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There are two more large issues with which I wish to deal. Both were referred to in the statement that the Prime Minister made on 27th April when the House approved the introduction of compulsory military training. The first has to do with excess profits in war time. I would remind the Committee that the Prime Minister in the speech to which I refer, stated our intention to limit the growth of profits of armament firms. That intention was carried out by the Armament Profits Duty in the last Finance Bill. But the Prime Minister went on to say that, if war ever came upon us,
we intend that a system shall be introduced to deal with all profits arising out of war, and not merely with profits arising out of armaments."—[OFFICIAL REPORT, 27th April, 1939; cols. 1350–51, Vol. 346.]
§ In fulfilment of that undertaking, I am proposing to introduce an Excess Profits Tax which is modelled on the Armament Profits Duty enacted in the last Finance Bill, and one of the Resolutions to be put from the Chair when I sit down will provide for this Excess Profits Tax. In essence, the system devised for Armament Profits Duty will be applied over the whole field of trade and industry generally, and, in consequence, there will be no further need to deal with armaments profits separately. The proposed Excess Profits Tax will, therefore, be a tax of 60 per cent. on any excess of the profits of any trades or businesses since 31st March last over their profits for a pre-war standard. The pre-war standard will be arrived at by the use of the same alternatives as we adopted in connection with Armament Profits Duty, and in the case of new businesses there will be a standard arrived at on similar lines. I cannot at present estimate—I cannot attempt to estimate—the yield of this taxation. It is unlikely to bring in any considerable revenue in the current year, both because the machinery of assessment and collection will have to get going and because, in the majority of cases, the accounting period for which the tax will be payable will be a period ending at
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some date hereafter. Most businesses make up their accounts to the end of the calendar year and in those cases the tax can only be collected after the trading results have been examined and compared with the past results. The National Defence Contribution will remain in operation, but only as an alternative to the Excess Profits Tax, so what is collected from a particular business will, in effect, be whichever of the two taxes is the higher. The remaining matter has to do not with increases of profits, but with additions to the capital wealth of individuals during the war. I should like to quote the Prime Minister's words on 27th April. He said:
It should be remembered that the changes which are induced by war may alter very materially the relative values of property, and that whereas some may be enriched others may be impoverished. It is doubtful whether the matter can be dealt with effectively during the progress of the war until the permanent change in value has been established, but I think it is possible that the subject could best be grappled with by a levy on war time increases of wealth, such as was examined by the Select Committee in 1920 but not at that time proceeded with. I want to say again to the House that we are studying this matter further at the present time, so that we can work out a scheme which can, without delay, be put into operation if ever the occasion should arise.".— [OFFICIAL REPORT, 27th April, 1939; col. 1351, Vol. 346.]
§ I wish to inform the Committee that this matter is being further studied, in accordance with the Prime Minister's promise. A levy of this kind could not appropriately or usefully be attempted during the progress of the war—the Prime Minister indicated as much. So far as it may be desired, or intended, to pay special attention to accumulations of wealth due to the war, the necessary calculations cannot be made until the end of the war. Apart from that circumstance, if one looks at it practically, delays in calculation, which are very elaborate, delays in assessment, and delays in collection are inevitable under war conditions, and would make anyproject for a levy during the war impracticable. In war-time taxation of income is the practical and effective method of proceeding. If Parliament is resolute, as I invite it to be, in imposing taxation, that fact will powerfully tend to prevent and forestall accumulations of war wealth. The subject—we have been studying it rather closely—involves technical problems in a variety of aspects, and I do not 1379 propose, therefore, to say anything more about it to-day, except to reaffirm the Prime Minister's statement of our intentions.
§ This emergency Budget will indicate to the Committee, and, I hope, to the country, the gravity of the financial and industrial problems involved in the waging of war. But let us get a few crumbs of comfort by way of comparison. We should bear in mind that, however serious our problem may be, the financial problem which confronts Germany is infinitely greater. Let me just take one illustration before I close. The pound sterling remains, when all is said and done, anaccepted medium of international trade. The pound sterling is available for all proper purposes at the official rate of exchange which is published daily. It is true that a limited number of transactions have taken place in other countries at a somewhat lower rate, but these rates are not a matter of primary importance, and their publication, I think, is perhaps rather misleading. On the other hand—let the Committee observe this—even before the war the official rate for the German mark reallymeant nothing at all. There were over 50 different kinds of marks, each showing a different degree of depreciation, and anyone who possessed a frozen balance in marks was very fortunate if he could realise it at a twentieth part of its official value. Atpresent the German mark has no position as an international currency, and it is likely to lose rapidly its value as an internal currency. The inflationary tendency which has been latent for several years is bound to develop further under war conditions. It is only 16 years ago—some of us remember it—when German currency depreciated in a short period until it needed 1,000,000,000 marks to buy what one mark bought previously, and if, as I believe to be the case, most people in Germany are afraidthat this phenomenon may recur, I cannot myself see any reason to regard their fears as entirely groundless.
§ I have now to the best of my ability discharged the task which was set for me to-day. I have proposed additions to our resources by further taxation which ought to bring in £107,000,000 this year, and £226,500,000 next year. It is not an enviable task which I have had to 1380 discharge. I have had to propose very heavy increases to the burdens which taxation lays upon our people. I am convinced that my fellow-countrymen will shoulder these burdens in the spirit of which the Prime Minister spoke yesterday from this Box, when he declared that the winning of the war depends upon the determination, courage and endurance of ordinary men and women. If the price of victory be high, it is a price worth paying, for it is the price of liberty and of all that makes life worth living for Europe and for ourselves.