HC Deb 28 November 1945 vol 416 cc1429-49
Sir H. Lucas-Tooth

On a point of Order. There are a number of Amendments on the Order Paper in the names of my hon. Friends and myself. I do not know whether it would be convenient for the Committee if you could give some guidance as to how the discussions should proceed. It is possible, of course, that some of the Amendments may not be called. There are two Amendments on this Clause 28 and there are a series of Amendments on Clause 38.

The Deputy-Chairman

I will take these two Amendments and call upon the hon. Member for Stockport (Sir A. Gridley).

Sir A. Gridley

I take it that these two Amendments can be discussed together?

The Deputy-Chairman

No, I am calling them separately.

Sir A. Gridley

I beg to move, in page 24, line 34, to leave out "forty-seven," and insert "forty-eight."

8.45 p.m.

The Chancellor has told us that it is his intention to reduce the rate of E.P.T. but not that he is going to abolish it. On the other hand, this Clause rules out relief for deficiency of profit after the end of 1946. E.P.T. as a tax may go on after that date. We may have the position arising which will be most unfair and unjustified, that the Chancellor of the Exchequer will get Excess Profits Tax after that date which would make no allowance whatever for any losses that may be sustained. I realise that the Chancellor of the Exchequer has in mind that a trader might quote unprofitable prices to get business because he had a "cushion" of E.P.T. to fall back upon, but in my view that is a very small risk for the Chancellor to take, and even if some firms did adopt that practice, it would result in increased employment and quite possibly an increase in our exports, and therefore the State and the Exchequer would benefit, or at any rate it would lose very little. I do not think that is a substantial argument for the Chancellor of the Exchequer to bring forward. As this Clause now stands, we are now almost in December. There is very little more than a year left for traders to complete their change-over arrangements from war to peace conditions and to get back to a normal trading basis.

There are a great many circumstances — and it is only necessary to point them out —which make it a practically impossible task to complete the change-over in so short a time. May I point out in parentheses that the Government themselves, in a recent Bill, demanded and secured the right to continue certain Measures for a period of five years when we on this side thought two years were ample. What are the circumstances which make it quite impossible for many industries to get back to a normal peace footing again? The first is obviously the lack of labour. Everybody knows that we are crying out today for a substantial increase in our labour force and we cannot get it, and we do not know when we shall. That is a very sound reason for assuming that it may be two years or three years from now before we get our labour force adequate, unless the present rate of demobilisation is very substantially speeded up. Then again men under 30 are being called up from our industries. That is going to create a gap in our labour force which, if persisted in, will substantially increase our difficulties. How do we know —and this applies particularly to those industries which did exist in the great towns and cities and which have been so badly affected by the blitz —when they are going to get building licences to rebuild their factories at a time when there is such a tremendous demand for labour and where, in the case of these badly blitzed areas, town planning comes in? It may be a very long time before the plans for the rebuilding of these towns and cities are passed and approved by the various Government Departments and for which building licences will have to be granted to firms to re-site their premises quite possibly in another place altogether, hundreds of yards away or a mile or two away from where they existed before being destroyed by the enemy.

I ask the Committee to put this question to themselves. Do they think that in places like Bristol —my own native city, which was badly blitzed —Coventry, Plymouth and many others known to all Members of the Committee, those town planning schemes are going to be finished within the next 12 months? We are accustomed to hear in this House questions being put almost every day about delay in derequisitioning, of owners getting re-possession —and here Government Departments are the great offenders —questions as to whether those who own them are going within the next 12 months to get possession of them. Even then they may have a great deal of work to carry out, a great deal of re-equipping to do before they can get back to work again. I referred just now to industries which are being telescoped like the hatting industry and the cotton industry. In my constituency, and in many other places these firms are not de-concentrated yet. They are still going on in this concentration scheme and they do not know how much longer they may go on working in these conditions and it might be months yet before those firms which are now shut down will be allowed to re-open their premises. If we are to bring our factories up to date with the most modem equipment, they will have to be re-equipped. Is all that to be done between now and December, 1946?

Then there is one other argument I would submit. There are a great many customers of mine who in pre-war days were very good customers. At the present time their premises are all smashed up, and it is going to take them a long time to get back to normal. Until they do I, and many others like me, will not be able to get back to pre-war conditions; we shall not know what tools and equipment we shall have to get to bring ourselves up to 100 per cent, efficiency and up to date in other respects.

These are just a few of the reasons which I could advance to show the probable difficulties —I put it no higher than that —with which a very large number of firms will be faced if all the time that they are going to get is just a little over one year. I recognise that there must be a time limit for the completion of the changeover, or some method of ascertaining when such changeover has, an fact, been completed, but I say that 12 months from now is a totally inadequate period in which to allow firms to bring into account costs which are going to be permitted under the refund of E.P.T., and to carry out all the work which falls within the categories which are permissible charges against E.P.T. I am making what I consider to be a most modest suggestion, namely, that we have one more year in which to complete the necessary work. In many cases I gravely doubt whether even that would suffice, but that is all I am asking. Therefore, I do not think anyone can say that it is an unreasonable request. It is because I think it is reasonable, and because I think the arguments I have put forward are unanswerable that I move this Amendment.

Sir P. Bennett

In a few words I wish to support the case put forward so ably by my hon. Friend the Member for Stockport (Sir A. Gridley). When this point was brought forward in the course of the Debate on the Budget Resolution, the Chancellor of the Exchequer was sympathetic with the principle; he said that he admitted there might be special cases and he would consider, without making any binding promises, whether he could find some way of meeting these special difficulties to which the hon. Member for Stockport has referred. So far, however, the kindness of his heart has remained locked to the rest of us; he no doubt has those kind thoughts, but they have not come forward in an Act of Parliament.

My constituents who are suffering do not quite know whether they will get any special consideration or not. This point has been put very forcibly to us in order to remove any doubt: Could not there be a year longer, as the hon. Gentleman has suggested, in order to give the time that is really needed? The more one goes into it, the more certain it is that some of these very hard cases will be unable to get back to a profit earning state by the end of 1946. It is quite impossible to do it. Take, for instance, the blitzed firms. In my own city of Birmingham, which many people do not realise was probably the most heavily bombed city outside London —the death rate shows that —there is a great number of bombed-out business organisations. Some of these have been put by the Government into other people's premises and they have been able to make some Excess Profit. There is no hope of them being able to get back to a profitable basis by the end of 1946, because they arc in other people's premises; they are in makeshift shops, and it is absolutely impossible for them to be able to do it in time.

We feel that that is the sort of company which the Chancellor has promised to help, but for which he has found no scheme which would fit the case. If the position could be extended so that for another year they would be able to charge up the deficit against the Excess Profits which they have earned, it would help. I am not talking now about terminal losses, because the Financial Secretary in his speech on the Budget made it quite clear that he understood the difference between terminal losses and trading profits. I am not dealing with terminal losses. I am dealing with people who will not be able to get back to making a profit during the year 1947. I support the Amendment moved by my hon. Friend the Member for Stockport, and agree that this would be the way out of the difficulty.

Sir W. Smiles

I support this Amendment. I think it is a very moderate Amendment indeed, and I think my hon. Friend would have been wiser to put down "49" instead of "48" and then, perhaps, the Chancellor might have met him halfway and agreed to 48 and split the difference. The only business about which I am going to speak this evening is that of textiles. In Northern Ireland, when I was with the Ministry of Aircraft Production, I was responsible for taking over many factories, turning out their old-established machinery and installing machinery which was necessary for the war. I could allude to one, a well-known spinning mill —the Barn Mills at Carrickfergus. All their spinning frames were turned out, and sewing machines were put in for sewing parachutes. A great many hon. Members in this Committee know the weight of a spinning frame; they know how difficult it is to move them and to re-erect them. At the present moment those Barn Mills are still on war contracts. The spinning frames have not been re-erected. There are in Northern Ireland many firms which are still carrying out war work and which have not even thought about returning to their peace-time occupations.

I crossed over on the aeroplane from Belfast on Monday morning with the chairman of one of the largest collar factories in the North of Ireland. He told me that he would not be able to do one bit of peacetime business before April, that he was still full up with war contracts and that he would be lucky to finish those before the end of March. I am informed that a great deal of unprocessed cloth is being exported abroad now, because the people who finish the cloth properly, who design it, dye it, bleach it and afterwards cut it up and embroider it for tablecloths, perhaps dress lengths and tropical clothes for' use abroad, have not been able to get started again. These manufacturers who have not started again will be diffident about taking these risks, and if they thought E.P.T. was to be continued for one more year they could afford to take some of these risks.

9.0 p.m.

A manufacturer exporting cloth, ordinary grey cloth, not properly finished, would be lucky to make 10 per cent. on the raw materials. If it is dyed and finished, or bleached, he should make 20 to 30 per cent. on the raw materials, and if he goes a bit further and cuts it up into finished tablecloths, ladies' dress lengths and things like that, he might easily make 60 per cent. on the raw materials. What we want to do is to encourage these manufacturers to take these risks again, in order to get the exchange from abroad, and to send out our exports in the highest possible form of finished goods, not half-made. As the hon. Member for Stockport (Sir A. Gridley) has said, we have also to consider the blitzed premises. We did not have many air raids in Northern Ireland, but at Easter, 1941, we did have 1,000 people killed in about a week. At that time we lost our biggest factory, York Street, and our second biggest, Ewart's, and several others. Those firms have not got completely started again. As the Financial Secretary knows, Irish linen was one of our greatest exports to the United States of America, and if he wants dollar exchange he should get those firms up to prewar exports. It will certainly help them and not hinder them if he accepts this Amendment and alters 1947 to 1948.

Sir Frank Sanderson (Ealing, East)

I should like to put forward a point, which I raised on the Second Reading of the Finance Bill, relating to commodities which are under Government control and which manufacturers can purchase only through the Government Department and at a price fixed by the Government. We can foresee that when we come to the end of next year, i.e. 31st December, 1946, when Excess Profits Tax comes to an end, such industries may have large stocks of those commodities which have been purchased from Government Departments at a price fixed by the Government, and in the event of control of those commodities being removed industry could be faced with very serious losses. I have in mind a whole series of commodities of which I have given particulars to the Chancellor of the Exchequer and have also furnished him with a report. We should like, if we can, to have some assurance that it will be possible to offset the Excess Profits Tax which has been paid in subsequent years against the possible loss upon these commodities. I am aware that in the Second Reading Debate on 19th November the Financial Secretary did to a considerable extent cover the point which I am making, but what makes me a little nervous is that he said that in any event it would be possible next April to consider the position in the light of the Chancellor of the Exchequer's further experience during the next six months, i.e., between now and his next Budget.

I am an optimist, but who is there among us who can be certain that the present Government will be in office next April? [Laughter.] I say that in all sincerity. No one can be sure. It may be that they will be in office, but surely it is not sufficient to ask us to accept a position which may be clarified during a Budget Debate which may or may not take place under the Government at present in office. I therefore think that we are justified an pressing the Government to make some Amendment to the Bill which would clarify and regularise the position. The Amendment of my hon. Friend would go a long way towards meeting the case which I have placed before the Financial Secretary to the Treasury, who gave it sympathetic support in his speech on the Second Reading. I would like to ask him if he will consider, between now and a later stage, drawing up a new Clause to cover the point which both he and I have in mind.

Mr. Glenvil Hall

I must ask the Committee to reject this Amendment. That is not to say that we do not see a good deal in the points that have been put to-night. I can assure hon. Gentlemen who have spoken that the Chancellor of the Exchequer will consider between now and next April what has been said. In telling the Committee that, I am doing no more than repeating what my right hon. Friend himself said in the earlier stages of the Debate on this particular part of the Budget.

Sir F. Sanderson

On that point, may I say that it was the statement made by the Financial Secretary on 19th November that gave me the necessary assurance?

Mr. Glenvil Hall

The assurance has been given twice, once, as the hon. Member has just said, by myself when I spoke on the Second Reading, and once by my right hon. Friend the Chancellor of the Exchequer when he was introducing the Budget Resolution on the subject.

Clause 28, to which this Amendment refers, implements the statement, made by the Chancellor of the Exchequer when he opened his Budget, that a period must be put to the time in which current profits in one particular accounting period can be set off against those of another accounting period within the same business. I think it is within the recollection of the Committee that he did say, with some support from hon. Members in all quarters of the Committee, that it would be unfair and unjust not to learn our lesson from the last war, when this relief was allowed to run on from year to year, and made a very great difference in the end to the amount that came in as a result of the E.P.D. of that period. He said that this time it was the intention of the Government to try to prevent the same thing happening. He therefore introduced a time limit, and the time limit he gave was 31st December, 1946. He said it would be possible to look at the matter again, as there would be another Budget in six months' time, when we should know better where we stood than we do now. He said that hon. Members would have to wait until then, when we could look at the matter in the light of the experience of the intervening six months. He also said, as I reminded the House on the Second Reading Debate, that many of the losses to which reference has been made were terminal losses and were covered by other parts of this Bill. That being so and those being the reasons — which we think are good ones —I ask the Committee to reject this Amendment and let us pass on to the next.

Mr. Eccles

I think the Financial Secretary's reply is most unsatisfactory because, first of all, there is a great deal of difference between this postwar period and the last one. Surely he recognises that the difficulties that might arise in countless businesses as regards blitz, concentration and the manpower situation are realty very much greater than they were in 1919, and that it will take much longer this time to sort those things out because we have, to use a common expression, mobilised for total war in a sterner way. Why should we wait till next April to know whether we are going to have an extension? It is most disturbing to business, and I think the Financial Secretary has missed the main point. The point we are trying to make is that it is not fair for the tax to run on and the revenue to get the pluses of the profits and no longer for the trade to be able to set off the minuses of the losses. It is that unfairness which we object to. If the Financial Secretary would say here and now that E.P.T. was going to finish at the end of next year, there would be no complaints. In fact, when I heard the date of December, 1946, I assumed it was another of the Chancellor's tips —he gave us one about long-dated Government stock —and that we could count on E.P.T. being over by the end of next year.

One final point. I do not think it is a very good point to say that business may use these losses and do things with them that will deprive the Treasury of revenue and, generally, do bad things such as under-cutting a competitor. Only on Monday last we heard the Government were going into business in the building industry with the taxpayers' money. That is exactly what the Government are going to do; they are going to use the taxpayers' money and compete with it. Why should not the ordinary business use its E.P.T. to build itself up, either at home or abroad, in the next year. I feel that we have had no satisfactory answer as to why we must be left in this uncertainty until next April.

Colonel Oliver Stanley

I appeal to the hon. Gentleman to add, if he can, to the statement he has made. It is agreed on all sides of the House, among people who take any interest at all in this point, that there is a possibility, at any rate, of a substantial grievance growing up. There is a great deal of common measure, and we all agree that we should not repeat the events of the last postwar period and should bring this to an end as soon as we can. Equally, everybody agreed that a reasonable period should be given to these firms to enable them to change over from wartime to peacetime operations before the period during which claims can be made is terminated.

9.15 p.m.

The only argument is on what is a reasonable period. I think all of us would agree that if times were normal and if every man running a business could be quite certain that he could get all the labour, materials and machinery he needed and had the energy to order during the coming year, probably a year would be sufficient; but that is not the case. We know quite well that there may be firms which, however energetic they are and however anxious they are to make the change-over in this period, will not be able to get the labour and materials necessary to enable the change-over to take place. Whether firms can complete the change-over in a year or cannot do so will not depend upon the energy or efficiency of their managements, but upon their geographical location, the length of time the war orders run on, the period at which they can begin to clear the decks for peace, the amount of structural alteration that was made when they were changed over to wartime work, and the amount of blitzing they suffered. It will depend upon a variety of circumstances quite outside their control.

Frankly, I would not press this Amendment if the Financial Secretary had been able to go even as far as the Chancellor of the Exchequer went when we were discussing the Financial Resolution. On that occasion the Chancellor admitted that there was a grievance to be met. During this Debate the suggestion has been made that, if the Chancellor should find it impossible to Extend the period because it would mean extending it for all and not only for those who in fact need the extension, he might at any rate agree to some kind of machinery, some tribunal, for instance, to which those unable to complete the change over in a year could appeal, and that such people, if their special circumstances were proved, should be entitled to an extension. I am afraid that inevitably I am trespassing upon the remedy suggested in the next Amendment on the Order Paper, but it is impossible to separate the two. I should have been happy to have agreed to a proposal of that kind. I believe it would have been fair and would have covered the majority of cases. A month ago the Chancellor, without giving any pledge —I do not for one moment accuse him of a breach of faith —said that he would look into this matter and to see whether it was possible to do something upon those lines. In that month, with all the Treasury behind him, with the help of the draftsmen, if the Chancellor had seriously meant to meet the grievance, he could have had something on the Order Paper now. Not only has the Financial Secretary not gone farther than the Chancellor went a month ago —he does not seem even to have gone as far. In those circumstances, I can only advise my hon. Friends to go into the Division Lobby in favour of the Amendment, unless even at this last moment the Financial Secretary can give us some more definite assurance than he has done so far.

Mr. Cobb (Elland)

We have just had six examples of aggressive vocal enterprise from six vital, aggressive enterprisers, and I want to deal with one or two of the points they have made. They have said that there is little risk' of this Excess Profits Tax payment being mis- used. I say that in every company where there is an Excess Profits Tax cushion there is an atmosphere of inefficiency that goes right through the firm from top to bottom, and the sooner the Excess Profits Tax cushion is removed, the better it will be for enterprise and British industry It has been said that firms cannot complete the change-over in the period in question. It is time British industry learned how to do what its American associates can do — [Interruption.] Hon. Members opposite may laugh. American industry has shown us how to change over in four months. Hon. Members opposite want a year. It is far too long. It is about time that hon. Members opposite had some dynamite put behind them to make them get a move on. Finally, I want to say that one of the reasons why they want the period to be longer has only to be sought in the expensive restaurants in the fashionable parts of London where large parties are being held every night at the expense of E.P.T. The sooner it is removed, the better for the country.

Sir W. Wakefield

We cannot allow the statement made by the hon. Member opposite to go unchallenged. The hon. Member said that industry cannot turn over as it has done in America. Well, of course, industry cannot turn over —[Interruption.] Where is the labour? In the Services, not in industry. Hon. Members on this side have complaints of failure of hon. Members opposite to release from the Services the men urgently required in industry. Every day, hon. Members on this side have complaints of industrialists not being able to get raw materials, because of restrictions, controls and obstructions. That is why the turn over from war to peace does not go ahead. That is why our export trade is not being developed as it ought to be — [Interruption]. I want hon. Members opposite to hear this. I want them to realise that, if it was not for the obstruction by the Government, we would be beating America. When assistance is asked of the Chancellor of the Exchequer in order to help industry to get on with the job, we are denied it. Well, the results will be seen in a few months' time. The results will be seen in unemployment—

The Deputy-Chairman (Mr. Hubert Beaumont)

I hope the hon. Member will deal with the Amendment on the Order Paper.

Sir W. Wakefield

I bow to your Ruling, Mr. Deputy-Chairman. I was carried away by the remark of the hon. Member opposite whom I was answering. The hon. Member was accusing hon. Members on this side of saying that British industry could not turn over from war to peace production and I say that, if that is allowed to go out to the world from this House of Commons, when the whole world is looking for our goods, it is not going to help our export trade.

Mr. Cobb

The statement was made by an hon. Gentleman over there, and I was paraphrasing it.

Sir W. Wakefield

It is a strange sort of paraphrase. I hope I have made this point, at any rate. Give industry the labour, give it the materials, give it the financial assistance for which we have

Division No. 33.] AYES. [9.25 p.m.
Adams, W. T. (Hammersmith, South) Collick, P. Grenfell, D. R.
Adamson, Mrs. J. L. Collindridge, F. Grey, C. F.
Allen, A. C. (Bosworth) Collins, V. J. Grierson, E.
Alien, Scholeneld (Crewe) Colman, Miss G. M. Griffiths, D. (Rother Valley)
Alpass, J. H. Cook, T. F. Griffiths, Rt. Hon. J. (Llanelly)
Anderson, A. (Motherwell) Corbet, Mrs. F. K. (Camb'well, N.W.) Gunter, Capt R. J.
Anderson, F. (Whitehaven) Corlett, Dr. J. Guy, W. H.
Attewell, H. C. Corvedale, Viscount. Haire, Fit.-Lieut. J (Wycombe)
Attlee, Rt. Hon. C. R. Cove, W. G. Hall, W. G. (Colne Valley)
Awbery, S. S. Grossman, R. H. S. Hamilton, Lieut.-Col. R.
Ayles, W. H. Dailies, P. Hannan, W. (Maryhill)
Ayrton Gould, Mrs. B. Dalton, Rt. Hon. H. Hardy, E. A.
Bacon, Miss A. Davies, Edward (Burslem) Hastings, Dr. Somerville
Baird, Capt. J. Davies, Clement (Montgomery) Henderson, A. (Kingswinford)
Balfour, A. Davies, Ernest (Enfield) Henderson, J. (Ardwick)
Barnes, Rt. Hon. A. J. Davies, Harold (Leek) Hobson, C. R.
Barstom, P. G. Davie, Haydn (St. Pancras, S.W.) Holman, P.
Barton, C. Deer, G. Hoy, J.
Battley, J. R. Delargy, Captain H. J. Hudson, J. H. (Ealing, W.)
Bechervaise, A. E. Diamond, J. Hughes, Hector (Aberdeen, N.)
Belcher, J. W. Dobbie, W. Hughes, Lt. H. D. (W'lhampton, W)
Benson, G. Dodds, N. N. Hynd, H. (Hackney, C.)
Berry, H. Douglas, F. C. R. Isaacs, Rt. Hon. G. A.
Bevan, Rt. Hon. A. (Ebbw Vale) Driberg, T. E. N. Janner, B.
Binns, J. Dumpleton, C. W. Jeger, Dr. S. W. (St. Pancras, S.E)
Blackburn, A. R. Durbin, E. F. M. Jones, J. H. (Bolton)
Blenkinsop, Capt. A. Dye, S. Jones, Maj. P. Asterley (Hitchin)
Boardman, H Edelman, M. Keenan, W.
Bottomley, A. G. Edwards, John (Blackburn) Kenyon, C.
Bowden, Flg.-Oflr. H. W. Edwards, N (Caerphilly) Key, C. W.
Bowles, F. G. (Nuneaton) Edwards, W. J. (Whitechapel) King, E. M.
Braddock, Mrs. E. M. (L'p'l, Exch'ge) Evans, E (Lowestoft) Kinghorn, Sqn.-Ldr. E
Braddock, T. (Mitcham) Evans, S. N. (Wednesbury) Kirby, B. V.
Brook, D. (Halifax) Ewart, R. Lang, G.
Brooks, T. J. (Rothwell) Fairhurst, F. Lavers, S.
Brown, George (Belper) Farthing, W. J. Lawson, Rt. Hon. J. J.
Brown, T. J. (Ince) Fletcher, E. G. M. (Islington, E.) Lee, F. (Hulme)
Bruce, Maj. D. W. T. Foot, M. M. Lee, Miss J. (Cannock)
Buchanan, G. Forman, J. C. Leslie, J. R.
Burden, T. W. Foster, W. (Wigan) Levy, B. W.
Burke, W. A. Fraser, T. (Hamilton) Lewis, J. (Bolton)
Butler, H. W. (Hackney, S.) Freeman, Maj. J. (Watford) Lewis, T. (Southampton)
Byers, Lt.-Col. F. Freeman, P. (Newport) Lindgren, G. S.
Callaghan, James Gaitskell, H. T. N. Lipson, D. L.
Champion, A. J. Gallacher, W. Little, Dr. J.
Chater, D. George, Lady M. Lloyd (Anglesey) Logan, D. G.
Chetwynd, Capt. G. R. Gibson, C. W. Longden, F.
Clitherow, R. Gilzean, A. Lyne, A. W.
Cluse, W. S. Glanville, J. E. (Consett) McAdam, W.
Cobb, F. A. Gooch, E. G. McAllister, G.
Cocks, F. S. Goodrich, H. E. McEntee, V. la T

asked, whether it is to help research or anything else, and we do not fear competition from America or anywhere else, but, if this assistance is not forthcoming, and this obstruction and these restrictions continue, then industry will not go ahead in the way in which we on this side. as well as hon. Members opposite, wish it to do.

Mr. Pritt (Hammersmith, North)

If the industrial position is as utterly hopeless as the hon. Member for St. Mary-lebone (Mr. Wakefield) describes, had he not better let people who understand how to run it get on with nationalisation?

Question put, "-That the word forty-seven stand part of the Clause."

The Committee divided: Ayes, 287; Noes, 135.

McGhee, H. G. Poole, Major C. C. (Lichfield) Thomas, I. O. (Wrekin)
Mack, J. D. Popplewell, E. Thomas, George (Cardiff)
McKay, J. (Wallsend) Porter, G. (Leeds) Thomson, Rt. Hon. G. R. (E'b'gh, E.)
Maclean, N. (Govan) Pritt, D. N. Thorneycroft. H.
MeLeavy, F. Pryde, D. J. Thurtle, E.
MacMillan, M. K. Pursey, Cmdr. H. Tiffany, S.
Macpherson, T. (Romford) Ranger, J. Tolley, L.
Mainwaring, W. H. Rankin, J. Tomlinson, Rt. Hon. G.
Mann, Mrs. J. Rees-Williams, Lt.-Col. D. R. Turner-Samuels, M.
Manning, C. (Camberwell, N.) Reeves, J. Ungoed-Thomas, Maj. L.
Marshall, F. (Brightside) Reid, T. (Swindon) Usborne, Henry
Mayhew, Maj. C. P. Rhodes, H. Vernon, Maj. W. F.
Medland, H. M. Richards, R, Viant, S. P.
Middleton, Mrs. U. Robens, A. Wadsworth, G.
Mikardo, Ian. Roberts, Sqn.-Ldr. E. O. (Merioneth) Walker, G. H.
Mitchison, Maj. G. R. Roberts, G. O. (Caernarvonshire) Wallace, G. D. (Chislehurst)
Monslow, W. Robertson, J. J. (Berwick) Wallace, H. W. (Walthamstow, E.)
Montague, F. Rogers, G. H. R. Watson, W. M.
Morgan, Dr. H. B. Royle, C. Webb, M. (Bradford, C.)
Morris, Lt.-Col. H. (Sheffield, C.) Scott-Elliot, W. Weitzman, D.
Morris, P. (Swansea, W.) Sharp, Lt.-Col. G. M. Wells, P. L. (Faversham)
Morris, Hopkin (Carmarthen) Shurmer, P. Wells, Maj. W. T. (Walsall)
Mori, D. L. Silkin, Rt. Hon. L. Whiteley, Rt. Hon. W.
Moyle, A. Silverman, J. (Erdington) Whittaker, J. E.
Murray, J. D. Silverman, S. S. (Nelson) Wilcock, Group-Capt. C. A. B.
Nally, W. Simmons, C. J Wilkins, W. A.
Neal, H. (Claycross) Skeffington, A. M. Willey, F. T. (Sunderland)
Nichol, Mrs. M. E. (Bradford, N.) Skinnard, F. W. Willey, O. G. (Cleveland)
Nicholls, H. R. (Stratford) Smith, Capt. C. (Colchester) Williams, D. J. (Neath)
Noel-Baker,. Capt. F. E. (Brentford) Smith, Ellis (Stoke) Williams, Rt. Hon. E. J. (Ogmore)
Noel-Buxton, Lady Smith, Norman (Nottingham, S.) Williams, J. L. (Kelvingrove)
Oldfteld, W. H. Smith, T. (Normanton) Williams, Rt. Hon. T. (Don Valley)
Oliver, G. H. Snow, Capt. J. W. Williamson, T.
Orbach, M. Solley, L. J. Willis, E.
Paget, R. T Sorensen, R. W. Wills, Mrs. E. A.
Paling, Rt. Hon. Wilfred (Wentworth) Soskice, Maj. Sir F. Wilson, J. H.
Paling, Will T. (Dewsbury) Stamford, W. Wise, Maj. F. J.
Palmer, A. M. F. Stewart, Capt. M. (Fulham) Woodburn, A.
Pargiter, G. A. Strachey, J. Wyatt, Maj W.
Parkin, Fit.-Lieut. B. T. Stross, Dr. B. Yates, V. F.
Paton, Mrs. F. (Rushcliffe) Stubbs, A. E. Young, Sir R. (Newton)
Paton, J. (Norwich) Swingler, Capt. S. Younger, Maj. Hon. K. G.
Peart, Capt. T. F. Symonds, Maj. A. L.
Perrins, W. Taylor, H. B. (Mansfield) TELLERS FOR THE AYES:
Piratin, P. Taylor, R. J. (Morpeth) Mr. Mathers and Mr. Pearson.
Platts-Mills, J. F. F. Taylor, Dr. S. (Barnet)
Aitken, Hon. M. Gage, Lt.-Col. C. McKie, J. H. (Galloway)
Allen, Lt.-Col. Sir W. (Armagh) Galbraith, Cmdr. T. D. Maclean, Brig. F. H. R. (Lancaster)
Amory, Lt.-Col. D. H. Gates, Maj. E. E. MacLeod, Capt. J.
Assheton, Rt. Hon. P. Glossop, C. W. H. Macmillan, Rt. Hon. Harold
Baldwin, A. E. Gomme-Duncan, Col. A. G. Macpherson, Maj. N. (Dumfries)
Barlow, Sir J. Gridley, Sir A. Manningham-Buller, R. E.
Beamish, Maj. T. V. H. Grimston, R. V. Marlowe, A. A. H.
Bennett, Sir P. Hannon, Sir P. (Moseley) Marples, Capt. A. E.
Birch, Lt.-Col. Nigel Hare, Lt.-Col. Hon. J. H. (W'dbridge) Marshall, Comdr. D. (Bodmin)
Boothby, R. Harvey, Air-Cmdre. A. V. Maude, J. C.
Bower, N. Haughton, Maj. S. G. Mellor, Sir J.
Boyd-Carpenter, Mai. J. A. Headlam, Lt.-Col. Rt. Hon. Sir G. Molson, A. H. E.
Braithwaite, Lt.-Comdr. J. G. Hinchingbrooke, Viscount Morrison, Rt. Hon. W. S. (Cirencester)
Buchan-Hepburn, P. G. T. Hogg, Hon. Q. Mott-Radelyffe, Maj. C. E.
Carson, E. Hollis, Sqn.-Ldr. M. C. Neven-Spence, Major Sir B.
Clarke, Col. R. S. Holmes, Sir J. Stanley Nicholson, G.
Cooper-Key, Maj. E. M. Hope, Lt.-Col, Lord J. Noble, Comdr. A. H. P.
Corbett, Lieut. Col. U. (Ludlow) Howard, Hon. A. Nutting, Anthony
Crookshank, Capt. Rt. Hon. H. F. C. Hulbert, Wing-Comdr. N. J. Osborne, C.
Crosthwaite Eyre, Col. O. E. Hurd, A. Peto, Brig. C. H. M.
Crowder, Capt. J. F. E. Hutchison, Lt.-Cdr. Clark (Edin'gh, W.) Pitman, I. J.
Cuthbert, W. N. Jarvis, Sir J. Poole, Col. O. B. S. (Oswestry)
Darling, Sir W. Y. Jeffreys, General Sir G. Price-White, Lt.-Col. D.
Davidson, Viscountess Joynson-Hicks, Lt.-Cdr. Hon. L. W. Prior-Palmer, Brig. O.
Digby, Maj. S. Wingfield Keeling, E. H. Raikes, H. V.
Dodds-Parker, Col. A. D. Kingsmill, Ll.-Col. W. H. Reid, Rt. Hon. J. S. C. (Hillhead)
Conner, Sqn.-Ldr. P. W. Lambert, G. Renton, Maj. D.
Dower, Lt.-Col. A. V. G. (Penrith) Lancaster, Col. C. G. Roberts, Ma]. P. G. (Ecclesall)
Drayson, Capt. G. B. Law, Rt. Hon. R. K. Robinson, Wing-Comdr. Roland
Drewe, C. Legge-Bourke, Maj. E. A. H. Ropner, Col. L.
Duthie, W. S. Lindsay, Lt.-Col. M. (Solihull) Ross, Sir R.
Eccles, D. M. Linstead, H. N. Sanderson, Sir F.
Erroll, Col. F. J. Lloyd, Maj. Guy (Renfrew, E.) Scott, Lord W.
Fletcher, W. (Bury) Lloyd, Brig. J. S. B. (Wirral) Shephard, S. (Newark)
Foster, J. G. (Northwich) Lucas, Major Sir J. Smiles, Lt.-Col. Sir W.
Fraser, Maj. H. C. P. (Stone) Lucas-Tooth, Sir H. Smith, E. P. (Ashford)
Fraser, Lt.-Col. Sir 1. (Lonsdale) Mackeson, Lt.-Col. H. R. Snadden, W. M.
Spearman, A. C. M. Thornton-Kemsley, Col. C. N. White, Sir D. (Fareham)
Spence, Maj. H. R. Thorp, Lt.-Col. R. A. F. White, Maj. J. B. (Canterbury)
Stanley, Col. Rt. Hon. 0. Touche, G. C. Williams, C. (Torquay)
Stoddart-Scolt, Col. M. Vane, Lt.-Col. W. M. T. Williams, Lt.-Cdr. G. W. (T'nbr'ge)
Sutcliffe, H. Wakefield, Sir W. W. Winterton, Rt. Hon. Earl
Taylor, C. S. (Eastbourne) Walker-Smith, Lt.-Col. D. Young, Maj. Sir A. S. L. (Parlick)
Teeling, Flt.-Lieut. W. Ward, Hon. G. R.
Thomas, J. P. L. (Hereford) Watt, Sir G. S. Harvie TELLERS FOR THE NOES
Thorneycroft, G. E. (Monmoulh) Wheatley, Lt.-Col. M. J. Commander Agnew and Mr. Studholme.
Sir H. Lucas-Tooth

I beg to move, in page 24, line 34, at end, insert: Provided that this subsection shall not apply to any deficiency of profits occurring in any chargeable accounting period beginning on or after the said first day of January, nineteen hundred and forty-seven, which is attributable wholly or partly to' expenditure or loss incurred by reason of, or consequential upon, circumstances arising in any chargeable accounting period beginning before the said first day of January, nineteen hundred and forty-seven (which expenditure or loss is hereinafter referred to as 'a terminal loss') to the extent that any such deficiency is so attributable. For the purpose of this subsection, but without prejudice to the generality of the foregoing, a terminal loss shall include—

  1. "(a) any expenditure incurred on repairs and renewals which were due to be made but could not be carried out before the said first day of January, nineteen hundred and forty-seven;
  2. "(b) any expenditure incurred in the process of rehabilitation from war-time production to peace-time production."
On the Report stage of the Budget Resolutions some of us on this side raised the question of deficiencies, and I asked for a definition of what deficiencies the Government were proposing to stop allowing for set-off against previously paid tax. At that time the Chancellor of the Exchequer in his reply showed some sympathy for the proposals and arguments which were put forward from this side of the House. I think that this is a fair statement of his reply: he said that he would give consideration to the continuance of relief in certain special types of case, and he emphasised the word "special." On the Second Reading of the Finance Bill, the Financial Secretary to the Treasury came back on rather a different line. He said that there appeared to be some confusion on this side of the House between deficiencies and terminal losses.

So far as I am aware the expression "terminal loss" is quite a loose one. If there is confusion on this subject it is because the Government have so far refrained from enlightening us as to what they mean by "terminal loss," which they are prepared to consider for special treatment. The Financial Secretary, referred to four classes of terminal loss, and suggested that they would be covered by the existing law, or, at any rate, the law as it will be when this Bill becomes an Act. I assume that the existing law to which he referred is the Finance Act, 1940, Section 33 (2). That is the Section which allows certain expenditure to be spread back, instead of having to bring it into the account for the year in which it is actually expended. It may be spread back so as to be attributed for purposes of Excess Profits Tax to previous years in which the tax has been levied. I have examined that Section very carefully since the hon. Gentleman directed the attention of the House to it, and it seems to me that, so far as that Section is concerned, such expenditure will only be affected so long as the Excess Profits Tax scheme continues in being. I will not read the Section, which is a fairly long one, but I think it is clear from the first lint: that it is contemplated that it will operate only so long as there is in fact an excess profits scheme.

I do not know whether it is the Government's intention that that Section shall continue to operate indefinitely. I rather gather that that may be so. It is extremely important to know whether the Government do or do not intend to continue that scheme indefinitely. I hope we shall have some statement from the Govt. this evening to tell us what they intend. I have put down a new Clause for the express purpose of clarifying that point. I do not know whether it. is intended to call that Clause or not, but it would be appropriate if the Chancellor or the Financial Secretary could say something as to that when replying to the Debate. It deals with the class of case which clearly falls within the meaning of terminal loss, but it would be misleading the Committee to suggest that that Clause covers terminal losses of the kind which have been referred to this evening. They go much further than that, and it is in order to cover this wider kind of terminal loss that I have put down the Amendment which is now under discussion.

I do not suggest that the wording of this Amendment is perfect. This is not the kind of Amendment which it is very easy for a private Member to draft and put upon the Order Paper, when we have seen examples of the sort of thing required to bring this sort of machinery into operation. But it is drafted to the best of my ability so as to show to those who read it what is intended. It is deliberately drafted widely in order that we shall be able to get a statement from the Government as to whether, in fact, a wide range of expenditure would be included within this type of case. The kind of question which it is fair to ask the Government tonight is, How widely do they intend to allow certain of these deficiencies to rank for set off next year, how widely are they prepared to go, or, if they are not prepared to do it by some such means as this, by what means do they intend to carry out what they have suggested? The Financial Secretary, in the course of his speech on the Second Reading, included in terminal losses the cost incurred in the rehabilitation of industry to peace-time conditions. That was wide expression. It is clear from his speech that it is intended that that particular class of loss shall be continued. It is certainly not continued under Section 33 (2) of the Finance Act, and I can find nowhere in this Bill anything which gives relief in, respect of that kind of payment. Therefore, I ask the Government if they will say whether they intend that Section 33 (2) shall continue to apply, and whether they will consider the kind of special case which is included in this Amendment? If they will not consider so wide an Amendment as this, will they say what machinery they intend to apply in order to carry out the intentions which have already been announced?

9.45 p.m.

Mr. Glenvil Hall

This Amendment follows closely that which we have just discussed and voted on, and therefore many of the points I might have made have already been covered either by my-self or other speakers on the preceding Amendment. I do not intend to weary the Committee with the same arguments again. What the hon. Member for South Hendon (Sir H. Lucas-Tooth) wants to do is to add something to Clause 28 (1). Clause 28, as we all know from previous discussions, provides that no relief shall be given in respect of deficiencies of profit accruing after the end of 1946. There has been some criticism and complaint of that and what the hon. Member wants to do now is to bring in two special types of deficiencies, which can go on and count beyond the end of next year. One of the things he wants to bring in is the question of repairs and renewals due to be made, but which could not be carried out before the 1st January, 1947. Actually these repairs and renewals are already covered and there is no need to cover them again.

Sir H. Lucas-Tooth

I think I am right in saying that they will only be covered if we get a firm assurance that Section 3 (2) of the Finance Act, 1940, is to continue in effect.

Mr. Glenvil Hall

They are now being covered, and if the hon. Member wishes me to add "provisionally," I will do so, because perhaps that is nearer to the facts of the case than the bald way in which I put it. They are covered now and the question arises whether they will be continued. An assurance has been given that terminal losses of all kinds will be dealt with at the proper time, and as the Chancellor said in his Budget speech, and as I made clear in my Second Reading speech, where you get borderline cases which may be considered as terminal losses, something will be done to ensure that they are carried over and dated back to E.P.T. as terminal losses. Into the same category comes the second type of expenditure to which the hon. Member referred, namely, the rehabilitation of war-time production. That is also covered like a terminal loss, and therefore it seems to me that the two objects to which this Amendment is directed are both covered, either provisionally or definitely. The Committee have, in addition, the assurance of my right hon. Friend the Chancellor of the Exchequer that terminal losses will be looked at afresh in the interests of justice and fair play to industry, so that fair play can be given to industry generally, and I think the Committee will agree that nothing could be fairer than that.

Mr. Godfrey Nicholson (Farnham)

Will it be possible to specify, and put down in black and white, the arrangements which may be made in this direction, or will it be left to the firms in question, and the Inland Revenue?

Mr. Glenvil Hall

It is very difficult for me to answer that question offhand. I would say, generally, that obviously it would be very inexpedient that points of this kind should be left for a bargain to be struck between the Inland Revenue and the individual trader. Certain principles have to be laid down, of course, and as far as the Income Tax law is concerned, up to now it has been pretty accurately laid down, and I hope that will continue.

Mr.. Nicholson

In effect, that means that possibly by next April, a fairly specific series of rules may be produced?

Mr. Glenvil Hall

Not necessarily. It is only three or four months since the war against Japan ended, and industry is now in process of turning back to a peace time basis, and it is early yet to say or to know what will happen. We shall have another Budget in about four or five months' time. By then the situation will be much clearer than it is today, and discussion then can take place in the light of the situation that will exist as to what should or should not be done in the months ahead.

Sir H. Lucas-Tooth

In view of the Financial Secretary's reply, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clauses 29 to 37 ordered to stand part of the Bill.