§ Considered in Committee.
§ [Sir Dennis Herbert in the Chair.]
§ EXCESS PROFITS TAX (INCREASE OF RATE).
§ 9.33 p.m.
§ The Chancellor of the Exchequer (Sir Kingsley Wood)I beg to move, 946
That the rate of Excess Profits Tax shall in relation to profits arising after the end of March, nineteen hundred and forty, be raised from 60 per cent. to 100 per cent.This Resolution is designed to implement the decision which was announced on the Second Reading of the Finance Bill, when I stated that I thought it was right and proper that the tax of 100 per cent. should not be confined to certain controlled undertakings but should extend to other trades and businesses, as denned by Section 12 of the Finance (No. 2) Act, 1939. I think it can be said that that decision has been generally welcomed. There were, however, one or two comments made in the course of the Debate as to some possible effects of the tax, and to these I should like to refer.I think the first and most important criticism was that a tax of 100 per cent. would give directors an undue incentive to spend. It was recalled that there was a considerable amount of extravagant expenditure in connection with the Excess Profits Duty during the last war. In the first place, in the circumstances of this war and the grave situation with which the nation is faced, and having regard to what the consequences may well be as far as trade and business are concerned and the difficulties of the future, I doubt whether with all those considerations in mind, the majority of directors would take such a course. Again, it must be remembered that it is only revenue expenditure and not capital expenditure which is involved. There is certainly one aspect—for instance, expensive office equipment, elaborate repairs and renewal of plant and machinery—which I think will be safeguarded, inasmuch as there will be limitations and little opportunity of obtaining luxury goods or employing luxury service.
I would also say this, as regards the payment even of increased remuneration and bonuses. I can see that in particular cases, if that course is pursued, it will only lead to future trouble and difficulty for the employer in the period after the war. I recognise, however, that the more difficult cases may arise in connection with family concerns and also to some extent with managerial and supervising staffs. There might be such a case as that of an employer who has a son in the business earning £200 a year, and the son could be given a nominal post as manager of a department and paid 947 £2,000 a year. There might be a case of a manager earning £1,000 a year being given a bonus of £5,000 for what the employer described as special services. Under the existing law it is impossible to challenge payments such as these, since the employer contends that the payments are wholly and exclusively incurred for the purposes of the business and the Revenue, generally, have no evidence on which they can rebut the employer's contention.
In order to meet at any rate the more flagrant cases, I have put on the Paper a new Clause which will give power to the Commissioners of Inland Revenue to disallow in whole or in part any item of expenditure—for the purpose of computing the profits, if any, on which they feel that tax should be charged—which cannot be shown to have been reasonably necessary for the purposes of the business. This Clause, which we can debate, if necessary, is drawn in wide terms in order to achieve its object, and there is no attempt made to prescribe any standard other than that of reasonableness. In this respect I should also remind the Committee that there is already in the law a provision against artificial transactions. This provision is designed to protect the charge from transactions of what are called the avoidable type. I can assure the Committee that I, for my part, shall not hesitate to ask for further powers, with retrospective effect if necessary to protect the tax from avoidance, if I find that anyone is resorting to any device calculated to circumvent the provisions and the intention of Parliament.
Because it is desirable that I should make the matter clear, I should also like to say a word to-night on an important matter connected with the assessment and collection of the Excess Profits Tax which will be dealt with administratively—that is, the treatment of deferred repairs and renewals. Undoubtedly war-time circumstances often preclude the possibility of carrying out repairs and renewals which have to be deferred until the end of the war. I have to state, to-night, that where the Commissioners of Inland Revenue are satisfied that expenditure on repairs and renewals has been deferred, and that special reserves have been made out of current profits to provide for the expenditure, the Commissioners will be prepared 948 to defer payment of the corresponding amount of Excess Profits Tax until the end of the war, and then, if the expenditure is then carried out, the duty in suspense will be discharged.
There is also one other statement that I must make in connection with this Resolution. Everyone in the Committee, I think, will agree that the increase of the rate of tax to 100 per cent. makes it all-important that the structure of the tax should be fair, and, in particular, that the profits standard—the datum line—measuring the excess should be a just one. The Committee may have observed that Clause 26 of the Finance Bill, which I hope we may reach to-morrow, provides a new and more equitable standard to be allowed to those concerns which, in the year of profit standards, either had no profits or such low profits as to constitute an unreasonable datum line for measuring the excess. But there is one matter which, I think, it is necessary to amend in relation to the increase to 100 percent.; that is what I may call the personal standard that exists as to an alternative of actual profits in the case of individuals, partnerships, and director-controlled companies. As the law now stands—it is a provision of the Finance (No. 2) Act, 1939—the personal standard consists of £750 per person, with a maximum of £3,000 where there are four or more partners or controlling directors. Certainly, for myself, I think, there is a case for increasing these figures. Undoubtedly, there are many businesses which have had low profits in the standard years where it would be very unfair to allow only £750 per head for the services of those running the business and then to take the rest in tax. I may tell the Committee that even when the tax stood at 60 per cent. strong representations have been made of many cases of hardship which have arisen in this connection. That may be all the more so when the tax is put at 100 per cent. Therefore, it is my intention, between now and the Report stage, to formulate an Amendment to allow a higher personal standard in such cases.
The only other criticism to which I would address myself is that the 100 per cent. Excess Profits Tax will react adversely on Income Tax and Surtax. It is not possible for me to give figures to-night, but I think the effect will be neg- 949 ligible in the present financial year and in later years the loss will be only a fraction of the increased Excess Profits Tax. I will answer a question which was put to me by my hon. Friend who sits behind me, who asked whether I could state, in the circumstances of the time and in the light of the proposals that I am now making, what are the duties of directors. I think that my answer would be that they should endeavour to avoid needless and extravagant expenditure, that they should carry on their businesses as efficiently as possible, that all who are engaged on war work or the export trade should increase their production as much as possible, and that everyone, as one of my hon. and learned Friends put it the other day, from the head of the business to the last joined boy, should put his whole back into the job in which he is employed. I hope and believe to-day—and I speak with confidence in this connection—that there exists a greater incentive than profit, and that in the great majority of industries and those engaged in them there is a will to victory and a determination to throw every ounce of our strength into the national effort by increasing the production of everything required for the successful prosecution of the war.
§ 9.38 p.m.
§ Mr. Pethick-Lawrence (Edinburgh, East)I have listened to the right hon. Gentleman with a great deal of interest, and I think that in all parts of the Committee there will be sympathy and support for what he has said. When I first learned that it was the intention of the Government to raise the Excess Profits Tax from 60 to 100 per cent., I naturally welcomed the proposal, not because I like to see people heavily taxed but because we all feel that at this critical time in the history of the country it is unseemly, to say the least of it, for certain individuals and companies to be making larger profits than they made before the war. The welcome which I gave to the decision of the Government was tempered, as I think it must be tempered in all parts of the Committee, by the recollection of what happened in the last war. I remembered that the Excess Profits Duty was responsible for a great deal of waste and extravagance, and that, though it brought in large sums of money to the Exchequer, it undoubtedly hindered in some respects the successful prosecution 950 of the war because of the great waste and extravagance in the national resources which it brought about. In that case the Excess Profits Duty was only 80 per cent. It was for that reason that the predecessor of the right hon. Gentleman said he thought it desirable to keep the tax at 60 per cent., largely with the hope of avoiding that misfortune in the present case. In spite of that, the Government have decided, and I think rightly, to raise the tax to 100 per cent.
What, broadly, is the case on the other side; what is the danger that we have to face and overcome? I propose to state it in the broadest possible terms. We are living at present in a sort of mongrel condition between private enterprise and public enterprise, and in so far as private enterprise continues to exist it will, in ordinary conditions only carry on successfully provided the motive power of private enterprise remains. The motive power of private enterprise is profit, and the question is whether the system of private enterprise will function successfully if one part of the motive of private profit is taken away. Of course, it is not taken away altogether by this proposal, because private enterprise still has to secure that it makes at least as much profit as it made before, and so far as there is any danger of profit not reaching that limit, the motive of private profit remains. It is only in the case where it reaches and threatens to surpass the previous standards that any question of the damping down of the motive of private profit arises.
The actual dangers are these: First of all, seeing that additional profit is all to be skimmed away by the public exchequer, there is the danger that if firms think that by going along in their ordinary leisurely course they will reach that standard in any case they will not show any enterprise or initiative in taking up fresh business. The second danger is that if they think they are likely to surpass their previous profits, they will tend to prevent that occurring, as they did in the last war, by spending the money and calling it current expenditure. That will keep them from making high profits on paper and yet give them some of the benefits which accrue from profits.
Let us see what is the answer to all that. The first answer that the Chancellor of the Exchequer makes—I think that to a very large extent it is a good one, and 951 I hope it will prove to be almost entirely a good one—is that unworthy motives which might influence directors and private firms will not operate in this hour of national emergency. I believe, as he believes, that in the great majority of cases worthy motives will prevail, but we must recognise that there is a good deal of the old Adam in human nature, and if patriotism demands getting up early in the morning and thinking out new ways of increasing business and all the rest of it, with no profit to be derived from it at the end of the day, there is a danger that a certain number of people, at any rate, will not go to that extra trouble and worry and possible risk. I do not know that anything that the Chancellor of the Exchequer has told them will put a spur into these people. They will say: "Why should I unnecessarily exert myself? I am doing very well. I am working hard, and I am producing every reasonable result. I am not going to take the additional risk of making profits if it is a question of 'heads I lose and tails I don't win?' "Therefore, despite what the Chancellor of the Exchequer has said, I think that risk will still remain.
With regard to the other points of the Chancellor of the Exchequer in the new Clause that is down, I think the Clause goes some way to check abuse. I hope that it will prove as successful as he thinks it will. It certainly gives wide powers, and if they are used, they will have a considerable effect in that direction. Perpetual vigilance will be required by the Government in all the fields in their control to make sure that the opportunities of evading their real duty is not taken advantage of by certain individuals in the community—I would not like to say by business as a whole—because there are black sheep everywhere. As we have to be careful and vigilant against the Fifth Column in the political and military spheres, so have we to be vigilant against what I may call the Sixth Column, of people who are not going to do their duty in the financial sphere. That obligation will rest with full force on the Government, whose business it is to see that these evasions and abuses do not arise.
I think I have said enough on the subject of the raising of the rate to 100 per cent. I agree with the Chancellor of the Exchequer that the increase in the 952 rate makes it more important than ever that the tax should be fair. I should certainly say that we shall examine with care and with every desire to be fair the new proposals that are being introduced into the Finance Bill to attain that object. It must be the wish of everyone that these drastic proposals should be as fairly administered as possible. The right hon. Gentleman will probably recollect that in the Debates that have taken place on the various forms of the E.P.T. as it has progressed—I forget what it was originally called—some of us have not entirely agreed that the standard years were altogether suitable. I do not know how far we shall be able to discuss this matter when we come to the Finance Bill; it certainly cannot be discussed now. That is a point which will have to be looked into afresh, as well as the points to which the right hon. Gentleman has already referred.
I think that I have now covered the ground, not from the narrow or party point of view, but from the point of view of the Committee as a whole. The clouds on the national horizon are dark, and they can be withstood only by a united people, prepared to make sacrifices in every direction consistent with upholding the national morale and the vigour and determination of our people. We have to make sure that this new proposal, sound as it is, and much as it will be supported in all parts of the Committee and in the country as a whole, works out fairly and that no black sheep will be in a position by any device to avoid their due share of the burden which is put on the country.
§ 9.51 p.m.
§ Mr. Hely-Hutchinson (Hastings)After what has been said by my right hon. Friend the Chancellor of the Exchequer and by the right hon. Gentleman opposite, there is really little to be said on this Resolution but that we shall await with interest the Clause which my right hon. Friend will introduce to put teeth into the proposition to control expenditure. The speech of the right hon. Gentleman opposite drove home every point which I should like to have made, and I am particularly grateful to him for what he said. I think perhaps that one general comment is permissible, and that is that for years hon. Members opposite have been trying to persuade us that the profit motive is naughty. Now in war-time we 953 on this side of the House agree that whether it is naughty or whether it is good—which, after all, is merely a doctrinal point—the profit motive is something which, in face of the national need, we must abandon in war-time. Therefore, we all agree that during the war we must produce for use and not for profit. So we stamp on one side of the currency which we shall use during the war, the words, "Profit motive abandoned." But turn over the coin, and what do we find stamped on the other side? We find the words, "Economy motive abandoned," which is the very point which the right hon. Gentleman opposite has been making. So perhaps it may be that after all capitalism was not so silly.
The point, however, is that the essential corollary to 100 per cent. taxation is control of expenditure, and it is upon the degree of control which my right hon. Friend succeeds in bringing about, that the success of this Measure depends.
§ 9.53 p.m.
§ Lieut.-Colonel Sir William Allen (Armagh)I am glad to have the opportunity of saying a few words on this particular Motion of the Chancellor of the Exchequer. I should like to congratulate him on the clarity of his statement. He always brings that clarity to bear on everything that he touches in connection with his office, and the Committee appreciate the way in which he has explained this very difficult tax. I well remember the 60 per cent. duty raised to 80 per cent. and the howl of execration which followed when that was done, but in those days we had not the vision of the present Chancellor of the Exchequer in trying to find some way by which to moderate the difficulty which such a tax placed on the taxpayers generally. Here we have a Chancellor of the Exchequer who, although he has decided to raise the tax to 100 per cent., tries to find a method of relieving those who might be penalised because of lack of profits prior to the introduction of the tax. He has shown a vision in that way which I believe will meet with the hearty approval of taxpayers generally. He referred to those who might possibly have recourse to undue and unnecessary expenditure—in fact, extravagant expenditure. That is to be disallowed. The difficulty will be as to who are to be the judges of this disallowance. In the first instance, there is 954 the tax collector; he is the first individual who sees the balance sheets of the companies.
§ The ChairmanI must stop the hon. and gallant Member on this. I had really a little doubt as to whether the Chancellor himself was not going too far, but I thought it was for the convenience of the Committee that they should have their attention brought to the fact that he was intending to make these proposals. These matters may be raised on the new Clauses of the Finance Bill. This is not the occasion for going into the exact implications of the proposals of the Chancellor.
§ Mr. Benson (Chesterfield)May I point out, with great respect, Sir Dennis, that Clauses in this Financial Resolution give power to increase taxes? Surely it is essential that we should be enabled to discuss the whole question, from every point of view, as to whether this increase is or is not desirable. Surely, if difficulties arise as a result of the tax, it is essential to discuss fully whether those difficulties can be met, before the proposals are agreed to.
§ The ChairmanThis is not the final stage. What is now relevant is a matter which, under the Rules of the House, is in the hands of the Chairman.
§ Sir W. AllenI am much obliged, Sir Dennis, for your guidance on that subject; but the Chancellor did refer to the possibilities of extravagance in connection with this 100 per cent. tax, and he said that, of course, it would be looked into by certain people and disallowed. My question was simply as to who would be the judges of this disallowance.
§ The ChairmanThat is a question which must come up on the Clause which will deal with that particular proposal for allowing or disallowing such expenditure.
§ Sir W. AllenWith reference to the 100 per cent. tax, the right hon. Gentleman has met the case very fairly, by comparison with the previous Excess Profits Tax. According to his idea, the matter is to be referred to a Board of Referees. That, I think, is a very satisfactory arrangement. I do not intend to go into that any further. The Chancellor told us that the Board of Referees would treat the 955 Excess Profits Tax and the question of additional burdens on those who have had very small profits prior to this tax in a generous way. People will bear that in mind when they have the opportunity themselves of pleading, as I presume they will, before the Board of Referees. We are grateful to the right hon. Gentleman for showing so much vision as to assist not only the Commissioners of Inland Revenue, but also the people affected.
§ 9.59 p.m.
§ Mr. Mander (Wolverhampton, East)I am glad to be able to support the Resolution. I have always felt that, sooner or later—and it has come sooner—the 60 per cent. would be increased to 80 per cent., and finally to 100 per cent. When people are making immense sacrifices, far beyond anything that one can value in money, it is obvious that every possible sacrifice should be made from a financial point of view. I think that the fact that this tax has been raised at such an early date to 100 per cent. has commended itself to the whole country. I was very interested to note that the Chancellor of the Exchequer said that he thought that people would not be animated at all by any commercial motive in the work that they did in their businesses now, and that they would work from an idealistic point of view for the State. I was glad to get the point confirmed that this has truly become a completely Socialist Government. The hon. Member for Hastings (Mr. Hely-Hutchinson) said that all thought of profit had now been put asideentirely for the rest of the war. That is all very well, but I do not know that everybody will reach the same heights of idealism as those two hon. Members who have spoken. There certainly will be a number of people who will have a lower motive and try to find every possible way they can to avoid taxation.
What is the position? We have to bear in mind in connection with raising the Excess Profits Tax to 100 per cent. that there are certain checks. First of all, you have your prices investigation going on all the time in every factory in connection with all articles made for the Government. That keeps down the profit made on each individual article and makes it more necessary that there should be energy and drive shown by the management in order to make sufficient profit to 956 pay the ordinary dividends. There is the further consideration that should not be lost sight of, that if it were found that a particular factory were content with simply going on in their old leisurely way, with a full day's work and no overtime and a single shift, whereas the machinery they possessed was capable of turning out articles of great value for the prosecution of the war on a three-shift basis, and they refused to do so, obviously there would have to be a further safeguard. Under the Defence Regulations the Government could take over that factory, which would be another incentive tending to keep the management up to its task. Even when you have your 100 per cent. Excess Profits Tax, it does not mean that firms will not make extra profits. Under the law as it stands at the present time a company which is able to choose a good standard year—and it will naturally take the one most favourable to itself—will be able to make increased profits without coming under the Excess Profits Tax at all and it will even be able to pay higher dividends than it was paying in the standard year without coming under the new tax. I know that I cannot go into this matter now, but I mention it in passing because it arises out of it.
I am very sorry that the Chancellor of the Exchequer announced yesterday that he had dropped the Limitation of Dividends Bill, because I am sure that there is still need for it. It will be possible, in spite of this new taxation, for companies, if they so desire, to pay increased dividends. That is a matter to which he will have to give attention sooner or later. There is one point to which I hope the Chancellor of the Exchequer will direct his attention. I find that among people who are most expert at construing and attempting to understand and to advise business people as to how these schemes will work, there is the greatest difficulty in understanding the meaning of the Clauses that are being put forward.
§ The ChairmanClearly the hon. Member is getting on to something which is outside the Debate. I think it is fairly clear that this is a question of raising existing taxation from one figure to another. It is quite legitimate to discuss all matters which affect the advisability or otherwise of raising it, but the method of 957 ensuring that it is not evaded or avoided is not a matter which can be debated in detail now.
§ Mr. ManderI was trying to put it in this way: It is very little good raising a tax from 60 per cent. to 100 per cent. if you frame your Regulations in such a way that the people who are covered by them are unable to understand what they are about. I would ask the Chancellor to bear that point in mind.
§ 10.6 p.m.
§ Mr. Denman (Leeds, Central)The Chancellor has almost the unanimous approval of the Committee in raising this tax to 100 per cent. I would like to say a few words of thanks to my right hon. Friend opposite for expressing what I think is felt widely in the Committee—the doubts and dangers that are incurred in this process of raising the tax. For the moment, I believe, with the Chancellor, that those dangers will not operate, that industry in all its branches will give of its best to the country and that so long as we are in our present peril there will be no thought of excess profits.
§ Sir Herbert Williams (Croydon, South)Does the hon. Gentleman suggest that people who work on Sundays should have single pay or double pay?
§ Mr. DenmanI will refer to that point in a moment. I think we have to consider what might happen a little further ahead if, in the course of the next few months, we escape from our present perils and come to more normal circumstances and more normal working. The question of removing the economic incentive to increased production will, I think, be a danger in the long run and one which it is worth while trying to obviate. We should adopt the sound principle which we have adopted in regard to labour. We have laid it down that additional effort entitles a worker to additional reward. That, we all agree, is good, sound common sense. When we come to an industrial corporation, we say that additional effort, no matter what additional pressure is put on existing plant, shall reap no extra remuneration whatever—
§ Mr. Pethick-LawrenceThe hon. Gentleman does not seem to see the point. What we are thinking of in this case is companies. The fact that workers 958 and managerial staffs put extra mind and thought into turning out more work results in shareholders receiving more money. The two things are not on the same footing at all. While workers were giving extra labour, shareholders, owing to fortuitous circumstances, would be making larger dividends.
§ Mr. DenmanIf in the leaders of a corporation you remove an important economic incentive, I think in the long run that is likely to happen. I am not arguing for the purpose of suggesting that the 100 per cent. Excess Profits Tax should be changed—we should keep to that—but that we should incorporate in that principle some regulation of the standard profit.
§ The ChairmanJust at this point the hon. Member is getting beyond what is relevant to the Debate. We must not discuss methods of enforcing this tax.
§ Mr. DenmanI was going to suggest practical methods whereby this 100 per cent. tax could be enacted without that danger. There is a common desire in the Committee to make this 100 per cent. tax a success, and by avoiding these obvious dangers we are much more likely to make it of permanent value to our fiscal system than if we allowed these dangers to develop and perhaps ruin the tax in a later stage.
§ 10.12 p.m.
§ Mr. Benson (Chesterfield)I am sure the Committee feels a strong desire to take the profit out of the war. There is no dispute as to the desirability of that, but, quite frankly, although from an emotional standpoint I welcome this 100 per cent. tax, I am by no means satisfied that the Chancellor's proposals are likely to be effective in dealing with the various problems which we all realise must be raised. This question of a 100 per cent. tax is a revolutionary proposal. It means that we are completely abandoning the whole basis of the capitalist system; we are abandoning the motive power of private profit. It is all very well to say that we are substituting for it the motive of patriotism. That is a desirable aspiration, but does anybody really believe that that motive, which in certain circumstances raises a man to heights of heroism which are beyond description, is the kind of motive which works in season and out 959 of season when a man is at a desk? Frankly, I do not believe it.
§ Mr. Leslie Boyce (Gloucester)Does the hon. Member realise that he has just advanced the most devastating argument against Socialism that has ever been advanced in this House?
§ Mr. BensonI do not realise anything of the kind. The hon. Member completely overlooks the fact that you have an industrial structure which has the basis of a given motive, and if you change that motive, you will require to change your industrial structure. I never suggested that you could never run industry save on a profit basis, but I say that under a capitalist system, with a capitalist industrial structure, and with a motive which is consonant with that structure, if you interfere with the motive, you interfere considerably with the whole efficiency of the system.
If you alter the structure, it is a different matter. We have the Civil Service. Does anybody suggest that ordinary private capitalists are any more efficient than civil servants. [Interruption.] All I can say is that I differ very strongly from those hon. Members who say "Yes." What I say is that under the capitalist system, if you tamper with the motive which is the mainspring of the capitalist system, you must take counterbalancing steps to see that you still retain the efficiency that is absolutely essential in war-time. There are one or two points that I want to put. We have a very elaborate costing system which applies to certain industries and certain products. Both the Estimates Committee and the Public Accounts Committee know full well that the old system of cost plus a percentage has no motive for economy and never produces economy. From that old system of costing we have now gone to a most elaborate method of fixing prices on what is known as a target basis. A price is fixed after a careful and elaborate investigation of the costs and then if the firm through greater efficiency reduces its cost still further, it is allowed to show a percentage underneath that target price.
§ The ChairmanThe hon. Member must realise that he may not discuss that now.
§ Mr. BensonI was giving an example. The point that I want to make is that 960 under an elaborate costing system we give the incentive of additional profit, but under this Resolution we are taking away that incentive of the additional profit which can be made by saving costs below the target price. Therefore, this interferes with the most careful and elaborate costing system.
§ The ChairmanI would point out to the hon. Member that a discussion of the costing system now is entirely out of Order.
§ Mr. BensonI am not quite sure what we may discuss on this Resolution. Is it in order to discuss the effects of raising the tax from 60 per cent. to 100 per cent.? Unless we can discuss the effects of the tax, I do not see that any discussion can develop.
§ The ChairmanIf the hon. Member cannot find anything to say that is in Order, I am afraid he must not ask me to suggest it to him.
§ Mr. BensonI am putting a general question as to whether the effects of the tax are relevant to a discussion on this Resolution. I hope the Committee will realise that we have some very big problems to meet which will require far more elaborate proposals than the proposals under the powers given in the new Clause. In a matter of this sort, it is no use depending on Christmas-card sentiments. It is of vital importance that we should maintain the efficiency of industry. That is just as vital as making a grand gesture and saying that we will take all excess profits. Unless we get some proposals of a far more elaborate character than those indicated by the Chancellor of the Exchequer, this Excess Profits Tax of 100 per cent. will do more harm than good.
§ 10.20 p.m.
§ Mr. Holdsworth (Bradford, South)The hon. Member for Chesterfield (Mr. Benson) suggested that there was no incentive to industry other than profit. It is a remarkable fact that not one individual in industry to whom I have spoken has taken exception to this 100 per cent. Excess Profits Tax. All they have asked is: Are the proposals with regard to standards, equitable and just and fair? I spent some time on Saturday with three of the leading business men, not only in Yorkshire but in this country, and they 961 said to me, "As long as we are left with our lives and the ability to work, we are content, if we win the war." I think that is the general attitude. I am glad that the Chancellor made the statement which we heard from him earlier. Nobody would attempt to justify what I would call fake expenditure. There is one way of avoiding it, and that is by giving adequate standards. I wish to ask the right hon. Gentleman one question. He referred to a Clause, dealing with the personal standards. Will that amendment of the law which he proposes to put down refer merely to the £750 for the individual or will it apply over the wider range—
§ The ChairmanI am afraid I must ask the; hon. Member to wait until those proposals come before the House.
§ Mr. HoldsworthMay I submit that it is impossible to discuss whether or not this tax should be raised from 60 per cent. to 100 per cent. unless we are able to form a judgment on the fairness with which the machinery will work?
§ The ChairmanI have already reminded the Committee that this is not the last stage of the legislation necessary in connection with this tax. This is a Resolution which will authorise certain legislation. It is when we come to the consideration of the Finance Bill that the matters referred to by the hon. Member will arise.
§ Mr. ManderIs it not the case that the Chancellor of the Exchequer referred to this matter in some detail?
§ The ChairmanI have already said that I doubted whether I should have allowed the Chancellor of the Exchequer to go as far as he did, but I thought it would be convenient that the Committee should know that the right hon. Gentleman intended to make certain proposals. The right hon. Gentleman did not, however, go into the proposals in detail, and I cannot allow the Committee to go into them in detail now. They will appear on the Order Paper for debate in another form and on another occasion.
§ Mr. HoldsworthI have no desire to challenge your Ruling, Sir Dennis, and I have only asked the Chancellor of the Exchequer to say whether his statement with regard to the proposed Clause, was a full statement. My view of whether it is right to increase the tax from 60 per 962 cent. to 100 per cent. must, of course, be coloured by the way in which it is proposed to carry out the change. If a man rendering a personal service can get away without paying any Excess Profits Tax, such as a chartered accountant, or a solicitor, surely the private individual in business who risks his capital in his enterprise should have his standard amount materially increased. I have heard only one complaint, that certain individuals in certain professions who will be helped by the war, such as chartered accountants in the last war, are left out and can have £10,000, £20,000 or £30,000 without excess profits. I should like the Chancellor of the Exchequer to give this his serious consideration, and I shall look with great interest at his proposed Amendments. Are the Amendments to be on the Order Paper to-morrow morning so that we can discuss them on the Committee stage, or will they be discussed on the Report stage?
§ 10.26 p.m.
§ The Financial Secretary to the Treasury (Captain Crookshank)May I appeal to hon. Members? As has been pointed out, this is not the last stage when we can discuss these matters. Indeed, we cannot discuss proposed Amendments to be made to the Finance Bill until we see them. I appeal to hon. Members to let us have this Resolution now, because there is other urgent business, not exempted, which it is of real importance that we should take, more particularly the Bill coming from the Ministry of Labour. Up to now there has been general agreement to the proposition that a 100 per cent. tax should be introduced, without going into any details, and as has been pointed out we cannot discuss any details on this occasion. The Chancellor, merely for the convenience of hon. Members, outlined in very general terms some further Amendment to the Finance Bill because of the change which is being introduced in this Resolution. As we have not suspended the 11 o'clock Rule, and as we have this other urgent business which we agree should be put through to-night, I hope the Committee will be good enough to allow us to have this Resolution, and that hon. Members will reserve their further criticism for a later stage when, according to the Ruling of the Chairman, it can be more easily elaborated.
§ 10.28 p.m.
§ Sir Herbert Williams (Croydon, South)My hon. and gallant Friend bases his appeal on the grounds that we are all agreed. The plain truth of the matter is that we are all not agreed. I do not suppose there is one Member in the Committee who does not know in his heart that this is a most stupid proposal.
§ Mr. Pethick-LawrenceOh, no.
§ Sir H. WilliamsThe right hon. Gentleman knows that it is a stupid proposal and said so.
§ Mr. Pethick-LawrenceNot at all.
§ Sir H. WilliamsSome years ago in this House we witnessed the spectacle of the Lord President of the Council abandoning his proposal for an Excess Profits Tax because it was realised that it would be a demoralising proposal. All Excess Profits Taxes are bad. They remove the stimulus, and when you carry out a 100 per cent. tax it is not merely wasteful expenditure that you are going to have, but the knowledge of those controlling industry that any efforts they put forward can produce no appreciable result to them, not only in an effort to increase output, but in efforts to avoid waste, does not matter. In due course this will mean that these proposals, which I regard as thoroughly humbugging proposals, will do infinite harm. They will demoralise labour in this country. At this moment men are being asked to work seven days a week. I think it is wrong, and I have said so. I think it is very bad. When they work on Sundays they receive double pay. Is there any proposal to tax the men?
It is brought forward with the idea that you will induce the great mass of people to put forward great efforts because their employers will be taxed 100 per cent. But they can rob the community to their hearts' content, as I know they are doing. We are doing a stupid and foolish thing which will hamper our war effort, upset the labour situation and disturb production. Do not let the Committee give assent to this Resolution without realising—[An Hon. Member: "Vote against it!"]. What is the use? Nobody will vote with me when the Committee is obsessed with emotionalism. Some people have good standards. This pro- 964 posal means that some people will pay7s. 6d. Income Tax and others 90 and 95 per cent. tax, with the result that many people will go through the war without any reward for their efforts. There is no equality of sacrifice. This is a proposal put forward for reasons that are wholly unintelligible and unscientific. It will produce great evils—and we all saw the appalling evils of the Excess Profits Duty in the last war in the demoralisation of labour, strikes and other troubles. This proposal will help to bring about the same evils. I only want to put it on record that one person at least does not agree with what I regard as a foolish proposal.
§ Question put, and agreed to.
§
Resolved,
That the rate of Excess Profits Tax shall in relation to profits arising after the end of March, nineteen hundred and forty, be raised from 60 per cent. to 100 per cent.
§ Resolution to be reported To-morrow; Committee to sit again To-morrow.