§ (1) If the Minister declares to the Commissioners that in any accounting period the total receipts of a business under armament contracts were not less than two hundred thousand pounds or, if the accounting period is less than twelve months, not less than such sum as bears to two hundred thousand pounds the like proportion that the length of the period bears to twelve months, the business shall, in relation to any chargeable accounting period which consists or forms part of that accounting period, be deemed to be an armament business.
§ Provided that, before making any such declaration with respect to a business, the Minister shall give to the person carrying on that business at least twenty-eight days notice that he proposes to do so and shall consider any representations made by that person before the expiration of that period and, if he makes the declaration, shall notify that person accordingly.
§ (2)For the purposes of the provisions of this Act relating to armament profits duty the expression "armament contract" means, in relation to any business—
- (a)a contract between the person carrying on the business and His Majesty's Government in the United Kingdom, being—
- (i)a contract for the supply of anything required for the purposes of the armed forces of the Crown or of any foreign armed forces, or for the supply of any machines, tools, or materials required for making or repairing anything required for those purposes;
- (ii)a contract for the execution of any works required for those purposes; or
- (iii)a contract for the supply of any such equipment, appliances or other materials as are mentioned in Section nine of the Air-Raid Precautions Act, 1937;
- (b)a contract under which the person carrying on the business supplies anything to, or executes any works' for, any other person, being a contract entered into by that other person for the purpose of enabling him to perform an armament contract; or
- (c) a contract between the person carry-on the business (being a company) and His Majesty's Government in the United Kingdom for the construction, alteration or management by the company as agent for
658 that Government of any factory in the United Kingdom which belongs, or is to belong, to the Crown:
§ Provided that nothing in this Sub-section shall apply to any contract for the supply of any such articles or materials as may from time to time be specified in an order of the Minister, being articles or materials which in his opinion are commonly required for purposes other than those mentioned in this Sub-section and for that reason cannot equitably be brought within the scope of the provisions thereof.—[Mr. Burgin]
§ Brought up, and read the First and Second time.
§ 3.53 p.m.
§ Mr. Ross TaylorI beg to move, as an Amendment to the proposed new Clause, in line 12, at the end, to insert:
(2)This Section shall not apply to any business carried on by statutory undertakers and consisting wholly or mainly in the rendering in the United Kingdom or a Dominion as defined in Section twenty-seven of the Finance Act, 1920, of any of the following services, namely, the supply of water, gas, electricity or hydraulic power.For the purposes of this Sub-section the expression statutory undertakers means any local or public authority authorised by or by virtue of any enactment to render any of the services aforesaid in the United Kingdom or a Dominion as defined in Section twenty-seven of the Finance Act, 1920, and any other person so authorised who is precluded by or by virtue of anyenactment from charging any higher price for those services than that authorised by or by virtue of the enactment or, in the case of a body corporate, is either so precluded or precluded by or by virtue of any enactment from paying a dividend at any higher rate, or distributing by way of dividend any greater amount, than that authorised by or by virtue of the enactment.The purpose of this Amendment will be clear to the Committee. It is expressly to exempt from the operation of the Armament Profits Duty those statutory undertakings mentioned in the Amendment. I realise that I may be met by the objection that the Amendment is unnecessary, that the duty will not apply to statutory undertakings, and that they cannot be said to be engaged in armament business; but I submit that, for the reasons which I shall try to give, an express exemption ought to be included in the Clause. The phrase "armament contract," as defined in the Clause, is very wide indeed. It includes contracts with His Majesty's Government for the supply of anything required for the purposes of the Armed Forces of the Crown or of any foreign armed forces, or for the supply of any machines, tools or materials required 659 for making or repairing anything required for those purposes. It also covers contracts with third parties for supplies enabling them to perform armament contracts. Therefore, it might very well be argued that supplies to His Majesty's Government, directly or through contractors or sub-contractors, of water, gas, electricity, or, in the case of gas, by-products of manufacture, might be regarded as supplies of things required for the purposes of the Armed Forces of the Crown.There is, therefore, a not unreasonable fear on the part of the larger public utility undertakings, both municipal and company, whose receipts are above the £200,000 limit, that attempts may be made to bring them within the operation of the duty, and therefore, they desire to have an express exemption. They ask for this exemption not because they desire to evade a financial burden imposed in the national interest, but because they are not in a position to make those excess profits which it is the purpose of the Clause to tax. Their profits are already controlled by Parliament. Every statutory undertaking is operating under an Act of Parliament, or an Order having the force of an Act of Parliament, which either limits the charges which may be imposed or precludes the payment of anything higher than the authorised dividend, or does both; so that the standard has already been imposed. The Amendment follows almost word for word the precedent set in the Finance Act, 1937. By Section 19 of that Act, statutory gas, water, electricity and some other public utility undertakings are expressly exempted from the National Defence Contribution. I should like to quote the words uttered by my right hon. Friend the Chancellor of the Exchequer when he was justifying that exemption in 1937, for they are very pertinent to my case. He said:
The view we took was that a public utility company, or in some cases a company established by law which was rendering that kind of service and was by law restricted as regards the profits it distributed or the charges it made, was a class of case which ought to be exempted, because they are not free as others may be to make what profits they please or charge what they like."— [Official Report, 30th June, 1937; col. 2062–3, Vol. 325.]That is really the case of the statutory undertakings to which I have referred in regard to this new duty. If I am told 660 by my right hon. Friend who replies that it is not intended that the duty shall apply to these undertakings, I would suggest that, in order to dispel all doubt, the exemption should be inserted, and, therefore, I hope that my right hon. Friend and the Committee will be prepared to accept the Amendment.
§ 4.0 p.m.
§ The Minister Without Portfolio (Mr. Burgin)I have sympathy with the object of this Amendment, and I may tell the Committee at once that it was never intended that water, gas, electric power and other statutory undertakings, as referred to in the Amendment, should come within the Clause. There may be some difficulty, perhaps, in determining whether or not these substances are articles or materials within the wording of the proviso of the proposed new Clause, and what I suggest to my hon. Friend is that he should accept my assurance that it is desired that these substances should not come within the scope of the Duty. Between now and another stage, I will consider whether the appropriate method is to enlarge the definition of what is to be excluded, or whether it would be more appropriate to insert specific words. With the object of the Amendment I am in sympathy. I cannot accept it in form, but perhaps with that assurance my hon. Friend will feel disposed to withdraw the Amendment.
§ Mr. Ross TaylorIn view of the assurance of the right hon. Gentleman, for which I thank him, I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 4.2 p.m.
§ Mr. Pethick-LawrenceI beg to move, as an Amendment to the proposed new-Clause, in line 16, after "Government," to insert "or any local or public authority."
If hon. Members will turn to the proposed new Clause which I seek to amend, they will find that it is concerned in Subsection (2) with the character of an armament contract, and in paragraph (c) of that Sub-section, such a contract is defined as:
A contract between the person carrying on the business …and His Majesty's Government in the United Kingdom.I am seeking by my Amendment to extend that definition so as to cover con- 661 tracts not made between the contractor and the Government but made between the contractor and "any local or public authority." To many of us this seems to be a matter of very considerable importance. It was discussed at some length in Committee of Ways and Means when the Resolution was before it last Monday, and if I judged aright the feeling in all parts of the Committee on that occasion there was a widespread opinion that the Bill as drafted was inadequate; and I would go so far as to say that this is one of the matters which is of first importance in considering whether the intentions of the Government really are to make an effective tax and to prevent profiteering by the armament manufacturers, or whether this is a piece of window-dressing in order to make the public think that something effective is being done when in fact very little is being accomplished, and how little that is will not be found out until some years afterwards when the net result of the tax comes to be seen.I should be out of order in referring to other Amendments in my name on the Paper, but in order to make the matter clear I think I am entitled to mention them in passing. The first question is the question of the apportionment, which occurs in a previous Clause. The second is the matter of the £200,000 in this proposed new Clause; there is the question of the datum year, which occurs in the next Clause on the Paper in the Chancellor's name; and there is the matter of the very large amount of depreciation which is referred to in the Schedule. Those five matters, of which this is one, are all matters which in my opinion are test questions for the Government. If in all these matters they adhere to the form of the proposals as drafted, I think there will be very little doubt that the proposals are not seriously meant, and that they are simply intended to give the public an impression which will not be realised when the amounts produced prove to be as small as they will be.
What are the facts as to the Amendment I have moved? The Government recognise perfectly well that armaments do not consist solely of munitions of war. They consist of all sorts of articles and preparations which are the subject of contracts not only for the purpose of waging a war, but for the purpose of maintaining the country, and therefore 662 within limit they propose to put in not merely the work required for fighting but for such things as air-raid precautions. Those things are referred to in Subsection (2) of the proposed new Clause. While the Government do that they propose to exclude from their purview all those contracts made with a local authority. It was pointed out in Committee of Ways and Means that a great many local authorities are compelled to provide air-raid precautions, and in fact public money, in some cases to the extent of 90 per cent., is going into those precautions. Yet the proposal of the Government is to exclude all those contracts. It does seem to some of us to be grotesque that the Government should take that view. I can imagine several answers that the Government may make to the Amendment. They may say, though I cannot see how they can do it, that these proposals are already included; or they may say that they could not be included without some different machinery from that which is provided. That may be true, but in that case it is perfectly open to the Government to find means by which they can certify the contract of the local authorities as coming within the purview of this tax. Therefore I do not think that that will serve to defend the exclusion of these contracts.
I think I have covered the whole ground. First there is the complete illogicality of excluding these contracts; secondly, there is the large hole in the net that the exclusion will create. It is no use the Minister of Supply designate shaking his head. It is a considerable hole, because first of all it will very likely exclude some of the contractors owing to the limit of £200,000; in the second place it will exclude part of their excess profits, and, thirdly, it will alter the proportion liable to tax as defined in the first of the new Clauses. When we take those three facts together they are bound to have a substantial result. I cannot see any ground on which the Government can resist the Amendment. I believe that that opinion would be supported by all Members who wish to see this tax an effective tax and not merely window-dressing to enable the Government to get away with a fiction.
§ 4.10 p.m.
§ Mr. BurginI cannot advise the Committee to accept the Amendment to the proposed new Clause. I say that not on 663 grounds of logic but on grounds of practical administration. So far from this being a large hole left open under the scheme of this tax, in reality it amounts to comparatively little, for reasons which I shall explain. The armament profits tax is intended to be something which can be quite easily capable of determination and collection. Where a Government Department places an order it is a relatively simple matter, by a process of ordinary arithmetic and addition, to know at once whether one of these supply contractors has had receipts amounting to £200,000 in a given accounting period. For some time past the three contract-making departments of the Service Departments of the Crown, the Army, Navy and Air Force, have been working in partnership with regard to supply contracts. That process is being continued, and it will be perfectly simple for the Minister of Supply, when the Bill has received the Royal Assent, to say at once that "such and such a supplier is a supplier of armament work amounting in the financial year to £ 200,000 or more." Where the contract is placed by a Government Department that information is in the possession of the Government and is a simple matter of ascertainment. Collection follows on ordinary Income Tax principles and the Inland Revenue Commissioners operate the tax.
Think what the position would be if, instead of the contracts being contracts placed by Government Departments, the matter was wide enough to include contracts placed by "local authorities or public authorities," whatever that last expression may be intended to mean. In England and Wales alone there are 1,557 local authorities and there are numbers of local authorities in Scotland. There are 1,082 local authorities in England, Wales and Scotland which are entitled to grant under the A.R.P. scheme. There is no method open to the Government for knowing when these local authorities place orders, with whom they place orders or how payments under those orders are effected, and in reality local government is very largely a matter of a great number of relatively small authorities up and down the country keeping alive the spirit of local patriotism. In England there are 28 metropolitan boroughs, 61 county authorities, 83 county boroughs and perhaps 300 muni- 664 cipal county boroughs. That is a total of something between 400 and 450. Those will be the main bodies. Does anyone think that contracts placed by the average urban district council or rural district council will amount to £ 200,000 with any one contractor? Of course they will not.
§ Mr. Pethick-LawrenceNo one suggests that one local authority will give a contract for £ 200,000, but it may easily happen that a contract given by a local authority will turn the scale, when added to other contracts already given by Government Departments.
§ Mr. BurginI will proceed a little further with the argument which I was addressing to the Committee. I want the Committee to understand that this is not a question of whether orders by a number of small authorities will or will not amount to £200,000 in a particular case. I ask them to look at the scope of what we are discussing. The greater part of the expenditure on air-raid precautions work is by the central Government. The greater part of the orders for steel shelters, sandbags, gas-masks and the like, are placed by Government Departments. All those supplies come within the ambit of the tax. For the year 1939, the expenditure of local authorities on air-raid precautions was something like £7,000,000, whereas the expenditure of the central government for like purposes was £34,000,000. The Committee will see that we are dealing with a relatively small section of the defence preparations expenditure. This Clause is a definition of "armament contract" and we are discussing the question of whether it is to go outside the scope of contracts placed by Government Departments. The right hon. Gentleman's suggestion is, from the point of view of administration, impracticable. It would need a very large machine to operate it. It would mean keeping a tremendous volume of data only to be employed in a relatively small number of cases, and, frankly, it would be the type of data, the collection of which would not be worth while.
§ Mr. MarshallDo we understand that the £ 7,000,000 is expenditure out of their own resources by local authorities, or is it aided by the Government?
§ Mr. BurginThe £ 7,000,000 is that proportion of local government expenditure in respect of which there is a national 665 grant. The total expenditure is something like £9,000,000.
§ Mr. MarshallThen £2,000,000 is out of their own resources?
§ Mr. BurginYes. I wanted to give the Committee at an early stage the attitude of the Government with regard to the point about local authorities.
Let me now refer to the other words of the Amendment "or public authority." I take it that would include public utility undertakings, railways, docks, harbours and some of the larger employers, in connection with screening of lights and matters of that kind. I cannot believe that the Committee intends armaments to include such matters. Expenditure by the Mersey Docks and Harbour Board, to take an example at random, on providing additional dock facilities, or laying down an additional siding for the clearance of the docks, or the storage of extra materials, could not, in the ordinary sense of words, be regarded as expenditure on arms. The notion of the Government in imposing the tax is something different. It is that the Government, meaning not merely the three Defence Services but also the Civil Defence authority, places contracts with suppliers of recognised materials for the conduct of the preparations for Defence; that those contracts are easily ascertainable; that they are placed in relatively large amounts with relatively few people. There will be very little conflict as to whether a firm is or is not within the £ 200,000 limit in a particular year; there will usually be a clear dividing line. But I suggest that a firm screening its windows by putting in extra blinds, or a dock company putting in an extra siding, or an electricity undertaking putting in a spare generator, cannot be said to be contributing to the armaments programme, without going completely outside the ordinary conception of armament contracts. I, therefore, ask the Committee to reject the Amendment.
§ 4.20 p.m.
§ Mr. SandysMy right hon. Friend tells us that the Government have not at their disposal the means of collecting this tax. I find it hard to understand why that should be so, but if he tells us that, we are powerless to press him to impose a tax which he says it is beyond his power to collect. I am in entire sympathy with the proposal of the right hon. Gentleman 666 the Member for East Edinburgh (Mr. Pethick-Lawrence). Had he not put down his Amendment, I would have put down such an Amendment myself, in a more complete form. The Amendment which I have put upon the Paper is an extension of the right hon. Gentleman's proposal. I cannot understand the attitude of the Minister. It seems to me that the purpose of this tax is not to hit a particular category of industrialists just because they are armament-makers. We do not recognise that there is anything wrong in being an armaments firm, though certain hon. Members opposite would like to do away with them. That is not the issue here. The fact that a particular firm produces a particular kind of equipment or appliances or munitions required for certain aspects of defence, does not put them into a different category, as far as the present discussion is concerned, from another firm which is producing other forms of equipment and materials required for other aspects of defence. I understood from the Chancellor of the Exchequer when he announced this tax that it was the intention of the Government to make its scope as wide as possible, and that it was only in exceptional cases, such as that of food and one or two other matters to which the Chancellor referred specifically, that contractors would be specially exempted by the Minister of Supply.
As I say, the purpose of the tax is not to penalise specific armament firms carrying on a specific kind of production. Its purpose is to meet the demand which is common to all parties and all sections in the country, that measures should be taken to see that neither individuals nor big firms shall derive profit and benefit from the nation's needs, that they shall not obtain advantages which they would not normally obtain, merely as a result of the country's danger. In so far as the Government accept that principle, surely they must accept the consequence of it, which is that any firm which is obtaining large profits as a result of the disturbed international situation and as a result of the demand for special defence precautions, whether in the field of the fighting forces or in the field of Civil Defence, shall be included. The matter of Civil Defence has been specifically introduced by the Government themselves. I cannot understand why, when they have accepted the principle that Civil 667 Defence should be included, they should seek to exclude the very large expenditure of local authorities. I am not dealing here with the actual figures, but I think that that expenditure is larger than my right hon. Friend has suggested. Anybody who has followed the provisions of the Air-Raid Precautions Act and of the Civil Defence Bill must realise the wide scope of the expenditure involved, and how much of it will be incurred by the local authorities and not directly by the Government. When I first looked at this proposal I was reassured by the reference to Section 9 of the Air-Raid Precautions Act, 1937. Incidentally, my right hon. Friend the Chancellor of the Exchequer assured me that he intended to bring the requirements of the Civil Defence Bill within the scope of the tax. Section 9 of the Air-Raid Precautions Act, 1937, covers any expenses incurred with the consent of the Treasury by the Secretary of State in the general superintendence and direction of measures taken under the Act, but it goes on to refer to:
paying to local authorities the grants payable under this Act.I imagined that the tax would therefore cover expenditure incurred by local authorities. I had, however, overlooked the fact that paragraph (a) (iii) of Subsection (2) of this Clause, which refers to Section 9 of the Air-Raid Precautions Act, 1937, was governed by the earlier words—a contract between the persons carrying on the business and His Majesty's Government.which limits the whole thing to such contracts. Therefore, this other expenditure does not, apparently, come within the scope of this tax at all. I do not propose to press my right hon. Friend on the matter at this stage. He has declined to accept the Amendment on the ground that, for technical reasons, the tax could not be collected in these cases. I am not in a position to examine the validity of that argument, but I ask him, between now and the Report stage, to consult those who are in the position to know how such taxes can be collected, and to see whether some means cannot be found of bringing the large expenditure of local authorities within the scope of the tax.
§ 4.26 p.m.
§ Mr. TinkerI hope the right hon. Gentleman opposite will take this Amendment in the spirit in which it has been 668 moved. We are anxious to help the Government in this matter. I take it that the Government's intention is that something shall be paid back to the State out of excessive profits made on armaments. It is on those lines that we are prepared to help. Incidentally, I take exception to the proposed limit of £200,000. I think it might have been much less but if that figure is to be fixed, then all contracts coming to any firm should be brought under one head, whether they come from local authorities or public authorities, or Government Departments. If they combine to make up £ 200,000 then the firm should be liable. Suppose a firm gets a £100,000 contract from the Government, and then gets a £50,000 contract from another source and a further £50,000 contract from a third source. According to this Clause as it stands, they could not be called upon to pay any tax because they would be within the £ 200,000 limit as far as the Government contract was concerned. There should be no difficulty in bringing together all the orders given from these various sources to one firm, and if an enlarged profit has been made on those orders, some of it ought to go back to the State. It is in that spirit that the Amendment is meant, and I do not think the Government should lightly turn down any attempt to help them in this matter. I do not think the attitude ought to be that of the difficulty of collecting the tax and the length of time that it would take to get it together. We believe that it can be levied. This is a national emergency call, and it is very unfair that any firm should be able to get away with excessive profits. Therefore, I think that after the appeal that has been made for further examination of the question, the right hon. Gentleman will give a little time before the Report stage to see whether or not it is workable. If he is satisfied that it cannot be worked, we must accept that, but I hope he will look again into the matter.
§ 4.31 p.m.
§ Mr. MarshallIt appears to me that the right hon. Gentleman put before the Committee a number of unreal difficulties. In the first place, he spoke about the difficulty of getting accurate information from the large number of local authorities in the country, but the Government, with their vast machinery, have all kinds of means of extracting information from the local authorities, and from that point of 669 view I do not think there is any difficulty at all. The right hon. Gentleman admitted that local authorities to-day were spending £2,000,000 out of their own resources, and I assume that that money is spent on productions which would likely come within the ambit of this tax. I want to say that that expenditure during the next few years, whether or not we have a war, is likely to increase very substantially. As a consequence, the right hon. Gentleman is denying himself of the opportunity of getting quite a considerable return from contracts that local authorities are placing to-day. It is possible, as the Clause is drawn, for a particular firm to supply 100 local authorities, and I have no doubt that many of them do supply special articles in that way, but let us assume that a contract with numerous local authorities comes to £300,000. Under the Clause as it is you will not get a halfpenny in respect of this tax from such huge contracts as that.
Let us take another case. It may be that a firm has contracts with the Government reaching the stipulated figure of £ 200,000. On top of that, it may have contracts for another £ 100,000 with various local authorities, but that £ 100,000 is absolutely cut out for the purposes of this tax by the right hon. Gentleman's Clause. I suggest that there must be some way of connecting these two. I admit that there are not many local authorities whose contracts would reach the figure of £ 200,000 in any charge-able year. It may be that the London County Council and certain other county councils would reach that figure, but I think we can admit straight away that the majority of local authorities would not. But they spend £ 20,000 here and £ 30,000 there, and I think there should be some way of bringing those local authority contracts within the scope of this tax. I do not know whether cement is included in the provisions of this Clause, but most of us who have been on local authorities know how, by a ring, the price of cement can go up in one week, thereby mulcting local authorities in an expenditure of thousands of pounds. I can quite imagine that the supply of this very necessary material would have to go up if hostilities should come about, but whether or not that were so, the local authorities are using an ever increasing amount of this material, and I cannot imagine the right hon. 670 Gentleman excluding contracts of that nature, with any reasonableness, at any rate. I think he ought to apply his mind to bringing forward some scheme which will connect the contracts with the Government and the local authorities together, in order that the tax may be extracted from the numerous contracts which local authorities have to make to-day.
§ 4.35 p.m.
§ Mr. BensonI think the argument of the right hon. Gentleman was that the multiplicity of local authorities is so great that to deal with this matter efficiently was quite beyond the power of the Board of Inland Revenue. I think he gave the number of authorities that would be involved as something over 1,000.
§ Mr. BurginThe number is 1,082.
§ Mr. BensonThat is undoubtedly a big figure, but the Board of Inland Revenue are dealing with three or four million Income Tax payers, they deal with 97,000 Surtax payers, and they deal with anything up to 200,000 estates that come under review for death duties. In view of these facts and of the fact that the Board of Inland Revenue has machinery for dealing, not with thousands, but with many millions, of incomes, I really cannot accept the argument that to ask the Board to deal with another 1,000 persons would break their backs, unless, of course, they suddenly develop creeping paralysis. These municipal authorities have their accounts properly audited. The Government have details in regard to £ 7,000,000 out of the £ 9,000,000 that the local authorities spend. They are statutory accounts, and what we are asking is that the Board of Inland Revenue shall take account of a maximum of 1,082 accounts, which are properly and efficiently audited, in addition to the several million accounts with which they are accustomed to deal.
That is quite a possible proposition, and it is ridiculous to tell the Committee that it cannot be done. Anyhow, even if it is beyond the powers of the Board of Inland Revenue, we are not concerned in this matter to scrape up every penny that ought to be scraped up. There are so many loopholes that even if we do not make the collection of this tax on the expenditure of local authorities 100 per cent. efficient, it does not matter. If the Minister will grant the principle and will say that the expenditure of local authorities shall, as far as is possible, within 671 the weak and puny powers of the Board of Inland Revenue, be subjected to this tax, we will accept it, but merely to turn down the entire principle that local authority expenditure should not rank for tax is illogical, and certainly the defence that the Minister put up is entirely invalid.
§ 4.39 p.m.
§ Mr. EdeWe have now had an opportunity of seeing the wicketkeeper at work, and I understand why we have a long stop. The right hon. Gentleman said that the amount with which we are dealing is only £7,000,000 out of a total of £34,000,000, but does that include all the works that are to be placed on the local authorities by the Civil Defence Bill which is not yet law? If it does, I cannot make out how the Treasury have arrived at any estimate, because, quite frankly, the big local authorities are appalled at the expense that they are going to have to encounter even after they have received the Government grant. I cannot understand the figure of £7000,000. I am a member of one quite substantial local authority, the Surrey County Council, and our bill for providing trenches for the elementary and secondary schools in our county, a bill which has already been approved by the Board of Education for a 50 per cent. grant, is £291,000. When we go to the people who are supplying us with the materials that will be necessary to enable us to construct these trenches and keep them in a reasonably permanent form, we are told, "You can only have a very limited delivery each week, because we have already entered into contracts with other education authorities which want the same kind of material." That is one thing alone, with one county council, and when I sit on the emergency committee of the county council which is dealing generally with the provisions under the Air-Raid Precautions Act and under the Civil Defence Bill which we have been asked to take into consideration, I am astounded at the width and the variety of the expenses that we have to incur.
The right hon. Gentleman has just left the Ministry of Transport, but I think that before he left, the Ministry asked us to make preparations to have bridge materials for all the important bridges in the county, including all the bridges over the Thames from Chiswick to Staines, and that expenditure on materials which are clearly within the range of armaments, 672 namely, iron, steel, and concrete, is tremendous. I cannot help thinking that this figure of £ 7,000,000 is a substantial under-estimate. Frankly, as one who is engaged for one county and as one who, as chairman of the air-raid precautions committee of the County Councils Association, has some idea of the difficulties confronting the other counties, without including the big county boroughs such as that which my hon. Friend the Member for the Brightside Division (Mr. Marshall) serves, I cannot understand how this figure is limited to £ 7,000,000 in one year. I think that must be the amount under the Air-Raid Precautions Act, based on the estimates for last year.
§ Mr. BurginOn my information— I will make further inquiries—it is the estimated total expenditure of local authorities on A.R.P. work in the year 1939.
§ Mr. EdeThat clearly cannot include the work under the Civil Defence Bill on such things as underground shelters, for which we have not yet got the power to take proceedings, and for which a very substantial amount of material will be required. However, I will leave that point. Clearly, it is a question of fact and can be ascertained, and the statement that I made I made on good faith, on the limited information at my disposal. Now I come to the question of the difficulty of entering into the accounts. The right hon. Gentleman has been Minister of Transport, and he knows the meticulous audit that is made of the accounts of local authorities before they can get a striver out of his Department; and no one imagines that the Lord Privy Seal, with his experience at the Home Office, will be less meticulous in his examination of the accounts. No one has ever suggested that police accounts are less carefully audited by the Home Office than the county engineer's accounts are audited by the Ministry of Transport. These accounts will all be audited and every receipt will be produced to a departmental auditor when the annual examination of the accounts takes place. Therefore, it will be information within the knowledge of one Department of the Government— every penny that has been spent for this particular purpose—and I hope the right hon. Gentleman will think again before he finally turns down the proposal that local authorities should be included.
673 I am sure his decision will be received with the greatest possible disappointment by the local authorities themselves, because our experience last September, when we had suddenly to order considerable quantities of materials such as sand-bags, timber, and concrete, was brought before the House. A statement was made by the clerk of the West Riding County Council, for instance, with regard to the way in which prices were put up. It makes us feel that unless we are protected by being brought within the ambit of this tax, we may very well find that some of the cases that I mentioned in my speech last night on a previous Clause may work out in this way, that while very small profits will be made on the work done for the local authorities, where the firm is doing work partly for Government Departments and partly for local authorities, a very different price will be asked from the local authorities compared with that which is asked from the Government.
These Clauses are brought in pursuance of the Prime Minister's pledge, when he said that he was going to introduce compulsory military training and that something would be done towards what was commonly known as the conscription of wealth. I have not heard it said that men will not be called up from small villages and hamlets because it is not worth while getting only one or two from a particular village or hamlet. Everyone who is of the prescribed age is being brought under the Military Training Act, and it seems to me that every contract concerned with National Defence, whether the contract is placed by a Government Department or by a local authority, should be brought within the ambit of this tax. On the analogy on which the whole tax is founded there is no ground for saying that to do what we suggest in regard to the contracts let by local authorities, with a substantial Government grant behind them— the placing of the contract merely happens because it is more convenient for the local authority to do it than the Government— the Government might be overwhelmed by the details. If they are going to audit the accounts, surely, there is no reason why they should not use the information they so obtain in order to ensure that this tax falls on everyone upon whom the people outside this House think it ought to fall.
§ 4.48 p.m.
§ Mr. BurginI much appreciate the spirit in which the Committee have dealt with this problem. They will understand that nobody speaking on behalf of the Government would wish to give up revenue or any chance of obtaining revenue, but, on the information placed at my disposal by my advisers and experts, I feel obliged to say that it would be impracticable to make the extension for which hon. Members opposite have asked. After 12 months of working it may be found possible to widen the class of contract, including contracts placed direct with contractors by local authorities, but for the moment, on the information before me, realising many of the points which have been raised and that there is the possibility of contractors putting prices up against local authorities in a time of emergency, the only promise and assurance I can give to the Committee is that as far as possible all common services shall be the subject matter of central Government purchases.
In addition to the items which I mentioned in my first speech in resisting the Amendment, namely, steel shelters, gas masks and a number of other things, I have been supplied with a further list of typical items of common user which are the subject of central Government purchase— fire engines, steel struts, fire-fighting hose and bleaching powder. In other words, wherever there is a recognition by the central Government that some particular substance will be wanted in very large quantities by local authorities up and down the country, then it may well be that the practice and normal rule should be that the acquisition of large stocks should be the subject matter of central Government purchase and should come within this Clause, rather than that the goods should be allowed to be purchased locally.
I think that hon. Members are underestimating the difficulties, just as they suggest, some of them, that some of the difficulties I am putting forward may be unreal. For instance, the hon. Member for Chesterfield (Mr. Benson) talks of the Inland Revenue auditing 1,082 accounts. First of all it is the Ministry of Supply which has to designate the taxpayer who comes within the ambit of this Clause. The matter never gets to the Inland Revenue authorities at all until the declara- 675 tion has been made by the Minister of Supply that such-and-such a firm comes within the ambit of the Clause. The question is not the audit by the Inland Revenue of 1,082 accounts, but the examination of 1,082 accounts of 1,082 buyers from a limitless number of suppliers. The matter has been surveyed, and, broadly, it is found that these are purchases of a very large number of substances locally in small quantities from a. very large number of different suppliers.
Mention has been made of cement. That comes within armaments contracts. It is dealt with in the Clause which refers to the definition of armaments contracts, but it is only included if the contract is made between a Government Department and a contractor who is building or supplying materials for works.
§ Mr. SandysI am sure the Committee appreciate the importance of the assurance which my right hon. Friend has given, that it is his object to bring as many firms as possible within the scope of the tax, and that the Government will buy centrally materials and appliances which will be required by local authorities in large quantities. Previously, my right hon. Friend referred to the question of steel shelters. Can he give a similar assurance in regard to the steel shelters which have to be bought by individuals whose incomes are over £250 a year? They would not come under the category of goods purchased by the Government, but it is obviously desirable that the supply of those steel shelters should be taxable, although in fact the individual is going to be the eventual purchaser.
§ Mr. BurginI am much obliged to my hon. Friend. I cannot give an assurance immediately, but I will look into the point and see whether it is the intention of my right hon. Friend the Lord Privy Seal to make purchases in that way. I wanted to give an assurance to the Committee as generally and as roundly as possible that where it is possible to make a central purchase— clearly the arguments that have been addressed to the Committee are strongly in favour of that—it should be done. The hon. Member opposite asked me about my figure of £7,000,000. I want to be perfectly frank. On the information I have before me, I am thinking of the estimates as known to the Department at the present time. I agree that there may be other obligations under the Civil Defence Act, but it is probable that these will not come as expenditure during the current year. The total figure of the Estimates so far for local government expenditure on air-raid precautions for the year 1939 is £9,000,000, of which £ 7,000,000 is the portion covered by the grants from Exchequer funds. That is the information we have. I and my advisers will consider most carefully the remarks made by hon. Members, but I should not like the Committee to receive any encouragement that the definition of armament contracts will be enlarged this year to include local government contracts. The point, however, is a substantial one and is worthy of consideration.
§ Question put, "That those words be there inserted."
§ The Committee divided: Ayes, 107; Noes, 179.
677| Division No.203.] | AYES. | [4.55 p.m. |
| Adams, D. M. (Poplar, S.) | Ede, J.C. | Jenkins, A. (Pontypool) |
| Adamson, Jennie L. (Dartford) | Edwards, Sir C. (Bedwellty) | Jenkins, Sir W. (Neath) |
| Adamson, W, M. | Frankel, D. | Jones, A. C. (Shipley) |
| Alexander, Rt. Hon. A, V. (H'lsbr.) | Gallacher, W. | Kennedy, Rt. Hon. T. |
| Ammon, C. G. | Gardner, B. W. | Kirby, B. V. |
| Anderson, F. (Whitehaven) | George, Major G. Lloyd (Pembroke) | Kirkwood, D. |
| Banfield, J. W. | George, Megan Lloyd (Anglesey) | Lathan, G. |
| Batey, J, | Graham, D. M. (Hamilton) | Lawson, J. J. |
| Bellenger, F. J. | Green, W. H. (Deptford) | Leach, W. |
| Benson, G. | Greenwood, Rt. Hon. A. | Leonard, W. |
| Bevan, A. | Grenfell, D, R. | Leslie, J. R. |
| Broad, F. A. | Griffiths, J. (Llanelly) | Logan, D. G. |
| Brown, C. (Mansfield) | Groves, T. E. | Lunn, W. |
| Burke, W. A. | Hall, J. H, (Whitechapel) | Macdonald, G. (Ince) |
| Cluse, W. S. | Harris, Sir P. A. | McEntee, V. La T. |
| Cocks, F. S. | Hayday, A. | McGhee, H. G. |
| Collindridge, F. | Henderson, A. (Kingswinford) | MacLaren, A. |
| Cove, W. G. | Henderson, J. (Ardwick) | Mainwaring, W. H. |
| Daggar, Q | Henderson, T. (Tradeston) | Mander, G. le M. |
| Davidson, J. J. (Maryhill) | Hills, A. (Pontefract) | Marshall, F. |
| Davies, R. J. (Westhoughton) | Hopkin, D. | Mathers, G. |
| Dobbie, W. | Isaacs, G. A. | Maxton, J. |
| Montague, F. | Salter, Sir J. Arthur (Oxford U.) | Thorne, W. |
| Morrison, Rt. Hon. H. (Haskney, f.) | Sanders, W. S. | Tinker, J. J. |
| Morrison, R. C. (Tottenham, N.) | Seely, Sir H. M. | Viant, S. P. |
| Naylor, T. E. | Sexton, T. M. | Walker, J. |
| Noel-Baker, P. J. | Silver man, S. S. | Watson, W. McL. |
| Paling, W. | Simpson, F. B. | Westwood, J. |
| Parkinson, J. A. | Smith, Ben (Rotherhlthe) | White, H. Graham |
| Pearson, A. | Smith, E. (Stoke) | Williams, E. J. (Ogmore) |
| Pethick-Lawrence, Rt. Hon. F. W. | Smith, Rt. Hon. H. B. Lees- (K'ly) | Williams, T. (Don Valley) |
| Poole, C. C. | Smith, T. (Normanton) | Wilmot, John |
| Price, M. P. | Stephen, C. | Woods, G. S. (Finsbury) |
| Quibell, D. J. K. | Stewart, W. J. (H'ght'n-le-Sp'ng) | |
| Riley, B. | Stokes, R. R. | TELLERS FOR THE AYES.— |
| Ritson, J. | Strauss, G. R. (Lambeth, N.) | Mr. Charleton and Mr. Whiteley. |
| Robinson, W. A. (St. Helens) | Taylor, R. J. (Morpeth) | |
| NOES | ||
| Acland, Sir R. T. D. | Fox, Sir G. W. G. | Peters, Dr. S. J. |
| Acland Troyte, Lt.-Col. G, J. | Fremantle, Sir F. E. | Petherick, M. |
| Albery, Sir Irving | Furness, S. N. | Pickthorn, K. W. M. |
| Allen, Col. J. Sandeman (B'knhead) | Gluckstein, L. H. | Pilkington, R. |
| Anstruther-Gray, W. J. | Glyn, Major Sir R. G. C. | Plugge, Capt. L. F. |
| Aske, Sir R. W. | Goldie, N. B. | Ponsonby, Col. C. E |
| Astor, Viscountess (Plymouth, Sutton) | Graham, Captain A. C. (Wirral) | Procter, Major H. A. |
| Baillie, Sir A. W. M. | Granville, E. L. | Radford, E. A. |
| Balfour, Capt. H. H. (Isle of Thanet) | Greene, W. P. C. (Worcester) | Ramsay, Captain A. H. M. |
| Baxter, A. Beverley | Gretton, Cot. Rt. Hon. J. | Ramsden, Sir E. |
| Beauchamp, Sir B. C. | Gridley, Sir A. B. | Rickards, G. W. (Skipton) |
| Beaumont, Hon. R. E. B. (Portsm'h) | Grigg, Sir E. W. M. | Ropner, Colonel L. |
| Beechman, N. A. | Hacking, Rt. Hon. Sir D. H. | Rosbotham,Sir. T. |
| Bennett, Sir E. N. | Hannon, Sir P. J. H. | Ross Taylor, W. (Woodbridge) |
| Bernays, R. H. | Haslam, Henry (Horncastle) | Rothschild, J. A. de |
| Blair, Sir R. | Haslam, Sir J. (Bolton) | Rowlands, G. |
| Bossom, A. C. | Heilgers, Captain F. F. A. | Royds, Admiral Sir P. M. R. |
| Braithwaite, J. Gurney (Holderness) | Hely-Hutchinson, M. R. | Russell, Sir Alexander |
| Briscoe, Capt. R. G. | Heneage, Lieut.-Colonel A. P. | Russell, S. H. M. (Darwen) |
| Brocklebank, Sir Edmund | Hepworth, J. | Samuel, M. R. A. |
| Brown, Brig.-Gen. H. C. (Newbury) | Herbert, Lt.-Col. J. A. (Monmouth) | Sandeman, Sir N. S. |
| Bull, B. B. | Higgs, W. F. | Scott, Lord William |
| Bullock, Capt. M. | Holdsworth. H. | Shakespeare, G. H. |
| Burgin, Rt. Hon. E. L. | Horsbrugh, Florence | Shaw, Captain W. T. (Forfar) |
| Butler, Rt. Hon. R. A. | Howitt. Dr. A. B. | Shepperson,Sir, E.W |
| Campbell, Sir E. T. | Hudson, Capt. A. U. M. (Hack, | Simon, Rt. Hon. Sir J. A. |
| Carver, Major W. H. | Hudson, Rt. Hon. R. S. (Southport) | Smiles, Lieut.Colonel Sir |
| Castlereagh, Viscount | Hunloke, H. P. | Smith, Sir R. W. (Aberdeen) |
| Cayzer, Sir C. W. (City of Chester) | Hurd, Sir P. A. | Snadden, W. McN. |
| Cazalet, Thelma (lslington, E.) | Joel, D. J. B. | Somerset, T. |
| Cazalet, Capt. V. A. (Chippenham) | Hutchinson, G. C. | Spears, Brigadier-General E. L. |
| Channon, H. | Knox, Major-General Sir A. W. F. | Spens, W. P. |
| Chapman, Sir S. (Edinburgh, S.) | Lambert, Rt. Hon. G. | Stewart, J, Henderson (File, E.) |
| Colfox, Major Sir W. P. | Lancaster, Lieut.-Colonel C. G. | Stewart, William J. (Belfast, S.) |
| Colville, Rt. Hon. John | Levy, T. | Strauss, H. G. (Norwich) |
| Cooke, J. D. (Hammersmith, S.) | Liddall, W. S. | Strickland, Captain W. F. |
| Courthope, Col. Rt. Hon. Sir C. L. | Lipson, D. L. | Stuart, Lord C. Crichton- (N'thw'h) |
| Croft, Brig.-Gen. Sir H. Page | Little, J. | Stuart, Rt. Hon. J. (Moray and Nairn) |
| Crooke, Sir J. Smedley | Loftus, P. C. | Sueter, Rear-Admiral Sir M. F. |
| Crookshank, Capt. Rt. Hon. H. F. C | MacAndrew, Colonel Sir C. G. | Sutcliffe, H, |
| Crowder, J. F. E. | Macdonald, Capt. P. (Isle of Wight) | Tasker, Sir R. I. |
| Cruddas, Col. B. | McEwen, Capt.J. H. F. | Taylor, C. S. (Eastbourne) |
| Davidson, Viscountess | McKie, J. H. | Thorneycroft, G, E. P. |
| Davison, Sir W. H. | Macnamara, Lt.-Col. J. R. J. | Touche, G. C. |
| De la Bèer, R. | Makins, Brigadier-General Sir Ernest | Wallace, Capt. Rt. Hon. Euan |
| Denman, Hon. R. D. | Manningham-Buller, Sir M. | Ward, Lieut.-Col. Sir A. L. (Hull) |
| Dodd, J. S. | Margesson, Capt. Rt. Hon. H. D. R. | Wardlaw-Milne, Sir J. S. |
| Doland, G. F. | Markham, S. F. | Warrander, Sir V. |
| Donner, P. W. | Maxwell, Hon. S. A. | Waterhouse, Captain C. |
| Dugdale, Captain T. L. | Mellor, Sir J. S. P, (Tamworth) | Watt, Lt.-Col. G. S. Harvie |
| Duncan, J. A. L. | Mills, Sir F. (Leyton, E.) | Wayland, Sir W. A. |
| Edge, Sir W. | Mitshell, Sir W. Lane (Streatham) | Wells, Sir Sydney |
| Edmondson, Major Sir J. | Moore, Lieut.-Col. Sir T. C. R. | Willoughby de Eresby, Lord |
| Elliot, Rt. Hon. W. E. | Morgan, R. H. (Worcester, Stourbridge) | Windsor-Clive, Lieut.-Colonel G. |
| Ellis, Sir G. | Morris, O. T. (Cardiff, E.) | Winterton, Rt. Hon. Earl |
| Elliston, Capt. G. S. | Morrison, G. A. (Scottish Univ's.) | Wright, Wing-Commander J. A. C. |
| Emmott, C. E. G. C. | Munro, P. | York, C |
| Entwistle, Sir C. F. | Neven-Spence, Major B. H. H. | |
| Evans, Colonel A. (Cardiff, S.) | Nicholson, G. (Farnham) | TELLERS FOR THE NOES— |
| Evans, E. (Univ. of Wales) | Orr-Ewing, I. L. | Lieut-Colonel Kerr and Mr. |
| Fleming, E. L. | Palmer, G. E. H. | Grimston |
§ 5.6 p.m.
§ Mr. SandysI beg to move, as an Amendment to the proposed new Clause, in line 16, after "Government," to insert "or any firm or person."
Certain assurances were given by the Government that they would look into this whole question of the expenditure by bodies other than the Government on matters of Civil Defence, and that, in particular, they would, as far as possible, bring the contractors concerned within the scope of the tax by means of large-scale central purchases. I should like to get a similar assurance with regard to the further category of persons proposed in this Amendment.
§ Mr. BurginI am willing to give the same assurance with regard to these words.
§ Amendment, by leave, withdrawn.
§ Mr. SandysI beg to move, as an Amendment to the proposed new Clause, in line 18, after the second "forces" to insert:
or for the purposes of any enactment (whether passed before or after the passing of this Act) relating to civil defence.The purpose of the Amendment is to include within the scope of the tax certain matters which do not appear at present to be included and which I cannot help feeling that the Government intended in the first place to include. As it stands the tax only covers the expenditure referred to in Section 9 of the Air-Raid Precautions Act, 1937. That specifies:expenses incurred with the consent of the Treasury by the Secretary of State in the general superintendence and direction of measures taken under this Act or in providing such services and training such persons and acquiring, on behalf of His Majesty, such equipment, appliances and other material as the Secretary of State considers it necessary to furnish.The words "equipment, appliances and other material" are rather confined, and do not cover by any means all the expenditure that is likely to be incurred even by the Government itself in the course of its Civil Defence activities. The purpose of the Amendment is to cover expenditure which is likely to be incurred by the Government to meet the requirements of the Civil Defence Bill such as is not already covered by Section 9 of the Act of 1937. In particular, it is intended to cover expenditure upon the execution of works which are not covered 680 at all by that Section of the Act. Merely "equipment, appliances and material" are referred to. As the Clause stands, the Government could not include within its scope contracts even, say, for the construction of air-raid shelters in Government offices in Whitehall. Even if the Government are not prepared to accept the right hon. Gentleman's Amendment regarding local authorities, it seems clear that it must be their intention to cover ail direct contracts regarding any form of work, whether the manufacture of appliances, or the digging of trenches, or the erection of shelters for which they are directly responsible.
§ 5.11 p.m.
§ Mr. Pethick-LawrenceAs I understand it, the intention at any rate of the Amendment is the same as mine, to insert:
or in any Act of the present session to make further provision for civil defence.The real point is this. As I see it, we are in doubt as to whether the Clause as originally drafted is sufficiently all- embracing to cover all the matters which we think, and I believe the Government also think, ought to be included in the purview of the tax, at any rate as far as orders by the Government are concerned. I cannot help feeling that the Government must wish that all those things should be included. If they can tell us that it is in the Clause as drafted, we shall be satisfied but, if it is not so drafted, I hope they will be able to accept this Amendment in substance.
§ 5.13 p.m.
§ The Chancellor of the Exchequer (Sir John Simon)What the right hon. Gentleman says is right. As the Clause is drafted, the Government contracts that were included were under three heads, (i), (ii) and (iii), and the third head was:
a contract for the supply of any such equipment, appliances or other materials as are mentioned in Section nine of the Air-Raid Precautions Act, 1937.When I moved the Resolution on Monday I was asked by certain Members whether or not we were so planning our tax as to cover contracts made by the Government for the purposes of Civil Defence. I said:I think that all contracts entered into by the Government for these supplies for passive defence are within the scheme."— [Official Report, 26th June, 1939; col. 63, Vol. 349]That was certainly the intention. I looked more carefully at the reference to 681 Section 9 of the Air-Raid Precautions Act. I am very far from saying that the draftsman was not quite right in his insertion, though I think it is a little cryptic to the reader. It did not look as if it was all embracing, but I think it was as far as equipment is concerned. Apart from equipment there is also the case of contracts for work which would not necessarily be equipment. Digging holes is not equipment. We may, before we have done this business, go further still. Therefore, I am glad to accept an Amendment which refers not only to the Air-Raid Precautions Act, 1937, but refers to any Act passed now or hereafter dealing with Civil Defence, and I am much obliged to the hon. Gentleman who made the point. It was always our intention to apply this provision to Civil Defence contracts made by the Government, and I have had the words looked at very carefully and feel convinced that they will have the effect of making the Clause all-embracing.
§ Amendment agreed to.
§ Further Amendments made to the proposed new Clause:
§ In line 20, after "for," insert "any of."
§ After "purposes," insert "or."
§ In line 21, after the second "for," insert "any of."
§ In line 22, leave out from "purposes" to the end of line 25.—[Mr. Sandys.]
§ 5.17 p.m.
§ Mr. Pethick-LawrenceI beg to move, as an Amendment to the proposed new Clause, in line 27, after "works," to insert directly or indirectly."
At an earlier stage the Chancellor of the Exchequer said that it was the intention that the proposals should cover contractors, sub-contractors to those contractors and, if necessary, sub-contractors ad infinitum. I have had difficulty in finding that that intention is expressed in the Clause. Reading paragraph (b) of Sub-section (2) without expert legal advice it would appear to cover only direct sub-contractors, and the Amendment is designed to give effect to what is, I understand, the intention of the Government.
§ 5.19 p.m.
§ Sir J. SimonI can well understand the reason for putting down this Amend- 682 ment, and for asking this question, for I agree that this point has to be looked at closely, but it sometimes happens that the skilled draftsman, by a neat use of words, does cover all the cases that we want to cover. There is no difference between us as to intentions. We are not limiting this Clause to imposing the duty upon A, who has a contract with the Government, but we want to include B, who is a sub-contractor, and who has a contract with A for the purpose of a Government contract, and also to include C, who has a sub-sub-contract with B; and so on ad infinitum as the right hon. Gentleman said. But that is not a very easy intention to express, and I doubt whether the words of his Amendment "directly or indirectly," would do it, but the Clause in fact does do it. The first provision, which is labelled "(a)"refers to:
A contract between the person carrying on the business and His Majesty's Government in the United Kingdom.There the person carrying on the business is the person I have called A, and his is the main contract. We want to be sure, having fixed the main contract, that B, who has a sub-contract with A, is also caught. He is caught, because the Clause next refers to:A contract under which the person carrying on the business "—that is (&)—supplies anything to or executes any work for any other person "—namely A—being a contract entered into by that other person for the purpose of enabling him to perform an armament contract.By the earlier Sub-section we have already established that in the case supposed A is within the Clause, and now, by reference or application, or walking down the scale, we have got B in. Exactly the same reasoning will show that C, the sub-sub-contractor, will be similarly caught, because he has a contract with B, who has now been identified as what I may call an armament subcontractor. The draftsman was good enough to show me this and I have tried to explain it. At first I suffered from the same disability as the right hon. Gentleman opposite, but when one looks at it carefully one can see that the purpose is effected. It is very neatly put, and there is the advantage that one does not have to say "and so on ad infinitum," be- 683 cause every step follows on the one before. I think I can assure the Committee that it is really all right. I am satisfied that we have really caught the sub-contractor and the sub-sub-contractor, and so forth for ever and ever.
§ Mr. Pethick-LawrenceOn that explanation I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 5.23 p.m.
§ Captain StricklandI beg to move, as an Amendment to the proposed new Clause, in line 34, at the end, to insert:
but only to the extent of any remuneration payable by His Majesty's Government in respect of such agency.The purpose of this duty is to tax excess profits that are made by contractors. The basis of the tax will be the total receipts of a business from the Government under armament contract, and an armament contract is defined in Sub-section (2) as being inter aliaa contract for the construction of any factory in the United Kingdom which belongs or is to belong to the Crown,This matter introduces the shadow factory. Certain firms and companies have been authorised by the Government to erect, maintain and organise certain factories for the production of Government supplies. The factories themselves do not belong to the Government agent. He is authorised to erect and construct the shadow factory, but merely acts as an agent, and in due course receives from the Government the cheque to pay for the factory. Under the provisions of this Clause that would be one of the receipts which might bring the firm within liability to pay the tax; but there has been no profit whatever made upon the transaction. The Government pays to its agent, which happens to be this company, a cheque for, say, £200,000, and the company pay over the £200,000 to the persons who have built the factory, and in that respect act only as an agent, and I submit that that is not the type of transaction which the Government had in mind in seeking to tax excess profits.There is nothing in this Amendment which would exclude any of the profits which are made out of actual trading or management, only any remuneration payable by His Majesty's Government in 684 respect of such agency; so that any profits made by this contractor would come under the consideration of the Government for the purposes of this tax; but as regards any grant paid to the company which acts as agent for the Government on which no profit is made that should be definitely excluded, and I do not think that would happen unless this Amendment were accepted.
§ 5.26 p.m.
§ Sir J. SimonThis is a curious point, and I have had it specially looked into, and with great respect to my hon. and gallant Friend I do not think his account of the way in which these matters are usually operated is quite correct. What actually happens is that the Government pay direct, and not through any agent, for the work of construction and the carrying on of the factory. It is not the case that we put somebody else in funds merely that he may hand the money on. The Government pay direct, and all that the agent receives is the agent's remuneration; though, of course, he may, in another connection, be a big armaments contractor, and come under one of the other sub-sections, in which case his profits will all come under review. Therefore, as a practical matter, what the hon. and gallant Gentleman is proposing would not make any difference. It is not the case that the Government hand over £200,000 to Mr. X because he is managing a shadow factory, and X pays that money over to other people. The Government pay the people whose bills are vouched for, and what they pay to the agent is the agent's remuneration.
I have had inquiries made at the Air Ministry and they tell me that, as far as they know, what I have said represents the invariable practice, but if there were an exception it obviously would be very wrong to treat those who are acting as agents in one way and to treat quite exceptionally somebody else in another way, and I think that as a matter of precaution it would be right to insert this Amendment and I am willing to accept it. But my information is that, as far as we know, it does not make any difference, for the reasons which I have stated. The point simply is that the agency business is remunerated by payment of the agreed remuneration. It is not the case that large sums of money are handed over to be handed on. 685 Therefore, in accepting the Amendment I am not altering the collection of the tax or the scope of it.
§ 5.29 p.m.
§ Captain StricklandIt is difficult, of course, for a Member of Parliament to know the exact procedure which is followed in these cases. One has to take the actual wording of the Clause itself. It is not a case only of the construction but of the management, and it is quite possible for those who act as agents to do something for the remuneration given by His Majesty's Government. I believe that in many cases they do actually pay accounts and then submit the accounts to the Government. I may be mistaken, but I should like these words to be inserted in order to make quite sure that the actual payment of any sums on which they are not making a profit will not bring them into the scheme but only so far as they are making profit out of the Government.
§ 5.31 p.m.
§ Mr. BellengerIs the right hon. Gentleman quite certain that the insertion of these words will exclude from liability an agent managing a shadow factory for the Government who is engaged at the same time in some other business which would ordinarily incur this A.P.D.?
§ Sir J. SimonThat is quite clear and that is what I had to provide. That is certainly so. I believe that in most cases the agency work is entrusted to firms which have very substantial armament contracts, and they would of course be within the earlier part of the Section. What is added to their profits under that head ought not to be more than the agency fee.
§ Amendment agreed to.
§ 5.32 p.m.
§ Mr. Noel-BakerI beg to move, as an Amendment to the proposed new Clause, to leave out lines 35 to 39.
I move the Amendment in order that the Minister may give an explanation of what the Clause means and how the Government intend to work it. On Monday—I hope the Chancellor of the Exchequer will not think it offensive if I say this—the impression left on the mind of the Committee by the information which he 686 gave was a little confused. I have reread what he said, and it does not seem to me that his own conception of the matter was crystal clear. I cannot make head or tail of what the Clause is to do. At one moment a thing appears to be excluded and at another to be included. Cement is to be in and coal is doubtful. Uniforms are voted in and out according to who is to wear them. Broadly speaking, there was no clear line at all. The Chancellor said—I think he was quite right—that he was prepared to make the definition right and to provide that exclusion could be made if required by the Minister.
In the Debate on Monday, attention was drawn by the hon. Member for Mossley (Mr. Hopkinson) to the proviso. He said it was most cryptic and that he would be glad to have an explanation; whereupon the Chancellor said—I have his words—that the proviso really arose on the draft Clause which, for the convenience of the Committee was printed on the Order Paper although it could not really have any existence until we had decided upon this general resolution. That is true, but it means that he gave no explanation on Monday and that the Committee are entitled to have an explanation now. On Monday, attention was chiefly devoted to supplies for local authorities. We want to know, as far as the Government can tell us, what is to be included in the way of materials in this proviso and how it is to work. It would be of great advantage to know what is to be in and what is to be out. That is fundamental for the purpose of checking excessive profiteering on preparations for war. What is in our mind is that already in the scheme of this A.P.D. there are gaps through which profiteers can escape, for example in the apportionment of which my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) spoke of £200,000, a limit about which we have our doubts. There is the question of the standard year, to which I shall draw attention in a moment. I want to know whether this is another loophole by means of which another great class of profiteers will escape the tax altogether. If the right hon. Gentleman gives us a satisfactory explanation we shall withdraw the Amendment, but if not we shall press it to a Division.
§ 5.36 p.m.
§ Mr. BurginOne of the disadvantages of speaking after 12 o' Clock at night is that you are too late for the Official Report for that day, and that what you are saying will not be available in print on the following day. Last night, at a time when we were all a little tired, I gave an explanation of this Clause. One of the difficulties is that my remarks are not now available to hon. Members, so I will try to explain again without having my previous data before me. Let me say again that it is proposed that the Ministry of Supply should issue, at a very early date after the Royal Assent is given to the Bill, an explanatory memorandum so that everybody shall clearly understand exactly how the process of a contractor notifying a sub-contractor and that sub-contractor notifying sub-contractors further down the line, is to be carried out.
The hon. Member for Derby (Mr. Noel-Baker) asks what the proviso means, whether it is intended to be a loophole to allow a whole class of profiteers to escape. No, it is not intended for anything of the kind. It is thought that in the wider conception of armaments there must be a number of substances not very easy to enumerate seriatim, which ought not, on any reasonable interpretation of words, to be included in the calculation. Food was an example that was given, largely because the substance is not one of which there has been a vastly increased manufacture by reason of the Defence programme. It is much more a user of the particular stocks in a special way rather than an increase of the total. Because there are more people in khaki consuming food and less people not in khaki doing so that does not mean that more food is produced but merely that there is a difference in the use. Food was intended to be a class of article properly to be excluded. Another substance which it seems to me could clearly be excluded would be coal. I do not think it would be possible for a coal merchant when selling coal to know the user to which the coal was to be put. The mere accident that some coal is used for something that goes into armaments does not warrant the inclusion of all coal. It does not seem equitable to say that coal is produced as an armaments supply.
688 If you proceed a little further I think you will find that tobacco should be excluded. I am not giving these articles as a complete list but am endeavouring to tell the Committee how I understand the dispensing power given by the Clause is intended to operate.
§ Mr. BellengerDoes the right hon. Gentleman include railways which are Used for carrying armament supplies?
§ Mr. BurginWe are not talking about the people but about the articles.
§ Mr. BellengerIt is a service.
§ Mr. BurginI am not talking about services, but about substances—all food, all tobacco and all coal. There may well be other substances of a like character. I have already intimated to the hon. Member who moved an earlier Amendment that the supply of gas, water, electric power and hydraulic power ought probably to be excluded also. I have attempted to give the Committee a sort of idea of the extent to which this Clause is intended to operate. I conclude by saying, as I did last night, that there must be a number of substances not fabricated at all which ought to be excluded, and that a memorandum dealing with the Government's intentions in the matter will be issued for general public information as we progress.
§ 5.40 p.m.
§ Sir Percy HarrisI was surprised to hear that the right hon. Gentleman would exclude public utility services such as water, electricity and gas, all of which are regulated by Acts of Parliament, and cannot be the subject of excessive charges. I am surprised about food. The history of the last War showed that there was more profiteering in bully beef, plum-and-apple jam and various foodstuffs than there was in guns and armaments. It is easier in the right hon. Gentleman's Department to control the price of munitions. It is very easy, through skilful costing, to know what ought to be the cost of guns and rifles or even of uniforms and equipment. It may be difficult when it comes to large contracts for foodstuffs of various quantities and qualities to prevent profiteering. I should not be surprised to hear that in previous wars, particulaly the South African War, excessive profits were made out of the necessity for feeding the armies. Food supply is as essential as is 689 the supply of equipment and ammunition, but there is no reason why a food contractor should be put in a privileged position equal with that of a manufacturer of guns or clothing. I suggest that the right hon. Gentleman should think again. I understand that the right hon. Gentleman is not binding himself.
§ Mr. BurginIn the earlier White Paper, food was put in as being one of the excepted articles. I am therefore binding myself completely.
§ Sir P. HarrisI take great exception to that. From the point of view of the public it would be a tragedy. We know that there always are complaints and suspicions about the food supply. While there are complaints from the front that the quality of the food is not good, there are people at home waxing fat on Army contracts for food. It would be a blunder from every point of view to put the food contractor into a privileged position. I see no reason why excessive profits should be made out of the necessities of the State in provisioning the Army. The food contractor should be subject to the same necessities in this Clause as any other contractor. Food is just as essential as ammunition. Many an Army has been defeated because of a shortage of food supply or because of bad quality. Excessive prices may be charged not so much by actual high prices but by the provision of poor quality and the reduction of standards. Incompletely excluding food the right hon. Gentleman will be going entirely against public opinion, when you remember the popular clamour and the general demand in time of war that nobody should profiteer out of the needs and necessities of the nation. I do not see why any profiteer in foodstuffs should be considered more than a profiteer in things like munitions.
§ 5.44 p.m.
§ Mr. SilvermanI am at a loss to understand what is the danger or the injustice which it is intended to guard against by having the proviso in the Clause at all. The Clause will not hit anybody until certain conditions are satisfied. Before anybody comes under the Clause, either his turnover or his receipts from Government contracts or sub-contracts in the accounting period reach £200,000, or his proportion of new Government work to ordinary work is appropriate to bring him within the category of a Government con- 690 tractor or sub-contractor of that size; and then no one will come under the Clause until the Minister of Supply himself specifies that the kind of work he is doing is such as to make him reasonably amenable to this kind of taxation. Supposing that a contractor had receipts or turnover within the accounting period sufficient to bring him within the Clause, but that his contracts were for food, on what possible ground is it conceivable that his liability to taxation should be different from what it would be if he were supplying to the Government, for exactly the same class of purposes, some other article?
What is it that the Minister wants to guard against? Does he want to guard against somebody being made liable to this taxation who is not supplying the Government with articles for general armament purposes? He need not be. There is nothing which compels the Minister to designate a firm. If a contractor is of such a kind that he ought not equitably to be subject to this taxation, the Minister need not designate him. But suppose that the Minister felt a difficulty about not designating him. Suppose that the Minister said: "I must designate him because these contracts that he is getting are really for armament purposes, although they are not for armament goods." If the Minister felt that the kind of contract he was getting, or the kind of business he was doing, was such that he ought, in justice to others and in the proper discharge of his duties under the Clause, to designate him, because he was doing what in effect was an armament business, why should he not be subject to the tax if his contract is of sufficient size? I cannot see why the proviso was thought necessary, or who would be brought under the Clause who ought not to be under the Clause if the proviso were not there. It may be that there is some answer on that point; I feel sure that there must be; but I feel equally sure that it has not been given yet.
If the matter is left in ambiguity, it is not altogether our fault. It ought not to be left in ambiguity, because it looks as if several people will escape, if the proviso is there, who ought not to escape. The right hon. Gentleman in introducing it, said it was not the intention of its framers or sponsors that a whole class of people should escape who otherwise would be caught. That may be so, and, if he says it, I see no reason why I should not 691 accept his word for it. But this Committee is not concerned with the intentions of framers of Clauses and their sponsors here: it is the facts that matter. The right hon. Gentleman said that, after all, there might be some articles that were not fairly suitable for this kind of taxation. He instanced food, and coal, and some other things. But, surely, it all depends upon what the food or coal is wanted for. The right hon. Gentleman shakes his head. I suppose that means that he does not agree.
§ Mr. BurginIf it depended on the use to which the article is put, I would ask the hon. Gentleman to put himself in the position of a taxing authority and consider how he would deal with a substance which is of general use, but which is to be taxed if it goes into certain hands and is not to be taxed if it goes into other hands.
§ Mr. SilvermanThere is no difficulty about that at all. First of all, the Minister himself has the right to designate or not to designate. The right hon. Gentleman shakes his head again. What is wrong with that? I thought that, under the Clause, nobody would be liable until he was designated by the Minister as a person amenable to this taxation. Is that a mistake?
§ Mr. BurginThe hon. Member is suggesting that, if the Minister knew that someone coming within the Clause was above the limit of £200,000, he had the option whether to make a designation or not. That is not the case.
§ Mr. SilvermanThe position then would be that, if a firm were supplying the Government with food for storage purposes—I am putting a purely imaginary case—to the extent of £200,000 or more, the Minister would have to designate?
§ Mr. BurginNot if food were an excluded article.
§ Mr. SilvermanI mean without the proviso.
§ Mr. BurginCertainly, without the proviso.
§ Mr. SilvermanThen what harm would be done? If a firm is supplying to the Government, for storage purposes, food of that value, and if the profit it makes out of that Government contract is within the 692 scale of this Clause, why should they escape paying the tax? There is no difficulty about identifying the user. The Government have placed the contract; the Government have ordered the goods; the Government know what they are going to do with the goods. The goods are not going into the shops; they are not going to be sold; they are going to be stored for war purposes. What is the difference between a profit made out of a contract of that kind and a profit made out of an order for shells, which equally are going to be stored? I do not see what the difference is between profit made out of food bought for storage against a time of emergency, and profit made out of shells bought and stored against the same time of emergency. Why should those who make a profit out of the one be taxed and those who make a profit out of the other not be taxed? That is what the right hon. Gentleman has not even attempted to explain, and I cannot see what the explanation is.
Here is a case where there is no difficulty in distinguishing according to the use to which the goods are to be put. Obviously, if a distinction of this kind is to be made at all, there is a difference between the profit made by a grocer selling goods over the counter for immediate consumption and the profit made by selling a large quantity of such goods for storage purposes. Suppose that the contractor is storing the food himself, under contract with the Government. Suppose that he has a contract with the Government, not to supply the goods for the Government to store, but to store them himself, and suppose that, when the Government come to require the food to be taken out of store, its price has risen, as it well might, and the contractor makes an enormous profit, as he well might do. He would be storing the goods under contract with the Government, and he would be ultimately supplying them to the Government, perhaps under a new contract. By what possible reasoning ought he to escape, as he would under this proviso, from taxation under the Clause? It really seems to me as though the matter has not been examined with the care it deserves, and that the Committee will find it impossible to understand, from what has been said so far, why this proviso was ever put in, if we are to accept the statement that it is not the intention to allow a class of people to escape this taxation who ought not to escape it.
§ 5.56 p.m.
§ Mr. SandysI agree with my right hon. Friend that this proviso is an essential part of the machinery of the Clause, and I do not see how the Committee could delete it without fatally impairing the working of the Clause as it is now drafted. But I would ask my right hon. Friend, if he is going to say any more on the matter, to assure us, as I think we wish to be assured, that he will use the powers given to him in the proviso very sparingly indeed. I am a little sorry that he has committed himself to excluding food from the application of this tax. I said earlier, and I wish to emphasise it once again, that the excess profits which we wish to tax under this Clause are not any particular profits derived by any particular businesses, but abnormal profits which have accrued as a result of the defence preparations which the nation has been obliged to undertake as a result of the international situation. We wish to stop people making excessive profits in these special and exceptional circumstances.
§ Mr. BrackenMay I remind my hon. Friend that in the last War very large profits were made by the multiple grocers?
§ Mr. SandysI have said that I am sorry food has been excluded from the operation of this tax, because any profits which have arisen as a result of the nation's need are profits that we wish to tax. I think that the hon. Member for Nelson and Colne (Mr. Silverman) made a valid distinction between food which is used for current consumption and food which is stored as an essentially military precaution— as a defence precaution to meet the possibility of war. Purchases of petrol for storage by the Government will come within the ambit of this tax, whereas in the case of purchases of whale oil, which we understand the Government are purchasing in considerable quantities, the profits of the contractors will not come within the operation of the tax. I would ask my right hon. Friend whether, in granting this exemption with regard to food, he means it to cover, not merely food for current consumption, but also those foodstuffs which the Government are purchasing, and which we hope they will purchase in increasing quantities, for storage purposes?
§ 6.0.p.m
§ Mr. BellengerWhile listening to the hon. Member for West Norwood (Mr. Sandys), I thought he was arguing in support of the case we had advanced. I agree with him that foodstuffs offer possibilities for enormous profits. If the principle behind these Clauses is that the Government want as far as possible to stop profiteering, but in so far as they cannot stop it, to tax it, why should they tax profits derived from making commodities to be used in killing people, and not tax profits derived from other commodities which will be used in attempting to keep people alive until they are killed? In the last War there were certain foodstuffs which the troops in France used to say contributed almost as much to their early decease as did the shells, and large profits were made from them.
I think we are giving powers to the Minister that are too wide, because, although the hon. Member for West Norwood asks him to use these powers sparingly, it will be entirely within the right hon. Gentleman's discretion, after the Bill becomes an Act, as to what he designates non-taxable commodities. Will these orders which the Minister is going to promulgate come before Parliament for confirmation or rejection, or are we giving him complete power to designate as he thinks fit? If the answer is that the whole power will reside in the Minister alone, without consultation with Parliament, those powers are far too wide. I interrupted the right hon. Gentleman to ask him whether it would be possible to tax increased profits for transport services— it might be railways or it might be road services— which are going to carry these armaments. The right hon. Gentleman evaded that question at the time. Under Sub-section (2, c), we are going to tax the services of those who manage our shadow factories. Why, therefore, should we not tax any excess profits derived, for example, from transport services? I do not know how the explanation that has been given appeals to my hon. Friend the Member for Derby (Mr. Noel-Baker). He told us that if the explanation was not satisfactory we should have to divide. I hope that we shall divide on this, because it is a most important issue.
§ 6.4 p.m.
Mr. David AdamsI, like my colleagues, must express my astonishment at the proposals to exclude food. It is generally agreed in the country that, for purposes of offence and defence, food is quite as essential as munitions, and the only explanation that could be given for excluding food would be that the Government are taking such steps as to prevent excessive profits on food. But we are all aware that no such protection is, or could be, given to the public. Therefore, food ought to be included. The hon. Member for West Norwood (Mr. Sandys) is of the same opinion. He began by saying that he was supporting the Minister, and then he went on to lament the fact that the Minister was taking this apparently reactionary step. His arguments were directly in opposition to the exclusion of food and, possibly, other commodities which would be required for armament purposes.
The Minister has not put up an argument which I thought he might have put up, namely, that there might be some difficulty in designating what food would be required for armament purposes as against other foods required for civilian purposes. Of course, there can be no such difficulty, because the Minister knows the purpose for which such food would be used, because he would be handling it. For him to assert that there is not likely to be any large profit on food would be putting forward an argument which would not bear examination. We are entitled to know specifically the reasons that are animating the Minister to say that one form of armaments, foodstuffs, shall not be charged with armament profits tax, when other forms of armaments, such as shells and guns, will have to bear the tax which the House are unanimous in declaring should be charged on excess profits. We have certainly had no explanation which would justify us in agreeing to the Minister's contentions.
§ 6.7 p.m.
Viscountess AstorI wonder why the Government have left out food, shipping and drink, because in the last War some of the largest fortunes came from profiteering in food and drink. The right hon. and gallant Member for Burton (Colonel Gretton) will bear me witness that before the last War brewers were 696 almost on their last legs, but when the War came along up went the shares. Some of the largest fortunes were made from drink.
§ Colonel GrettonThe Noble Lady has forgotten the circumstances. She forgets that brewers' materials were strictly limited by the exigencies and conditions of the War, and that the prices they were allowed to charge for their beer were controlled by the Food Controller.
Viscountess AstorThat is quite right, but, in spite of that, the brewers were richer after the War than they were before.
§ Colonel GrettonThe Noble Lady is making statements that are without foundation.
Viscountess AstorI had relations in the trade, and I know all about it. As soon as the War began, the drink trade had to be controlled, but, in spite of that, enormous profits were made. Then take shipping. I cannot remember all the men who came here after the War who had made colossal profits out of shipping. They did not all keep them. The profits disappeared, and so did the men. Some became blue-blooded, and some evaporated; but they made their fortunes from shipping. There is nothing more difficult than to control profiteering in a war. It is not only the rich who do it but all sections. Is it not profiteering for one section to strike for higher wages while others are bleeding at the front?
§ The Deputy-Chairman (Colonel Clifton Brown)I would ask the Noble Lady to apply herself more closely to the Amendment.
Viscountess AstorI thought it just as well to bring that in. In all seriousness there is nothing I think more repellant than profiteering in food and in drink during a war. If you want money look at the drink trade. Their profits in the last 10 years have been enormous.
§ The Deputy-ChairmanIt is not a question under this Amendment of whether we want money.
Viscountess AstorThat question must be in the mind of hon. Members. I ask what explanation can the Government give for leaving out drink, food and shipping, all fruitful sources of revenue? If a war comes they will have to be 697 tackled and I think it would be better for the Government to do something about it now.
§ 6.11 p.m.
§ Mr. BrackenI never thought I should live to see the day when I should support the Noble Lady. I am much attracted by the excellent and moderate suggestion which was put forward by the hon. Member for South-West Bethnal Green (Sir P. Harris). I cannot see why the Government should exclude very prosperous trades such as the grocery trade from this taxation. I do not know whether the Chancellor wants to go down in history as die grocers' Chancellor, but he certainly will. But why should he bother about the grocery trade? He will remember the poem:
The evil-hearted grocerHe called his mother 'Ma'am,'And bowed at her,And bobbed at her,Her aged soul to damn.Look at the profits that grocers made in the last War. As the Noble Lady said, they were ennobled and shunted into another place in serried rows. They made vast profits, and they will do so again. If the Chancellor's recommendations are carried out to their full extent every mother will be taught to say, "Mother, don't put your son into the armaments trade. The maker of armaments is an evil fellow." On the other hand, the grocery profiteer is regarded as a most estimable person.
§ The Deputy-ChairmanThat is going beyond the Amendment.
§ Mr. BrackenI beg pardon, Colonel Clifton Brown, but, of course, one gets enthusiastic on the subject of grocers. Surely it is very wrong to set apart one small section of the community for this taxation. I know that the Chancellor is more anxious than anybody to get new revenue. I think he has been driven into his present attitude by the Socialist party. They have been for years attacking one section of industry, the armament producers; and now, in a most illogical way, they adopt their present attitude, Just because it suits their book to attack the Government.
§ Mr. SilvermanDoes the hon. Member mean that there has ever been a time when this party has defended the making of unreasonable profits in any industry?
§ Mr. BrackenThe attitude of the Socialist party passes all understanding. If the hon. Member expects me to follow them from one slippery inconsistency to another, I can only say that I should be quite out of order in doing so.
Mr. Noel-BakersThe hon. Member knows that our party has always opposed a system which makes production for public needs dependent on private profits. In matters of life and death, it is especially important that production should not be in the hands of people who are making private, profit out of it.
§ Mr. BrackenI heard the hon. Gentleman's most generous tribute to the high principles upon which his party exist, but many Members of his party have lived very comfortably on this private profits system in spite of them—
§ The Deputy-ChairmanI must ask the hon. Gentleman to confine himself to the Amendment before the Committee.
§ 6.15 p.m.
§ Mr. Noel-BakerI hope that the Minister will be better at his third attempt than he was to-day at his second. I admit that some of the arguments used in this Debate have been merely in favour of a general excess profits duty rather than of the extension of his powers in this proviso, but it is certain that we shall have to divide the Committee unless he can tell us a little more. It is evident in all quarters of the Committee that there is a desire that profiteering in food supplied to the Forces in consequence of our present armament expansion should be taxed. Why not? It is only a question of taxing excess profit. You are going to leave normal profit in any case, and in fact a good deal more than normal profit, in view of the very high standard which is taken as a basis. We say that on Army contracts of food we ought now, in a time which the Prime Minister him self has said is not normal peace time, to prevent gross profiteering just as we tried to prevent it during the last War.
I want again to put another point in connection with food which was mentioned by my hon. Friend the Member for Bassetlaw (Mr. Bellenger). Why should it be the Minister who decides? Parliament ought to have a voice in this matter, and before the final decision on this question is taken Parliament should be able to express its view. There are 699 many things on which the Minister has given no information. We are left in great doubt on Monday about what is to be done on uniforms, and I am still in doubt. The Minister did not mention clothing, but the argument about clothing is the same as that about food. Why should there be gross profiteering? I am Sure that if he mentions them he will tell us that they will be included, but he might have used them as an illustration. There is steel.
§ Mr. BurginSteel was expressly raised last night, and I gave the assurance that it was included.
§ Mr. Noel-BakerI beg the Minister's pardon. I was not able to be here last night, and I have not seen it in the Official Report as it is not yet available. Half the value of the finished armament is, in fact, the value of the steel. Perhaps the right hon. Gentleman answered these questions also. Are copper, nickel, manganese to be put in? They all have a civil use, and they are all essential and are required for war. Immense profits are now being made out of them by people who are supplying them to aggressors who are destroying and attacking British interests all over the world. They certainly ought to be taxed.
There is another matter to which I hope the Minister will give particular attention and upon which he will be able to give us a specific answer. I refer to oil. Oil contracts for the armed Forces must have increased enormously even since the standard year. Compared with 1934, the oil contracts for the armed Forces have greatly increased, and I take it for granted that oil will be included. I could not at all understand the argument which the Minister used on the general principle that you could not help these things which were of double use. In many cases it is the Government themselves who are paying the price. There is the proportion of turnover which is sold to the Government, in the form of food, oil, clothes, etc. If a man is selling steel or copper, not to the Government, but to the manufacturer of arms, the matter is a little more difficult perhaps, but it is not insuperable. I am certain that in looking at the books of the company you could very easily find the necessary information. I hope that the right hon. Gentleman will give us better information. We say that Parlia- 700 ment ought to have a voice in deciding these schedules. I hope that that is going to happen, or we shall have to divide against this proviso, because it is unsatisfactory to leave the matter obscure as it is now.
§ 6.21 p.m.
Sir Patrick HarmonI am bound to say to the Minister, and to the Chancellor of the Exchequer, that they are placing the supporters of the Government in a very difficult situation. I have followed every detail of the Debate since the speech of the hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris), and I fail to see why food should be excluded. [Interruption.] And drink. I can recall the South African war, and anybody who had any experience in connection with contracts in relation to that war will remember the fortunes that were made out of it. Goods sold in preparation for war should certainly pay their quota of taxation. There were certain hon. Gentlemen who came into this House after the Great War who had accumulated immense fortunes owing to contracts connected with the supply of food. Anyone who was familiar with the circumstances of the men in the trenches during the War and realised what food was consumed must know of the immense fortunes that were made by food contractors during that period. I trust that the Minister will discharge his obligations with discretion and care, but, as an ardent supporter of the Government, I cannot feel happy that food is not included when it really becomes an instrument of war.
§ 6.23 p.m.
§ Mr. CollindridgeSince the right hon. Gentleman put his reasons for this proposal before the Committee I have heard three or four supporters of the Government who have indicated that they are not in line with the attitude of the Government on this matter. On many occasions when Government supporters have disagreed with their own Front Bench opinion they have walked into the Division Lobby at the back of the very policy which they have condemned.
§ Mr. BrackenWill the hon. Member remember the anguish caused to us by having to do so?
§ Mr. CollindridgeThere may have been anguish, but the stern fact is that, when that policy is contrary to the line of 701 argument, what they generally adopt in words they do not carry out in deeds. In no case have we heard at all since the right hon. Gentleman replied an argument in favour of his attitude. I sat in this House on Monday and tried to understand his attitude, and I have not understood it yet. There are certain articles which are used normally, but if we were to have a crisis and that crisis developed into a war, there would be more of those commodities consumed than formerly. There was an official attached to His Majesty's Government during the last War stationed at Copenhagen, and he saw commodities from this country which were very much needed by us. These commodities were re-exported from Britain to enemy countries and used against this country in its hour of need. In a future war we might have a shortage of goods, and yet the money received by the people who sold the goods might be greater and the profits very much in excess of normal times. Therefore, we are justified in asking either that the Minister should change his attitude from what it was an hour ago, or that hon. Gentlemen who belong to the Government should walk into the Division Lobby in support of the Amendment.
§ 6.26 p.m.
§ Sir Edward GriggI had the misfortune not to hear the Minister, and there fore I am not in possession of his argument, but I have listened to the whole of the rest of the discussion about the Clause and the proviso, and I agree with other hon. Friends of mine who are supporters of the Government in saying that I fail to understand why food and drink are to be omitted from taxation of this character. Certainly some of the greatest profits during the last War were made from food and drink. I do not know anybody who took part in that War who did not consider Machonachie, bully beef, and plum and apple jam as munitions of war. They were certainly so regarded at that time. I presume that this legislation will not only apply in an emergency, but will apply in time of war.
§ Mr. BurginWe are not at war. This is not a Measure dealing with profiteering, requisitioning or prices. We are dealing here with the definition of armament contracts for a special purpose.
§ Sir E. GriggThe fact remains that the Government are acquiring stocks and 702 stores for armament purposes, and, therefore, these stocks ought to be subject to the same taxation as all other articles of war. I beg of my right hon. Friend to realise that he it putting a very large number of supporters of the Government in a most embarrassing position. I shall feel quite unable to support the Government on this point, and I hope that he will reconsider the matter.
§ 6.29 p.m.
§ Mr. LevyI am. an ardent supporter of the Government. During the last War I was an assistant executive officer of food control, and had some opportunity of seeing the enormous profits that were made. Therefore, I want to add my argument to the arguments used by other hon. Members with regard to profiteering. My right hon. Friend said very properly that we were not at war and that this was not going to apply probably when an emergency took place. But the Government are acquiring stocks. These stocks will have to be dealt with sooner or later. They have been acquired and will have to be sold and replaced, and, therefore, I feel that they should be included so as to prevent discrimination between one trade and another.
§ 6.31 p.m.
§ Mr. BurginI am conscious that the explanation which I gave to the Committee on the Clause last night was at too late an hour for it to appear in the Official Report to-day, but I have endeavoured by explaining the Clause again to-day to define the Government's intentions in asking the Committee to agree to this proviso. There is agreement in the Committee that some proviso is necessary. The Debate has roamed over what is to come within the terms of the proviso. Let me try to help the Committee. The Clause proceeds on the basis of universality, that articles included in it shall become liable to taxation if the contract itself is an armament contract. Then there is the proviso. Let me say at once that the Government would use the proviso not for the purpose of letting people out, but in order to produce equity should inequity arise. That is the basis on which the proviso is intended to operate. I have not the slightest wish to leave anything out which properly should be included. The conception upon which I have been giving an explanation as to the articles which in my judgment will have to be excluded, has been this 703 sort of consideration. We proceed by article, not by person; in other words, it does not matter what it is as long as we are dealing with the article and the material.
Take the case of coal. I think there would be many difficulties, particularly in the case where coal is sold through middlemen, in tracing the substance through— not usually a very easy matter. In the original conception, food, and certainly food for civilian purposes, for ordinary normal consumption, would appear to come within that same category. I am convinced from the arguments I have heard this afternoon that there must be a class of contract for Army stores which could be identified, and I think hon. Members have rendered a real service by showing that food is not something capable of a globular definition, and that it would necessarily include every article of consumption of food or drink. The Committee has shown that it will be possible to include a category of Army foodstuffs which are easily and clearly identifiable, and which would not produce any inequity. I think the Committee have rendered a real service by making that clear, and I want to say at once that it is not our object to exclude anything which should properly be included. I do not know that it is very easy to define on the spot what type of Army food contracts can properly be included, but certainly from the cases which hon. Members have given, food contracts for the Army, contracts for the normal supply of large quantities for storage, for civilian consumption in time of war, seem to be clearly capable of identification, and I say that the Government are convinced from the Debate that they ought not to be excluded. I think I shall carry the Committee in saying that there are a large number of articles of ordinary consumption, of civilian food, which may properly be excluded.
§ Mr. SilvermanIf there are such articles which might properly be excluded because they are not of an armament character, why does the right hon. Gentleman retain the proviso? Under the Clause he has to certify that in an accounting period total receipts under Army contracts are more than £ 200,000.
§ Mr. BurginI am not concerned at the moment with the £ 200,000 limit; there 704 may be some substances which, whatever the total, ought nevertheless to be excluded. I think the general sense of the Committee is that we must have the proviso. Obviously, there are some articles which you must exclude. The hon. Member for Derby (Mr. Noel-Baker) put a series of substances to me. He was handicapped by not having heard my earlier statement, and as I did not put them down it may be that I shall forget one or two. Steel, I distinctly said would clearly be included. To talk about armaments and leave steel out would be like "Hamlet" without the Prince of Denmark. He asked whether uniforms were in or out. I think the Chancellor of the Exchequer has said that police uniforms would not be in because they are not for the armed Forces of the Crown, but uniforms for soldiers would certainly come in.
§ Mr. Noel-BakerAnd clothing?
§ Mr. BurginThat would certainly come within armament contracts. The hon. Member asked me with regard to a number of other substances, but I recollect only one— copper. I should have thought copper would certainly have been included.
§ Mr. Noel-BakerNickel?
§ Mr. BurginCertainly.
§ Mr. Noel-BakerAnd oil?
§ Mr. BurginThe hon. Member is quite right. I beg his pardon for not having put these substances down. Oil certainly is included.
§ Mr. BurginThat comes under another consideration.
§ Mr. Noel-BakerCement?
§ Mr. BurginThat is quite clearly included.
§ Mr. BrackenThe storage of drugs bought in great quantities for the Army?
§ Mr. BurginI know of no reason why drugs should be excluded. I do not want in this genial cross-examination to be too definite, because I want to give the broad assurance that the idea is the universality of articles and materials, that there are some things which should be 705 out, such as the public utility services, and then to add to that list some other things. We want to use the proviso quite sparingly.
§ Mr. BurginI have said nothing yet which excludes drink.
Colonel Arthur EvansIs it not true that the only alcoholic liquor which the Government purchase on behalf of the Forces is rum for the Navy?
§ Mr. BurginSeveral hon. Members have referred to what happened in the South African War and in the last War, as if war conditions are comparable with the period in which we are now. The Defence of the Realm Regulations and a number of similar emergency powers will be enacted should an emergency arise, and under those powers there will be food control, price control, requisitioning and control of profiteering, control quite out side anything which is my concern this evening. I am dealing with the definition of "armament contract," and I say that you must have a dispensing power and that the dispensing power should be most sparingly used.
§ 6.42 p.m.
§ Mr. Pethick-LawrenceThe right hon. Gentleman has announced a very considerable concession to the feelings of the Committee, namely, that he does propose to include food in bulk for storage. Members in all quarters of the Committee are grateful to him, but I want to point out that it does not really meet our case. I would suggest that he withdraws the proviso in its present form and that when he has his Schedule right, put it into the Bill at a later stage. It is for the Committee to decide what things should be or should not be included. It is just an accident that some of us thought of the question of food, and in cross-examination the right hon. Gentleman has found out the opinion of the Committee. I think we should have before us a Schedule in which there are items which can be specified in actual detail, and there should be a definition which the Committee would be prepared to accept. I 706 cannot advise my hon. Friend to give to the Minister these wide powers which are in the Clause at the present time.
§ 6.43 p.m.
§ Mr. GallacherThese Clauses are as full of holes as a Dutch cheese, and if the proviso goes in it will be all hole and no cheese. The right hon. Gentleman said that food in bulk under contract for the Army and storage for the civilian population in a time of crisis will come in, but that it would obviously be unfair to bring in food that is going in the ordinary way to the civilian population. The Minister must know that food going to the ordinary civilian population is not the subject of a Government contract. It has nothing whatever to do with the Clause or with the proviso and, therefore, the proviso is not directed to food that is going towards the civilian population but is directed to the supplies of one kind or another which are the subject of Government contract. Will the Minister kindly tell us what commodities subject to Government contract will be ruled out under the proviso?
§ 6.45 P.m.
§ Mr. BellengerI should be glad if the right hon. Gentleman would give a reply to the point which I put to him in my speech, and which my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) put in a different way. I said that the powers for which the Minister was asking were too wide, and I asked whether he would not give Parliament an option of saying whether it disagreed or agreed with the orders that he would ultimately make. My right hon. Friend suggested that the Minister should withdraw the proviso until he was able to insert in the Bill a schedule of the articles he was going to exclude. If the right hon. Gentleman will not accept that suggestion— and I take it that he will not— then, will he give Parliament the right to consider those orders which eventually he will make?
§ Question put, "That the words proposed to be left out stand part of the proposed Clause."
§ The Committee divided: Ayes, 179; Noes, 116.
709| Division No. 204.] | AYES. | [6.47 p.m. |
| Adams, S. V. T. (Leeds, W.) | Furness, S. N. | Radford, E. A. |
| Albery, Sir Irving | Gluckstein, L. H. | Ramsden, Sir E. |
| Allen, Col. J. Sandeman (B'knhead) | Gower, Sir R. V. | Rayner, Major R. H. |
| Amery, Rt. Hon. L. C. M. S. | Grant-Ferris, Flight-Lieutenant R. | Reed, A. C. (Exetar) |
| Anstruther-Gray, W. J. | Greene, W. P. C. (Worcester) | Reid, W. Allan (Derby) |
| Apsley, Lord | Gretton, Col. Rt. Hon. J. | Rickards, C. W. (Skipton) |
| Aske, Sir R. W. | Gridley, Sir A. B. | Ropner, Colonel L. |
| Baillie, Sir A. W. M. | Grigg, Sir. E. W. M. | Rosbotham, Sir T, |
| Balfour, G. (Hampstead) | Grimston, R. V. | Ross, Major Sir R. D. (Londonderry) |
| Beaumont, Hon. R. E. B. (Portsm'h) | Gritten, W. G. Howard | Ross Taylor, W. (Woodbridge) |
| Beechman, N. A. | Guinness, T. L. E. B. | Rowlands, G. |
| Blair, Sir R. | Hannon, Sir P. J. H. | Royds, Admiral Sir P. M. R. |
| Bossom, A. C. | Haslam, Sir J. (Bolton) | Russell, Sir Alexander |
| Bower, Comdr. R. T. | Hely-Hutchinson, M. R. | Russell, S. H. M. (Darwen) |
| Bracken, B. | Hepburn, P. G. T. Buchan- | Salmon, Sir I. |
| Braithwaite, J. Gurney (Holderness) | Herbert, Lt.-Col. J. A. (Monmouth) | Salt, E. W. |
| Briscoe, Capt. R. G. | Higgs, W. F. | Samuel, M. R. A. |
| Broadbridge, Sir G. T. | Hoare, Rt. Hon. Sir S. | Sandeman, Sir N. S. |
| Brocklebank, Sir Edmund | Horsbrugh, Florence | Sanderson, Sir F. B. |
| Brooke, H. (Lewisham, W.) | Hudson, Capt. A. U. M. (Hack., N.) | Sandys, E. D. |
| Brown, Brig.-Gen. H. C. (Newbury) | Hume, Sir G. H. | Shepperson, Sir E. W. |
| Browne, A. C. (Belfast, W.) | Hurd, Sir P. A. | Simmonds, O. E. |
| Bull, B. B. | Hutchinson, G. C. | Simon, Rt. Hon. Sir J. A. |
| Burgin, Rt. Hon. E. L. | Joel, D. J. B. | Sinclair, Col. T. (Queen's U. B'lf 'st) |
| Carver, Major W. H. | Lamb, Sir J. Q. | Smiles, Lieut.-Colonel Sir W. D. |
| Cayzer, Sir C. W. (City of Chester) | Lambert, Rt. Hon. G. | Smithers, Sir W. |
| Chamberlain, Rt. Hn. N. (Edgb't'n) | Leech, Sir J. W. | Snadden, W. McN. |
| Channon, H. | Leighton, Major B. E. P. | Southby, Commander Sir A. R. J. |
| Chapman, Sir S. (Edinburgh, S.) | Levy, T. | Spens, W. P. |
| Chorlton, A. E. L. | Liddall, W. S. | Stanley, Rt. Hon. Oliver (W'm'l'd) |
| Clarke, Colonel R. S. (E. Grinstead) | Lipson, D. L. | Stewart, J. Henderson (Fife, E.) |
| Colville, Rt. Hon. John | Little, J. | Storey, S. |
| Conant, Captain R. J. E. | Llewellin, Colonel J. J. | Stourton, Major Hon. J. d. |
| Cooke, J. D. (Hammersmith, S.) | Loftus, P. C. | Strauss, H. G. (Norwich) |
| Courtauld, Major J. S. | McCorquodale, M. S. | Strickland, Captain W. F. |
| Craven-Ellis, W. | Macdonald, Capt. P. (Isle of Wight) | Stuart, Lord C. Crichton- (N'thw'h) |
| Croft, Brig.-Gen. Sir H. Page | McEwen, Capt. J. H. F. | Stuart, Rt. Hon. J. (Mcray and Nairn) |
| Crooke, Sir J. Smedley | McKie, J. H. | Sutcliffe, H. |
| Crookshank, Capt. Rt. Hon. H, F. C | Macmillan, H. (Stcokton-on-Tees) | Tasker, Sir R. I. |
| Cross, R. H. | Macquisten, F. A. | Taylor, C. S. (Eastbourne) |
| Culverwell, C. T. | Manningham-Buller, Sir M. | Thomson, Sir J. D. W. |
| De Chair, S. S. | Margesson, Capt. Rt. Hon. H. D. R. | Thorneycroft, G. E. P. |
| De la Bère, R. | Markham, S. F. | Touche, G. C. |
| Denman, Hon. R. D. | Maxwell, Hon. S. A. | Turton, R. H. |
| Donner, P. W. | Mills, Sir F. (Leyton, E.) | Ward, Lieut.-Col. Sir A. L. (Hull) |
| Drewe, C. | Mills, Major J. D. (New Forest) | Warrender, Sir V. |
| Dugdale, Captain T. L. | Morgan, R. H. (Worcester, Stourbridge) | Waterhouse, Captain C. |
| Duggan, H. J. | Morris, O. T. (Cardiff, E.) | Wayland, Sir W. A |
| Dunglass, Lord | Morrison, G. A. (Scottish Univ's.) | Wells, Sir Sydney |
| Eastwood, J. F. | Morrison, Rt. Hon. W. S. (Cirencester) | Wickham, Lt.-Col. E. T. R. |
| Edmondson, Major Sir J. | Munro, P. | Windsor-Clive, Lieut.-Colonel G. |
| Elliot, Rt. Hon. W. E. | Nall, Sir J. | Winterton, Rt. Hon. Earl |
| Ellis, Sir G. | Nicolson, Hon. H. G. | Wolmer, Rt. Hon. Viscount |
| Elliston, Capt. G. S. | O'Connor, Sir Terence J. | Womersley, Sir W. J. |
| Emery, J. F. | O'Neill, Rt. Hon. Sir Hugh | Wragg, H. |
| Emrys-Evans, P. V. | Orr-Ewing, I. L. | Wright, Wing-Commander J. A. C. |
| Entwistle, Sir C. F. | Petherick, M. | York, C. |
| Evans, Colonel A. (Cardiff, S.) | Pickthorn, K. W. M. | |
| Everard, Sir William Lindsay | Pilkington, R. | TELLERS FOR THE AYES.— |
| Fleming, E. L. | Ponsonby, Col. C. E. | Lieut.-Colonel Kerr and Lieut. |
| Fox, Sir G. W. G. | Procter, Major H. A. | Colonel Harvie Watt. |
| NOES. | ||
| Acland, Sir R. T. D. | Chater, D. | Gardner, B. W. |
| Adams, D. (Consett) | Cluse, W. S. | Garro Jones, G. M. |
| Adams, D. M. (Poplar, S.) | Clynes, Rt. Hon. J. R. | George, Megan Lloyd (Anglesey) |
| Adamson, Jennie L. (Dartford) | Cooks, F. S. | Graham, D. M. (Hamilton) |
| Adamson, W. M. | Collindridge, F. | Greenwood, Rt. Hon. A. |
| Alexander, Rt. Hon. A. V. (H'lsbr.) | Cove, W. G. | Grenfell, D. R. |
| Ammon, C. G. | Cripps, Hon. Sir Stafford | Griffith, F. Kingsley (M'ddl'abre, W.) |
| Banfield, J. W. | Daggar, G. | Griffiths, J. (Llanelly) |
| Barnes, A. J. | Davidson, J. J. (Maryhill) | Hall, J. H. (Whitechapel) |
| Bellenger, F. J. | Davies, R. J. (Westhoughton) | Hardle, Agnes |
| Benson, G. | Day, H. | Harris, Sir P. A. |
| Bevan, A. | Dobbie, W. | Hayday, A. |
| Broad, F. A. | Ede, J. C. | Henderson, A. (Kingswinford) |
| Brown, C. (Mansfield) | Edwards, Sir C. (Bedwellty) | Henderson, J. (Ardwick) |
| Buchanan, G. | Evans, E. (Univ. of Wales) | Henderson, T. (Tradeston) |
| Burke, W. A. | Foot, D. M. | Hills, A. (Pontefract) |
| Cape, T. | Frankel, D. | Hopkin, D. |
| Charleton. H. C. | Gallacher, W. | Isaacs, G. A. |
| Jenkins, A. (Pontypool) | Oliver, G. H. | Stephen, C. |
| Jenkins, Sir W. (Neath) | Paling, W. | Stewart, W. J. (H'ghl'n-le-Sp'ng) |
| Jones, A. C. (Shipley) | Parkinson, J. A. | Stokes, R. R. |
| Kennedy, Rt. Hon. T. | Pearson, A. | Summerskill, Dr. Edith |
| Kirkwood, D. | Pethick-Lawrence, Rt. Hon. F. W. | Taylor, R. J. (Morpeth) |
| Lathan, G. | Prise, M. P. | Thorne, W. |
| Lawson, J. J, | Quibell, D, J. K. | Tinker, J. J. |
| Leach, W. | Richards, R. (Wrexham) | Viant, S. P. |
| Leonard, W. | Riley, B. | Watson, W. McL. |
| Leslie, J. R. | Ritson, J. | Welsh, J. C. |
| Lunn, W. | Robinson, W. A. (St. Helens) | Westwood, J. |
| Macdonald, G. (Ince) | Sanden, W. S. | White, H. Graham |
| McEntee, V. La T. | Seely, Sir H. M. | Whiteley, W. (Blaydon) |
| McGhee, H. G. | Sexton, T. M. | Williams, E. J. (Ogmore) |
| MacLaren, A. | Silkin, L. | Williams, T. (Don Valley) |
| Marshall, F. | Silverman, S. S. | Wilson, C. H. (Attercliffe) |
| Maxton, J. | Simpson, F. B. | Woods, B. S. (Finsbury) |
| Messer, F. | Sinclair, Rt. Hon. Sir A. (C'thn's) | Young, Sir R. (Newton) |
| Montague, F. | Smith, Ben (Rotherhlthe) | |
| Morrison, Rt. Hon. H. (Hackney, S.) | Smith, E. (Stoke) | TELLERS FOR THE NOES— |
| Naylor, T. E. | Smith, Rt. Hon. H. B. Lees- (K'ly) | Mr. Mathers and Mr. Anderson. |
| Noel-Baker, P. J. | Smith, T. (Normanton) |
§ Clause, as amended, ordered to stand part of the Bill.