which are Co-operative societies. The statistics are aggregated in accordance with weighting factors which may call for some revision, and if the right hon. Gentleman will examine the prices of the commodities which are included he will find that his statement is grossly misleading.


I thought that the hon. Gentleman rose to second the Amendment.


I am sorry. I am not seconding the Amendment because I object in existing circumstances to some increase in the duty on tea. The object of moving this reduction is to raise the question of Imperial Preference. If I were free to select the kind of Amendment I should like to move, it would be a proposal to reduce the duty on Empire tea and to increase to a greater extent the duty on foreign tea, but I am debarred from doing that. There is a case for raising the duty on tea because there cannot be any democracy without responsibility. The first responsibility is to pay taxes, and those who call the tune should pay the piper. The largest part of the tune in the last seven years has been an increase in civil expenditure of over £100,000,000. Therefore, there is a case for some increase in the Tea Duty in existing circumstances in order that those who pass resolutions in favour of more pensions and more everything for everybody should pay a bit.


Do I understand that the hon. Gentleman proposes to take back from the old age pensioners something that has been given to them?


As the increase in the Tea Duty will be £3,700,000, and the increased cost of social services in the last seven years is about £100,000,000, it is not very much to ask. Let us examine this question from the point of view of Imperial Preference. The preference remains unaltered at 2d., but instead of it being 50 per cent. of the duty, it is now 33⅓. What we have to consider is whether the effect of the preference remains the same. I think that the argument is conclusive that there must be a point at which the preference will cease to have value. If you employ the mathematical device where things are carried to the limit, it is obvious that you can raise the duty on foreign tea to 15s., and on Empire tea to 14s. 10d., and the preference then would cease to have any practical significance. Each upward movement limits the value of the preference.

I have some figures showing the average c.i.f. values before duty has been paid. I put China tea in a class by itself, because the question of taste more than of price enters into it. In the case of what is commonly known as Indian tea, we have the interesting fact that, generally speaking, the qualities of tea that come from India and Ceylon are better than the qualities of tea that come from the Dutch East Indies, which is the chief source of competition. There obviously must arise some point where, if you raise price by a duty, it affects the whole source of the supplies—a point which the right hon. Gentleman has overlooked. If you push up prices by a revenue duty, as in this case, people will adopt various devices for the purpose of avoiding any increase in their cost of living. You get a tendency, therefore, to shift from rather better qualities of tea to qualities not so good. When that arises, the tendency, having regard to the facts of the case, will be to shift from Empire tea to foreign tea.

Let us see what happened last year. The average price per lb. of tea from Nyasaland was 11.3d. per lb., from British India 13.1d., and from Ceylon 14.2d. The average price of tea from the Dutch East Indies was 9.6d. Foreign tea is, therefore, lower in average price than Empire tea, the difference ranging from 1.7d. to 4.8d. per lb. These are large ranges, and it is clear that within those average prices there is a whole range of average values. The effect of the Budget will not be to put the price up by 4d.; if it went up by 4d., the case of the right hon. Gentleman might be established. There will be a general lift up at 2d. That will obviously cause a certain movement of purchase from better qualities to slightly inferior qualities, and that will tend to change the direction of purchases from Empire teas to foreign teas. Anything of that kind would be disastrous.

I hope that the Chancellor will consider the possibility of amending the Financial Resolution to provide for a slight further increase in the duty on foreign tea. Alternatively, if he is not prepared to do that by the cut of 1d. which the Amendment suggests, but is prepared to do it by a cut of one-farthing, it will probably preserve the situation and increase the margin of preference from 2d. to 2¼d. I think that that probably might be enough to preserve the general balance of the situation, although on that point we should want the advice of the technical experts on tea. I hope that the Chancellor will consider the situation between now and the time when we reach the more important practical stage, namely, the Committee stage of the Finance Bill. I am not seconding this Amendment, in the hope that the Chancellor will say "yes" this afternoon, because obviously he cannot afford to sacrifice the £1,600,000 which this Amendment would involve. We only move it in this form for the purpose of staking our claim for some consideration in a more appropriate form on the Committee stage of the Finance Bill.

6.24 p.m.


I am not against an increase of the duty on tea in the present circumstances. If the Chancellor finds himself suddenly obliged to find a large extra sum for our Defence Services, I do not quarrel with the methods he has proposed for meeting that liability this year. When tea is compared with other stimulants, such as beer and whisky, we find that the proportion of taxation it has to bear is comparatively small. I do, however, regard with disappointment and a good deal of surprise the fact that the Chancellor is reducing the effective Empire preference on tea. It would be interesting if he could tell us whether he has considered what tax would be necessary had he decided to maintain the existing effective preference of 50 per cent. Clearly, if the tax on foreign tea remained at 6d. and the Amendment reducing the tax on Empire tea to 3d. were carried, the amount which the Chancellor received would be less than he budgeted for. Can he tell the House at what figure it would have been necessary to put the tax on foreign and Empire tea respectively, maintaining the effective preference of 50 per cent. and yet giving the Exchequer the same sum that he will now get by 6d. on foreign tea, and 4d. on Empire tea? I hope that my right hon. Friend will be able to give us some guidance on this point as it is undoubtedly a. matter on which more will be heard when we discuss the Finance Bill.

6.26 p.m.


I would like to take the opportunity on this Amendment to urge the Chancellor to take another view of this preferential duty, for I take a somewhat different view of it from that of hon. Members who have spoken. It is true, as the hon. and gallant Member for Blackburn (Sir W. Smiles) said, that when the preferential duty on tea was introduced, the majority of the tea planters asked for it and were in favour of it. They were not all in favour, and, judging from the observations of the chairmen of tea companies to their shareholders, many of them have taken the view that the preference has been of no advantage to them at all. How many of them would be in favour of the preferential duty now if they were consulted directly on the point, I do not know, but the number would be far fewer than it was at the time of its introduction.


Were the companies to which the hon. Gentleman refers in Java and Sumatra? If so, they would naturally be averse.


No, the companies were in Assam and Ceylon. I have not the actual data here, but I will be glad to supply them to the hon. and gallant Gentleman. The effect of the preferential duty has not been to stop the production of Java tea nor to increase the business in Empire tea, but to divert the trade from the channels in which it was formerly running. Java tea has been sent in largely increased quantities to Australia to the detriment of the growers of Ceylon and Assam tea and of southern Indian planters who were spending money to try and develop that market.

Brigadier-General Sir HENRY CROFT

Are they at a disadvantage in the market of Australia as compared with Java? How can the Indian tea supplier be worse off in Australia?


For two reasons. The first is that Java tea, having been diverted from its normal course by the preference, had to be sold somewhere, and the result was that it was sold more cheaply in Australia than Empire tea. Another reason that must be borne in mind is that Java has had a substantial advantage in the exchange. The result of the preference, therefore, has been to disadvantage Empire producers in the Australian market and also in the American market. There is also another effect which would not have been foreseen; because I frankly say the proposal is at first sight an attractive one. One result has been to alter to some extent the re-export trade in tea from this country to our dependencies very much in favour of the Dutch East Indian growers. There is practically no Ceylon tea or southern Indian tea in those brands of tea shipped from this country to our dependencies.

My hon. Friend the Member for South Croydon (Mr. H. G. Williams) was quite right in saying that the effect of the duty as it leaves this House will be to increase the consumption of Java teas in the home market. He quoted tea prices the exact relevance and signifiance of which I am not clear about. He quoted the c.i.f. value before duty is paid, but what governs the competition among teas this country is not the c.i.f. price before duty is paid but the price in the wholesale London market after duty has been paid, and I prophesy with some confidence that if the duty leaves this House as it is now proposed in the Budget the effect will be to favour the Java, the Dutch East Indian and, for anything I know, the Formosa tea in the London market as against Empire tea. I hope that in the interest of Empire planters as a whole and of the industry as a whole the Chancellor will take a fresh and independent view on the whole question, and let us know exactly where we stand, because I am convinced that things are not satisfactory from any point of view.

My hon. Friend the Member for South Croydon suggested that the question should be referred to those who have an intimate and special knowledge of these things, and I hope that will be done. Tea is an extraordinarily delicate commercial product, because there are probably more varieties of tea than of anything else, unless it be tobacco—and I think there are many more varieties of tea than of tobacco. Every different latitude produces a different quality of tea, every plantation produces different qualities of tea, and in these circumstances, whatever the arrangements that are made in London, we get some result which is unforeseen. The net result of the preferential duty upon tea has not been to advantage to any extent, as I am advised and as I believe, our Imperial planters. The effect has been that the East Indian planter has taken 2d. less— or whatever less the amount of the duty might he—for his tea, and so much more has been collected by the British Exchequer. The net result of the transaction has not been satisfactory to the consumer, it has been unsatisfactory to the exporter in this country, and it has not brought any noticeable advantage to the Imperial planter, and I suggest that the whole matter is ripe for re-investigation by expert and impartial people.

6.35 p.m.


I am supporting this Amendment because, if carried, it would mean some diminution of the burden which the Chancellor is placing upon the tea drinkers of the country, and by far the larger proportion of them belong to what may be fairly termed the dispossessed classes. Whenever the occasion is presented to this House it is the duty of those who come from depressed areas to make their protest against the continuance of these areas in a country with such prosperity as Great Britain. If there is one section of the community which will not benefit by the expenditure upon defence it is the people in the depressed areas. The Vice-President of the Miners' Federation of Great Britain, after a cereful survey of the situation in the county of Durham in particular, and an examination of the reports of the medical officers of health not only for the county but for the townships in the country, has come to the conclusion that there is a slow but certain depreciation in the physical and the mental standards of the people as a result of ill nourishment. With our unemployed numbering 2,000,000 there are something like 5,000,000 or 6,000,000 people in a depressed condition at least during part of the year, and if we add to the burden of the poor and the poorest by an increased tax upon this favourite commodity, tea, we diminish the possibilities of expenditure upon more essential commodities.

It has been stated that the poor spend largely upon bread and margarine and tea, and we know that in the homes of the poorest tea is consumed at every meal. It is therefore essential that that class, which is undoubtedly bearing an inordinate share of our taxation through the scheme of indirect taxation set up in the Government's programme of tariffs, should not have even a minimum addition to the burden of their expenditure. Ever since the party to which I belong came into existence we have been accused of being a class party. I venture to assert that we have had many exhibitions of class legislation since this Parliament began, and have seen huge sums taken from the National Exchequer going to certain favoured quarters. I should have thought that the Chancellor, with his wide experience of social conditions, would have been one of the last in face of the generosity exhibited to other classes in the community, to add in any way, however slight, to the burden of those whose lives are virtually intolerable through the gross poverty existing in the depressed areas.

This Amendment, if carried, would certainly aid in reducing, though very slightly, the proposed burden upon this class, and I say that unless some relief is given we shall be able to assert that it is not this party which is a class party, not we who are setting class against class, not we who are guilty of one of the seven deadly sins— "him that soweth discord among brethren" —but the party opposite. They will be taking advantage of this great instrument of the Budget, which might have been utilised to help the lot of the depressed, still further to depress their conditions, under the specious and absurd plea that the burdens of national defence ought to be adequately distributed among the beneficiaries in the community. Poor people, the poorest classes, the depressed classes ought in every Budget till their situation is improved and they are brought up to a normal state of existence, where under-nutrition is a thing of the past, to have additional benefits and relief conferred upon them.

6.40 p.m.


I just wish to offer a few comments on some of the fallacies which have been put forward to-night with regard to the Tea Duty. My hon. Friend the Member for Jarrow (Miss Wilkinson), for instance, talked about the differential rates of the duty affecting the varying price of teas. I would point out that even the co-operatives probably pay 3s., 4s., 5s. or 6s. a 1b. for some of the tea they require—they have to, for blending purposes. The average price at which they sell popular brands may work out at 1s. 6d. or 1s. 8d. per 1b., but it is well known to those who have had anything to do with tea that the product as sold in the ordinary market to the actual consumer is blended tea which includes tea of a variety of qualities. My hon. Friend the Member for Jarrow interjects that she spoke of unblended teas. If it is unblended tea it may well be more expensive. Hon. Members who talk about Woolworth's or other firms as special purveyors of very cheap tea ought to remember that these firms have always of necessity to buy expensive teas for blending purposes—to blend with other sorts in order to produce a suitable average quality beverage. I for one resist the party suggestion of the hon. Member for Consett (Mr. David Adams) that this proposed taxation is in any respects a class measure.

The hon. Member for Leigh (Mr. Tinker) talked about a cup of tea in Lancashire, or, as I know it, a "coop o' tay." It is a popular beverage, and when any candidate, whoever he may be, goes into the homes of the people there, probably the first greeting he gets is an invitation to have a "coop o' tay." I suggest that many of my people in Lancashire—I certainly would—would welcome a. duty of even 8d., provided always there was a 50 per cent. preference in favour of Empire tea, if it meant that we could use that duty on tea as a bargaining point for reciprocal trading with India. I would point out to India that we would put up the duty on Indian teas if India slid not offer a reciprocating preference in favour of Lancashire goods. I mentioned and stressed the fact in 1932, when I pointed out that the growing of Indian, or Ceylon, tea is not a matter which concerns only European or British capital: There may be £60,000,000 of British money invested in tea in India, but for every pound sterling of British money invested in India there is an equal capitalised value of Indian money involved in the growing and production of tea. It may be a fact that the people interested in actual tea growing are only those in Bengal, or in one part of India, like Assam, but under the new Indian constitution if the people in Assam feel the pinch through the people of Lancashire insisting on or demanding a higher duty on Indian tea they may well bring the central Government of India to a proper appreciation of the benefits of reciprocal trading. As a bargaining point for bargaining purposes I would welcome a duty of even 8d.—perhaps that is an exaggerated figure but I would welcome an increased duty—if such could achieve benefit for Lancashire.

Hon. Members who have talked about the value of Colonial purchases of tea do not seem to realise that this country is by far the biggest user of Indian and Ceylon, that is Empire, teas. There are, after all, 40,000,000 people here and 6,000,000 in Australia. This is the most important tea consuming market. This proposed increased duty will benefit lower grades of tea but I regret very much that my right hon. Friend the Chancellor is not giving some greater proportional preference to Indian and all Empire teas.

6.45 p.m.


This Amendment has been discussed from a number of different points of view and the motives of the hon. Members who have taken part in the discussion have clearly not always been the same. The hon. Member for South Croydon (Mr. H. G. Williams) and other hon. Members, who put down this Amendment, did not expect me to accept it. They recognised that its acceptance would cost me £1,500,000 to £2,000,000, which I could not be expected to forfeit, but they suggested that that sum could be obtained by an increase in the duty on foreign tea over and above that which would be lost by the reduction of the duty on Empire tea. I cannot accept the suggestion that I should take that course. The hon. Member for Blackburn (Sir W. Smiles) said that my pro- posals represented a new principle of Preference, but there he is entirely mistaken. I am not introducing any new principle, although some of my hon. Friends have chosen to interpret the alteration in the duty in terms of an alteration in the percentage of Preference. Those who have studied the subject know that the whole trend in recent years in respect of standardisation of Imperial Preference has been to standardise not on the percentage but on the actual amount of the duty in question.

At one time Imperial Preference on tea was regulated by a percentage. It was one-sixth of the full duty, so that when the duty was 1s. per 1b. the Preference was 2d. What happened in consequence of fixing the percentage? When the duty was reduced, after a time, from 1s. to 8d., down came the actual Preference from 2d. to 1⅓d. It did not stop there. The duty was again reduced to 4d., and the Preference, which had begun by being 2d. in favour of the Empire grower, came down to two-thirds of a penny. I dare say that is one reason why, at Ottawa, when the Indian representatives were asking us to stabilise the Preference which was given to Indian tea, they did not ask us to stabilise the percentage but to stabilise at 2d. Under the Ottawa Agreement with the Indian delegation, that Preference, which lasts as long as the Agreement lasts, is to remain at a minimum of 2d.

It has been argued by some hon. Members that the result of increasing the Preference to the Empire tea-grower which was given him when I made the duty on foreign tea 4d. and on Empire tea 2d. was to cause people to buy other teas. The hon. Member for East Birkenhead (Mr. White) accepts that view and hopes for a completely new outlook in regard to all Empire duties on tea. That

Division No. 151.] AYES [6.56 p.m.
Acland-Troyte, Lt.-Col. G. J. Beaumont, Hon. R. E. B. (Portsm'h) Briscoe, Capt. R. G.
Adams, S. V. T. (Leeds, W.) Belt, Sir A. L. Brocklebank, C. E. R.
Agnew, Lieut.-Comdr. P. G. Birchall, Sir J. D. Brown, Rt. Hon. E. (Leith)
Albery, I. J. Bird, Sir R. B. Brown, Brig.-Gen. H. C. (Newbury)
Allen, Lt.-Col. J. Sandeman (B'kn'hd) Blair, Sir R. Bull, B. B.
Amery, Rt. Hon. L. C. M. S. Blindell, Slr J. Bullock, Capt. M.
Anstruther-Gray, W. J. Bossom, A. C. Burghley, Lord
Baldwin, Rt. Hon. Stanley Boulton, W. W. Butler, R. A.
Balfour, G. (Hampstead) Bowater, Col. Sir T. Vansittart Campbell, Sir E. T.
Balfour, Capt. H. H. (Isle of Thanet) Bower, Comdr. R. T. Cary, R. A.
Barclay-Harvey, C. M. Bowyer, Capt. Sir G. E. W. Cautley, Sir H. S.
Baxter, A. Beverley Brass, Sir W. Chamberlain. Rt. Hn. N. (Edgb't'n)

view has not found any convert among the growers of tea in the Empire, so far as I am aware. If the Government proposed to abolish Imperial Preference to them, as a consequence of the heavy losses sustained as a result of the imposition of this increased duty, we should hear their answer in no uncertain terms. Nobody can be quite certain what will happen as a result of the alteration in the duty. It was not my intention, in altering the duty, to alter the advantage to the Empire tea grower, and for that reason I have kept the Preference at the amount it was before, the standardised figure of 2d.

It would be premature to alter my proposal on account of some fear that the change might be harmful to Empire tea growers. I am not prepared to deny that there is some force in the view that the higher you raise the duty the more tendency there is to go to the cheaper teas, for example, Formosa or Java teas. How far the alteration that I am proposing to make will carry an alteration of that character is extremely difficult to prophesy with any certainty or confidence. My own view would be that it is better to let the thing stand as it is, and to let us see what the effects actually are, and if it is found that the Empire tea grower is suffering from the reduced percentage of preference which he gets, it will then be time to consider whether anything further should be done in his favour.


In view of the remarks of the right hon. Gentleman I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question put, "That this House cloth agree with the Committee in the said Resolution."

The House divided: Ayes, 242; Noes, 118.

Chapman, A. (Rutherglen) Hopkinson, A. Ramsbotharn, H.
Chapman, Sir S. (Edinburgh, S.) Hore Bellsha, Rt. Hon. L. Rathbone, J. R. (Bodmin)
Chorlton, A. E. L. Horsbrugh, Florence Reed, A. C. (Exeter)
Clarke, F. E. Howitt, Dr. A. B. Reid, Sir D. D. (Down)
Clarry, Sir Reginald Hudson, Capt. A. U. M. (Hack., N.) Reid, W. Allan (Derby)
Clydesdale, Marquess of Hulbert, N. J. Remer, J. R.
Cobb, Sir C. S. Hume, Sir G. H. Rickards, G. W. (Skipton)
Collins, Rt. Hon. Sir G. P Hunter, T. Ross, Major Sir R. D. (L'derry)
Colville, Lt.-Col. D. J. Hurd, Sir P. A. Ross Taylor, W. (Woodbridge)
Cook, T. R. A. M. (Norfolk, N.) Jackson, Sir H. Rowlands, G.
Cooke, J. D. (Hammersmith, S.) James, Wing-Commander A. W. Ruggles-Brise, Colonel Sir E. A.
Cooper, Rt. Hn. A. Duff (W'st'r S.G'gs) Jarvis, Sir J. J. Russell, A. West (Tynemouth)
Cooper, Rt. Hn. T. M. (E'nburgh, W.) Jones, Sir G. W. H. (S'k N'w'gt'n) Russell, R. J. (Eddisbury)
Courthope, Col. Sir G. L. Keeling, E. H. Salmon, Sir I.
Craddock, Sir R. H. Kerr, H W. (Oldham) Salt, E. W.
Craven-Ellis, W. Keyes, Admiral of the Fleet Sir R. Samuel, Sir A. M. (Farnham)
Crookshank, Capt. H. F. C. Kirkpatrick, W. M. Samuel, M. R. A. (Putney)
Cross, R. H. Knox, Major-General Sir A. W. F. Sanderson, Sir F. B.
Crowder, J. F. E. Lambert, Rt. Hon. G. Savery, Servington
Culverwell, C. T. Law, R. K. (Hull, S.W.) Scott, Lord William
Davies, C. (Montgomery) Leech, Dr. J. W. Selley, H. R.
Davies, Major G. F. (Yeovil) Leighton, Major B. E. P. Shakespeare, G. H.
Davison, Sir W. H. Lewis, O. Simmonds, O. E.
Dawson, Sir P. Lindsay, K. M. Sinclair, Col. T. (Queen's U. B'If'st),
Denman, Hon. R. D. Llewellin, Lieut.-Col. J. J. Smiles, Lieut.-Colonel Sir W. D.
Dorman-Smith, Major R. H. Lloyd, G. W. Smith, L. W. (Hallam)
Drewe, C. Loder, Captain Hon. J. de V. Smith, Sir R. W. (Aberdeen)
Duckworth, G. A. V. (Salop) Loftus, P, C. Smithers, Sir W.
Duckworth. W. R. (Moss Side) Lovat-Fraser, J. A. Somervell, Sir D. B. (Crewe)
Dugdale, Major T. L. Lyons, A. M. Somerville, A. A. (Windsor)
Duggan, H. J. Mabane, W. (Huddersfield) Southby, Comdr. A. R. J.
Duncan, J. A. L. MacAndrew, Lt.-Col. Sir C. G. Spears, Brig.-Gen. E. L.
Dunglass, Lord McCorquodale, M. S. Spens, W. P.
Eastwood, J. F. MacDonald, Rt. Hon. M. (Ross) Stanley, Rt. Hon. Lord (Fylde)
Eckersley, P. T. MacDonald, Sir Murdoch (Inverness) Stanley, Rt. Hon. Oliver (W'm'I'd)
Edmondson, Major Sir J. Macdonald, Capt. P. (Isle of Wight) Storey, S.
Elliston, G. S. McEwen, Capt. J. H. F. Stourton, Hon. J. J.
Emmott, C. E. G. C. McKie, J. H. Strauss, H. G. (Norwich)
Emrys-Evans, P. V. Makins, Brig.-Gen. E. Stuart, Lord C. Crichton. (N'thw'h)
Entwistle, C. F. Manningham-Buller, Sir M. Stuart, Hon. J. (Moray and Nairn)
Errington, E. Margesson, Capt. Rt. Hon. H. D. R. Sueter, Rear-Admiral Sir M. F.
Erskine Hill, A. G. Markham, S. F. Sutcliffe, H.
Evans, Capt. A. (Cardiff, S.) Mason, Lt.-Col. Hon. G, K. M. Tate, Mavis C.
Everard, W. L. Mayhew, Lt.-Col. J. Taylor, C. S. (Eastbourne)
Fremantle, Sir F. E. Meller, Sir R. J. (Mitcham) Taylor, Vice-Adm. E. A. (Padd., S.)
Fyle, D. P. M. Mellor, Sir J. S. P. (Tamworth) Thomas, Rt. Hon. J. H. (Derby)
Gilmour, Lt.-Col. Rt. Hon. Sir J. Mills, Sir F. (Leyton, E.) Titchfield, Marquess of
Gluckstein, L. H. Mills, Major J. D. (New Forest) Touche, G. C.
Glyn, Major Sir R. G. C. Morgan, R. H. Tree, A. R. L. F.
Goldle, N. B. Morris, O. T. (Cardiff, E.) Tryon, Major Rt. Hon. G. C.
Goodman, Col. A. W. Morrison, W. S. (Cirencester) Tufnell, Lieut.-Com. R. L.
Gretton, Col. Rt. Hon. J. Muirhead, Lt.-Col. A. J. Turton, R. H.
Gridley, Sir A. B. Munro, P. Wakefield, W. W.
Grimston, R. V. Neven-Spence, Maj. B. H. H. Ward, Irene (Wallsend)
Gritten, W. G. Howard Nicolson, Hon. H. G. Wardlaw-Mllne, Sir J. S.
Guest, Hon. I. (Brecon and Radnor) O'Neill, Major Rt. Hon. Sir Hugh Warrender, Sir V.
Guest, Maj. Hon. O.(C'mb'rw'll, N.W.) Ormsby-Gore, Rt. Hon. W. G. Waterhouse, Captain C.
Gunston, Capt. D. W. Orr-Ewing, I. L. Wedderburn, H. J. S.
Hacking, Rt. Hon. D. H. Palmer, G. E. H. Wickham, Lt.-Col. E. T. R.
Hanbury, Sir C. Peat, C. U. Williams, H. G. (Croydon, S.)
Hannah, I. C. Penny, Sir G. Wilson, Lt.-Col. Sir A. T. (Hitchin)
Hannon, Sir P. J. H. Peters, Dr. S. J. Winterton, Rt. Hon. Earl
Hartington, Marquess of Petherick, M. Withers, Sir J. J.
Heilgers, Captain F. F. A. Pickthorn, K. W. M. Womersley, Sir W. J.
Heneage, Lieut.-Colonel A. P. Pilkington, R. Wood, Rt. Hon. Sir Kingsley
Herbert, A. P. (Oxford U.) Ponsonby, Col. C. E. Young, A. S. L. (Partick)
Herbert, Major J. A. (Monmouth) Porritt, R. W.
Hills, Major Rt. Hon. J. W. (Ripon) Pownall, Sir Assheton TELLERS FOR THE AYES.—
Holmes, J. S. Raikes, H. V. A. M. Lieut.-Colonel Sir A. Lambert Ward
Hope, Captain Hon. A. O. J. Ramsay, Captain A. H. M. and Dr. Morris-Jones.
Adams, D. (Consett) Burke, W. A. Davies, R. J. (Westhoughton)
Adams, D. M. (Poplar, S.) Cape, T. Day, H.
Adamson, W. M. Charleton, H. C. Ede, J. C.
Alexander, Rt. Hon. A. V. (H'lsbr.) Chater, D. Edwards, Sir C. (Bedwelity)
Andenon, F. (Whitehaven) Cluse, W. S. Fletcher, Lt.-Comdr. R. T. H.
Attlee, Rt. Hon. C. R. Clynes, Rt. Hon. J. R. Foot, D. M.
Banfield, J. W. Cocks, F. S. Frankel, D.
Barnes, A. J. Compton, J. Gallacher, W.
Barr, J. Cove, W. G. Gardner, B. W.
Benson, G. Cripps, Hon. Sir Stafford Garro-Jones, G. M.
Broad, F. A. Daggar, G. George, Major G. Lloyd (Pembroke)
Brooke, W. Dalton, H. Graham, D. M. (Hamilton)
Green, W. H. (Deptford) Lawson, J. J. Rowson, G.
Greenwood, Rt. Hon. A. Leach, W. Seely, Sir H. M.
Griffith, F. Kingsley (M'ddl'sbro, W.) Leslie, J. R. Sexton, T. M
Griffiths, G. A. (Hemsworth) Logan, D. G. Shinwell, E.
Griffiths, J. (Lianelly) Lunn, W. Silverman, S. S.
Hall, G. H. (Aberdare) Macdonald, G. (Ince) Simpson, F. B.
Hall, J. H. (Whitechapel) McGhee, H. G. Sinclair, Rt. Hon. Sir A. (C'thn's)
Hardie, G. D. Mac Laren, A. Smith, Ben (Ratherhithe)
Harris, Sir P. A. Maclean, N. Smith, Rt. Hon. H. B. Lees- (K'ly)
Henderson, A. (Kingswinford) Marklew, E. Sorensen, R. W.
Henderson, T. (Tradeston) Marshall, F. Stewart, W. J. (H'ght'n-le-Sp'ng)
Holdsworth, H. Messer, F. Strauss, G. R. (Lambeth, N.)
Hollins, A. Milner, Major J. Taylor, R. J. (Morpeth)
Napkin, D. Montague, F. Thurtle, E.
Jagger, J. Morrison, R. C. (Tottenham, N.) Tinker, J. J.
Jenkins, A. (Pontypool) Naylor, T. E. Viant, S. P.
Jenkins, Sir W. (Neath) Oliver, G. H. Walkden, A. G.
John, W. Owen, Major G. Walker, J.
Johnston, Rt. Hon. T. Paling, W. Watkins, F. C.
Jones, A. C. (Shipley) Pethick-Lawrence, F. W. Watson, W. McL.
Jones, H. Haydn (Merioneth) Potts, J. Welsh, J. C.
Jones, J. J. (Silvertown) Price, M. P. Westwood. J.
Jones, Morgan (Caerphilly) Pritt, D. N. White, H. Graham
Kelly, W. T. Rathhone, Eleanor (English Univ's.) Williams, E. J. (Ogmore)
Kennedy, Rt. Hon. T. Ritson. J. Wilson, C. H. (Attercliffe)
Kirby, B. V. Roberts, Rt, Hon. F. O. (W. Brom.)
Kirkwood, D. Roberts, W. (Cumberland, N.) TELLERS FOR THE NOES—
Lathan, G. Robinson, W. A. (St. Helens) Mr. Groves and Mr. Mathers.

Second Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

7.3 p.m.


I wish very briefly to thank the Chancellor of the Exchequer for giving this very much needed and welcome measure of Protection to the lager beer brewers. They are not a very large industry, but they have special difficulties, which actually gave their foreign competitors an advantage to some extent in our market. For instance, we have duties on imported barley and the duty on imported bottles is not collected on bottles which come in full. These advantages were added to by a very intensive campaign of propaganda which has been carried in the last two or three years by foreign importers into this country and into neutral markets. Large sums have been spent not only on advertising but on other forms of inducement, such as the provision of supplies, free of charge, of attractive glasses with the names of foreign beverages on them and in other forms of inducement of a more liquid nature. These matters were making it a very uphill task for the lager beer brewers, not only in our own country, but in neutral markets, and I want on their behalf cordially to thank the Chancellor of the Exchequer for giving this much-needed protection.

Question put, and agreed to.

Third Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

7.5 p.m.


May I ask the Chancellor of the Exchequer to give us some explanation? This would appear to be somewhat technical.


The House is aware no doubt that the duty on imported sugar depends on the polarisation of the sugar, which is in fact a test of the sugar. Therefore, if the polarisation of the sugar is reduced the Customs Duty is reduced. It was discovered by some ingenious chemist abroad that spraying sugar with what is called invert sugar, which is a liquid and a non-crystallisable sugar, would reduce the polarisation without affecting the purposes for which the sugar was to be used Accordingly they began doing that, and so brought the sugar in at a much lower rate of duty. As soon as that was discovered to be taking place, we passed legislation in this House which provided that the mixing of invert sugar in this way should not affect the Customs Duty which was to be payable on the sugar. That was quite effectual as far as this treated sugar was concerned, but last year a certain amount of sugar was imported from a foreign country which appeared to have undergone this treatment. It. was represented by the importers that it had not been so treated, but had developed invert sugar in the process of storage in a damp climate. That matter having been investigated by the Government chemists, it was reported that such a conversion might indeed take place, and that if that were so, that particular case was not covered by the wording of the legislation which we have passed. Consequently, the object of the Resolution is to include sugar which by natural processes such as I have described has developed invert sugar, and to apply to such sugar the same legislation as previously applied to sugar treated with invert sugar.

7.9 p.m.


Am I to understand that the importation of invert sugar is something entirely new? Invert sugar has been known for a long time and is a perfectly normal condition into which sugar turns, or can be turned in the processes of refining. From what countries has this invert sugar been imported, and why should it be taxed in this way? Invert sugar consists of something like 50 per cent. of glucose. Glucose bears the full rate of duty of 7s. and some odd pence. Sugar which does not contain any glucose before it has been inverted bears a rate of tax of 11s. Invert sugar, which is half glucose, ought to bear a lower rate of tax of somewhere between 7s. and 11s. But what the Chancellor of the Exchequer is doing is to say that any sugar which contains glucose shall immediately go on to the highest rate of taxation. That seems to be a rather extraordinary and unusual procedure to take. I hope that the Chancellor of the Exchequer will tell us how far this is really an attempt to protect further his pet child, the beet sugar industry.

7.11 p.m.


What has the Chancellor of the Exchequer got to say about honey that comes in?


The hon. Member for Chesterfield (Mr. Benson) did not fully appreciate my explanation, which was no doubt my own fault. It is not a question of charging invert sugar as such the highest rate of duty. The case we had to deal with was where refined sugar was treated with invert sugar and reduced in polarisation without altering its sucrose content. It was to provide for that difficulty that the legislation to which I referred was passed. All I am doing is to put into the same position sugar which has come to the same condition, not by treatment with invert sugar, but by the development of invert sugar in the sugar itself by climatic causes.

7.12 p.m.


Ordinary sucrose which has been sprayed with invert sugar contains a very small percentage of glucose. Invert sugar contains something like 50 per cent. of glucose. It is a mixture of glucose and fructose.

Question put, and agreed to.

Fourth Resolution agreed to.

Fifth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

7.16 p.m.


This Resolution is one which extends the Safeguarding of Industries Act—the Key Industries Act—f or another 10 years, and in any remarks that I have to make about it I should like to include Resolutions 6, 7, 8 and 9, for the reason that those further Resolutions merely add other items to those included within the Key Industries Act, so that Resolutions 5, 6, 7, 8 and 9 are all part of the same scheme.


I shall, of course, put the Resolutions separately, and the House can divide on them if it thinks fit. If it is the wish of the House that all these Resolutions should be discussed together, I am quite agreeable.


It will effect a great economy of time, and will enable me to make one or two references to the further Resolutions. The renewal of the Safeguarding of Industries Act, that is to say, the Key Industries Act, for 10 years, raises some questions on which I should like to have the observations of the Chancellor of the Exchequer. In the first place, a tariff has been set up in this country under two different systems. There is already in existence the Import Duties Act, under which duties may be imposed amounting to as much as 15 per cent. We have also another series of tariffs which were set up under the Key Industries Act, and I should like to hear whether the Chancellor considers it to be really necessary that we should maintain now two different Acts for the purpose of a common tariff.

I gather that the main difference, although it is only nominal, is that the Key Industries Act contains a specific reference to its further extension for a period of 10 years, while the Import Duties Act, although it can, of course, be extended for 10 years, 20 years, or indefinitely, does not contain any provision laying down any period by Statute. That seems to be the chief difference between the two types of Act. I have raised this point because there is some ground for suspicion that behind this protection within protection there are growing up smallish industries which within the last few weeks have shown a spectacular rise in value, to which great public attention has been called. I refer to the armament industries, which are being sheltered from public view and from much public interest by this particular machinery. I think that, when we come to discuss whether the whole manufacture of armaments should be under Government control, the question will need to be raised whether it would not be more suitable that a number of these particular industries should be nourished by Government ownership than under this system of tariffs.

These industries have a peculiar history. When the Act was originally passed in 1921, it was passed on the recommendation of a committee which also recommended that, if after five years the industries were not able to stand on their own feet, alternative methods of maintaining them should be adopted, of which the most prominent that was recommended was the proposal for what was called Government manufacture. The present Prime Minister was very emphatic that the opportunity for these industries to be kept free from Government manufacture should be limited to five years He said at that time: I myself stand by the five years which we have thought fit for this purpose."— [OFFICIAL REPORT, 31st May, 1936; col. 877, Vol. 142.] The five years elapsed; the industries could not stand on their own feet; the Act was extended for 10 years; and I noticed that the then Member for West Swansea said that by that time they were on such a healthy basis that they could altogether dispense with this hot-air treatment. The then Member for West Swansea is now the President of the Board of Trade, and it is under the auspices of his Department that the ex- tension for another 10 years is now proposed. My suspicion is that these industries, behind this double shelter, are not being very competently conducted; and that suspicion is strengthened if one reads the report of the committee appointed by the Board of Trade which recently examined into them, and notices some of the statements contained in that report. It says, for instance, that: In no industries are research and development of more vital importance than in those upon which the country is specially dependent for its defence. It goes on to say: In some industries there is a lack of coordination in research among the producing units. and it appears to us that, if there were closer co-operation between them in this respect the money devoted to research could be spent more effectively. Later on in paragraph 17 there is this statement: Some of our witnesses did not altogether appreciate that their salesmanship lacked both method and intensity. Therefore, I voice the suspicion that what is happening is that inside the tariff there is this little hedge for these particular industries, and, if you look over this hedge, you see a number of rather comfortable little industries carrying on very cozily and quietly, rather stagnant and conservative, and yet able to make very considerable profits on account of the privileged position which they occupy. Those are the suspicions which are raised by this report and by the whole position, and it is in order to get the view of the Government upon them that I have opened this discussion.

7.24 p.m.


The point referred to by the right hon. Gentleman, that there are two different systems under which our tariffs are regulated, was, of course, dealt with by the committee to which he has made reference, and in paragraph 20 of their report they say: Had the latter Act"— that is to say, the Import Duties Actbeen first in the field and the fiscal policy of the country protectionist in 1921, the special form of protection given to the goods under discussion would not have been required. The paragraph goes on to say, in its last sentence: The paucity of applications in response to the public announcement of our enquiry for additions to be made to the list of goods under the Safeguarding Act may be taken as evidence of the satisfaction of those industries with the working of the Import Duties Act. The committee were fully alive to the point that the right hon. Gentleman has made, but, nevertheless, they go on to say, in the next paragraph of their report: The Safeguarding of Industries Act … has served a definite purpose and has come to have a real and special meaning for the industries concerned, which have, with a few minor exceptions which are capable of rectification, made full and proper use of the protection afforded to them, and we are satisfied that no proposal to reduce the duties below the existing level should be entertained. There is an important difference between the circumstances of the key industries and the circumstances of the general tariff, because these key industries were picked out in the first instance for the reason which has given them their name —that is to say, because they are key industries of vital importance to this country, and because, if we were ever engaged in a great struggle for our existence, it would be of the highest importance that we should be able to produce in this country the articles comprised in these key industries, and should not be dependent for them upon outside production or importation. That being so, there is a different procedure altogether in the matter of these duties from that which obtains in the matter of the duties under the Import Duties Act. As the right hon. Gentleman knows, and as some of his friends complain, there are continual modifications, adjustments and alterations in the duties under the Import Duties Act as from time to time applications are made by the industries concerned. Notice is given of those applications, objections are put in by other industries which are consumers, and finally, after a review of the circumstances, a recommendation is made by the Import Duties Advisory Committee, which is or is not the subject afterwards of an Order by the Treasury. That procedure, however, is not applicable to the key industries, for the reason I have pointed out, namely, that in their case the first question is not a question of trade, or of revenue, or of whether the profits made are unduly high, or whether the prices charged are unduly high; it is a question of the preservation and development of industries which are of an essen- tial character in the national economy. That is the explanation of the fact that we have two systems.

With regard to the question whether it would be better that those industries should come under the control of the State rather than of private enterprise, that is a question which, I quite agree, might fairly be discussed, I should think more appropriately when discussing the whole defence programme, which it vitally concerns; but I must repeat what I think is quite well known, namely, that the circumstances would have to be very exceptional for the State to be able to show good reasons why it could conduct an industry better than those who are conducting it under private enterprise. Without saying that there could not be any such case, I think that a very good case would have to be made out for an alteration of the present system. I understand that one of the reasons why the Committee of Inquiry have recommended the continuance of these duties for another 10 years is that they want to obtain as far as possible an element of stability. It was rightly said by the right hon. Gentleman that more research is required. You cannot expect firms to undertake research, which is a slow process, and the returns from which only come back after a long period of time, and often considerable expense, unless they are assured of some reasonable period of stability. It was largely in consequence of the view of the Committee appointed by the Board of Trade that research is desirable and is only likely to be obtained if stability is given that the recommendation is made that the duties should be carried on for another period of 10 years.

7.31 p.m.


The right hon. Gentleman has really given a most extraordinary excuse for this method of dealing with these duties. I do not think it can be often that a Chancellor of the Exchequer, standing at that Box dealing with the imposition of a tariff upon articles coming into the country, can have said it is not a question of prices or profits being high. That really is a most amazing admission. Here you have a series of industries which are producing articles for everyday use by the public, many of them articles of great import- ance. They are not only key industries for the purpose of manufacturing armaments. Many of them are key industries for the ordinary manufacture of commercial articles. One has been led to believe that the policy of the Government as regards tariffs was to set up a Commission of three who were to judge as to the economic necessity of these impositions that would be put upon consumers.

Now we are told that, in spite of the building up of that machinery, we are still to perpetuate the machinery that was created when there was no such tariff structure. It is understandable that in the period when the Key Industry Act was first introduced, as there was no general tariff, it might have been desirable, as was then stated, for a certain period to give protection to these industries in order that it might be seen whether they could be established in this country. That was the object with which the duties were originally imposed. After the experience of five years a further period of five years was given them in order to make quite certain that they established themselves successfully. After thay had established themselves successfully, and after many of them are making very good profits indeed, this same exceptional system is to be continued regardless of the profits they make and the prices they charge.


indicated dissent.


I took the right hon. Gentleman's words down. Does he wish to correct them?


Yes, I do. They were not carefully chosen but impromptu words, and, when I look at them, I may feel that they were not quite as well chosen as I should have desired for my purpose, but I think the hon. and learned Gentleman understood that I was making a distinction, or a contrast, between the conditions of these industries and the conditions of the ordinary run of industries. What I was trying to say was that the primary consideration is not prices or profits, but the vital interests of the country. I did not mean to say that we must pay no attention to undue profits or prices.


I am sorry if I misrepresented the right hon. Gentleman. Incidentally, may I take the opportunity of congratulating him on his progress as a movie star? I was very struck with the peals of laughter that met the appearance of his film on Saturday night when I was listening to it in one of the cinematograph theatres of London. I am sure the right hon. Gentleman would have been flattered if he had realised how humorous his speech was. Surely the point that he has just made that you must, not perhaps entirely but mainly, regard the economic situation with regard to these industries makes it all the more important that you should throw them into the general tariff arrangements of the country.

These three gentlemen are sitting there, as we understood, in order to preserve and encourage industries, and they would not any the less preserve or encourage them because they are key industries, because they are important industries from the point of view of possible defence or anything else and, if the right hon. Gentleman does not stress the question that it is immaterial what the economic position of the industry may be, lie loses all his argument for having this special treatment of industries. Either determination of the duty is to be made on some basis which is not considered by the Tariff Commission, or else they may just as well form part of the general duties. There is in reality no excuse for maintaining this special treatment or purporting to impose these duties for ten years. It would be far better, as a matter of machinery and tariff structure for those who believe in tariffs, to bring all these industries under the general procedure as regards tariffs, leaving it to the Tariff Commissioners to say in the circumstances of the time—and these circumstances alter from year to year—what is a proper tariff to be applied to them having regard to prices, profits and other matters. As it is, you are giving them this type of protection which must necessarily lead to a temptation to become inefficient, because there is nothing behind this permanent barrier to stimulate them to keep their production, salesmanship and everything else up to the competitive standards which are demanded by capitalist industry.

Of course, if these are matters of vital importance to the country and the manu- facture must at all costs go forward, the obvious solution is for the Government to manufacture them, just as at Woolwich Arsenal and other places the Government manufactures things which it considers to be of vital importance. There is no excuse for allowing for another ten years large profits to be made by the small group of manufacturers who happen to be in these industries because the nation may require their products. If the nation requires them, it should not be called upon to pay the price of that assured profit and to risk the prices of these articles going up. That risk should be taken by the nation itself, and the manufacture should be conducted by the Government itself.

7.39 p.m.


The right hon. Gentleman has said that, although these industries are vitally essential to the nation, although they have been protected for 15 years, they still require another 10 years protection before they do any serious research. I do not know that that can be said of any other group of industries in the country. If they ar eso vital, surely it is for the Government to see that, in return for protection, we get efficiency. The Chancellor admits that at present we have not got it. He admits that they require further protection because they have not yet put their research house in order.


I did not say anything of the kind.


I know the right hon. Gentleman did not say so.


You said I admitted it.


The right hon. Gentleman admitted it by implication. If they have done the necessary research, if they are efficient, they do not require a further 10 years' protection. The right hon. Gentleman's argument was that they must have another 10 years' protection in order that they may undertake research and get a return for it. If that is not an admission that research has not been done in the past, what is? If these industries are so vital, if they are essential to the life and well-being of the nation, if the Board of Trade Report shows that the research is inefficient and insufficient, we are entitled to demand that, if we are to give them protection, we must insist upon efficiency. I know how hopeless it is to suggest that they should be nationalised, but it is not asking too much that, in return for the 10 years' protection which they will get, because we shall be voted down, they give us efficiency and put themselves into the position they were asked to put themselves in when protection was granted.

7.42 p.m.


I most whole-heartedly support the retention of this system of duties on key industries. I have some small knowledge of some of them and you could not apply the ordinary tariff method to them. The hon. and learned Gentleman the Member for East Bristol (Sir S. Cripps) said he wanted a tariff proper to the circumstances of the time. That means that, whether trade is good or bad, the tariff would go up or down on the recommendation of the Tariff Advisory Board. These industries are so technical and they so need the mobilisation of technical skill and research and the mobilisation of skilled men, that we cannot afford to allow them to be exposed to the blasts of ordinary economic competition, with or without tariffs, that ordinary industry has to bear. If these industries are required for the country's benefit in time of emergency, and if they cannot be built up in the course of a few weeks or months, they must be given this special treatment, because they could not live under the form of treatment that other industries obtain whether they have the protection of tariffs or not. They are special industries needing special treatment, which I am glad that the Government are giving them.

7.44 p.m.


The Chancellor's remarks by no means convince me of the justifiability of the proposed procedure. The purpose, as we have understood it, of this Tariff Commission is that all these cases of protection of industries should be examined by the members of the Commission, who regard the particular circumstances of each case, and it has often been claimed by supporters of the Government that one of the advantages of this procedure is that the Tariff Commission may on suitable occasions bring pressure to bear upon the industries to make them- selves more efficient. This argument was much stressed in the case of iron and steel. I agree with my hon. Friend behind me that, the more important these industries are and the more indispensable in time of war, the stronger is the case for their conduct by public enterprise.

I do not over-pursue that point now, but I suggest to the Chancellor of the Exchequer, that, if you have these industries living under the conditions which he has described of making high profits and charging high prices, there is a certain presumption that they are being efficiently conducted. The hon. and gallant Gentleman the Member for the Isle of Thanet (Captain Balfour) said that they could not stand up against the ordinary blast of competition. Surely, if they were being efficiently run, taking full advantage of research and the application of the latest scientific knowledge, at any rate, they should be able to prove that before the Tariff Commission. If it is to the interests of this country that these industries should be maintained, surely, it is to the interests of this country from the point of view of defence, that they should be maintained at the

Division No. 152.] AYES. [7.47 p.m.
Acland-Troyte, Lt-Col. G. J. Colville, Lt.-Col. D. J. Greene, W. P. C. (Worcester)
Adams, S. V. T. (Leeds, W.) Cook, T. R. A. M. (Norfolk, N.) Gridley, Sir A. B.
Agnew, Lieut, Comdr. P. G. Cooper, Rt. Hn. A. Duff (W'st'r S.G'gs) Grimston, R. V.
Allen, Lt-Col J Sandeman (B'kn'hd) Cooper, Rt. Hn. T. M. (E'nburgh, W.) Gritten, W. G. Howard
Anstruther-Gray, W. J. Craddock, Sir R. H. Guest, Maj. Hon. O.(C'mb'rw'II, N.W)
Aske, Sir R. W. Cranborne, Viscount Gunston, Capt. D. W.
Baldwin, Rt. Hon. Stanley Crookshank, Capt. H. F. C Hanbury, Sir C.
Balfour, G. (Hampstead) Crowder, J. F. E. Hannah, I. C.
Balfour, Capt. H. H. (Isle of Thanet) Culverwell, C. T. Hannon, Sir P. J. H.
Balniel, Lord Davidson, Rt. Hon. Sir J. C. C. Hartington, Marquess of
Barclay-Harvey, C. M. Davies, Major G. F. (Yeovil) Hellgers, Captain F. F. A.
Beaumont, Hon. R. E. B. (Portsm'h) Denman, Hon. R. D. Heneage, Lieut.-Colonel A. P.
Beit, Sir A. L. Denville. Alfred Herbert, Major J. A. (Monmouth)
Birchall, Sir J. D. Dorman-Smith, Major R. H. Holmes, J. S.
Blair, Sir R. Drewe, C. Hope, Captain Hon. A. O. J.
Blindell, Sir J. Duckworth, G. A. V. (Salop) Hopkinson, A.
Bossom, A. C. Duckworth, W. R. (Moss Side) Horsbrugh, Florence
Boulton, W. W. Dugdale, Major T. L. Hudson, Capt A. U. M. (Hack., N.)
Bowater, Col. Sir T. Vansittart Dunglass, Lord Hunter, T.
Bower, Comdr. R. T. Dunne, P. R. R. Hurd, Sir P. A.
Bowyer, Capt. Sir G. E. W. Eckersley, P. T. lnskip, Rt. Hon. Sir T. W. H.
Bracken, B. Eden, Rt. Hon. A. Jones, Sir G. W. H. (S'k N'w'gt'n)
Briscoe, Capt. R. G. Edmondson, Major Sir J Kirkpatrick, W. M.
Brown, Rt. Hon. E. (Leith) Elliston, G.S. Latham, Sir P.
Brown, Brig.-Gen. H. C. (Newbury) Elmley, Viscount Law, R. K. (Hull, S.W.)
Bull, B. B. Emmott, C. E. G. C. Leech, Dr. J. W.
Bullock, Capt. M. Emrys-Evans, P. V. Lewis, O.
Burghley, Lord Entwistle, C. F. Little, Sir E. Graham
Burgin, Dr. E. L. Errington, E. Liewellin, Lieut-Col. J. J.
Butler, R. A. Erskine Hill, A. G. Lloyd, G. W.
Campbell, Sir E. T. Evans, Capt. A. (Cardiff, S.) Loftus, P. C.
Cartland, J. R. H. Everard, W. L. Lovat-Fraser, J. A.
Cary, R. A. Fleming, E. L. Lumley, Capt. L. R.
Chamberlain, Rt. Hn. N. (Edgb't'n) Fremantle, Sir F. E. Mabane, W. (Huddersfield)
Channon, H. Furness, S. N. MacAndrew, Lt.-Col. Sir C. G.
Chapman, A. (Rutherglen) Fyfe. D. P. M. Macdonald, Capt. P. (Isle of Wight)
Clarke. F. E. Ganzonl, Sir J. McEwen, Capt. J. H. F.
Clydesdale, Marquess of Glyn, Major Sir R. G. C. McKie, J. H.
Cobb, Sir C. S. Goodman, Col. A. W. Macnamara, Capt. J. R.J.

highest possible state of efficiency. There is reason to suspect that they are not being so maintained at the present time. The House, and, indeed, the country outside in so far as you have an instructed public opinion following this particular matter, would feel much more assured that these industries were. being efficiently conducted with a view to the possibility of their being called upon to play a part in the national defence, if they had to run the gauntlet of examination by the Tariff Commission. For these reasons we cannot support the proposed transfer from the comparatively full investigation which can be operated under the Import Duties Act to the older Safeguarding of Industries Act under which there is no comparable examination made. The explanations of the Chancellor of the Exchequer have not been such as to persuade my hon. Friends and myself that this is a justifiable change. We propose, therefore, to divide against the proposal to transfer from one form to the other.

Question put, "That this House doth agree with the Committee in the said Resolution."

The House divided: Ayes, 209 Noes, 111.

Manningham-Buller, Sir M. Rathbone, J. R. (Bodmin) Stanley, Rt. Hon. Lord (Fylde)
Margesson, Capt. Rt. Hon. H. D. R. Rayner, Major R. H. Storey, S.
Markham, S. F. Reed, A. C. (Exeter) Stourton, Hon. J. J.
Mayhew, Lt.-Col. J. Reid, W. Allan (Derby) Srauss, H. G. (Norwich)
Meller, Sir R. J. (Mitcham) Ramer, J. R. Stuart, Hon. J. (Moray and Nairn)
Mellor, Sir J. S. P. (Tamworth) Rickards, G. W. (Skipton) Sutcliffe, H.
Mills, Major J. D. (New Forest) Robinson, J. R. (Blackpool) Thomas, J. P. L. (Hereford)
Morgan, R. H. Ross, Major Sir R. D. (L'derry) Titchfield, Marquess of
Morris-Jones, Dr. J. H. Ross Taylor, W. (Woodbridge) Touche, G. C.
Morrison, G. A. (Scottish Univ's.) Rowlands, G. Train, Sir J.
Morrison, W. S. (Cirencester) Ruggles-Brise, Colonel Sir E. A. Tree, A. R. L. F.
Muirhead, Lt.-Col. A. J. Russell, R. J. (Eddisbury) Tryon, Major Rt. Hon. G. C.
Neven-Spence, Maj. B. H. H. Russell, S. H. M. (Darwen) Tufnell, Lieut.-Com. R. L.
Nicolson, Hon. H. G. Salmon, Sir I. Turton, R. H.
O'Neill, Major Rt. Hon. Sir Hugh Salt, E. W. Wallace, Captain Euan
Ormsby-Gore, Rt. Hon. W. G. Samuel, Sir A. M. (Farnham) Ward, Irene (Wailsend)
Orr-Ewing, I. L. Sanderson, Sir F. B. Wardlaw Mllne, Sir J. S.
Palmer, G. E. H. Savery, Servington Warrender, Sir V.
Patrick, C. M. Scott, Lord William Waterhouse, Captain C.
Peat, C. U. Shakespeare, G. H. Wedderburn, H. J. S.
Penny, Sir G. Shepperson, Sir E. W. Wickham, Lt.-Col. E. T. R.
Peters, Dr. S. J. Simmonds, O. E. Williams, H. G. (Croydon, S.)
Petherick, M. Simon, Rt. Hon. Sir J. A. Winterton, Rt. Hon. Earl
Pickthorn, K. W. M. Sinclair, Col. T. (Queen's U. B'If'st) Wise, A. R.
Pilkington, R Smiles, Lieut.-Colonel Sir W. D. Withers, Sir J. J.
Ponsonby, Col. C. E. Smith, L. W. (Hallam) Womersley, Sir W. J.
Porritt, R. W. Smithers, Sir W. Wragg, H.
Pownall, Sir Assheton Somervell, Sir D. B. (Crewe) Young, A. S. L. (Partick)
Procter, Major H. A. Somerville, A. A. (Windsor)
Raikes, H. V. A. M. Southby, Comdr. A. R. J. TELLERS FOR THE AYES—
Ramsay, Captain A. H. M. Spears, Brig.-Gen. E. L. Lieut.-Colonel Sir A. Lambert Ward
Ramsbotham, H. Spens, W. P. and Mr. Cross.
Adams, D. (Consett) Harris, Sir P. A. Owen, Major G.
Adams, D. M. (Poplar, S.) Henderson, A. (Kingswinford) Paling, W.
Adamson, W. M. Henderson, T. (Tradeston) Pethick-Lawrence, F. W.
Anderson, F. (Whitehaven) Hollins, A. Potts, J.
Attlee, Rt. Hon. C. R. Hopkin, D. Price, M. P.
Bonfield, J. W. Jagger,. J. Pritt, D. N.
Barnes, A. J. Jenkins, A. (Pontypool) Ritson, J.
Barr, J. Jenkins, Sir W. (Neath) Roberts, Rt. Hon. F. O. (W. Brom.)
Batey, J. John, W. Roberts, W. (Cumberland. N.)
Benson, G. Johnston, Rt. Hon. T. Robinson, W. A. (St. Helens)
Broad, F. A. Jones. A. C. (Shipley) Rothschild, J. A. de
Brown, Rt. Hon. J. (S. Ayrshire) Jones, H. Haydn (Merioneth) Rowson, G.
Burke, W. A, Jones, Morgan (Caerphilly) Seely, Sir H. M.
Cape, T. Kelly, W. T. Sexton, T. M.
Cluse, W. S. Kennedy, Rt. Hon. T. Shinwell, E.
Clynes, Rt. Hon. J. R. Kirby, B. V. Silverman, S. S.
Cocks, F. S. Kirkwood, D. Simpson, F. B.
Compton, J. Lathan, G. Sinclair, Rt. Hon. Sir A. (C'thn's)
Cove, W. G. Lawson, J. J. Smith, Rt. Hon. H. B. Lees- (K'ly)
Cripps, Hon. Sir Stafford Leach, W. Stewart, W. J. (H'ght'n-le-Sp'ng)
Daggar, G. Lee. F. Strauss, G. R. (Lambeth, N.)
Dalton, H. Leslie, J. R. Thurtle, E.
Davies, R. J. (Westhoughton) Logan, D. G. Tinker, J. J.
Ede, J. C. Lunn, W. Viant, S. P.
Edwards, Sir C. (Bedwelity) Macdonald, G. (Ince) Walkden, A. G.
Fletcher, Lt.-Comdr. R. T. H. McGhee, H. G. Walker, J.
Frankel, D. Mac Laren, A. Watkins, F. C.
Gardner, B. W. Maclean, N. Watson, W. McL.
George, Major G. Lloyd (Pembroke) Marklew, E. Welsh, J. C.
Graham, D. M. (Hamilton) Marshall, F. Westwood, J.
Green, W. H. (Deptford) Mathers, G. White, H. Graham
Greenwood, Rt. Hon. A. Maxton, J. Wilkinson, Ellen
Griffith, F. Kingsley (M'ddl'sbro, W.) Messer, F. Williams, E. J. (Ogmore)
Griffiths, G. A. (Hemsworth) Milner, Major J. Wilson, C. H. (Attercliffe)
Griffiths, J. (Llanelly) Montague, F. Young, Sir R. (Newton)
Hall, G. H. (Aberdare) Morrison, R. C. (Tottenham, N.)
Hall, J. H. (Whitechapel) Naylor, T. E. TELLERS FOR THE NOES.—
Hardie, G. D. Oliver, G. H, Mr. Groves and Mr. Charleton.

Sixth to Ninth Resolutions agreed to.

Tenth Resolution read a Second time.

7.59 p.m.


I beg to move, in line 3, to leave out "nine," and to insert "six."

Last week the Chancellor of the Exchequer upbraided me as being one who had opposed his policy during the last five years, and I think that that is a little unfair to me, because I have not opposed him—rather have I regarded him as a most admirable Chancellor of the Exchequer—but I have felt it my duty from the back benches to express certain points of view. Indeed, the Chancellor of the Exchequer ought to welcome some of us taking the trouble to make possible some debate on these occasions. Surely, if we go on as we are doing to-night the Chancellor of the Exchequer will begin to think that his Budgets are so good that they can go through as unopposed business. As I look back, I can remember only one occasion upon which the Opposition divided on the Third Reading against the Budget of the Chancellor of the Exchequer, and that was when they were definitely goaded so to do by the then Financial Secretary to the Treasury, and so perhaps he will not object to some of us preventing him from having such an easy run as apparently the Opposition are prepared to let him have.

This Amendment is connected with the Amendment that I had on the Order Paper in regard to the Tea Duty. My reason for wanting to reduce the Tea Duty is based on my general view, that I do not think the need for this additional taxation exists. It is, however, very difficult to advance that point of view in face of the very courageous speech which the Chancellor of the Exchequer made last week. He expressed sentiments with which very few hon. Members could disagree, when he said that we are faced with large expenditure, and that it is important the public who are called upon to pay this expenditure should realise that they are paying for it. I do not see how anyone can object to a Chancellor of the Exchequer who has the courage to get up and say that he does not propose to cover up the new expenditure that he is undertaking, but that he is going to call upon the people to meet it. Nevertheless, there is a point of view to be put, which ought to be put, that direct taxation, and particularly direct taxation in the case of Income Tax, is better if it is lower.

I know that this Amendment, which I have moved on other occasions, raises many wide issues. It raises the whole principle of whether direct or indirect taxation is the more desirable, but, as the Chancellor of the Exchequer said earlier in to-day's proceedings, to debate whether the proportion of direct or indirect taxation is this or that has become purely academic owing to the reasons that he gave. Nevertheless, I hold very strongly that the lower Income Tax is the more likely is trade and industry to prosper. I have on previous occasions advanced the point of view, and supported it with statistics, that when Income Tax is low unemployment is low. It may be a coincidence, but the fact that the coincidence occurs so frequently would, by the process of deductive logic, at which the Chancellor is so excellent, lead one to the conclusion that there is some connection between the general prosperity of the country, the level of unemployment and the level of Income Tax. Therefore, I have no hesitation or shame in asking that the Income Tax be reduced from the proposed figure of 4s. 9d. to the previous figure of 4s. 6d.

My real reason for moving the Amendment depends upon the estimates for revenue, and I am moving it in the hope that my hon. and learned Friend the Financial Secretary will make some reply to the question that I put last week in the general Budget Debates. I hold the view that the revenue which we shall obtain by these two new taxes is not likely to be necessary, because the estimates of revenue are likely to be considerably exceeded. In support of that point of view I can adduce the facts of the last few years. During the last few years not merely in Income Tax but in most items of Inland Revenue there has been a considerable excess in the realised receipts over the estimates. It is interesting to recall that last year the Chancellor of the Exchequer said that the receipts he had received for the financial year 1934–35 were in excess of the Estimates because payments were made earlier than he had anticipated, and therefore there would be fewer arrears to collect in the financial year 1935–36. He came to the House last Tuesday and his explanation of the reason why his receipts this year were in excess of the Estimates was that he had collected an extraordinary amount of arrears—arrears which, according to h s statement of the previous year, were not there to collect. I cannot square those two explanations.

When we consider the facts of the last few years we must agree that the results are somewhat extraordinary. In 1934–35 the actual revenue received exceeded the Estimates by £25,000,000, and within the category of Inland Revenue exceeded the Estimates by £14,000,000. In 1934–35 the total excess was £10,000,000, and the excess of Inland Revenue £16,000,000. In 1935–36 the total excess was £18,000,000 and the excess of Inland Revenue £13,000,000. During the last three years, taking the figures of Inland Revenue alone, the receipts have exceeded the Estimates by £14,000,000 in 1933–34; £16,000,000 in 1934–35 and £13,000,000 in 1935–36. There are some hon. Members who at the beginning of these years have foreseen that that result was likely to happen. It has in fact happened, and there may be some reason for supposing that it is going to happen again, if these same hon. Members estimate that there is likely to be an excess.

I recognise fully that it is very difficult for a private Member to make any estimate of the probable receipts under the various heads of Inland Revenue, and it is fair for the Financial Secretary to say, as he may say in reply, that those of us who make these estimates are really guessing. We are not quite guessing. We have certain figures to go on, but it is extraordinarily difficult to make any sort of correct estimate. Can the Financial Secretary give us some reasonable explanation why not merely under the heading of Income Tax but under the heading of Inland Revenue there have been these continual excesses during the last three years? Can he give us any other reason, beyond those advanced to the House, why the receipts under the same heads during the current year will not be of such a bounteous character?

We have had excesses for three years, and the Treasury ought to feel somewhat different about the matter if next year, having presented us with these Estimates, they have to come forward and say: "The estimates that we have made have proved to be faulty, and the receipts are in excess of our Estimates." I take the view that that is likely to be the case. f have no accurate information to go upon, but the point of view that I am putting forward has been supported fairly widely in the House by hon. Members who speak with some authority, and it has been supported in the financial Press. There is considerable support for the sort of estimates that I suggest would be more nearly correct than the estimates proposed to us by the Chancellor of the Exchequer in his Budget statement. Therefore, I would ask the Financial Secretary to endeavour to deal carefully with this subject, which is a matter of concern to a great many people.

We want the Estimates to be correct. We do not grudge the increase of 3d. if we can be satisfied that it is really necessary, but I am sure that no hon. Member would desire that his constituents should be called upon to pay an extra 3d. of Income Tax if that extra 3d. is not necessary, and especially if when the results have been gathered in we find at the end of the year that the Estimates of Inland Revenue could have been achieved quite well without an additional 3d. I hope that my hon. Friend will make some reply which will satisfy the great body of taxpayers in the country who are alarmed by the proposed increase in Income Tax.

8.10 p.m.


I beg to second the Amendment.

I support my hon. Friend the Member for Huddersfield (Mr. Mabane) and congratulate him upon his prophetic qualities. Although he was too diplomatic bluntly to say, "I told you so," he is worthy of having it said on his behalf: "He told them so." In supporting him I should like to say that I do not doubt that the Chancellor of the Exchequer or the Financial Secretary can find much morally to justify their actions. If they can only balance the Budget by increasing the burden of taxation, it is right that the large Income Tax payers should be called upon to bear it, as their backs are the broadest. Again, it is right that the men of affluence and influence who have never felt any personal insecurity and who therefore do not know its meaning, should be shown unmistakably the effect upon business of foreign policy. Let them be warned, if any warning is needed, of the economic consequences which would follow isolation. Moreover, by raising the Income Tax this year the Chancellor of the Exchequer perhaps intends to make a demonstration in the eyes of foreigners both of our resolution and our financial buoyancy. I hope that he intends to signify to the Italians and the Germans that: We don't want to fight, but, by jingo, if we do, We've got the ships, we've got the men, We'll get the money too. That is the uncomfortable phase, unfortunately, through which collective security is passing—the glorious climax of four years' progressive deterioration, for which it would be folly exclusively to blame ourselves.

I do not think that anyone in this House who takes an objective view of our finances would deny to the Chancellor of the Exchequer illustrious success, because largely through his administration, which has been accompanied by progressive reductions of burdens, our skies are to-day domestically far clearer than when he assumed office in 1931. But I apprehend one or both of two consequences which may follow this, his latest, action, first, diminishing returns, because the rate of tax may now have exceeded its economic level, an argument very powerfully sustained by the right hon. Member for Epping (Mr. Churchill) last Tuesday, and, secondly, there may be another surplus, which will be automatically swallowed up in the redemption of debt. The second consequence may accompany and mask without actually excluding the first. No doubt it is orthodox to try to reduce the mountain of debt, but the tiny contributions which our annual surpluses for the last few years can make to such a purpose will have no more effect on the debt than an assault by a flea upon an elephant.

The raising of the Income Tax may check industrial recovery without yielding what is expected of it. I am strengthened in that belief by what was said just now by the Chancellor of the Exchequer in his reply to the Debate on Imperial Preference with regard to tea. He said that nobody could be quite certain what will happen as a result of this additional duty. No, and nobody can be quite certain of the effect of this extra 3d. on the Income Tax. It might have been well this year to have risked a deficit, because its proportions could not be acutely critical or irreparably formidable. The man who will be hit most by this raising of the Income Tax will be the young man in the late twenties, unmarried, but beginning to assume responsibilities. I am contemplating the man of provident energy, well equipped, and likely before long to offer the community the stuff of leader- ship. To such a man this Budget can only mean discouragement. He may even be deterred from incurring the extra expense of an early marriage and so avoid exposing himself prematurely to those beneficent advantages which the Chancellor of the Exchequer is this year seeking to bestow upon parenthood.

8.15 p.m.


One appreciates the desire of the hon. Member for Huddersfield (Mr. Mabane) to help the Opposition out of any difficulty, but may I tell him that in regard to the increase in Income Tax we support the Government? We are not an Opposition which says that we must oppose everything that the Government bring forward, because if they bring forward any good points either in a Bill or in their Budget—


Does that mean that the Opposition approve of what the Government do?


We opposed the duty on tea but we support the increase in the Income Tax. I notice that the hon. Member had two Amendments on the Order Paper in regard to the Tea Duty, but he did not speak on either of them. One would have expected that at any rate he would have supported us in our Amendments on the Tea Duty. Instead he said that, having regard to the able manner in which the Chancellor of the Exchequer had disposed of our criticisms of the Tea Duty, there was nothing further to say.


I said that my own two Amendments were really connected with the Amendment I am now moving in regard to Income Tax. I said that I did not regard an increase in the Tea Duty or in the Income Tax as necessary, and that I regarded the two cases as capable of being modified, by the same set of arguments.


I agree that the hon. Member said that, but he also said that after the able defence of the Tea Duty by the Chancellor of the Exchequer he did not intend to oppose it. I have always stood for direct as against indirect taxation, and, therefore. I support the increase in the Income Tax. The hon. Member argued that there might possibly be a surplus and that the increase might, therefore, be unnecessary. If there is a surplus there are plenty of means of using it for some good purpose, and I would far rather have a balance on the right side of the Budget than on the debit side. I cannot agree with the hon. Member who Seconded the Amendment and who sometimes opposes the Government. There is no sign of any diminishing returns so far as the wealth of this country is concerned. The hon. Member for Farnham (Sir A. M. Samuel) in years gone by has said that the time would come when there would be nobody to tax, that all the wealth would go to other countries. Year after year has gone by, we have kept up direct taxation, and still England is the safest place in the world for rich men.


That consequence is, in fact, occuring with regard to Surtax.


I will deal with that point later, but that is what the hon. Member for Farnham has told us in past years. When I asked him where the money would go he could not tell me.


I hope the hon. Member—

Mr. DEPUTY-SPEAKER (Captain Bourne)

The hon. Member's argument is now coming to a point when it would be more suitable on the question "That this House doth agree with the Committee in the said Resolution."


All I want to put is the point that this country is still the safest place in the world for rich men.


I must protest strongly. I have never said anything of the kind. I have always opposed money being invested abroad. I have made speeches in the country and in this House urging that we should keep money at home and invest it at home. The hon. Member must be mixing me up with a much cleverer person.


The hon. Member has said that we were driving capital out of the country. At any rate, I will find his speeches and show him what he has said in regard to diminishing returns. There is a statement published in the "Manchester Guardian" on the 12th March, 1936, on the distribution of capital, by Professor Daniels and Mr. Campion, which was read at the Manchester Statistical Society. They dealt with the increase of capital in this country within recent years, and said: For estates under £100 in value, which are not covered by the revenue returns, their estimates were based on the published funds of friendly societies, building societies and the like, and are clearly more open to a margin of error. They reach the conclusion that the total estates of £100 or less have increased in value from £400,000,000 to £700,000,000 in 1911–13, to £500,000,000 to £900,000,000 in 1924–30. Estates of £100 to £1,000 have increased in value from about £624,000,000 to £1,471,000,000 in the same period. But equally at the other extreme of the income scale estates of over £100,000 have reached in 1924–30 a total value of £3,266,000,000 as compared with £1,378,000.000 in 1911–13. That shows that there has been an all-round increase in the wealth of the country, proving that the House is quite justified in going to those places where the money is to be found, that is Death Duties, Surtax and Income Tax. If we need money to carry on the necessary defences of the country, then I say that those who have the greatest interest in the country, that is those with the greatest wealth, should pay more for the protection of the country than in the past. In the War wealth should have been conscripted as well as life. That was not done, and during the period to which I have referred the wealth of the very rich increased to an extent one would never have thought it would. The Chancellor is doing right in taking from them as much as he can at the present time. I would have welcomed the proposal if the Income Tax had been increased by 6d. I would certainly like more to be obtained from Income Tax and Estate Duties than is the case, and for relief to be given at the other end of the scale. We on this side do not oppose this increase, because we believe the burden should be on the backs of the rich.

8.26 p.m.


I do not quite agree with all the sentiments expressed by my hon. Friend the Member for Leigh (Mr. Tinker), who seems to be very anxious, as are many hon. Members on the Opposition benches, to have every body except themselves taxed. Their idea seems to be that if you can get money out of someone else, why pay yourself?


May I point out to the hon. Member that I pay Income Tax, and am glad to be in a position to pay it?


I have no doubt of that, but in effect the hon. Member said, "They on the other side are better able to pay than we are and therefore I ask the Chancellor of the Exchequer to tax them more than he has already." I happen to he one of those who, since 1930, has not increased his capital, but has lost no less than 25 per cent. of it. That, however, has nothing to do with the matter, except that I would like to say that I still believe the Chancellor of the Exchequer is right in imposing this extra taxation. I noticed that the object of the Mover and Seconder of the Amendment was to obtain a few expressions of view from the Chancellor of the Exchequer or the Financial Secretary, and were neither of them particularly averse from this increase of 3d.

I have always looked upon the present Chancellor of the Exchequer as a man to be implicitly trusted. When the Budget comes along, none of us, even my hon. and right hon. Friends who seem to enjoy delving into blue books and getting hold of all sorts of figures, are able to sum up exactly what money is expected and what money the Chancellor of the Exchequer may rely upon, so that, even supposing, as did the Mover and Seconder of the Amendment, that this 3d. means that there will be a surplus, I see no objection at all. We never know what may be ahead of us. We have trusted the Chancellor of the Exchequer and have never been let down by him during the last four years, and, for my part, I am willing to follow him in any suggestions of this sort which he may make, even though they may touch our own pockets.

As regards this extra taxation, I know there are people outside who do not understand the position and are a little resentful that there should be any increase in the Income Tax. It was not anticipated, and, as far as I know, not a single newspaper in its forecast of the Budget suggested that there was any likelihood of an increase in direct taxation. Consequently, it came rather suddenly. I cannot help thinking that if I were a non-National Government person and were asked to criticise any actions of the Government during the last four or five years, my one criticism would be that the Government have not kept our fighting forces up to the proper strength during that period. At the same time, being a supporter of the Government, I think they have been perfectly right in their action. [Laughter.] Nobody in this House can laugh better than I can, but I, being a Scotsman, always wait until the joke is finished before I laugh, and then my laughter is heartier than that of anybody else. If during the last four or five years we had had a Government which maintained our fighting forces at the pitch at which they should have been and had there been no other reasons for their not doing so, then we should have been paying every year an extra 6d. or 1s. in the pound in Income Tax, and that over four years would have meant two or three shillings.

We have not paid that. The Government have not kept our fighting forces up to the standard which is the level of security, but the reason was that they wanted the whole world to disarm and rightly considered that, the best thing to do was to set an example to other nations. Not one nation followed suit, and consequently, during the last few months, the Government have considered that they can no longer follow that policy, but must bring our Forces up to a standard which will enable us to do our duties both to this country and to our Dominions overseas. For that reason I wholeheartedly support the Chancellor of the Exchequer. I regret it, as does everybody else, when the Chancellor or any other person takes more money out of our pockets than was expected. At the same time, I think the Chancellor is fully justified, and that the amount which he has now asked us to pay is very reasonable compared with that which we might have had to pay if we had paid that extra amount for increased armaments during the last four years.

8.32 p.m.


This reduction in the proposed rate of Income Tax has been moved and seconded, as I gather, for different reasons. My hon. Friend the Member for Huddersfield (Mr. Mabane) moved the reduction because he thought that if the tax were allowed to remain at this level the Chancellor of the Exchequer would get too much, whereas my hon. Friend the Member for West Leeds (Mr. V. Adams) expressed a fear that if this increased rate -of Income Tax were allowed to obtain, the law of diminishing returns would come into operation and the Chancellor would get too little.


I meant to imply that as a result of the increase in the rate of Income Tax the Chancellor of the Exchequer would not get as much as he might have got without raising it. I did not say that there would definitely be a deficit.


I was not suggesting that; but surely there have been put forward two different and inconsistent reasons for proposing a reduction in the Income Tax, the one being that the revenues will be unduly swollen and the other that they will be diminished; in other words, that the Exchequer will get less than would have been the case if the rate had been left undisturbed. I appreciate that both the Mover and the Seconder have not in view any complaint about the tax as such, provided they are satisfied that it is justified, and I propose to offer some considerations which lead me to suppose that the Chancellor of the Exchequer, in estimating as he has done, has estimated with prudence and has not taken the course of so estimating as to thrust an unnecessary burden upon the taxpayer in present circumstances.

The basis of the case put forward by the hon. Member for Huddersfield was that on account of improved prosperity the yield of Income Tax was liable to be greater than the estimate. I am sure that he will agree, and the House will agree with me, that the cause of the expanding revenue and of the prosperity upon which it is based, is confidence in the financial integrity and stability of the country. In other words, a Chancellor in these days, in estimating the yield of his taxation, ought not to under-estimate. At the same time the risks which follow from over-estimating—the effect upon confidence, and, through the impairment of confidence, on the earning power of the community, have to be borne in mind.

I ask the House to consider what my right hon. Friend has estimated in this case. The hon. Member for Huddersfield drew attention to the fact that my right hon. Friend's estimate in the last Budget had been exceeded and that Income Tax has brought in £5,500,000 more than was anticipated. In this Budget my right hon. Friend has put the yield from. Income Tax in the coming year at £248,000,000. He has allowed an increase of £10,000,000 over the yield of last year —not over the estimate of last year but over the yield of last year, and as I have said the yield last year Was £5,500,000 over the estimate. It does not stop there, because the House will recollect that this year's Income Tax has to bear the burden of the proposed new reliefs to married people in the lower ranges of income. Comparing like with like, my right hon. Friend has taken into consideration the continuance of a, state of public confidence and of expanding revenue and has estimated for a very greatly increased yield from Income Tax in the coming year.


On the basis of existing taxation.


It is easy to form different opinions as to what the yield is likely to be. The hon. Member is, no doubt, aware of the practice which is followed in trying to arrive at as accurate a figure as possible. Information is given in confidence by firms as to their expectations. The whole of that information is collated and as accurate a forecast as possible is made of the total yield. I claim that the Chancellor of the Exchequer, in allowing, in his estimate, the expansion of the yield to stand as much as the proposed increase of duty, has acted with the prudence which the position of the country demands, and without any risk of overtaxing the people in the coming year.

No doubt, hopes and fears are always expressed at a time like the. present, but one needs not exaggerate either the hopes or the fears. I submit that the position, as it is to-day, shows how accurate the Chancellor has been in estimating the needs of the country as a whole. I draw the attention of the House to what my right hon. Friend said in his Budget speech. He said that in view of the uncertainty of the future as regards Defence there might be a necessity to borrow. If we have to borrow, let it be upon the basis of having done all we could to meet these increased charges out of revenue. It would be a very difficult position, from the point of view of this country, if we had to go for a loan without having shouldered our share of the burden in this financial year. I ask the House to say that this attempt to estimate the yield of the revenue and to fix the duty in accordance with that estimate is an honest attempt to present to the country and the world an honest Budget. We have estimated prudently and have resolved to do as much as we can out of revenue, without over-taxing or over-straining our people. In view of that explanation I hope that my hon. Friend who moved this Amendment, I understand, in order to get a statement on the subject, will now see fit to take a certain course.


In view of the full and candid reply of the Financial Secretary, I beg to ask leave to withdrawn the Amendment.

Amendment, by leave, withdrawn.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Eleventh Resolution agreed to.

Twelfth Resolution read a Second time.

Motion made, and Question proposed, "That the House doth agree with the Committee in the said Resolution."

8.42 p.m.


On this side of the House we welcome machinery legislation of this kind, although we regret that the activities of the wealthy section of the community should render it necessary. In dealing with such difficult legislation, one has to remember all the time that the wealthy and influential class which has a very large share of the income of the community and is very active in clamouring for armaments to protect, among other things, its particular interests, in pursuit of the protection of such interests invariably supports a Government of the type of that at present in power. We have to remember that that class has devoted, I will not say the best of its intelligence—it has been wiser than that—but the best intelligences it can hire, to the persistent, wily and skilful preparation step by step of new avoidances or evasions as each bolt-hole has been stopped by Chancellors of the Exchequer and Governments in successive Finance Acts. It is all, we are told, perfectly legitimate. I should prefer to describe it as perfectly lawful.

Many people who stoutly uphold the capitalist system view this method of playing tricks with that system with as much abhorrence as any person on this side of the House. With those who endeavour to rob many thousands of pounds which they ought fairly to pay in taxation, one can have no sympathy whatever. One can have a very great deal of sympathy with the little men who pay more tax by reason of those very activities and, seeing done on a large scale what they may do on a small scale, are indeed driven to follow suit, however little they may like it. With what I may call the leaders in the game, who, if one may judge from a perusal of the leading cases in the Law Courts, consist to a very large extent indeed of peers of the realm and to quite a substantial extent of Members of this House, one can have no sympathy at all. One can only say, in a rising tone, "That is Capitalism," hoping to add in the very near future, "That was Capitalism."

We may suspect the Government of not being so eager or sincere in pursuit of this particular form of revenue as they ought to be, but one can without difficulty accept that they are sincere in intending to stop the particular bolt-hole or series of bolt-holes mentioned in this Resolution, and if we can give any help from this side of the House, we are anxious to do it, but what we are still more anxious to do is to learn from the Government what exactly are the various avoidances which they are hoping to cover and to press them to make quite sure, before the Resolution is passed, that the Resolution ought not to be made wider in order to cover further tricks. In seeking to put these questions and even to proffer that assistance, I recognise some measure of presumption on my part. not, as I am sure the House will agree, because I have any modesty — [HoN. MEMBERS: "Hear hear !"]—I am glad to discover that hon. Members opposite agree with me at any rate on one point—but because I realise the extreme difficulty of this matter.

We have pitted against us the ablest technical brains in this country who are arranging these avoidances. We know that we have already serving the Government civil servants of at least equal technical skill, probably better on the whole than these evaders, who are always, however, one move ahead, and legislation cannot move very quickly. We are bound to feel that any recommendation or suggestion we can make to the Government is one that has already occurred to the acute minds of the civil servants, and for some reason has not been adopted. Then we have to remember too the very real need, as long as the capitalist system exists, of not working it more unjustly than it works itself; that is to say, in the effort to stop a bolt-hole, we must not stop transactions which are legitimate in any sense of the word under a capitalist regime. One also has to remember, of course, although I do not think it applies to this particular Resolution, the difficulty, which is constantly present to the minds of the experts in this matter, that if you pursue with zeal a new area of taxability, you may discover that you are losing more than you gain, because it brings some people's losses in which are more detrimental to the revenue than other people's profits that you bring in are profitable.

Still, with all those difficulties before me, I desire to put some observations before the House and to ask some questions of the hon. Gentleman the Financial Secretary to the Treasury in order to see whether this matter really is not being dealt with too mildly. In introducing this portion of the Budget, the Chancellor of the Exchequer dealt very shortly with some of these matters, and all that he said about what is now this Resolution was that it dealt with the avoidance of tax by an individual living in this country who transfers his property to persons abroad in such a way that, while he himself retains control over the property and himself enjoys the income from it, in the light of the Income Tax law as it stands at present he does not appear to be in receipt of the income. The Chancellor added: I am going to deal with that by providing that the income arising from property of this kind shall be taken as the measure of tax liability."—[OFFICIAL REPORT, 21st April, 1936; cols. 45–6, Vol. 311.] It sounds very reasonable and proper, but I am not sure that it goes far enough. I detect in past Debates of this kind, and possibly also in the speech of the Chancellor of the Exchequer on Tuesday, though I may be doing him an injustice, a certain reluctance to go into detail about the methods employed, for fear of giving to people who have not already got it the idea of the way in which they may avoid payment of tax in the future. I confess that I cannot regard that as a very real danger. In the first place, I do not believe that anything said in this House can possibly put into the minds of the skilful gentlemen who prepare new avoidances any schemes that they have not already got, and in the second place, of course, the full measure of legislation will have to be set out precisely in the Finance Bill, and unless I hear sonic strong dissent from the Financial Secretary to the Treasury, I shall assume that it is fair and right to discuss all these points practically, without fear of putting ideas into people's heads.

As I see it—I may be wrong—the main object of this Resolution is to deal with and make taxable the income from certain forms of property which persons resident in this country may have sent abroad in order to avoid taxation. What I might call the setting of the picture, which, of course, is an exceedingly elaborate picture when they get to work on it, is that under the law as it stands at present any person in this country enjoying income that comes from abroad, or that may come from abroad, but will not come immediately, is taxable on any income from stocks, shares, or rent, whether they bring it over from, say, the State of New York to England or whether they do not, but any income which is not income from stocks, shares, or rent does not attract tax unless they actually bring it over. It does not require much ingenuity to see that the first step of the evader will be to see that the income shall not be an income from stocks, shares, or rent, by putting it into a trust or something of that sort, perhaps with the intervention of a special company or firm here or in New York State, and then to see too, either that it does not come over, or that it comes over in some form which they hope will not attract tax.

I think perhaps one of the most usual methods is to hold property in the name of trustees in, say, New York State—a very convenient State, because it produces the necessary legal result that property in the things held by a trustee in that State is not in the English beneficiary at all, and, therefore, he merely has a right to call upon his trustees in New York and not an actual right to the income—and then the property will not be taxable unless and until it is brought over. I imagine that the House will agree that if people want to have the great privilege of living in this country under this National Government, sitting perhaps in this House or in another place, and they have these large incomes, they ought to subscribe from them at the same rate of taxation as their fellows who happen to have their property situated in this country or, as is the case with nine-tenths of the population, who have no property at all. I suppose that everyone will agree that these people ought to pay tax on the whole of their incomes. Of course, they have succeeded in arranging, in a very real sense in many cases, that they do not pay tax even on what any ordinary person would say was most emphatically their incomes.

The first thing I noticed in the Resolution—and it may be that I have misunderstood the intention of the Government in this respect—were two rather serious limitations. It is aimed at persons having the power to enjoy… any income of a person resident or domiciled out of the United Kingdom, but it is limited to a right which has been acquired—a phrase which has not the precision that I would like—and it is aimed, moreover, only at an acquisition by means of any transfer of assets. I would ask the Financial Secretary whether he will consider widening that matter either by dropping the word "acquired" or by saying, "has acquired or has." Will he also get rid of the possible limitation of "by means of any transfer of assets" by adding the words "or otherwise howsoever"? I am making that inquiry as to what the Government are prepared to do with undue humility, because I think that somebody must have considered it and put it on one side for some reason or another.

There is a much more important point about which I should like to ask the Financial Secretary to enlighten the House. Most of us have learned by now that one of the favourite tricks—I make no apology for describing them as tricks, however legitimate they are held to be by the courts—is to see whether you cannot persuade income to become capital. One knows that there are a great many difficulties where that sort of question arises. Various recent cases have shown that it is not as difficult as it aught to be to turn income into capital in this way. Think of somebody with a very large capital. It either is in New York State, or he proceeds to arrange that it shall be in New York State. It is there in the hands of trustees as the result of which his property in it is not an equitable property but a right to call upon the trustees to act in accordance with their duty. Instead of getting an income of £10,000 a year from it and bringing it over here and paying Income Tax on it like a good citizen, he realises £10,000 worth of capital, brings that over, says it is capital, and lives on it. There is nothing unlawful in living on your. capital.

Meanwhile, £10,000 of interest in New York. State is invested by the Trustees under his direction to make good the drain on the capital. As decisions stand at present, I understand that it is not too simple to do that, but it can be done with a little care, and the number of people who will take a little care over a tax on £10,000 a year will not astonish any student of human nature. I ask the Financial Secretary whether he will stop that. I do not think that it is stopped by anything that is in this Resolution. I speak with undue and unusual humility, but I do not think it is stopped. Will the Government stop it? If they will not, why will they not? Let them not tell the House that it cannot be done. Parliamentary draftsmen have done more difficult things for the community than that.

Another device which is often adopted in these matters is not to have the income remitted to this country at all, but to borrow from your trustees. To some people it seems incredible, ridiculous and somewhat disgusting that such things should be done, but they are done, and the Chancellor estimates that on one or two things alone he can save £4,000,000 a year. I do not think that the trick of borrowing is sufficiently covered by these words. It very likely is, unless the borrower takes the additional precaution of providing that the trustees are not to lend the money except with the consent of some third party. I am not clear about it, and I do not find it easy, and I would like to know what the Government's in- tention is in regard to it. In relation to that is a matter which arises in connection with a food many of these evasions. Many of the—I was going to call them taxpayers, but it is better to call them non-taxpayers—realising that if they have an unconditional right to their income they would have to pay tax on it, often provide that remittances of income to them or the payment of income to them shall be subject to the consent of a third party. Of course, the third party is a perfectly independent human being, perhaps an accountant or somebody else theoretically perfectly entitled to refuse his consent, and in practice quite certain never to refuse it. I can conceive that it is difficult to deal with that satisfactorily by legislation, but I am sure it is not impossible. I would ask the Financial secretary to say whether the Government intend to do it, or do they think it is sufficiently covered by this Resolution? Frankly, I do not.

I suggest that as there may be a difficulty in regard to affecting consents that are perfectly real and genuine, the Government might provide in this case and similar cases that where the consent of some third party is stipulated for, the Commissioners might be allowed to bring the matter before either a revenue judge or a judge in the Chancery Division on a summons and to ask the judge to declare, either that the stipulation for consent is unreal, or that the consent could be operated not only by the persons mentioned in the disposition, arrangement, or whatever the document is called, but that it should be operated also by the Commissioners. I have thought it over with some anxiety, and I do not believe that this suggestion would produce any unfair or unreasonable result. There is another matter on which I would like to hear the view of the Government. A few years ago there was a very common trick of persons with large incomes invariably selling their stocks cum dividend when they were very full of dividend, and buying them back a few days afterwards ex dividend, thus apparently never having any income at all and living simply, as it were, on the turn of the market on their stocks and shares, but, in fact, enjoying very large incomes and paying no Income Tax.

That was very effectually stopped by legislation six or seven years ago, I think, but I have a strong suspicion that the practice has grown up recently of selling stocks and shares of that kind cum dividend to persons resident abroad, who have proceeded to reclaim the tax deducted at the source—on the perfectly sound ground that they are resident out of England—and then in due course you have found, oddly enough, that the foreigner has transferred the shares back to the English non-taxpayer. Here again I speak with some hesitation, but I am not at all sure that that has been satisfactorily covered. I am not sure whether that is intended to be dealt with by the Resolution, and if not I apologise to the Financial Secertary for troubling him, but I should like to know the view of the Government about it.

Again with some hesitation I ask the Government to consider the magic words "fictitious or artificial transaction," which do not appear in this Resolution but which may well appear in the Finance Bill for I think the Resolution is wide enough to cover it. Those words have a not uninteresting history. They appeared with great effect and with great utility in all sorts of Regulations made during the War, Regulations as to maximum prices, as to contracts, as to passing goods round and round the market and all the other dreadful symptoms of that eczematous ulceration which attacks capitalism during war. They were very useful, I think, in curing a good many cases of eczema. I did not see them again until I saw them in the Finance Act of 1927.

Again, there are civil servants and Parliamentary draftsmen who know this subject very much better than I do. I am speaking without the slightest embarrassment, because my practice happens to be such that I do not think I have ever had a client consulting me either as to how to pay or to avoid payment of his Income Tax. The reason why the Courts hold so many of these transactions to be not merely legitimate but also effective in avoiding tax is that the Courts are compelled, and the Government are compelled, to admit that the transactions are real ones. People go through the most complicated manoeuvres in relation to their incomes or their non-incomes—their trustees' incomes—and the Court is driven to say "Yes, you are actually doing it; you are not merely wasting paper and failing to do it, you are actually doing it; but you are doing something you would never have dreamed of doing if you had not been seeking to avoid taxation, and if we, the Courts, are asked 'Can you do that or can you not?' we are compelled to say 'Within very narrow limits, yes, if you are really doing it you may do it.'" But among these transactions some few of them will be fictitious —perhaps that does not matter very much—but artificial they must certainly be, and if the model of the Act of 1927 could be used more fully I am certain that some very large bolt holes would be stopped. A phrase such as "the taxable income is to include any sums which but for some fictitious or artificial transaction would have become chargeable to tax" would, I think, save a very great deal of revenue.

There is only one other matter with which I want to trouble the Financial Secretary, and again I offer some apology for not being sure that I am speaking about a matter that comes properly under this Resolution. Last year the question was raised of Surtax payers in this country forming foreign companies for the purpose of avoiding Surtax—I do not pretend to understand exactly what it was—but the Chancellor of the Exchequer had not the slightest difficulty in understanding. His reply to the question was, "Yes, I do know of it, and it is growing, and believe me we are always watching it." It was not dealt with in last year's Budget and I should like to know from the Financial Secretary whether it is believed that the point is covered by this Resolution or is intended to be covered by the Finance Bill, or whether it is something that ought to be included and has not been and should, therefore, be dealt with either by widening the Resolution or by bearing the point very strongly in mind when the Finance Bill comes to be drafted. In all sincerity I seek not to embarrass but to assist the Government, and I shall be very glad to hear from the Financial Secretary the views of the Government on these various points.

9.10 p.m.


I wish to ask only one question on this Resolution, and that is whether it deals with the case of those persons who transfer their property to the Channel Islands and do it on a very considerable scale? The Chancellor of the Exchequer did not refer to the Channel Islands in his statement, and I am asking whether he proposes under this Resolution to stop the efforts of the people who are making use of those Islands.

9.11 p.m.


In reply to the hon. Member for East Wolverhampton (Mr. Mander), I can say at once that the case of persons who transfer their property to the Channel Islands is to be dealt with. I am sure we are much obliged to the hon. and learned Member for North Hammersmith (Mr. Pritt) for his very interesting speech on this question. It is true that in dealing with tax evasion he went to some extent outside the particular form of it which is described in this Resolution, but he shows a familiarity with the subject which convinces me that though he abhors the capitalist system he is very familiar with one or two wrinkles in this particular matter.


I look at it all day long.


The hon. and learned Gentleman will understand me when I say that many of the points of detail to which he drew attention can be more aptly discussed when the Clause in the Finance Bill is under consideration. The only object of this Resolution, if the House agrees to it, is to give the Government power to draft a Clause which will cover the necessary points and to introduce such a Clause to the House. If I may explain briefly what this Clause proposes, I should say that it is intended to cover one particular form of tax avoidance which is practised by any individual in this country who transfers the whole of his assets to a company or other person abroad, doing it in such a way that legally the whole of that property becomes the possession of the foreign entity.


Does the hon. and learned Member really mean the whole of the assets?


No, not necessarily the whole of his assets, but a great portion of them.


Any portion?


Yes, any portion—the whole of the assets on which Income Tax might arise. He may retain some of his assets at home or he may transfer the whole of the assets we are now considering to some foreign company in such a way that legally the possession is vested in the foreign company, though he at the same time retains such control over the operations of that foreign company that he is able to get back his property from the foreign company in some form which is not income for the purposes of the Income Tax Acts. The assets are transferred to the foreign company, and the man takes certain repayments from the foreign company and cashes them from time to time. The repayments of those loans are capital, and not income within the meaning of the Income Tax Acts; consequently there is avoidance of tax by that means. There are also cases in which the foreign company may be put into liquidation, by reason of which the owner of the assets gets his money back, again in a capital form, which is not income for the purposes of the Income Tax Acts. That is the general description of the type of avoidance which we attempt to deal with here.

It is hard to express this matter shortly. The hon. and learned Gentleman knows, none better, that though there are certain common features in these cases, there are varieties of peculiar circumstances attached to them. The common feature is, roughly, that though the assets with which we are dealing in this Resolution are technically and legally vested in a foreign company, the effective power of enjoying them remains in the individual. The Resolution is wide enough to enable the Government to bring in a Clause which will deal with the matter. What the hon. and learned Gentleman said is very interesting, and may enable us to improve what we had thought of presenting to the House. Those matters will be taken into consideration, but I can assure him that, for the purpose it sets out to achieve, the Resolution is already wide enough to cover the necessary Clause. I would ask the House to agree to the Resolution.

9.18 p.m.


I should like information from the representative of the Treasury on a point which I put in all enthusiasm for the general principle which the Resolution endeavours to bring into effect, namely, the stopping up of the bolt-holes described by my hon. and learned Friend the Member for North Hammersmith (Mr. Pritt). In the words which are used in the endeavour to effect this most praiseworthy intention we must be vigilant to see that no injustice is brought about. One principle which this House has traditionally made its own is that retrospective legislation in fiscal matters is to be avoided at practically any cost. The hon. and learned Gentleman will agree with me that a most useful principle in the interpretation of fiscal Statutes is that they must never be interpreted to be retrospective unless the words to that effect are very clear. I suggest that equally they should not be enacted so as to be retrospective unless there is some need, more than a mere financial need, to make clear the whole framework of which they form a part.

The relevant paragraph of the Resolution says: The provisions of this Resolution and the provisions included in any such Act as aforesaid shall apply for the purposes of assessment to Income Tax for the year 1935–36 and subsequent years. If one tries to envisage what those words mean, it seems that in some cases hardship will be brought about. The transfers which will be hit are those that may go back for a considerable period before the intended legislation will come into effect. Persons who are enjoying the proceeds of those transfers will have counted upon them, certainly in the disposal of their income taxation for the current year. In many cases they will have gone further than that. The income will have been used and disposed of for the financial year 1935–36.

In those circumstances, they have already become liable to pay, if the assessment is made of the taxation for the year 1935–36, and they will also have to meet, in a very short period, out of their already depleted income the taxation for the year 1936–37. It was pointed out by my hon. and learned Friend, and not questioned by those who speak for the Treasury, that this matter has been well known for some time. If persons have been allowed to accept that position, is it desirable that those who have already incurred commitments, and had to pay taxation on the current year, should be faced with the position which the Resolution will bring about? I agree that it is desirable to bring it about in the future.

Let me take the example of an executor who has had proceeds from a foreign company, and has, in accordance with his duty, to distribute the estate, including those proceeds. If the Resolution is succeeded by the legislation which is intended, and if the assessment is made for the year 1935–36, it is difficult for me to see, without enlightenment, how that executor is not to be personally liable for the taxation which would ensue from the assessment for 1935–36. However much we may desire to bring this position about, and I yield to no one in urging that desirability, that desire should be limited by the facts as they stand, and steps should be taken at some stage to see that persons who have not merely counted on the law being in a certain position for the year 1935–36, but who have disposed, as executors or trustees, of sums of money, counting upon the law being in that position, should be given protection. The Government would, I am sure, wish the House to take a course which is strict and severe in seeing that retrospective fiscal legislation does not become the rule.

9.24 p.m.


I am sorry that retrospective legislation is not proposed in this matter. The proposal before us is not in any way retrospective. There are people who take steps to avoid Income Tax and Surtax by forming foreign companies, those who have tried to avoid, not the standard rate of Income Tax, but the very heavy Surtax. The Surtax which is to be paid this year will be assessed upon the income of 1935 and 1936. There is nothing retrospective in this Resolution. I see no reason why this House should have sympathy for people who have entered into what my hon. and learned Friend called an artificial arrangement for the purpose of avoiding taxes which this House and the country have decided that they should bear. There is no particular sympathy due to these people merely because, hoping that they will escape, they have distributed their income. If this Resolution were retrospective, or if the Chancellor of the Exchequer wishes to make it retrospective, I assure him that we shall support him.


Surely my hon. Friend agrees that this Resolution applies to In- come Tax, and not merely to Surtax? If the assessment were made for 1935–36 income Tax would have to be paid for 1935–36.


That is purely a theoretical point. People who pay Income Tax and not Surtax do not go to the expense of forming foreign companies to avoid Income Tax. It is when the tax gets up to 12s. in the pound that they make these extraordinary arrangements.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Thirteenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

9.26 p.m.


My hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence), in opening the general Debate on the Budget Resolutions, made some inquiries of the Chancellor of the Exchequer about the meaning and scope of this provision. The Chancellor of the Exchequer did not find time to reply to my hon. Friend, and it would therefore appear that this would be a suitable occasion for rather more explanation to be given to us. I think that it is proposed to amend a Section of the Finance Act, 1922. My recollection of some previous Budget Debates carries me to the Finance Act when the right hon. Member for Epping (Mr. Churchill) was Chancellor of the Exchequer. I think that it was the Finance Act of 1925 or 1926, when a provision was explained with great lucidity by the Chancellor of the Exchequer at that time and Lord Hailsham regarding the one-man company, under which it was decided that the Inland Revenue authorities should have power to decree the income of a certain company to be in fact the income of the individuals who formed it. I am not clear as to the relation between that Section of our legislation, which is not proposed to be amended, and this Section of the Act of 1922.

I think it is generally recognised that it is in respect of Surtax rather than Income Tax that serious avoidance has been taking place, and my hon. Friends on these benches are anxious to assist the Government to the utmost of their power in seeing that as many as possible of these holes are stopped up. But we should be glad to know in more detail what the proposal in this particular Amendment may be and how far it goes. I do not claim the detailed knowledge of Income Tax law which is possessed by my hon. and learned Friends the Members for North Hammersmith (Mr. Pritt) and East Bristol (Sir S. Cripps), and therefore at this stage I will do no more than open up the discussion by inviting the Chancellor of the Exchequer or the Financial Secretary to the Treasury to give us a clearer version of what is intended, and expressing the hope that this provision may be made as drastic as may be necessary to reduce the avoidance of Surtax, which has increased of late and has misled public opinion about how right through the depression great wealth has accumulated in a few hands.

9.32 p.m.


I immediately respond to the invitation of the hon. Gentleman to try to express shortly what is proposed to be done. Again I would say that detailed discussion of what is proposed may, to the advantage of the House, be postponed until we have the actual Clause before us. The basis of the matter is that Surtax applies only to individuals, and a company is not assessable to that tax, and therefore there have been practised from time to time in the past efforts to evade Surtax by transforming an individual's possessions into the possessions of a company. Legislation has been directed against this particular form of evasion in the past. The first chapter in the story is the Finance Act of 1922, Section 21. That enacted, in brief, that where a one-man company failed to distribute a reasonable amount of its profits the amount that was withheld might be taxed for Surtax. That was all very well and did stop a certain amount of this avoidance. It was further strengthened by the Finance Act of 1927, to which the hon. Gentleman referred.

The present Resolution attempts to carry the matter somewhat further, and to check further developments of this particular form of avoidance. The main changes might be summarised as follows: In Section 21 the term "control" was used to link up the individual with the company. That has been a source of weakness from the point of view of the revenue, because cases have occurred where the individual has not got direct control of the company which owns his assets. There will be, as a result of this Resolution, a wider definition of control for the purposes of Section 21 so as to cover cases where the control is not direct but where it is potential or factual.

That is one of the points where legislation is being extended in this matter. Then the definition of "companies" in Section 21 has been found in fact to be slightly rigid, because taxpayers have been making use of other sorts of incorporated bodies which were not defined in that Section but will be defined in the Clause in the Finance Bill which is founded on this Resolution. The Clause will also, I hope, contain a provision to deal with cases where income is distributed, not as income, but by way of bonus debentures, which have legally all the appearance of being capital, being a sort of debenture charge purporting to be the repayment of a loan, whereas in fact they are really income. Again, trouble has sometimes been caused by a one-man company charged with Surtax delaying unduly the payment of the tax that has been assessed. In normal circumstances, if a company fails to pay its due taxation, there is no right of recourse by the Revenue against the shareholders, and that has been made use of by these companies effectually to avoid payment of tax.

We hope we shall be able to get the House to agree to a Clause which will stop that, so that, if the company fails to pay within a reasonable time what is due from it to the Revenue, the shareholder—who in this particular instance is the same individual—will be responsible for what is due. Except for certain special and highly technical matters relating to investment companies, which I assure the House will be more profitably dealt with when we have the actual words of the Clause before us, I have attempted to indicate the scope of the Resolution, and I hope that the House will now agree with the Committee in passing it.


I only rise to thank the hon. and learned Gentleman for his explanation. It is, as far as I can understand, quite satisfactory, and we shall give the Government our support on this Resolution.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Fourteenth Resolution read a Second time.

Motion made, and Question proposed, "That this House cloth agree with the Committee in the said Resolution."


May I ask, Mr. Deputy-Speaker, whether you are not proposing to call my Amendment—in line 5, after "his," to insert "or her"?


No; the hon. Member's Amendment is either unnecessary or out of order.

9.39 p.m.

Lieut. - Colonel Sir CIHARLES MacANDREW

I am in entire agreement with the efforts of the Government to stop the assignment of income with a view to the avoidance of tax, and I was amazed when I heard the Chancellor say in his Budget Speech what was going on in that direction in the country to-day; but I would like to say a word about irrevocable trusts which have already been made by parents for their children—not educational trusts only, but trusts going on all through the children's lives. I was glad to hear the Chancellor indicate in his speech that he realised that there are trusts of that kind; he mentioned that there were trusts where the motive was perfectly proper, and even laudable. There are in this country many trusts which have been made in all good faith, and this is a thing which has been going on for many years—long before the day of Super-tax, and when the Income Tax was in the neighbourhood of 1s. in the £. It has been going on as a form of prudent insurance, used especially by parents who are themselves involved in businesses of a speculative nature, and who by that means are able to guarantee their children's future whatever may become of their own affairs. Many such trusts are made literally at the children's birth. In this country we encourage life insurance, and a rebate is given in respect of the premiums paid. These irrevocable trusts have paid their premium by the fact that they are charged the Stamp Duty of 1 per cent. on the capital value in the case of voluntary settlements and deeds of covenant, and, naturally, those who have entered into them would have every reason to expect the same terms that they would get from a life assurance company when they have met their obligation by paying their premiums there. But now a. completely new departure in taxation in this country is being entered upon, and funds in which parents have no legal estate—because they are not going to be liable for Death Duties—are now going to be aggregated for Income Tax and Surtax purposes. In many oases the parents are not even trustees.

Another fundamental change is that parents are now going to be made liable for Income Tax and Surtax on that part of their children's income which may be more than is required for the children's education; they will have to be responsible for Surtax on money which it is illegal for them to spend even if they wished to do so. A remarkable point about this proposal, too, is that it is to go on until the children have reached the age of 21. In this country the children's allowances in the case of Income Tax stop at the age of 16 unless the child is kept at school longer than that; whereas the proposal with regard to these irrevocable trusts is to go on until the children have reached the age of 21. Infants in this country are allowed to drive motor cars at 17, or to join the Army at 18; infants may open bank accounts, hold Government stock, or railway stock, or shares in public companies, and they are, of course, assessable to Income Tax and Surtax. Therefore, that parents, until their children have reached the age of 21, should have, in the case of these irrevocable trusts, still to bear Income Tax and Surtax on their income, seems to me to be extraordinary. If an unmarried infant under the age of 21 leaves home, the parents, under this proposal, must still pay Income Tax and Surtax on money which they cannot ever use. A widow will have to aggregate with her Income Tax return the interest on money left by her late husband to his children, if they are unmarried and under the age of 21. This is a fundamental and illogical change in the method of assessment to Income Tax which has been going on in this country since the beginning of Queen Victoria's reign.

Looking at the matter from another point of view, does the Chancellor intend to annul these irrevocable trusts? If he does, surely he is in duty bound to return the Stamp Duty of 1 per cent. which has been charged as a premium when these trusts were formed. At that time they were perfectly legal, and it is now quite logical that this money should be returned if the trusts are to be annulled. It is obvious, however, that the Chancellor cannot afford to do that, because so large an amount would be required. If, on the other hand, he does not annul them, the only other logical thing he can do is to repeal the Trusts (Scotland) Acts, 1921 and 1926, and the Trustee Act, 1925, and allow the trustees to invest in more speculative stocks than in many cases they are allowed to invest in under their trust deeds, which compel them to invest only in trustee stocks. It is only reasonable, because people have arranged their budgets and they now find that they are going to be taxed in a way that was not expected. It is not an avoidance of tax. It is a prudent insurance. If they are going to be taxed on it, they must have freedom to invest in any stocks they like and get a bigger return. That means repealing certain provisions of the Trustee Act. That seems the only way out of the difficulty if this extraordinary proposition is going to be carried through.

Why should these new proposals apply only to parents? Why should parents be put in a less favourable position than any other subject of His Majesty, especially when they are doing something which they have paid a premium to do to ensure the safety and the future of their own children? I feel very strongly that these irrevocable trusts should be left alone and allowed to stand as they are. By all means let the Chancellor prohibit this kind of thing in the future, but do not let him go back on what people did perfectly legally and honestly and paid for doing. I am convinced that, if this had been proposed by the Opposition, no one would have been more scathing in his attack on it than the right hon. gentleman.

9.48 p.m.


I sincerely hope that the Chancellor will not listen to the hon. and gallant Gentleman's blandishments. We on this side welcome the Resolution as a tentative beginning in this matter of irrevocable trusts. There is no earthly reason why a parent should avoid paying Income Tax and Surtax upon a duty that every natural parent would wish to perform for his children. The hon. and gallant Gentleman seemed to be under the impression that the effect of the Resolution will be to cancel trusts which have been already established for the purpose of safeguarding the interests of children. It will no nothing of the kind.


As the Resolution is drawn, it will certainly cover that.


I take it that the object is to enable the Inland Revenue, not to cancel the trust but to collect tax upon the income.


They are quite entitled to see the deeds and make sure that they are legally and properly drawn up.


But they cannot aggregate. Why should they not aggregate? Why should a Supertax payer transfer a certain amount of income to a child and, in effect, obtain an allowance of Supertax at the maximum rate that he pays? That is avoidance of tax, which the Resolution is proposing to get at, and I sincerely hope the Chancellor will carry it through. But why has he chosen this one particular form of irrevocable trust to legislate for first of all? There are a very large number of other irrevocable trusts which have been established simply and solely for the purpose of-avoiding Income Tax and Supertax. It. could be argued that the particular form of trust that he has chosen to attack first is one of the more legitimate forms of trust. I do not say it is legitimate, but it is more legitimate than a number of others. Furthermore, in his Budget speech the right hon. Gentleman referred to the instruments whereby these trusts were established being hawked from house to house down the road. I do not know whether it is as bad as that, but I know from experience that certain insurance companies are putting these proposals forward to their clients. One came to my office with the whole pro-sal cut and dried, and showed me how much I could settle upon my children to the best advantage if my income was so much and, if it was so much more, that I could settle a larger sum.

The very fact that these instruments are widespread means that they are being used by the smaller Income Tax payer, in many cases by the Income Tax payer who does not pay Supertax. If the right hon. Gentleman had decided to tackle the question of irrevocable trusts, he should have cast his net a good deal wider than he has done; he should have tackled trusts not adopted primarily by the small Income Tax payer. If he wants to know what other forms of trusts there are, take the case of the Duke of Westminster, who established a trust in order to pay his servants' wages. That was taken to the House of Lords and held to be good. It is a clear case of evasion of Income Tax and Supertax.


How can you evade something that is perfectly legal?


I apologise to the Noble Lord, who is very meticulous. I will use the word avoid. It is legal avoidance, but moral evasion.


The hon. Member has no right even to use that word, in view of the judgment of Lord Sumner in the House of Lords case that the man was not doing anything immoral or dishonest.


This Resolution deals with settlements on children. There is no question of avoidance or evasion.


I am rather surprised to find the hon. Baronet the Member for Farnham (Sir A. M. Samuel) defending the use of an instrument to avoid tax which is morally payable. I hope that the Chancellor will not confine his efforts to this particular form of trust, but will cast his net a good deal wider and catch bigger fish who are escaping.

9.54 p.m.


Surely it is quite wrong to speak of moral evasion. It is the duty of a trustee to pay as little tax as he is compelled to pay by law. It has been decided that it is proper that tax should not be paid in these cases and a trustee would be evading his duty if he paid tax in excess of what he ought to pay. I rise, however, to ask questions on one or two points of detail which seem to arise in connection with the Resolution, which is drawn in a very wide fashion. I have certain Amendments down on the Paper, which, to my surprise, are not in order. The Resolution reads that these agreements may be made by any person in favour of any of his children. I know that in general in Acts of Parliament the masculine includes the feminine, but it is rather an unusual point, and I wanted to know whether "his children" includes "her children"—whether it applies to a father as well as to a mother. I also want the Financial Secretary to explain precisely how this applies to trusts made not directly by parents, but by other interested relatives, such as grandparents or uncles or aunts. It is clear that if there is tax avoidance, it would be perfectly easy to have tax avoidance by making disposition almost second-hand in that way. That this occurs to the Treasury is obvious by reason of the fact that after the word "children" there is in parentheses "step-children, adopted children and illegitimate children." It would be easy to enter into some process which would enable tax avoidance to be continued in the way I suggest.

I support the point of view of the hon. Gentleman who spoke first in this discussion that surely there is a great difference between the revocable and irrevocable trusts. I do not think that there is anyone in this House who would object to the Chancellor of the Exchequer endeavouring to prevent tax avoidance, if the person making the trust still had effective control of the money. I think that the House would be entirely in agreement that it would be improper for anyone to make a trust in such a matter if the person making the trust really had effective control of the money. I have tried to approach this matter with a perfectly open mind, and it appears to me that anyone making a disposition in favour of a child and entirely surrendering any control of the disposition of the fund is in a different category from the irrevocable trust. All Members who desire to support the Chancellor of the Exchequer in such efforts as he is making to stop tax evasion would like to know what is the view of the Treasury and have a clear statement of those two kinds of trusts. If anyone makes a settlement of a capital amount upon a child, then tax is not paid in consequence of the settlement of the capital amount. There may be parents who are not able to make a capital settlement and who, nevertheless, are prepared to make provision for an income of so much year by year. It does not seem right that they should be placed in a more unfavourable position. These are points upon which many Members of the House, anxious to support the Chancellor of the Exchequer in suppressing all forms of tax evasion, would like some reassurance.

9.59 p.m.


There are one or two observations of the hon. Gentleman the Member for Huddersfield (Mr. Mabane) about which I should like to say a word or two, and I should like to put a question to the Financial Secretary. Both the hon. Member for Huddersfield and one or two other hon. Members seem worried by the word "evasion." I gathered from the interruptions of one hon. Gentleman that after what Lord Sumner had said, it was perfectly moral, and that we on this side have no right to urge that it was not. We rather look upon Lord Sumner as one of the worst and most dangerous theologians of whom we know, and we do not propose to take his view or that of the hon. Member. We claim the right to say and to submit to the House that if a man with hundreds of thousands of pounds a year deliberately succeeds in evading £50,000 perhaps in taxation, the Government have no right to put 2d. per 1b. upon tea in order to build battleships.

I will turn to matters which appear to worry hon. Members opposite a little less. In respect of one thing mentioned by the hon. Gentleman the Member for Huddersfield, I understand that it continues settlements or arrangements which involve no transfer of capital, but merely the undertaking to pay income in the most common form. There is another matter which it seems incredible that the Government should not have borne in mind, and yet the Chancellor of the Exchequer in his speech last Tuesday unquestionably used words which indicate that he had not borne it in mind. He said that money in any way derived from the parent should be aggregated for all purposes of Income Tax law and will be completely unaffected by the change. The Resolution is drawn wide enough to depart from that, and I urge upon the Government the importance of departing from it. The device of two brothers who each have a son of settling, either by covenant or transfer of capital, a sum of money on the other one's son instead of their own in order to have the moral approval of hon. Gentlemen opposite and the moral disapproval of hon. Gentlemen on this side, and save a great deal of money in tax, has already occupied the attention of law reports in similar though not identical cases. It is already under discussion that there will be much more widespread evasion if this legislation is to be in the form mentioned by the Chancellor of the Exchequer. I ask the Government to make sure that cases would be covered where a settlement of this kind on the child is brought about directly or indirectly by the parent or on behalf of the parent.

It has been suggested that possible arrangements of that kind would be held to be invalid as being contrary to public policy. I ask the Government to take no risks on the matter and to make sure that in the Finance Bill all these things are properly covered.

10.2 p.m.


This Resolution has almost staggering powers which go far beyond what one understod from my right hon. Friend when he introduced the Budget. It is not a question of discussing the case of men with tens and hundreds of thousands of pounds, upon which the hon. and learned Member opposite seems to concentrate his attention, but a matter of great injustice to the middle classes. Who are those who pay the vast sums in Income Tax, much of which goes to education, and also try to make provision for the education of their children? The middle classes. They are the people who get little sympathy in these days from this House. If anything in the nature of the width of this Resolution is passed by the Finance Act, it is something for which I will never vote. I do not know whether there are other hon. Members. in the House who think of the middle classes as I do. This matter is a distinction between the revocable and the irrevocable. It is for the benefit of all honest taxpayers who try to meet their obligations to the country, that the man who tries to get round them should be caught. He is fair game for the Treasury and Inland Revenue officials. They are after him every year.

But in this case they have made a mistake, as they sometimes do. In order to catch the misdoer, they spread the net so wide that it will inflict grave hardship upon many people who, so far from being blamed for trying, out of means which are probably limited, to make prudent provision for their children's future, and so far from getting assistance from the Government, are being deprived of advantages they could get by not having these sums aggregated. We all know of the case of husbands and wives who, owing to having their incomes aggregated, are worse off than if they were living apart. The Chancellor of the Exchequer ought not to grudge the middle classes the advantage that they may get from making a prudent provision for their children, if they make it not with the idea of tax evasion but irrevocably for the future of the children who, I can assure hon. Members opposite, are just as dear to them as are the children to the working classes.

10.6 p.m.


The majority of hon. Members on this side of the House are absolutely in support of the Chancellor of the Exchequer in his proposal to deal with evasion of tax, and particularly with regard to one or two Resolutions that have been already passed, such as the transference of property abroad, and one-man companies. With regard to educational trusts, I listened to the Chancellor of the Exchequer's words last week, and noticed that he particularly referred to income. In the White Paper, which we received after the Chancellor of the Exchequer sat down, the words are: It is proposed to amend the law so as to prevent avoidance of Income Tax by way of transference of income from parents to children. Many hon. Members on this side of the House were of opinion that the Chancellor of the Exchequer was intending to deal with what he termed a certain class of educational trust which he said had been taken up very considerably during the last year or two, and they had no idea that under this proposal the irrevocable trust, which has been taken out by parents for many years, would be considered. The irrevocable trust is known, and always has been known, to Somerset House, and Income Tax has been rebated to the children for many years. It must be realised that there has been no evasion in such trusts, which has always been looked upon as a very proper and prudent thing to do. Take the case of a young man who has received capital, which has passed entirely out of the control of the parents. Probably at the age of 19 or 20 he starts in business. The parent then had no control of the capital, and perhaps has had no control of it for some years. The son has used the income and paid tax on it. Now, a year or two before the son is 21, the parent may be called upon to pay an additional tax and may have no means of finding it, because he may have retained only an amount sufficient to cover his own personal need.

Take another example, a retired civil servant, who perhaps 10 years ago passed over to his children capital in an irrevocable trust, the capital passing entirely out of his control, he himself not a member of the trust and having retained only a limited amount to provide for himself. He may find himself unexpectedly liable for Income Tax on the income of capital held by his children under 21 years of age. That capital is not subject to Estate Duty, but up to the time of the children reaching 21 years of age he may be called upon to pay Income Tax on the income and probably will have no means of paying it. If a parent is unable to do this for his child, why should he be allowed to do it for his brother's child or a friend's child? There are so many anomalies that will arise that I do beg the Chancellor of the Exchequer to reconsider the decision which is apparent in the Resolution, cut out the irrevocable trust and merely deal with those educational trusts with which many of us disagree and which we should support the Chancellor of the Exchequer in doing away with. I beg him to give this matter further consideration before the Resolution is passed.

10.10 p.m.


I think it is recognised generally that this Resolution is of a somewhat different character from those which have been passed already and that there are covered in the terms of the Resolution a great many different kinds of trusts, some of which may be on one side of the line, others may be equally on the other side of the line. There may reasonably be differences of view as to the side of the line upon which some lie. My first observation is that in discussing a Resolution of this kind it is well to avoid, if possible, questions about evasion or morality, which are not very easily determined. I particularly deprecate the suggestion which seemed to be implied in the observation of the hon. and learned Member for Hammersmith North (Mr. Pritt) that there is some difference in the morality of different classes of the population.


I had not the faintest intention of suggesting that.


I am glad to accept that correction. I think my hon. Friend the Member for Londonderry (Sir R. Ross) is going too far when he says that the Resolution will create an immense amount of injustice on the middle classes. Perhaps he is assuming that the Resolution, which is in fairly wide terms, will be identical with the Clauses of the Finance Bill. I have to recognise that in this matter there is a great range of different cases, the whole of which it would be extremely difficult to cover and be quite certain that one is getting all that one wants without covering more than one wants. The cases that I described in opening the Budget are cases which normally are being represented by agents to the taxpayers as methods of evading tax. There is no disguise about it. It is represented as a transaction in which taxpayers may save themselves from Income Tax liability. I do not think that any one will try to defend that.

Without entering into any question of morality, we want to see that taxpayers are treated fairly and alike. Some may manage to avoid liability quite legally. Nevertheless they manage to do it, and in so doing they are relieved of liability, and others have to make up for their deficiency. That, again, is a thing which everybody would desire to see remedied. At the same time one recognises that there may be falling within the terms of this Resolution cases which one would not wish to touch. I say deliberately that, although the terms of the Resolution are wide, I do not want the House at this moment to assume that every conceivable case that can come under this Resolution will be covered by the Clauses in the Finance Bill when they are presented to the House. I wanted to hear what hon. Members had to say on the subject, because I thought it possible that they might be able to mention cases of hardship to be considered.

The suggestion has been made by several hon. Friends that one could quite properly draw a line between revocable and irrevocable trusts. At present I am not convinced that that is right. Suppose we have an irrevocable trust, under which the taxpayer makes over a certain proportion of his capital to trustees with instructions to them to hold the security in trust for the child, but until the child becomes of age paying the income over to the parent for the purpose of maintaining the child. Is that a case which any hon. Member would wish to defend? After all, the only thing that has happened in that case is that the parent is not out of pocket in any way. He has merely discharged the natural obligation of a parent without incurring liability to Income Tax on that part of his income. As at present advised I do not think you can draw a line between an irrevocable and a revocable trust. But I should like to consider the points which have been put to me by my hon. Friends in the course of the Debate, and when the Clause in the Finance Bill comes to be drafted I will do my best to see that it hits the cases we want to hit and misses the cases we want to miss.

One other point has been raised, the rather obvious case of an arrangement under which two brothers might make reciprocal arrangements, which, it is suggested, has escaped my attention. That is not quite so. As a matter of fact, there is a case already decided by the courts, the Commissioners of Inland Revenue v. Clarkson Webb, which related to the transfer of income to children under an arrangement between two brothers. It was held that the two deeds were part of a mutual arrangement and that each person was to be regarded as providing for his own children.


Was that capital or Income Tax?


I cannot say, but I was going on to say that the Finance Bill will contain provisions to make it clear that cases of this kind, and also cases where A transfers property to B with a view of B making provision, will come within the scope of the Finance Bill.

10.18 p.m.


I hope the right hon. Gentleman will not weaken because of the barrage of criticism from hon. Members behind him. I can assure him that he can disregard those few people behind him who are grumbling because he will have the support of our party. That must be very welcome indeed to the right hon. Gentleman. He has asked that hon. Members should give him instances from their own experience which may help him to make up his mind as regards the scope of the Clause dealing with this matter in the Finance Bill. Let me give him the case of two brothers, about equally wealthy, both of whom happened to have four children. The one brother, with the express purpose of evading Income Tax, has settled on his four children the maximum amount by an irrevocable deed. The children, in fact, though not compelled, pay back to the parent the total income for the year to pay for their lodgings and board. The other brother, not thinking it a good thing to evade taxation, has made no such settlement at all. I am sure the right hon. Gentleman will agree that those two brothers ought to be taxed in the same way, that it is fair and just that they should be, and that, therefore, the question of the irrevocable trust made to the children—even though the trustees have no power to pay an income to the parents, the children in fact do so—should not be allowed to diminish one income for taxation as regards the other income.


Is not the first brother in danger of suffering the fate of King Lear?


I do not know what fate he is in danger of suffering, but I hope he is in danger of paying his proper share of taxation, and I understand that is what the right hon. Gentleman desires. I only put this case forward as an instance to show the right hon. Gentleman that the irrevocable deed, which sounds so nice, is more often than not used for the purpose of tax evasion. It is merely taking out of the income of the parents for taxing purposes a certain proportion of money which they would in any case spend on their children. Other parents—I dare say many hon. and right hon. Gentlemen opposite have familiar acquaintance with such deeds and may have made them themselves—discharge exactly the same duties to their children in just as full and proper a manner without making irrevocable deeds for educational purposes, but they also discharge their duty to the State and do not evade that duty.

10.22 p.m.


If I were a personal and political enemy of the right hon. Gentleman the Chancellor of the-Exchequer, instead of being a warm admirer and friend, I should have enjoyed the opening words of the speech of the hon. and learned Gentleman opposite. I cannot imagine anything more embarassing than that the hon. and learned Gentleman of all people, speaking for the vast army of followers which he has beside and behind him, should assure the Chancellor of the Exchequer that he and that army would be on the Chancellor's side in this fight for a tax which he thinks should have been imposed long ago. Personally, I think the Chancellor of the Exchequer has deal with the matter in a perfectly fair and reasonable way. Hon. Members opposite seemed to see something derisory in the right hon. Gentleman's remark that he was anxious to hear the views of the House on this matter. After all, there has been nothing of the kind before and the right hon. Gentleman was perfectly entitled to ask for those views. It will be an ill day when any Minister, in any Government, on rising to say he is anxious to ascertain the views of the House, is greeted with derisory cheers.

Although I agree with the Chancellor that there are many borderline cases, there is nevertheless some broad distinction to be made between revocable and irrevocable trusts, and it should be remembered that in the latter case, for example, while it may be true that the person does not permanently dispense with his capital, he may be placed, as a result of a change in his condition, in a serious position by so doing temporarily. To that extent he does make a sacrifice. I am content to leave the matter in the hands of the Chancellor, feeling assured that he will take into consideration the perfectly fair examples given by my hon. Friend of cases where the new tax, if carried out to the widest extent, would be onerous.

I would like again to protest against the misuse of the word "evasion." I was not surprised to hear it used by the hon. Gentleman opposite who made such wounding references to us on this side of the House, but I was surprised to hear it used by the hon. and learned Gentleman. I do not know whether he has ever been concerned in the courts with Customs cases, where a person has evaded the payment of Customs Duties which he was legally compelled to pay. That is an evasion of tax. When a man fails to take out a motor car licence, that is an evasion of tax. It has been laid down again and again by the highest court in the land that where a subject takes advantage, if you like, of the law to avoid the payment of a tax that is not evasion. [Laughter.] Certainly not. Hon. Gentlemen opposite by using this loose language—


Surely the Noble Lord will not say that you must necessarily break a law in order to evade. If the Noble Lord stays away from the House, he evades his duty but he does not break any law.


I do not propose to bandy juridical arguments on the question, least of all with the hon. and learned Gentleman who is a very distinguished lawyer. But it is within his knowledge that the word "evasion," in relation to taxation is used in the courts in a different sense from its ordinary meaning. It is a legal term. Hon. Gentlemen opposite in their anxiety—an anxiety which is growing—to attribute motives to Members on this side and to those whom they suppose Members on this side to represent, always suggest that it is the rich who do these things. In making what they no doubt think is a legitimate point, they are doing their little best, and it is only a little best, to injure the Prestige of this country by suggesting that there is widespread illegal evasion of taxation. That is not so and, as my lion. Friend the Member for Farnham (Sir A. M. Samuel) pointed out, there is more than one judicial decision to the opposite effect. By all means, let us make the Income Tax law symmetrical. The Chancellor is endeavouring to do so. We are all agreed that the burden should be fairly spread. But do not let us use terms which are unjust to many people who are not rich, but who have honestly done what they honestly believe to be in the interests of their children. Do not let us use these wounding terms about a perfectly legitimate action.

10.27 p.m.


I do not wish to enter into the merits of the case and I would not have risen had it not been for the speech of the Noble Lord. He congratulated the Chancellor on his desire to hear the views of the House of Commons on this matter. We were possibly a little ironical about that statement. We felt about it much as we felt about the Noble Lord's reference to evasion. We have the feeling that this is a pandering to the rich and that there is a difference between the treatment accorded to the friends of the Noble Lord and the treatment accorded to others. In a short time we shall have to discuss issues of tremendous importance to the children of the unemployed, but this House will not be allowed, even to move Amendments, or to express opinions on the matter. The Minister will not listen to speeches or Amendments when dealing with the poorest children in the country and Members of the Noble Lord's party will support certain proposals going through the House without Members having the right to move a single Amendment.

I welcome, at all times, a readiness on the part of any Member of the Government to hear arguments from all sides, but I think we must feel a little bit ashamed that we should only hear that view when the party opposite are speaking for the children of the comfortable section, but when it comes to speaking for the children of the poor, neither the right hon. Gentleman nor any other Minister, nor indeed any Member of the party opposite, will deign to listen to arguments or give the House of Commons the right to amend proposals.

10.30 p.m.

Lieut. - Colonel ACLAND-TROYTE

There is one case which has not been mentioned this evening, and that is that many people have taken out these trusts, which are neither legally nor morally wrong, and as a result have been able to send their child to a much more expensive school than they would otherwise have been able to do. Now they will have to pay the extra tax, and as a result may not be able to continue to send the child to so expensive a school. Therefore, that child will be bound to lose in education, and I hope my right hon. Friend the Chancellor of the Exchequer will take that point into consideration.

10.31 p.m.


As one who has never at any time paid Income Tax, I want to express my very great astonishment at the evidences of guilt that have been shown in this Debate. From what hon. Members have said, it would appear that all of them are desirous of continuing their wrong practices. I have to pay tax on tea and on tobacco, but what are the taxes for? They are in order to maintain the necessary forces of the country to protect your wealth, the wealth of the other side, the wealth of the Income Tax payers, not my wealth; I have none. [An HON. MEMBER: "What about the social services?".] The social services are an insurance against revolution. Or so your own leaders have always said. We want more social services and we will make all the potentialities for revolution that we can in order to force more social services. But with regard to the taxation that is being raised just now and that has caused this wide spreading of the net—and it cannot go wide enough for us, whether revocable or irrevocable—we propose that every penny that can be taken should be taken. But the spreading of the net is necessary because hon. Members opposite want so much armament. Therefore, I would suggest here to hon. Members opposite that we come to an understanding if we possibly can and that we try to meet each other's desires. Agree to stop spending the money on armaments, and we will agree to assist you in evading the Income Tax.

The Chancellor gets up with very great indignation, or an affectation of indignation, and charges the hon. and learned Member for North Hammersmith (Mr. Pritt) with having questioned the morality of hon. Members opposite, but when an unemployed man makes an avoidance or an evasion, there Is never any attempt to quibble, or justify, or differentiate between avoidance and evasion. It is the gaol for the unemployed man every time, and if we had the same morality for the other side as for this side, the same morality for the wealthy as for the unemployed, there is a whole lot of hon. Members who would probably be looking through the bars at this time. I want to make my strong protest against the exhibition that we are getting from the other side in the insistent demand for armaments and the desire to put the responsibility for paying for them on to other people who do not want them.

10.35 p.m.


There seems to be on the other side a great misunderstanding between evasion and avoidance. In my opinion, and in the opinion of many Members on this side of the House, the most damaging exhibition of avoidance of Income Tax that the country has seen was by an institution closely associated with the Members on the opposite side. For years there has been an avoidance of Income Tax by the Co-operative Society. Every method of political blackmail, of the use of their funds to intimidate the Government in power, and of reducing the effectiveness of the whole area of Income Tax has been chosen by this society. The result is that industry is paying more than it should because of the greatest example of avoidance and evasion the country has seen.

10.36 p.m.


As the youngest grandfather in the House I should like to say two or three words. I have always thought that the old virtues of thrift, of looking after one's family and of preparing for the future were admirable. They used to be so in past times, and many of us, like myself, not a rich man, not a manufacturer, not a solicitor, not even a trade union secretary, but a man without any regular work and who has earned his living by the sweat of his brow and educated his children by the sweat of his brow, still believe in them. I put it to hon. Gentlemen opposite that if they have not worked in my job they do not know what work is. People like myself are quite happy to educate the children of others, as we do through the Income Tax, as long as we are allowed to make what little arrangements we may for the future of our own children. I am not in the least ashamed that I have made on a small scale one of the numerous arrangements that are being discussed to-night. There has been too much heat generated on both sides about it. I agree, as the Chancellor has explained to us, that the system starts well, and although it was abused by people, it fundamentally started from a good instinct. I have four children and a grandchild. Two of the children I have educated under this system to the best of my ability, and it costs about £40 a year for each child. It is true to say that parents who are taking advantage of these arrangements are doing some special thing for their children which they could not afford to do otherwise.

As I educate the children of others through the Income Tax, I see no reason why I should not do what I can for my own children in this sort of way. At the same time, I am not opposing the Chancellor's proposals. The only practical thing I have to suggest is that as there are numerous variations of this arrangement, some of which are admirable and some of which are undesirable, a very simple solution of the problem would be for every question to be decided as a question of fact in the individual case by the Income Tax inspectors, as is done in other matters. It would be impossible to lay down a general rule, but it should be quite simple to propose a form of words under which the local inspectors and collectors could decide whether the arrangement in each case was a bone fide and desirable one or not.

10.41 p.m.


The hon. Member for Oxford University (Mr. Alan Herbert) spoke about the virtues of thrift. Some time ago a question was put in this House about some young men in the coal fields who are keeping their fathers and mothers out of their income and who had had Income Tax claims forwarded to them. When we asked the Chancellor that these young men should have a rebate of the amount they were giving to their parents the answer was, "No," that that they had got to pay Income Tax on the amount they were giving towards keeping the home going. I see the hon. Member for Huddersfield (Mr. Mabane) shaking his head. He knows "nowt" about it.


If the hon. Member had taken the trouble he could have found out that there is a perfectly proper way of securing to any person in that position a return of the Income Tax he has paid.


We do not all know these round-the-corner methods of getting at it. Those cases came from my own division. There were half-a-dozen lads who were earning sufficient as single men to be called upon to pay Income Tax. They referred the matter to me to ask about it. They were told clearly that although they were keeping the home they must also pay Income Tax. They were staying at home in order to help their people. I ask that the Chancellor should give as much sympathy to men in that position as he is going to give to the hon. Members behind him, and if he gives that sympathy we shall begin to feel that he is not considering his own side all the time.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Fifteenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

10.44 p.m.


In his Budget speech the Chancellor of the Exchequer made a reference to this proposal, but I should like him to carry his explanation a little further. He told us that this Resolution was to assimilate the provisions under taxation with those under the rating system. I should like to know why he thought it necessary to ask for this change. I understand that the decision of the Courts was in effect to extend the taxation somewhat beyond the rating of machinery, but I am not able to fathom why the Chancellor proposes to detract from the Revenue by giving this rebate. There is no doubt a perfectly simple explanation, and I rise only for the purpose of asking him to give it to us.

10.46 p.m.


This is a very complicated and technical Resolution, and I am possibly not the only Member who does not appreciate its exact effect. The Resolution provides that no account should be taken of the value of non-rateable machinery in ascertaining the annual value referred to in Schedule A. Anxiety is felt as to whether manufacturers will lose the benefit of their Schedule D computation in the statutory allowance of repairs, which was previously granted in respect of some part of the rateable machinery. I should be glad if the right hon. Gentleman would answer the question. It would be bad for industry if the Treasury reversed the policy which they have operated, of giving more generous allowances for wear and tear.

10.47 p.m.


I am not clear about what is meant by this provision. I think the main object is to bring the assessment of machinery under Schedule D more or less into line with the valuation for rating, but according to paragraph (2) certain machinery will be rateable. Is machinery let for rent to be taken into account in the Income Tax and Property Tax of the person who owns and lets the machinery? There seems a contradiction between paragraphs (1) and (2). Apparently if two people are involved in one case, the owner of the machinery and the renter of it, more tax will be collected than if the machinery were in the ownership of the person who uses it. That is how I read the Resolution.

10.49 p.m.


As was said by the hon. Member for Reigate (Mr. Touche), this is a technical matter. It is a matter of computing the annual value under Schedule A. The necessity for the Resolution arises out of a decision of the courts. There is no express provision in the Income Tax Acts for saying how this valuation is to be made, and we have proceeded in the last five years on the principle that the valuation should be in accord with the principles which are followed in rating for the purpose. The decision of the courts provides that certain machinery, which is not taken into account in rating, is to be taken into account in computing the annual value for Schedule A. If that remains the law, the first effect, of course, is that Schedule A is increased and the tax payable under Schedule A. But as the hon. Member is aware, in the following year when Income Tax for Schedule D is under assessment, there is a deduction from Schedule D for Schedule A.

The difficulty arises in this way: There is a special arrangement under which mills and factories in regard to machinery are allowed to deduct under Schedule D the gross allowance under Schedule A. If the allowance is on the value of the machinery as well as on the value of buildings, the hon. Member will see that the taxpayer would really get a double allowance. Under this provision the owner of the mills and factories gets the special allowance for his buildings. All that he does not get is the extra allowance which he would get if the decision of the courts were allowed to remain. The point of the hon. Member for Chesterfield (Mr. Benson) is a rather different point. This paragraph (2) is necessary to secure that the Exchequer does not lose tax which at present it gets in respect of non-rateable machinery.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Sixteenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

10.53 p.m.


I hope that the Chancellor of the Exchequer will give us some explanation of this matter. I tried to follow it out by looking up the Act of 1932, and I found that for some reason or other valuations for Schedules A and B are excluded from the main Act and a special valuation which is set forth in the Schedule is included. One other point which I would like to inquire into is this: It seems to be rather odd that as the product of A and B is a portion of the reserve taxes, the valuation on which those reserve taxes are based should be fixed by a Northern Ireland Act rather than by an Act emanating from this House. Apparently the present position is that our power of taxing Northern Ireland, in so far as reserve taxes are concerned, is not complete. Although we are able to impose a rate of tax so far as Schedule A and B are concerned, the valuation on which that tax is based arises out of a Northern Ireland Act. I made a slip earlier when I said that Schedules A and B were excluded from the main body of the Act; it is the agricultural hereditaments that have to be valued separately. I should be glad of an explanation as to why agriculture is separated from the normal Schedule A hereditaments, and why taxation by this House is to that extent limited by the fact that the tax arises out of a valuation which is not under the control of this House.

10.56 p.m.


This is, as the lion. Member has said, a curious position. It has arisen on account of the passing of an Act in Northern Ireland which brought in a general valuation. In Northern Ireland both Schedule A and Schedule B assessments were governed by the poor rate valuation instead of being separately ascertained as in Great Britain. That was the result of previous Statutes. But although that has been the case there has been no general valuation for rating purposes in Belfast since 1906, and there has not been one in other parts of Northern Ireland since the middle of the last century. In 1932 a Valuation (Amendment) Act for Northern Ireland was brought in, and that Act brought into being for the first time certain values for rating purposes. Those values came into force for the first time on the 1st April of the present year, and under the existing law those new values will have to be adopted for Income Tax in 1936–37 and subsequent years. The valuation itself does not give any cause for legislation in the Finance Bill, but certain minor alterations in rating law were made in the Northern Ireland Valuation Act which caused certain difficulties, and steps are being taken to deal with those difficulties in this year's Finance Bill with regard to the Income Tax Schedules A and B.

It is proposed to make provision for dealing with two points in particular. The first is the apportionment of the annual value of certain properties which are valued as a single unit for rating, but have to be treated as two or more units for Income Tax purposes. Cases of this kind arise occasionally. The second point is the maintenance of the existing Income Tax charges as respects certain properties now relieved from rates. These are the main objects of the Resolution. It does not create any difference in the Northern Ireland liability to Income Tax, but is purely a result of certain ancillary provisions in the Valuation Act passed in 1932, which came into force on the 1st April of the present year and which will modify the provisions as to valuation hitherto in force.


How far is the power of this House to tax limited by the present constitutional position? Have we any control over the values fixed upon which we are taxed?


That is not the position. This is not perhaps a convenient opportunity to enter into the rather complicated financial conditions with regard to rating which exist in Northern Ireland, but the valuations are done locally, and the point of the Resolution is that they will be done under the new Act which has recently been passed. It is in order to make that square with our practice that we are introducing these new provisions.

11.0 p.m.


I only rise to protest against the assumption underlying the hon. Member's speech. Whether the value of a property is ascertained by a valuer in Northern Ireland or by an English valuer the result is the same. The hon. Member's remarks were a slur on Northern Ireland.


I cast no slur on Northern Ireland. I only say it is an extraordinary state of affairs when taxation rests upon something over which this House has no control.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Seventeenth Resolution read a Second time.

Motion made, and Question proposed, That this House doth agree with the Committee in the said Resolution.


I beg to move, "That the Debate be now adjourned."

The House has made very good progress.

Question put, and agreed to.

Debate to be resumed To-morrow.

Eighteenth and Nineteenth Resolutions to be considered To-morrow.