NEW CLAUSE.—(Amendment of ss. (4) of s. 13 of 2 and 3 Geo. 6, c. 109.) (Hansard, 18 June 1941)

§ Sir John Wardlaw-Milne (Kidderminster)
I beg to move, "That the Clause be read a Second time."
It will be within the knowledge of the Committee that in the computation of profits for the payment of Excess Profits Tax certain years are laid down in the Finance Act (No. 2), 1939. The object of our legislation, as I understand it and 780 as it has been explained very often, is that Excess Profits Tax should be paid in the shape of money received in excess of the profits which a business would have earned previous to the war, and the object of the House of Commons and the country has been to ensure that people do not make money out of the war. Therefore, we want to see that the profit on which they pay Excess Profits Tax is a figure between their normal profit previous to the war, if they had any, and the figure they are earning under war conditions. With that general principle we are all agreed, and the object of my new Clause is to point out that, as the Act stands, it is not carrying out the intention of the House of Commons. I suppose it is true that in a large number of cases the Act does carry out the wishes of the House, but there are certain businesses, as there must be in a progressive community, which have been started so recently that they can have no standard on which to base the estimate for the Excess Profits Tax in the terms of the Act of 1939. In that Act the standard is taken from 1935 or a combination of years afterwards. There are certain businesses which were either non-existent in those earlier years or which were building up to a profit-making stage. They were perhaps spending money and not earning it in 1935 and 1936, and they are unable, therefore, to prove a standard which gives a fair computation for the imposition of the Excess Profits Tax to-day.
The object of the Clause is to give such concerns as have had no opportunity of earning profit previous to 1937 and 1938 the chance to use one of those years, if it is their first fair standard year, as the basis for the computation of the Excess Profits Tax. We want to see that nobody makes money out of the war, and, therefore, the profits above those earned pre-war should be taxed. We do not, however, want to handicap a business which has perhaps had years of expenditure so that it could get into an earning stage and which by chance—in this case misfortune —arrived at the earning stage just previous to the war, and, therefore, has all its profits taken because it had no previous standing. It is unfair that a business of that sort should get no return of any kind. I do not want to weary the Committee with cases of businesses which have been put before me, and in which 781 I have no concern, but I want to give an illustration of a business which has been building up for the benefit of British industry and the employment of large numbers of people through 1934, 1935 and 1936, and which got no return and certainly made no profit for its shareholders. It has actually been spending large sums of money, the result of which was shown almost immediately before the war. In a case of that kind a chance ought to be given to take the later years for the standard. It is impossible to put down a Clause which would deal with every case fairly. There will be some cases with which this Clause will not deal. There will be some concerns that would not have been earning profits until this year if there had been no war at all, but we cannot deal with every case. What we want to do is to remove the unfairness to those who have no standard under the present Finance Act and give them a chance to take the years stated in this new Clause.

§ Sir K. Wood
My hon. Friend is seeking to reopen the question of the choice of standard years, and in particular to allow either of the years 1937 and 1938 to be chosen as the standard year. In his Amendment, to which obviously I must address myself rather than to his speech, I can find no trace of anything winch would single out any of the special concerns which he has indicated have been brought to his notice. His Clause would cover all concerns and allow them all to have the substituted year, and that is the point to which I have to address myself. I regret that at this stage I cannot re-open this matter. It has been constantly discussed in the House, and very many statements have been made by the Government. I would only like to say for the purpose of record, that it was recognised that there might be hardships in cases where there were no profits in the standard year or the profits were so low as not to constitute a reasonable standard, and Section 27 of the Finance Act, 1940, did make provision—my hon. Friend may not think it is sufficient—for a substituted standard of profits to be applied in such cases. I would remind my hon. Friend that we are dealing with the case of borrowed capital and providing, in cases where pre-war losses were incurred, for the loss to be disregarded in computing capital for the purposes of standard. I 782 am thus helping developing concerns to which my hon. Friend referred in his speech on the Budget. In this way I am endeavouring to deal with at any rate certain aspects of the matter, but I cannot go further than that at the present time.

§ Sir H. Williams
I am not surprised at my right hon. Friend resisting this new Clause, but I would point out that the years which were selected were never selected on merit. They were selected for the purpose of a different tax, the Armaments Profits Tax, which was introduced to deal with firms engaged upon armament contracts a substantial time before the war began. It was designed to catch those people, and those years were chosen on the ground that during those years we had not really got under way with our armaments programme. When the tax was extended from businesses engaged on armament work to businesses not normally on armament work, a new basis of years ought to have been selected. I think a fundamental mistake was made then. The burdens which fell on certain firms in the textile industry and others to whom those years were bad years have created many difficulties for them. If the Armaments Profits Tax had been kept in existence to deal with firms engaged on rearmament for a substantial period before the war, and the Excess Profits Tax had been applied to the remainder, with appropriate years as a standard, a very much fairer situation would have arisen. I do not suppose that the Chancellor of the Exchequer is prepared now to depart from his present attitude; but I think it is as well that he should be reminded once a year that he is continuing to inflict hardship on a quite decent lot of people who, I am certain, will go on agitating in various ways until some further amendments are made.

§ Sir J. Wardlaw-Milne
My right hon. Friend has a very large heart, and if he could put his hand on his heart and tell the Committee that there is no unfairness under the present law, I should be only too glad to withdraw this Clause. But in spite of all he has said it is well known to him, I suggest, that the law as it stands does act unfairly towards a small number of firms who have suffered from the wording of the Act of 1939. Nothing that has-been done since has altered that fact. I have nothing to say at this moment of the 783 measures he has taken in that direction, but they do not take away from the difficulties from which these firms suffer.
I shall not press the matter now, as I know it is not worth doing so at the moment, and I agree that the matter has been considered over and over again; but I contend that it is not impossible to draft a Clause which will prevent the extension of these years to firms that do not need them and will allow the extension to those to whom it is everything, and so form a proper and reasonable basis of Excess Profits. I ask my right hon. Friend to consider the matter again. It is not impossible at all to prevent the loss to the Treasury of sums of money by the extension of those years, where it is not reasonable that they should be so extended. It is all a matter of drafting, and it can be done. There are certainly firms that suffer, and I suggest to my right hon. Friend that he should consider the matter again. In view of the attitude of the Chancellor, with which I do not agree, and while hoping that he will give it reconsideration, I have no intention of pressing the matter now, and I beg to ask leave to withdraw the Motion.