FINANCE BILL

HC Deb 11 December 1945 vol 417 cc225-58

Order for Third Reading read.

3.28 p.m.

The Chancellor of the Exchequer (Mr. Dalton)

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

We are coming at last to the end of a long Debate on a long finance Bill, which contains 60 Clauses and 10 Schedules. It has been very amply discussed and I am sure that you, Mr. Speaker, and the House, would not expect me to go over the whole ground again. I think it will suffice if I pick out and emphasise one or two of the principal points of the Bill.

So far as indirect taxation is concerned, the Bill is chiefly occupied with the Purchase Tax and with motor taxation. With regard to the latter, I have reaffirmed in substance and recommended to the House the views formed by my predecessor. I undertook to keep my mind, at any rate half open, until the matter was further considered in Committee, but the discussion in Committee pointed to the view, and no Division was challenged on it, that, on the whole, the best plan was to adopt the proposed 100 cubic centimetre basis of taxation. That has been done. I hope that the industry, knowing where it is, will now get on with the job of producing motor cars, especially for export.

So far as the Purchase Tax is concerned, I haw felt able to make a first step towards the exemption of a number of the more necessary articles, a wide range of domestic cooking and heating appliances, and refrigerators. I have received from all parts of the House during the passage of the Bill a number of suggestions for further extensions of Purchase Tax exemption, but I have felt able to accept only one or two—wireless sets for the blind, and certain articles connected with war memorials and intended to be used for that purpose. I was very glad to make these exemptions, which were particularly desired. The time is not ripe for me to move much further with regard to Purchase Tax remission, but I have undertaken to consider, and I will consider, between now and April, all the many suggestions that have been made for further extension. I hope that it may be possible then—I make no commitment—to go further along this particular road.

With regard to direct taxes, the discussion in the House and in Committee has mainly centred on the Income Tax and the Excess Profits Tax, possibly somewhat to the neglect of a number of other useful and important Clauses of a non-controversial character contained in the Bill, particularly those relating to double taxation which we hope to abate, and to the fixing of the appointed day under the Income Tax Act, 1945, which brings considerable reliefs and advantages to many Income Tax payers, particularly in business. These Clauses have not been subjected to-much discussion but that very fact indicates that all parts of the House have favoured their passage into law. We have had rather more discussion on the Excess Profits Tax to which the House will not expect me to add. The Finance Bill has also provided a number of Income Tax reliefs as from next April, such as the standard rate; the new two-tier arrangement reducing that standard rate of Income Tax at the lower level of incomes; and the new Surtax scale. These are the principal taxes affected, but, in addition, we have had long discussions on postwar credits in many aspects. It was generally accepted that these should cease at the end of this financial year, and after full discussion the House has approved the majority of my proposals without substantial amendment.

I do not think that the House will wish me to cover again the old ground of earned income allowance and kindred matters. I would merely repeat in one sentence that there was never any commitment, that any Chancellor of the Exchequer would reconstitute exactly, the allowances as they were when the late Sir Kingsley Wood introduced the postwar credits-system. It was always assumed, and rightly so, that the Chancellor of the Exchequer of the day would be reasonably free to make adjustments as between one allowance and another. The Leader of the Opposition said the other day during the Debate on the Motion of Censure that hon. Members opposite were out to do the greatest good to the greatest number. I have tried to do this in this Budget. I have tried to follow the right hon. Gentleman's precepts in dealing with Income Tax and that is why I thought it better to clear 2,000,000 people entirely from taxation, and for the rest to provide relief which, even allowing for the postwar credits, give to 11,750,000 people more relief than they would have got under an exact reconstitution of the 1941 allowance. I have said this myself about half a dozen times, and it has been expressed by others at least as often. The fact remains that, under these proposals, everybody is going to have a larger net income next year, than they would otherwise have had, and I think that has met with general satisfaction. That is a matter of fact which no sophistry can bypass.

With regard to Excess Profits Tax, it is very essential that industry, in reconverting to peace, should be assisted as much as is reasonably possible having regard to our commitments. That is why it seemed particularly important to stimulate exports. To do this, I have reduced the Excess Profits Tax in this, the first Budget in this new Parliament, to 60 per cent. and have made provision for the refund of 20 per cent., as the House well knows. We have had some discussions of a very interesting character as to the way in which we shall ensure that these refunds shall be used for the purpose for which my predecessor explicitly intended them—namely, to re-equip and build up businesses, and not merely to increase dividends or give short-term and immediate advantages to shareholders. We have considered at some length in this House all the necessary provisions and I think they will be found to be watertight and efficient. If, however, on re-examination, they are found not to be so, I shall always be willing to reconsider any of the details in order to see that we achieve exactly what is intended.

This Bill brought forward within three months of VJ-Day, is, as I said when introducing it, only the first instalment of our peacetime financial programme. Within the limits of what it is wise to do just now, it has emphasised the importance of stimulating production in every possible way. Within the limits of prudence I have endeavoured to give all the relief possible to taxpayers, but in the next Finance Bill to be introduced, according to the passage of the months, very soon—in April probably—a further advance may be possible along these lines where we have already made a beginning. It is, as I said when introducing my Budget, only the first step of this journey, and I ask that the Bill should be judged in this light.

3.38 p.m.

Sir J. Stanley Holmes (Harwich)

It was generally agreed that, when the Chancellor introduced his Budget on 22nd October, it had a good reception and a good Press. I think possibly there were a good many people in the country who felt there was nothing exceptional about it but, to use the words which the Prime Minister used just now with regard to Newfoundland, it was on constitutional lines and procedure and those people who are going to get some relief from it are, naturally, pleased. I think too, that throughout the Debates a pleasant atmosphere has been created by the Chancellor himself but as time went on— rather dully as I thought through the Committee and Report stages— I could not help feeling that there was far more disappointment about the Finance Bill which has now been completed, than there was about the Budget when it was first introduced.

I venture to suggest that the Chancellor was so pleased with the response to his Budget, that when he went back to the Treasury he ordered a rubber stamp with the letters "No" on it, so that whenever he got, from time to time, an Amendment or a new Clause proposed he simply took his rubber stamp, used it, and then handed over the Amendment or new Clause to the appropriate Treasury official in order that the necessary information by way of reply might be furnished to him, or to the Financial Secretary to the Treasury. He has himself told us today that all the relief that he gives in this Finance Bill, is to the direct taxpayers. That, if I may say so, seems contrary to all the best precedents, and to the policy of his own party They have always argued that everything should be done by direct taxation, and that indirect taxation should be reduced to a minimum.

Of course it was impossible to increase direct taxation. That had already been done by Lord Simon and by the late Sir Kingsley Wood, who had imposed on the direct taxpayers the highest possible taxation which was of any value to any Chancellor Therefore, it is quite understandable that the Chancellor, in this Finance Bill, must first reduce direct taxation. But it docs seem to be unfortunate that he was not prepared to give a little relief in one or two ways to the indirect taxpayer. I want to refer in the first place to a new Clause, which was put forward with regard to the Entertainments Duty. This was to relieve amateur sport from a certain amount of the Entertainments Duty.

Mr. Speaker

I would point out to the hon. Member that he is out of Order in talking about these things on the Third Reading, because they are matters which are not included in the Bill.

Sir J. Stanley Holmes

With due deference, Sir, I would point out that these are in the Bill. What I would like would be to sec them taken out of the Bill. These sports clubs arc being taxed by this Bill. I think it is unfortunate that that is so, and I hope the Chancellor will certainly consider between now and April, if he can do something about this Entertainments Duty which is paid by the amateur sports clubs. There arc other people besides direct taxpayers —

Mr. Speaker

I think the hon. Member is putting the cart before the horse. He is saying that these things are being taxed, and therefore are in the Bill, and that they should not be taxed. It is not a point that can be made on the Third Reading, and is, therefore, out of Order.

Mr. Oliver Stanley (Bristol, West)

Further to that Ruling, Mr. Speaker, would it be in Order, as the taxation is in the Bill, to address the House on the point that it is pressing on the clubs, and should be removed?

Mr. Speaker

The point is that to do that would require amendment of the Bill under discussion, and that, as I have indicated, is out of Order.

Sir J. Stanley Holmes

Perhaps I may test the matter once more by referring to what appears to me to be another unfortunate fact, and that is the Tea Duty, which is being continued at the same rate as last year. The relief in direct taxation has been given almost entirely, if one might say so, to the male population. After all, it is the man of the family who gets the Income Tax relief, even if his wife has an earned income —

Mr. Speaker

I think I could not have made my Ruling quite clear. The hon. Member is now talking about taxes which are already in previous Acts. He cannot talk about taxation which is in other Acts, and which has not been affected by this Bill, because in order to secure his point that would mean amendment, and it is for that reason that he cannot talk about it now. What he has just said comes under the same Ruling.

Sir J. Stanley Holmes

Then I must confine myself to saying that the whole relief has, in effect, been given in direct taxation, and it seems unfortunate to me that there has not been some relief in indirect taxation, and that something has not been given to the housewives who have at least borne six years of a very hard life, and have done it very bravely. There should, too, have been a certain amount of relief granted in indirect taxation, which would have given the boys and girls a chance for games and for physical recreation which have been largely denied to them during the past six years, and which they may not be able to get for some years yet. I feel that what is disappointing in this Finance Bill is the fact that so little money is being saved between now and the end of the financial year. The hon. Member for the Scottish Universities (Sir J. Anderson) when he opened his Budget in April last put down his expenditure as £5,565 millions for the year 1945–46. The Chancellor of the Exchequer has told us that he is going to reduce that expenditure by £ 90 millions between the time he took over and the end of the present financial year.

Mr. Speaker

I must remind the hon. Member that we cannot discuss expenditure on the Third Reading of a Finance Bill.

Sir J. Stanley Holmes

May I then add that I hope, at any rate, that when the Chancellor opens his Budget next April I shall be more fortunate in regard to keeping within Order, and shall have the opportunity of congratulating the Chancellor on having enormously reduced the expenditure of the country for the next year.

3.46 p.m.

Mr. Alfred Edwards (Middlesbrough, East)

I want to address myself to two items in the Bill, and if I survive as long as the last speaker, I think I shall succeed in getting over the point which I want the Chancellor to bear in mind. I refer to Clause 3. I congratulate the Chancellor—I think that would be a safe way to start—on adopting the capacity tax in place of the old horsepower rating. This is a tremendous advance, which I think will help the motor industry, although I regret that he did not go further. Our main purpose is to help the export trade, and I am not satisfied that, by the concession he has made, British manufacturers will be able to get as large a share as they are entitled to in the export market. If he had adopted the idea put to him in Committee, he might have enabled the designers of cars to have absolute freedom of design to help them in their competition with America. I hope that, between now and his next Budget, he will lend an ear to those people who have advice to tender to him, because I think he has missed the one opportunity that any Chancellor has ever had, to free the designers of motor cars in this country and, moreover, to put the money which he receives from the tax where it belongs— the Road Fund. The Road Fund was raided, and the money taken away, in a very dishonest manner, and the time is coming when, if the Chancellor continues to raid that Fund, the safety of the nation will be imperilled.

I had better get on to my next point, which concerns the Excess Profits Tax. Once more, I congratulate the Chancellor on reducing the tax to 60 per cent., and I would remind him again that, had he accepted advice, he would have removed the inequalities by which so many small people are paying tax today in order that big business may save some direct Income Tax. His own explanation was that if we helped the small people the larger people would have to pay more Income Tax. Of course they would; there is every reason why they should, too. During the past years the small business people have had no chance to get into production in competition with the big business men, and I hope that in his next Budget the Chancellor will take another look at the Excess Profits Tax and abolish it altogether. The other item is the Purchase Tax. I am sure the right hon. Gentleman does not receive from the Purchase Tax anything like the amount he imagines he is getting. Nobody will buy a motor car today. People have to satisfy themselves with what they have, and I think the Chancellor is getting precious little out of Purchase Tax, while at the same time, he inputting a tremendous handicap on business. He would be well advised to abolish the, Purchase Tax on motor cars and give industry a chance to survive.

4.50 p.m.

Professor Savory (Queen's University of Belfast)

I was present in the old House of Commons, sitting under the Clock, when Sir William Harcourt introduced his famous Budget in 1894. That is now well over 50 years ago and I have rarely missed since that date hearing the Chancellor open his Budget. If listening to Budget statements makes one a financier, I have surely by this time begun to qualify. Of all the Budgets I have heard I am bound to say that this one has caused me the gravest possible misgiving, on account of the very great seriousness of the financial situation, and I strongly object—and here I am sticking very closely to the Bill—to the Seventh Schedule to the Finance Bill. I strongly object, at a time like this when the nation is faced with such a financial crisis, to this immense remission of taxation, and especially to the remission of Income Tax. The Chancellor has stated that these remissions amount to no less than £322 million, and he has boasted that 2,000,000 people who formerly paid Income Tax will not now pay it. I believe that the broader the base of taxation,' the better it is for the people, and perhaps I might be allowed to give a personal reminiscence in this connection.

Before the last war I was lecturer on the English language and literature in the University of Marburg, Prussia, and I received the magnificent salary of £75 a year. There was at that time in Germany a "pay as you earn" system. At the end of the first month the porter brought me the few marks to which I was entitled, and in great fear and trembling, and with every kind of polite circumlocution, I pointed out that I thought he had made a slight mistake, as I seemed to be short of a few marks. He replied, "The bursar of the University of Marburg never makes a mistake. You have forgotten the Income Tax." With a salary of £75 a year I had to pay Income Tax. Anyone with an income of 1,000 marks a year— that is to say £50— had to pay Income Tax. In this Bill it is now proposed to raise the exemption limit from £110 to £120, with an immense loss of revenue.

I want to give the reasons why I oppose this Budget on its Third Reading, and the reasons are these. I would ask the House to contrast this remission of £322 million of taxation with the fact that the food subsidy has now risen from £200 million to the staggering figure of £300 million per annum. I would ask the House to contrast the gigantic total of the food subsidy with the fact brought out in this Budget that, if everything were taken after taxes from incomes in excess of £2,000 per annum the Chancellor would only gain £60 million. I feel I cannot insist too often on the fact that there is now—and I would call the attention of our hon. Friends opposite to this—no such thing as an unlimited pool of wealth in the hands of the rich upon which the Chancellor can continue to draw. No, you have already killed the goose which formerly laid the golden eggs.

The latest figures showing the financial position of the country are given in Command Paper 6709, published on 6th December, 1945. We there learn—and I am opposing the recklessness of the Budget on these grounds—that the net income from overseas investments in 1945 will be less than half of that received in 1938. Almost all the marketable United States' dollar securities of United Kingdom nationals were complsorily acquired for sale in order to finance the purchase of munitions.

Mr. Speaker

These arc considerations which should have been put forward on the Second Reading. Such considerations are now completely out of Order on the Third Reading.

Professor Savory

I should like to have your guidance, Mr. Speaker. Am I not allowed to give the reasons why I am opposing this Budget on the Third Reading?

Mr. Speaker

If the hon. Member's reasons are to be found inside the Finance Bill, yes; if they are all over the place outside the Bill, I am afraid, no.

Professor Savory

I would like to point out that I am opposed to this remission of taxation on account of the very precarious state of our finances, and I wish to give various figures showing how precarious those finances are.

Mr. Speaker

All that hon. Members may discuss on the Third Reading is how money is going to be raised, not how it is going to be spent or how serious our financial situation may or may not be. Those considerations are quite out of Order on the Third Reading of the Finance Bill.

Mr. Oliver Stanley

Would it be out of Order to call attention to the fact, for instance, that in one's own opinion the Finance Bill proposes to raise too much money, and point to the disastrous consequences which that might have on the national finances?

Mr. Speaker

I do not think we ought to go very far in that direction. That would be really becoming a Second Reading Debate and not a Third Reading Debate.

Professor Savory

I shall obey your Ruling, Mr. Speaker, and adhere to my very strong objection to this enormous remission of taxation. We are now informed, for the first time, of the fact that the total United Kingdom losses of national wealth are of the order of £7,300 million, and the most serious feature of this is that the newly created external liabilities amount to £3,455 million, to which the Chancellor yesterday added another £100 million, incurred during the period between 31st July and 30th September. We also learned that on the basis of a £75 million deficit in 1946 it would not be safe to base policy on the assumption of a further deficit of less than £500 million to provide for the two years 1947 and 1948. This leaves us with a cumulative deficit which will be of the order of £1,250 million, or even higher.

In order to meet this deficit the Chancellor has insisted, and everyone knows that it is essential, that we should increase our exports. I find that, assuming the volume of our exports in 1938 to be represented by 100, our exports were only 29 in the first nine months of 1944, and 42 for the first nine months of 1945.Let us just take a few figures, and I am sure this is relevant to the Budget. In the first nine months of this year we only exported 262 motor cars instead of 33,000 in the corresponding period of 1938. India and Australia only got one motor car each. During the same period we exported only 90 gramophones as compared with 31,000 in the corresponding period of 1938. Again we exported only 13 pairs of silk stockings instead of 63,000 pairs in 1938.

Mr. Speaker

The hon. Member cannot discuss questions of silk stockings at the present time. He is getting very far away from the question of the Third Reading of this Bill.

Professor Savory

I must apologise. I am just coming to my conclusion. With this serious financial background in view, I should like to read the fine words of the Chancellor of the Exchequer in opening his Budget. I shall abbreviate in order to save time. He said: The Committee may take for granted that next year there will be increased expenditure, both to extend social services and to carry out a number of other constructive tasks. Family allowances will begin to be paid next year. …Increased old age pensions and other improved benefits will begin to be paid. … There will also be increased expenditure on housing, on education … and expenditure on Colonial Development and welfare.

The Chancellor concluded with this most eloquent passage: To do all these things and to do them well, as part of a coherent plan, steadily accomplished stage by stage during the lifetime of this Parliament—such shall be our aim, such shall be our pledge and our pride. We shall do these things." —[Official Report, 23rd October, 1945, Vol. 414, c. 1885.] No, Mr. Speaker, they will not do these things because before they attempt half of them, they will be brought up by the threat of national bankruptcy. They are living in a fool's paradise. This rake's progress will bring them to a catastrophe even worse than that to which they brought the country in 1931, when a blow was struck at British credit from which it has never recovered. Do they suppose that this extravagant expenditure is going to be financed by the Debt which they are about to contract in the United States? Congress is restive at the thought of being obliged to provide for wildcat Socialist expenditure over here. I implore the Chancellor in the interests of the country to draw back before it is too late and save this country from the financial abyss in which he is about to plunge her.

4.3 p.m.

Sir Arnold Gridley (Stockport)

We have had a light touch introduced into this Debate, but I am feeling a little anxious, lest I trip over some of the boulders that lie in the path of those who speak on the Third Reading of the Bill, and I hope that I shall not make it necessary for you, Mr. Speaker, to rise during the few minutes I propose to occupy the time of the House. I should like to say, first, that, on the whole, the Chancellor has met us on this side of the House fairly well. We have by no means got all we had hoped to get, but, on the other hand, I am not sure that we should have been justified in expecting that we should get all we had hoped to obtain. Still, I think I can say that industry does feel that he has, to some extent, followed in the footsteps of his predecessor and that he did go a very considerable way, by changes in taxation, to facilitate the postwar development of industry and accelerate postwar employment, which we are all anxious to further to the utmost of our ability.

One matter which we discussed under Part V of the Bill was double taxation. I raised the point during the Debate on that Clause which the Chancellor promised to consider. I think he agreed with me that we have not succeeded in carrying out the intentions which lay behind these double taxation Clauses. Let me give a concrete example; probably there are many like it. I know of a big undertaking in this country in which half the capital is owned in America and the remaining half is divided into three parts and is held by three great undertakings in our Colonies and Dominions. America holds one half and these other undertakings hold the remaining half between them. What happens is this. The company here in England makes profits and distributes dividends to its shareholders, and the dividends on the American capital go out to the U.S.A. after being taxed. They form out there part of the income of the American company, in which there are a considerable number of British shareholders by reason of the capital structure which I have described. The profits made by the American company come back to this country, to the British shareholders, and are taxed. There you have a case of double taxation which is not yet met. I agree that it may be rather complicated to remove this double liability, but it is a case, I think, which the Chancellor would be justified in looking into further.

I would like to say a word next on the discussion we had yesterday on the year 1945, which the Chancellor is adhering to as the date from which these E.P.T. refunds may be used for postwar purposes. The Chancellor of the Exchequer has a great many things to look at between now and next April. It was suggested by my right hon. Friend the former Financial Secretary to the Treasury, or perhaps it was my right hon. Friend the former Secretary of State for the Colonies, that the Chancellor would have a great many Christmas cogitations, and I am not sure that he will not have a great many Spring chickens; but the Chancellor will have a good deal to. think about, in connection with the many points raised during the Committe stage and on Report, between now and next April, and I would ask him when he is applying his mind to the Clauses we discussed last night whether he will consider this: Industrial undertakings, as the Clause stands, will not be allowed to bring into refund account for the purposes of postwar development expenditure prior to April, 1945. I think I am right in that. If the Chancellor adheres to his proposal will he not be imposing considerable injustices on other firms who have carried out expenditure for precisely similar purposes but at an earlier date, very frequently because they have been asked or urged to do so by Government authorities, and sometimes partially with Government financial assistance? We may create considerable anomalies between one firm and another if the year 1945 is adhered to. Therefore, I ask the Chancellor to look at this matter again. I think it was not one of the cases to which he promised to give re-examination, but he has frequently told us that he keeps his mind flexible on many of these matters, and I suggest that flexibility might be applied here. That is all I want to say on the Third Reading, and I would repeat, although not everyone will agree with me, that I do feel the Chancellor has gone a good way to meet us on this side and T thank him for it.

4.12 p.m.

Mr. Warbey (Luton)

Not being an experienced Parliamentarian, I fear that I cannot hope to avoid the manifest pitfalls of a Third Reading Debate, but I shall rely upon you, Mr. Speaker, to pull me up very gently, and very firmly, if and when I do transgress. I wish to refer to something which is in the Bill and has already been mentioned: the proposal to introduce a cylinder capacity tax on motor vehicles. Like the hon. Member for East Middlesbrough (Mr. A. Edwards) I hope that the Chancellor will regard this as a transitional measure for the transitional period through which we are passing from a war economy to what we hope will be a normal peace economy. There is a very unusual feature about this tax. It is not purely a fiscal one. It is not a question simply of raising revenue, of distributing reliefs and incentives, but it is a tax which, by its form, has a very special effect upon engine design and, therefore, upon the capacity of a whole industry not only to meet the needs of the home market but also to make a contribution to our export trade. At present the form of tax probably does not make a lot of difference, because in the export trade we have a sellers' market, but that state of affairs will only last for perhaps a couple of years, and after that the motor industry must know what is the form of tax on which they are to base their decisions in regard to design and other matters affecting their permanent export policy.

I believe they are prepared to make their contribution, but I suggest to the Chancellor that he should, in view of the special effect of this tax, set up a small committee of experts to examine its effects and to make recommendations to him for a possible revision. The Committee might consist of economists of automobile engineers, of persons with general experience in the trade and manufacturing industry, and, of course, of other persons who have not a special interest in this particular industry. That committee, which might be set up possibly in collaboration with the Board of Trade, would be in a position to investigate the effects of the tax and the various proposals made by the manufacturing interests and by the consumers, and then to report upon the probable effects of this tax, or other forms of tax, upon the trade, upon our home market and, above all, upon our export trade. I hope the Chancellor will consider this suggestion seriously, because in his hands lies a great power—by his decision about the form of this tax—to influence employment in a very important industry.

It is an industry employing scores of thousands of workers and in my own constituency directly or indirectly affecting the welfare of probably one-third of the population. I hope the Chancellor will review this matter in the light of the national interest rather than as a result of ex parte statements and bargaining which are probably not the most satisfactory method of arriving at a conclusion on a matter which so much affects the country as a whole, the interest of the workers, and the balance of our foreign trade.

4.15 p.m.

Major Peter Roberts (Sheffield, Eccles-all)

I would like to have an assurance from the Chancellor of the Exchequer that one small but very important point is covered in the Bill. Will the Chancellor give an assurance that the Bill covers the 20 per cent. refund of Excess Profits Tax to colliery companies and other companies which are to be nationalized, and therefore, will be unable, because of what the Government have done, to put back that money into the re-equipment of their business? By Clause 38 (1, a) the Government will become the person who will Te-equip the industry, and therefore they will obtain the right to purchase by compensation or other methods from the colliery companies, the road hauliers, and so on, the right to the 20 per cent. refund in order to re-equip the business and get it going. The Chancellor will appreciate that a large amount of money is involved. To put the matter bluntly, will the Government get the right to put the 20 per cent. refund Excess Profits Tax into the businesses which they take over, or will those businesses be deprived of that amount, and if so, will the compensation be payable to the owners concerned?

4.17 p.m.

Lieut.-Colonel Sir Walter Smiles (Down)

I want to raise one matter, and in doing so I shall try to avoid being called to Order by you, Mr. Speaker. I had intended to raise the matter yesterday, but unfortunately the 'plane from Ireland came down in a fog near Chester instead of at Croydon, and I did not have an opportunity of raising the matter during the Report stage. I wish to refer to the Purchase Tax as it affects churches. A great many churches had some of their vessels destroyed in the blitz. When they replace those vessels, they will have to pay the full Purchase Tax on them. I have sent papers on this subject to the Financial Secretary, whose replies to me have been very sympathetic, but he has not given me any satisfaction. I put it to the Chancellor that when a church has to purchase a piece of silverware, which is clearly a work of art and which will never be resold again, he might take the opportunity of excluding that article from the Purchase Tax in future.

4.19 p.m.

Sir Peter Bennett (Birmingham, Edgbaston)

I wish to support the plea that was made by my hon. Friend the Member for Stockport (Sir A. Gridley) to the Chancellor to consider, between now and the next occasion on which he introduces a Budget, the point that has been made about the hardship imposed upon people who started reconstruction work before April, 1945. I raised this question in the days of the right hon. Gentleman's predecessor and obtained from him a promise that those industries which had already started reconstruction would have their postwar credits allowed against the work they had already put in hand. The Chancellor took that point up, and has given us the Clause which makes it clear that this will be allowed, but he has inserted the date when I brought the matter up— April, 1945. From that date onwards he will honour the promise that was made. When I raised the matter, however, I pointed out that the reconstruction had already started..

I feel that the Chancellor is taking rather a positive stand in this matter, whereas we feel that he should take a negative one—a rather unusual request from us. When the late Sir Kingsley Wood promised that these postwar credits would be available in certain conditions, he approached the matter from a negative point of view. He said there were certain things which must not be done with them; they must not be used for paying dividends or for bonus shares. Industry has always felt that as long as that was not done, they would be allowed to use the postwar credits in the process of developing their business. During the war, certain companies have made alterations, at the Government's suggestion, knowing that those alterations would help in the postwar period. Now the Government say that those companies have to spend the little capital that is coming back to them on doing all that over again. The firms want the money now to pay the extra cost of their stocks caused by the change in money values. They want it in order to have extra working capital, which they will need. I ask the Chancellor to reconsider this matter, and to see that people who have already done the work are not handicapped in this way.

We also asked the Chancellor whether he could not enable industrialists, as they spend that money, to have a simple means of obtaining a certificate from the Inland Revenue that they were inside the regulations and not to have any sort of contingent liability overshadowing them. Probably the Chancellor will think this is a matter which can be done by administration. Last night the Financial Secretary said that the door must be left open to chase people who do things which they ought not to do. I am certain the Inland Revenue have all the powers they need to do that. The large majority of people arc honest and straightforward. They do not want to have contingent liabilities. I hope the Chancellor will find a way in the regulations to enable people to rule their accounts off and to know that, unless something very unforeseen turns up, the accounts are finished.

I appreciate the point that was made in an earlier Debate by the hon. Member for West Coventry (Mr. Edelman). I appreciate the point he was making of the great value of the motor industry to this country, but I do not feel that the Chancellor needs any more committees to advise him. The question is in his hands. He has told us that he wants the present amount of taxation. In the years to come, or in the months to come —we prefer the shorter period to the longer—when the Chancellor has reached the stage at which he does not need the same amount of taxation from the country and is prepared to reduce the amount which he asks the industry to put into the Exchequer, that reduction will be better than any committee, and will enable the motor car designers to design larger cars, because the public will be in a position to buy them. That is the whole point. The matter is in the Chancellor's hands. He gave us a hint, when he answered my right hon. Friend the Member for West Bristol (Mr. Stanley), that these taxes are not like the laws of the Medes and Persians, and that the day may come when he will be able to do a little more to help the industry by way of a reduction in taxation. That is the time to which we are looking forward. That is the only thing which will enable the industry to produce larger cars in quantity, because people will be able to afford to buy them. This will give us the output, and enable us to sell more cars abroad.

4.25 p.m.

Mr. I. J. Pitman (Bath)

I wish to raise two points. According to Clause 15, the allowance for lower taxation ceases at £125, so that the full rate of tax of 9s. starts at £125, whereas under the old rate the reduced allowance of 6s. 6d. continued up to £165. The effect of this is that £40 of the earlier income of the workman will come on to the higher rate sooner. I deplore that. I think it will have a very discouraging effect upon working men, and particularly upon over-time earnings, that, at an earlier stage of their excess income over their allowance than in the past, they will have to pay the high rate of 9s. instead of 6s. 6d. I think the Chancellor of the Exchequer is under the impression that he can put that right in the Income Tax tables by some dodge, but I think I am correct in saying that differences in the gradation of rate of that kind cannot be coped with by the existing P.A.Y.E. tables, and that any attempt to put this right would have to be done by considerable notice in advance. Therefore, I ask the right hon. Gentleman not to wait until April to put right what I think many of us consider to be a very unfair and wrong part of this particular taxation proposal.

The other point with which I want to deal has reference to Clauses 38, 39 and 40, dealing with the treatment of Excess Profits Tax refunds. I very much agree with my hon. Friend the Member for Edgbaston (Sir P. Bennett) when he says, in effect, that this country is most fortunate in having a first-class Inland Revenue Department and a first-class set of companies who, between them, collect and pay up tax on an astonishing scale. Credit is due to both sides, and it is by co-operation and respect from the Inland Revenue to the companies and from the companies to the Inland Revenue that that good result is achieved. I very much fear—in fact 1 can safely predict—that the effect of the uncertainty and, as I see it, the misconceptions underlying Clauses 38, 39 and 40 will be very damaging to this mutual co-operation and respect and so to the country in the long run. Those Clauses are based on a major misconception, which, I suspect, has already been found out in another connection, namely, that you cannot put your finger on one of a number of sixpences that are handed over to somebody and say to him that one of those particular sixpences shall be used for one particular purpose only. One of the detailed misconceptions is on the question of bonus shares. Bonus shares are not a distribution. If a company has £40,000 in the bank and gets an Excess Profits Tax refund of £10,000 it then has a cash balance of £50,000. If it capitalises that as a bonus, that is the only way in which within the existing law the objective of the Chancellor and of the House can be achieved; that is the only way in which to ensure that the amount permanently remains part of the capital structure of the company and so permanently undistributed. There will be in the coming years many occasions on which there will be perfectly good bonus issue stories. I have been looking very closely into the matter and I cannot find a bad bonus issue story.

I cannot understand what is worrying the Chancellor and hon. Members opposite. The fact is that bonus issues of capital against a refund tie up the money so that it cannot be used for distribution. It becomes part of the capital structure of the company, and cannot be distributed. This inquisitorial panel, or approving panel, can hardly be called an advisory panel, because its functions, as defined in those Clauses, appear to be to inquire and approve. The setting up of that and above all, the wide open door which these Clauses give to people to get round them, is something which is most damaging to the tax structure of this country. I very much deplore those particular Clauses.

Viscount Hinchingbrooke (Dorset, Southern)

The Chancellor of the Exchequer always succeeds in introducing into our Debates a very happy atmosphere of generosity and accommodation but invariably his genial demeanour is accompanied by sedulous refusal of most of the concessions for which we ask. Today I notice, with some regret, that his characteristic friendliness does not extend as far as good manners. I have not been long in this House, but I always thought it was the custom of the Chancellor, when winding up on the Finance Bill, to pay some tribute to his hon. Friends who have sat through the Debate and borne the heat and burden of the day. The Financial Secretary opened the Second Reading Debate with a wholly admirable speech. He subsequently sat here through the long Debate on the Committee stage and when we asked him to intervene and give us a concession he got up, said "No" nicely and sat down again. Likewise the Solicitor-General has greatly distinguished himself during the Debate. He gave us long and learned disquisitions on the state and operation of the law, for which we were grateful. It seems to me that both hon." Gentlemen deserve some meed of praise from the Chancellor and in the absence of it, it perhaps falls to me, as a humble Member of this House, to express our thanks to them.

I join with my hon. Friend the Member for Queen's University, Belfast (Professor Savory) in deploring the fact that the Chancellor has excluded 2,000,000 persons from the taxation system of this country. Hon. Gentlemen opposite invariably express the utmost keenness about subjects which concern political education. It will not redound to their credit in the end that they have been associated with a Measure which excludes from taxation altogether a large part of the community. The Chancellor nods his head. He apparently agrees with me. If that is so why has he done it? Is it not good policy to demonstrate to the people of the country by practical, direct taxation that they have some responsibility, however slight, for the expenditure which is involved in providing them with security and with the many services they now enjoy? It is wrong and unwarranted of the right hon. Gentleman to associate the exclusion of those 2,000,000 people with a remark passed by the right hon. Gentleman the Leader of the Opposition when he said that everything should be done for the greatest good of the greatest number My right hon. Friend was speaking in another connection altogether —on demobilisation. I regard it as absolutely deplorable and a piece of popularity-seeking of the most short-sighted kind that the right hon. Gentleman has thought fit to exclude these classes.

Let me say a word in regard to earned income relief. It is astonishing to find the Socialist Party emerging as champions of the rentier. I always thought that they disliked inherited wealth. Many hon. and right hon. Gentlemen opposite come from the professional classes. A great part of their political doctrine is built up on dislike of the rentier class, which to them is something of a parasite in industry. Why is it that we have not had the distinction between entrepreneur and rentier drawn by hon. Gentlemen opposite? Is it because they have suddenly become altruistic about themselves and their profession and do not wish to push their type forward? I cannot believe that this is the case. The Chancellor has admitted in his speech on Second Reading that taxation bears hardly on enterprise. It is the enterprise of these professional men that we sorely need today and it is wrong and even stupid, to put them into the same class as people who receive their income from unearned sources. I hope that in the course of the next six months, when the Chancellor has had an opportunity to think out the whole matter again he will consult his hon. Friends from the professional classes and will make us some concession in the Budget next year. I turn to the Surtax provisions, which I regard as a profound mistake.

Mr. Jack Jones (Bolton)

Before the hon. Member leaves the question of. advocating that the very poor should pay tax —

Viscount Hinchingbrooke

I left that point some time ago.

Mr. Jones

The hon. Member is advocating that they should have a stake in the country be it ever so small. Would he tell the House how he ties it up with the poor not having to do at all with small savings?

Viscount Hinchingbrooke

Perhaps I may develop that argument on a later occasion. I am not sure that on the Third Reading of the Finance Bill, the discussion of small savings would be in Order. But perhaps I may avail myself of the interruption to give due warning that some of us on this side of the House will raise the subject of the organisation and direction of savings when the Motion to extend the National Loans Act is taken after the Budget next April.

I was speaking about Surtax. When the scales of Income Tax were raised during the course of the last 20 years it was always argued by successive Chancellors that it was right that Surtax should be proportionately higher. The principle was established that if another shilling was put on the Income Tax scale, then the Surtax payer should pay something in excess. But the moment that the present Chancellor sees fit to reduce Income Tax, he abolishes that principle altogether. He says, "No, we will make a concession to the Income Tax payer, but the Surtax man can stay exactly where he is." I dub that as class legislation of the worst order. The result of it will be felt by the country to an increasing extent as time goes on in lack of enterprise and enthusiasm, and in suspicion of the motives of the Labour Party.

One of my hon. Friends on this side of the House said the Chancellor had been accommodating. He has to the extent of forgoing Purchase Tax on wireless sets for the blind and on war memorials in churches. But scarcely more than that During the last few days on the Finance Bill we on this side of the House have been seeking for concessions of all sorts and kinds for the hard-pressed people of this country and we have been met with stolid refusal. We have asked for remission of entertainment duty. There was the suggestion made yesterday for the re-equipment of hotels. We asked the Chancellor to extend the housekeeper's allowance, likewise to raise the children's limit from £50 to £60; again with regard to a constant medical attendant. On whisky we asked for a concession and the Chancellor refused it; we asked for the repayment of postwar credits for pensioners and that was refused; we asked for greater earned income relief and for the reintroduction of the 1940 Surtax rates to which I have referred. There was a whole series of technical Amendments associated with the name of my hon. Friend the Member for Stockport (Sir A. Gridley) for the benefit of industry and for the most part they have been rejected.

What has been the main ground for this wholesale refusal? It has always been that it would add to the danger of inflation. I do not know whether anybody has attempted to sum up the cost of the concessions which have been asked for on this side of the House, but if they amounted to a tithe of what the Chancellor is himself spending at the moment, I should be amazed to find it so. He is spending money at the rate of £5,500 million a year. He goes so far as to say that there will be some reduction of that expenditure over the next few months but will not give us the information in the House as to what the extent is to be. In so far as there is a reduction in what he is spending is it not the very reverse of inflationary and are we not justified without being charged with inflationary intentions in asking for some concessions to be made against falling State expenditure? The danger of inflation is caused by the aggregate of Government and private spending. Given that the right hon. Gentleman himself cuts down his expenditure which he intends to do, is, indeed, compelled to do, he can well allow Members of the public to spend an equivalent amount without increasing risk of inflation. If we are not in a dangerous position today as regards inflation then we should be in no worse position if the right hon. Gentleman had pointed to his own reducing: expenditure and given us the concessions we asked for in the name of the public.

Under this Government at the present time the power of choice of the individual is dangerously limited. In so far as we can get concessions on this side of the House for the ordinary taxpayer freedom of choice is increased and that would benefit the entire country. The Chancellor is using this colossal weapon of taxation and, as I said the other day, what practically amounts to enforced loans to create a dull uniformity in the country. It is encouraging the black market. There is no doubt whatever that while State expenditure remains high and while that is used to establish the kind of principles which are adhered to by the party opposite the black market in this country will flourish exceedingly. One of the main ways in which the Chancellor can do away with the danger of the black market is to reduce, his own expenditure and allow greater freedom of choice to the public. If he does that, he will be adopting a course which is wise and right.

I think that this is a bad Finance Bill. I think that we have not been well treated on this side of the House. I urge the right hon. Gentleman to consider well whether he cannot himself introduce next April some of the numerous suggestions we have put to him in recent Debates. If not, I believe he will meet with more determined opposition than he has yet had.

4.44 p.m.

Mr. Oliver Stanley (Bristol, West)

In the early part of this afternoon, under the strict guidance of Mr. Speaker, this appeared to be less of a Debate than an attempt to journey between Scylla and Charybdis, a passage which was only successfully negotiated by the Ulysses from Ulster, who appears to be so fatigued by the effort that he has now had to retire. It is inevitable that we should discuss the concluding stage of this interim Finance Bill in rather an unreal atmosphere. Normally, of course, the Finance Bill is by far the most important financial Measure of the year. To a great extent, as it is good or bad, it will determine our economic prosperity. In this case, these matters we are discussing today, important as they are, appear insignificant, compared to the matters of immense moment which this House is to proceed to discuss in the next few.days—matters of vast implication which may render all the Chancellor's efforts nugatory.

There is, in regard to this Budget, this additional difficulty—that it is not this year's Budget that we are really discussing. We are really discussing next year's Budget on this year's figures, and that, of course, does create a considerable amount of difficulty, because, in fact, we have not been able to have, during these Debates, any estimates such as we should normally expect of expenditure or income relating to the year in which this taxation is going to take effect. With all those difficulties, we have had discussions which I would not say were long. The right hon. Gentleman referred at the beginning to "long discussions on the Budget." I think, thanks to our spirit of co-operation and willingness on this side, the right hon. Gentleman will find that they have been really considerably less than precedent. I should have expected, if the right hon. Gentleman had been distributing gratitude to anyone, that we should have had a word of thanks for the willing assistance we have given. I cannot agree with one hon. Member who spoke from these benches that, so far as we were concerned, these discussions have proved particularly fruitful. It is true that, in the last stages, we did wring one or two drops of blood out of the stony heart of the Chancellor, and there was just an airy hint that we might ask again some time before next April. But when it came to his able assistants, the Financial Secretary and the Solicitor-General, we never got anything, I think, from them at all. In the hardness of their hearts, they very much belied their kind and, indeed, benign exteriors.

The main objection that I have to this Bill is that it is difficult to relate its individual provisions to any one central economic theme. I am not going to deny that this Bill contains many concessions which will be welcomed after six years of strenuous sacrifice by a large number of people, but it does seem to me that the pattern of the right hon. Gentleman's Budget is a Victorian pattern—a Gladstonian pattern. It is an attempt, out of the money that the right hon. Gentleman has available, to dole out to the taxpayers whatever little personal assistance he can give them, having always in mind, of course, the consideration that the taxpayer is also the elector. I had thought that, at this period of our economic history, we should have had, instead of that, a Budget which was definitely and solely related to increasing the production of this country and restoring its industries. After all, it is on that, that the individual happiness and welfare of everyone is going to depend, rather than on a present of £1 here off the Purchase Tax or of £2 there off the Income Tax. That is what is going to decide the economic future of this country. That is going to decide the standard of life of the people; that is going to decide the rate of taxation which the Chancellor will have to impose.

I find this Budget singularly deficient in a connected theme of that kind. Let me give one or two examples. Take first the motor tax. I am not going to say that the right hon. Gentleman, faced with a choice between two ways of raising this taxation, has not in this Bill chosen the better of the two it appears to be the one preferred by industry. But no one can pretend that the treatment of motor taxation in this Budget has any real connection with the motor car industry, as one of our major exporting industries in the future. No one can pretend that this Bill really represents an effort by the Government to use the taxation of motor cars to establish the motor car industry as a great weapon in our export trade. Similarly, when we come to the earned income allowance, I cannot conceive how we can relate the necessity of stimulating production, initiative and energy with selecting, as the one class to be penalised —in proportion, let me put it—by this Budget those whose incomes are derived from labour, energy and efficiency. I am not going into the old arguments which we have had on many occasions. Although the Chancellor has returned different replies, on this point they have been, to my mind, invariably unsatisfactory. The right hon. Gentleman will agree that, whatever else has happened under this Budget, the relationship between earned income and unearned income has been upset, and it does seem to me extraordinary that a Budget devoted to production should have made that quite radical change in recent tax history.

Finally, there is, of course, the question of the Surtax. I am still waiting to hear from the Chancellor—I may hear in the last few minutes from the Financial Secretary—what incentive to production, what economic gain, what additions to trade are to be expected from imposing another £7,000,000 upon the Surtax-, payer. I shall be interested to hear how that can be justified by the right hon. Gentleman, on the sole basis on which, I believe, a Measure of this kind should be justified today—that it will increase our power in the markets of the world.

There is only one Clause in the Bill to which I want to refer particularly, and that is Clause 28. It is a Clause on which we have had some discussion. It deals with the question of deficiencies of profit occurring after the end of 1946. I feel here that a strong case was made that the date chosen, if not too early for the majority of cases, may prove too early for some. The right hon. Gentleman did give some hope that, between now and April, he would look into this matter again, not with a view to extending the date, but of seeing if there was not some way in which hard cases could be dealt with. I hope that, by that date, the right hon. Gentleman will be able to find some relief for them.

As one of my hon. Friends said, we have had to conduct the whole Debate upon this Measure under the threat of inflation. The right hon. Gentleman was able, at every inconvenient turn, to invoke in his assistance this terrible spectre of inflation. Apparently, Providence has willed it that the danger of inflation ceases at exactly that amount of tax relief which the right hon. Gentleman has decided to give, and that, if he were to exceed it by as much as an electric tea-kettle or a piece of wallpaper, we should fall immediately into the abyss. Of course, he would agree with me that the point at which inflation becomes a danger is not a static one. it can be moved forward or backward, and it can be moved, to a great extent, by the action of the Government. It is because of that, that the actual contents of this Bill are almost unimportant compared with the two great factors which are going to influence this policy—the rate of national expenditure and the rate of industrial reconversion. I know it would be out of Order to discuss, in any detail, these two points, but of this I am certain—that the whole task with which the right hon. Gentleman will be confronted in April, when he will have to give these figures, will be dominated by the success which he and his colleagues are able to achieve, in the intervening months, on these two great problems.

I did say something on the question of expenditure at an earlier stage, and I was reproved—by the hon. Member for Wellingborough (Mr. Lindgren), I think, in a military simile, which did not, perhaps, seem to suit him very well—for attacking the right hon. Gentleman opposite with a pea-shooter, because I had insisted that the main task was the elimination of these small items of waste. I still believe that to be true. I still believe that it is the man still in the Army when he need not be, the house requisitioned by a Government Department when not really wanted, the factory not released because of inertia on the part of a Gov- ernment Department—it is these things, multiplied 10,000 times, which are really braking the Chancellor's progress I am sure we can rely on him to cause a real drive against what has become the vested interest of the individual Department.

The other factor was the factor of re-conversion. To me, one of the poignant features in the Debates on this Bill was a little speech by the hon. Member for Elland (Mr. Cobb), who, in a pathetic voice, asked why our industrialists could not turn over as quickly as those of America, and if we had not better take a lesson from her. Look at the difference. Our unfortunate industrialists cannot even blow their own noses without asking the permission of the President of the Board of Trade, and, before he gives it, the right hon. Gentleman has to consider, first, whether the handkerchief is not wanted for the export trade.

Then he has to ask the ideological Brahmins of the party opposite whether, in a planned economy, it is after all right for anybody to blow their own nose, or whether it would not be better that somebody should blow it for them. When the answer comes finally, even if it is favourable, the unfortunate man is already dead of pneumonia—gone by a happy release to a land free of catarrh and of controls. [An Hon. Member: "What do they do in America? "] If I am allowed to say so, in America they are allowed to blow their own noses as and when they like.

Mr. Deputy-Speaker (Mr. Hubert Beaumont)

The right hon. Gentleman must confine his remarks to the Finance Bill.

Mr. Stanley

I naturally thought, Mr. Deputy-Speaker, that as you did not rise to prevent the hon. Gentleman asking me that question, when I rose to answer it that I should be in Order, but I understand that both the question and the answer were out of Order. All of us on this side must hope that the events of the next few months will make the basis of this Bill an economic reality. We must all hope that not only will the events of the next few months enable the Chancellor in April to confirm the benefits that he has been able to give now, but that he will be able to extend them, because all of us, whatever our politics, must look forward to a time when the whole of our population can get some relief from those heavy burdens which for six years they have borne so uncomplainingly.

5.2 p.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall)

I think there will be common agreement in all parts of the House that this Bill has been well considered. It is very long, very technical, and many of its Clauses are highly complicated. Nevertheless, from the time the Chancellor opened his Budget, through the Debate on the Budget Resolutions, the Second Reading, the Committee stage, the Report stage and now the Third Reading, we have between us discussed this Bill in all its phases, and it appears to me that there can be very little left for me to say in a winding-up speech. On every previous occasion we have been delighted by a humorous speech from the right hon. Gentleman the Member for West Bristol (Mr. Stanley) and I think it is only right and proper that we should have had another from him this afternoon just as we are about, as it were, to get rid of the body so far as this House is concerned.

This is, as he said, no ordinary Finance Bill. Much of it appeared earlier in the year and was introduced by my right hon. Friend's predecessor. It is a clearing-up Measure and not an ordinary Finance Bill in the accepted sense of the word. When the hon. Gentleman who sits for the University of Belfast (Professor Savory) was referring to the first Budget he heard in this House in 1894, I began to imagine the kind of Budget that would have been. I think it could not have been anything like the kind of Measure that the House has to deal with today. Income Tax was much simpler then than it is now, and all the fine points which have been made from the other side of the House about Surtax would have been unknown to the House of Commons of 1894 All that is something new which has been introduced since.

I am unable to reply to quite a number of the speeches because I think much of what was said was technically entirely out of order. They dealt with points which the speakers had hoped to include in this Bill but, unfortunately, have not been able to do so. However, something was said by my hon. Friend the Member for Middlesbrough East (Mr. Alfred Edwards) about the motor vehicle taxation and that matter was also referred to by quite a number of hon. Members in the course of the discussion. One of my hon. Friends on this side of the House suggested that the Chancellor might set up a technical committee to watch the new taxation, to see whether it works smoothly, and to watch its effect on exports. It is not for me to indicate to my right hon. Friend what he should do but, knowing something of what has gone on in the last months and the divided counsel which the Chancellor has had from the motor industry itself on how the taxation should be levied, I really tremble to think what might happen, if, in addition, he set up a new committee charged with the duty of advising him on these matters. The plain fact is that both the present Chancellor of the Exchequer and his predecessor, have had to make up their minds in the light of varying points of view and the advice of differing experts. It is my right hon. Friend's view—I think history will probably share it—that he has done the correct thing in coming down, as he has, on the side of short steps and refusing to turn over to a straight petrol duty. That might by no means have helped the export trade, because the industry would have concentrated, and very properly so, on producing an engine using a minimum consumption of petrol. Therefore it may very well be said in the years ahead that in coming to the decision he has, and to which in fact his predecessor also came, he has taken the only decision really open to him. At any rate we shall have to wait and see.

The right hon. Gentleman the Member for West Bristol put one question to me about Clause 28. That Clause deals with the date up to which deficiency payments can be reckoned and at the moment, in the Bill, it is 31st December. 1946. In the discussions we have had there has been considerable pressure, particularly from that side of the House, to put the date further on, on the not unreasonable grounds to those making the point that 31st December, 1946, was not really far enough ahead to permit industry to readjust itself. My right hon. Friend the Chancellor of the Exchequer dealt with this point and I thought he met the criticism very fairly and very fully. I am here to say on his behalf that he cannot possibly alter the date.

What happened at the end of the last war is still fresh, I hope, in the minds of all of us as to what happened under a similar tax. Much of the revenue accruing was never realised because no definite short date was fixed beyond which indus- try could not go. Industry now knows that it cannot go beyond 31st December, 1946, but that does not mean to say that legitimate losses which are incurred will not come in for proper treatment. Terminal losses are covered in another Clause in the Bill, and the Chancellor has indicated that, whilst he cannot alter the date, the Inland Revenue will be very generous in the way it looks at what can be considered a terminal loss. I hope that with that explanation and promise the right hon. Gentleman opposite will be satisfied. He asked me another question which, paraphrased, runs as follows, "What fillip has the trade and industry of this country received, or will receive, from the extra £7,000,000 which the Chancellor proposes to raise from the Surtax payers?" I do not, of course, profess to follow all the thought-processes of my right hon. Friend the Chancellor of the Exchequer, but I would not mind venturing a guess that he did not look at the matter in this way. He had to consider it from a much more commonsense point of view. He was making, as from April next year, a reduction of is in the standard rate of Income Tax, and he could see when he looked at the figures, that some Surtax payers, those who enjoy high incomes, would under the is decrease in the standard rate have an increase in their own income of varying amounts up to £4,500 a year. He felt, and I think the House will agree with him—

Mr. Stanley

How many would get relief of £4,500 a year?

Mr. Glenvil Hall

Not many.

Mr. Stanley

Would any?

Mr. Glenvil Hall

Oh, yes. Those in the higher ranges of Surtax payers would get varying sums up to, as I say, £4,500 a year. Of course, many of them would get less; some would get £500, some £1,000, some £1,500, and so on. It would have been possible for a Surtax payer to receive—because of the drop of is in the standard rate of Income Tax—in the next financial year 1946–47 a net increase in his income of £4,500 a year and the Chancellor of the Exchequer thought that at a time like the present, when the rest of the community is suffering, as it is under the heavy burden of taxation, that that would be unfair. What he has done—and this is the answer to another question which I think was put by the right hon. Gentleman or by the Noble Lord the Member for Southern Dorset (Viscount Hinchingbrooke)—is that every taxpayer, Surtax payer or ordinary taxpayer, gets something from this Budget and Surtax payers may get as much as £350 a year net. So all of us gain, and 2,000,000 of those in the lower ranges, as has been said, go out of the Income Tax paying class altogether.

Viscount Hinchingbrooke

That surely is fully admitted but the point is that it is not pro rata to their gross income and their liability.

Hon. Members

Why should it be?

Mr. Glenvil Hall

That is the burden of what I am trying to say. If it were pro rata they would, or so it seems to the Chancellor, have retained next year, in proportion to people who have a much greater struggle to live, a much higher sum than they should or, to do them justice, many of them desire, to keep in these very difficult and hard times.

The hon. Member for Stockport (Sir A. Gridley) and the hon. Member for Edgbaston (Sir P. Bennett) put another question to me. A similar question was put by them to the Chancellor last night. I really cannot add anything to what my right hon. Friend said then. They desire the dating back of the refunds of monies spent on the re-equipment and development of industry to 1941 instead of to April 1945—the date fixed in this Bill. The answer which the Chancellor gave was that as this money is to be spent —and it was made perfectly clear by the late Sir Kingsley Wood and equally clear by the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson)—that it must be spent for a definite purpose, namely, the rehabilitation of industry in the postwar period, for the objective of trying to rehabilitate this country in the markets of the world in the postwar years. Money spent away back in 1941 or 1942, when the war was in one sense hardly under way, could, of course, have been spent on equipment which was going to be used entirely in the after the war years. But if the money was spent then, the people who spent it should have been spending it on something of more use to the war effort than preparing for the postwar years. It is our view, therefore, and I think that it is a right and just one, that 1945 is the correct date, and my right hon. Friend cannot see his way to alter it.

Major Peter Roberts

Will the Financial Secretary answer a question which I put very definitely to him, and that is the question of the 20 per cent. refund E.P.T.

Mr. Glenvil Hall

I took fairly full note of what most speakers said, but I did not want to weary the House by going through them one by one. I will do my best to answer the question put by the hon. Gentleman. As 1 understand it, his point was this: That certain traders are entitled, or will be entitled, to a refund on account of E.P.T. Normally, that amount will have to be ploughed back into the business and spent on redevelopment or re-equipment. Supposing that industry is taken over by the State, what is to happen to the refund? The short answer, so far as I can give it, is that if it is handed over to the trader before the particular industry is nationalised, he will have given the undertaking, and I have not the slightest doubt he will implement it, to use it in the business in one form or another. If he does not it will still be there, and it will then be for consideration, as and when that industry is taken over and compensation for it is arranged, as to what is to happen to the money.

Major Roberts

The money will be available, that is the point.

Mr. Glenvil Hall

Of course it will, but whether the trader himself will spend it on equipment, or the State, or the corporation, or whatever the body may be which takes over the industry is a matter for consideration at the time, and in the light of the circumstances then existing. There is in this Bill, it seems to me, complicated though it is, evidence of the real desire of my right hon. Friend to help 'both the individual and the industry so far as each can be helped in these very difficult times. As my right hon. Friend said in his opening speech, V.J.-Day is not very many months behind us. This is not a Finance Bill of the ordinary kind; that will have to come next April. This Bill, however, does give to the ordinary taxpayer some hope that the enormous burdens laid upon him during the last six years are going to be lightened; and industry itself, with the payments that are going to be made to it, will also feel that the Government does desire to assist it too after the six strenuous years that have passed. This Bill sees a beginning made in the direction of tax relief. It also is designed to prevent what we would all wish to prevent, and what is a very great fear with all of us at the moment, the tendency to inflation. The Bill is in fact the first instalment by a Labour Government in power of the better days that are to come not only for the individual, industry and the community as a whole.

Question put, and agreed to.

Bill accordingly read the Third time, and passed.