Commons Sitting of 15 July 1937

Preamble
The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.
Banbury Waterworks Bill [Lords],
Read the Third time, and passed, with Amendments.
Hertfordshire County Council (Colne Valley Sewerage, etc.) Bill [Lords] (King's Consent signified),
Bill read the Third time, and passed, with Amendments.
Bournemouth Corporation (Trolley Vehicles) Provisional Order Bill,
Second Reading deferred till Monday next.

ORAL ANSWERS TO QUESTIONS.
  UNEMPLOYMENT.

    EX-SERVICE MEN.
    Mr. Thorneasked the Minister of Labour how many ex-service men are registered as unemployed at all the exchanges, and how many disabled are registered as unemployed?
    The Minister of Labour (Mr. Ernest Brown): At 5th April, 1937, the latest date for which these statistics are available, the number of ex-service men on the registers of Employment Exchanges in Great Britain was 341,428, of whom 33,398 were in receipt of disability pensions.

    BENEFIT AND ALLOWANCES (NON-CLAIMANTS).
    Mr. Graham Whiteasked the Minister of Labour whether he will state, as on the last convenient date, the number of men, women and juveniles on the non-claimants register?
    Mr. E. Brown: At 21st June, 1937, there were 54,216 men, and 36,108 women, aged 18 years and over, 9,621
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    juveniles aged 16 and 17 and 25,636 under 16 years of age, on the registers of Employment Exchanges in Great Britain who had no application for benefit or unemployment allowances.

    ASSISTANCE.
    Mr. Whiteasked the Minister of Labour whether he can state, as on the last convenient date, the numbers of able-bodied unemployed who have sought allowances from the Unemployment Assistance Board and have been disallowed on the grounds that they are out of scope?
    Mr. E. Brown: As regards persons in receipt of public assistance prior to the Second Appointed Day who applied for unemployment assistance allowances before that day, the number who were held to be outside the scope of the Unemployment Assistance Act was approximately 44,250. As regards persons who applied after the Second Appointed Day, the number held to be out of scope each week is about 1,000. Information is not available to show how many of the persons in question were able-bodied and are now unemployed.
    Mr. Batey: Will the Minister take the necessary steps to remedy the defect in the 1934 Act, as we believed the Unemployment Assistance Board would take over all the able-bodied unemployed from the Poor Law?
    Mr. Brown: On that point I have been asked to receive a deputation of local authorities, and I have said I would be glad to do so.
    Mr. Thorne: Can the right hon. Gentleman say what day has been appointed to see the deputation?
    Mr. Brown: Not at the moment. I will let the hon. Member know.
    Mr. Whiteasked the Minister of Labour whether he is aware of the frequent delays occurring in the payment of allowances on the accustomed day at Employment Exchanges, on behalf of the Unemployment Assistance Board, in cases where the allowance is varied owing to a change in circumstances; and whether he will examine this difficulty with a view to its removal?
    Mr. Brown: I am aware that in some cases payment may be delayed owing to the late receipt of applications for allowances or information as to changes of circumstances which necessitate the reassessment of an applicant's needs. The desirability of avoiding undue delay is, however, fully recognised, and the existing procedure is at present under examination.
    Mr. A. Jenkinsasked the Minister of Labour the number of applicants for unemployment assistance in the Pontypool Employment Exchange area who have sustained reductions during the current year as a result of the unemployment assistance regulations as compared with the payments made under the standstill agreement?
    Mr. Brown: Figures relating to Employment Exchange areas are not available, but in the Unemployment Assistance Board's administrative area of Pontypool in the Newport District there were on 26th June, 213 persons receiving less than they would have received under the standstill arrangements, otherwise than on account of personal earnings of the applicant.
    Mr. Jenkins: Is it not possible to take out the figures for the Pontypool Employment Exchange area?
    Mr. Brown: I think it would be very difficult, because the two areas do not coincide, but I will have a look at it.
    Mr. Shinwellasked the Minister of Labour whether, in view of the reduced expenditure on unemployment assistance, he is now in a position to recommend an increase in the amounts paid?
    Mr. Brown: No, Sir; the reduction in expenditure is due to the improvement in the industrial situation and has no bearing upon the adequacy of the allowances paid to persons who still remain unemployed.
    Mr. Shinwell: As there has been reduced expenditure, ought not the recipients of unemployment assistance be entitled to share in the prosperity of which the Government are frequently boasting?
    Mr. Brown: That is very dangerous doctrine for the hon. Member to urge, because the converse might be urged in time of depression.
    Mr. Shinwell: What is the use of talking about prosperity when these people are living on a semi-starvation scale?
    Mr. Brown: There is little need to talk about prosperity. It is happening.
    Mr. R. J. Taylor: Is the right hon. Gentleman aware that, as more are coming into employment, the amount received by them means a deduction in the applicant's home?
    Mr. Brown: The hon. Member had better put a question down. He will find he will have to frame it in a very different way.
    Mr. Jenkins: Is the right hon. Gentleman aware that in the Special Areas we still have more than 25 per cent. of unemployment, and does he regard that as prosperity?
    Mr. Brown: The hon. Member, at least, has no reason to complain with regard to his area.
    Mr. Shinwellasked the Minister of Labour the average weekly reduction in relief payments by the Unemployment Assistance Board since the beginning of the present year?
    Mr. Brown: During the first 12 complete weeks of the present year to 27th March the weekly expenditure on unemployment allowances fell from £727,000 in the first week to £679,000 in the last week. The scope of unemployment assistance was extended on 1st April and the expenditure in the week ended 3rd April rose to £766,000, dropping during the next 12 weeks to £698,000 in the week ended 26th June.
    Mr. Malcolm MacMillanasked the Minister of Labour whether he has any statement to make regarding the harsh operation of the seasonal regulations relating to unemployment insurance in the Western Isles; what modifications he intends to make in the regulations to end this hardship; and when he intends to take action?
    Mr. Brown: I am not aware that these regulations operate harshly. The hon. Member sent me one case about which I hope to let him have a reply in a day or two. If he has other cases in mind, perhaps he will let me have particulars.
    Mr. MacMillan: Is the right hon. Gentleman not aware that he is the only person satisfied with these regulations?
    Mr. Brown: It was a Labour Government that passed the Act and I have amended it to the advantage of the seasonal worker.
    Mr. MacMillan: It is the right hon. Gentleman and his friends who are operating it.
    Mr. Brown: As a matter of fact the alterations that have been made as the result of the report of the Unemployment Insurance Statutory Committee have made it considerably easier for the seasonal workers concerned.
    Mr. Leonardasked the Minister of Labour the number of persons in receipt of statutory benefit in 1936 who applied to the Unemployment Assistance Board for supplementary allowances; the number of such claims so granted; and the reasons gaining for them the grants?
    Mr. Brown: I regret that this information is not available. Generally speaking, such allowances were not payable in 1936. I will, however, circulate a statement in the OFFICIAL REPORT explaining the present position, which, I hope, will give the hon. Member the information he needs.
    Mr. George Griffiths: Does the Minister say in his answer that in 1936 they were not entitled to these allowances? They have been given ever since that Act was put into operation, but they have blinded the people to make them believe that they could not get them.
    Mr. Brown: I think the hon. Member has put his supplementary question under a misapprehension. If he will read the answer he will see that I have said that such allowances were generally not payable in 1936.
    Following is the statement:
    Prior to 1st April, 1937, the Unemployment Assistance Board were not empowered to take into consideration applications for allowances from persons in receipt of statutory benefit under the General Scheme. Since that date the average number of applicants for such allowances on the register has been 3,208, and the average number who have received supplementation payments in addition to statutory benefit has been 2,100 per week. Allowances granted in respect of waiting days prior to the receipt of
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    statutory benefit have averaged 939 per week, the average weekly number of applications being 1,233. The number of separate individuals who have received these allowances since 1st April, is not known. As in the case of all allowances granted by the Board the need of the applicant is considered in relation to all the circumstances of his case.

    TEAM VALLEY TRADING ESTATE.
    Mr. W. Joseph Stewartasked the Minister of Labour the estimated cost of the scheme of development of the Team Valley Trading Estate; the number of acres enclosed; and when it is anticipated that the scheme will be completed?
    Mr. E. Brown: The total area of the trading estate is about 700 acres. The estimated cost of the first scheme of development is just over £1,400,000. The date of completion of this scheme, which covers only a part of the estate, will depend on the demand for factories.

    TRANSFERENCE.
    Mr. Dayasked the Minister of Labour the number of persons from the depressed areas who have found employment in London through the Employment Exchanges during the 12 months ended to the last convenient date; will he give comparable figures for the previous 12 months; how many of these persons have been found employment through the Borough (Walworth Road) Employment Exchange; and the number of effective grants that have been made to these persons for household removal to the London area?
    Mr. E. Brown: During the 12 months ended May, 1937, 5,295 persons from the depressed areas were placed by local offices of the Department in employment in London as compared with 4,509 during the 12 months ended May, 1936; of these 59 were placed by the Borough Employment Exchange during the 12 months ended May, 1937, and 51 during the 12 months ended May, 1936. These figures relate to adults. Comparable figures for boys and girls are not available. Actual figures of household removals into particular areas are not available, but it is estimated that during the two years ended May, 1937, approximately 4,000 families from the depressed areas were assisted to remove to the London division.
    Mr. Day: Is any provision made for housing these families before transfer takes place?
    Mr. Brown: The hon. Member knows that the Ministry of Labour makes many inquiries about the matter.
    Mr. T. Williams: How many of the transferred persons are still working in London?
    Mr. Brown: I will make inquiries if a question is put down.
    Mr. Day: Is the right hon. Gentleman satisfied with the manner in which transference is proceeding?
    Mr. Brown: I think it is an admirable piece of work.

    CANNING FACTORIES.
    Mr. James Griffithsasked the Minister of Labour whether he is aware that in the period 1932 to 1936 25 new factories were established in this country for the production of canned foodstuffs; that of these 19 are located in the southern and south-eastern areas of England; that most of the tinplate used at these factories is produced in South Wales yet not one factory was established in that area; and, in view of the fact that the tinplate is produced in South Wales and has to be transported for distances varying from 200 to 300 miles to the canning factories, whether he will consult with the Commissioner for the Special Areas to ascertain what steps can be taken to secure that any new factories built will be established in South Wales?
    Mr. E. Brown: I have already been in consultation with the Commissioner for Special Areas about the possibility of his assisting the establishment of canning factories in South Wales, but I feel bound to point out that apart from such considerations as the cost of transport it is often essential that the canning should take place near where the perishable goods are produced.
    Mr. Griffiths: In view of the prospect that this industry will continue to increase will the right hon. Gentleman have consultations to see whether it is possible to induce some of these new factories to come into the area?
    Mr. Brown: I have said I am having consultations with the Commissioner.
    Mr. Lawson: Is the right hon. Gentleman aware that the Special Commissioner reported six months ago that the planting of these factories in these areas had stopped?
    Mr. Brown: It is about those points that I am having consultation with him.

    ALIENS (EMPLOYMENT PERMITS).
    Sir John Mellorasked the Minister of Labour approximately the normal interval of time between an application for a permit for an alein immigrant to work in this country and the notification of the Ministry's decision.
    Mr. E. Brown: The interval of time which necessarily elapses between the receipt of an application for a permit and the notification of the decision depends on the nature and extent of the enquiries which are found to be necessary. Owing to the diversity of occupations in respect of which permits are applied for and of the circumstances in which such applications are made it is impossible to define any interval as "normal." I can assure my hon. Friend that there are no avoidable delays, having regard to the volume of the work and the investigations which, in most cases, are necessary.

    INTERNATIONAL LABOUR CONVENTIONS.
    Mr. James Hallasked the Minister of Labour when the last statement as to the proposed action by His Majesty's Government regarding the draft conventions and recommendations adopted by the International Labour Conference was published; what draft conventions and recommendations have been adopted since; whether there are any other draft conventions and recommendations in respect to which no statement on the proposed action has yet been published; and whether he intends to arrange for the publication of a White Paper outlining the action proposed in relation to these draft conventions and recommendations at an early date?
    Mr. E. Brown: The last statement in the form of a White Paper setting out the proposed action by His Majesty's Government regarding the draft conventions and recommendations adopted by

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    the International Labour Conference was published in April, 1936 (Cmd. 5141). I am circulating in the OFFICIAL REPORT a list of the conventions and recommendations adopted since that date, and I will consider whether the issue of a White Paper is desirable.
    Mr. Hall: Is not the right hon. Gentleman aware that there have been six circulars issued since the issue of the last White Paper and 20 conventions and recommendations have been adopted? Is not a report overdue?
    Mr. Brown: All these reports are available in the Library. What is necessary is to bring them up to date. I am considering whether the whole information would be advantageous to the House in the form of a White Paper.
    Following is the list:—
    Draft Conventions and Recommendations of the International Labour Conference adopted since April, 1936.
    Draft Convention (No. 50) concerning the regulation of certain special systems of recruiting workers;
    Recommendation (No. 46) concerning the progressive elimination of recruiting;
    Draft Convention (No. 51) concerning the reduction of hours of work on public works;
    Draft Convention (No. 52) concerning annual holidays with pay;
    Recommendation (No. 47) concerning annual holidays with pay;
    Recommendation (No. 48) concerning the promotion of seamen's welfare in ports;
    Draft Convention (No. 53) concerning the minimum requirements of professional capacity for masters and officers on board merchant ships;
    Draft Convention (No. 54) concerning annual holidays with pay for seamen;
    Draft Convention (No. 55) concerning the liability of the shipowner in case of sickness, injury or death of seamen;
    Draft Convention (No. 56) concerning sickness insurance for seamen;
    Draft Convention (No. 57) concerning hours of work on board ship and manning;
    Draft Convention (No. 49) concerning hours of work on board ship and manning;
    Draft Convention (No. 58) fixing the minimum age for the admission of children to employment at sea (revised 1935).
    In addition, the following draft conventions and recommendations were adopted by the Conference last month, but the authentic texts have not yet been circulated to Governments by the International Labour Office:—
    Recommendation on International Co-operation in respect of public works;
    Recommendation on the national planning of public works;
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    Draft Convention fixing the minimum age for admission of children to industrial employment (revised 1937);
    Draft Convention concerning the age for admission of children to non-industrial employment (revised 1937);
    Recommendation concerning the minimum age for admission of children to industrial employment in family undertakings;
    Draft Convention concerning the reduction of hours of work in the textile industry;
    Draft Convention concerning safety provisions in the building industry;
    Recommendation concerning safety provisions in the building industry;
    Recommendation concerning co-operation in accident prevention in the building industry;
    Recommendation concerning vocational education in the building industry.

    FASCIST DEMONSTRATION, TRAFALGAR SQUARE.
    Mr. Gallacherasked the Secretary of State for the Home Department how many policemen were engaged on Sunday, 4th July, clearing a route and clearing Trafalgar Square to allow the Fascists to make a demonstration; and what was the approximate cost of the police mobilisation?
    The Secretary of State for the Home Department (Sir Samuel Hoare): I am informed by the Commissioner of Police of the Metropolis that the total number of police employed in connection with the demonstration was 2,383. The approximate expenditure incurred is not expected to exceed £150, this expenditure being in respect of travelling expenses.
    Mr. Gallacher: Is the Minister aware that these provocative demonstrations would not take place if the police did not provide the necessary protection for them; and will he withdraw the police and so put an end to these provocative demonstrations?
    Sir S. Hoare: The provocation, unfortunately, comes from both sides.
    Mr. Gallacher: No.
    Sir S. Hoare: If the hon. Member will restrain his followers, no doubt this kind of protection may not always be necessary.
    Mr. Gallacher: Is he not aware that they showed very much restraint on that occasion, and that the masses of the workers generally would not tolerate the provocative demonstrations but for the fact that the police are there to encourage them?
    Mr. Gallacherasked the Home Secretary whether he is aware that the route covered by the Fascists in their march to Trafalgar Square was prohibited to the unemployed marchers; that the unemployed marchers were informed that no procession would be allowed to follow this route; and can he explain the reason for this privilege being granted to the Fascists?
    Sir S. Hoare: I presume the hon. Member refers to a meeting of the unemployed held in Trafalgar Square on 15th November last which was attended by contingents marching from different parts of London. As regards the contingent from Mornington Crescent, I am informed by the Commissioner of Police that the route followed was the same as that used by the Fascists on 4th July as far as the junction of Hampstead Road and George Street. The Commissioner would have directed the Fascists to follow the same route as the unemployed marchers from that point also, but this course was not possible since Gower Street is under repair and a procession along it would have caused considerable inconvenience. I am satisfied that there has been no discrimination in favour of the Fascists.
    Mr. Gallacher: Is the right hon. Gentleman aware that when the unemployed

    COAL MINERS.

    Applications to the Silicosis Medical Board in the six months ended 30th June, 1937, for certificates under the Various Industries (Silicosis) Schemes.

    —

    Number of applications received.

    Number granted.

    Number refused or negative,

    Number awaiting decision.

    Death

    48

    32

    14

    2

    Disablement or suspension

    327

    130

    162

    35

    Separate particulars for anthracite miners for same period.

    Death

    23

    14

    7

    2

    Disablement

    114

    56

    45

    13

    DRUNKENNESS CHARGES (MEDICAL EXAMINATIONS).
    Sir J. Mellorasked the Home Secretary whether all police forces have instructions that any prisoner in custody on a charge involving drunkenness is to be informed of his right to examination by a doctor selected by himself; and whether they are further instructed as to
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    approached the Police Commissioner and asked to be allowed to follow the route which was followed by the Fascists, he said that in no circumstances—and it was quite definite—no procession would be allowed to go along that route?
    Sir S. Hoare: No, Sir, I am informed that Scotland Yard cannot trace any record of an application of the unemployed marchers for any special route on 15th November, 1936.

    SILICOSIS.
    Mr. J. Griffithsasked the Home Secretary the number of applications received by the Silicosis Medical Board from coal miners for certificates of disablement under the Various Industries (Silicosis) Schemes, 1928–34, in the six months ended 30th June, 1937; the number of applications received in the same period for certificates that death was caused by silicosis; how many of the applications were granted and how many refused; and separate particulars for the anthracite coalfield of South Wales?
    Sir S. Hoare: As the reply involves a number of figures, I will, with the hon. Member's permission, circulate a statement in the OFFICIAL REPORT.
    Following is the statement:
    the time at which such information should be given?
    Sir S. Hoare: As my hon. Friend will appreciate, cases not infrequently occur in which a prisoner in custody on a charge involving drunkenness is incapable of expressing any wishes in the matter, and some such prisoners are obviously not in a position to pay a doctor's fee. In

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    such cases it would clearly be superfluous to offer to call a doctor of the prisoner's choice, but, as I have already stated, any prisoner who expressed a wish to call in a doctor would be given all facilities to do so.
    Sir J. Mellor: Will my right hon. Friend give instructions that any prisoners who are capable of taking advantage of it, should be informed of their right to call an independent doctor, and that that information should be given to them at the earliest possible moment?
    Viscountess Astor: Is not that rather a dangerous precedent, and does not the Minister think that some persons have pet doctors, and that pet doctors are apt to say what their patients want them to say?
    Mr. Logan: Is it possible, in the case of a person who is drunk and is taken to the police station, for him to ask his local Member of Parliament to come down?
    An Hon. Member: The doors would be closed.
    Mr. Logan: He ought to be locked up, I know.

    ELECTORAL LAW.
    Mr. Dayasked the Home Secretary whether, in view of the distance certain electors have to walk to register their votes in some districts, he will consider revising the electoral law so that in cases where old and infirm electors reside a distance of two miles or more from a polling station conveyances may be provided at State expense in order to enable them to travel to register their votes?
    Sir S. Hoare: No, Sir.
    Mr. Day: Will the right hon. Gentleman introduce legislation so that a more satisfactory way may be provided of conveying persons to register their votes?
    Captain Sir William Brass: Will it not be possible for the hon. Member to use his Rolls Royce car for this purpose?

    METROPOLITAN POLICE (DISCIPLINARY BOARDS).
    Mr. Dayasked the Home Secretary the number of police officers who
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    have appeared before the Metropolitan Disciplinary Board during the 12 months ended to the last convenient date; the number of such officers who have appealed to him on the decision of the board, and with what results; whether any of these officers were represented before the board, and whether any shorthand record was taken of the proceedings; and whether these officers before their appearance are made acquainted with the evidence it is intended to submit to the board?
    Sir S. Hoare: During the year ended 30th ultimo, 33 members of the Metropolitan Police Force appeared before disciplinary boards. Of these 10 were dismissed or required to resign but none of them appealed to me or to my predecessor. Fifteen of them had assistance in presenting their case before the board. A shorthand record of the proceedings was taken in every case. Any police officer charged with an offence against discipline is afforded access to all reports and statements relating to the charge and may take copies of them if he wishes.
    Mr. Day: Is the Secretary of State considering reviewing the submission of evidence or the calling of witnesses on behalf of these men?
    Sir S. Hoare: No, Sir. From the information I have got, I do not think that any further action is needed.

    WHIST DRIVES.
    Sir Cooper Rawsonasked the Home Secretary whether any discrimination is shown in police prosecutions in respect of whist drives between those run for personal profit and the normal drives organised by various clubs and associations; and will he make some clear pronouncement on the subject to allay the existing disquiet?
    Sir S. Hoare: There have been a number of judicial decisions to the effect that whist drives held under certain conditions are unlawful. It has, however, always been recognised that, as ordinarily conducted, whist drives are an innocent form of amusement and free from the element of mischief which accompanies gambling. Accordingly, while the Home Secretary has no authority to give instructions to the police on a matter relating to the enforcement of the law, chief

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    constables have been advised by the Home Office to the effect that, in the view of the Secretary of State, the police should not institute proceedings except where there is reason to believe that a whist drive is a cloak for gambling or for profit-making out of gambling, that the police should limit their interference to cases where they have reason to think that actual harm is being done, and that whist drives held as a purely incidental part of their various social activities by members of bona fide clubs or institutions would not usually come within the mischiefs aimed at by the law. I have no doubt that the police generally are guided by this advice.
    Sir C. Rawson: Will the right hon. Gentleman state whether the decision to prosecute rests entirely with him, or with the local watch committee or the police?
    Sir S. Hoare: Certainly, with the local authorities.
    Sir C. Rawson: Does the right hon. Gentleman consider that an ordinary whist drive for some club or organisation should come within the definition that he has mentioned?
    Sir S. Hoare: I think I have given a very full answer which covers the question.
    Mr. Thorne: Does the right hon. Gentleman think that a game of draughts or chess in this House for a cigar would come within the definition of gambling?
    Sir S. Hoare: I would rather not go beyond the answer I have given.

    APPROVED SCHOOL CASE (LANCASHIRE).
    Mr. Rowsonasked the Home Secretary whether he can state the reason why James Evans, whose home is at 51, Southern Street, off Worsley Road, Farnworth, Lancashire, has not been allowed to return home, seeing that he was sentenced to three years at an approved school on the 27th June, 1934, and the three years have now expired; why this boy was only at the school for 20 months, and for the last 17 months has been hired out to a farmer who has not paid him any wages, and has only allowed him 2S. per week as pocket money; and is he aware that this boy's crime was stealing three bananas and it was his first offence?
    Sir S. Hoare: This boy was ordered by a juvenile court to be sent to an approved school in June, 1934, having been found guilty of breaking and entering a store-room and stealing. It was his first offence. He was released on licence by the managers of the school in the exercise of their discretion in April, 1936; and in accordance with the provisions of the Children Act he remains under their supervision until June, 1940. The Managers were satisfied that it was in the boy's best interests to place him in employment with a local farmer. I am informed that the statement in the hon. Member's question in regard to the boy's wages is not correct.
    Mr. Rowson: Am I to understand that the authorities have the right to keep this boy for another three years?
    Sir S. Hoare: Yes, Sir. If the hon. Member is interested in the case and would like further details, I will gladly give them to him. I think that when he reads the details he will see that the decision is well justified.
    Mr. Paling: When boys are sent out to work on farms, are they paid the ordinary wage?
    Sir S. Hoare: That is another question. They are paid a wage.
    Mr. Logan: Has this boy been honest while he has been under this farmer at 2s. a week?
    Viscountess Astor: Is it not the case that it is the greatest kindness for people to take these boys?
    Mr. Rowson: Is the right hon. Gentleman aware that if this boy is kept away in this district as an agricultural labourer he will attain manhood on the very lowest wage in the country, whereas if he were allowed to come back before he is 18 years of age there would be the possibility of his getting a much more remunerative occupation in his own locality?
    Sir S. Hoare: I have looked into this case and I think the decision is a wise one. I should be glad if the hon. Member would look at the details, and I think he will see that the whole circumstances are such that the decision is the right one.
    Mr. Rawson: I accept the right hon. Gentleman's advice to consult him about the details, but I cannot allow the matter to rest where it is.

    MOTOR DRIVERS (PROSECUTIONS, LONDON).
    Sir W. Brassasked the Home Secretary how many summonses have been issued in the Metropolitan area against drivers for dangerous parking under Section 50 of the Traffic Act, 1930, during the year 1936, and how many during the same period for exceeding the statutory limit of 30 miles per hour?
    Sir S. Hoare: During 1936, the number of prosecutions in the Metropolitan Police District under Section 50 of the Road Traffic Act, 1930, was 70. In the same year, prosecutions for exceeding the speed limit in a built up area, in the case of motor vehicles not otherwise subject to restrictions on speed, was 45,833.
    Sir W. Brass: Having regard to the difference between these two figures, will my right hon. Friend consider impressing upon the police the importance of the provisions of the Road Traffic Act, 1930, and will he also consider whether the police might be armed with cameras in order to be able to give first-class evidence of this very dangerous practice?
    Sir S. Hoare: I always consider any points that my hon. Friend may make, but on my present information I do not think that any further action is necessary.

  EDUCATION.

    BENEFICIAL EMPLOYMENT.
    Mr. Edmund Harveyasked the Parliamentary Secretary to the Board of Education whether the Board will take steps to provide guidance to local education authorities as to the meaning of the beneficial employment for which exemption from school attendance may be granted when the school-leaving age is raised?
    The Parliamentary Secretary to the Board of Education (Mr. Kenneth Lindsay): Under Section 2 of the Education Act, 1936, the question of granting employment certificates for beneficial employment is to be considered by the local education authority in the light of the particular circumstances of each individual case, and the determination of the authority is to be final. The main considerations to be taken into account in each case are set out fully in the Act, and
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    I do not think it would be feasible or proper for the Board to issue to local education authorities any indication of the meaning of beneficial employment which would be of general application. A memorandum is in preparation by the Board for circulation to local education authorities indicating the procedure which is suggested as being usually appropriate for considering applications, but this memorandum does not, for the reasons I have given, attempt to give any definition of beneficial employment.
    Mr. Harvey: Has the Board considered the danger that will arise from a very different standard being adopted by various education authorities?
    Mr. Lindsay: I think attention is drawn to that specific point in the memorandum.
    Mr. H. G. Williams: Does the Minister not consider that it is probable that before the Act comes into operation they will all have had offers of beneficial employment?
    Viscountess Astor: Will the hon. Member point out in the circular to the juvenile employment committees the devastating effect which certain mechanical processes in factories is having on the brains and characters of children between 14 and 15 years of age?
    Mr. Lindsay: I think that point is covered by Section 2, and particularly by paragraph (d):
    "the value, in relation to the future career of the child, of any training or other advantages afforded by the employment."
    Sir Percy Harris: May we see a copy of that circular?

    SCHOOL CAMPS.
    Mr. Sorensenasked the Parliamentary Secretary to the Board of Education how many local authorities have made arrangements for school camps; and what is the total number of children who will spend a week or more in such camps during 1937?
    Mr. Lindsay: During 1936, the latest year for which complete figures are available, 35 local education authorities in England and Wales are known to the Board to have sent children to camp schools held during term time, and 40 local education authorities sent parties of children to camps held during the summer holidays. I have no information in

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    regard to the last part of the question. The Board's attitude is very sympathetic to such camps, and they, of course, pay grant on the expenditure of local education authorities upon approved schemes.
    Mr. Sorensen: Does the hon. Member not think that it would be valuable to find out exactly the total number of children who went last year and this year?
    Mr. Lindsay: I think it would, and I am trying.

    ECONOMICS AND GEOGRAPHY (INSPECTORS' QUALIFICATIONS).
    Mr. Sorensenasked the Parliamentary Secretary to the Board of Education how many of His Majesty's inspectors of secondary schools possess qualifications in economics and geography?
    Mr. Lindsay: Seven of His Majesty's inspectors of secondary schools possess qualifications in economics and three in geography. The services of qualified inspectors of elementary schools are also utilised for inspecting geography in secondary schools.
    Mr. Sorensen: Does the hon. Member not consider, seeing the growing importance of economics and geography in the secondary school, that there should be a larger number of inspectors with qualifications in these subjects?
    Mr. Lindsay: I understand there are sufficient to cover these subjects as they are already taught.
    Mr. Sorensen: Will the hon. Member make special inquiry?
    Mr. Lindsay: I have made inquiry. will look into it again.

    MILK (SCHOOL CHILDREN).
    Mr. Gordon Macdonaldasked the Parliamentary Secretary to the Board of Education, the number of elementary school children in receipt of free milk in Lancashire on the latest date for which figures are available?
    Mr. Lindsay: During the month of May, 1937, the number of children attending public elementary schools in the geographical county of Lancashire for whom free milk was provided by the local education authorities was 76,313.
    Mr. Macdonaldasked the Parliamentary Secretary to the Board of Education the total number of local education authorities that have decided to grant free milk to elementary school children during the holidays, giving separate figures for Lancashire; and will he take all the steps in the power of his Department to get this done in all cases?
    Mr. Lindsay: In the year which ended on 31st March, 1937, 50 local education authorities, including seven authorities in Lancashire, provided free milk for selected necessitous children attending public elementary schools during all or some of the school holidays. I am unable to say how many other authorities have decided to introduce such arrangements, but the London County Council have recently prepared a scheme, which has been approved by the Board of Education, under which milk will be provided during the coming summer holidays in five parks and recreation grounds. My right hon. Friend would welcome the extention of such arrangements, but it is not always easy to secure the attendance of children during the holidays, even when the milk is given free.
    Mr. Macdonald: Is the hon. Member aware that the withholding of this permission means hardship on many poor families?
    Mr. Lindsay: There is no withholding of permission, to my knowledge.
    Viscountess Astor: Will the hon. Member collaborate with the Minister of Health and try to get this milk delivered free not only during holidays?
    Mr. Lindsay: That is a separate question.
    Lieut.-Colonel Sir Thomas Mooreasked the Parliamentary Secretary to the Board of Education whether his attention has been called to the difficulties in various parts of the country in obtaining supplies of milk for schoolchildren at small schools; and whether, in view of the fact that in such cases the difficulties of supply leave no profit to the suppliers, he will consider whether some amendment of the scheme can be made so as to ensure that the children at these schools get adequate supplies of milk?
    Mr. Lindsay: Yes, Sir. As I said in the answer which I gave on 28th June to

    1467
    the hon. Member for Honiton (Mr. Drewe), difficulty is being experienced in obtaining supplies of milk in certain rural areas because the suppliers claim that the distribution allowance under the milk-in-schools scheme is insufficient. The future of this scheme is one of the questions which falls for consideration in connection with long-term milk policy, a matter to which the Government are giving close attention, and in this connection the difficulty to which my hon. Friend refers will not be overlooked.
    Sir T. Moore: Has the hon. Member any idea how to get over this matter for the moment while the long-term policy is being considered, in view of the fact that at the present time farmers are not able to deliver because of the low prices they get?
    Mr. Lindsay: I agree with the hon. and gallant Member about the difficulties of the question, but, as I have said, it is partly owing to the nature of the schools. We will see what can be done of a temporary nature, but it is not easy.

    HANDICRAFT TEACHERS.
    Mr. Harveyasked the Parliamentary Secretary to the Board of Education how many persons are engaged in full-time teaching of handicraft in secondary schools in England and Wales; and how many of these are graduates holding the City and Guilds of London Institute certificate in woodwork and metalwork?
    Mr. Lindsay: The number of persons engaged on 31st March, 1936, in full-time teaching of handicraft in grant-earning secondary schools in England and Wales was 304, of whom six were graduates holding the City and Guilds of London Institute Certificate in woodwork and metalwork.
    Mr. Harveyasked the Parliamentary Secretary to the Board of Education how many non-graduate teachers of handicraft in secondary schools in England and Wales hold the qualifications set out in the Board of Education's Administrative Memorandum No. 163, issued on 31st March, 1937, which entitle them to be placed on the graduate scale?
    Mr. Lindsay: So far as I have information there are at present no non-graduate teachers of handicraft in secondary schools in England and Wales who hold
    1468
    the qualifications prescribed in the recent amendment by the Burnham Committee, and communicated in the Board's Administrative Memorandum No. 163, as entitling such teachers to be placed on the graduate scale. I may add that arrangements are being made for further consultation with the Burnham Committee on the matter.
    Mr. Harvey: Has the Board of Education considered that the reason why there are no such teachers may be partly due to having no one-year course recognised by the Board for handicraft?
    Mr. Lindsay: I am inclined to agree with the hon. Member.

    PHYSICAL TRAINING, GERMANY.
    Mr. W. Joseph Stewartasked the Parliamentary Secretary to the Board of Education whether he will arrange for the issue as a command paper of the report of the Board's investigation of the methods and results of physical training in Germany?
    Mr. Lindsay: The issue of the report as a command paper would involve reprinting in a different form at considerable expense which I do not feel would be justified. I am, however, arranging for copies of the report to be available in the Vote Office for any Member who applies for one.

    OLD AGE PENSIONERS.
    Mr. Gallacherasked the Minister of Health what complaints he has received from old age pensioners or from others who find difficulty in obtaining an adequate supply of the necessities of life against the 1d. rate being charged for Coronation celebrations; and whether he will take steps to see that they are relieved from this added burden?
    The Minister of Health (Sir Kingsley Wood): I have received one such complaint. I have no power to relieve any ratepayer from his liability. The reduction or remission of rate payments on account of poverty is a matter for the rating authority or in certain circumstances the local justices.
    Mr. Gallacher: Is the right hon. Gentleman not aware that owing to the rising cost of living it is difficult for old age pensioners to get the ordinary necessities

    1469
    of life, let alone luxuries such as decorations, and will he not recommend to local authorities that they should be relieved of this rate and also recommend the Government to increase old age pensions?
    Sir K. Wood: The one case was a case from Crayford of an old age pensioner, and I am informed that in connection with the Coronation special arrangements were made for the old age pensioners and those who could not attend received 2s. 6d. as a gift. In this particular case I observe that the old age pensioner has sufficient funds to issue a leaflet denouncing the work of the Labour party in the area.
    Mr. Gallacher: May I ask whether it is in order for the Minister of Health, when I am dealing with old age pensioners generally, to produce some peculiar old age pensioner?
    Mr. Tinkerasked the Minister of Health whether he will have the returns made to his Department of old age pensioners who are in receipt of payments from Poor Law relief tabulated so that they will show the amount paid and the number of cases dealt with by each separate Poor Law authority?
    Sir K. Wood: Returns are made by public assistance authorities which show the number of old age pensioners in receipt of poor relief on 1st January in each year. I will circulate in the OFFICIAL REPORT a statement showing the numbers for each authority on 1st January last. A special return would be required to show the expenditure on out-relief to such persons, and I do not think that I should be justified in asking the authorities for such a return.
    Following is the information:

    STATEMENT showing for each County and County Borough in England and Wales, the number of old age pensioners who were in receipt of poor relief on 1st January, 1937.

    Counties—

    Bedford

    …

    …

    …

    …

    508

    Berks

    …

    …

    …

    …

    812

    Buckingham

    …

    …

    …

    975

    Cambridge

    …

    …

    …

    …

    498

    Chester

    …

    …

    …

    …

    2,585

    Cornwall

    …

    …

    …

    …

    1,069

    Cumberland

    …

    …

    …

    …

    1,437

    Derby

    …

    …

    …

    …

    2,737

    Devon

    …

    …

    …

    …

    1,583

    Dorset

    …

    …

    …

    …

    1,239

    Durham

    …

    …

    …

    …

    8,398

    Ely, Isle of

    …

    …

    …

    396

    Essex

    …

    …

    …

    …

    5,014

    Gloucester

    …

    …

    …

    …

    1,442

    1470

    Counties—cont.

    Hereford

    …

    …

    …

    …

    424

    Hertford

    …

    …

    …

    …

    1,381

    Huntingdon

    …

    …

    …

    223

    Kent

    …

    …

    …

    …

    4,488

    Lancaster

    …

    …

    …

    …

    8,292

    Leicester

    …

    …

    …

    …

    825

    Lincoln—

    Parts of Holland

    …

    …

    375

    Parts of Kesteven

    …

    …

    427

    Parts of Lindsey

    …

    …

    1,191

    London

    …

    …

    …

    …

    27,398

    Middlesex

    …

    …

    …

    …

    5,644

    Norfolk

    …

    …

    …

    …

    1,545

    Northampton

    …

    …

    …

    753

    Northumberland

    …

    …

    …

    1,860

    Nottingham

    …

    …

    …

    2,183

    Oxford

    …

    …

    …

    …

    675

    Peterborough, Soke of

    …

    …

    252

    Rutland

    …

    …

    …

    …

    64

    Salop

    …

    …

    …

    …

    910

    Somerset

    …

    …

    …

    …

    1,588

    Southampton

    …

    …

    …

    1,192

    Stafford

    …

    …

    …

    …

    1,993

    Suffolk, East

    …

    …

    …

    602

    Suffolk, West

    …

    …

    …

    469

    Surrey

    …

    …

    …

    …

    1,950

    Sussex, East

    …

    …

    …

    857

    Sussex, West

    …

    …

    …

    654

    Warwick

    …

    …

    …

    …

    1,008

    Westmorland

    …

    …

    …

    125

    Wight, Isle of

    …

    …

    …

    347

    Wilts.

    …

    …

    …

    …

    1,002

    Worcester

    …

    …

    …

    …

    1,072

    York—

    East Riding

    …

    …

    …

    764

    North Riding

    …

    …

    …

    1,250

    West Riding

    …

    …

    …

    8,523

    Wales—

    Anglesey

    …

    …

    …

    …

    376

    Brecknock

    …

    …

    …

    …

    427

    Caernarvon

    …

    …

    …

    …

    670

    Cardigan

    …

    …

    …

    …

    158

    Carmarthen

    …

    …

    …

    833

    Denbigh

    …

    …

    …

    …

    971

    Flint

    …

    …

    …

    …

    723

    Glamorgan

    …

    …

    …

    …

    8,724

    Merioneth

    …

    …

    …

    …

    196

    Monmouth

    …

    …

    …

    …

    3,590

    Montgomery

    …

    …

    …

    283

    Pembroke

    …

    …

    …

    …

    440

    Radnor

    …

    …

    …

    …

    94

    County Boroughs—

    Barnsley

    …

    …

    …

    …

    692

    Barrow-in-Furness

    …

    …

    535

    Bath

    …

    …

    …

    …

    308

    Birkenhead

    …

    …

    …

    1,063

    Birmingham

    …

    …

    …

    4,337

    Blackburn

    …

    …

    …

    …

    803

    Blackpool

    …

    …

    …

    …

    268

    Bolton

    …

    …

    …

    …

    883

    Bootle

    …

    …

    …

    …

    582

    Bournemouth

    …

    …

    …

    454

    Bradford

    …

    …

    …

    …

    1,719

    Brighton

    …

    …

    …

    …

    760

    Bristol

    …

    …

    …

    …

    1,961

    Burnley

    …

    …

    …

    …

    734

    Burton-upon-Trent

    …

    …

    165

    Bury

    …

    …

    …

    …

    321

    Canterbury

    …

    …

    …

    …

    101

    Carlisle

    …

    …

    …

    …

    141

    Chester

    …

    …

    …

    …

    186

    Coventry

    …

    …

    …

    …

    482

    Croydon

    …

    …

    …

    …

    822

    Darlington

    …

    …

    …

    …

    172

    1471

    County Boroughs—cont.

    Derby

    …

    …

    …

    …

    898

    Dewsbury

    …

    …

    …

    …

    291

    Doncaster

    …

    …

    …

    …

    351

    Dudley

    …

    …

    …

    …

    195

    Eastbourne

    …

    …

    …

    …

    276

    East Ham

    …

    …

    …

    …

    870

    Exeter

    …

    …

    …

    …

    211

    Gateshead

    …

    …

    …

    …

    1,094

    Gloucester

    …

    …

    …

    …

    100

    Great Yarmouth

    …

    …

    …

    291

    Grimsby

    …

    …

    …

    …

    842

    Halifax

    …

    …

    …

    …

    341

    Hastings

    …

    …

    …

    …

    308

    Huddersfield

    …

    …

    …

    448

    Ipswich

    …

    …

    …

    …

    606

    Kingston-upon-Hull

    …

    …

    2,984

    Leeds

    …

    …

    …

    …

    3,104

    Leicester

    …

    …

    …

    …

    1,375

    Lincoln

    …

    …

    …

    …

    1,181

    Liverpool

    …

    …

    …

    …

    7,169

    Manchester

    …

    …

    …

    …

    5,891

    Middlesbrough

    …

    …

    …

    811

    Newcastle-upon-Tyne

    …

    …

    2,240

    Northampton

    …

    …

    …

    625

    Norwich

    …

    …

    …

    …

    1,169

    Nottingham

    …

    …

    …

    …

    2,311

    Oldham

    …

    …

    …

    …

    1,155

    Oxford

    …

    …

    …

    …

    163

    Plymouth

    …

    …

    …

    …

    1,054

    Portsmouth

    …

    …

    …

    …

    1,101

    Preston

    …

    …

    …

    …

    470

    Reading

    …

    …

    …

    …

    433

    Rochdale

    …

    …

    …

    …

    453

    Rotherham

    …

    …

    …

    …

    859

    St. Helens

    …

    …

    …

    …

    659

    Salford

    …

    …

    …

    …

    1,128

    Sheffield

    …

    …

    …

    …

    4,480

    Smethwick

    …

    …

    …

    …

    405

    Southampton

    …

    …

    …

    1,244

    Southend-on-Sea

    …

    …

    …

    567

    Southport

    …

    …

    …

    …

    312

    South Shields

    …

    …

    …

    709

    Stockport

    …

    …

    …

    …

    696

    Stoke-on-Trent

    …

    …

    …

    1,511

    Sunderland

    …

    …

    …

    …

    2,155

    Tynemouth

    …

    …

    …

    …

    384

    Wakefield

    …

    …

    …

    …

    414

    Wallasey

    …

    …

    …

    …

    339

    Walsall

    …

    …

    …

    …

    575

    Warrington

    …

    …

    …

    …

    464

    West Bromwich

    …

    …

    …

    307

    West Ham

    …

    …

    …

    …

    2,595

    West Hartlepool

    …

    …

    …

    463

    Wigan

    …

    …

    …

    …

    666

    Wolverhampton

    …

    …

    …

    685

    Worcester

    …

    …

    …

    …

    184

    York

    …

    …

    …

    …

    544

    Wales—

    Cardiff

    …

    …

    …

    …

    2,566

    Merthyr Tydfil

    …

    …

    …

    1,446

    Newport (Mon.)

    …

    …

    …

    616

    Swansea

    …

    …

    …

    …

    1,094

    Total (All Counties and County Boroughs)

    …

    …

    …

    214,901

    Mr. Liddallasked the Minister of Health whether he can furnish an estimate of the number of wives of men in receipt of contributory pensions who have not reached the age of 65; and in what proportion of these cases is assistance
    1472
    being granted by the public assistance committees?
    Sir K. Wood: I would refer my hon. Friend to the reply which I gave on 17th June to a similar question asked by the hon. Member for Leigh (Mr. Tinker) of which I am sending him a copy.
    Miss Ward: Is the right hon. Gentleman aware that there are a large number of supporters of the Government behind this general idea, and that it would be a gracious tribute to his own supporters if he would find the information which is required?
    Mr. Shinwellasked the Financial Secretary to the Treasury the reason why the Government are unable to increase the amount paid to old age pensioners?
    The Financial Secretary to the Treasury (Lieut.-Colonel Colville): I would refer the hon. Member to my speech on the Motion for the Adjournment on 6th July.
    Mr. Shinwell: Does the right hon. and gallant Gentleman know that his speech provided no satisfactory answer; does he realise the serious hardships which are imposed upon recipients of old age pensions, and when are the Government going to take suitable action?
    Lieut.-Colonel Colville: The hon. Member will see from my speech the financial implications of the change which he proposes and I would ask him to bear in mind the fact that this Government is spending more in pensions than the Government of which he was a member.
    Mr. Shinwell: Does the right hon. and gallant Gentleman not realise that the comparative merits of different Governments have nothing to do with the question; and may I ask him further whether he will make representations to his right hon. Friend the Prime Minister asking him to implement the pledge which he 2,566 gave in his speech at the Albert Hall when he said he desired to secure the happiness of every person in the country?
    Lieut.-Colonel Colville: Again, if the hon. Member refers to the speech he will see from it that every pledge which was given in regard to social services is being amply fulfilled.
    Mr. Kirkwood: Arising out of the original reply, is the Financial Secretary aware that since he made that speech we have had information to the effect that

    1473
    the number of millionaires has been increasing, and that the rich are growing richer?
    Mr. Speaker: That does not seem to arise.
    Mr. Kirkwood: May I submit that it arises on the Financial Secretary's answer. The rich are getting richer.

  PUBLIC HEALTH.

    WATER SUPPLY, LANCASHIRE.
    Mr. Chorltonasked the Minister of Health whether he is able to give a report of the work of the regional water committee in Lancashire; and whether a map showing thereon the water mains of the various authorities has been completed?
    Sir K. Wood: The South-West Lancashire Committee have completed their survey of demands and resources and find that the time has not yet arrived for the provision of additional resources for their region; the North, Central and South-East Lancashire Committee have carried out a similar survey and are considering the position disclosed. I understand that it has not been found necessary, in either case, to prepare a map showing the water mains of the various authorities.
    Mr. Chorlton: May I ask how many meetings of the regional committees have taken place?
    Sir K. Wood: I will inquire and inform the hon. Member.
    Mr. Levy: Will the regional water committees issue a report?
    Sir K. Wood: I will make an inquiry.

    RIVER THAMES (POLLUTION).
    Lieut.-Commander Fletcherasked the Minister of Health whether he has been informed that Eton College bathing places have been closed on account of pollution of the Thames; that Windsor swimming baths have been closed for the same reason; and that the Eton Urban Council has erected notices warning bathers of the danger of bathing in the Thames on account of pollution; and whether he has any statement to make?
    Sir K. Wood: Yes, Sir. I understand that when the Slough Urban District Council have completed their improvements to their sewage disposal works at
    1474
    Dorney and Cippenham the trouble will be remedied. In the meantime the council are taking temporary measures to reduce the pollution as far as possible. I am watching the situation carefully, as is the Thames Conservancy.
    Sir Richard Meller: Can the Minister give an assurance that there is no danger involved to the water supply of London?
    Sir K. Wood: I can say that the Thames water is fully treated, and as supplied to the consumers is of first-class quality, both chemically and bacteriologically.
    Captain Gunston: Are we to understand that pollution has been diminished since the college bathing places have been closed?
    Mr. Annesley Somerville: Is the right hon. Gentleman aware that the Thames Conservancy Board has just received a report from their official analyst and that the report is eminently satisfactory? Is he further aware that the Metropolitan Water Board, which as hon. Members know is responsible for the water supply of London, is quite satisfied with the condition of Thames water?
    Sir K. Wood: I am much obliged to the hon. Member for the information.
    Mr. Mander: Can the right hon. Gentleman say whether it is not the case that the best schools are built on the top of hills in order to avoid pollution?

    DIPHTHERIA IMMUNISATION
    Mr. Leachasked the Minister of Health what methods are adopted by medical officers of health to ascertain whether or not diphtheria patients have been immunised, seeing that in the majority of immunisations no certificates are issued nor do the patients bear any marks to show that they have been immunised?
    Sir K. Wood: I am informed that it is the practice of medical officers of health to keep records of the names of all persons who are immunised against diphtheria under arrangements made by the local authorities.
    Mr. Leach: Will the right hon. Gentleman personally examine the merits of this highly dangerous and ill-chosen expedient before his Department gives it official recognition and sanction?
    Sir K. Wood: I cannot accept that description of it.
    Mr. Leachasked the Minister of Health how many cases of diphtheria have occurred in inoculated children at Cardiff since immunisation was started in that town?
    Sir K. Wood: According to the information furnished by the local authority, out of 14,523 children who had been inoculated up to the end of 1936, 195 contracted diphtheria. During the same period 2,918 cases of diphtheria occurred among all children under 15 years of age.
    Mr. Leachasked the Minister of Health which of the county boroughs of

    NUMBER OF CHILDREN IMMUNISED AGAINST DIPHTHERIA IN CERTAIN COUNTY BOROUGHS.

    County Borough.

    1925.

    1926.

    1927.

    1928.

    1929.

    1930.

    1931.

    1932.

    1933.

    1934.

    1935.

    1936.

    Totals.

    Blackburn

    —

    —

    —

    —

    58

    760

    1,009

    2,359

    4,360

    589

    398

    573

    10,106

    Bury

    —

    —

    —

    —

    —

    —

    —

    —

    —

    —

    567

    154

    721

    Burnley

    —

    —

    —

    —

    —

    —

    —

    —

    221

    535

    537

    562

    1,855

    Bournemouth

    —

    —

    —

    —

    —

    —

    —

    —

    —

    —

    405

    689

    1,094

    Coventry

    —

    —

    —

    —

    1,171

    742

    157

    185

    427

    399

    3,536

    1,729

    8,346

    Leeds

    —

    —

    —

    92

    101

    174

    602

    1,874

    1,372

    2,773

    31,166

    2,150

    40,304

    Liverpool

    16

    329

    104

    112

    183

    484

    1,543

    6,647

    7,371

    7,221

    6,116

    8,548

    38,674

    Oxford

    —

    —

    —

    —

    —

    241

    389

    189

    —

    —

    425

    9

    1,253

    Southampton

    —

    —

    —

    —

    —

    —

    —

    —

    —

    5,748

    2,110

    7,858

    Tynemouth

    —

    —

    —

    —

    —

    —

    52

    3

    —

    —

    3

    1

    59

    Wallasey

    —

    —

    —

    —

    —

    —

    —

    —

    —

    —

    255

    442

    697

    Cardiff

    —

    —

    —

    —

    —

    —

    —

    —

    —

    —

    —

    —

    14,523

    Merthyr

    —

    —

    —

    —

    —

    —

    —

    —

    —

    —

    —

    —

    *2,251

    * This figure is inclusive up to the 30th June, 1937.

    MATERNITY AND CHILD WELFARE.
    Mr. Lipsonasked the Minister of Health whether he is prepared to arrange for milk to be available at 1½d. a pint, the price now charged for school children, for expectant and nursing mothers, and children under school age in families covered by National Health Insurance or of equivalent economic status?
    Sir K. Wood: The question of increasing the supply of milk to these classes of the population will be considered in connection with the Government's long-term policy for the milk industry.
    Mr. T. Williams: Can the right hon. Gentleman say when that long-term policy may be expected?
    Sir K. Wood: No, Sir. That is not a question for me.
    Mr. T. Johnston: Is the right hon. Gentleman not aware of the urgency of this question and of the desirability, on the grounds of public health, of providing cheap milk for the most necessitous sections of the community?
    England and Wales have introduced diphtheria immunisation schemes for their child population; the number of children immunised in each of the boroughs which have such schemes in operation?
    Sir K. Wood: I have no complete information on this subject, but with the hon. Member's permission, I will circulate in the OFFICIAL REPORT a statement giving such particulars as are available in the case of those county boroughs the councils of which have received my sanction under the Public Health Act, 1875, to the provision of facilities for immunisation against diphtheria.
    Following is the statement:
    Mr. Lipson: Is the right hon. Gentleman aware that in Sweden, where the price of milk is 1½d. a pint, the consumption is 420 pints per head per year, whereas in this country it is only 150 pints per head?

    FOOD (COMPOSITION AND DESCRIPTION).
    Mr. Leonardasked the Minister of Health whether he is now able to make any announcement regarding legislation to implement the recommendations contained in the Report of the Departmental Committee an the composition and description of food?
    Sir K. Wood: I would refer the hon. Member to the answer given to my hon. Friend the Member for Enfield (Mr. Bull) on this subject on 9th February, of which I am sending him a copy.
    Mr. Leonard: Does the right hon. Gentleman not consider that this matter requires expedition?
    Sir K. Wood: Perhaps the hon. Gentleman will study this further Reply.

    NURSING HOMES.
    Miss Rathboneasked the Minister of Health what report has been made by the local authorities to the circular letter of 30th September last, in which attention was called to the importance of the adequate supervision of nursing homes?
    Sir K. Wood: I have not called for a special report from local authorities on this subject. The circular referred to by the hon. Member requested the local supervising authorities to satisfy themselves that their arrangements for the inspection of Nursing Homes are sufficient to ensure that the requirements of the Nursing Homes Registration Act are in all cases fully observed. If the hon. Member has any particular authority in mind and will let me know I will gladly make inquiries.
    Miss Rathbone: Will the right hon. Gentleman take steps to find out what action has been taken by the local authorities and whether they are acting on his circular?
    Sir K. Wood: That would mean asking for returns from the local authorities, and I do not want to overburden them at the present time when they are engaged in dealing with very many important duties. If the hon. Lady has any particular cases in mind, I will gladly take them up with the local authorities.
    Sir Francis Fremantle: As the right hon. Gentleman issues a circular every year advising the medical officers on what they should deal with in their annual reports, will he ask them to pay special attention to this matter, which has hitherto been very considerably neglected in many large areas?

    LOCAL AUTHORITIES (HEALTH SERVICES).
    Miss Wardasked the Minister of Health whether, in view of the health campaign to be inaugurated in the autumn, he will ascertain the adequacy of the services provided by individual local authorities?
    Sir K. Wood: The surveys of the health services of individual local authorities which are conducted by the medical officers of my Department, and which have been in progress since 1930, afford an opportunity for ascertaining the adequacy of these services, and as my hon.
    1478
    Friend is aware, it is my practice to bring to the notice of the local authorities any improvements in their health services which appear to be desirable and to make appropriate recommendations.
    Miss Ward: Is the campaign that is to be inaugurated to be on the highest standard or on the lowest standard, and if it is to be on the highest standard, may I ask what is to happen to those people who want to take advantage of the health services which are advertised on the highest standard when they find that they are not available owing to non-provision by their own local authorities?
    Sir K. Wood: In regard to the first part of the question, naturally anything associated with the Ministry of Health will be on the highest standard.
    Miss Ward: May I have a reply to the second part of my question?
    Sir K. Wood: If the hon. Lady has any particular case in mind, I shall be glad to take it up, but I think that generally speaking the local authorities are carrying out their duties as we would desire.
    Mr. J. J. Davidson: Will the right hon. Gentleman bear in mind that any health campaign is doomed to failure until the Government bring into that health campaign those people who are suffering from malnutrition?
    Miss Wardasked the Minister of Health whether he will consider issuing a detailed summary of the services available under the various Health Acts and the names of the local authorities operating the equivalent provisions?
    Sir K. Wood: It is the practice of many local authorities to publish particulars of the health services available in their areas, and I am hoping shortly to arrange with my right hon. Friend the Postmaster-General for information of this kind to be made available at Post Offices. I anticipate that this information will become widely known through the agency of the local authorities in connection with the forthcoming health campaign.
    Miss Ward: While thanking my right hon. Friend for what he is going to do, when that information is available will he see that there are comparable services on the part of all local authorities?
    Sir K. Wood: I keep asking my hon. Friend to give me particulars of any case she has in mind, and I will take it up.
    Miss Ward: Does the right hon. Gentleman realise that I have raised this matter in a speech, but that I have never yet really been able to get all the details of all the local authorities?

    EX-MEMBERS OF PARLIAMENT (SUGGESTED PENSION SCHEME).
    Sir Assheton Pownallasked the Prime Minister whether he can state the decision of the Government with regard to the suggested inquiry into the question of a pension scheme for ex-Members of Parliament?
    The Prime Minister (Mr. Chamberlain): I have appointed a Departmental Committee to examine the practical aspects of the suggestion for a pension scheme for Members of Parliament, the necessary funds to be raised and maintained by personal contributions from Members (whether compulsory or voluntary) without any charge to the taxpayer, and to report to me what are the various alternatives. On receipt of this report, I propose to consult further with representative Members of Parliament on the matter.

  GOVERNMENT DEPARTMENTS.

    PERMANENT SECRETARY TO THE TREASURY (STATUS).
    Colonel Goodmanasked the Prime Minister whether, with a view to settling prevailing uncertainty on the matter, he will state whether the Permanent Secretary to the Treasury is the head of the Civil Service?
    The Prime Minister: Yes, Sir. The status of the Permanent Secretary to the Treasury as head of the Civil Service has been recognised for something like 70 years. It dates from the period during which the previously unco-ordinated civil establishments of the Crown were organised as a regular Service under general Treasury control, and the position has been publicly affirmed from time to time since. Experience has shown that it is a convenient and businesslike arrangement and one which—under Ministerial control, and particularly under the control
    1480
    of the Prime Minister as First Lord of the Treasury—forms an essential link in providing the requisite means of ensuring the efficient administration of public business.
    Mr. Wedgwood Benn: When the Prime Minister is not the First Lord of the Treasury, what then?
    The Prime Minister: Wait until that arises.
    Mr. Benn: It has arisen.

    CUSTOMS AND EXCISE (STAFF).
    Mr. Woodsasked the Financial Secretary to the Treasury the number of staff employed by the Customs Department for each year since 1931, together with the cost?
    Lieut.-Colonel Colville: As the reply contains a number of figures, I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.
    Following is the reply:
    The number of staff employed in the Customs and Excise Department on 1st April of each year from 1931, and the approximate cost in salaries and wages for the preceding 12 months, are as follow:

    £

    1931

    …

    …

    11,906

    4,097,000

    1932

    …

    …

    12,590

    3,915,000

    1933

    …

    …

    13,245

    4,184,000

    1934

    …

    …

    13,784

    4,322,000

    1935

    …

    …

    14,155

    4,481,000

    1936

    …

    …

    14,574

    4,665,000

    1937

    …

    …

    14,787

    4,819,000

    MESSENGERS.
    Mr. Creech Jonesasked the Financial Secretary to the Treasury whether he will consider raising the minimum weekly pay of Government messengers to 53s. instead of the present 47s. 6d., in view of the fact that the necessaries of healthy life cannot be provided at less than 53s. a week for an urban worker with a wife and three children, as is established by Mr. Seebohm Rowntree's recent survey entitled "The Human Needs of Labour," based on the standard laid down by the British Medical Association Committee of 1933?
    Lieut. Colonel Colville: I would refer the hon. Member to the answer given to the hon. Member for Romford (Mr. Parker) on 6th May.
    Mr. Jaggerasked the Financial Secretary to the Treasury whether he is prepared to permit Government Departments to provide pensions for Government messengers in the same way as local authorities are permitted, under the Local Government Superannuation Bill of this year, to provide pensions for servants?
    Lieut.-Colonel Colville: I would refer the hon. Member to the answer given to him by my right hon. Friend the Chancellor of the Exchequer on 8th July.
    Mr. Jagger: Does the Financial Secretary realise that the way to stop me from asking this question is to make these officers eligible for pensions?
    Lieut.-Colonel Colville: I think my hon. Friend knows that one grade is already eligible for pensions and that members of the other grade are eligible for promotion.

    CLERICAL OFFICERS (PAY).
    Lieut.-Colonel Acland-Troyteasked the Financial Secretary to the Treasury the reason for granting an increase in the maximum of the scale for higher clerical officers in the Civil Service, having regard to the fact that the Treasury has stated that the duties of that grade are in many instances similar to those of the junior clerical officer grade, the maximum of which is only £350 a year; and whether, in the circumstances, he will consider increasing the maximum of the scale of

    County of Glamorgan (including associated County Boroughs.

    County of Monmouth (including associated County Boroughs).

    Year ended 31st March.

    Expenditure on poor relief not met out of specific income.

    Average number of persons in receipt of poor relief.

    Expenditure on poor relief not met out of specific income.

    Average number of persons in receipt of poor relief.

    £

    £

    1931

    1,296,629

    64,834

    326,933

    18,982

    1932

    1,283,727

    67,551

    320,060

    19,096

    1933

    1,367,897

    77,806

    353,833

    21,219

    1934

    1,431,532

    81,153

    392,234

    23,592

    1935

    1,507,913

    82,352

    406,927

    24,128

    1936

    1,456,748

    80,561

    391,068

    23,441

    1937

    not available

    79,640

    not available

    22,138

    1938 (3 months April, May and June).

    not available

    70,306

    not available

    18,936

    PALESTINE (GOVERNMENT POLICY).
    Mr. Vyvyan Adamsasked the Prime Minister whether the proposals of His Majesty's Government for the future
    1482
    the junior clerical grade to the minimum of the scale laid down for the higher clerical officer grade, namely, £397 per annum?
    Lieut.-Colonel Colville: The scale of pay for clerical officers was fixed by agreement with the Civil Service Clerical Association in May, 1936, and that Association was also a party to the agreement reached in June of this year with regard to the pay of higher clerical officers. I see no reason, therefore, for any revision of these recently agreed scales.

    PUBLIC ASSISTANCE (GLAMORGAN SHIRE AND MONMOUTHSHIRE).
    Mr. Jenkinsasked the Minister of Health the total cost of public assistance in Glamorganshire and Monmouthshire and the number of applicants for relief for each year from 1930 to 1936, and for the current year to the latest available date?
    Sir K. Wood: As the answer contains a number of figures I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.
    Following is the answer:
    The following statement gives the desired information, so far as it is available. The figures do not include the numbers and cost of maintenance of rate-aided patients in mental hospitals.
    of Palestine will be submitted to Parliament as a White Paper or in the form of a Statute, or whether his Majesty's Government propose to exercise their prerogative of making a series of appro-

    1483
    priate treaties without the consent or the will of Parliament?
    The Prime Minister: The immediate intentions of His Majesty's Government which are set out in Command Paper 5513 will be submitted to Parliament before the House rises and Parliament will be kept fully informed of future developments of policy by means of Command Papers or otherwise. The exact procedure to be followed in connection with the Treaties proposed in the Report will be a matter for later consideration.
    Mr. Leach: Will the Prime Minister be willing when the discussion takes place to allow a free vote of the House on the matter?

  HOUSING.

    SLUM CLEARANCE (HEYWOOD).
    Mr. Chorltonasked the Minister of Health whether, in confirming the Order for the demolition of certain houses in Heap Brow and Lord Street, Heywood, Lancashire, he was aware that this property constituted the major income of the ladies owning it, and that there were further charges outstanding on the property which the owners are without means to meet; and what steps he proposes to take through the local authority to ensure that some compensation can be made for such a case of hardship?
    Sir K. Wood: The facts in the first part of the question were not put before me by the objectors, presumably in the knowledge that I was precluded by Statute from taking them into consideration in making my decision. I found, after public inquiry, that the houses were in so bad a condition that I had no alternative but to confirm the order for their demolition. I was advised that the houses had not been well maintained—and was therefore unable to direct the local authority to make any payment on that account.

    WALLSEND-ON-TYNE.
    Miss Wardasked the Minister of Health what progress is being made for the provision of the urgently required houses in Wallsend, Willington Quay, Forest Hall, and other parts of the Parliamentary borough of Wallsend-on-Tyne?
    Sir K. Wood: I have sanctioned loans for the erection by the Wallsend Town Council of 537 houses in connection with the council's slum clearance programme. The council have, moreover, a large area of land which it is understood will be sufficient for the remainder of their slum clearance needs and enable them to deal further with overcrowding in the borough.

    LOCAL GOVERNMENT (REORGANISATION).
    Mr. Herbert Morrisonasked the Minister of Health whether His Majesty's Government are considering the reorganisation of local government in various parts of the country on a regional basis; and whether he can make any statement on the matter?
    Sir K. Wood: No, Sir, but I am glad to have an opportunity of clearing up misunderstanding which appears to have arisen. The recommendations of the Tyneside Commissioners raised certain general principles, and I thought it proper that I should have the benefit of the advice on this general matter of the associations of local authorities in the provinces, with whom I accordingly communicated, as well as the observations of the local authorities particularly concerned. I do not expect that the associations will be in a position to furnish me with their observations for some time yet. I should add that the particular recommendations of the Commissioners in regard to the organisation of local government on the Tyneside are still under consideration, and I have not yet received the observations relating to that issue of all the local authorities concerned.
    Mr. Morrison: Will the right hon. Gentleman use his influence with a certain Conservative morning newspaper in London to prevent it misrepresenting both him and me?
    Sir K. Wood: If I once began to do that, I should then have to ask the right hon. Gentleman to take on a greater task still, and deal with his own particular organ.
    Mr. Lawson: May I ask whether one of the right hon. Gentleman's principles is not the levelling out of the cost of public assistance, so that the poorer areas can get some advantage?

    NATIONAL HEALTH INSURANCE.
    Mr. Leonardasked the Minister of Health the number of employers interviewed in 1936 by his insepctors as defaulters in fixing insurance stamps on their employés' cards; the loss of benefit sustained by employés because of this; and the number of prosecutions made for recovery?
    Sir K. Wood: 635,814 employers were visited by my inspectors during 1936 in the ordinary course of their duties under the National Health Insurance Act but no separate record is kept of the number of cases where default in the payment of contributions was discovered. In the large majority of cases there were no irregularities or only irregularities of a minor character. No statistics are available which would enable me to answer the second part of the hon. Member's question, but every case brought to my notice is fully investigated and, where appropriate, legal proceedings are instituted for the recovery of the unpaid contributions. With regard to the third part of the question, the number of prosecutions during 1936 was 2,139.
    Mr. Leonard: Does not the right hon. Gentleman consider that, in view of the hardship this must entail upon employés in such circumstances, it is high time that the Department had statistics covering this matter, and will he not also consider the desirability of relieving employés from this hardship, in view of the fact that they must surrender the cards to their employers?
    Sir K. Wood: I appreciate what the hon. Member says, but I think that it may be said generally that there is a practically universal compliance with the provisions of the Act. It is only in exceptional cases that payments are not made, and as the hon. Member will see from the answer, in cases where it is considered necessary, we prosecute.
    Captain Strickland: Seeing that there are so few of these cases, does not the Minister think that provision might be made to reinstate those employés who suffer through no fault of their own?
    Sir K. Wood: That has been very fully discussed from time to time, and there are many difficulties.
    Mr. Mathers: Where prosecutions are successful, do the widows of the men who
    1486
    have been disqualified because of failure on the part of their employers to stamp their cards, receive the pensions, as is their right, because of the contributions made?
    Sir K. Wood: I would not like to answer a general question of that kind. Of course, in many cases payments are received.

    SCRAP-IRON (COLLECTION).
    Mr. Walkerasked the Minister of Health whether, in view of the national shortage of scrap-iron, he has considered, or will consider, the advisability of issuing a circular to all local authorities asking them to organise, in connection with their refuse collection, a house-to-house collection of scrap-iron, the profits to be devoted to local charities?
    Sir K. Wood: Local authorities have power to undertake or contract for removal from premises of house refuse, which includes tins and other scrap metal. A considerable amount is recovered by a number of authorities in this way. I am advised, however, that in many cases, particularly those of smaller authorities, the cost of recovery would substantially exceed the amount realised and I do not, therefore, think that it is practicable to take any further steps in the matter.
    Mr. Walker: Is the Minister aware that at the present moment we are importing thousands of tons of scrap; that there are thousands of tons of scrap in this country which is not being collected because there is no adequate or efficient means of doing so, and as the local authorities possess the only effective means of doing the job, will the right hon. Gentleman not issue a circular such as I have suggested in the question; and further is he aware that the non-collection by local authorities is not confined to the small authorities but extends to the larger authorities as well?
    Sir K. Wood: In the case of the smaller authorities, it might well be considered that it was not particularly the duty of a local authority to act in this matter especially when, as I have stated, the cost of recovery would substantially exceed the amount realised.
    Mr. Thorne: Is the Minister prepared to advise local authorities to get rid of the old tanks and guns which many of them have?

    NATIONAL MARITIME MUSEUM.
    Sir C. Rawsonasked the Financial Secretary to the Treasury, how many men are employed on weekdays and Sundays, respectively, at the National Maritime Museum, Greenwich, to protect the Nelson relics and other treasures; and, in view of the number of visitors on Sunday, will he consider augmenting the number of wardens or guards engaged on Sundays?
    Lieut.-Colonel Colville: The number of wardens on duty at the National Maritime Museum, Greenwich, on weekdays and Sundays is 12 and 6 respectively. This Museum was only opened in April. The trustees have under active consideration the problems raised by the popularity of the Museum on Sundays and will no doubt make, or if necessary approach me on, such adjustments as they find to be desirable in the light of practical experience.
    Sir C. Rawson: Will the right hon. and gallant Gentleman see that the authorities in charge do not leave the matter until it is too late, before they take action.
    Lieut.-Colonel Colville: It is primarily a matter for the trustees.

    SPAIN.
    Mr. Wedgwood Benn(by Private Notice) asked the First Lord of the Admiralty what was the position of the steamship "Molton" when captured yesterday; what was the position of the insurgent vessel when making the capture; where is the steamship "Molton" now; has she been brought or ordered to proceed outside Spanish territorial waters; what British ship reported the capture, and in what terms; did she make any signals to the steamship "Molton", and, if so, what were they, and did she take any action—[HON. MEMBERS: "Circulate it"]—and, if so, what action?
    Mr. Speaker: I must point out to the right hon. Gentleman that the latter part of the question as he has addressed it to the Minister does not appear in the notice submitted to me.
    Mr. Benn: With great respect, Sir, it is perfectly true that the sentence asking whether the ship made signals was interpolated, and if you do not wish me to ask that part of the question, I shall not do so.
    Mr. Speaker: The right hon. Gentleman is aware that Members who are exercising the privilege of putting Private Notice Questions must frame those questions in accordance with the notice given.
    Mr. Benn: I have no desire, Sir, to abuse the privilege which you have given me.
    The Civil Lord of the Admiralty (Lieut.-Colonel Llewellin): According to a report which I have received from the Rear-Admiral, Second Battle Squadron, who was present in His Majesty's Ship "Royal Oak," the steamship "Molton" entered Spanish territorial waters opposite Santander at approximately 5.45 a.m. yesterday morning. At this time the Spanish cruiser "Almirante Cervera" was outside territorial waters. When the steamship "Molton" was some distance inside territorial waters, the "Almirante Cervera" signalled to her, but these signals could not be distinguished from His Majesty's Ship "Royal Oak." Subsequently the "Almirante Cervera" fired two warning shots, after the second of which the steamship "Molton" submitted, indicating the fact by altering course and reversing her engines. The "Almirante Cervera" ordered steamship "Molton" to proceed on a Northerly course. Shortly afterwards the "Almirante Cervera" fired another warning shot, whereupon His Majesty's Ship "Royal Oak" intervened and asked why she continued to fire after the ship had submitted. The "Almirante Cervera" replied that she fired because the steamship "Molton" was delaying in carrying out the order. Thereafter steamship "Molton" steered the course ordered and was taken off under charge of the "Almirante Cervera." I regret that I am not aware of her present whereabouts. The report I have received so far does not show that any signals were exchanged between the steamship "Molton" and His Majesty's Ship "Royal Oak" during the incident.
    Mr. Benn: Do I understand that this attack on the "Molton" was made by the insurgent ship when the insurgent ship was outside territorial waters, and do I further understand that no action was taken by the "Royal Oak" against this insurgent ship when attacking the British ship?
    Lieut.-Colonel Llewellin: Yes, Sir. The right hon. Gentleman is quite right. The "Almirante Cervera" was outside territorial waters, but the point really to be noted is where the merchant ship was. She was well within territorial waters.
    Mr. Benn: Do we understand, therefore, that it is the orders of the Admiralty to their ships not to interfere with insurgent ships outside territorial waters when attacking British vessels?
    Lieut.-Colonel Llewellin: The policy of the Government has been made quite clear on this matter, and it was made clear as long ago as 21st April of this year, when my right hon. Friend the Home Secretary, then First Lord of the Admiralty, said in this House:
    "If, however, a British merchant ship enters Spanish territorial waters, she does so at her own risk. These conditions apply whether or not the Spanish warship is inside territorial waters."—[OFFICIAL REPORT, 21st April, 1937; cols. 1725–6, VOL 322.]
    Mr. Gallacher: Is there any further degradation for us?
    Mr. Arthur Henderson: Is it not without precedent in the history of this country for a British warship to stand by and allow a British commercial ship to be attacked by an insurgent warship, even though in territorial waters, when a state of belligerency has not been recognised?
    Lieut.-Colonel Llewellin: Let us be quite clear. This ship was not attacked [Interruption.] She was brought to by the firing of two rounds. I may say there is a great distinction, if you are in a ship, as to whether you are being fired at or not. At any rate, it is the clear policy of the Government not to afford protection in territorial waters. All merchant ships have been fully advised that that is the case, and they go there at their own risk.
    Captain Arthur Evans: Is it not the fact that warning was given to merchant shipowners by the Admiralty, and is it not true to say that no protests or representations have been made to the Admiralty by the Cardiff shipowners?
    Lieut.-Colonel Llewellin: I should want notice of that question.
    Mr. Benn: Is it not a fact that the Admiralty have not informed the owners of what has happened to the "Molton"?
    Lieut.-Colonel Llewellin: I think I was quite clear. We do not know where the "Molton" is. [Interruption.]
    An Hon. Member: You do not seem to know anything.
    Mr. Speaker: I must ask hon. Members to assist me to see that questions are carried on in an orderly way. They seem to forget what my duties are. My duties are to protect Members of this House, and Ministers are Members as well as other hon. Members. Hon. Members are quite justified in asking questions and eliciting answers, but Ministers are also justified in asking for due courtesy to be paid to them.
    Mr. Benn: In view of the unsatisfactory nature of the answer, I shall seek your permission, Mr. Speaker, to take an early opportunity of raising the matter.
    Mr. Attlee(by Private Notice) asked the Secretary of State for Foreign Affairs whether at the meeting of the Non-Intervention Committee to-morrow he will withdraw the proposal for the recognition of General Franco until after the complete withdrawal of foreign nationals has shown whether or not he enjoys the support of any substantial part of the Spanish people.
    The Secretary of State for Foreign Affairs (Mr. Eden): The right hon. Gentleman will recollect that, at the meeting of the Non-Intervention Committee held on Friday last, His Majesty's Government were entrusted by the Committee with a mandate to seek agreement on a solution of the present difficulties. The proposals drawn up by His Majesty's Government in pursuance of this task, which are set forth in Command Paper 5521, have been communicated to the members of the Committee and are to be considered by the Committee at its meeting to-morrow. In these circumstances, there can clearly be no question of any modification of proposals submitted at the Committee's direct request and which the Committee itself has not yet considered. In the meanwhile, the House, recalling that these proposals have been submitted in discharge of an international mandate, will, I am sure, wish to take no step which might have the effect of jeopardising in advance the cause of international appeasement which they have been designed to further.

    SPAIN (NON-INTERVENTION PROPOSALS).
    Mr. Attlee: In view of the nature of the reply which has just been given by the Foreign Secretary, I ask leave to move the Adjournment of the House for the purpose of discussing a definite matter of urgent public importance, namely,
    "The declared intention of His Majesty's Government to make to the Non-Intervention Committee to-morrow proposals which contemplate the granting of belligerent rights to General Franco, and which do not make effective provision for the complete cessation of foreign intervention in Spain."
    The pleasure of the House not having been signified, Mr. SPEAKER called on those Members who supported the Motion to rise in their places, and, not fewer than 40 Members having accordingly risen,
    The Motion stood over, under Standing Order No. 8, until Half-past Seven o'clock this evening.

BUSINESS OF THE HOUSE.
Mr. Attlee: May I ask whether the Prime Minister can state the business for next week?
The Prime Minister: Monday:—Supply; Committee (17th Allotted day)—A Debate on Foreign Affairs will take place.
Tuesday:—Second Reading of the London Naval Treaty Bill; Committee stage of the Milk (Amendment) Bill, and of the Coal (Registration of Ownership) Bill [Lords].
Wednesday:—The Report of the Royal Commission on Palestine will be debated. Further consideration of the Milk (Amendment) Bill and of the London Naval Treaty Bill.
Thursday:—Supply; Committee (18th Allotted day)—Scottish Estimates will be considered. (For the Herring Industry and Department of Health.)
Friday:—Report and Third Reading of the Coal (Registration of Ownership) Bill [Lords], and consideration of other Business which will be announced later.
On any day, if there is time, other Orders will be taken.
Mr. Attlee: Can the right hon. Gentleman say whether the debate on Palestine in this House will precede or coincide with the debate in another place?
The Prime Minister: I cannot say what the arrangements are in another place.
Mr. Lambert: Can my right hon. Friend say whether the business for to-night will be affected by the Motion for the Adjournment which is coming on?
The Prime Minister: No, Sir.
Mr. Shinwell: Does the right hon. Gentleman mean to say that he has no control over the Government arrangements for business?
Ordered,
"That the Proceedings on Government Business be exempted, at this day's Sitting, from the provisions of the Standing Order (Sittings of the House)."—[The Prime Minister.]

NAVY AND AIR EXPENDITURE, 1935.
Resolved, That this House will, upon Tuesday next, resolve itself into a Committee to consider the surpluses and deficits upon Army and Air Grants for the year ended 31st March, 1936, and the application of surpluses to meet expenditure not provided for in the grants for that year.—[Captain Margesson.]
Ordered, That the Appropriation Accounts for the Army and Air Departments, which were presented upon the 19th January last, be referred to the Committee.—[Captain Margesson.]

QUESTIONS TO MINISTERS.
Mr. Frankel: On a point of Order, Mr. Speaker. I gave notice of a private notice question to the Home Secretary, and you have not called upon me to ask it.
Mr. Speaker: The hon. Member was informed that he should put the question on the Paper in the ordinary way.
Mr. Frankel: I am sorry to say that I have not been so informed.
Mr. Speaker: I am sorry if that is so, and I must inform the hon. Member now.
Mr. Frankel: Am I to understand that your last remark is to inform me, and that that is the proper way in which I ought to be told that my question ought to be put down?
Mr. Speaker: The hon. Member must not take it that I am in any way discourteous. It is the proper procedure; it is the procedure to take when a question is not accepted as a private notice question.
Mr. Frankel: Might I not have been informed earlier than a minute or two ago that the question was not accepted by yourself?
Mr. Speaker: I do not know the reason why the hon. Member did not receive my letter to inform him, and I cannot say anything now except that I am very sorry.

CIVIL ESTIMATES (SUPPLEMENTARY ESTIMATES, 1937).
Estimate presented,—of a further sum required to be voted for the service of the year ending 31st March, 1938 [by Command]; Referred to the Committee of Supply, and to be printed.
BILLS REPORTED.

  NORTH COTSWOLD RURAL DISTRICT COUNCIL BILL [Lords].
  Reported, with Amendments, from the Committee on Unopposed Bills (with Report on the Bill).
  Bill, as amended, and Report to lie upon the Table; Report to be printed.

  SHOREHAM HARBOUR BILL [Lords].
  Reported, with Amendments, from the Committee on Unopposed Bills.
  Bill, as amended, to lie upon the Table.

  DARTFORD TUNNEL BILL [Lords].
  Reported, with Amendments, from the Committee on Group L of Private Bills (with Report on the Bill).
  Bill, as amended, and Report to lie upon the Table: Report to be printed.

MESSAGE FROM THE LORDS.
That they have agreed to,—
London County Council {General Powers) Bill,
Wadebridge Rural District Council Bill,
Torquay Corporation Bill,
Newcastle - upon - Tyne Corporation Bill,
Bucks Water Bill, with Amendments.

ORDERS OF THE DAY.

  FINANCE BILL.
  As amended, further considered.
  NEW CLAUSE.—(Exemption in respect of controlled houses.)
  In the case of any business the chargeable profits whereof include income from property, there shall be deducted from the amount of National Defence Contribution otherwise payable in respect of any chargeable accounting period an amount equal to five per centum of the aggregate of the net annual values of all properties the income from which is included as aforesaid, which properties were, during any part of such accounting period, properties the rents whereof were restricted under any of the provisions of the Rent and Mortgage Interest Restriction Acts, 1920 to 1935.
  For the purpose of this Section the net annual value of any particular property shall be taken to be the annual value of such property as assessed under the provisions of No. 1 of Schedule A and as reduced for the purposes of collection under the provisions of Rule 7 of No. V of Schedule A.—[Mr. Roland Robinson.]
  Brought up, and read the First time.
  4.3 p.m.
  Mr. Roland Robinson: I beg to move, "That the Clause be read a Second time."
  This Clause is designed to afford exemption from National Defence Contribution to businesses whose income is already restricted by the control afforded by the Rent Restrictions Acts, to companies whose property rights are drastically regulated in that the yield on their property is restricted in the interests of the poor. The limitation in such cases is not one of percentage yield, but of the actual cash return, which is fixed at a maximum low rate irrespective of economic circumstances. The result is that these companies are in such a position that they cannot reap any value from increased prosperity, nor can they make full economic use of their capital; and it is my submission that the yield on that property cannot fairly be treated in the same way as an economic yield on property which can be used freely. It seems to me that for the purpose of National Defence Contribution it would be only right and proper to put companies owning controlled properties rather in the position of those public utility companies which have restricted income
  1520
  and are, therefore, exempt from National Defence Contribution. I need not say more, except that I hope the House will not think that this new Clause is in any way concerned with slum property. It is intended to deal with those larger companies which in their own interests can have only good property which is well maintained. The Clause is reasonable in substance and in spirit, so reasonable indeed that it speaks for itself, and I hope that the Chancellor of the Exchequer will accept it.
  Captain Strickland: I beg to second the Motion.
  4.7 P.m.
  The Chancellor of the Exchequer (Sir John Simon): My hon. Friend the Member for Blackpool (Mr. R. Robinson) has stated his proposal with admirable brevity, and he will excuse me if I reply to it without speaking at any great length. The proposal seems to me to amount to this: It is a proposal that National Defence Contribution shall not be imposed upon property owners unless they are free to pass the tax on to their tenants. That is really the nature of the proposal. I do not think that it is a proposal which the House of Commons will accept.
  Mr. R. Robinson: My right hon. Friend has rather misinterpreted the tenour of my speech. The point behind my argument is this: At the present moment these people who own controlled property in the interests of the poorer section of the community are forced to accept a rent which is very much lower than what would normally be an economic return, and lower than the rent which they could gain on the open market. It seems to me that by this very restriction on the yield of their capital they are rather put in the position of a public utility company which is exempt from National Defence Contribution.
  Sir J. Simon: I appreciate the kind of case that my hon. Friend has in mind, and I am not without sympathy with it. But I am sure he will appreciate that we really have to look at the effect of the new Clause. He told us that the Clause would not apply to slum property. I reply that it would; it would apply to protect the owner of slum property just as it would apply to those entirely reputable companies which my hon. Friend has more particularly in mind. I cannot

  1521
  take the view that because the Rent Restrictions Acts prevent the raising of rents in a free market, therefore the owners of house property who are restricted by those Acts should escape from any portion of this tax. After all, the Rent Restrictions Acts were not passed for the purpose of fixing what was the reasonable rent to charge. They were passed for the purpose of preventing rents being raised. That is not the same thing as pronouncing judgment on what is or what is not a reasonable rent. If rents had been unlimited they might have been put up to much higher figures, but the State came in and limited the further profit that might be made.
  In those circumstances my hon. Friend will see that while there is no doubt very much force in the argument about estate companies, I cannot recommend acceptance of such a wide proposal. I do not take the view that the holding of every sort of house in this country at the present time under rent restriction can be regarded as strictly analogous. When one speaks of a public utility company one is speaking of something that is in the first place a monopoly, and a monopoly which is providing an essential public service—transport, lighting, or something of the kind. No doubt houses are very essential. But so are boots, and so are umbrellas. We really cannot make exceptions to the general scheme of the tax because there is a case to be made that in instances of this sort it may not be possible to pass the tax on to the tenants of the property, the rents of which are thus restricted. I recognise that there is a certain measure of hardship, but there is hardship in every case of taxation.
  4.11 p.m.
  Mr. H. G. Williams: I heard only a few words of what the Chancellor of the Exchequer has said, and I might not have understood the whole substance of his argument, but I am not very much impressed with that part of it which I did hear. Public utility companies have been exempted on the ground that either their profits or their rates of charges are limited. Here is a case where people supply what is a part of an essential public service, and they have been limited in their profits ever since 1915. The rents that these people draw are proportionately very much less than the rents
  1522
  charged by local authorities for houses of equivalent accommodation. [HON. MEMBERS: "No."] Every municipality in this country, on the basis of accommodation for accommodation, is charging, and every other owner of free houses is charging very much higher rents, proportionately. That is undeniable. If not, what is the objection to removing the Rent Restrictions Acts from the Statute Book? The knowledge that rents would rise. The rents of controlled houses are below the economic limit. In fact, we have created a new vested interest by the Rent Restrictions Acts, and, rightly or wrongly, we have transferred part of the capital value to the tenants. No one can deny the truth of that. Here are people who have been deprived for many years of part of their property by the action of the State. Into the circumstances we need not go now.
  Here are people supplying an essential service, who have been supplying it, in one sense, at a loss that was imposed upon them by Statute over 22 years ago—in one sense a loss, because the rent they obtain is substantially below that which they would obtain in a free market and which every municipality has charged for similar accommodation. The people who are in this unfortunate position are now, where the property happens to be owned by a company which does not do anything else but own property for investment—these people who for years have not had a square deal are now called upon to pay this special tax. The only argument of the Chancellor of the Exchequer is an argument not on merit but an argument that it would cost so much money. In effect he says, "I do not want to do it because I have already given so much away to other people." If that is the argument, we have to put up with it, but we are not convinced on the merits and I ask the right hon. Gentleman to give a little more consideration to the proposal.
  Question, "That the Clause be read a Second time," put, and negatived.
  CLAUSE 6.—(Minimum quantity of sweets to be sold by holders of off-licences.)
  4.14 p.m.
  Mr. R. C. Morrison: I beg to move, in page 6, line 17, to leave out from "vessels," to the end of line 18.
  The Chancellor of the Exchequer will recall the brief discussion we had on the

  1523
  Amendment in Committee. The proposal has been introduced to take away the privilege held by off-licence holders for 75 years past, which enabled them to sell a commodity called "sweets"—I do not understand why that term is applied—more properly known as British wines, in open vessels or in bottles of any size to customers. For some reason the Finance Bill on this occasion takes away from off-licence holders the privileges they have possessed in this respect. When the Chancellor spoke on my Amendment at a previous stage, he directed his attention particularly to the abuses that might arise if these British wines were sold in open vessels. With regard to the other point as to the possibility of permitting the sale of British wine in bottles that hold less than a pint, he went so far as to say that, in view of certain other points that were brought out in the short Debate which took place, he would, without giving any promise, look into the matter and see whether it was possible to do anything. Acting on that suggestion, I have confined my Amendment merely to the last part of the Clause in order to try and maintain the right of off-licence holders to sell British wines in any quantity less than one reputed pint bottle.
  There is no suggestion that the right of off-licence holders have in this respect been abused and the suggestion was not made by the Chancellor nor by anyone in the discussion. It is difficult for the House to follow this discussion because of the difficulty of knowing exactly what we are discussing. For the purposes of greater accuracy, therefore, I would like to display to the House what it is that are called sweets in this Clause. I have here a bottle of one of the most popular brands. It is called "Rich White Wine" and is sold by off-licence holders. Another bottle I have here is of "Whiteways Ginger Wine." I produce these two small bottles in order to show that there is nothing in the argument used on the last occasion, when it was suggested that people might go into an off-licence with, say, a medicine bottle, or that the off-licence holder might bottle the stuff himself and hand it out in that way. These are proprietary articles and they are popular with and purchased mostly by old ladies and others who have a rooted objection to going into a public house.
  1524
  They prefer to go into an off-licence and buy a small bottle, which they can get very cheaply.
  I find some difficulty in understanding why it should not be possible to accept the limited Amendment, which is confined to these British wines that are proprietary articles and are not bottled by the off-licence holder but by the manufacturer. These wines, I am told, are made almost entirely from grapes derived mainly from the Empire and manufactured under excellent hygienic conditions by British labour. They are purchased almost exclusively by the poorer classes, and I suggest that hon. Members who have more expensive tastes in wines should not deprive the poorest classes of the little comfort which they derive from buying these wines. The effect of the Clause as it stands will be to give a preference to hotels and public houses. Almost every new hotel and public house has an off-licence department, so that the off-licence holder will have to refuse the poor old people who come in to buy this British wine, because he is unable to supply them, and tell them to go to the nearest public house in order to obtain it. In the case of the off-licence which is part of a public house, a person who wants to purchase some of this wine will merely have to go in at one door and out at the other. The Clause will give an advantage to the hotel keeper and the publican who have off-licence departments as part of their premises.
  I should make it clear that I am not a spokesman of off-licence holders. I know only one. I have known him for 30 years, and I know him only because he lives not far from me. I am merely putting the Amendment forward in order to assert the right of poor people to obtain cheap small bottles of wine, as they have been able to do in the past, without being forced to go into a hotel or a public house. I understand that this practice obtains in Scotland with no evil effect, and there have been no allegations of any abuse. There have not been any in England. I believe that the licence holders are respectable citizens. Probably 95 per cent. of them are supporters of the National Government. They are a body of people who earn a modest living and obey the law, and I do not think that any allegation can be made against them. Big profits are earned by certain sections of this trade, but they do not

  1525
  come the way of off-licence holders. The concession asked for in this Amendment, which is strictly limited to the narrow point into which the Chancellor promised to look, will not effect the revenue to any material extent. I hope that the right hon. Gentleman may see his way, having given further attention to it, to grant it.
  4.24 p.m.
  Mr. Liddall: I beg to second the Amendment.
  Unless the Amendment is accepted, it will mean that the legitimate owner of an off-licence, who for over three-quarters of a century has been legally entitled to sell these sweets, which, as the hon. Member has explained, are really British wines, in small quantities, will no longer be entitled to do so. His most serious competitor, the off-sales department of the on-licence will be able to do so. What reason can be given for so grave an injustice of transferring trade from one normal source of supply to another? Already the off-sales department of the public house possesses certain decided advantages over the selling rights of the off-licence. Wines and spirits can be sold in open vessels and in small quantities for consumption off the premises. While no objection can be taken to the on-licences catering for off-licence sales, I submit that in all fairness the off-sales department of the off-licence should be granted similar trading rights. What are these cheap British wines? We have had two samples produced here this afternoon.
  Mr. MacLaren: We have only seen them.
  Mr. Liddall: No doubt the hon. Member for Burslem (Mr. MacLaren) will be able to taste them shortly. When I was a young man they were called raisin wine, orange wine, ginger wine, port wine, and all sorts of names, and if to-day some of them are given more fancy names in order to bring them up-to-date, they are still the same kind of stuff that total abstainers delight to provide at weddings and funerals. They are manufactured in this country by British labour. Only the purest fruit juice is used in their manufacture and most of it is produced within the Empire. The more British wines we sell, therefore, the more workpeople will be employed. It has been said by some foolish people that other foolish people in their own homes have been known to add methylated spirits to give the wines
  1526
  a kick. Surely, if that has been done it is no fault of the off-licence holder.
  No case has been proved that these wines have been supplied to the public adulterated with harmful or undesirable ingredients. It is significant that those people who make such allegations have never instituted proceedings in order to prove their correctness. In any case, the action proposed in this Bill will not meet the problem. The consumers affected, the lower middle and working-classes, the people who quite rightly limit the amounts they purchase in accordance with the size of their purses, will resent being constrained either to buy more than they want or to go elsewhere for the small quantities that they require and can afford. It is to obviate such resentment and in order that a worthy and highly respectable body of traders shall have fair play and justice, that this Amendment has been moved.
  4.30 p.m.
  Sir J. Simon: I have had representations on the subject of this Amendment from many quarters, and I observe that it is supported on the Order Paper by hon. Members sitting in all parts of the House. There are, naturally, certain differences of opinion about it, and possibly that is inevitable, because I do not know that trading interests are all of the same mind in the matter. In putting forward this Clause we were not so much concerned with the revenue point of view, but were endeavouring to trim up certain loose ends of the law, and the question before the House is whether we should do it in the terms of the Clause or whether we should do one thing at a time and make the present Clause refer only to the sale of wine in open vessels by off-licensees.
  The situation is a curious one as far as England is concerned. An on-licensee may sell wine or other things either in a closed or an open vessel and in such quantities as the customer wants. Ever since 1910 the off-licensee has been limited in two ways in the sale of wine. First of all, he may not sell wine in an open vessel, and, secondly, he may not sell wine—in England; it is different in Scotland—in any quantity less than one reputed pint bottle. When we say "in any quantity less than one reputed pint bottle" it does not mean that a licensee cannot supply his customer with wines

  1527
  in those nice little smaller bottles such as have been exhibited to us, but that he must sell two of them at a time. The sale of two quarter-bottles constitutes a sale of a half-bottle. Therefore, it is merely the total quantity sold at a time which matters. As regards sweets—these British wines and some other things—there has never been a law in England which required the off-licensee to sell the liquid in a closed vessel. That seems to me absurd. If a man has only an off-licence manifestly he ought not to be entitled to sell excisable liquors in an open vessel. That a person should be able to go to his shop and say, "Fill that" and then to take it away is plainly wrong. Therefore I think we should all be at one in desiring to amend the law by providing that a man possessing an off-licence may not sell sweets in open vessels.
  Now comes the second question raised by the hon. Member for North Tottenham (Mr. R. C. Morrison). The Clause goes on to say that an off-licensee may not sell these sweets in a quantity less than one reputed pint bottle. As I have pointed out, that would not mean abolishing the quarter-bottle; the licensee would only have to sell two quarter-bottles at once.
  Mr. Logan: How could two bottles be one reputed pint bottle?
  Sir J. Simon: One reputed pint bottle is really called a half-bottle, and I was substituting the word "half-bottle." You do sell a quantity which is not less than one-half bottle if you sell two quarter-bottles.
  Mr. Logan: That is not one bottle.
  Sir J. Simon: Undoubtedly it has been the practice to supply the public with these smaller bottles. The hon. Gentleman produced two, unfortunately sealed, and I cannot recall in Parliamentary history any more eloquent exhibit since the days when Edmund Burke produced a dagger and flung it on the Floor of the House. This practice of selling wine at off-licence shops has been going on in Scotland, and no one is proposing to alter it, and I do not see any particular reason why the North of the Tweed should have an advantage over the rest of the country in this matter. I should
  1528
  like, at any rate, to see how the administration of the new law providing that there is to be no selling of sweets in open vessels works out, and in view of the number of hon. Members who have put forward views in support of this Amendment I am prepared to accept it and to omit from the Clause the words
  "or, in England, in any quantity less than one reputed pint bottle."
  I cannot really think that the matter is of very great importance to the interests concerned. I do not desire in the least to alter the balance between the on-licence trader and the off-licence trader, because it is our duty to deal fairly and properly with all branches of the licence trade. I cannot think it will be a very important point from the on-licensee's point of view, but if off-licensees do attach importance to the change, I think we can agree to it.
  4.36 p.m.
  Mr. McEntee: I wish to express on my own behalf, and on behalf of all the other Members of the House who have put their names to this Amendment, our appreciation of the action of the Chancellor in accepting it. I had myself brought a bottle, from a place which the Chancellor knows very well, in a constituency which he himself at one time represented. It is corked. Somebody has been good enough to hand me a corkscrew since I came here, and if the Chancellor really meant what he said in his a references to the bottles produced by the hon. Member for North Tottenham (Mr R. C. Morrison) I should like to present him not only with this bottle but with the corkscrew.
  4.37 P.m.
  Colonel Gretton: As the Chancellor of the Exchequer has said, no question of importance concerning the revenue is involved in this Amendment. I agree that it does not raise a very important question. The position is that of late years there has grown up a business in what are called British wines, and that it is really necessary, in the interests of the administration of the licensing laws, that the law on the subject should, as the Chancellor has expressed it, be trimmed up. I would warn hon. Members who are amused by seeing sealed bottles produced in the House that they have not had the whole story. There are a good many other classes of sweets and British wines which

  1529
  are not put up for sale quite so attractively, and possibly they have not the same carefully-prepared contents.
  Amendment agreed to.
  CLAUSE 7.—(Amendment as to unladen weight of goods vehicles).
  4.39 p.m.
  Captain Strickland: I beg to move, in page 6, line 24, after "receptacle," to insert "being an additional body."
  There are three Amendments standing in the names of hon. Friends of mine and in my own name all relating to this special point: In page 6, line 24, leave out "or in."; in line 28, at the end, insert:
  "Provided that the weight of a receptacle shall not he included in the unladen weight of a goods vehicle by virtue of this section—

  (a) unless the receptacle is placed on the vehicle by or on behalf of the person in whose name the vehicle is registered under the Roads Act, 1920; or

  (b) if the receptacle is constructed or adapted for the purpose of being lifted on or off the vehicle with goods or burden contained therein."

  I should like, if I may, to discuss the three Amendments as one. They have been put down with the object of removing a certain ambiguity which has existed for many years with reference to the use of containers on goods vehicles on the road. A container is a receptacle, complete in itself, into which goods can be loaded for safe transit. It serves a purpose exactly similar to that which would be served were the goods separately packed into many crates and placed on the vehicle for conveyance. The container is really one large packing-case, and its use is much more convenient and much safer than if the goods were packed in sacks or in cases, placed on a lorry and bound together with rope.
  Many traders have found the use of containers an advantage in the distribution of their goods, and many containers belong to traders themselves and not to the haulage contractors who may be engaged to distribute the goods. Under this Clause 7 any road haulier who went to a trader, loaded up the container on his lorry and then drove away to the place to which it was to be delivered would be liable to a much heavier tax on the vehicle, which was his property, because he was carrying a container which was not his property. That is not the
  1530
  whole tale, because it meant that as the road haulier would not be quite sure which vehicle he might have to use for the purpose of conveying a container it would be necessary for him to take out considerably more expensive licences for the whole of his fleet of vehicles. Side by side with that would come this fact, that if the container was to be regarded as being part of the vehicle itself, that is to say, to be included in the unladen weight of the vehicle, the capacity of the load which he could carry would be considerably reduced if he kept his vehicle down to the weight which would permit him to run it at 30 miles an hour instead of 20.
  The first Amendment deals with the case where the container itself belongs to the trader and not to the proprietor of the vehicle. The second Amendment deals with the container which is the property of the haulage contractor. In most cases a haulage contractor will have only one or two containers to a fleet of, perhaps, 20 vehicles, and were this Clause 7 passed in its present form it would mean that he would have to license at the extra rate the whole of his fleet, because he would not know which particular vehicle was going to take the load. This extra licence charge would amount to anything from £5 to £20 a year on each of his vehicles, and in some cases the additional charge might rise to £40 a year through, out his whole fleet.
  The Amendment has been put down not for the purpose of avoiding the intention of the Government, but in order to clarify the position which has arisen since the Road Traffic Act, 1930, was passed, a position which I can illustrate by one specific case. It was the case of a man who was licensed in London and a case in which the container was not regarded as part of the unladen weight of the vehicle. He was going a journey southward and when driving in Wiltshire was apprehended for not having his container added to the unladen weight of his vehicle, which had previously been sanctioned in London. The case is so well known that I do not propose to enter into details. I hope the House will accept this Amendment and the others, and that the Minister will thus make clear a position which, if it were not made clear, would constitute a great injustice to road hauliers and be of distinct detriment to the traders of the country.
  Mr. H. G. Williams: I beg to Second the Amendment.
  4.44 p.m.
  The Parliamentary Secretary to the Ministry of Transport (Captain Austin Hudson): As my hon. and gallant Friend has said, Clause 7 of this Bill was inserted to clear up an ambiguous position. Where additional bodies are placed on vehicles, by Section 26 of the Road Traffic Act, 1930, those additional bodies have to be included in the unladen weight. When this Clause was before the Committee various Members indicated that they thought the wording could be improved and that it was unfair. I then gave an undertaking that I would receive a deputation and would see whether I could meet their point. I did receive a deputation, and I came to the conclusion that some Amendment would improve the Clause. The wording which my hon. and gallant Friend has put down is the result of consultation with my Department. I think it is fair. Containers as such are exempt, but the additional body as such is part of the unladen weight.
  Mr. R. C. Morrison: Do I understand that the hon. and gallant Gentleman is now accepting the four Amendments?
  Hon. Members: Three.
  Captain Hudson: I understand that the fourth is out of order.
  Amendment agreed to.
  Further Amendments made:
  In page 6, line 24, leave out "or in."
  In line 28, at the end, insert:
  "Provided that the weight of a receptacle shall not be included in the unladen weight of a goods vehicle by virtue of this Section—

  (a) unless the receptacle is placed on the vehicle by or on behalf of the person in whose name the vehicle is registered under the Roads Act, 1920; or

  (b) if the receptacle is constructed or adapted for the purpose of being lifted on or off the vehicle with goods or burden contained therein."

  CLAUSE 13.—(Amendments of 12 13 Geo. 5. c. 17. s. 21.)
  4.47 p.m.
  Mr. Croom-Johnson: I beg to move, in page 12, line 12, to leave out "they think fit," and to insert "it seems proper to them so to do."
  I am afraid this is rather a lawyer's point. There is in existence Section 21
  1532
  of the Finance Act, 1922, aimed at stopping certain evasions in the payment of Surtax, brought about by holding up interest or profits made by companies in control of less than five persons so that ultimately, without having declared any dividend and without the person who is entitled to benefit having paid any Surtax, he winds up the company and then gets the benefit of the assets. Section 21 provides certain machinery which works in order to stop that particular type of evasion. The Clause which I am seeking to amend is an endeavour to stop a further evasion which we have discovered. It arises in this way: Somebody holds a number of shares which, theoretically, entitle him to share in the profits of a company, but the company does not declare any dividend and the individual's income not being within the Surtax range is not liable for Surtax. In winding up the company, the capital is arranged so that some other individual, who would be a Surtax payer if he got the profits, is entitled to have the assets.
  The Clause prevents that. The Special Commissioners are empowered to give a direction as to the amount of profits which ought to be divided, in accordance with the real facts and in accordance with the proportion of the assets in the winding up due to the particular individuals concerned. I have nothing to say but to applaud the object of the Clause, and the only little point which has arisen is that language has been used which suggests to the legal mind that the Special Commissioners have an absolute discretion as to how they are to make that division and apportionment. The object of the Amendment is to show that they have not an absolute discretion, but that they have to investigate and to do the thing on proper lines. That being the whole object of the Amendment, I commend it to the attention of the House.
  Mr. Levy: I beg to second the Amendment.
  4.49 p.m.
  The Attorney-General (Sir Donald Somervell): My hon. and learned Friend said that this was a drafting point. The words at present in the Bill are, "they think fit," and he proposes to substitute the words in his Amendment. The question is, which wording is the more fit and proper of the two. On the whole we

  1533
  agree with him, and we are prepared to accept his Amendment.
  Amendment agreed to.
  CLAUSE 14.—(Allowance for depreciation of mills, factories, etc.)
  4.50 p.m.
  Mr. H. G. Williams: I beg to move, in page 13, line 34, to leave out the first "and," and to insert
  "being either—
  (i) a building which".
  There is a second Amendment, linked with this one. I cannot speak on this matter with the authority I would like, because I am moving the Amendment as a result of certain proposals made upon the Committee stage by my hon. and gallant Friend the Member for West Birkenhead (Colonel Sandeman Allen). He cannot be here to-day because he is commanding a Territorial Brigade of which he is the commanding officer, and which is at the moment in camp. He asked me whether I would look after these Amendments for him. I understand he desired to move them at the instance of that celebrated authority, the Mersey Docks and Harbour Board, with which are associated other enterprises which run docks and harbours in various parts of the country. Despite his absence in camp, I regret to say that my hon. and gallant Friend has deserted the Amendments, because he has taken his name from them and has transferred it to the Amendment which my hon. Friend the Member for Elland (Mr. Levy) proposes should be made in the second of my Amendments. This Amendment to the proposed Amendment would add force to the Amendment which I have upon the Paper.
  May I now explain the position? The Clause is easy to understand. It provides for depreciation in respect of certain buildings—that is the general theory—of a kind that suffer depreciation from the presence of working machinery in or associated with them. In the case of a docks and harbour board, the buildings are not generally erected where manufacturing processes are carried on. They are buildings where storage takes place and where there is movement of goods, but, in fact, a very large amount of machinery is used in those buildings, and those buildings belonging to dock and canal authorities do suffer depreciation.
  1534
  It takes place not only in the building in which the machinery is, but to a considerable extent in adjoining buildings. The Amendment, as I have it on the Order Paper, covers only buildings in which machinery happens to be situated, but the further Amendment of my hon. Friend the Member for Elland goes further and includes adjoining buildings in which there is no machinery but which suffer from the vibration. If the Government accept my proposal, I hope they will do as I feel inclined to do, accept the Amendment to the Amendment of my hon. Friend the Member for Elland. Perhaps we might have some indication from the Front Bench before my hon. Friend moves his Amendment, because I do not want his Amendment to prejudice mine.
  Mr. Croom-Johnson: I beg to second the Amendment.
  4.53 p.m.
  The Financial Secretary to the Treasury (Lieut.-Colonel Colville): It might be convenient if I adopted the suggestion which my hon. Friend the Member for South Croydon (Mr. H. G. Williams) has made and if, with your permission, Mr. Speaker, I dealt with this Amendment and its effect upon the one which follows. I would make it clear now that while we feel able to accept the Amendment of my hon. Friend the Member for South Croydon, as well as that which follows, we do not feel that we can go as far as to accept the Amendment proposed by my hon. Friend the Member for Elland (Mr. Levy), and my hon. and gallant Friend the Member for West Birkenhead (Colonel Sandeman Allen), whose absence we all understand. Clause 14 is intended to deal with abuses which have crept into the method of securing a certain allowance for depreciation which was granted in the Finance Act of 1918. As I was careful to emphasise to the Committee, the intention of the Clause is not to take away or to increase the allowance, but to deal effectively with abuses that have crept in, and, in general, to leave the effect of the allowance as before.
  An Amendment which I was unable to accept was moved by my hon. and gallant Friend the Member for West Birkenhead, but it had in it a point which was worthy of consideration. That point has been embodied by my hon. Friend the

  1535
  Member for South Croydon in the Amendment which he has moved. That point briefly is that the Clause gives an allowance for special depreciation of mills and factories due to vibration caused by power machinery in respect of a building containing, and wholly or mainly used for the purpose of operating, such machinery. It was represented that it would also be fair to give an allowance for a building which forms part of the premises and which, while not itself containing power machinery, suffers substantial depreciation from the operation of the machinery in the other building. The second Amendment of my hon. Friend would make the allowance applicable to the depreciation of the building affected by the operation of the machinery in the first building, that is to say, a building used wholly or mainly for the purpose of operating power machinery. We agree that that is a reasonable point, and are prepared to accept the Amendments. The second of them does, to a very small degree, extend the allowance.
  My hon. Friend the Member for Elland would go further and extend the allowance to any building containing machinery which had a substantial effect on the depreciation of the building, whether or not that building was used wholly or mainly for the purpose of operating the machinery. The reason why we cannot accept the Amendment to the proposed Amendment is that it is not our intention to introduce a new allowance but merely to repeat in a different form the allowance granted in the Finance Act, 1918. For that reason I can accept the Amendment in the name of my hon. Friend the Member for South Croydon, but cannot go further.
  Amendment agreed to.
  4.58 p.m.
  Mr. Levy: Since I was asked to move this Amendment by my hon. and gallant Friend, who is now in a Territorial camp, I appreciate that the Minister cannot accept it but I think that further consideration ought to be given to the point which it raises. The Minister says that he will allow depreciation where the premises are used wholly or mainly for machinery. Let us take the ordinary case of warehouses; there are lifts, grain elevators and machinery to operate the various cranes in those warehouses, and yet it cannot truly be said that the—
  Mr. Speaker: Is the hon. Member moving his Amendment to the proposed Amendment?
  Mr. Levy: Yes, Sir.
  Mr. Speaker: The main Amendment has not yet been proposed.
  Mr. H. G. Williams: I beg to move, in page 13, line 36, at the end, to insert:
  "or
  (ii) a building the depreciation of which is substantially increased by the operation of machinery so worked on the premises in any such building as is mentioned in paragraph (i) of this Sub-section."
  5.0 p.m.
  Mr. Levy: I beg to move, as an Amendment to the proposed Amendment, in line 3, to leave out from "premises" to the end.
  I understand that in the case of the Mersey Docks and Harbour Board, and authorities of that kind, this kind of depreciation is not allowed, whereas in the case of all private undertakings it is allowed. I think the right hon. Gentleman the Member for Hillsborough (Mr. A. V. Alexander) will agree that even in the case of co-operative stores, which have large buildings, warehouses and the like, this depreciation is allowed. But we find that in the case of dock authorities there is a certain amount of discrimination, and depreciation on buildings is only allowed, as I understand it, where the premises contain and are used wholly or mainly for the purpose of operating machinery worked by mechanical power; while in the case of other premises in which machinery is necessary, such as elevators to deal with corn, but which could not really be said to be wholly or mainly used for the purpose of operating that machinery, no depreciation is allowed.
  One can easily imagine the use of a building wholly or partly for the purpose of operating machinery causing such vibration in an adjoining warehouse as to cause it to depreciate unduly, and yet in that case no depreciation would be allowed. My hon. and gallant Friend the Member for West Birkenhead, in moving his Amendment in Committee, said that the question deserved to be looked into further, and he withdrew the Amendment on the understanding that consideration would be given to the question whether the point could be met by an Amendment on Report. We have put down the

  1537
  Amendment again, but I understand that the Financial Secretary cannot accept it. I am not going to press it, but I hope he will give the point consideration at some future time, when perhaps he may be inclined to alter his view.
  5.3 p.m.
  Mr. Maxwell Fyfe: I beg to second the Amendment to the proposed Amendment.
  I want to emphasise what my hon. Friend has said with regard to the position of the Mersey Docks and Harbour Board. It is, as hon. Members are aware, a board of particular value to the public service, to the City of Liverpool, and to the docks on the Mersey, and the situation of which my hon. Friend has spoken bears very hardly in that regard. I would like just to remind the Financial Secretary that the position of the Mersey Docks and Harbour Board was discussed in a number of derating appeals a few years ago, when it was set out in great detail and with great clarity.
  Amendment to the proposed Amendment negatived.
  Proposed words there inserted in the Bill.
  5.4 p.m.
  Mr. H. G. Williams: I beg to move, in page 14, line 14, at the end, to insert:
  "(5) A person occupying any premises as the tenant thereof shall be treated for the purposes of this section as if he were the owner thereof if, under the covenants to repair contained in the lease or agreement by virtue of which he occupies the premises the whole of the burden of any depreciation of the premises falls upon him."
  This Amendment also I am moving on behalf of my hon. and gallant Friend the Member for West Birkenhead (Colonel Sandeman Allen). I can summarise its object by saying that it proposes that only the persons who are entitled to the money should get it.
  Mr. Levy: I beg to second the Amendment.
  5.5 p.m.
  Lieut.-Colonel Colville: We are able to accept this Amendment. It was moved in another form in Committee by my hon. and gallant Friend the Member for West Birkenhead (Colonel Sandeman Allen) but, as his wording was not quite correct, I was then unable to accept it. Its object is to ensure that the allowance—which is the same allowance that was referred to
  1538
  in the last Amendment—should go to the benefit of the person on whom falls the burden of making good the special depreciation in question. That may be the owner or may be the tenant who has, under the terms of his lease, to bear the burden of any depreciation of the premises, and, as the Amendment is in line with our practice, we propose to accept it.
  Mr. Williams: I am very much obliged.
  Amendment agreed to.
  5.6 p.m.
  Mr. H. G. Williams: I beg to move, in page 14, line 19, to leave out from "trade," to the end of the paragraph.
  It will be seen that the words which I am moving to leave out, namely,
  "or for lighting any street, public place or public building,"
  might create a sense of ambiguity.
  Mr. Croom-Johnson: I beg to second the Amendment.
  Lieut.-Colonel Colville: We accept this Amendment. It is a drafting Amendment. The words which it proposes to leave out are not necessary.
  Amendment agreed to.
  CLAUSE 17.—(Charge of National Defence Contribution.)
  5.8 p.m.
  Mr. A. V. Alexander: I beg to move, in page 16, line 11, at the end, to insert:
  "Provided that the total amount of National Defence Contribution to be charged under this Section on any society registered under the Industrial and Provident Societies Acts, 1893 to 1928, shall not exceed five per cent. of the nett sum on which the society is assessed for the purposes of Income Tax."
  I should like at the outset to say, if I may be allowed to do so, that, however high political feeling may run at times—and I daresay it does run high at times in connection with the discussion of co-operative societies—I hope that this Amendment will be considered by the House without any of that political feeling. The plea that I make from that point of view needs a word of explanation, because I often hear statements made by hon. Members of the House, when they are dealing with the question of the taxation of co-operative societies, which indicate that their attitude towards this matter would have been very different but for the fact that co-operative societies have

  1539
  essayed to take certain political steps. However controversial that subject may be, I beg hon. Members to consider that that is not really a legitimate answer to a straight and honest case for fair treatment in regard to the manner in which co-operative societies are assessed to taxation and, indeed, the very kind of case that we are considering to-day emphasises and stresses the necessity under which co-operators have found themselves of defending themselves as far as they can against situations of this kind when they actually arise.
  I often have to confer with my hon. Friends on the measures to be taken to secure justice in cases of this kind, and we have to remember that we are dealing, not only with Members of Parliament who represent their constituents, but with Members of Parliament who have very wide commercial interests, and can be expected to look at these matters from a business point of view, even though we may not agree with that point of view. When we consider that there are 790 directorships of trading, commercial and financial companies within this House, I do not think that any great case can really be made against us on the ground that we happen to have certain political avenues of defence, and it is on that ground that I ask that this matter should be considered without political prejudice.
  As to the reason for moving this Amendment, I will put it to the House first of all from the social standpoint, I feel that in doing so I am on very firm ground, in view of the Debates which have already taken place on the Financial Resolution and on an Amendment in another form which was moved during the Committee stage. It is clear, from the utterances of the Chancellor and other representatives of the Government in those Debates, that, whatever may have been his original intentions in framing the second edition of the National Defence Contribution, he has undoubtedly been moved by social considerations in the concessions and arrangements which he has made up to date in respect of this tax. One might submit to the House, in dealing with this tax, quite a number of considerations from the social standpoint, but, since I am arguing mostly on the ground of the action which the Chancellor has taken, I will confine myself to three.
  1540
  First of all, there is the main overriding proviso in the Chancellor's computation proposals which gives complete exemption to all trading profits which do not exceed £2,000 a year. There can be no shadow of doubt that the only reason for his action in that direction is a social consideration; I do not believe there can be any other explanation than that, for social reasons, he does not want to superimpose this tax, in addition to Income Tax, upon small traders or small trading bodies, because he thinks it will unduly interfere with what he regards as their legitimate position in the commercial and political structure of the country. In the second place, I submit that the Chancellor has admitted, in his treatment of the building societies, the necessity for making adjustments for social reasons, for during the Report stage of this Bill an Amendment to his original tax provision has been made which reduces by two-thirds—a pretty substantial reduction—the contribution of building societies, on what is undoubtedly a social ground, namely that the building societies perform a service to the community in the direction of assistance in the provision of housing which he thinks would be injured by the full operation of the National Defence Contribution.
  So far as the Chancellor of the Exchequer has moved to make this concession to the building societies, not on tax grounds but upon social grounds, he has completely departed from the general principles which he put into the Bill for governing the levy of this tax on those societies. In the third place, the Chancellor exempts altogether from the operation of the National Defence Contribution the profits of public utility companies and societies although there is certainly far less claim to exemption, either upon social grounds or upon the actual profits which on the average they make, than there is claim for adjustment and relief to the co-operative societies.
  We feel that the Amendment will bring to co-operative societies, not the full justice that they ought to have, because, if we were properly treated, as we do not make profits, we ought not to be taxed on profits, but it will bring an element of that justice to which we have a right, and I think we are entitled to submit some evidence of the social value of the societies. Can anyone doubt the real

  1541
  social service of co-operative societies in this modern community of ours? Here we have gathered together in about 1,150 separate and autonomous organisations between 7,000,000 and 8,000,000 of the population, in the main that section of the population which, because of the lowness of its income, is totally exempted from any assessment to Income Tax. When the State in its wisdom has exempted that large section of our working class population from Income Tax, ipso facto, it recognises that up to that point those members of the community have discharged their just liabilities to the State in taxation. They gather together in their co-operative societies at that point, having fulfilled all their tax liabilities to the State upon their incomes, to engage in mutual association with each other to spend their nett incomes in a manner most economical to themselves and to raise, as far as they possibly can, the standard of their life, which is far too low.
  It is a tribute to the common sense, the independence, and the thrift of great masses of the British industrial population that we have now to say about the British co-operative movement, if I may quote the title of a book recently published by one of our own Members, that Britain has become not only the cradle of co-operation but pre-eminently an example to communities in all parts of the world as to what can be done voluntarily by mutual association of the poorest people in any community provided, not that they are given privileges, but that they are at least protected by the State from undue handicap and from unfair interference. That is all that we are asking for when we ask for the element of justice that we are submitting to the House. There are thousands of our co-operative members who would never have been able to become, as they have become, depositors in building societies if they had not first been able by their mutual thrift to put themselves in a position, first to make a deposit, and then to keep up their payments to the building society when they actually take out their advances for the purchase of their houses. Therefore, if it were not for the thrift and economy practised by co-operators there would be a vast difference to-day in the amount of service that is rendered to the State by the building societies.
  Even more striking proof is forthcoming with regard to the social service rendered
  1542
  to the stability of the State in general by co-operative members if one thinks of their service in time of economic stress in the State. I could give numerous examples, but I am content to give one outstanding example which springs to my mind because I have the honour to represent the City of Sheffield. I and many of my friends who are connected with Sheffield will not forget the circumstances of the economic depression after the great armaments expenditure from 1915 to 1919. I remember the demonstration before the town hall pleading on behalf of the unemployed for something more than a bare maximum of £1 a week to keep body and soul together in a whole family. When we had spent all that we could possibly raise by rate revenue in order to make up out of the Poor Law fund what could not be given at that time from the Unemployment Fund, the City had to come to the Minister of Health and borrow in the course of less than 15 months no less than £1,250,000 for current expenditure on poor relief, which it is still repaying to-day by a special rate of 6d. in the £, and yet in the course of that same 15 months the more thrifty members of the industrial population in the City drew out from their co-operative society £1,000,000. If it had not been for the existence and the success of the thrift of the co-operators in that instance the charge upon public funds would actually have been double.
  Is there any doubt that, when building societies make their claim, with which we do not quarrel, on their social service to the State, the co-operative movement can make double the claim, both in regard to its size and in regard to the measure in which its effort comes from the working class, and also on the relief that it brings to the State through the efforts of the working class. As I and my hon. Friends who are used to addressing co-operative gatherings travel about the country, we find that there is not a single important industrial local authority whose treasurer will not say that they bless the existence of the co-operative societies and their regular periods of disbursement of the savings of those people, because it avoids 50 per cent. of the difficulty that they would otherwise have in collecting the local rates, which bear so hardly upon the working class. This is the kind of mutual thrift and economic independence which

  1543
  the Chancellor in our view is seeking to tax and to tax unduly.
  I will touch briefly on some of the other activities of these millions of co-operators. In education, in the provision of houses, assisting holidays, and in the provision of general social amenities they are pre-eminent. With regard to employment, I wonder whether the Chancellor would consider the effect of any unfair taxation upon the position which these mainly working people have adopted with regard to their employés. This vast group of societies is giving, not broken but continuous employment—guaranteed employment—to 306,000 people. I wonder whether it is really recognised that the majority of these people are employed in the distributive trade and that 94½ per cent. of them are in a trade union, not always by the voluntary effort of the worker but because the working-class nature of these societies leads to the members going to their quarterly meetings and saying, "We want to give the best trade union conditions that we can afford in negotiation with the trade unions but, if we give them you, our employés must be in a trade union and must help to raise the standard of other workers."
  For 15 solid months now, since April, 1936, the Minister of Labour has called periodic conferences of the distributive trades trying to get some measure of voluntary agreement for raising the standards of distributive workers and yet up to the moment we see no real progress. Outside the co-operative movement not more than 5 per cent. of all the hundreds of thousands of distributive workers are in a trade union, and the vast majority of them have not got trade union conditions. If the Chancellor persists in what we feel is an unfair additional imposition upon our societies, he must answer the charge that every extra penny that he takes from them in this way will be retarding and not helping the maintenance of those employment conditions which are so satisfactory a feature of the co-operative movement. I hope I have said enough on the social position to show that the gist of our case is that it is not a loss to the State, it is an investment to the State, to adopt a course, not which confers a privilege, but which will withhold the House from enacting an injustice upon our societies.
  1544
  I now turn to a comparison of the treatment of co-operative societies with that which has been accorded to building societies and public utility companies. The capitalisation of the building societies is in no real sense different at all in principle from that of the co-operative societies, because neither of these sets of organisations works on a fixed aggregate capital, and their shareholders in both instances are able at any time either on demand or, if the rules show it, by very short notice to withdraw their capital when they need it. Further, both organisations work upon a low fixed interest, very often lower than the interest upon those loan charges, which figures in other parts of this Measure, lower, in fact, than on many issues of company debentures. On the other hand, when we come to make a comparison of industrial and provident societies with the building societies we must remember that whereas the building society is enabled to take from any individual shareholder a sum up to a maximum of £5,000, and that a shareholder in the building society can, therefore, receive, at what perhaps is the average rate to-day of 3 per cent., up to £150 per annum free of tax as pure investment income. An industrial and provident society is limited by statute to 200 per member.
  Take the next comparison. The building societies to-day, taking the average of their shareholders from the returns in their reports, have an average holding of nearly £300 per member. What is the position of the co-operative societies? The average holding does not represent £20 per member. That is to say, that the average holding of the building society member is 15 times as great as it is in the case of the co-operative society. Therefore, if you take these things in comparison, you will see that, if there is a case for the building society, there is a far greater and stronger case from the point of view of the economic level of the member of the co-operative society.
  If you take the average holding of £20 per member and the fact that the average rate of interest on those shares does not exceed 4 per cent., there are thousands upon thousands of shareholders in the co-operative movement to-day who are exempted in effect from being charged

  1545
  with Income Tax and then having to reclaim it afterwards, but who will be mulcted indirectly in this new form of tax although the maximum that they can receive from investment income upon their average of £20 is probably not more than 16s. or 17s. a year. We think that that is a perfecly unreasonable condition for the movement to have to face. We are not asking in this Amendment—and I dare say that some of my hon. Friends will think that we are not asking for enough—for as much relief to co-operative societies as is accorded to the building societies.
  But I come back to the treatment of the co-operative societies in comparison with that of public utility companies. Here is a very general exemption altogether from assessment to the new tax of public utility bodies, if they are either required by Statute or by Order to limit their prices or, on the other hand, by the same kind of Statute or Order to limit their interest upon shares. I am not going to suggest, and I hope that the Chancellor of the Exchequer will not take me when I deal with the public utilities in this matter as advocating without very careful examination at any rate, a change in the view with regard to public utilities. I do not feel that on this Amendment I am called upon to do it, but it is incumbent upon me to contrast the kind of return which we get from public utility companies which are exempt. I hope that the House will bear with me while I take a few random selections which I have made within the walls of this House from the "Stock Exchange Year Book," a document which is open for consultation to any Member of the House. Let me take the Altrincham Electricity Company, which is a subsidiary, I understand, of one of those holding companies about which we have heard so much in the course of the Debate, and may I ask hon. Members on this side of the House who are interested in mining to listen to one or two of these figures?
  Here is the Altrincham Electricity Company: 1923 to 1925, payment on preferred shares, 500 per cent; in 1926, 1,000 per cent. and a capital bonus of 8,571 per cent. in the same year; in 1927 to 1933, 146 per cent. on the inflated capital. In 1934, 1935 and 1936 they continued to pay 146 per cent., having passed another capital bonus; in 1927 of 60 per
  1546
  cent. If I come up to November, 1936, not so long before the Chancellor of the Exchequer gives them the exemption from this tax, the capital bonus in that year was 50 per cent. on the ordinary, and 357 per cent. upon the deferred shares. Does the Chancellor of the Exchequer really justify the special taxation of co-operative societies while he exempts companies of that kind? I think that that is enough, but I want to give one or two other examples. No doubt if the Chancellor of the Exchequer went to his officials they would say, "Well, of course, one black sheep does not make a whole black flock." But let me take some more examples and come back to more sober figures. Banbury Electricity Company paid 10 per cent. in 1925, 1926 and 1927, to per cent. in 1928, plus a capital bonus of 100 per cent., and from 1929 to 1931 10 per cent. on the double capital, and a very substantial interest ever since. Let me take Bournemouth, which is not a small company. In 1923 it paid 13 per cent. and a capitalised bonus of 20 per cent.; 1924 to 1926, 10 per cent. each year on the inflated capital, plus another 4 per cent. bonus; 1927, 15 per cent. and another capital bonus of 100 per cent.; 1928 to 1933, 15 per cent. each year, and the further maintenance of 15 per cent. in the last accounting period.
  I will take one or two of the main London companies, which, I have no doubt, are to be exempted from the impost of the National Defence Contribution. The Brompton and Kensington Company have averaged nearly 9 per cent. since 1923, and have included in that period a capitalised bonus of 20 per cent. Charing Cross, which is a pretty big and influential company, in 1924 and 1925 paid 15 per cent.; in 1926 11½ per cent. and a bonus of 80 per cent.; in 1927 to 1929, 8 per cent. on the inflated capital; 1930, 8 per cent. and another bonus of 6½ per cent.; 1931, 8 per cent. and a bonus of 10 per cent. With these additions to capital, they have had no difficulty in maintaining throughout the economic depression a regular 8 per cent. I will take Chelsea—and I want to drive this home if I can—in 1923 and 1924 they paid 12 per cent.; 1925, 12 per cent. and a capitalised bonus of 60 per cent.; 1926, 10½ per cent. on the inflated capital; 1927 to 1928, 8⅞ per cent.; 1929, 8 per cent.; 1930, 8 per cent. and another

  1547
  capital bonus of 5 per cent.; 1931, a further 8½ per cent.; and 1935, a further 10 per cent. on the inflated capital. These are large Metropolitan public utility companies, and the Chancellor of the Exchequer exempts them. I am not asking him to decide to-night to change his intentions, but I am asking for corollary justice to those great masses of working-class people who are gathered together in their co-operative societies.
  This sort of thing does not apply only to electrical companies. The same thing applies to large numbers of gas companies, but I will say on behalf of the gas companies that they do not show this great mass of profits like those which I have quoted from the electrical companies, but still they are substantial. Altrincham, 9¼ per cent. on original shares, 7 per cent. on new ordinary shares; Ashton, 17⅞ per cent., 15¾ per cent. and 14 per cent., and in the last two years 15¾ per cent. and 13½ per cent., not a bad return for shareholders in a public utility company which is to get exemption. Take Banbury, 10 per cent. and 7 per cent.; Beccles Water and Gas, 10 per cent, and 8 per cent.; Bideford, where they have maintained from between 13½ per cent. to 14½ per cent. for the last 14 years, almost without a break on their local gas, light and coke company; Bilston, 11, 8, 12, and 9 per cent. in successive years. And so I could go on. From the numerous other cases, I could produce a book of statistics for the House if they needed further proof of the case.
  I would add this further comment that it does not end there because my hon. Friend the Member for East Ham, South (Mr. Barnes) said a word or two earlier in the Debates about the position of the transport companies. We know some of the difficulties of companies like the main railroad companies. We do not want to interfere in any way with a proper adjustment of the position as is required by social conditions, but when one comes to look at the companies which are exempted —take the type of company like Thomas Tilling, Limited, which my hon. Friend the Member for East Ham, South, mentioned a few weeks ago in this House—is there any doubt that, compared with the treatment which the Chancellor of the Exchequer is giving industrial and
  1548
  provident societies, they are absolutely in clover. That is the only way to describe it under this tax when you get results like this, in 1923, 15 per cent. and a bonus of 30 per cent.; 1924, 15 per cent.; 1925, 15 per cent. and a tax free cash bonus of 33⅓ per cent., plus a capital bonus of 66 per cent.; 1926, 15 per cent.; 1927, 15 per cent. and a bonus of 15 per cent.; 1928 and 1929, 20 per cent.; 1930, 20 per cent. and a cash bonus of 5 per cent. and a capitalised bonus of 50 per cent.; 1935, 10 per cent, and a capitalised bonus of 100 per cent. And so I could go on. There seems to be no end to the way in which the public can be found to be contributing to these very substantial profits in what are termed public utilities and which are given the special social preference of being exempt altogether from the provisions of this National Defence Contribution.
  One of the main arguments put up by the Chancellor of the Exchequer in dealing with the exemption of these societies and companies is, that they are on a special plane and do not really enter into competition with anybody. He says that if you take the case of building societies, there is no other body with whom they can compete. Is that so? I mentioned to the House yesterday that it is not so with regard to building advances. The ordinary provincial banker is still advancing money to his smaller clients on house property, the solicitor on behalf of clients, and other lenders. I have seen the case of the building societies, because we have a large building society in our own membership. I have seen the case which has been submitted to the Treasury for special treatment. The ground of their case in the main is that if they had been mulcted in the full tax they would have to raise their rate of interest, and if they had to raise the rate of interest to borrowers, they could not compete with many forms of competition which they have to meet.
  That is the burden of their case, and it is no use the Chancellor of the Exchequer saying that they can justify the special treatment on the ground that they are not in competition. Take the public utility company. It may be that there is no special ground for disputing the Chancellor's claim as to competition in the case of the railway company in many respects, but that does not apply to all

  1549
  the public utility companies. I have here among my papers a circular which came to me this morning at my house from the Gas Light and Coke Company. It begged my patronage for the purchase or hire, whichever I was able to do, of a gas refrigerator. It is perhaps not without interest to tell the House that the co-operative members have banded themselves together to provide themselves with their own make of refrigerator.
  These people whom you exempt actually compete with us. The Gas Light and Coke Company are not the only people concerned. I went into a new house recently and the Westminster Electric Supply Company wanted to supply me with all my electrical fittings. They wanted to sell or hire to me all the electrical fittings and stoves that I required; but our co-operative members supply themselves from their own factories with all these things. Therefore, these concerns are competing, and yet the Chancellor of the Exchequer said that they are in a special position because they do not compete with other people. There is not a shadow of justification for that argument or that we are asking for special treatment in relation to ourselves. We maintain that if the Chancellor of the Exchequer has been able to discover social grounds on which he can exempt incomes up to £2,000, on which he can exempt the building societies, in part, and exempt altogether the public utility societies, then we have an unanswerable argument for a fairer treatment for the industrial and provident societies.
  I have taken up a considerable amount of time, but I feel very deeply on this matter. I should like now to come to the final stage of my argument. I hope that the Chancellor of the Exchequer will not misunderstand me when I say that it is very important that he should be under no misapprehension in regard to our case. Our societies hold the view that they proved beyond the shadow of doubt to the Norman Raeburn Committee that our societies' mutual surpluses would not constitute profits and that they ought to be exempted altogether. The Chancellor of the Exchequer does not now take that view. It is only because of the unfair and unjust treatment of our societies in the Finance Act of 1933 that the right hon. Gentleman is able to get away from his own legal view and from what we
  1550
  regard as much more important, the splendid rational way in which he put his view in 1920, when he said that the co-operative societies did not actually make a profit. The case for complete exemption having been argued before I do not want to press it now. We rest our case upon the element of justice which ought to be given in relation to the payment of this tax.
  We are only asking that the contribution made by industrial and provident societies as entities should be confined to a 5 per cent. charge upon the net sum to which they would ordinarily be assessable for Income Tax. Let us look at the incidence of the new tax. I have not yet received an answer to a point which I put to the Chancellor of the Exchequer, and that is whether there are any companies assessable under the National Defence Contribution who will in fact pay a higher net sum under this tax than 5 per cent. of the sum on which they are assessable to Income Tax in the ordinary way. I have not been able to discover any such companies. That is not how it works out in the case of co-operative societies.
  Our headquarters at Manchester have been getting out a few more examples of the effect on industrial and provident societies. Let me give two examples. Society A is obviously a small, I will not say a struggling society, but it has very little margin to play with. Their Income Tax payment assessed under the Act of 1933 is £126 10s., but under the National Defence Contribution they will be required to pay £407 14s. The cheque made out by that society to the Treasury for a tax which nominally is to be at one-fifth the rate of Income Tax will be more than three times the size of the cheque payable for Income Tax under the Act of 1933. Is that just? Society B has an Income Tax liability of £178 and a National Defence Contribution liability, if taken on the accounts for last year—I do not know what it will be for the current year—of £412, or 2½ times as much as the charge for Income Tax or, to put it in another way, nearly 12 times what they ought to pay if they were paying at one-fifth of the rate of Income Tax. Is that just?
  The Chancellor of the Exchequer has put up what he regards as the legal answer to the case. He says that whilst we complain that we are not given exactly the

  1551
  same treatment in law as we were given under Section 32 (4) of the Finance Act, 1933, under which Share Interest is not brought into charge because we are not allowed to deduct Income Tax from that interest, we do not mention Section 31 under which all surplus is brought into charge. He says that it was only a matter of machinery that Section 32 with its special rules was put in the Finance Act of 1933.
  That will not be an answer to the working-class directors of co-operative societies in their board rooms at Heckmondwike and Cleckheaton when they have to make out cheques perhaps two and a half times as much for Defence Contribution as for Income Tax. If I had anything to do with advising them as to the approaches that they should make to the right hon. Gentleman, I should say that they are entitled to look to him as their representative as well as Chancellor of the Exchequer. Let him explain to them how it is that the companies with which they are competing in Cleckheaton and Heckmondwike only pay under this tax one-fifth of what they have been paying in Income Tax, whilst they are to be so heavily mulcted. In the Finance Act of 1933 it was settled what was their just contribution to Income Tax, and now, hey presto, the right hon. Gentleman finds that he must charge them on a Defence Contribution of 1s. in the £ more than they pay in Income Tax at 5s. in the £. The answer of the right hon. Gentleman will not be found a very satisfactory answer for them, and it is certainly not an answer on the actual facts of the situation.
  If this thing is looked at from an entirely impartial point of view and the social values to which I have referred are taken into account, there is an overwhelming case on which the right hon. Gentleman could rely for giving the relief which is asked for in this Amendment. He and his Government in the last four or five years have been responsible for changing the judicial judgment of the House of Lords in regard to the basis of our assessment. There was no ground for that action except a political ground. There was no case in law, and no legal reason for it. It was purely a political act. The right
  1552
  hon. Gentleman and his Government are responsible for changing it, and now when it comes to dealing with this question of the National Defence Contribution this Government changes from the principle that was settled in the Finance Act of 1933 in regard to the charges for Income Tax upon co-operative societies. We submit that in equity and common sense and in recognition of our social value as a movement the Government ought not to charge co-operative societies more than one-fifth of the sum that they would be assessed on for Income Tax, and it is on that basis that we have tabled our Amendment and on that I urge the Chancellor of the Exchequer to accept it.
  5.55 p.m.
  Sir J. Simon: The right hon. Gentleman will, I hope, permit me as an old Member of the House and an old colleague to say that nobody admires the tone and the manner of his speech more sincerely than I do. It is a very difficult thing for anybody who has devoted his life service to a cause of this sort, to present an argument on which he feels very deeply with such unfailing moderation and good temper, and I hope that I shall be able to state, bluntly and firmly but I hope without any heat, the considerations which I think justify the House in not accepting the right hon. Gentleman's proposal. He began by justifying very eloquently the great importance and usefulness of the co-operative movement. I do not dispute it. I have never either publicly or privately spoken slightingly of the co-operative movement, or attacked it. It is not only a movement which has rendered great service to its members, but it is a movement which has extended all over the country, and I am glad to take note of the fact that more particularly in the distributive trades its branches have had great success. Therefore, whatever else may be said, it cannot be said that if this tax is imposed on co-operative societies it is being imposed on people who cannot afford to pay.
  Without any technicalities, what I observe and what we all observe is that if one walks down a street in any town or large village in the country, one finds that there is Messrs. X. and Company, Limited, carrying on a retail trade in, say, provisions, grocery, drapery and so so. Then there is Messrs. Y. X. in

  1553
  partnership carrying on a similar trade, and further down the street one finds a co-operative store carrying on the same trade. Technicalities apart, I must say that I think the result would be very remarkable, if we are going to impose this tax, if we did not impose it upon the profits which are made by all three concerns. I do not think that the argument, powerful as I think the argument is, on its proper occasion, that the profits made by co-operative societies are only profits in a very specialised sense—I do not think that it would satisfy the country or the House of Commons if any distinction was to be drawn between these different classes of traders.
  The right hon. Gentleman has said, quite frankly, that he does not want to fight the battle of 1933 over again. I have never had the slightest difficulty in understanding the old argument in favour of the co-operative societies on the subject of profits, and I do not in the least retract my view that there was some logic and force in that argument. The right hon. Gentleman accepts the provision which Parliament made in the Finance Act of 1933, the words of which are very simple. It says:
  "any reference to profits or gains shall be deemed to include a reference to profit or surplus arising from transactions of the company or society"—
  we will say a co-operative society—
  "with its members which would be included in such profits or gains for the purposes of"—
  We will say Income Tax—
  "if they were transactions with non-members."
  In those circumstances the profits have been treated as profits which attract Income Tax. The right hon. Gentleman does not give up his contention that the political philosophy which enacted that law is bad, but he accepts what was done in the Act of 1933. The question, therefore, comes to this, should co-operative societies bear this tax in common with their rivals, and if so, what are the methods by which the tax should be applied to them. I have given the reasons why I think they should not be exempt from the tax, and, of course, the right hon. Gentleman does not suggest in the Amendment that they should be exempt. What is proposed in the Amendment is special treatment for co-operative societies. Let me deal with that. The
  1554
  right hon. Gentleman protested against what he called the special taxation of co-operative societies. There is nothing special in the proposal about co-operative societies. Indeed, as I pointed out in Committee, co-operative societies are never mentioned in the Bill from beginning to end. We are not making special proposals for the taxation of co-operative societies, we are merely asking that they should rank with other traders and come within the scope of the tax. It is those who are proposing the Amendment who are suggesting that some special arrangement should be made in the case of the co-operative societies.
  Let me say perfectly bluntly what I believe is the meritorious part of the argument upon which the case for the co-operative societies rests. It is equally true of the small man who holds shares in an ordinary company. This tax, which is to be a simple tax on profits, does in fact operate in this way, whether you are dealing with the small man who is a member of a limited company holding a few ordinary shares or whether you are dealing with a man who is a member of a co-operative society. The tax is so constructed that you apply it to the profits which are made by the undertaking itself without asking how the profits afterwards are going to be divided or subdivided and whether they are going ultimately to reach the pockets of poor people or rich people. If it was possible to devise a more elaborate system there would be something to be said for trying to make some arrangement for the small recipient, but I deny that that is the case of the co-operative societies alone, it is equally true in the case of 10,000 people in the country who hold one or two shares in an ordinary company. You find for this purpose that a company is faced with a tax which does not contain all kinds of allowances, abatements, and concessions, and references to earned and unearned income.
  The House must face the truth that a simple tax on profits made by an undertaking has this consequence, that if you consider how what is left may be distributed you must not draw a distinction between those cases in which the distribution will be infinitely sub-divided and those cases where it will not. To that extent the right hon. Gentleman has a case, but it is not the case of the co-operative societies. It is a complaint

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  against the construction of the tax. My point is that it clearly is in the nature of the construction of this simple tax on the profits of an undertaking that you must first find out your undertaking, whether it is a limited company or not, then ascertain the profits it makes—I am not using the word "profits" in a technical sense but in the ordinary sense—impose your tax on those profits and ask for the tax to be paid. This tax should be regarded as a sort of levy, a licence duty, which is paid by an undertaking because it is engaged in making profits through trading.
  Mr. Alexander: I take the right hon. Gentleman's argument about the company, but I cannot find in the case of any company that the revenue authorities have found in the past such a number of shareholders below the taxable limit that they have denied the company the right to deduct the tax. In the case of an industrial provident company it is the Government which have settled the provision and everybody was to have the right to this deduction. The Government now propose to deny them this right.
  Sir J. Simon: I am obliged to the right hon. Gentleman. I hope the right hon. Gentleman and those who support him will forgive me if I give them one or two figures. I really think that there is widespread misunderstanding on this subject. The Amendment, in fact, is a proposal that the National Defence Contribution should be regarded in the case of the co-operative societies as though it was a tax on their undistributed profits. I reply by saying that that is a misunderstanding of the nature of the National Defence Contribution. It is not a tax on undistributed profits, whether they are made by a company or by a co-operative society. It is a tax on profits, whether distributed or not. Let me give a case to show how it will work out. I appreciate the importance of the different methods by which the Income Tax Acts work out in the case of a co-operative society and a private company. In the case of a co-operative society the law charges the whole of the profits made for Income Tax, let us say it is £100,000. Having done that the law says, as a piece of machinery we will only ask the co-operative society itself to pay Income Tax on £40,000, the undistributed por-
  1556
  tion, and if they desire they distribute £60,000 as interest to the shareholders. Take these figures, £100,000 profit, £60,000 paid as interest to the shareholders, and £40,000 undistributed. The co-operative society is charged on the £100,000, but by a subsequent section its own cheque will be a cheque for the Income Tax on £40,000, and at the present rate that cheque would be £10,000. Many people imagine that that makes a fundamental difference from the case of a company. Does it? Suppose a limited company makes in a given year £100,000 of profit and decides to declare a dividend of 6 per cent., £60,000, and to put to reserve £40,000.
  The right hon. Gentleman and hon. Members opposite say that in a case like that the limited company has to draw a cheque for Income Tax not on the £40,000 but on the £100,000—and that is true. The Income Tax on the £100,000 would be £25,000. What happens next? Having declared a dividend of 6 per cent. the company, which has already paid Income Tax on the whole of its profits of £100,000, discharges to its shareholders this 6 per cent. dividend by distributing to them not £60,000 but £60,000 less the amount of Income Tax; which is £15,000. It follows that having in the first place paid £25,000 to the revenue it gets the £15,000 back and is left with a net tax payment of £10,000. The difference between the two cases is a difference of pure machinery. It is not true to say that there not be many shareholders who will go to the Revenue and get the tax back. There will be many who will do so.
  I agree that in the case of co-operative societies like that of the ordinary shareholders of a company, the National Defence Contribution does not inquire into how many fractions the profit will be divided, but that is a criticism which may be made against the tax as a conception, and it is a complete confusion of ideas to suppose that it is something which is done for the special injury of co-operative societies. It is a necessary consequence of the character of the tax, and it is a complete delusion to suppose that because a co-operative society pays Income Tax on the £40,000 of undistributed profits that a company in similar circumstances pays more. It does not. It pays more in the first instance, but it

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  gets back £15,000 from the shareholders to whom it has distributed dividends.
  I hope I have made the matter perfectly clear. For my part I cannot see how there is any case here at all other than the case that this kind of taxation undoubtedly does not make special provision to give relief to the ordinary shareholder or to any other person in a small way who will ultimately get only a small fraction of the total profits. Those are the reasons why I cannot accept the Amendment. The right hon. Gentleman in the Amendment says that in no case would a company pay more than one-fifth of what it would be assessed at under the Income Tax. I would point out that my figures show that it is true also in the case of the co-operative societies, and the only reason why the right hon. Gentleman thinks it is not true is because he takes the view that in the case of the co-operative societies it is only undistributed profit which is to be taxed, whereas there is no difference. It is merely a difference in machinery by which the ultimate amount of the tax is payable.
  The right hon. Gentleman has not asked for special relief on the ground that those for whom he speaks are particularly unfortunate or find themselves in an embarrassing position in the way of trade. Everybody knows that co-operative societies, along with the retail trade generally, are doing very well. The "Board of Trade Journal" of 1st July contains very surprising statistics about the retail trade for the month of May, the last month reported. The total value of the daily sales made was 13.2 per cent. greater in that part of the distributive trade than a year ago, and it was the second largest advance on the previous year recorded since the figures have been taken. The co-operative societies undoubtedly had a very important section of the advance shown in those figures. I am afraid I cannot agree that a case has been made out for this wholly special exception. It is not correct to say that what is proposed in the Bill is any special tax upon co-operative societies. On the contrary, an entirely special provision would have to be inserted if we accepted the proposal contained in the Amendment.
  I thought, as no doubt did many other hon. Members, that one of the most effective parts of the speech of the right hon. Gentleman was that part in which he gave figures that he had extracted about the
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  distributions made by some companies which he considered would come within the exemption on the grounds of being public utility companies. I found those figures, as he set them out, extremely impressive, and naturally I want to look at them. The conception which we had in proposing the exemption for public utility companies was that the law so operates as to set a reasonable limit to the profits which they make. I quite understand that the right hon. Gentleman was not using that argument except indirectly, but I admit its force indirectly, and I shall certainly want to examine the figures which he gave and to see exactly how they work out. We may have to reconsider it in a subsequent year, but for the present all I have to say is that the special case I submitted to the House the other day in regard to building societies stands, and the House accepts it.
  I regret I am not able to find a special case for a concession to co-operative societies. I do not for a moment think that the view which I take, and which I believe is very widely supported, is in the least inspired or biased by any desire to treat the co-operative societies unjustly. I have not found that there has been that dead set against them which in some quarters it is said there is. I know that in many parts of the country they discharge very large and important distributive functions. I do not want to do anything unfair or unjust to them, but for my part I must say that I am not in the least impressed that they are entitled to special provision, and therefore, to my great regret, I cannot accept the Amendment.
  6.19 p.m.
  Mr. Barnes: The Chancellor of the Exchequer opened his case against this Amendment by stating that co-operative societies can afford to pay this tax. I suggest that, from the figures that have been given this afternoon, it is clear that public utility companies can afford to pay it. The Chancellor again repeated that he would look into that matter, but it was mentioned on the Committee stage, and he has not looked into it between the Committee stage and the Report stage. That brings out very clearly his different interests in this matter. I would point out also that the building societies can afford to pay the tax on the same basis, but the right hon. Gentleman has made an exception in their case. He also referred to the

  1559
  fact that there are substantial co-operative stores premises in trading areas where there are other traders. I would remind him that he has exempted businesses whose profits do not exceed £2,000 a year, and that when a business is operating on a profit basis of £2,000 a year, it means that there is an investment of capital of £10,000, £15,000, £20,000 or £25,000.
  Sir J. Simon: The hon. Member should bear in mind that that equally applies to a co-operative society which does not make a profit of £2,000 a year.
  Mr. Barnes: I realise that. I was replying to the Chancellor's argument that the co-operative societies can afford to pay the tax. My point is that public utility companies, professions and building societies can afford to pay it, and that there are many businesses operating on a capital of £10,000, £15,000 or £20,000, and making an annual profit of £1,500, which can afford to pay it. Therefore, the argument that co-operative societies can afford to pay the tax appears to me to have nothing to do with the Amendment. The right hon. Gentleman then proceeded to say, in justification of his refusal to accept the Amendment, that this charge is levied on the profits of the undertaking. I clearly understood that. It was made clear, when the Chancellor proposed the new National Defence Contribution, that it was to be a tax of 5 per cent. on the profits of the undertaking and that it was to represent one-fifth of the amount paid in Income Tax. Let me turn again to the comparison with building societies. I wish to repeat the figures I gave when we were considering this matter in Committee.
  There are just over 2,000,000 shareholders in building societies, and there are 7,500,000 shareholders in industrial and provident societies. The share capital of building societies is £480,000,000, and the deposits, which represent loan capital, amount to £141,000,000. The issue of share capital in a building society is exactly the same as the issue of share capital in a co-operative society. If the £480,000,000 share capital of building societies had been loan capital, the Chancellor would not have found it necessary to make this special adjustment for building societies. If the share capital had been £141,000,000, instead of £480,000,000, this charge on the building societies would have worked out roughly at the figure of
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  £400,000 or £500,000. Because the tax of 5 per cent., or one-fifth of their Income Tax payment, levied on a share capital of £480,000,000 represented the excessive charge of £1,000,000, the Chancellor, the Treasury and the Government were compelled to recognise that the incidence of National Defence Contribution fell with undue severity on building societies.
  The building societies were faced with three alternatives, because of that heavy and exceptional incidence of National Defence Contribution on their share capital. They had to reduce the rate of interest to shareholders, to take the additional £600,000 out of reserves, or to increase the mortgage interest charge to their borrowers. When the matter was submitted to the Chancellor, there were those three alternatives, and the right hon. Gentleman found it necessary to depart completely from the principle that he has laid down of charging the tax to the undertaking, and in the case of building societies he has altered the whole basis of computation of this tax. I submit that if the right hon. Gentleman can find a justification for changing the whole basis of the computation for building societies because of the weight of their share interest charge, the case of the co-operative societies should be considered on the same basis.
  I want the House to observe that the Chancellor's explanation did not dispute the argument put forward by my right hon. Friend the Member for Hillsborough (Mr. Alexander), that in the case of the co-operative societies, the share interest is not charged at the source, and that the Treasury have agreed to and have recommended the procedure that this should be taxed in the hands of the recipients. in the case of building societies, the Treasury altered the basis of computation in order to avoid the building societies having to pay a heavier tax than was justified, but in the case of the co-operative societies, they say it is a question of machinery and they bring the whole of the share interest charge, which has previously been taxed in the hands of the recipients, back into the accounts and levy the National Defence Contribution on that amount. It is that change of procedure that has caused the National Defence Contribution to fall with excessive severity on co-operative societies as compared with private companies.

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  Let me give to the House one or two additional cases. First of all, I will give the case of a co-operative society on the North-East coast, operating in one of the worst-hit industrial towns in this country. Last year the tax paid by that society was £900; under National Defence Contribution it will have to pay £400 or £500, which is equal to 50 per cent. In the case of a large Midland co-operative society, with approximately 60,000 members, it is estimated that the Income Tax liability this year is £7,000; the National Defence Contribution charge will be £3,000, or 42.8 per cent. of what it pays in Income Tax. Another society, which operates largely in a mining area and where the capital of the members averages £17 a member, paid £5,230 in Income Tax last year; the amount that society will have to pay under the National Defence Contribution will be £3,996, or 76 per cent. of what it paid last year in Income Tax, on the 1933 basis. A large Metropolitan society paid £20,000 in Income Tax last year; under National Defence Contribution it will have to pay an additional £15,000, or 75 per cent. That is the case which we desire the Chancellor to answer. In the three debates on this subject the Chancellor of the Exchequer has not so far replied to that case.
  My right hon. Friend the Member for Hillsborough has brought forward a number of instances of public utility companies, and I do not think that any useful purpose would be served by emphasising that point. But we wish to submit once again to the House of Commons the case on behalf of these 7,000,000 citizens of this country who have joined together legitimately to carry on business operations. The legislation governing that type of trade in this country is restrictive in character. The only restriction imposed upon a statutory company is that its prices must bear some relation to its profits and a public utility company operates on fixed capital. But in the case of a co-operative society, the capital is withdrawable and the practice of those societies is to limit their rate of interest to 3 or 3½ or 4 per cent. and the average shareholding is very low compared with any other type of undertaking. Yet the Chancellor, when finding excuses for differentiation on other occasions, cannot meet the simple point of this Amendment.
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  We are not now discussing whether the co-operative societies should be exempt or not, but the simple issue of whether the Chancellor's statement that this is a 5 per cent. tax applies to the co-operative sociėties or not. This Amendment puts before the House a simple issue. We are prepared to pay one-fifth of the sum which we pay in Income Tax on the 1933 basis, without any change in the practice of the Treasury in our regard. When the proposition is reduced to those terms, the right hon. Gentleman should have no hesitation in accepting the Amendment because it does not prejudice any other concerns, but gives justice to the co-operative societies.
  6.33 p.m.
  Mr. Lees-Smith: The speech of the Chancellor of the Exchequer and the reply which has just been given by my hon. Friend the Member for East Ham, South (Mr. Barnes), reduces the issue to a simple point which can rapidly be brought to a head and to which, I think it can be shown, we have not yet had any reply. It is agreed that for the purposes of this Debate, the question which was settled in 1933 of whether co-operative societies should or should not be taxed is not being re-opened. That question is not at issue. It is also agreed that this new National Defence Contribution is, broadly, based on the principles of the Income Tax and that in the Bill, co-operative societies are not specifically discriminated against because they are not mentioned at all. The National Defence Contribution is, to the ordinary company, practically an addition of 1s. in the £ to the Income Tax. A company which now pays 5s. in the £ will pay another shilling or an increase of about 20 per cent. All that is agreed, but the problem which we are considering arises out of this difference between ordinary Income Tax and the National Defence Contribution. In connection with Income Tax there is an elaborate system of abatements and exemptions which has been constructed specially to meet the cases of the smaller Income Tax payers and also those who are outside the range of Income Tax altogether. This problem arises out of the fact that such machinery is not included in the new National Defence Contribution proposals.
  I know the Chancellor of the Exchequer has made a reply. He has said that what

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  we complain of is a necessary consequence of the National Defence Contribution without those exemptions and, broadly speaking, I can understand that if you take two ordinary companies, including about the same numbers of persons with small incomes, it does a kind of rough justice as between the two. But here is the case which the Chancellor of the Exchequer has to meet. If there are institutions which are recognised as having within their membership a far larger proportion of taxpayers of the smaller class than the ordinary company, and if in their case you make no allowance for exemptions or abatements, then those institutions will pay a larger percentage of increase on their tax than ordinary companies. There is a difference both in degree and in kind. Two classes of institutions of that kind exist in this country and their special case has been recognised, I do not say in the principles of the Income Tax but in the actual mechanism of its collection. I refer to building societies and co-operative societies.
  Broadly speaking, it is calculated that the ordinary company will pay an additional 20 per cent. on its Income Tax in this new contribution. The building societies made it clear that they would have to pay an additional 50 per cent. of their Income Tax. Figures of a remarkable character have been given by my right hon. Friend the Member for Hillsborough (Mr. Alexander), but I think the general position is that co-operative societies under these proposals will pay an extra 40 per cent. of their Income Tax. That is to say, the co-operative societies will pay about twice as much as the ordinary companies. We have heard the argument which applies to the building societies. The position of the co-operative societies is exactly the same. The right hon. Gentleman's dilemma was shown by his treatment of the building societies. He has recognised the special position in their case and has drawn up a special formula to exclude them, but his whole case was abandoned when the formula was revealed to the House. The actual formula simply destroyed the whole National Defence Contribution and every principle of it.
  I was interested in a question which was put by the hon. Member for
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  Gravesend (Sir I. Albery), who has a professional knowledge of this subject, about the building societies' formula. It was a very innocent question. He asked on what grounds, if special concessions were to be made to the building societies, a method outside the ordinary machinery was being employed. The grounds are very simple. If the concession were made on the ordinary simple grounds it would have to include the co-operative societies. So, a formula has been devised for building societies to keep the building societies out of the main charge of the tax and keep the co-operative societies in. The result can be clearly shown. I think it can be summed up in the example quoted by the Chancellor of the Exchequer earlier. He said that if in one street there was a co-operative society, a company and a partnership of private traders, all competing in the same business, it would be very remarkable if they did not all pay the same tax. That is our argument. What will happen is that the co-operative society, on the average, will pay about 40 per cent. increase on its Income Tax; the company will pay 20 per cent. increase, and the private traders, if as in most cases they are earning less than £2,000 a year, will pay nothing at all. That is why we say that there were two institutions which clearly needed special treatment in this matter unless grave injustice was to be done. Of those two in-institutions, one has been selected for that special treatment, but the co-operative societies have been left with a penal discrimination against them in the new tax proposals.
  6.39 p.m.
  The Attorney-General: I have very little to add to what was said by my right hon. Friend the Chancellor of the Exchequer, and I hope that nothing I say on this subject will cause offence. I shall try to follow the example of those who have spoken before me, and who have shown such moderation in dealing with this question. My right hon. Friend in an interjection made a reference to the £2,000 exemption, and of course, as the House is aware, it applies to the small co-operative society just as to anybody else. There have been frequent allusions to dividends, and as that word has two connotations in connection with a co-operative society, it is right to make it

  1565
  clear that the dividends on purchases are deducted before the National Defence Contribution percentage is calculated. The fallacy which, in our view, ran through the argument of the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) arose when he slipped from the 5 per cent. on profits to 20 per cent. on the Income Tax paid, because this tax is a tax on profits, and has no logical relationship, or only an accidental relationship, to the particular cheque which any particular company or individual may have to draw for Income Tax.
  The dispute which arises on the Amendment springs out of the fact that a company pays its Income Tax, whatever the rate may be, on the whole of the profits irrespective of how much it may distribute. It has been said by an eminent legal authority—and though the actual phrase has been criticised, it expresses the result in business language—that a company in respect of distributed profits pays Income Tax as an agent for or on behalf of its shareholders. That, in a business sense, is what happens. It is because a company has done so, that it is entitled, if it declares a dividend of 6 per cent., to pay only £4 10s., deducting the appropriate tax from the dividend which it has declared. In our view, giving full regard to the fact that the majority of the shareholders in co-operative societies are below the Income Tax limit, when one comes to apply this 5 per cent. to co-operative societies, one must, in fairness, apply it to the sum which is made up of the amount put to reserve and the amount distributed to shareholders. I put it in that way, because if I used the word "profit" it might be said that it was a question-begging word in relation to this argument. But call it profits or surplus, or what you will, it is the figure which is available for the two purposes of reserves and distribution, just as the profit, in the ordinary sense, made by a company is the amount available for those two purposes of reserve and distribution. Accepting, as we all do, for the purposes of this Debate, the decision arrived at in 1933, the only possible figure to apply to the 5 per cent. duty is the sum of those two amounts, that which is put to reserve and that which is distributed.
  1566
  I hope the House will bear with me for a few moments while I point out what really absurd results would be arrived at if we applied the 5 per cent. to the actual figure of the undistributed profits. Broadly speaking, the cheque which a co-operative society pays to my right hon. Friend is Income Tax on the undistributed profits, without regard to what is distributed. Let us assume that a co-operative society has built up such adequate reserves that it is able to distribute the whole of the surplus in a particular year to its shareholders. That society, if this Amendment were accepted, would pay no National Defence Contribution at all, because, owing to its financial strength and owing to the fact that it had accumulated such large reserves, it did not have to make any provision this year. It would not have to pay Income Tax to my right hon. Friend, and it would make no contribution to the National Defence Contribution at all. I am sure that anyone who views this matter impartially will recognise that that would be a totally absurd result. The Amendment before the House, if carried, would make the measure of the National Defence Contribution the amount put to reserve. You might find a very rich society which needed to put nothing to reserve, and, on the other hand, you might find a society in its early stages, pursuing what is called, without any political significance, a conservative financial policy, building up reserves before it thought itself justified in distributing sums to its shareholders. The National Defence Contribution would descend with its full force, if this Amendment were carried, on the latter society, in its earlier, struggling stages, while letting off the society which I put as a hypothetical case, but which is not at all an impossible case, which has so strong a reserve that it does not need to put by anything.
  Mr. Barnes: May I point out that that is just what the 1933 Act has done, to penalise the type of society to which the hon. and learned Gentleman has just referred, and that it is very unfair?
  The Attorney-General: If it was unfair in 1933, do not let us repeat that unfairness now, though I do not admit that that result does follow from the 1933 Act.
  Mr. Pethick-Lawrence: Is the hon. and learned Gentleman aware that, in quite a different position from the ordinary company which can distribute dividends to its ordinary shareholders of 10, 15, 20, or even 25 per cent., the co-operative societies limit the amount of the dividend which they can distribute on their share capital generally to 4 per cent. and even less?
  The Attorney-General: I fully appreciate that point, and if this tax was not a flat tax on profits, if it did take account of the actual Income Tax position of the shareholders or the amount distributed, there would be something in that point, but the principle of the tax—the principle can be criticised—is to look at the profits before they are distributed and to descend on them. I wanted to give a small reference to the sort of case that the right hon. Gentleman who opened the Debate put, of which the hon. Member for East Ham South (Mr. Barnes) gave examples, which, of course, on the face of them, appeared to be rather extraordinary. I took, roughly, certain figures which the right hon. Gentleman gave. He gave the case of a society which last year paid £125 for Income Tax to the revenue, and he said that if this Amendment were not accepted, and National Defence Contribution applied, it would pay £400 or a little more next year in Income Tax and National Defence Contribution. That means that the National Defence Contribution amount next year would be £275, that is, the difference between the £125 paid last year and the £400. If it had to pay £275 National Defence Contribution, that means that it had a trading surplus or profit of £5,500, and it is out of its £5,500 that it is being asked to pay £275 as National Defence Contribution. It is simply because, as a matter of machinery, it only paid a tax of £125 on the £500 which it did not distribute and had to pay no tax on the £5,000 which it did distribute, that these rather startling figures result.
  If we imagine the case of a co-operative society which is making the same surplus of £5,500 and which, pursuing a policy appropriate to its circumstances, puts a larger sum to reserve and distributes a smaller sum, the figures will be quite different. But when the House realises that in this sort of case it simply means that there has been a very large
  1568
  distribution of surplus, it will not only realise that the application of this tax as between co-operative societies and those trading in the same line of business is fair, but that these figures—
  Mr. Alexander: Neither the Attorney-General nor the Chancellor of the Exchequer has met the social case. In this case you actually exclude from the provisions for assessment to this tax Section 32, Sub-section (4). When the Attorney-General now speaks about a large distribution of surpluses, that is our case. The people need that distribution.
  The Attorney-General: Section 32 says that the co-operative societies should have a different principle from the ordinary companies in that they would not have to pay on the whole of their profits, and, consequently, would not pay their dividend subject to deduction. That was done, because the bulk of their shareholders are below the Income Tax limit. If this tax was one which paid any regard to the Income Tax position of shareholders who might or might not get a distribution of profits, it would, of course, be very illogical for the Chancellor of the Exchequer not to have regard in this tax to this feature of the co-operative societies and also to the right of recovery in the case of shareholders in ordinary companies, whose income is below the Income Tax limit, and—
  Mr. Alexander: What about building societies?
  The Attorney-General: Let me finish the sentence. It is because this tax does not have any regard, either in the one case or the other, to the Income Tax position of the individual shareholder, that that argument really has no relevance. I think the House will endorse what I say when I point out that my right hon. Friend, when putting forward his arguments in respect of building societies, did not base them on the smallness of the incomes of the shareholders. If he had done that, he would have been admonished much more forcibly than he has been by the right hon. Gentleman opposite, who told the House that the average individual's holding in the building societies is larger than the average holding in the co-operative societies. The building society concession was not based on that aspect of the matter at all.
  Mr. Barnes: What was it based on?
  The Attorney-General: I do not think a reply to that question would be in order, nor do I think the House would desire me to go into it. I was challenged on a particular point, namely, that the building society concession ought to have led to a concession based on the fact that the shareholders in co-operative societies are below the Income Tax limit. Having pointed out that that was not the basis on which the building societies were met, I think I have paid due respect to that point.
  6.56 p.m.
  Major Milner: The Chancellor of the Exchequer and the Attorney-General have spent a great deal of time in trying to prove that there has been no departure from Income Tax principles and no discrimination against co-operative societies in this matter, but I submit that their argument is a complete fallacy. The position of the co-operative societies under the Income Tax law is clear. First of all, under Section 31 of the Finance Act, 1933, which first made co-operative societies liable, a calculation is made which is based on the whole of their profits, and one calculation which, in the case of an ordinary company, would mean that they were liable to a deduction is made, and that deduction is set out in Sub-section (4) of the same Section. That is to say, while a building society has a calculation made having regard to the whole of its profits, yet, by reason of the social ground which has been voiced by my hon. Friends, and by reason of the small incomes of the great majority of co-operative society members, a special principle is applied to co-operative societies. That special principle, which is not in any sense a favour to co-operative societies, but is based on the fact that their members are below the Income Tax limit, is that there shall be a reduced payment made, that reduction being measured by the sum paid on the amount of share interest or loan interest in any year. The right hon. Gentleman has departed entirely from that principle in the case of the National Defence Contribution.
  Under the 1933 Act there is a certain provision for a reduction, a perfectly justifiable reduction, and what my right hon. Friend the Member for Hillsborough (Mr. Alexander) asks for in his Amend-
  1570
  ment—whether it be appropriately worded or not—is that the principles applied in the 1933 Act should be applied in the case of the National Defence Contribution. If they are not applied, I submit with confidence that obviously there is a discrimination against co-operative societies in this matter. Under the 1933 Act they are taxed on one principle, but for the purposes of the National Defence Contribution they are to be taxed on another principle, and to that extent there is a departure from the ordinary Income Tax principles applicable to co-operative societies. The fact that that is so is proved by the figures given by my right hon. Friend. He proved that co-operative societies are going to pay a larger amount in proportion, having regard to the principles under which they are taxed under the 1933 Act, than is the ordinary limited company, and there again it must be clear that there has been a departure from the ordinary principles and that, in fact, there is a discrimination in this matter against the co-operative societies.
  The whole relevance of the arguments addressed to the House by every speaker on this side has been that the eventual result is that a higher proportion of tax is to be paid by co-operative societies, having regard to the principles of Income Tax applicable to them under the 1933 Act, than is to be paid by a limited company. That is the justification for the Amendment. I am not altogether happy about the wording of it, but the principle is perfectly clear, in that my right hon. Friend would have less complaint if co-operative societies were dealt with under this tax precisely as they are dealt with under the Income Tax, which this tax is supposed to follow. In default of any concession, I hope that my right hon. Friend will insist on going to a Division.
  7.1 p.m.
  Mr. Gallacher: I would like to say a word or two in view of the fact that I was the only Member of the House who supported the original tax. I am satisfied that if the original tax were brought in again, the Chancellor would have much more difficulty in getting it withdrawn. Many hon. Members on this side, had they been left alone and allowed to act according to their instincts, would have supported the original tax, and now we

  1571
  are getting a tax which the Chancellor himself admits, although he tries to cover it up, inflicts the most terrific injustice on the members of the co-operative societies. He has said that nothing unfortunately has been done to relieve the people of small means, but that that applies to every company. But he understands, and every Member of the Government understands, that as far as the ordinary company is concerned the man with small means is the exception. [HON. MEMBERS: "No."] Yes, the man with small means is the exception in ordinary companies, but in the case of the co-operative societies all the millions of members are affected by this.
  The Chancellor uses very nice words and he has such a nice manner. He has such a regard for the right hon. Gentleman, but he had a regard for the co-operative societies when he was participating with others in the profits which are not profits. He wants to he so scrupulous and so fair and he says, as one whose conscience is at stake, "Here is a business which is competing with an ordinary company." I will take him to town after town and village after village and show him a business owned by the co-operative movement, a business owned by Mr. X and a business owned by Mr. Y and they are all engaged in the same business. Why should they not all be treated alike? Mr. X is making a profit of £1,750. How much is he to pay? Nothing. Mr. Y is making a profit of £1,750. How much does he pay? Nothing. The co-operative society, in between, is making a profit of £2,500 and there are 100 members who have a share in that, all small people, working for their livelihood, who have come together in a mutual association in order to economise and make their wages go as far as possible. Mr. X and Mr. Y
  between them have a profit of £3,500 and they pay nothing. But the 100 co-operators—working men and women, some of them unemployed, some of them old age pensioners, all of them with small means —have all got to pay. But the Chancellor is so scrupulous to see that justice is done. He cannot go to his own constituency or any constituency in the country and before any meeting of intelligent men and women justify this tax. Having admitted that an injustice is being done—
  Sir J. Simon indicated dissent.
  Mr. Gallacher: The right hon. Gentleman has admitted that there is an injustice to the small people who are being pulled into this, and that it is unfortunate that nothing has been devised to relieve the small people. He was very scrupulous in his words, but he is going to be very unscrupulous in his actions, and the more unscrupulous he is in his actions the more honeyed he is in his words. In view of the fact that he has made a correct concession to the building societies, I want to appeal to the Chancellor and those associated with him to understand the justice of this demand, and to tell us that they are prepared to consider the Amendment and, maybe, bring in something to ease the situation at a later stage. I emphasise the fact that a gross injustice is being done to a mass of people who, when the National Defence Contribution was first promulgated, were quite outside the scope of anything which the then Chancellor had in mind. He never had in mind that the masses of people in the co-operative movement were to be mulcted in this way.
  Question put, "That those words be there inserted in the Bill"
  The House divided: Ayes, 135; Noes, 228.

  Division No. 292.]

  AYES.

  [7.8 p.m.

  Acland, Rt. Hon. Sir F. Dyke

  Brown, Rt. Hon. J. (S. Ayrshire)

  Edge, Sir W.

  Acland, R. T. D. (Barnstaple)

  Buchanan, G.

  Fletcher, Lt.-Comdr. R. T. H.

  Adams, D. (Consett)

  Burke, W. A.

  Foot, D. M.

  Adams, D. M. (Poplar, S.)

  Cape, T.

  Frankel, D.

  Adamson, W. M.

  Chater, D.

  Gallacher, W.

  Alexander, Rt. Hon. A. V. (H'Isbr.)

  Cluse, W. S.

  Gardner, B. W.

  Anderson, F. (Whitehaven)

  Clynes, Rt. Hon. J. R.

  George, Major G. Lloyd (Pembroke)

  Aske, Sir R. W.

  Cocks, F. S.

  Gibson, R. (Greenock)

  Attlee, Rt. Hon. C. R.

  Cove, W. G.

  Graham, D. M. (Hamilton)

  Banfield, J. W.

  Cripps, Hon. Sir Stafford

  Green, W. H. (Deptford)

  Barnes, A. J.

  Dalton, H.

  Greenwood, Rt. Hon. A.

  Barr, J.

  Davidson, J. J. (Maryhill)

  Grenfell, D. R.

  Bellenger, F. J.

  Davies, R. J. (Westhoughton)

  Griffith, F. Kingsley (M'ddl'sbro, W.)

  Benn, Rt. Hon. W. W.

  Davies, S. O. (Merthyr)

  Griffiths, G. A. (Hemsworth)

  Broad, F. A.

  Dobbie, W.

  Griffiths, J. (Llanelly)

  Bromfield, W.

  Dunn, E. (Rother Valley)

  Groves, T. E.

  Brown, C. (Mansfield)

  Ede, J. C.

  Hall, G. H. (Aberdare)

  Hall, J. H. (Whitechapel)

  Maclean, N.

  Seely, Sir H. M.

  Harris, Sir P. A.

  MacMillan, M. (Western Isles)

  Shinwell, E.

  Hayday, A.

  Mander, G. le M.

  Short, A.

  Henderson, A. (Kingswinford)

  Marshall, F.

  Silkin, L.

  Henderson, J. (Ardwick)

  Mathers, G.

  Simpson, F. B.

  Henderson, T. (Tradeston)

  Maxton, J.

  Smith, Ben (Rotherhithe)

  Hills, A. (Pontefract)

  Messer, F.

  Smith, E. (Stoke)

  Holdsworth, H.

  Milner, Major J.

  Smith, Rt. Hon. H. B. Lees- (K'ly)

  Hopkin, D.

  Montague, F.

  Smith, T. (Normanton)

  Jagger, J.

  Morrison, Rt. Hon. H. (Hackney, S.)

  Sorensen, R. W.

  Jenkins, A. (Pontypool)

  Morrison, R. C. (Tottenham, N.)

  Stephen, C.

  John, W.

  Muff, G.

  Stewart, J.Henderson (Fife, E.)

  Johnston, Rt. Hon. T.

  Nathan, Colonel H. L.

  Stewart, W. J. (H'ght'n-le-Sp'ng)

  Jones, A. C. (Shipley)

  Noel-Baker, P. J.

  Strauss, G. R. (Lambeth, N.)

  Kelly, W. T.

  Oliver, G. H.

  Taylor, R. J. (Morpeth)

  Kennedy, Rt. Hon. T.

  Paling, W.

  Thorne, W.

  Kirby, B. V.

  Parker, J.

  Thurtle, E.

  Kirkwood, D.

  Parkinson, J. A.

  Tinker, J. J.

  Lathan, G.

  Pethick-Lawrence, Rt. Hon. F. W.

  Walker, J.

  Lawson, J. J.

  Pritt, D. N.

  Watkins, F. C.

  Leach, W.

  Rathbone, Eleanor (English Univ's.)

  Watson, W. McL.

  Leonard, W.

  Ridley, G.

  Westwood, J.

  Leslie, J. R.

  Riley, B.

  Wilkinson, Ellen

  Logan, D. G.

  Ritson, J.

  Williams, T. (Don Valley)

  Lunn, W.

  Roberts, Rt. Hon. F. O. (W. Brom.)

  Windsor, W. (Hull, C.)

  Macdonald, G. (Ince)

  Robinson, W. A. (St. Helens)

  Woods, G. S. (Finsbury)

  McEntee, V. La T.

  Rothschild, J. A. de

  Young, Sir R. (Newton)

  McGhee, H. G.

  Rowson, G.

  MacLaren, A.

  Sanders, W. S.

  TELLERS FOR THE AYES.—

  Mr. Whiteley and Mr. Charleton.

  NOES.

  Acland-Troyte, Lt.-Col. G. J.

  Cruddas, Col. B.

  Herbert, Major J. A. (Monmouth)

  Albery, Sir Irving

  Culverwell, C. T.

  Higgs, W. F.

  Amery, Rt. Hon. L. C. M. S.

  Davies, Major Sir G. F. (Yeovil)

  Hills, Major Rt. Hon. J. W. (Ripon)

  Anstruther-Gray, W. J.

  Davison, Sir W. H.

  Holmes, J. S.

  Apsley, Lord

  Denman, Hon. R. D.

  Hope, Captain Hon. A. O. J

  Assheton, R.

  Donner, P. W.

  Horsbrugh, Florence

  Atholl, Duchess of

  Dorman-Smith, Major Sir R. H.

  Hudson, R. S. (Southport)

  Barclay-Harvey, Sir C. M.

  Dower, Major A. V. G.

  Hume, Sir G. H.

  Barrie, Sir C. C.

  Drewe, C.

  Hunter, T.

  Beamish, Rear-Admiral T. P. H.

  Duckworth, Arthur (Shrewsbury)

  Hurd, Sir P. A.

  Beaumont, M. W. (Aylesbury)

  Duggan, H. J.

  James, Wing-Commander A. W. H.

  Beaumont, Hon. R. E. B. (Portsm h)

  Duncan, J. A. L.

  Jarvis, Sir J. J.

  Beechman, N. A.

  Eastwood, J. F.

  Jones, Sir G. W. H. (S'k N'w'gt'n)

  Beit, Sir A. L.

  Eden, Rt. Hon. A.

  Keeling, E. H.

  Bennett, Sir E. N.

  Edmondson, Major Sir J.

  Kerr, H. W. (Oldham)

  Bernays, R. H.

  Ellis, Sir G.

  Kerr, J. Graham (Scottish Univs.)

  Birchall, Sir J. D.

  Elmley, Viscount

  Keyes, Admiral of the Fleet Sir R.

  Bird, Sir R. B.

  Emery, J. F.

  Kimball, L.

  Blair, Sir R.

  Emrys-Evans, P. V.

  Lamb, Sir J. Q.

  Boothby, R. J. G.

  Entwistle, Sir C. F.

  Law, R. K. (Hull, S.W.)

  Boulton, W. W.

  Errington, E.

  Lees-Jones, J.

  Brass, Sir W.

  Evans, Capt. A. (Cardiff, S.)

  Leighton, Major B. E. P

  Briscoe, Capt. R. G.

  Everard, W. L.

  Lennox-Boyd, A. T. L.

  Brocklebank, Sir Edmund

  Fildes, Sir H.

  Levy, T.

  Brown, Rt. Hon. E. (Leith)

  Findlay, Sir E.

  Lewis, O.

  Bull, B. B.

  Fleming, E. L.

  Liddall, W. S.

  Burton, Col. H. W.

  Fremantle, Sir F. E.

  Little, Sir E. Graham-

  Buller, R. A.

  Furness, S. N.

  Llewellin, Lieut.-Col. J. J.

  Campbell, Sir E. T.

  Fyfe, D. P. M.

  Loftus, P. C.

  Gartland, J. R H.

  Ganzoni, Sir J.

  Lyons, A. M.

  Cary, R. A.

  Gibson, Sir C. G. (Pudsey and Otley)

  Mabane, W. (Huddersfield)

  Cayzer, Sir C. W. (City of Chester)

  Gilmour, Lt.-Col. Rt. Hon. Sir J.

  MacAndrew, Colonel Sir C. G.

  Cazalet, Thelma (Islington, E.)

  Gledhill, G.

  McCorquodale, M. S.

  Chamberlain, Rt. Hn. N. (Edgb't'n)

  Gluckstein, L. H.

  MacDonald, Rt. Hon. M. (Ross)

  Channon, H.

  Goldie, N. B.

  McEwen, Capt. J. H. F.

  Chorlton, A. E. L.

  Goodman, Col. A. W.

  McKie, J. H.

  Clarke, Lt.-Col. R. S. (E. Grinstead)

  Grattan-Doyle, Sir N.

  MacNeill, Weir, L.

  Clarry, Sir Reginald

  Gretton, Col. Rt. Hon. J.

  Maitland, A.

  Cobb, Captain E. C. (Preston)

  Gridley, Sir A. B.

  Manningham-Buller, Sir M.

  Colville, Lt.-Col. Rt. Hon. D. J.

  Grimston, R. V.

  Margesson, Capt. Rt. Hon. H. D. R.

  Conant, Captain R. J. E.

  Gritten, W. G. Howard

  Markham, S. F.

  Cooke, J. D. (Hammersmith, S.)

  Guest, Lieut.-Colonel H. (Drake)

  Marsden, Commander A.

  Cooper, Rt. Hn. T. M. (E'nburgh, W.)

  Guinness, T. L. E. B.

  Mason, Lt.-Col. Hon. G. K. M.

  Courthope, Col. Rt. Hon. Sir G. L.

  Gunston, Capt. D. W.

  Maxwell, Hon. S. A.

  Cox, H. B. T.

  Guy, J. C. M.

  Mayhew, Lt.-Col. J.

  Cranborne, Viscount

  Hannah, I. C.

  Mellor, Sir R. J. (Mitcham)

  Croft, Brig.-Gen. Sir H. Page

  Harbord, A.

  Mellor, Sir J. S. P. (Tamworth)

  Crooke, J. S.

  Harvey, Sir G.

  Mills, Major J. D. (New Forest)

  Crookshank, Capt. H. F. C.

  Haslam, Henry (Horncastle)

  Morgan, R. H.

  Croom-Johnson, R. P

  Heilgers, Captain F. F. A.

  Morrison, G. A. (Scottish Univ's.)

  Crossley, A. C.

  Heneage, Lieut.-Colonel A. P.

  Morrison, Rt. Hon. W. S. (Cirencester)

  Crowder, J. F. E.

  Herbert, A. P. (Oxford U.)

  Munro, P.

  1574

  1575

  Neven-Spence, Major B. H. H.

  Rowlands, G.

  Taylor, C. S. (Eastbourne)

  Nicolson, Hon. H. G.

  Royds, Admiral P. M. R.

  Taylor, Vice-Adm. E. A. (Padd., S.)

  O'Neill, Rt. Hon. Sir Hugh

  Russell, Sir Alexander

  Thomas, J. P. L.

  Orr-Ewing, I. L.

  Russell, S. H. M. (Darwen)

  Tryon, Major Rt. Hon. G. C.

  Patrick, C. M.

  Salt, E. W.

  Wakefield, W. W.

  Peaks, O.

  Samuel, M. R. A.

  Ward, Lieut.-Col. Sir A. L. (Hull)

  Peat, C. U.

  Sandeman, Sir N. S.

  Ward, Irene M. B. (Wallsend)

  Perkins, W. R. D.

  Savery, Sir Servington

  Wardlaw-Milne, Sir J. S.

  Petherick, M.

  Selley, H. R.

  Warrender, Sir V.

  Pickthorn, K. W. M.

  Shaw, Major P. S. (Wavertree)

  Waterhouse, Captain C.

  Plugge, Capt. L. F.

  Simon, Rt. Hon. Sir J. A.

  Wedderburn, H. J. S.

  Raikes, H. V. A. M.

  Smith, Bracewell (Dulwich)

  Wells, S. R.

  Ramsay, Captain A. H. M.

  Smith, L. W. (Hallam)

  Whiteley, Major J. P. (Buckingham)

  Ramsbotham, H.

  Smith, Sir R. W. (Aberdeen)

  Wickham, Lt.-Col. E. T. R.

  Rathbone, J. R. (Bodmin)

  Somervell. Sir D. B. (Crewe)

  Williams, C. (Torquay)

  Rawson, Sir Cooper

  Somerville, A. A. (Windsor)

  Williams, H. G. (Croydon, S.)

  Rayner, Major R. H.

  Spears, Brigadier-General E. L.

  Willoughby de Eresby, Lord

  Reed, A. C. (Exeter)

  Spens, W. P.

  Windsor-Clive, Lieut.-Colonel G.

  Reid, J. S. C. (Hillhead)

  Stanley, Rt. Hon. Oliver (W'm'I'd)

  Winterton, Rt. Hon. Earl

  Remer, J. R.

  Storey, S.

  Withers, Sir J. J.

  Rickards, G. W. (Skipton)

  Strauss, E. A. (Southwark, N.)

  Womersley, Sir W. J.

  Robinson, J. R. (Blackpool)

  Strauss, H. G. (Norwich)

  Wood, Hon. C. I. C.

  Rosbotham, Sir T.

  Stuart, Hon. J. (Moray and Nairn)

  Young, A. S. L. (Partick)

  Ross, Major Sir R. D. (Londonderry)

  Sutcliffe, H.

  Ross Taylor, W. (Woodbridge)

  Tasker, Sir R. I.

  TELLERS FOR THE NOES.—

  Lieut.-Colonel Kerr and Mr. Cross.

  7.16 p.m.
  Mr. Maitland: I beg to move, in page 16, line 37, after "by," to insert:
  "a local authority and shall not apply to any trade or business carried on by."
  There are two consequential Amendments and, with permission, I will refer to them together. The purpose of the Amendment is to ask the Chancellor to consider the extension of the exemptions which have been granted under Subsection (5) of Clause 17. Under that Sub-section exemption is given to any trade or business
  "carried on by statutory undertakers and consisting wholly or mainly in the rendering …of any of the following services, namely:

  (a) the supply of water, gas, electricity or hydraulic power;

  (b) the provision or maintenance of a canal, harbour, lock, pier, road, bridge, ferry or tunnel;

  (c) the conservancy of a river;

  (d) the carriage of goods or passengers by railway or the carriage of passengers by road, or the carriage of goods by canal or inland navigation."

  All these are exempted from the operation of the contribution. This Amendment is submitted at the request of the Association of Municipal Corporations and follows a discussion which took place in the Committee stage when my hon. and gallant Friend the Member for Blackburn (Captain Elliston) moved an Amendment asking that exemption from the tax should apply to markets. The exemptions given so far are satisfactory to the municipal authorities to the extent that they cover the principal undertakings in which they are engaged, and which
  1576
  have been described as trades or businesses. It covers their businesses of gas, water and electricity. I am asked by the local authorities to point out that they are engaged in other undertakings which may also, presumably, be classified as trades or businesses, for example, public baths, markets, aerodromes, and so on. It is the opinion of the Association that there is no justification liar imposing a charge upon profits arising from any of these undertakings, and that the exemptions should be general and not limited to particular undertakings.
  When the matter was raised upon the Amendment of the hon. and gallant Member for Blackburn the Chancellor said that he foresaw that markets could not properly be asked to be exempted unless similar undertakings carried on by municipal authorities were excluded from the operation of the tax. That was on 1st July. On 29th June the association had sent to his Department a request that all similar undertakings should be exempted. The Chancellor in very guarded language promised on the Committee stage to look into the matter again. Since that time the Association of Municipal Corporations have had the opportunity of seeing the representatives of the Inland Revenue Department, and they have submitted to the Department their case for the exemption of these undertakings. They have requested that if the Chancellor cannot see his way to grant exemptions in respect of all the undertakings, he will, at any rate, exempt the markets. I will not put the details which have been submitted by the association, for I am assuming that the Chancellor has fortified

  1577
  himself with them. The Chancellor may feel disposed to say that while there may be general cases, there are other instances where an authority may make a profit out of a race-course. I should say, however, that even they should be exempted, for the profits go to the reduction of the general rate. I hope that the brevity with which I have moved the Amendment will not detract from its merits.
  7.22 p.m.
  Mr. Marshall: I beg to second the Amendment.
  The Association of Municipal Corporations feel very keenly about this matter. It was raised on the Committee stage of the Bill and the Chancellor, although giving no promise that he would exempt these other undertakings, said he would look into the matter. I hope that his investigations will be followed by favourable results. The same principle was involved in the Amendment on the Committee stage to exempt markets, and I want to urge that if there is a case to exempt markets or any other statutory undertaking, surely the argument is valid for exempting all statutory undertakings. There are two kinds of undertakings. There are those which are purely public and owned by local authorities. The profits accruing from these are used to further the public interest, and no individual gets dividends or interest from them. These are the real statutory undertakings, and they are limited very rigidly by Act of Parliament, sometimes by local Acts and sometimes by general Acts. There are other kinds of statutory undertakings which are semi-private, such as gas and electricity undertakings, where private individuals are allowed to earn profits.
  Curiously enough, the Chancellor proposes to exempt such statutory undertakings, but the arguments that can be adduced for exempting them can be used with tremendous force for exempting those that are owned solely by municipalities. On any logic there is a strong case to exempt such things as markets, crematoria, parks and burial grounds. In some cases these things make profits, and it would be anomalous if we exempted, say, a gas undertaking which can make anything up to 10 or 15 per cent., as has been pointed out to-day, and yet make a market subject to the
  1578
  tax. I can give an illustration of what it will mean to one group of statutory undertakings. In the case of Sheffield, for instance, the Income Tax payable on the markets amounts to £7,306 this year. This does not include such things as the abattoir, the wholesale meat market and the cold stores, but only the ordinary distributive markets. If the National Defence Contribution is applied to these markets, they will have to pay another £1,147.
  7.26 p.m.
  Sir J. Simon: This matter has been raised with commendable brevity and fairness, and I think that it will be possible for me to deal with it adequately in the short time left. I have looked personally into this question. I was reminded on the Committee stage that the Association of Municipal Corporations were making representations about it, and I have since had the opportunity of studying what they said. They were naturally anxious to urge that these further exemptions should be made, but I am afraid that I cannot advise the House to agree. We have already exempted from the tax under Clause 17, Sub-section (5), the undertakings carried on by local authorities as long as they fall within the list in that Sub-section. To go further and exempt every sort of undertaking, whatever the circumstances, carried on by local authorities would go a great deal further than our principles of taxation permit.
  The House may take it that it has never been accepted by the House of Commons as a principle that you should not ask for Income Tax from local authorities when they are carrying on profit-making undertakings. The general view of the House probably is that the exemptions which have been given here to statutory undertakings are wide and generous. Indeed, we have heard some information which has made us wonder whether we have not gone rather far. I am afraid that I cannot agree that local authorities should get complete exemption in all circumstances. The matter has been considered very fully, with a complete regard for the importance of the association, but I do not think that the view I have expressed will be a great surprise to my hon. Friend who moved the Amendment, because we are only following the principles we have constantly followed.
  Question put, "That those words be there inserted in the Bill."
  The House divided: Ayes, 127: Noes, 233.

  Division No. 293.]

  AYES.

  [7.29 p.m.

  Acland, Rt. Hon. Sir F. Dyke

  Griffiths, J. (Llanelly)

  Parker, J.

  Acland, R. T. D. (Barnstaple)

  Groves, T. E.

  Parkinson, J. A.

  Adams, D. (Consett)

  Hall, G. H. (Aberdare)

  Pethick-Lawrence, Rt. Hon. F. W.

  Adams, D. M. (Poplar, S.)

  Hall, J. H. (Whitechapel)

  Pritt, D. N.

  Adamson, W. M.

  Harris, Sir P. A.

  Procter, Major H. A.

  Alexander, Rt. Hon. A. V. (H'Isbr.)

  Hayday, A.

  Ridley, G.

  Anderson, F. (Whitehaven)

  Henderson, A. (Kingswinford)

  Riley, B.

  Attlee, Rt. Hon. C. R.

  Henderson, T. (Tradeston)

  Ritson, J.

  Banfield, J. W.

  Hills, A. (Pontefract)

  Roberts, Rt. Hon. F. O. (W. Brom.)

  Barnes, A. J.

  Hills, Major Rt. Hon. J. W. (Ripon)

  Robinson, W. A. (St. Helens)

  Barr, J.

  Hopkin, D.

  Rowson, G.

  Bellenger, F. J.

  Jagger, J.

  Sanders, W. S.

  Benn, Rt. Hon. W. W.

  Jenkins, A. (Pontypool)

  Seely, Sir H. M.

  Bromfield, W.

  Jones, A. C. (Shipley)

  Shinwell, E.

  Brown, C. (Mansfield)

  Kelly, W. T.

  Short, A.

  Brown, Rt. Hon. J. (S. Ayrshire)

  Kennedy, Rt. Hon. T.

  Silkin, L.

  Burke, W. A.

  Kirby, B. V.

  Simpson, F. B.

  Cape, T.

  Kirkwood, D.

  Smith, Ben (Rotherhithe)

  Charleton, H. C.

  Lathan, G.

  Smith, E. (Stoke)

  Chater, D.

  Lawson, J. J.

  Smith, Rt. Hon. H. B. Lees- (K'ly)

  Cluse, W. S.

  Leach, W.

  Smith, T. (Normanton)

  Clynes, Rt. Hon. J. R.

  Leonard, W.

  Sorensen, R. W.

  Cooks, F. S.

  Leslie, J. R.

  Stephen, C.

  Cove, W. G.

  Logan, D. G.

  Stewart, W. J. (H'ght'n-le-Sp'ng)

  Cripps, Hon. Sir Stafford

  Lunn, W.

  Strauss, C. R. (Lambeth, N.)

  Davidson, J. J. (Maryhill)

  Macdonald, G. (Ince)

  Taylor, R. J. (Morpeth)

  Davies, R. J. (Westhoughton)

  McEntee, V. La T.

  Thorne, W.

  Davies, S. O. (Merthyr)

  McGhee, H. G.

  Thurtle, E.

  Day, H.

  Maclean, N.

  Tinker, J. J.

  Debbie, W.

  MacMillan, M. (Western Isles)

  Viant, S. P.

  Dunn, E. (Rother Valley)

  Mander, G. le M.

  Walker, J.

  Ede, J. C.

  Marshall, F.

  Watkins, F. C.

  Fletcher, Lt.-Comdr. R. T. H.

  Mathers, G.

  Watson, W. McL.

  Frankel, D.

  Maxton, J.

  Wedgwood, Rt. Hon. J. C.

  Gallacher, W.

  Messer, F.

  Westwood, J.

  Gardner, B. W.

  Milner, Major J.

  Wilkinson, Ellen

  George, Major G. Lloyd (Pembroke)

  Montague, F.

  Williams, T. (Don Valley)

  Gibson, R. (Greenock)

  Morrison, Rt. Hon. H. (Hackney, S.)

  Windsor, W. (Hull, C.)

  Graham, D. M. (Hamilton)

  Morrison, R. C. (Tottenham, N.)

  Woods, G. S. (Finsbury)

  Green, W. H. (Deptford)

  Muff, G.

  Young, Sir R. (Newton)

  Greenwood, Rt. Hon. A.

  Nathan, Colonel H. L.

  Grenfell, D. R.

  Noel-Baker, P. J.

  TELLERS FOR THE AYES.—

  Griffith, F. Kingsley (M'ddl'sbro, W.)

  Oliver, G. H.

  Mr. Whiteley and Mr. John.

  Griffiths, G. A. (Hemsworth)

  Paling, W.

  NOES.

  Acland-Troyte, Lt.-Col. G. J.

  Campbell, Sir E. T.

  Dorman-Smith, Major Sir R. H.

  Albery, Sir Irving

  Cartland, J. R H.

  Dower, Major A. V. G.

  Amery, Rt. Hon. L. C. M. S.

  Cary, R. A.

  Drewe, C.

  Anstruther-Gray, W. J.

  Cayzer, Sir C. W. (City of Chester)

  Duckworth, Arthur (Shrewsbury)

  Apsley, Lord

  Cayzer, Sir H. R. (Portsmouth, S.)

  Duggan, H. J.

  Aske, Sir R. W.

  Cazalet, Thelma (Islington, E.)

  Duncan, J. A. L.

  Assheton, R.

  Chamberlain, Rt. Hn. N. (Edgb't'n)

  Eastwood, J. F.

  Astor, Viscountess (Plymouth, Sutton)

  Channon, H.

  Eden, Rt. Hon. A.

  Atholl, Duchess of

  Chorlton, A. E. L.

  Edge, Sir W.

  Baldwin-Webb, Col. J.

  Clarke, Lt.-Col. R. S. (E. Grinstead)

  Edmondson, Major Sir J.

  Barclay-Harvey, Sir C. M.

  Clarry, Sir Reginald

  Elliot, Rt. Hon. W. E.

  Barrie, Sir C. C.

  Cobb, Captain E. C. (Preston)

  Ellis, Sir G.

  Beamish, Rear-Admiral T. P. H.

  Colville, Lt.-Col. Rt. Hon. D. J.

  Elmley, Viscount

  Beaumont, M. W. (Aylesbury)

  Conant, Captain R. J. E.

  Emery, J. F.

  Beaumont, Hon. R. E. B. (Portsm'h)

  Cooke, J. D. (Hammersmith, S.)

  Emrys-Evans, P. V.

  Beechman, N. A.

  Cooper, Rt. Hn. T. M. (E'nburgh, W.)

  Entwistle, Sir C. F.

  Beit, Sir A. L.

  Courthope, Col. Rt. Hon. Sir G. L.

  Errington, E.

  Bennett, Sir E. N.

  Cox, H. B. T.

  Evans, Capt. A. (Cardiff, S.)

  Bernays, R. H.

  Cranborne, Viscount

  Everard, W. L.

  Birchall, Sir J. D.

  Croft, Brig.-Gen. Sir H. Page

  Fildes, Sir H.

  Blair, Sir R.

  Crooke, J. S.

  Findlay, Sir E.

  Boothby, R. J. G.

  Crookshank, Capt. H. F. C.

  Fleming, E. L.

  Boulton, W. W.

  Croom-Johnson, R. P.

  Fremantle, Sir F. E.

  Brass, Sir W.

  Crossley, A. C.

  Furness, S. N.

  Briscoe, Capt. R. G.

  Crowder, J. F. E.

  Fyfe, D. P. M.

  Brocklebank, Sir Edmund

  Cruddas, Col. B.

  Ganzoni, Sir J.

  Brown, Rt.-Hon. E. (Leith)

  Culverwell, C. T.

  Gibson, Sir C. G. (Pudsey and Otley)

  Bull, B. B.

  Davies, Major Sir G. F. (Yeovil)

  Gilmour, Lt.-Col. Rt. Hon. Sir J.

  Burghley, Lord

  Davison, Sir W. H.

  Gledhill, G.

  Burton, Col. H. W.

  Denman, Hon. R. D.

  Gluckstein, L. H.

  Butler, R. A.

  Donner, P. W.

  Goodman, Col. A. W.

  Gower, Sir R. V.

  Maitland, A.

  Savery, Sir Servington

  Grattan-Doyle, Sir N.

  Manningham-Buller, Sir M.

  Selley, H. R.

  Gretton, Col. Rt. Hon. J.

  Margesson, Capt. Rt. Hon H. D. R.

  Shaw, Major P. S. (Wavertree)

  Gridley, Sir A. B.

  Markham, S. F.

  Simon, Rt. Hon. Sir J. A.

  Gritten, W. G. Howard

  Marsden, Commander A.

  Smith, Bracewell (Dulwich)

  Guest, Lieut.-Colonel H. (Drake)

  Maxwell, Hon. S. A.

  Smith, L. W. (Hallam)

  Guinness, T. L. E. B.

  Mayhew, Lt.-Col. J.

  Smith, Sir R. W. (Aberdeen)

  Gunston, Capt. D. W.

  Mellor, Sir R. J. (Mitcham)

  Somervell. Sir D. B. (Crewe)

  Hannah, I. C.

  Mellor, Sir J. S. P. (Tamworth)

  Somerville, A. A. (Windsor)

  Harbord, A.

  Mills, Major J. D. (New Forest)

  Southby, Commander Sir A. R. J.

  Harvey, Sir G.

  Morgan, R. H.

  Spears, Brigadier-General E. L.

  Haslam, Henry (Horncastle)

  Morrison, G. A. (Scottish Univ's.)

  Spens, W. P.

  Heilgers, Captain F. F. A.

  Morrison, Rt. Hon. W. S. (Cirencester)

  Stewart, J. Henderson (Fife, E.)

  Heneage, Lieut.-Colonel A. P.

  Munro, P.

  Storey, S.

  Herbert, Major J. A. (Monmouth)

  Nicolson, Hon. H. G.

  Strauss, E. A. (Southwark, N.)

  Higgs, W. F.

  O'Connor, Sir Terence J.

  Strauss, H. G. (Norwich)

  Holdsworth, H.

  O'Neill, Rt. Hon. Sir Hugh

  Stuart, Hon. J. (Moray and Nairn)

  Holmes, J. S.

  Orr-Ewing, I. L.

  Sutcliffe, H.

  Hope, Captain Hon. A. O. J.

  Patrick, C. M.

  Tasker, Sir R. I.

  Horsbrugh, Florence

  Peake, O.

  Taylor, C. S. (Eastbourne)

  Hudson, R. S. (Southport)

  Perkins, W. R. D.

  Taylor, Vice-Adm. E. A. (Padd., S.)

  Hume, Sir G. H.

  Petherick, M.

  Thomas, J. P. L.

  Hunter, T.

  Pickthorn, K. W. M.

  Tryon, Major Rt. Hon. G. C.

  Hurd, Sir P. A.

  Plugge, Capt. L. F.

  Tufnell, Lieut.-Commander R. L.

  James, Wing-Commander A. W. H.

  Procter, Major H. A.

  Wakefield, W. W.

  Jarvis, Sir J. J.

  Raikes, H. V. A. M.

  Ward, Lieut.-Col. Sir A. L. (Hull)

  Jones, Sir G. W. H. (S'k N'w'gt'n)

  Ramsay, Captain A. H. M.

  Ward, Irene M. B. (Wallsend)

  Keeling, E. H.

  Ramsbotham, H.

  Wardlaw-Milne, Sir J. S.

  Kerr, Colonel C. I. (Montrose)

  Rankin, Sir R.

  Warrender, Sir V.

  Kerr, J. Graham (Scottish Univs.)

  Rathbone, J. R. (Bodmin)

  Waterhouse, Captain C.

  Keyes, Admiral of the Fleet Sir R.

  Rawson, Sir Cooper

  Watt, G. S. H.

  Kimball, L.

  Rayner, Major R. H.

  Wedderburn, H. J. S.

  Lamb, Sir J. Q.

  Reed, A. C. (Exeter)

  Wells, S. R.

  Law, Sir A. J. (High Peak)

  Reid, J. S. C. (Hillhead)

  Whiteley, Major J. P. (Buckingham)

  Law, R. K. (Hull, S.W.)

  Reid, W. Allan (Derby)

  Williams, C. (Torquay)

  Lees-Jones, J.

  Remer, J. R.

  Williams, H. G. (Croydon, S.)

  Leighton, Major B. E. P.

  Rickards, G. W. (Skipton)

  Willoughby de Eresby, Lord

  Lennox-Boyd, A. T. L.

  Robinson, J. R. (Blackpool)

  Wilson, Lt.-Col. Sir A. T. (Hitchin)

  Levy, T.

  Rosbotham, Sir T.

  Windsor-Clive, Lieut.-Colonel G.

  Lewis, O.

  Ross Taylor, W. (Woodbridge)

  Winterton, Rt. Hon. Earl

  Liddall, W. S.

  Rowlands, G.

  Withers, Sir J. J.

  Llewellin, Lieut.-Col. J. J.

  Royds, Admiral P. M. R.

  Womersley, Sir W. J.

  Lyons, A. M.

  Russell, Sir Alexander

  Wood, Hon. C. I. C.

  Mabane, W. (Huddersfield)

  Russell, R. J. (Eddisbuty)

  Young, A. S. L. (Partick)

  MacAndrew, Colonel Sir C. G.

  Russell, S. H. M. (Darwen)

  McCorquodale, M. S.

  Salt, E. W.

  TELLERS FOR THE NOES.—

  McEwen, Capt. J. H. F.

  Samuel, M. R. A.

  Mr. Cross and Mr. Grimston.

  McKie, J. H.

  Sandeman, Sir N. S

  It being after Half-past Seven of the Clock, and leave having been given to move the Adjournment of the House under Standing Order No. 8, further Proceeding was postponed, without Question put.

  SPAIN (NON-INTERVENTION PROPOSALS).
  7.37 p.m.
  Mr. Attlee: I beg to move, "That this House do now adjourn."
  I rise to call attention to a definite matter of urgent public importance, namely,
  "the declared intention of His Majesty's Government to make to the Non-Intervention Committee to-morrow proposals which contemplate the granting of belligerent rights to General Franco, and which do not make effective provision for the complete cessation of foreign intervention in Spain."
  In reply to questions this afternoon the Foreign Secretary made an appeal to be allowed to get on with his work at the
  1582
  Non-Intervention Committee. If we considered that the line which he was going to take was one which was helpful we should certainly not have moved this Motion. In my view the proposals that are being put forward by the Government are unjust, ill conceived and dangerous. I do not think they will effect what is desired, I do not believe they will make non-intervention work, I do not believe they will make for peace. I believe that they will, if accepted, only give rise to another of those incidents which have occurred during the long history of non-intervention, in which, under the pretence of making non-intervention more effective, the forces of General Franco are given advantages against the Spanish Government.
  The right hon. Gentleman undertook, as he says, a difficult task. He was asked to reconcile widely divergent views. I think that he was attempting to reconcile the irreconcilable, and in the result he has, in effect, surrendered to the demands

  1583
  of the Fascist Powers. The suggestions which were put forward by this country and by France—I do not say they went all the way, but I think they were effective in many respects—did make a proposal which might have begun to make the non-intervention system less harmful and less unfair than it has been previously. The proposals of Germany and Italy were crude obvious attempts to weight the scales against the Spanish Government. The fact is that the Fascist Governments only want non-intervention as a convenient screen behind which they can intervene. What non-intervention means is that certain Powers abstain from assisting the Spanish Government and in fact hinder it, and that while they are holding the hands of the Spanish Government the Fascist Powers are allowed to support Franco. All through their agreement to non-intervention has been based on the fact that they knew that they could break it, and they did break it.
  We are, therefore, entitled, looking at the whole history of non-intervention, to view these proposals with very, very grave suspicion, to look closely at what is proposed as a final solution to the question of getting effective non-intervention, and also the steps which are to be taken to bring about some change in the system, because on every occasion when restrictions under non-intervention have been imposed they have always been rigorously enforced against the Spanish Government a long time before anything was done against General Franco. That has been the history throughout. We had the restrictions on munitions put on at once by this country and by France, and then, when the munitions had been piled in and piled in by Italy, the Italians having given all they wanted at that time, were cynically able to sign. They have taken full advantage of the time that was given in order to do all they could against the Spanish Government and for General Franco. Undeterred by that experience we had precisely the same thing with regard to volunteers. The ban was put on the volunteers first of all. We had the usual response from Signor Mussolini. Masses of troops were poured into Spain.
  The British Government have always shown tenderness; they are always very
  1584
  tender when it comes to anything with regard to Franco. It was only by action in this House that we prevented this Government from blockading Bilbao for General Franco. There was a complete exposure of the fact that this Government, when it got the word of General Franco, did not look too closely into the facts. We had extremely garbled reports, and step by step Ministers were driven back. That was an ineffective blockade. We have had very much the same thing going on with regard to Santander. I doubt whether we have profited much by the change in the First Lord of the Admiralty. I do not think we get much more clarity, and, like all the other Ministers, he is always completely ill-informed on these matters.
  Mr. Speaker: I would point out to the right hon. Gentleman that the words of his Motion include only the questions of granting belligerent rights and the making effective of the cessation of foreign intervention, and it does not appear to me that the question of Santander is directly concerned.
  Mr. Attlee: With great respect I submit that this is a question of foreign intervention, a question of whether there is a blockade or not and of whether this country is not, in effect, intervening by acting on behalf of General Franco. But I will not pursue that subject further.
  Mr. Speaker: Is the hon. Member referring to this in connection with foreigners in Spain?
  Mr. Attlee: Oh, yes, foreign intervention as regards Spain. We are foreigners in regard to Spain. We have had the same policy followed out. If you look at the outline of the proposals you will find, on page 4 of the White Paper, that the system of supervision on the land frontier will be restored at once—the land frontier which we have kept all the time against the Spanish Government. It is admitted that for a long time General Franco has had the stronger force at sea; in fact, opening the sea and closing the land has made all the time in favour of General Franco.
  Therefore, while we have proposals set out here in regard to dealing with control by sea, which involves negotiations, commissions to be sent out and discussions with regard to volunteers in

  1585
  every port, there is one thing to be done at once, and that is to put a bridle on the Spanish Government. What it means is that while these conversations are going on it will be possible for them to be dragged out for a long time—we have seen over and over again how negotiations are dragged out in this matter—and we shall again have a system of one-sided non-intervention. Look at what is going to be done: the naval control system is to be discontinued and, instead, international officers are to be at Spanish ports. I would like to ask the right hon. Gentleman whether those officers in the Spanish ports are to be drawn from strictly neutral countries, or whether they are to include officers from countries taking an active part in intervention in Spain. Will they be mixed groups or merely individuals? If you have groups, they can only be in certain ports, and the rest of the coast will be open to the landing of arms and men. What action will be taken if an infringement is discovered in this system, in which you are merely to have certain officers at ports and on board ships? This is to happen after the frontier has been closed, and kept closed.
  Now I come to the more important proposal to grant belligerent rights to General Franco. That proposal is to be made upon conditions which I will examine later. I should like to know the reason for this proposal, except a desire to please Herr Hitler and Signor Mussolini. I do not want to weary the House to-night with a long history of the granting of belligerent rights. It is a long and tangled history, but beyond all doubt the granting of belligerent rights by this country has been extremely rare. The last occasion was the American Civil War. There was an occasion before that, some time back in 1854. There has been some dispute, but undoubtedly my hon. Friend the Member for Derby (Mr. Noel-Baker) was correct in regard to that. The granting of belligerent rights is very exceptional. You must have regard to the position in any country. In the American Civil War there had been the secession of a number of States and a separate Government set up; even then, belligerent rights were granted only as the result of a blockade and after a long period.
  What is the position in Spain? On one side you have the Government of Spain,
  1586
  and on the other side a number of mutinous officers who have broken their oath. It is a very serious thing to break an oath of allegiance. I do not know whether it is regarded as serious by all Members of this House to-day, because the old standards have gone by the board. The fact is that they were mutinous soldiers who broke their oath to the Government. They are dependent upon foreign Powers for their support; not just for money and munitions, but for men, masses of men. That is a significant point. In the American Civil War it was never suggested that you should import masses of men to do the fighting, or that there was not a large native force in the field. I have no doubt that there were individual volunteers here and there, but, in the main, the armies were native forces. General Franco started with every advantage. He had most of the Army and all the officers. He had the arsenals. He had everything in his favour, and an abundant supply of munitions was sent to him. You would have thought he had every opportunity to raise a great Spanish army. He has had plenty of aeroplanes and plenty of munitions, but the fighting has, in fact, apart from a mere handful of enthusiastic Fascists, been done by the Moors and the Italians. When he is in trouble, he calls out for more Italians. He has not managed to get the man power of Spain. [HON. MEMBERS: "Oh."] Hon. Members who doubt that can study the reports of any correspondent and any number of people who have been to Spain, and they will find that when a major battle has been fought foreign troops have done the fighting.
  Viscountess Astor: On both sides.
  Mr. Attlee: I do not think any hon. Member on the other side will disagree with me when I say that General Franco has not managed to raise a great national army.
  Captain Cazalet: He has at least 200,000 trained men fighting now.
  Mr. Attlee: Let us look at the other side. The Spanish Government have been deprived of their arms and of their arsenals. They had very scanty munitions and very few skilled instructors, but the fighting has been kept up for more than a year, and there are now very large armies —trained and organised armies. I take those facts not from one side or

  1587
  the other. They are very fine armies, up to the number of hundreds of thousands capable of taking the field. I claim that if General Franco had been able to raise enough Spanish forces to fight, he would not have wanted to be indebted to Germany and Italy for troops. The Spaniards would not like to have their battles fought by somebody else. Therefore the continued importations of foreign troops and the continued calls for more are pretty fair indications that General Franco has not the support of the people of Spain, even in the parts which are under his authority. It is obvious that without this foreign support General Franco would collapse.
  This is the Government that our Government propose to recognise. I say that this Spanish war is an undisguised aggression by foreign Powers. I say there is no case for granting belligerent rights at all, and there is certainly no case for doing so while there are masses of foreigners fighting on that side. I want to see all foreigners withdrawn from Spain. I am certain that if that were done there would very soon be an end of the Spanish war. General Franco could not possibly continue. What we have now is a proposal to do just what the Fascist Powers want. We are to have the granting of belligerent rights. That will mean a blockade, the stopping of ships, incidents, the seizure of ships, and all that follows from that. There are Governments in the world who will not sit down under General Franco's blockade; there are Governments who will not take their orders from General Franco; there are Governments who will not humiliate their soldiers by asking them to sit by while their own nationals are being treated in a hostile manner. There are also nations that will not have groups of Conservative Members who will cheer when their ship is captured.
  I ask the right hon. Gentleman to tell us when he comes to speak why the Committee had to pass a unanimous resolution in favour of the withdrawal from Spain of all persons whose evacuation is recommended, and why unanimity is left out with regard to the recognition of belligerent rights. Is the rule of unanimity to apply to the granting of belligerent rights? Can he tell us anything about the proposed basis for the withdrawal of volunteers? Is it to be equal numbers
  1588
  from each side or proportional numbers from each side? What is meant by "substantial progress"? Will the evacuation of a certain number of volunteers be counted as substantial progress? As long as any number of those troops remain, there is intervention. There ought to be no consideration of any proposals until there is complete withdrawal of volunteers.
  I would ask the House to observe the extraordinary manner in which the vital matter of aircraft and air personnel is treated in this document. There is an elaborately set out programme, but when we come to air personnel we are told that they merely considered further the question of the employment of foreign aircraft. This is one of the main issues of the war. How can it be supposed that any Power is genuinely taking part in non-intervention if it continues to send aircraft and air personnel, whatever the Power is? Obviously, therefore, you will have continuing intervention, and the more you restrict other forms of intervention but leave untouched one form, the more those who want to intervene will concentrate upon this form. It is, therefore, futile to take up the position we take up to-day while we leave a vital matter like aircraft out of consideration.
  It is about time that the Non-Intervention Committee faced realities. No non-intervention will be the least use unless there is honest intention on the part of the signatories to carry it out. I say there never has been an honest intention to carry this out. All the time, the Fascist dictators are laughing at the whole subject and laughing at this country. I do not believe for a moment that Signor Mussolini is specially interested in the success of General Franco as a victory for the Fascist ideal. I think he is out for something much more concrete; I think he is out to make the Mediterranean an Italian lake, and, so far as I can make out, he will do it to the cheers of hon. Members opposite. They cheered him in the Eastern Mediterranean, and when guns were posted opposite Gibraltar. That is the reason why it is quite useless to expect non-intervention without a real intention to carry it out.
  There should be an attempt to make a reality of non-intervention. Let there be the withdrawal of all volunteers and foreign troops on both sides, as a test of

  1589
  honest intention. It would be a double test; a test of honest intention on the part of those governments not to intervene in the Spanish struggle, and a test of the reality of the claim of General Franco to have the approval of a large section of the people of Spain.
  I would call the attention of the House to the danger of this situation—this continuing situation of what is really a sham. I believe that the Spanish people have shown a great deal of patience with the countries that have honestly supported non-intervention. I think they have realised the possibility of European complications. I remember a speech by Earl Baldwin, when he was in this House, in which he said that sooner or later the Spanish people would turn against the foreigners who were intervening, and that those who had not intervened would be recognised as their best friends. I think that that is happening already. I think that already the Spaniards, even on General Franco's side, are disgusted with foreigners. I think that more and more this war is ceasing to be a civil war, and more and more it is becoming a question of the Spanish nation against foreign adventurers, against that collection of foreigners who are so inaptly described by some of our newspapers as the Nationalist Forces.
  I am convinced that all history leads one to believe that as the struggle proceeds it will more and more become one of Spaniards against foreigners; and, if this country continually puts itself in the position of helping General Franco, and by so doing prolonging the ordeal of the Spanish people, it will share in the resentment of the Spanish people. I believe that in this matter it is quite useless to think that, by giving way to every demand of the Fascist Powers, you can get them to join heartily in non-intervention. I think the whole history of the conflict has shown that that is a mistake, and that the only occasions when the Fascist Powers have sought to apply non-intervention was when they realised that the other Powers were in earnest over non-intervention. If you want to make non-intervention a success, you must make it just.
  Finally, I should like to say that in these proposals there is a falling away from all the standards of international law. We see year by year all the old
  1590
  landmarks of international law going by the board. The question of belligerent rights is just another instance. The Foreign Secretary said in his last speech that Europe would always be at the mercy of an international incident until there was a general acceptance of the rule of law. I want this country to stand by the rule of law, and not on every occasion, because there is a threat of war, to accept the orders of the Fascist States. I recognise quite clearly that there will always be dangers, but you can never get rid of them by letting it be known that, whatever others wish you to do, you will do it. I am afraid that that is a habit which has gradually grown up in this Government in the last few years. In the name of peace and quietness they have broken up international law, and have actually made, not for peace, but for war.
  8.5 p.m.
  The Secretary of State for Foreign Affairs (Mr. Eden): When I read in my newspaper this morning that it was the intention of the party opposite to seek to debate to-day the proposals we are submitting to the International Committee, before the nations who have called for them have had a chance to examine or pronounce upon them, I deeply regretted that decision, which, I think, is quite without precedent in our Parliamentary procedure. I am convinced that by taking that attitude hon. Members have done a disservice, not only to their own cause in the country—which perhaps does not matter very much—but, what matters far more, they have done a disservice to the cause of peace. When I listened to the right hon. Gentleman's speech, I wondered why he had asked for this debate at all. He had virtually nothing to say in detailed criticism of these proposals, and I began to wonder, as he spoke, whether he had even read them at all. The points he picked out were small points. Was there anything, he asked, in the fact that, whereas we asked for unanimity in one place, we did not ask for it in another? I can answer that question. All the Committee's decisions are taken by unanimous votes, so there is nothing in that point. Not once did the right hon. Gentleman strive to show that the general balance of these proposals was unjust, or that, in attempting to carry out this unenviable task, we have failed to produce proposals

  1591
  which were at least calculated, so far as a Government placed as we are can calculate them, to try and secure agreement.
  I submit that the Opposition's attitude to-night is in flagrant contradiction of their own doctrines as preached heretofore. They have always advocated international collaboration. What are we engaged upon now, at this very moment, but such a task, entrusted to us at a critical juncture of European history by every nation in Europe? What are hon. Gentlemen opposite doing to-night except trying to make the execution of that task as difficult as possible? The right hon. Gentleman told us that these proposals would not effect what is desired. Perhaps he has sources of information which are not open to me, but up to the present there is nothing in the messages which I have received from abroad that justifies that verdict. But this I can say, that the right hon. Gentleman and his friends have done all that lies in their power to see that these proposals do not come to a successful issue. if that is what hon. Gentlemen opposite desire, I congratulate them on their performance. I do not believe that it is the desire of this country as a whole that this effort of our Government should fail. You cannot pursue a policy of international collaboration by only collaborating when others agree with you. You cannot hope to secure agreement between contending theses by merely imposing your own.
  What have we been asked to do in this matter? May I remind the House of the origin of the proposals which are now before it, and to which the right hon. Gentleman scarcely referred? Some weeks ago a gap was created in the naval patrol scheme which was an essential part, in our view, of non-intervention. Jointly with the French Government, we submitted proposals for closing that gap. Those proposals were rejected by the German and Italian Governments. They submitted counter-proposals of their own, which we rejected. The result was that, when the Non-Intervention Committee met last Friday, the deadlock was complete. That is true. But there was one matter, and I would invite the attention of the House to this point, on which the Non-Intervention Committee was unanimous. There was not a single nation on
  1592
  that Committee who wanted this policy of non-intervention to break down—not one. The attitude of hon. Gentlemen opposite is not endorsed by one single Government in Europe. They differ, and they differ, I think, for reasons which are quite intelligible. The Governments of Europe bear responsibilities of which His Majesty's Opposition are not conscious. They know, and every Member of the House knows, that, if non-intervention breaks down, the risks of a European conflict are thereby inevitably increased. It may be that we shall be unable to avoid reaching that point, but it is hardly surprising that every nation in Europe is reluctant to approach that abyss if it can be avoided. The Leader of the Opposition was himself, once upon a time, very conscious of this risk. He said:
  "There were those whose impulse was to say: 'We must rush to help our Spanish comrades,' but on these matters they must consult their heads as well as their hearts."
  To-night all that is forgotten. To-night, so far as the Opposition are concerned, hearts are trumps. On Friday all the nations, every single one of the Committee, expressed the desire to go on with the policy of non-intervention.
  Mr. MacLaren: Hilter and Mussolini?
  Mr. Eden: Yes, and Stalin, too. Nobody raised a voice against it, and all the nations unanimously asked the Government of this country to attempt to reconcile these two divergent points of view. What is our task? Some hon. Members opposite, who have been frequent in attendance at Geneva in years gone by, know very well what is the task of a rapporteur—an individual who is nominated by the other nations to attempt to work out an agreement which they all desire and which they cannot produce for themselves. That is precisely the task which has been entrusted to us in this instance. Is it argued—and this is the question I want to ask whoever is going to speak for the Opposition later—is it argued that we ought to have refused to undertake this task? Is it argued that we ought to have said to the nations of Europe, "Twenty-six of you ask Great Britain to undertake this task, and we will not accept the responsibility"? Does anybody in this House suggest that? If it is agreed that we should have undertaken the task, all that remains to be decided is whether we

  1593
  have resolved it rightly or not. I will come to that proposition later, but I would remark in passing that, however little confidence the Leader of the Opposition may have in the impartiality of this Government, it argues that Europe has confidence, or Europe would not have asked us to undertake it. Hon. Members opposite would have rendered a greater service to the pacification of Europe had they followed the line taken by an Opposition Liberal newspaper this morning, in which a very well known correspondent writes these words:
  "It is not in the nature of compromises to arouse enthusiasm."
  We all endorse that. He goes on:
  "But it was recognised that the present effort stood a better chance of acceptance than any other that could be devised."
  I ask for nothing more than that in judgment of what we have tried to do. That is the "News Chronicle." I should like to put another question to hon. Members opposite. Is it their view that, even if our judgment is right, and the judgment of the writer of that is right, and these proposals represent the best chance that there is of securing agreement, and if agreement is secured, are they still going to persist in their opposition? If that is not their attitude, would it not have been very much wiser to wait to see how the nations of Europe would pronounce before taking an early opportunity to make it as difficult as possible for agreement to be reached?
  I want to examine the criticisms of these proposals. It is frequently said—I think it was the argument of the right hon. Gentleman to-night—that General Franco is nothing but a rebel. To contend that his supporters are confined to a few rebel officers and priests is nonsense. The argument is that General Franco is a rebel against a constitutionally elected Spanish Government, and that it is contrary to international law that he should be put on an equal footing with the Spanish Government.
  Mr. Attlee: The right hon. Gentleman has entirely misunderstood the argument. The specific point that I put was that, as he was supported by and dependent on foreign troops, he had clearly shown that he was not supported by a substantial portion of the Spanish people.
  Mr. Eden: That was on the question of the withdrawal of volunteers. I want
  1594
  to deal first with the point that the right hon. Gentleman did raise, the question of the recognition of belligerent rights. If it is said that you must never put a legitimate Government and insurgents on the same footing, that must mean that you will never accord belligerent rights where an insurgent is fighting a Government. That, obviously, is an untenable proposition because, if you were to say that, you could never recognise any insurgent as a belligerent, and, of course, we have frequently done that before in our history. I submit that the objection of hon. Members opposite is not the grant of belligerent rights to insurgents as such. It is the grant of belligerent rights to insurgents of whose cause they do not approve. The granting of belligerent rights does not carry with it any measure of approval at all. If we grant belligerent rights to the Government and to General Franco, that is no more expressing approval of General Franco than it will be if the German Government gives belligerent rights to Valencia and to Franco. That does not mean that they are approving the cause of Valencia. There is no approval in granting belligerent rights at all.
  This grant of belligerent rights is conditioned by certain limitations to which the Leader of the Opposition never even referred, but they are of the essence of the matter. I want to draw the attention of the House to them. Contraband lists are, under our proposals, to be limited, to be identical with the Non-Intervention Committee's lists, and ships carrying observers are not to be liable to visit and search on the ground of the carriage of contraband. Any such limitation of belligerent rights is not only unusual but unprecedented, and the practical effect of this proposal is this—I invite the attention of the House to it, because I really think there is on this point a measure of misunderstanding—that the two parties will be free to deal as they can with ships attempting to enter Spain without complying with the procedure laid down under our non-intervention scheme. If a ship is trying to go to Spain without carrying an observer, the two parties in Spain are entitled to try to deal with it. In the same way, if ships are carrying troops between one Spanish port and another, and if they are engaged

  1595
  in the transmission of intelligence, either party in Spain has a right to interfere, and that is perfectly correct if we want a non-intervention policy carried out.
  On the other hand, bona fide ships which carry out the proper procedure will, by arrangement with the two parties, be free from interference altogether. That is a very considerable limitation of the exercise of belligerent rights, since it means that the two parties, in the absence of a regular and effective blockade of a particular port, will be expected to allow ships to sail to ports of the enemy with any cargoes that are not prohibited under the Non-Intervention Agreement. That is clearly a very limited form of belligerent rights and it would not certainly have been justified in any circumstances except that arrangements had been made by the States themselves to take steps to prevent the carriage of munitions, and it is therefore reasonable, we think, to ask both parties that the grant of belligerent rights should be limited to a corresponding degree.
  Now I want to say something about the withdrawal of volunteers from Spain. I ask the House first of all to notice this, that in the two rival sets of proposals upon which a deadlock was reached on Friday the withdrawal of volunteers did not figure at all. It might, therefore, have been argued that, in carrying out the task entrusted to us by the Committee, we were not called upon to deal with that subject. But we have all along attached the greatest importance—there I agree with the right hon. Gentleman—to this question of the presence of foreigners in Spain. That is why we thought it essential that account should be taken of that problem and steps taken to resolve it. I do not think that there would be a doubt in any hon. Member's mind that if there were no foreign nationals in Spain, then the case for belligerent rights would be overwhelming. It might be argued that we could have dealt with this question by getting a guarantee of withdrawal before we granted belligerent rights. Well, we have had some experience in this non-intervention business. We did not leave it there. We have gone much further. We propose not only that the Committee should express itself unanimously in
  1596
  favour but also that a Commission should be sent out to both sides to supervise the withdrawal. We have not only asked the Governments to undertake to co-operate in this work, but we have put in the further safeguard that in our plan belligerent rights will not become effective until the Committee have placed on record their opinion—and I quote the words—
  "that the arrangements for the withdrawal of foreign nationals are working satisfactorily, and that this withdrawal has in fact made substantial progress."
  Therefore, not only must the principle be accepted, but machinery must be in definite operation, and must have produced substantial results. But there is another safeguard beyond that. The Committee itself—and the Committee works unanimously—has to pronounce its judgment upon the outcome of this withdrawal before the decision about belligerent rights is taken. What does this mean? The right hon. Gentleman made great play of the fact that he thought every foreigner ought to have gone before belligerent rights began, and if I understood what he said at the end of Question Time, that was his real divergence from our proposals, and in what he had to say, he added nothing else to it, I think, to-night.
  I put this consideration to the House. If these proposals are to have any result at all, it will only be because the nations, upon reflection, are willing to work them rather than to face the dread alternative. I believe that every nation dreads the alternative. If they are prepared to work them to the extent of setting up machinery for the withdrawal of volunteers and of getting that machinery to work in substantial measure, that means that there is a spirit of co-operation different from that which has existed up to now. So the alternatives, as I see them, are these: Either that these proposals will fail altogether, or that belligerent rights will be granted and foreigners will be withdrawn. I do not believe that the middle alternative which the right hon. Gentleman professes to fear is in the least likely of realisation. In introducing this scheme we have tried to produce one which seemed to us fair and reasonable, and could be so recommended to the nations. The right hon. Gentleman thinks us partial. Well, with respect, I do not think that on this subject he is a very good judge of impartiality. He gave one instance—the situation at Bilbao. I

  1597
  do not want to pursue it except to say this. Does the House realise that no single foreign ship entered Bilbao after General Franco sought to impose his blockade except British ships under the protection of the British Navy up to the three-mile limit. How in the world does that show that we were partisan? Not a single French ship or any other foreign ship entered Bilbao except our own.
  For one moment I will put the situation the other way round. Suppose, for the sake of argument, that General Franco had been beleaguered in the city by Government forces and the insurgents were being starved and were going to surrender for lack of food, do hon. Gentlemen opposite ask us to believe that they would have shown the same enthusiasm and the same earnest desire in the protection of the British Mercantile Marine in order that these food ships should go into the beleaguered Franco city? You must not ask us to be so credulous.
  Mr. David Grenfell: On a matter of common knowledge, does the right hon. Gentleman not remember that occasions are reported here of British warships taking away refugees and no protests were made on this side of the House? We have never complained about it.
  Mr. Eden: That is quite a different case from that which I have just quoted. If the hon. Gentleman objects to it, let me put it in this way. It may be said—and I have heard it said—that the two cases are not on all fours because one is the legitimate Government of Spain and the others are insurgents. There is a definite answer to that. It is impossible in international law to recognise a blockade unless you grant belligerency to both sides, and suppose circumstances had been exactly the opposite at Bilbao we could not have permitted the blockade of the Government without at the same time granting General Franco belligerent rights.
  Mr. Wedgwood Benn: Is the right hon. Gentleman going to say anything about the air control?
  Mr. Eden: Yes, Sir, I am. In this problem of the air control we are perfectly conscious of the fact that we are up against the most difficult feature of the whole of these many problems created by the Spanish Civil war. If the House will reflect for a moment and cast their minds
  1598
  back over the history of this dispute they will realise how many of the difficulties have been due to the air arm, for instance, the "Deutschland" incident and such things, and it is—and I do not disguise it from the House—a matter of the greatest difficulty to find a way of dealing with this problem. The International Committee tried, and their experts tried, and the experts of all the nations tried, but they failed, and, so far as I am aware, and as far as we have been able to discover, there are two ways of doing it. Either you must put observers on virtually all the aerodromes of Europe, clearly an impossible task—either that, or you must seek the agreement of both sides to put observers on the aerodromes of Spain. We have suggested the latter course, which, so far as we have been able to determine, is the best method possible, and the only method, probably, of trying to check these arrivals of foreign airmen.
  If these proposals are accepted by the nations who are represented on the Non-Intervention Committee, they can, in our view, prove the means of making non-intervention effective, of limiting the risks of this conflict spreading, and of confining, as we wish to confine, the Spanish war to Spaniards. If they fail, and if as a consequence non-intervention breaks down, then Europe will enter—let us make no mistake about this—upon a new and more perilous phase. You will have unchecked exports of munitions to both sides. You will have rumours, impossible to check, of the arrival of large numbers of volunteers. You will go back into an era of grave peril—an era in which incidents such as have already occurred, and must inevitably mark civil war of this kind, will have a much deeper significance. The Government are convinced that Europe does not want this. That is why Europe has charged us with this task. We have sought to discharge it equitably. Even the right hon. Gentleman opposite would admit that we have discharged it rapidly. To-morrow it will be for Europe to decide. To-night, I ask this House to approve these proposals as a contribution to the preservation of peace.
  War settles nothing. Whether war results in victory or defeat, bitterness remains. I do not accept the doctrine of the inevitability of war. One sometimes

  1599
  hears it argued that it is not worth discussing whether this or that step before 1914 would have averted war, because the clash was inevitable. I do not accept that statement. A war postponed may be a war averted. It is in that light that I ask this House to judge our policy in respect of the Spanish conflict during the past year. I ask the House to endorse these proposals, not because they like individual items in them—there are items I do not like myself—not because they like this or that item, but because they are, we believe, a contribution to European collaboration and, therefore, a contribution to peace.
  8.37 p.m.
  Sir Archibald Sinclair: We have listened to a speech from the Secretary of State which must have strengthened the belief, which I hold, and which I believe is widely held on this side of the House, in the sincerity with which he is pursuing a policy of peace and impartiality in Spain. Nevertheless, I do not think that he has given quite adequate expression to what, as I think he must understand, is the sincerity with which many of us on this side criticise the results of the non-intervention policy in so far as they have been revealed. It is, unfortunately, true that at every stage in the development of the civil war, or, rather, at three successive stages, large reinforcements have come for General Franco's side, in spite of non-intervention, while at every stage non-intervention has operated to prevent the Spanish Government from obtaining, except with great difficulty, countervailing support to help them against General Franco and his Italian and German auxiliaries. Therefore, I do not think it is surprising that we on this side of the House look with some caution at the plan which the right hon. Gentleman circulated to us this morning.
  For my own part I have been a patient and consistent supporter of non-intervention, but I have been compelled to say from time to time that I thought the Government ought to take a stronger line and ought to indicate clearly to those Powers which were not carrying out non-intervention the consequences of continuing to violate the agreement. We had a Debate on these lines about a fortnight ago, and it was followed by a meet-
  1600
  ing of the Non-Intervention Committee, at which, as the right hon. Gentleman has reminded us, there was a deadlock. The Secretary of State now says that there was not one nation on that committee that did not wish non-intervention to continue; but, unfortunately, there were some nations on that committee which have never observed the agreement which they had signed. When the deadlock was reached the Netherlands Minister proposed that His Majesty's Government should undertake the task of finding a way out of the deadlock, and he was supported by all the nations present. The right hon. Gentleman claimed that that showed what confidence they had in His Majesty's Government. Perhaps it had something to do with the fact that they were meeting in London, the capital of this country. [Interruption.] If hon. Members opposite interrupt that statement I will say that I do not think the right hon. Gentleman has a right to claim that the mere fact that these nations asked His Majesty's Government to undertake this task is a measure of their confidence in it. [HON. MEMBERS: "Why not?"] Because it is quite obvious that when an International Committee is meeting in the capital of one country, with a Minister of that country in the chair, it is only natural that they should ask that Government to act.
  Brigadier-General Sir Henry Croft: Would the right hon. Gentleman say that that would be so if the Conference had been in Berlin or Rome?
  Sir A. Sinclair: I do not know what International Conference the hon. and gallant Member has in mind, and I hope he will not interrupt me. I was merely taking up a small point that was made by the Secretary of State. I think he pushed his case, if I may say so with respect, a little too far.
  So this request was made to His Majesty's Government, whatever may have been the motives of those who made it, and it was not a pleasant task to be asked to undertake. It was a very heavy responsibility on the Government and on the Secretary of State, and I think that we in this House ought to give credit to the Secretary of State for his willingness to undertake so heavy and embarrassing a task. The Secretary of State has said that there are in the proposals some

  1601
  points which he would prefer were not there. I certainly do not like all the proposals, but I do want the war in Spain to stop. I do want peace. I do want the volunteers withdrawn from both sides and nobody that I am aware of in this House —I shall be interested to know if there is anybody—can suggest a quicker way of achieving those objects than the way which the right hon. Gentleman proposes. If you are engaged in an international controversy, there are, broadly, only three ways of settling it—arbitration, conciliation or force. This is an effort at conciliation, and I prefer it to force. Therefore, I think it ought to be given its trial.
  I do not think that the Opposition Motion gives a fair description of the proposals:
  "The declared intention of His Majesty's Government to make to the Non-Intervention Committee to-morrow proposals which contemplate the granting of belligerent rights to General Franco and which do not make effective provision for the complete cessation of foreign intervention in Spain."
  As a matter of fact, these proposals for granting belligerent rights to General Franco cannot come into operation until the Non-Intervention Committee by a unanimous vote, including not only our own Government and the French Government and the Scandinavians Governments and all the other neutral Governments, but also those who have been most active and fervent in their support of the Spanish cause like the Russian Government, has recorded its opinion that the withdrawal of foreign volunteers is proceeding satisfactorily. Not until then is it contemplated, to use the words of the Motion, that belligerent rights shall be given to General Franco. It may be that these proposals may not work. The Government have said so at the beginning of the White Paper. But again I say, who has a better plan? In the meantime let us give this plan a chance.
  After all, there is nothing wrong in itself in granting belligerent rights to an insurgent party in a foreign country. The hon. Member for Derby (Mr. Noel-Baker) in a very cogent letter he wrote to the "Times" on the subject quoted Mr. Hall as perhaps the best and most authoritative of British writers on the subject. Mr. Hall deals with three possible cases in which this issue might arise, one, the case of insurgent communities in an inland State, and he says:
  1602
  "As long as a Government is struggling with insurgents isolated in the midst of little provinces and consequently removed from contact with foreign States, the interests of the latter are very rarely if ever touched in such a way as can be served by recognition."
  He goes on to say:
  "When a State is contiguous with a revolting province it may he different."
  The third case he quotes is that of a maritime war, and he says:
  "There the presumption of propriety lies in the opposite direction. No circumstances can be assumed as probable in which the interests of a foreign State possessing a mercantile marine will not be affected, and it may recognise insurgents as belligerents without giving just cause for suspicion of bad faith as soon as a reasonable expectation of maritime hostilities exists."
  Therefore, on such high authority, and one to which the hon. Member for Derby paid a tribute, I think we may justly reach the conclusion that the grant of belligerent rights to insurgents is not in itself a wrong thing to do, but, on the contrary, where a maritime war is at issue there is a presumption in favour of granting them. But while that is true I should strongly object, and I understand the Government would strongly object, to the granting of rights to an insurgent party which was not really a party of Spanish insurgents at all or in only a small degree a party of Spanish insurgents but a party which depends in large measure on the support of alien forces from outside. If that is the case, and in so far as it is the case, I should strongly resist the granting of belligerent rights.
  I support the proposal in the White Paper only because it is made clear that there can be no question of recognising belligerent rights until the Non-Intervention Committee is satisfied that the measures for the withdrawal of volunteers are working satisfactorily. So I say, why should we torpedo this scheme before it is ever discussed on the Non-Intervention Committee? The responsibility is not ours, it rests upon the right hon. Gentleman, and it is altogether an unenviable responsibility. I agree with the right hon. Member for Bow and Bromley (Mr. Lansbury), who a fortnight ago said that the right hon. Gentleman is discharging the responsibility of seeking peace with credit to himself and to the Government. He does not ask us to accept the responsibility for these proposals, and I say do not let us hamper him at this stage.

  1603
  I should like to make one or two criticisms and to utter a few warnings on these proposals. The first is this: Do not let other people drive a wedge between ourselves and France. When we were discussing the broader aspects of this matter in the House a fortnight ago I said—and the House showed its approval—that the firm and loyal friendship between ourselves and France is the firmest ground for peace in Europe at the present time. There are some people who are not unwilling to disturb this friendship. I observe for example that in "The Observer" of last Sunday there was a reported statement by Dr. Hafeldt voicing the views of the Foreign Office in Berlin. It said:
  "This firm attitude of Germany and Italy towards the Anglo-French proposals last week has broken the London-Paris united front. On Friday for the first time we saw England and France marching in opposite directions."
  I hope the right hon. Gentleman will be very careful to avoid anything of that kind happening. There must be no compromise on the question of refusing to grant belligerent rights until volunteers are withdrawn. That comes home direct to the French; they feel it more than we do. If we are to have firm and loyal relations with France there can be no compromise on that point.
  Now I come to the White Paper itself. I ask how this new system of observation in the ports is going to work. How is smuggling into the small ports to be prevented? This is an important point. You can carry arms and munitions in ships of small size, of a few hundred tons. How is this smuggling into the smaller ports around the coasts to be prevented? What are the Government plans for dealing with it? Then I would also ask, how is withdrawal to be carried out? In the last speech I made I put the point, is it to be by an equal number on both sides or roughly in proportion to the number of troops on either side? I have not seen any authoritative estimate of the number of foreign troops on the Government side, which puts the figure at more than 20,000. I think that is far more than the actual numbers. I have seen no authoritative estimate which puts the figure of Germans and Italians at less than 80,000, and many people say that it is over 100,000. Is there to be some sort of rough proportion? I know
  1604
  that the right hon. Gentleman cannot lay down an exact proportion, and say that it shall be four to one or five to one, but will he assure us that there is to be some kind of rough justice meted out as between the two sides, and that there will not be an effort to make each side withdraw an equal number of volunteers at the same time? When the White Paper states that the Non-Intervention Committee has to be satisfied
  "that the arrangements for the withdrawal of foreign nationals are working satisfactorily,"
  does that mean that it will at any rate be made clear that all foreign nationals will have been withdrawn from the firing line? I do not say that they can have been got out of the country, but at any rate they ought to have been withdrawn from the firing line and no; to be fighting in the war. With regard to the observers in the ports, what are they to do if they see a cargo coming in? What will be the next procedure for them to follow? Will the Non-Intervention Committee have to be satisfied, not merely that the volunteers are being withdrawn, but also that the non-intervention agreement about munitions is being observed? For example, if we are told that the volunteers are being withdrawn, but the observers in various ports say that munitions are still coming in, surely we will not then grant belligerent rights to General Franco? I ask for an assurance to that effect from the Government.
  Sir H. Croft: Would that apply to the other side?
  Sir A. Sinclair: Certainly it would apply to the other side. Another question I wish to ask is whether belligerent rights can be withdrawn? Suppose that after belligerent rights had been granted, these agreements were again violated, what check would there be then? The Government may say, "Is it not rather unfair to ask what is going to happen if the whole thing breaks down?" I do not think so, because recently we have had some rather sad experiences of agreements which have been signed and not kept. I think it is a fair question to ask the Government what will happen if this agreement, having been signed, is not kept. Can we then withdraw belligerent rights? I rather think that the authorities are against it. Mr. Hall says:
  "Recognition of belligerency when once accorded is irrevocable, except by agreement,

  1605
  so long as the circumstances exist under which it was granted."
  Is that a saving clause? If belligerency is granted on certain conditions, and if those conditions are no longer being fulfilled, will it then be possible to withdraw the grant of belligerency? As to aeroplanes, I did not think that the Secretary of State dealt quite adequately with the criticism that has been made. The White Paper says:
  "The Committee to consider further the question of the employment by the two parties of foreign aircraft which enter Spain under their own power, and to examine in particular the possibility of requesting the two parties to accept foreign observers in specified aerodromes in Spain."
  Surely that is very weak. The Foreign Secretary has more than once admitted that this is a serious gap in the Non-Intervention Agreement. I urge that a stronger line should be taken about the means of preventing aeroplanes from entering Spain.
  The Government have warned us that this plan may not work. At any rate, the plan cannot make the position of the Spanish Government worse than it is now. The recognition of belligerency depends upon the withdrawal of volunteers. The re-establishment of control depends upon—but here I would not like to be dogmatic. I ask the Noble Lord, who I understand is to reply, to deal with this point. The Leader of the Opposition made a criticism which I think was not quite met by the Secretary of State. The Leader of the Opposition said that we were going to re-establish control in a form which would be injurious to the Spanish Government at the present time. He said that the first step will be to clamp on the land control straight away. That, of course, would be injurious to the Spanish Government. Am I right in saying that that will not happen, and that the re-establishment of control depends upon the acceptance of the whole scheme? It is the first step in the scheme, but that control will not be re-established until the whole scheme is accepted, including the agreement for the withdrawal of volunteers. I would like to know definitely that that is so.
  If this plan is to be rejected, let us know who is responsible. Do not let it be this House which rejects this possibility of peace. If indeed there are Governments abroad which are not sincere in their pursuit of peace, let us know which
  1606
  they are. Let the responsibility be placed upon other shoulders than ours. The Leader of the Opposition referred to the danger of continuing a sham. I agree that there is a danger in continuing a sham. I hope the Government will make it clear that they have an alternative policy if other nations refuse to take this up and work it sincerely. But I believe that here is a possible path to peace. I believe it would be wrong to reject it. I hope we may be able in this way to obtain genuine co-operation, which we have never had since the beginning of the Spanish trouble, between the European Powers.
  The right hon. Gentleman the Member for Epping (Mr. Churchill), in one of the previous Debates on this subject, made an immense impression not only in this House but also in the country by an appeal which he made, based, as he said, on a day-dream of his own. Using the psychologist's definition of worry—a spasm of the imagination—he applied it to the psychological state of the Governments of Europe at the present time, and he said that if only we could find some new policy, a theme, which would enable this spasm to be relaxed, not only might we find our way out of the difficulties in Spain, not only might we restore peace to that distracted land, but we might go on from that to restore and firmy establish real peace in Europe. It is because I feel that there is some chance here of pursuing that line of thought, it is because nobody else to whom I have listened has suggested any better or more hopeful way, that—although I realise the weakness of this plan, the difficulties, and the possibilities that it may break down or that it may not be accepted by the other Powers concerned—I hope this House will not take upon its shoulders the responsibility of rejecting it.
  9.4 p.m.
  Mr. Churchill: I was glad to find myself coming more and more into agreement with the right hon. Gentleman as his speech proceeded. It is a matter of value and importance, extending far outside this House, that the party which he leads, and which plays such a very large part in moulding opinion in the country, should definitely range itself upon this issue at the side of His Majesty's Government. But I must confess that what has weighed with me a good deal in

  1607
  these last few weeks was what the right hon. Gentleman a little tried to discount. I have felt it to be a most remarkable thing that when, on the London Committee, there was a definite difference, a distinct divergence, between the great Powers, and when the whole committee was summoned together, it was asserted broadly, and I believe truly, that no fewer than 23 out of those 27 Powers, if matters had been forced to a division, which happily they were not, would have followed the lead of the two great Western democracies, Great Britain and France. I think that is a tremendous event, and, believe me, it adds to our safety.
  Then we have seen a second event which is, in a way, even more remarkable. When there was a deadlock last week the committee, including those with whom we had sharp differences, and whose sympathies are violently engaged upon one side or the other, came together and unanimously asked the British Government to try to find a way out. What greater tribute could there be to our having played fair and steered a straight course? It is a real tribute. It is not a tribute of words, but a proof of trust, and a recognition of the fact that we have tried our best to make things better, and not to make them worse from the beginning of this Spanish quarrel. I do not remember anything for years quite like this.
  I think it is of the greatest importance and value that Governments from Moscow to Berlin, from Rome to Prague, from Lisbon to Oslo should have done this, not as a mere compliment to the chairman of the committee—although let me say that, reading only in the newspapers, it seemed to me that Lord Plymouth in his conduct of this committee has rendered remarkable services, and has created for himself a very solid reputation. But it was certainly not a mere spirit of compliment to hosts which led all those different countries, with their divergent points of view, finding themselves in a deadlock, to appeal to the British Government to try to carry the matter forward and find a way out. It seems to me that this is a matter of great importance to us all. Nothing is more agreeable at the present time than to see the growing understanding of British policy which is spreading throughout the United States, and what could
  1608
  be more a determining factor in the opinion of the United States than the spectacle of all those Powers inviting the British Government to lead the movement of events?
  I would have thought that if any Motion was submitted to the House on this occasion it would have been one to congratulate His Majesty's Government upon the steady course they have steered throughout a year of baffling difficulties and of so many dangerous situations. Instead of that, what has happened? We have the Adjournment moved. We have a Motion, which, if it were carried, would be a most decisive Vote of Censure. While all Europe pays its tribute, the Leader of the Opposition passes his censure, and, of course, if this Motion were agreed to, it would be far more than a mere Parliamentary and political event. It would bring the position of Great Britain in international affairs down to the ground in futility and ridicule. Fancy the effect that would be produced upon our slowly gathering prestige in Europe. It would at one fell stroke render us impotent in the future stages of this Spanish difficulty and, perhaps for many years to come, we should not be able to play an effectual part in Europe. But that is the question upon which we are to vote, because it was not necessary to raise this matter as a mere vehicle of debate, as a convenient moment for ventilating the topic. The whole matter could have been discussed most freely on Monday next. This has been a quite definite challenge which, if it were successful, would, in my humble opinion, strike a blow at the idea of the Concert of Europe, of collective security, of the working together collectively of many Powers, a blow from which the whole process of European appeasement would not recover.
  Mr. Gallacher: A rotten concert, anyhow.
  Mr. Churchill: As to this plan which has been put forward, I was very glad to hear the lucid defence of certain intricate points put forward by the right hon. Gentleman. Of course it is a compromise. It is a compromise between not only divergent but vehemently antagonistic views and interests. You cannot expect to find an attractive, symmetrical, clear-cut proposal such as would spring in its integrity from one man's mind,

  1609
  when you have to cater for no fewer than 27 different nations. I have not the slightest doubt there are points in this plan which are extremely repugnant to Germany and Italy, but then, I imagine, there are also points in it which are repugnant to Soviet Russia, and there are some points which, perhaps, are not entirely in accord with the views of France. But if we are to keep the whole of these Powers together round the table, it is absolutely necessary for everybody to put up with a certain amount which they do not like, for the sake of producing a scheme upon which all may be able, possibly, to agree.
  I go as far as this. I conceive that our safety is enormously dependent upon the maintenance of the Concert of Europe and the united treatment of this topic, and even if this plan were worse, even if it were less equipped with hopeful feeling, I still would say that it would be necessary to find even a formula, which would keep these Powers together round the table. I have no hesitation in saying—I am sure it is true—that the fact that the Powers should remain together is of greater consequence to the peace of Europe than the actual merits of any agreement which keeps them together. I am not at all convinced—and I was very glad to hear the argument of the right hon. Gentleman upon this point—that it is a bad and a vicious plan making it necessary for the Opposition immediately to challenge an Adjournment Motion. As far as I can see, the worst you can say about it is that it is probably too good to be true. We should be very glad indeed if we could to-night congratulate the Foreign Secretary on having netted all the fish that are in this White Paper. Indeed that is a stage which lies ahead. But if this plan were adopted, does anybody doubt that the control may actually be less inefficient than it has been in the past.
  Certainly, the control of arms going into Spain, if you regard that as a matter of high consequence—personally, I think there is a certain amount of illogicality in supposing that preventing arms going to belligerents shortens the war; I think it would probably have the opposite effect—but certainly the object has been to prevent arms from going in, and if this scheme were to come into operation, can anyone doubt that the control would
  1610
  be far greater than could be exerted supposing that all went by the board and you had a vast, chaotic intrusion of arms from all quarters to both sides? What could be a greater advance—and here we are all agreed—than to procure the withdrawal of the so-called volunteers—I say "so-called" advisedly—from both sides in Spain? There we are all at one. What could be better than to strip from this Spanish quarrel this odious infusion of foreign malevolence and of people who care nothing for the future of the Spaniards, but who are there simply as the champions of grisly abstractions which are equally detestable to all parties and classes in this island?
  Lastly, there is this question of according belligerent rights. It has been explained, and it is the essence of the story, that belligerent rights are not to be accorded unless this great advantage of the withdrawal of the foreign intruders has been rendered very largely effective, and on that I understand that we ourselves will be the judges, judges with others, but unanimity is required, and therefore we have an absolute judgment upon the matter. Does anyone doubt, does even the right hon. Gentleman who is going to reply doubt, that if you could get the foreign volunteers from each side to withdraw, it would be well worth while according the very limited and guarded form of belligerent rights recognition which is proposed here? But I must say this, that the refusal to accord any measure, even the most restricted, of belligerent rights to a combatant Power which disposes of armies numbered by several hundred thousands. [Interruption.] That is the information which I have from many direct quarters—which is in possession of the greater part of the Spanish Peninsular, judged both by territory and by population, which has a constituted Government, which has upon the whole the command of the seas, behind whose frontiers there is, as we get by testimonies from almost every quarter, a remarkable measure of order and even of normal life—to refuse even to consider this question of the recognition of belligerency, I say that is in itself a highly questionable proposition and one which does not accord with the majority of precedents which have guided us in the past.

  1611
  We need not waste our time prophesying what the end of the Spanish war will be—all these matters are veiled in the uncertainty of the future—but we must recognise this fact, that whoever wins in Spain, we shall have to try to live with them in more or less neighbourly fashion —whoever wins—as we have done with all sorts of Governments, as we are doing now, living as well as we can with all sorts of Governments, some of them very powerful Governments, which I shall certainly not attempt to particularise. It seems to me that we should not be prudent or right in trying to draw some absolute line against the recognition of belligerency to either side or to both sides in Spain, and certainly we should not do so if, at the price of this comparatively small concession on our part, we were able to achieve the great, solid advance of a substantial withdrawal of the volunteers.
  There is one more reason why I venture to suggest that we should not allow ourselves to become too much the partisans of either side. We ought also to try to gain influence with both sides in Spain. I must say, when people talk of the horrors of war, that there are worse things than the horrors of war, and those are the cruel executions and blottings out of whole political classes on both sides which have stained the Spanish struggle. I am very glad indeed to notice that the capture of Bilbao has not been attended by anything like those scenes which took place in the earlier days of the struggle, but obviously and certainly it will be of the very greatest importance to us, if we have got influence with both sides in Spain, and especially with the side which is going to win in Spain, because then alone may we be able to intervene and procure mercy for the vanquished.
  I have not tried to exacerbate this Debate, because I know how strongly, ardently, and passionately hon. Members opposite feel, and that there are equally strong opinions on the other side. But, in view of the challenge of this Motion, in view of the calamitous consequences which would follow its adoption, it is surely the duty of those who support His Majesty's Government to give the fullest expression to their feelings of confidence, and I will say of gratitude, to Ministers who have brought us through this year
  1612
  of Spanish turmoil without involving our country in the cauldron, without rupturing the general peace, and without losing—nay they have enhanced it to an unprecedented point—the respect which is extended to us from so many nations.
  9.23 p.m.
  Mr. Maxton: I congratulate the right hon. Gentleman the Member for Epping (Mr. Churchill) on his intervention, which followed the lines of previous speeches he has made on this subject, but I am afraid I must differ from him profoundly on the conception that it is wrong for the Opposition in this House to raise its voice on important matters of foreign policy at the time when these important matters of public policy are still open for decision. He tells us to wait until Monday, when the crucial meeting in this matter is tomorrow. That would not have been his conception of the Opposition's duty if he had been sitting on the opposite side, and I, for one, wish to support the official Opposition and to congratulate them on having seized this opportunity to debate in this democratic Assembly important issues that are fraught with serious results for this country and for the whole of Europe.
  Admittedly, we are in a dangerous situation, and no one wants to make that situation more dangerous. Nobody in this House wants to make the situation more dangerous, I know. I want to say here very definitely that in my view—and in the Minister's view, if I read his tone and bearing in the last few weeks aright—the situation is more dangerous to-day than it was 12 months ago, when this policy of non-intervention was embarked upon. I see in these proposals to-day—I may be wrong and shall be prepared to admit it—an increasing blatancy and impertinence on the part of the Fascist Powers in Europe, and an increased tendency on the part of the British Government to try to conciliate them. The right hon. Gentleman the Member for Epping talks about people who are in Spain in pursuit of grizzly abstractions. Does he believe that Herr Hitler's intervention in Spain is in pursuit of abstractions? Does he believe that?
  Mr. Churchill: I believe that that is playing a great part on both sides.
  Mr. Maxton: Does he believe that it is a grizzly abstraction which led to the mounting of German guns to dominate

  1613
  Gibraltar? These 12 months have seen the situation become more menacing. We adopted this policy and I must admit that although I opposed it I felt the force of the argument, which was "Let us limit the area of the conflict; let us, by so doing, reduce the duration of the conflict; let us create a situation which will prevent dangerous incidents which might easily spill into a general war." It has not limited the duration of the conflict. It is obvious to everybody here that if the view propounded from the Opposition Benches from the beginning, honest recognition of the Spanish Government—not intervention, but the giving to the Spanish Government of the same rights as have been given to every other legitimate Government in the past—this conflict could have ceased. But this House and the Foreign Secretary, pursuing the theory that it was good policy to be friends of both sides, because one of them might win, have gone on encouraging the insurgents in every possible way, and as Britain has shown this non-partisan spirit more and more the more advances Italy and Germany have made and the more demands they have made of the other Powers concerned.
  Mr. C. S. Taylor: Will not the hon. Gentleman agree that even if it has not limited the duration of the conflict it has limited the size of the conflict?
  Mr. Maxton: The Foreign Secretary warns us to-night that we must accept these compromise proposals, making substantial concessions to General Franco. The hon. and gallant Member for Bournemouth (Sir H. Page Croft) need not say, "No. no," because the granting of belligerent rights to General Franco has been a matter of constant propaganda on the part of him and his friends. That has not been shouted for as some academic abstraction, but because they believe what is true, that the granting of belligerent rights raises the status of General Franco. It makes him, instead of being an insurgent, the head of a properly constituted Government over part of Spain and represents him as having at his back a substantial proportion of the people. All the facts contradict that. But to-night you are in process of making him a person of standing in international affairs, and in doing so you are raising the status of those European nations who have nailed
  1614
  their colours to the Fascist mast from the beginning. We are deliberately raising the whole status of the Fascist Powers in Europe.
  This tenderness towards Franco is not in the interests of Great Britain. From the outset of this conflict I have seen in this House a class prejudice operating to an extent which in the most extreme cases puts the interests of Britain out of account altogether as against the interests of class. As I hear some of these hon. Members, they would rather Franco wins and Hitler and Mussolini dominate Spain and have Britain down, than see the Spanish Government win and Britain on top. Prejudice is carried to extremes that I have never seen in this House before. A great deal has been made of the point that we ought all to be sitting full of wonder and gratitude that the nations of Europe have chosen Great Britain and our Foreign Secretary to be Chairman of this Committee to deal with this situation. That apparently raises our status to a point which it has not reached for years. What awful rubbish; what utter rubbish. I have often been appointed chairman of committees of one kind and another. I have not always been foolish enough to believe that it was because of a high appreciation of my qualities, but because a whole lot of elements thought that they could rush me better than they could rush somebody else.
  Some four or five years ago I asked how many international conferences there had been since the War, and I was told that the number was 37. Since then many more international conferences have been held and the total must be near the century, and over a large proportion of these Britishers have presided. But I cannot remember this enthusiasm on previous occasions. For instance, when Mr. Arthur Henderson was Chairman of the Disarmament Conference I cannot remember Members throwing their hats in the air and saying that this was a great victory for Britain. I cannot remember the hon. and gallant Member for Bournemouth or the hon. Member for Middleton and Prestwich (Sir N. Stewart Sandeman) claiming that a great victory for British prestige had been achieved when the right hon. Member for the Scottish Universities (Mr. J. R. MacDonald) was presiding at the World Economic Conference. But to-night, because the right hon.

  1615
  Gentleman the Foreign Secretary has taken on another dirty job, we are supposed to be enthusiastic. On his own showing it does not seem to offer any greater prospects of success than the World Economic Conference. I would be willing, if I were a betting man, to say that while the World Economic Conference had a very short run, this one of his would even beat it with the celerity with which it will meet and disband without having achieved anything of concrete value for the peace of Europe. This is not a change of policy; it is merely a development and a carrying forward of the policy which has been carried on for almost 12 months, a policy which has produced no concrete results and has brought us on his own showing nearer the danger of war than we were 12 months ago. For these reasons I support the Opposition's Motion.
  9.35 p.m.
  Mr. Lennox-Boyd: The speech of the hon. Member who has just sat down has introduced the first note of serious controversy into this Debate to-night. The hon. Member says that the Government in the last few months, and still more in the White Paper issued yesterday, have been helping the cause of General Franco. The proposals of His Majesty's Government which will come before the Non-Intervention Committee to-morrow are based first and foremost on the withdrawal of foreign volunteers. That is the necessary pre-requisite for the granting of belligerent rights. It is the opinion of the hon. Gentleman and those who think with him that General Franco is dependent almost entirely on foreign volunteers in order to continue his war. How then can they seriously argue that proposals which involve inevitably the withdrawal of what they regard as his only source of strength will help his cause?
  Mr. Maxton: For once the hon. Gentleman makes a legitimate point. We assume when we make our points against him that General Franco will treat any agreement he makes on this matter in the same way as he has treated previous agreements.
  Mr. Lennox-Boyd: I am grateful to the hon. Gentleman, but I have a number of other points to make, and if his replies
  1616
  to them are of equal value to the one he has just made, I hope that he will allow me to continue. It is common knowledge that some members in this House hope for the success of General Franco and that others hope for the success of the Government of Valencia; but to-day we are not engaged in a controversy of this kind. We are agreed that we want to localise the Spanish war and accelerate its conclusion. Because of that desire which is common to all decent people, we welcome the proposals of the Government and congratulate my right hon. Friend on months of laborious work which we hope are going to reach a triumphant conclusion. I think it is fair to say that we on both sides are anxious that when this unhappy war is over a solution will be found in Spain that comes neither from the east nor from the west, but shall be exclusively Spanish. I think we recognise that we are most likely to achieve that desire if on both sides of this unhappy controversy, in so far as it is a controversy in England, we do try and appreciate what are really the motives underlying our particular championship of one side or the other. The right hon. Gentleman the Leader of the Opposition, in his opening speech, said that he saw some demerit in that part of these proposals which said that there should be an immediate restoration of land control. He spoke as if land control merely meant the control between France and Spain. He forgot that land control means also the restoration of rigorous control, if it has ever ceased, on the frontier between Portugal and Spain as well. The right hon. Gentleman does no good to his cause by suggesting that the Spanish frontier merely runs along the Pyrenees.
  The two problems with which we are concerned are those of belligerency and foreign volunteers. It is deeply regrettable, when all sorts of people like myself, equally ill-qualified, are anxious to take part in foreign debates, if we do not try to master some of the legal problems with which we are obliged to deal. On the question of belligerency there has been a great deal of muddled thinking in the course of the last few months. It has grown in the eyes of hon. Members opposite to be a sort of favour that the Government of the day either grants or withholds according to its political prejudices. It is not a favour, but recognition of a

  1617
  state of fact. I do not want to weary the House with elaborate quotations from authorities, either rival or agreeable to those already quoted, but it will be generally recognised that when a rebellion has assumed such proportions that it may without abuse of language be called a war, then belligerent rights should be granted not as a favour but as a recognition of a state of fact. No one will dispute that this rebellion has assumed such a size that it may without abuse of language be called a war. In the course of the next few weeks, if these admirable proposals receive assent abroad—as first Press reports seem to show they will—and we recognise the flag of General Franco flying on his various ships at sea, and the flag also of the Valencia Government, in so far as they have any ships—if they had been a little more discriminating in the slaughter of their officers they might have had a more efficient fleet—
  Colonel Wedgwood: Will the hon. Gentleman give the evidence for that statement?
  Mr. Lennox-Boyd: I could supply chapter and verse for it, but it would break my argument, which was probably the right hon. and gallant Gentleman's purpose, and I will not do it now. If we recognise these flags they will not be regarded as emanations or symbols of sovereignty, but as proceeding from an organised body of persons who, so far as waging war goes, are able to act as a sovereign State carrying on the Government of their own particular district and of those who are fighting for them. The right hon. Gentleman the Leader of the Liberal party rightly said that for a maritime nation like ours to refuse the grant of belligerent rights in a war which is a maritime war might well land us in great difficulty. That is why I am glad we are taking this step.
  When the right hon. Gentleman the Leader of the Opposition says that if we grant belligerent rights there might well be a collision at sea, I would reply that if we did not grant belligerent rights, there will inevitably be a collision at sea. Hon. Members opposite say that we have not granted belligerent rights before and therefore we ought not to grant them now. In 1825 we gave belligerent rights to the Greek Provincial Government when
  1618
  it was trying to overthrow the rule of Turkey. In reply to a question asked at the time as to whether we were not helping a rebellious state, the Secretary of State of the day replied that the character of the belligerent was not a principle, but a fact. It was added that the only alternative for granting belligerent rights was to treat both sides as pirates. I cannot believe that any Members on the other side of the House, faced with the consequences of treating the ships of either side as pirates on the high seas, would shrink from granting belligerent rights.
  With regard to the second contention I would like to advance about volunteers, I believe that His Majesty's Government, who have such a happy record in this regard, can be trusted to see that the removal of volunteers from Spain is conducted courageously and expeditiously. Their record in regard to stopping the entry of volunteers into Spain in the last few months has been a commendable one. My right hon. Friend rightly warned Members a few weeks ago against the dangers involved in taking seriously as gospel truth chance or propagandist reports in the newspapers of the world. On 21st June he denied that Italians had entered Malaga. A few days later my Noble Friend, the Under-Secretary, in a written reply denied that there had been any breach of the contraband clauses in regard to cargoes going over the land frontier which were subject to search on the seas. On 6th July my right hon. Friend again said that he saw no reason to believe that the Portuguese frontier would be abused. Even more important, in reply to a Parliamentary question at the beginning of this month, he said:
  "I understand the Non-Intervention Committee have no evidence of foreign nationals having arrived in Spain from any quarter since the ban was agreed upon."
  That was the statement made by my right hon. Friend, who is in a position to know all the facts. I would take his judgment, even if he were in opposition, rather than the judgment of any people opposite. I believe, with most Members of this House, that though the withdrawal of volunteers would not mike any very great difference, probably, to the length of time during which this war would continue, none the less it would enormously reduce the prospects of this war leading to a world war. I believe also, in contradiction to what has been

  1619
  advanced from the other side of the House, that the forces which I call the Nationalist forces have a very substantial measure of support in Spain. I should be out of Order, I imagine, if I developed that theme overmuch, but it has already been touched upon by the Leader of the Opposition in his opening speech, and I take it that I am entitled to say that two-thirds of Spain is now ruled by General Franco and that peace and quiet obtain there. There are 14,000,000 people on his side living in peace and without opposition in territories controlled by him. General Mola captured Pamplona with 500 men and General Quiepo de Llano captured Seville with 183, which is hardly likely to have been the case if the populations of those towns were against him. In addition, and in conclusion on this point, it was not until the international brigade and the Russian tanks got really into action that there was a sudden stoppage in his onward march. Further, I think that it ought to be recognised that there is no mutual massacre among his supporters, such as now blackens the records of some of those on the other side.
  Being as I am in entire agreement with the policy put forward by my right hon. Friend and wishing him God-speed in the really grave decisions which the world will reach in the next few days, I would ask him to bear seriously in mind this point that some people who have gone as volunteers into Spain may have become Spanish subjects by the issue of Spanish passports to them when they crossed the French frontier or went in otherwise. That fact should be borne in mind, because I am one of those who think that those who are fighting on General Franco's side are unlikely to be ready to drop their nationality when they enter Spain, and may desire to remain nationals of their State, though that may not operate in the case of those fighting on the other side.
  9.48 p.m.
  Mr. Herbert Morrison: The hon. Member for Mid-Bedfordshire (Mr. Lennox-Boyd) has this to his credit, that he has made no secret of the fact that he is a fairly definite supporter of General Franco.
  Mr. Lennox-Boyd indicated assent.
  Mr. Morrison: For his frankness in that respect we pay him tribute and we respect him. It is, perhaps, of some significance in this way, that he is at the same time a definite supporter of the cause of General Franco and an admirer of the foreign policy of the Foreign Secretary, and a warm supporter of the proposals in the White Paper which are to go before the Non-Intervention Committee to-morrow. Frankly, I think the hon. Gentleman is right in supporting this White Paper. From his point of view it is good business. I leave it to the Foreign Secretary and the Noble Lord who will follow to reconcile the alleged impartiality of His Majesty's Government with the fact that one of their prominent supporters, one of a number in the ranks of the Conservative party who are definitely the supporters of rebellion and insurgency in Spain, should believe in these proposals which the Government are submitting to the Non-Intervention Committee.
  Mr. Lennox-Boyd: Was the right hon. Gentleman one of those Labour leaders who sent messages of good will to those in Spain in 1934 who were trying to overthrow an equally constitutional Government?
  Mr. Morrison: The answer is in the negative. That shot has gone wide.
  Mr. Lennox-Boyd: That is why the right hon. Gentleman is not leader of the Labour party.
  Mr. Morrison: The Foreign Secretary made some sort of complaint that this Debate should have taken place at all. He complained that the Opposition had intervened by moving the Adjournment with a view to expressing its dissent from his proposals. That is an extraordinary complaint for a Minister to make. Our duty in this House is to say what we think, and if the Government advances proposals which were announced last night and are to be intimated to the Non-Intervention Committee to-morrow, and if the Opposition disagree with those proposals, it is not only reasonable that the Opposition should express its disagreement but it is the duty of the Opposition to seize the earliest opportunity of challenging and criticising that policy. It therefore seems to me to be childish to complain that the Opposition should take advantage of any opportunity within the rules

  1621
  of Order to express its opinions and its dissent from the Government's policy. Supposing that we had waited until Monday with our criticisms. Would it not have been said by the Treasury Bench that the Opposition had then no right to complain? It would have been said that this document was published and in the Vote Office on Wednesday night, that the Opposition knew that it was to be put before the Non-Intervention Committee on Friday, and why did not the Opposition raise the point beforehand? If this is an example of the way in which the right hon. Gentleman conducts business in the affairs of Europe I do not wonder that he gets into muddles.
  My right hon. Friend the Leader of the Opposition was reminded that in the earlier stages of this business he had advised his supporters at a Labour Party Conference to use their heads as well as their hearts. That is always good advice, from whatever quarter it may come. I personally took the view all along, right from the beginning, that the whole of this non-intervention business was bad and was bound to prove humbug. The majority of my hon. Friends and Members of the Labour party with whom I am associated quite understandably and equally sincerely took the view that if non-intervention could be made genuine, if it was equally and strongly applied all round, it would be a good thing. That was their view, but all of them, including the Leader of the Opposition, were insistent that if neutrality was to be a fair proposition it must be applied equally to every country concerned and must be rigorously enforced. When it became clear that it was not being enforced we took the view that we could not support it—not I, I am speaking of my friends, because I never did support it. The party to which I belong took the view that it could not consistently with the declarations it had made at the beginning continue to support a non-intervention that had ceased to be non-intervention, and had become a proven instrument for intervention on the part of Fascist Powers.
  Therefore, it ill-becomes the right hon. Gentleman to chide my right hon. Friend with the allegation that he has changed his opinion. The real truth is not that he has changed his opinion, but that His Majesty's Government did nothing serious to enforce and to secure that non-intervention and that neutrality to which they
  1622
  pledged themselves at the beginning of this affair. It is the Government which has run away from its original declaration. It is the Government which has tolerated intervention by particular States, and it is quite logical for my right hon. Friend, having seen that non-intervention does not work and that neutrality has become a farce, to say, "Very well, the proviso we made not having been observed we give it up, and we do not support any longer this which has become a farce."
  The truth is that the longer the development of the machinery of non-intervention and neutrality is extended, the more it becomes true that the policy of refusing to supply arms to the constitutional Government of Spain and of placing an embargo against that Government —really imposing sanctions against the constitutional Government of Spain—which was undertaken with a great deal of public good will, has not avoided international complications and risks to the peace of the world, especially in the way it has been administered, and the more it is apparent that it has not made Europe more secure for peace or minimised the risks of war. The very elaborate machinery of non-intervention has increased the complications of the diplomatic situation and has increased the risks of war. [HON. MEMBERS: "No."] It has been so, and it is so far so that the right hon. Gentleman has now brought forward proposals which he knows will not secure proper non-intervention. He is now afraid of bringing forward proper proposals because of the diplomatic situation which his own policy has created over many months, in dealing with other Governments in Europe. The policy of neutrality and non-intervention has not furthered the cause of peace, has not safeguarded the peace of Europe and has not eased the diplomatic situation, but has made it more complicated than it was.
  It is my own belief, firmly held, that the simplicity of the European situation and the lessening of the risks of war would have been far better served, if, right at the beginning of this conflict, the British Government, the French Government and the Soviet Government had said: "Here is a rebellion against constitutional authority which is not a Fascist government, and not a dictatorship government either of Fascism or Communism." I say quite

  1623
  seriously that there is a sacred right of rebellion against any dictator of any character. A moral right of rebellion exists when a country is denied freedom of institutions. [HON. MEMBERS: "Hear, hear."] Certainly, Spain was a democracy. [Laughter.] The hon. Member who is in such a state on the other side may think that he is the incarnation of Democracy, but he can take it from me that he does not look like it.
  Mr. Michael Beaumont rose—
  Mr. Morrison: As the hon. Gentleman admittedly is rather scornful of Democracy, let him not pose here as a champion of Democracy. Spain had a Liberal government. [An HON. MEMBER: "Minority government."] Who are the Tory party to talk about minority government? They have had governments upon minority votes before now. A Liberal government and not a Socialist government was in office. It was not a Communist government. Heaven knows why the people were so careful to return the Popular Front, and then put the Liberals in office, but they were. It was a Liberal government, and these traitors—[Interruption.] Yes, just as much traitors, if hon. Members can imagine it, as though a political friend of the hon. Member for East Fife (Mr. Gallacher) who was a General and Field Marshal in the British Army, proceeded to organise and to lead a Communist rebellion against this Government. Would he receive recognition?
  Mr. Liddall: He would not be successful.
  Mr. Morrison: Would he be a traitor? that is my question. He would be at once denounced by hon. and right hon. Gentlemen opposite as a traitor to his country and a breaker of his sacred oath to constitutional authority, and they would be right. I would not support such a man, whatever his politics might be. I believe in the upholding of Parliamentary democracy, even though it produces a curious government of the sort that we have to-day in this country. Spain was a constitutional democracy. Reduced to its elements, this is a rebellion by treacherous generals, traitors, blood-thirsty traitors, who have deliberately and of malice aforethought, after having conspired with foreign countries, organised the overthrow
  1624
  of the lawful Government of their country and acted unconstitutionally. That is the issue, and I say that, Spain being a friendly country, it was the duty of other friendly Governments to assist that Government at the beginning by a supply of arms, in order that it might quell the rebellion. If that had been done, the position in Europe would have been much better served than it has been by the policy of His Majesty's Government.
  Let us look at this precious document which His Majesty's Government have published. On page 3, the White Paper says that the Committee charge His Majesty's Government with the task of drawing up proposals aimed at closing the present gap in the control scheme. It does not close the gap. The Foreign Secretary admitted that, at any rate, on the side of the air, this scheme does not close the gap. The White Paper goes on to say that His Majesty's Government were asked to bring forward proposals which would enable the policy of non-intervention to be continued. That presumably means that as long as they continue something like the present policy that is called non-intervention, that will be judged satisfactory. It is not an instruction to make non-intervention effective or a decision to make non-intervention watertight, but to make it continue. Let us look at how non-intervention has worked for many months past. At the beginning of our disputations His Majesty's Government denied, or would not accept until it was proved, that there had been breaches of the non-intervention agreement by the Fascist Powers. During recent weeks they have admitted that there had been serious breaches of the non-intervention agreement.
  Let us look at what has been happening and the kind of thing which, in some sort of way, it is evidently contemplated shall be continued. I was interested, and a little sad, to find the Liberal party supporting the Government in this policy. It is really rather pathetic. I thought the Liberal party had shed their reactionary elements, who had become Ministers or hoped to be Ministers, and that they were now a progressive party. The Liberal Opposition are taking an exceedingly unsatisfactory attitude. Their leader—[Interruption.] I do not blame hon. Gentlemen opposite because I think they did very well with the speech. The right hon. Gentleman was giving support to the

  1625
  general proposals of the Government on the ground that they were a genuine attempt to implement non-intervention. We do not agree that this is a genuine attempt to implement non-intervention. What is the case against the Fascist Powers upon whom the observance of this non-intervention agreement has to depend—let us look at their past record before the civil war broke out. Documents that have been found have proved that Germans in Spain were actively conniving with the reactionary and rebellious forces to promote the rebellion itself.
  It has been denied even to-night, by the hon. Gentleman who spoke last, that the Italians have broken the non-intervention agreement as regards volunteers since it was made. Let me give to the hon. Gentleman some evidence which appeared in the "Temps" of Paris, reprinted from matter in the "Popolo d'Italia." The "Temps" of 14th July, a reputable French newspaper of Conservative tendencies, says that the "Popolo d'Italia" publishes each day actual photographs of Italian volunteers who have fallen in battle in Spain, and that in particular it has published recently a photograph of Sergeant-Major Vasco Zannoni, who, the Italian paper itself points out, left Italy on 14th April, 1937. There can be no dispute that both Italy and Germany have, on an extensive scale, thoroughly broken their agreements both in regard to the sending of arms to Spain and the sending of men. The only possible defence that I can find for the Italian denial that volunteers have gone is that, if it be true that volunteers have not gone, it has been conscripts, organised and equipped soldiers, who have gone. This denial was made by Signor Grandi in his speech at the Non-Intervention Committee last week. He, an official Ambassador of the Kingdom of Italy, specifically denied that any volunteers had gone to Spain from Italy since the agreement was signed by Italy, I think in February of the present year; and at the same time these photographs of fallen Italian volunteers are published in the Italian papers, and in the case of one of them the actual date of his departure is given as 14th April, 1937. But Italy was in the business, apparently, right at the beginning of the civil war, on a basis which made it appear that Italy was probably in the business before
  1626
  the civil war ever broke out. The "Corriere della Sera," one of the leading Italian papers, in an article dealing with the Air Force—I am again quoting from a translation in the "Temps" of this month—says that:
  "In July, 1936, right at the beginning of the civil war, General Franco was not in a position to transport his troops from Morocco to Spain, although these reinforcements were indispensable to resist the Red pressure."
  That confirms my right hon. Friend's point that General Franco could never have got where he is had it not been for organised intervention in a military sense on behalf of Germany and Italy. The Italian newspaper goes on to say that General Franco resolved to fight the Fleet with aeroplanes, but only possessed six, of which two were out of date. He ordered three tri-motor bombers and chasers from foreign factories. He received at Morocco, at the end of July, 1936, just after the beginning of the civil war—[Interruption.] What I am arguing at this moment is that Italy was, right at the beginning, and probably before the beginning, conspiring with the rebels against constitutional authority.
  Duchess of Atholl: May I remind the right hon. Gentleman that the evidence before the French Committee of Inquiry into the question of the three Italian aeroplanes which came down in French territory in July showed that they were received by General Franco on 15th July, 1936, before the insurrection broke out?
  Mr. Morrison: I am obliged to the Noble Lady. The evidence is really conclusive. The Italian newspaper says that:
  "General Franco received at Morocco, at the end of July, 1936, a part of this material. The flying personnel were Italians, and it was this first bombing group which made possible the transport of 4,000 Moroccans on 6th August, and on the 20th August, 1936, there was constituted the first squadron of Italian chasers. This squadron was incorporated on 5th December in the Spanish Air Force."
  The 5th December was after the agreement as to the export of material to Spain and the supply of military equipment, but it was on 5th December that these Italian aeroplanes and their personnel were incorporated in the Spanish rebel air force. We are asked to believe that this agreement, which is very imperfectly drawn, is likely to be successful when it is admitted by the right hon. Gentleman, and is stated in the White Paper itself,

  1627
  that its success is dependent on genuine co-operation, good faith and willingness to implement it all round. The German and Italian Fascist Governments never meant to implement non-intervention. Breach of faith, breach of their pledged word, breach of what they promise to do, is a cardinal principle of Fascist politics. [Interruption.] It is true. I know it is offensive to the hon. Gentleman's Franco outlook, but I am going to say it. It is true. We have got into this muddle. We have got into a situation in which the Government are wobbling into war. They have got into that state first because they want to believe what the Fascist Governments tell them, and secondly because, if any Fascist politician frowns at them, they shiver and crumple up and run away. It is precisely because of the cowardice of the Government, coupled possibly with their simplicity, that Europe is in the serious situation it is.
  Let us have a look at some more evidence of Italian and German neutrality, because we are told to-night that all Europe, 27 nations, are such admirers of the Foreign Secretary, they have such confidence in him, including Herr Hitler and Signor Mussolini. [HON. MEMBERS: "Stalin."] If you want to throw in Stalin as a supporter of the right hon. Gentleman it may comfort you to know that he is not a supporter of mine. It is assumed by the Government and by hon. Members opposite that these Fascist Powers really want neutrality and none-intervention and that they are anxious for the right hon. Gentleman to find a watertight scheme, but let us go to the heads of these two Fascist States themselves and ask them what they think about it. An article in the "Popola d'Italia," supposed to be by Mussolini himself—that is the general report of the British Press—at the end of June says:
  "In this great fight which has brought face to face two types of civilisation Fascist Italy has not been neutral but has fought, and victory will be hers."
  These are the neutral friends of the right hon. Gentleman. I pass to another neutral friend of the Foreign Secretary, Herr Hitler, Chancellor of the German Reich. Herr Hitler did not cover it up in an unsigned newspaper article. In his speech, reported in the British Press, on 28th June he said:
  1628
  "Germany needs to import ore. That is why we want a Nationalist Government in Spain, to be able to buy Spanish ore."
  So we are re-arming, everyone knows, primarily because of fear of Germany and Italy, and the great Tory party, the patriots, the Imperialists, are pursuing a policy which is assisting what they know or assume to be a potential enemy of their own country to get access to raw material for war purposes. It is not only that the Tory party are the foes of democracy and the friends of tyranny. They are the enemies of their own country as well. At both ends of the Mediterranean they have done and are doing their best to imperil British sea communications with the British Commonwealth of Nations, and it is therefore a degenerate type of Toryism which exists at present and which is governing this country.
  It is the case that the German and Italian Governments have supplied men and arms to the rebels. They supplied them before they agreed not to do so and they supplied them after they agreed not to do so, and they will continue as long as they want to. What is the result?
  The Dean of Canterbury said at a public meeting—[Interruption.] Hon. Members not only receive with hilarity the holding up of a British ship but they are scorning the Church of England. May I say that the Church of England would be a much greater institution than it is if it had more men like the Dean of Canterbury? He sent to Spain, and he saw German aeroplanes with German airmen. [Laughter.] It is really nothing to laugh at. [An HON. MEMBER: "He must have seen Russians!"] He saw German aeroplanes with German airmen, German bombs and German machine-guns, deliberately shooting by machine-gun old men, women and children who were refugees retiring from a town which had been seriously bombed, and evidence came to him that these men were instructed to kill every living thing within sight, man, woman, child or animal. That is what is taking place when these countries have signed solemn agreements not to send men arid material. This is the kind of thing I see smiles about. Such is the Tory party that it can smile and be hilarious about that kind of thing. For myself, I cannot.

  1629
  At the same time that these Basque people were the victims of German aircraft, German airmen and German ammunition, they themselves were prevented from importing by sea new equipment, munitions or volunteers because of the control of the Navies which were preventing that from being done. Indeed the British Navy has warned food ships off. Is it not the elemental truth that, in fact, non-intervention so-called has become the instrument for intervention by the Fascist Powers against the constitutional authority in Spain? [Interruption.] I have had plenty of interruptions which have lost time and I am not giving way. Let us look at these proposals and I will try to tell the House what I think will happen. At the end of the proposals on page 6, there is a section headed:
  "Immediate Action by His Majesty's Government to be Authorised by the Committee."
  This is the first thing that has to happen. I agree that, if it is to be implemented at all, it must be the first thing that must happen:
  "His Majesty's Government to be authorised by the Committee to enter immediately into discussions with the two parties in Spain"
  on the various points. Before anything further can be done these discussions with the two parties in Spain must be completed. Before men can be withdrawn that must be done. Before the additional controls, for what they are worth, are put on, these discussions must proceed. Before anything even as effective as is proposed in this White Paper can be done, these discussions must proceed with both sides and must be completed. Does the Foreign Secretary remember the discussions with Germany about munitions and men? Did not they hang about just as long as they liked with those discussions and came to a conclusion when it suited them to do so? That is what General Franco will do, in all probability. If in his view there is the possibility of military success, with the great forces he has got from Germany and Italy, and with the additional forces that will probably come in during the whole of these discussions, and he thinks that by hanging up agreement with His Majesty's beautiful Government, which has been entrusted with the task because of their impartiality, and he thinks he has something to gain by delay, he will be able to delay just as long as he wants to delay,
  1630
  just as Germany and Italy and Portugal did before. Therefore, in the concluding section of this document there are all the possibilities of delay and evasion that we experienced in arriving at agreement with Germany, Italy and Portugal about munitions and men. I do not need to go any further. That is a complete condemnation of the practicability of this document as a real instrument of neutrality and non-intervention.
  But I will go further and deal with some other points. On page 3, it is stated:
  "It is admittedly a compromise between varying points of view; it can only be successful if it is accepted by the Governments concerned in a spirit of compromise."
  That is the trouble with this whole situation and with the whole of this document. The right hon. Gentleman got up to defend non-intervention and neutrality on the basis that he was going to secure it by this document. If he was not going to secure it he ought to have told us: "I am not going to get non-intervention and neutrality, but some miserable compromise." The assumption is that His Majesty's Government think that they are going to get non-intervention and neutrality. What is the case? Because the French and the British had put up one proposal about closing the gap in the naval patrol and the Germans and Italians put up another scheme, His Majesty's Government were asked to put up other proposals. The interpretation by His Majesty's Government is that they have to produce something between the French and British proposal and the German and Italian proposal. That is a totally wrong conception. The duty of His Majesty's Government is to produce a really effective scheme of non-intervention and neutrality in this dispute.
  There are to be placed in various Spanish ports officers of various countries. The right hon. Gentleman did not answer my right hon. Friend's question as to the nationality of these officers in Republican ports. Are they to be German and Italian officers, as was the case in the naval patrol? Is it right that Germans and Italians, who may well be spies, and experience shows that they would be, should be planted in Spanish ports? May I put an analogy which hon. Members opposite may be able to understand? Let us suppose that Soviet Russia had an army in occupation of part of Great

  1631
  Britain and that there was a proposal as to neutrality and it was urged that there should be planted in London, where the Soviet armies were not in occupation, Soviet nationals in order to see that the United States, for example, did not send us materials for military purposes. Would any of us be happy that Russian people, sent by the Russian Government, with a Russian army in occupation of part of our country, should be placed in our cities? That is precisely what is being urged in these proposals. [Interruption.] Well, the right hon. Gentleman did not answer my right hon. Friend's question on the point. If there is a misunderstanding it is not our fault. The right hon. Gentleman did not do his job and answer the question as we expected it would be. We have had no answer about the small ports, and it is admitted by the right hon. Gentleman himself that control over the importation of new aeroplanes will be very imperfect. The intervention of new units of bombing and other air machines is a very vital element in a civil war. They largely accounted for Bilbao. Munitions and men can be carried, and it is vitally important that the air element shall be dealt with.
  Finally, it is proposed, subject to certain conditions, to grant belligerent rights to General Franco. We say with the utmost definiteness that His Majesty's Government have no moral right whatever to grant belligerent rights to a rebel against elected and constitutional authority, and that it is a disgrace to the British Government that it should ever be contemplated. Even so, they sell the pass and provide that belligerent rights are to be granted whenever the Non-Intervention Committee decides that the withdrawal arrangements are working satisfactorily. Nobody says what it means. We have had no answer. This scheme in our judgment is utterly ineffective and will only lead to a repetition of the farcical situation which has gone on before. Finally, can we trust this Government to be impartial? We cannot.
  Sir William Davison: The country does.
  Mr. Morrison: I am speaking for myself. It is the case that this Government imposed an embargo on arms against the Spanish Government weeks before the Fascist Powers agreed to do
  1632
  so. They did exactly the same so far as men were concerned, and in this document they propose immediately to close the Pyrenees.
  Mr. Lennox-Boyd: And the Portuguese frontier.
  Mr. Morrison: I know, but it is the case that the French have far more honourably observed their bargain than the Portuguese. On these three occasions they have acted to the disadvantage of the Spanish constitutional Government. The right hon. Member for Epping (Mr. Churchill) has said, let us be impartial between the two sides. Quite recently the right hon. Member declared in a speech in his own constituency that if he had been an Italian he would have been on Mussolini's side 15 years ago when he rescued the country from the horrible fate of sinking into violent Communism. That means that the right hon. Gentleman would have been a Fascist and would have assisted Mussolini in destroying the liberties of the Italian people. He was also on the side of intervention in Russia immediately after the War. We do not accept the impartiality of His Majesty's Government We do not believe they are impartial. We believe they are foes of Governments of the Left, foes of democracy, and that their foreign policy is animated by class considerations and for considerations of national interest. Therefore, we oppose this White Paper. We say it is another betrayal of a people who are bravely and rightly struggling to be free, and we entirely dissociate ourselves from this and other aspects of His Majesty's Government policy in this matter.
  10.36 p.m.
  The Under-Secretary of State for Foreign Affairs (Viscount Cranborne): His Majesty's Opposition pressed for a Debate this evening, as a matter of urgent public importance, on the Government's plan for closing the gap in the control scheme so as to enable non-intervention to be carried on. I suppose that the first deduction that most hon. Members might have drawn from the Opposition's attitude was that they really wished to obtain information on the scheme and to clear up some obscure and difficult points. No doubt if that had been their intention, the Debate might have served a very useful purpose, but it appears from the

  1633
  speeches that we have heard, especially the speeches of the Leader of the Opposition and the right hon. Gentleman the Member for South Hackney (Mr. H. Morrison), that that was not their main object. Their main object was to damn the scheme and to show the world, if they could, that England was not united behind the Government. But in their definite opposition to this scheme, they stand alone. We heard a speech from the Leader of the Liberal Opposition, the right hon. Baronet the Member for Caithness (Sir A. Sinclair).
  Mr. Gallacher: He is not sure whether he is for or against the scheme.
  Viscount Cranborne: On the contrary, the right hon. Gentleman was perfectly frank about what he regarded as the shortcomings of non-intervention. He said how anxious he was about certain aspects of this scheme, but he did, I must honestly say, show a genuine and most generous understanding of the difficulties of the situation, and on behalf of the Government I would like to thank him for his contribution. Nor do other countries share the views of hon. and right hon. Gentlemen opposite. Of course, it is too soon to get any very definite opinions—hon. and right hon. Gentlement opposite have not waited for that—but there have been certain preliminary indications, and from whatever quarter they come, they all say that the scheme is at any rate worthy of very serious consideration. Hon. Members opposite alone have determined to do their very utmost to wreck the scheme from the first. I ask the House, Could anybody be more irresponsible than that? His Majesty's Government had been asked to undertake this task in circumstances of exceptional danger and difficulty. Every nation in the Non-Intervention Committee had expressed the view that it wished non-intervention to go on if it could, and recognised the dangers of a breakdown. I quite recognise that the right hon. Gentleman the Member for South Hackney does not take that view. He thinks that non-intervention is a mistake, and he is welcome to his view, but it is not shared by the Government of any of the principal nations of Europe. In those circumstances, what conceivable object could there be in trying to prejudice these discussions on the day before they are
  1634
  to take place except a spirit of sheer malice, mischief and irresponsibility?
  I was asked certain questions by the right hon. Gentleman the Member for Caithness to which I would like to reply before going any further. He expressed the hope that there was no question of driving a wedge between ourselves and the French Government. I think I can fully reassure him on that point. While, of course, we have not consulted the French Government or any other Government on this plan, for which His Majesty's Government take full responsibility, there is no question of action on our part which would tend to weaken the friendship between France and Great Britain, the value of which to the peace of Europe we recognise as fully as the right hon. Gentleman does. Then I was asked a question about ships going to small ports, a question which was re-echoed by the right hon. Gentleman the Member for Hackney That is a very material point for the Committee but obviously one of the disadvantages of the Opposition having raised this matter before the scheme has even been submitted to the Committee is that these questions are inevitably more difficult to answer. [HON. MEMBERS: "Why?"] Obviously, this scheme has to be beaten into shape by the combined wisdom of the Committee. I would remind hon. Members, that if there are observers on these ships the position is just as it is at present. If there are no observers, then, in those circumstances, the ships would be liable to capture by either belligerent.
  On the actual details of the scheme, as I say, these must inevitably be worked out by the Committee when the scheme comes before them. The right hon. Gentleman the Member for Caithness also asked how withdrawal was to be carried out and whether it would be in proportionate numbers on both sides. That, also, is of course a question that must be dealt with by the Committee. [Laughter.] It is all very well for hon. Members to laugh, but it only shows an utter lack of understanding of the position. I would only say that His Majesty's Government would be, in principle, in favour of this being done proportionately. There is, however, a first stage. A Commission is to go out to both sides in Spain and find out accurate figures of the

  1635
  foreign combatants. It is only when that has been done that recommendations can be made to the main Committee on the nature of the scheme.
  Then I was asked whether the re-establishment of land control was dependent on the acceptance of the whole scheme. Of course it is. The scheme is a coherent whole and all its provisions stand together. I was also asked whether, if observers at the ports saw breaches occur, what action they would take. They report to the Board, but it would be quite wrong to assume that that is ineffective, because experience has shown that where there have been observers on ships these breaches have not occurred. The right hon. Gentleman the Member for Hackney asked what were to be the nationality of the observers. I say once more that all these matters must be hammered out in the Committee; but I would point out to hon. Members that this Committee has on it representatives of all conceivable points of view on this subject, and may be depended upon to choose neutral observers. There can be no question, as the right hon. Gentleman suggested, that the observers chosen by the Committee as a whole would be biased in one direction or another.
  As to the criticisms, they were very few. There was a certain amount of general accusation and the sort of thing that we have very often heard in this House—completely unsubstantiated statements proving that the Spanish Government has never had help from anybody and that General Franco has had help from everybody. Then there were points arising out of the question of belligerent rights, and I rather gathered that hon. Members opposite have given up the argument which they used earlier that there was no precedent for giving belligerent rights to insurgents. This evening the Leader of the Opposition said that it was rare, but that it had been done. I hope, therefore, that that idea is dead and buried once and for all. But there was another criticism of a more limited kind made by the right hon. Gentleman. He said that General Franco had not established his claim to belligerent rights. He said, I think, that General Franco represented a few insubordinate officers.
  Mr. Attlee: I said that this was a rebellion by a number of officers; in fact,
  1636
  I said it was the majority of officers. [Interruption.]
  Viscount Cranborne: There is a certain inconsistency there. First the right hon. Gentleman says that the whole Army was with General Franco, and afterwards that he had nothing but foreign troops. They cannot both be true. At the same time, I think there is really no difference of opinion between us. The right hon. Gentleman did say that General Franco had not established the right to belligerent rights.
  Mr. Attlee: It is not a question of a right.
  Viscount Cranborne: I will say that the right hon. Gentleman said he had not established the conditions for the recognition of belligerent rights. What are these conditions? The first is that the revolt is a serious one which is not likely to be rapidly suppressed, so that what may be regarded as a real war is in existence; secondly, that the insurgents are in possession of a considerable portion of the territory of the State concerned; thirdly, that they have set up a Government; and, fourthly, that they carry on hostilities in a regular manner. I do not quite know what that means, but I should say that probably, according to our lights, neither party has carried on hostilities in a perfectly regular manner. At the same time, there is nothing to choose between them. It seems to me that those conditions are undoubtedly satisfied by General Franco's administration to-day. The revolt is a serious one, the insurgent forces are in possession of a considerable portion of territory, they have set up a Government, and they are carrying on hostilities apparently in a regular manner—well, as much as the other people are.
  There is only one qualification which was made by the right hon. Member for Limehouse (Mr. Attlee), and I think we should all agree with him there. It is more a political qualification than a legal one. There is a doubt how far this situation has been brought about by the support which General Franco receives from his own countrymen and how far by support received from outside. There is a doubt on that point. His Majesty's Government have repeatedly said, like other sections of opinion in this country, that the destiny of Spain is a matter for the Spaniards, and they consider it important that conditions should be created under

  1637
  which the Spaniards can decide their own destiny. It is indeed for that very reason that they propose in the scheme that the granting of belligerent rights, which is proposed, should only take effect when the withdrawal of foreign combatants has made substantial progress. Until then there is no question of the grant of these belligerent rights, and that is obviously reasonable. I know that it is not enough for hon. Members opposite. What they say is, why should belligerent rights be granted under the scheme before every volunteer on both sides is withdrawn?
  That is the main point of difference between us. The reason is perfectly simple and practicable. It is that it would be virtually impossible to say when every single foreign combatant has left Spain. You would merely be putting off the operation of the scheme for ever. What is possible to say is, that enough have gone to ensure that the destiny of Spain shall in fact be decided by Spaniards, and that is the idea behind this scheme. The Opposition say that the word "substantial" is too vague. Well, it is vague, and it is intentionally so. It is the view of His Majesty's Government that it is not for them to decide when substantial withdrawal may be achieved. That is a matter for the Committee to discuss as a whole. These proposals are not in their final form, and no Government has made any comment on them. I have no doubt that, as a result of various discussions which will take place, these provisions will acquire a far more definite form; but at the same time His Majesty's Government thought it right, and I should have thought the House would agree, to lay down a general principle on this subject; and surely, I would appeal to hon. Members opposite, there can be no objection to that. I think that the proposals are generally recognised by the great majority of the Members of this House as a sincere attempt to produce an impartial scheme. I think that it is an impartial and well-balanced scheme, and that that is the reason hon. Gentlemen opposite do not like it. They are not impartial—they are quite frank about it.
  Mr. Gallacher: You are partial on the other side.
  Viscount Cranborne: The right hon. Member for Wakefield (Mr. Greenwood)
  1638
  said: "I have done what I can to provide arms for the people of Spain. I have never been neutral. We have done a great deal. We have done a great deal more than we dare say in public." He said that at Oxford at the end of May, and, although they are not quite as frank, that is the attitude of most hon. Members opposite. Where they are not so frank is as to their reason for wishing Valencia to win. They constantly tell us that the Valencia Government is the legitimate Government, but do they say that that is the only reason why they want Valencia to win? The legitimate Government of Italy is a Facist Government.
  Miss Wilkinson: But not a democratic government.
  Viscount Cranborne: Suppose there was a social democratic revolt against the Italian Government and the rebels captured a large amount of territory and set up a government. Do hon. Members opposite expect us to believe that they would be strongly in favour of supplying arms only to Signor Mussolini? Of course, they would not.
  Mr. Cocks: That would be your policy.
  Viscount Cranborne: There would be a tremendous outcry about the forces of progress and liberty. I can hear the hon. Member for Jarrow (Miss Wilkinson) and the hon. Member for Derby (Mr. Noel-Baker) making their speeches.
  Mr. Gallacher: Would you be for non-intervention?
  Viscount Cranborne: The reason they are in favour of the Valencia Government is not because it is the legitimate government but because it is the anti-Fascist Government. They wish to involve us in an ideological conflict.
  Mr. Maxton: Is that not a good enough reason?
  Viscount Cranborne: I know that there are some people in this country—most of them are on the opposite benches — who think that it would be right to enter into such a conflict, but that is not the view of the country as has been proved at the recent bye-elections. Nor is it consistent with the fundamental principles of the League. After all, the League is a world-wide institution which consists of nations representing all races, languages, and political

  1639
  creeds. If one political creed is going to try to exterminate the other political creed, that means that the League is dead. The League must be tolerant. The action of the Opposition to-night in moving the Adjournment is utterly inconsistent with the principles of the League, which they say they support, and with the real wish of the country
  I would like to say, in conclusion, that it has been the view of the Government that the Spanish conflict is a matter entirely for the people of Spain. It is essentially a civil war and the Spanish people should control their own destinies. There is only one factor which differentiates this from the ordinary civil war. It is the extent of the intervention. There has always been intervention in every civil war from Lord Byron onwards, but this has been intervention of a different kind. It is organised intervention, and that is the main reason for the doubt whether the Spanish people are going to be allowed to work out their own destiny. The main object of the scheme which the Government have put forward is to create conditions which will enable them to do that. It is the view of the Government, and it is their intention, that such a scheme should be sincere, well-balanced and practical. Hon. Gentlemen opposite, for all their talk, have not produced any alternative this evening. They made one suggestion for a mild alternative, but it was an alternative of degree. It was that, instead of a substantial number of volunteers being withdrawn, all volunteers should be withdrawn. That is only a question of degree. They have not produced any real alternative. It is our belief that this scheme will be a real contribution to the solution of the present difficulties, and, in spite of what hon. Members opposite have said, we still ask the support of Members in all parts of the House for the scheme which has been put forward.
  10.56 p.m.
  Mr. Cocks: The Noble Lord, with that air of genteel superiority and cheerful casuistry which marks most of the members of his family and endears him to many of us, has rebuked the Opposition, as his chief did, for bringing forward this Motion. Indeed, the Foreign Secretary said that it was without precedent. Unfortunately, the Government themselves have given us a precedent in this White
  1640
  Paper. They produced in the past another White Paper, very much like it, describing the Hoare-Laval proposals. Now they are proposing to raise Cain by the present proposals. The reason we have raised this matter to-night is that we do not want again to have our British honour laid in the dust. In these two documents we have the embodiment of the true mind of the Foreign Office. It is a very simple mind, but a crafty mind. It is a pro-Fascist mind also. The right hon. Gentleman the Member for Epping (Mr. Churchill) said the proposals were a compromise between the powers of darkness and of light. When you have a compromise between light and darkness you get twilight. Perhaps this White Paper is, therefore, a reflection of the twilight which seems to be descending over Europe—the twilight of the gods. The proposals which were put forward by the Government a year or so ago ended in the betrayal of Abyssinia to Italy. The result of these proposals will be the betrayal of Spain to Italy. That is why we have raised this matter, and although the Government have the support of 24 nations in putting forward the proposals, I am not sure that they will have their support to-morrow morning. I hear that in Rome and Berlin the proposals are regarded as acceptable. Of course they are, because they give something, and very nearly all what those two countries want. I doubt whether they are acceptable to the Spanish Government or the French Government, and I hope that the French Government themselves will save us from the proposals.
  It being Eleven of the Clock, the Motion for the Adjournment lapsed, without Question put.

  FINANCE BILL.
  Postponed Proceeding resumed on Consideration of Bill, as amended.
  CLAUSE 17.—(Charge of national defence contribution.)
  Amendments made:
  In page 17, line 6, after "canal," insert "or other inland waterway, or a."
  In line 7, after "dock," insert "quay."—[Lieut.-Colonel Colville.]
  11.4 p.m.
  Lieut.-Colonel Colville: I beg to move, in page 17, line 33, at the end, to insert:

  1641
  "(6) This Section shall not apply to the business carried on by the British Broadcasting Corporation."
  The object of this Amendment is to exempt the British Broadcasting Corporation from this tax. The object of the Corporation as defined by its charter is to carry on a broadcasting service. It is precluded by the terms of its charter from paying out any money by way of profits, and the charges which it can make to consumers are effectually limited. In the event of its requiring further funds for the purpose of its work, its only course is to apply to the State for them.
  Mr. Alexander: May I ask whether the British Broadcasting Corporation are exempt in the same way from Income Tax?
  Lieut.-Colonel Colville: No, Sir.
  Mr. Alexander: Then I understand that they are charged Income Tax on profits which if not distributed are assumed to be made. The only comment I would make is that this is yet another instance of a concession made under this second edition of National Defence Contribution which is totally incompatible with the treatment which is being meted out to the industrial and provident societies.
  Amendment agreed to.

  FOURTH SCHEDULE.
  11.5 p.m.
  Major Hills: I beg to move, in page 78, line 33, at the end, to insert:
  "5. In computing the profits or losses of a local authority from any trade or business carried on by that authority a deduction shall be made equal to the amount which is required to be defrayed by them in repayment of debt by way of sinking fund payments, instalments or otherwise."
  This is a very important Amendment for the local authorities, who are allowed wear and tear which does not cover the payments which they have to make either by sinking fund or in repayment of loan charges. When local authorities borrow money for local purposes, they are put on terms of repayment of principal and interest by a sinking fund. I suggest to the
  Chancellor that he might very well make this concession.
  11.8 p.m.
  Major Milner: I beg to second the Amendment.
  A local authority is under the statutory obligation to make payments to sinking fund, and it would be very difficult to satisfy the ratepayers that contributions to sinking fund were profits in the ordinary sense of the term. For those reasons, and others adduced by the right hon. Gentleman, the Chancellor of the Exchequer might think it right to make this concession. A similar concession was made in Excess Profits Duty when it was first brought in and also, on the same grounds, in the original National Defence Contribution.
  11.9 p.m.
  Lieut.-Colonel Colville: I should have had great pleasure in accepting the Amendment, and I must give my right hon. Friend a word of explanation for rejecting it. Repayment of loans is clearly a capital expenditure, and it is immaterial whether the profits earned in the trade or business carried on by a local authority are applied in such a repayment or in relief of rates. Deductions of this nature would involve similar claims by non-public undertakings on a very large scale. It is for that reason that we cannot accept the Amendment of the right hon. Gentleman. So many important branches of activity carried on by local authorities have been exempted from the charge that I do not think it can be seriously contended by the ratepayers that the remaining activities will be heavily affected by the National Defence Contribution. However that may be, for the reason which I have stated, and which I think must commend itself to the House, I cannot accept the Amendment.
  Question put, "That those words he there inserted in the Bill."
  The House divided: Ayes, 95; Noes, 202.

  Division No. 294.]

  AYES.

  [11.11 p.m.

  Adamson, W. M.

  Benn, Rt. Hon. W. W.

  Cluse, W. S.

  Alexander, Rt. Hon. A. V. (H'Isbr.)

  Bromfield, W.

  Cooks, F. S.

  Ammon, C. G.

  Brown, C. (Mansfield)

  Cove, W. G.

  Anderson, F. (Whitehaven)

  Brown, Rt. Hon. J. (S. Ayrshire)

  Dalton, H.

  Attlee, Rt. Hon. C. R.

  Buchanan, G.

  Davidson, J. J. (Maryhill)

  Banfield, J. W.

  Burke, W. A.

  Davies, S. O. (Merthyr)

  Barnes, A. J.

  Charleton, H. C.

  Debbie, W.

  Barr, J.

  Chater, D.

  Dunn, E. (Rother Valley)

  Ede, J. C.

  Leonard, W.

  Robinson, W. A. (St. Helens)

  Fletcher, Lt.-Comdr. R. T. H.

  Leslie, J. R.

  Rowson, G.

  Gibson, R. (Greenock)

  Logan, D. G.

  Soely, Sir H. M.

  Green, W. H. (Deptford)

  Lunn, W.

  Simpson, F. B.

  Greenwood, Rt. Hon. A.

  McEntee, V. La T.

  Smith, Ben (Rotherhithe)

  Grenfell, D. R.

  McGhee, H. G.

  Smith, E. (Stoke)

  Griffith, F. Kingsley (M'ddl'sbro, W.)

  Maclean, N.

  Smith, T. (Normanton)

  Griffiths, J. (Llanelly)

  MacMillan, M. (Western Isles)

  Sorensen, R. W.

  Hall, G. H. (Aberdare)

  Mainwaring, W. H.

  Stephen, C.

  Hall, J. H. (Whitechapel)

  Marshall, F.

  Stewart, W. J. (H'ght'n-le-Sp'ng)

  Harris, Sir P. A.

  Maxton, J.

  Strauss, G. R. (Lambeth, N.)

  Harvey, T. E. (Eng. Univ's.)

  Milner, Major J.

  Taylor, R. J. (Morpeth)

  Hayday, A.

  Morrison, Rt. Hon. H. (Hackney, S.)

  Tinker, J. J.

  Henderson, J. (Ardwick)

  Morrison, R. C. (Tottenham, N.)

  Watkins, F. C.

  Henderson, T. (Tradeston)

  Muff, G.

  Westwood, J.

  Hills, A. (Pontefract)

  Nathan, Colonel H. L.

  White, H. Graham

  Hills, Major Rt. Hon. J. W. (Ripon)

  Noel-Baker, P. J.

  Wilkinson, Ellen

  Holdsworth, H.

  Paling, W.

  Williams, T. (Don Valley)

  Hopkin, D.

  Parker, J.

  Windsor, W. (Hull, C.)

  Jagger, J.

  Parkinson, J. A.

  Woods, G. S. (Finsbury)

  Jenkins, A. (Pontypool)

  Pethick-Lawrence, Rt. Hon. F. W.

  Young, Sir F. (Newton)

  Kelly, W. T.

  Pritt, D. N.

  Kirby, B. V.

  Ridley, G.

  TELLERS FOR THE AYES.—

  Lathan, G.

  Ritson, J.

  Mr. Whiteley and Mr. John.

  Lawson, J. J.

  Roberts, Rt. Hon. F. O. (W. Brom.)

  NOES.

  Acland-Troyte, Lt.-Col. G. J.

  Drewe, C.

  Liddell, W. S.

  Adams, S. V. T. (Leeds, W.)

  Duggan, H. J.

  Lindsay, K. M.

  Albery, Sir Irving

  Duncan, J. A. L.

  Lipson, D. L.

  Amery, Rt. Hon. L. C. M. S.

  Eastwood, J. F.

  Little, Sir E. Graham-

  Anstruther-Gray, W. J.

  Eckersley, P. T.

  Loftus, P. C.

  Apsley, Lord

  Eden, Rt. Hon. A.

  Lyons, A. M.

  Aske, Sir R. W.

  Edge, Sir W.

  Mabane, W. (Huddersfield)

  Astor, Viscountess (Plymouth, Sutton)

  Edmondson, Major Sir J.

  MacAndrew, Colonel Sir C. G.

  Atholl, Duchess of

  Elliot, Rt. Hon. W. E.

  McCorquodale, M. S.

  Baldwin-Webb, Col. J.

  Emery, J. F.

  McKie, J. H.

  Balfour, Capt. H. H. (Isle of Thanet)

  Emrys-Evans, P. V.

  Macnamara, Capt. J. R. J.

  Baxter, A. Beverley

  Errington, E.

  Margesson, Capt. Rt. Hon. H. D. R.

  Beauchamp, Sir B. C.

  Evans, Capt. A. (Cardiff, S.)

  Markham, S. F.

  Beaumont, M. W. (Aylesbury)

  Everard, W. L.

  Maxwell, Hon. S. A.

  Beaumont, Hon. R. E. B. (Portsm'h)

  Fildes, Sir H.

  Mayhew, Lt.-Col. J.

  Beechman, N. A.

  Findlay, Sir E.

  Mellor, Sir J. S. P. (Tamworth)

  Beit, Sir A. L.

  Fleming, E. L.

  Mills, Major J. D. (New Forest)

  Bernays, R. H.

  Fremantle, Sir F. E.

  Moore-Brabazon, Lt.-Col. J. T. C.

  Bird, Sir R. B.

  Fyfe, D. P. M.

  Morgan, R. H.

  Boothby, R. J. G.

  Canzoni, Sir J.

  Morrison, G. A. (Scottish Univ's.)

  Boulton, W. W.

  Gibson, Sir C. G. (Pudsey and Otley)

  Morrison, Rt. Hon. W. S. (Cirencester)

  Bracken, B.

  Gledhill, G.

  Munro, P.

  Brass, Sir W.

  Gluckstein, L. H.

  Neven-Spence, Major B. H. H.

  Briscoe, Capt. R. G.

  Goldie, N. B.

  Nicolson, Hon. H. G.

  Brocklebank, Sir Edmund

  Granville, E. L.

  O'Connor, Sir Terence J.

  Brown, Rt. Hon. E. (Leith)

  Greene, W. P. C. (Worcester)

  O'Neill, Rt. Hon. Sir Hugh

  Bull, B. B.

  Gretton, Col. Rt. Hon. J.

  Orr-Ewing, I. L.

  Burghley, Lord

  Gridley, Sir A. B.

  Patrick, C. M.

  Campbell, Sir E. T.

  Grimston, R. V.

  Peake, O.

  Gartland, J. R. H.

  Gritten, W. G. Howard

  Peat, C. U.

  Cary, R. A.

  Guest, Lieut.-Colonel H. (Drake)

  Petherick, M.

  Castlereagh, Viscount

  Guinness, T. L. E. B.

  Plugge, Capt. L. F.

  Cayzer, Sir C. W. (City of Chester)

  Gunston, Capt. D. W.

  Procter, Major H. A.

  Cazalet, Thelma (Islington, E.)

  Hannah, I. C.

  Ramsbotham, H.

  Cazalet, Capt. V. A. (Chippenham)

  Harbord, A.

  Rathbone, J. R. (Bodmin)

  Clarke, Lt.-Col. R. S. (E. Grinstead)

  Hartington, Marquess of

  Rayner, Major R. H.

  Cobb, Captain E. C. (Preston)

  Haslam, Henry (Horncastle)

  Reed, A. C. (Exeter)

  Colman, N. C. D.

  Heilgers, Captain F. F. A.

  Reid, J. S. C. (Hillhead)

  Colville, Lt.-Col. Rt. Hon. D. J.

  Heneage, Lieut.-Colonel A. P.

  Reid, W. Allan (Derby)

  Conant, Captain R. J. E.

  Hepburn, P. G. T. Buchan-

  Remer, J. R.

  Cook, Sir T. R. A. M. (Norfolk, N.)

  Herbert, Major J. A. (Monmouth)

  Rickards, G. W. (Skipton)

  Courthope, Col. Rt. Hon. Sir G. L.

  Herbert, Capt. Sir S. (Abbey)

  Robinson, J. R. (Blackpool)

  Cox, H. B. T.

  Higgs, W. F.

  Ross Taylor, W. (Woodbridge)

  Cranborne, Viscount

  Holmes, J. S.

  Rowlands, G.

  Crooke, J. S.

  Hope, Captain Hon. A. O. J.

  Royds, Admiral P. M. R.

  Crookshank, Capt. H. F. C.

  Horsbrugh, Florence

  Russell, R. J. (Eddisbury)

  Croom-Johnson, R. P.

  Hudson, R. S. (Southport)

  Russell, S. H. M. (Darwen)

  Cross, R. H.

  Hume, Sir G. H.

  Salt, E. W.

  Crossley, A. C.

  Kerr, H. W. (Oldham)

  Samuel, M. R. A.

  Crowder, J. F. E.

  Kerr, J. Graham (Scottish Univs.)

  Sanderson, Sir F. B.

  Cruddas, Col. B.

  Keyes, Admiral of the Fleet Sir R.

  Savery, Sir Servington

  Culverwell, C. T.

  Kimball, L.

  Scott, Lord William

  Davies, Major Sir G. F. (Yeovil)

  Lamb, Sir J. Q.

  Shaw, Major P. S. (Wavertree)

  Denman, Hon. R. D.

  Law, Sir A. J. (High Peak)

  Simon, Rt. Hon. Sir J. A.

  Donner, P. W.

  Law, R. K. (Hull, S.W.)

  Smith, L. W. (Hallam)

  Dorman-Smith, Major Sir R. H.

  Leighton, Major B. E. P.

  Smith, Sir R. W. (Aberdeen)

  1644

  1645

  Somervell, Sir D. B. (Crewe)

  Thomas, J. P. L.

  Willoughby de Eresby, Lord

  Somerville, A. A. (Windsor)

  Tryon, Major Rt. Hon. G. C.

  Wilson, Lt.-Col. Sir A. T. (Hitchin)

  Southby, Commander Sir A. R. J.

  Tufnell, Lieut.-Commander R. L.

  Windsor-Clive, Lieut.-Colonel G.

  Spans, W. P.

  Wakefield, W. W.

  Winterton, Rt. Hon. Earl

  Stanley, Rt. Hon. Oliver (W'm'I'd)

  Ward, Lieut.-Col. Sir A. L. (Hull)

  Wise, A. R.

  Stewart, J. Henderson (Fife, E.)

  Ward, Irene M. B. (Wallsend)

  Womersley, Sir W. J.

  Storey, S.

  Wardlaw-Milne, Sir J. S.

  Wood, Hon. C. I. C.

  Strauss, E. A. (Southwark, N.)

  Waterhouse, Captain C.

  Young, A. S. L. (Partick)

  Strickland, Captain W. F.

  Wayland, Sir W. A

  Stuart, Hon. J. (Moray and Nairn)

  Wells, S. R.

  TELLERS FOR THE NOES.—

  Sueter, Rear-Admiral Sir M. F.

  Whiteley, Major J. P. (Buckingham)

  Mr. Furness and Lieut.-Colonel

  Taylor, C. S. (Eastbourne)

  Wickham, Lt. Col. E. T. R.

  Kerr.

  Taylor, Vice-Adm. E. A. (Padd., S.)

  Williams, H. G. (Croydon, S.)

  11.22 p.m.
  The Attorney-General: I beg to move, in page 78, line 36, at the end, to insert:
  "6. Where, in respect of any profits arising from a trade or business, relief from Income Tax chargeable in the United Kingdom is granted by virtue of arrangements with the Government of any other country, being arrangements which for the time being have effect either—

  (a) under Section eighteen of the Finance Act, 1923 (which as amended by Section thirty-one of the Finance Act, 1924, and Section nine of the Finance Act, 1931, provides for the relief of shipping and air transport from double taxation); or

  (b) under Section seventeen of the Finance Act, 1930 (which provides for the relief of certain agencies from double taxation);

  those profits shall not be included in the profits arising from that trade or business, if and so long as the profits of trades or businesses which, by virtue of those arrangements, are relieved from Income Tax chargeable in that other country, are relieved from all taxes chargeable in that other country on the profits of trades or businesses."
  In the Section of the Finance Act referred to in this Amendment there is power to arrange reciprocal agreements with foreign countries for mutual exemption from taxes in respect of certain activities, namely shipping, air transport and certain agencies. The object of the Amendment is that, in cases where there are such agreements for reciprocal avoidance of double taxation, we shall be empowered to relieve the profits of a company in a country with which we have made an agreement from National Defence Contribution here provided that under the agreement a company resident here gets relief from all taxes on its profits in so far as they arise in that foreign country. It is simply an extension of a valuable principle already enshrined in our Finance Act to National Defence Contribution where we are getting full relief from all taxes on profits arising in a foreign country in respect of companies resident here part of whose profits may arise in that foreign country.
  Amendment agreed to.
  11.21 p.m.
  Major Hills: I desire to move, in page 79, line 10, at the end, to insert:
  "(b) in the case of an assurance business, other than the business of life assurance, capital redemption and annuity business, the profits shall include interest at the average rate received from its investments on a sum representing the nett premium income of the business, but not exceeding the actual amount of interest received."
  The Amendment concerns the important point of the investments of the general insurance companies and not the life insurance companies or those that do annuity business. It asks for a concession in respect of the provision that all the income from the investments of those companies is to be subject to the National Defence Contribution. I am ready, and more than ready, to admit proper liability, but I feel—and I say this with all sincerity—that in the present case they are in a different position from that which the Chancellor of the Exchequer has stated. He put the insurance companies in the class of companies, the income on whose investments ought to be taxed, by saying that the whole of the investment is an essential part of the business of an insurance company. On 7th July, he said that the holding of these investments is essentially the business of insurance companies. On these grounds he decided that insurance companies are subject to the National Defence Contribution on the income from the investments which form their reserves. Is the making of these investments essentially the business of the insurance company?
  I will take an example of what the word "essential" means. I will take the Chancellor of the Exchequer himself. It is essential that the Chancellor of the Exchequer should eat. But eating is not wholly or mainly the business of the Chancellor of the Exchequer. He is a civilised being and eats to live, but does not live to eat. That is the distinction I make in all seriousness between the position of

  1647
  these companies and trust companies. The holding of investments is essential to these companies, but it is not the whole or main business of these companies. I agree that they cannot live without investments, but the making of investments is not their whole or main business. Their whole or main business is underwriting, and for the purpose of underwriting it is essential that they should hold investments. They differ from banks and trust companies in this respect. In the case of a bank the holding of investments is its whole or main business. A bank takes its customers' money and invests it. It is the same with a trust company. It takes its shareholders' money and invests it. Therefore, the holding of investments is the whole or main business of trust companies, and they are properly taxed. The Chancellor of the Exchequer further said that assurance companies used their investments as an advertisement; they advertised the fact that they held investments as part of their business. Certainly they do, but the business for which they canvass is underwriting business. They hold out these investments as a sign of their strength for the purpose of underwriting, and not for the purpose of acquiring other investments.
  Mr. Speaker: The right hon. and gallant Gentleman is under a misapprehenson. We have already passed paragraph (6) of this Schedule which includes all assurance companies. He is now proposing to leave out life assurance companies. That would not be consistent with what is already in the Bill.
  Major Hills: The Amendment is really a suggestion to meet the Chancellor of the Exchequer half way.
  Mr. Speaker: The right hon. and gallant Gentleman should have moved his two Amendments which are on the Paper before this one, otherwise, it will not be read. Perhaps the Chancellor of the Exchequer will put me right on the point, if that is not so.
  11.30 p.m.
  Sir J. Simon: I am unwilling to interfere, but I think Mr. Speaker is right in his interpretation. Paragraph 6 says that income received from investments shall be included in the case of an assurance business. The right hon. and gallant
  1648
  Member proposed to include life insurance business and capital redemption and annuity business, but he has not thought it necessary to move his first two Amendments, and therefore I do not see we can now deal with special arrangements for capital redemption and annuity business.
  Mr. Speaker: The Chancellor of the Exchequer agrees with me on the point I raised, and the Amendment of the right hon. and gallant Member is out of order.
  Major Hills: I did not move my Amendments dealing with life insurance and capital redemption and annuity business because I did not want to waste the time of the House. I regarded the present Amendment as an exception to the general terms of insurance companies.
  Mr. Speaker: It would be inconsistent with what we have already passed in the Bill, and I must rule it out of order.
  11.33 p.m.
  Sir J. Simon: I beg to move, in page 79, line 18, after "which," to insert:
  "either alone or in conjunction with any statutory undertakers."
  It has been pointed out that the provision in the Bill would not meet the case of a company holding in conjunction with a statutory undertaking. It is a technical adjustment to meet this particular case.
  Amendment agreed to.
  Further Amendment made: In page 79, line 21, leave out "those undertakers," and insert "that other body corporate."—[Sir J. Simon.]
  11.34 p.m.
  Lieut.-Colonel Colville: I beg to move, in page 79, line 31, after "of," to insert "United Kingdom."
  This Amendment is consequential upon an Amendment accepted in the Committee stage to allow Dominion Income Tax as a deduction for the purposes of the National Defence Contribution.
  Amendment agreed to.
  11.35 p.m.
  Sir J. Simon: I beg to move, in page 79, line 41, after "directors," to insert "other than whole-time service directors."

  1649
  This is an important Amendment, and is one which, I think, will commend itself to the House. The House knows that the Bill embodies a scheme to secure that in the case of companies which are controlled by their directors, it shall not be possible for the directors so to manipulate the remuneration they receive as to draw away from the pool of profits and leave nothing for the tax to operate upon. I think it is agreed on all hands that such an arrangement is proper; but it has been pointed out, as is perfectly true, that cases do arise in which the person who holds the position of director holds it only because he has been allotted a few shares, and that the real position is that he is employed as a full-time service director of the company.
  It is not in agreement with the spirit of the Bill that we should, include such whole-time service directors, but that, of course, is always subject to this, that we define whole-time service directors and limit them to such servants of the company as only have a small shareholding. The whole-time service director holding many shares is not omitted from the calculation, but is included. I propose later on to introduce a definition Clause which limits this exception to whole-time service directors who do not hold more than 5 per cent. of the shares. We must not, of course, depart from the principle that a director controlling a company cannot so manipulate the profits as in fact to avoid the incidence of the tax. By that I stand, but it was never my intention to include in this calculation a man who is really a servant of the company and who, it may be for purposes of convenience, has been given a director's qualifications. When the House bears in mind that I intend to define a whole-time service directorship so as to limit it to a person holding not more than 5 per cent. of the shares, I hope it will be satisfied that this is a proper proposal, and one which carries out entirely the principle which we recognise.
  11.37 p.m.
  Mr. Pritt: I am sure all my hon. Friends accept the principle which the right. hon. Gentleman has put forward, but we wonder whether there is sufficient safeguard against the comparatively simple trick of a person who really holds a substantial shareholding in a company
  1650
  making himself into a whole-time service director by having the shares held by a nominee.
  Sir J. Simon: I think we shall be able to meet that.
  Mr. H. G. Williams: I would like to thank the Chancellor for his Amendment, which entirely meets the point which I put on the Committee stage. Therefore, I shall not seek to move the Amendment which stands in my name, and in the names of my hon. Friends, to Schedule 4, page 79, line 44. I am very grateful to the right hon. Gentleman.
  11.38 p.m.
  Mr. Pethick-Lawrence: In reply to my hon. and learned Friend, the Chancellor made a remark while he was sitting down, and I am not sure it will get into the OFFICIAL REPORT. I do not know whether he intended it to be heard or not.
  Sir J. Simon: The hon. and learned Gentleman put a quite important point. He asked whether we shall be able to secure that our intentions are not defeated by the device of putting shares in the name of a nominee. I had previously consulted those who advise me about that question. We are not entirely without experience of this kind of arrangement, and it existed in a rather different form in the Corporation Profits Tax. Those who advise me tell me that they are pretty confident that they will be able to secure that our real intentions are carried out. I think we should proceed on that basis. Needless to say, and I hereby give public notice of the fact, if there was reason to think that the arrangement we are now making was being defeated by any such device, then I am quite certain Parliament would not be content, and we should have to take more active steps to stop it.
  Sir Irving Albery: I would like to put a point with reference to the family business in which one member of the family practically directs the business. Such a case, I imagine, would come under the definition of whole-time service director, but in that case, the person might very well hold a larger percentage of the shares than that provided. I was wondering whether such a case would be ruled out.
  Sir J. Simon: He would be ruled out in this way, that, although he might be a

  1651
  whole-time service director in that sense, he would not satisfy the definition which it is proposed to insert later in the Schedule.
  Amendment agreed to.
  Further Amendment made: In page 79, line 44, after "directors," insert "other than whole-time service directors."—[Sir J. Simon.]
  11.40 p.m.
  Sir J. Simon: I beg to move, in page 80, line 6, at the end, to insert:
  "11.—(1) In the case of a trade or business carried on in any chargeable accounting period by an individual or individuals in partnership, he or they may claim that there shall be allowed as a deduction in respect of that period the greatest amount which could have been allowed as a deduction under the last foregoing paragraph in respect of the remuneration of the directors other than whole-time service directors, if the trade or business had been carried on in that period by a company the directors whereof had a controlling interest therein:
  Provided that where a deduction is made under this paragraph as respects any period, the profits arising from the trade or business in that period shall be chargeable to the national defence contribution at the rate applicable in the case of a trade or business carried on by a body corporate.
  (2) Any claim under this paragraph shall be made by notice in writing given to the Commissioners of Inland Revenue within one month from the end of the chargeable accounting period in question."
  Mr. Pethick Lawrence: I think we ought to have an explanation of this Amendment.
  Sir J. Simon: The right hon. Gentleman is quite right in asking for an explanation. It was pointed out during the Committee stage that the scheme of the Bill as it then stood, applying the tax to companies which are director-controlled, and allowing certain deductions which were then defined as maximum deductions, would have, in certain cases, this effect. When those deductions were allowed and tax was then charged at the rate of 5 per cent., the amount of duty which became payable would contrast with the duty payable by a partnership which was charged at the rate of 4 per cent. with no deductions allowed, and in some cases the partnership would be worse off than the director-controlled company. I think I remember saying in Committee that there was no mathe
  1652
  matical formula which would avoid that result, and that is the case. But I have thought it well to propose that, in the case of a partnership where the charge would be heavier because of this distinction to which I have referred, the partnership should have the right to claim to be treated as though it was a director-controlled company. The result will be that the partnership will have to pay 5 per cent. instead of 4 per cent., but it will be entitled to make these deductions. That proposal has this great advantage which will appeal to the House, that beyond all question the partnership and the director-controlled firm will be treated on an equality. Otherwise, cases of hardship might arise, and, what is more, cases of unjustifiable hardship where we would be hitting the partnership harder than the company. I am obliged to the right hon. Gentleman for having called for an explanation of this point, because I think it is very important.
  Amendment agreed to.
  Further Amendment made: On page 80, line 7, leave out "the foregoing provisions of."—[Sir. J. Simon.]
  Sir J. Simon: I beg to move, in page 80, line 23, to leave out "and for the purpose of sub-paragraph (b) of this paragraph," and to insert:
  "(c) the expression 'whole-time service director' means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity and is not the beneficial owner of more than five per cent. of the ordinary share capital of the company; and (d)"
  This Amendment introduces the definition of "whole-time service director" to which I have referred.
  11.44 p.m.
  Mr. Mabane: It occurs to me that, "ordinary share capital" in this definition must include participating preference shares, which would carry to them no voting control or the company. Are we to understand that such an enterpretation is correct and that if the person were to own more than 5 per cent. of participating preference shares he would be excluded from this definition?
  Mr. McCorquodale: I also was going to ask my right hon. Friend whether he

  1653
  would define a little more closely the word "ordinary" in this correction.
  11.45 p.m.
  Sir J. Simon: There is, I think, a definition, on page 80 of the Bill, as follows:
  "The expression 'ordinary share capital' means all the issued share capital (by whatever name called) of the company, other than capital the holders whereof have a right to a dividend at a fixed rate or a rate fluctuating in accordance with the standard rate of income tax, but have no other right to share in the profits of the company."
  That definition will apply for all the purposes of the Fourth Schedule, not only, of course, to sub-paragraph (b), but everywhere, and it does, therefore, apply here. I do not think we can define it further than this, and I suggest that we do meet the case fairly if we say that we cannot make an exception in the case of a whole-time service director unless the individual
  "is not the beneficial owner of more than five per cent of the ordinary share capital"
  as so defined.
  11.47 p.m.
  Mr. Pethick-Lawrence: This is rather a technical point, and I am not quite clear about it. Supposing a company so arranged its business that the preference shareholders should really take the whole of the profits, a particular individual might be a very large preference shareholder and take the bulk of the profits, and yet he might have less than 5 per cent. of the ordinary shares. As I understand it, if he takes his interest in the company in that form, he will be able to get away with it, but I am not quite sure that I have got it right. I would suggest that there is a loophole here which the Chancellor has not stopped up, and if that is the case, I think the right hon. Gentleman ought to look into it and see whether something cannot be done in the matter.
  Mr. C. S. Taylor: Does it not largely hinge on what rate of interest is paid?
  11.48 p.m.
  The Attorney-General: The definition follows the ordinary principles and differentiates between a preference share at a fixed rate of interest and a share which is at an uncertain rate of interest. Therefore, I think the principle which my right hon. Friend has adopted is right. I am
  1654
  not forecasting that we may not find that ingenious people may find devices by which the general intention and the form which this legislation takes is evaded. I do not for the moment see how it can be done, but if it was found that someone, although within the letter of the definition of a whole-time service director holding less than 5 per cent. of the ordinary share capital was, by some arrangement, getting round the Clause or that the capital was so arranged that in effect there was such a large issue of preference shares that in no ordinary circumstances would the fixed rate be attained—I can see that there might be cases of that kind—then undoubtedly my right hon. Friend would consider whether some alteration was necessary. I suggest that the exemption as it is drafted should be accepted.
  Sir I. Albery: Would it not be better to make the qualification the holding of not a larger shareholding than a certain percentage?
  Mr. Alexander: Cannot we have an assurance that some sort of wording of that kind might be adopted?
  11.50 p.m.
  Sir J. Simon: I know how carefully this has been looked into. I spent some time with the Parliamentary draftsman on it. I feel sure myself that the definition of ordinary share capital which is here, which has been very carefully considered with a desire to stop all possible evasions, is really the best. I would be most unwilling, while recognising the sincerity of the suggestion made by my hon. Friend, to change a thing of this sort just now. The ordinary shares get the residue of the profits after various fixed charges have been met. We do not want to do any injury to the man who is really employed by the company, and if he holds only a limited portion of the ordinary shares he should get relief. If he holds a large share, I do not think that we should let him off. This Amendment has been carefully drawn, and if there is a loophole I have no doubt that we shall be able to stop it. But I do not think we shall stop it by acting in anticipation here.
  Amendment agreed to.
  FIFTH SCHEDULE. — (Assessment and Collection of National Defence Contribution, Appeals and Supplementary Provisions.)
  11.53 p.m.
  Lieut.-Colonel Colville: I beg to move, in page 83, line 7, after "return," to insert:
  "(in such form as the Commissioners of Inland Revenue may prescribe)."
  Mr. Alexander: Is this the general form or a form to be varied?
  Lieut.-Colonel Colville: The point is that the Fifth Schedule provides for the rendering of returns, and we want to make it clear that the Commissioners of Inland Revenue shall prescribe the form of return. There is nothing novel about that. It is part of the existing procedure and it is necessary to make provision for it under this tax.
  Mr. Alexander: We ought to know. The form prescribed should, as far as possible, be uniform. I asked a plain question, whether the arrangement was such as to make the form uniform or so that it could be varied?
  11.54 p.m.
  Sir J. Simon: The right hon. Gentleman does not want to have as many forms as there are taxpayers. That, of course, is right enough. The words which will be inserted:
  "in such form as the Commissioners of Inland Revenue may prescribe,"
  are intended to provide for a standard form. If there are any variations, as we sometimes see, "insert either A or B", according to the circumstances, that will appear on the form; but it is intended to have standard forms in the ordinary official way.
  Amendment agreed to.
  Bill to be read the Third time tomorrow.

  AGRICULTURE BILL.
  Order for Third Reading read.
  Motion made, and Question proposed, "That the Bill be now read the Third time."
  11.55 p.m.
  Mr. Grenfell: I do not think that the House would be doing its duty if it allowed this Bill to pass as if it were
  1656
  a measure of no importance, but I do not intend to speak for any length of time. The Minister will welcome the opportunity to make some comments on the Bill, which has been before the House on repeated occasions.
  We have no general grounds for condemning the intentions of this Bill, and I want to say a word with regard to the fertility part of it which we think is all to the good. It will be a great advantage if the fertility of our land can be improved by the measures designed here, and by further measures which are not in the Bill, such as land drainage and improvements in other ways. The one thing that we must not allow to be omitted fom any criticism of the Government's agricultural policy is their readiness to dole out subsidies here and there which will go mainly to the advantage of the landlords, and to lay the basis of their policy on a system which is almost akin to bribery. One notices in this simple, innocent Bill references to various State payments. They are first called "Exchequer contributions," which is another name for subsidy. Then we find the word "subsidy" used. In another case it is "Exchequer grant," and in the fourth case it is "special payment." They all mean money to various classes of producers with the intention, it is assumed, of benefiting directly the man who works on the land. Ultimately, however, it benefits the landlord and nobody else, and it does so at the expense of the consumer.
  One is not entitled at this time of the night to challenge the whole agricultural policy of the Government, but as I represent an agricultural constituency I am entitled to say a few words. That division is occupied by small farmers who work very industriously tilling the land and tending their herds with great skill and making a fairly decent living. Anybody who knows that part of the country will admit the high standard of agriculture there. I do not think that the agriculturists whom I represent in that division are complaining of poverty. They are not nearly as poor—and this is where the Government's policy is wrong —as their neighbours in the industrial parts of the division. If all the millions which are to be poured out under this Bill to subsidise various things were

  1657
  brought together and used to subsidise the consumers of agricultural products, we would find a much more healthy demand for those products with the prospect of much higher prices, and the prosperity would be much more widely shared. If a landlord becomes prosperous as a result of these subsidies, it does not benefit his neighbours in the countryside; it certainly does not benefit the urban dwellers. If a higher purchasing power were given to the industrial population, it would work right through the markets and give direct benefit to the farmers. While this enhanced demand persisted they would have better prices for the commodities they produced. I do not feel like censuring this Bill altogether. The provisions for lime and basic slag are an essential part of the reconstruction of the industry, for they will be a healthy tonic to the land. Under this remedial process which is being applied to the land it is not the farmer who will be the first to benefit. The benefit will go, in the first place, to the producers of lime and basic slag, whose volume of business will be considerably increased.
  It is not our intention to vote against this Bill, but we would warn those who represent agriculture in this House and the Minister of Agriculture on the course they are taking. We could understand their policy if we had a Government prepared to plan agriculture with the object of producing a large proportion of our food at home, but the measures which they have taken have in many cases imposed definite restrictions on production. Their subsidies have been ill-placed and will not benefit agriculture. The best way in which to assist agriculture is by building up the consuming power of the people. If they have the means they will purchase more of the food which is grown at home, which they would prefer to the food brought in from abroad. We take leave of this Bill with the final warning that we are not satisfied with the agricultural policy which is embodied in it.
  12.3 a.m.
  Sir Hugh Seely: I should like to take the opportunity of expressing a personal view. What I have to say may not meet with agreement, possibly, from those of my friends who sit with me on these benches. I feel very strongly that, as
  1658
  the hon. Member for Gower (Mr. Grenfell) has said, this Bill is dealing with the problem of agriculturalists in entirely the wrong way. I do not believe in these subsidies. We are wasting money and are not getting the best out of agriculture. It is difficult for an agricultural Member to vote against these subsidies, but I have done so many times and still feel that I have done right, because the money is not going into the right pockets. The money is not going to the good farmers, but to those who are not doing their duty in husbandry. They are the people who will benefit from this expenditure on drainage. The Government are giving the money to the landlords. They cannot deny that. I am to a very large extent a landlord, both in the Isle of Wight and in Nottinghamshire, and I know full well that it is my part to get as much of this subsidy as I can.
  Sir Joseph Lamb: You will be disappointed.
  Sir H. Seely: That is where the money does go. It does not go to the agricultural labourer, it does not go to the industry. The Government are on the wrong tack in thinking they can build up an industry by merely doling out large sums of money which is not going to the industry but to a few particular friends of theirs—and perhaps to me. [Interruption.] I admit, as I say, that it comes to me. By increasing the demand for the produce of agriculture we should, as has been said, be doing something really to help those engaged in agriculture. I am not going to oppose this Bill, but I do not believe in these subsidies, and I do not vote for them. I think the Government are wrong, but, at any rate, the Bill will go forward, and I wish it success.
  Question, "That the Bill be now read the Third time," put, and agreed to.
  Bill accordingly read the Third time, and passed.

  ISLE OF MAN (CUSTOMS) BILL.
  Considered in Committee.
  [Captain BOURNE in the Chair.]
  CLAUSE I.—(Continuation of certain annual duties.)
  Motion made, and Question proposed, "That the Clause stand part of the Bill."
  12.6 a.m.
  Mr. Kelly: I do not wish to raise points of detail, but it is wrong and unfair to the wonderful people of that great island that such an important Bill as this should be taken at this late hour of the night.
  Question put, and agreed to.
  Remaining Clauses ordered to stand part of the Bill.
  Bill reported, without Amendment; read the Third time, and passed.
  The remaining Orders were read, and postponed.
  It being after Half-past Eleven of the Clock upon Thursday evening, Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.
  Adjourned at Eight Minutes after Twelve o'Clock.