HC Deb 20 December 1937 vol 330 cc1720-4

Question proposed, "That the Clause stand part of the Bill."

10.4 p.m.

Sir S. Cripps

I want to ask the Minister who will be dealing with this matter whether the Commission are going to be liable for Income Tax on the whole of the sums they receive by way of royalties. If they are, it will make a very large hole indeed in their receipts. If on the whole of the£4,500,000 that they receive they are going to be liable for Income Tax, without balanacing against it any outgoings—because they will not be making any profits—it is going to make a very serious reduction indeed in favour of the Exchequer before there is any possibility of a surplus arising, and it seems to us that these words shall be deemed to exempt the Commission from liability for any tax, duty, rate, royalties, welfare levy, or other charge whatsoever, whether general or local, may mean that every royalty payment will be liable to Income Tax, Property Tax, or whatever it may be, and that as a result there will be a very large reduction of the amount which is available. If the Commission are in fact going to purchase by the amortisation of their loan the whole of the royalties for the benefit of the country, that is to say, if the miners through the Commission are going to pay the coal royalties, it seems monstrous that they should be taxed for Income Tax purposes and so increase the already long period of time which it will take to build up a reserve with respect to those royalties. I cannot imagine that it is intended that that will take place, but it seems to be so from the use of these words.

10.6 p.m.

Mr. Stanley

As I understand it, this Clause, which is declaratory, does make the Commission liable for all taxes, including Income Tax. What, of course, it does not make them liable for, and what many of the royalty owners are liable for in their private capacity, is Surtax, but I think there is nothing wrong here. The State otherwise would lose a very large sum of money from the transfer, and although I know the hon. and learned Gentleman thinks the Exchequer should be responsible for this, we, on the other hand, take the view that this should be assumed by the industry and that the profits as they accrue should be devoted to that industry. If you accept that principle, as we do, it seems to me that there is no justification for imposing on the Exchequer the loss of a very large sum of money by the exemption of the Commission from one particular tax while it remains liable for such taxes as Mineral Rights Duty and so on.

10.8 p.m.

Mr. Jenkins

Can the right hon. Gentleman indicate the amount of tax, exclusive of the tax that has been raised from the industry and which he proposes to continue to impose on the industry? My impression, rightly or wrongly, is that State property is exempted from taxation at this time. I do not know whether the right hon. Gentleman contends that this is not State property and that it is not to have the benefits of State property in respect of taxation. The case that comes to my mind is the Carlisle licensing scheme, which I think is exempt from rates and taxes. It strikes me that there is a provision here that the mining industry shall continue to bear the taxation arising from royalties, when we were told that it was going to be a State unification of mining royalties, and some hon. Members on the other side have said that this is the ownership of royalties. As far as I understand now, the industry is to continue to bear the whole taxation and even Super-tax, that it has been bearing when the royalties were privately owned.

10.9 p.m.

Sir S. Cripps

Can the right hon. Gentleman tell me upon what basis the purchase price was fixed? Was it 15 years' purchase of the net receipts of the royalty owners, that is to say, after the deduction of taxation, or was it the gross receipts before deduction of taxation? The basis of 15 years' purchase was on the basis that the Commission were going to be taxed£4,000,000. We have all talked to-day on Clauses 20 and 21—and the hon. and gallant Gentleman the Minister for Mines himself was talking—about the£4,500,000 that was going to be received, the£2,750,000 or whatever it was interest, and the expenditure of the probable surplus, but if it is going to be a taxation of 5s. in the£, there will be£1,000,000 in Income Tax to come off this£4,500,000 before we start. That will reduce it to£3,500,000. Then you have£2,750,000 for interest, then your amortisation, and I begin to think that the hon. Member for North Leeds (Mr. Peake) was nearer the truth than he believed, because I do not think he or anyone else in the Committee at that stage ever thought of£1,000,000 being deducted for Income Tax before we started to deal with the net receipts of the Commission. It entirely alters the complete aspect of this Bill.

The figures so far given on the Second Reading and during the Committee stage have been given on the basis that the net receipts will be£4,500,000, roughly. It is 15 times that sum that amounts to the£66,000,000, and nobody, I imagine, thought that£1,000,000 of that would be taken by the Exchequer in the form of Income Tax, reducing the receipts to£3,500,000 and leaving this wretched Commission almost bankrupt before it starts. On that basis, because it has also got to pay all the other taxes, mineral duties and all the rest of them, it will have paid, not 15 years but 20 years' purchase for the net revenue they are to get, if that is the true state of the case. I beg that the right hon. Gentleman will at least examine the finance of this, because, I am sure inadvertently, that the Minister of Mines has completely misled the Committee in the course of these discussions. Time and again he has spoken about the surplus that would be available, when quite clearly, if this large sum is deducted for Income Tax, there will not be a surplus available at all.

10.12 p.m.

Mr. H. G. Williams

There is also the question of the National Defence Contribution, which is a temporary tax, as we presume, in respect to which no reference has so far been made. The hon. and learned Gentleman was, I understood, always in favour of nationalisation, but he seems to object to it at this stage and is really in favour of syndicalism. But that is not the point that I wish to raise. Under this scheme the revenue of the Commission will be approximately£4,500,000, on which they will pay Income Tax in the same way as existing royalty owners. Now the royalty owners will receive a sum of£66,000,000 in the form of stock, and it is estimated that that will represent an income of£2,500,000. I take it that the royalty owners will also pay Income Tax on that£2,500,000. The present position is that on the income from mining royalties Income Tax is levied on£4,500,000. When this scheme goes through. Income Tax in respect of those royalties in future is to be levied on£7,000,000. We have only got to conduct a sufficient number of transfers so that every penny counts 2d., and we can raise all the revenue we like in this ingenious way. The real income which arises is£4,500,000. Are we going to have assessments on£7,000,000? [Laughter.] This is not a joke, but a perfectly serious matter. We have one lot of people collecting£4,500,000, and of that they hand£2,500,000 on to the present owners of the property. The£4,500,000 is to be deemed to be income assessable to Income Tax in full. Is the£2,500,000 to be a charge against the£4,500,000? Therefore, is Income Tax to be assessed, not on£4,500,000, as the hon. and learned Gentleman estimates, but only on the difference of£2,000,000; and from that are there to be deducted the expenses of the Commission? If it is to be on£7,000,000, the Exchequer is committing a fraud on someone, I am not certain whom; because if you can run up your Estimates in an unlimited way that is a complete answer to every problem of every Chancellor of the Exchequer, until we are all incarcerated in lunatic asylums because we suddenly find that the money is not there.

10.16 p.m.

Mr. Stanley

I am sorry. I ought to have made it clear, in answering the hon. and learned Gentleman, that, although the Commissioners are not exempt from Income Tax, they will not be liable on the amount of the interest on the loan, but only on their net revenue. That is the answer to the hon. Gentleman when he speaks of a number of transactions running up the Estimates in an unlimited way. Because the amount of the interest on the loan is exempt, there will not be a double imposition of Income Tax on the Commission. That will also make it plain that the estimate of nearly£1,000,000 which the Commission will have to pay is excessive.