Commons Sitting of 22 June 1948

Preamble
The House met at Half past Two o'Clock
PRAYERS
[Mr. SPEAKER in the Chair]
MESSAGE FROM THE KING

  PENSIONS (INCREASE) ORDER
  THE VICE-CHAMBERLAIN OF THE HOUSEHOLD (Mr. POPPLEWELL) reported His Majesty's Answer to the Address, as follows:
  I have received your Address praying that the Pensions (Increase) Act (Extension) Order, 1948, be made in the form of the draft laid before Parliament.
  I will comply with your request.

ORAL ANSWERS TO QUESTIONS
  EMPLOYMENT

    European Volunteer Workers
    Mr. Beswickasked the Minister of Labour the total number of European voluntary workers brought to this country to the last convenient date; the total number who have been placed in employment; and the total permitted to change from the industry into which they originally were placed.
    The Parliamentary Secretary to the Ministry of Labour (Mr. Ness Edwards): Up to 5th June, 60,856 European volunteer workers had been brought to this country, of which number some 57,000 had been placed in employment. Statistics are not available of the number given permission to leave their first employment, but it is very small.
    Mr. Beswick: I wonder whether, in view of the fact that these people were brought over in the first place to man essential industries, it would be possible to keep a sort of check upon their movement—if there is any movement—away from the particular industries?
    Mr. Ness Edwards: They cannot take alternative employment without the permission of my Department. I assure my hon. Friend that we are keeping a close eye on the matter.
    Mr. Ernest Davies: Can my right hon. Friend tell the House how many of these people have been returned to Europe as being unsuitable for employment?
    Mr. Ness Edwards: Without notice, I could not give the exact figure, but it would be very small.
    Mr. Swinglerasked the Minister of Labour how many European voluntary workers and how many Poles have taken up employment in the coalmining, textile and agricultural industries, respectively, in the first quarter of 1948.
    Mr. Ness Edwards: The numbers of European Volunteer Workers placed in coalmining are 5,979, textiles 1,956 and agriculture 6,329 during the first quarter of this year. The corresponding figures for Poles are 581, 993 and 259.
    Mr. Swinglerasked the Minister of Labour how many training centres have been established in this country for European voluntary workers; and what have been the total overhead costs to date.
    Mr. Ness Edwards: No training centres for European Volunteer Workers have been established; the second part of the Question does not therefore arise. There are six holding camps, where European volunteer workers recruited for employment in coalmining who have insufficent knowledge of English are given a six weeks' course in English.
    Mr. Swingler: Can the Minister say whether it is proposed to establish training centres with facilities for the training of these workers?
    Mr. Ness Edwards: As these men are recruited for specific industries, the training they receive is in the industries concerned.
    Mr. Beswick: How are these people recruited for specific industries, since I understand that on the Continent they are not allocated to particular industries?
    Mr. Ness Edwards: They are collected on the Continent for their physical fitness. They are asked to volunteer for one of three or four industries and they are sorted out in this country.
    Mr. Swingler: Surely the Minister will agree that many of these workers need training. Is it not proposed to develop some scheme in the future for training them?
    Mr. Ness Edwards: No, Sir. In the mining industry, for instance, the training centres are run by the industry itself. There has been no need to establish special training centres.

    Redistribution of Labour
    Mr. Swinglerasked the Minister of Labour whether, in view of the fact that the numbers of persons employed in local government service and in the clothing trades are still increasing whereas reductions in manpower in these occupations were forecast in the Economic Survey for 1948, and in view of the prospect that the reduction in manpower in the building trade will be smaller than was estimated at the beginning of the year, he proposes to take any new steps or initiate any new consultations with employers and trade union leaders in order to carry out his policy for the redeployment of labour.
    Mr. Ness Edwards: There is constant consultation with both sides of industry on the means to achieve such redistribution of lat our as is necessary to man up the undermanned essential industries. As an example, individual employers are being seen in the textile areas for the purpose of transferring suitable workers to cotton production.
    Mr. Swingler: Bearing in mind the development during the first four or five months of this year, is the Minister satisfied with the progress made in his policy? Is he satisfied that he will be able to reach the objectives set out in the Economic Survey?
    Mr. Ness Edwards: That is rather a different question, and I would like to see it on the Order Paper.

    Statistics
    Mr. Beswickasked the Minister of Labour how many of the total number of unemployed at the last convenient date had been unemployed for more than one month, three months and six months, respectively.
    Mr. Ness Edwards: These statistics are being collected for 14th June, but are
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    not yet available. As soon as they are, I will send them to my hon. Friend.
    Mr. Beswick: Will my right hon. Friend have the statistics circulated in the OFFICIAL REPORT?
    Mr. Ness Edwards: Yes, Sir.

    Manpower Targets
    Mr. Beswickasked the Minister of Labour whether, in view of the reported increase in the first quarter of the year of 5,000 employed in the coalmining industry as against the Economic Survey target of 32,000; of 8,000 actual increase in the agricultural industry, against the target of 55,000; and 14,000 in the textile industry, against a 108,000 target, he is satisfied that the targets will be reached by the end of 1948.
    Mr. Ness Edwards: Later figures are now available. In the first four months of this year the net increases were: in coalmining 6,000, in agriculture 20,000, and in textiles 18,000. The immediate effective demand for agricultural labour has in general been satisfied. In the coal-mining and textile industries a considerable increase in the rate of recruitment will be needed if the targets are to be attained. We are taking all possible steps to do so.
    Mr. Beswick: Can my right hon. Friend say anything about the steps he has taken? As recruitment for agriculture has now almost satisfied the demand, is my right hon. Friend still proposing to bring further people over from the Continent?
    Mr. Ness Edwards: We are bringing them now at the rate of 1,200 a week for mining and textiles.
    Mr. David Renton: Does the increase which the right hon. Gentleman has described for agriculture include European Volunteer Workers who have come in?
    Mr. Ness Edwards: Yes, Sir.

    Overseas Workers
    Mr. Osborneasked the Minister of Labour if he will suspend the policy of encouraging overseas workers to come to this country now that we have thousands of our own people unemployed, and in view of the danger of increased unemployment.
    Mr. Ness Edwards: No, Sir. Additional suitable workers from overseas are still required in a number of industries. I cannot accept the implication that unemployment is increasing. It is lower than at any time since last year.
    Mr. Osborne: Is the Minister satisfied that the trade union leaders have no objection to these men being brought over in view of the likelihood of increased unemployment as envisaged by the Minister of Health?
    Mr. Ness Edwards: In the industries for which we are recruiting foreign workers, we have the complete agreement and co-operation of the trade unions concerned.

    Polish Resettlement Corps
    Mr. Heathcoat Amoryasked the Minister of Labour what action is being taken to hasten the absorption of the 29,800 men still in the Polish Resettlement Corps into productive employment.
    Mr. Ness Edwards: We have placed 67,000 in jobs. The remaining members of the Corps are being systematically interviewed and offered suitable employment. If they unreasonably refuse to take it, they are discharged from the Corps. The rate of placing at the moment is 500–600 a week and it is hoped to increase this.
    Mr. Amory: Does not the right hon. Gentleman find it rather difficult to reconcile the existence of nearly 30,000 men without productive employment with the continuing shortage of manpower in the basic industries?
    Mr. Ness Edwards: No, Sir, having regard to the fact that in the Polish Resettlement Corps there is a substantial number of rather elderly men and a lot of disabled men. Very many have never had any training for heavy manual employment. On the whole, the scheme is now going well.
    Sir Ralph Glyn: Can the right hon. Gentleman say whether the wives of some of these men are to be brought back from East Africa soon in order to enable them to return to Poland.
    Mr. Ness Edwards: I understand that we have now almost finished that traffic and practically all have been brought back. I think the last shipload came last week.
    Mr. Collins: Can my right hon. Friend say if there is any duration of time for which these men are allowed to remain in the Polish Resettlement Corps?
    Mr. Ness Edwards: Certain pledges were given to the House at the time when we discussed the Bill relating to the matter. I think I may say that it is the Government's intention to wind up this Corps by the end of the year.
    Mr. Tolley: Can my right hon. Friend say how much longer these men will be allowed to remain in this country when they refuse to take any employment?
    Mr. Ness Edwards: If my hon. Friend reads the answer which I have given, he will see we are dealing with that matter.

    Agriculture (Labour Force)
    Mr. Goochasked the Minister of Labour what proportion of the 6,000 additional workers in agriculture, placed in employment during the four weeks ended 12th May, were of British nationality.
    Mr. Ness Edwards: The figure of 6,000, to which my hon. Friend refers, is not a figure of placings but represents the estimated net increase in the total labour force in agriculture during the month of April. I regret that it is not possible to say what proportion of entrants into agriculture in any period are of British nationality.
    Mr. Gooch: Does my right hon. Friend appreciate the desirability of increasing the British labour force on British farms, and, further, the great desirability of enabling many foreign workers to return to their homes?
    Mr. Ness Edwards: It is very desirable that we should have as many of our own people in agriculture as possible. I am grateful to the Union of Agricultural Workers for their assistance in this matter.
    Mr. Renton: Bearing in mind that about five Questions back the Parliamentary Secretary said that the increase in agriculture included European Volunteer Workers, will he say whether the increase which has taken place among these workers is regarded as a permanent increase or only a temporary one?
    Mr. Ness Edwards: We are hoping that the foreign workers who have been

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    recruited will settle permanently in this land and become a useful part of our rural population.

  SCOTLAND

    Municipal Houses (Rents)
    Mr. Gallacherasked the Secretary of State for Scotland whether he will take steps by legislation to prevent the heavy increases of rents to occupiers of municipal houses, now being imposed by many local authorities.
    The Secretary of State for Scotland (Mr. Woodburn): The fixing of rents is by statute entrusted to local authorities who, with their local knowledge, are best able to judge what rents are appropriate. I am not aware that local authorities are exercising their powers unreasonably, and I do not propose to interfere with the existing arrangements.
    Mr. Gallacher: In view of the fact that the Secretary of State for Scotland does not consider that there are increases in rents, will he take note of the fact that local authorities are doing this because they have a very considerable deficit on their housing finance, and that this deficit could be met if the Chancellor of the Exchequer would reduce the interest rates to local authorities? Will he as Secretary of State for Scotland take that up with the Chancellor and get something done?
    Mr. Woodburn: The country itself has a very serious deficit with other parts of the world, and it does not remove a deficit to pass it round from one person to another.
    Mr. Gallacher: In view of the pathetic answer of the Secretary of State for Scotland, I beg to give notice that I will raise this matter on the Motion for the Adjournment.

    Local Government Law (Committee)
    Mr. Prydeasked the Secretary of State for Scotland whether he is now in a position to make any statement as to the prospect of consolidating the local government statutes relating to Scotland.
    Mr. Woodburn: Yes, Sir. After consultation with the local authority associations I have decided to appoint a representative committee to review the whole
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    field of local government law in Scotland and to prepare the necessary measures for its revision and consolidation. The Committee will comprise representatives of the political parties, of the local authority associations, and of the Government Departments concerned. Mr. Matthew G. Fisher, K.C., has agreed to act as Chairman of the Committee, the constitution and terms of reference of which I shall with permission circulate in the OFFICIAL REPORT.
    Mr. Pryde: Is my right hon. Friend aware of the great satisfaction that this answer will give to local authorities in Scotland?

    House-building (Bricks)
    Commander Galbraithasked the Secretary of State for Scotland what effect on the cost of and time of erection of houses has resulted from the enforced use by Scottish builders of the 3-inch brick in place of the traditional 3½-inch brick.
    Mr. Woodburn: Before the war brick sizes in Scotland varied between 3-inch and 3½-inch and no one size could properly be called traditional. Brick makers are now concentrating on production of a smaller sized brick, but information is not yet available to show the effect of its use.
    Mr. McKinlay: Is my right hon. Friend aware that the adoption of the English 3-inch brick will necessitate 12 additional courses for an ordinary four-apartment house, which will involve extra cost? Can he explain how it is better for a bricklayer to lay 3-inch bricks instead of 3½-inch bricks when he has to lay extra courses?
    Mr. Woodburn: This has been carried out according to the advice of the union of the building trades. I take it that they believe it will be more effective to use the smaller brick, but experience has not yet been sufficient to test this out.
    Commander Galbraith: Surely the right hon. Gentleman considered this increased cost before he allowed the smaller bricks to be used?
    Mr. Woodburn: This was done during the war period. It was an agreement arrived at during the time of the Coalition Government, and I have no reason to doubt the wisdom of the decision.

    Film "The World is Rich" (Schools)
    Mr. Emrys Hughesasked the Secretary of State for Scotland what arrangements he is making for the documentary film, "The World is Rich," to be shown to children in Scottish schools.
    Mr. Woodburn: I understand that this film is at present on theatrical distribution but copies will be placed in the Scottish Central Film Library and will be available for schools after October.
    Major Guy Lloyd: May I ask whether this documentary film refers to the years between the wars, about which the children are so uneducated?
    Mr. Woodburn: The film referred to is "The World is Rich." I take it that it is to tell people what to do with riches if they are properly handled.
    Earl Winterton: Is that not a matter for the courts?
    Mr. Woodburn: Courtesy is also a matter for the courts, evidently.

    Requisitioned Shop Premises
    Lady Grantasked the Secretary of State for Scotland whether he is aware that the requisitioning of shop premises in Scotland is causing considerable hardship; and whether he will review the administration in this connection.
    Mr. Woodburn: All the cases submitted to me have been very carefully considered in the light of all the circumstances and of any representations made by the owners, and possession is being taken only where this is necessary to maintain essential supplies and services. These cases will be kept under review.
    Lady Grant: Is not the Secretary of State aware that certain premises have been requisitioned, that the tenants have gone elsewhere, and that the premises have then been de-requisitioned and sublet to somebody else? Will he, therefore, ensure that requisitioning does not take place without careful consideration in the first place?
    Mr. Woodburn: I am not aware of that. Of course a notice of intetnion to requisition is given, and the owners must be given certain time to make their repre-
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    sentation before a final decision is taken. I can have no responsibility for what tenants do in the meantime.

    Tuberculosis
    Mr. Hubbardasked the Secretary of State for Scotland the number of pulmonary tuberculosis cases notified in Scotland in 1938, 1943, 1947 and 1948.
    Mr. Woodburn: The numbers in 1938, 1943 and 1947 were 4,793 7,215 and 7,943, respectively. The provisional figure for the first quarter of 1948 is 2,089.
    Mr. Hubbardasked the Secretary of State for Scotland the number of pulmonary tuberculosis cases in Scotland for whom hospital treatment is recommended but accommodation is not available.
    Mr. Woodburn: There were 2,378 cases of pulmonary tuberculosis on the local authorities' waiting lists for admission to hospital at 31st March, the latest available date.
    Mr. Hubbardasked the Secretary of State for Scotland what steps are being taken to recruit necessary nursing staff for T.B. hospitals.
    Mr. Woodburn: The recruitment of nurses is primarily the responsibility of my right hon. Friend the Minister of Labour and National Service; for my part, I have recommended that the conditions of service agreed by the Scottish Nurses Salaries Committee should be adopted for nurses in tuberculosis hospitals. These conditions are more favourable than those generally applicable to hospital nurses and will, I hope, aid recruitment.

    Convicted Youths, Glasgow (Appeal)
    Mr. Emrys Hughesasked the Secretary of State for Scotland if he will review the cases of the youths aged 20 and 17, respectively, who were sentenced to six months imprisonment at Glasgow Sheriff Court on 7th June for offences against the Explosive Substances Act, 1883, with a view to a possible remission of the sentences.
    Mr. Woodburn: These cases are at present under appeal.

    Rothesay Town Council (Claim)
    Mrs. Jean Mannasked the Secretary of State for Scotland whether he is aware that Rothesay Town Council paid £39,797 to a Company supplying the Burgh Gas Department, for goods which have not been delivered, and have accepted £3,000 in settlement of their claim; and if he will make a statement.
    Mr. Woodburn: I am considering an interim report on this matter by the Auditor of the Rothesay Town Council accounts and I am therefore not in a position to make any statement at present.
    Mrs. Mann: Can my right hon. Friend promise that he will make a statement later on if I put a Question on the Order Paper?
    Mr. Woodburn: I will consider that.

  MINISTRY OF PENSIONS

    National Service (Disability Pensions)
    Lieut.-Commander Clark Hutchisonasked the Minister of Pensions if he is now able to make a statement regarding the eligibility for the award of disability pensions of men called up under the National Service Act, 1947, who sustain injuries whilst undergoing either whole-time or part-time training.
    The Minister of Pensions (Mr. Buchanan): This matter is still under consideration. An announcement will be made as soon as possible.
    Lieut.-Commander Hutchison: Will the right hon. Gentleman be able to make an announcement before the Recess?
    Mr. Buchanan: I think I can promise that we will make one before the end of this Session.

    Civil Damages (Abatement of Pensions)
    Mr. Manningham-Bullerasked the Minister of Pensions whether he will make a statement as to the action it is proposed to take with regard to disablement pensions, allowances and grants payable to members of His Majesty's Forces, their widows and dependants where damages have been recovered by them in the civil courts.
    Mr. Buchanan: I will, with permission, answer this at the end of Questions.
    At the end of Questions—
    Mr. Buchanan: I promised to answer Question No. 26 at the end of Questions. As promised in the House on 28th May, I have discussed this matter with my Central Advisory Committee. As a result a new practice has been agreed and will, apply as from 5th July. This is as follows:

    (a) In the case of the disablement pensioner the present practice is to abate the pension by an amount representing the annuity value of 75 per cent. of the damages. In future only 25 per cent. of the damages will be taken into account for the abatement of pension.

    (b) In the case of the war widow, the present practice of disregarding 10 per cent. or £50 of the damages, whichever is the greater, will be continued, but in taking account of the balance, the pension will not be reduced below 30s. a week where the widow is over go years of age, or is incapable of self-support or has children, or 20s. in any other case. The present minimum is 10s. a week in all cases

    (c) In the case of children, £150 of the damages in respect of each child will still be disregarded, but the minimum allowance for the first child will be 7s 6d. a week instead of 5s. as at present.

    In all cases, of course, the disabled man or widow retains the damages in full.
    These arrangements will, I believe, secure that the war pensioner who obtains damages for the injury for which pension is also being paid will ordinarily receive at least parity of treatment with the industrial injury pensioner.
    Mr. Tolley: May I ask the Minister, in view of the tremendous importance of the answer which he has given, to give the widest publicity to it so that those affected can make fresh applications?
    Mr. Buchanan: No one needs to make a fresh application in this case. The matter is one which will come to us automatically. I am certain everybody who is entitled to receive benefit will receive it.
    Mr. Manningham-Buller: Is it quite clear that the courts in assessing damages, will not take into account the war pension or any other pension?
    Mr. Buchanan: The courts will not take into account any income received by way of war pension.
    Mr. Charles Williams: Can the right hon. Gentleman assure me that in no case

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    will an ex-Service man be worse off now in the way of pension than the industrial worker?
    Mr. Buchanan: It is difficult to get an exact arrangement. We have achieved broad parity. On the whole, about 70 per cent. of the ex-Service men stand to gain slightly. There may be a small number who will lose slightly but, taking the position by and large, ex-Service people gain considerably. They will be much better off than they were before.

    Artificial Limbs
    Captain John Crowderasked the Minister of Pensions whether patients applying for artificial limbs under the National Health Scheme after 5th July will only be supplied with one type of limb; and whether orders will be placed only with his Department's sole contractors.
    Squadron-Leader Flemingasked the Minister of Pensions whether, after 5th July, 1948, disabled ex-Service men in the Manchester area will continue to have their artificial limbs repaired by the original makers; or to whom must they apply for major refitting or repairs.
    Sir John Mellorasked the Minister of Pensions why, under the National Health Service, artificial limbs may be supplied by two firms only, to the exclusion of all other makers; and whether he will enable users to choose any make of limb preferred, provided additional expense does not fall upon public funds.
    Mr. Buchanan: This matter is under consideration. I hope shortly to be able to make a statement.
    Captain Crowder: Is it the present position that a disabled man who wants his artificial limb repaired will have to pay for it himself unless he goes to one of the Government's sole contractors?
    Mr. Buchanan: The present position is that the scheme is not started, so that at present a person other than an ex-Service man must pay for it unless he comes under a Ministry of Labour scheme. However, this matter is being considered, and I would like to leave it at that at the moment.
    Sir J. Mellor: Could not the Minister at least give an assurance in the terms of the second part of my Question No. 32? Cannot he give an assurance that users will be permitted to make their own choice provided no additional expense falls on public funds?
    Mr. Buchanan: I hope people will be reasonable on this matter. I hope I am not an unreasonable Minister, and I hope that the people I am negotiating with in this matter will bear in mind the general interests of the community. If all of us are reasonable, I am sure we can work it out in a reasonable way.
    Mr. Tolley: Will my right hon. Friend make a statement at the earliest possible moment? I can assure him that many disabled men are showing real concern at the fact that in all probability in the future they will not be able to go to the makers for repairs and replacements, and they are disturbed as to what their future is likely to be.
    Mr. Buchanan: In my view they need not be disturbed at all. I do not want any Party conflict on this, but nobody need be disturbed. The limb we make now is made for the persons who served in His Majesty's Forces during the war. That has been done for years without any reasonable complaint. I take it that if those who have this limb are fairly satisfied, it is not a bad limb for other people as well.
    Mr. H. D. Hughesasked the Minister of Pensions whether non-pensionable limbless ex-Service men in employment are entitled to receive a duplicate issue of artificial limbs.
    Mr. Buchanan: All ex-Service men who lost a limb during war service are provided with a duplicate artificial limb. Under the National Health Service duplicate artificial limbs will be provided on the same lines as to the war disabled.
    Mr. Gammansasked the Minister of Pensions why, under the new Health Act, only one firm has been selected to make artificial legs and one other firm to make artificial arms; why the remaining 25 limb-making firms are excluded; and to what extent artificial limbs are being made on semi-mass production lines.
    Mr. Buchanan: The matters referred to in the first part of the Question are under

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    review and I hope to make a statement shortly. As regards the last part of the Question all artificial limbs supplied by the Ministry of Pensions are fitted to the needs of the individual although as in other productions some parts are made in quantity.
    Mr. Gammans: Does the right hon. Gentleman realise that, if this policy is pursued, it will put out of business some very highly skilled firms in this country; and will he say what exactly is the meaning of the suggestion that these artificial limbs are to be made on semi-mass production lines? Does that mean that applications must be on semi-mass production lines?
    Mr. Buchanan: I would like to know who said that. I have not said it. No hon. Member has a right to rise and say I have said something which I have not said. What I have said is that, as regards the last part of the Question, all artificial limbs supplied by the Minister of Pensions are fitted to the needs of the individual. Some parts, however, are made in quantity, but each leg is made to suit the individual.
    Colonel Ropner: Can the right hon. Gentleman give an assurance that his policy is not to establish anything in the way of a monopoly in the making of artificial limbs? Is he aware that, rightly or wrongly, there is an impression amongst these unfortunate men and women that something is happening behind the scenes which will limit their choice of the manufacturer of the artificial limbs?
    Mr. Buchanan: I have already given a full answer to this Question when it was raised by the hon. and gallant Member for Finchley (Captain Crowder), the hon. and gallant Member for Manchester, Withington (Squadron-Leader Fleming) and the hon. Member for Sutton Coldfield (Sir J. Mellor). Having talked with the people concerned in this matter I hope to make a reasonable adjustment.
    Mr. Donner: Can the Minister give an assurance that the present delays will be brought to an end, because they are causing great suffering to many unfortunate people who cannot now get their artificial limbs as a result.
    Mr. Buchanan: Nobody who needs or wishes to have an artificial limb need be without it. The present scheme applies,
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    until 5th July, to ex-Service men and to people who come under contract with the Minister of Labour. We are meeting in full, with a first-class limb, the demands of every one of those people. The issue before us is what will happen after 5th July. We are hoping to come to an amicable agreement.
    Mr. John Hynd: Will the Minister tell the House when this so-called monopoly was first established?
    Mr. Buchanan: This so-called monopoly has been going on all the time. For a long time the main contractor has had the monopoly of supplying limbs to those who suffered as a result of the war.
    Mr. Gammans: In view of the fact that the Minister is not able to give an assurance that a monopoly will not be set up in artificial limbs—[HON. MEMBERS: "He said so"]—I beg to give notice that I shall raise this matter on the Adjournment.

    King's Fund
    Brigadier Petoasked the Minister of Pensions what is the total amount of money in the King's Fund, of which he is the principal trustee; for what purposes it is used; and how much was paid out in benefits during 1947.
    Mr. Buchanan: The balance remaining in the King's Fund on the 16th June was approximately £81,600. The King's Fund, which is entirely dependent upon voluntary donations and bequests, is used to provide additional help, for objects which are outside the scope of Government grants, to those who have been disabled or bereaved by war service and are in need or distress. Those who may benefit include ex-members of His Majesty's Forces disabled in either World War, disabled ex-members of the Mercantile Marine and the Civil Defence Organisations and the widows and dependants of those who lost their lives. The amount spent in benefits during 1947 was £13,337.
    Brigadier Peto: Does not that reply indicate that it is time for the Government to reconsider raising the basic rate so that those who suffer 100 per cent. disability pension are not dependent—
    Mr. Speaker: The basic rate does not appear to come under this Question, which only asks for the total amount of money in the King's Fund.
    Mr. Godfrey Nicholson: Can the right hon. Gentleman use this Fund for particularly pathetic cases just outside the regulations, such as the one to which I drew his attention, where a disabled ex-Service man has only a few months to live owing to cancer, for which he is not entitled to have a pension?
    Mr. Buchanan: We use this Fund very liberally. It is not used to supplement pensions but for a variety of purposes in connection with the ordinary difficulties of human life that pensions cannot overcome. We use it in a very generous way and, in the main, the officials who run it are to be complimented.
    Mr. Lipson: Will my right hon. Friend take steps to make it widely known that it is both necessary and desirable to increase this Fund, and that contributions from well-meaning people would be welcomed?
    Mr. Buchanan: Only today I have sent out a letter to somebody who has left us £1,000 in a will. Also I addressed letters the other day to the Scottish Football Association and to the greyhound racing people asking them for help. I shall be truly thankful to anybody who can help us in this way.
    Mr. Vane: The right hon. Gentleman told us how much was spent out of that Fund last year; can he tell us what was the income?
    Mr. Buchanan: I could not say what is the income without notice.

    Parents' Pensions
    Mr. Collinsasked the Minister of Pensions whether he is prepared to disregard any part of a parent's earnings in assessing income for the purpose of awarding parents' pensions.
    The Parliamentary Secretary to the Ministry of Pensions (Mr. Blenkinsop): Yes, Sir. As from 5th July next the first 20S. of a parent's earnings will be disregarded. Cases where a pension is in payment will be reviewed without application and any increase admissible will be paid. As between 40 and 50 thousand cases are involved this review will naturally take some time. Where pension has been refused on the ground that need does not exist application will be necessary.
    Mr. Collins: While thanking my hon. Friend for that reply, which seems a more
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    substantial contribution than the usual weekly one, may I ask him if it means that earnings will be disregarded only where they do not exceed 20s. a week? Can he also say whether his reply means that there is a considerable increase in the number of parents receiving pensions for the first time?
    Mr. Blenkinsop: To deal with the first part of my hon. Friend's supplementary question, it means that in the past only earnings which did not exceed 20S. were disregarded but, in future, whatever the earnings may be, the first 20S. will be disregarded. To deal with his second supplementary point, I hope that this will mean an improvement for a large number of parents and that, in particular, it will benefit many widowed parents who are earning small sums in part-time employment.

  BRITISH ARMY

    Regular Commissions
    Mr. Douglas Marshallasked the Secretary of State for War whether he is aware that officers appointed to permanent Regular commissions from War Emergency Commissions only rank in the Regular Army as from the age of 21 years; that this arrangement is harsh on those who joined up upon leaving school; and whether he will consider adjusting this matter.
    The Secretary of State for War (Mr. Shinwell): The arrangement referred to by the hon. Member is necessary in order to ensure that cadets appointed to permanent Regular commissions from Sandhurst should not be at an unfair disadvantage in comparison with emergency commissioned officers appointed to permanent Regular commissions. I do not consider that it would be desirable to alter it.
    Mr. Marshall: That may sound all right, but is the Minister aware that, where those men started fighting at 18 years of age, they are the people who suffer the disadvantage in pension requirements at the end of their permanent service?
    Mr. Shinwell: It not only sounds all right, it is all right.
    Mr. J. Langford-Holt: The system before the war was that cadets from Sandhurst got one day's seniority from officers entering from the Supplementary Reserve. Can the right hon. Gentleman tell us what is the seniority today?
    Mr. Shinwell: If the hon. Member will put down that Question I will answer it.

    Proposed Artillery Range, Holy Island
    Mr. Skeffington-Lodgeasked the Secretary of State for War whether he has considered the unanimous resolution sent to him by the joint Synod of the Convocation of York protesting at the proposal to establish an anti-tank artillery range near Bamburgh and Holy Island; and whether he will make a statement.
    Mr. Shinwell: This proposal was the subject of a public local inquiry on 16th June, the findings of which are not yet available. At the inquiry representations were made regarding Holy Island. In these circumstances I do not think that it would be desirable for me to make any statement now.

    Brigade of Guards (Uniform)
    Sir Waldron Smithersasked the Secretary of State for War of what material or materials the equipment and rifle slings used by the Brigade of Guards when in full dress are made.
    Mr. Shinwell: Buff leather.
    Sir W. Smithers: May I ask the Secretary of State for War why, when the Trooping of the Colour was so unnecessarily cancelled, the reason given was that it would spoil the webbing equipment?
    Mr. Shinwell: That is quite another question.
    Sir W. Smithers: Does not the Secretary of State for War know the difference between buff equipment and webbing equipment?
    Mr. Shinwell: I am well aware of the difference. I have answered the hon. Member's Question.
    Sir W. Smithers: The right hon. Gentleman has not answered it.
    Mr. Shinwell: That is all the hon. Member will get now.
    Lieut.-Colonel Liptonasked the Secretary of State for War whether full dress uniform is the personal property of other ranks in the Brigade of Guards; or when this concession was withdrawn.
    Mr. Shinwell: The full dress uniform now in possession of the Brigade of Guards is public clothing. No question of the withdrawal of any concession arises, as, under the prewar regulations, a soldier has no absolute right of property in his personal clothing. This is still the position.
    Lieut.-Colonel Lipton: Is it not a fact that these uniforms were the personal possession of other ranks before the war and that they were personally responsible for them? Is any compensation being afforded to them for the withdrawal of the privilege and will the Minister arrange for these uniforms not to disappear entirely from the public view now that they are under national ownership?
    Mr. Shinwell: National ownership of these articles still holds the field and there is no intention to abandon it. As regards the advantages derived since the close of the war, as compared with before the war, I would remind my hon. and gallant Friend that every soldier now leaving the Service is entitled to civilian clothes.
    Colonel Gomme-Duncan: Is it not a fact that the original issue in every case was the property of the State but that the soldier was allowed to purchase thereafter a second or a third suit if he wished, and that the second and third suits would be his own property?
    Major Legge-Bourke: Would the right hon. Gentleman say what has happened to the second tunics which belonged to members of the Brigade of Guards before the war and which were handed in to store during the war? Has compensation been paid for them if they are no longer usable or have deteriorated whilst in store?
    Mr. Shinwell: I cannot see anything in the Question about a second tunic.

    Land Requirements, Braunton (Inquiry)
    Brigadier Petoasked the Secretary of State for War whether he will now give an approximate date for the holding

    1123
    of a public inquiry into his Department's land requirements at Braunton, North Devon; whether he is aware that this inquiry has now been awaited for two years; and that the prolonged delay has had prejudicial effects on the many other parties interested in this unique area.
    Mr. Shinwell: It has been difficult to determine the land requirements of Combined Operations units for which it is proposed to acquire a permanent training area in this district. I hope that an early decision will be taken, but, in the meantime, the date of the public local inquiry cannot be fixed.

    Gun Site, Walthamstow
    Mrs. Leah Manningasked the Secretary of State for War whether he has any alternative site which he can offer to the Essex Education Authority in return for the gun site in Walthamstow, on which it had been intended to erect a junior technical school.
    Mr. Shinwell: I regret that my Department has no alternative site which it can offer the Essex Education Authority. The proposal to acquire the gun site permanently is still under consideration and the interests of the Education Authority have been and will continue to be represented in the discussions on the matter.
    Mrs. Manning: Am I to understand from the reply of my right hon. Friend that there is no finality in the answer given to me by the Under-Secretary that this site would be used as a permanent gun site for the defence of London?
    Mr. Shinwell: So far there is no finality.

    Currency Losses, Germany
    Mr. A. R. W. Lowasked the Secretary of State for War why, in view of the assurances given by his predecessor in the House of Commons on 21st July, 1947, that all possible disciplinary action was being taken in connection with the £58 million currency losses, investigations made with the object of establishing responsibility for part of these losses have been abandoned; and whether, in the light of that assurance, he will now make a statement.
    Mr. Shinwell: The hon. Member is mistaken in thinking that investigations were abandoned in any case where it was profitable to pursue them. As undertaken by my right hon. Friend, disciplinary action was taken to bring to trial cases where evidence could be found, and to prevent further infractions of regulations.
    Mr. Low: Would the right hon. Gentleman do what I asked him to do last week, and which he refused to do—that is, give a statement to the House of the disciplinary action which has been taken—and will he also try to explain to the House why it is that S.I.B. investigations, which began last July, appear now to have stopped?
    Mr. Shinwell: A great deal of disciplinary action has been taken. About 200 courts-martial have been held and a large number of persons have been adequately sentenced. Beyond that we cannot go. We cannot take disciplinary action where it is not desirable to take it.
    Colonel Crosthwaite-Eyre: Can the Secretary of State for War say how much money has been recovered as a result of these actions?
    Mr. Shinwell: I have no information as to the amount recovered.
    Mr. Low: Does not the right hon. Gentleman realise that I asked him last week to say how much of the loss of £58 million was covered by the disciplinary action already taken? If he cannot say now, will he say so later?
    Mr. Shinwell: It is very difficult to say actually how much was recovered or lost. All we can say is that action was taken in cases where it was possible to take suitable action and that the offences were adequately dealt with by the judicial authorities concerned. Apart from that, the losses were stopped in 1946—or so I understand, for that was before my time—by the introduction of new canteen vouchers. That, of course, was the right action to take to stop unseemly behaviour of this kind.
    Colonel Gomme-Duncan: Can the right hon. Gentleman amplify his statement that disciplinary action would only be taken where desirable, because, when public funds are done away with, it is always desirable to take disciplinary action?
    Mr. Shinwell: It is not desirable to take disciplinary action when it is undesirable.
    Viscount Hinchingbrooke: Now that currency reform has taken place in Germany, is there any prospect of getting some of this money back from the German people who presumably have benefited by it?
    Mr. Shinwell: That is as relevant as are some of the noble Lord's references to War Savings.

  SIR PERCY SILLITOE (VISIT TO U.S.A.)
  Mr. Emrys Hughesasked the Prime Minister what is the nature of the employment of Sir Percy Sillitoe; what is his salary; and what is the purpose of his visit to Washington.
  Mr. Platts-Millsasked the Prime Minister what is the purpose of the visit to the U.S.A. of Sir Percy Sillitoe and of his discussions with Mr. J. Edgar Hoover, Director of the Federal Bureau of Investigation.
  The Prime Minister (Mr. Attlee): As announced at the time of his appointment in January, 1946, Sir Percy Sillitoe holds the post of a Director in the War Office. He is employed on special duties. His salary is £3,000 per annum. He has been on a visit to the United States on official business.
  Mr. Emrys Hughes: Can the Prime Minister tell us why Sir Percy Sillitoe has been interviewing Mr. Marshall and if this is part of Marshall Aid? Is he also aware that in Glasgow Sir Percy was an authority on burglary, and in view of the fact that the Home Secretary has been burgled seven times is it not time that Sir Percy was brought to the home front?
  Mr. Platts-Mills: While we all know that Sir Percy is closely associated with M.I.5 and the whole House will be interested to learn of this new instalment of the American way of life, may I ask is this part of the standardisation of military equipment with U.S.A., and is the British Secret Service now to be under the orders of the notorious F.B.I.?
  Mr. William Shepherd: Can the right hon. Gentleman give an assurance that the visit to America has nothing to do with
  1126
  the activities of the hon. Member for Finsbury (Mr. Platts-Mills)?
  The Prime Minister: That is quite true.
  Mrs. Mann: Can my right hon. Friend give an assurance that Sir Percy Sillitoe's qualifications are really equal to the job, and not based on puff paragraphs in the newspapers to the effect that he quelled gangsterism in Glasgow, because those statements are utterly untrue?
  Mr. Gallacher: In view of the statement the Prime Minister has made about Sir Percy Sillitoe, will he now advise us of how many associates Sir Percy has in this secret police force? Is he also aware that this man was puffed up as a lion tamer in South Africa?

  NATIONALISED INDUSTRIES (MINISTERIAL RESPONSIBILITY)
  Mr. Boyd-Carpenterasked the Prime Minister what steps he is taking in order to establish Parliamentary control over the nationalised industries.
  The Prime Minister: The basis of the socialisation legislation is that boards of competent persons should, subject to the reservations stated in the Acts, undertake the management of publicly-owned industries and services. Therefore, the hon. Member's assumption of Ministerial responsibility for management matters is in conflict with decisions reached by Parliament. As the hon. Member is aware, the Ministers of parent Departments have statutory responsibility for certain aspects of the work of the nationalised industries and are, therefore, answerable to Parliament on those matters. The scope of Parliamentary Questions about the nationalised industries was defined in Mr. Speaker's statement of 7th June, 1948.
  Mr. Boyd-Carpenter: Does that answer mean that the Prime Minister is quite satisfied with the present position? Has he considered the effect on the prestige and position of this House of depriving it of control over large-scale activities of bodies under public ownership?
  The Prime Minister: The Government are carrying out the decision of the House of Commons in this matter. The decision was come to after full consideration.
  Mr. McGovern: Is the Prime Minister aware that a very large number of people in the Labour movement are perturbed at the passing of power from this House to these boards, in contrast to the method adopted in regard to the Post Office, by which hon. Members have a right to put questions about that Department?
  The Prime Minister: This decision was taken by Parliament. It was decided that these industries should be run in a certain way. If it had been decided to run them on the basis of the Post Office, as a Department, the hon. Member would be able to ask questions, but this was a decision taken by Parliament, and the Government must carry out decisions of Parliament.
  Mr. Geoffrey Cooper: Is it not time we gave each of these nationalised industries a large degree of self-government, making them answerable to a national council of informed opinion, made up of those with real technical, industrial and commercial experience, and only in the last resort answerable to a Minister in this House?
  Mr. Godfrey Nicholson: Is the Prime Minister satisfied with a position in which Questions can be addressed to Ministers about almost every industry owned by a private firm, but not about the industries owned by the people?
  The Prime Minister: I have never known that kind of Question asked about a private firm.
  Mr. Nicholson: Will the Prime Minister keep his eye on the Order Paper?

  INDUSTRIAL DISPUTES (GOVERNMENT ACTION)
  Mr. Henderson Stewartasked the Prime Minister what Ministers, other than the Minister of Labour and the Minister of Food, have been engaged in efforts to settle the Dock Strike; and what Minister is responsible for directing and co-ordinating Government action in large-scale disputes of this kind which affect national welfare.
  The Prime Minister: All Questions of industrial relations are dealt with by my right hon. Friend the Minister of Labour. Any other Questions arising as a result
  1128
  of industrial disputes are dealt with by the appropriate Ministers, co-ordination of action being secured as necessary by the normal machinery of government.
  Mr. Stewart: In view of the widespread effects of the present strike, can we have an assurance that the Cabinet regard it as their duty as a Cabinet to take some direct interest in the settlement of the strike and the care of food and so on?
  The Prime Minister: Certainly.
  Mrs. Braddock: Does the Prime Minister consider that it is showing a full sense of public responsibility when neither the Minister of Labour nor his Parliamentary Secretary was available at the Ministry's offices in London on Saturday morning, when I wanted to talk to either, on matters affecting dockers generally in the country and I was compelled to speak to a civil servant?

  THAMES BARRAGE PROPOSAL
  Mr. Donnerasked the Prime Minister whether he will set up a Royal Commission to examine and report on the practicability of a Thames barrage at Woolwich to provide an emergency fresh water supply for London and to remove permanently the danger of flooding.
  The Prime Minister: No, Sir.
  Mr. Donner: Will the right hon. Gentleman reconsider this decision as an alternative scheme to the flooding of the Enborne Valley, which would cause a substantial loss of food production and involve a great deal of hardship?
  The Prime Minister: I cannot think that it would be a good idea to draw a supply of drinking water for London from below Woolwich.

  NATIONAL FINANCE

    Coinage
    Mr. Donnerasked the Chancellor of the Exchequer whether he is aware that the coins recently issued for public use stain and dirty the fingers to an extent hitherto unknown; and whether, accordingly, he will withdraw these from circulation.
    The Chancellor of the Exchequer (Sir Stafford Cripps): The answer to both parts of the Question is, "No, Sir."
    Mr. Donner: Is the Chancellor aware of widespread adverse comments on this coinage and that it is no satisfaction to anyone to have a base coinage which merely reflects a debased Government?
    Sir S. Cripps: I have no information from any bank or any other institution dealing with this coinage that there has been any complaint.
    Mr. Gallacher: If the hon. Member does not like it he can hand it over to me.
    Mr. George Jeger: Is the increase of dirt in this connection due to too much money chasing too few ideas?

    Production
    Mr. Osborneasked the Chancellor of the Exchequer how much greater national production must be in 1948 than in 1938 in order to maintain the standard of living of 1938 after allowing for the worsening of export and import price levels, the loss of invisible income and the necessity to repay interest and loans overseas as detailed in Sections 12, 32, 33 and 37 of Command Paper No. 7344.
    Sir S. Cripps: I regret that the complicated issues raised by the hon. Member's Question cannot be dealt with adequately in the reply to a Parliamentary Question.
    Mr. Osborne: Is the Chancellor aware that a similar answer was given to me last week and that it was very unsatisfactory? Can he say how the position has changed since he issued this document a few months ago?
    Sir S. Cripps: I am glad that the hon. Member has marked my consistency.

    Import Programme
    Mr. William Shepherdasked the Chancellor of the Exchequer what changes in the import programme are contemplated for the second half of the year.
    Sir S. Cripps: The import programme is now under consideration, in relation to the position under E.R.P. and I cannot yet say what, if any, changes will be required.
    Mr. Shepherd: Is the Chancellor able to say when he will be able to make an announcement about the changes if they are to take place?
    Sir S. Cripps: I am afraid I cannot say now.

    Defence Bond Repayments
    Sir J. Mellorasked the Chancellor of the Exchequer whether in the weekly statements issued by the National Savings Committee, the figures given for Defence Bond repayments include the premium of 1 per cent. payable at maturity.
    Sir S. Cripps: No, Sir; but it is included in the figure of Defence Bonds paid off on maturity published weekly in the Exchequer Return.
    Sir J. Mellor: Are not these weekly statements very misleading?
    Sir S. Cripps: No, Sir.

    Purchase Tax (Refunds)
    Mr. Boyd-Carpenterasked the Chancellor of the Exchequer whether he has considered the representations made to him by the Kingston-upon-Thames Chamber of Commerce on the subject of the inability of traders to claim refunds of Purchase Tax on goods held in stock on occasions when Purchase Tax is officially withdrawn or reduced; and what action he proposes to take in this matter.
    Sir S. Cripps: Yes, Sir; but there is no legal authority for refunding the tax in such circumstances and it would be impracticable to attempt to do so.
    Mr. Boyd-Carpenter: Has the right hon. and learned Gentleman considered the widespread hardship which this kind of thing causes, and if there be no legal authority is he not contemplating taking some?
    Sir S. Cripps: No, Sir.
    Mr. De la Bère: Why not?

    Exchange Control, Hong Kong
    Colonel Crosthwaite-Eyreasked the Chancellor of the Exchequer if he will now make a statement on exchange control in Hong Kong.
    Sir S. Cripps: Not yet, but I hope to be able to make a statement at an early date.
    Colonel Crosthwaite-Eyre: As the Chancellor said he anticipated that he would make a statement in the middle of May and as there is a leak in Hong Kong of at least 40 million dollars per year, can he give any indication when the particular date is likely to be, so that a stop can be put to the leakage?
    Sir S. Cripps: I cannot give any indication of the exact date.

    Andes Agreement
    Colonel Crosthwaite-Eyreasked the Chancellor of the Exchequer, in view of the exact term of the Andes Pact, for what reason His Majesty's Government are now reviewing the provision of that agreement.
    Sir S. Cripps: The terms of the Andes Agreement remain unchanged, and its provisions are not under review.
    Colonel Crosthwaite-Eyre: If that is so, can the Chancellor tell the House why it is that Article 5 (c), which would grant import permits to Argentine for £10 million worth of goods from this country, has not yet been fulfilled?
    Sir S. Cripps: Because it is necessary to arrange what goods should be imported. That is now under discussion.
    Colonel Crosthwaite-Eyre: Is it not a fact that the Chancellor informed the House when this Agreement was discussed that the list of goods to that value had been agreed?
    Sir S. Cripps: No, I informed the House as regards the £10 million that agreement would subsequently be reached as to which goods should be imported under it.
    Colonel Crosthwaite-Eyre: If the right hon. and learned Gentleman says "subsequently" will he say why the word "forthwith" is used in the Agreement?
    Sir S. Cripps: "Forthwith" means immediately following.

    Customs Duty (American Visitors)
    Colonel Crosthwaite-Eyreasked the Chancellor of the Exchequer whether he is aware that American visitors to this
    1132
    country are required to pay in dollars Customs duties exceeding £5 on goods in transit to the Continent, that refunds of such duty are made in sterling notes and that the visitors concerned are then informed the sterling notes so received in excess of £5 cannot be taken from this country, with the result that confiscation of the money involved is liable to ensue; and if he will take steps to alter this practice.
    Sir S. Cripps: Goods in transit can be removed under bond without deposit of duty. Alternatively, duty can be deposited in dollars or by traveller's cheque and repayment made by official cheque convertible to dollars through the payee's bank. These arrangements have been widely advertised.

    Bonus Tax
    Lieut. - Commander Gurney Braithwaiteasked the Chancellor of the Exchequer what has been the yield of the bonus tax to date.
    Sir S. Cripps: About £1¼ million.

    CIVIL SERVICE (ALLEGATIONS)
    Mr. Hardyasked the Chancellor of the Exchequer what is the result of his inquiry concerning the allegations of sabotage on the part of civil servants made last October by the hon. Member for Bexley (Mr. Bramall).
    Sir S. Cripps: My right hon. Friend the Prime Minister told the House on 27th October, 1947—OFFICIAL REPORT, Col. 504—that I had asked my hon. Friend the Member for Bexley (Mr. Bramall) for particulars supporting his assertions in a public speech that civil servants were sabotaging the Government. In reply my hon. Friend informed me that his remarks had been reported out of their context and that he had made a point of saying that he was well aware that the great majority of civil servants were doing their work loyally and well. My hon. Friend further said that on reflection he had come to the conclusion that it would have been better to use the word "disloyalty" rather than "sabotage" to convey what he had in mind. Shortly afterwards he sent me particulars of 10 incidents in support of the views he had expressed.

    1133
    On receiving these particulars, I asked Sir John Forster, K.C., the President of the Industrial Court, to make a full inquiry into the allegations made and to report to me how far they, if substantiated, constituted acts of disloyalty to the Government. Sir John Forster has gone into the matter very fully and I should like to take this opportunity of thanking him on behalf of the Government for the patient and thorough work he has done. I am glad to inform the House, and I am sure the House will be glad to hear, that his findings are that in no single one of the incidents investigated was there any evidence of sabotage or disloyalty on the part of any member of the Civil Service. My hon. Friend the Member for Bexley has been informed of these findings and has expressed to me his desire to withdraw the allegations which he made in all good faith.
    Mr. Gallacher: In view of that report which has been given to the Prime Minister, will not he stop this quite unjustified discrimination against Communists working in the Civil Service?
    Sir S. Cripps: No, Sir.
    Earl Winterton: Do I understand the right hon. and learned Gentleman to say that the hon. Member for Bexley (Mr. Bramall) has not merely withdrawn the allegation, but has apologised to the civil servants for the charges he has made against them?
    Sir S. Cripps: I said that he had been informed of the findings and had expressed to me his desire to withdraw the allegations, which he made in all good faith.
    Hon. Members: Where is he?

  GOVERNMENT DEPARTMENTS

    Paper Consumption
    Brigadier Raynerasked the Chancellor of the Exchequer whether the figures showing the amount of paper and stationery consumed by Government Departments in 1947 included the tonnage allocated to various newspapers issued by the Departments and by nationalised industries.
    Sir S. Cripps: Yes, Sir; in the case of Government Departments. The figures do not include tonnage obtained by nationalised industries other than through the Stationery Office.

    Letter Headings (Telephone Numbers)
    Mr. Geoffrey Cooperasked the Financial Secretary to the Treasury in view of the aid to efficiency in printing the telephone number on letter headings, as has now been done by the Ministry of Education, if he will request all Departments to follow this example.
    The Financial Secretary to the Treasury (Mr. Glenvil Hall): I believe that telephone numbers are generally shown except on notepaper used by Ministers. A general request from me would hardly be appropriate, but the Stationery Office will bring the suggestion to the attention of those concerned when reprinting is ordered.
    Mr. Cooper: Since the Ministry of Education has been able to educate the Departments on business methods by printing their telephone number, and since they also give their address on their stationery could the Financial Secretary to the Treasury encourage the other Departments to follow this excellent example as it does aid Members and others in conducting their correspondence with the Departments?
    Mr. Glenvil Hall: It is not for me to issue instructions to the Departments.

  TRADE AND COMMERCE

    Statistics (Index)
    Mr. Shepherdasked the President of the Board of Trade if he will publish an index in simple form showing the fluctuations in the terms of trade between 1913 and 1947.
    The Parliamentary Secretary to the Board of Trade (Mr. Belcher): With the hon. Member's permission, I will circulate the desired information in the OFFICIAL REPORT.
    The figures are as follow:

    —

    Index Numbers, 1938 = 100

    Average values of imports.

    Average values of United Kingdom exports.

    Terms of Trade.

    1913

    97

    68

    142

    1919

    233

    189

    123

    1920

    277

    245

    113

    1921

    185

    184

    101

    1922

    148

    136

    109

    1923

    145

    130

    112

    1924

    150

    129

    116

    1925

    151

    126

    120

    1926

    138

    118

    116

    1927

    132

    112

    118

    1928

    133

    111

    120

    1929

    130

    109

    119

    1930

    114

    104

    110

    1931

    92

    93

    98

    1932

    86

    87

    98

    1933

    83

    87

    95

    1934

    86

    88

    98

    1935

    89

    89

    100

    1936

    93

    91

    103

    1937

    107

    98

    109

    1938

    100

    100

    100

    1946

    211

    196

    108

    1947

    258

    222

    116

    NOTE.—The figures under the heading "Terms of Trade" above show the changes in the volume of exports required to pay for a fixed volume of imports, i.e., a rise in the index indicates an adverse movement in the terms of trade. These figures can only give an approximate measure of the fluctations in the terms of trade, owing mainly to variations in the make-up of imports and exports and to uneven fluctations in the pricey of particular commodities.

    Perambulators
    Mr. Piratinasked the President of the Board of Trade whether he is aware that perambulator manufacturers are not permitted to make them with extensions; and, in view of the fact that babies grow out of the perambulators now being sold, if he will issue instructions permitting the manufacturing of extensions to perambulators.
    Mr. Belcher: No, Sir. There is nothing to stop manufacturers making perambulators with extensions, and some of them do so. The second part of the Question, therefore, does not arise.
    Mr. Piratin: Is the Parliamentary Secretary aware that a shopkeeper told me a little while ago that that was not
    1136
    the case? Is he further aware that his answer will give great satisfaction to the babies concerned?

    Utility Textile Prices (Order)
    Sir J. Mellorasked the President of the Board of Trade why the Cloth and Household Textiles (Utility) (Maximum Prices) (No. 14) Order, 1948, S.I., 1948, No. 1038, which was made on 14th May and came into operation on 24th May, was not presented to Parliament until 27th May, notwithstanding Sittings of the House of Commons on 25th and 26th May; and when the Order was published.
    Mr. Belcher: This Order was published on 21st May and came into operation before presentation to Parliament in accordance with the proviso to Section 4(1) of the Statutory Instruments Act, 1946. I very much regret that owing to an oversight the presentation of the Order was delayed for two days after the end of the Whitsun Recess. Stops have been taken to prevent repetition of such an omission.

    Trade Marks (Registration)
    Mr. Asshetonasked the President of the Board of Trade the average delay experienced at the present time by firms applying to the Trade Marks Registry for permission to use trade names for their goods.
    Mr. Belcher: The average period between the filing of an application for the registration of a trade mark and the communication to the applicant of the official report is now about 10 months.
    Mr. Assheton: Would the hon. Gentleman agree with me that that is a very long time and causes great inconvenience?
    Mr. Belcher: Yes, I agree that it is a long time and that it is bound to cause inconvenience. We are trying to overtake arrears which were created over a period of years. The staff has been gradually increased and I hope that the rate of overtaking the arrears will improve as we go along.

    Second-Hand Furniture Prices (Review)
    Mr. Lipsonasked the President of the Board of Trade if he will remove the control of prices at auction sales of

    1137
    second-hand furniture as the maximum prices are no longer reached and the control involves unnecessary waste of time and labour.
    Mr. Belcher: I have asked the Central Price Regulation Committee to review the position and to report their findings to me as soon as possible.

    Pencil Lead Factory, Hayle
    Commander Agnewasked the President of the Board of Trade whether he has given further consideration to the application by Messrs. L. and C. Hardtmuth for permission to erect a pencil lead factory at Guithian, Hayle; and whether permission will now be granted.
    Mr. Belcher: Messrs. L. and C. Hardtmuth have been notified that they can proceed with the erection of their factory at Hayle as soon as they are ready to put the work in hand.
    Commander Agnew: Can the Minister say how soon this company will be ready to begin building the factory?
    Mr. Belcher: I am afraid I cannot because that is a matter for the company: as far as we are concerned, as soon as they are ready to go ahead they may do so.

    Tobacco
    Colonel Ponsonbyasked the President of the Board of Trade whether the intention of the United States Department of Agriculture to subsidise a large quantity of fire-cured and dark air-cured tobacco from the 1946 crop to the extent of one-third of the fair and reasonable f.a.s. price has been notified to signatories of the General Agreement on Tariffs and Trade, in accordance with Art. XVI of that Agreement; and whether he has discussed with Dominion or Colonial Governments the effects on Dominion and Colonial producers of these types of tobacco.
    Mr. Belcher: No such notification has reached us, but we are seeking further information on the matter.

    Bilateral Agreements
    Sir W. Smithersasked the President of the Board of Trade if he will cease the practice of bilateral trade agreements.
    Mr. Belcher: No, Sir.
    Sir W. Smithers: May I ask the President of the Board of Trade if he is aware that these bilateral agreements are one of the main causes of the country's crisis?
    Mr. Belcher: No, Sir.

  LONDON DOCKS STRIKE
  Mr. Eden(by Private Notice) asked the Prime Minister whether he has any further statement to make about the dock strike.
  The Prime Minister: I am informed that at the meeting called by the Trade Union this morning, it was decided by an overwhelming majority that work should be resumed tomorrow morning The trade union, I understand, will take steps to consult its members in London and other ports, and will later call a national delegate conference to consider the possible modification of the disciplinary clauses of the scheme based on the experience gained of the scheme's working since its inception. In the circumstances, the Government look to the men to recognise their obligation to resume work tomorrow morning. Any continuation of the strike would have serious effects on the national economy, and it will be essential that the goods accumulated at the docks should be handled with the utmost expedition. We cannot afford any further check to our export drive, and all perishable foodstuffs must be shifted without delay. I hope in these circumstances that the House will agree to await the result of the decision.
  Mr. Eden: In connection with the remarks which the Prime Minister made about perishable foodstuffs, can we take it that a course of action has now been prepared by the Government to make quite certain that these perishable foodstuffs are not lost, whatever the circumstances tomorrow?
  The Prime Minister: Yes, all preparations have been made.
  Mr. Eden: May I ask the Prime Minister if he has been made aware that there is considerable concern that the Minister of Labour should have left the country at this particular moment to go to a conference where the Permanent Secretary of the Ministry of Labour already is, and whether

  1139
  it would not have been possible to retain the Minister of Labour here until these difficult negotiations were completed?
  The Prime Minister: At the time my right hon. Friend the Minister of Labour left for the important Conference of the I.L.O. it was thought that the matter had been settled. The matter is, of course, in hand with the Parliamentary Secretary, and I can assure the right hon. Gentleman that everything will be done. It is, of course, unfortunate that the Minister of Labour should be absent, but these things threaten at times and one can never quite tell whether they are coming off or not.
  Mr. Gallacher: Is not the Prime Minister aware that there were 1,800 men estimated to be at the Albert Hall when that decision was taken, and that over 6,000 men at Victoria Park took an opposite decision? Would the Government take immediate steps to grant the elementary demands of the men and get them back to work and then have an inquiry? It is a shameful thing that ships should be held up at this time. The Government should take responsibility. They should take action for getting the men back by granting the demands of the men. Why is it that the demands of the men are never granted?
  The Prime Minister: The figures of the hon. Member are quite wrong.
  Earl Winterton: Would the right hon. Gentleman say, to allay the natural anxiety felt in constituencies like mine and many other districts based on London for their meat supplies—[Interruption]—It is a very important matter, whatever hon. Gentlemen below the Gangway may say. Would he be in a position tomorrow to have a statement made by the Minister of Food saying exactly how the rations will stand this week and next?
  The Prime Minister: Yes, certainly. As I have already said to the right hon. Gentleman opposite, all steps have been taken to ensure that perishable goods shall be moved, and if necessary, other matters shall be dealt with.
  Mrs. Braddock: I understood the Prime Minister to say that the figures stated at the meeting this morning were wrong. I was at the Victoria Park meeting and there were approximately 7,000 men there. They all held up their union cards, stating
  1140
  that until the withdrawal of the penalties that have been imposed, they would not be prepared to resume work. May I say, not wanting in any way to hurt the situation, because I shall be involved in exactly the same way as I was involved before, that while I want to see this matter straightened out, I do hope that the Prime Minister will not comment with such complete complacency on the fact that these men will return tomorrow. I think further steps—
  Mr. Speaker: This is becoming a speech and not a question.
  The Prime Minister: I did not use any words of complacency. My information does not agree with that of my hon. Friend.
  Mrs. Braddock: I was there.
  The Prime Minister: I know, but perhaps my hon. Friend is not as good at counting as some other people. My information is correct. In any case I am quite sure that the right thing here is that the decision of the union should be honoured by all the members.
  Mr. Piratin: Is the Minister aware that the meeting called at the Albert Hall this morning was convened by the Transport and General Workers Union who refused to allow the other union involved, the Stevedores Union, to participate and that therefore such a decision does not involve the Stevedores Union, and would he look into that matter?
  Mr. Speaker: It is a pity that we should go on asking these provocative questions. The great thing is to get the matter settled.

PERSONAL STATEMENT
Mrs. Leah Manning: On a point of Order. May I call your attention, Mr. Speaker, to the fact that my name has been omitted from Division Lists 232 and 233 yesterday, although I was in the House during the whole of the Sitting and voted in all Divisions?
Mr. Speaker: The correction will be made in due course. The hon. Lady has raised the matter and the correction will be made.
Mr. Beverley Baxter: While not for a moment doubting what was said by the

1141
hon. Lady the Member for Epping (Mrs. Manning), could we have your Ruling, Mr. Speaker, whether at any moment in the proceedings of this House a Member can say, "I voted twice in two Divisions and my vote was not recorded," and that that statement will be accepted automatically by you, Sir? There might be an extraordinary Division sometime where one vote might decide the fate of a Government. Would the mere statement of any hon. Member be accepted by you, Sir, as being final?
Mr. Speaker: These problems are flung at one at the last minute. As a rule, one accepts the statement of an hon. Member. I think myself that if an hon. Member said that he had voted twice when he had only voted once, the House would have something to say, and I do not think that we would allow a decision to be taken by a false vote of that kind. I think that one can trust hon. Members in matters of this kind.
Mr. Baxter: While thanking you very much for that statement, Sir, may I again recall my hypothetical case—that the fate of a Government might be decided by such a statement? Would you, therefore, even if it meant the defeat of a Government on a major issue, accept the statement of a Member that he or she had voted?
Mr. Speaker: No, but the trouble there is that the Division is taken, the votes are given, and I declare the votes. In this case an hon. Member says afterwards that she voted and it was not recorded. That does not affect my declaration. I have done that the day before, so that
1142
there would not have to be another vote, This could not affect the fate of a Government or the fate of any Bill.
Lieut.-Commander Gurney Braithwaite: Is it not the responsibility of all of us, before passing the Tellers, to see that our names are correctly marked off by the Clerks in the Lobby?
Mr. James Glanville: Is the House aware, and are our worthy friends opposite aware, that this Government is in no danger of being defeated?
Mrs. Manning: Might I ask your advice on this point, Mr. Speaker? I was very doubtful about my Division list in the last Session. Since then, I have taken the utmost care to give my name, my constituency and also my married state when passing the Clerks in the Lobby. But there are two hon. Members of the same name in this House, and it is not the first time that this has happened and that I have reported it. I do not know what else one could do except hold up the Division while one put one's finger on the proper place and saw one's vote recorded. Divisions would take a very long time if all hon. Members did that.
Mr. Speaker: I do not know that I can give the hon. Lady any more advice except that she should take the greatest care to see that her own name is ticked off instead of that of the hon. Member who bears the same name. I can tell the hon. Lady that I have shared her difficulty. When I was a private Member I had also a brother of the same name who was a Member, and there were a good many other Browns, too. I had to watch very carefully where my vote was recorded.

ORDERS OF THE DAY
  FINANCE (No. 2) BILL
  As amended, further considered.
  FINANCE (No. 2) BILL

    CLAUSE 19.—(New Purchase Tax rates.)
    Amendment made: In page 13, line 18, leave out from the first "the," to "shall," in line 20, and insert:
    "articles mentioned in paragraph (c) of Group 23 in the said Part 1."—[Mr. Jay.]
    3.45 p.m.
    The Economic Secretary to the Treasury (Mr. Douglas Jay): I beg to move, in page 13, line 24, at the end, to insert:
    "and
    (d) the following articles shall be deemed to have been chargeable at the rates hereinafter respectively specified for the period beginning with the said ninth day of April and ending with the fifteenth day of June, nineteen hundred and forty-eight, that is to say—

    utility garments made wholly or mainly of fur skin

    Second

    articles comprised in paragraph (d) of Group 5 in the said Part I

    Second

    paper handkerchiefs and paper towels

    Second

    articles comprised in subparagraph (iii) of paragraph (b) of Group 11 in the said Part 1

    Second

    articles comprised in paragraph (r) of Group 11 in the said Part 1

    First

    appliances comprised in paragraph (b) of Group 12 in the said Part 1, being appliances suitable for operation from gas mains

    Third

    articles comprised in paragraph (d) of Group 14 in the said Part 1, other than glass chimneys and similar primary glasses

    First

    articles comprised in subparagraph (i) of paragraph (a) of Group 17 in the said Part I or in subparagraph (i) of paragraph (b) of that Group or in sub-paragraph (i) of paragraph (c) of that Group

    Second

    articles comprised in paragraph (a) of Group 18 in the said Part 1

    Second."

    This and the previous Amendment are consequential on the statement I made on 11th June giving the concessions in Purchase Tax which my right hon. and learned Friend had decided to make since the Debate on the Committee stage. This
    1144
    Amendment is necessary in the case of each of those items then enumerated in order to validate the collection of the tax during the interim period between 9th April, when the increased tax was imposed, and 16th June when the concession took effect.
    Mr. David Eccles: I beg to move, as an Amendment to the proposed Amendment, to leave out
    "articles comprised in paragraph (a) of Group 18 in the said Part I—Second."
    I am surprised that the Economic Secretary introduced his Amendment so shortly, since it affects a very large number of people. My Amendment refers only to the tax on wireless and television sets. The question before the House is from what day should this reduced rate of 33⅓ per cent. begin to operate. I would remind the House that when the Chancellor opened his Budget, the tax on wireless and television sets stood at 50 per cent. He then, to the general dismay of the industry, proposed to raise that tax to 66⅔ per cent. Some weeks later, when the right hon. and learned Gentleman had been assailed by hon. Members in all parts of this House sitting in Committee, he confessed his error, turned right about and reduced the tax to below what it had been before—that is to 33⅓ per cent. The Chancellor's Amendment has in it more petulance than grace, because what the right hon. and learned Gentleman is saying is, "I was right until I admitted that I was wrong." He proposes that the condemned rate of 66⅔ per cent. should stay in force for a period from 8th April to 15th June. Our Amendment is a very friendly gesture. We want the right hon. and learned Gentleman to earn a reputation for doing handsomely what he has been convinced by this House it is right to do in one way or another, and we propose that the new rate of 33⅓ per cent. should begin to operate from 9th April.
    There is a lot of money involved in this Amendment. Radio dealers up and down the country are carrying heavy stocks. Like any other trader, the radio dealer has to pay Purchase Tax at the time he takes delivery from the manufacturer or wholesaler, so that the capital which he has tied up in his stocks always includes the payment of Purchase Tax at the rate applicable at the time when he bought

    1145
    the goods in question. These stocks have been growing heavier for a long time. That really is no surprise to this House, because one of the chief arguments which the Chancellor accepted for the reduction in the tax was that the output of the radio industry has been overtaking demand at current prices. When that occurs, naturally, stocks increase in the hands of the trade. The truth is that the sales of wireless sets were falling off long before the Budget, and that, after 15th June, if the Clause is amended in the way which the Chancellor desires, nobody will have to pay more than 33⅓ per cent. Purchase Tax on a wireless or television set. That is a very considerable sum. It ranges, roughly, from £4 to £25 per set. The retailers will have to take the loss upon all their stocks on which they hay paid the higher rate of tax.
    It would, therefore, seem fair to ask the Chancellor to make arrangements for the refund of all the tax upon stocks on which they themselves have paid the old rate of tax, but our Amendment does not do that. We are limiting the concession for which we are asking, to 8th April and after. We know that that means that very heavy losses will still have to be borne on pre-Budget stocks, but we have certain reasons for so restricting our proposals. In the first place, we are only asking the Chancellor to repair his own mistake. After all, the right hon. and learned Gentleman never ought to have brought in a 66⅔ per cent. Purchase Tax on wireless and television sets. He listened to the arguments, was convinced of his mistake, and cut the tax by half. We are only asking him to be generous in money as well as in words.
    Secondly, the retail trade undertook to make a contribution to the campaign sponsored by the right hon. and learned Gentleman to reduce prices, a campaign which we support, and it seems to us reasonable that they should, as their contribution to the reduction of prices, bear the loss on their pre-Budget stocks. That is the second reason for limiting the concession for which we are asking. The third reason is that we wish to avoid the administrative problems which would be inevitable if we took into consideration the pre-Budget stocks of the trade and traced back all those sets that have been in stock for a very long time.
    1146
    If our Amendment is accepted, as I am sure it will be, there will be no difficulty for the manufacturer or wholesaler to refund to the retailer the Tax which he has already collected since 8th April, and, in his turn, the wholesaler or manufacturer can make the adjustments in the payments that he will have to make from time to time to the Revenue. At the other end of the chain of distribution, the retailer can easily identify anybody who has been so impatient as to purchase a wireless set between 8th April and 15th June and make the appropriate refund to that customer.
    There is a special reason for pressing this Amendment in regard to wireless and television sets, and one which I think will appeal to the Chancellor, because he has an intimate knowledge of the radio industry. When, after the war, it became possible again to manufacture sets for domestic use, demand greatly exceeded the supply and manufacturers were obliged to allocate their output on a quota system to retailers all over the country. As things got easier, the retailers continued to take up their quotas; indeed, the great majority of them continued to do so all along, even after the Budget last April, when they had grounds for thinking either that this House would reduce the tax from 66⅔ per cent. or that, if we failed to do that, a buyers' strike would develop. The fact is that the retailers have continued to take delivery, and I think this House should appreciate that action because, if they had not taken it, unemployment in the factories would have begun in earnest and the situation of the radio industry, which is going to be difficult enough in spite of this concession in tax, would have been very much worse. The retailers have played the game, and we are asking the Government to do the same.
    I hope that the Government will not argue that the retailers do not deserve this concession because they made a windfall profit when the tax was raised from 33⅓ per cent. to 50 per cent. last November. Nothing of the kind is true. Their profit margins were controlled by the price control regulations, and it was not open to the majority of them, even if they had wished to do so, to raise their prices to cover the increase in the tax then imposed. But, far more important, the trade was already declining. The Christmas

    1147
    sales last year were only pushed to the volume which they did reach, and it was not a very satisfactory volume, by offering sets at pre-November Budget prices. I think the whole trade would agree with that statement.
    4.0 p.m.
    There is one further point. Why is it that we are only asking for this change in the Chancellor's Amendment in respect of one series of articles—wireless and television sets? It might be said that it is thoroughly unjust to pick out one article and not another. The answer is quite simple. If we were discussing paper handkerchiefs or second-hand Army blankets, it would be utterly impossible to identify the purchasers between 8th April and 15th June. A woman goes into a shop, puts her money on to the counter, takes away a few handkerchiefs, or buys a blanket or a piece of bedding, and nobody knows who she is, nor is it possible to say some weeks later whether she bought the handkerchiefs or not. That is not the case with wireless or television sets, because all these articles bear a serial number and it is, therefore, perfectly simple to identify them and to know exactly who has bought them.
    I hope we shall not get from the Government an argument, such as we sometimes get, which runs roughly on the lines that because it is not possible to do justice to everybody, the Government do not see their way to do justice to anybody. We must not have that argument today. Here is a case—and this by far the most important case in the reduction of Purchase Tax brought about through the arguments of this House in Committee—where an enormous number of people are involved, and I feel sure we can trust the Government to accept the Amendment. In fact, I think this is an Amendment where we have the right to expect all sides of the House to give us support in persuading the Chancellor that "handsome is as handsome does."
    I hope, therefore, that the right hon. and learned Gentleman will accept the Amendment, which goes part of the way—no more—to relieving a widely felt injustice brought about simply and solely because the Chancellor made a mistake. He brought in a rate of Purchase Tax, which, had he consulted the trade and all
    1148
    those people who knew about this business, he never would have brought in. All we are doing is to ask him to act handsomely in confessing the error which he has made.
    Mr. Nigel Birch: I beg to second the Amendment to the proposed Amendment.
    Mr. Bramall: I should like to say a few words in support of the Amendment to the Amendment. It is true to say, I think, that the need for the remission, of the higher rate of tax was as strongly urged from this side of the House as from the other side. I think the Chancellor would be depriving us of at least half the benefit of this concession if he were not to follow it by conceding the point which has been put by the hon. Member for Chippenham (Mr. Eccles).
    As I understand it, the case for this reduction of Purchase Tax was based on the effect it would have on two sections of the trade—first, the radio retailers, a quite definite and distinct section of the retail trade whose primary function is selling this type of goods and very few others; and, secondly, the manufacturing trade. If the further concession is not granted, the evil effect on the retail trade will, for a period, be very considerable. We are to be left with a position where the retail trade will have to carry this burden purely because, as the hon. Member for Chippenham put it, the Chancellor made a miscalculation in proposing something which he subsequently found to be unacceptable and to be a very heavy burden.
    The burden is heavy because, as the hon. Member for Chippenham said, the retailers took steps to lessen the effect on the other section of the trade. I think it is true to say that the most evil effect of this higher rate of tax, which was in the minds of hon. Members on this side of the House, was the effect on the radio manufacturing industry and the danger of unemployment. In so far as those full effects have not been felt, they have not been felt because of the action of the retail trade in not cutting down more quickly their orders for goods. We are left, therefore, with the position that if this Amendment is not accepted and this concession is not granted, the retail trade will have to continue to bear a burden which this higher

    1149
    rate, for a limited period, places upon them, and will also have to bear part of the burden which they brought upon themselves through not allowing the full effect of the tax to fall on the manufacturing trade.
    I cannot see how there can be any strong argument against the granting of this concession. The amount of money involved to the Exchequer must be small. There is a very recent precedent for this action because I remember that last year there was some discussion on heaters of various kinds. In that case the Chancellor gave a concession which was made retrospective, so that members of the public who had purchased goods—incidentally, less easily identifiable than those with which we are dealing—were able to obtain a refund of the money from the retailer, and the retailers were able to obtain their refund from the earlier stages of the trade, and so back to the Treasury. That was done with heaters last year and I imagine, therefore, there can be no great administrative difficulty. The number of articles purchased must have been comparatively small. I suggest that broad justice would be done if the Chancellor granted this concession.
    Mr. David Renton: I support the Amendment to the Amendment, not only for the reasons which have been put forward already from both sides of the House, but for the further reason that I think the Government should be looking to the future in this matter. The arguments, so far, have been concerned largely with the possibility of injustice relating to the past. If, on this occasion, a decision is taken adverse to traders, surely they will in future be discouraged from laying up stocks of any commodity in respect of which they might think Purchase Tax was likely to be reduced in the future. Surely traders should be encouraged by every possible means to take steps to lay up reasonable stocks and not to cut down stocks. There must be a fear that if a decision against traders is taken on this occasion, in future they will be discouraged from laying up stock, and so the public may be inconvenienced and a shortage of goods may continue in the shops while goods may very easily be in plentiful supply.
    Mr. Jay: The hon. Member for Chippenham (Mr. Eccles) fairly stated the issue
    1150
    which was before the House when he said the question was whether this reduction in tax should take effect on 9th April, as he proposes, or on 15th June, as we propose. It is, of course, clear that if the reduction were dated back to 9th April provision would have to be made for the refunding of the money already paid in tax. Therefore, the proposal to effect the reduction also involves a proposal for refunding, which is actually not included in this Amendment. Those really are the alternatives before us.
    The hon. Member's Amendment is strictly confined to radio and, as I understand him, he argued that the concession which he proposes should be given for radio alone. I must say, straight away, that in our opinion that would be impossible. We could not possibly justify making this unusual and expensive concession solely for radio sets. The hon Member spoke of paper handkerchiefs and paper towels, which are also on the list, and he made a distinction there, but of course the reduction also includes clocks, watches, utility fur coats and kitchen furniture, and we are quite sure it would be inequitable to select one of these commodities and to make a concession for that commodity alone. I think that if I were to confine my remarks strictly to radio sets that would be the whole argument on which I should have to rest the case. However, I think that since my argument is that we cannot make this concession for radios in this way without making it for other goods, it would probably be for the convenience of the House if I stated the difficulty a little more widely.
    We all approach this problem with the wish to overcome the difficulty, as did the hon. Member for Chippenham and the other hon. Gentlemen who have spoken; and I must say candidly that I approached it in that way myself. The more one looks into this proposed solution, however, the more impracticable, I am afraid, it turns out to be. In the first place, the difficulty arises inevitably from the decision which we made—I think in accordance with the wishes of most hon. Members—to make this reduction in tax. The hon. Member for Chippenham spoke of the Chancellor's mistake. I think the right course in these matters is to listen to what the House or Committee of the House wishes, and to make

    1151
    our final decisions in the light of the views of the House. It is an inevitable consequence of any reduction in Purchase Tax made in the light of those discussions that this difficulty should arise; and the only way of getting rid of the difficulty altogether would be to restore the former higher rate of tax.
    I am not sure whether the hon. Member quite realised that, of course, the difficulty applies not merely to reductions of Purchase Tax made in the course of the Budget Debate but applies to all reductions of Purchase Tax on all articles in all Budgets, where precisely the same problem in the reduction of the tax on stocks occurs. All former Governments and all former Chancellors—with one exception which I will deal with in a moment—have come to the conclusion, after the most prolonged joint examination of this problem by the Customs and Excise and retail organisations, that no solution can be found.
    I should like to set out ac well as I can just what the practical difficulty is. It arises from the point which the hon. Member for Chippenham himself explained, that, of course, if the wholesaler is to be given the right to recover from the Crown the money he has paid, the retailer must have the same right to recover it from the wholesaler, and the public, who have actually paid the higher price, must have the same right to recover from the retailer. That can only be done if there is a written record of every transaction, including the transactions between the retailers and the public. Unfortunately, when we are dealing with thousands of articles, including paper towels and handkerchiefs, and clocks and accessories for clocks and watches, radio sets, and kitchen furniture, we find that such records often do not exist.
    There is a further complication that the refund would have to apply, not to all the goods the public bought during the interim period, but only to those goods which the wholesaler sold to the retailer since the increase in Purchase Tax, and on which the higher tax had been paid; and, of course, the public would think that all the goods they had bought in the interim period ought to share in the refund. That would be a further source of confusion. The hon. Member may argue that, though that may
    1152
    be true of smaller and less identifiable objects, it is not true of radio sets because they are more identifiable and expensive, and also because they have a serial number. But we are not dealing only with radio sets; we are also dealing with valves and other things which would be sold separately, and if we made a concession for the sets we should have to make it for the valves also. Nor, as I suggested before, do we think it possible to leave out other items such as clocks and furniture.
    4.15 p.m.
    My hon. Friend the Member for Bexley (Mr. Bramall) mentioned electric and gas cookers, on which a concession was made last year. But that argument, actually, tells the other way. The gas and electric cookers were a case in which this refund should, if anywhere, have been administratively practicable, for they are large objects and expensive, and they are easily identifiable, and one might have expected records to have been kept of them. However, our experience last year showed, in fact, that it was a very unhappy experiment which nobody responsible for administrative efficiency would wish to repeat. The public expected to be refunded for any cooker bought in the interim period. The retailers, naturally, and quite rightly, refused to give the refund in any case where they bought the cookers before the Budget.
    A dispute thereupon followed between the retailers and the members of the public who had bought the cookers, and quite a number of people wrote to Customs and Excise calling upon them to umpire in the dispute, which, of course, they were unable to do because the evidence did not exist. A good deal of confusion did, unfortunately, result, in the course of which, almost certainly, some purchasers got money who ought not to have got it, and some money which was remitted by the Crown in fact never got into the hands of the people who ought to have had it. For all these reasons experience does show that this concession simply is not practicable.
    In addition to that, one must not overestimate the degree of loss or hardship which is incurred by retailers as a result of this difficulty. In the first place, of course most retailers sell a large number of lines of goods on only some of which

    1153
    the tax will be reduced at any one time. In the second place, it does not necessarily follow that, when the tax is reduced, it becomes impossible to sell the goods at the price including the tax which has been paid. That is certainly sometimes so, though admittedly by no means always. It may be argued, as the hon. Member for Chippenham argued, that that is not so with radio sets. I think that is why he selected radio sets—because, he says, there will undoubtedly be a large loss because it clearly has not been and will not be possible for the retailers to sell the sets bought earlier at the higher price. However, when we look into the actual size of the loss in the retail trade I do not think it is as large as has been suggested.
    The fact is that during the period when there was public argument going on about the Purchase Tax—between the Budget and my right hon. and learned Friend's decision to make a concession—sales to the retailers from the manufacturers fell very heavily indeed. The hon. Member for Chippenham questioned that. However, overwhelming evidence was furnished to us during the interim period—by the manufacturers, in particular, but it was borne out by other sections of the trade—that purchases by retailers had almost entirely dried up; and I must say that it was the evidence furnished to us on that point that was one of the considerations which we had very much in mind in deciding to grant the concession on the tax.
    I do not think anybody who has knowledge of the radio trade will deny that very few sets were bought by retailers at the 66⅔ per cent. rate. It is true, as the hon. Member also pointed out, that considerable stocks of sets did exist, and probably still do exist, which were bought at the 50 per cent. rate between the November Budget up to 9th April, and it may well be true that retailers will now have to sell sets at a price corresponding to the 33⅔ per cent. rate which bore tax at the 50 per cent. rate, but even if they are compelled to do that on a large number of sets they will not incur a net loss on those sets because the amount of tax is very much less than the normal retailer's margin.
    I believe it is the general case that on a set which sells to the public at £15,
    1154
    the cost to the retailer is only £10 That is to say, his profit margin amounts to about £5 out of £15. The difference between the tax at 50 per cent. and the tax at 33⅓ per cent. works out at only £1 13s., which is about one-third of his normal profit margin; so, if the retailer is compelled to sell under these conditions, he will not be suffering an out-of-pocket loss on these sets, but will be making for a time only about two-thirds of his normal profit margin. I am sure that if the radio retailers had to choose between retaining the higher rate of tax, with its obvious discouragement of sales, whilst overcoming this difficulty, or enjoying the stimulus to sales which will follow from the reduction, whilst having meanwhile to put up with this temporary reduction in profit, they would choose the latter alternative. The fact is that by the reduction in tax to 33⅓ per cent., we have given a very great stimulus and benefit to the whole trade—manufacturer, wholesaler and retailer. I am sure that the retailer would on balance prefer this course with its inevitable consequences, and for those reasons I must recommend this course to the House.
    Mr. Oliver Stanley: I think that my hon. Friends are extremely disappointed at the reply of the Economic Secretary. I would make it plain that it is not the fault of my hon. Friends or myself that this discussion is limited to radio sets. We had a new Clause on the Order Paper which would have dealt with matters in a wider aspect, and I think that probably the brief which the hon. Gentleman was studying was directed to answering that new Clause which would have been moved had we been fortunate enough to catch your eye, Mr. Speaker. We are, therefore, limited in this Amendment to the question of radio sets.
    There is nothing exceptional, as I am sure the hon. Gentleman himself will admit, in taking one particular article and in attempting in the case of that article to remedy an admitted injustice. That was done last year by the predecessor of the present Chancellor of the Exchequer with heaters. It was done, as the hon. Gentleman says, because it was thought that that case was easier to administer than others, and similarly we believe that to be so with radio sets. Nothing that the hon. Gentleman has said in his argument has destroyed our case that the

    1155
    unfortunate manufacturers have suffered a loss which they ought never to have incurred. It is all very well for the hon. Gentleman to talk about the great stimulus which the Government are giving to sales, by the reduction in the duty, but we must not forget that that follows on the great handicap which the Government in April placed upon the manufacturer and the retailer by actually increasing the rate of duty which the Government now propose to reduce.
    I emphasise that this is an exceptional case. It is not the type of case which we have had before in the Budget proposals, where a rate of duty has been left unchanged, to be reduced afterwards as a result of discussion in Committee. Here the rate of duty had been heavily increased in the Budget Resolutions, and-we were afterwards in Committee told that not only has that increase been abandoned but an actual decrease is to be made. The loss which these people have suffered now need never have occurred. The stimulus and the need for the stimulus to this industry might have been recognised by the Government in April, before the discussions in Committee had taken place. Grateful as we are to the Chancellor of the Exchequer for listening to our views, we should have been more grateful had he observed the facts of the situation before April and prevented this situation from arising, in which retailers suffered a loss due to the Government's action which need never, and should never, have taken place. It is, I submit, the prime duty of the Government to restore if they possibly can the loss which they themselves created. There was nothing in the speech of the hon. Gentleman which convinced us on this side that a really genuine effort was being made to meet the loss in respect of which they cannot absolve themselves from all responsibility.
    It may be that the bold experiment—but an experiment which this House welcomed—which was made by the Chancellor of the Exchequer last year in a similar case to try and undo some of the mischief done then, has not turned out completely successful in detail, but, surely, the answer of the present Chancellor should not have been weakly to abandon the effort of his predecessor, but to see whether he could not have improved upon it, and to have used the
    1156
    experience gained over the heaters last year to introduce, in respect of this article, a new arrangement which would have been satisfactory.
    We have been confronted in this case, as so often throughout discussions in this Debate, and particularly in the discussions on the Special Contribution, with admitted cases of hardship and injustice, with no attempt whatever from the Government Benches to defend them or to pretend that they are not unjust or hard—merely a refuge always in the administrative inconvenience of trying to promote justice for the individual. We, on this occasion, shall once again register in the Lobby our protest against the attitude of mind of the Treasury which today appears to place administrative convenience far beyond the dictates of justice or the needs of the individual.
    Sir Peter Bennett: On previous occasions I warned the Chancellor of the Exchequer that this sort of thing would happen, and on each occasion the same story has been repeated—that there are not enough brains in the Treasury to find a way of handling it. On each occasion I said that I had greater confidence in their administrative capacity than apparently the Chancellor has. I once more come back to that, because I am quite sure we shall have these things occurring again in the future. I am sure that they will continue to happen because we are not going to have a level of Purchase Tax which will never be altered.
    The day will come when those representing the workers will be told that if it were not for the Purchase Tax, goods could be sold that are not being sold, and the cry will come from Members representing working class constituencies, "Our men are out of work because of your Purchase Tax." When the Purchase Tax is reduced we shall have this problem again. I urge the Chancellor not to put it on one side and forget it. It is coming back like a boomerang. The Government may talk glibly about the retailer selling these sets and making a little less profit than he would otherwise have done. The retailer has very heavy expenses to pay, and he relies on the profit margin which he has worked out.
    4.30 p.m.
    The Purchase Tax on such things as motor cars is very substantial. I have

    1157
    been looking up my records, and as far as I remember, the tax ranges from £60 for the cheapest car to over £2,000 for the most expensive car. What hope is there of an industry carrying on when the dealers are faced with a Purchase Tax of between £ and £2,000? They will not order, and the industry will be brought to a standstill. Once more I warn the Chancellor that this problem must be thought out. We shall not let it rest, because in his interests, in the interests of the revenue, of the workers and of the retailers, this problem must be thought out and a solution found.
    Mr. Hollis: I should like, in a few sentences, to put before the House what seems to me to be the issue. There has been no denial by the Economic Secretary that there is an essential justice in this request, and, if my right hon. Friend the Member for West Bristol (Mr. Stanley) will forgive me for saying so, the Government cannot put forward the plea of administrative inconvenience. The Economic Secretary simply cannot shelter himself behind the argument which my hon. Friend the Member for Chippenham (Mr. Eccles) specifically hoped he would not use, that this injustice cannot be remedied, that justice cannot be done to one person, if justice cannot be done
    to everybody. (That argument would make sense only if it could be shown that the rest of the community would somehow suffer if this concession were made. One can imagine certain cases where, if a concession is made to a few people, it is to the disadvantage of the rest of the community. But it cannot be shown that the person who has purchased a handkerchief will be worse off if a person who has purchased a radio set gets a little bit of money back. Why, because it is impossible to refund the handkerchief purchaser, should it, therefore, be impossible to refund the radio purchaser? There is only one conceivable argument upon which the Government could rest their case, and that was torn to shreds by the Economic Secretary himself. The only conceivable argument would be that the amount of money involved was so large that it would upset the whole of the Government's budgetary arrangements; but the Economic Secretary made mincemeat of that argument when he admitted that the amount of money involved would be very small.
    Question put, "That the words proposed to be left out stand part of the proposed Amendment."
    The House divided: Ayes, 256; Noes, 129.

    Division No. 235.]

    AYES.

    [4.36 p.m.

    Adams, W. T. (Hammersmith, South)

    Champion, A. J.

    Evans, Albert (Islington, W.)

    Alpass, J. H.

    Chater, D.

    Evans, E. (Lowestoft)

    Attewell, H. C.

    Chetwynd, G. R.

    Evans, S. N. (Wednesbury)

    Awbery, S. S.

    Cluse, W. S.

    Ewart, R.

    Ayles, W. H.

    Cocks, F. S.

    Fairhurst, F.

    Ayrton Gould, Mrs. B.

    Coldrick, W.

    Farthing, W. J.

    Bacon, Miss A.

    Collindridge, F.

    Fernyhough, E.

    Balfour, A.

    Collins, V. J.

    Foot, M. M.

    Barnes, Rt. Hon. A. J.

    Colman, Miss G. M.

    Fraser, T. (Hamilton)

    Barstow, P. G.

    Cook, T. F.

    Freeman, Peter (Newport)

    Barton, C.

    Cooper, Wing-Comdr, G.

    Gallacher, W.

    Battley, J. R.

    Cove, W. G.

    Ganley, Mrs. C. S.

    Bechervaise, A. E.

    Crawley, A.

    Gibbins, J.

    Belcher, J. W.

    Cripps, Rt. Hon. Sit S.

    Gibson, C. W.

    Benson, G.

    Crossman, R. H. S.

    Gilzean, A.

    Berry, H.

    Daggar, G.

    Glanville, J. E. (Consett)

    Beswick, F.

    Daines, P.

    Gooch, E. G.

    Bing, G. H. C.

    Davies, Edward (Burslem)

    Gordon-Walker, P. C.

    Binns, J.

    Davies, Ernest (Enfield)

    Greenwood, A. W. J. (Heywood)

    Blackburn, A. R.

    Davies, Harold (Leek)

    Grenfell, D. R.

    Blyton, W. R.

    Davies, Haydn (St. Pancras, S.W.)

    Grey, C. F.

    Bowles, F. G. (Nuneaton)

    Davies, R. J. (Westhoughton)

    Griffiths, D. (Rother Valley)

    Braddock, Mrs. E. M. (L'pl. Exch'ge)

    Deer, G.

    Griffiths, W. D. (Moss Side)

    Braddock, T. (Mitcham)

    de Freitas, Geoffrey

    Guest, Dr. L. Haden

    Bramall, E. A.

    Delargy, H. J.

    Gunter, R. J.

    Brook, D. (Halifax)

    Dobbie, W.

    Guy, W. H.

    Brooks, T. J. (Rothwell)

    Dodds, N. N.

    Hall, Rt. Hon. Glenvil

    Brown, T. J. (Ince)

    Donovan, T.

    Hamilton, Lieut.-Col. R.

    Bruce, Maj. D. W. T.

    Dugdale, J. (W. Bromwich)

    Hannan, W. (Maryhill)

    Buchanan, Rt. Hon. G.

    Dye, S.

    Hardman, D. R.

    Burden, T. W.

    Ede, Rt. Hon. J. C.

    Hardy, E. A.

    Burke, W. A.

    Edwards, Rt. Hon. Sir C. (Bedwellty)

    Harrison, J.

    Carmichael, James

    Edwards, John (Blackburn)

    Haworth, J.

    Chamberlain, R. A.

    Edwards, W. J. (Whitechapel)

    Henderson, Joseph (Ardwick)

    Herbison, Miss M.

    Manning, C. (Camberwell, N.)

    Solley, L. J.

    Hicks, G.

    Manning, Mrs. L. (Epping)

    Sorensen, R. W.

    Holman, P.

    Marquand, H. A.

    Soskice, Rt. Hon. Sir Frank

    Holmes, H. E. (Hemsworth)

    Marshall, F. (Brightside)

    Sparks, J. A.

    Horabin, T. L.

    Mathers, Rt. Hon. George

    Stross, Dr. B.

    House, G.

    Mellish, R. J.

    Stubbs, A. E.

    Hoy, J.

    Middleton, Mrs. L.

    Swingler, S.

    Hubbard, T.

    Mikardo, Ian

    Sylvester, G. O.

    Hudson, J. H. (Ealing, W.)

    Millington, Wing-Comdr E. R.

    Symonds, A. L.

    Hughes, Emrys (S. Ayr)

    Mitchison, G. R.

    Taylor, R. J. (Morpeth)

    Hughes, Hector (Aberdeen, N.)

    Monslow, W.

    Taylor, Dr. S. (Barnet)

    Hughes, H. D. (W'lverh'pton, W.)

    Morrison, Rt. Hon. H. (Lewisham, E.)

    Thomas, D. E. (Aberdare)

    Hynd, H. (Hackney, C.)

    Moyle, A.

    Thomas, George (Cardiff)

    Hynd, J. B. (Attercliffe)

    Murray J. D.

    Thomas, I. O. (Wrekin)

    Irvine, A. J. (Liverpool)

    Nally, W.

    Thorneycroft, Harry (Clayton)

    Janner, B.

    Neal, H. (Clay Cross)

    Thurtle, Ernest

    Jay, D. P. T.

    Nichol, Mrs. M. E. (Bradford, N.)

    Tiffany, S.

    Jeger, G. (Winchester)

    Nicholls, H. R. (Stratford)

    Timmons, J.

    Jeger, Dr. S. W. (St. Pancras, S.E.)

    Noel-Buxton, Lady

    Titterington, M. F.

    Jenkins, R. H.

    O'Brien, T.

    Tolley, L.

    Jones, D. T. (Hartlepools)

    Oldfield, W. H.

    Usborne, Henry

    Jones, Elwyn (Plaistow)

    Oliver, G. H.

    Vernon, Maj. W. F.

    Jones, J. H. (Bolton)

    Paton, Mrs. F. (Rushcliffe)

    Viant, S. P.

    Jones, P. Asterley (Hitchin)

    Paton, J. (Norwich)

    Walker, G. H.

    Keenan, W.

    Peart, T. F.

    Wallace, G. D. (Chislehurst)

    Kenyon, C.

    Platts-Mills, J. F. F.

    Warbey, W. N.

    Key, Rt. Hon. C. W.

    Poole, Cecil (Lichfield)

    Watkins, T. E.

    Kinley, J.

    Popplewell, E.

    Watson, W. M.

    Kirkwood, Rt. Hon. D.

    Porter, E. (Warrington)

    Weitzman, D.

    Lang, G.

    Porter, G. (Leeds)

    Wells, P. L. (Faversham)

    Lawson, Rt. Hon. J. J.

    Pryde, D. J.

    Wells, W. T. (Walsall)

    Lee, F. (Hulme)

    Pursey, Comdr. H.

    Westwood, Rt. Hon. J.

    Lee, Miss J. (Cannock)

    Randall, H. E.

    Wheatley, Rt. Hn. John (Edinb'gh, E.)

    Leonard, W.

    Ranger, J.

    White, C. F. (Derbyshire, W.)

    Lever, N. H.

    Rankin, J.

    White, H. (Derbyshire, N.E.)

    Levy, B. W.

    Reeves, J.

    Whiteley, Rt. Hon. W.

    Lewis, J. (Bolton)

    Reid, T. (Swindon)

    Wigg, George

    Lipton, Lt.-Col. M.

    Rhodes, H.

    Wilkins, W. A.

    Logan, D. G.

    Ridealgh, Mrs. M.

    Willey, O. G. (Cleveland)

    Longden, F.

    Rogers, G. H. R.

    Williams, J. L. (Kelvingrove)

    Lyne, A. W.

    Ross, William (Kilmarnock)

    Williams, R. W. (Wigan)

    McEntee, V. La T.

    Royle, C.

    Williams, W. R. (Heston)

    McGhee, H. G.

    Scollan, T.

    Willis, E.

    McGovern, J.

    Scott-Elliott, W.

    Woodburn, Rt. Hon. A.

    Mack, J. D.

    Shackleton, E. A. A.

    Woods, G. S.

    McKay, J. (Wallsend)

    Sharp, Granville

    Yates, V. F.

    Mackay, R. W. G. (Hull, N.W.)

    Shurmer, P.

    Young, Sir R. (Newton)

    McKinley, A. S.

    Silverman, J. (Erdington)

    Younger, Hon. Kenneth

    McLeavy, F.

    Simmons, C. J.

    Mainwaring, W. H.

    Skeffington, A. M.

    TELLERS FOR THE AYES:

    Mallalieu, E. L. (Brigg)

    Skinnard, F. W.

    Mr. Pearson and

    Mallalieu, J. P. W. (Huddersfield)

    Smith, Ellis (Stoke)

    Mr. Richard Adams.

    Mann, Mrs. J.

    Snow, J. W.

    NOES.

    Agnew, Cmdr. P. G.

    Digby, S. W.

    Jarvis, Sir J.

    Amory, D. Heathcoat

    Dodds-Parker, A. D.

    Jeffreys, General Sir G.

    Anderson, Rt. Hn. Sir J. (Scot Univ.)

    Donner, P. W.

    Keeling, E. H.

    Assheton, Rt. Hon. R.

    Drewe, C.

    Lambert, Hon. G.

    Astor, Hon. M.

    Dugdale, Maj. Sir T. (Richmond)

    Langford-Holt, J.

    Baldwin, A. E.

    Eccles, D. M.

    Law, Rt. Hon. R. K.

    Barlow, Sir J.

    Eden, Rt. Hon. A.

    Lennox-Boyd, A. T.

    Bennett, Sir P.

    Fletcher, W. (Bury)

    Lipson, D. L.

    Birch, Nigel

    Fraser H. C. P. (Stone)

    Lloyd, Maj. Guy (Renfrew, E.)

    Boles, Lt.-Col. D. C. (Wells)

    Fraser, Sir I. (Lonsdale)

    Lloyd, Selwyn (Wirral)

    Bossom, A. C.

    Galbraith, Cmdr. T. D.

    Lucas, Major Sir J.

    Boyd-Carpenter, J. A.

    Gammans, L. D.

    Lucas-Tooth, Sir H.

    Braithwaite, Lt.-Comdr. J. G.

    Gates, Maj. E. E.

    MacAndrew, Col. Sir C.

    Bromley-Davenport, Lt.-Col. W.

    Glyn, Sir R.

    Macdonald, Sir P. (I. of Wight)

    Buchan-Hepburn, P. G. T.

    Grant, Lady

    Mackeson, Brig. H. R.

    Bullock, Capt. M.

    Granville, E. (Eye)

    McKie, J. H. (Galloway)

    Byers, Frank

    Grimston, R. V.

    Maclay, Hon. J. S.

    Challen, C.

    Gruffydd, Prof. W. J.

    Macpherson, N. (Dumfries)

    Channon, H.

    Harden, J. R. E.

    Manningham-Buller, R. E.

    Clarke, Col. R. S.

    Harris, F. W. (Croydon, N.)

    Marlowe, A. A. H.

    Clifton-Brown, Lt.-Col. G.

    Harvey, Air-Comdre. A. V.

    Marsden, Capt. A.

    Cooper-Key, E. M.

    Headlam, Lieut.-Col. Rt. Hon. Sir C.

    Marshall, D. (Bodmin)

    Crookshank, Capt. Rt. Hon. H. F. C.

    Henderson, John (Cathcart)

    Marshall, S. H. (Sutton)

    Crosthwaite-Eyre, Col. O. E.

    Hinchingbrooke, Viscount

    Mellor, Sir J.

    Crowder, Capt. John E.

    Hollis, M. C.

    Morris, Hopkin (Carmarthen)

    Cuthbert, W. N.

    Holmes, Sir J. Stanley (Harwich)

    Neven-Spence, Sir B.

    Davidson, Viscountess

    Hutchison, Lt.-Cm. Clark (E'b'rgh W.)

    Nicholson, G.

    De la Bère R.

    Hutchison, Col. J. R. (Glasgow, C.)

    Noble, Comdr. A. H. P.

    1160

    1161

    Nutting, Anthony

    Robinson, Roland

    Turton, R. H.

    Odey, G. W.

    Ross, Sir R. D. (Londonderry)

    Vane, W. M. F.

    Orr-Ewing, I. L.

    Savory, Prof. D. L.

    Wadsworth, G.

    Osborne, C.

    Smith, E. P. (Ashford)

    Wakefield, Sir W. W.

    Peaks, Rt. Hon. O.

    Smithers, Sir W.

    Ward, Hon. G. R.

    Peto, Brig. C. H. M.

    Spearman, A. C. M.

    Watt, Sir G. S. Harvie

    Pickthorn, K.

    Spence, H. R.

    Webbe, Sir H. (Abbey)

    Pitman, I. J.

    Stanley, Rt. Hon. O.

    Wheatley, Colonel M. J. (Dorset, E.)

    Ponsonby, Col. C. E.

    Stewart, J. Henderson (Fife E.)

    Williams, C. (Torquay)

    Poole, O. B. S. (Oswestry)

    Stoddart-Scott, Col. M.

    Williams, Gerald (Tonbridge)

    Prior-Palmer, Brig. O.

    Studholme, H. G.

    Willoughby de Eresby, Lord

    Ramsay, Maj. S.

    Sutcliffe, H.

    York, C.

    Rayner, Brig. R.

    Taylor, C. S. (Eastbourne)

    Reed, Sir S. (Aylesbury)

    Taylor, Vice-Adm. E. A. (P'dd't'n, S.)

    TELLERS FOR THE NOES:

    Reid, Rt. Hon. J. S. C. (Hillhead)

    Teeling, William

    Sir Arthur Young and

    Renton, D.

    Thornton-Kemsley, C. N.

    Major Conant.

    Roberts, P. G. (Ecclesall)

    Thorp, Brigadier R. A. F.

    Proposed words there inserted in the Bill.

    CLAUSE 24.—(Charge of income tax for 1948–49.)
    Sir Hugh Lucas-Tooth: I beg to move, in page 16, line 32, to leave out from "to," to "any," in line 33.
    This Amendment can be taken together with the Amendment, in line 34, after "1947–48,"to insert:
    "and passed before the passing of this Act."
    The point which is raised here is constitutional rather than financial. It arises out of the Ruling given by Mr. Speaker on the Report stage of the Gas Bill. The House may remember that one Clause of that Bill purported to impose a charge of Income Tax on certain payments to be made under that Bill, which would not in themselves be income for the purposes of the Income Tax Acts. It was necessary, therefore, if they were to be treated as income so to provide in some statutory Measure, and it was in fact provided in Clause 34—now Clause 35—of the Gas Bill. I have no complaint about the fact that the payments in question were to be subjected to a charge of Income Tax, which in itself was all quite proper. My point arises out of the point of Order which I raised with Mr. Speaker on that occasion, that the Clause purported to impose a charge of Income Tax and was not supported by a Resolution in Committee of Ways and Means. In reply, Mr. Speaker gave a carefully considered Ruling, the relevant part of it for present purposes being as follows:
    "Consequently the effective provision for imposing Income Tax on these payments has to be made by the Finance Bill, and Clause 24 (2) of the Finance (No. 2) Bill does, in fact, impose tax on these payments by reference to the present Gas Bill."
    1162
    Mr. Speaker then said:
    "There is nothing unprecedented in this form of procedure; it was adopted without objection in the comparable cases of the Transport Act and the Electricity Act, and also in other cases affecting the incidence of the tax, which occurred in advance of the imposition of the tax itself."—[OFFICIAL REPORT. 9th June, 1948, Vol. 451, c. 2192–3.]
    The result of Mr. Speaker's Ruling is that the Clause I am now seeking to amend, as it is a taxing provision, taxes by reference to what is stated in the Gas Bill. It will be seen that the words I seek to delete refer not only to the Gas Bill, but also to any Bill relating to agriculture during the present Session, or to any other enactment taking effect after the year 1947–48.
    4.45 p.m.
    Although taxing by reference is not a particularly desirable thing, I do not wish at the present time to take exception to that aspect of this Clause. It may be that there are occasions when legislation by reference is the most convenient way of doing what is required. What I am objecting to here is the principle that it is possible to tax by reference to an instrument which is not yet in existence. I have no objections to taxing by reference to an existing instrument, whether it is an Act of Parliament, an Order or any other instrument, but it seems wholly wrong to do so by the terms of some document which is not in existence, or which is still liable to be amended either here or in another place.
    Perhaps I may be allowed to give an illustration. Under the Wills Act, a person making a will is required to do so in a very particular manner. He has to sign the will in the presence of two witnesses, and they have to witness it in the present of each other. The purpose of that is to prevent anything in the nature of a fraud. A person making a will may include in it a reference to an existing

    1163
    document or an existing settlement. That is perfectly valid, because the terms of an existing document can be ascertained; but he is not allowed to make reference to a document he intends to make after the date of the will, for the very good reason that if he were allowed to do so he could avoid the stringent provisions of the Wills Act. For example, if he could say that property was to be left in accordance with a list he would make after the will, the door would be open to abuse or fraud. That is an illustration of my argument.
    The Constitution provides that a taxing Measure has to follow a very special procedure, and that procedure has been worked out in the course of centuries and designed for the protection of the subject. Before the subject can be charged, legislation has to pass through a particular form, which requires the prior approval of a Resolution of Ways and Means, and it seems to me that we should not allow the Government to drive a horse and cart through that old procedure by stating in the Finance Bill that the subject shall be charged in accordance with the provisions of a Bill which may be passed after the date of the Finance Bill.
    That would mean, in effect, that the Government could, if they wished, put a short Clause in a Bill to say the taxes for next year would be in accordance with whatever legislation happened to be passed during the Session, and by that procedure they would circumvent the entire system which has been built up. I am not saying that the Government have done that in this case, but it is a danger for which we should look, and it is growing. Mr. Speaker's Ruling showed that there were growing precedents, and we seek in this Amendment to say that, if the Government are to tax by reference, it must be something clearly determinable on the date that the taxing Act passes through this House. I hope the Government will indicate that if they cannot accept the Amendments as they stand, they will accept the principle of them and have suitable words inserted at another stage.
    Mr. I. J. Pitman: I beg to second the Amendment.
    The Financial Secretary to the Treasury (Mr. Glenvil Hall): This is the third time we have dealt with this matter, including, of course, the very detailed and
    1164
    lengthy Ruling which Mr. Speaker gave on 9th June, and to which the hon. Member for South Hendon (Sir H. Lucas-Tooth) referred. I do not know what I can say that will be of use. I can only repeat the arguments which I and others used upstairs when we dealt with this matter on the Gas Bill, and which I used again on Clause 24 of the Finance Bill during the Committee stage.
    It seems to me that the Opposition are labouring under a misapprehension in this matter. Clause 34 of the Gas Bill—now Clause 35—does not impose a tax at all. Mr. Speaker makes that quite clear. All that that Clause does is to say that certain payments to be made to the stockholders and passed in due course to the holders of securities shall be deemed to be income for the purposes of the Income Tax Acts. They are, in fact, final payments in lieu of dividends and interest. They are not strictly coming out of profits. They will come out of the global sums, which are there for the needs of the area boards and the Gas Council, as and when gas organisations pass to them. By common agreement upstairs they should rank as income to the recipient and, if they rank as income, they should be liable to Income Tax. The Gas Bill itself does not impose a charge or tax. If it did we agree that the matter is one for this House and not for a Standing Committee. On that Bill we only laid it down that the payments shall rank as income and be subject to the Income Tax code. This Bill imposes the tax, and even if the Gas Bill were passed, Clause 34 would be of no avail if this House did not later on agree in the Finance Bill to impose Income Tax afresh.
    Sir H. Lucas-Tooth: The right hon. Gentleman says that if this House does not later on agree to do certain things in the Finance Bill, Clause 34 would be of no avail. Does he mean by that that he is accepting my Amendment? That is the whole effect of my Amendment.
    Mr. Glenvil Hall: I was not, in fairness to the hon. Gentleman going to refer to the Amendment, because, if he works the Amendment out, he will find that it means nothing whatever. If the Gas Bill is passed before the Finance Bill, the Amendments, if accepted, will not alter the effect of Clause 24 (2); if the Gas Bill is passed afterwards, it will override any alteration we may make in Clause 24.
    Colonel Crosthwaite-Eyre: Before the right hon. Gentleman leaves that, will he say why it will override any alteration?
    Mr. Glenvil Hall: If the hon. and gallant Gentleman will read the Clause, he will see why. This Clause imposes a tax; Clause 34 of the Gas Bill links up with it. What the Finance Bill does is to impose Income Tax for the current year, because Income Tax is an annual tax; if it were not imposed, Clause 34 of the Gas Bill would be of no avail, for there would be no Income Tax to be levied. This Bill lays down that the annual Income Tax shall be levied for the year 1948–49 and that its rate shall be 9s. in the £.
    The change which the hon. Member for South Hendon proposes would have no effect in any way. That is the short answer to the points which have been made from the other side of the House. When the Ways and Means Resolution was passed on the first day, it covered this matter. In the proper way upstairs, we have linked these payments in the Gas Bill to the Income Tax code and here in proper form in this Bill we impose the tax. There is nothing unconstitutional or extraordinary about that. Nothing was said when the National Insurance Act, 1946, was passed, though the same provision was made with regard to the payments which were not being made, and would not be made, until 1948. Subsequently we agreed that certain payments under that Act should rank for all purposes as income and be subject to Income Tax as and when levied. Therefore, I ask the House to reject this Amendment.
    Mr. David Renton: I can quite appreciate that when there are two Bills passing through the House, not only in the same Session but at the same time, it is necessary to do something to make the two dovetail. This Clause as at present drafted, however, appears to go further than that. The Financial Secretary mentioned just now by way of analogy the position that arose under the National Insurance Act, 1946, and how that was dovetailed into the Finance Act of that year. I may be wrong, but if my recollection serves me right when the Finance Act, 1946, referred to the National Insurance Act, it did so in those terms. I do not think that it used
    1166
    the very broad expression which is used here, namely,
    "Subject to the provisions of any Act of the present Session relating to gas or agriculture. …
    That brings me a stage further and arouses another doubt in my mind, which is, why are the words "or agriculture" inserted? Apart from the Agricultural Wages Bill, which, I believe, is before another place, I do not know of any Bill relating to agriculture which at this moment is passing through either House of Parliament. There are certain principles of legislation which apply to all Bills which come before us. We should try as far as possible to be consistent in dealing with those principles. The outstanding principle, of course, is that when we make laws the people who have to obey them should know exactly where they stand and we should not leave them in any state of uncertainty The very wide use of these words
    "… any Act of the present Session relating to gas or agriculture"
    must create some uncertainty in the minds of those, whether they be farmers, landowners or investors, who have planned their businesses in relation to agriculture, when they study this Finance Bill. That principle—that we should try to avoid creating uncertainty in the minds of those who have to obey the laws that we make—should most particularly be applied and very conscientiously adhered to, when we are dealing with financial matters. For those reasons, I suggest that the Financial Secretary has not really answered the point raised by my hon. and gallant Friend.
    5.0 p.m.
    Colonel Crosthwaite-Eyre: I do not think the Financial Secretary has attempted to meet the case put forward by my hon. Friend the Member for South Hendon (Sir H. Lucas-Tooth). He said that there were two real points to be met, but the right hon. Gentleman did not attempt to meet either of them. He skated over the first one by saying that it was agreed upstairs that Clause 34 did not need much comment. I hope the right hon. Gentleman will cast his mind back and remember how much comment was made on Clause 34, particularly by my right hon. Friend the Member for Bournemouth (Mr. Bracken). If he is suggesting that no comment was made, may I remind him of what was said? First, there was an

    1167
    appeal to the Chair to rule that the Clause was out of Order. Then subsequently he said that it was agreed—and here I will use the same phrase as he used—that the matter should be referred to Mr. Speaker. In fact, the simple proposition remains that Clause 34 of the Gas Bill imposes a tax. The right hon. Gentleman says it does not, but I would remind him that it makes certain payments, particularly payments by the stockholder's representative, subject to Income Tax. That must mean that it is subject to a charge.
    Mr. Glenvil Hall: To begin with, I did not say that we had an argument upstairs on Clause 34 from the constitutional point of view. I did not refer to that at all. What I said was that it was generally agreed upstairs that these payments were equivalent to income and should, therefore, be subject to taxation. I went on to quote Mr. Speaker's Ruling and said that Clause 34 does not impose a tax but brings these payments within the ambit of the Income Tax code.
    Colonel Crosthwaite-Eyre: If the right hon. Gentleman puts the point in that way, I quite agree with him, but I would remind him of the first words of Clause 34, which are:
    ". … shall be deemed to be income for all purposes of the Income Tax Acts."
    Therefore, it brings these payments within the ambit of the Income Tax Acts. I hope he is right in saying that Income Tax will not be imposed next year—
    Mr. Deputy-Speaker (Major Milner): The hon. and gallant Gentleman cannot discuss the Gas Bill.
    Colonel Crosthwaite-Eyre: With respect, Mr. Deputy-Speaker, the Subsection which we are discussing refers particularly to Measures affecting gas or agriculture. Therefore, I hope that we may at least refer to the specific case that was advanced by the mover of this Amendment. All I was trying to say was that while the right hon. Gentleman says that the Clause does not impose a tax, it brings the matter within the ambit of a tax in respect of all those particular payments, and, therefore, one should be clear of the exact definition which was intended when the right hon. Gentleman used the word "impose."
    1168
    We were told that the crux of the matter was whether we in this House were going to admit that taxation should be made by reference; in other words, that a series of payments might be brought within the ambit of a tax before the necessary Resolutions or, alternatively, before the necessary Finance Bill has been introduced in this House. I think it will be agreed that Clause 34 was published in January; we had the Financial Resolutions in only April, and the Finance Bill is still going through this House. Yet, at the same time, all these payments have been brought within the ambit of Income Tax. The right hon. Gentleman went on to say that the House can agree at a later date to a question of taxation. With that I thoroughly agree. All we are asking by these Amendments is that where certain payments are brought within the ambit of Income Tax, it should be left to this House later on to confirm that taxation.
    As I understand the right hon. Gentleman, he argued that even if the House did not accept it, these payments would still be brought within the ambit of the Income Tax Acts because of the phrasing of Clause 34 (2). I must admit that I was quite unable to follow that argument. If these Amendments are accepted, then it will be open to this House to say that payments made by the stockholders' representative shall be taxed or shall not be taxed. But if the Bill is left as it is drafted, then we are committing ourselves to taxation by reference, and we are saying that one of the most jealously guarded privileges of this House, which is that it shall impose taxation, shall be delegated to some Committee upstairs. That seems to me to be the very simple issue.
    We on this side of the House have no objection to the right hon. Gentleman's proposition that it is proper to bring certain payments within the ambit of the Income Tax Acts. What we dislike is that that decision should be taken by reference, long before any Measure is tabled in this House to justify or to legalise it. Therefore, I hope that before we leave this Amendment we shall have a somewhat clearer explanation of why the Government thought it necessary to adopt this procedure, and why the right hon. Gentleman has not thought fit to answer any of the objections raised by the mover of this Amendment.
    Mr. Charles Williams: I was interested in the method by which the Financial Secretary tried to pull the wool over the eyes of the House on this Amendment, although he was not very successful. If I understand the position correctly, this is what is happening: the Government promise the unfortunate holders of Gas Stock that they will be given certain compensation. That compensation covers capital and a certain amount of income accruing. I think that is right, but if the right hon. Gentleman wishes to interrupt me I will certainly give way. I think the point is that a certain amount of compensation to be paid under Clause 34 of the Gas Bill will cover income or, rather, profits which might have accrued to those stockholders.
    The point, as I see it, is that not being quite certain whether what they were doing upstairs was right, the Government are seeking—to use a phrase of the former Chancellor of the Exchequer—to claw a bit more into the Treasury. The Financial Secretary has said that whatever became of these Amendments, nothing would happen, because the Gas Bill is not yet law and possibly may not be law until after this Finance Bill becomes law. Surely, that is only an argument for amending the Gas Bill in another place so as to deal with this not very honourable transaction.
    The Chancellor of the Exchequer is always telling us what a good and righteous man he is. Here is an opportunity for him to undo something which would hardly pass in ordinary business circles. Whether he will do it or not I do not know, but I rather doubt it because, although he was boasting earlier today of his consistency, he has shown that consistency by never wishing to do his best by the taxpayer. Why is agriculture mentioned in this Clause at all? The hon. Member for Huntingdon (Mr. Renton), the intelligent representative of the leading Liberal Party, has said that so far as he knows there is no major Agriculture Bill before Parliament at the moment. Why refer to agriculture? Is this a hidden way of carrying on the Chancellor's policy of attacking agriculture? Is there another Agriculture Bill to be forced through quickly, between now and the beginning of August, which will handicap agriculture still further? If nothing of that sort is contemplated, why not take agriculture out of the Clause altogether? The words of the Clause cannot
    1170
    be simply mere verbiage: they must mean that there is something peculiar going on.
    Mr. Glenvil Hall indicated dissent.
    Mr. Williams: The Financial Secretary shakes his head, but I believe there is a good deal more behind these words than he is willing to admit.
    Mr. Glenvil Hall: The only thing behind the words is the unfortunate assumption that the hon. Gentleman does not follow the proceedings of Parliament, because there is an Agriculture (Scotland) Bill before another place which, I believe, got its Third Reading there yesterday.
    Mr. Williams: The right hon. Gentleman pointed out that I do not attend to my Parliamentary duties, but I do my best. I do not do what he repeatedly does—try to get the House to pass a Clause which he knows nothing whatever about and on which he has not got a brief. I have found the right hon. Gentleman out on many occasions, as the columns of HANSARD will show. If there is any Member of the House who is unjustified in telling others that they do not attend to their duties it is the right hon. Gentleman who, by his past performances, has shown that he does not know his own job.
    Let me refer to the Agriculture (Scotland) Bill, if that is the trouble. It is not within my province to know the whole of the contents of that Bill, but it would not be beyond me to get to know something about it. I would remind the right hon. Gentleman that a few minutes ago I said "major Agriculture Bill." Does the right hon. Gentleman mean that through the Agriculture (Scotland) Bill the Government mean to impose harsher terms on the Scots than on the English? If there are any Scotsmen present, I hope they will take notice, because I warn them to be on the look-out for the right hon. Gentleman in his dealings with them.
    Having dealt with that interruption, perhaps I may now come to the further point, why the House should be asked to accept this Clause. It is not a straight piece of legislation; it is not legislation of the ordinary type, which will enable an ordinary Member of Parliament to explain to his constituents what precisely is taxation. It is an attempt at legislation which will carry with it a curious reaction on

    1171
    different Bills at different times. It is an attempt by the clever people at the Treasury to get a little more money from those people who are being dispossessed of their shares in certain industries. If there is any real standard of honesty in the Treasury at present, I hope the Amendment will be accepted, because it cannot do much harm. There has been no claim from the Government that it will bring them large sums of money. This is one more of the small irritants which the Government are now placing upon industry. Until a short time ago I thought the Chancellor was a man of very high standing and I ask him, on this occasion, at any rate, to go back to that old standard, which he held for a time in the last Parliament, and help to restore British credit by accepting the Amendment, rather than shelter himself behind the rather mean little excuses which have already been put forward on behalf of the Government.
    5.15 p.m.
    Mr. Assheton: I think the House should be grateful to my hon. Friend the Member for South Hendon (Sir H. Lucas-Tooth) for having raised this extremely interesting constitutional point. I am not myself satisfied that the answer which the Financial Secretary has given is satisfactory, because I believe the wording of the Clause is somewhat different from the Act of 1947, to which the right hon. Gentleman referred. He said there was a precedent, and I looked at the Act of 1947 to see what it was. I find that the words in this Bill do not find a place in the Act of 1947, Section 14 (2) of which—
    Mr. Glenvil Hall: It is Section 27 of the 1946 Act.
    Mr. Assheton: I am referring to the 1947 Act, which contains a similar provision:
    "… and of any enactment which has effect only after the end of the year 1947–48."
    These words do not appear in last year's Act: the Bills dealing with transport and electricity were then before the House. What is the distinction between what we are asked to pass now, and what we passed last year? Does the argument on which the right hon. Gentleman based his precedent hold good, seeing that it is not the same this year as it was last
    1172
    year? Why is agriculture brought into this Clause at all? What part of the Agriculture (Scotland) Bill necessitates bringing the word "agriculture" into this Clause? I have not the slightest idea, and think it would be convenient if the right hon. Gentleman would tell us what is the significance of the word "agriculture." We know the significance of "gas," because some of us have gathered what took place in the Standing Committee upstairs. Various references have been made to it since. The Agriculture (Scotland) Bill has not been nearly so much before the House and we do not know what the point at issue may be.
    The main constitutional objection is that there appears to us—if we are wrong I hope that the Chancellor will tell us why—that the Government are taking power here to impose taxation otherwise than through the normal financial procedure of this House. The financial arrangements of the House are very carefully worked out and have been very carefully guarded, and it would be deplorable if, through some Bill other than the Finance Bill, taxation could be imposed. Amendments might be made in the other place, or Heaven knows what. It would be a most unfortunate development. I hope that the Financial Secretary will enlighten us.
    Mr. Pickthorn: What is the argument for making these words so extremely general? On the face of it, there seems to be no reason for doing so except that all Governments, and this Government more than any previous Government, are in the habit of taking powers to do not only what is in contemplation but to do that unguessable more which they may vaguely forbode as ejusdem generis. If that is the only reason for putting in these words, it is a very gross occasion for extending that error that it should be in the course of a Finance Bill and in the course of putting taxation upon the people.
    Why would it not be enough in this Subsection to refer to the two specific Bills about which we already know, the Gas Bill and, as we now understand, the Agriculture (Scotland) Bill? Is it really conceivable that there should be some new Bill of which we as yet know nothing dealing with one of those two topics, and which might, between now and August, be brought in, in such a way that—well,

    1173
    I will not say that people would be taxed, because I do not wish to be disrespectful to the Chair? I understand that the Chair has made a distinction, which I do not quite follow, between putting a tax upon people or things, and bringing people or things within the ambit of a tax. So I will say, so as to extend the ambit of a tax. Here, presumably, if these words were omitted, or if they were less general, the result would be that some people who would otherwise pay tax, as the Bill stands, would not pay it. If that is not imposing taxation it is very difficult to know what it is—at least extending the ambit.
    What I have just said is perhaps an unnecessary putting into my own words of what has already been asked. The thing which I think had not been asked by anyone else and which I venture this once to repeat is, Why the generality? Upon any of the arguments there seems no reason why the reference in line 32 should be to anything other than the existing Bills relating to gas and Scottish agriculture and not vaguely to any such Bills in the course of the present Session, the length or the shortness of which lies, I was going to say "on the knees of the gods" but really in the subconsciousness of the Lord President of the Council. Why should it be necessary to take that extension of power?
    Mr. Glenvil Hall: Perhaps I can answer briefly the points which have been put in this discussion. I will take first the point made by the right hon. Member for the City of London (Mr. Assheton). He asked me, referring to last year's Finance Act, why the words
    "any enactment which has effect only after the end of the year"
    were inserted. The answer is that those words were put there because of the passage into law during that Session of the Agriculture Act, 1947. Part II of that Act was to come into force under an order in council. The order in council was not put into operation, so Part II did not come into effect until 1st March, 1948. Therefore, the imposition of any taxation for 1947–48 did not apply. What we sought to do, and what the Act did, was to ensure that certain payments which accrued under the terms of the provisions of the Agriculture Act, 1947, did come within, and were reckoned for the purpose of, Income Tax. We did not
    1174
    levy the tax on them for 1947–48, and therefore the Bill had to make provision for Income Tax to be levied on those payments in any subsequent year.
    The safeguard here is that these words are not general but pretty specific. They can only refer to any enactment passed in a particular Session and can refer to such enactment only if provision is made, by leave and order of the House, for these payments to be reckoned and, when they are paid, to—
    Mr. Pickthorn: I think the right hon. Gentleman has twice used this odd phrase "by leave of the House," as though it were a technical phrase. What Bill is not introduced by leave of the House?
    Mr. Glenvil Hall: The assertion seemed to be implied, and was quite definitely, in what the right hon. Gentleman said, that it would be possible for the Treasury or the Inland Revenue to assume that certain payments were liable to tax, and to levy taxation without the permission of this House. That is not so.
    Mr. Assheton: Is that the proper financial procedure?
    Mr. Glenvil Hall: The proper financial procedure was followed when the National Insurance Act, 1946, was passed. The same thing happened then. If the right hon. Gentleman will turn to Section 27 of the Finance Act, 1946, he will find that the same procedure was followed. It was there decided that certain payments and certain benefits, which accrued to individuals under the provisions of the National Insurance Act, should be reckoned as the income of the recipients and be liable to Income Tax for subsequent years. Those payments will not be made, will not begin to be made, until this year, 1948; yet the House, in its wisdom, was legislating in 1946 that payments to be made in 1948, as and when they were made, should be reckoned as income and be liable to be taxed under the Income Tax code.
    In the following year, in the Agriculture Act, 1947, under which the Minister might take over a farm, it was laid down that certain payments which might be made should be notionally or actually considered as rent, and therefore as income, and thus become liable to Income

    1175
    Tax. This year the reference is to the Agriculture (Scotland) Bill, which is the Scottish counterpart of the Agriculture Act, 1947. The whole thing is perfectly simple—[HON. MEMBERS: "Oh."] Well, I hope that, after my explanation, the House will agree that there is nothing unusual in what has been done and that it is the proper thing to do. I hope that the House will reject the Amendment.
    Sir H. Lucas-Tooth: The right hon. Gentleman said in the course of his speech that these words were strictly limited. Will he say what limit there is at all as regards future legislation—we are only dealing with future legislation—on the words:
    "to any enactment which has effect only after the end of the year 1947–43"?
    Is there any limit?
    Mr. Glenvil Hall: It is limited in that it must be an enactment—[Interruption.]
    Oh, yes,—an enactment which has been passed. I have given the House the enactments which have been passed and which, by certain provisions therein, will bring them within the ambit of Clause 24.
    Mr. Assheton: Where does it say that the enactment must have been passed?
    Mr. Pitman rose—
    Mr. Deputy-Speaker: The hon. Gentleman has already spoken.
    Hon. Members: No.
    Mr. Deputy-Speaker: The hon. Gentleman seconded the Amendment.
    Question put, "That the words proposed to be left out stand part of the Bill."
    The House divided: Ayes, 262; Noes, 142.

    Division No. 236.]

    AYES

    [5.32 p.m.

    Acland, Sir Richard

    Crawley, A.

    Guy, W. H.

    Adams, W. T. (Hammersmith, South)

    Cripps, Rt. Hon. Sir S.

    Hale, Leslie

    Alpass, J. H.

    Crossman, R. H. S.

    Hall, Rt. Hon. Glenvil

    Attewell, H. C.

    Daggar, G.

    Hamilton, Lieut.-Col. R.

    Awbery, S. S.

    Gaines, P.

    Hannan, W. (Maryhill)

    Ayles, W. H.

    Davies, Edward (Burslem)

    Hardman, D. R.

    Ayrton Gould, Mrs. B.

    Davies, Ernest (Enfield)

    Hardy, E. A.

    Bacon, Miss A.

    Davies, Harold (Leek)

    Harrison, J.

    Balfour, A.

    Davies, Haydn (St. Pancras, S.W.)

    Haworth, J.

    Barnes, Rt. Hon. A. J.

    Davies, R. J. (Westhoughton)

    Herbison, Miss M.

    Barstow, P. G.

    Deer, G.

    Hicks, G.

    Barton, C.

    de Freitas, Geoffrey

    Holman, P.

    Battley, J. R.

    Delargy, H. J.

    Holmes, H. E. (Hamsworth)

    Bechervaise, A. E.

    Dobbie, W.

    Horabin, T. L.

    Ballenger, Rt. Hon. F. J.

    Dodds, N. N.

    House, G.

    Benson, G.

    Donovan, T.

    Hoy, J.

    Berry, H.

    Driberg, T. E. N.

    Hubbard, T.

    Beswick, F.

    Dugdale, J. (W. Bromwich)

    Hudson, J. H. (Ealing, W.)

    Bevan, Rt. Hon. A. (Ebbw Vale)

    Durbin, E. F. M.

    Hughes, Hector (Aberdeen, N.)

    Bing, G. H. C.

    Dye, S.

    Hughes, H. D. (W'lverh'pton, W.)

    Binns, J.

    Ede, Rt. Hon. J. C.

    Hynd, H. (Hackney, C.)

    Blenkinsop, A.

    Edwards, Rt. Hon. Sir C. (Bedwellty)

    Hynd, J. B. (Attercliffe)

    Blyton, W. R.

    Edwards, John (Blackburn)

    Irvine, A. J. (Liverpool)

    Bowles, F. G. (Nuneaton)

    Edwards, N. (Caerphilly)

    Jay, D. P. T.

    Braddock, Mrs. E. M. (L'pl. Exch'ge)

    Evans, Albert (Islington, W.)

    Jeger, Dr. S. W. (St Pancras, S.E.)

    Braddock, T. (Mitcham)

    Evans, E. (Lowestoft)

    Jenkins, R. H.

    Bramall, E. A.

    Evans, S. N. (Wednesbury)

    Jones, D. T. (Hartlepools)

    Brook, D. (Halifax)

    Ewart, R.

    Jones, Elwyn (Plaistow)

    Brooks, T. J. (Rothwell)

    Fairhurst, F.

    Jones, P. Asterley (Hitchin)

    Brown, T. J. (Ince)

    Farthing, W. J.

    Keenan, W.

    Bruce, Maj. D. W. T.

    Fernyhough, E.

    Kenyon, C.

    Burden, T. W.

    Foot, M. M.

    Key, Rt. Hon. C. W.

    Burke, W. A.

    Fraser, T. (Hamilton)

    King, E. M.

    Carmichael, James

    Freeman, Peter (Newport)

    Kinley, J.

    Chamberlain, R. A.

    Gallacher, W.

    Kirkwood, Rt. Hon. D.

    Champion, A. J.

    Ganley, Mrs. C. S.

    Lawson, Rt. Hon. J. J.

    Chater, D.

    Gibbins, J.

    Lee, F. (Hulme)

    Chetwynd, G. R.

    Gibson, C. W.

    Lee, Miss J. (Cannock)

    Cluse, W. S.

    Gilzean, A.

    Leonard, W.

    Cobb, F. A.

    Glanville, J. E. (Consett)

    Leslie, J. R.

    Cocks, F. S.

    Gooch, E. G.

    Lever, N. H.

    Coldrick, W.

    Greenwood, A. W. J. (Heywood)

    Levy, B. W.

    Collindridge, F.

    Grenfell, D. R.

    Lipson, D. L.

    Collins, V. J.

    Grey, C. F.

    Lipton, Lt.-Col. M.

    Colman, Miss G. M.

    Griffiths, D. (Rother Valley)

    Logan, D. G.

    Cook, T. F.

    Griffiths, W. D. (Moss Side)

    Longdon, F.

    Cooper, Wing-Comdr. G.

    Guest, Dr. L. Haden

    Lyne, A. W.

    Cove, W. G.

    Gunter, R. J.

    McEntee, V. La T.

    McGhee, H. G.

    Porter, G. (Leeds)

    Tiffany, S.

    McGovern, J.

    Pritt, D. N.

    Timmons, J.

    Mckay, J. (Wallsend)

    Pryde, D. J.

    Titterington, M. F.

    Mackay, R. W. G. (Hull, N.W.)

    Pursey, Comdr. H.

    Tolley, L.

    McKinley, A. S.

    Randall, H. E.

    Turner-Samuels, M.

    McLeavy, F.

    Ranger, J.

    Osborne, Henry

    Macpherson, T. (Romford)

    Rankin, J.

    Vernon, Maj. W. F.

    Mainwaring, W. H.

    Reeves, J.

    Viant, S. P.

    Mallalieu, E. L. (Brigg)

    Reid, T. (Swindon)

    Walker, G. H.

    Mann, Mrs. J.

    Rhodes, H.

    Wallace, G. D. (Chislehurst)

    Manning, C. (Camberwell, N.)

    Ridealgh, Mrs. M.

    Warbey, W. N.

    Manning, Mrs. L. (Epping)

    Rogers, G. H. R.

    Watkins, T. E.

    Marquand, H. A.

    Ross, William (Kilmarnock)

    Watson, W. M.

    Marshall, F. (Brightside)

    Royle, C.

    Weitzman, D.

    Mathers, Rt. Hon. George

    Scollan, T.

    Wells, P. L. (Faversham)

    Mellish, R. J.

    Scott-Elliott, W.

    Wells, W. T. (Walsall)

    Middleton, Mrs. L.

    Shackleton, E. A. A.

    Westwood, Rt. Hon. J.

    Millington, Wing-Comdr. E. R.

    Sharp, Granville

    Wheatley, Rt. Hn. John (Edinb'gh, E.)

    Mitchison, G. R.

    Shurmer, P.

    White, C. F. (Derbyshire, W.)

    Monslow, W.

    Silverman, J. (Erdington)

    White, H. (Derbyshire, N.E.)

    Morrison, Rt. Hon. H. (Lewisham, E.)

    Simmons, C. J.

    Whiteley, Rt. Hon. W.

    Moyle, A.

    Skeffington, A. M.

    Wilkes, L.

    Murray J. D.

    Skinnard, F. W.

    Wilkins, W. A.

    Nally, W.

    Smith, C. (Colchester)

    Willey, F. T. (Sunderland)

    Neal, H. (Clay Cross)

    Smith, Ellis (Stoke)

    Willey, O. G. (Cleveland)

    Nichol, Mrs. M. E. (Bradford, N.)

    Snow, J. W.

    Williams, J. L. (Kelvingrove)

    Nicholls, H. R. (Strafford)

    Salley, L. J.

    Williams, R. W. (Wigan)

    Noel-Buxton, Lady

    Sorensen, R. W.

    Williams, W. R. (Heston)

    Oldfield, W. H.

    Soskice, Rt. Hon. Sir Frank

    Willis, E.

    Oliver, G. H.

    Sparks, J. A.

    Wilson, Rt. Hon. J. H.

    Orbach, M.

    Stross, Dr. B.

    Woods, G. S.

    Palmer, A. M. F.

    Stubbs, A. E.

    Wyatt, W.

    Parkin, B. T.

    Swingler, S.

    Yates, V. F.

    Paton, Mrs. F. (Rushcliffe)

    Sylvester, G. O.

    Young, Sir R. (Newton)

    Paton, J. (Norwich)

    Symonds, A. L.

    Younger, Hon. Kenneth

    Pearson, A.

    Taylor, R. J. (Morpeth)

    Zilliacus, K.

    Pearl, T. F.

    Thomas, D. E. (Aberdare)

    Piratin, P.

    Thomas, George (Cardiff)

    TELLERS FOR THE AYES:

    Poole, Cecil (Lichfield)

    Thomas, I. O. (Wrekin)

    Mr. Joseph Henderson and

    Popplewell, E.

    Thorneycroft, Harry (Clayton)

    Mr. Richard Adams.

    Porter, E. (Warrington)

    Thurtle, Ernest

    NOES.

    Agnew, Cmdr. P. G.

    Fraser, Sir I. (Lansdale)

    Maclay, Hon. J. S.

    Amory, D. Heathcoat

    Galbraith, Cmdr. T. D.

    Macpherson, N. (Dumfries)

    Anderson, Rt. Hn. Sir J. (Scot Univ.)

    Gammans, L. D.

    Manningham-Buller, R. E.

    Assheton, Rt. Hon. R.

    Glyn, Sir R.

    Marlowe, A. A. H.

    Astor, Hon. M.

    Comme-Duncan, Col. A.

    Marsden, Capt. A.

    Baldwin, A. E.

    Grant, Lady

    Marshall, D. (Bodmin)

    Barlow, Sir J.

    Granville, E. (Eye)

    Marshall, S. H. (Sutton)

    Beamish, Maj. T. V. H.

    Gridley, Sir A.

    Mellor, Sir J.

    Bennett, Sir P.

    Grimston, R. V.

    Molson, A. H. E.

    Birch, Nigel

    Gruffydd, Prof. W. J.

    Morris, Hopkin (Carmarthen)

    Boles, Lt.-Col. D. C. (Wells)

    Harden, J. R. E.

    Nicholson, G.

    Boyd-Carpenter, J. A.

    Hare, Hon. J. H. (Woodbridge)

    Noble, Comdr. A. H. P.

    Bracken, Rt. Hon. Brendan

    Harris, F. W. (Croydon, N.)

    Nutting, Anthony

    Braithwaite, Lt.-Comdr. J. G.

    Harvey, Air-Comdre. A. V.

    Odey, G. W.

    Bromley-Davenport, Lt.-Col. W.

    Headlam, Lieut.-Col. Rt. Hon. Sir C.

    Orr-Ewing, I. L.

    Buchan-Hepburn, P. G. T.

    Hinchingbrooke, Viscount

    Osborne, C.

    Bullock, Capt. M.

    Hollis, M. C.

    Peaks, Rt. Hon. O.

    Byers, Frank

    Holmes, Sir J. Stanley (Harwich)

    Peto, Brig. C. H. M.

    Challen, C.

    Hope, Lord J.

    Pickthorn, K.

    Clarke, Col. R. S.

    Howard, Hon. A.

    Pitman, I. J.

    Clifton-Brown, Lt.-Col. G.

    Hurd, A.

    Ponsonby, Col. C. E.

    Conant, Maj. R. J. E.

    Hutchison, Lt.-Cm. Clark (E'b'rgh W.)

    Poole, O. B. S. (Oswestry)

    Crookshank, Capt. Rt. Hon. H. F. C.

    Hutchison, Col. J. R. (Glasgow, C.)

    Prior-Palmer, Brig. O.

    Crosthwaite-Eyre, Col. O. E.

    Jarvis, Sir J.

    Raikes, H. V.

    Crowder, Capt. John E.

    Jeffreys, General Sir G.

    Rayner, Brig. R.

    Cuthbert, W. N.

    Joynson-Hicks, Hon. L. W.

    Reed, Sir S. (Aylesbury)

    Davidson, Viscountess

    Keeling, E. H.

    Reid, Rt. Hon. J. S. C. (Hillhead)

    De la Bère, R.

    Lambert, Hon. G.

    Roberts, P. G. (Ecclesall)

    Digby, S. W.

    Lancaster, Col. C. G.

    Robinson, Roland

    Dodds-Parker, A. D.

    Langford-Holt, J.

    Ropner, Col. L.

    Donner, P. W.

    Law, Rt. Hon. R. K.

    Ross, Sir R. D. (Londonderry)

    Grayson, G. B.

    Legge-Bourke, Maj. E. A. H.

    Sanderson, Sir F.

    Drewe, C.

    Lloyd, Maj. Guy (Renfrew, E.)

    Savory, Prof. D. L.

    Dugdale, Maj. Sir T. (Richmond)

    Lloyd, Selwyn (Wirral)

    Shepherd, W. S. (Bucklow)

    Duncan, Rt. Hn. Sir A. (City of Lond.)

    Low, A. R. W.

    Smith, E. P. (Ashford)

    Duthie, W. S.

    Lucas, Major Sir J.

    Smithers, Sir W.

    Eccles, D. M.

    Lucas-Tooth, Sir H.

    Spearman, A. C. M.

    Eden, Rt. Hon. A.

    Macdonald, Sir P. (I. of Wight)

    Spence, H. R.

    Fletcher, W. (Bury)

    Mackeson, Brig. H. R.

    Stanley, Rt. Hon. O.

    Fraser H. C. P. (Stone)

    McKie, J. H. (Galloway)

    Stewart, J. Henderson (Fife, E.)

    1178

    1179

    Stoddart-Scott, Col. M.

    Turton, R. H.

    Williams, C. (Torquay)

    Studholme, H. G.

    Vane, W. M. F.

    Williams, Gerald (Tonbridge)

    Sutcliffe, H.

    Wadsworth, G.

    Willoughby de Eresby, Lord

    Taylor, C. S. (Eastbourne)

    Wakefield, Sir W. W.

    York, C.

    Taylor, Vice-Adm. E. A. (P'dd't'n, S.)

    Ward, Hon. G. R.

    Teeling, William

    Watt, Sir G. S. Harvie

    TELLERS FOR THE NOES:

    Thorneycroft, G. E. P. (Monmouth)

    Webbe, Sir H. (Abbey)

    Sir Arthur Young and

    Thornton-Kemsley, C. N.

    Wheatley, Colonel M. J. (Dorset, E.)

    Major Ramsay.

    Thorp, Brigadier R. A. F.

    White, J. B. (Canterbury)

    CLAUSE 30.—(Farming, and other profits arising from land.)
    Mr. Turton: I beg to move, in page 21, to leave out lines 32 to 41.
    I should point out that the following Amendment in page 22, line 4, at the end, to insert,
    "and for the purposes of this section farming shall not include the growing of flowers, fruit and hops, the rearing of race horses, silver foxes, domestic rabbits or musk rats."
    is consequential on this Amendment and that both Amendments deal with the taxation of small farmers.
    Under the Clause the Chancellor is forcing all farmers, however small, to keep accounts and to be assessed under Schedule D. In Committee some of my hon. Friends moved an Amendment to relieve farmers from that obligation if the annual value of their farms is under £75, and the hon. Member for Brecon and Radnor (Mr. Watkins) moved an Amendment to exempt all farms under £50 annual value. The Chancellor, in his reply, made it clear that, in his view, any idea of exempting by annual value was not to the point since profitability did not depend in those cases on yield per acre nor on the size of farms, but on the nature of the farming. He gave a graphic description of some profits which he alleged were made in the farming of silver foxes and fruit.
    After a long discussion it was noticeable that the Minister of Agriculture was not present and it is noticeable today that there is no Minister present representing the agricultural Departments. This is a provision dealing with agriculture, and one would expect that when questions of agriculture and ordering farmers to keep accounts were under discussion, the Chancellor of the Exchequer would have the advice and comfort of the Minister of Agriculture. [Laughter.] It is no laughing matter. At the end of the Debate on the Committee stage, the Chancellor said that he would look at the problem again. We said that we would do so, in order to see how we could solve it and get over
    1180
    the difficulties which he put forward against the arguments of the hon. Member for Brecon and Radnor, so that we could secure that farmers who were making unduly high profits, such as the Chancellor mentioned, would be caught for tax, while the majority of small farmers would be rid of this obligation.
    I think the Chancellor quite unwittingly misled the country when he quoted figures to the effect that at present 120,000 farmers pay under Schedule D and 40,000 under Schedule B and that this proposal would deal only with 40,000 farmers. In fact, this proposal that all farmers, large or small, shall have to keep accounts and be assessed under Schedule D will not deal only with 40,000 but with 130,000, because there are 250,000 farmers in the country. This proposal would exempt from Schedule D and make liable for Schedule B all small farmers engaged in bona fide farming, but would bring into Schedule D small farmers engaged in a fancy type of farming such as we have instanced in the second Amendment:
    "flowers, fruit and hops, the rearing of race horses, silver foxes, domestic rabbits or musk rate."
    5.45 p.m.
    In those cases the profit does not depend on the annual value of the farm but on the nature of the husbandry. If this Amendment is successful, the sum total of inconvenience caused to the industry will be very much reduced. When the Chancellor was dealing with this problem earlier—and presumably whether he agrees or disagrees with this Amendment he will take a similar line—he used the analogy of the small shopkeeper. I want the House to realise the very great difference between assessing farms under Schedule B and assessing small shopkeepers. The small shopkeeper does not have a stock which grows or fluctuates in value throughout the year. He does not grow his own stock, and does not consume the stock he is producing. The great difference between the shopkeeper and the farmer is that usually

    1181
    the shopkeeper has a cash register which shows his takings every day and he has wholesalers' receipts by which he can judge his expenses.
    The case of the farmer is entirely different. His stock is of lambs, calves, heifers and young ewes on which he cannot put a value, as most of them are not going, to be sold. The Chancellor nods going his head, or makes what is called a moue, but actually his Department recognises that fact by saying that the larger hill farms will not be assessed under the normal type of Schedule D but on a herd basis. It is not possible, however, to value young growing stock which has to be used for replacement in the herd. At the time of making up accounts, the animals have a very different value from that which they might fetch when actually sold. In my experience of agriculture, I have never seen cash registers on farms. It is going to be difficult for the farmer to work out all the expenses and wages, including such things as his wife's hen money and the two-way accounts of agricultural merchants. That is what the Chancellor is going to impose on farmers, unless he accepts this Amendment.
    All small farmers, smallholders and, in many cases, agricultural workers who have an agricultural holding in addition to the work they do for the farmer, will be brought into the ambit of this Clause. Every pound of butter they consume from their own holding will have to be checked, valued and entered in a ledger after it has gone from the dairy to the kitchen. They will have to make up accounts daily, and at the end of the year they will have to enlist the services of an accountant to transform them into Income Tax jargon. That is the sort of life promised to the small farmer by the Chancellor's proposal. Is the Chancellor going to say today that that is not so because he has up his sleeve some administrative means of saying which small farmer is to be assessed and which is not? I think that is an untenable attitude. The Chancellor is using the urban analogy of the small shopkeeper. But with small shopkeepers profitable ventures can be distinguished from those which are unprofitable because profitability depends on turnover. The shopkeeper with a large turnover will be earning a large profit. A busy tobacconist at a street corner will earn larger profits
    1182
    than a small tobacconist hidden away in the middle of a back street. Similarly, a café at a seaside resort is more likely to be a taxable subject than a small shop in a remote village.
    In agriculture the problem is entirely different. A pair of silver foxes or an acre of well-tended orchard in a remote area will make all the difference between profitability or the reverse. As far as I can see, the only way in which the Chancellor can efficiently sift out the taxable from the untaxable by administrative means is to bring into the countryside an army of snoopers to go round every farm, to find out those who have a profit, or are likely to have one, and those who have not. We cannot use the same methods as are applied to small shopkeepers. I hope the House will not allow this problem to be solved by Treasury snoopery. That would be a great mistake. If the Chancellor uses the snooper method, what will be the position when the snooper has discovered what he thinks is a taxable victim? He will say to him, "You ought to have kept accounts. We think you made a profit." Then he makes the assessment and the farmer will have to pay that assessment, whether it is right or wrong, unless he can produce accounts which he has not kept.
    That is the dilemma in the Chancellor's idea of getting over this problem by administrative means. Unless the farmers are forced to keep accounts the problem cannot be cured administratively. The present method of assessing farmers is no secret. Where accounts are not received from a large farmer, the Special Commissioners of Income Tax levy or fix an unduly large assessment on him to induce him to produce accounts. With large farmers that is reasonably practicable. They get an accountant and eventually the accounts are produced. To harry by these methods all the small marginal farmers, small-holders and agricultural workers will be to turn the whole of agriculture into a turmoil.
    It is all very well for the Financial Secretary to laugh. It may be an easy matter for him, but for his constituents in the Colne Valley, many of whom are small farmers and indulge in some of these marginal sorts of farming which might bring them into the taxable class, the circumstances will be very different. We

    1183
    are dealing with the men on whom we rely to produce food. We should exempt as many as possible from the necessity of keeping unnecessary accounts. Snoopery and bullying are not the right methods. Those are my reasons for moving the Amendment.
    Mr. Vane: (Westmorland): I beg to second the Amendment.
    I reinforce the plea of the hon. Member for Thirsk and Malton (Mr. Turton) that the arguments put forward by the Chancellor for treating the small farmer in the same way as the small shopkeeper are unfair. Without wishing to embarrass the Parliamentary Secretary to the Ministry of Agriculture, I think we should give him a word of welcome for Coming in at so timely a moment after such a long absence. When taxation was at a low level it mattered very little from the point of view of agriculture whether there were certain anomalies, but now that taxation appears to be stabilised at a high level, it matters a great deal whether there are anomalies in the burden of tax which falls on one farm as compared with another. Whereas I agree that the old arrangement—by which farmers whose assessment was less than £100 per annum might comfortably be taxed under Schedule B—was no longer fair, I think equally that the Chancellor's proposals will be as unfair and will cause small farmers a great deal of unnecessary work and accountancy.
    This extra trouble will be caused not only to farmers, but also to the accountants who will have to prepare their accounts for them and who already, for transport and other reasons, have great difficulty in getting through their work for large farmers. Any of the officers of the right hon. and learned Gentleman will tell him of the difficulties experienced in getting in Income Tax valuations and accounts except after many months' delay. With a little ingenuity, the Chancellor should find it possible to choose a form of words which will be fair to the tens of thousands of small farmers whom he is proposing to leave in the middle of a sort of Income Tax "no man's land."
    The Chancellor of the Exchequer (Sir Stafford Cripps): I am much obliged to the Opposition for putting forward this Amendment, which has been moved in words of the wildest exaggeration by the
    1184
    hon. Member for Thirsk and Malton (Mr. Turton). From what he has said it would appear highly desirable that nobody should ever keep any accounts for anything—
    Mr. Vane: Like the war agricultural committees.
    Sir S. Cripps:—and that it was impossible to ask anybody to keep accounts of their businesses. I am quite sure that farmers are not really the ignorant, stupid people he made them out to be—at least, not those whom I have met. It is true that some of them, perhaps, do not keep their accounts in a perfect form, but nowadays there are very few of them who keep no accounts whatever. Most of them are able to say, within a reasonable figure, whether or not they make any profit on their farms.
    The attempt is made here to define not by the annual value or the rent paid for the property, but by the class of agriculture which is carried on. On the Committee stage I suggested a number of illustrations of the sort of thing which could very well produce large incomes from small-holdings. It did not include by any means all the points one might have dealt with; my examples were merely illustrative. I notice that the movers of this Amendment have included most of them for the purpose of exclusion from the provision which would apply under the two Amendments—that the farm with an annual value of £100 should continue to be taxed under Schedule B. There are, of course, a great many other activities besides these which lead to exceptional profits. It would be interesting to know, for instance, whether rhubarb is included under fruit of this definition. [An HON. MEMBER: "Raspberries."] Raspberries are included under fruit, but certainly broccoli is not, and water-cress is not, and also a mass of other vegetable products.
    They are not included in the Amendment because many of them are grown as farming crops and not as vegetable crops; that is to say, they are grown for animal consumption and not human consumption. For instance, a field of turnips grown for human consumption can be much more profitable than one grown for sheep. Therefore it is quite impossible to put in this definition vegetables because they are undefinable. Does the ordinary swede now used for vegetables come under it or not?
    6.0 p.m.
    Mr. Turton: It the Chancellor will allow me to interrupt, he has already dealt with vegetables in the 1941 and 1942 Acts, where market gardening is excluded from this definition.
    Sir S. Cripps: The hon. Gentleman knows very well that the line between market gardening and farming is not very clear, but it has been defined by a number of decisions and it does not include growing mushrooms in open fields, growing broccoli or rhubarb in open fields, and so on. There might be a rotational crop of one of these on an ordinary farm—[An HON. MEMBER: "Rhubarb?"] Certainly, long-term rotation—
    Captain Crookshank: Very long-term.
    Sir S. Cripps: Twenty-five years, but one would reach the cycle when that particular field was not growing rhubarb and, therefore, it could not be said that it was a rhubarb farm.
    Mr. York: If the Chancellor knew the price at which land can be sold that is able to grow rhubarb, he would realise that rhubarb land is rhubarb land and nothing else.
    Sir S. Cripps: I know it very well. I have been in many cases where claims have been made for rhubarb land. At the time when the London County Council was taking over the Dagenham area, where the land was largely covered by rhubarb, the price went up to £11,000 an acre. Therefore, one does know something about some of these things. It is quite true that rhubarb is a profitable crop, but it does not necessarily come under market gardening.
    Mr. Turton: It might in that case.
    Sir S. Cripps: It might in that case if that was the sole cultivation, but if it is merely one field on a farm it does not. That only points to the impossibility of getting any definition which will limit this to a particular type of growth on a particular area of land.
    Therefore, having eliminated, as we all agree, the possibility of taking the annual value as the criterion, having eliminated the possibility of taking the crop as the criterion, there really is nothing left unless you take the colour of the farmer's hair, and that would not be satisfactory.
    1186
    Again, I think everyone was agreed in the former Debate that there was no reason why the farmer should not pay Income Tax like everybody else—he is not asking for any special privileged exclusion from Income Tax—and so the only way to ascertain it is as it is done with everybody else, find out what is his income and, if it is large enough, he pays Income Tax and, if it is not, he does not.
    It is said that there may be a lot of small people who would not pay Income Tax, and everybody knows that, from the things they grow and the size of their farms. It is asked, "Do you want to put them to a lot of trouble?" What we have said is that we do there what we do in many other cases, we do not assess people if we know, or are substantially certain, that they will not be payers of Income Tax. It is not worth anybody's trouble to assess them, and that same discretion will be utilised for farmers as is for everybody else. However, we cannot make the assumption that it is wrong to assess farmers because it means they have to keep accounts. I am sure it would be much healthier for the agriculture of this country if farmers kept accounts and if they had a more accurate knowledge of what was happening to their holdings. Therefore, in so far as this has any effect, I hope it will encourage farmers to keep accounts. If it does that, apart from any question of the collection of money, it will have not an adverse but a beneficial effect upon farmers. Therefore, I regret that we cannot accept this Amendment.
    Mr. Gerald Williams: If the Chancellor is at all doubtful about water-cress and rhubarb, I am sure my hon. Friend will be quite willing to add a few more words to the Amendment. The Chancellor spent all his time in telling us what difficulties there would be in accepting our Amendment, but we want him to realise what difficulty there would be in leaving the Bill as it is. The trouble about farmers keeping accounts is that they are not like the small shopkeepers, nearly all of whom have been brought up to keep accounts because they knew they had to. The Chancellors of the past have deliberately encouraged small farmers not to keep accounts, and after many years of not keeping accounts they cannot be expected suddenly to learn accountancy, any more than an accountant can be expected to milk a

    1187
    cow or shear a sheep. It is asking too much. Either they have to pay somebody to do the job for them, which is in many cases an impossibility, or else they have to learn, and many of them are too old to start now.
    All hon. Members agree that the principle of making the large farm profit-maker pay, which the Chancellor is after, is right, and I think that the Amendment will solve all the troubles that we discussed on the Committee stage. After all, there are farmers who make no profits at all, and if it is to be left to the tax collector to decide whether they are making profits or not, farmers will be informing on their fellows, there will be unpleasantness which one does not want to encourage, and people will be trying to cause trouble just because they may be jealous of their neighbouring farmer.
    The other difficulty which I must stress is that the Chancellor estimates that he may collect about £2¼ million or £2½ million out of this tax, but he did not give his estimate of what it will cost to collect. Conservatives and Socialists are all agreed that more food is wanted in the country; Conservatives are all agreed that fewer officials are wanted in the country. But as the Bill stands we shall discourage food production, encourage more officials, and have greatly increased costs. All this is being done to catch just a few people who are getting away with it. It is like an apple orchard where a few apples are stolen by an odd gang or two. It would not pay to have a policeman stationed at every orchard in the country, because the cost would be too much, and I believe that the cost and the trouble of collecting this £2¼ million will not be worth while.
    Mr. Baldwin: I cannot help thinking that the Treasury, in adopting the method of the small boy who put a nut under a steam roller in order to get the kernel, will get as much out of this tax as the small boy would get of the kernel after he had put it under the steam roller. This proposition will cost an immense amount of money in accountancy, in Income Tax officials, and so on, in order to catch a few people who are getting away with profit on a small acreage of land. I want to make it quite clear that we as farmers do not want to see any of our colleagues getting
    1188
    away with a profit and not paying Income Tax upon it. However, we want to see these small farmers getting on with their job of food production, instead of having to take up their time in keeping accounts and having to make valuations.
    Let us look at it from a practical point of view. The suggestion has been made that over 200,000 farmers will be forced to keep accounts. The first thing that will have to be done by these farmers is to have an ingoing stocktaking valuation. That means that all those who have to keep accounts should now have had their stocktaking valuation made. The Chancellor is apparently determined to proceed with this proposal. He has said, and has repeated today, that he will not assess the small farmers just as he does not assess the small shopkeepers. If that is to be the case, I beg the Chancellor at once to set up machinery in every Income Tax district in order to let these small farmers who are not to be called upon to show books, know that they are not to be called upon and so make it unnecessary for them to have a stocktaking valuation. There is no reason why that should not be done.
    I wonder how the Chancellor will find it so easy to decide who is and who is not making money? The Chancellor did not say who was to decide that nor did he tell us the steps which are to be taken to find out. The necessary measures should at once be taken so that farmers can ascertain what steps they have to take in order to find out whether they have to keep accounts or not. It is no use a small farmer going to a valuer in 12 months' time and asking him to take a stocktaking valuation as from the beginning of the year. That would be quite impossible.
    The Chancellor has been led astray by something which he has been told about fabulous sums which some people make on a small acreage of land. He mentioned the sum of £10,000 having been made on a small acreage of land. That must be hearsay. I cannot conceive of anyone making £10,000 on a small acreage of land divulging the fact to anyone. Such a person would certainly take great care that it did not reach the ears of the Income Tax inspector. The Chancellor also spoke of rhubarb land costing about £11,000 an acre. I have seen some land sold at a good price in my time but I

    1189
    think that the Chancellor has been led astray by something he has been told and which is not in accordance with the facts.
    If he intends to proceed with this tax I ask him an once to instruct inspectors of taxes in all districts to set up some machinery so that small farmers can at once be given a decision as to whether they have to show books or not. Not one per cent. of the men who are today assessed at £100 a year will be making more than £300 profit a year. It should be easy to let these farmers know promptly whether they are to be rid of this incubus of keeping accounts. The small farmer does not want to keep accounts. His bank balance at the end of the year will tell him fairly accurately how he has been doing.
    Captain Crookshank: I wish to voice my dissatisfaction at the attitude of the Chancellor to these Amendments. We have tried to take him at his word in what he said on the Committee stage. He pointed out then:
    "it is the particular type of cultivation which really determines whether they are likely to be people who are making these sort of incomes or not."—[OFFICIAL REPORT, 2nd June, 1948; Vol. 451, c. 1138.]
    That is, large incomes in comparison with their previous tax position. We took him at his word and tried to devise in these two Amendments some types of cultivation which it might be desirable to exclude. The Chancellor has merely told us that there are plenty of other types. That is not our fault. We had hoped that as a result of the previous Debate the Chancellor would see that he was rather misguided in the line he was taking in trying to bring all this class of small farmers under the normal taxation system.
    As we have not been privileged at any stage to hear the voice of any of the agricultural Ministers on this subject—although I am sure that the Parliamentary Secretary's advice would always be listened to with considerable attention by the Chancellor of the Exchequer—we are left wondering why this desire for uniformity should be so strong. The Chancellor said just now that it would be healthier if everyone kept accounts. We know the right hon. and learned Gentleman's views about health matters. They are not subscribed to by everyone and
    1190
    I do not know that his view that keeping accounts is a healthy thing to do would necessarily be accepted by the people to whom he is directing his attention today.
    6.15 p.m.
    There is a difficulty which has not yet been resolved. The Chancellor says that there are a lot of small people who obviously have so small an income that no one will bother to assess them and that they will not have to pay—they will be exactly in the position in which they are today. The Chancellor having said that, someone presumably has to decide whether the profits of particular persons are so small as not to make it worth while to assess them. Who is to take that decision? That seems to me to be a point of real consequence. I can only assume that it will be the local inspector of taxes. If that is so, let me remind the Financial Secretary that up and down the country the local inspectors of taxes are already tremendously overworked. They will certainly not have the time to go about their districts, because I presume it will mean going about, by road, on foot or on bicycles or whatever form of transport it may be, to see whether small farmer A or smallholder B or little man C should not be assessed. It does not seem to me to be sense.
    There the analogy of the small shopkeeper breaks down because I imagine that from the point of view of the inspector of taxes it is comparatively easy in a small town or village or wherever he may be, to decide from the general look of a small shop, and from the information which he can readily obtain about it, whether it is worth assessing or not. It is quite a different matter in the case of an outlying smallholding where the crop may be different this year from the crop last year, and where profitability one year varies greatly with the profitability another year.
    I should like to have it categorically stated now what instructions are to be given to whom to decide how to assess. That seems to be the crux of the whole matter. I am afraid that the Chancellor has hardened his heart once again and that we are to get no concession or help because—[Interruption]—the hon. Member for West Ealing (Mr. J. Hudson) sits and burbles the whole time. It is a great tribute to the good tea which he

    1191
    has no doubt had. If he has any observations to make on these somewhat technical points I should like him to make them. They are difficult and technical points, I am saying that I should like to know what instructions are to be given to whom as to the sort of grounds on which they are to decide whether they are to assess or not. I do not expect any satisfactory answer. The Chancellor has given us no hope that he will relax on this matter, and as we feel that this provision will cause unnecessary trouble all round for little money and will probably entail larger expenses than are worth while, we shall go into the Lobby in support of the Amendment.
    Mr. Watkins: I wish to reinforce the question put by the right hon. and gallant Member for Gainsborough (Captain Crookshank) as to what instructions are to be sent out to the Income Tax inspectors. My constituency is so large that there are three or four inspectors administering Income Tax in the area and there are different Income Tax collectors. If there is not uniformity of practice one can imagine that in about 12 months time I shall be getting up in this House to ask, "Why has Income Tax inspector A put an assessment on a certain farm in a certain area and inspector B is not doing so?"
    Therefore it will be as well if the Financial Secretary gave some indication
    that his Department is going to get together and consult with the National Farmers' Union and others as to what type of directions or instructions are to be sent out. I have to decide whether I shall go into the Lobby in favour of the Amendment. I am rather doubtful about what it is best to do. I am prepared to give the Treasury a chance to see what they can do in 12 months' time in the way of administration, but unless the Financial Secretary or the Chancellor will say that he will go into the matter and decide that a uniform practice is to be adopted, I am afraid that, for the first time, I shall have to go into the Lobby against the Government.
    Sir S. Cripps: I am not in the least concerned with what the hon. Gentleman said in his last sentence, but I am concerned with answering his question. It is a courtesy which I try to extend to both sides of the House. The hon. Member asked what form of instruction will be given. Whatever form of instruction is given it will be uniform. Instructions will not be given to one district and not another, and inspectors will not assess people who obviously will not have to pay.
    Question put, "That the words proposed to be left out stand part of the Bill."
    The House divided: Ayes, 287;Noes, 108.

    Division No. 237.]

    AYES.

    [6.23 p.m.

    Acland, Sir Richard

    Bramall, E. A.

    Daines, P.

    Adams, Richard (Balham)

    Brook, D. (Halifax)

    Dalton, Rt. Hon. H.

    Adams, W. T. (Hammersmith, South)

    Brooks, T. J. (Rothwell)

    Davies, Edward (Burslem)

    Alpass, J. H.

    Brown, George (Belper)

    Davies, Ernest (Enfield)

    Attewell, H. C.

    Brown, T. J. (Ince)

    Davies, Harold (Leek)

    Austin, H. Lewis

    Bruce, Maj. D. W. T.

    Davies, Haydn (St, Pancras, S.W.)

    Awbery, S. S.

    Burden, T. W.

    Davies, R. J. (Westhoughton)

    Ayles, W. H.

    Burke, W. A.

    Deer, G.

    Ayrton Gould, Mrs. B.

    Byers, Frank

    de Freitas, Geoffrey

    Bacon, Miss A.

    Carmichael, James

    Delargy, H. J.

    Balfour, A.

    Chamberlain, R. A.

    Debbie, W.

    Barnes, Rt. Hon. A. J.

    Champion, A. J.

    Dodds, N. N.

    Barstow, P. G.

    Chater, D.

    Donovan, T.

    Barton, C.

    Chetwynd, G. R.

    Driberg, T. E. N.

    Battley, J. R.

    Cfuse, W. S.

    Dugdate, J. (W. Bromwich)

    Bechervaise, A. E.

    Cobb, F. A.

    Durbin, E. F. M.

    Bellenger, Rt. Hon. F. J.

    Cocks, F. S.

    Dye, S.

    Benson, G.

    Coldrick, W.

    Ede, Rt. Hon. J. C.

    Berry, H.

    Collindridge, F.

    Edwards, Rt. Hon. Sir C. (Bedwellty)

    Beswick, F.

    Collins, V. J.

    Edwards, John (Blackburn)

    Bevan, Rt. Hon. A. (Ebbw Vale)

    Colman, Miss G. M.

    Edwards, N. (Caerphilly)

    Bing, G. H. C.

    Cook, T. F.

    Evans, Albert (Islington, W.)

    Binns, J.

    Cooper, Wing-Comdr. G.

    Evans, E. (Lowestoft)

    Blenkinsop, A.

    Cove, W. G.

    Evans, S. N. (Wednesbury)

    Blyton, W. R.

    Crawley, A.

    Ewart, R.

    Bowden, Flg. Offr. H. W.

    Cripps, Rt. Hon. Sir S.

    Fairhurst, F.

    Braddock, Mrs. E. M. (L'pl. Exch'ge)

    Crossman, R. H. S.

    Farthing, W. J.

    Braddock, T. (Mitcham)

    Daggar, G.

    Fernyhough, E.

    Fletcher, E. G. M. (Islington, E.)

    Logan, D. G.

    Sharp, Granville

    Follick, M.

    Longden, F.

    Shinwell, Rt. Hon. E.

    Foot, M. M.

    Lyne, A. W.

    Shurmer, P.

    Fraser, T. (Hamilton)

    McAllister, G.

    Silverman, J. (Endington)

    Freeman, J. (Watford)

    McEntee, V. La T.

    Simmons, C. J.

    Freeman, Peter (Newport)

    McGhee, H. G.

    Skeffington, A. M.

    Gallacher, W.

    McGovern, J.

    Skinnard, F. W.

    Ganley, Mrs. C. S.

    McKay, J. (Wallsend)

    Smith, C. (Colchester)

    Gibbins, J.

    Mackay, R. W. G. (Hull, N.W.)

    Smith, Ellis (Stoke)

    Gibson, C. W.

    McKinlay, A. S.

    Snow, J. W.

    Gilzean, A.

    McLeavy, F.

    Solley, L. J.

    Glanville, J. E. (Consett)

    Mainwaring, W. H.

    Sorensen, R. W.

    Gooch, E. G.

    Mallalieu, E. L. (Brigg)

    Soskice, Rt. Hon. Sir Frank

    Granville, E. (Eye)

    Mallalieu, J. P. W. (Huddersfield)

    Sparks, J. A.

    Greenwood, A. W. J. (Heywood)

    Mann, Mrs. J.

    Steele, T.

    Grenfell, D. R.

    Manning, C. (Camberwell, N.)

    Stross, Dr. B.

    Grey, C. F.

    Manning, Mrs. L. (Epping)

    Stubbs, A. E.

    Griffiths, D. (Rother Valley)

    Marquand, H. A.

    Swingler, S.

    Griffiths, Rt. Hon. J. (Llanelly)

    Marshall, F. (Brightside)

    Sylvester, G. O.

    Griffiths, W. D. (Moss Side)

    Mothers, Rt. Hon. George

    Symonds, A. L.

    Guest, Dr. L. Haden

    Mellish, R. J.

    Taylor, R. J. (Morpeth)

    Gunter, R. J.

    Messer, F.

    Taylor, Dr. S. (Barnet)

    Guy, W. H.

    Middleton, Mrs. L.

    Thomas, D. E. (Aberdare)

    Haire, John E. (Wycombe)

    Millington, Wing-Comdr. E. R.

    Thomas, George (Cardiff)

    Hale, Leslie

    Mitchison, G. R.

    Thomas, I. O. (Wrekin)

    Hall, Rt. Hon. Glenvil

    Monslow, W.

    Thorneycroft, Harry (Clayton)

    Hamilton, Lieut.-Col. R.

    Moody, A. S.

    Thurtle, Ennest

    Hardy, E. A.

    Morgan, Dr. H. B.

    Tiffany, S.

    Harrison, J.

    Morrison, Rt. Hon. H. (Lewisham, E.)

    Timmons, J.

    Haworth, J.

    Murray J. D.

    Titterington, M. F.

    Herbison, Miss M.

    Nally, W.

    Tolley, L.

    Hicks, G.

    Nichol, Mrs. M. E. (Bradford, N.)

    Tomlinson, Rt. Hon. G.

    Hobson, C. R.

    Nicholls, H. R. (Stratford)

    Turner-Samuels, M.

    Holman, P.

    Noel-Baker, Capt. F. E. (Brantford)

    Ungoed-Thomas, L.

    Holmes, H. E. (Hemsworth)

    Noel-Baker, Rt. Hon. P. J. (Derby)

    Vernon, Maj. W. F.

    Horabin, T. L.

    Noel-Buxton, Lady

    Viant, S. P.

    House, G.

    Oldfield, W. H.

    Wadsworth, G.

    Hoy, J.

    Oliver, G. H.

    Walkden, E.

    Hubbard, T.

    Paling, Rt. Hon. Wilfred (Wentworth)

    Walker, G. H.

    Hudson, J. H. (Ealing, W.)

    Palmer, A. M. F.

    Wallace, G. D. (Chislehurst)

    Hughes, Emrys (S. Ayr)

    Parkin, B. T.

    Warbey, W. N.

    Hughes, Hector (Aberdeen, N.)

    Paton, Mrs. F. (Rushcliffe)

    Watkins, T. E.

    Hughes, H. D. (W'lverh'pton, W.)

    Paton, J. (Norwich)

    Watson, W. M.

    Hynd, J. B. (Attercliffe)

    Pearson, A.

    Weitzman, D.

    Irvine, A. J. (Liverpool)

    Pearl, T. F.

    Wells, P. L. (Faversham)

    Irving, W. J. (Tottenham, N.)

    Piratin, P.

    Wells, W. T. (Walsall)

    Janner, B.

    Poole, Cecil (Lichfield)

    Westwood, Rt. Hon. J.

    Jager, G. (Winchester)

    Popplewell, E.

    Wheatley, Rt. Han. John (Edinb'gh, E.)

    Jeger, Dr. S. W. (St. Pancras, S.E.)

    Porter, E. (Warringten)

    White, C. F. (Derbyshire, W.)

    Jenkins, R. H.

    Porter, G. (Leeds)

    White, H. (Derbyshire, N.E.)

    Jones, D. T. (Hartlepools)

    Pritt, D. N.

    Whiteley, Rt. Hon. W.

    Jones, Elwyn (Plaistow)

    Pryde, D. J.

    Wilkes, L.

    Jones, J. H. (Bolton)

    Pursey, Comdr. H.

    Wilkins, W. A.

    Jones, P. Asteriey (Hitchin)

    Randall, H. E.

    Willey, F. T. (Sunderland)

    Keenan, W.

    Ranger, J.

    Willey, O. G. (Cleveland)

    Kenyon, C.

    Rankin, J.

    Williams, J. L. (Kelvingrove)

    Key, Rt. Hon. C. W.

    Reeves, J.

    Williams, R. W. (Wigan)

    King, E. M.

    Reid, T. (Swindon)

    Williams, W. R. (Heston)

    Kinley, J.

    Rhodes, H.

    Willis, E.

    Kirby, B. V.

    Richards, R.

    Woodburn, Rt. Hon. A.

    Kirkwood, Rt. Hon. D.

    Ridealgh, Mrs. M.

    Woods, G. S.

    Lawson, Rt. Hon. J. J.

    Roberts, Emrys (Merioneth)

    Wyatt, W.

    Lee, F. (Hulms)

    Roberts, Goronwy (Caernarvonshire)

    Yates, V. F.

    Lee, Miss J. (Cannock)

    Rogers, G. H. R.

    Young, Sir R. (Newton)

    Leonard, W.

    Ross, William (Kilmarnock)

    Younger, Hon. Kenneth

    Leslie, J. R.

    Royle, C.

    Zilliacus, K.

    Levy, B. W.

    Scollan, T.

    Lipson, D. L.

    Scott-Elliott, W.

    TELLERS FOR THE AYES:

    Lipton, Lt.-Col. M.

    Shackleton, E. A. A.

    Mr. Joseph Henderson and

    Mr. Hannan.

    NOES.

    Amory, D. Heathcoat

    Channon, H.

    Eccles, D. M.

    Assheton, Rt. Hon. R.

    Clarke, Col. R. S.

    Fletcher, W. (Bury)

    Astor, Han M.

    Clifton-Brown, Lt.-Col. G.

    Fraser, Sir I. (Lonsdale)

    Baldwin, A. E.

    Crookshank, Capt. Rt. Hon. H. F. C.

    Galbraith, Cmdr. T. D.

    Barlow, Sir J.

    Crosthwaite-Eyre, Col. O. E.

    Gammans, L. D.

    Bennett, Sir P.

    Crowder, Capt John E.

    Gates, Maj. E. E.

    Birch, Nigel

    Dodds-Parker, A. D.

    Gomme-Duncan, Col. A.

    Boles, Lt.-Col. D. C. (Wells)

    Drayson, G. B.

    Grant, Lady

    Braithwaite, Lt.-Comdr. J. G.

    Drewe, C.

    Gridley, Sir A.

    Bromley-Davenport, Lt.-Col W.

    Dugdale, Maj. Sir T. (Richmond)

    Grimston, R. V.

    Buchan-Hepburn, P. G. T.

    Duncan, Rt. Hn. Sir A. (City of Lend.)

    Harden, J. R. E.

    Bullock, Capt. M.

    Duthie, W. S.

    Harris, F. W. (Croydon, N.)

    1194

    1195

    Harvey, Air-Comdre. A. V.

    Marshall, S. H. (Sutton)

    Shepherd, W. S. (Bucklow)

    Headlam, Lieut.-Col. Rt. Hon. Sir C.

    Mellor, Sir J.

    Smith, E. P. (Ashford)

    Hinchingbrooke, Viscount

    Molson, A. H. E.

    Smithers, Sir W.

    Hollis, M. C.

    Morris, Hopkin (Carmarthen)

    Spearman, A. C. M.

    Holmes, Sir J. Stanley (Harwich)

    Morrison, Rt. Hon. W. S. (Cir'cester)

    Spence, H. R.

    Howard, Hon. A.

    Noble, Comdr. A. H. P.

    Stanley, Rt. Hon. O.

    Hurd, A.

    Odey, G. W.

    Stoddart-Scott, Col. M.

    Hutchison, Lt.-Cm. Clark (E'b'rgh W.)

    O'Neill, Rt. Hon. Sir H.

    Studholme, H. G.

    Hutchison, Col. J. R. (Glasgow, C.)

    Orr-Ewing, I. L.

    Sutcliffe, H.

    Jarvis, Sir J.

    Osborne, C.

    Taylor, Vice-Adm. E. A. (P'dd't'n, S.)

    Jeffreys, General Sir G.

    Pickthorn, K.

    Thorneycroft, G. E. P. (Monmouth)

    Keeling, E. H.

    Pitman, I. J.

    Thornton-Kemsley, C. N.

    Lambert, Hon. G.

    Poole, O. B. S. (Oswestry)

    Turton, R. H.

    Lancaster, Col. C. G.

    Prior-Palmer, Brig. O.

    Vane, W. M. F.

    Langford-Holt, J.

    Raikes, H. V.

    Wakefield, Sir W. W.

    Law, Rt. Hon. R. K.

    Ramsay, Maj. S.

    Wheatley, Colonel M. J. (Dorset, E.)

    Lloyd, Maj. Guy (Renfrew, E.)

    Rayner, Brig. R.

    White, J. B. (Canterbury)

    Law, A. R. W.

    Reed, Sir S. (Aylesbury)

    Williams, C. (Torquay)

    Lucas-Tooth, Sir H.

    Roberts, P. G. (Ecclesall)

    Williams, Gerald (Tonbridge)

    MacAndrew, Col. Sir C.

    Robertson, Sir D. (Streatham)

    Willoughby de Eresby, Lord

    Mackeson, Brig. H. R.

    Robinson, Roland

    York, C.

    McKie, J. H. (Galloway)

    Ross, Sir R. D. (Londonderry)

    Young, Sir A. S. L. (Partick)

    Maclay, Hon. J. S.

    Sanderson, Sir F.

    Macpherson, N. (Dumfries)

    Savory, Prof. D. L.

    TELLERS FOR THE NOES:

    Manningharn-Buller, R. E.

    Scott, Lord W.

    Commander Agnew and

    Major Conant.

    Mr. Glenvil Hall: I beg to move, in page 23, to leave out lines 1 to 10.
    This Amendment is consequential on an Amendment exempting commercial woodlands which, on the Committee stage, we inserted among the provisos to Subsection (1). The definition which at present appears in the Bill will, therefore, not be necessary and we propose to delete it.
    Amendment agreed to.

    CLAUSE 33.—(Remission of balancing charges and other provisions, in case of certain undertakings absorbed under nationalisation schemes.)
    Mr. Peter Roberts: I beg to move, in page 25, line 18, at the end, to insert:
    "or in the case of property transferred to the British Transport Commission under Part III (Transport of Goods by Road) of the Transport Act, 1947, the liability remains the liability of the transferor."
    I suggest that it would be convenient to discuss at the same time, the consequential Amendments to lines 19 and 23. This' is another attempt to persuade the Government to see sense and justice in the claim for balancing charges for assets taken over under nationalisation measures. We discussed the wider aspects of this subject yesterday on the question of the handing over of profits in the case of road hauliers. Unfortunately, the Paymaster-General was left to deal with the matter and I do not think that he was aware of the full facts. I hope that today the Chancellor of the Exchequer will reply. I
    1196
    see that the Paymaster-General has returned to the Chamber: I do not know whether or not he is to assist us.
    The principle involved is that where a haulier has assets which are transferred to a nationalised industry, and those assets stand at a higher price than had been allowed for under wear and tear, then the money is subject at present to Income Tax. We suggest that that should not be so. We say that because, if the State takes them over on the same basis as that on which the shares were taken over, then the State is relieved of the necessity to pay the Income Tax. The reply of the Minister was that it would be impossible for the Government to undertake a valuation of all assets taken over purely on a share valuation. There are instances where wagons and lorries are taken over on a valuation basis. There the Government say that a valuation has taken place and that they can easily assess the Income Tax which is due.
    We suggest that that is unfair. The first reason for that suggestion is that if one refers to what happened under the Coal Industry Nationalisation Act where similar circumstances existed—where wagons were taken over and paid for in stock, as lorries are to be taken over and paid for in stock in this case—the Treasury saw fit to say that the owners of the wagons need not pay this Income Tax in those circumstances. I appreciate that at that time there was an arrangement between the Minister of Fuel and Power, the Mining Association and the Treasury. Under that arrangement it is

    1197
    fair to say that the wagons were taken over at a slightly lower price than the Mining Association otherwise would have claimed should be their valuation. In other words, a certain amount of latitude was allowed; but that is nothing like the 50 per cent. which would accrue to the road hauliers. It was possibly a 10 per cent. reduction on wagons taken over in the case of the coal industry.
    Here the effect will be a reduction of practically 50 per cent. We cannot see any reason why the road hauliers and the coalowners should be treated differently. I appreciate that this Amendment would take away entirely the liability of the transferee for Income Tax in this respect. If the Government were to say that they would be prepared to deal with this matter in the same way as they dealt with wagons from the coal-owners, and that they would allow some deduction in price to be agreed between the parties concerned, that would not be unacceptable.
    The main point of the argument I used yesterday was that the Government are compulsorily taking over assets and, therefore, the Treasury are stepping in and taking money which otherwise they would not get. When the State takes over assets and pays compensation for shares, then it is admitted by the Government that no tax is payable; but if they take them over on a valuation then they say that tax must be paid. That is unfair. This procedure was not followed by the Government when wagons were taken over on the nationalisation of the coal industry. We suggest that that procedure, or something like it, should be followed. When the State steps in and makes a compulsory transfer, then those people who have to hand over their assets should not have to pay Income Tax which otherwise, if the Nationalisation Bill had not been passed, they would not have had to pay.
    Mr. Eccles: I beg to Second the Amendment.
    I only wish to add one argument to those so clearly put by my hon. Friend the Member for Ecclesall (Mr. P. Roberts). Our Amendment is designed particularly to help the road haulier. Suppose that a man bought a lorry before the war for £400 or £500 and that he has written it off completely in his books. Now, the British Transport Commission comes along and
    1198
    forcibly takes him over. It may well be that the price of the second-hand lorry today is above even the original cost price before the war, so much have prices changed in the market. It may be that compensation value is £600. This man is therefore going to be called upon to pay Income Tax on the difference between the £400, the original cost, and £600 which is the valuation on compensation.
    6.45 p.m.
    We say that that would not be unfair if the man were making a voluntary sale, because, after all, in business occasionally, assets are sold at a profit over and above what they cost, and it is reasonable to take that into consideration for taxation. But here is a man who never intended to sell his lorry at all. He wanted to continue in the road haulage business. He was a prudent man, and so, when the new lorry which he wanted was going to cost him much more than a pre-war lorry, he wrote his old lorry down, tacked his money away and never intended to take the secondhand value profit on that old lorry, but, instead, was going to run it until it was finished and then buy a new one.
    The strong argument for our Amendment is that this man would never have taken this profit, on which he is now going to be taxed, had it not been for nationalisation, and I cannot really see why the Government should make a distinction in the case of coalowners and let them off all but a fraction, and also in the case of railway equipment taken over under Part II of the Transport Act, and yet, under Part III of the Transport Act, these wretched road hauliers are to be caught.
    The Solicitor-General (Sir Frank Soskice): Three points have been made in support of this Amendment, and I will try to deal with each of them separately. The first was that, where assets are being taken over by buying out the shareholders, the system of a balancing charge has not been incorporated; that is to say, the transferor has been let off. The second point is that there was an arrangement made under the coal nationalisation transfer which it is said could be adopted for the purposes of taking over the road hauliers' undertakings. The third point is that the transfer is compulsory and not voluntary in the case of road haulage undertakings.
    May I first say a word about the transfer of the collieries? That scheme cannot

    1199
    be incorporated for the purposes of the road haulage undertakings for a variety of reasons. Quite shortly, as I said during the Committee stage, there was an overall scheme, which embraces the colliery undertakings, under which the National Coal Board and the colliery undertakings mutually gave away various rights, and there was a complicated system of agreed concessions which worked out in the end equitably to both sides. That was a very large and elaborate scheme, and, for a number of detailed reasons which I have not time to explain here, it would be very difficult to reproduce that scheme in the case of the assets of road haulage undertakings now being taken over.
    Mr. P. Roberts: May I interrupt the right hon. and learned Gentleman? I know something of this matter with regard to wagons. The point was clearly made that, in principle, it was unfair that this tax should be paid on wagons taken over for a different kind of payment. That principle was agreed by the Treasury at the time. What we want to know is why the Government are going away from that principle now
    The Solicitor-General: I cannot agree that that principle was agreed It was a scheme whereby rights were mutually foregone on both sides, and that situation is not analogous to the present case. It is said that in the electricity and main railway undertakings, the transfer is being effected upon the basis of the shareholders being paid the value of their shares. There, the balancing charge is not possible, so that that again is entirely distinguishable from the case we are now considering. There was a going concern, and the State concern took over the enterprise of that private going concern by paying out the shareholders, taking it over as a going concern and taking over its liabilities. Amongst those liabilities were any liabilities there might be in respect of balancing charges.
    It so happens that, as a result of Section 60 of the Income Tax Act, 1945, as a matter of law, transfers of that kind would have brought about consequences which nobody really desired. They would have been that, in respect of each of the assets of a private concern taken over under that general transfer of these enterprises, a notional sale would have been
    1200
    deemed to have taken place, and the balancing charge and balancing allowances would have had to be computed by reference to that notional sale It Section 60 had been applied to that transfer, it would have had to take place with every single asset transferred in the general transfer, and each would have had to be separately valued, the market price ascertained separately in relation to it, and, for every asset, a balancing charge imposed, computed by reference to whatever that market price was found to have been. That would have led to an almost infinite process of calculation and valuation and to a great deal of work.
    The reason why we introduced Clause 33 was to prevent Section 60 operating in that way, and, in relation to these transfers, to avoid what was really a completely unnecessary valuation, and to scale down the allowances to which the State concern would be entitled. Accordingly, the balancing charge is not being made, and that was to facilitate the process of transfer by cutting out a great deal of completely unnecessary labour. For the assets of road haulage undertakings the system of compensation is entirely different. The shareholders of the road haulage undertakings are not being bought out. Individually, the assets are being bought by a process of compulsory sale, compensation being paid which is computed in general terms on the value of the lorry that is taken over. These people are, in other words, selling their lorries and being paid compensation prices equal to the value of the lorries computed in a certain way when sold in a compulsory sale. There the valuation has been done, and it is easy to compute the balancing charge.
    Not only that, but the process of transfer is not in any way analogous with that of the railway and electricity undertakings. The undertaking is taken over as a going concern, and the transferee takes over the obligations and debts, but, in road haulage undertakings each and every individual asset is being bought separately. In those circumstances, is there any reason, when we have a separate sale of each asset and there is a compensation price which represents its value, why the Income Tax Act, 1945, should not operate as it was intended to operate, and a balancing charge or allowance should not be imposed?

    1201
    It is said that the reason why that should not take place is because the sale was compulsory. That, I respectfully submit, is no reason whatsoever. I should like to quote in support of my argument what the right hon. Member for the Scottish Universities (Sir J. Anderson), who introduced the Income Tax Act of 1945, himself said when he was explaining the principles of that Act. He dealt with the question whether there was really any distinction, so far as balancing charges and balancing allowances were concerned, between a compulsory sale and a voluntary sale, and this is what he said:
    "If we accept that the purpose of this Bill is to write off capital expenditure incurred in earning profits—and inasmuch as the rate at which the expenditure is written off must inevitably be more or less arbitrary, it is an empirical rate—we have, therefore, to introduce, in order to avoid inequalities and injustices, the conception of a balancing charge, or a balancing allowance, the two being co-relative, for the purpose of correcting in the light of ascertained facts, the operation of the empirical allowance which is given year by year after the initial allowance. That is the purpose of it. If that principle is accepted, it seems to me that it is applicable in just the same way to the case of compulsory acquisition as to the case of voluntary acquisition."—[OFFICIAL REPORT, 4th. June, 1945: Vol. 411, c. 591.]
    What he was saying—and I should like to adopt that argument myself—was that the Act provides for certain writing-off allowances, which are empirical allowances. We do not know, when we get to the end of the user by the particular taxpayer of the particular asset, whether too much or too little will have been written off. A certain arbitrary allowance is made. Therefore, when reaching the stage when sales of that asset or parts of it take place, we have, by looking at the amount he receives, to determine whether he has had too much or too little written off. If it is too much, he has to pay a balancing charge. If it is too little, he gets a balancing allowance.
    That applies with exactly the same force if it is a compulsory sale as it does if it is a voluntary sale. In either case, we have to correct the allowance which had been given under the Income Tax Act, by either charging him or making him a further allowance, and in that respect a compulsory and a voluntary sale stand on precisely the same footing. There is no distinction whatever. If the allowances
    1202
    have been too big he has to pay a charge. If they have been too small he gets an allowance. Those were the three points made in support of this Amendment, and in view of what I have said I hope the House will agree that it should not be accepted. When one examines the arguments individually, in my submission to the House they have no validity whatsoever.
    Colonel J. R. H. Hutchison: This problem has been discussed in Committee and I submit that the Solicitor-General has spent a great deal of his time explaining something which we already fully appreciate, and that he has not met our objections that there is discrimination—unfair discrimination—between one type of enterprise taken over by the State by one method and another type of enterprise taken over by the State by another method.
    He told us that where undertakings have been taken over by the transfer of shares no balancing charge would arise because there were no assets transferred. That we quite clearly realise. He went on to say that in another case, I think the transfer of certain coal assets, certain cross concessions had been made as between the State and the coal industry. He said, therefore, that there should be in that case no balancing charge either, but we say that there should equally be no balancing charge payable on assets such as road transport vehicles which perfectly well should get the same type of concession as was made in the assets transferred to the Coal Board. Because in one part of British industry it is convenient for it to be taken over in one form, and in another part of British industry it is convenient for it to be taken over in another form, is no reason why one part should be subjected to this form of taxation. That is unfair.
    It would, perhaps, not have been unfair if in the price, or the system of assessment for road vehicles, there had been something to set off against this balancing charge, which is the subject of our discussion and the Amendment, but there is no evidence that this was so. Indeed, it may be said that where the system of taking over is one of Stock Exchange market value of shares, those taken over on that basis are rather better off than those where we split up an asset on an individual basis, proceed to pay the

    1203
    individual value of that asset, and then subject it to a balancing charge afterwards. Stock Exchange figures, in fact, allow for a measure of good will, which the other method does not, and there is no deduction from the Stock Exchange values for a possible and potential balancing charge which it was never considered likely to be made at the time the Stock Exchange quotations were taken. I suggest, therefore, that a concession of the kind we have asked for—that is, the elimination of the balancing charge in the case of road transport vehicles—has been abundantly made out.
    Mr. Stanley: There is no need for me to say we are disappointed with the reply of the Government. We knew beforehand that we should be disappointed. I rise only to deal with one point which the right hon. and learned Gentleman made. Out of a mass of verbiage with which he clothed a complete unwillingness to face the actual points which had been put to him, apparently he found great comfort in some words of my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson). I am far from wishing to discourage him from such an excellent practice. The more he learns
    from the precedents established or the principles laid down by my right hon. Friend, the better he will find himself in the future, and he must not take what I now say as throwing any censure or the least discouragement on the practice he has decided to adopt. I think it is only fair, however, to make this point clear.
    The words which he quoted were used by my right hon. Friend in 1945. That was before the advent of this Government. My right hon. Friend is a man of great experience, but in some ways he is also a man of almost ingenuous honesty of character. In the speech which has been quoted he referred, of course, to transactions of the normal standard of commercial honesty. He would not have anticipated—as a man of his character would not—that in three years there would be in power a Government which did not compulsorily acquire the assets, but stole them. If he had known that, the words he used would undoubtedly have been different.
    Question put, "That those words be there inserted in the Bill."
    The House divided: Ayes, 96; Noes,282.

    Division No. 238.]

    AYES.

    [6.59 p.m.

    Agnew, Cmdr. P. G.

    Howard, Hon. A.

    Ross, Sir R. D. (Londonderry)

    Amory, D. Heathcoat

    Hurd, A.

    Sanderson, Sir F.

    Assheton, Rt. Hon. R.

    Hutchison, Lt.-Cm. Clark (E'b'rgh W.)

    Savory, Prof. D. L.

    Astor, Hon. M.

    Hutchison, Col. J. R. (Glasgow, C.)

    Scott, Lord W.

    Barlow, Sir J.

    Jarvis, Sir J.

    Shepherd, W. S. (Bucklow)

    Bennett, Sir P.

    Jeffreys, General Sir G.

    Smith, E. P. (Ashford)

    Birch, Nigel

    Joynson-Hicks, Hon. L. W.

    Smithers, Sir W.

    Braithwaite, Lt.-Comdr. J. G.

    Lancaster, Col. C. G.

    Spearman, A. C. M.

    Buchan-Hepburn, P. G. T.

    Langford-Holt, J.

    Spence, H. R.

    Channon, H.

    Law, Rt. Hon. R. K.

    Stanley, Rt. Hon. O.

    Clarke, Col. R. S.

    Legge-Bourke, Maj. E. A. H.

    Stoddart-Scott, Col. M.

    Clifton-Brown, Lt.-Col. G.

    Linstead, H. N.

    Strauss, Rt. Hon. G. R. (Lambeth)

    Crookshank, Capt. Rt. Hon. H. F. C.

    Lipson, D. L.

    Sutcliffe, H.

    Crosthwaite-Eyre, Col. O. E.

    Lloyd, Maj. Guy (Renfrew, E.)

    Taylor, Vice-Adm. E. A. (P'dd't'n, S.)

    Crowder, Capt. John E.

    Lucas-Tooth, Sir H.

    Thorneycroft, G. E. P. (Monmouth)

    Dodds-Parker, A. D.

    MacAndrew, Col. Sir C.

    Thornton-Kemsley, C. N.

    Donner, P. W.

    Mackeson, Brig H. R.

    Turton, R. H.

    Drewe, C.

    Maclay, Hon. J. S.

    Vane, W. M. F.

    Dugdale, Maj. Sir T. (Richmond)

    Macpherson, N. (Dumfries)

    Wadsworth, G.

    Duthie, W. S.

    Manningham-Buller, R. E.

    Wakefield, Sir W. W.

    Eccles, D. M.

    Mellor, Sir J.

    Walker-Smith, D.

    Foster, J. G. (Northwich)

    Molson A. H. E.

    Wheatley, Colonel M. J. (Dorset, E.)

    Fraser, Sir I. (Lonsdale)

    Morris, Hopkin (Carmarthen)

    White, Sir D. (Fareham)

    Galbraith, Cmdr. T. D.

    Morrison, Rt. Hon. W. S. (Cir'cester)

    White, J. B. (Canterbury)

    Gammons, L. D.

    Odey, G. W.

    Williams, C. (Torquay)

    Gomme-Duncan, Col. A.

    O'Neill, Rt. Hon. Sir H.

    Williams, Gerald (Tonbridge)

    Granville, E. (Eye)

    Orr-Ewing, I. L.

    Willoughby de Eresby, Lord

    Gridley, Sir A.

    Osborne, C.

    York, C.

    Grimston, R. V.

    Pickthorn, K.

    Young, Sir A. S. L. (Partick)

    Harris, F. W. (Croydon, N.)

    Pitman, I. J.

    Headlam, Lieut.-Col. Rt. Hon. Sir C.

    Poole, O. B. S. (Oswestry)

    TELLERS FOR THE AYES:

    Hinchingbrooke, Viscount

    Raikes, H. V.

    Mr. Studholme and

    Hogg, Hon. Q.

    Ramsay, Maj. S.

    Major Conant.

    Hollis, M. C.

    Rayner, Brig. R.

    NOES.

    Acland, Sir Richard

    Foot, M. M.

    Marshall, F. (Brightside)

    Adams, Richard (Batham)

    Fraser, T. (Hamilton)

    Mathers, Rt. Hon. George

    Adams, W. T. (Hammersmith, South)

    Freeman, J. (Watford)

    Mellish, R. J.

    Alpass, J. H.

    Freeman, Peter (Newport)

    Messer, F.

    Attewell, H. C.

    Ganley, Mrs. C. S.

    Middleton, Mrs. L.

    Austin, H. Lewis

    Gibson, C. W.

    Millington, Wing-Comdr. E. R.

    Awbery, S. S.

    Gilzean, A.

    Mitchison, G. R.

    Ayles, W. H.

    Glanville, J. E. (Consett)

    Monslow, W.

    Ayrton Gould, Mrs. B.

    Gooch, E. G.

    Moody, A. S.

    Bacon, Miss A.

    Greenwood, A. W. J. (Heywood)

    Morgan, Dr. H. B.

    Balfour, A.

    Grenfell, D. R.

    Moyle, A.

    Barstow, P. G.

    Grey, C. F.

    Murray J. D.

    Barton, C.

    Griffiths, D. (Rother Valley)

    Nally, W.

    Battley, J. R.

    Griffiths, Rt. Hon. J. (Llanelly)

    Neal, H. (Clay Cross)

    Bechervaise, A. E.

    Griffiths, W. D. (Moss Side)

    Nichol, Mrs. M. E. (Bradford, N.)

    Belcher, J. W.

    Guest, Dr. L. Haden

    Nicholls, H. R. (Stratford)

    Bellenger, Rt. Hon. F. J.

    Gunter, R. J.

    Noel-Baker, Capt. F. E. (Brentford)

    Benson, G.

    Guy, W. H.

    Noel-Buxton, Lady

    Beswick, F.

    Haire, John E. (Wycombe)

    Oldfield, W. H.

    Bevan, Rt. Hon. A. (Ebbw Vale)

    Hale, Leslie

    Oliver, G. H.

    Bing, G. H. C.

    Hall, Rt. Hon. Glenvil

    Paling, Rt. Hon. Wilfred (Wentworth)

    Binns, J.

    Hamilton, Lieut.-Col. R.

    Palmer, A. M. F.

    Blenkinsop, A.

    Hardy, E. A.

    Pargiter, G. A.

    Blyton, W. R.

    Harrison, J.

    Parkin, B. T.

    Bowden, Flg. Offr H. W.

    Haworth, J.

    Paton, Mrs. F. (Rushcliffe)

    Braddock, Mrs. E. M. (L'pl. Exch'ge)

    Henderson, Rt. Hn. A (Kingswinford)

    Paton, J. (Norwich)

    Bramall, E. A.

    Herbison, Miss M.

    Pearson, A.

    Brook, D. (Halifax)

    Hicks, G.

    Peart, T. F.

    Brooks, T. J. (Rothwell)

    Hobson, C. R.

    Piratin, P.

    Brown, George (Belper)

    Holman, P.

    Poole, Cecil (Lichfield)

    Brown, T. J. (Ince)

    Holmes, H. E. (Hemsworth)

    Popplewell, E.

    Bruce, Maj. D. W. T.

    Horabin, T. L.

    Porter, E. (Warrington)

    Buchanan, Rt. Hon. G.

    House, G.

    Porter, G. (Leeds)

    Burden, T. W.

    Hoy, J.

    Pritt, D. N.

    Burke, W. A.

    Hubbard, T.

    Pryde, D. J.

    Callaghan, James

    Hudson, J. H. (Ealing, W.)

    Pursey, Comdr. H.

    Carmichael, James

    Hughes, Emrys (S. Ayr)

    Randall, H. E.

    Chamberlain, R. A.

    Hughes, Hector (Aberdeen, N.)

    Ranger, J.

    Champion, A. J.

    Hughes, H. D. (W'lverh'pton, W.)

    Rankin, J.

    Chater, D.

    Hynd, J. B. (Attercliffe)

    Rees-Williams, D. R.

    Chetwynd, G. R.

    Irvine, A. J. (Liverpool)

    Reeves, J.

    Cluse, W. S.

    Irving, W. J. (Tottenham, N.)

    Reid, T. (Swindon)

    Cobb, F. A.

    Janner, B.

    Rhodes, H.

    Cocks, F. S.

    Jay, D. P. T.

    Richards, R.

    Coldrick, W.

    Jeger, G. (Winchester)

    Ridealgh, Mrs. M.

    Collindridge, F.

    Jeger, Dr. S. W. (St. Pancras, S. E.)

    Roberts, Goronwy (Caernarvonshire)

    Collins, V. J.

    Jones, D. T. (Hartlepools)

    Rogers, G. H. R.

    Colman, Miss G. M.

    Jones, Elwyn (Plaistow)

    Ross, William (Kilmarnock)

    Cook, T. F.

    Jones, J. H. (Bolton)

    Royle, C.

    Cooper, Wing-Comdr G.

    Jones, P. Asterley (Hitchin)

    Scollan, T.

    Cove, W. G.

    Keenan, W.

    Scott-Elliott, W.

    Crawley, A.

    Kenyon, C.

    Shackleton, E. A. A.

    Crossman, R. H. S.

    Key, Rt. Hon. C. W.

    Sharp, Granville

    Daggar, G.

    King, E. M.

    Shawcross, Rt. Hn. Sir H. (St Helens)

    Daines, P.

    Kinley, J.

    Shinwell, Rt. Hon. E.

    Dalton, Rt. Hon. H.

    Kirby, B. V.

    Shurmer, P.

    Davies, Edward (Burslem)

    Kirkwood, Rt. Hon. D.

    Silverman, J. (Erdington)

    Davies, Ernest (Enfield)

    Lawson, Rt. Hon. J. J.

    Simmons, C. J.

    Davies, Harold (Leek)

    Lee, F. (Hulme)

    Skeffington, A. M.

    Davies, Haydn (St. Pancras, S. W.)

    Leonard, W.

    Skinnard, F. W.

    Davies, R. J. (Westhoughton)

    Leslie, J. R.

    Smith, C. (Colchester)

    Deer, G.

    Levy, B. W.

    Smith, Ellis (Stoke)

    Delargy, H. J.

    Lewis, J. (Bolton)

    Snow, J. W.

    Diamond, J.

    Lipton, Lt.-Col. M.

    Solley, L. J.

    Dobbie, W.

    Logan, D. G.

    Sorensen, R. W.

    Dodds, N. N.

    Longden, F.

    Soskice, Rt. Hon. Sir Frank

    Donovan, T.

    Lyne, A. W.

    Steele, T.

    Driberg, T. E. N.

    McAllister, G.

    Stross, Dr. B.

    Dugdale, J. (W. Bromwich)

    McEntee, V. La T.

    Stubbs, A. E.

    Durbin, E. F. M.

    McGhee, H. G.

    Swingler, S.

    Ede, Rt. Hon. J. C.

    McGovern, J.

    Sylvester, G. O.

    Edwards, Rt. Hon. Sir C. (Bedwellty)

    McKay, J. (Wallsend)

    Symonds, A. L.

    Edwards, N. (Caerphilly)

    Mackay, R. W. G. (Hull, N. W.)

    Taylor, R. J. (Morpeth)

    Edwards, W. J. (Whitechapel)

    McKinley, A. S.

    Taylor, Dr. S. (Barnet)

    Evans, Albert (Islington, W.)

    McLeavy, F.

    Thomas, D. E. (Aberdare)

    Evans, E. (Lowestoft)

    Mainwaring, W. H.

    Thomas, George (Cardiff)

    Evans, S. N. (Wednesbury)

    Mallalieu, E. L. (Brigg)

    Thomas, I. O. (Wrekin)

    Ewart, R.

    Mallalieu, J. P. W. (Huddersfield)

    Thorneycroft, Harry (Clayton)

    Fairhurst, F.

    Mann, Mrs. J.

    Thurtle, Ernest

    Fernyhough, E.

    Manning, C. (Camberwell, N.)

    Tiffany, S.

    Fletcher, E. G. M. (Islington, E.)

    Manning, Mrs. L. (Epping)

    Timmons, J.

    Follick, M.

    Marquand, H. A.

    Titterington, M. F.

    1206

    1207

    Tolley, L.

    Weitzman, D.

    Williams, J. L. (Kelvingrove)

    Tomlinson, Rt. Hon. G.

    Wells, P. L. (Faversham)

    Williams, R. W. (Wigan)

    Turner-Samuels, M.

    Wells, W. T. (Walsall)

    Williams, W. R. (Heston)

    Ungoed-Thomas, L.

    Westwood, Rt. Hon. J.

    Willis, E.

    Usborne, Henry

    Wheatley, Rt. Hn. John (Edinb'gh, E.)

    Woodburn, Rt. Hon. A.

    Vernon, Maj W. F.

    White, C. F. (Derbyshire, W.)

    Woods, G. S.

    Viant, S. P.

    White, H. (Derbyshire, N. E.)

    Wyatt, W.

    Walkden, E.

    Whiteley, Rt. Hon. W.

    Yates, V. F.

    Walker, G. H.

    Wigg, George

    Young, Sir R. (Newton)

    Wallace, G. D. (Chislehurst)

    Wilkes, L.

    Zilliacus, K.

    Warbey, W. N.

    Wilkins, W. A.

    Watkins, T. E.

    Willey, F. T. (Sunderland)

    TELLERS FOR THE NOES:

    Watson, W. M.

    Willey, O. G. (Cleveland)

    Mr. Joseph Henderson and

    Mr. Hannan.

    CLAUSE 37.—(Expenses allowances, etc.
    Mr. Assheton: I beg to move, in page 27, line 15, at the end, to insert:
    "and for the purposes of this Part of this Act expenses of travelling between such place as a director or person employed in an employment to which this Part of this Act applies may elect as constituting his principal place of business and any other place at which his duties require him to attend as a director or employee whether of the same or of any other body corporate shall be deemed to be money expended wholly, exclusively and necessarily in performing the duties of the office or employment."
    I hope that the Financial Secretary, or possibly the Solicitor-General, will tell me that this is an unnecessary Amendment, and that its intention is already provided for. This point is a narrow one but it is important, and I hope that the right hon. Gentleman will give his attention to it. At the present time, the normal rule is that one has to pay one's travelling expenses to the place where one usually works. If one works in an office in the City of London and comes up every day from Reigate, one has to pay one's travelling expenses in going to and from the office, the theory being that one should live as near as possible to one's work, and if one chooses to live at a greater distance than is easily accessible to one's work, one suffers for it.
    I am given to understand that as this Clause is drawn, it will have an unfortunate affect. Let us imagine a man who is in business as a solicitor in Manchester, and who is on the board of an insurance company in London. He has to come to London once a week to attend a board meeting of the insurance company. That man is normally every day going to his business in Manchester. One day a week he has to go from Manchester to London and back. Hitherto, he has been entitled to charge the expenses of his journey to London, and, if necessary,
    1208
    the cost of staying the night in London as expenses against his income. How does that work out in practice?
    Supposing that man is paid £500 a year for being a director of this insurance company, and he goes once a week to London; he would be earning, therefore, approximately £10 a visit, and if that a £10 is taxed it would leave him with £5 10s. on the assumption that he is not a Surtax payer. If he were a Surtax payer, it would leave him with considerably less. Out of the £5 10s., he has to pay his travelling expenses to London and back, and the cost of staying the night in London, which would absorb in many cases more than the total amount of his fees, and therefore it is clear that it would not be profitable for him to continue in that business. I do not think that that can be the intention of the Government because it is obviously unreasonable, but I am a little anxious that it may be so because this has arisen in the past with regard to recorders. They have felt very badly treated in the past and are still badly treated.
    If one happens to be in practice as a barrister in London, with chambers in the Temple, and one takes the honourable but not very remunerative occupation of being a recorder in some not very important place at a considerable distance from London, and one has to travel four times a year to that place and stay there while the sessions are on and then return, one is not allowed to charge the expenses of those journeys against one's income and one finds oneself working for nothing. A certain number of gentlemen are no doubt in a position to do that, but it is not a very intelligent way of working the Income Tax law.
    I am informed—and the Solicitor-General will tell me if I am right—that this unfortunate experience which recorders have had to suffer, and which

    1209
    I would like to remedy—and I hope that this Amendment will do so, or, if not, that it will be altered to do so—is now to be imposed on directors, and will chiefly apply to those who live in the provinces and come to London, but it will equally apply to those who live in London and go to the provinces. If this matter is not already provided for somewhere in the Bill, I hope that the Government will now tell us that they intend to provide for it.
    The Solicitor-General: The proposal which the right hon. Member for the City of London (Mr. Assheton) has in mind would work a radical departure from the principles upon which travelling expenses are treated for the purposes of Schedules D and E taxation under Rules 3 and 9. The principle, which in that respect is not affected by these new expense provisions, is that the cost of getting to work is not an expense which one can deduct from the emoluments one receives from one's work under Schedules D or E. If one's work requires that one must, in the course of it and for the purpose of it, travel between two places, one can treat the cost of getting between those two places as an allowable expense.
    Suppose, as the right hon. Gentleman mentioned, there is a director of two or three different companies, the board meetings of which take place at different times, the right hon. Gentleman's suggestion is that he should be allowed to treat as deductions from his director's fees, or earnings as an employee in any other capacity of the companies concerned, the cost of getting to the place of business of those companies. That, for all ordinary purposes, cannot be allowed, and there is no real reason why an exception should be made against the general principle relating to the treatment of this sort of travelling expense in the case of directors and highly-paid executives to whom Clause 37 and the succeeding Clauses relate. In time this would perhaps seek to make in other cases a general exception.
    If we take a solicitor who has a place of business in London and a place of business in Manchester, and his work as a solicitor requires him to travel between those two places of business, the cost of getting between one and the other is an allowable expense against his earnings. In
    1210
    the case of the recorder, as the case of Ricketts v. Colquhoun decided some time ago, the cost to which the recorder is put in getting to the place in which he sits as recorder is not an expense which he incurs in the carrying out of his duties as a recorder.
    Mr. Assheton: Can the right hon. Gentleman justify that?
    7.15 p.m.
    The Solicitor-General: Yes. Unless we completely recast Rule 9 of Schedule E and Rule 3 of Schedule D, the principle on which these two rules are based excludes that type of expense because it is not an expense which the person incurs in doing his duties but an expense which he may incur before beginning to do those duties. Hon. Members on both sides of the House, I have no doubt, would like no taxes at all, but if we must have taxes, we have to work them on a reasonable and logical basis and to start from a particular point. The point of accepted travel for purposes of Schedules E and D is the point where one begins to do one's work—something that one does when one gets to one's work; not something that one does before one begins work.
    Let us take the case of a person living in London who accepts employment in Oxford with the result that he has to go between London and Oxford to do his work. If a man accepts work at a place 60 or 70 miles from his place of abode, that is his own concern. We do not decide where he will accept the work; he must decide that for himself and whether the renumeration is sufficient to make it justifiable from his point of view to involve himself in the expenses of travelling. In a Debate of this sort, once one begins to go from instance to instance, one can reach undefinable limits. One has to confine oneself to the general principles, and ask oneself whether there is sufficient reason, in the case of these directors and highly-paid executives, for making an exception to the general rule which applies to all persons taxed under Schedule E in respect of their emoluments from employment.
    I do not believe the right hon. Gentleman would contend that. I think that in moving this Amendment he was actuated by the general feeling that Schedule E works out unjustly; but, assuming that Schedule E remains in its

    1211
    present form, I feel he would not go to the length of saying there was any case for making an exception, in the case of directors and highly paid executives, from the ordinary principles on which Schedule E is based.
    Sir Frank Sanderson: Would the Solicitor-General clarify the position? In the case of a Member of Parliament travelling from Aberdeen to London to attend Parliament, travelling expenses would be paid. Is it suggested that in the case of a man who has to travel from Aberdeen to London to attend a directors' meeting those expenses should not be permitted?
    The Solicitor-General: That has been the law for a long time.
    Mr. Assheton: Oh, no.
    The Solicitor-General: The case under the Amendment has nothing to do with the provisions of the 1918 Act. The Member of Parliament who travels from his constituency—I am assuming the hon. Member means the constituency is Aberdeen—
    Sir H. Lucas-Tooth: No, his home.
    The Solicitor-General: Then he does not get it.
    Sir H. Lucas-Tooth: Yes, he does.
    The Solicitor-General: Whatever the position of a particular person, the question is: are we now, in the case of this particular type of director and highly paid executive, to alter Schedule E? If Schedule E stands, there really is not a case for altering it for such a person. A Member of Parliament who goes to his constituency gets his ticket.
    Mr. John Foster: And to his home.
    The Solicitor-General: And to his home. I am not justifying or condemning the system by which a Member of Parliament gets certain free travelling facilities. That is a matter which does not arise within the scope of this Amendment. The Member of Parliament gets travelling facilities because it has been thought that there is sufficient and good reason for allowing him those facilities; he could not carry out his duties otherwise. That is a special
    1212
    concession, and not an Income Tax concession; it has nothing to do with Income Tax; it is a special travelling facility which is made available to him. Apart from those travelling facilities, Members of Parliament are, of course, taxed in the ordinary way under Schedule E. Their taxation, apart from any facilities of that sort which are specially provided for them and have nothing to do with the Income Tax Acts, depends upon the application of the ordinary rules formulated under Rule 9 of Schedule E. For those reasons, I hope the House will agree that there really is not any case for this Amendment to apply to this specific class.
    Mr. Assheton: Could the Solicitor-General clarify one thing? Did he say that the law was not being altered? I suggest that at the present time such expenses may be charged.
    Mr. Pickthorn: I want very shortly to put only one point to the Solicitor-General. Five or six times he used the expression "highly paid executive," and I should like him to explain that, if he will. Did he mean to indicate that there was some difference in the application of the law in this matter according to whether one was highly paid or not highly paid? Or was he merely endeavouring to import prejudice? What was the object of using that epithet half a dozen times? It was the more striking because of the exposition of the Income Tax law beginning to apply at the point at which the work was begun, which must have brought to the minds and memories of a good many hon. Members the law about accidents in the course of or arising out of employment, because there it certainly is not held that there is no liability until the moment at which the work is begun. Therefore, I should have thought it all the more necessary to ask for an explanation. Is it suggested that the law is, or ought to be in this respect, different according to the remuneration of the person concerned; and if so, what is the ceiling below which the law is different?
    Mr. Foster: I think it a little anomalous for a Member of Parliament like the Solicitor-General to object in principle to a person in the situation envisaged by this Amendment, getting his travelling expenses allowed against Income Tax, when a Member of Parliament, travelling from

    1213
    his home which is not in his constituency gets an entirely free travelling allowance. I quite agree that it has nothing directly to do with Income Tax, but it is even more advantageous as a concession, because the Member of Parliament gets the whole thing free. What we are asking in this Amendment is that a person in a similar situation, who has to travel from one place of business to another, should get a travelling allowance against Income Tax.
    The Solicitor-General mentioned a person with employment in Oxford, about 60 miles from London, and said that it was open to him to accept or refuse that employment, and that he would calculate whether it was worth it. In the case of a recorder, while it is true that there must be plenty of other people on the circuit who could do it as well, I do not think that is quite the test. When I was appointed Recorder of Oxford, I did not weigh up the chances of employment in Oxford; there is nothing I can do to warrant my staying nearer my work there, because if I go to stay in Oxford in order to work there as a recorder four times a year, I have to travel every day to London to exercise my profession as a barrister. It is anomalous and unjust that a recorder should come under Schedule E, whereas a barrister—and only barristers can be chosen as recorders—should come under Schedule D. One has the situation whereby the recorder-ship of a small place is worth perhaps £40 or £50—at Abingdon I think it is worth £80 or £90—but travelling there from London four times a year would cost more than the amount paid for the recorder-ship. Yet somebody on the circuit has to do the job; justice has to be administered. The result of the way in which these two rules work is that the person works at a loss.
    Surely, the Solicitor-General must think, quite apart from Schedules E and D and Rules 3 and 9, that that is unjust. He did not answer that point; he did not say whether in his opinion it was unjust; all he said was that we could not change Rules 3 and 9 at this stage. This Bill modifies the application of Rules 3 and 9, and all we suggest in this Amendment is that in its modification it should iron out some of the injustices which at present exist under these rules. It will not apply to a person who travels from his home
    1214
    to his work purely and simply. It applies where a man travels from one place of business to another. That is the point. That is why the ambit of this Amendment is not as large as the Solicitor-General thought it was, and would not make such an inroad on the present administration of Rules 3 and 9 as he thinks.
    7.30 p.m.
    Mr. I. J. Pitman: I hope that some trade union Member opposite will be able to help us in this discussion, because this is analogous to an erector or a mason who might live at Godalming and go up daily to his work in London and be sent away to do a job of work in Torquay. As I see it, that person ought to be allowed not to regard those expenses as income. We are saying in this Amendment that we want the erector and the director to be allowed to travel from Godalming to Torquay without paying tax. As I understand it, the Solicitor-General says that if the person goes up to London first and then goes to Torquay there is no difficulty, but if he makes the shorter journey from Godalming to Torquay he is thereby rendering himself liable to tax. I see that the Financial Secretary is shaking his head. I should like to be put right on this because it seems to me to be a very important issue.
    Sir Arnold Gridley: I must at once declare that I have a strong personal interest in this Amendment, as I am a director of various companies. I have endeavoured to follow the Solicitor-General's argument, but probably due to my own fault, I am still as fogged as I was before I heard his speech. There are co-directors of mine who have to come up to London from the places where they are ordinarily engaged, such as Gloucester and Birmingham. They are most valuable men whose attendance in London is absolutely essential, and whose services I should be very loath to dispense with. In exactly the same way my duties entail regular visits to something like seven or eight different works in various parts of the country. Hitherto I have charged the amounts to out-of-pocket expenses. I am not one of those directors who receive extravagant allowances, as has apparently been the case in the past with certain directors—extravagant allowances which the Treasury are now quite rightly seeking to prevent, or

    1215
    at any rate to tax, and which I hope the Treasury will succeed in preventing from being paid.
    I want the matter to be made clear beyond peradventure, not only for my own sake but for the sake of hundreds of directors in the country, who, if I may say so with modesty, are also trying to do their utmost to further the exports of the country. It should be made perfectly clear what is our exact position. It should be made clear, if my colleagues have to come up to London, or if I have to visit various works each month, whether the expenses are a legitimate charge to the working expenses of the company, or whether they are to be treated as allowances to directors and subject to tax. I think this is going to be a very serious injustice and a very grave handicap to business. This new method which is being introduced for the first time is being introduced at a very unhappy moment in the industrial struggles of the country.
    Mr. Selwyn Lloyd: We were discussing the other day the question of the Raw Cotton Commission. That Commission has a certain number of part-time members, and it was agreed that that was of substantial advantage to the Commission. The Commission normally meets in Liverpool, and a number of these part-time members live in Manchester and other places where they carry on their ordinary businesses. Are we to understand from this declaration that such persons are not entitled to charge their expenses? That is a matter that should be made quite clear.
    Colonel J. R. H. Hutchison: I have always understood it to be a principle of Income Tax law that the individual lives at his place of work, and that if he chooses to live elsewhere, he does not get an allowance for the costs of travelling. But in the case we have in mind, the individual cannot live at his place of work because he has two or three places of work. How is it to be argued, therefore, that a person is not entitled to get the costs of going to an extraordinary place of work as compared with his ordinary place of work? It is that individual with whom we are concerned.
    Mr. Assheton: May I, by leave of the House, speak again if there is to be no reply?
    The Solicitor-General: Perhaps I can reply quite shortly to what has been said. The senior Burgess for Cambridge University (Mr. Pickthorn) thought it right to suggest that I was endeavouring to import prejudice because I used the phrase "highly-paid executive." really do not think he could have taken the trouble either to have read the Amendment or the Clauses we are discussing, because if he had taken the trouble to do either of those things, it would have been obvious why I used that expression, and what my argument was meant to be The Amendment reads:
    "and for the purposes of this Part of this Act expenses of travelling between such place as a director or person employed in an employment to which this Part of this Act applies."
    In other words, it is designed to apply only to persons who are engaged in employment to which this Part of the Bill applies, and those are persons who are paid £2,000 a year and upwards. That is what I meant by "highly-paid executives," which does not seem to me to be a wholly incorrect description of persons who receive that amount of money. It is the hon. Member's own responsibility if he thinks it right to make such a remark without taking the trouble to read the Bill.
    Mr. Pickthorn rose—
    The Solicitor-General: I am not going to give way. So long as one accepts that Schedule E stands as it does, there is no case for making an exception in the case of these persons, which is what the Amendment seeks to do. That is to say, if we alter Schedule E, we must alter it for all persons, and not only for those persons referred to in this Part of the Bill. I think that the right hon. Gentleman will agree with that, which is my answer to his Amendment. Therefore, the argument really is essentially against Schedule E as a whole, a question which has been constantly discussed; it was discussed earlier during the Committee stage, and the Financial Secretary discussed and explained the matter. Whether hon. Members are right or wrong, they cannot, in my submission, raise that argument on this Amendment which seeks only to make a partial exception. That

    1217
    was the burden of my argument which, if I did not make it plain earlier, I hope I have now made plain. Directors cannot charge expenses to which they are put in getting to board meetings, but if as directors they have to travel because they are directors, from one place to another, they can charge the expenses to which they are put in getting to those places. For these reasons, I hope the Committee will not agree to this Amendment.
    Amendment negatived.
    Mr. Eccles: I beg to move, in page 27, line 23, at the end, to insert:
    "(3) The Income Tax (Employments) Act, 1943, and the Income Tax (Offices and Employments) Act, 1944 (which provide that tax shall be deducted from certain emoluments by the persons paying them), shall not apply to any sum which, by virtue only of the provisions of this section, falls to be treated as a perquisite of the office or employment of any director or person employed in an employment to which this Part of this Act applies."
    When we were discussing this Clause in Committee my hon. and gallant Friend the Member for Holderness (Lieut.-Commander Braithwaite) and I attempted to get the Chancellor of the Exchequer to give us a clear statement whether or not the change in the methods of the determination of these expenses would bring any kind of disbursements so made within the provisions of P.A.Y.E. We were not at all satisfied with the answer the Chancellor of the Exchequer gave us, because the right hon. and learned Gentleman then seemed to think that the only point we had raised was whether or not, when the accountant of a business was reimbursing someone for some expenses he had incurred, a new calculation of his code number would have to take place. That was not the point at all. The point that we were trying to put to the Chancellor was the extraordinary administrative difficulties that will take place if any of these repayments of tax have to go under P.A.Y.E. arrangements.
    Although any claims to be made by the directors or employees for repayment of taxes will not, in practice, be brought under current coding or will be dealt with by a separate claim, that money will only be paid back to them at the end of the year or even later. The point is best put by way of illustration. Is it a fact or is it not that a man, who spends £5 on giving
    1218
    an entertainment or clearing some expenses on behalf of his firm and then goes back to the firm's accountant and claims that £5, will, under these new provisions, have that expense treated as an emolument and, therefore, added to his income? If that should fall under the P.A.Y.E. system then the accountant is going to reimburse him with £5 less tax, and he must go and make a claim upon the Revenue to get the tax back when the expense has been admitted as a proper expense under the Bill.
    We feel that that would not only be unfair but would cause an immense amount of unnecessary work. What we asked the Chancellor of the Exchequer on the Committee stage was whether in his opinion this Clause 37 brought those payments under the P.A.Y.E. system, to which the Chancellor gave us a very unsatisfactory and partial answer. Therefore, we put down this Amendment hoping that it will be unnecessary to press it, because it will be made clear in the reply to be made on behalf of the Government that all tax raised on these expense allowances, in cases where it should be raised, should be raised by way of assessment and not by way of deduction under P.A.Y.E. regulations.
    Mr. Oliver Poole: I beg to second the Amendment.
    As my hon. Friend the Member for Chippenham (Mr. Eccles) said, the object of this Amendment is to clarify the position under P.A.Y.E. I certainly share his hope that it will not be necessary for us to press the Amendment after we hear the reply of the Solicitor-General. There are two different methods by which people receive payment for expenses. In certain cases there is a lump sum payment made to the directors or employees of certain firms for general expenses during the period of a year, and under the provisions of this Bill they will now be subject to tax and the expenses will be paid back under Schedule E. The principle of that will be accepted by everybody on all sides of the House.
    7.45 p.m.
    On the other hand, in a very much larger number of cases—and I would emphasise that—people travel around the country and in carrying out their business incur certain quite small expenses totalling perhaps £5 to £20.

    1219
    When they return to their offices they put an account into the accounts department which shows what was spent on railway fares, etc. They receive in cash the exact amount of money expended on expenses. When this was raised in Committee the example I put to the right hon. and learned Gentleman was that of a man engaged—I took this example because it came first to my mind—as a public works contractor in London or Birmingham with contracts in many towns or districts. It was essential that he should travel about from place to place. The reply that the Chancellor gave then was that that kind of expense, which was normal and in accordance with the general run of his business, would be taken care of under Section 41 of this Bill.
    I accepted that because I felt quite sure that the Chancellor of the Exchequer meant to convey to me and to the Committee that that sort of expense was quite justifiable and he had no wish to be unfair about it. When we went into it more carefully, however, we found that there was nothing in the Bill to prevent P.A.Y.E. deductions being made from those payments. As my hon. Friend the Member for Chippenham said, if this system is carried through, a great amount of inconvenience and unnecessary work will be caused as well as hardship which will be unreasonable. I hope that the Solicitor-General will give us a reassuring answer in this case, and, if our Amendment cannot be accepted, that he will undertake that some other more suitable words will be put in the Bill.
    The Solicitor-General: The Amendment raises the question as to how these expense remuneration figures—if I may so call them—will be treated for purposes of P.A.Y.E. The Amendment would seek to exclude them from the ambit of the P.A.Y.E. system. To a certain extent one has to apply a system to a new situation in such a way as to make it work most effectively and sensibly. May I first say how it works? The P.A.Y.E. regulations start off with requiring an employer to deduct taxes on all emoluments assessable to Income Tax under Schedule E. That is the basic situation with which one starts. Expense payments affected by Clause 37—the one we are discussing—will be emoluments, and, accordingly, they will automatically fall within the
    1220
    pay-as-you-earn scheme as the regulations stand and as at present they are worked.
    In some cases it will be perfectly clear that if the payments were brought in as gross remuneration, as Clause 37 requires, they would be counterbalanced by an equivalent claim under Rule 9, under which the claim can be made for deduction of expenses incurred by the recipients. In cases where it is obvious the Clause provides for it, and the inspector will be able to notify the employer that the payments can be ignored. Where he does so, there will not be any question of deducting tax on those payments. In other cases, if the situation appears to be that the taxpayer is likely to be entitled to a deduction under Rule 9, an estimated figure for that allowance will be taken into account in arriving at his code number. There will be an estimate made, the object being to see that, as far as practicable, his proper tax will be deducted in the course of the year. At the end of the year when full particulars of the emoluments become available, the correct deduction for expenses will be made in arriving at the assessments. That is the ordinary case.
    There are, however, certain classes of emoluments—for example, the free use of a car—which are very difficult to fit into what I have just said. Questions may arise as to how the P.A.Y.E. regulations would fit into the kind of benefits in kind with which Clause 38 deals. That Clause deals with benefits in kind which are made direct as part of the emoluments of the director or the executive. In the case of such a benefit—I have mentioned the use of a free motor car—deduction of tax, as such, will not be possible from the very nature of it, but, so far as possible, the value of the benefit will be taken into account in fixing the taxpayer's code number for the year, with the result that the tax on the salary and the assessable value of the benefit in kind together will be deducted from the salary. In other words, the best assessment will be made of the value of the use of the motor car, for example, and the appropriate figure will be included.
    I would like to say what would happen if the Amendment were accepted. Suppose that these emoluments were excluded from the principle of the P.A.Y.E. regu-

    1221
    lations. For the purpose of my argument I would like to speak in terms of year 1—the year in which the emolument is enjoyed—year 2, and year 3. The House will then know what I mean. After the end of year 1—that is to say in year 2—an assessment would have to be made in respect of the emoluments enjoyed in year 1—am talking on the basis that the Amendment has been accepted—and there would be brought into charge for tax any part of the payments which could not be shown to be admissible as an expense under Rule 9 of Schedule E.
    The tax on those amounts which could not be justified as an expense under Rule 9 of Schedule E would fall to be taken into account in fixing the code number for the next year—year 3—during which the emolument would rank for tax. The result would be that the tax on the emolument which was received in year 1 would not be collected until year 3. That is a situation which really is not justifiable. Provided the regulations can be so worked as to make an estimated deduction in order to fix with reasonable accuracy what the taxpayer's code number should be—and we feel that we can do it—there is no justification for the tax which is due in respect of an emolument enjoyed in year 1 not being collected by the Revenue until year 3. For those reasons we feel it would not be right to accept that Amendment.
    Mr. O. Poole: Can the right hon. and learned Gentleman say why it can only be claimed back under P.A.Y.E.? It would seem to me much better if the tax were paid by cheque immediately at the end of year 1, when the inspector had disallowed the claim under Schedule E.
    The Solicitor-General: An assessment has to be made upon it, and it would have to be included in the code number fixed for the next year—that is to say year 3.
    Mr. Poole: Why cannot it be paid straightaway? Why has it to be collected back by means of P.A.Y.E.? Why cannot it be collected by immediate payment?
    The Solicitor-General: It would not be received in year 1 even if we did that. There would have to be a separate assessment, which might mean a substantial payment by the director or the executive in year 2, which might be much less convenient to him than having it deducted
    1222
    pro rata monthly by P.A.Y.E. in year 3. If the hon. Gentleman's suggestion were adopted, a director or an executive might have to pay in year 2 by cheque a substantial sum of money in respect of an emolument which he had enjoyed in year 1. If one requires a method which would not impose on him the burden of making a substantial payment by cheque, it would have to be done by P.A.Y.E. in year 3.
    Mr. Poole indicated dissent.
    The Solicitor-General: The hon. Gentleman shakes his head. Either it is paid by cheque, which would make it necessary to find a substantial sum in year 2, or it could be broken up so as to include it in his code number in year 3.
    Mr. Assheton: I hope the right hon. and learned Gentleman will consult with his friends in the Board of Inland Revenue and think about this matter again. I cannot imagine anything more inconvenient both to the Inspector of Taxes and to the taxpayer than to adopt the plan which the right hon. and learned Gentleman has just put before us. I am sure the proposal made by my hon. Friend the Member for Oswestry (Mr. O. Poole) is much more likely to be agreeable to the Inspector of Taxes and to the taxpayer. A passion for uniformity has overwhelmed the right hon. and learned Gentleman. He wishes to get everything fitted into the planned P.A.Y.E. system. I suggest it would be wise on this occasion to think about it again and see whether, after further consideration, the Board of Inland Revenue could not give some different advice.
    Mr. Pitman: The Solicitor-General ought to consider the terms of this Amendment and explain what his proposals are, because I do not see how anything that he is proposing can work. As I understand it, this Bill is likely to become an Act on Friday, and at the end of June a great number of accountants will be faced with this problem. A number of cases will arise, such as that of the highly remunerated commercial traveller who does very well on commission and whose travelling expenses can be very high.
    As I understand the proposal of the Solicitor-General, it is that at the monthly

    1223
    deduction of tax under P.A.Y.E., the whole of the expenses, whether they are justified or not, will be regarded as income and chargeable to Income Tax at the full rate. It may well be that the man will be actually out of pocket for several months as a result, and will have nothing to live on during the time when the case is argued out, even when the secretary or the accountant of a company considers that it is an obvious case of allowable deduction, because the inspector has to decide in due course whether a deduction shall be allowed. I should like to know whether that is the proposal of the right hon. and learned Gentleman in lieu of the suggestion put forward by my hon. Friends the Members for Chippenham (Mr. Eccles) and Oswestry (Mr. O. Poole).
    Their scheme has this great merit, that this Clause is limited to people who are drawing £2,000 a year and over, as was pointed out by the Solicitor-General to the senior Burgess for Cambridge University (Mr. Pickthorn). There is a publication which shows how many people there are in receipt of that sum or more. P.A.Y.E. is designed for the millions of weekly wage earners, whereas, under the old system of taxation, the amount due was paid by cheque, after assessment. That system worked very well while the number of taxpayers was relatively few. This new provision will affect relatively few cases. It will not affect millions of taxpayers. It is better procedure that Income Tax should be agreed later with the inspector of taxes, and the right amount then paid. It will cause great hardship if the Solicitor-General insists on a full deduction on all these expenses, and if there have to be reclaims of tax from the Inland Revenue, months later. As I understand it, that is what the present proposal means in practice.
    8.0 p.m.
    Mr. Eccles: If I may say a few words again, with the leave of the House, I would like to tell the Solicitor-General that until tonight I did not understand why my hon. Friends on this side and I had had so many letters from businesses on this subject. Clause 37 and P.A.Y.E. have produced a larger crop of letters than any other Clause of the first 46 Clauses of the Bill. But now I see that the amount of work which will be put on businesses
    1224
    as a result of collecting tax in this way will be extraordinary. Imagine a man who has a motorcar—and a chauffeur—belonging to a company, and part of the time the car is used by his wife. A calculation as to the value of the car to the man in his proper business journeys, and the other part of expenses which could properly be attributable to his wife going shopping, has to be made. The part belonging to his wife has to be made subject to a calculation as to what the man's tax code number is to be next year.
    The whole think is topsy-turvy. The only sensible thing to do is to calculate all this tax by assessment, and make the man pay directly he has been assessed. To try and bring it into P.A.Y.E. will cause headaches to thousands of people. It would not be right to press the Amendment, because I do not understand exactly what the Solicitor-General said and I think we ought to go away and think about the matter. If there is any way of preventing a business from having this extra burden put upon it, then something out to be done by administrative action to that end.
    Amendment negatived.

    CLAUSE 38.—(Benefits in kind to be taken into account.)
    Colonel J. R. H. Hutchison: I beg to move, in page 28, line 25, to leave out from "meals," to "for," in line 26.
    We have already had a discussion in Committee, on the question of meals provided by firms for their employees. It was laid down in the Bill as drafted, that benefits in kind were to be computed in an individual's assessment for tax as being part of his remuneration, but it was expressly provided that meals provided on the premises by firms would not be so treated. It was stated that that was not the invariable practice, but a considerable number of firms do provide meals in outside canteens and when this was represented to the Chancellor he gave way and inserted in the present edition of the Bill the words:
    "… in any canteen in which meals are provided …"
    We believe, however, that the discussion we have so far had leaves the present position very obscure, and we wish to make Subsection (4) of the Clause read as follows:

    1225
    … this section shall not apply to expense incurred by the body corporate in or in connection with the provision of meals for the staff generally."
    I suggest that the definition of whether a place is a canteen or not leaves room for very considerable doubt. Where it is the practice for a firm to provide meals generally for their staff—although perhaps not for 100 per cent. of their staff—there is a much clearer method of deciding whether or not that payment should be an emolument. For instance, the right hon. and learned Gentleman said that if part of Lyons Corner House were set aside, and employees went to that place only for meals, with a meals ticket, it became a canteen. But he told us there was no definition of a canteen, which will cause a number of firms a great deal of thought. The Treasury would not lose any money if they defined who will and who will not be entitled to have this provision of meals discounted for taxation.
    I would like the right hon. and learned Gentleman to tell me what would be the position of a firm which gave its employees meal tickets, which could be honoured in one or two local restaurants, for those members of its staff who could not conveniently get home. I know of a case where workers living near their works go home for their meals, but many cannot get home in the time available, and are given tickets to take to two or three neighbouring restaurants. What would be the position under such an arrangement? I consider that the Clause and the Bill would be clearer if the Amendment were adopted.
    Sir P. Bennett: I beg to second the Amendment.
    When we discussed this matter in Committee the Chancellor met our point of view, and we are grateful for what he did, but he will remember that my right hon. Friend the Member for the City of London (Mr. Assheton) said that we would like to look at the matter further between then and now. We have done that. The Chancellor will be aware that when he was Minister of Aircraft Production during the war, he insisted on firms going to different parts of the country to establish branch works. Canteens were not then available, and are still not available. Headquarters staffs have had to get meals where they could, and have been lucky
    1226
    to get them. It is no good saying that canteens must be provided, because the caterers are not available and suitable arrangements cannot be made. Also, gangs of workers, with supervisory staffs, have been sent to different parts of country to do different jobs. Canteens cannot be provided for them either, and they have had to go for meals where they could get them. Firms have not been able to earmark a section of a local restaurant and say, "That is for our use." If the Chancellor will accept the Amendment, he will not lose anything; on the contrary, he will remove a certain amount of doubt.
    Mr. Jay: As the hon. and gallant Member for Central Glasgow (Colonel Hutchison) pointed out, the purpose of the Clause is to give relief in the case of meals provided in canteens—a legitimate activity and one which is to be encouraged. As he observed, the original form of the Clause would have given relief only in the case of meals provided on the premises of the employer in question. It was pointed out that in many cases the canteen might actually be on the premises of another firm, or might be a regularly used portion of a nearby restaurant. The earlier Amendment of my right hon. and learned Friend, and the Clause in the form in which it now stands, provides that relief will be given in the case of outside premises of that kind. The hon. and gallant Member asked whether this provision would apply where meal tickets are given to employees who get their meals at an outside restaurant. I understand that it would apply if the meal tickets were used by a number of employees at a restaurant where they regularly took their meals, but that if they were used at large numbers of restaurants in different parts of the district it would not apply.
    Colonel Hutchison: I assume the Economic Secretary is not saying that the meal tickets must be given to 100 per cent. of the staff, but is referring to the staff generally?
    Mr. Jay: That is correct, as I understand it. The objection to the Amendment is that if we omitted, as is suggested, the words:
    "in any canteen in which meals are provided,"
    the exemption would then be wideneu

    1227
    to cover firms who provided meals for their directors at expensive hotels, if at the same time they provided meals in a canteen for the staff generally. The Amendment would have that effect and that is wider than we wish or intend to go. It would not be right to grant this relief in such a way that the Exchequer would be partly financing expensive meals of that kind for directors or highly-paid employees. We cannot, therefore, accept the Amendment and we think that the Clause should stand in its present form.
    Lieut.-Commander Gurney Braithwaite: The Economic Secretary has moved some distance in the right direction but a little clarification is still desirable. Should our Amendment not be made—I gather it will not be accepted—there is still need for a proper definition of a canteen. The Chancellor may remember that I put this point to him during the Committee stage. He said it was not difficult to identify a canteen and that, where the staff or the bulk of them went regularly to an outside restaurant under the meal ticket system, it would be regarded as a canteen for the purposes of the Bill. There are cases, one of which I know, where in a thickly-populated district a firm without a canteen, which desires that its employees—and office staff, in particular—should get their meals within a reasonable period of time, uses a meal ticket system by which the tickets are available in three, four or five different cafés in the vicinity. The meal tickets are available in all five cafés. This is no case of what the hon. Gentleman a moment ago called an expensive meal; nor would our Amendment make that possible, because the provision would still include the words "for the staff generally." Even if our Amendment were to be accepted, those words would remain.
    8.15 p.m.
    Unless the word "canteen" is to be extended to cover those cases where the workers of a firm, and office workers, in particular, in order to get their meals within a reasonable time and without long periods of queueing, such as so often happens in outside cafés and restaurants, make use of four or five such establishments to overcome the difficulty, such places would not be covered, according to the words of the hon. Gentleman. I feel that there is surely some form of
    1228
    words which the Government could use without allowing any abuse in the way of expensive meals of the kind referred to. I am sure the Chancellor must know of similar cases, especially in a city such as Bristol, which has a number of these cafes. The spirit of the Clause would not be abused in any way if he could see his way to revise that aspect of the matter and deal with that particular difficulty.
    Sir S. Cripps: I appreciate the point made by the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite), but if we tried to include a definition of the word "canteen" we should, in fact, narrow it down by doing so, because anything outside the definition would then be excluded. If the Clause is sensibly administered, a broad view can be taken of what is included in the word "canteen." Directly we start to define the word we shall get lots of cases coming outside our definition. It is wiser to leave the matter to sensible administration than to try to get down to a very accurate definition of the word.
    Regarding the second point raised by the hon. and gallant Member, he will see that the Amendment proposed would not have quite the effect he is suggesting because, provided the meals were given "for the staff generally," it would not matter where they were given; that is to say, the ordinary staff could be fed in a canteen, other people could be given tickets to go somewhere else and the directors could be sent to the Ritz for their lunch. One of the things at which we are aiming is the habit which has grown up of expensive directors' lunches being charged to expenses. Everybody who has been to the big hotels in London will realise that that is one of the abuses of this scheme. We are anxious not to allow that abuse to continue. The Amendment suggested would inevitably allow it to do so.
    Lieut.-Commander Braithwaite: With the leave of the House, I would like to ask the Chancellor a further question. He says the provision can be sensibly administered in those cases where a number of cafés must be used to deal with this problem. Let us suppose the firm in question, being in this difficulty, submitted their case to the Inspector of Taxes, before proceeding with their system of meal tickets spread over four

    1229
    of five restaurants. If the Inspector were satisfied that the suggestion was reasonable and did not abuse this provision, does the Subsection as drafted permit the Inspector to give that permission?
    Sir S. Cripps: Such a case is unlikely to arise. We are dealing only with people earning over £2,000 a year. The schemes with which the hon. and gallant Member is dealing do not touch those people. I know of similar schemes, but they do not affect people with those incomes. I know of a solicitor's office in the City of London where the staff are given meal tickets, but they are not given to the partners and senior members. They are given only up to a certain level. The cases mentioned would not come within the Clause. We are dealing only with meals for high executives and directors, who are the only class of people included. All these schemes dealing with the mass of the lower-paid staff do not, therefore, come into the picture.
    Mr. C. Williams: I was glad to hear the last explanation of the right hon. and learned Gentleman. We all agree that there is no wish to provide for expensive meals. The Economic Secretary dealt with the matter of hotels and I agree that there is no wish to benefit directors of hotels, but we want to make sure that the position of the hotel staffs is not worse than that of any other—
    Mr. Jay indicated dissent.
    Mr. Williams: The hon. Gentleman mentioned the staffs of hotels—
    Mr. Jay indicated dissent.
    Mr. Williams: If he says he did not refer to hotels, I am perfectly willing to accept that.
    Mr. Jay: I mentioned meals to directors in hotels but I made no reference to the staffs of hotels.
    Mr. Williams: I apologise sincerely. I thought the hon. Gentleman referred to staffs in hotels, and that confused me.
    Colonel Hutchison: In view of what has been said by the right hon. and learned Gentleman, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.

    CLAUSE 43.—(Charities and non-trading bodies.)
    The Solicitor-General: I beg to move in page 32, line 12, at the end, to insert:
    "or, except in relation to persons employed by it in an employment to which this Part of this Act applies wholly or mainly for the purposes of a trade carried on by it, to any local authority as defined for the purposes of section twenty-one of the Finance (No. 2) Act, 1945.
    The Clause provides that this part of the Measure is only to apply to a body corporate if it carries on a trade or if its functions are those of an investment company. If the local authority carried on any trading undertakings with the Clause as it stands, all the employees of the local authority, providing their emoluments were above the £2,000 level, would be brought within the scope of this part of the Measure and it was not desired that the employees of a local authority employed for any purpose which would not constitute its trading purpose should be brought within the Clause.
    Amendment agreed to.

    CLAUSE 46.—(Charge, and amount of contribution.)
    Mr. Eccles: I beg to move, in page 34, line 15, after "exceed," to insert "three-quarters of."
    Here, after 10 days, we are back again to our old enemy the Special Contribution. We consider that the present provisions of the Clause for giving marginal relief where the person's income just exceeds £2,000 operate very harshly. So long as his total income remains within the marginal relief bracket he pays a contribution of 100 per cent. on so much of his income earned and unearned as exceeds the exemption limit. The effect is that where a man's income is just over £2,000 any moderate increase becomes a disadvantage, since he has to pay Income Tax and Surtax on that increase as well as being liable to pay as Special Contribution an amount equal to the whole of it.
    There is a marginal relief in the Clause but, in our view, it does not act properly. It makes it come about that a man had better not have earned any income at all. I can give a series of examples with figures showing that there are many cases where it would pay a man to stay at home

    1231
    and not earn an income. I am suggesting that we should insert the words "three-quarters." The effect of doing so is to graduate the imposition of the tax in the early stages of collection. That means that the relief will be stepped up to a point where a man has £3,200 a year and after £3,200 a year he gets no marginal relief at all.
    My Amendment would not in any way diminish the tax on a person whom one might describe as a rich man, but it would not fall with such a tremendous blow between £2,000 and £3,200. It would have the desirable effect of not taking away from a man on account of the Contribution more than he earned in the low bracket of the Special Contribution. I believe the Chancellor never meant the tax to work in such a way that it would result in its being a disadvantage to earn money at all. I hope that as this proposed change is very modest, it will be accepted.
    Mr. Selwyn Lloyd: I beg to second the Amendment.
    The ground was fairly covered during the Committee stage although I did not succeed on that occasion in making the Solicitor-General fully cognisant of my argument. I should have thought it would be possible for both right hon. and learned Gentlemen to go with us so far as to agree that it should definitely not be a financial disadvantage to a person that he has worked. I gave certain examples to the Committee and showed that for a man with £800 earned income and an unearned income of £2,000 it was a financial disadvantage to him that he had worked in the year in question. I was told that it would have been even more striking in the case of a man with £2,000 unearned income and a rather smaller earned income. I should think it not too much to expect the Chancellor to agree that he does not desire anyone to suffer financial disadvantage because he worked during the relevant year. The Chancellor should be grateful to my hon. Friend the Member for Chippenham (Mr. Eccles) for this ingenious Amendment. Our Amendment on the Committee stage perhaps went too far, but this Amendment meets both points of view and I hope the Chancellor will accept it.
    Sir S. Cripps: I think this Amendment proceeds upon a false assumption. As I have said on other occasions, this is not a tax on income; it is a tax on capital, which is assessed by virtue of the amount of income. It is not right to look at the income except first to see whether it is above £2,000 because that is the exemption. No one with an income under £2,000 is to be subject to this tax. If one wished to vary the case of the person getting an income of £2,000 in their favour, one should raise the exclusion limit which we think is already high enough.
    8.30 p.m.
    On the other hand, it is obviously desirable in all cases of this kind to have some marginal provision. Otherwise there is a marked disparity between two persons, one of whom has £1,999 a year and the other £2,001. That striking disparity between two friends, two brothers or two other people may lead people to feel that something is wrong with the tax, although in fact it works out perfectly correctly. Therefore, it is customary in these cases to have some margin over which that disparity is spread. Under the provisions of this Bill that margin goes from £2,000 to £2,700. That is a very appreciable margin.
    If the proposal of this Amendment were accepted it would have the effect of raising the margin to £3,200. We think that that is not justified as a marginal provision. Once it has been decided that £2,000 is the right limit of chargeability, that is to say, that a person has to have more than £2,000, it is not reasonable to add above that figure a marginal limit of £1,200. That is out of all proportion for a marginal limit. If it was desired to do that and to include people higher up in the scale the exclusion limit would have to be raised to £2,500, and the marginal limit put above that, so giving a limit of £3,200. This Amendment is attempting to do something in quite the wrong way. If this is, as the hon. Member for Chippenham (Mr. Eccles) admitted it was, a marginal provision, it would be out of all proportion to make a marginal provision which goes to 60 per cent. above the original figure and makes the figure of £2,000 into £3,200. Therefore I regret that I am unable to accept this Amendment.
    Mr. Pitman: We should be greatly helped in this matter if the Chancellor

    1233
    would say what view he takes of the Amendment which immediately follows this one, because if I take his point correctly it is that there is a real objection to this proposal in that it raises the margin to the critical point of £3,200. The main point with about which we on this side of the House are concerned relates to the man who is earning a sum which brings him into the ambit of the Special Contribution, and we wish by some means, whether by this Amendment or the next one, to see that such a man is not penalised solely by reason of the fact that he works.
    The Chancellor has said that this is a tax on capital and that the capital is assessed in terms of income. But he has omitted an important consideration, that there is a third factor, that it is a tax which is set in action by a trigger, the trigger being an income of £2,000 per year and over, and that the trigger can be pulled by a man working. What we feel is so clearly wrong is that of two people with identical capital behind them one should be taxed to the extent of a large sum merely because in addition to owning his capital he has the decency and social spirit to go out to work.
    I have shown to the Chancellor a letter from a well-known public man, Sir Ernest Barker, who went, I think I am right in saying, at the request of the Government to Germany. He did a really fine job of work in Cologne University. In the letter he has given the figure he earned by going to Germany as £650. Merely because he went to Germany he is, so far as I understand it, to be charged £699 10s. in tax. He is an elderly man, and if he had remained at home in comfort and not responded to the call of duty—and it was a very courageous action to respond to the call of duty in that case—he would have paid no tax at all because his income would have been below the £2,000 mark. Merely by reason of the fact that he took on this job he pulled the trigger which brought under taxation the whole of the income which otherwise would not have been brought under that taxation at all.
    We are asking that the marginal case should really take care of instances of this kind and we have put down two Amendments. The first would achieve this object, that is if a person was not to be taxed more than three-quarters of his in-
    1234
    come over £2,000 then his tax would be reduced and he would get some benefit instead of incurring a penalty for having worked. Similarly he would be covered under the next Amendment. But—and this is the point which we wish the Chancellor to bear in mind—we think that the people of this nation expect a tax system to be fair and reasonable but they do not accept as fair and reasonable a situation in which if two people have identical capital one is let off and is taxed nothing in respect of what is purported to be a capital levy solely because he does not work, whereas the other is taxed on his capital solely because he works.
    There is a great onus on the Government to put forward taxes which are ethically acceptable. It seems to me that to tax more than the sum earned is so clearly unacceptable that I should like the Chancellor to say whether he accepts this general thesis which is being put to him. My hon. Friend has already given one instance, and has said quite rightly that if the investment income is £2,000 and the earnings small, the result is even more spectacular. I have given the Chancellor a specific case of a well-known public character and he has had an opportunity of looking at the figures. Would he tell us whether he can give and how he proposes to give relief in such cases?
    Amendment negatived.
    Mr. Eccles: I beg to move, in page 34, line 16, at the end, to insert:
    "and in the case of an individual whose total income for the said year included earned income the contribution shall not exceed the amount of contribution which but for the existence of such earned income would have been chargeable by an amount greater than the amount of such earned income less the income tax including surtax appropriate thereto on the footing that such earned income is regarded as the highest part of the individual's total income."
    My hon. Friend the Member for Bath (Mr. Pitman), has made a most excellent case for this excellent Amendment. Therefore, I propose to move it formally.
    Lieut.-Commander Braithwaite: I beg to second the Amendment.
    Sir S. Cripps: This matter has also been dealt with on a previous occasion, and substantially in connection with the last Amendment. The principle is really just the same. It is two methods of arriving at a similar result. The object of this Amendment is in the same way to try

    1235
    to extend the marginal relief of which the hon. Member for Bath (Mr. Pitman) spoke at the end of his speech on the last Amendment. We see no reason for extending the marginal relief in this way any more than extending it in the other way.
    The criterion of whether the capital should be taxed is primarily whether it produces more than £250 a year in interest. Even if it does that we say that a person with an income of less than £2,000 should not have to pay this tax at all. The criterion as to the amount of tax depends on the amount of investment income and not on the amount of total earnings. This exemption on the amount of total earnings is for the purpose of not weighing hardly in a tax of this sort on people with an income of less than £2,000. Therefore, there is really no reason why we should differentiate between earned and unearned income. It is a question of whether the person has £2,000 in a year as income, because if he has not it is a case where he would not have to pay anything whatever his investment income might happen to be.
    The corollary of what the hon. Member is suggesting is that we should do away with the £2,000 altogether and put it only on investment and everybody who has more than £250 investment income, whatever their income, should pay this even if they have only an income of £250. We have avoided that by putting in the totality of the combined income as a measure below which they should not pay. We believe that is a perfectly fair way of imposing the tax.
    Mr. Stanley: I did not intervene in the discussion on the preceding Amendment because I thought that this one more exactly expressed the grievance which we wish to remedy. The right hon. and learned Gentleman definitely admits now
    what has never been admitted before, that this is a tax on capital. I have heard the Chancellor and the Economic Secretary explain at great length that this is a tax on income which in some cases might be only possible or convenient to pay from capital. I have heard it explained, at any rate, in the lower ranges that it is expected that this will be paid from income. However, now it is admitted to be nothing less than a tax on capital.
    What we ask in this Amendment is that the tax on a man's capital should not increase because of a fortuitous increase in his income which has no relation whatever to the capital. We say that if a tax is to be judged from the form of income then an increase in income which can only arise from an increase in capital may be called to support an increase of tax. But when there is an increase in income which has no relation to the increase in capital we say it is quite wrong that this now admitted capital tax shall be increased because of that higher income. The Amendment is designed to prevent that happening. I trust that although, in order to save time, we have discussed this succinctly, my hon. Friends will be prepared to take this to a Division.
    Mr. Pitman: The Chancellor has not met the point about the trigger. It seems to me to be perfectly clear that everything he has said is reasonable and straightforward provided he has not this operative factor of the trigger. But he has a situation in which this tax is set in motion solely by reason of the fact that the man is earning. The tax, under our Amendment, would not exceed what he ought to pay under what would be normally recognised on both sides of the House as being fair.
    Question put, "That those words be there inserted in the Bill."
    The House divided: Ayes, 107; Noes, 285.

    Division No. 239.]

    AYES.

    [8.47 p.m.

    Agnew, Cmdr. P. G.

    Channon, H.

    Fyfe, Rt. Hon. Sir D. P. M.

    Assheton, Rt. Hon. R.

    Clarke, Col. R. S.

    Gage, C.

    Baldwin, A. E.

    Clifton-Brown, Lt.-Col. G.

    Galbraith, Cmdr. T. D.

    Beamish, Maj. T. V. H.

    Conant, Maj. R. J. E.

    Gomme-Duncan, Col. A.

    Bennett, Sir P.

    Crookshank, Capt. Rt. Hon. H. F. C.

    Gridley, Sir A.

    Birch, Nigel

    Crowder, Capt. John E.

    Grimston, R. V.

    Bossom, A. C.

    Dower, E. L. G. (Caithness)

    Harris, F. W. (Croydon, N.)

    Bower, N.

    Drayson, G. B.

    Headlam, Lieut.-Col. Rt. Hon. Sir C.

    Boyd-Carpenter, J. A.

    Dugdale, Maj. Sir T. (Richmond)

    Hogg, Hon. Q.

    Braithwaite, Lt.-Comdr. J. G.

    Duthie, W. S.

    Hollis, M. C.

    Buchan-Hepburn, P. G. T.

    Eccles, D. M.

    Holmes, Sir J. Stanley (Harwich)

    Byers, Frank

    Fletcher, W. (Bury)

    Howard, Hon. A.

    Challen, C.

    Fox, Sir G.

    Hurd, A.

    Hutchison, Lt.-Cm. Clark (E'b'rgh W.)

    Morris, Hopkin (Carmarthen)

    Spence, H. R.

    Hutchison, Col. J. R. (Glasgow, C.)

    Nicholson, G.

    Stanley, Rt. Hon. O.

    Jarvis, Sir J.

    Odey, G. W.

    Stoddart-Scott, Col. M.

    Jeffreys, General Sir G.

    O'Neill, Rt. Hon. Sir H.

    Sutcliffe, H.

    Joynson-Hicks, Hon. L. W.

    Orr-Ewing, I. L.

    Taylor, C. S. (Eastbourne)

    Langford-Holt, J.

    Osborne, C.

    Taylor, Vice-Adm. E. A. (P'dd't'n, S.)

    Law, Rt. Hon. R. K.

    Pete, Brig. C. H. M.

    Teeling, William

    Legge-Bourke, Maj. E. A. H.

    Pickthorn, K.

    Thornton-Kemsley, C. N.

    Lennox-Boyd, A. T.

    Pitman, I. J.

    Thorp, Brigadier R. A. F.

    Lipson, D. L.

    Ponsonby, Col. C. E.

    Turton, R. H.

    Lloyd, Maj. Guy (Renfrew, E.)

    Poole, O. B. S. (Oswestry)

    Vane, W. M. F.

    Lloyd, Selwyn (Wirral)

    Prior-Palmer, Brig. O.

    Walker-Smith, D.

    Low, A. R. W.

    Raikes, H. V.

    Wheatley, Colonel M. J. (Dorset, E.)

    Lucas-Tooth, Sir H.

    Ramsay, Maj. S.

    White, Sir D. (Fareham)

    MacAndrew, Col. Sir C.

    Rayner, Brig. R.

    Williams, C. (Torquay)

    Mackeson, Brig. H. R.

    Reid, Rt. Hon. J. S. C. (Hillhead)

    Williams, Gerald (Tonbridge)

    Macpherson, N. (Dumfries)

    Robertson, Sir D. (Streatham)

    Willoughby de Eresby, Lord

    Manningham-Buller, R. E.

    Ropner, Col. L.

    Winterton, Rt. Hon. Earl

    Marples, A. E.

    Ross, Sir R. D. (Londonderry)

    York, C.

    Marsden, Capt. A.

    Sanderson, Sir F.

    Young, Sir A. S. L. (Partick)

    Marshall, D. (Bodmin)

    Scott, Lord W.

    Mellor, Sir J.

    Shepherd, W. S. (Bucklow)

    TELLERS FOR THE AYES:

    Molson, A. H. E.

    Smith, E. P. (Ashford)

    Mr. Drewe and

    Moore, Lt.-Col. Sir T.

    Spearman, A. C. M.

    Mr. Studholme.

    NOES

    Acland, Sir Richard

    Davies, Edward (Burslem)

    Harrison, J.

    Adams, Richard (Batham)

    Davies, Ernest (Enfield)

    Haworth, J.

    Adams, W. T. (Hammersmith, South)

    Davies, Harold (Leek)

    Henderson, Rt. Hn. A. (Kingswinford)

    Alpass, J. H.

    Davies, Haydn (St. Pancras, S.W.)

    Henderson, Joseph (Ardwick)

    Attewell, H. C.

    Davies, R. J. (Westhoughton)

    Herbison, Miss M.

    Austin, H. Lewis

    Deer, G.

    Hicks, G.

    Awbery, S. S.

    de Freitas, Geoffrey

    Hobson, C. R.

    Ayles, W. H.

    Diamond, J.

    Holman, P.

    Bacon, Miss A.

    Debbie, W.

    Holmes, H. E. (Hemsworth)

    Baird, J.

    Dodds, N. N.

    House, G.

    Balfour, A.

    Donovan, T.

    Hoy, J.

    Barnes, Rt. Hon. A. J.

    Driberg, T. E. N.

    Hubbard, T.

    Barstow, P. G.

    Dugdale, J. (W. Bromwich)

    Hudson, J. H. (Ealing, W.)

    Barton, C.

    Durbin, E. F. M.

    Hughes, Emrys (S. Ayr)

    Battley, J. R.

    Ede, Rt. Hon. J. C.

    Hughes, Hector (Aberdeen, N.)

    Bechervaise, A. E.

    Edwards, Rt. Hon. Sir C. (Bedwellty)

    Hughes, H. D. (W'lverh'pton, W.)

    Ballenger, Rt. Hon. F. J.

    Edwards, John (Blackburn)

    Hynd, H. (Hackney, C.)

    Benson, G.

    Edwards, N. (Caerphilly)

    Hynd, J. B. (Attercliffe)

    Beswick, F.

    Edwards, W. J. (Whitechapel)

    Irving, W. J. (Tottenham, N.)

    Bing, G. H. C.

    Evans, Albert (Islington, W.)

    Jenner, B.

    Binns, J.

    Evans, E. (Lowestoft)

    Jay, D. P. T.

    Blenkinsop, A.

    Evans, S. N. (Wednesbury)

    Jeger, G. (Winchester)

    Blyton, W. R.

    Ewart, R.

    Jenkins, R. H.

    Bowden, Flg. Offr. H. W.

    Fairhurst, F.

    Jones, D. T. (Hartlepools)

    Bowles, F. G. (Nuneaton)

    Farthing, W. J.

    Jones, Elwyn (Plaistow)

    Braddock, Mrs. E. M. (L'pl. Exch'ge)

    Fernyhough, E.

    Jones, P. Asterley (Hitchin)

    Bramall E. A.

    Field, Capt. W. J.

    Keenan, W.

    Brook, D. (Halifax)

    Fletcher, E. G. M. (Islington, E.)

    Kenyon, C.

    Brooks, T. J. (Rothwell)

    Follick, M.

    Key, Rt. Hon. C. W.

    Brown, George (Belper)

    Foot, M. M.

    King, E. M.

    Brown, T. J. (Ince)

    Forman, J. C.

    Kinley, J.

    Bruce, Maj. D. W. T.

    Fraser, T. (Hamilton)

    Kirby, B. V.

    Buchanan, Rt. Hon. G.

    Freeman, Peter (Newport)

    Kirkwood, Rt. Hon. D.

    Burden, T. W.

    Gaitskell, Rt. Hon. H. T. N.

    Lawson, Rt. Hon. J. J.

    Burke, W. A.

    Gallacher, W.

    Lee, F. (Hulme)

    Callaghan, James

    Canley, Mrs. C. S.

    Lee, Miss J. (Cannock)

    Carmichael, James

    Gibbins, J.

    Leonard, W.

    Chamberlain, R. A.

    Gibson, C. W.

    Leslie, J. R.

    Champion, A. J.

    Gitzean, A.

    Levy, B. W.

    Chetwynd, G. R.

    Glanville, J. E. (Consett)

    Lindgren, G. S.

    Cluse, W. S.

    Gooch, E. G.

    Lindsay, K. M. (Comb'd Eng. Univ.)

    Cobb, F. A.

    Greenwood, A. W. J. (Heywood)

    Lipton, Lt.-Col. M.

    Cocks, F. S.

    Grunion, D. R.

    Logan, D. G.

    Coldrick, W.

    Grey, C. F.

    Longden, F.

    Collindridge, F.

    Griffiths, D. (Rother Valley)

    Lyne, A. W.

    Collins, V. J.

    Griffiths, Rt. Hon. J. (Llanelly)

    McAllister, G.

    Colman, Miss G. M.

    Griffiths, W. D. (Moss Side)

    McEntee, V. La T.

    Comyns, Dr. L.

    Guest, Dr. L. Haden

    McGhee, H. G.

    Cook, T. F.

    Gunter, R. J.

    McGovern, J.

    Cooper, Wing-Comdr. G.

    Guy, W. H.

    Mack, J. D.

    Corbel, Mrs. F. K. (Camb'well, N.W.)

    Haire, John E. (Wycombe)

    McKay, J. (Wallsend)

    Cove, W. G.

    Hale, Leslie

    McKinlay, A. S.

    Crawley, A.

    Hall, Rt. Hon. Glenvil

    McLeavy, F.

    Crossman, R. H. S.

    Hamilton, Lieut.-Col. R.

    Macpherson, T. (Romford)

    Daggar, G.

    Hannan, W. (Maryhill)

    Mainwaring, W. H.

    Daines, P.

    Hardman, D. R.

    Mallalieu, E. L. (Brigg)

    Dalton, Rt. Hon. H.

    Hardy, E. A.

    Mallalieu, J. P. W. (Huddersfield)

    1238

    1239

    Mann, Mrs. J.

    Rankin, J.

    Tiffany, S.

    Manning, C. (Camberwell, N.)

    Rees-Williams, D. R.

    Timmons, J.

    Manning, Mrs. L. (Epping)

    Reeves, J.

    Titterington, M. F.

    Marshall, F. (Brightside)

    Reid, T. (Swindon)

    Tolley, L.

    Mathers, Rt. Hon. George

    Rhodes, H.

    Tomlinson, Rt. Hon. G.

    Mellish, R. J.

    Richards, R.

    Turner-Samuels, M.

    Messer, F.

    Ridealgh, Mrs. M.

    Ungoed-Thomas, L.

    Middleton, Mrs. L.

    Roberts, Goronwy (Caernarvonshire)

    Vernon, Maj. W. F.

    Millington, Wing-Comdr. E. R.

    Ross, William (Kilmarnock)

    Viant, S. P.

    Mitchison, G. R.

    Royle, C.

    Wadsworth, G.

    Monslow, W.

    Scollan, T.

    Walker, G. H.

    Moody, A. S.

    Scott-Elliot, W.

    Warbey, W. N.

    Morris, Lt.-Col. H. (Sheffield, C.)

    Shackleton, E. A. A.

    Watkins, T. E.

    Moyle, A.

    Sharp, Granville

    Watson, W. M.

    Murray J. D.

    Shawcross, C. N. (Widnes)

    Weitzman, D.

    Nally, W.

    Shawcross, Rt. Hn. Sir H. (St. Helens)

    Wells, P. L. (Faversham)

    Neal, H. (Clay Cross)

    Shurmer, P.

    Wells, W. T. (Walsall)

    Nichol, Mrs. M. E. (Bradford, N.)

    Silverman, J. (Erdington)

    Westwood, Rt. Hon. J.

    Nicholls, H. R. (Stratford)

    Simmons, C. J.

    Wheatley, Rt. Hn. John (Edinb'gh, E.)

    Noel-Baker, Rt. Hon. P. J. (Derby)

    Skinnard, F. W.

    White, C. F. (Derbyshire, W.)

    Noel-Buxton, Lady

    Smith, C. (Colchester)

    White, H. (Derbyshire, N.E.)

    Oldfield, W. H.

    Smith, Ellis (Stoke)

    Whiteley, Rt. Hon. W.

    Oliver, G. H.

    Solley, L. J.

    Wigg, George

    Orbach, M.

    Sorensen, R. W.

    Wilkes, L.

    Paling, Rt. Hon. Wilfred (Wentworth)

    Soskice, Rt. Hon. Sir Frank

    Wilkins, W. A.

    Palmer, A. M. F.

    Steele, T.

    Willey, O. G. (Cleveland)

    Pargiter, G. A.

    Stewart, Michael (Fulham, E.)

    Williams, J. L. (Kelvingrove)

    Parkin, B. T.

    Stross, Dr. B.

    Williams, R. W. (Wigan)

    Paton, Mrs. F. (Rushcliffe)

    Stubbs, A. E.

    Williams, W. R. (Heston)

    Paton, J. (Norwich)

    Swingler, S.

    Willis, E.

    Pearson, A.

    Sylvester, G. O.

    Woodburn, Rt. Hon. A.

    Peart, T. F.

    Symonds, A. L.

    Woods, G. S.

    Popplewell, E.

    Taylor, R. J. (Morpeth)

    Wyatt, W.

    Porter, E. (Warrington)

    Taylor, Dr. S. (Barnet)

    Yates, V. F.

    Porter, G. (Leeds)

    Thomas, D. E. (Aberdare)

    Young, Sir R. (Newton)

    Pryde, D. J.

    Thomas, I. O. (Wrekin)

    Zilliacus, K.

    Pursey, Comdr. H.

    Thomas, George (Cardiff)

    Randall, H. E.

    Thorneycroft, Harry (Clayton)

    TELLERS FOR THE NOES:

    Ranger, J.

    Thurtle, Ernest

    Mr. Snow and

    Mr. George Wallace.

    CLAUSE 48.—(Meaning of "investment income.")
    Mr. Turton: I beg to move, in page 35, line 34, at the end, to insert:
    "(d) such amount of income from agricultural land within the meaning of the Income Tax Act, 1945, as is equal to 10 per cent. of the gross income from such land where the person in receipt of such income manages such land himself and does not employ any other person, otherwise than for the purpose of rendering clerical assistance, in the management thereof, or, where the person in receipt of such income manages such land and in addition employs another person for purposes other than of rendering clerical assistance in the management thereof, 10 per cent. of the gross income from such land less any sums paid to such other person."
    This Amendment seeks to deal with the anomaly which at present exists where land is managed in the case of a large estate by an agent, and, in the case of a smaller estate, by the owner himself, who looks after his own land. Under the Clause, the large landowner can deduct from agricultural rents the amount which is paid to his agent for management, but the small owner who is looking after his own estate cannot make this deduction.
    I should like to give a concrete instance of how this works out, and, in order to make the point clear, I have to take a
    1240
    large rental. I will take the cases of two men each of whom has a net agricultural rental of £3,000 a year. In the one case, the man is earning £2,000 a year in a professional job, and, because he is not able to look after his estate himself, he employs an agent to do it for him at £1,000 a year. That man, under the present proposal, will pay no capital levy at all. The other man, who is getting the same amount of net agricultural rental of £3,000 a year, and who is looking after his own estate—and, as he is doing it himself, probably has professional qualifications—will be charged under this provision £825 as a capital levy.
    I suggest that that is an unfair anomaly between two people in very similar situations, though not in the same financial position, because the man who is earning £2,000 a year and employing an agent is better off than a man who is looking after his estate himself. It is quite wrong that one should pay no levy while the other pays £825. If hon. Members like to reduce that sort of case to smaller proportions, they will find that the anomaly is there just the same, though the sums involved are not so great. The reason why this anomaly has been created is the fact that land quite unlike

    1241
    gilt-edged securities or debentures, cannot be managed of itself. One really cannot get agricultural rents without doing a great deal of work. The smaller landowner does that work himself. I suggest that it is reasonable that that man should be allowed to deduct something for the work he is doing in managing his own land.
    9.0 p.m.
    Many farmers who are getting a certain profit from their farms, and yet own outside their farms one or two other farms, will, if their profits are anywhere near the £2,000 limit, be forced under the provisions as at present drafted to pay the capital levy without being able to make any deduction. If the Financial Secretary replies and says, "What about Income Tax? They are not allowed to deduct the expenses they incur in management for Income Tax," the answer is very clear and simple. The reason why, under Income Tax law, the man who looks after his own estate is not allowed to make any deduction is because if he were allowed to make this deduction for his work in management, the deduction would be immaterial as he would be assessed for Income Tax on his earnings in looking after his own estate. Under the capital levy provisions, where earned income is being freed from the scope of the levy and unearned income is being brought in, there is an entirely different set of principles and, therefore, in my submission, different rules must be applied to deal with the case.
    In the second half of this new paragraph we have dealt with the owner who, although he manages the land himself, employs a land agent as a consultant for certain specific purposes. There are certain landowners who, although they manage the land themselves, when there is a need of legal advice employ a qualified land "agent and pay a fee for that work. It is suggested that the deduction of 10 per cent. of the gross income should be diminished in the case where the owner has employed a consultant agent, by the amount he pays that consultant agent. We on this side of the House quite clearly have no desire to see an owner being able to get a deduction twice over, but we claim he should get that 10 per cent. deduction.
    1242
    It is important, I think, that this House should clearly realise that the management of land is a business and, as a business, should be put in exactly the same position as other businesses under this Finance Bill. Let us regard the position of a rather large landowner who turns his land into a limited company—
    Mr. Gallacher: Our land.
    Mr. Tuition: His land. No doubt in Fife the hon. Member for West Fife (Mr. Gallacher) owns large quantities of land, but we are dealing with the landowner who is not necessarily in West Fife. If he turns his land into a limited company, under the Tenth Schedule such a landowner would be allowed to make a deduction for his earnings in looking after that land. We are dealing here with the case of a landowner who is not so wealthy as to be able to turn his land into a limited company. We can justly claim that he should be granted a reduction similar to that which is granted for a working director of a private company.
    For those reasons I commend this paragraph to the House. I do not think a great deal of money would be involved, but the paragraph has tremendous psychological importance. If it is accepted it will establish a fact which is often forgotten by some quarters of the House—that the management of land is a very important business in the national interest. A great deal depends upon the wise management of the land as to how far we shall be able to produce the food we require at the present time.
    Mr. York: I beg to second the Amendment.
    It is a very curious thing that the agricultural industry is the only industry whose working directors have been picked out to suffer the burden of the capital levy. One cannot help feeling that the Treasury has not been well advised about agricultural matters in connection with this Bill. So seldom have we seen the presence of the agricultural Ministers on the Front Bench opposite—and I see they are absent once again—that one can only surmise that they are not strongly behind the Government in their impositions on this industry.

    1243
    In this case there is a special reason why the Treasury should accept the arguments put forward by my hon. Friend the Member for Thirsk and Malton (Mr. Turton), because if the Minister of Agriculture were here to advise the Financial Secretary, he would tell him that today the sons of the owners—indeed, the owners themselves—are in many cases actually qualified land agents. In many cases—in fact, in most cases—of estates of any size, the owners have been to Cirencester College where they have been fully trained in the art of land management. In a great many cases of which I know, the sons of owners have been trained by qualified land agents, who have themselves passed the qualifiying examinations; they are fully qualified land agents in all but having the letters after their names. The Government say that, even though these men are qualified directors of their businesses, yet they may receive no remission of tax on that part of their income which is derived from the rents of agricultural property. There can be no justification for differentiating between the working director in a private textile company and the working manager of an agricultural estate.
    Let me say one word about the consultants my hon. Friend mentioned. This refers to cases in which the owner is managing his land and employs, perhaps, an expert forestry consultant and pays him either by a retaining fee, or by time spent. Although a case can be made out the other way, we thought it proper, in order to try to help the Government to do justice by the main argument, to deduct the consultant's fee from the 10 per cent. for which we ask as a proper deduction. Another point is how we arrive at the figure of 10 per cent. It is a general practice, subject, of course, to many variations, that where an agent is employed 10 per cent. is taken as the general level of the payment of the agent. Therefore, we consider that 10 per cent. should be the correct deduction for an owner managing his estate.
    I believe this Amendment will commend itself to all fair-minded men. Whether the Government will accept it or not is another matter. However, I do consider that they should justify, if they can, and if they are not prepared to accept the Amendment, their differentiation
    1244
    between the manager of a private industrial business and the manager of a private estate.
    Mr. Glenvil Hall: The object of this Amendment—and I think it has been put both by the mover and seconder, so that there can be no ambiguity about it—is to enable the owner of agricultural land who works in the management of that land to treat himself as though he were employed by himself and to deduct 10 per cent. from the gross income which comes to him from the land so that the total on which Special Contribution is charged is diminished by that amount. If he does employ a factor, or someone to manage his estate, he would be able to make a similar deduction of 10 per cent. which would include the maintenance claim in respect of the factor.
    Mr. Turton: If he employs a factor then we deduct the factor's salary so long as it does not exceed 10 per cent. of the agricultural rent. If it is less than 10 per cent. we deduct the factor's salary and the margin between the factor's salary and 10 per cent.
    Mr. Glenvil Hall: That is as I understood it, and what I was trying to state was the object of the Amendment.
    When the Central Landowners' Association's representatives came to see us at the Treasury, they put forward three points. One was that they should be allowed to treat the year 1947–48 as the basis for the computation of expenditure on maintenance. They also put forward a claim that they should be allowed to deduct a notional sum for managerial expenses, even where no manager was employed. It is a fixed rule in Income Tax law that, if an expense has not been incurred, one cannot notionally assume that it has been incurred. Therefore, it was quite impossible for my right hon. Friend to accede to that request.
    Where a landowner has actually been involved in this expenditure, then, under the present Income Tax law, he can enter it, as part of the management expenses of his estate. I want to make it quite clear that we are dealing here with landowners and not with farmers. Farmers are not touched by this in so far as they are farming and their farming profits are concerned. We are dealing here with landowners who must be in a pretty big way—[HON. MEMBERS: "No."]—oh, yes, for the simple reason

    1245
    that, if they are in a small way, the amount of Special Contribution which they will have to pay will be very small indeed. Therefore, the 10 per cent. gross indicated in the Amendment will be of little or no use to them; it will not be worth their while to pick it up.
    Captain Crookshank: Nonsense.
    Mr. Glenvil Hall: The people who would gain will be the very rich landowners. I think that this is quite definitely the case if we look at the Clause as it is proposed to be amended. Hon. Gentlemen opposite seem to think that landowners, by looking after their property, are doing something which is out of the way. Surely, if they own property, it is their job to maintain it. Under the present law, Income Tax allowances are made for the fact that property has to be kept in repair, and we think that that is sufficient. It puts landowners on the same basis as other people, and we see no reason whatever why they should be put in a specially privileged position, as they would be if this Amendment were accepted. That, we could not contemplate for a single moment. It is true—and I have not the slightest doubt that it will be said again from the other side of the House—that the agricultural community is now engaged in providing as much food as it can for our people. That is undoubtedly true; but do not let us forget that we are now doing a great deal for agriculture, which was not done in the past.
    Captain Crookshank: Where is the Minister?
    9.15 p.m.
    Mr. Glenvil Hall: Agriculture is de-rated, and considerable sums are given in subsidies. [HON. MEMBERS: "To whom?"] There are guaranteed prices and, in a great variety of directions, agriculture is not doing too badly.
    Captain Crookshank: Why is not the Minister here?
    Mr. Glenvil Hall: I must say, these continual attempts to get something extra for agriculture are grossly unfair to the community generally. [HON. MEMBERS: "Oh!"] I must ask the House to resist this further attempt to get something extra, which, quite frankly, it ought not to have.
    Captain Crookshank: Unless the blue pencil is to be used, when what the Financial Secretary has just said appears in HANSARD tomorrow it will get a very strange reception from both the Chancellor of the Exchequer and the Minister of Agriculture, whose absence once again from this Debate I must call to the attention of the House; I cannot understand why he has boycotted all the proceedings on the Clauses—
    Mr. Glenvil Hall: I wonder if the right hon. and gallant Gentleman could tell us how many times the Minister of Agriculture attended Debates on Finance Bills when he was Financial Secretary to the Treasury?
    Captain Crookshank: I can tell him that at once: every single time there was before the House any Clause which dealt with agriculture matters. Tonight, and throughout this Debate, we have not had the advantage of the presence of the Minister of Agriculture. That is very unfortunate, because the Financial Secretary's explanations of what he thought this Clause did are so wide of the mark that a little instruction from the Minister of Agriculture would have kept him right. I entirely support the point of view put forward by my hon. Friends. It really is a very simple proposition, into which the Financial Secretary has tried to inject a great deal of prejudice, because, towards the end of his speech he said that this would advantage only the rich employer.
    Mr. Glenvil Hall: The rich landowner.
    Captain Crookshank: Well, why should he say anything of the kind?
    Mr. Gallaeher: Because it is true.
    Captain Crookshank: If the Communist Party has anything to say it can say it afterwards, or at Victoria Park, but not in the middle of my speech.
    Why should the right hon. Gentleman try to prejudice the issue by saying that this could only help the rich landowner, when the case we are putting is that of a landowner who is using his own efforts to manage his own land? I should have, thought, ex hypothesi, if he were a very rich landowner he would probably get somebody else to do it; the long odds certainly are that he would. We are concerned with the small man who is far more likely to be managing his own land

    1247
    than the very large and rich landowner. Therefore, on this point the right hon. Gentleman was trying to raise prejudice, as also he was in saying that this was one more attempt to get help for the agricultural industry which was already being subsidised. It is not being subsidised. It is the people who buy the produce of the agricultural industry who are the subsidised folk, not the farming community or the landowners at all.
    Mr. Follick: They have guaranteed markets.
    Captain Crookshank: The proposition before the House at the moment is perfectly simple, and is this. It is already conceded that in the case of other businesses and other companies there is such a position as a working director, and under this Bill the working director is given certain concessions with regard to investment income, arising from the fact that he is a working director. That is conceded by the Government, and the only point here at issue is whether in agriculture, a landowner who is himself the manager of his own land is, to that extent, akin to a working director in another industry or other company. We say that there is that similarity.
    If it is accepted that there is a similarity between the working director in one kind of company organisation and the landowner manager in agriculture, then we put it to the Government that they should find some way of dealing with the problem. We have put forward this suggestion as being the best way we can think of to equalise the position. The right hon. Gentleman, without the advice of the Minister of Agriculture, has thrown it out, together with opprobrious remarks about the agricultural industry which all of us who sit on both sides of the House will, I am perfectly sure, resent.
    Mr. Vane: I never expected that the hon. Member for West Fife (Mr. Gallacher)
    would show any particular sympathy for this Amendment, but I was horrified with the reply of the Financial Secretary. It showed that he understood this point as little as he understood a similar point which we argued last night. He took refuge in a sort of playing-to-the-gallery speech, which I do not think was very worthy of him. His reference to the fact that the Amendment would benefit the larger landowners was particularly ill-timed. I do not know—and I have had some experience of managing property in a professional capacity—of one large landowner who manages his property without help—he would be extremely unwise to do so bearing in mind today's many complications. The point of this Amendment is to benefit the smaller landowners who, in the main, manage their own property, and I think it is a very good thing that they should do so, and, if possible, also study and obtain professional qualifications.
    It is usual to declare one's interest, and I am going to declare my interest to show how foolish the present position is. It happens that I am qualified professionally, but since I am here in this House and cannot give the necessary time to my business, I employ an agent, and I am entitled to deduct the salary of that agent from the gross assessment to this levy. If I were not a Member and had more time to devote to my business, I should naturally be engaged in managing my own property, and in that case I should not be allowed to deduct anything. If anyone wants any further illustration to show how absurd is the position, then he cannot really be capable of understanding simple facts. I hope, therefore, that the Financial Secretary will recant and at least try to find some means of meeting this particularly foolish situation, of which he has been the creator.
    Question put, "That those words be there inserted in the Bill."
    The House divided: Ayes, 108; Noes, 287.
    Mr. Donovan: I beg to move, in page 35, line 39, at the end, to insert:
    "(4) Where in pursuance of any scheme for reconstruction or amalgamation a company is wound up, any income of the company which pursuant to subsection (4) of section thirty-one of the Finance Act, 1927, is deemed to be the income of the members of the company for the purposes of surtax but is not distributed to them, shall not be deemed to be investment income for the purpose of this Part of this Act."
    The amount of the Special Contribution depends upon the amount of investment income during the year 1947–48, and the amount of investment income for that year is to be calculated in the same way as income is calculated for Surtax purposes. Income calculated for Surtax purposes may, in certain circumstances, include a sum which is purely fictional—that is to say, a sum which the taxpayer never received as income. That, however, will make no difference to the amount of the Special Contribution.
    The purpose of this Amendment is to avoid that result in a particular and
    1252
    special case. In 1922, by Section 21 of the Finance Act, Parliament passed a provision designed to force companies to declare higher dividends. The reason was that Surtax was being avoided through the non-distribution of companies' profits. The Legislature said that if companies controlled by five or fewer persons did not declare a reasonable dividend for any period, the whole of the company's income for that period should be deemed to have been distributed and the shareholders should pay Surtax on the basis that they had the income. There was a saving in favour of companies which could show that the undistributed income was all needed for the maintenance and development of the business. If that was so, the provision I have outlined had no effect.
    In 1927, by Section 31 (4) referred to in the Amendment, Parliament enacted that when such a company went into liquidation the defence that it needed its undistributed profits for maintenance and development should not apply in the com-

    1253
    pany's last period of life. That made sense, because in most cases when a company was wound up it needed no income to put to reserve for maintenance and development since its business ceased. But business does not cease in the case of every liquidation. It does not cease when a company goes into liquidation as part of the process of amalgamating its business with another. A business does not cease when it is carried on by a reconstructed company with the old shareholders, the old company going into liquidation. Nevertheless, in a case of that kind such an amalgamation or reconstruction has always, since 1927, carried with it this threat of a possible Surtax penalty merely because of the reconstruction or amalgamation followed by a liquidation of the old company.
    If such an amalgamation or reconstruction took place during 1947–48, the amount of the Special Contribution might be materially affected, because if the Special Commissioners directed that the whole of the income of that company for its last period of life should be deemed to be the income of the members, at once that enters into the calculations of the Special Contribution, although that amalgamation or reconstruction may have been a perfectly genuine commercial operation. I suggest that it would not be right that that result should follow in such a case; and that it would not be right because the Special Contribution depends upon the amount of investment income during 1947–48. In the case I have put and which the Amendment is designed to cover, no such income in fact arises, and there is no taint of tax avoidance about such a transaction which should attract such further penalty.
    I am glad to think that there are no hon. Members in this House more anxious to avoid a conscious fiscal injustice than those who sit with me on these back benches; and I hope that the Front Bench will not lag behind, but will agree that the Amendment should be accepted, subject always to this: these cases under Section 21 of the Finance Act, 1922, have fallen off in recent years because of the incidence of Excess Profits Tax, now Profits Tax, and because it is public policy to which some companies conform, that high dividends should not be declared. Therefore, it may be that the Special Commissioners would not exercise
    1254
    their discretion—and it is entirely a matter within their discretion—to make a direction under Section 21 which would have the effect that I have indicated. If it is not their practice to make such a direction in the case of a genuine amalgamation and reconstruction, and that assurance can be given, I am quite content, and it will not be necessary to press this Amendment.
    Mr. Selwyn Lloyd: I beg to second the Amendment.
    It has been moved in a most admirable manner, by the hon. and learned Member for East Leicester (Mr. Donovan). He made only one controversial remark when he said that his friends on the other side of the House were anxious to check fiscal injustices. I wish that we could have seen more evidence of that willingness on other Amendments which have been moved in regard to the Special Contribution. It will be yet another anomaly if notional income of this sort is to be taken into account in reckoning the Contribution to be paid. I hope that the Government will accept this Amendment and remove one of the many anomalies brought about by this bad tax.
    The Solicitor-General: As my hon. and learned Friend the Member for East Leicester (Mr. Donovan) pointed out in moving this Amendment, the provisions of Section 31 (4) of the 1927 Act do no more than make the income of the final period before the liquidation liable to a direction made by the Special Commissioners; that is to say, the Subsection only provides that the income of that final period can be treated as the income of the members of the company if the Special Commissioners make a direction to that effect. My hon. Friend went on to say in the course of his argument that if he could receive an assurance that during the relevant period, during the year 1947–48, it was not the practice of the Special Commissioners to make directions in the circumstances which the Amendment envisages, he would feel content and would agree that the Amendment should not be pressed. I can give him that assurance.
    I can give him the assurance that where the liquidation takes place for the purpose of reconstruction or amalgamation and not for the purpose of withdrawing tunds

    1255
    from the company, in other words, that it is a genuine amalgamation or reconstruction, it was not during 1947–48 the practice of the Special Commissioners to make a direction in respect of the income for the final period. I understood from my hon. and learned Friend's argument that that assurance would satisfy him and that he would feel that the Amendment need not be pressed.
    Mr. Donovan: These directions are sometimes made years late. I take it that the assurance would be that it would not be the practice for—and not merely in—1947–48 to make such a direction?
    The Solicitor-General: It would not be the practice for 1947–48 in respect of the income of that final period. I except the case in which there was some kind of spurious quality in the transaction—where a liquidation although nominally for the purpose of reconstruction or amalgamation was really with the object of withdrawing funds from the company. In that case a direction might and would probably be made. In a genuine case it was not the practice in respect of that year to make a direction. In those circumstances, I hope that the mover and the seconder of the Amendment will agree that it is not necessary to press it.
    Mr. Donovan: I beg to ask leave to withdraw the Amendment.
    9.45 p.m.
    Mr. Pitman: It seems to me that there are two outstanding points on this, first, that surely the Commissioners—
    Mr. Scollan: On a point of Order, Mr. Speaker. Is it in Order to continue the discussion when the Mover of the Amendment has asked leave to withdraw?
    Mr. Speaker: The hon. Member should study the rules. If anybody gets up it cannot be withdrawn. It can only be withdrawn by leave. Therefore, I deliberately called the hon. Member for Bath (Mr. Pitman) because I hoped that the hon. Member who wished to withdraw would be able afterwards to withdraw. That was my object in calling the hon. Member for Bath.
    Mr. Pitman: The point I wish to make is that surely the Commissioners are not
    1256
    servants of the Treasury and are not, and may not properly be, directed as to what they are to do. They are judicial officers and they are expected to exercise their discretion. They would greatly resent an overriding direction in this respect. I would put that to the Financial Secretary. I go further and say that if he does accept, as I understand he does, the principle of the Amendment, would it not be a better way to accept the Amendment and not to affront the Commissioners by telling them precisely what they are to do in a situation in which their legal freedom should be protected?
    Mr. C. Williams: The Solicitor-General gave a general promise that the Commissioners would act in the way that the hon. Gentleman wished. That being so, why should we not have it in the Bill? Why cannot we have it there? Surely it is much better to put it in an Act of Parliament than to leave it in this way. It does seem, from an ordinary and not a legal point of view, that it would add to the clarity of the Measure if we could have it in the Bill itself.
    Mr. Stanley: Despite what my hon. Friend has said, I am satisfied by the assurance of the right hon. and learned Gentleman. As I understand it, the Commissioners are split into two parts, assessing and judicial. It is only the judicial Commissioners who will be acting in a judicial capacity. There is nothing wrong or improper in the assessing Commissioners giving attention to the kind of direction to which their attention has been called. I hope my hon. Friend will accept the assurance.
    Mr. Donovan: I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.

    CLAUSE 49.—(Ascertainment of aggregate investment income.)
    Mr. Pitman: I beg to move, in page 35, line 43, at the end, to insert:
    "Provided that where investment income from any capital asset be shown to the satisfaction of the Special Commissioners to exceed 10 per cent. of present value of the said asset, no contribution shall be payable on the excess."
    This is an interesting Amendment because it goes right to the root of the question of this Special Contribution. The Chancellor said clearly today that

    1257
    the intention is that this Special Contribution should be levied on capital. In Committee he made it quite clear that he was envisaging that the working back to capital from income was on the basis of 33⅓ years' purchase, because he said that the tax is "something like 1½ per cent. of the capital." In a subsequent explanation the Solicitor-General pointed out that he was assuming the highest rate of 10s. in the £ on the income, and the explanation of his 1½ per cent. was that he was assuming that the capital yielded 3 per cent. If we are, in this Special Contribution, to work back from income to capital, we must recognise that in point of fact capital varies enormously from Treasury Deposit Receipts on which the interest is at the rate of one half per cent.—and the capital is, therefore, 200 years' purchase—to a case like the last year in a long leasehold in which the leaseholder is getting an investment income on a capital which does not exist at all. The moment the last rental has been received, the lease falls in to the ground landlord for the building upon it, and that poor lease-holder has an income which supposes a theoretically big capital, whereas in point of fact there is no capital at all. The purpose of this Amendment is to put a ceiling on the rate of levy upon only small capital, under this Clause.
    Suppose that an individual has an investment income of £2,000. That capital can be either in Treasury deposit receipts—a capital sum of £400,000, which is a very considerable sum—or, if we take the rate that the Chancellor himself suggested—and let us be charitable and take the Electricity Stock instead of the Transport Stock—the capital is £66,666. If we take 5 per cent., the capital is £40,000, and if we take 10 per cent., which is the point on which I seek to draw the line, the capital is £20,000.
    The odd thing about the arrangement of this Contribution is that the man with the highest capital pays the lowest rate of tax and vice versa. The rate of Contribution is only 2 per cent. assuming an income of £2,000 drawn from Treasury Deposit Receipts on the £400,000 capital but on £400,000 it goes up to 4 per cent. on the £20,000 of somebody who has the same income from a ten-years' purchase investment. The rate is thus twenty times greater on the smaller capital. More-
    1258
    over in the case of the owner of a leasehold property that is expiring, he pays a very heavy tax indeed, literally at a rate of millions per cent., because it is levied on a capital which does not exist at all.
    That applies equally to the case, which the Solicitor-General admitted was true of a widow holding copyrights of her husband's works which, in the last year before the expiry of the copyrights in question, could yield a very considerable income on no capital at all. The Solicitor-General has told us that in the hands of the widow that will be an investment income. The purpose of this Amendment is to stop the results of this most curious arrangement which the Chancellor has brought forward. He is taking the line that if income exists then capital exists, entirely failing to realise that there can be capital without income and that there can be income without capital. If there is money on current account at the bank, however big that amount is, however much capital an individual may own, there will be no Contribution at all. On the other hand the less capital he has, literally, the higher and higher the rate of Contribution which he has to pay, until, when he has any expiring investments, he is paying a Contribution at a rate of infinity per cent. We want to put on a limit so that he shall never pay at a rate of more than 4 per cent. on his capital at the £2,000 mark. We think that is a very reasonable proposition to put forward in this respect, because there ought clearly to be a ceiling to prevent a real injustice to people of this kind.
    I want to make these further points. First, there are two cases where the capital is not there at all, and there are two reasons why it is not there. The first is in the case of terminability, such as a leasehold or copyright. There is also the case of the personal effort company, in which the so-called capital of the company is a fiction. It is there for purposes of convenience; the owner of a share is entitled to a share in his own personal efforts, and that share does not represent any real capital. I would quote as an instance business consultants and engineering consultants, who may be operating as a company, but who, in point of fact, can and easily may have no capital whatever behind them, and whose shares really represent a proportion of the profits of their joint efforts.

    1259
    Secondly, there is the case where there is capital, but where it is capital only to a small extent, and, here again, there are two classes. There is the case of risk capital, and, surely, we in this House wish to encourage capital where it is taking a real risk and to discourage it in the cases where it is locked away as cash, not invested at all or put into Treasury Deposit Receipts so that it can be drawn at any time. Then, there is the case of accumulation in trusts, in which the trustee has a discretion to withhold the income and accumulate it, or to pay the income of one year with that of previous years. We were discussing this question yesterday, and the learned Solicitor-General referred me to Clause 60, but I am certain that it does not apply to the case of trustees who pay in one year the accumulation of, shall we say, 10 years' previous income of the trust. That trust will be assumed to have a far greater capital than, in point of fact, it has, merely by the accident of accumulation. The Chancellor has already given way on the concession in regard to Death Duties, and we ask him to give way on this, which has an equal precedent along the same lines.
    In all these cases, the Amendment will achieve the desired results of giving some relief down to the level of 10 years' purchase. We must always remember that there is a trigger which lets off this particular levy, and that it may be either the accident of work or the accident of marriage. My point is that neither of these accidents has anything whatever to do with the real justice of the tax. It is something irrelevant and accidental, and this is an additional reason for inserting a ceiling to prevent injustice. I hope, therefore, the Chancellor will meet this very clear injustice in these cases by accepting the Amendment.
    10.0 p.m.
    Mr. Hollis: I beg to second the Amendment.
    In any event I think this case would have been a strong one, but following the tone this Debate has taken it is a particularly strong one because, as my hon. and gallant Friend the Member for Holderness (Lieut.-Commander Braithwaite) said yesterday, the Chancellor entertained us for two days by hopping from foot to foot like a stork, undecided
    1260
    whether this is a tax on capital or a tax on income. Eventually, in a Debate on an Amendment to Clause 46, he came down on the fact that it was a tax on capital and, having come down, like a stork he flitted from the Chamber leaving the Financial Secretary to hold the baby—which, frankly, I must say he has at present shown very little capacity for holding—and to make the best of the case that he could.
    The fact of the matter is that this is a tax on capital, which it is frankly admitted must be predominantly paid out of capital, but the precise obligation is calculated on income. The fact is that it would be much better if the whole thing were to go, but we cannot properly urge that at the moment. If that is not possible, it is at any rate essential, in his own interest, that the Financial Secretary should accept the Amendment moved by my hon. Friend the Member for Bath (Mr. Pitman), or some similar Amendment, and make his own legislation of such a sort that it can conceivably be workable, by dealing with the more gross possibilities and anomalies in it. I second the Amendment in any case, but I do so most heartily in order to beg the Financial Secretary—if I can beg no more—at least to try to whip his own legislation into some sort of shape in which it can conceivably work.
    The Solicitor-General: I do not think a case has been made out for this Amendment. May I, first, deal with one or two points which were mentioned by the hon. Member for Bath (Mr. Pitman), who moved the Amendment? He mentioned the case, as I understood it, of a discretionary trust in which the trustees in a particular year had paid accumulated income. He said that was not within the scope of the relief provided by Clause 60 of the Bill. I think that probably is the case, but of course the answer is that in the case of a trust there is nearly always capital behind it, and if the income has accumulated from the previous years and is paid in the year 1947–48, the contributor has the right of recourse against the trustees, who can go against the capital.
    The hon. Member had in mind, when moving the Amendment, not that type of case, because it did not seem to me that that particular case was directly relevant. He had in mind the kind of case in which we have capital which is not quantitative

    1261
    in terms of value. One can think of a variety of things—patents, copyrights, and so on. Looking at the incidence of this tax, it seems to me that the hon. Member is painting a rather unreal picture. Take the case of a person with an income entirely from investment of, say, £1,000. The Contribution payable on an income from investment of that sort is £125.
    It is unlikely, in the first place, that a person who has a very substantial investment income of £1,000 will have no capital behind that income; that is to say, that he will draw the whole of it from one form of capital investment. It is extremely substantial in terms of quantifiable value. It is in the highest degree unlikely it will not be £125 many times over. [HON. MEMBERS: "Why?"] Because he will probably not draw all that investment from one particular form of capital, but from a variety of different investments—partly stocks and shares, partly real property, partly, it may be, copyright; but in any case £125 upon an investment income of £1,000, which is, as I say, a very substantial income, does not seem to us, at any rate, to be a very serious burden. If he has not income from which he can find £125 in toto he can probably find part of it from capital, and if the worst comes to the worst and he cannot find the money out of capital, because it is of such a nature that he cannot turn it into money, he can pay that sum of £125 out of income. If he has £1,000 investment income it should not be such a substantial burden in the case of a "once-for-all" tax such as this.
    In these circumstances, it is said, because we must view this as solely a tax upon capital, it follows as a matter of axiomatical necessity that if one has any capital difficult to quantify in terms of value, something must be put on it. I do not see there can be any reason for saying so. The tax is payable by the individual and he can pay it as he likes. There is no obligation on him to realise capital. There is no obligation on him to pay out of income. It is entirely a matter for him to suit his own personal arrangements. If we are talking in terms of a sum like £125, and a substantial investment of that sort, it is for the man to decide how to pay it. It is in the highest degree unlikely in the case of an income of that sort that he could not pay, if he wished to realise it, out of capital, or that he would not have suffi-
    1262
    cient capital to enable him to find that sum of money. For those reasons we are saying that there is no ground for this Amendment.
    To some extent there was a case to be made for the partnership which was converted into a company and the capital was really represented by the brains of the partnership. We have provided for that case by Schedule 10. It deals with working directors, and that is the object of the Tenth Schedule. But beyond that we really cannot see a case to be made out for this ceiling. The incidence of the tax makes such a ceiling unnecessary. If we did have such a ceiling it would introduce unfortunate complications in the assessment of the tax, because it would mean that in particular cases in which there could be any question of a return of about 10 per cent. we should have to value the capital asset. Sometimes it would be so difficult to know the value of that capital asset. We should have to value, perhaps, patents or something of that sort, or copyrights. It would be extremely difficult to do so, and it would convert a tax from one simple to assess and to collect to one which would involve an enormous amount of research into values. But the ground on which I oppose this Amendment is upon the general merits having regard to the amount of Contribution, which should not really mean any hardship to a person; and it is extremely unlikely, if he had such a sufficient investment income, that he would be unable to produce the necessary money either out of income or out of capital.
    Amendment negatived.
    Mr. Stanley: I beg to move, in page 36, line 2, to leave out from "persons," to "shall," in line 3, and to insert:
    "for valuable and sufficient consideration"
    This is a simple Amendment. It will afford the Solicitor-General no excuse for using such terms as "quantified value of the investment" with which he sought to clarify the situation on the previous Amendment. Subsection (2) of this Clause has for its purpose the exclusion of terminable annuities from the investment income on which the levy is to be based. The reason is obvious. In fact, that investment income represents no capital, and, therefore, as this is now admitted to be a capital tax, it clearly

    1263
    should be excluded. The limitation is put upon the provision of Subsection (2) that it is to be a terminable annuity payable by the National Debt Commissioners, or, roughly speaking, from people carrying on assurance business.
    I do not see the reason for a limitation of that kind. So long as the annuity has been created for valuable and sufficient consideration, so long, therefore, as someone has parted with his capital to whomever it may be in order to establish this annuity, it would seem that this exemption ought still to apply. The object of the Amendment is to put any annuity created for valuable and sufficient consideration into the same position as an annuity which happens to be bought through an ordinary life assurance business. I hope that on whichever of the storks it falls to answer this, he will try on this occasion to stand with both feet on the ground and give me an affirmative answer.
    The Solicitor-General: I am not sure that I know exactly what the Amendment adds to the Clause. The Clause, as at present drawn, is, we think, quite wide enough to exclude those sorts of annuities which ought to come out of the ambit of the tax, in that they can be said to represent no capital investment.
    "A terminable annuity payable by the National Debt Commissioners or by any other persons in the carrying on of life assurance business shall be disregarded in ascertaining aggregate investment income …"
    is a wide description which does take out of the scope of the tax all that can be said to be annuities which should not, having regard to the intention of the tax, be within its scope. If the words
    "for valuable and sufficient consideration,"
    are to be substituted for the words
    "in the carrying on of life assurance business,
    that is a wide description of the type of annuities envisaged in the excluded words, and I do not see that the words
    "for valuable and sufficient consideration,"
    would amplify the scope in any definable sense. They would introduce a considerable degree of uncertainty as to what form of annuity was intended to be excluded, and I feel that, for those reasons, the Amendment does not add anything to the Clause.
    Mr. Stanley: I must apologise. I am afraid that the simplicity of the language which I used has obscured the meaning of the Amendment. The whole object of this Clause is that we should not be confined to annuities which happen to be purchased from the people carrying on the business of life assurance. If I had purchased for valuable and sufficient consideration an annuity from the right hon. and learned Gentleman, if he happened to be indulging in that form of transaction, I see no reason why that should not get the exemption in the same way as if I had bought it from one of the assurance companies in the City of London. That, surely, is the obvious meaning both of the words on the paper and the words with which I introduced the Amendment. I most sincerely apologise to the Solicitor-General that I did not have time to clothe the Amendment in that obscurity which would have made its meaning more clear to him.
    10.15 p.m.
    Mr. Eccles: I really am surprised at the reply which we have had from the Solicitor-General. He will recollect that when we discussed this point in Committee, I asked the Chancellor of the Exchequer what would be the position of a man who, retiring from his business and not wishing, say, his son to have to find a large capital sum for taking on his business, agreed with his son that he should have so much a year in exchange for handing over to the boy the stock in trade, the goodwill and the whole of the business. Now, that is a very common form of selling a business. The Chancellor then answered in a way which, I am advised by other legal authorities, is very dubious. He said that if the business were sold in exchange for a fixed number of payments—say £25,000 paid as to £2,500 every year for 10 years—those payments would not attract Income Tax and Surtax, and, therefore, would not attract the Special Contribution. But that was not really the case which I put to the right hon. and learned Gentleman. There are many instances where a business is sold, not for a fixed number of payments but for so much a year for the father's life; in other words, for an annuity.
    It is perfectly clear that unless our Amendment is accepted, the sale of a business—or it could be a patent, or any-

    1265
    thing else—on those terms, for annual payments, must result in those annual payments—which are nothing more or less than annuities—attracting the tax. There are many other instances, with which I do not wish to detain the House at this time of night. Very often a business will sell an annuity to one of its servants; it is not necessary to go to an insurance company; there are plenty of other people who trade in annuities, and why they should be excepted I cannot see. I really think that the Solicitor-General must give a much better answer than the one we have had so far, because he apparently completely overlooked the argument we had in Committee, and treated this question as though there were no annuities at all, other than those sold through insurance companies, or it may be the Post Office. I hope we shall get some further reply from the Government.
    Mr. Scollan: Would the hon. Member clear up a point? I have been trying to follow the argument, and I can quite understand
    "shall be disregarded in ascertaining aggregate investment income,"
    but how would that be amended by inserting:
    "for valuable and sufficient consideration"?
    Valuable to whom? Sufficient for what?
    Mr. Eccles: It is a well-known term. Suppose the hon. Member for Western Renfrew (Mr. Scollan), in order to avoid his heavy Surtax liability, were to give me £500 a year for no consideration on my part at all, and I were then to go round to his back door and return some money to him. It would not be reasonable to exclude that. But if I paid the hon. Member £10,000, in exchange for which he gave me £500 a year for the rest of my life, I should have given him a valuable and sufficient consideration. It is precisely that kind of annuity which is excluded.
    Mr. Pritt: Would the hon. Member for Chippenham (Mr. Eccles) explain to the hon. Member for Western Renfrew (Mr. Scollan) whether or not that is good in Scots law?
    The Solicitor-General: If I did not make my answer clear before, may I try to do it again? I have no doubt it was my fault. I criticised the Amendment, because I submitted to the House that it introduced an
    1266
    obscurity, and I will endeavour to explain why I think that is so. At the moment, we have tried to exclude annuities which can be pointed to, if I may so describe it—annuities which are definable. What we want to exclude, in general, is annuities which have no capital behind them, and so we first selected terminable annuities issued by the National Debt Commissioners, because we can clearly put our finger on those. In the next phrase we have excluded annuities issued by other persons in the carrying on of life assurance business. That, I should have explained, introduces a definable type of annuity, for reasons which I did not give, because it incorporates the definition of a life assurance business which is to be found in Section 237 of the Income Tax Act, 1938. If we refer to that definition we can find what type of annuity is within it and what types are not. The definition is a wide one, and includes terminable annuities issued by life assurance companies and also by various other institutions, such as friendly societies, trade unions and all the rest. What we have done in selecting the language is to put a circle around the kind of thing we have in mind.
    I criticised the Amendment by saying that it introduced an obscurity, because it virtually covered every annuity issued for valuable consideration. In the first place that would react upon Subsection (3), which again deals with another definable type of annuity. It would include various annuities which might or might not have capital behind them. It is not altogether easy to draw a line between those that have a capital basis and those that have not.
    Mr. Stanley: Can the Solicitor-General give me an instance where, having bought an annuity for full and valuable consideration, there can be no capital behind an annuity?
    The Solicitor-General: Take the case of Consols.
    Mr. Stanley: That is not a terminal annuity.
    The Solicitor-General: Perhaps that is not a good example. The difficulty is that one does not know exactly what it would include and what it would not include. What we do know with the words we have chosen, is exactly what is and what is not included.

    1267
    The hon. Member for Chippenham (Mr. Eccles) referred to something which my right hon. and learned Friend said in Committee, which undoubtedly was perfectly correct. My right hon. and learned Friend was asked what would be the position if a business were sold and purchased by instalments. The answer he gave was that the instalments would represent capital payments and would not be income payments at all, and therefore would not come into the Contribution provisions at all. In regard to the case of a father retiring from business and drawing benefit from the business thereafter carried on by the son, we have provided for that case in Clause 49 (3), and in the case of an arrangement made in regard to an individual's retirement from business, the annuity paid to him will not count for purposes of investment income. We feel that we have marked off what we think ought not to rank for the purposes of investment income, leaving the rest to rank for the purposes of investment income. We feel that the Amendment does not improve on that position, to put it at its highest. It does not in any way provide for what we have not already provided for. We have tried to draw the line in such a way that it can be interpreted by reference to a particular set of considerations.
    Sir H. Lucas-Tooth: I have sent an example already to the right hon. and learned Gentleman. There are cases where annuities are payable without any capital behind them at all, and in those cases they are not to be disregarded but will pay the Contribution. The question I wish to ask is whether the Contribution is to be provided against the annuitant, or if not, who is to pay the contribution?
    Mr. E. P. Smith: The Solicitor-General realises that there are certain cases where a private individual of substantial means will sell an annuity to somebody else. He may have only three or four, but does he come under the definition of a person carrying on a life assurance business? I do not think he does, and if he does not, how is that Contribution to be reckoned and who is to pay it?
    Sir Ian Fraser: I must protest against what seems to me to be a most monstrous injustice. The Solicitor-
    1268
    General has given no satisfactory explanation for his view. His only point is that he finds it difficult to understand what my right hon. Friend, the Member for West Bristol (Mr. Stanley) means, but it seems to me to be absolutely clear. If there is a case for excluding the annuity arranged through an insurance company there must be a case for excluding a similar annuity arranged by other people. If the one is just the other is just too. If it is right in regard to one annuity, it is right for the other. It is not enough for the right hon. and learned Gentleman to say that he does not understand it, or that the words of my right hon. Friend are not clear. If they are not clear the Government should find words which would secure justice rather than make arguments against it.
    Captain Crookshank: As I understand the speech of the right hon. and learned Gentleman, he attempted to explain that the phrase, "in carrying on a life assurance business" was a term of art, for the interpretation of which one had to go back to the 1918 Act. Is that right?
    The Solicitor-General: Yes.
    Captain Crookshank: And the reason why those words were used was because they had a meaning which was long established. The question I want to ask the right hon. and learned Gentleman is, what is covered by that term of art? Is it larger or smaller than would be covered by my right hon. Friend's Amendment?
    The Solicitor-General: It is difficult to answer because it is difficult to say what is covered by the words in the Amendment. They would cover if possible a form of annuity issued for valuable consideration, but they would not cover any other form of annuity, whereas the definition we have used would cover some which were not issued for such consideration. Therefore, it would not work out.
    Captain Crookshank: Does that mean that the Government are trying to put into this Bill what is obviously unfair?
    Question put, "That the words proposed to be left out stand part of the Bill."
    The House divided: Ayes, 275; Noes, 105.

    Division No. 240.]

    AYES.

    [9.24 p.m.

    Agnew, Cmdr. P. G.

    Bower, N.

    Clifton-Brown, Lt-Col. G.

    Assheton, Rt. Hon. R.

    Boyd-Carpenter, J. A.

    Corbet, Lieut.-Col. U. (Ludlow)

    Baldwin, A. E.

    Braithwaite, Lt.-Comdr. J. G.

    Crookshank, Capt. Rt. Hon. H. F. C.

    Beamish, Maj. T. V. H.

    Buchan-Hepburn, P. G. T.

    Crowder, Capt. John E.

    Bennett, Sir P.

    Challen, C.

    Dower, E. L. G. (Caithness)

    Birch, Nigel

    Channon, H.

    Drayson, G. B.

    Bossom, A. C.

    Clarke, Col. R. S.

    Drewe, C.

    Dugdale, Maj. Sir T. (Richmond)

    Luces, Major Sir J.

    Ropner, Col. L.

    Duthie, W. S.

    Lucas-Tooth, Sir H.

    Ross, Sir R. D. (Londonderry)

    Eccles, D. M.

    MacAndrew, col. Sir C.

    Sanderson, Sir F.

    Fletcher, W. (Bury)

    Mackeson, Brig. H. R.

    Scott, Lord W.

    Fraser, Sir I. (Lonsdale)

    Macpherson, N. (Dumfries)

    Shepherd, W. S. (Bucklow)

    Fyfe, Rt. Hon. Sir D. P. M.

    Manningham-Buller, R. E.

    Smith, E. P. (Ashford)

    Gage, C.

    Marples, A. E.

    Spearman, A. C. M.

    Gomme-Duncan, Col. A.

    Marsden, Capt. A.

    Spence, H. R.

    Grimston, R. V.

    Marshall, D. (Bodmin)

    Stanley, Rt. Hon. O.

    Hannon, Sir P. (Moseley)

    Mellor, Sir J.

    Stoddart-Scott, Col. M.

    Hare, Hon. J. H. (Woodbridge)

    Molson, A. H. E.

    Sutcliffe, H.

    Harris, F. W. (Croydon, N.)

    Moore, Lt.-Col Sir T.

    Taylor, C. S. (Eastbourne)

    Headlam, Lieut.-Col. Rt. Hon. Sir C.

    Morris, Hopkin (Carmarthen)

    Taylor, Vice-Adm. E. A. (P'dd't'n, S.)

    Hogg, Hon. Q.

    Neven-Spence, Sir B.

    Teeling, William

    Hollis, M. C.

    Nicholson, G.

    Thornton-Kemsley, C. N.

    Holmes, Sir J. Stanley (Harwich)

    Odey, G. W.

    Thorp, Brigadier R. A. F.

    Howard, Hon. A.

    O'Neill, Rt. Hon. Sir H.

    Turton, R. H.

    Hurd, A.

    Orr-Ewing, I L.

    Vane, W. M. F.

    Hutchison, Lt.-Cm. Clark (E'b'rgh W.)

    Osborne, C.

    Walker-Smith, D.

    Hutchison, Col. J. R. (Glasgow, C.)

    Peto, Brig. C. H. M.

    Wheatley, Colonel M. J. (Dorset, E.)

    Jarvis, Sir J.

    Pickthorn, K.

    White, Sir D. (Fareham)

    Jeffreys, General Sir G.

    Pitman, I. J.

    Williams, C. (Torquay)

    Lambert, Hon. G.

    Porrsonby, Col. C. E.

    Williams, Gerald (Tonbridge)

    Langford-Holt, J.

    Poole, O. B. S. (Oswestry)

    Willoughby de Eresby, Lord

    Law, Rt. Hon. R. K.

    Prior-Palmer, Brig. O.

    Winterton, Rt. Hon. Earl

    Legge-Bourke, Maj. E. A. H.

    Raikes, H. V.

    York, C.

    Lennox-Boyd, A. T.

    Ramsay, Maj. S.

    Young, Sir A. S. L. (Penick)

    Lloyd, Maj. Guy (Renfrew, E.)

    Rayner, Brig R.

    Lloyd, Selwyn (Wirral)

    Reid, Rt. Hon. J. S. C. (Hillhead)

    TELLERS FOR THE AYES:

    Low, A R. W.

    Robertson, Sir D. (Streatham)

    Mr. Studholme and

    Major Conant.

    NOES.

    Acland, Sir Richard

    Corbel, Mrs. F. K. (Camb'well, N.W.)

    Griffiths, Rt. Hon. J. (Llanelly)

    Adams, Richard (Balham)

    Cove, W. G.

    Griffiths, W. D. (Moss Side)

    Adams, W. T. (Hammersmith, South)

    Crawley, A.

    Guest, Dr. L. Haden

    Alpass, J. H.

    Crossman, R. H. S.

    Gunter, R. J.

    Attewell, H. C.

    Daggar, G.

    Guy, W. H.

    Austin, H. Lewis

    Deities, P.

    Haire, John E. (Wycombe)

    Awbery, S. S.

    Dalton, Rt. Hon. H.

    Hale, Leslie

    Ayles, W. H.

    Davies, Edward (Burslem)

    Hall, Rt. Hon. Glenvil

    Ayrton Gould, Mrs. B.

    Davies, Ernest (Enfield)

    Hamilton, Lieut.-Col. R.

    Bacon, Miss A.

    Davies, Harold (Leek)

    Hannan, W. (Maryhill)

    Baird, J.

    Davies, Haydn (St. Pancras, S.W.)

    Hardman, D. R.

    Balfour, A.

    Davies, R. J. (Westhoughton)

    Hardy, E. A.

    Barnes, Rt. Hon. A. J.

    Deer, G.

    Harrison, J.

    Barstow, P. G.

    de Freitas, Geoffrey

    Haworth, J.

    Barton, C.

    Diamond, J.

    Henderson, Rt. Hn. A. (Kingswinford)

    Battley, J. R.

    Dobbie, W.

    Henderson, Joseph (Ardwick)

    Bechervaise, A. E.

    Dodds, N. N.

    Herbison, Miss M.

    Ballenger, Rt. Hon. F. J.

    Donovan, T.

    Hobson, C. R.

    Benson, G.

    Driberg, T. E. N.

    Holman, P.

    Berry, H.

    Dugdale, J. (W. Bromwich)

    Holmes, H. E. (Hemsworth)

    Beswick, F.

    Durbin, E. F. M.

    House, G.

    Bing, G. H. C.

    Ede, Rt. Hon. J. C.

    Hoy, J.

    Binns, J.

    Edwards, Rt. Hon. Sir C. (Bedwellty)

    Hubbard, T.

    Blenkinsop, A.

    Edwards, John (Blackburn)

    Hudson, J. H. (Ealing, W.)

    Blyton, W. R.

    Edwards, N. (Caerphilly)

    Hughes, Emrys (S. Ayr)

    Bowden, Flg. Offr. H. W.

    Edwards, W. J. (Whilechapel)

    Hughes, Hector (Aberdeen, N.)

    Bowles, F. G. (Nuneaton)

    Evans, Albert (Islington, W.)

    Hughes, H. D. (W'lverh'pton. W.)

    Braddock, Mrs. E. M. (L'pl. Exch'ge)

    Evans, E. (Lowestoft)

    Hynd, H. (Hackney, C.)

    Bramall, E. A.

    Evans, S. N. (Wednesbury)

    Hynd, J. B. (Attercliffe)

    Brook, D. (Halifax)

    Ewart, R.

    Irving, W. J. (Tottenham, N.)

    Brooks, T. J. (Rothwell)

    Fairhurst, F.

    Janner, B.

    Brown, George (Belper)

    Farthing, W. J.

    Jay, D. P. T.

    Brown, T. J. (Ince)

    Fernyhough, E.

    Jeger, G. (Winchester)

    Bruce, Maj. D. W. T.

    Field, Capt. W. J.

    Jenkins, R. H.

    Buchanan, Rt. Hon. G.

    Fletcher, E. G. M. (Islington, E.)

    Jones, D. T. (Hartlepools)

    Burden, T. W.

    Follick, M.

    Jones, Elwyn (Plaistow)

    Burke, W. A.

    Foot, M. M.

    Jones, J. H. (Bolton)

    Callaghan, James

    Forman, J. C.

    Jones, P. Asterley (Hitchin)

    Carmichael, James

    Fraser, T. (Hamilton)

    Keenan, W.

    Chamberlain, R. A.

    Freeman, Peter (Newport)

    Kenyon, C.

    Champion, A. J.

    Gaitskell, Rt. Hon. H. T. N.

    Key, Rt. Hon. C. W.

    Chetwynd, G. R.

    Gallacher, W.

    King, E. M.

    Cluse, W. S.

    Ganley, Mrs. C. S.

    Kinghorn, Sqn.-Ldr. E.

    Cobb, F. A.

    Gibson, C. W.

    Kinley, J.

    Cocks, F. S.

    Gilzean, A.

    Kirby, B. V.

    Coldrick, W.

    Glanville, J. E. (Consett)

    Kirkwood, Rt. Hon. D.

    Collindridge, F.

    Gooch, E. G.

    Lawson, Rt. Hon. J. J.

    Collins, V. J.

    Greenwood, A. W. J. (Heywood)

    Lee, F. (Hulme)

    Colman, Miss G. M.

    Creole D. R.

    Lee, Miss J. (Cannock)

    Comyns, Dr. L.

    Grey, C. F.

    Leonard, W.

    Cook, T. F.

    Griffiths, D. (Rother Valley)

    Leslie, J. R.

    1250

    1251

    Levy, B. W.

    Pargiter, G. A.

    Taylor, Dr. S. (Barnet)

    Lindgren, G. S.

    Parkin, B. T.

    Thomas, D. E. (Aberdare)

    Lipson, D. L.

    Paton, Mrs. F. (Rushcliffe)

    Thomas, I. O. (Wrekin)

    Lipton, Lt.-Col. M.

    Paton, J. (Norwich)

    Thomas, George (Cardiff)

    Logan, D. G.

    Pearson, A.

    Thorneycroft, Harry (Clayton)

    Longdon, F.

    Peart, T. F.

    Thurtle, Ernest

    Lyne, A. W.

    Popplewell, E.

    Tiffany, S.

    McAllister, G.

    Porter, E. (Warrington)

    Timmons, J.

    McEntee, V. La T.

    Porter, G. (Leeds)

    Titterington, M. F.

    McGhee, H. G.

    Pritt, D. N.

    Tolley, L.

    McGovern, J.

    Proctor, W. T.

    Tomlinson, Rt. Hon. G.

    Mack, J. D.

    Pryde, D. J.

    Turner-Samuels, M.

    McKay, J. (Wallsend)

    Pursey, Comdr. H.

    Ungoed-Thomas, L.

    McKinley, A. S.

    Randall, H. E.

    Vernon, Maj. W. F.

    McLeavy, F.

    Ranger, J.

    Viant, S. P.

    Macpherson, T. (Romford)

    Rankin, J.

    Wadsworth, G.

    Mainwaring, W. H.

    Rees-Williams, D. R.

    Walker, G. H.

    Mallalieu, E. L. (Brigg)

    Reeves, J.

    Warbey, W. N.

    Mallalieu, J. P. W. (Huddersfield)

    Reid, T. (Swindon)

    Watkins, T. E.

    Mann, Mrs. J.

    Rhodes, H.

    Watson, W. M.

    Manning, C. (Camberwell, N.)

    Richards, R.

    Weitzman, D.

    Manning, Mrs. L. (Epping)

    Ridealgh, Mrs. M.

    Wells, P. L. (Faversham)

    Marshall, F. (Brightside)

    Roberts, Goronwy (Caernarvonshire)

    Wells, W. T. (Walsall)

    Mathers, Rt. Hon. George

    Ross, William (Kilmarnock)

    Westwood, Rt. Hon. J.

    Mellish, R. J.

    Royle, C.

    Wheatley, Rt. Hn. John (Edinb'gh, E.)

    Messer, F.

    Scollan, T.

    White, C. F. (Derbyshire, W.)

    Middleton, Mrs. L.

    Scott-Elliott, W.

    White, H. (Derbyshire, N.E.)

    Millington, Wing-Comdr E. R.

    Shackleton, E. A. A.

    Whiteley, Rt. Hon. W.

    Mitchison, G. R.

    Sharp, Granville

    Wigg, George

    Monslow, W.

    Shawcross, C. N. (Widnes)

    Wilkes, L.

    Moody, A. S.

    Shawcross, Rt. Hn. Sir H. (St. Helens)

    Wilkins, W. A.

    Morris, Lt.-Col. H. (Sheffield, C.)

    Shurmer, P.

    Willey, O. G. (Cleveland)

    Moyle, A.

    Silverman, J. (Erdington)

    Williams, J. L. (Kelvingrove)

    Murray J. D.

    Simmons, C. J.

    Williams, R. W. (Wigan)

    Nally, W.

    Skinnard, F. W.

    Williams, W. R. (Heston)

    Neal, H. (Clay Cross)

    Smith, C. (Colchester)

    Willis, E.

    Nichol, Mrs. M. E. (Bradford, N.)

    Smith, Ellis (Stoke)

    Woodburn, Rt. Hon. A.

    Nicholls, H. R. (Stratford)

    Solley, L. J.

    Woods, G. S.

    Noel-Baker, Capt. F. E. (Brentford)

    Sorensen, R. W.

    Wyatt, W.

    Noel-Baker, Rt. Hon. P. J. (Derby)

    Soskice, Rt. Hon. Sir Frank

    Yates, V. F.

    Noel-Buxton, Lady

    Steele, T.

    Young, Sir R. (Newton)

    Oldfield, W. H.

    Stewart, Michael (Fulham, E.)

    Zilliacus, K.

    Oliver, G. H.

    Strose, Dr. B.

    Orbach, M.

    Swingler, S.

    TELLERS FOR THE NOES:

    Paling, Rt. Hon. Wilfred (Wentworth)

    Sylvester, G. O.

    Mr. Snow and

    Palmer, A. M. F.

    Taylor, R. J. (Morpath)

    Mr. George Wallace.

    Division No. 241.]

    AYES

    [10.30 p.m.

    Acland, Sir Richard

    Fool, M. M.

    Messer, F.

    Adams, W. T. (Hammersmith, South)

    Forman, J. C.

    Middleton, Mrs. L.

    Alpass, J. H.

    Fraser, T. (Hamilton)

    Millington, Wing-Comdr E. R.

    Attewell, H. C.

    Freeman, J. (Watford)

    Mitchison, G. R.

    Austin, H. Lewis

    Freeman, Peter (Newport)

    Monslow, W.

    Awbery, S. S.

    Gallacher, W.

    Moody, A. S.

    Ayles, W. H.

    Ganley, Mrs. C. S.

    Morris, Lt.-Col. H. (Sheffield, C.)

    Ayrton Gould, Mrs. B.

    Gibson, C. W.

    Moyle, A.

    Bacon, Miss A.

    Gilzean, A.

    Murray J. D.

    Baird, J.

    Glanville, J. E. (Consett)

    Nally, W.

    Balfour, A.

    Gooch, E. G.

    Neal, H. (Clay Cross)

    Barnes, Rt. Hon. A. J.

    Greenwood, A. W. J. (Heywood)

    Nichol, Mrs. M. E. (Bradford, N.)

    Barstow, P. G.

    Grey, C. F.

    Nicholls, H. R. (Stratford)

    Barton, C.

    Griffiths, D. (Rother Valley)

    Noel-Baker, Capt. F. E. (Brentford)

    Bechervaise, A. E.

    Griffiths, Rt. Hon. J. (Llanelly)

    Noel-Baker, Rt. Hon. P. J. (Derby)

    Bellenger, Rt. Hon. F. J.

    Griffiths, W. D. (Moss Side)

    O'Brien, T.

    Benson, G.

    Guest, Dr. L. Haden

    Oldfield, W. H.

    Berry, H.

    Gunter, R. J.

    Oliver, G. H.

    Beswick, F.

    Guy, W. H.

    Orbach, M.

    Bing, G. H. C.

    Haire, John E. (Wycombe)

    Paling, Rt. Hon. Wilfred (Wentworth)

    Binns, J.

    Hale, Leslie

    Palmer, A. M. F.

    Blackburn, A. R.

    Hall, Rt. Hon. Glenvil

    Pargiter, G. A.

    Blenkinsop, A.

    Hamilton, Lieut.-Col. R.

    Parkin, B. T.

    Blyton, W. R.

    Hannan, W. (Maryhill)

    Paton, Mrs. F. (Rushcliffe)

    Bowden, Flg. Offr. H. W.

    Hardy, E. A.

    Paton, J. (Norwich)

    Bowles, F. G. (Nuneaton)

    Harrison, J.

    Pearson, A.

    Braddock, Mrs. E. M. (L'pl. Exch'ge)

    Haworth, J.

    Peart, T. F.

    Brook, D. (Halifax)

    Henderson, Rt. Hn. A. (Kingswinford)

    Porter, E. (Warrington)

    Brooks, T. J. (Rothwell)

    Henderson, Joseph (Ardwick)

    Porter, G. (Leeds)

    Brown, T. J. (Ince)

    Herbison, Miss M.

    Price, M. Philips

    Bruce, Maj. D. W. T.

    Hobson, C. R.

    Pritt, D. N.

    Buchanan, Rt. Hon. G.

    Holman, P.

    Proctor, W. T.

    Burden, T. W.

    House, G.

    Pryde, D. J.

    Burke, W. A.

    Hubbard, T.

    Pursey, Comdr. H.

    Callaghan, James

    Hudson, J. H. (Ealing, W.)

    Randall, H. E.

    Carmichael, James

    Hughes, Hector (Aberdeen, N.)

    Ranger, J.

    Chamberlain, R. A.

    Hughes, H. D. (W'lverh'pton, W.)

    Rankin, J.

    Champion, A. J.

    Hynd, H. (Hackney, C.)

    Rees-Williams, D. R.

    Chetwynd, G. R.

    Hynd, J. B. (Attercliffe.)

    Reeves, J.

    Cobb, F. A.

    Irving, W. J. (Tottenham, N.)

    Reid, T. (Swindon)

    Cocks, F. S.

    Janner, B.

    Rhodes, H.

    Coldrick, W.

    Jay, D. P. T.

    Richards, R.

    Collindridge, F.

    Jeger, G. (Winchester)

    Ridealgh, Mrs. M.

    Collins, V. J.

    Jenkins, R. H.

    Roberts, Goronwy (Caernarvonshire)

    Colman, Miss G. M.

    Jones, Rt. Hon. A. C. (Shipley)

    Rogers, G. H. R.

    Comyns, Dr. L.

    Jones, D. T. (Hartlepools)

    Ross, William (Kilmarnock)

    Cook, T. F.

    Jones, Elwyn (Plaistow)

    Royle, C.

    Corbet, Mrs. F. K. (Camb'well, N. W.)

    Jones, P. Asterley (Hitchin)

    Scollan, T.

    Cove, W. G.

    Keenan, W.

    Scott-Elliott, W.

    Crawley, A.

    Kenyon, C.

    Shackleton, E. A. A.

    Crossman, R. H. S.

    King, E. M.

    Sharp, Granville

    Daggar, G.

    Kinghorn, Sqn.-Ldr, E.

    Shawcross, C. N. (Widnes)

    Daines, P.

    Kinsey, J.

    Shawcross, Rt. Hn. Sir H. (St. Helens)

    Dalton, Rt. Hon. H.

    Kirby, B. V.

    Shurmer, P.

    Davies, Edward (Burslem)

    Lee, F. (Hulme)

    Silverman, J. (Erdington)

    Davies, Ernest (Enfield)

    Lee, Miss J. (Cannock)

    Simmons, C. J.

    Davies, Harold (Leek)

    Leonard, W.

    Skeffington, A. M.

    Davies, Haydn (St. Pancras, S. W.)

    Leslie, J. R.

    Skinnard, F. W.

    Davies, R. J. (Westhoughton)

    Levy, B. W.

    Smith, C. (Colchester)

    Deer, G.

    Lewis, J. (Bolton)

    Smith, Ellis (Stoke)

    de Freitas, Geoffrey

    Lindgren, G. S.

    Snow, J. W.

    Delargy, H. J.

    Lipton, Lt.-Col. M.

    Solley, L. J.

    Diamond, J.

    Logan, D. G.

    Sorensen, R. W.

    Dobbie, W.

    Longden, F.

    Soskice, Rt. Hon. Sir Frank

    Dodds, N. N.

    Lyne, A. W.

    Steele, T.

    Donovan, T.

    McAllister, G.

    Stewart, Michael (Fulham, E.)

    Driberg, T. E. N.

    McEntee, V. La T.

    Stross, Dr. B.

    Dugdale, J. (W. Bromwich)

    McGhee, H. G.

    Swingler, S.

    Ede, Rt. Hon. J. C.

    Mack, J. D.

    Sylvester, G. O.

    Edwards, John (Blackburn)

    McKay, J. (Wallsend)

    Taylor, R. J. (Morpeth)

    Edwards, N. (Caerphilly)

    McKinley, A. S.

    Taylor, Dr. S. (Barnet)

    Edwards, W. J. (Whitechapel)

    McLeavy, F.

    Thomas, D. E. (Aberdare)

    Evans, Albert (Islington, W.)

    Macpherson, T. (Romford)

    Thomas, George (Cardiff)

    Evans, E. (Lowestoft)

    Mainwaring, W. H.

    Thomas, I. O. (Wrekin)

    Evans, S. N. (Wednesbury)

    Mallalieu, E. L. (Brigg)

    Thorneycroft, Harry (Clayton)

    Ewart, R.

    Mallalieu, J. P. W. (Huddersfield)

    Thurtle, Ernest

    Fairhurst, F.

    Mann, Mrs. J.

    Tiffany, S.

    Farthing, W. J.

    Manning, C. (Camberwell, N.)

    Timmons, J.

    Fernyhough, E.

    Manning, Mrs. L. (Epping)

    Titterington, M. F.

    Field, Capt. W. J.

    Marshall, F. (Brightside)

    Tolley, L.

    Fletcher, E. G. M. (Islington, E.)

    Mathers, Rt. Hon. George

    Tomlinson, Rt. Hon. G.

    Follick, M.

    Mellish, R. J.

    Ungoed-Thomas, L.

    1270

    1271

    Vernon, Maj. W. F.

    Wheatley, Rt. Hn. John (Edinh'gh, E.)

    Williams, W. R. (Heston)

    Viant, S. P.

    White, C. F. (Derbyshire, W.)

    Willis, E.

    Wadsworth, G.

    White, H. (Derbyshire, N. E.)

    Woods, G. S.

    Walker, G. H.

    Whiteley, Rt. Hon. W.

    Wyatt, W.

    Wallace, G. D. (Chislehurst)

    Wigg, George

    Yates, V. F.

    Warbey, W. N.

    Wilkes, L.

    Young, Sir R. (Newton)

    Watkins, T. E.

    Wilkins, W. A.

    Zilliacus, K.

    Watson, W. M.

    Willey, F. T. (Sunderland)

    Weitzman, D.

    Willey, O. G. (Cleveland)

    TELLERS FOR THE AYES:

    Wells, P. L. (Faversham)

    Williams, J. L. (Kelvingrove)

    Mr. Popplewell and

    Wells, W. T. (Walsall)

    Williams, R. W. (Wigan)

    Mr. Richard Adams.

    NOES.

    Agnew, Cmdr. P. G.

    Hutchison, Lt.-Cm. Clark (E'b'rgh W.)

    Prior-Palmer, Brig. O.

    Assheton, Rt. Hon. R.

    Hutchison, Col. J. R. (Glasgow, C.)

    Raikes, H. V.

    Baldwin, A. E.

    Jarvis, Sir J.

    Ramsay, Maj. S.

    Beamish, Maj. T. V. H.

    Jeffreys, General Sir G.

    Rayner, Brig. R.

    Bennett, Sir P.

    Lambert, Hon. G.

    Reid, Rt. Hon. J. S. C. (Hillhead)

    Birch, Nigel

    Langford-Holt, J.

    Ropner, Col. L.

    Bower, N.

    Law, Rt. Hon. R. K.

    Ross, Sir R. D. (Londonderry)

    Boyd-Carpenter, J. A.

    Legge-Bourke, Maj. E. A. H.

    Sanderson, Sir F.

    Braithwaite, Lt.-Comdr. J. G.

    Lennox-Boyd, A. T.

    Scott Lord W.

    Buchan-Hepburn, P. G. T.

    Lipson, D. L.

    Shepherd, W. S. (Bucklow)

    Challen, C.

    Lloyd, Maj. Guy (Renfrew. E.)

    Smith, E. P. (Ashford)

    Channon, H.

    Lloyd, Selwyn (Wirral)

    Spearman, A. C. M.

    Clarke, Col. R. S.

    Lucas, Major Sir J.

    Spence, H. R.

    Clifton-Brown, Lt.-Col. G.

    Lucas-Tooth, Sir H.

    Stanley, Rt. Hon. O.

    Corbel, Lieut.-Col. U. (Ludlow)

    MacAndrew, Col. Sir C.

    Stoddart-Scott, Col. M.

    Crookshank, Capt. Rt. Hon. H. F. C.

    McCorquodale, Rt. Hon. M. S.

    Studholme, H. G.

    Crowder, Capt. John E.

    McKie, J. H. (Galloway)

    Sutcliffe, H.

    Dodds-Parker, A. D.

    Macpherson, N. (Dumfries)

    Taylor, C. S. (Eastbourne)

    Dower, E. L. G. (Caithness)

    Manningham-Buller, R. E.

    Taylor, Vice-Adm. E. A. (P'dd't'n, S.)

    Drewe, C.

    Marples, A. E.

    Teeling, William

    Dugdale, Maj. Sir T. (Richmond)

    Marsden, Capt. A.

    Thomas, J. P. L. (Hereford)

    Eccles, D. M.

    Marshall, D. (Bodmin)

    Thorneycroft, G. E. P. (Monmouth)

    Fletcher, W. (Bury)

    Molson, A. H. E.

    Thornton-Kemsley, C. N.

    Fraser, Sir I. (Lansdale)

    Moore, Lt.-Col. Sir T.

    Thorp, Brigadier R. A. F.

    Fyfe, Rt. Hon. Sir D. P. M.

    Morris, Hopkin (Carmarthen)

    Turton, R. H.

    Gage, C.

    Neven-Spence, Sir B.

    Wakefield, Sir W. W.

    Gomme-Duncan, Col. A.

    Nicholson, G.

    Walker-Smith, D.

    Grimston, R. V.

    Odey, G. W.

    Wheatley, Colonel M. J. (Dorset, E.)

    Hannon, Sir P. (Moseley)

    O'Neill, Rt. Hon. Sir H.

    White, Sir D. (Fareham)

    Hare, Hon. J. H. (Woodbridge)

    Orr-Ewing, I. L.

    Williams, C. (Torquay)

    Harris, F. W. (Croydon, N.)

    Osborne, C.

    Williams, Gerald (Tonbridge)

    Henderson, John (Cathcart)

    Peto, Brig. C. H. M.

    Willoughby de Eresby, Lord

    Hogg, Hon. Q.

    Pickthorn, K.

    York, C.

    Hollis, M. C.

    Pitman, I. J.

    Howard, Hon. A.

    Ponsonby, Col. C. E.

    TELLERS FOR THE NOES:

    Hurd, A.

    Poole, O. B. S. (Oswestry)

    Major Conant and

    Brigadier Mackeson.

    CLAUSE 55.—(Recovery of contribution from trustees.)
    The Solicitor-General: I beg to move, in page 39, line 39, at the end, to insert:
    "Provided that where at the expiration of twenty-eight days after the contribution became due part, but part only, of the contribution remains unpaid, and that part is less than the amount specified in the last foregoing subsection, the difference shall—

    (a) unless the contributor by notice in writing to the Special Commissioners otherwise requires, be repaid to him by those Commissioners,

    (b) if he does so require as aforesaid, be treated as having been paid on behalf of the persons from whom recovery may be made under this section or, if recovery may be so made from different persons in different capacities, then on behalf of all or any of them and in such proportions as may be specified in the notice given by the contributor under the last foregoing paragraph."

    This Amendment is designed to meet objections made during the Committee
    1272
    stage to the effect that in certain circumstances the Special Commissioners might recover more than was due. It deals with a case where a contributor is entitled to recover from trustees tax which he has paid himself. As the Clause reads, the result might be that even if the contributor had paid part of the amount which he can recover from the trustees, that is, an amount which he himself ought not to bear, the whole of the amount which the trustees ought to pay can still be recovered from them. That would mean that the tax, to a certain extent, might be paid twice over. By the Amendment we provide that where a contributor has, in fact, paid part of the amount which the trustees ought to pay, he is entitled to say that the part of the amount which he can recover from them, or the Special Commissioners can recover from them, should be paid back to him, or on his election

    1273
    should be paid on his behalf to any beneficiary or trustee or any other persons interested.
    Amendment agreed to.
    The Solicitor-General: I beg to move, in page 41, line 32, to leave out "to whom the notice was given," and to insert "exercisable."
    This is a drafting Amendment. In a case where there are successive trusts each of which is liable to pay the Contribution, the words "to whom the notice was given" could not be properly applied to the second, third and fourth trust.
    Amendment agreed to.

    CLAUSE 57.—(Provisions as to husband and wife.)
    Mr. Glenvil Hall: I beg to move, in page 44, line 13, to leave out from "wife," to "in," in line 14.
    This is a matter which was raised by the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) at an earlier stage. He pointed out that if a claim had to be made for separate assessments for husband and wife by 5th October, 1948, there might be hardship caused, because by that date the notice of assessment might not have been received by either of them. As a result we have put down this Amendment following upon investigations by my right hon. and learned Friend. The two subsequent Amendments on the Order Paper have also been made to meet the point which was raised and which the Solicitor-General promised to meet.
    Mr. Selwyn Lloyd: I should like to express my gratitude to the right hon. Gentleman. I think the House will agree that this and the following Amendment meet a real matter of difficulty.
    Amendment agreed to.
    Further Amendments made: In page 44, line 20, leave out from "unless," to "notice," in line 21.
    In line 24, at end, insert:
    "Provided that no application or notice under this subsection shall be made or given after the fifth day of October, nineteen hundred and forty-eight or such later date, not falling after the expiration of twenty-eight days from the giving to the husband of notice of the assessment to contribution, as the Special Commissioners may allow."—[Mr. Glenvil Hall.]

    CLAUSE 59.—(Appeals.)
    Mr. Glenvil Hall: I beg to move, in page 47, line 1, after "Act," to insert:
    "or section (Limitation of liability of trustees) or section (Relief where capital subject to death duties) thereof."
    This is a consequential Amendment arising from two new Clauses which were moved yesterday and accepted by the House. The first dealt with the point that where trustees are required to pay Contribution but can show that they have no trust assets out of which payment could be made, the Special Commissioners can, if they think proper, give a direction for the limitation or release of their liabilities. This Amendment is consequential upon that. Another new Clause to which the House agreed related to the case of an individual receiving income from capital from the estate of a person who died before the end of the year 1947–1948 and where a proportion of the capital of the estate has to be handed over by way of Estate Duty. The Amendment is also consequential upon that Clause.
    Mr. Eccles: We cannot let this Amendment go without reminding the right hon. Gentleman that, although it goes some way, it does not go as far as we wish. This is a point where the trustees are allowed to appeal on matters of law. We do not think that is enough; we think that they ought to have a much wider field. We welcome this Amendment, but as I say, it does not by any means go as far as it ought to go.
    10.45 p.m.
    Mr. Glenvil Hall: I did not want to elaborate on the Amendment because the hour is rather late. This gives not only the right of appeal on a point of law to the High Court, but also the right of appeal to the Special Commissioners. I thought that was understoood, but I now make it plain by specifically stating it.
    Amendment agreed to.

    CLAUSE 73.—(Estate duty where policies kept up or effected under settlements.)
    Lieut.-Commander Braithwaite: I beg to move, in page 55, line 41, to leave out Clause 73.
    Hon. Members will recollect that when we were in Committee, this was Clause 70 and it was not reached until 5.15 a.m.,

    1275
    which might decently be described as a late hour, and not an hour at which a very complicated matter was very easy to consider. The Solicitor-General will remember that I said at the time that we should like to give the matter more consideration between then and now. That is the purpose of this Amendment. The chief point about the Clause is that where there is a gift of life insurance policy, together with the necessary money to keep up the premiums, such a gift must be disregarded for the purposes of Estate Duty, and that operates however long a period the gift may have been made before death. The Amendment which I moved during the Committee stage sought to bring such gifts into the purview of others which are described as inter vivos by making them valid if made five years prior to death, during the life of the insured person.
    The right hon. and learned Gentleman, who was good enough to reply on that occasion, briefly because the sitting had been very long and the Committee was somewhat exhausted, produced an argument which I have since submitted to legal opinion of considerable eminence, and the view has been expressed that the right hon. and learned Gentleman's opinion is untenable. He talked then about evasion of Death Duties, but I am informed that the case which he quoted was not in fact an example of evasion at all. It is generally agreed that if you give money away five years before your death, there is no reason why Estate Duty should be charged upon such a gift, and we feel that this should apply to an insurance policy just as much as to anything else. There can only be evasion if the gift is not genuine; but surely that does not arise here, because in such cases both the insurance policy and the money to keep up the premium payments upon it are given away by the person concerned.
    I am entirely unable to see how any question of evasion arises in this case, any more than in other cases which come under the inter vivos arrangement. The example the right hon. and learned Gentleman gave was how Estate Duty could be evaded by a somewhat subtle arrangement between husband and wife. I suggest that that is not applicable to the argument he advanced then. In the
    1276
    first place, I am informed that, so far as the arrangements which the Solicitor-General described on that occasion can be understood, the insurance policy did not succeed in escaping Death Duties in any way. In the second place, it is entirely unnecessary, because a husband can always take out a policy on his wife's life, and the wife on her husband's, and there is no question of Estate Duty on either of them.
    Mr. Donovan: Will the hon. and gallant Gentleman quote the authority for the last statement he has made?
    Lieut.-Commander Braithwaite: The authority? My own humble opinion—nothing more.
    Mr. Donovan: It is quite wrong.
    Lieut.-Commander Braithwaite: I do not know whether the hon. and learned Member for East Leicester (Mr. Donovan) was present at the previous very brief Debate. I then gave notice that I would raise the matter again, and I have considered it since. If I am wrong, then the Solicitor-General, I hope, is as well informed as the hon. and learned Gentleman. It may be wrong or it may not be, but that is the view which I was submitting to the right hon. and learned Gentleman. If it is a mistaken view, of course he will tell me. It may be that the Solicitor-General has some other argument which he did not deploy on the previous occasion, but I feel that the reasons he put forward then for treating life insurance gifts differently from other gifts, do not carry the necessary conviction, and I hope that he, like myself, has reconsidered the matter and that he has come to a different conclusion from that to which he came on that occasion.
    Sir H. Lucas-Tooth: This is a somewhat technical but quite important point. The policy of the law is that if a man insures his life and pays premiums on that, the policy moneys when they come to be paid, although they cannot be paid to him after his death, nevertheless are deemed to be part of his estate for Estate Duty purposes. That is the broad policy of the law; it is well settled and we do not complain of that at all. In the Barclay's Bank case which gave rise to this new Clause, it was decided that if a person, instead of paying premiums him-

    1277
    self, simply arranged to pay money or any sum of the capital to trustees and they paid the premiums for him, then Death Duties would be avoided. That case showed a serious loophole in the law and this Clause, as I see it, is to stop that loophole. I have no complaint about that at all, and neither has anyone else on this side of the House.
    Our complaint is that the Clause goes too far. Suppose that a man insures his life, pays premiums for some time, and then assigns the policy to a son and the son then continues to pay the premiums on the insured person. The policy moneys will belong to the son, and there will be no question, at any rate if five years elapse after the assignment date. I think that is agreed and no one on either side would complain of that. Alternatively, if a man makes a gift of capital to his son, then assuming he survives for five years no Estate Duty will be payable on that gift of capital. But suppose the man does both; that is, not only assigns a policy of insurance to his son but gives him a gift of capital as well, then the effect of doing both these things will be, under this Clause as at present drafted, to attract Estate Duty to the gift of the policy money.
    I do not really think that is the intention of the Government, but that is the effect of the Clause as at present drafted, for the premiums would then be paid by virtue, or in consequence, of a settlement out of property indirectly provided by the father—by the deceased person. It will be seen that the word "settlement" is defined in Subsection (4) as including any disposition, agreement or arrangement, so that if the father has already given an insurance policy on his own life to his son, it will be virtually impossible for him to make any further gift whatever to his son, for such gift will necessarily enable the son to keep down the premiums, whether that is the intention or not. I do not believe for a moment that that is the intention of the Government. It is too late at this time to suggest an appropriate Amendment to the Clause, but I think the Government should look at the matter again and that the Clause should be amended so as to provide that only where the deceased person has either retained the interest himself in the settlement or has imposed an obligation on the owner or a third party
    1278
    to keep down the premium should the general part of the Clause be affected. If the Government could make that Amendment, it would be agreeable to both sides of the House.
    There is another small point. Subsection (3) provides that the Section shall be deemed to have effect as respects persons dying on or after 7th April. 1948. There will be cases where the policy has been assigned before that date and, indeed, there may be no further premiums to be paid on that policy at all and the owner of the policy may have either sold or mortgaged the policy money. It seems to me that it is quite unfair to bring back, by virtue of this Clause, a provision whereby the fact of a person's death after the introduction of this Bill retrospectively reduces much of which had already accrued before the Bill was published. I should have thought that the proper provision here would have been to limit the operation of the Clause to settlements made after the date of the introduction of the Bill. If that Amendment could be made, it would cover the case that the Government have in mind and avoid the unfairness which I have sought to point out.
    The Solicitor-General: I think hon. Members opposite appreciate the general purpose of the Clause, and the point made is that it goes too far. It is designed, however, to prevent what is considered to be a loophole which was disclosed in the decision in the Barclay's Bank v. Attorney-General case in 1944. The hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) described the method which could be used, and it was the method that was used. There were two policies assigned by the testator to trustees. They were policies on his life and he had transferred to the trustees certain income-yielding investments out of which a premium had to be paid. The result was that it was held that in those circumstances the policy was not wholly kept up by the testator for the benefit of the donee. The further result was that the full Estate Duty did not accrue. That was the scheme evolved, and it was to prevent that scheme and others, that this Clause was devised.
    Sir H. Lucas-Tooth: I am not sure whether the right hon. and learned Gentleman is being quite fair to certain

    1279
    people involved in that case. There was no suggestion that Barclay's Bank was involved in such a scheme.
    11. p.m.
    The Solicitor-General: I did not intend to use any disparaging language: I deliberately intended not to use the names of the persons involved in the case, which would reflect upon them. I will withdraw the word "scheme" and substitute the word "method," or something like that, which will not necessarily imply disparagement. There is a method by which one can avoid payment of Estate Duty, and the Clause is designed to avoid that being attempted.
    The case has been cited of a father who had given his son more than five years past a death policy the premiums on which the son had paid. That would be excluded by the proviso, provided that the Commissioners of Inland Revenue were satisfied that in these circumstances there was no reciprocal arrangement. If hon. Members will look at the proviso between line 10 and line 18, they will see that where the premium is paid not from property which originates from the testator but from some outside source—in the case the hon. Member for South Hendon (Sir H. Lucas-Tooth) had in mind it was paid by the son out of the son's own resources—that would be a case which would be excluded by the proviso, subject always to the Commissioners of Inland Revenue being satisfied that there was not a, scheme—I use the word in the disparaging sense—for the purpose, that it was not a scheme which formed part of a reciprocal arrangement between the deceased and others. Therefore, I do not think the Clause goes further than the intention we had in mind.
    Sir H. Lucas-Tooth: Would the right hon. and learned Gentleman deal with the case in which the father makes provision for the son out of which the son does make the payments? The father may hand over a lump sum some 20 years before his death, and may have no further interest in the matter whatever. Notwithstanding what the right hon. and learned Gentleman says, the Clause would be effective because, although there is no scheme, the son does pay the premiums out of money provided by the father. Will the right hon. and learned
    1280
    Gentleman also deal with the other point I raised in connection with Subsection (3)?
    The Solicitor-General: If the son pays the premiums out of money supplied by the father, is it unreasonable that it should be held in that case that it falls within the Customs and Revenue Act, 1889, Section II, as capital put up by the father? I say it is not unreasonable in that case to hold that the policy is kept up by the father. I suggest that in a case where the father, via the son, pays the premium, it is not unreasonable to say that he keeps it up.
    Mr. O. Poole: I think the Solicitor-General has rather missed the point. A man decides to hand over a portion of his estate to his son. In doing so he hands over a capital sum of money and also a life insurance policy. The value of that policy is simply the paid-up value at the time. Instead of cashing the policy for, say, £5,000, he hands over the policy as part of the lump sum handed over in the ordinary way of gift. We are assuming for this purpose that the man lives more than the statutory period of five years.
    When the son receives that policy, there are three actions he can take: he can leave the policy to mature without paying a further premium; he can cash the policy and take the paid-up value; or, and this is the one we are concerned about, he can continue to pay the premiums. The point my hon. Friend made was that he does pay the premiums from money his father handed over to him. There is no condition that he should do so, no reciprocal arrangement—he just uses a part of the money for his own benefit in keeping up the premium. The Solicitor-General indicated that that would not fall because of the proviso. But if one looks at the words of the proviso, it would be held, and the Solicitor-General cannot argue in that case that the money is being kept by the father for the benefit of the father. The premiums are being kept up by the son out of money given by the father for any purpose the son likes.
    The Solicitor-General: If, more than five years before death, the father were to hand over a policy and also some money or securities with which he parts absolutely, if he makes a present of it to his son, that is not property which in any sense belongs to the father; and,

    1281
    therefore, if the son pays the premiums out of that property which his father has given him absolutely, this proviso takes it out, because the premiums do not originate from anything which is the property of the father.
    Mr. Poole: I am sure the right hon. and learned Gentleman means that, but it seems to us that that is specifically excluded by Subsection (4, a). The words there are very wide. The words
    "the expression 'settlement' includes any disposition, trust, covenant, agreement of arrangement"
    would seem to us to be far and away beyond the rather narrow interpretation the Solicitor-General puts upon the proviso.
    Lieut.-Commander Braithwaite: I hope the words will be studied by the Solicitor-General before any decision is given in the courts in the matter. However, to save the time that would be occupied by passing through the Division Lobby, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.

    EIGHTH SCHEDULE.—(Purchase Tax.)
    Mr. Jay: I beg to move, in page 69, line 32, to leave out "Second," and to insert "First."
    This Amendment carries out the undertaking I gave on my right hon. and learned Friend's behalf on 11th June that the Purchase Tax on utility fur garments would be reduced from 66⅔ per cent. to 33⅓ per cent.
    Amendment agreed to.
    Mr. Jay: I beg to move, in page 71, line 25, at the end, to insert:
    "(d) Articles of bedding of the following descriptions, not being utility articles, that is to say, pillows, bolsters, soft-filled mattresses and upholstered spring interior mattresses First."
    This Amendment carries out the undertaking to reduce the tax on the articles named in the Amendment from 66⅔ to 33⅓ per cent.
    Mrs. Jean Mann: I should like to ask my hon. Friend whether he will not exempt secondhand Army reconditioned blankets. I understand that at present they carry tax at 66⅔ per cent. my proposed Amendment, in page 71, line
    1282
    I want to know whether he will accept 25, at the end, to insert:
    "(d) Secondhand Army reconditioned blankets Exempt."
    I do not know the reason for having such a high tax on such humble domestic articles. I believe the policy has now been reversed, and that the Chancellor wishes to see prices reduced. I understand an appeal has gone out in the White Paper asking everyone to try to bring prices down. It is very difficult to understand why then tax at 66⅔ per cent. should be—
    Mr. Deputy-Speaker (Major Milner): I am sorry, but the Amendment to which the hon. Lady is referring, and which concerns secondhand blankets, has not been selected by Mi. Speaker, and I am afraid, therefore, that she cannot raise that matter now.
    Amendment agreed to.
    Mr. Jay: I beg to move, in page 72, line 39, to leave out "Paper handkerchiefs, paper towels."
    This Amendment is to carry out the undertaking to exempt these articles from tax altogether.
    Amendment agreed to.
    Mr. Jay: I beg to move, in page 73, line 9, to leave out "paragraph (e),"and to insert:
    "sub-paragraph (iii) of this paragraph or in paragraph (e) or paragraph (n)."
    This Amendment, together with the following Amendment, carries out the undertaking given to reduce the Purchase Tax on kitchen cupboards and dressers from 66⅔ per cent. to 33⅓ per cent.
    Amendment agreed to.
    Further Amendment made: In page 73, line 12, at end, insert:
    "(iii) Cupboards and dressers designed for use in kitchens, except those comprised in paragraph (e) or paragraph (n) of this Group … … First."—[Mr. Jay.]
    Mr. Jay: I beg to move, in page 74, line 11, at the end to insert:
    "(r) Parallel-sided or tapered baths of galvanised steel not less than 42 inches in length over all … … … Exempt."
    This Amendment carries out the undertaking to exempt baths of the kind mentioned from Purchase Tax.
    Mr. Assheton: Would the hon. Gentleman explain the significance of the words "parallel-sided or tapered"?
    Mr. Jay: This is a type of bath that is not normally built into premises but is usually bought separately.
    Mr. Assheton: Is it not an idiotic expression?
    Mr. Glenvil Hall: It is a trade term.
    Amendment agreed to.
    Further Amendment made: In page 74, to leave out lines 19 to 24, and to insert:
    "(b) Space heating appliances (including appliances of a kind used for boiling or cooking and also for space heating), instantaneous water heaters, immersion water heaters, storage water heaters, circulator water heaters for tank storage and water boilers for tank storage or central heating—
    (i) suitable for operation from electric mains, except appliances comprised in paragraph (e) of this Group Third
    (ii) suitable for operation from gas mains Second"
    —[Mr. Jay.]
    Mr. Jay: I beg to move, in page 75, line 31, after "lighting," insert:
    "except those comprised in paragraph (d) of this Group."
    This Amendment and the following Amendments provide exemption from Purchase Tax in the case of oil-burning and paraffin lamps and certain accessories.
    Amendment agreed to.
    Further Amendments made:
    In line 39, leave out "oil or."
    In line 41, after "mantles," insert:
    "except those comprised in paragraph (d) of this Group."
    In line 44, at end, insert:
    "(d) Oil-burning lamps of a kind used for interior domestic or office lighting and accessories for such lamps:—
    (i) articles not comprised in the following sub-paragraphs of this paragraph Exempt
    (ii) incandescent mantles, and glass chimneys and similar primary glasses Exempt
    (iii) globes, shades and reflectors First" —[Mr. Jay.]
    Mr. Jay: I beg to move, in page 76, line 15, to leave out "Second," and to insert "First."
    1284
    This Amendment, together with the following two Amendments, reduces the Purchase Tax on clocks and watches from 66⅔ per cent. to 33⅓ per cent.
    Amendment agreed to.
    Further Amendments made: In page 76, line 28, leave out "Second," and insert "First."
    In line 44, leave out "Second," and insert "First."—[Mr. Jay.]
    Mr. Jay: I beg to move, in page 77, line 7, to leave out "Second," and to insert "First."
    This Amendment reduces the Purchase Tax on radio sets and television sets from 66⅔ per cent. to 33⅓ per cent.
    11.15 p.m.
    Mr. McAllister: I am sure everyone will welcome the announcement which the Economic Secretary made a few days ago. The radio industry are probably well satisfied with the concession which was announced then. I should like to ask my hon. Friend to reconsider this matter before the final stage of this Bill, because there is one small injustice which is done by the Amendment, as drafted, and although it is small it is nevertheless not insignificant. What I am referring to is that while the tax on radios of all kinds is reduced by 33⅓ per cent., the tax on radio gramophones stands at 66⅔ per cent. I have in mind a small factory in Scotland, one of the few radio industries in Scotland, which happens to manufacture nothing whatsoever but radio gramophones. They have reduced their costs of production to an extraordinarily low level so that they are able to offer the consumer, leaving Purchase Tax aside, a radio gramophone which costs little more than the ordinary console radio set.
    Mr. Deputy-Speaker: The hon. Member is referring to an item which is not in this Amendment, and I am afraid he is out of Order.
    Mr. McAllister: Further to that point of Order; when the Economic Secretary made his announcement in the House, he specifically added to his own announcement that radio gramophones were excepted. It did puzzle me, and I put down an Amendment which you, Mr. Deputy-Speaker, are not calling. In the course of legitimate discussion on these matters, where can such a matter be debated if

    1285
    it cannot be discussed under wireless receiving sets and the like, seeing that my Amendment is not called? The Rules of Order should make it possible to discuss what seems to me to be an injustice.
    Amendment agreed to.
    Mr. Jay: I beg to move, in page 78, line 22, at the end, to insert:
    "and except for bottoms of wood or other vegetable substance."
    This carries out the undertakings to reduce the Purchase Tax on baskets with the bottoms mentioned.
    Amendment agreed to.

    TENTH SCHEDLTLE.—(Special provisions as to working directors.)
    Mr. O. Poole: I beg to move, in page 84, line 6, after "director," to insert "or employee."
    On two previous occasions we began debating the Tenth Schedule at a very late hour, or perhaps it might be better to say at a very early hour, in the morning. On the last occasion when we came to this Schedule, the Chancellor of the Exchequer suggested that we should postpone discussion on it until we got to the Report stage. We did so in the hope that we might be able to reach it at a reasonably convenient hour, so that we could have a detailed discussion on this rather technical matter, and one which is of great interest to a large number of people. I am afraid, therefore, that it will be necessary to apply ourselves fairly closely to the Schedule, and I would remind the House that if we do so at this time of night, it is because we have had no previous opportunity of discussing it.
    This Amendment is really paving the way for other Amendments. I do not think it necessary to dilate very long upon it, but the Chancellor of the Exchequer, realising the unfairness that would have fallen upon a certain class of people, has inserted this Schedule in the Bill to make special provision for working directors. We have now had considerable time to examine it, and to see how it will work, and we cannot see any reason why it should not equally apply to employees who also receive a proportion of their salaries because of their shareholdings. The right hon. and learned Gentleman will know of many family businesses where the whole interest of the family, whether small industrial undertakings or
    1286
    brokerage houses is concerned, and where not necessarily all of the members of the family are directors. Certain cases have been brought to our notice where one member of the family is a secretary of the company, another is a manager of a certain branch of the concern, and the other members are directors, but all of them take remuneration in the form of holdings of shares. I hope the Chancellor will agree that this provision should apply to them as well as to working directors.
    Mr. Eccles: I beg to second the Amendment.
    The Solicitor-General: We do not feel there is any justification for this proposal. It is suggested that employees of these private companies should virtually be assimilated to the position of directors responsible for the policy of the company. It is difficult to see exactly what kind of situation the hon. Member for Oswestry (Mr. O. Poole) really has in mind. The object of the Tenth Schedule is to provide for relief from this particular tax, where a partnership existed before and the partners for good reason or bad, decided to form the partnership into a private limited company, themselves becoming directors of this private limited company. It was said that it was unreasonable that, if they took emoluments from the company in the form of salary, they should escape the Special Contribution but that if they decided to take part of the emolument as dividends from shares, those dividends from shares were caught by the Special Contribution provisions. That was the case when the proposal was mooted that there should be a special provision for private companies run by private directors. That case was accepted on the basis that those persons who had previously been partners,—and after the company was formed had it in their power to say whether they would take their remuneration in the form of dividends or salary—should not be disadvantaged by the chance that they had taken part of their emoluments in share dividends.
    This consideration did not apply to employees of the company. Why should an employee have the same privilege? An employee, whether a secretary or in whatever capacity he is engaged, has no responsibility for the policy of the company and it is not his decision whether

    1287
    he is paid by salary or share. He enters into a contract with the company and his remuneration is laid down by that contract. If he agrees with the company to take part of his remuneration in the form of shares and not as salary, that is a matter of arm's length negotiation between him and the company. Once the contract is entered into, he cannot alter it. But the directors of a company, in the case of a director-controlled company, can alter it. Before 1947–48 they could at any time, had they known of the possibility of a tax of this sort, have said that they would convert all their income into earned income. An employee could not. It is difficult to see what case can be brought for the member of a family who in the partnership was a partner, and is subsequently demoted into the position of a secretary or an employee of the company after the company is formed.
    If one accepts the position that a person who is not responsible for the direction of the company shall be entitled to this privilege which Schedule 10 offers, one must accept that it equally applies to the employee of any other company, and that he shall be treated the same. If he is an employee, whether he is secretary or whatever he is, it follows as a matter of reasonable probability, at any rate, that when the partnership existed he was regarded as a person not suitable to be entrusted with the responsibility incumbent upon a partner. He presumably would have been an employee of the partnership, and it is because of that that he is taken into the company and employed as a secretary, or in some other capacity, when the company is formed. We do not see any justification for extending the Schedule in this way. Once one extends it to persons who serve the company otherwise than in the capacity of whole-time service directors, it is difficult to draw the line and to know how far we are going to be led in extending the privilege. For these reasons, I hope the House will not agree to this Amendment.
    Mr. O. Poole: I must say that, unlike many previous speakers in the long deliberations we have had on this Bill, I am not surprised at the answer which the Solicitor-General has given; and after the answer he gave to some hon. Members on the previous Amendment, nothing
    1288
    which the Solicitor-General says will surprise me again. But the fact is that many of these companies were converted from partnership to limited liability companies after the first world war. That is some 30 years ago. Many of the people who are now in these family businesses of the type which I have in mind, who get their salaries or remuneration from these companies, are the sons or relatives of people who were then in the businesses, and were themselves never partners at all. So there can be no question of their ever being "demoted" from partners to employees.
    The second point is that the Solicitor-General says that if anyone had considered the possibility of this tax, he could, have altered his position from director prior to 1947; but I would remind the right hon. and learned Gentleman that not only did no one think of this, or anticipate this particular Contribution, but it has also been made quite clear by many Government speakers—although it has been denied by the Chancellor of the Duchy of Lancaster—that this Special Contribution will never take place again. Therefore, there can be no reason why they should have adjusted their firms prior to 1947 in order to make themselves particularly suitable for legislation brought in unexpectedly once and for all in 1948.
    11.30 p.m.
    What I have in mind is a small family business, or a reasonably-sized family business, where one member of the family owns a considerable block of shares and gets his remuneration from those shares rather than through a direct salary. It has nothing whatever to do with responsibility. It is a purely technical fact of how he gets his remuneration. The responsibility which he carries has nothing to do with this Schedule at all. This Schedule, quite rightly, is intended only to deal with matters of fact and the question of the responsibility of a director, except in so far as it is reflected in the extent of the remuneration, does not arise. There is also the question of employees, and we are later going to move an Amendment on management shares. I hope the right hon. and learned Gentleman is going to make a statement on the whole matter of management shares, because these will make a difference to employees rather than to directors. The same applies to

    1289
    employees of public companies, and I suggest that the right hon. and learned Gentleman has not applied himself to the point at all. There are many cases such as that in which the member of a family becomes the secretary of the company, rather than a director, and I hope that the Government are going to reconsider this particular point.
    Amendment negatived.
    Sir P. Bennett: I beg to move, in page 84, line 7, to leave out "private company," and to insert:
    "company the directors whereof have a controlling interest therein."
    I shall be as brief as I can. This new Schedule, dealing with working directors, refers only to those who have a controlling interest in private companies. If the directors are in control of the company it is immaterial whether the profits of the company are distributed by way of remuneration or dividend, and to meet this point, the Chancellor has introduced this Schedule. But the argument is just as obvious for the directors controlling a public company. There are many companies which are public in law, because they have issues of debenture and preference shares, but they are private companies in effect, because they have their ordinary shares all privately held. They are, therefore, director-controlled, and if these are wholly controlled through the ordinary shares, we feel that they should have the same benefits as the private company. It is a technical difference, but a point which is just. The existing legislation for Profits Tax purposes restricts the remuneration of directors with a controlling interest, and there is no distinction as to whether a company is private or public. By this Amendment, we want to follow that procedure and to make it quite clear that a company is controlled through its ordinary shares and is only controlled from outside because of debentures.
    Mr. Walter Fletcher: I beg to second the Amendment.
    There are companies which, in appearance, are public, but which, in fact, are private companies, and I feel certain that the Chancellor does not want to perpetuate an injustice to them.
    The Solicitor-General: I am sorry we cannot accept this Amendment. We have
    1290
    got to draw a clear line between what is within the scope of the Schedule and what is not. We are taking the case of the small private firm which has assumed corporate status. In the vast majority of cases there may be exceptions, but I personally know of none—it is undoubtedly true to say that those private firms, when they do assume corporate status, are converted into private limited companies. If we introduce public companies which are controlled by directors, we are going quite outside the ambit intended to be covered by this Schedule. We should be including ordinary companies in cases where the directors held 51 per cent. and outside members of the public held the other 49 per cent. of the shares.
    That is not the sort of company which is intended to be within the provision. That is not the sort of company formation which we would find when we have a small private firm carried on by two, three or four partners which in due course is converted into a company. Almost invariably, I would say, when you have that sort of company, the resulting company is a private one. In the case where 51 per cent. of the holding is in the hands of the directors, we cannot envisage that as other than an ordinary investment by these directors. They have invested in 51 per cent. of the shares. If we accept this Amendment, we are entirely changing the character of the Schedule. It would cover ground not intended to be covered. It would go outside the converted private firm and bring in all sorts of other cases which we cannot really define beforehand, because we do not know what may or may not be included. We feel it is not practicable to go further than we have gone, and we feel that in what we have done we have met the purpose we had in mind.
    Mr. Eccles: I cannot say that I am satisfied with what the right hon. and learned Gentleman has said, because the real intention of including the Schedule was surely not simply to exempt dividends derived from shares in private companies. The purpose of putting in the Schedule was to meet the case where dividends of any sort could be shown to be part of a man's earned income and therefore proper to be excluded from his investment income. Surely, in justice, it does not matter what

    1291
    sort of shares a man holds, whether in a private or a public company. The whole point of the Schedule is to bring within its ambit all those dividends that can be shown to be taken by the recipient instead of a salary.
    If there is a public company—and surely there must be many—where the directors hold all the ordinary capital, have small salaries and take their remuneration through ordinary or deferred shares of that company, they are on all fours with other persons doing exactly the same thing in private companies. I do not think there is any justice in what the Solicitor-General said. It is one more case of the Government saying that because they do not think it would be right to exempt everybody, they will not exempt a few. Is there any reason why the general run of director-controlled companies should be excluded? When a company is controlled by the directors, when they do own the equities of the business, it is a very long shot that they are going to remunerate themselves from the dividends. I found the answer quite unsatisfactory because I do not think that there is any justice in drawing a line between one kind of dividend drawn from one sort of share, and another kind.
    Amendment negatived.
    Mr. O. Poole: I beg to move, in page 84, leave out lines 13 to 34.
    When the Amendment was moved to Clause 48 which actually introduced this Schedule, I took the opportunity of making certain remarks which related to the Schedule as a whole. It was then agreed that the discussion would be postponed until a later date. I therefore hope that the Solicitor-General will take this opportunity of replying to some of the points which I made then. I do not wish to repeat at any length the points I made on that occasion, but I hope we shall get a detailed answer to some of them. All I will do now is refer briefly to this particular Amendment which does in fact sum up and meet the objection to the Schedule. We welcome the fact that the right hon. and learned Gentleman has moved this Schedule in relation to the anomalies which must arise under the Special Contribution, to which attention has been drawn throughout our deliberations and which will do reasonable, if
    1292
    rough justice to a limited number of the people who get their remuneration by way of shares rather than by a direct income. As the Solicitor-General said on the last Amendment, it does to some extent take care of that.
    Our main objection to this Schedule is that it takes one particular kind of income, derived from shares, which is, in fact, earned income—and which the Schedule decidedly admits is a legitimate type of income by excluding it from the Special Contribution—and then, having admitted that, it says that it will divide that income into two and if you have less than so much, you will be excluded, but if you have more, it will not be treated as earned income at all. There can be no possible argument to justify saying that, if a certain type of income is to be treated as earned income for purposes of this Special Contribution, the higher portion of it in certain circumstances ceases to be earned income.
    As we have pointed out on many occasions it is a matter of pure accident. It is a matter of pure chance, having regard to the way in which companies are organised, what proportion the directors get of their remuneration by way of shares and by way of salary; and I would repeat what I said on the last Amendment, that many of these companies, probably the majority of them, are old firms, partnerships turned into limited liability companies for reasons totally unconnected with modern taxation.
    11.45 p.m.
    What the Government have done has been to put a limit of £2,000, or a share of 15 per cent. of the company's profits up to £15,000, as the maximum remuneration for any working director, including his salary, and anything over this is to be treated as unearned income. That seems to us to be absolutely and wholly wrong. One can argue whether people should have high incomes or not, and taxation is devised on an increasing scale, with Surtax, to take care of that; but in this case there is no possible justification for making that distinction. If this Amendment were accepted, it would cut out this absolutely objectionable qualification which, for some reason that I think cannot be explained, the right hon. and learned Gentleman has seen fit to put into the Schedule.

    1293
    There are certain other points on which I should like to get a definite answer, but whatever the arguments may be for the distinctions with regard to shareholdings in companies, they cannot possibly apply to management shares—and when I say "management shares" I mean shares in companies which are issued to people in lieu as part of their remuneration. There is no capital value in those shares which can be held for anybody else except a director or employee of the company. When the person concerned leaves the company, the shares have to be handed over automatically: they cannot be taken away. I very much hope that it will be possible for the right hon. and learned Gentleman to say that that type of share is specifically excluded from the incidence of this tax, and that is why I was so disappointed that our last Amendment relating to employees was not accepted, because there are many hundreds of firms which remunerate not only their directors but also their employees in this way. I would also like the Chancellor of the Exchequer to say exactly what "management shares" are, because there are many different sorts of management shares.
    I wish to draw attention to an Amendment on the Order Paper—which I do not believe will be called but which, I should hope, is acceptable to the Government—dealing with the question of men not employed whole-time who could not be called "substantially employed."
    Mr. Deputy-Speaker: That Amendment is out of Order and the hon. Member cannot speak on it.
    Mr. Poole: I appreciate that, but this is rather a difficult position because I understood it was entirely acceptable to the Government and I thought they would make a statement that could clear up the point.
    Mr. Deputy-Speaker: I am afraid that we cannot discuss it at all.
    Mr. Poole: I apologise, Sir. I will not refer to it again. It is our object, in moving this Amendment, to express our complete objection to the qualification which the right hon. and learned Gentleman has put into the Schedule.
    Mr. Selwyn Lloyd: I beg to second the Amendment.
    1294
    I think the Schedule as it stands is completely illogical. I would remind the Solicitor-General of the words he used on 3rd June:
    "I think on the general principle the two sides of the Committee are not far apart. It is the case of the partnership which, notwithstanding the fact that a company has been formed, really continues in a sense to be a partnership, so that the dividends paid to the directors should to a certain extent, at any rate, be regarded as income and, therefore, not within the investment capital.—[OFFICIAL REPORT, 3rd June, 1948; Vol. 451, c. 1368.]
    That is an admirable statement except for that one qualification "to a certain extent." What is the logical justification for the qualification? If there is a partnership, the partner may receive a salary, interest on his capital, and a share of the profits. That is the way in which his remuneration may come. All these things are treated as income for the purpose of the Income Tax Acts. Why, if it has been changed to a limited company, should there be any difference in dealing with the matter? If it is a partnership, he can treat the whole of that income as earned income. Why should there not be exactly the same situation appertaining in the case of a partnership that has been turned into a limited company?
    The Solicitor-General: It seems to me that both hon. Gentlemen who have spoken in support of this Amendment are labouring under a misconception. We start off imposing this tax on investment income. Where there is a partnership which has been converted into a company, and the partners take shares in the company, that is prima facie investment income; it is income they draw from shares in a corporate body in which they are shareholders. There is no sort of differentiation between that kind of investment income and any other sort. That is the starting point, and when these provisions were first framed, they contained no sort of exclusion for the purpose of assisting persons who had been partners in a partnership.
    Having started from the standpoint that this is a tax on investment income, an exception is made to the general principle on which the tax is based, which is illogical, if you like, in the sense that it treats what is really investment income as earned income. We make an exception because we feel that the principle of treat-

    1295
    ing investment income as it should be treated, as investment income, in all cases, may work hardship in particular cases. What both sides have in mind is where one has a small private firm conducted by partners who accept corporate status. It is no good pretending that converting a partnership into a company means nothing. It means that the reserves are not liable to Surtax. A number of changes take place. The partners or directors are no longer liable to the extent of an unlimited liability, but receive the protection of the Companies Acts, and the reserves of the company escape liability to Surtax. That is a substantial change. By conversion they procure the advantages of limited liability which the Companies Acts confer.
    That being so, we were confronted with the question whether, in spite of that change, and in spite of the fact that the partners each put an end to their partnership status and acquire the advantages which limited liability confers, some further exception should not be made in regard to contribution on investment income in their case. We thought, considering the case and bearing in mind that they continue to work and to control the partnership, which has now been converted into a company, some relaxation—but I repeat, some relaxation only—should be made in their case. When I used the words which the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) quoted, I did use the words "to a certain extent," and I meant those words to form an integral part of the language which I used. We grant the exemption to a certain extent in order to mitigate the hardship which would result in the case of ex-partners if we treated the income which working directors draw—who were previously partners—as it should be treated really, that is, as investment income.
    The question is whether we have gone far enough in the relaxation which we have felt able to concede. After all, we have selected the higher of two standards—£2,000 per director or the standard provided in sub-paragraph (b), which might be considerably more in the case of a company which has a very substantial undertaking. We feel that that should really—and I believe it is conceded—meet all ordinary cases. There may be some cases in which the partners by way of shares
    1296
    and salary or other emoluments have more than £2,000. No doubt, there are; and the excess will attract liability to the Special Contribution. However, we feel that that would not be very much of a hardship. In fixing upon the figure of £2,000 or, where it is appropriate, the higher standard provided in sub-paragraph (b) we feel we have really fixed upon the right limit.
    In approaching this problem we must look at it in its true light, namely, that we are agreeing to a certain measure of relief—only a certain measure of relief—from the general incidence of this tax upon investment income in order to assist a particular category of undertaking, namely, a small private firm which has become a private company. With regard to that we say, notwithstanding that the ex-partners have the advantages which limited liability gives them, nevertheless, we will, to a certain extent, assist them by allowing them to treat their emoluments from the company as earned instead of unearned income. We feel we have acted justly in the matter, and that we ought not to be asked to go further.
    Mr. O. Poole: Will the right hon. and learned Gentleman not say what the position would be in regard to management shares?
    The Solicitor-General: I am sorry; I meant to deal with management shares. There is already in the Income Tax Acts a Section which deals with certain classes of management shares—Section 14 (3, b) of the Act of 1918, which enables earned income to cover income from property which is attached to or forms part of the emoluments of any office or employment held by an individual. The question is what is the interpretation to be placed on those words as applied to management shares. They are applied strictly. Generally speaking, and without going into all the niceties of the thing, if one can show that the management shares are held solely by virtue of the employment—that they have to be given up, and that they have not been paid for, and so on—they would then be within the scope of that Section.
    The Section has been applied rigidly, and it has to be applied rigidly; but providing that can be said with regard to management shares—that they do fall within the description of property within

    1297
    that Subsection—then the dividends which accrue from them would be earned income. There is, therefore, already provision in the Income Tax Acts to deal with management shares of a particular class. They are held on all sorts of terms; but if they are not paid for, and if they are held solely by virtue of the employment of the shareholder, it may well be—it depends upon the exact circumstances of the case—that this particular Subsection would cover them; and in that case the dividends which accrue from them would be earned income.
    12 m.
    Mr. Eccles: We are not trying to get exemption from the capital levy of income which is properly described as invested income. All we are concerned with is those cases where, instead of taking a salary, someone receives remuneration by way of dividend. I want to point out to the Solicitor-General that if he does not accept our Amendment, the effect on the companies concerned must be that they will say to themselves that they had better pay salaries and lower dividends, because it is open to them to decide which method of remuneration it shall be, and that is not in the best interests of British business or its employees. It is in the true interests of business that the rewards should come out of profits earned, and the fewer fixed charges there are on a business the better, in order that when times are not so good there are not so many fixed charges to pay. I seriously suggest to the Government that they ought not to bring in taxes which have the effect of making people give up equity earnings and in return take salaries in respect of which they will no doubt have contracts. That is really a retrograde step in the arrangements of our business.
    Of course, the answer will be that this is a once-for-all levy. If we could really believe that, it would be a good thing, but we know that business does not believe it, and that they are going to say that from now onwards the taking of remuneration only after profits have been earned is not such a safe way to escape taxation as to take it by way of salaries. I do not think that is a good thing. I think that the Chancellor ought to take these things into consideration. It is exactly the same sort of case as we had with the Profits Tax.
    1298
    To come to the particular point of the Amendment, I agree entirely with my hon. Friends that income is either earned or it is not, and that if it is earned income, it ought not to attract the capital levy. This is purely an arbitrary figure. The Chancellor says that £2,500, or whatever the sum is, is the limit of what a man may earn by way of shares. One could give him many cases of small firms of skilled partners who have no fixed assets at all, but which make very large sums every year, who have converted their business into a company and take the whole of their remuneration by way of dividends according to what they have earned in the preceding year. It is purely by chance that they are remunerated in this way, whereas if they had taken their profits under a partnership they would attract no taxation. If they make exactly the same sum over the year, but they happen to be remunerated by this arrangement, they attract taxation, but if they had remained a partnership they would not attract taxation. I consider it is extremely unfair and that we ought to press the Amendment.
    Mr. Howard: I tried to raise a point on this in the early hours of the morning during the Committee stage, and on that occasion it was indicated to me that there might be a further opportunity of raising the matter. I am entirely dissatisfied with the explanation the Solicitor-General has given in reply to this Amendment. If I might, without being offensive, use the words which he employed in regard to a previous Amendment, I would say that the explanation he gave was "unsubstantial in terms of quantifiable value." The point I want to raise is that the Solicitor-General made perfectly clear that it is the desire of the Government to grant a measure of exemption or mitigation to working directors of companies who were, in fact, in partnership beforehand. My hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) has reminded the House of what the Solicitor-General himself said on this subject in Committee.
    I wish to give a specific example which seems to me to come clearly within the definition given by the Solicitor-General and what I understand to be the desire of the Government and the whole House, but which yet, I understand, will be-

    1299
    come subject to this Special Contribution. This concerns a firm, which, if I quoted its name, would be known to probably 99 per cent. of the Members of this House. It was in existence as a private partnership for nearly 200 years, and it became an unlimited company approximately 20 years ago. In the agreement drawn up between the directors of that company, they are all referred to as partners. It is, of necessity, a qualification of their becoming directors that they acquire shares in that company. No one else can hold shares except those directors who are partners. It is perfectly clear that this is a partnership, although legally it is a fact that it is a company. Nevertheless the term "partnership" is still used in the legal documents making the arrangements between the individuals concerned. Yet these individuals are going to be subject to this levy. That is clearly unjust, and it is contrary to the Government's intentions, that they should become subject to this levy.
    The second point is how those individuals are to pay the levy? This is surely a matter of interest to the Chancellor of the Exchequer, even if the point of justice is not. I happen to know one of the partners or directors personally, and I asked him as a matter of confidence if he could give me some indication whether there would be any difficulty in the partners meeting their liabilities under the levy. There are now five partners or
    directors in this firm or company. The advice he gave me, quite privately, was that of those five one had some other investment assets, from which he obtained what is normally called investment income, and, therefore, he would financially be able to meet his commitments if he were assessed for this tax. The only assets that another of the five partners or directors had was his investments in the company, his house and his personal belongings. Theoretically, he could meet the levy by raising a mortgage on his house or private possessions. The other three had no other outside investments whatsoever apart from the remuneration which they received by way of directors fees and salary and by way of interest on their shares. So far as they could see, they would be unable to meet the levy.
    I apologise to hon. Members for keeping them rather longer than they wanted, but the purpose of this Schedule is to mitigate the hardships which existed before the Schedule was introduced. The fact is that hardships are being created by the proposals in this Schedule, and it is in an attempt to mitigate some of those hardships which will be created if this Schedule passes in its present form, that the Opposition are now proposing this Amendment.
    Question put, "That the words proposed to be left out stand part of the Bill."
    The House divided: Ayes, 188; Noes, 63.

    Division No. 242.]

    AYES.

    [12.12 a.m.

    Acland, Sir R.

    Cove, W. G.

    Foot, M. M.

    Adams, Richard (Balham)

    Crawley, A.

    Forman, J. C.

    Adams, W. T. (Hammersmith, South)

    Cripps, Rt. Hon. Sir S.

    Fraser, T. (Hamilton)

    Alexander, Rt. Hon. A. V.

    Crossman, R. H. S.

    Freeman, John (Watford)

    Ayles, W. H.

    Dalton, Rt. Hon. H.

    Gibson, C. W.

    Bacon, Miss A.

    Davies, Edward (Burslem)

    Gilzean, A.

    Barton, C.

    Davies, Ernest (Enfield)

    Glanville, J. E. (Consett)

    Bechervaise, A. E.

    Davies, Harold (Leek)

    Gordon-Walker, P. C.

    Benson, G.

    Deer, G.

    Greenwood, A. W. J. (Heywood)

    Beswick, F.

    Delargy, H. J.

    Griffiths, D. (Rother Valley)

    Bing, G. H. C.

    Diamond, J.

    Griffiths, Rt. Hon. J. (Llanelly)

    Blackburn, A. R.

    Driberg, T. E. N.

    Guest, Dr. L. Haden

    Blyton, W. R.

    Dugdale, J. (W. Bromwich)

    Gunter, R. J.

    Bowles, F. G. (Nuneaton)

    Ede, Rt. Hon. J. C.

    Guy, W. H.

    Braddock, Mrs. E. M. (L'pl. Exch'ge)

    Edwards, John (Blackburn)

    Hale, Leslie

    Brown, T. J. (Ince)

    Edwards, W. J. (Whitechapel)

    Hall, Rt. Hon. Glenvil

    Burke, W. A.

    Evans, A. (Islington, W.)

    Hamilton, Lt. Col. R.

    Callaghan, James

    Evans, S. N. (Wednesbury)

    Hannan, W. (Maryhill)

    Chamberlain, R. A.

    Ewart, R.

    Henderson, Joseph (Ardwick)

    Champion, A. J.

    Fairhurst, F.

    Herbison, Miss M.

    Collindridge, F.

    Farthing, W. J.

    Hobson, C. R.

    Collins, V. J.

    Fernyhough, E.

    Holman, P.

    Comyns, Dr. L.

    Field, Captain W. J.

    House, G.

    Cook, T. F.

    Fletcher, E. G. M. (Islington, E.)

    Hubbard, T.

    Corbet, Mrs. F. K. (Camb'well, N.W.)

    Follick, M.

    Hudson, J. H. (Ealing, W.)

    Hughes, Hector (Aberdeen, N.)

    Moody, A. S.

    Soskice, Sir Frank

    Hughes, H. D. (Wolverhampton, W.)

    Morris, Lt.-Col. H. (Sheffield, C.)

    Steele, T.

    Hynd, H. (Hackney, C.)

    Nally, W.

    Stewart, Michael (Fulham, E.)

    Hynd, J. B. (Attercliffe)

    Neal, H. (Claycross)

    Stokes, R. R.

    Janner, B.

    Nichol, Mrs. M. E. (Bradford, N.)

    Swingler, S.

    Jay, D. P. T.

    Nicholls, H. R. (Stratford)

    Sylvester, G. O.

    Jeger, G. (Winchester)

    Noel-Baker, Capt. F. E. (Brentford)

    Taylor, R. J. (Morpeth)

    Jenkins, R. H.

    Noel-Baker, Rt. Hon. P. J. (Derby)

    Thomas, George (Cardiff)

    Jones, D. T. (Hartlepools)

    O'Brien, T.

    Thomas, I. O. (Wrekin)

    Jones, Elwyn (Plaistow)

    Oliver, G. H.

    Thorneycroft, Harry (Clayton)

    Jones, P. Asterley (Hitchin)

    Orbach, M.

    Tiffany, S.

    Keenan, W.

    Pargiter, G. A.

    Timmons, J.

    Kenyon, C.

    Paton, Mrs. F. (Rushclifte)

    Titterington, M. F.

    King, E. M.

    Paton, J. (Norwich)

    Wadsworth, G.

    Kinghorn, Sqn.-Ldr. E.

    Pearson, A.

    Wallace, G. D. (Chislehurst)

    Kinley, J.

    Peart, Thomas F.

    Warbey, W. N.

    Lee, F. (Hulme)

    Popplewell, E.

    Watkins, T. E.

    Lee, Miss J. (Cannock)

    Porter, G. (Leeds)

    Watson, W. M.

    Levy, B. W.

    Price, M. Philips

    Weitzman, D.

    Lewis, J. (Bolton)

    Pritt, D. N.

    Wells, P. L. (Faversham)

    Lindgren, G. S.

    Pryde, D. J.

    Wells, W. T. (Walsall)

    Longden, F.

    Randall, H. E.

    Wheatley, Rt. Hn. J. T. (Edinb'gh, E.)

    McAllister, G.

    Ranger, J.

    White, C. F. (Derbyshire, W.)

    McGhee, H. G.

    Rankin, J.

    Whiteley, Rt. Hon. W.

    Mack, J. D.

    Reid, T. (Swindon)

    Wigg, George

    McKinlay, A. S.

    Robens A.

    Wilkes, L.

    McLeavy, F.

    Roberts, Goronwy (Caernarvonshire)

    Willey, F. T. (Sunderland)

    Mallalieu, E. L. (Brigg)

    Ross, William (Kilmarnock)

    Willey, O. G. (Cleveland)

    Mallalieu, J. P. W. (Huddersfield)

    Royle, C.

    Williams, J. L. (Kelvingrove)

    Mann, Mrs. J.

    Scollan, T.

    Williams, R. W. (Wigan)

    Manning, Mrs. L. (Epping)

    Shackleton, E. A. A.

    Williams, W. R. (Heston)

    Marquand, H. A.

    Sharp, Granville

    Willis, E.

    Mathers, Rt. Hon. G.

    Shawcross, Rt. Hon. Sir H. (St Helens)

    Wyatt, W.

    Mellish R. J.

    Silverman, J. (Erdington)

    Yates, V. F.

    Messer, F.

    Skeffington, A. M.

    Zilliacus, K.

    Middleton, Mrs. L.

    Skinnard, F. W.

    Millington, Wing-Comdr E. H.

    Smith, C. (Colchester)

    TELLERS FOR THE AYES:

    Mitchison, G. R.

    Snow, J. W.

    Mr. Simmons and Mr. Wilkin?.

    Monslow, W.

    Sorensen, R. W.

    NOES.

    Amory, D. Heathcoat

    Henderson, John (Cathcart)

    Pitman, I. J.

    Assheton, Rt. Hon. R.

    Hogg, Hon. Q.

    Poole, O. B. S. (Oswestry)

    Baldwin, A. E.

    Hollis, M. C.

    Prior-Palmer, Brig. O.

    Beamish, Maj. T. V. H.

    Howard, Hon. A.

    Raikes, H. V.

    Bennett, Sir P.

    Hutchison, Col. J. R. (Glasgow, C.)

    Ramsay, Major S.

    Birch, Nigel

    Jarvis, Sir J.

    Rayner, Brig. R.

    Braithwaite, Lt-Comdr. J. G.

    Langford-Holt, J.

    Ropner, Col. L.

    Buchan-Hepburn, P. G. T.

    Law, Rt. Hon. R. K.

    Scott, Lord W.

    Channon, H.

    Legge-Bourke, Maj. E. A. H.

    Smith, E. P. (Ashford)

    Clarke, Col. R. S.

    Linstead, H. N.

    Spearman, A. C. M.

    Conant, Maj. R. J. E.

    Lloyd, Selwyn (Wirral)

    Spence, H. R.

    Corbett, Lieut.-Col. U. (Ludlow)

    Lucas-Tooth, Sir H.

    Stanley, Rt. Hon. O.

    Crookshank, Capt. Rt. Hon. H. F. C.

    MacAndrew, Col. Sir C.

    Thomas, J. P. L. (Hereford)

    Crowder, Capt John E.

    McCorquodale, Rt. Hon. M. S.

    Thornton-Kemsley, C. N.

    Dodds-Parker, A. D.

    Mackeson, Brig. H. R.

    Wheatley, Col. M. J. (Dorset, E.)

    Drewe, C.

    Manningham-Buller, R. E.

    White, J. B. (Canterbury)

    Eccles, D. M.

    Marshall, D. (Bodmin)

    Williams, C. (Torquay)

    Fletcher, W. (Bury)

    Molson, A. H. E.

    Willoughby de Eresby, Lord

    Fraser, Sir I. (Lonsdale)

    Neven-Spence, Sir B.

    York, C.

    Gomme-Duncan, Col. A.

    Nicholson, G.

    Hare, Hon. J. H. (Woodbridge)

    Osborne, C.

    TELLERS FOR THE NOES:

    Harris, F. W. (Croydon, N.)

    Peto, Brig. C. H. M.

    Commander Agnew and

    Mr. Studholme.

    Question put, and agreed to.

    12.15 a.m.
    The Solicitor-General: I beg to move, in page 85, line 27, at the end, to insert:
    "(2) Where during a period being or comprised in the year 1947–48 an individual was a director of two or more private companies which, within the meaning of section eighteen of the Companies Act, 1947, either were a holding company and one or more subsidiary companies thereof or were subsidiary companies of the same holding company, and during that period he worked full time in the actual management or conduct of the trades or businesses of the companies taken together, he shall be treated as a working director of such one of the companies as he selects and
    1302
    the provisions of this Schedule shall apply accordingly but subject to the following modifications:—

    (a) the aggregate of his emoluments from all the companies as a director for the said period, being emoluments which fall to be included in his total income for the year 1947–48, shall be treated for the purposes of sub-paragraph (1) of paragraph two of this Schedule as if they were emoluments from the company of which he is to be treated as a working director,

    (b) he may require that investment income from share capital of all the companies shall be treated as if it were investment income from share capital of the said company:

    1303
    Provided that nothing in this sub-paragraph shall affect the operation of this Schedule in relation to a director who would be a working director apart from this sub-paragraph."
    This is a manuscript Amendment. This is not the simplest of all the proposals in this Bill, although I hope that it is not too difficult to understand. The object of the Amendment is, first, to provide that a private company, for the purpose of the Tenth Schedule, shall include a group of companies. That is to say that where there is a holding company and a subsidiary company, or subsidiary companies, which form a group of companies, that group shall be treated as a company for the purpose of the Tenth Schedule. The result is that a person who can be said to work whole-time as a director of the companies in the group—that is to say, of the various companies within the group altogether—shall be treated as a working director entitled to the advantages given to him by the Tenth Schedule.
    Mr. Eccles: I thank-the right hon. and learned Gentleman for bringing forward this Amendment which, I think, was prompted by an Amendment which I put on the Order Paper this morning and which, I regret, was not put there earlier. I have only two comments to make. First, it includes the words, "he worked full time," and we have a later Amendment by which we seek to put in the word "substantially." I do not think it fair that if a man does some small job outside this group of companies he should attract the tax, and I hope that the words "full time" will be modified. Secondly, we do not like this applied only to private companies, but as our previous Amendment on that point has fallen, I cannot proceed farther on that point.
    Mr. Selwyn Lloyd: I gather from what the right hon. and learned Gentleman has said that this is to deal with directors of associated companies. Does it also apply to directors concerned with companies which are not associated? To illustrate my point, I would refer to a director of a toll company, which operates largely during the summer season; he is then the director of a garage during the winter. The two companies are not associated. Why is this man not treated as a full-time director? He works full-time in the capacity of a director, although is director of companies
    1304
    which are separate entities during their respective seasons.
    Mr. O. Poole: In regard to the last few words of the Amendment, am I to take it that if a man is director of a company in which he is employed whole-time and draws the remainder of his remuneration either in salary or shares, because he is associated as director with one or two other companies and attends a casual board meeting, these companies not being in a group—that such a man is precluded from saying he is substantially a director of one?
    The Solicitor-General: I should have acknowledged that the Amendment down in the name of the hon. Member for Chippenham (Mr. Eccles) brought the point to our minds and that that is why it is presented in the form of a manuscript Amendment. In reply to the hon. Member for Oswestry (Mr. O. Poole), the word "substantial" is not in the wording of this Amendment. So tar as we can do so legitimately, we will interpret this generously, in the sense that we will endeavour to be reasonable where we find in substance that the individual concerned gives the whole of his time to a company. Where there are two companies wholly unconnected and a director gives half his time to each, this Amendment would not apply, because it deals with groups of companies within the meaning of the Companies Act, 1947.
    Mr. Selwyn Lloyd: Is the right hon. and learned Gentleman going to cover that case?
    The Solicitor-General: Though we are bound by the terms of the statute, of their nature they allow a certain amount of latitude. Where we find a person in a group of companies who gives substantially the whole of his time to the service of the group or of an individual company, if this Amendment does not apply to his case, we will endeavour to give him the relief which the Schedule affords.
    Mr. E. P. Smith: Will membership of this House preclude anyone from being considered as a full-time director?
    Mr. Howard: The Solicitor-General has still not covered the point of the working director who does work full-time, but for companies which are not a group. He has said that he will try so far as possible to

    1305
    interpret the Act, so that that point can be covered. If he did not mean to give that impression to the House, I apologise, but the impression he gave to me was that it was the intention of the Government to endeavour to interpret these provisions very widely so that an individual working full-time, but for more than one company and those companies not in one group, would get relief. If that was not the intention, what is the intention of the Government?
    The Solicitor-General: I will repeat what I said in order to avoid ambiguity in the matter. Where a director is working substantially whole-time for a company or group of companies, we will do our level best, even if some of his time is devoted to some outside business, to bring him within the scope of the Schedule. I did not say, that where he has whole-time employment under different companies which do not form a group he is entitled to be treated as a whole-time director.
    Amendment agreed to.

    ELEVENTH SCHEDULE.—(Enactments repealed.)
    Sir S. Cripps: I beg to move, in page 87, line 37, column 3, to leave out from "only," to "in," in line 41.
    This and the following Amendments are consequential upon the exemption of commercial woodlands.
    Amendment agreed to.
    Consequential Amendments agreed to.
    12.30 a.m.
    Mr. Eccles: I beg to move,
    "That the Bill be recommitted to a Committee of the Whole House in respect of the Amendment to Schedule to, page 85, line 27, standing on the Notice Paper in the name of Sir Peter Bennett."
    Mr. O. Poole: I beg to second the Motion.
    The Solicitor-General: We promised at an earlier stage to allow a full discussion of this subject on the Report stage and we are, therefore, prepared to accept this Motion.
    Bill immediately considered in Committee.
    [Major MILNER in the Chair]

    TENTH SCHEDULE.—(Special provisions as to working directors.)
    Sir P. Bennett: I beg to move, in page 85, line 27, at the end, to insert:
    "Provided that if a director of a company works less than full time in the actual management or conduct of the trade or business of the company, the Special Commissioners shall treat him as a working director subject to such adjustment of the standard amount as may be just having regard to the proportion of his full time that he devotes to working in the said management and conduct of the business."
    This is a matter of considerable importance because it is the very point which has not been dealt with in the manuscript Amendment which has just been considered. I did not raise it because I saw no way in which we could include the point in issue in the matter then being discussed. This Amendment deals with the working director who is a member of companies which are not in the same group or not in the holding company. There are companies, and I can name dozens of them in my own experience, private companies, where the working director has several interests. I submit that we do not want to do anything to prevent that happening. Suppose a man has inherited his father's business; he is complacent, he takes a working directorship, he does nothing more, he gets benefit under the provision that has been made.
    But suppose he is the type we want in this country—adventurous and energetic. He is not content with carrying on his business as left to him, but promotes another business and thus increases the commerce of the country. There are many, such cases in the industry with which I am connected and I have no doubt in other industries too; cases of men who are devoting the whole of their working life to promoting businesses outside the one with which they started. Yet, according to the definition we have been given, they are not a single holding company, they are different directors. Sometimes a man is the only link between one and the others, and spends the whole of his working life in them, but he is to be treated quite differently from the man who has sat down, taken life easily, and has an interest in only one company.

    1307
    The Special Commissioners should have power to give proportionate reliefs to a director who spends proportions of his time in different companies. We are in safe hands and I am quite sure that the Special Commissioners are very articulate and very wide-awake. There is no fear of any discrepancy or any illegalities creeping in. In this way we could meet the position without handicapping these men by any suggestion that they should be complacent and take life too easily. We could help them to go out and do good in their working lives.
    Colonel J. R. H. Hutchison: May I support what was said on this point by the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) a few moments ago? The Chancellor of the Exchequer has seen fit to meet the point we are making where the companies are associated, but I cannot see that there is anything which justifies such a distinction between the two directors—that is, between the one who gives his whole time to a group of associated companies and the other who gives his whole time to a number of companies which are not associated. My hon. and learned Friend instanced the case of seasonal occupation where it is virtually impossible for a concern to work or be in active operation for the whole of a year—as at Blackpool—and where a director transfers his attention to a different company in the summer from the one he has attended during the winter. I think this Amendment gives very reasonable powers to the Special Commissioners to judge whether a man is in fact working whole time or not.
    The Solicitor-General: One objection—apart from any objections on the merits of this case—is that this would be almost impossible to administer. Just imagine the difficulty, in the case of any particular person who distributed his available working time amongst various enterprises, in deciding exactly what measure of relief he will be entitled to by reference to the amount of time he gives. The Amendment would require that in the case of any person who claimed to be entitled to relief under Schedule 10, it would have to be decided exactly what percentage of his time he devoted to the particular concerns to which he was attached. That would involve an enormous amount of
    1308
    irksome research work and it would be irksome to the taxpayer himself. It would be really very disagreeable to him to have to establish exactly what percentage of his time he could be said to have worked in a particular undertaking.
    Colonel Hutchison: Will there not be exactly the same research when the companies are associated?
    The Solicitor-General: No, there will not. The proposal is that where a person works less than full time he shall be entitled to proportionate relief: that is what the Amendment asks for. Therefore, in order to determine whether he was entitled to relief or not, you would have to work out what proportion of the time he gave to the particular concern. That would involve a difficult and irksome task, particularly unpleasant to the taxpayer himself.
    Quite apart from that, on the merits, I do not think this suggestion should be adopted. A person who works only part-time for a particular company, or who works whole-time for a number of companies which do not form part of a group and are completely dissociated, is not the person we had in mind in framing this Schedule. As has been repeatedly stated, the person we have in mind is the person who is a partner in a concern which has become a private company. We envisage the case of two, three or four partners who carried on a private firm and at a certain point converted that private firm into a company. These are persons who worked the whole of their time in conducting that private firm, and we afforded them this measure of relief for the reason that they were whole-time partners, and when the company was formed they became whole-time working directors.
    In the manuscript Amendment I have just moved, and which the House accepted, all we have done is to say that where you have a working director who is giving his whole time, not to a single company but to a constellation of interrelated companies, a group of companies, then you may treat him as a working director for the purpose of the Schedule. I have also stated that administratively, as far as we can, we would not be too meticulous or too finicky about deciding whether in fact he was full-time or nearly full-time. We felt that we could go as far as that. This proposal is that we

    1309
    should go very much further. It would result in this: supposing a person only gave one-fifth or one-tenth of his time to a company, he should be entitled to say, "I am not a working director in the ordinary sense of the term, but although I do not do much work I give about one-fifth of my time to this company, and therefore I want a measure of relief proportionate to that amount of my time." That is not the sort of person we are endeavouring to relieve by this Schedule; he does not come within the category at all. For these reasons, quite apart from the fact that it would be extremely difficult to administer and extremely tiresome for all concerned, on the merits we feel that this suggestion ought not to be adopted.
    Amendment negatived.
    Schedule agreed to.
    Bill reported without Amendment; to be read the Third time this day; and to be printed. [Bill 118.]

  NATIONAL INSURANCE REGULATIONS
  The Parliamentary Secretary to the Ministry of National Insurance (Mr. Steele): I beg to move,
  "That the Draft National Insurance (Mariners) Regulations, 1948, a copy of which was presented on 9th June, be approved."
  These Mariners Regulations were drafted after discussion with the National Maritime Board, were then submitted to the National Insurance Advisory Committee, and have been more or less agreed.
  Resolved:
  "That the Draft National Insurance (Industrial Injuries) (Mariners) Regulations, 1948, a copy of which was presented on 9th June, be approved."—[Mr. Steele.]
  Mr. Steele: I beg to move,
  "That the Draft National Insurance (Airmen) Regulations, 1948, a copy of which was presented on 9th June, he approved."
  12.45 a.m.
  Major Legge-Bourke: With reference to paragraph 2 (2), will the hon. Gentleman say why an employer should be liable to pay under the Act in respect of an airman employed on board a British aircraft? It seems to me the employer is being put under an unfair obligation as compared with the airman himself.
  Mr. Steele: This has been agreed with the Joint Air Council, and no objection has been raised to it. Therefore, we submit the Regulation as the Advisory Committee have agreed to it.
  Resolved:
  "That the Draft National Insurance (Industrial Injuries) (Airmen) Regulations, 1948, a copy of which was presented on 9th June, be approved."—[Mr. Steele.]
  The Minister of National Insurance (Mr. James Griffiths): I beg to move,
  "That the Draft National Insurance (Married Women) Regulations, 1948, a copy of which was presented on 7th June, be approved."
  These regulations have been before the National Insurance Advisory Committee which has consulted the organisations interested in them. Since they are important, let me say they give married women the choice of paying or not paying to the national insurance scheme. We have prepared a guide for the women, and copies are available in the House; and I hope hon. Members will secure copies so that they will be able fully to answer all the questions which, no doubt, will be put to them concerning these provisions.
  12.48 a.m.
  Mr. Richard Law: I agree with the right hon. Gentleman that these regulations are of very great importance. If I have one mild criticism to offer, it is not because I oppose the regulations but simply that the Minister may have an opportunity, if these regulations are ever revised, of taking into account the point I would put to him. The point is this. Under these regulations and, I think, under the Act, if an individual contracts out of the insurance, the employer has to continue to pay the contribution even though the individual affected is not in the insurance scheme. I doubt very much whether that is a good principle.
  However, in this particular case it does seem to me that it may be damaging to the employer concerned, and not only damaging to the employer, but damaging to the interest which, I am sure, the Government as a whole have in view. The point relates to part-time workers. I gather that it is the desire of the Government as far as possible to encourage women to come into industry even on a

  1311
  part-time basis. The effect of these regulations is that if an employer engages a married woman on part-time, and if she contracts out, he has to pay, so to speak, a whole-time contribution in respect of that woman. If he should, in order to make up his complement of workpeople, engage two married women on part-time, he has to pay a double tax on those married women. It seems to me that the effect of these regulations must be to discourage the employment of part-time women workers, if they elect to contract out of the insurance scheme. I hope that if he comes to revise these regulations the right hon. Gentleman will bear that point in mind.
  Mr. J. Griffiths: I think the point the right hon. Gentleman has in mind is more relevant to another set of regulations dealing with part-time workers, but I note his comments and will look at this again. We permit an option to the married women to pay or not to pay. We do that because the insurance scheme provides benefits for wives through their husbands' insurance. I am sure, however, that because of this we should not allow the employer to be exempt from paying his share. I know the point the right hon. Gentleman has in mind, but I think it is much more relevant to the other problem we shall be discussing—that of the part-time workers.
  12.51 a.m.
  Mr. J. H. Hare: There are two points to which I should like to draw attention. The first is that it seems to me that a married woman who is non-employed at the beginning of the scheme and has married a husband of over 65 is going to come out very badly. These women really have the worst of both, worlds. It is difficult to assess who will come under this category, but there are many husbands who have been fortunate enough to marry wives 15 or 20 years younger than themselves. The Minister should look at this rather closely, because it seems to me that these women should be allowed, if they so wish, to elect to contribute, so that after 10 years they shall be able to draw the normal benefits under the Act.
  My second point concerns paragraph 8 of these regulations. There it is laid down that where a woman's marriage
  1312
  has been terminated certain procedure can be undergone, and the woman can elect to contribute under the Act. But we know that, unfortunately, there are many cases of wives who have been deserted by their husbands who may have gone abroad or have disappeared entirely. I do not think the case of a woman who has been separated from or deserted by her husband has been covered by the regulations. Great hardship may be suffered by such a woman. There are husbands who have gone into the underworld and have been living with other women under different names. It is impossible for the wife of such a person to know what benefits she is entitled to as a result of still being officially married. There is a case for saying that where a wife has been separated from or deserted by her husband she should be entitled to contribute under the Act.
  12.54 p.m.
  Major Legge-Bourke: I should like the Minister to enlarge a little on the reason why Condition I of the Schedule has been drawn up in this way. I do not understand why it is laid down:
  "That not less than fifty-two contributions as an employed person, whether or not in respect of continuous weeks, have been paid by or credited to a married woman, of which at least twenty-six were paid contributions."
  I do not see the difference between paid contributions and the 52 contributions of an employed person. This has a particular bearing on paragraph 2 (4), paragraph 6 (1) and paragraph 8 (3). As I understand it, this condition comes into operation in all those cases, and it means that where a person has contributed up to 52 contributions all is lost unless there have been 26 continuous contributions paid up. That is a little unfair, if that is what it means.
  12.55 a.m.
  Mr. Steele: The point has been raised regarding a man who is over 65 and whose wife is younger. This is something to which we have given considerable attention. Questions have been raised in the House about it, and it was fully discussed during the passage of the Bill. The actuarial basis of the scheme provides for men coming in at 16 and paying up to 65, while for women the ages are 16 to 60. Married women are in effect voluntary contributors, and the fact remains that if

  1313
  an option of the character suggested were given to this particular type of women, mainly the ordinary housewives, the only ones who would come in would be those who are going to receive considerable benefits. Therefore, the whole structure of the scheme would have to be looked at again and no doubt increased contributions would be required. We have given this class of women, housewives and others careful consideration but we cannot bring them in.
  The provisions of the regulations under paragraph 8 are clear. A woman continues to be subject to the Married Women's Regulations as long as she is married, even if she is legally separated from her husband. She ceases to be subject to the regulations on becoming a widow, on the presumed death of her husband or if she receives a decree absolute of divorce. The question was raised, what does she get? Although she is separated from her husband she is legally married to him, and, of course, if the husband should die she would become entitled, provided the contribution and other conditions were in order, to the widow's pension if of course she was not prohibited from having it by reason of cohabitation with another man or because of any other disqualification. She would also be entitled, as the legal wife of her husband, to the retirement pension when he qualified for retirement pension at 65 or later. A married woman or a woman separated from her husband is not precluded from again entering into insurance. She can do so if she starts work again as an employed person or as a self-employed person, when she could become insured in her own right and entitled to benefits in her own right.
  That brings me to the point raised by the hon. and gallant Member for the Isle of Ely (Major Legge-Bourke) with regard to the 52 contributions. Where we have a married woman who is able to exercise an option as to whether she is going to contribute or not, certain special conditions are required to govern the receipt of benefit. Everyone entering insurance for the first time is entitled to certain pre-entry credits, but married women, if they have gone out of insurance or failed to pay the necessary qualifying contributions in the contributions year, cease to be entitled to be insured. They have opted out or ceased, because of disqualification, to be insured persons when they come
  1314
  back into insurance again. We say in the Schedules that they ought to have 52 contributions or credits before any benefit can be paid to them, and 26 of these must be paid. I hope with that explanation that the House will agree to these regulations.
  Resolved:
  "That the Draft National Insurance (Married Women) Regulations, 1948, a copy of which was presented on 7th June, be approved."
  1.0 a.m.
  Mr. J. Griffiths: I beg to move,
  "That the Draft National Insurance (Extension of Unemployment Benefit) Regulations, 1948, a copy of which was presented on 2nd June, be approved."
  In February, 1947, powers were given to us to bring in certain of the new scheme provisions during the transitional period and we brought the Section of the Act relating to the extension of unemployment benefit into operation. We did it by means of transitional regulations, and these will lapse when the Act comes into operation on 5th July. Since the transitional regulations came into operation we have had nothing but commendation for the way the tribunals have done their work, and we propose to make them substantive under the Act. They will operate from 5th July.
  1.2 a.m.
  Mr. McCorquodale: I hope the Minister will not mind one personal comment. Since coming back to the House after two and a half years' absence nothing has surprised me more than the way in which the Government bring forward regulations dealing with the lives of thousands of people of this country at the most extraordinary hours. I can only think that if the regulations were brought forward in this way by Governments before the war, hon. Members opposite, who were then on this side of the House, would have kept us here for days discussing these matters, particularly if there had been any suggestion of trying to rush them through.
  This is undesirable especially today when there is such a shortage of newsprint so that practically nothing done in this House is reported in the popular Press, while things that are dealt with at one o'clock in the morning are not

  1315
  mentioned at all. When important insurance regulations were taken the other night at a late hour there was not even mention of them in "The Times" the next morning. I do not think that anything appeared in any other paper. It is most undesirable, because it is most important that the public should know about these important considerations coming before Parliament. I hope that in future it will be possible to take important matters of this kind at an earlier hour so that the Press will be able to take some notice of them.
  There are two points I want to raise about these regulations. One is with regard to paragraph 3 (b, ii), which says:
  "any genera] directions issued for the purpose of the said Section 62 and of these regulations by the Minister"
  shall be for the guidance of local tribunals. If these new regulations are issued at any time in the future will the House of Commons get some intimation in regard to them? Will they be reported to the House? It is desirable that we should know what are the general regulations which from time to time will be issued.
  The only other matter on which I wish to comment is this. Those who will come within the scope of the regulations and who, in actual fact, are not employed persons but are unemployed and running out of statutory benefit under the Unemployment Fund and are about to appeal to the tribunal to get further unemployment benefit because they have no private means—and this particularly applies to those unemployed men with wives and families—would be better off not to go to the tribunal but to go to the Assistance Board as their rates are higher than would be paid out of the Unemployment Fund. I think I am right in saying that if a person still wishes to get further benefit from the Unemployment Fund beyond his statutory right, then, in addition, he may go to the Assistance Board and claim extra and he would get from that Board the differential between the rate of the Unemployment Fund and the rate of the Assistance Board Fund. It would appear that for those without substantial financial means of their own it would be better and much simpler if they did not go to the tribunal at all, but went straight after finishing their statutory benefit to the Assistance Board.
  1316
  Therefore, if my argument is right, and I think the Minister will agree with me, these regulations only really benefit those thrown out of employment who have fairly substantial financial benefits of their own, and who therefore would not get the full amount of the Assistance Board rates. If that is so, I think it ought to be made clear, so that the unemployed who have no financial resources of their own should be steered directly to the Assistance Board, from which they get the higher rate of benefit.
  1.6 a.m.
  Major Legge-Bourke: The Minister of National Insurance will remember that when we were discussing an earlier stage of this Bill considerable emphasis was laid upon the training of those who were for a prolonged period unemployed. I am disappointed that in this regulation no mention is made of that matter. As I understood it, those coming particularly under paragraph (2) of this regulation were likely to be trained either under his Ministry or under the Ministry of Labour, but I notice no mention of training, but merely of an extension of unemployment benefit.
  Mr. Speaker: The hon. and gallant Member is not in Order in speaking of what is not in the regulation, and training is not mentioned.
  Major Legge-Bourke: I abide by your Ruling, Mr. Speaker, and will leave that point if you wish me to do so. Another point which I wish to make is that in paragraph (3) of this regulation there is rather the same inconsistency between sub-paragraphs (a) and (b) as was noticed in a Section of the Act. It seems to me a little difficult for a local tribunal not to consider the financial resources of an applicant and at the same time to consider the particular circumstances of an applicant, including the industrial conditions in the district. I do not know whether, since we discussed the Bill, the Minister has been able to clarify what is meant in sub-paragraph (b) by "the industrial conditions" and "particular circumstances," and how those "particular circumstances" exclude the financial resources of the applicant. It seems to me that they are so bound up one with the other that it is impossible to divide them. I know that the Minister wants to keep away from any form of

  1317
  means test, and if he can elucidate this matter a little, I shall be grateful.
  1.9 a.m.
  Mr. J. Griffiths: I do not object to the right hon. Member for Epsom (Mr. McCorquodale) complaining that we are discussing this matter at ten minutes past one o'clock in the morning. I know that they are important regulations, but if there had been a little more co-operation earlier tonight, when another Measure was being discussed, we could have avoided sitting so late. [Interruption.] That is only a matter of opinion. The Opposition cannot have it both ways.
  With regard to directions to the tribunals, the right hon. Gentleman has, I know, been absent from the House for some time; but when the transitional regulations were introduced in February, 1947, the original directions issued by the Minister to the tribunals were made available to Members. There will be no new directions, as far as I can see. If at any time we feel disposed, or feel that it is necessary, to change the character of the directions, we shall make them available as we did before. It is true that we considered regulations last week dealing with assistance and also the relationship of assistance to benefit. It is open to unemployed men to seek assistance to supplement unemployment benefit long before they exhaust that benefit. We must remember the general relationship of assistance to all insurance benefits.
  Mr. McCorquodale: But once he runs out of standard benefit, in order to get further benefit; his case has to go before the local tribunal, and that involves a long rigmarole. If he went straight to the Assistance Board, all that would be saved.
  Mr. Griffiths: The reply is, quite frankly, that there are many people who prefer benefit to assistance, and I can give some figures which should interest the right hon. Gentleman. Since February, 1947, 132,000 unemployed persons have applied for, and received extended benefit, rather than ask for assistance, and that, I think, is a fine characteristic of our people. It is something of which we should be proud. We do not want to compel an unemployed person to ask for assistance if he does not want it. Even if the number is only
  1318
  132,000, we ought to continue this provision after 5th July.
  The hon. and gallant Member for the Isle of Ely (Major Legge-Bourke) asked about financial resources. We discussed this previously, and I should like to say that the tribunal is prohibited from making investigations into the financial circumstances of the applicant, and there is no means test. It is an extension of benefit, and the extension, once it has been authorised by the tribunal, has to be paid by my Department in just the same way as ordinary benefit. Instructions on this point have been issued for the guidance of tribunals, and we have been very explicit indeed in the directions we have issued. We have worked the scheme since February, 1947, and I would remind the House that when Section 62 of the Act was discussed, there were apprehensions as to how its provisions would work out in practice. I speak in the presence of hon. Members on all sides of the House, who will recall that. The instructions, to which I have given a good deal of thought, have worked well, and we have had very few complaints.
  There has been a complaint about the time which we have taken over this matter, and the time at which it has been raised, but I can remember the occasion when regulations of this sort took four or five days to pass—a time when the Opposition were putting them before the House.
  1.13 a.m.
  Viscount Hinchingbrooke: The right hon. Gentleman has thought fit to make slighting references on the work of this Chamber during the course of today and yesterday, and claims that if we had gone more quickly in the discussions on the Finance Bill we could have got on earlier to this subject. If he had thought fit to come here earlier and to see the amount of important work which has been done by the Opposition, he would have understood why we have reached the hour of 1.15 in the morning. I might tell him that if he had only listened to the Solicitor-General and the time taken by him to explain a point, he might have decided to alter the proceedings and take this important matter at another time. Surely he recollects, as I do, the time—it was when I had a relatively unimportant post at that Box—

  1319
  when my right hon. Friend the Member for West Bristol (Mr. Stanley) was concerned with unemployment benefit. Hours and days were then devoted by the Government to the question of unemployment, and yet, here he comes, at 1.15 in the morning, at a time when deflation is coming to this country, when there is every likelihood of very serious unemployment before the end of the winter, and suggests to the House that these matters can be dealt with in a quarter of an hour. I hope, when we get to next Autumn and he sees what grave hardship is suffered by many people, he will regret the short time and inadequate discussion given to this matter.
  Resolved:
  "That the Draft National Insurance (Extension of Unemployment Benefit Regulations, 1948, a copy of which was presented on 2nd June, be approved."

  LOST TOBACCO TOKENS
  Motion made, and Question put, "That this House do now adjourn."—[Mr. Robert Taylor.]
  1.16 a.m.
  Mr. E. P. Smith: I shall make no apology whatever for opening this Debate on the Adjournment even at this late hour, because the case which I wish to exhibit to the House is, in my judgment, one of such shocking injustice that if the time had been a quarter-past ten in the morning, instead of a quarter-past one, I should still be here in my seat to plead my case. I call it, "The Amazing Case of Mr. Potts," and I believe Members on all sides of the House will be amazed when they hear the story which I am going to unfold. On 20th February last, a little house in a small Kentish village was burned to the ground. The inhabitants escaped with their lives, but only just. All else was consumed. Among them was an old age pensioner, Mr. Potts, and his wife.
  Now, Mr. Potts is one of those citizens of this country who have had an obscure but nevertheless distinguished career. As a boy of seventeen, he joined the Buffs. He took part in the North-West Frontier Campaigns of 1897 and 1898; he fought throughout the South African War; and he
  1320
  served throughout the whole of the First World War. Then for 24 years he was the rural postman in the village of Appledore in Kent, the next village to my own, where he was a much loved and much respected public servant. In the evening of his life, he has lost his home, his belongings, his chattels, his clothes, his ration books, his identity card and last, but not least, his old age pensioner's privilege tobacco token book. He could not get this last item re-issued to him, so he applied to me.
  "It is not, sir," he said, "as if I had lost it through carelessness or negligence. If I had, I would not have asked for its re-issue. But I lost it through circumstances over which I had absolutely no control." "Oh, there'll be no difficulty about that, Mr. Potts," I replied airily, "The Chancellor of the Exchequer is quite a decent sort of bloke. And I'm sure he'll understand." And then, in my fatal over-confidence, I committed what I realise now was a grievous blunder. I put down a question on the Order Paper. In reply to this Question, the Chancellor told me bleakly that to re-issue a book in these circumstances would lead to grave abuse. I could not refrain from wondering whether George Meredith had had a Ministerial reply of his own day in his mind when he penned the famous lines:
  "Ah, what a dusty answer gets the soul,
  When hot for certainties in this our life."
  I wondered what grave abuse the re-issue of a privilege tobacco book in these circumstances would entail. The Chancellor, as we all know, rarely speaks at random, and I realised it must be something very subtle indeed. Eventually it dawned on me that it might encourage old age pensioners who were heavy smokers to burn down their homes and their furniture and all their belongings in order to obtain an extra and illicit privilege tobacco book, having presumably previously deposited their existing book in a place of safety. What other abuse a liberal gesture of this character to this old and poor public servant would encourage I have been unable to discover, and I look forward tonight to some information and enlightenment on the subject; nor do I envy the right hon. Gentleman his task of replying to me.
  Now, when this answer was conveyed to Mr. Potts, he made a statement which is movingly illustrative of the essential pathos of faith. He said, "If Sir Stafford

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  Cripps says that, he must have right on his side." But that is more than a mere statement of faith. It is a classic example of the non sequitur, which may be defined philosophically as a fallacious deduction resting on an unrelated hypothesis. It is my fault that I should have made such a gross error as to have put down a Question on the Order Paper. I realise now that I ought to have gone and buttonholed the Chancellor of the Exchequer privately, chatted to him and coaxed him, and probably I should have got it. I put down a Question on the Order Paper because I was sure the answer would be "Yes, Sir": but it turned out to be "No, Sir"—and with knobs on. If you put a Question on the Order Paper, a Minister automatically assumes the defensive and often, in the case of the Chancellor of the Exchequer, the aggressively defensive.
  I have a great respect for the Chancellor of the Exchequer. I admire his courage, tenacity and single-mindedness; but it is just those people for whom one entertains those sort of feelings who so often disappoint one—and I am most grievously disappointed in the Chancellor. If I have been less than tactful, he has been decidedly less than generous. The only person who comes out of this with flying colours is poor old Mr. Potts, but then he was flying his country's colours long before I was—or even the Chancellor of the Exchequer. The great Cardinal Manning had one favourite epithet which he used of his opponents—"mulish."Heaven forbid that I should call the right hon. and learned Gentleman mulish for, even at the 59th minute of the nth hour, he might yet grant this concession. But I must warn the Chancellor of the Exchequer that my self-imposed forbearance will end if he does not accede to what I want; and I do ask him seriously to give this matter a little more consideration. Even tonight it is not too late for the Chancellor of the Exchequer to attain salvation. The gates of Heaven are still ajar.
  1.24 a.m.
  Mr. Baker-White: I support my hon. Friend. I have, of course, an interest in this case. I have had conversation and correspondence with the right hon. and learned Gentleman about it and I would like to emphasise what my hon. Friend has said. There was no possible ground to suppose that there was likely to be any fraud in this case. There
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  were an ample number of witnesses, including a sufficient number of firemen, who saw the whole of the property destroyed. I believe the argument put forward is that these concession token books do not bear on them the name of the owner of the book, whereas the ration books do. I think I am right in saying that last year something like 900,000 ration books were lost and 900,000 new ration books and clothing books were issued to replace them. The number of old age pensioners likely to lose their tobacco tokens book must on any relation to that number be very small indeed. I have had correspondence from old age pensioners who say that in certain cases they have been ordered to put their names on these books.
  There is another aspect of the question. Old age pensioners, particularly in the country, go to the local shop to get their tobacco; the shopkeepers know them and their wives very well by sight, and they would detect fraud, if any were attempted, probably quicker than anybody. To return to this question of the names on the token books, I wonder how many clothing books have their owners' names on them. The usual practice is to take the clothing book out of the ration book, and I do not suppose five out of ten people bother to put their names on the clothing book as well.
  I reinforce my hon. Friend's plea that the Chancellor of the Exchequer should look at this case again. It is probable that these cases happen very infrequently, but when they do, they inflict very great hardship because the old age pensioner has not many pleasures in life, and pipe tobacco is one of the few. I do not believe that the Chancellor of the Exchequer or the Financial Secretary to the Treasury intended to be hard-hearted in this matter; what I think happened was that there was a rigid application of some principle thought out by a permanent official.
  1.27 a.m.
  The Financial Secretary to the Treasury (Mr. Glenvil Hall): I need hardly say that my right hon. and learned Friend and myself have the utmost sympathy for Mr. Potts in the loss he sustained; it was undoubtedly a grievous loss. He lost his home and, I gather, everything except the night clothes in which he and his wife stood up. Among the other things

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  he lost were the tokens which had been issued to him as an old age pensioner so that he might get his tobacco at a cheaper rate. From the accounts I have read, and from what the hon. Member for Ashford (Mr. E. P. Smith) has said tonight, I know that Mr. Potts has had a long and honourable career in the service of his country in the Buffs. I also had the honour of serving in the Buffs for a period and that made my heart warm to Mr. Potts, particularly as it is quite obvious that he is a bit of a philosopher. He is taking his loss with more calmness than the hon. Member for Ashford and that, to me, is very much in his favour.
  Books of tobacco tokens have been issued to about 1,500,000 people. When issued they contained 48 tokens worth two shillings apiece and had a total value of £4 16s. Next year, the tokens will each be worth 2s. 4d. and the total value will be k5 125. Thanks to the very proper decision of my right hon. Friend the Chancellor of the Duchy of Lancaster that it should not be necessary for an old age pensioner himself to visit the tobacconist in order to cash his tokens, these tokens are very negotiable. Anyone who happens to have a tobacco book can walk into a tobacconist's establishment and use them. Therefore, they are a currency and do represent actual money. That is the answer to the hon. Member for Canterbury (Mr. Baker-White). The ration book or clothing book is simply a book of coupons. The coupons represent nothing except your right—if you have the money—to go into a shop and buy certain things. The tobacco tokens actually represent money itself.
  Right from the beginning, it has been made clear to those entitled to these books that they are something definitely different from ration books. They were warned, and there is a notice in the books, that they should take great care of them because they are negotiable. Unless the most rigid precautions are taken, it is quite likely, and quite possible, that a black market might arise. The temptation to some old people, who do not themselves smoke or take snuff, to ask for a book and to pass it on might be overwhelming. Therefore, it has been necessary, and it has been made plain from the beginning, to say that the books must be treated like £1 or 10s. notes, or stamps, and that they
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  cannot be replaced if they are lost. I do not know whether Mr. Potts lost any banknotes in the fire; but, if he did, if he cannot produce some sort of evidence of this, he must suffer the loss, because they cannot be replaced. Indeed, the hon. Member does not come to this House and ask us to replace any banknotes that Mr. Potts may have lost.
  It has then been suggested that my right hon. and learned Friend should issue another book in this case because it is quite obvious that a book of tokens was lost in the fire, that there was no negligence on Mr. Pott's part, and that there is pretty ample evidence that the book has been destroyed. My right hon. and learned Friend has looked at this with the utmost sympathy, and he has come down in the end—
  Mr. Smith: On the wrong side.
  Mr. Glenvil Hall: He came to the decision that it would be quite impossible for it to be done. If it were done for Mr. Potts, it would have to be done for others. This is always the difficulty where you are dealing with a broad mass of taxpayers. You have to treat all alike. You cannot do what a big firm may do and make a concession in one case. If you make a concession once to one individual, you have to treat other individuals who may be in a like situation in the same way. Another person might not have a fire, but he might easily be able to argue, and perhaps with truth, that the wife, sorting out old letters on the mantlepiece, threw a batch of letters on the fire and that there must have been some current tobacco tokens among them. If my right hon. and learned Friend gave way here because a token book has been burnt, what is there to prevent him from having to give way in a similar case in which the same could be said. We have to remember that my right hon. and learned Friend is in a very difficult position if he does give way in this case.
  While I do not put it forward as an argument for not doing something—I have already explained why this must be—I would add, in mitigation of what we do feel for Mr. Potts, that from all I hear, people have rallied round him to a considerable extent. So far as I know, he will have lost the value of about one pound of tobacco. In the Autumn,

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  he will get another book of tokens. But while he has lost a certain number of coupons—I agree that it is a loss, and one that he will feel—I understand that he has been made presents of money and that people have sent him tobacco and cigarettes. That being so, we can feel that, while we sympathise with Mr. Potts, his loss is perhaps not as severe as the hon. Gentlemen would make out.
  1.35 a.m.
  Colonel Gomme-Duncan: I feel that we have listened to a most mean interpretation of this case on the part of the right hon. Gentleman. First, he implies that old age pensioners are dishonest. I wonder how many of the million-odd old age pensioners are dishonest. Then he implies that this book of coupons should have been kept in a safe place and was not; which presumably means, as Mr. Potts had on only his pyjamas, kept in the pocket of the pyjamas. Then he suggests that because the coupons represent money, no redress can be made, and that, therefore, they are different from ration books or clothing coupons. Does the right hon. Gentleman really think ration books and clothing coupons are not exchangeable for money? One can get any amount of money for them if one will try. They are just as exchangeable as tobacco coupons.
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  In the one or two cases—they must be few—in which tobacco coupons are lost, and proved by genuine evidence to have been lost surely exceptions can be made? It is typical of the Treasury that they should look at the matter like this. I am not suggesting that the right hon. Gentleman or his right hon. and learned Friend are mean-minded themselves. I am sure they are sympathetic. But why cannot they get over their permanent officials in this matter? Here is a case of an old age pensioner, a worthy old man in every sense of the word, who has suffered very considerable loss, which bears on an old man much more hardly than it would on a young man. Cannot an exception be made for the replacement of his coupons—not a whole year's coupons, but those for a portion of the year? I think that old age pensioners as a class are less likely to be dishonest than probably anyone else in the country, and to suggest that, because there may be one or two rogues among them, all the rest must suffer, is not worthy of a great Department. I think we ought to hear something better from the Treasury, for the help of this old man and other people like him.
  Adjourned accordingly at Twenty-two Minutes to Two o'Clock.