§ In the proviso to Sub-section (3) of Section twenty-seven of the Finance Act, 1940, the word "six "in the second line shall be altered to "eight," and the word "eight" in the fourth line shall be altered to" ten" —[Sir H. Williams.']
§ Brought up, and read the First time.
§ Sir H. Williams
I beg to move, "That the Clause be read a Second time."
In this case I do not think I shall have the support of the hon. Member for Leigh (Mr. Tinker). It may be remembered that in connection with the Excess Profits Tax there are two methods of assessment, and the object of these two methods is to make the tax reasonable and fair as between one citizen and another. I do not think that because one man has been particularly prosperous in the past he should be allowed to go on indefinitely whereas another man who has had a rather recent unprosperous past should have no consideration at all. That was why, in the Finance Act to which I have referred, my right hon. Friend or his predecessor introduced a provision which was commonly described as the hardship Clause. Under that provision, where a firm's immediate past has, for any reason whatever, provided it with a very low standard, it can apply for an alternative standard based upon its capital, and it is allowed, in cer- 775 tain circumstances, to have as much as 8 per cent. on its ordinary share capital, subject to the condition, however, that taken over the whole of the capital, the amount is not to be more than 6 per cent.
On the last occasion I tried to explain to my right hon. Friend that this operates very unfairly in the case of companies which have undergone rapid development during a period of great difficulty and adversity—rapid development in the sense that the employment they have provided has grown very rapidly, that they have obtained very little reward, and that they have had to raise the money necessary for the development under most unfavourable circumstances, that is to say by issuing new preference shares at high rates of interest. The holders of these preference shares will continue to get the high rates of interest, and their position is safeguarded, but the men who have taken the fundamental risk, the ordinary shareholders, will not be able, in some cases, to have any reward of any sort as long as the Excess Profits Tax exists. I do not think that, as long as any sort of capitalist system exists, even the hon. Member for Leigh (Mr. Tinker) would say that the owner of ordinary shares in a large company is not to get anything during the period of the war.
I could furnish Individual cases of companies which, under the Clause as it now stands and as long as the Excess Profits Tax remains in operation, will not only be prohibited from distributing any dividend to their ordinary shareholders, but will not be able to make any provision for reserves. That is a position which is very bad and very detrimental to the public interest in the long run, from the point of view of employment after the war is over. In the Debate yesterday, the case for the 20 per cent. being put into cold storage was argued very strongly by the Chancellor, and though there was opposition from some quarters, this received a great deal of support from those who realise that, after all, the fundamental job of employers is to provide employment. That is not a function that will ever be performed by Employment Exchanges, which can only direct attention to where employment happens to exist. Unless the institutions which exist for the production of goods and the provision of employment have the necessary resources, then, when 776 the war ends, there will be a state of unemployment much graver than would otherwise be the case. On the grounds of public interest, and quite apart from what may be regarded as the selfish interests of people who think that they may be entitled to some payment for their efforts, there is a very powerful case for this new Clause. Whether the Chancellor will make any concession is, of course, a different matter. My right hon. Friend is stony-hearted. However, there are wider considerations of public policy to be taken into account over and above the vitally important and urgent necessity of getting money for the Exchequer. There are powerful arguments for this new Clause which, although it would not affect a large number of cases, would affect an important number of cases, and I ask my right hon. Friend to look into the matter.
Mr. Graham White
It is a little difficult to have this discussion towards the end of our proceedings, because, although I doubt whether my hon. Friend the Member for South Croydon (Sir H. Williams) will get much support for his new Clause, he has in fact raised a quite important case. The Chancellor has done a good deal to recognise the inequality which arises in some instances under the Excess Profits Tax. I do not think there is anybody in the Committee who questions for one moment the desirability of a 100 per cent. Excess Profits Tax, but what has happened, partly because of the beneficent intentions of the Chancellor, is that there is a widespread belief that a company of the sort to which my hon. Friend the Member for South Croydon has referred, is in a position to pay a remuneration of 6 per cent. to those who have put their money into that enterprise. In a limited number of instances that is not the case. I think the Chancellor of the Exchequer knows the kind of case in view. On some other occasion, when we had more time before us, it would have been useful to give more publicity and consideration to this matter. The hon. Member for South Croydon has raised a matter which does not in any way challenge the principle of the tax but the equity of its incidence.
§ Sir K. Wood
I will carefully note what both my hon. Friends have said on this matter. I cannot go further in making a concession in regard to the Excess 777 Profits lax than I mentioned in my Budget Statement. While I will study what they have said, and have regard to it in the next 12 months and see what the position is then, I cannot go further than I have indicated in my Budget speech.
§ Sir H. Williams
In view of the mildly optimistic speech of the Chancellor of the Exchequer, I beg to ask leave to withdraw the new Clause.
§ Motion and Clause, by leave, withdrawn.