CLAUSE 16. — (Appointed day joy Part IV of Finance Act, 1944, and Income Tax Act,1945.) (Hansard, 28 November 1945)

§ Sir Wavell Wakefield (St. Marylebone)
I want to ask the Financial Secretary to the Treasury to explain why it is that the appointed day is 6th April, 1946. That day implements the Finance Act, 1944, and the Income Tax Bill, 1945, under which certain reliefs may be given for expenditure on scientific development and research. In his speech on the Second Reading of the Bill, the Financial Secretary pointed out that this Clause is of very considerable importance to industry, and I think we all agree with that statement. It is of great value to industry that help should be given for scientific research by permitting reductions to be made as an expense in computing the profits for the purpose of Income Tax and that relief should be given on expenditure of a capital nature for scientific research. I want to put a question to the Financial Secretary. Why is it that the appointed day has been delayed from October or November until April? I fully realise that expenditure incurred now for the purposes described is allowable for relief after the appointed day; that is to say although it is incurred now, relief can be obtained after the appointed day. I want to know 1406 why such relief cannot be obtained now. Why cannot the appointed day be, say, 1st October or 1st November? If this Clause is of such importance to industry, surely relief shoud be granted now.
When this question was raised in 1944 and again in 1945,the war was still on, and there was good reason for delaying the appointed day, and delaying expenditure on research and development for peacetime purposes; but that reason is no longer valid. Surely, it is up to the Government to give all possible encouragement for research and development to take place now. Surely, industry ought to be encouraged by a lead from the Government. If there is delay until next year, if there is a wait until April, 1946, surely industry will think that there is no urgency in this matter, and that the Government do not feel it is as important as the Financial Secretary indicated in his speech in the Second Reading Debate. It seems to me, therefore, that an explanation is due as to the reason for this delay. I can well understand that some small firms might delay in appointing scientists to carry out research and do work of value, because the benefits will not become available until next April. We do not want that to happen. Industry in this country has leeway to make up. We have to meet great competition from America, and every possible advantage, every effort, every piece of initiative, that can be at the country's command ought to be used. Therefore, I appeal to the Financial Secretary to reconsider this 1407 Clause on the Report stage in order to see whether this date cannot be advanced so that the effects of the very valuable provisions in the 1944 and 1945 Acts can be made available now instead of in April of next year. I hope that, unless some very satisfactory explanation is forthcoming, the Financial Secretary will be able to agree to this proposal.

§ Mr. Glenvil Hall
The hon. Member for St. Marylebone (Sir W. Wakefield) put down an Amendment in the sense in which he has spoken, and had that Amendment been called I would have had to resist it for the very simple reason that the thing he wants to do can now be done even with the date fixed—as the Chancellor of the Exchequer said it must be fixed—at 6th April, 1946. I might perhaps briefly remind the Committee that this Clause does fix the appointed day for bringing into operation the allowances of various kinds, both for capital equipment and for expenditure on research of various kinds, and in both cases expenditure that has been incurred, in so far as the balance is concerned, can be, under the terms of the Bill, considered as though it had been incurred on 6th April, 1946. Therefore, expenditure that is being incurred now—and in some cases, as far as research expenditure is concerned, from January, 1937, and as far as capital expenditure on buildings, plant and machinery is concerned, from April, 1944 —if it complies with the 1944 Act and the Income Tax Act, 1945, can be reckoned; but notionally it will be assumed that the expenditure has been incurred on and from 6th April, 1946, so that no trader now is really at a disadvantage. These allowances are to help postwar development and postwar recovery, and although it is true that in some instances expenditure on re-equipment has been undertaken, nevertheless the bulk of it will be incurred, and necessarily incurred because of wartime restrictions, after 6th April, 1946. Therefore, both types are covered; those who have been fortunate enough to have some of their re-equipping done now will get the allowances when the appointed date comes on 6th April, 1946, and those who are forced for various reasons to go in for their renewals, repairs, reconditioning and new plant after 6th April will also get them. It was thought fairer all round that that date 1408 should be fixed. It is for those reasons that I would have had to ask the Committee to reject the Amendment if it had been called.

§ Viscount Hinchingbrooke (Dorset, Southern)
I do not think the Financial Secretary's reply is entirely satisfactory. It seems to me that small firms which have not very great cash resources, and which are being asked to wait for a period of six months before the expenditure which they will now incur can be charged against their accounts, according to the terms of the Bill, will be out of pocket in so doing. If the appointed day were made now, at a time when the war has ended and firms have begun to develop their plans for the future, they could immediately settle their accounts in accordance with the provisions of the Finance Bill and proceed to make cash payments to the scientific firms to which they want to contribute and to the manufacturers supplying them with capital equipment. That is the first point I want to make— that the cash resources of a small firm might prohibit something being done now owing to the fixing of this date.
7.30 p.m.
The second point I want to make is with regard to current expenditure. I am not sure that the Financial Secretary's reply on that aspect is entirely satisfactory. On the Second Reading of the Finance Bill, the Financial Secretary said that any capital expenditure now being incurred is not deprived of the new allowance, but will rank for the allowance, though it would not become effective until 6th April next. The Financial Secretary also said: I should also make it clear that the provisions for allowance on capital expenditure on research extend to buildings and plant provided after January, 1937."—[OFFICIAL REPORT, 19th November, 1945; Vol. 416, c 45.] Every word of what he said then related to capital expenditure. The intention of the Finance Act, 1944, inter alia, was to provide 'for any current expenditure on scientific research, or payments to any scientific research association, being allowed to be set off. We have had no word about that. Would the Financial Secretary also answer that point?