CLAUSE 13.—(Computation of standard profits.)

HC Deb 10 October 1939 vol 352 cc209-55

4.48 p.m.

Mr. Lewis

I beg to move, in page 18, line 13, to leave out from "was," to "they," in line 14, and to insert: not sufficient to give a reasonable return upon the capital employed. This Clause provides for the method of computation of standard profits, and Subsection (7), which we are seeking to amend, provides that in certain circumstances a person carrying on a business may appeal to the Board of Referees if he is of opinion that the standard profits in his case would not be fair. As the Sub-section reads now, the Board of Referees can only take action if such an application is made if they are satisfied that, in the standard period, the rate of profit or the volume of business was less than might then have been reasonably expected. We take the view that those words are much too vague. Let me give an example. Suppose a man engaged as a cotton spinner went to the Board of Referees and said, "During the years mentioned in this Clause my business was carried on at a loss. I ask, therefore, for a special computation of standard profits in my case." The Board of Referees might say, "Let us see what Sub-section (7) says. It says that we can interfere if we are satisfied that the rate of profit or the volume of business was less than might then have been reasonably expected. It is notorious that in those years conditions in the cotton trade were very bad, markets difficult to obtain and foreign competition very severe. We do not think that you could reasonably have expected to make a profit during that period." If the Board of Referees said that, this cotton spinner would be entitled to no relief at all.

No doubt the Chancellor will say, That is not what I mean"; but we are not concerned with what the Chancellor means, but with the words which are in the Bill, and when the Bill is passed it will be too late to rectify things if we find that we have not indicated sufficiently clearly to the Board of Referees what are the circumstances in which we want them to act. I submit that the words as they stand now, particularly with the word "then" included, could reasonably bear the interpretation which I have suggested, and that in such cases the Board of Referees might, within the terms of the Sub-section, refuse to give any relief at all. Surely the House would wish that where over these alternative standard years a firm which has been properly conducted has been unable to make a reasonable profit it should be granted a special standard to get over the difficulty. That is, I take it, the intention of the House, and I ask that words should be inserted which will clearly state that intention. The Amendment proposes to leave out the words: less than might then have been reasonably expected, and to insert instead. not sufficient to give a reasonable return upon the capital employed. The referees would then be able to take action if they were satisfied that in those periods the rate of profit or the volume of business was not sufficient to give a reasonable return on the capital employed. I would point out that they would not be obliged to do so, but that they could grant relief within the limits given by the Bill. I dislike exceedingly the words which the Chancellor has put into the Bill. It may be that he does not any more care for the words which I suggest. I am not wedded to any particular form of words, but it seems to me there is a weakness in the Bill here. The instructions to the Board of Referees are not sufficiently clear. Obviously they must be granted the wide discretion they get from the rest of the Sub-section, but if I am right in claiming that the House desires that where it was not possible to earn a reasonable return on the capital employed, during the periods laid down the Board of Referees should, if they think fit, be allowed to give a special standard. If I am right in that assumption I do not think it can be argued that the Bill as it stands gives adequate instructions to the Board of Referees, and I would ask the House to amend it.

4.55 p.m.

Sir Nairne Stewart Sandeman

I beg to second the Amendment.

When this question was raised on the Committee stage the Chancellor promised that between now and the next Budget he would go into it very fully. That is all right as far as it goes, but I have heard from the cotton trade that in the meantime they are extremely worried and would like to know something more definite. Perhaps this Amendment may raise difficulties, such as, what is the meaning of the words "capital employed"? But I feel certain the cotton trade would much rather have a close scrutiny made of the capital employed than have things left to the will of the Board of Referees, no matter how fair-minded they be. They would like a little hope, and I think it is not much to ask that words like this should be inserted in the Bill. The Chancellor will have plenty of time before his next Budget to alter the wording to something better for the cotton trade than even these words, but I would beg him to accept this Amendment, which really will do a great deal of good.

4.57 p.m.

Mr. Amery

I hope that my right hon. Friend will give favourable consideration to amending the words of the Sub-section. I consider that the Amendment put forward by my hon. Friend would effect an improvement, but, at the same time, I am not sure that it covers all the difficulties which may arise and which my right hon. Friend promised to consider between now and his Budget next spring. As an instance of the difficulties that may occur I would suggest the case of industries like mining. It is not reasonable to expect a profit, or at least a substantial profit, in the early years of development in mining. The words of the Clause as they stand, especially the words "reasonably expected" and "a reasonable return upon the capital employed" would give no consideration to the case of a mine which had been making a loss, or no profit, or a very small profit over the standard years, but which is making a substantial profit to-day or may be making it in the near future. The position in the standard years would be no indication at all of what would be reasonable treatment as regards the profits now earned.

It may be said that that point is, to some extent, met by the second part of the Sub-section dealing with the alternative of a standard rate of profit, but there, again, it should be remembered that in the case of many of these undertakings the profits are the profits of a business not only highly speculative in character but engaged in the exploitation of a wasting asset, an asset which may in some circumstances waste very rapidly. There, again, I hope that my right hon. Friend will give consideration to some modification of the second part of the Sub-section in order to meet that difficulty. In the case of E.P.D. during the late war, special provision was made for undertakings of this sort, and special rates of standard profit adjudicated in respect of them. I wish deferentially to suggest to my right hon. Friend that here, also, is a special problem which I know that he cannot deal with in the wording of the Clause this afternoon, but which I hope he will take fully into consideration in the course of the next few months.

5.0 p.m.

The Financial Secretary to the Treasury (Captain Crookshank)

Broadly speaking, two kinds of case have been put forward during the discussions this afternoon and on the Committee stage. They are, first, the business undertaking which was in the process of development and had not earned what would be considered a reasonable standard of profit, and, secondly, the general case of businesses suffering from industrial depression, having made only a small profit or having even suffered losses beyond reasonable expectation. It is clear that, as the Sub-section now stands, both classes of case would have the opportunity of going to the Board of Referees and stating their case. The mover of the Amendment was of the opinion that there is not sufficient direction to the Board of Referees as to the basis upon which they are to make any change. He said that he was not wedded to any form of words, and so did the seconder of the Amendment, and they thought that the words proposed were better than those in the Bill, although they might not necessarily be the best words, and we might have to amend them next year. In view of that impression, perhaps we had better short-circuit the matter and not change the words of the Bill now.

Mr. Leslie Boyce

Is the interpretation of the right hon. and gallant Gentleman that the words as they now stand in the Bill would give the Board of Referees an unfettered discretion to do what they thought right in the circumstances?

Captain Crookshank

I do not say that that is the case as the words now stand. I made the definite statement on the Committee stage in regard to this matter— as the Chancellor has also said—that this legislation will not be affected by these words one way or the other, as the words will not be finally required until after the next Finance Bill. My right hon. Friend said that he would need to consider the points raised, and possibly others as well. We recognise that the new tax is of some complexity, and that the Committee stage has had to be taken a day or two after the Second Reading, which does not give those who may come within the range of the tax an opportunity of considering all its effects. The normal procedure upon a Finance Bill is to allow a very big gap between the Second Reading and the Committee stage, because it provides an opportunity for discussing points which we may not ourselves have foreseen, but those whom the Finance Bill touches may have seen. That does not mean that we always think the suggestions made are reasonable, but there is an opportunity for discussion.

Sir N. Stewart Sandeman

Do we understand the Minister to be making a promise that the words will be amended in order to carry into effect what we are trying to get at?

Captain Crookshank

I cannot say that they will be amended to carry into effect anything in particular. I did not take the matter any further on the earlier stage, and I cannot take it any further now. My right hon. Friend has noted what has been said, and in both kinds of case which have been raised we shall give the matter our consideration in the light of all the circumstances so that we can put before the House our conclusions in the next Finance Bill. Provided that my hon. Friends who are interested in this matter do not resign before then, they will, no doubt, have an opportunity of bringing the matter forward again. On the whole, the House will probably agree that that is the best way to deal with it. These are difficult matters, but we recognise the weight of the argument which has been presented.

5.6 p.m.

Mr. Pethick-Lawrence

What the right hon. and gallant Gentleman has said is reasonable in all the circumstances, but I am a little doubtful as to the precise meaning and effect of the words which appear in the Bill. I am not sure that they meet the point which the Sub-section was intended to meet, but if, after full examination of them, the Chancellor of the Exchequer can come to the House next spring with a slight emendation of them in order to achieve the purpose which we all have in mind, we, on these benches, shall examine the new words without any prejudice, in order to do justice to all concerned. Of course, the words which the promoters of the Amendment would substitute are unacceptable, because they would change the whole basis of the tax. They would go back from the idea of a tax on excess profits, to a tax on an excess of profits over some standard based on capital. That was just the mistake which was made on a previous occasion, and which it would be impossible to resurrect in the Bill. I am prepared to look favourably on some Amendment if it be found that the words as they stand in the Bill do not achieve the purpose which we all have at heart, but such words as are now proposed in order to amend them could not possibly be accepted.

Mr. Lewis

Having regard to the undertaking which has been given by the Financial Secretary to the Treasury that this matter will be further examined, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Bill be now read the Third time."

5.8 p.m.

Mr. James Griffiths

I am sure that the Chancellor of the Exchequer and the Financial Secretary have no cause to complain of the way in which the Budget and the Finance Bill have, on the whole, been met in the House and in the country. A moment or two ago the Financial Secretary said that normally there is a very wide gap between the first and later stages when we are discussing matters of this kind. On this occasion the gap between the introduction of the Budget and the Third Reading of the Finance Bill is just 14 days, and during the whole of the discussion the tenor of the House has been a desire to help the Chancellor of the Exchequer although we have made criticisms and have taken some of the criticisms to the Division Lobby. Listening to the Committee stage last week, and again this afternoon, I felt that most of the Amendments and criticisms were in the nature of canvassing and special pleading for something to be done when the Budget and the Finance Bill come to be discussed next year.

I wish to say a word or two at this stage, when bidding farewell to this emergency Finance Bill, about what we think are some of the things in the Bill that will need consideration. We have to face a colossal expenditure of £2,000,000,000, only half of which we are raising by this Bill. Many criticisms have been made about the severity of the taxation that is being imposed, but we ought, on sober reflection, to remind ourselves that, even on the estimated expenditure of £2,000,000,000, this Finance Bill will raise only half the amount required; and the expenditure of this financial year is likely to exceed, perhaps substantially, that sum of £2,000,000,000. We are meeting only half the bill; we are passing on the other half to the next generation, or that part of it which will survive this war. If the country has received this Finance Bill and the Budget on which it is based with some measure of commendation it is because it believes, and will go on believing until it is deceived, that the Government intend to meet as much of the cost as can be met as the war goes on, instead of following the example set in the last war of passing on so much of the bill to those who come after.

Let me say a word about Part I of the Bill—the part which includes the indirect taxation which is being levied. The Financial Secretary to the Treasury, in reply to a question by an hon. Member on this side of the House early in August, gave some very interesting figures. He was asked the total amounts of indirect taxation levied in this country in the financial year 1930–31 and in the financial year 1939–40. The reply which he gave indicated the enormous increase that has taken place in indirect taxation in recent years. It should be remembered that indirect taxation weighs heaviest on those who are least able to bear it; and, therefore, an increase in indirect taxation is an increased tax on the livelihood of the poorest in the land. The Financial Secretary's reply showed that in 1930–31 the amount raised by indirect taxation was, in round figures, £240,000,000, and in 1939–40 it had increased to £343,000,000. Added to that increase are the millions more which are being imposed under the new Budget, which the poorest people have to pay on their necessities of life. Every additional indirect tax means a reduction of the standard of life of the people of this country. In this Budget we are increasing indirect taxation, and so reducing the standard of life of our people; and we feel that that has not been justified by the arguments put forward. That is why we pressed the Government in Committee to reconsider some of the indirect taxation they are proposing; and we shall go on protesting whenever such indirect taxation is proposed.

The only indirect tax in this Bill to which we took such strong objection that we registered our protest in the Division Lobby was the increased duty on sugar. I detected in the speeches from the other side—with some notable exceptions—a kind of complaint that we were making much of little, that after all this increase was only a penny per pound and that, therefore, there was no real substance in our complaint. But there is real substance in our complaint. It may be only a penny per pound; but there are, unfortunately, tens of thousands in this country who have to budget in terms of pennies, who have to calculate carefully how they shall spend the few shillings and pence that they get; and every additional penny reduces still further a standard of life which is already too low. The aged, the widows, the sick, the injured, the unemployed, and another class of our people about whom we shall hear more to-night—the soldiers, airmen and sailors who are fighting the battles of the country now—find this an addition to the very heavy responsibilities and burdens that they have to carry. Our objection has not been expressed out of a desire to make political capital, but because we know, out of our own experience, that every penny taken from these poor people means a reduction of their standard of life, which ought not to be reduced any further.

It is not only a question of the penny per pound added to the cost of sugar. It involves an increase in the price of every commodity into which sugar enters as an ingredient. Already those commodities are increasing in price. I do not know to what extent the increases that have taken place in the prices of these commodities are justified by the addition to the cost of sugar. We know that people who manufacture and trade in these things pass on these additions to the consumers, and often they pass on much more than the amount that is levied by this House. We ought to realise that when we levy a penny per pound on sugar we actually impose a burden of very much more than is represented by the tax. This increase has taken place at the same time as other increases in prices. Since the war started there has already been an average increase of a penny per pound. That means altogether an increase of 50 per cent. in the price of sugar. That is a real imposition upon the poor—an imposition that they cannot bear.

We had hoped that, if we had been able to continue to live in peace, we might be dealing in this Parliament—perhaps daring this week—with the needs of one of the most deserving classes of our population—the old age pensioners. Instead of considering their claims, which now, apparently, for the time being have been laid on one side, and easing their burdens and making life a bit brighter and happier for them, we are adding burdens to them. I urge the Financial Secretary, when, along with his right hon. Friend, he comes to consider the next Budget, to realise that at a time like this, first consideration ought to be given to the poorest people in the land and added burdens ought not to be put upon them.

I want to add a word or two to the very eloquent appeals which have been made with regard to the changes that have been made in this Finance Bill in the incidence of Income Tax by reducing the exemption limit from £125 to £120, reducing the allowance in respect of earned income from one-sixth to one-fifth, reducing the allowance to married taxpayers by £10 and reducing the allowance for children from £60 to £50 for each child. Eloquent and well-informed appeals were made in this House to the Chancellor of the Exchequer and the Financial Secretary to reconsider this matter. My hon. Friends, including the Member for Kennington (Mr. Wilmot), placed before the Chancellor of the Exchequer a case which I thought would have met with a response. They put the case amply that here in this Budget the Government are increasing out of all proportion the burden that falls upon the little men in this country—the men receiving £400 or £500 a year. This type of man is becoming increasingly important in industry. The technicians and supervisors and people who have this income are usually unorganised and have no one to fight for them. Their incomes are fixed, and do not increase with an increase in the cost of living, and at a time like this the incidence of taxation falls very heavily upon them. I hope the Financial Secretary to the Treasury will read once more the speeches which have been made from this side of the House upon this aspect of the problem, and also the circular which, I believe, has been sent to every Member of Parliament by the National Federation of Professional Workers, an organisation which speaks for some of these people, pointing out that the incidence of these new proposals weighs very heavily upon them.

There has been very general agreement throughout the country that the reduction in the allowances for children is a very short-sighted policy. At a time like this those who are bearing the responsibility of parenthood and are doing their best to equip their children for the tasks of life, ought to be encouraged. During last Session I heard most eloquent speeches from hon. Members opposite urging that the time had come to consider some sort of family allowances, so that the burden of rearing families should not fall entirely upon parents, who ought to be assisted by the State. That plea has been made by the right hon. Gentleman the Member for Sparkbrook (Mr. Amery) and by the right hon. Gentleman who is now the Secretary of State for Dominion Affairs. If the country is satisfied, as I believe it is, that we ought to ease the burdens upon parents, it is unjustifiable in this Finance Bill to add to their burdens at a time like the present. I hope that the Financial Secretary will still be in his place when next April comes round and this problem has to be reviewed, and that he will pay full attention to the speeches and the representations which have been made, and will restore these allowances to their pre-Finance Bill position.

I want, in conclusion, to say a few words about the subject of the Excess Profits Tax, which took up most of the time on the Committee stage of the Bill, from the standpoint of the workers and the industries of the country, bearing in mind particularly our experience during the last war. We on these benches welcome the Excess Profits Tax as far as it goes, and yet we ought to think also of the psychological effect of beginning a struggle like this with the knowledge that there are to be excess profits which are to be taxed, the State to take 60 per cent. and the person making the excess profits being left with 40 per cent. We would take the lot. We would do something more—we would stop excess profits being made. The Chancellor of the Exchequer and the Financial Secretary have been very careful in speaking about this tax. They have made, as far as I recall, no estimate of what it will produce, and I can quite appreciate that fact. There have been varying opinions expressed in this House. The hon. Gentleman the Member for East Aberdeen (Mr. Boothby), who speaks frequently on financial matters, expressed the opinion that this tax would be the most productive of all the taxes in this Finance Bill. He hazarded the opinion that excess profits were going to be made, and attempted to justify excess profits. [An HON. MEMBER: "No!"] I believe I am not doing the hon. Member an injustice, though he is not here. He pleaded for deflation and an increase in price level. He said that unless we raised the price level, and, therefore, by implication raised the standard of profit, and made excess profits in order to tax them, we should not be able to pay for the war. I believe that I am summarising fairly the argument which he put forward.

I want to put one or two practical considerations to the Financial Secretary in dealing with the Excess Profits Tax. I would ask him again to think of the psychological effect. It obviously means, if there are to be substantial excess profits, that the price level will be raised and that prices will be increased. If the cost of living increases, the real value of wages will fall, and industrial workers will begin to agitate—as indeed they are agitating already—and we shall have all over again what we had during the last war, that industrial will o' the wisp—the attempt to keep wages up in accordance with increasing prices and causing an enormous amount of discontent. I hope the Financial Secretary will read the report of the Commission appointed in 1917 to investigate the causes of industrial unrest. Representatives of the Commission went to South Wales, Durham, Northumberland and Scotland and investigated the causes of the industrial unrest which was so manifest during 1917. They presented reports and Mr. G. N. Barnes, who was then a Member of this House, summarised their findings.

The two reasons they put forward for industrial unrest—in the order of their importance, they said—were the increases in the price of food and complaints about malnutrition, and, secondly, suspicion of profiteering. That was second in importance, and will be so now. I remember the last war. I was in South Wales, and I remember what took place. There were increases in prices, fabulous increases; industrial workers making vain attempts to keep up with those increases in prices; war-time millionaires. I remember the feeling at that time. We are told that Welsh people are very mercurial and temperamental, but I know the Welsh people, and I can tell the House that one of the causes of the unrest was that, whereas miners were working hard and getting a good deal of paper, it meant very little in the shops. At the same time they saw these millionaires strutting about the place making excess profits out of the anguish of the nation. I do not believe that people in 1939 and 1940 will stand that. If we are to face the difficulties that are ahead and sustain the morale of the people, a stop must be put to that. There must be no profiteering.

When people talk about paying for the war out of increased profits I want them, when putting forward their financial theories, to realise the practical effect on the people of this country. I ask the House to consider that if we increase the price level and increase profits the time will come when we shall have to adjust ourselves. We know what took place when the adjustment came after the last war. Fundamentally the Special Areas are the consequence of the increased prices in the last war, and their effect on the export trade. There were tremendous repercussions in South Wales and Northumberland and Durham, in the cotton trade and in all exporting districts. Those districts paid a terribly heavy price for the way in which the last war was financed. After the inflation there came deflation. I hope that consideration will be given to this matter. In one of the weekly papers last week the military critic ended his article with these words: This is a war of nervous attrition, and it is the moral effect of the coming offensive that will count more than the military. The real front is at home And it is. Most of our hopes are based upon the possibility, that we hope will become a probability and a certainty, that the German people will overthrow their rulers, and refuse to put up with their misdeeds.

If the important front in Germany is the home front, I hope it will be realised that the home front is important with us, too. When we frame our budgets and our finance Bills, it is essential that we should place the burdens upon those best able to bear them, that we should not place burdens upon the poorest, that we should not do any of the things we did in the last war which we paid for so heavily afterwards. We have passed legislation in this House which compels the youth of this country to lay their lives on the altar of sacrifice for the nation. This House has no right to pass legislation to lay the lives of the youth of this generation on the altar of sacrifice unless at the same time we pass legislation that wealth be mobilised for the service of the nation.

5.37 P.m.

Mr. Graham White

The eloquent appeal made by the hon. Member for Llanelly (Mr. J. Griffiths) for measures to control prices and prevent inflation and all the evils which flow from it, was in fact a plea for a strong and centrally controlled economic policy which will make effective the regulations which decide the order of priority of those services that remain to the civil population, and for a general ordering of our economic life— which we understand is the wish of the Government—in order that the whole resources of the nation may be devoted to the prosecution of the war. We have heard to-day and yesterday something of the plans which the Government have made, of the committees appointed and of the assistance sought from eminent men to carry this control into effect. The House and the country will watch with great interest and some anxiety the work of those committees and of those who are to control our economic destinies. I am quite sure there is no temper to tolerate anything which is inefficient. People will expect that inefficiency and incompetence at home should be dealt with in the same way as inefficiency and incompetence on the field of battle. I associate myself with all that my hon. Friend said in that respect.

Now that we are parting with the Finance Bill I should like to comfort myself with the reflection," Sufficient for the day is the evil thereof," but I think everybody must feel that this Bill is probably one of a series of Finance Bills each succeeding one of which will probably have to be more drastic in its character. Certainly we are not likely to forget the first of the series, which makes higher demands on the taxpayer than any Finance Bill in recent times, or possibly at any time. It is a most notable feature of the discussions in the House on this Bill that they have been conducted without prejudice and with an absence of political predilection which, I think, is quite extraordinary. Everybody feels that any Chancellor of the Exchequer who failed at this time to propose drastic taxation would be failing in his duties. The taxpayer feels that there is a great deal of disagreeable medicine to be taken, and that he should make the best of things and take the first dose as quickly as possible. The most disappointing thing about this Finance Bill is that, in spite of the very heavy burdens and exactions which are placed upon the community, the net result is so small and the amount raised in effect contributes such a small amount of the total expenditure, as far as we can see, at present. The new taxes, grievous as they are, do not yield more than £107,000,000 this year and £220,000,000 in a full year, and this year they add only £52,000,000 or £53,000,000 to the aggregate of the estimated income on the taxes made in April last. The whole total amounts to 51 per cent. of the estimated expenditure presented before the House by the Chancellor of the Exchequer. That is a comparatively small result in spite of very great efforts.

This Budget places taxes and demands with great severity upon people at both ends of the income scale. At the higher end of the income scale it amounts almost to a social revolution. It will cause many people to alter their modes of life, and the lower end of it will fall most grievously upon that class to which an hon. Member referred a short time ago when he spoke on the sugar tax. In regard to the old age pensions, had the House been told in July last that nothing was to be done and that conditions were, in fact, to be worse, there would have been a revolution on the benches. The country expects something to be done. The fact is aggravated and not softened by the great amount of expenditure which is taking place at present. In spite of all our difficulties, something should be done. We were told at Question Time to-day by the Chancellor of the Exchequer, in response to a question, that in raising the Bank Rate from 2 per cent, to 4 per cent. over the six periodical issues of Treasury bills, it had averaged an increased cost to the Treasury of £340,000 a week. Those matters make one think it should be possible to do something to lessen this blow and the great hardship which falls upon the poorest of the poor.

For my part, I approve in the main the policy of the Chancellor of the Exchequer. My friends and I criticised the sugar tax because we would have been willing to advise and work with the House in accepting that tax if we had been given an assurance that something would be done for the old age pensioners. We also felt called upon to demur with great misgiving at the reduction of the children's allowances, because it is out of step with the thoughts of the country at the present time with regard to the younger generation. Anyone who thinks must realise that the life of a nation depends upon the number and also the quality of its children, and that is out of line with what the Government are doing in this direction. So far from placing an increased burden upon the rising generation and upon those who are responsible for them we should see something established in the nature of increased children's allowances. We think the Chancellor of the Exchequer was right in raising the greatest amount he could by taxation, because nothing can be done to shuffle the burdens of the present day on any succeeding generation. The money has to be raised now and it has to be spent now, even if it is spent on armaments and the like rather than on other things which are more beneficial to the people. We approve of the policy also because it is the only alternative to the policy of inflation, which we know works badly and unjustly and places hardships upon people who are unable to contract out of them.

With regard to the remarks of the hon. Member above the Gangway who made one or two observations on the Excess Profits Tax, I think everyone agrees that we should be happier if we thought there would be no such things as excess profits in war time. It is by no means certain that there will be any; on the other hand, it may be inevitable, but it remains to be seen whether there will be any excess profits, and if so what they will be. I think we should look forward to the future. After all, this Bill does not exact the maximum total of our resources. It does not amount to more than 16 or 17 per cent. of the total income of the people in this country, and that is an important fact which should be noted not only in this country but also abroad. In approving the taxation as provided in this Bill, my hon. Friends and I have not been unmindful of the criticism which has come from certain quarters, which are entitled to be heard, to the effect that this Bill and the taxing proposals were untimely and unopportune. I realise that those words are endeared to the hearts of people who criticise Bills, but it will be said that, coming now, this taxation has increased unemployment and has stopped the wheels of civil industry before the war machine was ready to take over those who were in charge of industry and those employed in it. That criticism may prove to be justified.

Finance is not the whole story. We cannot consider finance without relating it to the wider subject of the general economics of the country. People in this country would, I believe, be prepared to face even heavier burdens if they were convinced, but only if they were convinced, that the maximum effort was being made. Critics who say that the taxation policy of the Budget is wrong because it dislocates civil machinery before the other machinery is ready, will be justified in their criticism if the other departments do not function with boundless energy, drive and initiative so that they absorb the unemployed. Our whole resources should be mobilised in the task of winning this war.

5.50 p.m.

Sir George Schuster

I do not propose to deal with the major issues raised by the Finance Bill. So far as they are concerned they are really settled. The Chancellor of the Exchequer is going to get his Bill, and our job now is to make the scheme a success and do our best to produce the maximum effort in spite of some difficulties which will be created by the burdens of the Budget. I only wish to raise certain points of detail in connection with the Excess Profits Tax, which I had not the opportunity of doing in the earlier stages of our discussions. I hope that the Financial Secretary will take note of them.

In the first place, I would ask him if he could give us a little more definite assurance or explanation, of what are the intentions of the Government as regards the coming into force of this burden. The position has been taken by the Chancellor—in response, indeed, to a suggestion from an hon. Member—that inasmuch as the tax cannot raise very much money this year it is not very material to have all the details settled satisfactorily at this time, and that there will be time to review them before the Finance Bill is introduced at the regular time next spring. But I want to make this point. There will be many companies closing their accounts at the end of December or before the introduction of the next Finance Bill, and they will have to make some reservation for the Excess Profits Tax. They will not know where they are if things stand as at present, and I put it to my right hon. and gallant Friend that it would be of immense value if these details could be discussed without delay so that if the Government come to the conclusion that some more definite words are possible than the words in Clause 13 then some early indication might be given of what the Government propose to do in the matter. I am sure that everyone who reads the words of Sub-section (7) must feel that as they stand they are extremely ambiguous, and that we cannot know where we are.

In talking on this matter I want to make it clear that I am not talking as one who objects to burdens. If the Excess Profits Tax is a good tax and the money is required, by all means let the burden be imposed even to a much heavier degree than we have before us now, but I am quite sure that we shall all agree that burdens of this kind, if they are to be imposed, should be imposed fairly and that injustice should not be done as between one class of business and another. I see the possibility of considerable injustice being done as the words stand, if they are interpreted in ways which are quite possible.

My right hon. Friend made the point in what he said this afternoon, that two classes of cases had been put before him, the class of case of a business such as the cotton industry which has been going through a depressed period in the years when the datum line has to be fixed, and another class of business which is just building up its undertaking and, therefore, had not developed its resources properly in the years which count for the datum line. I should like to put to him a third kind of case which is possible, and that is the case where, say, business A for one reason or another has been going through a time of re-organisation during the years which count for the datum line. It is quite possible that in those years the business may have been earning very little profit because it has been carrying out a scheme of re-organisation, whereas another undertaking, in the same field of business, has been operating normally at a handsome rate of profit. I happen, as a matter of fact, to be personally affected by such a case. No one wants to argue his own business interests but when we have knowledge from our own experience it is just as well to bring it out as a piece of evidence. I am giving this case by way of illustration and the figures which I shall use are not exact but merely illustrative.

You may have business A in the years 1935, 1936 and 1937 operating on a basis which produced no profits at all, and business B engaged in the same trade may have been earning 10 per cent. Business A may have recovered in the year 1938 before any of the influences of the war began to work and may have earned a profit of 10 per cent. Business B has been making 10 per cent. all the time. Business A is not entitled to take its 10 per cent. for the year 1938 into account in calculating the datum line. Both business A and business B may then go through the war earning a profit of 10 per cent. but business A will be only able to distribute 4 per cent. on its capital, while business B will be able to distribute the full 10 per cent. That, in my opinion, is extremely unfair, and I cannot believe that it is the intention of the Government in putting forward this proposal to produce a result of that kind. I recognise that it is quite possible that the referees will interpret the wording of Sub-section (7) of Clause 13 as entitling them to give special consideration to the circumstances of business A, but there is no security in the words as they stand. The referee can say, "Admittedly you were going through a period of reorganisation at the time and it was quite a ' reasonable expectation that you would earn no profits in those years." Therefore, I put it to the Chancellor of the Exchequer that those words require clearing up, and that the sooner they are cleared up the better. All that anyone asks for is fair treatment. I take it that the intention of the Bill is to catch profits which are above the normal expectations of shareholders as based on past results, such extra profits being directly or indirectly connected with conditions created by the war or preparations for the war. If that intention can be embodied clearly in the wording of the Bill it would represent the real purpose behind this Measure and would achieve universal satisfaction.

There is just one other point of detail that I should like to put to the right hon. Gentleman. It is a very technical matter. I do not want to go into it in any detail, but merely to have it on record for consideration. It is the question as to the method in which the profits of subsidiary companies are taken into account in assessing the parent company. According to the wording of Sub-section (7) of Clause 13 the ceiling of profits which can be allowed, except in special circumstances, would be profits sufficient to pay the preference dividends of the company and 6 per cent. on the nominal ordinary share capital. A company which has a subsidiary company, that is a company in which it owns not less than 90 per cent. of the ordinary share capital, is, according to the wording of Clause 17, to be assessed on the whole of the profits of itself and its subsidiary, and it has to take into account the capital employed in the subsidiary. That is capital in a different sense to capital on which the 6 per cent. is allowed. It is quite possible that the subsidiary company may have a large issue of preference shares carrying a higher rate of dividend than 6 per cent., all held by the outside public and 10 per cent. of its ordinary shares held by the outside public which also have received regular higher dividends than 6 per cent. I want to ask my right hon. Friend to consider whether the words as they stand are quite clearly drawn so that sufficient profits to pay the dividends on preference or ordinary shares held by the outside public would be taken into account in settling the "ceiling" for the profit which the parent company would be allowed to earn.

I only want to make one more point in conclusion. I listened with very great sympathy to what was said by the hon. Gentleman who spoke first from the benches opposite. Nothing would be better than if we could go through the war without any excess profits being earned—if we could go through it in a spirit of partnership, all of us working under the inspiration of motives of patriotism and not of a desire to make profits. I believe that is possible. But, if we are to go through the war on that basis it demands very efficient organisation in the Government Departments and a purpose—a fulfilled purpose—on the part of the Government to stimulate voluntary co-operation and to take advantage of every offer of voluntary cooperation. Given such a lead and a technique for making it effective, I believe that people will pull together for a common purpose from motives of patriotism, and not of profit.

6.2 p.m.

Mr. Tinker

I have been present at many Third Readings of Finance Bills but I have never known so much interest taken before. It seems to me rather strange that I have heard very little criticism with regard to the increased Estate Duties. Usually there is a great outcry from the other side against any proposals to increase them, but this time it has been recognised that that is one of the places where money can be found, and there is very little objection to it. I wish the Chancellor of the Exchequer had gone rather deeper into the Estate Duties and got a little more money and left other things out. The next point is in regard to excess profits. We can have no doubt that there is some idea in the Chancellor's mind that excess profits will be made. It fills most of us with dismay to think that in a time of national crisis, when everyone ought to be giving all he can to help to bring the war to a sucessful issue, we have to try to meet people who use every means in their power to make excess profits out of the nation's need. I trust that a message will go forth to manufacturers and others who have to deal with these things to keep down their profits as much as possible. Let it be brought to their mind that this kind of thing is not altogether playing the game. I trust that hon. Members opposite will not try to protect these people. The purpose of certain Amendments on the Report stage seemed to mc to be to protect those who were making excess profits. They seemed to be trying to urge on the Chancellor not to be too hard on them, not to enact provisions which might make the burden worse for them than it is. If they are making excess profits, let us get as much out of them as we can. I hope that the words of the last speaker will be noted by manufacturers that patriotism ought to be the first thing in the mind of everyone.

In reference to Income Tax, there are one or two things with which I did not altogether agree in regard to children's allowances, but, on the whole, one cannot complain of the Income Tax increase. Neither can one complain about the Surtax increase. That, again, to my mind, is the right way to get the money. I have always held that whatever you take from the Surtax payer cannot very much reduce his standard of life. He has all that he wants to live upon. It may be that some luxury that he can very well do without will be cut away, but he ought not to complain of being called upon to pay Surtax on his income above £2,000. I think the Chancellor might very well have examined the question of indirect taxation more carefully.

The sugar tax, to my mind, is the worst of all the taxes in this Bill. The burden will fall very heavily on the poor homes, and it is one of the chief things to which we object in the Bill. We did not object to the Bill as a whole, but there are items in it to which we took strong objection. Sugar is used in every home in the land, and the increase will be a burden on poor homes more than on rich. One section which will be harder hit than any is the old age pension people. Everyone to whom we speak about the Budget, Conservative, Liberal or Labour, agrees that the old age pensioner is being the hardest hit of all and that something ought to be done. If that was the feeling of the House of Commons in July last, and it was evident that something would be done before the end of the year, how is it that, now that the burden has become greater, there is no attempt to meet it? We have had no promise at all from the Government that anything wil be done. Give us some kind of promise, some hope for the future for these aged people. If the right hon. and gallant Gentleman would reassure us on that matter I would almost compromise with him on many things. If he would say, "In a few months time we will see what we can do in regard to that," it would go a long way to winning my approval of the Budget. If he does not give that promise, then I can only say that the Government will be getting away with a point with which they have no right to get away. The case ought to be met by the Government. I trust that when the right hon. and gallant Gentleman replies to the Debate, we shall receive some assurance that he recognises the claims of these people, and that he will give us some promise.

6.11 p.m.

Mr. Hely-Hutchinson

I am grateful for an opportunity of saying a few words at this stage of the Bill, although I fear my approval of its contents must necessarily be qualified. I support the Bill as far as it goes, but I do not think it goes far enough. I do not think it is a brave enough Bill. Those who have to meet the taxes imposed by the Bill are glad and proud to shoulder these additional burdens in so far as they fall upon themselves alone, and for that reason, and to that extent, they approve of the taxes that are imposed. I should like to say that certain of the remarks made by the hon. Member who opened the Debate from the Opposition Benches fell upon my ears most acceptably, although I did not agree with his conclusions. The hon. Gentleman was speaking of the decreased allowances in respect of children. There are not many hon. Members who have so many concrete reasons as I have for hoping for generous allowances in respect of children, but nevertheless, I am most happy to do my best to meet the additional burdens now imposed and proud to the extent that I am able to do so.

On the other hand, far the greater part of the adjustments in life which are forced upon taxpayers by this increased taxation necessarily involves economies in sums of money paid out to other people, either directly in wages or indirectly in the purchase of goods the cost of which is necessarily made up by wages. The burden of these increased taxes, therefore, necessarily falls upon a great many who are not directly taxed by the Bill and falls unevenly upon them in relation to their total income. Quite a proportion of this secondary group will accordingly contribute less to the revenue on their own account. Therefore, I have some misgivings as to whether my right hon. Friend will, in fact, collect the revenue which he anticipates.

Mr. Montague

Does not the hon. Member see that his argument, if carried to a logical conclusion, is that the same thing would apply wherever the taxes were applied?

Mr. Hely-Hutchinson

I see that perfectly. I am not disputing it. I am merely pointing to that side of the matter. What is needed, I think, is a tax which inflicts economy, but by a tax on expenditure rather than a tax on income, because a tax on expenditure falls much more on the individual. Even if my right hon. Friend does collect the revenue which he hopes, when we consider the relation of that expected revenue to the total expenditure with which we are faced, we realise that it produces only one tenth of the estimated deficit this year, and only one fifth in a whole year—and even that, as the hon. Member for East Birkenhead (Mr. White) pointed out, only on the assumption that the expenditure itself has not been under-estimated for the present year and will not be increased next year, an assumption which, I think, none of us feels he can make with any degree of certainty.

Therefore, as we consider the Bill we are rather led to the comment, "All this disturbance with so little result," and I think we may feel that the comment of Mr. Keynes—the accuracy of whose mathematics no man can gainsay—that these proposals are mere "chicken feed to the Dragons of War," is a justifiable comment. Indeed, to take one tax alone, the Surtax, even if it were practicable to take the whole of the balance of the income of the Surtax payers, which is in fact the means of livelihood not only of 100,000 Surtax payers, but of their 1,500,000 of families and dependants, the whole of that £250,000,000 would still produce only a further one-fifth of the deficit with which we are at present faced. Moreover, I am inclined to agree with those who feel that the Excess Profits Tax will be effective only to the extent that there is a rise in prices, and that rise in prices will create the very effect which the hon. Member for Llanelly (Mr. J. Griffiths) fears—a fear in which I entirely join with him.

We must face the fact that it is mass expenditure which makes up the cost of war and the increase in the cost of living which all of us fear and wish to avoid. It has been estimated that in the last war, when we were in the full tide of our war effort, there were over 5,000,000 people who were receiving and spending on an average £3 a week more than they had been receiving before the war. That amounts to £750,000,000 a year—a direct and indirect addition to the cost of war and the cost of living, for those 5,000,000 people were directly or indirectly employed in some way in the war effort. One is forced to conclude that while the spectacle of a comparatively small number of large fortunes being acquired in the course of the war is a public scandal, nevertheless it does not create anything like such a financial problem as the problem which is created by the increase of a very large number of small incomes, which are no scandal at all. Therefore, I suggest that it is mass economy, mass self-denial and mass sacrifice which is going to turn the scale of victory, and it is a Government which dares to demand mass sacrifice which will lead us to victory.

My right hon. Friend warned us that an emergency Budget is not the time to introduce new and untried methods of taxation, and, indeed, I should expect to be called to order if I made any suggestions on that line at present; but I hope that we may infer from my right hon. Friend's phrase with reference to new forms of taxation that he contemplates next April, if not before, a bolder course; that he will dare to lay the taxes where the votes are; and that the kindness and consideration that he will show to taxpayers will be the true kindness of leadership: Such kindness as first treads the path of fear Not tendance on the wounded in the rear.

6.20 p.m.

Sir Henry Fildes

I may be pardoned for intervening in this Debate, because I recollect well that my maiden speech in this House some 20 years ago, was in relation to the Excess Profits Duty. Let me say, in the first place, that I hope every Member of the House has studied carefully the OFFICIAL REPORT which reached us this morning. In it there is revealed to us a list of the persons who are or who have been employed by the Ministry of Information.

Mr. Deputy-Speaker (Sir Dennis Herbert)

I do not see how the hon. Member can possibly bring that into a discussion on the Third Reading of this Finance Bill.

Sir H. Fildes

All I will say is that I hope the Press will publish that list in the middle pages of the newspapers.

Mr. Deputy-Speaker

I must ask the hon. Member to take what I have said as a quite definite Ruling and request him to make no further reference whatever to that subject.

Sir H. Fildes

I accept your Ruling, Mr. Deputy-Speaker, and apologise if I have transgressed, even if only for the limited period of one minute. I submit that we ought to take a long view with regard to this question of the taxation of excess profits. When the country is in danger and the Chancellor has to make provision for its defence, whose property is he defending? He is not necessarily defending the property of those people who have unsuccessful businesses and whose profits are negligible. But there are industrialists—I do not mention names, but we all know them—who for years have been making, perhaps, £3,000,000 or £4,000,000 a year and if they have been making that for four or five years before the war, they can go on making it without any fear of being called on to pay any special taxation in connection with the war. I know of one firm which made aeroplanes during the last war. They had no pre-war standard, but the Government said to them, "We must have your products." They were compelled to send the secret details of their drawings up and down the country to different works. The Treasury advanced £300,000 on mortgage for additions to buildings and plant. When the war came to an end they got an offer of what appeared to be a satisfactory sum as compensation for the cancellation of contracts. Having done that the Treasury raised the Excess Profits Duty to 80 per cent. They took back 80 per cent. of the amount given by way of compensation for the cancellation of the contracts. Then the Treasury came in and asked those people to repay the £300,000 of mortgage debentures on buildings and machinery, with the result that the business had to be sold to meet those charges.

I say that that is grossly unfair and that the system is wrong. We say to people who have been making £3,000,000 or £4,000,000 a year profit before the war that they can go on making it, but if a man is producing a war requirement which is of advantage to the country and will help us to achieve our end we call upon him and we take 60 per cent. of his profit and he is not allowed more than a limited sum for managing his business. We have seen this in the case of firms in the North, for instance, in the Newcastle area. In one case, the will of the head of the firm was proved for something like £4,000,000. Money was borrowed from the bank to help to pay the Death Duties. Two years after the war was ended, the firm had not realised enough money to pay back what had been borrowed from the bank. When war comes businesses which may have done little or nothing for a period of 15 years are brought into the picture and we say to those people, "Although you have been making nothing during the time of peace, you can be useful to us in the time of war and we propose to penalise you on account of that fact." I beg of hon. Members to look at the question from that point of view. If the burden is to be fitted to the back which has to bear it, you should reduce the Excess Profits Tax and, if you like, increase Income Tax all round, over a certain figure. The reason why we had such a disaster at the conclusion of the last war was that with duties of one kind and another we shut up so many businesses that we created a measure of unemployment which was deplorable. I do not want to see that happen again and I submit that people who have been making £3,000,000 or £4,000,000 for a number of years past are better able to pay than people who have no pre-war standard at all.

6.27 p.m.

Mr. David Adams

I desire to detain the House for a short period on this occasion as there have been few opportunities, during the discussions on the Finance Bill in Committee, of making any observations on the points which I intend to raise. I feel that as the Bill is now passing from this House it is appropriate that it should go hence with our condemnation of any of its features on which we feel condemnation to be justified. On two main points, one the reduction in the child allowance and the other the reduction in the earned income allowance, I regard it as unsound in principle and unfair in practice. Moreover, I find that this Budget, more than any other Conservative Budget of which we have had experience, displays an unjust percentage of increase in relation to certain classes of taxpayers. The proposed new scale of imposts shows a sharply diminishing rate of increase as we come to the higher levels of income. For instance, a single man with an income of £130 a year suffers an increase of 469 per cent. in a full year. A single man with an income of £250 a year suffers a lower percentage of increase, namely 243 per cent.; a single man with £1,000 a year suffers the substantially smaller increase of 145 per cent.; and with £2,000 per annum he has an even less proportionate amount of increase, namely, 141 per cent.

This would be illogical enough even in the case of single men, but the favouritism shown by the Budget to rich people is proportionately much greater where they have family responsibilities. The poor person and the rich person with families are not, however, placed in parallel positions, the wealthy being highly favoured. Take the case of a man with £400 a year. A single person's increase is 163.3 Per cent.; if he is married, without children, it is 242.6 per cent.; if married, with one child, 320.3 per cent.; and the crowning case, I think, in the whole Budget is that of the married person with £400 a year and two children, who has an increase in a full year of no less than 712.8 per cent., figures which would lead me to assent to the observation made by the "Times" about the Budget, in which it was stated by the "Thunderer," with reference to the reduction in the child allowances, that this could only have occurred to a mind which preferred tidiness to foresight. That really indicates the lack of foresight which the Chancellor had in framing the Budget. These amazing changes are grossly and manifestly unfair. If you go into the higher region and take the case of the £2,ooo-a-year man, you find that, if he is single, he pays an increase of 141.8 per cent—he is carefully protected by the Chancellor—but if he is married, without children, he pays 145.7 per cent., as against the person with £400 a year, whose increase, if he is without children, is 242.6 per cent., but for his richer brother if he is married, with one child, it is 144.5 per cent., and if he is married, with two children, it is 145.9 Per cent. One would have expected that the Chancellor, in a period of warfare, when the attention of the country is naturally directed to the sharp diminution in the increase of our population, would have shown special leniency towards people with children, but the tendency of this war Budget is to make their burdens very much heavier and to discourage the having of children, particularly among the poorer sections of the community. It is true that married people with two children do not pay anything if their income is less than £350 per annum, but immediately after that the increases are substantial and might indeed be termed crushing. The £500-a-year man, if he is single, has an increase of 155 per cent.; if he is married, with no children, it rises to 177 per cent.; if married, with one child, the increase goes up to 236 per cent. and if married with two children it rises to 330 per cent. There we see alarming increases imposed upon persons who dare to have families. It is interesting to note, however, that the richer families are not penalised to anything like the same degree, because the £2,000-a-year man, if single, has an increase of 141.8 per cent., but only of 145.9 per cent. if he has a wife and two children, so that the middle class and the poorer sections of the community who are endeavouring to raise a family are really penalised under the remarkable scale of increases which the Chancellor has sub- mitted to this House in this Bill, to which we are to give, I understand, the Third Reading without a Division to-night.

In the case of the single person with an income of £130 a year, his increase is 469 per cent., and there is a progressive decline down to the person with £2,000 a year, whose percentage increase is only 141.8 per cent. In proportion to the increase in his wealth, the percentage increase in his taxation diminishes, when, unquestionably, it ought to rise. There is the same story with a married couple with two children, where you have this striking situation, that while a £400 a year person has an increase of 712.8 per cent., the person with £100,000 a year has an increase of only 120.19 Per cent., clearly confirming the point which I have ventured to submit to the House. I am not opposed to sharp increases of taxation, being an Income Tax payer myself. I have, however, the strongest possible resentment against unjust increases imposed upon other sections of the community who happen to be on the lower income level.

It certainly seems to me a very staggering outlook for the British people if the Government's prediction, which apparently has been made, that the war may continue for a further three years at least, proves to be true, and we are to have additional war Budgets from time to time. If they are to be framed on the basis of this Budget, then we can expect another sharp increase in the diminution of population, and we shall see a sharp increase in the impoverishment of the lower sections of the community, unless some new and additional forms of relief are to be found for them. It has been pointed out to the Chancellor how the taxation of land values would bring in substantial sums without injury to those who own the land, and a 2 per cent. tax upon the known wealth of the country would bring in a revenue—

Mr. Speaker

There is no taxation of that kind in this Bill, and the hon. Member must deal only with the taxation which is in the Bill.

Mr. Adams

I am afraid that I was digressing a little from the strait and narrow path which leads to the great place. Although we are not to have changes in this Budget such as we have pointed out ought to be made, there is a clear and imperious case in subsequent Budgets for a diminution of the wide disparities which prevail in this Budget, particularly those between rich and poor.

6.42 p.m.

Sir Frank Sanderson

We have just listened to an illuminating speech showing the abnormal increases of direct taxation upon the smaller taxpayers and comparing them with the rates which will be paid by the larger taxpayers. So illuminating are the figures which the hon. Member gave that I should like to quote two of them. He stated that the increase of direct taxation paid by those who enjoy an income of £130 a year will be no less than 469 per cent., and that an income of £400 per annum would bear an increase of tax of 712 per cent. Those figures may be correct, but when we consider the higher incomes, it is only fair, in order that we may judge the rate of taxation which is levied, that I should draw attention to the fact that if there were an increase of only 20 per cent. the whole income would be taken in taxation. It is important that hon. Members should appreciate that you cannot increase the higher incomes more than 20 per cent. because it would make the taxation slightly in excess of 20s. in the £.

Mr. David Adams

The increases which I quoted are the increases over the present amounts which are being paid.

Sir F. Sanderson

I appreciate my hon. Friend's point, but when he reads the OFFICIAL REPORT in the morning and studies what I have said he will find that I do not exaggerate the position when I say that it would not require an increase of more than 20 per cent. to make the taxation over 20s. in the £. I wish to make reference to the Excess Profits Tax, which has caused more general discussion in the House to-day than any other tax. I would be one of the last to raise a voice in favour of anything which would make it possible for industry to make excess profits during war time, but there are many industries which have during the last few months, and which will during the next year or two, should the war be prolonged, increase output, not by 20 or 30 per cent., but by 500 or even 1,000 and more per cent. In such cases, where small businesses are devoloped during the process of the war, it is inevitable that increased profits would be made. The general standard is so low that it is only the development of such businesses during wartime that would create profits which would not be made at any other time, and the whole House desires to see the Chancellor take his full quota of those profits.

On the Committee stage I referred to the abnormal profits which were made during the Great War in the shipping industry and I desire to put this point to my right hon. and gallant Friend. While I appreciate that the shipping industry during the Great War was subjected to Excess Profits Duty, we know that vast profits were made by virtue of the fact that business was done in the buying and selling of ships. I cannot see any difference between buying a ship and selling it at a considerable profit and buying a cargo of grain and selling it at a considerable profit. Can my right hon. and gallant Friend give me an assurance that the profits made by the buying and selling of ships will be subject to the Excess Profits Tax?

With the considerably increased taxation and the complexity of the method of arriving at the exact amount which should be subject to direct taxation, many industries and individuals have to seek the advice of accountants. Their costs in this connection run into large figures. It must be to the advantage of the Chancellor, as much as to the advantage of the taxpayer, that the amount subject to taxation should be accurate. Would my right hon. and gallant Friend consider between now and the next Budget making a concession which would allow of the deduction of accountants' fees before arriving at the net income upon which an individual is assessed for his taxation?

Another point to which I wish to call attention is that many industrial concerns have as a precautionary measure reduced their interim dividends and in many cases passed them altogether, while others have passed their final dividends, and even the preference dividends, where there is little or no likelihood of these not having been earned. While taking all reasonable precautions, I consider companies should pay dividends wherever possible, because to deprive the small investor of his income causes not only severe hardship but will do much damage to trade generally, beside reducing the value of industrial securities. It is important in war-time to refrain from unnecessarily reducing the market value of securities. The import- ance of maintaining the value of our national assets is frequently overlooked. A convenient illustration is the case of the railways. If the railways were not to receive fair consideration the result would be a considerable depreciation of one of our greatest national assets. The importance of maintaining it is that it will enable those who will help to finance the war to lodge securities with their banks and to borrow the money with which to subscribe towards the great loans which will have to be raised. So I say deliberately that it is in the national interest that we should do everything possible not to deflate the value of the securities of our great national assets.

We are getting towards the end of the Third Reading of a Budget which will go down to history as the Budget which passed through this House in the minimum space of time and raised the maximum amount of revenue. I submit that the manner in which it has passed through the House is due to a great extent to the dexterity with which it has been steered through all its stages both by the Chancellor of the Exchequer and the Financial Secretary to the Treasury. It is a Budget which will be borne with fortitude, though undoubtedly it will affect the economic life of the country and affect the customary standard of living in every household, however humble or however rich. It is a significant fact that neither in the City of London nor among the great industrialists of the North, which I frequently visit, have I heard any adverse criticisms of it. All are willing and anxious, as never before, to make their full contribution to the prosecution of the war to a victorious end.

6.55 p.m.

Captain Cazalet

Since the Budget was introduced I have not heard many of the Debates, but I have heard some of them, and on the whole I gather that the general feeling of the House has been one of approval. Such adjectives as "bold" and "courageous" have been applied to the Budget. I am afraid that my own views of it are somewhat less flattering. I think it is an unimaginative Budget, unwise in certain directions and definitely foolish in certain particulars. I think it is unlikely to produce the revenue estimated, and such money as it does produce will be got only at the maximum of inconvenience to the payers and with con- siderable distress and dislocation of life for many innocent people. I think that is stating the effects of this Budget mildly and moderately. Honestly, it is not a question of personal sacrifice. Of course no one exactly likes paying, but I think everybody agrees that the great bulk of the people are prepared to give everything, life itself if necessary, in order to win this war, and yet I feel there is a very legitimate criticism to be made against the methods employed to raise the money.

We have huge increases in both direct and indirect taxation, and I do not believe that is either the best method of getting the money or of maintaining the normal life of the country, which must go on. After all, no one objects—perhaps "objects" would not be the right word, but no one is opposed—to paying a high Income Tax and Super-tax if he has an income upon which those taxes fall. Let the Chancellor say that the Income Tax must be 7s. 6d. or 8s. if he will, but to put on the whole increase up to 7s. this year will not only have a retrospective effect upon Income Tax payers but will, I think, make it more difficult to get the money. Surely the better way would have been to add 6d. now, 6d. or is. next March and another 6d. if necessary later. In that way we should have given the direct taxpayer time and opportunity not only to pay but to adjust his life to the increased taxation. I venture to prophecy that next March there will be thousands, even tens of thousands, of direct taxpayers owing the Government large sums of money. Not that that is of very great importance. In the past people have been able perhaps to meet their taxes by the sale of capital, but the state of the capital market to-day does not. make one believe that they will be prepared or able to do that, even if they wished to do so.

But it is not of vital importance that (a) large number of taxpayers should be owing money to the Government. What is important is that we shall be throwing out of work thousands of innocent people whom I do not believe the war effort will be able to embrace in its activities. They will suffer as a consequence of this increased taxation. I know quite well that a great deal of the "old order," as it has been called, will have to go. I believe that this Budget will, both immediatelv and permanently, alter the social and economic life of the countryside to an extent which it is difficult to envisage. If that "old order" has to go, let it be a gradual change. do not let it be an immediate shattering of an organised society which has made great contributions to the life of this country, thus imposing unnecessary and cruel hardships on a very large number of people.

Then, after having imposed these taxes, what does the Chancellor say? He says, "Save, spend and do not dismiss anybody." Is that a joke, or does the Chancellor not want people to pay their taxes? He cannot have it both ways. What are these taxes going to raise? An infinitestimal sum of money compared with what we shall have to spend next year on prosecuting the war and out of all proportion—if the Chancellor gets the return from them that he expects—to the suffering and hardship that will be imposed on a large number of people in this country.

Again, the deductions in the allowances for children are a great mistake. Those with small incomes are already badly hit by the war and many are in reduced circumstances. Some have joined the Army. A man in my constituency had a job at the Post Office at between £400 and £500 a year. Before the war he joined some Territorial organisation and he has now been called up. He has an income in the neighbourhood of £150 a year and he has a wife and two children. Probably that man had entered into obligations with regard to his children. To cut the allowances for children at this moment is a grave social mistake and may go far towards damaging the educational system in this country. Those cuts are tiresome and a nuisance to the parents; they may be disastrous to the children. These deductions may represent a real tax on many homes in this country. It comes, I understand, to something in the nature of 10s. per person per year which, in a family of four, means a tax of £2 per year. It is obvious that in the course of the next few years there will be a measure of inflation in this country and there may be demands—which will be met, no doubt —for increases in wages. I believe it takes about is. a week increase in wages to make up the effect of the increase in the Sugar Duty. There is no compensating factor for any appreciable portion of what the direct taxpayer is to be called upon to pay.

Old age pensions have been mentioned. I have always taken the view that there was an unanswerable case for making up those pensions to a sum comparable to that paid in unemployment insurance where, I think, the figure for a man and wife is about 25s. or 28s. a week. The case is just as unanswerable now, and I would welcome any measure which would bring an increase into effect. I realise that I cannot oppose the Budget. I have to support it and I have to pay if I can. Perhaps my gloomy prognostications and prophecies might not come true. I hope they will not. Of course, we all have sympathy with any Chancellor of the Exchequer in the present conditions, and in the grim task which lies before the right hon. Gentleman, but I felt that I must make my small protest against what I believe to be a deliberate and unnecessary attempt to make the lives of many ordinary citizens even grimmer and blacker than they are to-day.

7.4 p.m.

Mr. Vyvyan Adams

As I intend briefly to examine the effect of Income Tax upon various levels of income, I think there must be a sort of avuncular relationship between myself and the hon. Member for Consett (Mr. David Adams), although I do not share his melancholy prognostications about the birth rate. The war has already produced a spate of marriages; and marriages have been known to precede births. I have been wondering how I could make relevant to a Third Reading Debate on the Finance Bill a plea for better old age pensions. This delicate inhibition did not discourage the hon. Members for Llanelly (Mr. J. Griffiths), East Birkenhead (Mr. G. White), and Leigh (Mr. Tinker), and the hon. and gallant Member for Chippenham (Captain Cazalet), but, in order to be strictly in order, I have decided upon a certain form of words. It is this:—The Finance Bill provides for the expenditure of tens of millions of pounds on the health services, including old age pensions. Ten shillings a week is better than nothing, but 15s., or even 12s. 6d., would be better still. This year's Finance Bill must be treated as the basis of next year's and that of the year after, but by then I hope to see some upward adjustment, if necessary with increased contributions. When an old man or old woman is near to destitution—

Mr. Speaker

The hon. Member cannot pursue that line of argument because there is nothing at all in the Finance Bill about old age pensions.

Mr. Adams

I hope that you will allow me to point out that in at least three speeches old age pensions were the main burden of the remarks of hon. Members. Having said that, I assure you, Sir, that the rest of my remarks will be prosaically in order.

Seldom do I find myself able to agree with the "Times" newspaper, but on 5th October it had a leading article which I was bound to admire. It was upon the subject of bureaucracy. This practice of bureaucracy, which is extending its tentacles right through our social and commercial life to-day, means death to all trade and enterprise. The Chancellor of the Exchequer whom—to quote the Senior Member for Oxford University (Mr. A. Herbert)—we all admire and love, expects us to pay a mountainous and indeed a fantastic Income Tax; simultaneously the Government are risking bludgeoning trade to death with the club of bureaucracy. The individual could and would pay the tax, but I fear that numbers of firms may have to face loss and bankruptcy. It is not rational for the Chancellor to say "Spend, save and pay," at the same time that the exasperating interference of officialdom is darkening life and destroying the enterprise of commerce.

Men of business are, on the whole, as patriotic as anyone. They are perfectly willing to supply the revenue. Indeed— whatever theoretical objections His Majesty's Opposition may have to the industrial system—it is the men of business who are the main source of revenue. It is foolish to cramp their activities by every sort of needless interference. I will give an instance which lately came to my attention. I am informed that the Metal Corporation has been taken over by the Government and is, in consequence, able to put all its rivals out of business. That is one of the consequences of the emergency which has accompanied the war. So much for men, in their commercial and business capacities.

I now wish to consider, if the House will bear with me, the effect of the Budget upon the individual citizen. I take quite a different view of this matter from that of some hon. Members who have spoken. The rigours of the Budget are great but they can easily be exaggerated. I thought that the hon. Members for East Birkenhead and Chippenham came very near to that vice of exaggeration—if I may so call it. I do not wish to incite the Chancellor of the Exchequer or the Financial Secretary to the Treasury to any unnecessary and adventurous raids, but I want to say that we could stand even heavier burdens than are contained in this Budget. [Interruption.] I mean the taxpaying community, particularly the Income Tax paying community, about whom I am going to speak if the hon. Member for Kennington (Mr. Wilmot) will allow me to follow my argument without interruption. During the period when I have been in the Chamber most attention has been concentrated on Income Tax. I ask whether the level of Income Tax is so very dreadful after all. I make bold to say that this Budget, which we are bound to pass, is in fact perfectly endurable. I do not know whether any Members of this House belong to the very rich class. If they do, I hope that they will abstain from saying—if they have any temptation to say it—that their world is ended. I do not believe that that is so.

I would remind the House of a few rather consoling figures, derived from the table published at the time of the Budget statement. I will begin at the bottom of the scale of the Income Tax payer. In 1941 a bachelor earning £350 a year will pay £40, but a married man with three children who earns a similar income will pay nothing. In 1941 a bachelor earning £1,000 will be left with three-quarters of his income, and if he earns as much as £3,000 a year the Chancellor will generously leave him in possession of two-thirds of that income. It is not until the bachelor earns the considerable income of £9,000 a year that he will have to pay 50 per cent. in Income Tax. I will now address myself to the bachelor with an income of £150,000 a year. I cannot consciously see him, though I suppose he must exist somewhere, because he figures in these tables of the Chancellor of the Exchequer. Even that somewhat mythical person is going to be left with £26,000 for 12 months. He is able patriotically to consume any quantity of cigars, cigarettes, sweets, and bottles of whisky, though he will be able to use only one of his cars, and that rarely. I think this individual may be invited to cheer up. On the Second Reading the Financial Secretary quoted the younger Pitt. Perhaps I might be somewhat more contemporary, and quote Tennyson: Though much is taken, much abides. That bachelor, with his enormous income, may be able to save a few coppers to invest in War Loan, and when his fortune shows some signs of obstinately increasing, under the pressure of war prosperity, he may be of some value if we are eventually reduced to the expedient of a levy on capital. I once heard the First Lord of the Admiralty say that just after the last war he was himself in favour of that expedient. We can endure this Budget, and much besides. I suppose the most heroic figure to-day is the Chancellor of the Exchequer, From 1931 to 1935 he was Foreign Secretary, and had to witness the death of disarmament and democratic Germany. No doubt those pregnant incidents caused him great sorrow, but a fortnight ago, unabashed and unperturbed, he came down to this House and called upon his fellow-citizens to pay the bill. He must, among his colleagues, be much beloved—or well-liked, as we say in the north—because one would normally imagine that someone else might have been called upon to find the money to pay for the wreckage of our hopes, and to win the war. Once, when I recently criticised the Chancellor of the Exchequer, he informed me that he did not admire long speeches or laborious criticism. So I have a double reason for not prolonging my observations. He is not here to listen to what I have to say. Therefore, I sit down.

7.16 p.m.

Captain Hammersley

I shall not seek to follow the hon. Member for West Leeds (Mr. V. Adams) in any long review of the Finance Bill. I wish to refer to one point, which has been already raised by previous speakers and which has been commented upon by many. It concerns the Excess Profits Tax. I do not think that, from the comments that have been made, one can come to any conclusion other than that Clause 13 is, in many respects, unsatisfactory and unfair. I read the report of the Debate in Committee, and I noticed that the Financial Secretary, answering some points of criticism, said: I do not hold out any particular promise with regard to any form of words, or anything of that kind, but the inquiries that are being made, to which reference has been made, will no doubt cover this matter among the many other matters that will be put forward, and it will be in the light of all the circumstances that my right hon. Friend will finally put forward any Amendments which he thinks it right to include in the next Finance Bill."— [OFFICIAL REPORT, 5th October, 1939; col. 2174, Vol. 351.] I take it that the opinion of the Committee at that time was that a certain unsatisfactory situation had been proved, and that the Chancellor of the Exchequer was, at a later stage, to introduce Amendments. One of the trades which was mentioned as being most particularly affected by the unfair selection of the standard profit was the cotton trade. In the selection of years are the years 1935, 1936, and 1937. They were disastrous years for the cotton industry, so disastrous that this House thought it desirable to introduce special legislation to deal with the situation. I myself sat on a committee upstairs for several months, during which we discussed an Enabling Bill to provide for the Lancashire cotton trade a reasonable level of prices and of profits. We are in the peculiar position that the President of the Board of Trade has endeavoured to give a reasonable level of prices and profits to the Lancashire cotton trade, and the Chancellor of the Exchequer is introducing legislation to make that impossible.

I will just reinforce what has been said by other hon. Members about that, and suggest that it is not satisfactory to leave the matter in the position that certain Amendments will be introduced in the next Finance Bill, because we shall have a period of grave uncertainty. It seems to me that in the next few weeks the Chancellor of the Exchequer ought to make some statement. As I understand, this Finance Bill lays down a chargeable accounting period, which begins on 1st April this year. That means, in effect, that whatever is passed under this Bill will be the law of the land and, therefore, although the Chancellor may agree that the position is unfair, he will not be able to correct the situation unless he introduces retrospective legislation. I shall be glad if, when the Financial Secretary replies, he will indicate whether or not it is the intention of the Chancellor of the Exchequer, when he makes these Amendments, to make them retrospectively.

7.21 p.m.

Mr. John Wilmot

I rise only to ask the Financial Secretary whether, when he replies, he will give me the answer to the point which I raised on the Committee stage and which the Chancellor of the Exchequer was good enough to promise would be answered. The Financial Secretary will recall that the point which I put to the Chancellor of the Exchequer was that it had been represented to me that the effect of a decision by the Special Commissioners was a very peculiar one, and in view of the widespread voluntary evacuation it has rather an important bearing at this time. It was represented that if a tenant had evacuated his premises and removed his furniture, and the premises, therefore, were no longer liable for rates, in those circumstances, if the tenant in honour of his lease or agreement was continuing to pay his rent to his landlord although he was not occupying the premises, the landlord receiving such rent was exempt from tax in respect of it. That seems to me to be an important point at this time when there are a large number of premises lying empty where the tenants are, in honour of their obligations, paying their rents. The Chancellor of the Exchequer promised to look into the matter, and said that if this was an illegal method of tax evasion he would stop it. I shall be glad if the Financial Secretary will be good enough to let me know about it.

7.23 p.m.

Mr. Pethlck-Lawrence

The Debate has run for a considerable time—a little longer than some of us supposed—and I certainly have no intention of detaining the House for more than a few minutes before we receive the reply of the Financial Secretary. There is only one matter, and only one aspect of it, to which I wish to draw attention, and that is with regard to the question of excess profits. I believe that a number of Members are under a slight confusion as to how excess profits arise. They arise in two clearly distinct ways. They may arise because some person or firm or company manufacturing an article that is in great need during the war takes advantage of the public necessity in order, quite improperly and unnecessarily, to put up the price. Where that occurs a person is guilty of grave lack of patriotism, and if it were possible to punish him, punishment ought to be imposed. That is the first way.

Closely allied to that is a rise in prices due to quite a different cause, namely, that the Government have been guilty of bringing about inflation. If the Government were to finance this war in anything like the way the Government financed the war of 1914–18, creating very great inflation, windfall profits will fall to individuals owing to the rise in prices, which is a monetary phenomenon.

A third class of excess profits arises from an entirely different cause, which may be described as the fortune of war. The effect of war upon the national economy is to bring about a complete change in the things which are required by the people of the country as a whole. One thing which has legitimately been produced in times of peace and on which the person making it obtained a moderate and reasonable amount of profit is entirely dashed out of the way. The profit falls to nil because the number of articles produced is nil, or something very near it. On the other hand, at the same time, some other person who has been making an article which has perhaps had a moderate sale in time of peace suddenly finds himself called upon to manufacture and to sell perhaps five or ten times, it may be 50 or 100 times, the quantity he sold in peace-time. If that is the case, the manufacturer, without any desire to profit at the expense of the nation, may even, if he is sufficiently patriotic and public-spirited, cut down his price and profit per article, and yet, owing to the immense number of articles he makes, make a profit fabulously larger than anything he could imagine in the wildest dreams of avarice in peacetime. It is very important that the House should note these three classes.

Captain Hammersley

Is there not a fourth class? Is there not the case of the producer who, because of a declining world demand for a world-wide product, has been producing at a loss for a period of years, and then, owing to the circumstances of the war, makes large profits?

Mr. Pethick-Lawrence

I do not think that that is entirely a separate case. The point I am trying to make is that this profit arises in a number of entirely different ways, and the House should be clear in its mind with regard to these differences. There will be cases where men will make profits simultaneously from several causes. Take such a very simple household article as the small torch that many of us carry at night in order to prevent tripping up off the pavement or being run over when we get into the roadway. It may very well be that at the outbreak of war some person who sold these torches put up the price, and because of the national need made a very considerable profit in consequence. It may also well be that a man who did not put up the price and try to make a profit out of the needs of the nation, might make a very much greater profit owing to the fact that at least 10 times more torches were likely to be required during the war than was the case before war time.

The people who are putting up prices ought to be prevented from doing so by the Government. I hope that in these cases the Government will not be content with the Excess Profits Tax, but will use every means in their power to stop illicit profits of that kind. The Excess Profits Tax in this case is not nearly sufficient. These profits ought to be stopped. I hope that the Chancellor of the Exchequer will be very careful that inflation does not take place, or at any rate not more than is absolutely necessary in order to see the war through. The third type of profit is where the legitimate field for the Excess Profits Tax comes in. These people are not criminal; in many ways they render considerable service to the community in having a great deal of foresight by getting ready to produce articles which the country greatly needs in time of war. The right method of dealing with them is by Excess Profits Tax, so that they shall be made to contribute to the benefit of the State and the prosecution of the war.

I want to refer in conclusion to one or two speeches made by hon. Members in different parts of the House and to point a moral. It was said, I think by the hon. Member for Walsall (Sir G. Schuster)—and there is a certain amount of truth in it—that it is not fair that because one company happens to have made fairly good profits before the war it should escape, while another company which was in low water should be mulcted. But the real point is that we cannot proceed on lines of absolute justice in this matter. We can proceed only by rough-and-ready methods which do a fair amount of justice, because the conditions of war are so extraordinary and bring about such dislocation that complete equity between one individual and another cannot be entirely observed.

There are three measures of capacity for paying. There is the measure that comes about from having a high income, and this Bill in its earlier parts does take part of that high income by means of the enormously increased Income Tax which is being imposed. Then there is the measure of great additional prosperity due to what I called, in the earlier part of my speech, the fortunes of war. We are taking a large part of that by means of the Excess Profits Tax. But there remains a third measure of capacity, which is the possession of a considerable amount of capital wealth. In some shape or other there should be added to those burdens which are imposed in the Bill some form of tax graduated to the amount of capital wealth possessed by individuals and this trinity of tests would make I think the nearest approach to equity which can be done.

7.33 P.m.

Captain Crookshank

I must apologise to the House because the Chancellor of the Exchequer expected to be here to wind up the Debate, but the exigencies of war have taken him away. I am sure the House will understand that circumstances necessitate such sudden changes. There has been, as might be expected in this Third Reading Debate, a review of many of the proposals which my right hon. Friend put before the House less than a fortnight ago, and the discussion has ranged from very big things to small things. I have been asked to answer specific questions, and on the other hand I have been asked to consider the Budget in its wider aspect, so that it is difficult to find a middle way. Perhaps I might start with one or two of these smaller questions. The hon. Member for Kenning-ton (Mr. J. Wilmot) asked me to deal with something which he asked my right hon. Friend earlier. I have not been able to trace any actual case or decision given which in any way makes am alteration in the law, but I think that, generally speaking, the position is as he put it and it does touch upon a very complicated matter of the relationship between assessments under Schedule A and rents actually paid. It is a very wide and complicated subject, and all I can say upon it is that these matters are at the present time under consideration. If any gaps require to be filled my right hon. Friend will make appropriate proposals.

The right hon. Gentleman who has just spoken gave us a very interesting speech —interesting particularly in the definition he gave of those kinds of excess profits which might arise. It was interesting also because he came to the correct conclusion that there was a class of profit being made which it was entirely right should come within the scope of taxation of this kind. It was interesting further because the hon. Gentleman who opened the Debate for the Labour party rather deplored the fact that we should be called upon to legislate about excess profits at all and he has been answered by my right hon. Friend. I think, if I may say so with respect to the hon. Gentleman who opened the Debate, that there seems to be some confusion about the term "excess profits." What is being taxed is the growth of profits over standard years, and it is not the same problem as the problem which people talk about in terms of profiteering and excess profits which are out of all proportion to what anybody might anticipate.

Mr. J. Griffiths

You call them excess profits yourself.

Captain Crookshank

Excess profits over standard pre-war years. There is a Section in the Bill which deals with firms building up new connections. That would come under the term "excess profits," but it does not necessarily imply that those profits are excessive or arise from profiteering. That is an instance where there may be confusion of thought. Now that we have done away with the Armament Profits Duty, which was specifically designed to deal with large profits in the armament industry, and was itself a tax on the growth of profits, we have extended that system to the whole of industry. Therefore everybody will now be under this legislation and pay not on excessive profits but on the growth of profits as compared with the standard year which is an average of years prior to 1938.

The hon. Member for Walsall (Sir George Schuster)—I think as the result of something I said earlier with reference to Clause 13 (7)—said that nobody would know where they were. With all respect I think that is dealing with the matter far too largely. What that Clause deals with is not the whole question of Excess Profits Tax, but only those cases—which are not all cases by a long shot—where the profits of an industry in the standard years were not considered reasonable. The great bulk of firms will think those years were all right. It is not going to put all firms in confusion although some may be in doubt as to what will be taken into account. I really cannot anticipate that matter or take it further to-day. The hon. Member for Consett (Mr. David Adams) and the hon. and gallant Member for Chippenham (Captain Cazalet) told us that a reduction in the children's allowances would have a frightful effect. An instance was given of a man who earned £500 a year. I would again point out that the difference this makes to a married couple with two children with £500 a year earned income, is an extra tax of £3 15s.

Mr. Pritt

In justice to the hon. and gallant Member, he was referring to a man who had dropped from £500 a year to, I think, £150 a year, and who had also to lose his allowances.

Captain Crookshank

I believe he said he had joined up, but the hon. Member hung his argument on the income of £500 a year. Even in the case of the man with £500 a year and two children, the effect of the reduction is £3 15s. per annum as regards children's allowances. In spite of the prognostication of the hon. Member for Consett, I do not think this will have a serious effect on the birthrate. In reply to the hon. Member who read out a most terrifying account of the percentages of increased taxation on a wide range of incomes, of course, if he likes to discuss these matters in terms of percentages, no one can say him nay, but they are not very relevant. There was one case, I believe, of a married couple with two children where the tax went up from £1 13s. 4d. to £11 17s. 6d. in the next year. Anyone can see that if that is worked out on a percentage basis the dif- ference is very large, but when you consider the effective rate of tax it goes up from 1d. in the £ to 7d. in the £.

Mr. Pritt

That is still a very big percentage.

Captain Crookshank

It is still a big percentage, but people do not pay in percentages; they pay in £s. d. The argument which the hon. Gentleman opposite is quick to use in regard to higher incomes applies also to lower incomes. It is what is left that matters.

Mr. David Adams

Surely an increase of £10 is excessive?

Captain Crookshank

I do not think it can be argued as being an excessive burden in the present situation. As my right hon. Friend explained in his Budget speech, it was decided that there should be these alterations in these allowances in order that there should be a different curve; my hon. Friend will remember his gesture when he pointed it out, how there was this great burden which had to be paid for and how it was only fair that everybody should make a higher contribution than that which they were already making. My hon. and gallant Friend the Member for Chippenham said he deplored this Finance Bill because of the infinitesimal sum which it raises. I must say that "infinitesimal" is hardly the word that I should have used in this connection. Most of the hon. Members, from whatever angle they were talking, have endeavoured to impress the Committee and the House with the terrific burden which has been placed on the taxpayers, and to say that £107,000,000 extra taxation this year and £226,500,000 next year as a result of these increases is "infinitesimal" is, I think, rather straining language. The figures which have already been discussed in this House show clearly that, terrible though it is, the burden has, in the view of my right hon. Friend, been spread as wisely as he knows how.

While we have noted the protests which have been made, and which I may say were not unexpected, I would like to say, as we take leave of this Bill this evening, that we do recognise that vast sums of money are being raised. We have the assurance, I think, of spokesmen in all quarters of the House that, in the words of the hon. Member for East Birkenhead (Mr. White), we are right in raising as much as possible in taxation. That fundamental idea at the back of all these proposals has been accepted wholeheartedly, and the only questions have been what the taxation should be and who is to bear it. As long as time continues there will always be arguments on those points when fresh taxation is to be imposed. Fundamentally, the principle which underlies the Budget statement, and on which the Bill is founded, is that we should raise as much as possible by taxation now in order to finance the war; it has been accepted, and my right hon. Friend is very grateful that the House should agree with it. No doubt, burdens are being placed upon the taxpayers, but I believe, and I think the House believes, that they will bear them in the confident hope that, with the financial sacrifices involved, they will be bringing nearer the day of victory.

Question, "That the Bill be now read the Third time," put, and agreed to.

Bill read the Third time, and passed.