§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
§ Mr. Assheton
About these bonus shares. The Chancellor of the Exchequer is very apt to tell us in the House, when we are debating financial matters, that any proposal he has made has been warmly praised in the financial Press. That is one of his gambits. He usually seems to find, in trying to secure backing, some reference less slighting than usual to the Chancellor's proposals. If I might quote from "The Times" and the "Financial Times," I would be able at once to dispose of the suggestion that there is support for this proposal from financial writers. What "The Times" said was that this was "transparently obnoxious, restrictive, and pointless" and that it should be strongly fought by all sane people until it was removed. The "Financial Times" had an article, which began, not in very good Latin, "Boni, Bono, Bunkum" on this same proposal. The Chancellor has made a lot of remarks about bonus issues, and I hope to debunk 'em. In the Budget speech, he said:These issues may sometimes be a defensible method of capitalising reserves or genuine profits. That may be. But often they are nothing more than a watering of capital, a method of concealing profits, and so misleading customers, employees, and the general public.That was an advance, because if one looks back to the remark of the right hon. Gentleman at Question time, one finds that he did not go so far. I do want the House to appreciate that, when the Chancellor talks of deceiving the public, the boot is not always on the right foot. The Chancellor went on to say:In a quiet way I have been looking round to see how I might, at the same time, both give 1174 a little pleasure and collect a little revenue. It seemed to me that there was a case for my being a little more forthcoming in permitting bonus issues, on condition that the public also participated in a reasonable rake-off from these somewhat debatable operations.These words were used to raise prejudice. The Chancellor was trying to lead the House to believe that all issues of bonus shares had something disreputable about them, and something of which the companies concerned ought to be ashamed. I see now that he does not really believe it, but he is not frank enough to say so. I would like the House to consider the two sorts of bonus shares, and I will refer again to the Chancellor's own remarks. He said:First, there is the bonus issue proper which is a gratuitous issue of new shares to existing shareholders in proportion to their holdings."—[OFFICIAL REPORT, 15th April, 1947; Vol. 436, c 82.]What that means is that one bas an orange and cuts it into four pieces. One then cuts it into eight pieces. It is the same orange, but there are eight shares instead of four, and, similarly, if the company which has 100,000 ordinary shares, decides to give the shareholders another 100,000, the position is the same, and each person owns the same proportion of the business. Why it is done from time to time is this. Over a period of years a company which has been managing its affairs well, has put aside to reserve a considerable amount of money. As time goes on, that money put to reserve forms new capital, just as in the same way as an hon. Member who saves £100 a year from his income is forming £100 capital for himself. It is a desirable and proper thing for those who are able to do it.
When a company has done that over a number of years it finds that it has reserves which it has built up, which may perhaps be equal to, or more than, the original share capital, and that means that there is twice as much money in the business as there was before, and it is therefore a perfectly reasonable proposition that the proprietors of that company should look at the balance sheet and write down in the balance sheet what is in fact the truth—that the original capital of that company is double what it was before. That is the proposition and there is absolutely nothing objectionable in that practice, and when the Chancellor of the Exchequer talks in the way he does he is trying to create prejudice. "The 1175 Times" in dealing with this particular class of capitalisation of reserves says:Capitalisation of reserves would ordinarily be out of the question owing to the prohibitive weight of taxation which it would attract.Now, the 10 per cent. tax which the Chancellor has imposed will result in this particular form of capitalisation of reserves not normally being used and therefore the public will more often than not be deceived in consequence of the Chancellor of the Exchequer's action. The real position of the company will not be as clearly disclosed as it might be. That deals with one class of bonus shares. The second type, he says, is the issue of new shares containing a bonus element, that is the issue of new shares for which indeed the shareholders pay something less—that is a remark to create prejudice—and sometimes very much less than their market value.
What is the position about those? If you have the case of a company with a capital of £100,000 and the shares stand at £2 each, and it is desired to raise new capital, and to issue to the shareholders a further 100,000 shares at £1 each, what happens then? The average value of the shares after that manoeuvre will be 30 shillings. The man who has taken up the bonus shares at £1 has a profit of about 10 shillings a share, and the shares which he held before, and which were previously worth have fallen to 30 shillings. The Chancellor proposes to tax him on the increase of the 10 shillings on the shares he gets but not to give him any rebate on the falling of the other. This is merely an illustration. I hope to show—
§ Mr. Assheton
I think I explained that to those who understand orthodox finance. The hon. Gentleman told us earlier in the day that he was not a believer in orthodox finance. I accept what he said.
§ Dr. Morgan
On a point of Order. Is the right hon. Gentleman entitled completely to misinterpret my remarks—to attribute to me remarks which I did not make and then refuse to allow me to correct him?
§ Dr. Morgan
I never said that I was against orthodox finance. I said that I was against orthodox political economy.
§ 11.30 p.m.
§ Mr. Assheton
I apologise. I misunderstood the hon. Member. I withdraw entirely, what I said about him. What he is against is orthodox political economy. He believes in orthodox finance—or I assume that he believes in orthodox finance.
I have only one illustration to give the House before I sit down. Earlier in the life of this Government the Chancellor perpetrated the manoeuvre which acquired the Bank of England. What did he do? The Bank of England was a very old-established company, and Bank of England £100 stock was standing somewhere in the 300's. The Chancellor bought the Bank of England; about the price he paid, there was much dispute. He gave the shareholders for their £100 stock, £400 of Treasury 3 per cent. stock, a bonus of 400 per cent., a well deserved, well-merited bonus which those shareholders in the Bank had accumulated during those 200 years of patient, hardworking endeavour. The Chancellor gave them the biggest bonus issue of which I have ever heard.
§ Mr. Birch
I am glad the right hon. Member for the City of London (Mr. Assheton) had a chance to put his case so clearly. It is very likely misunderstood by hon. Gentlemen opposite. The hon. Member for Uxbridge (Mr. Beswick) said all dividends ought to be 5 per cent. I do not think he quite understood what he meant. We had an even more startling illustration of confused interpretation and muddle headedness the other day when the Minister of Fuel and Power said, talking about electricity, there had been gross cases of watering of capital, by bonus issues, in the electricity industry. If that means anything, if he is making an accusation of substance, it must mean that shares were standing higher than they should have stood—and he proposed to take over at market value and pay public money for them, exactly in the same way as my right hon. Friend instanced in the case of the Bank of England. It is most important that hon. Gentlemen opposite should realise the difference between real and nominal capital and I believe a great many of them do not understand. It was very clearly put by my right hon. Friend.
1177 There are two other objections to the tax. First there is the fundamental one, on the principle of taxation. The right hon. Gentleman advocated the tax in his Budget speech. He said the tax would he made on the difference between the issue price and the market value of the shares on the Stock Exchange after the issue. Therefore we are imposing a tax the weight of which it is impossible to calculate at the time it is levied. Those who know how Stock Exchange prices go up and down, know that you always pull prices down on a new issue. If you get a turn of the market, they might go down very considerably, or might go up if there is enough pull on the price. You cannot calculate beforehand how much tax is going to accrue. It is not a dis-inflationary tax. So far as it is purely a capital tax, it withdraws no money whatever from circulation. I hope the Chancellor today will make a better defence of this tax than he did during the Budget speech. I hope he will explain clearly to his friends the real difference between real capital and nominal capital and excuse his right hon. Friend who made a fraud on the public by proposing to buy shares at inflated, watered values. I hope he will explain what the real purpose of a capital tax of this nature is and will further put up some reasonable excuses for going against the fundamental principles of taxation which, had I read the whole of his works, I would know he had himself supported.
§ Colonel Ropner (Barkston Ash)
I want to ask the Chancellor a specific question in regard to a number of companies affected by this proposal. I want him to imagine the case of a company which, in the lean years between the wars, reduced the nominal capital in its shares. If these shares are again written up to the original value, will he tell the House whether such an operation would attract the taxation which he proposes?
§ Sir John Mellor (Sutton Coldfield)
The Chancellor is showing a strange inconsistency in this Resolution, because, in the previous Resolution, he has deliberately discriminated in favour of that part of the profit which is retained in the business. Capitalisation of reserves ensures that those reserves shall be permanently retained in the business. Therefore, it seems to me that, in differentiating the Profits Tax, the Chancellor is aiming 1178 at ensuring the retention of the profits in the business, and, under this Resolution, is proceeding in precisely the opposite direction. I think that is unfortunate, and we ought to have some consistency from him, however unsatisfactory the Budget might be. I suggest that the really important thing is that companies should be enabled to bring their issued nominal capital into some real relation with their assets, and I hope that, when he comes to reply, the Chancellor will at least give an explanation to the House of what appears to me to be an inconsistency between this Resolution and the Resolution with regard to the tax on profits.
§ Mr. Eccles
I have no doubt that, when the Chancellor comes to defend this tax, he will quote the "Economist," because the "Economist" did say last week that there were instances where bonus issues had been used to evade Surtax. That may be so, but I am asking the "Economist" to give me instances of that, which is not very easy to do. Supposing it is so, we have the machinery of the Capital Issues Committee, which judges whether a bonus issue is made for a sound or a bad reason. If it is for a bad reason, for instance, to evade Surtax, the Capital Issues Committee is there to prevent it. On the other hand, there are a number of bonus issues which it is a very good thing should be made, especially for the reason, given by my hon. Friend who has just spoken, that we want companies to retain profits and plough them back, but they cannot go on doing that for ever and keep their shareholders, I will not say quiet, but satisfied, unless, from time to time, they offer them something in exchange for a dividend. They must say to a man that they will take his dividend for five years because they want to extend their plant, but, at the end of that time, they will give him a bonus issue.
I would like the Chancellor to call to mind the way in which Courtaulds was financed. Are we not all proud of Courtaulds? It is undoubtedly one of the best businesses which has ever been established in this country. It could never have grown as it has without the bonus issue. That has been a means by which Mr. Samuel Courtauld has been able to finance his great business, and which now means so much to us. If we had had a Capital Issues Committee at that time, who would 1179 suppose that they would have refused Mr. Courtauld permission to make his bonus issues from time to time, which he did? Because he ploughed his profits back, we have had a great volume of employment, and we have got ahead of similar rayon manufacturers in other countries, and the whole country has benefited from the growth of that industry.
I think that the Chancellor should be content with his Capital Issues Committee. Let them refuse any bonus issue which is not made for proper commercial reasons, but when, on the other hand, a bonus issue is put up which is to capitalise profits that have been ploughed back, or to raise more money because an extension is in the interests of expanding employment and production, why put a tax on it? If we put taxes on this sort of issue, the same thing will apply, as I mentioned to the House, in the case of the Profits Tax. We shall find that businesses will go outside the United Kingdom. Take, for example, the mining business—the subscription to rights in a new mine. Hon. Members who know anything about the extraordinary length of time taken, and the risk of money involved, in proving a deposit of ore, will know that a parent company goes on for years, sometimes succeeding, but very often failing. Finally, having proved that a certain deposit is worth opening up, and worth sinking a shaft, which is going to cost millions of pounds, they then issue rights to their own shareholders to put up the money—the same shareholders who have put up other money which has been lost in bad speculations—and those rights, of course, are very valuable. All hon. Members know that that is the prime method by which South African mining ventures have been financed, and are being financed at the present time.
As far as I can understand, if the mining companies which are registered in this country—which is what we all wish, because where the head office is, there also is the technical staff and the whole prosperity of managing the business—have to pay 10 per cent. on the difference between the money subscribed to the rights in the mine when it is floated off, and the first price at which the shares are dealt in, I can tell the House exactly what will happen. All the great finance companies will move their head offices to Johannesburg or to somewhere else outside the 1180 United Kingdom, because it is not reasonable to bear this tax in addition to the cost of opening up the mine when all one has to do is to register the company somewhere else in the British Empire, and thus get out of paying the tax. This tax is anti-Imperial and militates against retaining London as the centre of a great Empire. That is not in the interest of any section of the British people. We want the employment here; we want the technical skill to come from here, and we want the management and the control of these companies to remain in London. It is one of the ways in which we can pay for our food and for our raw materials. If we cast all this away, we are going to be much worse off. We may be better Socialists, but we shall be poorer people.
I wish to say a word on the point raised by my right hon. Friend the Member for the City of London (Mr. Assheton) about calculating the actual liability. The only fair way of doing that is to take the capital value of the company before the bonus is made, and to recalculate the value after the bonus is made. If the tax must be paid at all—which is thoroughly wrong—it should only be paid on the difference. It is unfair that a tax should be paid on the difference between the subscription price and the first dealing price, if no set-off is given for the fall in the value of the old share. The only fair basis for what the Chancellor has described as the "rake-off" is this: Take, for example, the Selection Trust. There was a share issued at 45s. and they issued another for 35s.; shortly afterwards, the old and the new shares both stood at 37s. 6d. The only bonus to the old shareholder who has got two shares, for one of which he paid 45s. and the other for which he paid 35s., is the half-crown—the difference between the price at which the new one was issued and the price at which they both stood when the issue was made. As I understand the tax, the shareholder would have had to pay tax upon 7s. 6d.—the difference between the subscription price and the price at which the new share stood when the dealing first took place. That is not fair, and I hope the Chancellor will not do that.
The Chancellor said that bonus issues are means of deceiving customers, employees and the general public, and heading off demands for lower prices and better conditions. That is obviously the matter 1181 which weighs with hon. Gentlemen opposite. If it is a bad bonus issue, made to deceive, then the Capital Issues Committee should squash it. On the other hand, it may be a genuine one, and we must remember that in this enlightened time customers and employees are all anxious to learn about the general economy of the country, we have White Papers like the economic White Papers, and we must bring the facts of our economic position down to the man at the bench. Is it beyond us to explain to these people when an issue is a sensible issue? I do not think it is. It is absurd to say that, if one takes the trouble, one cannot explain to people who are working in a business the good sense of ploughing back money and then capitalising it, rather than distributing it when it would attract this higher tax. If we are not able to make the people of this country understand elementary facts like that, all I can say is that we shall not survive. To start with a tax which is going to make confusion worse is not progressive. In fact, it is reminiscent of the time when it was not possible to make the worker understand the facts. We have left that time behind. If we have not, it is not the least good the Government thinking we shall recover. This is a bad tax, and the Chancellor ought to take it away.
§ Mr. I. J. Pitman
We had a most interesting meeting in Committee upstairs, when the Chancellor, the Financial Secretary and the Solicitor-General, discussed bonus issues in relation to the Control of Borrowing Bill. In that discussion it was made quite clear that the main objection to bonus shares was the allegation that they were a deception on working people. The Financial Secretary said that his objection was that it deceived people, and that it was a "racket." The hon. Member for South Nottingham (Mr. N. Smith), whose speeches we all enjoy so much, went on to say how the "Daily Herald" worked. He quoted the price of their shares, and the very high dividends which they paid. He said it was desirable that the father of the chapel should be aware of those very high dividends, so that he would be able to say, in his negotiations for the printing industry, "Now, we want some of these very high dividends that are being paid." In winding up the Debate the learned Solicitor-General said that it was deception and cloaking—he then withdrew the word "deception" and brought 1182 it back to cloaking—that it was doing down the working man at the bench, who was thereby being done out of what was his right.
I very much agree with my hon. Friend the Member for Chippenham (Mr. Eccles). If they cannot do the mathematics of bonus issues, and if their leaders in the trade unions cannot do it, then there is something wrong with both the rank and file and the leaders of the trade unions. But even supposing that they are so stupid that they really do not realise that a dividend of half the rate on a doubled share issue is equal to twice the dividend on the original, surely, it is perfectly easy for a company to declare a dividend of so much per share? So far as I know, there is absolutely nothing in company law which makes anyone describe a dividend as necessarily so much per cent. on the particular shares held. Therefore, if workpeople and their leaders really are so stupid that they cannot do the mathematics involved when there is a one for one bonus issue and a dividend which was 20 per cent. becomes 10 per cent., then, clearly, they cannot master the dividend per share, and there is no security to them in preventing bonus issues.
The other objection which the Chancellor has put forward is that it is a means of evading Surtax. He and I have corresponded on this, and I have challenged him to produce even one example. I repeat that challenge to produce even one example, real or hypothetical, in which Surtax has been evaded, and in which it is the bonus issue itself which is to be criticised. It cannot be the bonus issue that is in any way lending itself to, or responsible for, any Surtax evasion. Let us face the facts. The effect of a bonus issue is to treat profits, which until that moment were distributable, as from that moment onwards as part of the capital structure of the company, which can be distributed only under the most severe conditions, normally going to the courts and getting permission to distribute that part of the capital structure of the company. Therefore, the action of a bonus issue is the very thing which the Chancellor is constantly telling us he wants, namely, the fossilising permanently into the structure of a company the profits of the past, which can then be used only in the development of that company. I repeat my challenge. It is just impossible to find any means by which a bonus 1183 issue can be used as a distribution and as a means of evading Surtax.
There are only two explanations for that muddled thinking. Here I would ask the Chancellor to remember that he professes to be a professor in this subject. He was a Professor of Commerce, and this is a subject which he really ought to understand. Only one of two possibilities can be the explanation. Either hon. Members opposite are being deceived by the word "bonus"—that because a workman at the bench is paid a bonus, and that is something which is a distribution, therefore a shareholder who is paid a "bonus" is necessarily getting a distribution, when, in point of fact, he is getting the very opposite of a distribution, which is a permanent fossilising into the structure of the company of profits hitherto distributed—or it is another instance of this playing on the drum of class hatred. It seems to me that the Chancellor looks over that right shoulder of his at the people behind him too often. He likes to give them a sop, to show what a good Socialist he really is, and how he is socking the people they have come here to destroy. They are doing nothing less than destroying the life's blood of this country, by doing something which is idiotic, and purely class conscious.
§ Colonel Crosthwaite-Eyre
I do entirely agree with my hon. Friend the Member for Bath (Mr. Pitman), who pointed out to the Chancellor of the Exchequer that, really, the only reason for this Resolution can be to satisfy those behind him. I think one can discern that if one looks at his Budget speech, particularly the passage in which he said:In a quiet way, I have been looking round to see how I might, at the same time, both give a little pleasure and collect a little revenue.''—[OFFICIAL REPORT, 15th April, 1947; Vol. 436, c. 82.]Hon. Members opposite have got to take up one point of view or the other. Either bonus shares are bad, in which case they have got to stop them; or they are not bad, and serve a most useful purpose, in which case they ought to facilitate them. The Chancellor of, the Exchequer reminds me of Pooh-Bah in the "Mikado," who was always ready to receive a little sum to grease his palm, and was ready to do much for an "insult." But the Chancellor will remember how, in Act 1, he says, "Another insult, and I fear a light 1184 one." It is the same tonight with the Chancellor. He is compromising his conscience in exchange for 10 per cent. And even for a Socialist Chancellor that is a poor bargain. But if one looks at these bonuses, as so many of my hon. Friends have said, how can the Chancellor possibly justify the attitude he has taken, and defended with such vigour from that Box, in view of the previous Resolutions? How can he really say, as he did in his Budget speech—which passage, I think, ought to be printed in every one of the 600 new Labour Party journals that are to be published:The characteristic of this type of issue is that no new money what so ever is subscribed. This if one may use a colloquialism, is sheer' money for jam."—[OFFICIAL REPORT, 15th April 1947; Vol. 436, c. 82.]What has been said by my hon. Friends is so true, that the money subscribed for this class of share is money which, in answer to the Chancellor and hon. Members behind him, has been permanently payed back into industry. It has been done at his request and put into industry for its development. How can he now manage to say this is "money for jam"? This is money in answer to the Chancellor's appeal, money for industry as a whole—and not only put into it at the Chancellor's request, but, naturally, for the consolidation of the companies' status, and so that the efforts of shareholders shall be recognised in the future.
I think the Chancellor was most unfair, too, when he talked about "watering of capital," and said that these shares were a means of giving shareholders something for nothing. If he will remember, the Minister of Fuel and Power, as the hon. Member for Flint (Mr. Birch) said, during the Second Reading of the Electricity Bill, produced various cases in support of this contention. He was challenged from this side of the House with accurate figures, and asked to substantiate one of them. I do think the Chancellor of the Exchequer, before he makes a statement like that, knowing well what effect statements have by him from that Box there on the commercial integrity of this country, should be able to produce a few cases, or give us some examples of what he is getting at. His colleague the Minister of Fuel was bowled out completely on every case. Can he now make a convincing case? Can he say anything, not to cheer on his 1185 hon. Friends behind him, but to give us something concrete on which he can base this quite new departure in the realms of commerce? Can he give us some idea of what he is aiming at, something to help us?
If I may refer again to the electricity industry, I asked the Minister of Fuel and Power on Second Reading of the Bill, if he could produce a single company that, as a result of information revealed in the two Reports, particularly the Sankey Report, had sinned in this way. He could not give us one. But perhaps the Chancellor can give us something to help.
I will raise one further point. Can the Chancellor tell us why it is that in this tax a distinction is made between public and private companies? The public company is to pay on a basis which I think it is fair to say was a shock to hon. Members on this side of the House. But what about the private company? Why is it to pay 10 per cent. on issue price above par, whatever it may be? Why should that be? What is the justification for this penalisation of the private company? For penalisation it must be. If you have a prosperous private company which issues shares at the proper price, then it is going to be penalised, as I read the Chancellor's speech, under this proposal. I would say, in conclusion, that where we have a tax like this which, with the main proposition propounded by the Chancellor, will not bear examination, one is forced to conclude that it is 8esired to cheer his own supporters. So far as industry is concerned, this is an unjustified burden, so far as international commerce is concerned, it is something which will do this country irreparable harm. I hope we shall have support from all sides of the House for the view that this tax will adversely affect our industrial integrity.
§ Mr. Hogg
I entirely agree with my hon. Friends that one of the major elements entering into the introduction of this tax has been the desire of the Chancellor to justify himself before his own supporters. But I think my hon. Friends have a little under-estimated the astuteness of the Chancellor in using, exploiting, and even making a mock of what he knows is the ignorance of his own supporters. The Chancellor, who is a past teacher of economics, is perfectly aware, of course, 1186 that his own supporters have shown, not only this evening but on other occasions, that they are completely ignorant of the capital structure of a limited liability company. He knows that their view is rubbish. And the Chancellor knows that we know it, and he knows that we know that he knows it, too. Of course, hon. Members opposite do not know it. They think their views are sense, and they cannot know the interesting processes going on in the Chancellor's mind.
The right hon. Gentleman, of course, is as aware as any hon. Member of this House, that when a company is described as having a share capital of £100 divided into 100 £1 shares, that does not necessarily mean that its capital is valued at £100. He knows perfectly well that at least 75 per cent. of his own supporters will suppose that if a bonus is issued by that company of one for one, the capital of the company is mysteriously increased to £200 and that every shareholder will receive a present of £2 each. He therefore carefully frames his speeches so that they make some kind of economic sense, as inspired and briefed by those who sit behind him and in places in this House where they can listen but not intervene. But at the same time he uses language which he knows will appeal to the lunatic fringe behind him. That is the object of these operations, and in the meantime he is exploiting their ignorance and prejudices to get a different objective. His real object in imposing this tax has nothing whatever to do with the alleged wickedness of bonus shares. He knows that that is all nonsense. That is introduced simply for the purpose of giving his hon. Friends their shot of dope. His real object is to drive companies into paying more profits tax by discouraging them from making bonus issues. That, I submit, is his only real object in introducing this tax. I should not have objected to it if only the Chancellor would have admitted that that is his real purpose and reason. What merely makes me feel rather sick is his attempt to get popularity by doing this, while secretly laughing at the ignorance of his supporters.
§ Mr. Douglas Jay
Having listened to hon. Members opposite I think that the muddle and the ignorance are rather on their side, and that is particularly so in the case of the lunatic speech to which we have just listened. But I want to deal with the real issue. There is the case of 1187 the company which issues a bonus share merely to misrepresent dividends it intends to pay, or to avoid the payment of Surtax. An hon. Member opposite issued a challenge to us to give such an example. I will answer that challenge by quoting the case of the British Electric Traction Company which used to do this regularly on a big scale. It was done, largely, to avoid payment of Surtax, and the fact was well-known in the City.
§ Mr. Pitman rose— —
§ Mr. Jay
There are all sorts of other examples. In the case where the Capital Issues Committee agrees to a bonus issue—an issue which is completely genuine—that, of course, is all right. The fact is, nevertheless—and this is a point to which hon. Members opposite should listen—that there is a capital payment made to the shareholder—[HON. MEMBERS— "No."] Hon. Members opposite know that that is so. A capital is made in this way, and the total value rises as a result of that issue. Although this may be a legitimate thing to do, then, it is also legitimate to impose a tax. There is just as much a case for taxing this as for taxing income and for demanding death duties.
§ Mr. Henry Strauss
I do not think anybody will accuse the hon. Member who has just resumed his seat of belonging to the "lunatic fringe" on the benches opposite. That is a defence of his intelligence at the expense of his can dour in his address to the House, but I would ask him where he imagines a company gets the money to give away to its shareholders—[Interruption.] Sometimes, hon. Members opposite, by their interruptions, defy parody. I would ask the Chancellor, if he has not forgotten all his economics since he left his university, to treat this serious matter seriously. I agree with the hon. Member who spoke of the importance of considering this Resolution together with the Resolution dealing with profits that which we dealt with some time ago.
He found that there was a contrast between the treatment of the ordinary shareholder interested in that former resolution and the treatment which he is receiving under the present resolution. But the two resolutions have this in common, that they are designed quite clearly to ensure that the ordinary shareholder in whatever way the company seeks to make 1188 any return to him is penalised. Now, I wonder what the right hon. Gentleman's philosophy is regarding the ordinary shareholder and the duty of companies. In an earlier speech this evening we heard from the hon. and learned Solicitor-General that the ordinary shareholder really contributes nothing but merely spends so much money, gets the shares, and thereafter nobody was interested in his enterprise. That description, I assume, so far as it has any relation to the facts at all, refers to existing companies. The first thing I want to put to the Chancellor of the Exchequer is that he must, I suppose, realise that one day a new company may be created in this country, and he desires that to happen. I imagine that in his more serious moments, which I think must be very common at the Treasury, however much they have to be disguised on the Treasury Bench, he desires that a new company when created shall have such a success as Courtaulds have had, the Company mentioned by my hon. Friend the Member for Chippenham (Mr. Eccles). Does the Chancellor really desire that never in the future shall a company be able to build up its business in the way that the business of Courtaulds has been built up? I ask for an answer to that question.
It is quite clear that if the two Resolutions I have mentioned had been embodied in legislation at the time, the progress of Courtaulds as we have known it would have been absolutely impossible. I do not think that the right hon. Gentleman desires that for a moment. Does he really either desire that nothing like that should happen in the future or wish to make it impossible? On a former resolution there was a very illuminating observation made by the Communist Party behind the right hon. Gentleman. The Communist Party said: "supposing profits instead of being distributed were ploughed back, then the shareholders would in due course demand more." That was quite obviously true. Apparently the Communist Party are of the opinion that the one thing that is quite intolerable is that the shareholder should ever get a return for his money. Any return is prima facie wrong. If it is given in the form of dividends the right hon. Gentleman says that it ought to have been ploughed back. Whether it is always to be ploughed back, asked in a very relevant intervention by the right hon. Gentle- 1189 man the Senior Burgess for Oxford University (Sir Arthur Salter), has not been answered today. Well, that was the theory, that profits must never be distributed, that they must be ploughed back. Now we are told that they must not be capitalised and given to the shareholders in capitalised form. Surely when any new company is formed the shareholders when invited to subscribe to the company ought, to know what they can expect. Can they assume that the philosophy now prevailing on the Treasury Bench is going to be embodied in legislation?
I think that these two Resolutions taken together are so clearly unjustifiable, so clearly indefensible by reason, but so utterly discouraging to ordinary equity shareholders, that the object may be further to boost the gilt-edged market by showing that nothing could be more dangerous than to risk any money in ordinary shares. That at least would give a reason, though not a good reason, for the action the right hon. Gentleman has taken. There is one other argument the right hon. 'Gentleman has given in his budget speech: that there might be some justification for dealing with ordinary shareholders in this manner because they have hitherto suffered less than the holders of fixed interest bearing bonds. The fallacy of that argument is that the normal investor is both a holder of ordinary shares and of fixed interest bearing securities and the fallacy becomes more obvious when one remembers the arguments the Chancellor used on an earlier occasion.
I remember on one of the nationalisation Bills when the right hon. Gentleman was challenged about the unfairness of compensating a bondholder deprived of the securities he has hitherto held with government stock bearing a low rate of interest, the Chancellor said—I am not quoting his exact words but I think I am being quite fair to him—that what was given him would have the same capital value and if he needed more income he could sell it and buy equities. The Chancellor then clearly recognised that equities were entitled to a greater distribution because of the risk they bore than would be earned on fixed interest bearing securities and also recognised clearly that the typical investor is both a holder of equity shares and a holder of fixed interest bearing securities. But for the future, in the interests of the expansion of our trade 1190 and the capture of external markets, I think the right hon. Gentleman is bound to need new enterprise. He wants the public to participate in that enterprise. He wants the public to subscribe for ordinary shares and stocks. Why on earth should the public do this unless they have some opportunity of receiving a return which the Chancellor thinks right. What is the rate the Chancellor thinks right? Is a company only behaving well when it ploughs back everything and never gives anything to the shareholders, and if that is not his argument, will he explain why when anything is given to the ordinary shareholders, either in the way of dividend or bonus issue, he thinks it proper to subject it to exceptional taxation?
§ Mr. Pritt (Hammersmith, North)
I do not want to consider what the hon. and learned Member has said, because he repeated the speeches of seven or eight other people, but I would deal with some of the observations of the hon. Member for Oxford (Mr. Hogg). He spat out some observations about the "lunatic fringe" behind the Chancellor. If the hon. Member had another ten years' training he could become quite abusive. He spoke of hon. Members on this side of the House in terms of withering contempt that I have heard before, and heard very often, in the descriptions given by company promoters of their own shareholders and victims. I would just remind the hon. Member for Oxford of what this "lunatic fringe" consists. It consists almost entirely of people who did not have the advantage of rich fathers. It consists of people who through long years of hard work in local government and various unadvertised jobs have trained themselves into becoming good politicians. It consists, as I know from my own personal experience of them, of people who understand economics very much better than do most hon. Members opposite. Finally, it consists exclusively of people who kicked out of Parliament at the last Election people like the hon. Member for Oxford.
§ Mr. Norman Bower (Harrow, West)
May I give one short example in answer to the hon. Member for North Battersea (Mr. Jay)? I submit to the Chancellor that this tax is being levied on the wrong basis, as has been pointed out by the hon. Member for Chippenham (Mr. Eccles). 1191 The hon. Member for North Battersea said that, when bonus issue shares are made, the shareholder gets a capital benefit. In most cases, I do not believe that he does, but it is possible that he may. Supposing, for example, a shareholder in a company has 100 shares worth £2 each; he then gets, by way of a bonus issue, another 100 shares for nothing. Normally, in a case like that, the price after issue will be £1, so that he will have 200 shares of £1 each, and, if so, he will get no benefit at all. It is possible, if the market happens to be good, that the after-issue price will be 25s., in which case the real capital profit of that shareholder will be 5s. on 200 shares; in other words, a capital profit of £50. I submit that it is on that basis that the tax should be levied, whereas, as I understand it, the tax is really being levied on the basis that the shareholder is making a profit of 25s. on 100 shares, or £125, which he is not making at all, but only £50.
§ Mr. Dalton
We have had a number of very lively speeches and many subtle points, including some very subtle suspicions. I think that some hon. Members did me altogether too much credit in attributing obscure motives for this proposal. Perhaps I may begin by answering the broad points raised, but, before I do so, I would say that the hon. Member for Bath (Mr. Pitman) surely exaggerated very much when he said that a tax of this kind would destroy the very lifeblood—that was his phrase—of British industry and commerce. Surely, that is fantastic over-emphasis?
§ Mr. Pitman
I was referring to the registration of companies, not in London, but elsewhere. It was only in regard to this development and its effect upon a large and important part of London's commercial life.
§ Mr. Dalton
But what we are actually talking about is a proposal to have a tax of 10 per cent. on certain classes of bonus issues, and I do not for a moment believe that that is going to lead to an enormous movement of that kind. They need not be made at all. Commerce would not be disadvantaged, in any serious or real way, if never again were a single bonus issue made in this country. This business of issuing bonus shares, of which I will say something more in a moment, has no bearing whatever on the profits earned by a 1192 company. All that it has a bearing upon, is the nominal capitalisation of a company. Therefore, it does not directly affect production energies in any way at all. What I am desirous of arguing—and it is a perfectly serious argument—is that British industry and commerce would not seriously suffer if never again were a bonus issue made in this country.
Reference has been made to Courtaulds. I myself paid a tribute to that particular concern on a previous occasion. In the course of my Budget speech, in connection with the changes in the Budget, I paid a tribute to the rayon industry generally. I have not all the facts before me, but I fully accept the fact that what Courtaulds issued were bonus element issues, not straight bonus issues, as one means of raising money on existing shares. But I do not believe that Courtaulds' success was entirely due to that. Mr. Samuel Courtauld and the other people associated with him were intelligent and far-sighted men, and they would have made just as great a success as they did through their bonus issues, if new issues had been put on the market in the ordinary way. The bonus element method is an alternative method of collecting new money for business, and, in my opinion, a method very often open to objection, and, to that extent, a proper object for taxation.
The hon. Member for Flint (Mr. Birch) and other hon. Members made the point that the objection to the mode of taxation proposed on the bonus element, was that we did not know beforehand what would be the market value of the shares after they had been augmented in number by the new issues. That is quite true, but it would surely be much worse if the tax was based upon the difference between the price paid by the recipient of the share and the value before the bonus issue was made. That would yield me a larger revenue; it would yield a revenue which would be based upon a previously ascertainable statistic. But I am sure that the hon. Member for Flint would not advocate that that should be substituted for the method that I propose, and, if he does not propose that, I do not see any third alternative. If, when we reach the Committee stage of the Finance Bill, he were to propose that I should look at it again—as I have often agreed to do in other matters—I would certainly look into it sympathetically, because it would give me 1193 more revenue. But I do not think that would be an improvement.
With regard to the suggestion which the hon. Member for Sutton Coldfield (Sir J. Mellor) made, and to which I believe other hon. Members have referred, that there is some conflict, or contradiction, between what I am proposing and what was proposed in regard to the Profits Tax, surely there is some confusion? The bonus issue does not distribute profits at the time when the new scrip is distributed. It is merely an arrangement for the recapitalisation of the company, and, in the case of the bonus element, though not of the bonus issue proper, it brings in a certain amount of new money, though, I think, in a manner which is not, generally speaking, the best, or the most clearly understood by the people. I do not think there is any conflict between that approach to bonus issues and the desire which I expressed in support of Profits Tax, that some encouragement should be given for ploughing back profits into the business rather than their distribution in dividends.
§ 12.30 a.m.
§ Sir J. Mellor
May I explain? The capitalisation of reserves ensures their permanent retention in a business, whereas if they are not capitalised they can always be paid out in dividends. Therefore, it seems to me to run counter to the Chancellor's desire to see profits ploughed back permanently if he imposes this 10 per cent. tax.
§ Mr. Dalton
I do not see that, when making a bonus issue, one can predetermine what will be the total distribution of profits in the future. It may be that a company will think, if the concern is doing well, that in the next year they will make an increased distribution of profits, and the increased distribution of profits on a larger capitalisation might, of course, yield the same rate of dividend. Alternatively, it might be possible that within the next year they would pay out so much more because they thought they had so much more profit, due to the success of the business, that they would be paying out at a higher rate of dividend than before the bonus issue. The two things seem to me to be quite separate, and to depend upon the decision of the directors of the company. Therefore, I merely desire to rebut the suggestion that there is any inherent contradiction between my advocacy of this tax and my advocacy of the Profits Tax.
§ Mr. Henry Strauss
Would not the example which the right hon. Gentleman has just given us be a definite and final capitalisation of past profits?
§ Mr. Dalton
No. If we seek to study the matter in its simplest form, in the case of a bonus issue, what is happening, surely, is this. Profits are not distributed. What are distributed are scrip, shares. They are distributed either for nothing, in the case of the bonus issue proper—I do not think it is right to describe it as gratuitous, because that implies something which is given for no return—
§ Mr. Assheton
Why I said it was gratuitous was because it is not a gift to the shareholders. They are in exactly the same position as they were before. The orange is cut into smaller slices. The shareholders are in the same position. Instead of holding 100 shares, they hold 200 shares in exactly the same proportion.
§ Mr. Pitman
May I give the Chancellor the answer? The real answer is that the units become more manageable. By ploughing back, one gets, say, ten times the capitalisation with £100 shares, and, as there are few people who can spend £1,000, it is a good thing to make it a more manageable and more marketable unit.
§ Mr. Dalton
It is a technical point which has some substance, but I do not think it is a major point. The major point, surely, is, as my hon. Friend the Member for North Battersea (Mr. Jay) said, that after distribution, the holding of the individual shareholder is worth more in the market than it was before. In the vast majority of cases it will be so, surely? This is simple arithmetic, which can be checked up by anybody.
§ Colonel Crosthwaite-Eyre
Could the Chancellor, in support of that argument—which I think is quite insupportable—give a few examples of where that has happened?
§ Mr. Pitman
Might I put to the Chancellor this point, which I think, with respect, is more important? There is no difference between a technical improvement in the market, in some news connected, say, with the assaying of the ore in a particular mine, and the technical 1195 situation which arises from a decision to do a capitalisation of this kind. It shows the prospects of a company are good, and the price goes up because the prospects are good, not because, of the bonus issue. The bonus issue is the occasion, not the cause.
§ Mr. Dalton
I am obliged to the hon. Members for the guidance that they are giving to the line of discussion. I am anxious to follow the point raised, and to deal with the House frankly. When I said the hon. Member for Bath had raised a point which had some technical importance, I meant exactly what I said; but I do not think it applies, by any means, to all these bonus issues. There are a great many bonus issues when the capital value of the shares is nothing like 10 times the nominal value. There are many cases where that is not so, and in those cases I do not think there is any real additional manageability—to use his word—arising. This technical advantage arises only in a minority of cases. I have not come here with a long list of cases. Indeed, one hon. Member said, very rightly, that he was sure I did not wish to pick out and name a whole series of companies to whose bonus issues I thought objection might be taken. I have not come prepared to indict particular concerns at all. However, it is certain that such cases will be found. I am quite confident that if particular cases are studied the net effect upon the value of the holdings of a particular shareholder of these issues will be that, in the aggregate, they are increased as a result of those bonus issues. I am confident that is so. That can be checked up. We can have an inquiry about it.
§ Mr. Dalton
It would not take very long to check it. I do not think there is any serious doubt about it. My submission is that in most cases, though not in all, the shareholder benefits in terms of the total market value of his holding. I think that can be checked. The hon. and gallant Member for Barkston Ash (Colonel Ropner) put to me a specific question, which I will answer right away. As I understood him, he asked: if after the date when this new tax takes effect, a bonus issue were made in a concern which had, at some previous date, writ- 1196 ten down the value of its shares, would such a bonus issue come to tax? The answer is, "Yes, we draw a dead line." We draw a line through the date when this begins to operate, namely, the date of the Budget Speech. Bonus issues subsequent to that will be subject. We do not go back into the past history of the concern; we merely look to what has happened after the date of the Budget Speech.
§ Colonel Ropner
What I am not quite sure about is whether, when a share re-valued at, say, £1, having been previously reduced to 10s., the revaluing bringing the share up to its old value is included in his term "bonus issue".
§ Mr. Dalton
I do not want to give a misleading answer. My impression is, that the answer I have given is quite correct. But I will check it up and let the hon. and gallant Member have a specific answer to the question as he has put it.
The general case is this. I do not want to make accusations against existing concerns, but if we go back into the i9th century, to days in respect of which most of the participants have since passed on, the early days of Britain's railways—this is not blaming any living person; far be it from me to do so—there is no doubt that there was a great deal of what everybody would now regard as watering of capital. There is no doubt that some of the very large number of companies. which, at that time, between them constituted the British railway system did issue new shares to their existing shareholders; in many cases they doubled their capitalisation. But there was not even any increase in the physical assets as represented by the permanent way, the rolling stock, the stations, restaurants and so on. None at all. They doubled the nominal value of their capital, and continued to pay out approximately the same sum of money in dividends, with the result that they appeared to be paying half the rate they were before.
I am trying to put this simply, in a way which may be understood, and without arousing undue passions, and so I hope it is not thought I am attacking a particular class of people. I said in my Budget speech that the result of operations such as that was to deceive the customers for the goods and services rendered and the employees who worked in those con- 1197 cerns, and to "head off"—I used the word deliberately—demands legitimately made for lower prices, on the part of the customers, for the services rendered, or better conditions of employment, by those who worked in the concerns. That was one of the arguments used by the railways in the last century when it was said by the railways, "Our operations are very expensive, and we are paying only a poor four per cent. "It was really double that, until they issued the additional shares. They said" We are very poorly off. We are struggling along. We have a very narrow margin for our shareholders. Therefore, we cannot afford cheaper railway travel, or cheaper freights, or pay more to our workers." That is, undoubtedly, an argument that was used, and the records will show it—the records of the debates between the railways and the general public, on the one hand, and the railways and the workers, on the other.
I deliberately take an event way back in history. But that is the kind of thing that may arise again now, particularly where we have a large monopolistic institution, where competition, by the very definition, has been largely done away with, where we have all the production of some important commodity in the hands of one or, perhaps, two of the leading, large concerns. The tendency of a monopoly, as we know, is to maximise its profits and they are able to do it better in the absence of competition. This is all very elementary, but. I was invited to give explanations. The tendency of monopolies—I do not wish hon. Members opposite to think I am speaking of nationalised public services—
§ Mr. Dalton
The Post Office is subject to continual pressure, which the Chancellor of the Exchequer has to resist in the interests of the Revenue, to render cheaper and cheaper services. In the case of the Post Office, again, we have a public monopoly. One of the arguments, indeed, for the socialisation of these institutions is that we are able to get the play of public opinion working on them in a way we cannot upon a private concern; and Members of Parliament become active, among others, in putting pressure on Ministers and the Administration in order, on the one hand, to reduce charges, and, on the other, to improve the con- 1198 ditions of employment of those concerns' employees. This is one of the arguments in favour of Socialism. I had not intended to produce it until I was challenged by the hon. and learned Member for Oxford—
§ 12.45 a.m.
§ Mr. Dalton
I have stated the broad, general case. As I said, these cases were objectionable, and that was why I said there was a prima facie case. By doubling capitalisation, without any corresponding change in the assets, companies can make it appear that they are less prosperous than they really are. Having doubled the nominal capital, and having made no increase whatever in their assets, they are able, thereby, to benefit shareholders and declare dividends only half of what they declared before, and use poverty as a defence against demands for better services, or for better conditions for their workpeople.
There are cases—and I mentioned these in my Budget speech—in which it can be shown that these transactions in particular circumstances are legitimate. But the Capital Issues Committee will now have a wider discretion to let them through, when they mean bonus issues proper, in which is represented no new money. In bonus issues proper, no new money is put up at all. Not an additional penny is put up by anyone to modernise plant or increase equipment. All that happens is that a number of pieces of paper are distributed among existing shareholders, who are then told that they hold a larger number of shares than they did before, in a company with which they were previously associated. No one can deny that that is a true statement of the facts. Even the Opposition is reduced to acquiescent silence.
§ Mr. Eccles
It is true that it is a gratuity, that no new money is put up. But money has previously been subscribed. Auditors will not allow the issue of this gratuitous bonus, unless there is something in the balance which has been acquired which can be capitalised. If you tried to do it without having accumulated a profit you would go to prison.
§ Mr. Dalton
None of us would wish the hon. Member to go to prison. I thought we had nearly reached agreement on the facts. In changing to a bonus issue proper, nothing is done to improve the physical equipment of the company, or the production efficiency, or the social value of the employment. It remains the same, except that there has been a distribution of pieces of paper which constitutes a financial rearrangement which has no counterpart in the world of real affairs.
§ Lord William Scott (Roxburgh and Selkirk)
Does the Chancellor suggest that Courtaulds' issues resulted in no increase in the production?
§ Mr. Dalton
The mere issue of bonus shares did nothing to increase it—that is, bonus issues proper. In the case of bonus issues proper, not one penny of new money is put up. No good purpose is served; there is purely a financial rearrangement. I do not believe that hon. Members opposite disagree with this part of the argument. Bonus issues proper do nothing but bring about certain financial rearrangements. On the other hand, there is the other type of bonuses, where you acquire some new money, though less than the equivalent of the value of the share. It was generally these that Courtaulds issued. It was not so much the bonus element under which existing shareholders were required to pay something, for shares which were worth a great deal more than they had paid for them. The new money collected was, no doubt, put by them to new uses. My submission is that this new money could have been got by a straightforward issue in the market, and not by an ambiguous method such as the bonus issue.
I do hope that the Opposition acquit me of a desire, as has been suggested, merely to put forward a plan which has no real argument behind it. The argument is not nonsense. There is a general suspicion, which we are entitled to entertain, that these things have a deceptive effect in the minds of the public, and, for that reason, as well as for others, this is a suitable object for taxation. That is especially so at a time when we are looking about for sources of revenue. At a time when, on the one hand, we are anxious to give certain reliefs, what hon. Member is going to say it would have been better had I not increased the child allowance in order to refrain from imposing a 1200 tax on bonus shares? Is it not really better that I should have put a tax on bonus shares if that is one way in which we can get relief for the families of the income tax payers? There is no reason for this tax to bring me any revenue at all, for there is no need for any bonus issue to be made. If one is made, then there should be this entrance fee payable to the Treasury. This is a case which is rational. There may be a rational counterargument on the other side. I have not heard it. I am sorry that the accusation is made that the argument from this side has not been rational nor sincere, but I assure the House that there is every sincerity, and I assure the House that this measure is one which, at this time, we consider necessary and fair.
§ Mr. Stanley
I am glad to think that we shall have many more opportunities of discussing this most interesting topic and, therefore, I do not propose to say very much. We have listened to a typical speech from the Chancellor. Some people may have believed the case he made out. If so, I can only use the words used by the Prime Minister at Question time this afternoon—words which, incidentally, were used by the Duke of Wellington a good deal earlier—that "If they believe that, they will believe anything." But I am not going tonight over the technical financial arguments used on one side or the other. I do not, for instance, pretend to the great economic knowledge displayed by the hon. and learned Member for North Hammersmith (Mr. Pritt) in a speech in which I think we all felt that he had finally paid his passage home. I have even heard rumours, which I believe to be true, that the hon. and learned Gentleman is to be accepted back in the fold.
§ Mr. Stanley
Well, I accept that rebuke. When a suggestion was made, so prejudicial to the party opposite—that the hon. and learned Gentleman was going to return to their ranks—I should, perhaps, have been a little suspicious. As I say, I would leave the more technical aspects of this Resolution and put to the House our dilemma, which to a simple person like myself does need some resolving. The Chancellor has spent the whole of his time this evening in telling us, in one 1201 way or another, how wholly undesirable bonus share issues are, whether they are, as he calls them, gratuitous or whether they have some element of new issue. If they are so wholly undesirable, why did they suddenly become desirable provided they contribute to the Exchequer? We are told that, in one way or another, they contribute to the deception of the worker, to the deception of the consumer, to the deception even of the right hon. Gentleman. But we are told that it does not matter if the worker is deceived, if the consumer is deceived, or even if the right hon. Gentleman is deceived, so long as they pay 10 per cent. for the privilege of doing so. I was brought up on the principle that there was such a thing as right, and such a thing as wrong and that the two things were always different. This new morality preached by the Chancellor of the Exchequer, that something which is wrong can easily become right at 10
§ per cent., is one that I must confess I have not yet been able to assimilate.
§ No doubt, between now and the further stages of these proposals, we shall discuss this Measure, and we simple souls on these benches shall see whether we can adapt ourselves to this new morality which is being preached. Seriously, we shall take another opportunity of challenging the whole case which the Chancellor has put up against bonus issues. We shall press for an explanation of how it is that, if he really believes his own case, if he really believes what he has been saying tonight, about bonus issues, he can possibly consent to a bonus issue on any terms, even one contributing 10 per cent. to the Treasury.
§ Question put, "That this House cloth agree with the Committee in the said Resolution."
§ The House divided: Ayes, 181; Noes, 75.1203
|Division No. 141.]||AYES.||[12.57 a.m.|
|Adams, W. T. (Hammersmith, South)||Griffiths, W. D. (Moss Side)||Morgan, Dr. H. B.|
|Alexander, Rt. Hon. A. V.||Hale, Leslie||Morley, R.|
|Alpass, J H.||Hall, W. G.||Morris, P. (Swansea, W.)|
|Anderson, A. (Motherwell)||Hannan, W. (MaryhiII)||Nally, W.|
|Austin, H. Lewis||Hardy, E. A.||Neal, H. (Clayoross)|
|Baird, J.||Henderson, A. (Kingswinford)||Nicholls, H. R. (Stratford)|
|Barnes, Rt. Hon. A. J.||Henderson, Joseph (Ardwick)||Paget, R. T.|
|Barton, C.||Hobson, C. R.||Paling, Will T. (Dewsbury)|
|Bechervaise, A. E.||Holman, P.||Palmer, A. M. F.|
|Beswiok, F.||Holmes, H. E. (Hemsworth)||Pargiter, G. A.|
|Bing, G. H. C.||House, G||Paton, Mrs. F. (Rushcliffe)|
|Binns, J.||Hoy, J.||Paton, J. (Norwich)|
|Blyton, W. R.||Hughes, Hector (Aberdeen, N.)||Pearson, A.|
|Boardman, H.||Hughes, H. D. (Wolverh'pton, W.)||Piratin, P|
|Braddock, Mrs. E. M. (L'pl, Exeh'ge)||Hynd. H. (Hackney, C.)||Platts-Mills, J. F. E.|
|Braddock, T. (Mitcham)||Hynd, J. B. (Altercliffe)||Porter, E (Warrington)|
|Bramall, E. A.||Irving, W. J||Porter, G. (Leeds)|
|Brown, George (Belper)||Janner, B.||Price, M. Philips|
|Brown, T. J. (Ince)||Jay, D. P. T.||Pritt, D. N.|
|Burke, W. A.||Jeger, G. (Winchester)||Proctor, W. T.|
|Butler, H. W. (Hackney, S.)||Jeger, Dr. S. W. (St. Pancras, S.E.)||Pryde, D. J.|
|Callaghan, James||Jones, J. H (Bolton)||Pursey, Cmdr. H.|
|Carmichael, James||Jones, P. Asterley (Hitchin)||Randall, H. E.|
|Champion, A. J.||Keenan, W.||Ranger, J.|
|Collindridge, F.||Kenyon, C.||Rankin, J.|
|Comyns, Dr. L.||King, E. M.||Reid, T. (Swindon)|
|Corbel, Mrs. F. K (Camb'well, N.W.)||Kinghorn, Sqn.-Ldr. E.||Rhodes, H.|
|Crawley, A.||Kinley, J.||Ridealgh, Mrs. M.|
|Daines, P.||Lang, G.||Roberts, Goronwy (Caernarvonshire)|
|Dalton, Rt. Hon. H.||Lee, F. (Hulme)||Rogers, G. H. R.|
|Davies, Ernest (Enfield)||Lee, Miss J. (Cannock)||Ross, William (Kilmarnock)|
|Deer, G.||Leonard, W.||Royle, C.|
|Delargy, H. J.||Lever, N. H.||Sargood, R|
|Dodds, N. N.||Lewis, A. W J. (Upton)||Scollan, T.|
|Driberg, T. E. N.||Licton, Lt.-Col. M.||Shackleton, E. A A.|
|Dumpleton, C. W.||Longden, F.||Sharp, Granville|
|Ede, Rt. Hon. J. C.||McAllister, G.||Shawcross, C. N. (Widnes)|
|Evans, S. N. (Wednesbury)||Mack, J. D.||Shurmer, P.|
|Fairhurst, F.||McKay, J. (Wallsend)||Silverman, J. (Erdington)|
|Fletcher, E. G. M. (Islington, E.)||Mackay, R. W. G. (Hull, N.W.)||Skeffington, A. M.|
|Fcot, M. M.||McKinlay, A. S.||Skinnard, F. W.|
|Foster, W. (Wigan)||McLeavy, F.||Smith, S. H. (Hull, S.W.)|
|Gaitskell, H. T. N.||MacMillan, M. K. (Western Isies)||Snow, Capt. J. W.|
|Gibson, C. W.||Mallalieu, J. P. W.||Soskice, Maj. Sir F|
|Gilzean, A.||Mann, Mrs. J.||Steele, T.|
|Goodrich, H. E.||Middleton, Mrs. L.||Strauss, G. R. (Lambeth, N.)|
|Gordon-Walker, P. C.||Mikardo, Ian||Stross, Dr. B.|
|Greenwood, A. W. J. (Heywoed)||Mitchison, G. R.||Stubbs, A. E.|
|Griffiths, D. (Rother Valley)||Monslow, W.||Swingler, S.|
|Symonds, A. L.||Wallace, H. W. (Walthamstow, E.)||Williams, D. J. (Neath)|
|Taylor, H. B. (Mansfield)||Watkins, T. E.||Williams, J. L. (Kelvingrove)|
|Taylor, R. J. (Morpeth)||Weitzman, D.||Williams, W. R. (Heston)|
|Taylor, Dr. S. (Barnet)||Wells, P L (Faversham)||Wills, Mrs. E. A.|
|Thomas, I. O. (Wrekin)||Wells, W. T. (Walsall)||Wise, Major F. J.|
|Thorneycroft, Harry (Clayton)||West, D. G.||Woodburn, A.|
|Thurtle, E.||White, H. (Derbyshire, N.E.)||Wyatt, W.|
|Timmons, J.||Whiteley, Rt. Hon. W.||Yates, V. F.|
|Tolley, L.||Wigg, Col. G. E.||Younger, Hon. Kenneth|
|Vernon, Maj. W. F.||Wilkes, L.||TELLERS FOR THE AYES|
|Walkden, E.||Willey, F. T. (Sunderland)||Mr. Michael Stewart and|
|Wallace, G. D. (Chislehurst)||Willey, O. G. (Cleveland)||Mr. Simmonds.|
|Agnew, Cmdr. P. G.||Fyfe, Rt. Hon. Sir D. P. M.||Prior-Palmer, Brig. O|
|Assheton, Rt. Hon. R||Galbraith, Cmdr. T. D.||Roberts, Maj. P. G. (Ecclesall)|
|Baldwin, A. E||Gomme-Duncan, Col. A||Robinson, Wing-Comdr. Roland|
|Barlow, Sir J||Grimston, R. V.||Ropner, Col. L.|
|Birch, Nigel||Head, Brig. A. H.||Ross, Sir R. D. (Londonderry)|
|Hinchingbrooke, Viscount||Scott, Lord W.|
|Bower, N.||Hogg, Hon. Q.||Smith, E. P. (Ashford)|
|Buchan-Hepburn, P. G. T.||Hollis, M. C.||Spence, H. R.|
|Bullock, Capt. M.||Hope, Lord J.||Stanley, Rt. Hon. O.|
|Carson, E.||Howard, Hon. A||Stoddart-Scott, Col. M.|
|Channon, H.||Keeling, E. H.||Strauss, H. G. (English Universities)|
|Clarke, Col., R. S.||Lambert, Hon G.||Stuart, Rt. Hon. J. (Moray)|
|Clifton-Brown, Lt.-Col. G.||Lancaster, Col. C. G||Taylor, C. S. (Eastbourne)|
|Conant, Maj. R. J. E.||Lucas, Major Sir J.||Thomas, J. P. L. (Hereford)|
|Corbett, Lieut.-Col. U. (Ludlow)||Lucas-Tooth, Sir H.||Thorp, Lt.-Col. R. A. F.|
|Crookshank, Capt. Rt. Hon. H. F. C.||Macdonald, Sir P. (I. of Wight)||Vane, W. M. F.|
|Crosthwaite-Eyre, Col. O. E.||Mackeson, Brig. H. R.||Wadsworth, G.|
|Cuthbert, W. N.||Maitland, Comdr. J. W.||Wheatley, Colonel M. J|
|De la Bère, R.||Marshall, D. (Bodmin)||Williams, C. (Torquay)|
|Dodds-Parker, A. D||Medlicott, F.||Willoughby de Eresby, Lord|
|Drayson, G. B.||Mellor, Sir J.||York, C.|
|Drewe, C.||Morrison, Maj. J. G. (Salisbury)||Young, Sir A. S. L. (Partick)|
|Eccles, D. M.||Neven-Spence, Sir B.|
|Fletcher, W. (Bury)||Noble, Comdr. A. H. P||TELLERS FOR THE NOES:|
|Foster, J. C. (Northwich)||Pickthorn, K||Mr. Studholme and|
|Fox, Sir G.||Pitman, I. J.||Major Ramsay.|
|Fraser, H. C. P. (Stone)||Poole, O. B. S. (Oswestry)|
Question put, and agreed to.