HC Deb 29 April 1947 vol 436 cc1801-16
Sir D. Maxwell Fyfe

I beg to move, in page 133, line 28, at the end, to insert: Provided that where, by virtue of a Road Haulage Organisation control agreement the whole or any part of an undertaking was under the control of -the Minister during any part of the year, nineteen hundred and forty-six, such undertaking may elect to bring into average any three financial years falling wholly within the period between the first day of January, nineteen hundred and thirty-eight, and the date on which the undertaking vests in the Commission. We now come to the Ninth Schedule which, as hon. and right hon. Gentlemen will be aware, is another of these undiscussed matters which now come before hon. and right hon. Members for the first time. The Committee will, therefore, bear with me if I put the short points which I suggest would make for equity with regard to the compensation for road hauliers. It might be convenient, Sir Charles, if we discussed the point raised by this Amendment with the next Amendment—in line 35, at the end, to insert: Provided that, if the transferor so elects, the three financial years shall be adjusted on a day to day basis, so that the trading profit immediately before the date of transfer shall be brought into average. —as they are cognate matters. The first point I have to put to the Committee concerns the selection of the years on which the average net profits will be based, and the suggestion in my Amendment is that the undertaking may elect to bring into average any three financial years falling wholly within the period 1st January, 1938, and the date on which the undertaking vests in the Commission. At the present moment there is, as I see it, a real difficulty with regard to undertakings which were controlled previously by the Ministry of War Transport through the wartime Road Haulage Organisation. The last three financial years suggested in the Schedule will include part of the control period and, as the right hon. Gentleman and his hon. Friend will appreciate, the profits of the control period were themselves based on the average profit of two years falling wholly between 1st January, 1935, and 31st March, 1939. Therefore, on this basis, if one takes into account the period of control, one is really going back some 15 years in order to get any of the years that are relevant—that is, if I have the scheme correctly; once you take the control years, then you are thrown back automatically to the years between 1935 and 1939.

I suggest to the right hon. Gentleman that the proposal is not an unreasonable one, that one should allow an election of any of the three years which fall between 1938 and the time of acquisition. I would remind the right hon. Gentleman that we have already made clear—I am afraid, emphatically clear—our views as to the adequacy of this compensation; that we think the multiplier which the right hon. Gentleman has put forward in his Bill is wrong. We have argued that point and been defeated on it but, after all, this is a comparatively small suggestion of alleviation, that the years which are suggested shall be at the election of the person who is to be expropriated and shall fall within a period between 1938 and the period of acquisition. I do not want to reiterate points made already, but I should remind the Committee of the fact, which is undeniable, that those people with whom we are dealing here are to lose their business and their livelihood. That, we are all agreed upon and, therefore, this is a very minor second line of alleviation which we are suggesting, and I put it forward in that way, without any elaboration, as a suggestion which would go some way—nothing like the whole way—to let these people feel that they are having their own points of view fairly considered.

The second point which I have suggested, that we might discuss, is an even smaller point, but again it helps. I am suggesting that it ought to be possible to go on a day-to-day basis. The first suggestion in the Schedule—again I hope the Parliamentary Secretary will check me if I have it wrong, but I do not think I have—is that one should be conditioned by the accounting period on which the business has been running up to now; that is, if the accounting period ends on a certain day, that will mark the one terminus of the period of three years which they can choose. I suggest that that should be allowed to go on from day to day so that if, for example, it is a business whose accounting period ends on 31st March and it is taken over on 1st February, if it is on a rising line of business—that is, if its profits are improving—the owner should have the right to elect and say, "I will take it on a day-to-day basis up to the day when I am acquired." I am quite frank with the Committee; I am asking for the selection so that, if it were the other way, he could make a different selection of the years. I am saying frankly that, in view of the position in which the road hauliers find themselves, they should be given such minor improvements of their position as will not seriously or largely affect the amount of compensation, but will at any rate free them from the feeling that they have not only had the major difficulty of losing their business, but they have also been subjected to minor injustices. I ask the Parliamentary Secretary and the Committee to join me in removing these minor injustices, which will be removed if the two methods of election which suggest are adopted. I do not think is a point which I need elaborate, or detain the Committee about for any long time. I ask that whatever their political views, they should view this with clear vision and without any previous antipathies, this light improvement in the road haulier's position.

7.30 p.m.

Mr. G. R. Strauss

The right hon. and learned Gentleman has made suggestions for altering the compensation for road hauliers—in one case making a rather substantial alteration from the proposal in the Bill, and, in the second place, a smaller alteration. Neither alteration is reasonable. The first Amendment suggests that the road haulier, instead of being taken over on the basis of the three years prior of transfer, should have the option of taking any three years he likes since 1st January, 1938, as the basis for the calculation of goodwill. Such an option is not really reasonable. I have never heard of any transaction where one party is given an option of picking out the three best years from 10 years as the basis of calculation of the price of transfer. It is not reasonable to give the haulier such an option. Three years prior to transfer is the proper basis on which the calculation should be made.

Sir D. Maxwell Fyfe

The hon. Gentleman will appreciate that I am only asking that where, by virtue of a Road Haulage Organisation control agreement the whole or any part of an undertaking was under the control of the Minister during any part of the year, Such undertaking may elect to bring in these years. It is limited.

Mr. Strauss

I agree, but even so, it would be very hard to justify the proposition that a haulier should have the option of picking out the best three years in the last 10 years, and I cannot ask the Committee to accept the suggestion.

The second proposal is that where it is in the interests of the road haulier, the basis should not be on the ordinary accounting period when the books of the haulier are made up, but that the accounts should be made up on a day to day basis, and for this purpose, ending on the day prior to the transfer. There are strong practical reasons for not accepting that proposal. If the accounts acre made up from year to year, we know where we are. Usually the date is 31st December, and sometimes 5th April, but if the haulier thinks in the middle of the year that it might be to his advantage, as he has done rather better in the first half of that year than previously, to have his accounts made up to 1st June, and a new set of accounts made up, it would be of great inconvenience to everyone concerned, and there might be delay. If the accounts are to be made up at a later date, when the transferor thinks it to his advantage, there should in fairness be an alteration in the opposite direction. The proposal can he of little benefit to the road haulier, but it would be of great inconvenience to make up special sets of accounts on a special day prior to the transfer. A great deal of unnecessary work would be involved. From the practical point of view it is asking for something which is unreasonable, and which would be of small advantage to the haulier. I much regret that we cannot accept either of the Amendments.

Mr. Hollis (Devizes)

I think the Parliamentary Secretary and the Minister will have overlooked two points. It is true that there is something not normal in taking the three preceding years,, but those years are put in for special reasons. The current year is likely to be an extremely disadvantageous one, because, owing to the recent fuel shortage, firms have been prevented from extending their business as they would have extended in normal times, and their profits are likely to be abnormally small, whereas the two preceding years were not real years at all from the point of view of the working companies, as the profit was calculated by what happened not in those years, but in the 15 years before. That in itself makes the calculation extremely unreal, and also unfair. because there has been a very large change in the value of money between that distant day and the present time. These unfortunate people are going to be compensated for profits they made at a time when the had an entirely different purchasing power. I ask the right hon. Gentleman again to consider the Amendments, and to see if he cannot meet this injustice, by accepting one or other, or, better still, accepting both.

Mr. Renton

The Parliamentary Secretary's reply was very largely based on his belief that it was unreasonable that the transferor should be given some choice in the matter. Not only is it not unreasonable, but there is nothing original or new in the idea of giving people choice in such matters. In regard to Income Tax and E.P.T., Parliament has frequently provided that people shall be able to choose the period that is to their benefit. This matter has been very justly administered by the Income Tax authorities in order to meet the exceptional cases where people might have had a little bad luck. Some flexibility has been introduced.

Mr. G. R. Strauss

But can the hon. Member suggest to me any comparable circumstances where an option has been given to choose any three years out of ten years?

Mr. Renton

It was not far off that when people were invited to choose standard years for E.P.T., at the beginning of the war. I do not know if any hon. Member can give the Parliamentary Secretary a more specific assurance than I can, merely from memory, but my memory was that one was allowed to choose any two years out of five somewhere between 1936 and 1941.

Mr. Alfred Edwards (Middlesbrough, East)

It was 1935, 1936 and 1937.

Mr. Renton

There is great flexibility when one is allowed, as a business or professional man, to choose the end of one's financial year. I know that the Solicitor-General will bear me out when I say that it is of great advantage to barristers of fluctuating income, especially in their early years, to be able to choose, for Income Tax purposes, the average of their three earliest and worst years. Then, at a later date when the average period has come to an end, they are able to say exactly at what date in each year they would like their financial year to begin. I suggest that there is in substance as great a choice already given there as that for which the right hon. rand learned Gentleman was asking. There is nothing

original in the Amendment, but only a repetition, applied to particular circumstances, of a principle which has already been accepted and which is frequently applied.

Mr. M. Philips Price (Forest of Dean)

I do not know whether the hon. Gentleman may have some good argument in respect of E.P.T., but with regard to Income Tax he certainly has no good argument at all. In the case of Income Tax it was possible to get out an average over the last three years in the case of an estate, where one did not come in under the one-sixth statutory allowance but wished to estimate the cost of the estate over a period. In that case one is given no choice at all but has to take the last previous three years. That is reasonable. If we allowed a principle of picking and choosing in order that we might estimate our liability for Income Tax I do not know where we should get to.

The Temporary-Chairman (Colonel Sir Charles MacAndrew)

We should probably get out of Order.

Mr. Price

Yes, Sir Charles. I only wished to point out that the principle which applies in the case I have cited should apply here too. One cannot pick and choose there, so one should not be allowed to pick and choose in this case either, in a matter of assessment of compensation.

Question put, "That those words be there inserted."

The Committee divided: Ayes. 126; Noes, 308.

Sir D. Maxwell Fyfe

I beg to move, in page 134, line 11, to leave out "nil," and to insert: a sum representing one-tenth of the value of the vehicles acquired by the Commission calculated in accordance with Subsection (1) of Section forty-eight of this Act, with the addition of a sum representing one twentieth of the value of other relevant property acquired by the Commission calculated in accordance with Subsection (2) or Section forty-eight of this Act and the aggregate of such sums shall be deemed to be the annual net profit of the undertaking. With your permission, Sir Charles, I will discuss together this Amendment and the following two Amendments, in page 134, lines 23 and 27, which are consequential. Hon. Members will find that paragraph 5 of the Ninth Schedule reads: The amount of the profits made in the said three years ascertained and adjusted as aforesaid, shall then be aggregated, and the amount of the losses made in the said three years, ascertained and adjusted as aforesaid, shall also be aggregated. If there are no profits to be aggregated, or the aggregate of the profits does not exceed the aggregate of the losses, the average net annual profit shall be taken to be nil. That is the position which I commend to the consideration of the Committee. One may well have a business where on that formula, the average of the net annual profit shall be taken to be nil because one is in the preparatory stages of the business, and as every hon. Member knows, in the preparatory stages of building up a business, one not only often has, but one expects, a period of loss. One has seen that constantly in the most admirable businesses which have turned out to be very successful. In the preparatory period one inevitably has to undertake expenses which make the possibility or the probability of a profit very small indeed. What we have heard so often during the past two days, especially when we were considering the question of railway compensation, has been that we must not look at the past, because in that case we would have a figure of earnings and of dividends paid far in excess of what was suggested in the compensation. The argument we have heard from the hon. Member for Enfield (Mr. Ernest Davies) and the Minister is that we must remember what are the prospects of the future and what is the chance of a net maintainable revenue for future years. I suggest that by and large, when you get a period in which there has been a loss over the three years which you are choosing, you will in many cases see that the loss is preparatory to building up a better business in the future.

Strictly, I agree at once that you ought in those circumstances to look forward and see what are your future possibilities, and if you are going to give anything, it ought to be based on future possibilities. I concede that at once. I think the Minister realises that I would not argue anything different. But, of course, as he has said, there are great difficulties in arriving at the accounts of the actual position and of estimates for the future, and in these matters one has sometimes to take a rough and ready rule simply because the labour of trying to arrive at a method on a logical basis would be too great. What I suggest, as a purely rough and ready rule in order to meet the circumstances which I have put before the Committee, is that one should add to the compensation for the vehicles 10 per cent. of the value of the vehicles and 5 per cent. of the value of any other property simply as an arbitrary figure to cover the cases I have put, and which, I suggest, will be the large majority of cases, where people have a prospect of future earnings, although they cannot base that prospect of future earnings on past results. Again, I put it forward to the Committee simply as an abbreviation. I remind the Committee in the fewest possible words that these people are losing personal businesses. It is not a question of merely losing an investment, but of losing a livelihood, and I therefore suggest that no harm will be done and it will be no injury to the Bill, if these finer difficulties are smoothed over in what I quite admit is bound to be an arbitrary way. If the Amendment which I am moving is adopted, there will have to be certain consequential results in subparagraph (3), and those consequences are contained in the following Amendments standing in my name.

8.0 p.m.

Mr. G. R. Strauss

The case put forward by the right hon. and learned Gentleman, as I understand it, is that there may be hauliers who are starting in business and have not made a profit, but who might make a profit if they were allowed to continue in existence. They have nothing on their records to show that they are going to make a profit, in fact they have made losses, but, nevertheless, because it is possible for them to make a profit in the future, they should be compensated in some way for goodwill, and a notional profits figure should be put down although they may have made a series of losses or an overall average loss. I appreciate that point, but I really do not think it is workable. We cannot possibly estimate the prospects of all these firms. All we can do is to go on the record of their past three years. If we are to try and base our compensation proposals on what their prospects may be, we shall be in appalling difficulties immediately. It may well be that firms which have made profits during the last three years have exceedingly bad prospects, and if we assess prospects properly we might find that they would probably make losses during the subse-quent three or five years. There is no reason to believe that a firm will make a profit in future just because it has made an average loss for the three years previous to transfer. It therefore seems to me to be wholly unrealistic to assume that every firm which has made a loss during the past three years will make a profit in future and should be compensated on some notional profit which, on its record, it has never made and which there is no reason to believe it ever will make.

So, while I appreciate the desire of the right hon. and learned Gentleman to meet this type of case, and there may be some cases of this sort, I do not see how it could possibly be done without altering the whole basis of compensation and saying that we shall not go on past records at all but will try and assess the future prospects of every firm in each case. As I say, there may be many firms whose records will show a profit but whose prospects for the future are such that they are unlikely to make any more profits, and to whom, therefore, nothing should be given by way of compensation for goodwill. The only reasonable way in which Parliament can proceed in this matter is to go on the ascertainable facts. In some cases it may be, as the right hon. and learned Gentleman says, rough and ready justice. One cannot help that, but I do not think it is so rough and ready. We see what their records have been for the past three years and decide what goodwill, if any, they should be paid according to their achievements during that period, and I suggest to the House that that is the only reasonable and practical way in which we can proceed in this matter.

Major Haughton (Antrim)

The Parliamentary Secretary has said that one of the reasons why he rejects this suggestion is that it is impossible to assess the earnings or losses of a company, but surely we have to be consistent about this. The argument used yesterday was that the railway companies, or their shareholders, could not be compensated on arbitration or any other basis because the net maintainable revenue could not be ascertained in advance. You cannot have it both ways. If that is to be an argument why the shareholders should not receive a certain value for their shares, it cannot be argued the other way, that it is impossible to assess what the losses will be of a newlyformed road company.

Mr. E. P. Smith (Ashford)

I feel that the Parliamentary Secretary is not adopting a very generous or even a very practical attitude over this matter. I am quite sure that he would be the first person to admit that there must be a seed-time before there is a harvest, and that seed-time is very often a time of loss. Nevertheless, the ground is ploughed and sowed, and labour and organisation are spent upon it, and I cannot help thinking that it would not be impossible, if the Government would undertake to try, to ascertain in individual cases what in point of fact has been done to establish a future harvest in the way of creating goodwill and preparing the ground for business. The Government, if they would, could give consideration to that in individual cases.

Mr. Hollis

It is most important that we should do justice so far as we can in paying compensation, but I would like to bring up again the point made by my right hon. Friend the Member for the City of London (Mr. Assheton) when we were talking about the larger "omnibus" Amendment. It is not merely a matter of compensation, it is also a matter of efficiency. A certain time has to elapse before the appointed day, and nothing could be more important to the country than that, during that time, those people who have still to manage the transport business of the country should have every motive for managing it efficiently, and should not feel that it does not matter whether they do their job properly or not. Also, as has been said, this happens to be a period when people are building up businesses, and a period, after the war, when it is important in the national interest that businesses should be built up. After a time, when this Bill comes back as an Act, these things will be managed by the State, but time is to elapse before they are to be managed by the State, and it is of the most vital importance in the interests of the Government and of the nation that those who will manage the industry until then should be given what encouragement they can, or at least they should not be unnecessarily discouraged from putting their backs into this work during the short time which must elapse before their businesses are taken from them. Therefore, it is for the reason that it is in the national interest even more than because it would be an act of kindness to these particular individuals that I strongly commend this Amendment to the Committee.

Amendment negatived.

Schedule agreed to.