HC Deb 07 July 1943 vol 390 cc2115-88

Order for Third Reading read.

The Financial Secretary to the Treasury (Mr. Assheton)

I beg to move, "That the Bill be now read the Third time."

It is nearly three months since my right hon. Friend the Chancellor of the Exchequer introduced his Budget, and today we hope to reach the end of this particular journey. There are those, I know, who say that it is better to travel pleasantly than to arrive. [HON. MEMBERS: "Travel hopefully."] Hopefully and pleasantly, too. This is hardly a method which we can deliberately apply to a Finance Bill; however, it has turned out, that not only have we reached the end of the journey, but that, on this occasion at any rate, it has been, on the whole, a pleasant journey. It has been a pleasant one, thanks to the wisdom of my right hon. Friend's proposals, and also to the great good will and sense of responsibility of this House. Although the Finance Bill incorporates proposals which impose upon the people of this country financial burdens greater than they have ever yet been called upon to bear, none the less those burdens have been accepted readily and cheerfully, because it is appreciated that they are not only necessary to enable us to carry on the war to the fullest possible extent, but also that they are generally thought in themselves to be just.

Looking at the Bill itself and the various taxes and duties imposed in it, one is bound to comment on the very high rate of taxation involved. Inland Revenue taxes are estimated to yield in this year nearly £1,900,000,000, and the Customs, Excise and Motor Vehicles Duties are to provide another £1,000,000,000. Our predecessors in this House at any time before the last war, or even during the last war, would, I am sure, have rubbed their eyes at some of the Clauses in this Bill. Let us look first at the Income Tax. When my right hon. Friend the Prime Minister was born and Disraeli was Prime Minister, the Income Tax was 2d. in the £. When my right hon. Friend the Chancellor of the Exchequer was born and Gladstone was Prime Minister, it was 6d. in the £. The highest rate to which Income Tax went as a result of the last war was 6s. in the £, and now we are supporting a rate, for the time being, of 10s. in the £ with all the sacrifices which that rate of tax implies. Before the last war the highest level of Surtax was 6d.; it is now 9s. 6d. Before the last war, the duty on beer was one-third of a penny a pint; it is now 7¼d. a pint.

Mr. Maxton (Glasgow, Bridgeton)

Would the hon. Gentleman give us some comparison of incomes in those periods? What I want to get at is whether the man who is now paying that 9s. 6d. has not still got a bigger income than the fellow who is paying the lower rate?

Mr. Assheton

If my hon. Friend wants to go into that question, he will find a most interesting set of tables in the Report of the Board of Inland Revenue, to which I would refer him. It may well be asked how it is that Parliament, whose very origin is so intimately bound up with the duty of checking expenditure by the Executive, and whose whole history for many hundreds of years has been that of a struggle to protect the taxpayer from the Crown, should be prepared to approve of such enormous burdens of taxation. The answer, of course, is perfectly clear. It is that we are prepared to accept any sacrifices and burdens which are necessary to win the war and to preserve freedom in the world.

In spite of the great revenue which we are obtaining, we have vastly increased the National Debt since the war began, and it now stands at the enormous figure of £17,700,000,000. It is interesting to note that we are borrowing as much money every eight weeks now as was borrowed during the whole period of the Napoleonic wars, and that the National Debt, at the end of the wars conducted by the great Duke of Marlborough, had reached a figure of something like £53,000,000, a sum which we shall spend between now and the end of this week. The upheaval in our national finances caused by the war could not, of course, fail to raise serious economic and social issues, and Budgetary problems have therefore taken on an entirely new aspect. Considerations of economic stability, as well as considerations of revenue, have to be taken carefully into account, but, as my right hon. Friend will probably deal with some of those considerations later, I propose to confine myself to some of the purely financial aspects in the taxation Clauses and in Clause 29, which is the Debt Clause of this Bill

The taxation question and the Debt question hang very closely together. One of the principal objects of high taxation is to minimise the burden of the Debt after the war. In his speech on the Second Reading of the Bill my right hon. Friend emphasised the fact that whatever some optimists may say, the post-war cost of the Debt must be taken seriously, for that cost will have to be raised by taxation, in one way or another, and the more revenue is required for the service of the Debt, the less easy will it be to find revenue for those many desirable developments which we are anxious to see after the war.

Mr. MacLaren (Burslem)

What about Beveridge now?

Mr. Assheton

The difference between a reasonable level of taxation and an oppressive level can certainly make or mar business enterprise, and it would equally make a great deal of difference to social arid industrial contentment. If the public readily accepts these burdens, it can properly expect the Government to play their part in borrowing both as cheaply and as soundly as possible. As the House knows, the average cost of our war borrowings up to date has been 2 per cent. We have, however, not merely been able to borrow at a low rate of interest, but what is just as important is that we have not had to have excessive recourse to the Floating Debt. Of the total National Debt of £17,700,000,000, the Floating Debt at present is somewhat over £4,000,000,000, but it is important to bear in mind that nearly half the Floating Debt represents the investment of official funds, and this makes the position of the Government less vulnerable than it would be if the whole of the Floating Debt was in the hands of the public. Clause 29 of the Bill provides £375,000,000 for the Debt charge. Of the total loans raised from different sources during the war and up to the end of June last, it is interesting to make the following analysis. Small savings have provided 22 per cent., subscriptions from non-official sources to longer-term loans 34 per cent., short-term borrowing from the money market and banks 22 per cent., extra-Budgetry funds 8 per cent., Tax Reserve Certificates 5 per cent., and other sources 9 per cent. Those figures show a very satisfactory proportion of loans raised from the general public, and, if we are to keep the Floating Debt within reasonable bounds, it is essential that we should get the highest possible yield from savings and the other sources from which we get these loans.

Mr. Stokes (Ipswich)

Will the hon. Gentleman tell the House what these non-official sources are which supply 34 per cent.?

Mr. Assheton

The non-official sources which subscribe money to these loans are very numerous—insurance companies and many other bodies. If the hon. Member wants further details of the analysis, no doubt I shall be able to provide him with some figures in due course, but for the purposes of this analysis to-day I naturally want it to be in such a form as will be easily understood. The maturities of our various longer-term loans have been arranged with great care and forethought, and we shall try to avoid again finding ourselves with one big maturity, such as the old War Loan of the last war which the State might be called upon to repay in any one year.

I am glad to say that in the "Wings for Victory" weeks so far held, the proportion of small savers is higher than in the corresponding "Warships" weeks of last year. Also during the first six months of this year the total of small savings is something like 25 per cent. higher than in the same period of 1942. Moreover, the proportion of the total value of Saving Certificates sold in the smallest units is steadily rising. These are very creditable results, and they are a striking tribute to the sacrifice of the saving population and to the devotion of that very large army of unpaid War Savings workers. As time passes, we hope for even greater contributions from these sources, which should be possible with the increased amount of purchasing power in the hands of the people. Great as are the burdens shared by all taxpayers, savings represent an additional sacrifice borne by individual citizens in the exercise of their free will. The more we value the greater freedoms which we are fighting for, the more ready should we be to dedicate to the war effort those lesser freedoms, like the freedom to work hard and the freedom to do without non-essentials and to save.

This Finance Bill will cover our finances up to and beyond the fourth year of the war. There is no reason why they should not remain as satisfactory in the fifth and, if necessary, in further years of war, provided our people continue to be ready to make the sacrifices they are now making. We can be confident that they will, for they realise that the maintenance of sound finance is not only vital to victory but will also be of inestimable value when we are face to face with new problems in the early years after the war. I think we should all agree that finance, like fire and water, is a good servant but a bad master. But we must also remember that, if a good servant is to do his best for us, he must be treated with respect. We may each of us, here, have our own design for living after the war, and we may each shape our design for budgeting accordingly. Some want this new order, and others want that. There may be some who have hankerings after some part of the old order, and there are others, like the hon. Member for Bridgeton (Mr. Maxton), who would probably prefer in their heart of hearts to have no order at all. [Interruption.] He never made much secret of his views. Whatever our favourite design, we each want to carry it out in circumstances which will give it the best chance of success. The foundation of such success is that we should start the post-war years in a sound economic and financial position. This Finance Bill is a sound one, and I beg to move its Third Reading.

Mr. Pethick-Lawrence (Edinburgh, East)

I propose to commence my remarks by handing out bouquets. The first I wish to hand out is to the British taxpayers, who as a class uncomplainingly are facing the heavy burdens which the Chancellor of the Exchequer has imposed upon them. Not only so, but, as the Financial Secretary has told us, a large number of the taxpayers have between them put by considerable savings and lent them to the Chancellor of the Exchequer. The hon. Gentleman has given us some figures showing the extent of those savings in the present year. I should be glad if we could be told how far, during the last three months let us say, small savings are greater than for the similar period last year. I shall also be grateful if the Chancellor sees fit to enlarge a little on the question of closing the gap. In previous years we have closed the gap for all but a very small space, and I am wondering how far the increased savings of the current year will suffice to close the gap entirely. One thing one ought to say before passing from the question of the small saver is that, while the total is surprisingly good, and while the individual effort of those who are saving is very great, there are still, I think, a number of people who could save and do not, and, if they were to come into line with the others, our figures would be still better than they are.

The second bouquet that I want to hand out is to the people and the Government of our great Dominion of Canada, who, by their great and unprecedented generosity, have made such a substantial reduction in the total outlay of the United Kingdom. I am sure I am only expressing the opinion of every part of the House when I render that great tribute to a fine and generous people. The third bouquet I want to present is to the people at the United States, who have undoubtedly made great sacrifices in order to send supplies to ourselves. I do not know how far the House realises what tremendous sacrifices they have made in the limitation of gasoline alone. The United States depend far more on private motor transport than we do in this country, and in order that the tankers might be available for supplying the war needs of this country the Americans have made a complete change in their whole method of life. I consider that on that ground, if for no other, it is right that we should pay them the homage of our thanks and respect.

Finally, I should like to say a good word for our present right hon. friend the Chancellor of the Exchequer and his most able Financial Secretary, to whose speech we have just listened with interest and attention. I pay him that compliment not merely for the friendly way in which he has conducted the proceedings on this Bill through its various stages, but because we recognise that though he has a firm intention, which he puts into definite effect, to raise these enormous sums from the pockets of the British taxpayer, he is willing to listen, and not infrequently to make concessions, when it is represented to him that the shoe pinches very hard on certain people. The House has secured such concessions as the Chancellor has felt able to make, both on direct taxation in the shape of allowances and in the matter of the Purchase Tax. It would be fulsome to say that all our criticisms have been met; they have not, and no one is more aware of that than the Chancellor himself. I know and he knows that there are many people who are having great difficulties in meeting their burdens, particularly those who are going on in years, who are in straitened circumstances and who suffer great hardship owing to the amount and sometimes owing to the time of collection of the Income Tax. At the present time, when the rate of Income Tax is very high, these are solid grievances. I ask the Chancellor to say, without making any specific promises, that he will give careful and, indeed, sympathetic and human consideration to whatever may be represented to him between now and the formulation of his next Budget.

I pass to a somewhat different subject, the question of "pay-as-you-go." I believe that with the lapse of time it is being brought home more and more to all sections, to those who have to pay, to Members of this House who represent them here, to the Inland Revenue, to the Treasury itself and, of course, to the Chancellor and the Financial Secretary that it will be necessary in the end, in spite of the difficulties, to bring forward some proposal of this kind. The present Finance Bill continues the existing system of taxation in arrear, and we cannot carry the discussion on the matter much further today. The Chancellor promised on one occasion to put in the Library some account of the discussions that were held in the Congress of the United States, but up to the present I understand that this has not materialised. Can he tell us when he hopes to be in a position to supply that paper and whether it is likely to be before the summer Recess; and also whether he thinks it will be possible some time later, probably not before the autumn, to have a Debate when this question can be threshed out in all its details? I am particularly anxious, and I believe it is the wish of the House, that he should not close his mind on this matter. If he cannot at this stage give a positive assurance of progress, I hope that he will not say anything which will show that his mind is closed and that he will not consider the situation when it is presented to him.

The third matter to which I wish to draw attention are the Clauses in the Bill dealing with tax avoidance. The House supported with keen interest the proposal of the Chancellor to deal with the particular tax dodging referred to in those Clauses, and with, I think, one exception the House willingly supported the retrospective provision which the Chancellor found it necessary to make. None of us likes retrospective legislation, but we are all agreed that in many cases of tax dodging it is necessary, and we are prepared to sustain the Chancellor when he comes to that decision. We all know that the tax dodger generally gets one move in front of the Chancellor, and sometimes more than one, and that he does so when he is supported and advised by unscrupulous persons who have professional knowledge which they place at his disposal. I said on the Report stage that I believed the time might be coming when the Chancellor might, after full investigation of the matter, come to the conclusion that it was necessary to take the further step of a more fundamental alteration of the law. I would like to repeat that if the Chancellor comes to the House and tells us that in his opinion the time is ripe and it is necessary to have some such further steps, I believe he will have the support of the overwhelming majority of the House.

When I made a reference to this on the Report stage my hon. Friend the Member for Chesterfield (Mr. Benson) was under a slight misapprehension of what I had in mind, and I want therefore to explain what my view is. I suggested then that there might be a slight extension of the definition of fraud to cover cases where a purely bogus façade was set up in order to escape tax. I made that suggestion, not with a view to bringing the criminal law to bear on such persons, but to enable a proper interpretation of the financial facts to be made. My desire was that the authorities should have the power to tear down any purely bogus, artificial façade and to expose the true facts which lay behind. It has been said that all of us have a perfect right so to arrange our affairs that we do not pay more tax than is necessary. I think that we can all subscribe to that view, but that is entirely a different matter from allowing persons to set up a purely artificial procedure which can be shown beyond a peradventure to be designed solely for the purpose of tax dodging. The House will be quite willing, if the Chancellor shows good cause, to change the law so as to give him further power.

I want to ask the Chancellor a final question arising out of our financial position. A few weeks ago we had a preliminary Debate on post-war currency and exchange, when what is known as the Keynes plan was under discussion. It would not be proper for me, even if it were in Order, to go in any detail into that question to-day, but on that occasion the Chancellor promised that a further opportunity would be provided to the House for discussing the matter before it was finally settled and crystallised by international agreement. I only want to ask him to assure us that he has not forgotten his promise and to say whether he can give any indication of how soon he thinks the time will be ripe for that further Debate before anything definite is done which will commit this country and this House. With these remarks I propose to support, as I am sure the House will, the Third Reading of the Bill.

Mr. Graham White (Birkenhead, East)

My hon. Friend the Financial Secretary to the Treasury in his closing observations said that the Finance Bill had on the whole had a pleasant journey. I am not sure that the word "pleasant" is the best one to use in this connection. At all events, it may be said that the Bill has had a much easier passage than anybody would have thought possible a few years ago. If that is so, it is due to the fact that there has emerged in our economic life a series of events which indicate a very different outlook and standard of conduct. I am entirely in agreement with what my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) said about the help we have received from the Canadian Government. It is without parallel, and the Canadian Government and their people have been extraordinarily modest about it. When one takes that into account, together with the marvellous war effort of Canada as a whole in their production of shipping and the like it is a remarkable testimony to the value of the British way of life that the Dominions of their own free will should take action of that kind. I am not certain whether the journey of the Finance Bill would not have been much less pleasant had it not been for Lend-Lease. That again is a matter which set a new standard of outlook altogether. I am glad to know that it is no longer a one-way traffic but that the contribution of Great Britain and the Dominions is constantly on the increase. It is a new conception which, with a farseeing vision, will avoid the bickering and retaliation which went on after the last war. My hon. Friend also referred to the attitude of the taxpayer. It is almost miraculous when we think that in 1939 the amount paid out to the equity shareholders in British industry, out of a gross total of £47,750,000 amounted to £36,500,000, and that by 1940 out of a reduced total of £43,000,000 they received £21,500,000, and that without any serious complaint at all. It does indicate a sense of financial responsibility which is a favourable augury for our future affairs.

There is one aspect of our affairs which certainly is not nearly so pleasant to contemplate. In connection with every Finance Bill of recent years the Chancellor of the Exchequer, the Board of Inland Revenue and Parliament have had to devote time, labour and ingenuity to attempting to defeat the misplaced ingenuity of those gentry, who were referred to a few moments ago by my right hon. Friend, who seek to evade obligations which the rest of the community accept quite loyally. It is an outrage that the time of Parliament should have to be devoted to affairs of this kind, and I sincerely hope that the publicity which has been given to these transactions will ensure that next year for the first time we may have a Finance Bill which is free from these special Clauses. Such transactions are a slur upon the honour and the commercial integrity of this country. The people who are engaged in them should remember that robbery is no less robbery and an offence against the community even when it is possible to bring it within the ambit of a somewhat doubtful legality.

Sir Francis Fremantle (St. Albans)

Is my hon. Friend arguing that a law should be interpreted in the spirit and not in the letter of the law, and that the law should be changed accordingly?

Mr. White

No, I do not suggest that. The law has been changed; we have made a great many changes in this very Bill. I think the time of the Treasury is far too much occupied as a result of a general obscurity in the presentation of accounts. Accounts are often presented in such a manner that they conceal from the Revenue authorities information to which they are entitled, and also conceal from the proprietors of business information which it would be to their benefit to know. That is a matter which should not be dealt with in a Finance Bill, but by a reform of the company laws, and I am glad to know that the President of the Board of Trade has appointed a Committee which will take these matters into account.

There are two other matters to which I should like to refer briefly. They are two milestones on the journey of the Finance Bill in this year. One is the increasing realisation in the House of the importance of finance as an instrument for the direction of industrial policy and economic policy after the war. I was very much interested, as indeed was the whole House, in the important Amendment, which was not moved, which stood on the Order Paper in the name of my hon. Friend the Member for Chesterfield (Mr. Benson), supported by my hon. Friend the Member for Walsall (Sir G. Schuster) and others. I have always taken the view—I have said this before, and I repeat it—that provided the means of production were not broken in our hands by enemy action and that our financial affairs were conducted on their present basis, we should be able to carry on and build up our economic life for ourselves after the war. I believe that still. I do not think there is anything in the present position of our finances which raises an insuperable difficulty for us after the war, but we must bear in mind that there are more ways of destroying the means of production than by enemy action, and grave doubts have arisen in the minds of many competent observers whether the high level of taxation, and more especially the incidence of Excess Profits Tax, is not so depleting the re sources of industry that when the war comes to an end we shall find ourselves very seriously handicapped with much business which depended upon international relationships taken away from us. Therefore I am very glad indeed that the Chancellor of the Exchequer has promised that he will set up a committee to examine the incidence of this taxation, and that that examination will be conducted on the widest possible basis, so that the House may know what are its economic effects. We do wish to be sure that we are not doing ourselves more harm than good by our financial arrangements. We shall look forward to hearing the result of the inquiry, and if we are here again this time 12 months, we may be able to give further consideration to the practical points put before us.

The other point which I think is of very great importance and which has already cast its shadow before is one which has already been referred to by my right hon. Friend the Member for East Edinburgh, namely, the difficulties which are going to arise at the end of the war, or even before in a period of fluctuating employment, from the present method of collecting Income Tax. There are more than 12,500,000 direct taxpayers, and one is apprehensive of the difficulties, discomforts and dangers which will arise after the war if we are not successful in devising some method of "pay-as-you-go." It does not require a great deal of imagination to see what extraordinary difficulties may arise, and they will not be confined to this country. The Government of the United States and the Government of Canada are in virtually the same difficulty. One must hope that the Chancellor will be able to produce a plan which will prevent the discomforts and the disorganisation which are already beginning to appears in the case of some of those who have come out of the Forces or who are unable to continue their employment through sickness and find themselves with a millstone of arrears of Income Tax round their necks, and unable to pay. It is a matter the importance of which it is difficult to exaggerate from the point of view of public morale after the war, and I am glad that it is receiving the active consideration of my right hon. Friend.

In conclusion, I repeat that I see no reason why we should not be able to work unimpeded by financial difficulties to any great extent after the war, provided that we turn our backs for all time upon the short-sighted and cowardly policy of restrictions which prevailed between the war, and provided also that we dismiss from our minds and from our practice that mixture of loose thinking and good intentions which has governed too much of our finance in the past and has brought us to the pass in which we find ourselves to-day. Finally, if we realise once and for all that the interdependence of nations is now far more important than their independence, and that in future we shall have no more foreign affairs, because all our affairs will be foreign affairs, and if we realise that prosperity, like peace, is indivisible and handle the financial resources which remain to us with courage and with imagination, there is no reason why we should not regard the future with calm.

Sir Arnold Gridley (Stockport)

I was struck by one quotation made by my hon. Friend the Financial Secretary to the Treasury, that it is better to travel pleasantly than to arrive. I believe the correct expression is that it is better to travel hopefully than to arrive. Pleasant as the journey may have been to the Treasury, it has been more of a hopeful one for the rest of us who have been travelling, but I think some of us, although we have not languished by the way, have not yet arrived at our ultimate destination, and must continue to press for certain further concessions between now and the next Budget, and seek to gain the ear of the Chancellor, as we shall do if we have any reasonable proposals to put forward. I should like to re-echo what has been said about the great debt of gratitude we owe to the Canadian people. It is true that they have made light of what they have done. I dare say that some hon. Members, like myself, were courteously sent copies of the Canadian Parliament Hansard in which a Financial Debate was reported and in which reference was made to the gratitude expressed to Canada by Members of this House. But their contribution was brushed aside as relatively a small contribution to the united efforts of the Empire. I think we cannot look upon it as such. As has been said, it is an example of totally unprecedented generosity on the part of a Dominion to the Mother Country.

The method of "pay-as-you-go" in relation to the Income Tax liabilities of workers has been referred to, and I would put this definite question to the Chancellor, in the hope that he will answer it when he replies. Does he intend in the course of the present year to endeavour to reach a concrete plan which can be submitted to the House for approval when next Budget day arrives? We none of us know when this war may end. It may suddenly collapse, as the last war did, and we all hope it may, but in any case it is a contingency that prudence should provide for, and the House should have before it the Treasury's proposals to meet this problem of "pay-as-you-go," because sooner or later, there is no question about it, the problem will have to be met.

The next point, to which I would like to know that the Treasury is giving some attention, is the question of a double Budget. We all have our own ideas of the shape of the new world, as it is called, but probably if six of us met together we should get six different opinions. Yet if the aspirations of many of us are to be realised, we cannot go on treating the finances of this country on the same Budgetary basis as we have done in all these bygone years. We are up against an entirely new set of circumstances, and new financial methods will have to be devised to deal with them. I hope that we shall hear that some very capable minds are being applied to this problem. I would like, if it were practicable, for some form of White Paper to be issued at no distant date so that we could have an opportunity to consider these matters for ourselves. Perhaps we might also have a Debate upon them, and the Government might thereby ascertain the views of Members of this House.

I would next reiterate the plea I have submitted before, that further consideration should be given by the Chancellor to the position of people earning small, fixed incomes. The right hon. Gentleman who followed the Financial Secretary to-day referred to the classes who find life extremely hard and the task of meeting their tax liabilities almost impossible in these times, because they have not the opportunities possessed by other sections of adding to their incomes in time of war. I hope that further consideration will be given to their hard lot between now and the next Budget.

A word as to the 20 per cent. refund of the Excess Profits Tax. The Chancellor has made it clear that, in certain conditions, the refund will take place, but he still leaves the date of the refund an entirely open question. I see that a writer in the "Investors' Chronicle" said: On the question of the date of repayment, I feel that it is impossible at present to fix a precise date.' Thus the Chancellor, in a written communication. 'It will depend upon the duration of the war and the duration of E.P.T.' This is the writer's comment: This 'Dear-Mother,-I-am-sending-you-7s. 6d.,-but-not-this-week' attitude is disturbing industry, and, in spite of the Chancellor's earlier reassurances, is causing widespread mistrust of the Government's intentions, which we cannot believe to be a good thing. The suggestion made is that the greater part of -le mistrust could be removed for good by a really firm undertaking to pay the refunds, if necessary subject to specific conditions on a future appointed day—a very different matter from the present nebulous promise 'to ascertain and record.' I would ask the Treasury to reflect upon those suggestions.

I come to my last point. The Chancellor, his technical advisers and the country are to be thoroughly congratulated upon the fact that we are financing the immense cost of this war on so cheap a basis. It is not only a tremendous advantage to us now and will be to those who come after us, that 2 per cent. has enabled sufficient funds to be raised to carry the financial burden of the war, but it is also of most vital importance to carry forward into the postwar reconstruction period the same policy of cheap money. That can be secured only so long as confidence prevails, which depends upon the Government of the day, whatever their texture may be, carrying out a policy which commands the general support of the country and does not risk undermining the sound basis of our prosperity in the past, and our hopes for the future.

Sir George Schuster (Walsall)

Before I come to the very few remarks that I propose to make, I should like to say how much I appreciated the very clear statement that the Financial Secretary gave us to-day. There is just one comment on it that I would like to make. He gave interesting comparisons between our expenditure to-day and the expenditure in the time of the Napoleonic wars and the wars of the Duke of Marlborough. I may perhaps comment that the symbols by which our expenditure is measured, although not meaningless, have very much changed their meaning since those earlier days and that we have to take that change into account.

Passing from that, I should like to echo the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) who started, as he said, by handing out bouquets. I am very glad that he put high on his list for a bouquet the Dominion of Canada. I agree with him that not enough has been said on that subject. I would also like to join him in expressing my great appreciation to the Chancellor of the Exchequer for the way in which he has handled many matters which have come up for discussion while the Bill has been going through. I should also like to attach to that a special word of appreciation for our new Financial Secretary to the Treasury, who has met some of us on several occasions and whose sincerity and sympathy have certainly made the discussion of these matters much more satisfactory than they often are. We all appreciate that very much, but I myself am particularly grateful for the promise that has been given of an inquiry into the broader aspects of the effects of taxation as at present levied. I look forward to the future value of this inquiry. And in saying that, I want to underline the point that those of us who have asked for it, and elicited that promise, take that promise very seriously and hope for very interesting results.

I know that one has to be careful on this occasion to stick to the Finance Bill that is before us, but the Financial Secretary did call attention to the fact that we are now reaching the stage when, in handling our finances, we have to take account of what should be done in order that we may end the war in a sound financial position. Nowadays we are being given chances to judge of what the financial position is and is likely to be such as were never given to the House before. I refer to the White Papers, and the point I want to make is that I could myself have formed a better judgment on this occasion if certain other particulars had been added. Therefore I want to suggest to the Financial Secretary to the Treasury that in future certain particulars should be added. A statement of the capital assets which have been financed by Government during the course of the war would be extremely valuable if it could be given to us at some stage or other. Further, if we are to judge of the soundness of our national financial position we require to have also an estimate of the capital requirements of the nation as a whole, and of what capital resources are available to meet them in private hands, and otherwise. In view of what the Chancellor himself has said on the matter we are really justified in asking for an estimate of the money which is to be allowed back to industry for specific purposes under the E.P.T. refund, for information in fact which will enable us to judge what that is likely to amount to and in what directions it will flow. The question of the direction in which it will flow is particularly important in view of the Chancellor's suggestion that reliance can be placed on this refund as a very valuable and even adequate reserve for the re-equipment of our industries after the war.

Then in one of the earlier Debates the Chancellor told us that he was making arrangements for a better national statistical system and I wish to ask for particulars as early as possible of what is being done in that direction. And that brings me to the next point I have to make, which concerns the general attitude to taxation. I want to repeat a point which has already been made in earlier Debates that at present levels of rates and taxes, the significance of taxation has totally changed. As a result the responsibility of the Treasury in handling taxation policy as well as the interest of the Treasury, have also changed. The Chancellor of the Exchequer, as I pointed out the other day, has become, quite apart from Surtax and E.P.T. and all his other interests—a 50 per cent. shareholder in every industrial undertaking in this country. Therefore, as I have put it, he has reached the stage where his shareholder interest is more important than his tax-gatherer interest. That has a real significance. When Income Tax is on a low level; the Chancellor can always get a bit more money by putting up the rate, but when Income Tax has reached its present level he can get more money only by making industry more fruitful. It is in fact only if industry itself can be made more fruitful that he can increase his revenue. In making this point, I want to emphasise very strongly that I am not a taxation escapist. I believe in Income Tax being used as a measure for redistributing income and I look to see a very high level of taxation maintained. But it is just for that very reason that I want to urge how important it is that taxation should be levied in a way which does not harm the industrial structure of this country.

My last point is that we have, during the various stages of this Bill, had discussions on several complicated Clauses and I want to ask the Chancellor to do his best, as I know he always tries to do, to help those of us who try to follow these matters in the discussions. Those of us with business interests and responsibilities are in a somewhat difficult position. We are bound to speak according to our own experience in business but we certainly ought to be very careful that we do not speak according to our own business interests and that these should not influence what we say. We, here, ought to take into account only the national interest. The Chancellor of the Exchequer can help us very greatly in that respect. A vast amount of information is available to the Inland Revenue officials. Not only have they got voluminous records which must contain a mine of valuable information, but they have exceedingly able brains. I believe that more could be done, in interpreting the results which must come to the knowledge of the Inland Revenue authorities, to explain to us what the real position is and what the significance of particular tax changes may be. For example, when discussing Clause 22, I personally would very much have liked to have information showing just what the Chancellor had to guard against and what his Inland Revenue authorities told him the effect was going to be, of the various amendments that some of us put forward or asked for.

If we could have the opportunity, perhaps not in public, but in those private discussions that go on, for really frank discussion so that we could learn exactly what might result from particular measures that we may be urging, I, personally, should feel very much happier in the part I could play in helping to promote sound tax measures. From all this information which is available in the Inland Revenue records it ought to be possible to extract most valuable lessons on what I have described as the indirect effects of taxation. I hope very much that what the Chancellor has promised as regards a new statistical service will make the fullest possible use of such information and that the Inland Revenue authorities themselves will be encouraged to take a human interest in these affairs. Personally I want them to act—as I am sure they are ready to act—not as soulless tax gatherers but as agents for a Minister, who as I have said is entirely dependent as a shareholder on the prosperity of industry, and also as patriotic citizens deeply concerned with the national welfare. Therefore I suggest to him that we in this House who are interested in finance could really take a more useful part in discussions if we could meet the Inland Revenue authorities, speak frankly with them and know what the inner significance of any proposed changes might be. One word in conclusion. The Financial Secretary in opening his speech described this Third Reading as the end of the story; but in truth when we are finishing the story of one Finance Act that is just the time when we ought to be thinking about the next one. Therefore if I were not bound by the Rules of Order of this House I should have liked to make some further remarks on the Finance Bill for 1944–45.

Mr. Price (Forest of Dean)

There are just two points with which I would like to deal briefly. The Finance Bill presents an opportunity every year to review the national accounts. They have been made very much more interesting in recent years by the publication by the Chancellor of this White Paper, "Analysis and Sources of War Finance and the Estimate of National Income and Expenditure". But I feel that there are important gaps in that White Paper which I hope it will be possible to fill at some future date. It is clear that the State is becoming increasingly directly concerned as a partner in the economic life of the nation whether in the form of ownership of shadow factories, ownership of requisitioned mines or industries, or in the form of national investments in forestry, with which I am particularly concerned. That process is going on and will continue. I think the time has come when it ought to be possible for us to look at the White Paper and say: "The national capital investments are so much under their various heads", and have these items separated from ordinary current expenditure. We just cannot do that at the present time. I know the Chancellor's Department, like every other Department, is probably greatly overworked and understaffed. I know he will say: "I cannot do that now because it would mean too much time and difficulty now for my officials". I quite appreciate that, as I am sure the House does, but I hope that as soon as the opportunity comes, he will give us that which I am sure the House and the country would like to have.

In connection with Part II of this Bill, which concerns Income Tax, I hope it will be possible for the Chancellor before the next Budget to meet the obvious wishes of the House in regard to some reform of the workers' Income Tax—the "Pay as you go" method—but I will not develop that point. However there is another point I would like to raise. I would utter a word of warning with regard to certain effects of Income Tax and Excess Profit Tax. Reference was made on the Second Reading of this Bill to the taxation of reserves of industrial undertakings, having the effect ultimately of making it difficult to re-equip industry for post-war conditions. Exactly the same thing is going on in connection with agricultural enterprise. We all agree that there must be a very high level of direct taxation now, in order to prevent expenditure on anything other than absolute necessities. All the rest must go to the war. But that does not mean that one must interfere with the normal financing of undertakings, or make it difficult for post-war reconstruction.

Evidence, is accumulating that well-managed agricultural enterprises at the present time are becoming increasingly indebted to the banks, through failure to allow sufficient depreciation and replacement for machinery on capital account such as would normally take place. Many farms which have been in debt to the banks as a result of years of pre-war depression and who have gradually been getting out of that position, are now going back into that position again because of the present level of taxation which is not accompanied by, I think, sufficient allow- ance for replacement and depreciation of capital assets. There is reason to believe it took, let us say, from £8 to £10 per acre to finance a 500-acre farm in 1938. It now takes £15 per acre, Owing to increased arable acreage and in consequence of greater depreciation and wearing-out of machinery and the new machinery needed in order to keep up to the highest possible level of cultivation, there is at least a 35 per cent. increase. There should be a proportionate allowance made before the final assessment of tax on the net income is completed.

With regard to expenditure on other items like seeds, perhaps 200 per cent. represents the increase over pre-war figures and in the case of artificial manure 100 per cent., and fuel 100 per cent. I am not going to argue on these last points because they could perhaps more properly be dealt with under ordinary expenditure, but in the case of machinery I insist that there should be a greater allowance. It has been proved impossible to finance agricultural undertakings at present out of the 10s. left when the Income Tax and in some cases E.P.T. has been taken; very often it is not that nor anywhere near that. There is nothing like sufficient to finance an undertaking and keep it up to date and make it possible to run the farm, as things are at the present time, without borrowing from the bank. That is what is happening. I do not know whether the banks are going to be kind enough to carry this kind of undertaking, which is increasing. Therefore, I ask whether the Chancellor cannot, between now and the next Budget, examine the possibility of allowing for something which is a very legitimate expenditure, to keep the agricultural industry up to date, while seeing also that the finances of the country are kept in order.

Mr. Ralph Etherton (Stretford)

The Financial Secretary said he thought that some of our predecessors of bygone days would have rubbed their eyes at certain Clauses of this Bill. I can well understand my hon. Friend saying that, for there are certain provisions in this Bill which offend the fundamental principles of our Constitution. Even though those provisions may have been put in the Bill to meet actions with which none of us can have any sympathy at all, I do not think that the Bill ought to be allowed to pass without a protest in regard to these new matters, for I believe the time will come when we shall regret taking any step which would lead to the procedure of the Star Chamber and infringe liberties built up during centuries. The Bill creates crime in retrospect, a new feature which is alien to all justice. Parliament and the courts, for centuries, have always upheld certain basic principles. For example, a person is always held to be innocent until proved guilty. It has been said that it is better that ten guilty men shall go free, than that one innocent person shall be condemned and punished. You cannot maintain that under the provisions of this Bill.

Mr. Pethick-Lawrence

Will the hon. Member point out where the Bill creates this crime?

Mr. Etherton

Yes, in Part III. If the law is to be interpreted as to its spirit and not as to its letter we are embarking, I venture to submit, on a path which leads downhill to disaster. It is the duty of every citizen to know the law, but you cannot know a law which has yet to be created. Judges have said in the courts, time and again, that there can be no ethics in crime, or in taxation, and that, in my submission, is fundamental to justice. In taxation, either you owe money to the State, or you do not owe money to the State. After all, no one in this country pays money in taxation unless they think themselves properly liable. We all, I believe, claim the allowances to which we are properly entitled, and I doubt whether there are many members of the community who omit to claim allowances to which they are entitled and of which they are aware. After all, the arrangement of one's affairs in legal and proper form, so as not to be liable for extra taxation, is not always a matter of morals working in one direction.

Take Death Duties, for example, in connection with which in certain circumstances a person becomes liable for duties on the whole of an estate, not only in this country but in several other countries too. A situation can arise and has arisen, in which the percentages for which an estate becomes liable in this country and in certain Dominions, and, indeed, in foreign countries, too, are in the aggregate more than the total of the whole estate. That is an exceptional position, but it is nevertheless a fact. Surely, if in accordance with law, and in proper circumstances, a person's affairs can be legally and properly arranged to avoid that, there is nothing particularly immoral in taking that course. I suggest that the red herring of the whisky cases scandals—and they are scandals—has been introduced here to make fundamental and grave constitutional changes, which are passing through the House without their effect being fully appreciated. By all means let us tighten up the law, let us close every possible loophole; but I am sorry that the principle has been introduced that something which is proper and legal at the time it is done, is retrospectively to be made a crime. That, I believe, is fundamentally wrong, and I regret that we should have embarked on such a course in this Bill.

Mr. Clement Davies (Montgomery)

May I add my voice to the very sincere tribute which has been paid to the Dominion of Canada for her generous and spontaneous act? It will be an inspiration to us and to those who will come after us, to remember how not only the Dominions but the Colonies have all sprung to our assistance in our time of need, and how Canada has helped us to shoulder this enormous burden. Each of the hon. Members who preceded me referred to changed conditions. Each called attention to some particular matter. For example, the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) emphasised what he has emphasised before—the question of paying Income Tax as you earn—and the Chancellor of the Exchequer has said that the Treasury is inquiring into the matter. There has been a change in the spread of Income Tax. The burden used to fall on a comparatively few; now it falls on the majority of the people of this country. The number of families in this country is roughly 11,000,000, and about 7,000,000 of them are now called upon to pay Income Tax. My hon. Friend the Member for Walsall (Sir G. Schuster) mentioned again the growing importance of what we call the White Paper which is now issued with the Budget, and asked for further and better particulars to be contained in it in future. What does that mean? It means that we are in a transitional stage. The Budget in future will perhaps take a different form. In this transitional stage, may I congratulate the Chancellor of the Exchequer upon the quick and comparatively easy passage of this Bill? The amount of taxation is growing, but the people are facing the fact cheerfully, because they realise that there is a sense of interdependence now among us all.

While there is that general feeling in the country, there seems to be less and less interest in this House in the ways of providing the money. The power of this House grew and its privilege extended through the care it exercised over money matters. It is still true, in theory, that His Majesty expresses to the House his needs for the year and asks the House to provide the means for him to carry on the government of the country. Therefore, the matter is brought before the House on what is known as a Vote of Supply, and it has been the privilege of the House to discuss its grievances before granting the Supply for which it has been asked. Then it is for the House to decide how that Supply should be met. That we do in Committee of Ways and Means. Might I direct the attention of the House to a matter to which new Members, an any rate, pay too little regard? This Finance Bill is ordered to be brought in by, of all persons, the Chairman of Ways and Means, one of the honoured officials, if I may say so, of the House. Of course, the burden falls upon the Chancellor of the Exchequer and the Financial Secretary to the Treasury, but this is primarily a House matter. For some years the House has been taking less and less interest in the matter. That means that the power of the Executive has been growing, and that of the House becoming less.

How rarely does the House express its will against that of the Executive on any particular Amendment. If the Chancellor is determined that the ways and means that have been suggested by the Executive, of which he is a member and the mouthpiece, are the ones to be followed, he has the power of his party and of his Government behind him in forcing that upon the House. Great injustice might be done. That is much more likely in small matters than in big ones. The only case I can recall within 40 years where the House has taken a different view from the Executive on a major matter was when the late Mr. Neville Chamberlain was Chancellor of the Exchequer, just before he become Prime Minister. He introduced, as a part of the ways and means of providing the required Supply in his Budget, a new form of taxation which he called the National Defence Contribution. The necessary Resolution was passed. It was then included in the Finance Bill. But when it came before the House the feeling of the House, as representing the taxpayers, was so strong that the House enforced its will upon the Executive, and the Prime Minister, as he then was, had to withdraw the tax. That is a case of the House taking the interest which it should take in matters of taxation, because it represents the people, as against the Executive, in providing the ways and means by which the Executive can carry on. But in smaller matters, which perhaps directly affect only some aspect, and only indirectly affect the whole, the Executive has a tendency to become all-powerful.

May I mention the instance of Clause 22 of this Bill? The matter was discussed in Committee and the Chancellor replied. There was not a very full Committee. If we had challenged a Division, the Chancellor would have had the full power of the Government behind him, he having accepted the advice that was tendered to him by his officials. Whether that advice, given to him, as it is, by very able men, would take account of the possibilities and the difficulties that would arise, one does not know. I want to join in paying the highest tribute to the officials of the Treasury for their ability, their high-mindedness, and their care in dealing with these matters, but, in their nature, they would take the line, I will not say of least resistance, but which would enable them, following their old rules, to collect the taxation with the least possible trouble. That might bring injustice on the people. It is the duty of the House to inquire into that.

The Chancellor of the Exchequer (Sir Kingsley Wood)

No, Sir; it is the duty of the Chancellor of the Exchequer. My hon. Friend is trying to make a distinction between the officials who advise me and the Chancellor of the Exchequer. There is not a person who knows the constitutional position who would not agree with me, that I could not let that go unchallenged. I would deprecate very much this endeavour to draw a distinction which has never been attempted or made in this House.

Mr. Davies

I do draw that distinction. It is inevitable under our Constitution. There was a time when this House was so jealous of its position that it did, for a time—and I think wrongly—tend to exclude the Executive from discussions in the House. Very rightly, it brought them back. But the Chancellor occupies two positions; he is a member of the Executive—and that is why he is Chancellor of the Exchequer—and he is a Member of this House, representing West Woolwich. It is the duty of this House to examine these proposals with extreme care. Of course, the Chancellor looks into them, and it is necessary that he should do his best to ascertain what would be the effect of them, not only on the House but on the country. But the House, for some time, has not inquired into these matters with the care and attention that was shown in the past. I am sure that we shall have to consider in future some other means of bringing these matters to the attention of the House, and that we should accept some other advice than that of the officials of the Chancellor of the Exchequer. I realise that I cannot develop this matter further at the moment, as we are on the Third Reading of this Bill, but, as the hon. Member for Walsall has said, the moment one Budget is over we have to consider what will be the financial proposals for next year. I sincerely suggest to the House and the Chancellor that these matters to which I have referred must receive not slight but very considerable attention between now and the next Budget.

Mr. George Griffiths (Hemsworth)

I do not purpose following the hon. and learned Member for Montgomery (Mr. C. Davies), because I am afraid that if I did you, Mr. Deputy-Speaker, would rule me out of Order very quickly. I want to put a point which has not been put across to-day. I have heard some hon. Members say that people are paying the tax cheerfully and patriotically. I do not find that state of things in my Division. There are thousands of men now paying tax who never paid it before, and it is pinching the toe in the shoe. I do not know whether the Chancellor of the Exchequer knows the feeling in the country among working-class people, who say that if they are to pay tax, they should pay it on the wages they earn in the current week. The Chan- cellor says that he has been thinking this thing out, but we have not yet got any scheme. For what purpose have we made the right hon. Gentleman Chancellor if we cannot get from him a scheme to meet the weekly wage-earner? He has been Chancellor of the Exchequer for some years and has brought in certain reforms as far as taxes are concerned, and he has wrung more money out of the British public than any other Chancellor. He has managed it somehow. I want to put a concrete case to him. I met a miner's wife in my Division on Monday afternoon, and I said to her, "How are you getting on"? and she replied, "I am getting on bad. Our Jack, on Saturday only brought a bob home after he had had his tax stopped off it." [Interruption.] That was the statement that she made to me. It was his back taxation he had had to pay, and he had had a snort week. Half a dozen colliers stopped me in the street this week end and said, "Ask the Chancellor of the Exchequer, if you have the chance at all, to let us pay our tax when we draw our wages on Friday or Saturday." Another fellow came up to me and said, "George"——

Mr. Deputy-Speaker (Mr. Charles Williams)

While it is perfectly legitimate for the hon. Member to state that this would be a better way of paying taxation than that contained in the Budget and give possibly one illustration, if every hon. Member were to give numerous illustrations, we would get rather far away from the Budget itself.

Mr. Griffiths

I am sorry you stopped me, Mr. Deputy-Speaker, because the case I want to give now is more vital than the other one.

Mr. Deputy-Speaker

We will make it two, then.

Mr. Griffiths

I will sit down after this one. The demand note of this collier for the next 25 weeks was £38. He pays his tax six months back; in 25 weeks it worked out at 34s. 4d. a week. At the present time this man is only doing four days a week because he is sick, and he said to me, "I wish I had paid this when I was earning the money." That is the point that I wanted to put, and I would ask the Chancellor to alter the paying of the tax an this way as soon as possible. Some of these men have spent the money six months after they have earned it. If such a man is killed, the Chancellor will lose that money. He cannot get it out of the wife, as she will have none. I want to put this case in the way that the miners and their wives give it to me, so that the Chancellor will at least understand what they think about it.

Mr. Colegate (The Wrekin)

I very much sympathise with the hon. Member for Hemsworth (Mr. G. Griffiths) on the question of "pay-as-you-go," and I would like to add my voice to the voices of others who have urged upon the Chancellor that he will, before his next Budget, consider the various schemes of this kind which have been suggested and which we believe are being discussed elsewhere, to see whether something of the kind is not possible to avoid the hardships of which the hon. Member for Hemsworth gave one or two very striking examples.

I would like to turn from that to the speech of the hon. and learned Member for Montgomery (Mr. C. Davies), with which I found myself in profound disagreement. If there is one doctrine more fully established than any other, it is that of Ministerial responsibility to the House of Commons. If Members here are not taking the interest that they should do in the financial affairs of the State, it is due to the Members themselves, and not to the Chancellor of the Exchequer or to the Treasury officials. The hon. and learned Member shakes his head, but he certainly gave us that impression.

Mr. Clement Davies

I regret that I should have given that impression. I did not want to convey such an impression but to convey the impression that matters of ways and means are for Members of this House as a whole, and therefore they should take more interest in them and discuss them more fully and not merely accept them. That is the point.

Mr. Colegate

I am glad that the hon. and learned Member has said that, because we are all in agreement with it, but I think that if he will look at his words in the OFFICIAL REPORT, he will find that he rather led us to consider the officials of the Treasury as apart from the Chancellor of the Exchequer, and that we really must not do. The Chancellor of the Exchequer is the man responsible. I entirely agree with the hon. and learned Member that Members of this House do not take sufficient interest in our financial affairs. Nowadays, if one has regard for the history of our constitutional procedure to which he referred, it is rather distressing to see how little interest people take in the work of the Chancellor of the Exchequer in safeguarding the Treasury and how much interest they take in spending. The Chancellor of the Exchequer, if he has any complaint—he is so polite and considerate to us all that probably he has not—he would rightly say that he does not always get the support of this House for protecting the interests of the taxpayer that he might expect. It is very easy to come down here and make proposals for spending money, but it is not very popular to come and support the Chancellor of the Exchequer in resisting those proposals and seeing that our financial affairs are so ordered and so done that we can face the future with the confidence with which we ought to face it. This Budget, and future Budgets to the end of the war, will have a very material effect on what happens at the end of the war. If we are to pass from the state of war into the period of reconstruction and of peace with success and with as little friction as possible, it is essential that our finances should be on the soundest possible principles, and the utmost care should be taken to make people understand that we are not inflicting upon them any burden that we can possibly avoid.

Several speakers have said that the people are bearing their burdens of taxation cheerfully, and that is undoubtedly true. My hon. Friend the Financial Secretary said that the people would bear them cheerfully if they believed that the Chancellor was acting fairly. That is true but there is something very much more in it than that. People are bearing their burdens of taxation cheerfully on the understanding that at the very earliest possible moment all classes of taxation should be reduced. Whether a man drinks his pint of beer and pays his 7¼d. or whatever it may be in taxation, or whether many of us have to live on capital because of the operation of taxation and Supertax, people are bearing the burden because they believe that the Chancellor will reduce taxation as soon as it is possible to do so. It is essential that people should believe that. If you want men to be put back into employment quickly after the end of the war, you must create in those whose particular business it is to organise industry a feeling of confidence that they are not to have unduly heavy burdens placed upon them in their efforts once more to expand in those fields of export and elsewhere which have brought so much wealth to this country in the past.

There is one other point I would like to make. The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) referred to Clause 22, which has now become Clause 24, which is associated in the minds of a great many people with whisky. I am bound to thank the Chancellor of the Exchequer for meeting us over this point. Those of us who proposed that the Clause should be drafted so as to exclude the innocent, had a very real fear in our minds, which reflected a very real fear throughout the country. Although I agree—and no one would agree more than I do with the right hon. Gentleman the Member for East Edinburgh—that we should tear down the façade and get at these tax criminals, the more we do that the more we must be careful that we do not involve the innocent with the guilty. No one can fail to be cognisant of the many examples of the hardships that occur at the present time. An additional 1s. or 2s. in the £ may not be a hardship but it may become a real hardship when the Income Tax is 10s., plus Surtax, and it is important that we should make the clearest distinction between what I would call the tax criminal and the man who is merely taking the ordinary advice of the highest authority in the land—the Judges of the High Court—so as to reduce his taxation to the legal minimum to which he is entitled. It is very important that we should see that the distinction, as it has been to some extent defined in Clause 24, is continued in future legislation which the Chancellor may introduce. I would only say, in conclusion, that I hope the Chancellor will very seriously consider the question of "pay-as-you-go." Here again, it not only affects the present position, but it affects, what I am very largely concerned with, the post-war position and the transition from the state of war to the state of peace. There may be many changes in rates of pay—I hope not—but undoubtedly there will be many changes in earnings. Overtime will be stopped, and many weekly wage-earners will find themselves with nominally the same trade union rate of pay but with a much lower amount of earnings, which may lead to serious friction and serious hardship. Therefore, I hope that the Chancellor will see by the time his next Budget arrives whether he can at least mitigate part of the dangers and hardships which might arise in the circumstances.

Mr. Tinker (Leigh)

I do not intend to follow the hon. Member for The Wrekin (Mr. Colegate), whose speech was something of a mixture. He defended vested interests in one part and later referred to workmen whom he wanted to protect.

Mr. Colegate

Both have vested interests.

Mr. Tinker

To-day the Chancellor has done a tot of nodding, and I think he is riding very easily because his Financial Statement has been so well received by the House. The Financial Secretary has given us an indication of what wars mean. He told us that the present National Debt is £17,000,000,000—that is twice as much as it was before the war started—and we realise how costly wars are when they are fought on the scale at which this war is being fought to-day. What we have to try to do is to avoid war in the future. Wars like the present war cause everything to go to the top, and we must try to avoid that in future. I want to commend the Chancellor on Clause 24, which deals with tax dodgers, people who have had stocks in hand and who have resold them in order to evade State duties. I think Parliament has done a piece of creditable work in dealing with this class of case, although whatever we may try to do to stop loopholes the fact remains that there are men and businesses who continue to use every endeavour to dodge their State responsibilities. Such action is very unworthy at any time, but is even more so in war-time, when we are asking everybody to throw everything they have into the national effort. Therefore, I hope that when people of this sort come within the clutches of the law an example will be made of them in order to try and prevent others from doing the same kind of thing.

As regards easy borrowing, some of my hon. Friends and I have advocated for many years a reduction of interest charges, and we take some little credit to ourselves. We are pleased that the rate is down to a practical minimum that will appeal to investors. I hope to see the time when the State will not require any borrowings at all. The hon. Member for Walsall (Sir G. Schuster) spoke about a 50 per cent, interest in industry; if we can get a 100 per cent. interest, then we can control any finance.

I would like the Chancellor to pay particular attention to my final point, which is in connection with Post-War Credits. Wherever I go I find there is a lack of knowledge as to what the State intend doing when the war is over, when repayments will be made and how they will be made. I am met by such inquiries as this: "If I should die, to whom will my Post-War Credit go? Will it go to my wife or family, or will the State take it?" Another one was this: "If I accumulate Post-War Credits for a year or two, can the Chancellor include that in my assets and tax me on it?" I have with me my own certificate of Post-War Credits. [An HON. MEMBER: "And a bachelor, too."] Yes, and a bachelor has to pay more, and rightly so, because he has certain advantages that a married man does not get. It is difficult to understand what will be done when the war is over, and I think the Chancellor might make some explanation when he sends out the certificates. I have here, too, another document, entitled, "How to fill up your form," which is circulated with the Income Tax forms. There are 31 paragraphs in the document, but I do not find any mention of Post-War Credits. Will the Chancellor, therefore, on the certificate of Post-War Credits give a fuller explanation of what they mean or say something about them when he sends out this other document showing people how to fill in their Income Tax forms? This would enable a lot of people to feel that at some time or other the State will make repayment. I know it is very difficult to say when that will be; it will depend on the result of the war. I expect payment will be made according to the needs of the people.

There is this further point. In a newspaper on 30th June I saw the headline "£10 tax credits 10s.," referring to a paragraph which said: 'A fear among miners that they will not get their post-war Income Tax credits is being fought by the North West Regional Industrial Savings Council,' said Mr. Harold Parkinson, Chairman of the Council, speaking in Manchester yesterday. I know of cases where miners have been offering £10 certificates for 10s.: he said. This statement is false. There is no miner doing that kind of thing. When I saw that in the newspaper I wondered what was behind it. I have been asked by miners to refute the statement, but I want the Chancellor to do it as well. I wonder whether the Chancellor would make a statement something like that he made when Post-War Credits were introduced in 1941. I have re-read the statement he made then; it is a clear statement, but after a year or two people are apt to forget, and if he would make clear what is the intention behind these Post-War Credits, I think it would give general satisfaction to the public. I have nothing further to say now. I raised certain objections on the earlier stages of the Bill because I thought it was necessary. I protested, for instance, against the extra tax on beer and the extra tax on tobacco. I know that the money has to be found somewhere, but I did think that it was rather harsh on the people who had to pay the extra money.

Mr. Brooke (Lewisham, West)

We have had a series of interesting speeches that have ranged wide. May I bring the House back to one particular Clause of this Bill, to which I hope we shall give a unanimous Third Reading? On the Committee stage I moved an Amendment to what was then Clause 21, but has now become Clause 22, and the Chancellor was good enough to say that the point I had raised was one of substance and that before the Report stage he would put down an Amendment to clear up the matter. On the Report stage no Government Amendment covering that point appeared on the Order Paper, and I think it is now the Chancellor's intention to try and deal with it—it is somewhat technical—by means of Regulations. Perhaps my right hon. Friend, when he is winding up this Debate, will be good enough to clarify his intention. If that is his plan, I think that he can cover a great many of the cases concerned by means of Regulations, but I also believe that a certain number of cases will still be omitted, and in that event all who are interested will continue to watch the matter in case it is necessary to put down a new Clause in next year's Finance Bill. If I am right in my supposition as to what my right hon. Friend is thinking of doing, let me say that I am grateful.

There are only two general matters on which I would like to touch. First, may I ask the Chancellor to give serious attention to the proposal I made in a previous Debate, that he and the Treasury should prepare and issue an interesting, popular booklet on the subject of how we are paying for the war? Every person outside this House with whom I have discussed the suggestion has agreed that such a booklet would be of wide interest. My own belief is that here in the House one of the principal reasons why the Chancellor has carried all of us with him in his financial proposals is because of the exceptional trouble he has taken to explain in his Budget speeches and other financial Debates not only his cut-and-dried proposals but the principles of action which have lain behind them. We have felt that we have been let into his mind, and that fact has helped to carry us with him. Unfortunately, or perhaps fortunately, the general mass of the people of this country to not read the OFFICIAL REPORT and, consequently, they have not had the same opportunities as we have had to get a firm grip of the principles on which the Chancellor has conducted his financial policy and by which he is enabling us to pay for the war. Nothing will remove my conviction that there would be a large demand for an authoritative, well-written booklet of this kind, priced at sixpence or so, by means of which people could turn up the correct answer, and not some fancied answer, to the question: "How is Britain paying for the war?"

My only other point concerns the attitude of this House to finance and taxation. I agree with some previous speakers that not enough hon. Members take an active interest here in national finance. One of the difficulties appears to me to be that in between one Budget and another, one Finance Bill and another, it is extremely hard to raise, except at Question time, any matter affecting taxation. In almost any of the other financial Debates we have during the year, taxation matters are out of Order. This shortcoming could in large measure be met if arrangement was made by which the House, one day early in the new Session, annually, could have a day's De- bate intended to give opportunity for a review of taxation principles and large tax questions with which the Treasury and the House have to be concerned whenever new Budget proposals are being brought up. As it is, the only opportunity provided for a Member to raise these matters is either behind the scenes with the Chancellor or else in Debates after the Budget, when the Chancellor has made up his mind as to what he intends to do that year, so that it is the least likely time when he can make any considerable changes. That is why I should like to commend to the House that we should press for the holding of a Debate of the kind that I have described at some time between every two Budgets.

Mr. A. Edwards (Middlesbrough, East)

The lion. Member suggested the publication of a pamphlet telling the public how we pay for the war. I should like to draw his attention to a pamphlet recently published by the Oxford University Press showing that we shall not be very much poorer after we have paid for the war, and disillusioning a good many people who preach that we shall be so poor that we shall have to tighten our belts. It is most instructive, and I hope it will be widely read.

Mr. Deputy-Speaker (Mr. Charles Williams)

I cannot see that either of these pamphlets has anything to do with the Budget.

Mr. Edwards

My right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) started off by offering bouquets, and I think the one he offered to the Chancellor of the Exchequer was well merited. The difficulty about finding out all the good things that Ministers do is that so many of us are fully occupied chasing their shortcomings. Having spent two years on the War Expenditure Committee, we found it very difficult to give much praise to anyone and, when we would like to have published a report complimenting the Government and the country on our very great achievements, it did not seen to come within our terms of reference. Much as we should have liked to do it, we found that we could not spend much time on it. At the same time, while we want to give the Chancellor and the Government all credit for their achievements—and they are many—those who have read the reports of the War Ex- penditure Committee must ask themselves occasionally if the Chancellor has not some responsibility for paying more attention to some of those reports when he has to raise the money and sees so much gross waste and inefficiency. Has he not a responsibility to look more carefully into those things? I sometimes think he ought to look upon himself not so much as a national cash register studying only where he is going to get the money to pay his debts. He should be very much concerned about seeing that people's pockets are adequately filled, so that he can levy a contribution on them, which involves a study not merely of finance and the meaningless symbols of L.S.D., but of our national economy. He should be studying and giving the House more carefully devised scientific plans for the distribution of the national income. Unless L.S.D. are related to the national income, and to the actual production of real wealth, they do become meaningless symbols. The Financial Secretary said that it was better to travel hopefully than to arrive.

Mr. Assheton

I said some people say so.

Mr. Edwards

That is a different thing, because the hon. Gentleman did not say so when speaking recently about the Beveridge proposals. He did not give people a chance to travel very hopefully.

Mr. Assheton

I have not made any speeches about the Beveridge proposals anywhere.

Mr. Edwards

The hon. Gentleman is much wiser than some of his colleagues if he has not. I had it in mind that he had made some very scathing remarks about people making wild proposals for spending the national income, whereas the Chancellor of the Exchequer and his colleagues, when speaking about what we can and cannot afford, give the impression that at the end of it we are going to be very much poorer and people will have to tighten their belts. Are they not going to consider that the men who are doing the fighting are paying in the only currency they can, in sweat, and blood and toil? You must not talk to these men who are making this tremendous sacrifice about coming back to further sacrifices and tightening their belts. Are you going to inflict penalties instead of rewards on them for all their work, or are you going to encourage them and say there is to be a scientific distribution of wealth when they return, instead of constantly sneering at people who try to help the Chancellor to do his job more efficiently? There is a lot of common ground in the House and in the country, but frequently we are talking at cross purposes. I believe that if we re-instituted a limitation of dividends, it would overcome many of the evils that we are all opposed to, but no one seems to be entirely agreed how this should be dealt with. It would abolish what is now taking place, speculating in gold shares, a commodity which no one wants. The Chancellor has the responsibility, which he does not pursue, of discouraging the hope that we are going constantly to base our currency on this obsolete gold standard idea. The best authorities in the world would agree that there is an abundance of gold to last us for evermore, and there is not the slightest justification for producing another ounce, from any point of view.

The Financial Secretary went back to the question of savings, and the idea of large numbers of people spending their energy week after week doing something which we think entirely unnecessary, because the Chancellor has access to all he requires in other ways, telling the country things that are positively untrue, though not quite so untrue now as they used to be, and trying to make them believe that they get more battleships and aeroplanes. They do not do that now, because they recognise how ludicrous such a statement was. The Financial Secretary said that we got from other sources 34 per cent. of the savings, but he did not tell us how much came from insurance companies. We are misrepresented sometimes as attacking the banks, but that is grossly unfair. Whatever system we may have in future, we have to-day the soundest and safest banking system in the world, and I do not want to alter it in the slightest unless we discover something much better. But that does not alter the fact that the banks are the first to admit that they get a lot of interest on money which they do not possess but deliberately manufacture. One could argue that it does not do a great deal of harm in the long run, and if in the future they were committed to not increasing their dividends, perhaps it would not do any harm.

Mr. Deputy-Speaker

I cannot find anything about this in the Bill. We are rather strict on the Third Reading and can only refer to what is actually in the Bill.

Mr. Edwards

One hears remarks about the proposals to tax the tax dodgers. Those most ingenious people have been of great service, because they have shown all the loopholes and all the weaknesses which we have not noticed ourselves, and if there had not been those lopholes, we should not have discovered what scoundrels we have in our midst. They are only an infinitesimal proportion of the community, but there they are. I remember a previous Minister saying that the only Scriptural injunction that is obeyed in the City is to watch and pray, but they spell it with an "e" and not an "a." There are still a lot of people who have to be watched, but they have now exposed themselves, and we know enough to circumvent them.

We have had expressions of gratitude to Canada for their generosity, but I am sure we are all agreed that, when the time comes for settling these things, there will be an equitable settlement of the total bill for the war. We do not know yet how much everyone is to have to contribute, but America was wise enough on this occasion not to begin to build up a war debt. I suppose at some time or other it must be converted back in terms of universal Lend-Lease. Let us have a fair understanding that all are going to pay their fair share, and let us pay compliments at the end when the final settlement comes.

Dr. Russell Thomas (Southampton)

I agree with the hon. Member that the ingenuity of certain people in the past has certainly helped the Chancellor in framing measures to catch them now. That brings me to the point that I want to make, namely, the retrospection of the Bill. I said in Committee that the general purpose of retrospective legislation is that it should be retrospective in regard to the clarification of the existing law. That is not the case with this Bill. Clause 24 is a clarification of Section 35 of the Act of 1941. It should not bring in transactions which were not previously liable to tax. It is of far-reaching effect and should actually refer only to the sale of stock below cost in accordance with Section 35 of that Act.

I should be the last one to countenance the type of people we have heard of during recent discussions. I would not for a moment hold a brief for them. I would not suggest that the Chancellor should not use the harshest measures for catching them in the future. But I want to say a word about the principle that is being asserted in the present Bill. It goes much further than clarifying the law. It makes actions which were perfectly legal in years past completely illegal now. All the people who apparently acted quite legally in years gone by are now having their acts declared illegal. That is a most dangerous principle and I cannot think of anything more disastrous in a Bill. In three or four years' time we might have a Government which, taking a Bill like this as a precedent, will look upon the acts of many of us as averse to the policy that they might then have in mind, and they might lay down that many of us acted illegally. That could well be done and it should be put on record. The Attorney-General said in regard to this provision: It is retrospective and applies to all these past transactions … The Amendment will … operate in the main on what has happened in the past when the scheme was legal."—[OFFICIAL REPORT, 29th June, 1943; col. 1515, Vol. 390.] In past discussions we have heard the most extraordinary remarks from hon. Members and they have talked in a way that betrayed loose thinking on their part. It suggests to me that the House has not quite grasped the position. We have heard different expressions such as "tax evasion," "fraud," and "criminals" applied to these people. In a moral sense perhaps they are right, but we must bear in mind that in the past all these people acted perfectly legally according to the law of the land. Taxation falls on every member of the community and I do not think eat any one desires to pay his taxes.

Mr. Stokes (Ipswich)

Hear, hear.

Dr. Thomas

My hon. Friend probably takes the same attitude as the hon. Member for Hemsworth (Mr. G. Griffiths) took a short time ago. I wonder whether anyone who returns his income brings in any more than he should. Does he bring in some gilt in order to swell his income? When a person makes out his expenses for the revenue does he not bring in as many expense, as he is legally entitled to do? I wonder how many people pay the Chan- cellor voluntary taxes. Suppose a man is not liable for taxes, does he offer to pay? Does anyone pay the Chancellor any more than he should pay? That is the general attitude to taxation and it is perfectly legal. If the law was such that an action taken at a certain time was legal we should be very chary before we pass a law against that action and make it retrospective. I should like to quote one or two extracts from the previous Debate. The hon. Member for East Birkenhead (Mr. Graham White) said this, and it is an example of the loose thinking to which I referred: In these clays apparently the buccaneers go into the City and, by these nefarious transactions, seem to avoid the liabilities which the rest of the community in honour bound accept in war-time."—[OFFICIAL REPORT, 29th June, 1943; col. 1495, Vol. 390.] The important point is that they were not legal liabilities at that time. The hon. Member for North-East Leeds (Mr. C. Henderson) said a similar thing. There were some people … who were out to evade Excess Profits Tax."—[OFFICIAL REPORT, 29th June, 1943; col. 1496, Vol. 390.] They could not evade the Excess Profits Tax, because they were not liable to it owing to the looseness of the Bills brought before this House. The Noble Lord the Member for Horsham and Worthing (Earl Winterton) described the matter in language which we are accustomed to hear from him. He said: Any man in this country who seeks to defraud the Revenue is committing a criminal act, and if any hon. Members deny that let them get up and say so."—[OFFICIAL. REPORT, 29th June, 1943; col. 1500, Vol. 390.] I deny it. None of these people committed any wrongful act at the time. I am not sympathising with them and I hope the Chancellor will catch as many as possible under the new Clause, but what I am trying to draw the attention of the House to is the fact that this is retrospective legislation in a dangerous sense. The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) made remarks of this kind: If a person, wanting to commit a crime, went to a lawyer in advance to find out how he could do it, and came less badly off as a result, I am not quite so sure that the lawyer who gave him advice in that way would not be an accessory before the fact."— [OFFICIAL REPORT, 29th June, 1943; col. 1511, Vol. 390.] People are perfectly entitled to go to their lawyers and. ask for advice about any matter. They are not conspiring to commit a crime or something of that kind. The law says that certain action is not illegal at the time. I wonder how many lawyers there are who have not been asked advice in regard to some point where their clients wanted to get out of what they thought was a liability. It is the job of lawyers to advise on such matters and we cannot blame them in any way. They are acting quite properly in the course of their profession. To use these loose terms in the House is a grave mistake. The House in embarking on legislation of this retrospective kind is setting a precedent which at some future time might well come back on the heads of the people of this country. We have handed to the executive Government enormous powers which only Parliament can soften and control, and it is as well to remind the Government that they should go very carefully in these matters. They should not by one Clause of a Bill make a precedent for sweeping and backward legislation. If they do that we shall be entering into dangerous waters and the freedom and liberty for which we are supposed to be fighting might be gravely endangered.

Mr. Stokes (Ipswich)

I have only two or three remarks which I wish to address to the Chancellor and his right-hand man. Not having listened to all the Debate through circumstances over which I have no control, I will deal only with what my hon. Friend the Financial Secretary said. He tried to frighten us or to impress us with the danger with which we shall be confronted at the end of the war in facing the cost of the service of the National Debt. I wish he had been a little more frank with the House and the country by reiterating what that service is likely to be, because in my opinion and the opinion of those who hold views such as I do, which are shared I believe in his heart, not by the Chancellor, but by the Financial Secretary, it is important that people should realise of what magnitude this service will be. The Financial Secretary gave the National Debt as being now £17,700,000,000. Taking the Prime Minister's forecast of the end of the war in Europe as the end of 1945, it is doubtful whether it will be less than £22,000,000,000 or £25,000,000,000 by that time. As far as I can judge, the service of the National Debt will be of the order of £600,000,000 a year. It would have been much better had my hon. Friend made it clear to the House and the country what the figure is. I may be wrong, but the figure is of that order, and it is important that people should understand it. May I make this reflection also? The cost of the service of the National Debt would not be so great if the Chancellor had taken my advice and the advice of some others and insisted on interest-free loans during the war, and if he had taken unto himself the power and the right to create and control money and credit.

The Financial Secretary slid very quickly over another point as if not wishing to tell the people what the truth is. If he wanted to tell the truth, why did not he do so? No doubt I shall get a satisfactory answer to my next Parliamentary Question on the subject. He slid over the part played in the "Wings for Victory" weeks by the small subscriber. I tried to interrupt him to ask him to tell us what the proportion had been. I hope that on the next suitable occasion, which as far as I am concerned will be in the next series of Sittings, he will tell me precisely what the small subscriptions have amounted to. If he was able to make the statement he did make to-day, he must know, whereas whenever I ask the Chancellor what the analysis is he always says that he does not think it profitable to make the analysis. The two things do not hang together. There ought to be more fraternity between the Chancellor and his Financial Secretary to prevent their falling into this mess. No doubt we shall now get at the truth.

The third point I wish to make on my hon. Friend's opening speech is his curious analogy between finance, fire and water. If there had been alliteration in the phrase, one would have felt more sympathetic about it, but there was not even that. I see no relation whatever between fire, water and finance, except possibly that fire might be used to burn up the rubbish which the City issues. Fire and water are absolute things which you can understand, but what is finance? It is the biggest humbug which has ever been perpetrated on the peoples of the world.

Mr. Assheton

I said they were all bad masters but good servants.

Mr. Stokes

But my hon. Friend did not set out to explain to the people how badly they had been misled by this humbug of finance. He went on to say that the methods by which the Treasury had conducted our finances in this war had left them less vulnerable than might have been expected. Vulnerable to whom? To the taxpayers? No. To the other members of the Government? No. To the Tory Party? No. To whom? Less vulnerable to the vagaries of finance controlled by private interests to the disadvantage of the ordinary citizens of the country. He did not say that, but that is what he really meant. I hope that people will, take to heart what he has implied in his remark, and insist that before the end of the war there shall be a change in the control of the whole financial machine. Finally, though I know it would be out of Order if I were to develop it, I want to spend one minute in offering an admonition to my right hon. Friend the Chancellor of the Exchequer. He will be aware that on the Second Reading of this great Bill 70 wise virgins, with lamps filled, put down an Amendment urging that he should make certain provisions to acquire for the people of the country——

Mr. Deputy-Speaker

Order. We have had a very wide Debate, but on Third Reading hon. Members cannot put forward any suggestions as to what the Chancellor of the Exchequer ought to have put in the Bill.

Mr. Stokes

With great respect, I am not suggesting what he ought to have put in the Bill. I am only offering him a little advice as to what he ought to consider and put in the Bill before he comes to the House with his next Budget.

Mr. Deputy-Speaker

That is a matter which the hon. Member had better put forward at Question Time. He cannot make the point on Third Reading.

Mr. Stokes

My difficulty with the Chancellor is that at Question Time he will not answer my Questions.

Mr. Deputy-Speaker

That has nothing to do with me or with the Third Reading of this Bill. I suggest that the hon. Member should frame his Questions, better.

Mr. Stokes

I will certainly take your advice, Sir, but may I be allowed to conclude my sentence by saying respectfully to you and the Chancellor that I hope he will re-read that very wise Amendment put down upon Second Reading, take into consideration the justice of this case for which the 70 wise virgins stand, and see that provision is made next year before he introduces the Budget?

Mr. Collindridge (Barnsley)

I have sat through this Debate for quite a long time and have heard several suggestions made to the right hon. Gentleman as to what he ought to do in order to get the necessary finance for the war. I think I should be justified in saying to those who from various parts of the House may have sympathised, as the hon. Member for Southampton (Dr. R. Thomas) did, with those who have hitherto been practising tax evasion, that I do not think the country will support their view but will back the right hon. Gentleman in what he has done. Some of us feel that he should have gone rather farther than he has done in that direction. When I heard my hon. Friend the Member for Southampton as I thought apologising——

Dr. Russell Thomas


Mr. Collindridge

Though the hon. Member said he did not sympathise with the tax evasionists, I felt he was supporting them. I think that when those boys and girls of ours who are fighting in this war, those men of the sea from the hon. Member's constituency and elsewhere, read haw in this House people are still defending those who are avoiding their rightful obligations to the nation while they themselves are risking their lives, they will estimate the hon. Member's contribution at its rightful value.

I want to say a word for the mass of the people who have recently been brought within the scope of Income Tax. It may be, as has been said, that people do not rush forward to pay their taxes, but as regards the broad belt of the population of the country, I believe that if a proper appeal is made to them, if they are shown how necessary finance is for the prosecution of the war, and they feel that an attempt has been made to lay the greatest burdens upon the broadest backs, we shall find them ready to support these taxation proposals in the Budget. Like a good many other hon. Members, I sit at times in my Division to receive my constituents, and among the complaints from the men in the Forces is this: Often they say they have left a good job in civil life and are reduced to the lower income which they receive when they join one of the Services, and out of this meagre pay they ought not to have to pay Income Tax on their past earnings, particularly at a time when tax evasion is taking place in other quarters. I want in my contribution to this Debate to support the plea which has been made to the right hon. Gentleman to usher in speedily some system of "pay-as-you-go" for working class Income Tax payers.

I was interested in the remarks of my hon. Friend the Member for Hemsworth (Mr. G. Griffiths) about how this question was viewed in the mining districts. I come from the constituency next to that of my hon. Friend. There is turmoil over the system now in vogue, and T believe it would be to the advantage of production and would certainly give satisfaction to the people if we could introduce a system of "pay-as-you-go." It is all very well for apologists of the present system to say that a man may have had a period of low wages and would pay the Income Tax on those low wages at a time when he is earning a high rate of pay but the complaints we hear do not come from those folk but from people who have worked through a high wage period and are having to pay the tax on those high wages in a period when they are receiving only low wages. I expect that the Chancellor will say in reply to the hon. Member for Hemsworth that there never was an instance where a man paid so much tax in a week that he was left with only 1s. to take home, because I know there are provisions whereby too much tax cannot be deducted from a man's wages in one week because of minimum wage standards, but could not something in the nature of a direction go forth to employers of labour—without the necessity for all the circumlocution attending appeals here and appeals there from workers—that a minimum standard of wages should be paid and that no deduction of Income Tax should be made which would bring the wages below that standard?

May I also put in a plea for consideration for the women war workers? I know that already the right hon. Gentleman has allowed for an increase in their earnings standard before they are taxed, but I would point out that many of them are married women who were formerly acting as housewives and that they now have to meet heavy travelling expenses in going to work. I stood on the platform of my local railway station at 6 o'clock on Monday morning, and I saw about 600 workers there, the overwhelming majority of them women. Most of them were women who had newly come into industry. It was a district in which formerly there was a heavy roll of unemployment. Those women get no rebate for travelling expenses, and I suggest that that is a matter which should have attention from the right hon. Gentleman. The right hon. Gentleman suggested, and I am sure he intends it, that the system of "pay-as-you-go" ought to be introduced. I suggest that he might consult with the members of his staff who are working in the districts most affected by the present system, and I think also that the Staff Federation of the Inland Revenue Department might bring to the right hon. Gentleman's notice a scheme for "Pay-as-you-go" which in my view is worthy of consideration.

Mr. Benson (Chesterfield)

I think I am correct in saying that the last half-dozen Members who have addressed the House on the Finance Bill have started by declaring that they did not intend to speak for more than a few minutes and apologised for the fact that they had risen at all. But this is a Finance Bill dealing with £3,000,000,000, and I have not the slightest intention of apologising for discussing it as long as I like. If the Government have put down other Orders for to-day they have done so at their own risk. A Bill raising £3,000,000,000 is one which requires very careful consideration by this House.

I am very glad that the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) raised once again the tax avoidance Clauses, and I think the Chancellor will admit that to-day that has been the topic of main interest. My right hon. Friend said that sooner or later the Chancellor would have to take the power to tear down the facade of these artificial erections raised by the tax evader. I think we are getting to the time when he will have to consider recasting the whole policy of taxation in so far as avoidance is concerned. We have a very efficient Income Tax machine, but let us not forget that its effectiveness rests very largely on the fact that we pay our taxes more or less voluntarily. No matter how efficient the machine may be, unless a tax commands the acceptance of the tax-paying population it cannot be efficiently enforced. There is no question that after the war we shall be faced for many years with a very much higher rate of direct taxation than before the war. I am afraid that may lead to post-war avoidance, or to attempts at it. Mr. Philip Snowden, when he was Chancellor, put 2s. on the Surtax in 1929 or 1930. I do not think the Surtax ever recovered from that. If one takes the yield of Surtax and the growth in that yield from 1929 onwards, and compares it with the growth of the national income and the growth of the yield of ordinary Income Tax, there is a very great discrepancy. That increase of 2s. shocked the Surtax payer. It did not carry the consent of the Surtax payer, and I do not think that in the long run the increase of 2S. increased the yield of Surtax over that decade.

Mr. Ivor Thomas (Keighley)

Is my hon. Friend suggesting that that result, is due to evasion?

Mr. Benson

Not evasion, but avoidance. Evasion is illegal and avoidance is legal. I can only assume that a good deal of avoidance did take place in the period between 1929 and 1939.

We have gone a long way towards stopping loopholes and in the future avoidance will be of an immensely complex nature, and that means increasingly complex taxation machinery—even more complex than at the present time. That complexity contains a definite danger. The basic principle of our taxation has been a precise definition by this House of what is taxable and what is not, with the right of an appeal to the courts as to what the interpretation of our legislation should be. This is a fundamental principle of the method of levying taxation. The Financial Secretary to the Treasury himself referred—I have his words here—to the "struggle throughout the ages to protect the taxpayer from the Crown." It is almost true to say that the history of the growth of Democracy has been the history of this House asserting its right to tax. Precise definition of what is taxable and what is not, is inherent in our whole financial system. But an increasingly complicated system of avoidance, prevented by an increasingly complicated system of tax avoidance Clauses, may well develop a very grave weakness in that system of precise definition. Let me cite what has happened in connection with the present Finance Bill. Speaking on Clause 24 during the Committee stage, the Chancellor of the Exchequer himself said: I find it very difficult to imagine anyone connected in any way with these cases being able for a moment to pretend that there is anything innocent about any of them."—[OFFICIAL REPORT, 2nd June, 1943; col. 322, Vol, 390.] That is a pretty wide statement; but notice how the Attorney-General interprets that wide statement. Speaking on the recommittal stage, the Attorney-General said: Of course, it was never my right hon. Friend's intention that the Special Commissioners should use this drastic power of joint and several liability to bring in, as responsible for the major sum or any substantial proportion of it, persons of this kind."—[OFFICIAL REPORT, 29th June, 1943; col. 1492, Vol. 390.] The atmosphere and the emphasis of those two statements are as wide apart as possible. I want to draw particular attention to the statement of the Attorney-General. He admits here, clearly and definitely, that the Special Commissioners have a power of choice to bring certain people in, to tax them or leave them out, according, apparently, to their moral responsibility. This power also attaches to the Commissioners in the first instance. In another place in his speech, the Attorney-General definitely stated that the Amendment made mandatory what had hitherto been permissive powers to protect the taxpayer.

Constitutionally, that is an intolerable position. It makes taxation depend not upon the will of this House but upon the opinion of the Board of Inland Revenue and of the Special Commissioners, and it is an opinion upon moral issue and not upon facts. There is no appeal for the taxpayer against that situation. It is true that the taxpayer can appeal on the purely abstract legal point as to whether he is inside the Clause or not, but that is not the point at which the Board of Inland Revenue have the choice. It is the people who are definitely inside the Clause to whom the Board can say, "We will tax you or we will not tax you." In other words, the whole basis of the strict interpretation and the strict definition of what is taxable and what is not taxable, has gone. As drafted, Clause 24 of the Finance Bill makes a very definite hole in the fundamental principle that this House lays down, strictly and precisely, what is and what is not taxable, and the House was perfectly right in protecting the interests of the taxpayer in insisting on the recommittal of the Bill and in making mandatory, instead of permissive, those powers to protect the taxpayer.

I said that the principle of precise definition was in danger of breaking down, on account of the increasing complexity of our legislation, but Clause 24 was not complex. It was a comparatively simple Clause, as compared with many which we have passed on the subject of fax avoidance, yet in this comparatively simple Clause there was laid down, or it appeared that it had been laid down, the principle of the right of the Board of Inland Revenue to decide who should and who should not be taxed. I am afraid that is evidence of a tendency that has been growing up for some time. The evasion Clauses that we have passed in past Finance Bills are so wide that I am not at all certain that they are workable, except as a result of a good deal of discretion on the part of the Board of Inland Revenue. In fact, it almost looks as if this principle of precise definition had already become a fiction and as if, behind the façade, there was taking place taxation according to the opinion and the discretion of the Board of Inland Revenue. If that is so, we have to recognise the abandonment of a fundamental principle of our legislation. If we are to abandon the old principle of precise definition we should do it openly, and we should substitute for it something sounder, and more in accord with the past than Departmental decisions and interpretations of the law.

We have already set a useful precedent ourselves in the Finance Bill of 1927 where we have used the phrase, "fictitious and artificial transactions." We have laid it down that certain fictitious and artificial transactions do not enable the taxpayer to avoid taxation. The question of what is a fictitious and artificial transaction is referable to a court of law. It is not something against which the taxpayer has no appeal. He can have an independent judge to decide the question. I suggest that it is along those lines that we shall have to meet tax avoidance in the future. Let us recognise that precise definition is breaking down, and let us, therefore, take steps to frame our legislation so that we can at any rate retain the protection which this House has given to the taxpayer through the centuries, against the Crown or the representatives of the Crown. Let us adapt our legislation in such a way that the taxpayer has some protection against decisions and interpretations of the Executive.

As a matter of fact, if the Chancellor of the Exchequer will adopt the method of declaring that all artificial and fictitious transactions shall not enable a taxpayer to avoid tax, he will go a long way towards killing future tax avoidance. Suppose we have a simple Clause in the Finance Bill that all fictitious and artificial transactions should be null and void against the Exchequer, that would probably be sufficient. It would take away from the tax avoider a great advantage which he has at the present time, in that he gains two or three years' freedom from taxation by these transactions. To establish these complex schemes that are now necessary is not a cheap matter but it may be cheap in comparison with the gain of two or three years freedom from tax until the Exchequer has stopped up that particular hole. If the Board of Inland Revenue were in a position to say—subject to an appeal to the Courts— "This is an artificial transaction and we shall not allow it," the tax avoidance would be stopped immediately, for the schemes would no longer be worth while. The sooner we put our tax avoidance machinery on this basis, the better it will be for the Exchequer. And we shall not need to keep such a careful eye on the Chancellor and his Clauses to see that the innocent are not going to be made to suffer with the guilty.

Mr. Cyril Lloyd (Dudley)

This is one of the few occasions on which we can review our system of taxation and collection as a whole in this House. There are two or three small points which I should like to raise. The Financial Secretary has stated that we are ready payers of taxes in this country. That is a most fortunate thing, and one upon which we can congratulate ourselves, but it should be a matter of very careful conservation. I think that readiness of payment depends very closely on the justice and equity of the method and also on the quality of the provisions of the Bill. In that respect I want to reinforce various appeals that have been made for greater information regarding the statistical position on which our finances are based, so that there may be a closer understanding of the position as a whole. It is quite clear, I think, from the remarks, for instance, of the hon. Member for Ipswich (Mr. Stokes), who I see is not in his place, that there is a considerable lack of grasp of the principles of finance in certain quarters. But the difficulty that is most pressing to my mind is that of the very small taxpayer. In the cases that are apt to occupy the attention of this House, complexity is great and the machinery for dealing with them is great. It is true that the accounting system of this country is working under a tremendous strain, and I think the Chancellor might well appeal to some of his colleagues to ease up the strain on the accountants of the country so that the taxation position might be more closely regulated and more quickly arranged. But the small taxpayer has not a good grasp of the taxation system as it stands, and indeed it is too complex for his ready understanding.

I wonder whether a greater clarity might not he achieved, even under the present system, though I should support what has been said from the opposite benches, on the value of a far more simple system, though I think it would not be in Order to discuss that to-day. But the collection is based on a system very carefully set up which has lasted years and based, as the last speaker has said, on the need to protect the taxpayer in every possible way. There is another point on that I wish to make. I hope the Chancellor will arrange to avoid, as far as possible, not only retroactive legislation, which is a most unfortunate thing when it is forced on us by particular cases of evasion, but also the frequent attempts of the Inland Revenue to upset the decisions of Commissioners by appeals to the higher courts. I think the Chancellor should be very chary of applying the great power which is behind him, to wearing down what might be a genuine case of uncertainty, or even injustice, by saying, "If you appeal there will be another appeal and another appeal and in the end, if you win in the House of Lords, there will be retroactive legislation to defeat you in the end." There may be cases of justice among such appeals. No one, I am sure, wants to protect the avoider, and particularly the avoider who has evil intent. But it is most unfair, I think, to ascribe to those who dislike this retroactive legislation, any idea that they are out to protect malefactors.

There is one other point to which I should like to refer. Allowances for expenses, particularly in the smaller cases, are, I think, a matter for sympathy and inquiry. I agree with the previous speaker who raised the question of expenses. It certainly is a difficulty that the legislation is not very elastic on these points. It is a misfortune that when we try, as is highly desirable and, as is the duty of this House, to define precisely what is the payable tax, the tax surveyor is apt to apply that, even on the most stringent points, to dubious cases and therefore to introduce a sense of hardship which damages the reputation for equitable dealing of the Treasury as a whole. I hope therefore that the future may bring us some relief on these points. I would only say one other word. I should have liked to have noticed a greater sense of heaviness of heart on the part of the Chancellor, in introducing this Bill. After all, it does carry into hundreds of thousands of small homes the greatest trials and anxiety and difficulty. It is a burden which is very readily borne, but there is a feeling, I think, that these small taxpayers are burdened without any sympathy for their case at all. I feel that these small payers, who suffer in a thousand different ways by the special hardship of their case, might in many cases be helped and certainly would be cheered if they felt that there was greater recognition of the sacrifices they are making in the interests of the country and of the war.

Mr. Kendall (Grantham)

It is obvious that the Third Reading of this Bill is having a very smooth passage. It is also obvious that everyone is willing to contribute his part to the needs of the war. No matter what the cost of winning the war is, it is obvious that everyone is willing to do his part. I feel I must protest on one point. The Budget does less than justice to the most defenceless and the weakest section of our community, the old age pensioners, in so much as the tax on tobacco and beer has not been eliminated on their behalf. Although I suppose it is too late to do anything about this situation now, I ask the Chancellor, when he brings forward his new Budget, to take this matter into serious consideration, and to take care to deal with what a number of us consider to be a really grave injustice. That is the only point I wish to make at this time.

Mr. David Adams (Consett)

It is impossible to discuss the Third Reading of this great Measure without paying a proper tribute to the objects of it and for the lucidity and informative attitude of the Chancellor and the Financial Secretary on the passage of this Bill through the House. The fact that it is to-day having a smooth passage is very much due to the fact that the difficulties and the disabilities under which the House at first laboured have very largely been removed. I think it can be very justly affirmed that this Measure does give a general measure of justice to all sections of the community. There is, of course, that particular section, the poorest section who pay no Income Tax and who are also under the duress of indirect taxation. They are the most heavily taxed in the entire community. I referred to that during the discussions on the Budget, and certainly trust that that aspect of subsequent taxation may receive sympathetic consideration at the hands of the Chancellor. The burden is not only upon the individual but it is frequently upon the communities where that individual may reside.

The hon. Member for Chesterfield (Mr. Benson) has certainly given us an entertaining dissertation upon tax avoidance. He seems to be a great expert in tax avoidance, and I have no doubt that his adumbrations to-day will be of the greatest value, certainly of interest to the tax avoiders of the future, and even to the more bold section who are tax evasionists. I disagree with the outlook and the attitude signalised by the hon. Members for Ipswich (Mr. Stokes) and East Middlesbrough (Mr. A. Edwards) in their condemnation of local war savings efforts. I have participated in quite a few of these. I must say that I believe the results of each have been an improvement in the standard of the morale and in the general outlook of the community concerned, but they actually have a valuable psychological effect upon those concerned. It certainly is a great and unifying factor. To me and my fellow citizens and constituents these war savings efforts have proved to be new and entertaining occupations. We have inculcated the habit of saving, which is a valuable one, and we have also obtained money which need not have been subscribed to the State, which might have been left uninvested or invested otherwise.

I am glad to learn, speaking from some knowledge of industrial matters, that we are to have some further review of the Excess Profits Tax. Industry in many quarters and in many directions is awaiting some light upon that position, when it is evident, I think, that a stimulus will be available, probably, which is not available at the present time. No one knows how speedily the war may come to a conclusion, when industry must gird itself for the difficult periods which are coming. The State to-day is, and increasingly will become, a participant in industry. It is concerned and must be concerned not only with a maximum production but a maximum and more equitable distribution of the nation's wealth. It follows therefore that planning in finance and industry is inevitable. The longer the delay in recognising that fact, the worse it will be for the State. We have been informed to-day that the Chancellor is a 50 per cent. shareholder. More than that, he is an extortionate shareholder; he takes extortionate profits from industry. We can only hope that when the war ends he will be content with 20 or 30 per cent. profits, instead of 50 per cent., as at present.

If we are to be permitted to fulfil the Atlantic Charter, among our other obligations, we must do more planning than in the past. We shall require a forecast of the needs of industry, such as is given in another great country. We should be able, through the financial power of the Treasury, to know, for a period of perhaps two or three years, what will be the State's financial liabilities. I hope, too, that there will be some solution of the problem of "pay-as-you-go." It may appear to many in this House rather a minor matter, but in the industrial field, and particularly the mining field, it is very serious. It has been the means of preventing overtime and Sunday work. It has created a sense of injustice, which has militated against a maximum production. So I hope that the Chancellor, who has now had some months to contemplate the situation, will at last come to a speedy settlement. I am satisfied with the financial condition of the country to-day, and, whether the war terminates early or late, I feel that there is a sense of hopefulness and perhaps even of satisfaction, that the future, to which we have made great promises, may be not altogether dark. With the Chancellor pursuing such a course in future as he has done in the past, we trust that these years will find us able to meet in every particular the obligations resting upon Parliament, upon the State, and upon the general community.

Mr. John Wilmot (Kennington)

I will not detain the House more than five minutes, although I think it is a pity that this undue haste has been occasioned because two very important matters have been put down for the same day. I will confine myself to one topic, which has been referred to by my hon. Friend the Member for Consett (Mr. D. Adams), this question of the collection of Income Tax as the income is earned. I do not think that the Chancellor fully appreciates the magnitude and urgency of this question. I am told that the Treasury are inclined rather to sniff at it. If that is so, what Mr. Belloc said of the University of Oxford must be true of the Treasury officials, and I fear that the Chancellor: keeps within a kind of fence or pen A lot of very learned men. If he would let these learned men break out of the fence and come down to the factories they would find a very clamant state of affairs. It has been my duty during this war to have a good deal to do with workmen in factories on war production. I know, as all Members who have to do with factory life know, that this question of Income Tax arrears is a principal topic in every workshop conversation and a primary consideration at every production meeting. Every project and every programme is now considered in terms of its effect in terms of Income Tax. My hon. Friend the Member for Hemsworth (Mr. G. Griffiths), with his remarkable first-hand knowledge of mining conditions, tells me some most painful stories of the position of miners in his pits with regard to Income Tax arrears. I am sorry that he is not here. He tells me of one man, with £38 of Income Tax arrears, who has fallen sick, and whose recovery is retarded by the perpetual worry of this situation. I am very disappointed that the Chancellor has not found it possible to produce some solution of this problem before the final reading of the Finance Bill. He has before him the experience of other countries, not perhaps entirely applicable to us, but at any rate forming the basis of some investigation and some amended proposals.

I will not keep the House now, but I beg the Chancellor to let us have at an early date, in the form of a White Paper, the facts and a considered view of the problem. It is said that any "pay-as-you-go plan" will involve the Exchequer in forgiving some portion of the accumulated Income Tax liability. I hope that that consideration is not a major barrier. If we are to come down from over-time working to normal hours, one way or another, this Income Tax will not be collected. If it is not going to be collected it is much better that it should be forgiven as a matter of deliberate policy, rather than allowed to peter out in a slovenly non-payment of the debt due. The moral and industrial effects of that would be very far-reaching and undesirable. I ask the Chancellor, once again, to let us have at an early date, in the form of a White Paper, his views, after due consideration, so that we can have a Debate in this House to determine the matter. I am certain that this one question has grown so large as to be a major factor in full production.

Mr. Denman (Leeds, Central)

The Clause by which I think this Bill is most likely to be remembered is Clause 24. It has been referred to frequently, both with approval and with disapproval, but I do not think that all that ought to he said on it has yet been said. When it was last before us there were Government Amendments, which were objected to from two angles. One was that they freed from liability professionals who were obviously in the game: they were aiding and abetting, if not instigating, the schemes of avoidance, and they were freed from liability which might have attached to them under the original Clause for extra taxation on the normal profits that they would derive from that professional activity. To that some of us objected. On the other hand, it was objected that the Amendments did not free shareholders who were undoubtedly innocent of any complicity in these transactions. The Attorney-General made an ingenious defence of the Clause. He said that it was attacked by some as going too far, and by others as not going far enough, and some thought it about right. It was, therefore, probably not far wrong on the whole. That reminded me of the pleasant old story of a retired K.C., who was asked his view as to the efficacy of his advocacy during his long life. He replied, "In my youth, as a novice, I lost cases which I ought to have won, and in my old age, with experience, I won cases which I ought to have lost. So, on the average, justice was done." This Clause is a precisely similar average-justice Clause. No doubt, the professionals who have escaped liability will be satisfied with the Amendments, but I do not think that the innocent shareholders will be equally pleased.

I had an interview recently with a shareholder, who came to me with what seemed a very hard case indeed. He had received from the directors of his company an offer, to buy his shares at a price which had not attracted him. He thought that the transaction was a normal merger, that some larger competitor was taking over the smaller company. He began by refusing the offer. It was only when he found that he would be left in a small minority, that he realised that it was advisable for him to sell. That man had committed no offence of any kind; he had reluctantly accepted an offer which the directors had put before him. The people who were to blame were obviously those who had concealed from him the real reason for the transaction. But because of Sub-section (4) (b), he finds that a year after that transaction was completed he is liable to be called upon to refund a considerable amount to repay the Excess Profits Tax that should have been paid by other people. I mention this case because, as the Chancellor knows, I have consistently supported this method of retrospective legislation to kill avoidance of tax. It seems to be the only effective weapon in the armoury of the Treasury, and it is just because I want that weapon kept bright and effective that I ask the Chancellor to be exceedingly careful how he uses it. If the Clause is so administered that innocent people suffer and we have to raise cases on the Adjournment, we shall be reluctant to give the Chan- cellor similar powers in future. It is because I want this weapon, which seems to me essential, to be relied upon by the public to do justice, that I ask the Chancellor to be exceedingly careful not to administer it in such a way as to cause hardship to innocent persons.

Mr. Sexton (Barnard Castle)

I am not getting up to sympathise with or apologise for those people who are called tax evaders and tax dodgers, but I am going to renew and emphasise the claim of those people who want to pay their taxes but to pay them in the easiest possible manner. I am sure that the Chancellor of the Exchequer will be almost wearied in hearing the appeals from various Members in this Debate and in the Debates on the Budget for the "pay-as-you-go" method. My hon. Friends the Member for Leigh (Mr. Tinker), the Member for Consett (Mr. D. Adams), the Member for Hemsworth (Mr. G. Griffiths), the Member for Barnsley (Mr. Collindridge) and other hon. Members have put forward the plea that something should be done to try and mitigate the hardships which the workers now have to bear. I am not speaking for the miners, although I speak for many of them, but I am speaking very largely for agricultural workers and men who work in quarries and whose work is seasonal. In the winter-time the outdoor workers make less wages, and in the summer-time their wages are higher. In the winter six months when the wages are low they have to pay a higher Income Tax based upon the amount when their wages were high. Surely some method can be evolved—some method has been evolved in some countries—to evade this difficulty, and I hope the Chancellor of the Exchequer, after hearing all the appeals that have been made during Debates on the Finance Bill, will take into account those earnest and sincere appeals and try to bring forward something in the future to remedy that evil. After all, the Chancellor of the Exchequer is the loser in some cases. As my hon. Friend the Member for Hemsworth said, if a worker dies, then Income Tax for the previous six months dies with him.

There are questions I want to ask the Chancellor. What is the position of wage-earners who are called to the Forces and have hanging round their neck the debt of unpaid Income Tax? Will they be expected to pay that tax when they return to employment, if they do return? I should like an answer to that question, as it has been put to me a number of times in my Division. There is another question which is causing great concern among the workers. At the end of the war, if they be unemployed and have a debt of Income Tax, will the post-war credit be taken, either wholly or in part, to liquidate that debt? Those questions are causing very serious concern among the workers, and I hope that the Chancellor of the Exchequer will give an explicit reply to-day on these matters. "Pay-as-you-go; present wages should bear present taxation," is the motto that he should adopt. If he would give me an answer to these questions and some assurance that the method of levying Income Tax on wage-earners will be eased somewhat so that the anxieties and hardships are removed, I shall be satisfied.

The Chancellor of the Exchequer (Sir Kingsley Wood)


Mr. William Brown (Rugby)

On a point of Order, Mr. Speaker. Am I to be called?

Mr. Speaker

The Chancellor of the Exchequer also rose, and I called him.

Mr. Brown

I am very much obliged to the Chancellor of the Exchequer for giving way. It is some two months since I spoke in this House, and I want to contribute some observations on the Budget from a different point of view from that from which most of the contributions in this Debate have been made. As far as I know, nobody up to now has challenged the broad structure of the Budget. Individual Members have expressed regret at this or that. Hon. Members have made this, that, or the other proposal, but nobody has challenged the Budget as a whole. That is precisely what I wish to do. I wish to challenge the structure of this Budget as a whole, before it leaves this House for good and all: I wish to say of it (1) that it is an irrelevant Budget, (2) that it is an unjust Budget, (3) that it is a silly Budget and (4) that it is a Budget which envisages either the alternative of debt repudiation, or the denial of any hope of a "new Britain" after the war. Those are the four points.

I assert, first, that it is an irrelevant Budget. We have had this Budget com- mended to us by the Chancellor of the Exchequer, and by the Financial Secretary, on the ground that it is through the Budget that we pay for the war. We are told that the Budget is the measure of the sacrifice that the people of this country have to make, in order that this war may be financed. It is time that somebody said bluntly that that is arrant nonsense. In time of war the Government control all the essentials of making war. The Government control——

Mr. Speaker

I am afraid that the hon. Member is now getting outside the provisions of the Third Reading. He can discuss on the Third Reading what is in the Bill. The considerations which the hon. Member is now putting seem to be very appropriate to a Second Reading speech but not to a Third Reading speech.

Mr. Brown

I must obviously accept your Ruling, Mr. Speaker, but it was in my mind to say that I do not think we ought to leave this Bill, even on its Third Reading, without declaring what we think of it. I do not want to contravene your Ruling, Sir, in any way, hut I wish to say, and I hope it is in Order, that the premises on which this Budget rests are wrong. The premises on which it rests are that the war is paid for in terms of units of value, pieces of paper, pieces of coin, and the rest of it, which have no relevance whatever to the waging of the war. When the Government control, as they do, labour, material and everything else, it is idle to pretend that our war effort is to be measured by the size of the Budget. That is my first point.

I say next that it is an unjust Budget. In spite of all the appeals that have been made to the Chancellor of the Exchequer, the treatment of the various categories of pensioners in this country remains as it was when this Budget was first introduced. Let us take a look at these categories of pensioners, because they are going to bear the burden of this Budget without relief. There are first the several categories of State pensioners, police pensioners——

Mr. Speaker

The hon. Member cannot discuss police pensioners under the Finance Bill.

Mr. Brown

I would respectfully submit that it may not be out of Order for me to refer to categories of pensioners on whom the taxation levied by the Budget will fall.

Mr. Speaker

The hon. Member may refer to categories, but he must not discuss details of these cases.

Mr. Brown

I have not the slightest intention of so doing. I wanted to point out that, apart from old age pensioners, there were other categories of pensioners, Civil Service pensioners, prison officer pensioners, local government officer pensioners, teacher pensioners and other Government officers, to whom the Chancellor of the Exchequer has refused any kind of relief since this war started. He has given them even less consideration than the old age pensioner, and goodness knows, the old age pensioner has had little enough. Upon these the burden of the taxation proposed in this Budget is to fall. I say that in the case of the old age pensioner it is to take away with one hand what you give with the other. In the case of other categories of pensioners it is to take away where you have not even given any relief at all. If the Chancellor of the Exchequer can sleep easy in his bed when he thinks about these categories, his conscience must be such as to justify his appointment as Chancellor of the Exchequer.

I say next that it is a silly Budget, a Budget which dodges every problem of the future, which the Chancellor of the Exchequer ought to be envisaging. When this war ends, if the precedent of the last war is followed, there will be a sharp diminution in the wage earning capacity of the civil population. I do not pretend to know how much that diminution will be, but I do know that if, in the year which follows this war, the Chancellor imposes taxation on the working classes based upon earnings of the year before the war ends—in other words, if he imposes high taxation at a time of low income—then, believe me, he is heading for a first-rate industrial crisis in Britain. If no other consideration would move him, in regard to applying taxation of income as it is earned, that consideration ought to appeal to him, because if he does not do this he will get a mass movement of non-co-operation on the part of the wage earners in this country in the year that follows the war.

I say, fourthly, that this is a Budget which foreshadows either repudiation of debt, or the denial of any hope of the "New Britain" which is held in front of the eyes of the masses in order to induce them to contribute their best to the war. We have been told that the National Debt to-day is £17,700,000,000. I do not know how long the war is going on, but we appear to be adding to that burden of debt at the rate of approximately £3,000,000,000 a year. I was informed by a Government Whip the other day—and who am I that I should question his authority?—that the Government were working upon the assumption that the war would continue in Europe for another four years. I do not pretend to know how long the war will last, but on the basis that it continues for another four years the National Debt will have risen to something like £29,000,000,000. Even at 2 per cent., which the Financial Secretary gave as the average cost of the debt incurred in this war, a National Debt of £29,000,000,000 would require the whole of the pre-war Budget to service it.

What does that mean? It means one of two things—either that the Treasury deliberately intends to inflate so that it pays back that debt in pounds of a lower value than the value of the pounds it was contracted in, or, alternatively, that any dreams of the Beveridge Report—education up to the age of 16, a minimum wage in industry, and all the other things which have been put before us—become completely impossible from a financial point of view. We know what the Government intend to do, but they have not got the courage to say it. What they intend to do is to indulge in a measure of controlled inflation; they intend to inflate the present value of the pound to the tune of 100 per cent., in order to try to keep the postwar cost of servicing the war debt within something like manageable limits. If they do that, they defraud everybody, who has put £1 into War Savings, "Wings for Victory" Weeks, or any other kind of national saving. If they do not do that, then they must face the other horn of the dilemma—that within the limits of this debt-ridden society it will be impossible to get a large enough Budget to service the National Debt, and at the same time make good the promises that have been made to the people of this country during the war. That is the inescapable dilemma which confronts the Chancellor, and I would not mind betting very heavily that when the right hon. Gentleman comes to reply to the Debate, he will do his best to avoid either horn of that dilemma.

Mr. Ivor Thomas

Which horn would the hon. Member grasp?

Mr. Brown

The horn which would be probably carefully avoided by the hon. Member, who walks on a tight-rope as perilously as any Member of this House. I should choose the horn which faced up to the whole problem of this debt-ridden, bank-ridden society——

Mr. Montague (Islington, West)


Mr. Brown

The hon. Member makes a fair point. This side of the House of Commons has been attached to the system of the other side of the House of Commons in the role of a junior partner long enough. It is incredible that a man of the intelligence of the former Under Secretary for Air——

Mr. Speaker

We must get back to this Bill.

Mr. Brown

I am sorry, but my conception of a controversy has always been that when one Member is allowed to interrupt, it is not unfair for the hon. Member who is speaking to be allowed to reply.

Mr. Speaker

An hon. Member may interrupt, but that does not necessarily mean that the hon. Member who is speaking may make a reply at great length.

Mr. Brown

I do not think that charge can be laid against me, Sir, as I had only started to reply.

Mr. Speaker

I think the hon. Member had replied at enough length.

Mr. Brown

In that case I will not attempt to continue with my reply. My own grasp of the horn of the dilemma is that I hope these inflated figures of the National Debt will bring this country where it ought to have been long ago, namely, to the position of assessing the function of money in the community, and to answering the question as to whether industry ought to serve money, or money ought to serve industry and humanity. When we come to that conclusion, we shall not be discussing a Budget that operates within a financial system such as now exists in this country, and there will be no need for Front Bench speeches such as that which we had from the Financial Secretary earlier to-day. We shall be dealing with money as the servant of man, and if the breakdown of the Budget which I clearly foresee, as the alternative to debt repudiation, produces that result then even the experience of this war will not have been in vain.

The Chancellor of the Exchequer (Sir Kingsley Wood)

First I would like to thank the House for the kind observations they have made concerning the Financial Secretary and myself and I would also like to thank Members for their co-operation with the Treasury and myself in connection with this Bill. I propose to say a few words on some of the major points which have been raised in the course of the Debate to-day and I will, if I may, communicate with other hon. Members regarding the smaller points which perhaps they will excuse rite from answering to-day owing to the pressure of other business. It is hardly necessary for me to do so, but I would like to commend what was said by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) and others concerning the generous assistance which has been given to this country by Canada and America. I endeavoured in the course of my Budget speech to draw attention to the magnificent contributions of these two countries but I do not think we can too often express our gratitude for their wide and large-minded attitude which has been and is of such help to us to-day. I can only hope that such assistance as we are able to give in return—for instance by reciprocal aid—is proving helpful to Canada and America.

This, I think, is the sixth Finance Bill since the beginning of the war and while it is true that no financial fortifications are impregnable and that complacency is as dangerous in this field as in the military field, we can, I think fairly claim that after four years of unprecedented strain, our financial front stands strong and firm. I do not think it is too high a claim to make that British finance has played a vital part in, and has made a potent contribution to, our war effort. As regards what the taxpayer has done, it can be said—and I would be the first to say it—that we have not spared ourselves. Our object has been to pay for the war as much as we can, as we go along. This year our Budget expenditure will be over eight times what it was 10 years ago and our total expenditure since the war began is already double what it was during the whole of the last war. The amount to be raised in taxation this year is over three times the amount raised in 1938 and is half as much again as the total amount raised in taxes during the last great conflict. We have borrowed a sum more than the whole of the National Debt before the war began. One of my hon. Friends rather suggested that I did not pay sufficient tribute to what has been done in this respect by the community. Nobody appreciates it more than I do; in fact last year taxes of all kinds took just under 40 per cent. of all private incomes. The average citizen paid about one-third of his entire income mainly to support the fight for freedom and civilisation.

This contribution, of course, has not been borne by any one section of the community. All have made sacrifices and in my judgment that is why these heavy impositions have been generally supported and have received such universal approval. It is a real test for our democracy and the response and cooperation of the whole country have not been found wanting. I certainly realise the unprecedented changes which have taken place in our taxation affairs. There have been many drastic adjustments in many people's lives. Take, for instance, the so-called rich. They have certainly paid very heavily and it should be said on their behalf, and by me, that they have not complained or whimpered. There has been some discussion about the 100 per cent. Excess Profits Tax, about which I will say a little more in a few minutes, but the whole idea behind this tax was to take the profit out of war. There are now some 12,500,000 direct taxpayers—not 7,000,000 as one hon. Member said—and of this number, some 10,000,000 belong to the smaller Income Tax groups. Weekly wage-earners, black-coated workers and others, are not only making a considerable contribution to the war effort but it certainly can be said that at no time in our history have so many of our citizens had a direct and vital interest in taxation matters as they have to-day. Further, out of every £1 we have to spend this year we shall have to borrow 10s. in one form or another. Although we have this vast number of taxpayers it is a remarkable fact that as a result of voluntary savings during the war, a capital sum of £2,000,000,000 is now in the possession of the "small" men and women. That not only indicates a profound change in the circumstances of the time, but it will undoubtedly have a great effect on our policy and plans after the war.

Certainly one of the great duties of the Government and the Chancellor, whoever he may be, must be to maintain economic stability, even if only in the interests of the small men and women, who now have such a vital stake in our national affairs. It is most important, of course, from their point of view, and from that of other citizens, that that particular side of our financial affairs should always be present to us. Taxation takes its place and Indeed an important place in the measures we have taken to secure economic stability; the development, for instance, of a vicious spiral of wages chasing prices would not only weaken the war effort and cause unsettlement and anxiety among the workers, but it would very seriously threaten economic Stability. I need only recall the events of the last war and the disasters which then overwhelmed us. I am very anxious to emphasise the necessity of carefully watching the position —this is the duty of the House, as well as of myself—because I am sure no one desires to see a repetition of what occurred during the last war.

I fully appreciate the desire of all who have spoken to impress upon me the necessity, if it is at all practicable, of adopting some system of "pay-as-you-go" I have never for a moment endeavoured to controvert the advantage of such a system if it could be properly and fairly introduced. I have told the House on other occasions that I have been in constant touch with the Trades Union Congress and the Employers' Federation, who have the same desire as Members of this House, and it is only because, at any rate up to a little time ago, no practical scheme had emerged which in the judgment of those two great organisations and myself would have been fair and practicable that no scheme has yet been introduced. It has not been any wish to hinder a measure which would obviously bring a great deal of relief and advantage if it could be introduced. It has simply been that in the judgement, not only of myself but of those two organisations, as I explained in the White Paper at the time of the last Budget, no acceptable scheme had been brought forward. I would invite hon. Members to read that White Paper again, which shows some of the difficulties with which we are confronted. If one follows the course of events in America and Canada, one will see that it is not by any means easy going. I am still hoping to obtain some material on the proceedings in America which I will make available to Members as soon as I can obtain it, though, of course, conditions in America are obviously somewhat different from our own; I hope, perhaps in the early autumn, to make a further statement. I have not given up hope that some reasonable scheme can be devised. I have always said that, if it can, I believe it will come from people who are experienced and have been working on taxation matters for so many years. My hopes lie in that quarter more than any other, because, if it is at all possible, they are the people who can make suggestions which will be of value.

Sir Patrick Hannon (Birmingham, Moseley)

Are we to understand that my right hon. Friend is giving his attention to what has been done by the Canadian Government?

Sir K. Wood

I have been studying more particularly the American plan. It is very difficult indeed to follow what has taken place from the newspapers, and I have been trying to get further information.

The hon. Member for Leigh (Mr. Tinker) and others asked me about Post-War Credits. I am disappointed that the hon. Member has not had the information that I thought he would have had, because, at considerable expense, and by the use of a great deal of labour, we issued to every taxpayer an explanatory leaflet with the Post-War Certificate. He apparently did not get that. I must consider what further efforts I can make, and I will also consider what can be done by way of broadcasting so, that the matter can be more fully understood.

Mr. Tinker

I hope the right hon. Gentleman will follow up what he has said. I do not remember receiving any explanatory note.

Sir K. Wood

We will make further efforts, because it is important that the position should be more widely known.

Mr. Wilmot

Will the right hon. Gentleman say something about the deduction of arrears of tax from the Post-War Credit? Many people are worried because they fear that, if they fall out of employment, arrears of Income Tax upon high earnings in the past may be deducted from Post-War Credits.

Sir K. Wood

I have given a very definite undertaking on that matter. I will send the hon. Member the exact terms of it.

It has been represented there is still doubt about the 20 per cent. return of Excess Profits Tax. I cannot understand why there should be any difficulty or confusion, unless it has been caused by statements other than my own, because it is quite definitely laid down in the Statute so far as it can be done before the conclusion of hostilities. I do not think, at any rate at this time, anything can be made more binding on the State than the provision that we have made. I will also carefully study what my hon. Friends the Member for Walsall (Sir G. Schuster) and Stockport {Sir A. Gridley) have said in relation to the position of trade and industry. I think they made two valuable contributions to the matter. I thought the most practical measure would be to have an exact investigation into the matter by the authorities concerned. That investigation has now begun, and my advisers are now engaged in measuring the field and in consulting with a number of bodies representative of industry. It is of importance that it is not only an inquiry by the Board of Inland Revenue, but by representatives of the Board of Trade and of the Treasury as well.

Mr. Levy (Elland)

Reverting to the question of stability and the 20 per cent., I hope my right hon. Friend will recognise that no responsible set of accountants would put down any part of that 20 per cent. on a balance-sheet. [An HON. MEMBER: "They ought to."] I give them credit for knowing their own business best. It is obvious that my right hon. Friend has not made himself sufficiently definite and clear to enable them to do so.

Sir K. Wood

It may very well be that, when we approach the conclusion of hostilities and can make definite plans, we shall be able to make a more precise statement.

Sir G. Schuster

My right hon. Friend spoke of consulting bodies representative of industry. I hope he is also consulting bodies like the Institute of Chartered Accountants, which represent no industry but have a great volume of expert knowledge on these matters.

Sir K. Wood

I am glad to answer that. I had an opportunity of talking with the president of that body, and I am very grateful for the suggestions they have already made. My hon. Friend can take it from me that we shall value very much any information or co-operation they can give us.

Mr. Price

Will the right hon. Gentleman say a word in relation to agriculture, in regard to depreciation of machinery and stocks?

Sir K. Wood

I would refer my hon. Friend to what I said on the Second Reading of the Bill. I would not trust my memory to repeat it now.

In regard to the savings movement, I am most anxious that the House should continue to give their help to the great work that that movement has undertaken. It has been one of the most successful efforts in our time, and when the history of the war comes to be written one of the matters that will certainly always be referred to will be the wonderful effort made by the people in voluntary savings. My hon. Friend the Member for Ipswich (Mr. Stokes), who is not now in his place and who likes to have a little tussle with me, seems to think that there is some mystery about the savings movement and the amount of small savings. One of the finest things about the savings movement during the last 12 months has been the considerable improvement in the small savings. I am glad to be able to tell the House that the total of small savings in the last six months was 25 per cent. higher than in the same period of 1942. I will gladly send my right hon. Friend the Member for East Edinburgh exact particulars of the small savings and the large savings which have been obtained up to date in the "Wings for Victory" weeks.

My right hon. Friend the Member for East Edinburgh also asked about the position of post-war currency, which we discussed at considerable length recently. The position at the moment is that in Washington there have been certain meetings of a purely exploratory nature in which certain experts have taken part. The official representative of the British Treasury who is stationed in Washington and others who happen to be there have from time to time attended and discussed the two papers which we know as the British Paper and the American Paper. They have discussed them in the light of the Debates that have taken place in the House of Commons and in Congress. These expert discussions will doubtless continue, and I cannot at present make any further statement except that I think these discussions are of value, and I hope they will continue. I repeat the undertaking that I gave that there will be no commitment of any kind entered into by the British Government without one and possibly more discussions in this House on this matter, which, of course, is of tremendous importance to our future. The House can rest assured about that. The matter is still on the official level, and no Governments are being committed by these discussions. When opportunity serves and there is anything further that I can usefully say to the House, I will do so, and I will keep the House informed from time to time how the matter is proceeding.

Mr. Pethick-Lawrence

My right hon. Friend says that there will be no commitments. I take that to mean that we shall not be brought together to have a statement embodying some proposed arrangements which we must either take or leave. Shall we have an opportunity of discussing it before it becomes crystallised?

Sir K. Wood

I think I can safely say that, but the matter is not advanced to anything like that extent yet. I must preserve the right of the Government constitutionally, but I do not think my right hon. Friend need have any anxiety that there will not be full opportunity for discussion.

Sir Frank Sanderson (Ealing)

Will my right hon. Friend go as far as to say that he agrees in principle that there should be one currency scheme and not two schemes and that he will incorporate into the scheme the best that each has to offer?

Sir K. Wood

I will not go further than what I have said. I have only myself explained the scheme to the House and have not pledged the Government or myself to any particular course.

I want to say something, in conclusion, about the avoidance of taxation and the provisions that we have made in this Bill against a particular form of avoidance of the Excess Profits Tax. Efforts were made to sell pre-war stocks of whisky at the high prices now obtaining without incurring liability to Excess Profits Tax on the profits resulting from that transaction. I want to say a word or two generally on the subject of the avoidance of taxation. Tacitus recorded of the inhabitants of Britain that they were good taxpayers unless they were exasperated by official insolence. That is true to-day. There never has been a time when the British people have paid their taxes so willingly and promptly, and there has been nothing like it in financial history. The Excess Profits Tax has been in existence over practically the whole field of industry, and the Exchequer has again benefited from the traditional willingness of the British taxpayer to pay. Industry for their part—I am glad to say this—have generally regarded the 100 per cent., whatever they may think of the merits, as a necessary part of the war effort. Whenever people have discussed this matter with me on behalf of industry, while they have had their criticism to make, they have never suggested that it should be resisted or not properly paid. From the outset of the Excess Profits Tax and in the years before we instituted the system of Tax Reserve Certificates, under which tax can be paid in advance and interest credits given, industry generally not only paid punctually what was due but even came forward and paid large sums in advance on assessment towards the liabilities that would ultimately fall due. In the years 1940 and 1941 the Exchequer received no less than £20,000,000 and £80,000,000 respectively by way of advance payments before assessment.

The general experience of the Commissioners of Inland Revenue is that industry willingly faces its heavy tax bill in the same way as the ordinary citizen willingly meets his individual liability. I should not be treating the House with candour, however, if I did not say, indeed it was apparent from the discussions that have taken place on this Bill, that unfortunately there are a few who seek to avoid contributing their fair share to the cost of this war. I know the House will agree with me when I say it is the duty—and this is my answer to some of my hon. Friends who have spoken to-day—of the Legislature, especially at the present time, effectively to counter the devious methods that may be adopted by such people to achieve what I regard as their unpatriotic purpose. It is true that the methods that are adopted may be within the letter of the law, but I suggest to the House that where they are plainly directed to defeat the purpose of the law, the law must be protected. In a recent judgment in a case in the House of Lords, the Lord Chancellor, referring to methods of avoidance, said: Judicial dicta may be cited which point out that however elaborate and artificial such methods may be those who adopt them are entitled to do so. There is, of course, no doubt that they are within their legal rights, but that is no reason why their efforts, or those of the professional gentlemen who assisted in the matter, should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship. On the contrary, one result of such methods, if they succeed, is, of course, to increase pro tanto the load of tax on the shoulders of the great body of good citizens who do not desire or do not know how to adopt these manoeuvres. Another consequence is that the Legislature has made amendments to our Income Tax code which aim at nullifying the effectiveness of such schemes. In a later case, which came before the House of Lords only a few weeks ago, in which the avoidance of taxation was again the issue, another Law Lord said: It was reasonably plain in that case that the taxpayer concerned was one of those persons who, rightly or wrongly, exercised much ingenuity in discovering gaps in the net spread by the Legislature and in so arranging their affairs as to escape, but that if the taxpayer saw no impropriety in doing so, it did not lie in his mouth to accuse the taxation authorities of impropriety in choosing to exercise their powers in such a way as to defeat his scheme. It is one thing for the taxpayer to see that he is charged no more tax than the law allows by reference to his actual circumstances, but it is quite a different thing for the taxpayer to enter into highly artificial and ingenious devices so as to make his circumstances appear to be something different from what they actually are, and it is this which lies at the root of avoidance of taxation. In pre-war years it was found necessary to pass a considerable amount of complicated legislation to defeat those who resorted to such methods. It has, happily, not proved to be necessary during the war, for the national purpose has undoubtedly been fortified by a spirit that recoiled from the employment of methods such as those we have been discussing during this Finance Bill.

In relation to Excess Profits Tax, the amount of avoidance has certainly been relatively small; sufficient proof of this is to be found in the healthy attitude of industry as a whole. To check, however, any growth of the avoidance of Excess Profits Tax special provision was made in Section 35 of the Finance Act, 1941, under which the assessing authorities were given general powers to direct such adjustments to be made in the liability to the tax as to counteract any avoidance. When these provisions were before the House I pointed out that many of the past provisions dealing with the avoidance had been retrospective, and that people who wished to evade taxation—I said this very deliberately and definitely at the time—did so at their peril, for they might be dealt with retrospectively. The Financial Secretary repeated the warning. I should like to quote his exact words in the Debate on 1st July, 1941: There is also the Clause which we have just touched upon, with its very rigorous action against tax dodgers, and in that connection I will draw attention once again to what my right hon. Friend has said, namely, that if it is still found to persist in spite of these wide powers he feels himself at liberty to take more strict action, retrospectively, if necessary, because the one thing this House and the people will not tolerate is tax dodging in time of war."—[OFFICIAL REPORT, 1st July, 1941; col. 1282, Vol. 372.] Despite that warning, certain people have resorted to what I regard—and I stand by all I said on this matter on previous occasions—as an outrageous form of avoidance in the case of these whisky stocks. I do not think anybody can possibly defend it; it was, however, found that Section 35 of the Finance Act which I have quoted did not enable the Revenue authorities to recover the tax, and Clause 24 of this Bill carries out my promise that in such cases I would seek effective Parliamentary powers, while giving certain protection to those persons who have not been concerned in such nefarious transactions. The powers given by the Clause, while effectively dealing with the whisky racket, are, I would remind the House and the country, of such a character that ordinary commerce is untouched, for they only apply where a company sells its trading stock at less than its value to a person who is a controlling shareholder. This legislation which we are passing to-day implements the warning I gave in 1941, and I would only say that while I will consider any suggestions made in the Debate as to whether any further action is necessary—I hope it will not be—I trust that any people in future who still feel inclined to resort to such methods will take note of the warning I give. Whatever differences of opinion there may be, the great majority of Members on all sides of the House, while quite rightly desiring to protect the innocent—and it is right that we should do that and not allow our indignation to lead us to do anything unfair—will, I am sure, support me when I say that I shall not hesitate to come to the House again if necessary for powers to stop this sort of thing; I do not think it ought to be allowed at any time, but certainly not in war.

It is for that reason that I have made this statement to the House to-day, and I am hopeful that people will take warning by it. It has been the main topic in our discussions, and I am very grateful to the House for the consideration they have again shown me, and thank them once again for the support they have given to the proposals. I think the proposals embodied in this Bill have received practically the universal acceptance of the country and I believe the main reason for that is that the country feels that I as Chancellor, with the House of Commons supporting me, have endeavoured to deal fairly by all sections of the community in the difficult circumstances of the time. It is too early to talk about remissions of taxation; no one can tell what lies in front of us. I feel that the way in which we have endeavoured to treat this Finance Measure, that is to say, not in any party or sectional manner, but with a view to doing what we can in the best interests of the community, is the way in which, in the future, our safety and success will continue to lie.

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

Bill read the Third time, and passed.