HC Deb 11 July 1938 vol 338 cc1027-37

As from the first day of April, nineteen hundred and thirty-eight, Section nineteen of the Finance Act, 1937 (which relates to charge of national defence contribution), shall not apply to any society or company which is a housing association as defined in Section one hundred and eighty-eight of the Housing Act, 1936, and Section twenty-five of the Housing (Scotland) Act, 1935.—[Mr. Pethick-Lawrence.]

Brought up, and read the First time.

Mr. Pethick-Lawrence

I beg to move, "That the Clause be read a Second time."

I propose to move two Clauses standing in my name and that of some of my colleagues relating to housing associations. Now housing associations are bodies that have achieved a great deal of public benefit during the period of their existence, and that public benefit has been recognised by several Members of the Government and in fact by a very large number of people who have studied this question up and down the country. The present Minister for Air, when he was Minister of Health, spoke as follows: These associations are playing an increasing part in the national housing campaign, and their numbers, I am glad to see, are increasing. Their work is not to be measured solely or even mainly by their housing operations. They help to keep alive public interest in housing. They serve as a focus for voluntary effort, and being less restricted than local authorities they are able to undertake pioneer work and experiments. Viscount Gage, speaking for the Government on a recent occasion, said: I should like to pay a tribute to the work of these associations and say we should regret it if their activities were curtailed. Finally, the present Chancellor of the Exchequer used these short but impressive words: The good work done by these authorities is gladly recognised. The essence of the case that I have to put before the Chancellor of the Exchequer to-night relates to the special limitations which are imposed upon the dividends that these housing associations are entitled to distribute, and it is in connection with Section 188 of the Housing Act, 1936, so far as this country is concerned, and of Section 25 of the Housing (Scotland) Act, 1935, so far as Scotland is concerned, that a housing association means: Any society or body of trustees or cornpany established for the purpose of, or amongst whose objects or powers are included those of, constructing, improving or managing, or facilitating or encouraging the construction or improvement of houses for the working classes,"— and these are the essential words— being a society, company or body of trustees who do not trade for profit or whose constitution or rules prohibit the issue of any capital with interest or dividend exceeding the rate for the time being prescribed by the Treasury, whether with or without differentiation as between share and loan capital. The rate prescribed at the present time is five per cent. When we were discussing the recent Amendment I reminded the Chancellor of the Exchequer, and I thought he was rather inclined to agree, that the National Defence Contribution was something of a hit-and-miss procedure, and that what he had to do was to make it as reasonable and equitable as circumstances would permit. In pursuance of that general principle, the Chancellor of the Exchequer, when the proposal was originally put forward, decided to omit from the scope of its operation the public utility societies on the ground that there was a certain limitation imposed by the State upon the profits that they could make. The facts have been brought before the Chancellor of the Exchequer, and it was shown that perhaps the limitation are not quite so great as the Chancellor of the Exchequer at one time supposed.

What seems to be peculiar is that these housing associations, whose profits are strictly limited—and the amount of 5 per cent. is the Treasury's own figure of limitation—and who contribute to the public welfare by providing better, more suitable and cheaper houses, are not included in the term of public utility society. So far as the National Defence Contribution is concerned, the housing association is mulcted to the full extent. The particular point is that many of these societies are distributing 5 per cent. at the present time, and any relief given to them would not therefore be given for the benefit of their shareholders, but would inure to the improvement of the houses, the cheapening of the rents, and to the general advantage of the community.

I would not go as far as to say that there are no societies which may be failing to reach their maximum dividends with regard to which there might not be a benefit to the shareholders, but, in the main, the benefit of this remission, if the Chancellor of the Exchequer is able to give it, will inure to the benefit of the community as a whole. These being the broad facts, and as the Chancellor of the Exchequer told us with regard to the previous Amendment that he is anxious to do, as far as is possible within the rough-and-ready method of this particular tax, reasonable justice and to adopt an attitude that is consistent with general equity for the benefit of the community as a whole, I hope very much he will see his way to grant this concession.

Mr. Deputy-Speaker (Sir Dennis Herbert)

Before the right hon. Gentleman concludes his remarks, I ought to call his attention to his next new Clause on the Paper which deals with a similar point. Therefore, if the right hon. Gentleman proposes to ask me, in the event of this new Clause not being accepted by the House, to call the other one, I shall have to put it to the House merely for a decision without further remarks.

Mr. Pethick-Lawrence

If that is your Ruling, I would say that, if the Chancellor of the Exchequer can see his way to meet me over the present proposed new Clause, I shall not feel it incumbent upon me to move the second Clause, which deals with another relief for the -same people. If it is your pleasure that I should say a few words on the second Clause I will proceed to do so. If the Chancellor of the Exchequer, as I hope may not be the case, is unwilling to make a concession on this Amendment, I should propose to move the second new Clause in my name and that of my hon. Friends. The only point with regard to that Clause that I have not already covered is that the proposal relates to Income Tax and not to National Defence Contribution. There should be a reduction of Income Tax on the amount that is put to reserve. That is really the part of the profits of the association which goes to the improvement and cheapening of houses for the working people. Therefore, it would be a concession not to shareholders, but one to the advantage of the housing of the people of this country.

If the Chancellor of the Exchequer is unable to meet us over the National Defence Contribution, I hope that he will see his way to meet us over the second Clause relating to Income Tax. I will not make reference to Sub-section (2) of the second proposed new Clause. It is purely a technical matter, which, I am sure, the Chancellor of the Exchequer will understand, and I do not think that it would be of interest to the House to go into it at length. Broadly, the second Clause relates to the remission of Income Tax on that part of the profits on housing associations which do not inure to the benefit of the shareholders, but which would inure to a great extent, if the Chancellor of the Exchequer accepted the new Clause, to the housing amenities of the people of this country.

8.22 p.m.

Sir J. Simon

Perhaps, as the right hon. Gentleman at the end of his speech and at your invitation, Mr. Deputy-Speaker, said a word about the second or alternative proposal which he has down on the Paper, I may without being called to order say a word about that first. That is really a proposal that we should completely depart from one of the principles of Income Tax in the case of these housing associations. To exempt such proportion of the proceeds as are put to general reserve or sinking fund is a proposition horrifying to everybody who, like the right hon. Gentleman, has served in the Treasury, and would cut extremely deep into the principles of Income Tax law, and I am afraid that I cannot accept that.

I turn to the main proposal, which is the one which would probably mean more to those very important and useful bodies on whose behalf he speaks. I know that the Chancellor of the Exchequer is suspected, and rightly suspected, if, first of all, he professes his sympathy and then does not agree with the concession. I feel a very close interest in these housing associations for various reasons, and I have a great deal of sympathy with what has been said, but I must put to the House the reasons why I am afraid I cannot accept this proposal. The societies for which the right hon. Gentleman is pleading are, as he said, bodies established for the purpose, among other purposes—I call the attention of the House to the words "among other purposes"of constructing, improving or managing or facilitating or encouraging the construction or improvement of houses for the working classes.

All that is admirable, but they are not associations that do not make a profit. If they did not make a profit they would have nothing to fear as far as National Defence Contributions are concerned. The trouble is that they make a profit, and they work to a 5 per cent. profit, which, I agree, is a good deal less than profits made by public utility concerns in certain exceptional cases, but still it is a profit as things go, and a substantial one in the view of many people. The question is, can we say, as regards these housing societies, that they are to be exempt from National Defence Contribution? The first difficulty is that there are building societies which undoubtedly must be regarded as enterprises which would also have to be considered. Although it is true that there are special arrangements made in regard to building societies, they are not exempt from National Defence Contribution. Therefore, I should have a difficulty in that regard.

I agree that these housing societies do a very useful work, but I do not think they can really be regarded as falling in the same category as those public utility enterprises for which we have made special exceptions. The ground on which a public utility company is given exemption is not that it does not work for profit or that its profit is limited, but the ground is that it is one of those enterprises supplying gas, water, transport, electricity and so on which render a public service which puts it in a special category. For the same reason we exempt these public utility enterprises when they are conducted by local authorities. I do not think the real test, therefore, in the case of enterprises providing these essential services is the question of what is the percentage of profit they earn, but what is the kind of work they are doing, and the kind of work which they are doing is not analogous with the work that is being done by building societies or these housing societies. I agree with the right hon. Gentleman that there are some instances in which these essential service enterprises are earning a higher rate of profit than I contemplated when we made the exception in their favour, and I should like if I could to devise a formula which would cover such a case, but I have not been able to do so.

Lastly, in regard to these housing societies, I would point out that they have these housing purposes among other purposes, and my advisers are alarmed at the idea that there should be exemption in their favour, because it would be easy to have a housing association the object of which includes the provision of houses but also includes a lot of other purposes, with a view to supplementing the money that is available for the main object. I regret very much that, after looking at this matter with all the care and the sympathy that I can, I cannot advise the House to make this concession. The housing societies already enjoy certain privileges which are of very material assistance to them. They are already recognised as being entitled to receive from the local authorities assistance in connection with their housing work under the Housing Acts. The local authorities may pay such associations by way of annual grant an amount not less than the contribution made by the Exchequer. They have, therefore, in some respects a favoured position. I am sorry, but I do not see how I could make this concession without sacrificing revenue which I cannot afford to lose, and without opening claims on behalf of the building societies and other enterprises.

8.29 p.m.

Mr. Benson

I think the speech of the Chancellor of the Exchequer has thrown into clear relief the extraordinarily illogical basis of this taxation. He did not adduce one single logical argument against the Clause. He did not, because he could not. There are no logical arguments against it. The only thing that he can do is to argue the matter on the analogy that such and such a type of enterprise or industry is included in or excluded from the scope of the tax and that therefore the particular enterprise under discussion, or any enterprise of a more or less similar character, ought also to be included or excluded as the case may be. Public utility companies dealing in gas, water, electric light and so on are excluded because it is said that they are serving some public purpose. Surely, the housing society is serving a public purpose?

Sir J. Simon

And the building society.

Mr. Benson

Yes, and the building society. I admit it. Once you lay down any particular canon of the kind advanced by the Chancellor of the Exchequer you do not know where you are getting to. Some public utility companies are extraordinarily rapacious profit-making concerns. I can well understand concession being given to a public utility company where they are working on a low basis of profit, with the definite idea and with the prime object of giving public service, for instance the London Transport, but where the idea is to make as much profit as they can, as some of the electric companies do, I cannot understand why they should be excluded. The housing society, although it may have other objects under its articles than the provision of houses, undoubtedly does work, as the Chancellor of the Exchequer said, for profit, which is strictly limited to 5 per cent., and such a society is far more like what one normally thinks of as a public utility company than a gas company or an electricity company which is forcing every penny it can from the consumers.

The Chancellor of the Exchequer has given no valid argument, because he has no logical basis to argue on, in refusing this concession. He has merely said that these societies do not fall into the particular category of a public utility company and that if he includes housing societies in the exemption he would be compelled to include building societies, and that if he includes building societies he would have to include other enterprises. I maintain that these housing societies should be excluded from the tax, just as certainly as the better type of public utility companies should be excluded. The fact that the Chancellor of the Exchequer refuses to grant this concession on such vague and indefinite grounds suggests that the National Defence Contribution is a tax which is unworthy of this House.

8.33 p.m.

Mr. McEntee

I am disappointed at the Chancellor of the Exchequer's statement. I was hopeful that he would have made some concession to the societies concerned. Although I am not personally interested in any of these societies now, I had an interest in them at one time and I still am interested because I know of the good work they have done and are doing. I am sorry that the right hon. Gentleman cannot see his way to make the concession. I remember appearing before a Chancellor of the Exchequer with a deputation and asking for a concession for societies similar to these we are discussing to-night. I was under the impression then that they ought to be considered as public utility societies, but I was reminded by the Chancellor of the Exchequer at the time of the actual definition of a public utility society, which still stands, and I am aware that these housing societies do not come under that definition.

No one will argue that the provision of gas by a private company or the provision of electricity by a private company, which comes within the definition of a public utility society, is in fact more useful service to the public than the work of a housing society. The Chancellor said that they were doing other work, or that they had the power to do other things, but I am sure that if he desired the Chancellor of the Exchequer could very easily limit the concession to that part of their work which deals with houses. I hope he will pay little more attention to this matter and make a concession to their work so far as it deals with houses.

There is another aspect which I think should be considered. These housing associations are running pretty near to the mark. They try to secure for their shareholders the 5 per cent. to which they are entitled, but above that they do not want to make a profit. As a matter of fact some of them are making a profit in excess of 5 per cent. and that profit at the moment is going to increase the amenities of the properties and thus make them more useful and better to live in. If the Chancellor of the Exchequer puts on this National Defence Contribution, the effect will be that in some cases this small margin of 5 per cent. will go and these amenities will no longer be available for tenants. Many of these amenities are almost necessities and their loss would be rather serious. I hope also that the Chancellor of the Exchequer will consider whether the definition of a public utility society ought not to he widened in order to include societies like housing associations, which are doing extremely useful work, in order that they get concessions which are at present given to public utility societies.

I should like to say a good deal about building societies, but I am afraid that if I deal with that subject I could not agree entirely with all the good things which the Chancellor of the Exchequer has said in regard to them. Many harsh things could be said; indeed, they cannot be compared in any way with the associations with which it is intended to deal in this proposed new Clause.

Question put "That the Clause be read a Second time."

The House divided: Ayes 126; Noes, 191.

Division No. 291.] AYES. [8.40 p.m.
Adamson,W. M. Grenfell, D. R. Montague, F.
Anderson, F. (Whitehaven) Griffith, F. Kingsley (M'ddl'sbro, W.) Morrison, Rt. Hon. H. (Hackney, S.)
Attlee, Rt. Hon. C. R. Griffiths, G. A. (Hemsworth) Morrison, R. C. (Tottenham, N.)
Banfield, J. W. Griffiths, J. (Llanelly) Muff, G.
Barnes, A. J. Groves, T. E. Noel-Baker, P. J.
Barr, J. Hall, J. H. (Whitechapel) Oliver, G. H.
Batey, J. Hardie, Agnes Paling, W.
Bellenger, F. J. Harris, Sir P. A. Parker, J.
Benn, Rt. Hon. W. W. Harvey, T. E. (Eng. Univ's.) Parkinson, J. A.
Benson, G. Henderson, A. (Kingswinford) Pethick-Lawrence, Rt. Hon. F. W.
Bevan, A. Henderson, J. (Ardwiek) Poole, C. C.
Broad, F. A. Henderson, T. (Tradeston) Quibell, D. J. K.
Bromfield, W. Hioks, E. G. Ridley, G.
Brown, Rt. Hon. J. (S. Ayrshire) Hills, A. (Pontefract) Riley, B.
Buchanan, G. Hopkin, D. Ritson, J.
Burke, W. A. Jagger, J. Robinson, W. A. (St. Helens)
Cape, T. Jenkins, A. (Pontypool) Salter, Dr. A. (Bermondsey)
Chater, D. Johnston, Rt. Hon. T. Seely, Sir H. M.
Cluse, W. S. Jones, A. C. (Shipley) Sexton, T. M.
Clynes, Rt. Hon. J. R. Jones, Sir H. Haydn (Merioneth) silkin, L.
Cocks, F. S. Kelly, W. T. Silverman, S. S.
Collindridge, F. Kennedy, Rt. Hon. T. Simpson, F. B.
Cove, W. G. Kirby, B. V. Smith, E. (Stoke)
Cripps, Hon. Sir Stafford Kirkwood, D. Smith, Rt. Hon. H. B. Lees- (K'ly)
Daggar, G. Leach, W. Smith, T. (Normanton)
Dalton, H. Lee, F. Sorensen, R. W.
Davidson, J. J. (Maryhill) Leonard, W. Stephen, C.
Davies, R. J. (Westhoughton) Lestie, J. R. Summerskill, Dr. Edith
Day, H. Logan, D. G. Taylor, R. J. (Morpeth)
Dobbie, W. Lunn, W. Thorne, W.
Dunn, E. (Rother Valley) Macdonald, G. (Ince) Thurtle, E.
Ede, J. C. McEntee, V. La T. Viant, S. P.
Edwards, Sir C. (Bedwellty) McGhee, H. G. Walkden, A. G.
Evans, D. O. (Cardigan) MoGovern, J. Walker, J.
Fletcher, Lt.-Comdr. R. T. H. MacLaren, A. Watkins, F. C.
Foot, D. M. Maclean, N. Watson, W. McL.
Frankel, D. Mander, G. Ie M. Williams, T. (Don Valley)
Gallacher, W. Marklew, E. Windsor, W. (Hull, C.)
Gardner, B. W. Marshall, F. Woods, G. S. (Finsbury)
George, Major G. Lloyd (Pembroke) Mathers, G. Young, Sir R. (Newton)
George, Megan Lloyd (Anglesey) Maxton, J.
Gibson, R. (Greenock) Messer, F. TELLERS FOR THE AYES.—
Greenwood, Rt. Hon. A. Milner, Major J. Mr. Charleton and Mr. Whiteley.
NOES.
Acland-Troyte, Lt.-Col. G. J. Clarry, Sir Reginald Elmley, Viscount
Adams, S. V. T. (Leeds, W.) Clydesdale, Marquess of Emmott, C. E. G. C.
Agnew, Lieut.-Comdr. P. G. Conant, Captain R. J. E. Entwistle, Sir C. F.
Albery, Sir Irving Cook, Sir T. R. A. M. (Norfolk, N.) Erskine-Hill, A. G.
Allen, Col. J. Sandeman (B'knhead) Cooke, J. D. (Hammersmith, S.) Findlay, Sir E.
Apsley, Lord Cooper, Rt. Hn. T. M. (E'nburgh, W.) Fleming, E. L.
Aske, Sir R. W. Craven-Ellis, W. Furness, S. N.
Assheton, R. Crooke, Sir J. Smedley Gilmour, Lt.-Col. Rt. Hon. Sir J.
Balfour, Capt. H. H. (Isle of Thanet) Crookshank, Capt. H. F. C. Gledhill, G.
Beit, Sir A. L. Cruddas, Col. B. Gluckstein, L. H.
Bernays, R. H. Davidson, Viscountess Grant-Ferris, R
Blair, Sir R. Davies, Major Sir G. F. (Yeovil) Gridley, Sir A. B.
Bossom, A. C. De la Bére, R. Grigg, Sir E. W. M
Boulton, W. W. Denman, Hon. R. D. Grimston, R. V.
Bower, Comdr. R. T. Denville, Alfred Guest, Lieut.-Colonel H. (Drake)
Braithwaite, Major A. N. Despencer-Robertson, Major J. A. F. Guest, Maj. Hon. O. (C'mb'rw'll, N.W.)
Brass, Sir W. Di[...] Capt. Rt. Hon. H. Gunston, Capt. Sir D. W.
Broadbridge, Sir G. T. Dodd, J. S. Hannah, I. C.
Brown, Col. D. C. (Hexham) Doland, G. F. Hannon, Sir P. J. H.
Bull B. B. Dower, Major A. V. G. Harbord, A.
Burghley, Lord Duckworth, W. R. (Moss Side) Harvey, Sir G.
Butcher, H. W. Dugdale, Captain T. L. Haslam, Henry (Horncastle)
Campbell, Sir E. T. Duncan, J. A. L. Haslam, Sir J. (Bolton)
Cary, R. A. Eastwood, J. F. Heilgers, Captain F. F. A.
Cayzer, Sir C. W. (City of Chester) Elliot, Rt. Hon. W. E. Hely-Hutchinson, M. R.
Clarke, Colonel R. S. (E. Grinstead) Ellis, Sir G. Heneage, Lieut.-Colonel A. P.
Herbert, Major J. A. (Monmouth) Moreing, A. C. Shepperson, Sir E. W.
Holmes, J. S. Morgan, R. H. Simon, Rt. Hon. Sir J. A.
Hope, Captain Hon. A. O. J. Morris-Jones, Sir Henry Smith, Sir R. W. (Aberdeen)
Hopkinson, A. Morrison, G. A. (Scottish Univ's.) Somervell, Rt. Hon. Sir Donald
Hore-Belisha, Rt. Hon. L. Morrison, Rt. Hon. W. S. (Cirencester) Somerville, A. A. (Windsor)
Horsbrugh, Florence Muirhead, Lt.-Col. A. J, Southby, Commander Sir A. R. J.
Hudson, Capt. A. U. M. (Hack., N.) Munro, P. Spens, W. P.
Hulbert, N. J. Nall, Sir J. Strauss, E. A. (Southwark, N.)
Hume, Sir G. H. O'Connor, Sir Terence J. Strauss, H. G. (Norwich)
Hunter, T. Peake, O. Stuart, Hon. J. (Moray and Nairn)
Hurd, Sir P. A. Peters, Dr. S. J. Tasker, Sir R. I.
Hutchinson, G. C. Petherick, M. Tate, Mavis C.
Joel, D. J. B. Pickthorn, K. W. M. Taylor, C. S. (Eastbourne)
Jones, Sir G. W. H. (S'k N'w'gt'n) Pilkington, R. Thomas, J. P. L.
Jones, L. (Swansea W.) Plugge, Capt. L. F. Thorneycroft, G. E. P.
Kerr, J. Graham (Scottish Univs.) Ponsonby, Col. C. E. Touche, G. C.
Kimball, L. Pownall, Lt.-Col. Sir Assheton Tufnell, Lieut.-Commander R. L.
Lamb, Sir J. Q. Procter, Major H. A. Turton, R. H.
Leech, Sir J. W. Radford, E. A. Walker-Smith, Sir J.
Lees-Jones, J. Raikes, H. V. A. M. Wallace, Capt. Rt. Hon. Euan
Levy, T. Ramsbotham, H. Ward, Lieut.-Col. Sir A. L. (Hull)
Lewis, O. Rathbone, J. R. (Bodmin) Warrender, Sir V.
Lipson, D. L. Rayner, Major R. H. Wells, Sir Sydney
Little, Sir E. Graham- Reed, A. C. (Exeter) Whiteley, Major J. P. (Buckingham)
Llewellin, Colonel J. J. Reid, W. Allan (Derby) Wickham, Lt.-Col. E. T. R.
Locker-Lampson, Comdr. O. S. Remer, J. R. Williams, H. G. (Croydon, S.)
Loftus. P. C. Rickards, G. W. (Skipton) Willoughby de Eresby, Lord
MacAndrew, Colonel Sir C. G. Ross Taylor, W. (Woodbridge) Wilson, Lt.-Col. Sir A. T. (Hitchin)
MacDonald, Rt. Hon. M. (Ross) Rowlands, G. Windsor-Clive, Lieut.-Colonel G.
Maitland, A. Royds, Admiral Sir P. M. R. Wise, A. R.
Makins, Brigadier-General Sir Ernest Ruggles-Brise, Colonel Sir E. A. Withers, Sir J. J.
Margesson, Capt. Rt. Hon. H. D. R. Russell, Sir Alexander Womersley, Sir W. J.
Markham, S. F. Russell, S. H. M. (Darwen) Wood, Hon. C. I. C.
Maxwell, Hon. S. A. Salmon, Sir I. Wragg, H,
Mayhew, Lt.-Col. J. Samuel, M. R. A. Wright, Wing-Commander J. A. C.
Mellor, Sir J. S. P. (Tamworth) Sandeman, Sir N. S.
Mills, Major J. D. (New Forest) Sanderson, Sir F. B. TELLERS FOR THE NOES.—
Moore, Lieut.-Col. Sir T. C. R. Selley, H. R. Lieut.-Colonel Kerr and Major
Moore-Brabazon, Lt.-Col. J. T. C. Shaw, Captain W. T. (Forfar) Harvie Watt.