NATIONAL DEFENCE CONTRIBUTION (Hansard, 31 October 1945)

§ Captain Marples (Wallasey)
I will not delay the House very long but I think that the National Defence Contribution is rather heavy, in view of its elder brother E.P.T. I think it deserves mention because it undoubtedly taxes the equity and the equity holder, and they deserve a very great deal of consideration from the Chancellor of the Exchequer. I have been looking at the Financial Statement, and I find that the Chancellor of the Exchequer said, on 23rd October, when discussing E.P.T., that under those conditions this tax worked against the incentive and against efficiency. Then he goes on to say just one sentence about N.D.C. He said: Meanwhile, I am leaving the National Defence Contribution unchanged."—[OFFICIAL REPORT, 23rd October, 1945; Vol. 414, c. 1898.] The Chancellor was extremely lucid and I followed his Budget Statement with the greatest ease. I did think he might have said a little more about the National Defence Contribution. His two arguments are inconsistent. On the one hand he is out to encourage incentive and I believe that is his intention, and on the other hand he does not make the slightest change in N.D.C. That position ought to be put right.
I was looking at some old Hansards and I turned up one in 1937 where, instead of just one sentence on N.D.C., we read a whole peroration by theright hon. Gentleman on the subject of the National Defence Contribution and how it affects unemployment. He said: Any hon. Member who represents a special area could give the names of particular undertakings which are known to have been struggling on, many of them small undertak 516 ings and others of moderate size, but representing between them an appreciable amount of employment. They have struggled on in spite of all the depression and the exceptional burden of local rates. Unless some additional power of relief is given to the Commissioner, this tax will be imposed on the top of all the other taxes and local burdens, and it might indeed be the last straw which will break the camel's back with regard to many of these undertakings."—[OFFICIAL REPORT, 1st July, 1937; Vol. 325, c. 2201.] I think that that is consistent with the right hon. Gentleman, for he is always lucid on these points. Having tracked that down, I agree with him that it is necessary to encourage the small businesses and the equity holders. We can compare the National Defence Contribution with the Corporations Profits Tax, which was imposed after the last war by Lord Snowden, the First Labour Chancellor of the Exchequer. He said of the Defence Contribution: It was unloved by its parents. It was reviled by its subsequent guardians. It was condemned by every party, not least by the Labour Party. I would ask the right hon. Gentleman to consider the early abolition of or some reduction in the National Defence Contribution because, not only is it a deterrent to private enterprise and the small equity holder and the small business, but it will, I think, give pleasure to Lord Snowden's ghost.

§ The Solicitor-General
The observations which were made by the hon. and gallant Member with regard to the National Defence Contribution are equally applicable, and have already been made, to the series of taxes that we have been discussing.

§ Captain Marples
The Excess Profits Tax does not bear as hardly on the equity holder as the National Defence Contribution.

§ The Solicitor-General
I am surprised to hear that because the Excess Profits Tax is 100 per cent.—

§ Captain Marples
I think the Chancellor will agree with me on that.

§ Mr. Dalton
No, the Excess Profits Tax has been 100 per cent. standard. It was reduced, in effect, to 80 per cent. by the grant of the refund. It will be reduced, if the House agrees to my proposal, to 60 per cent. A tax of 60 per cent. is something very different from a tax of 5 per 517 cent., which is all that the National Defence Contribution is. There may be exceptional cases where the Defence Contribution represents a somewhat high proportion of the total earnings of a concern, but that will only be in very exceptional cases. Let me make it clear that, just as with the Purchase Tax on motor cars, I am giving no under taking—

§ Colonel Stanley
On a point of Order. I would like to know which of the right hon. Gentlemen is addressing the House, the Solicitor-General or the Chancellor.

§ Mr. Dalton
At this moment I am addressing the House. A special appeal was made to me by the hon. and gallant Gentleman to give my opinion, and I am glad to oblige him. My hon. and learned Friend was explaining with great lucidity a brief point and I am grateful to him, but I was specially asked to give my view. My view is that the Defence Contribution is a relatively slight burden in the great majority of cases, and I am not proposing to alter it in this Budget. Whether I shall alter it in the future I cannot yet say.