HC Deb 02 July 1951 vol 489 cc1977-2022
Mr. R. A. Butler (Saffron Walden)

I beg to move. in page 10, line 40, to leave out subsection (1) and to insert: (1) In relation to expenditure incurred on or after the sixth day of April, nineteen hundred and fifty-two, for the provision of plant and machinery for the purposes of a trade, subsections (1) and (3) of Section twenty of the Finance Act, 1949 (which increased the initial allowances in respect of plant and machinery and made consequential provisions), shall be of no effect. I do not know whether it would be convenient for the House if we were to have the discussion on initial allowances on one Amendment, namely, that which I have moved, and if that is so, I would suggest, Mr. Speaker, that you should concede the opportunity of having a Division on each of the two Amendments on the Order Paper in my name, the one I am moving now and that in page 10, line 44. If that is so, the arguments can be covered in one discussion.

Mr. Speaker

If that is for the convenience of the House I am quite willing, and I shall see that the Amendments are called separately so that Divisions can take place on both.

Mr. Butler

In that case I will launch into some of the arguments concerned with initial allowances. I should like to say at the outset that there are points concerned with agriculture which will be raised on the Amendment in page 10, line 45, in the name of my hon. and gallant Friend the Member for Richmond, Yorks (Sir T. Dugdale), and others of my hon. Friends, and I think that that issue had better be discussed separately. My hon. Friends who are associated with that Amendment will have plenty to say about the effect of the removal of the initial allowances upon the agricultural industry, a matter in which I am personally interested, but about which I shall refrain from speaking now because they will be discussing it later.

We discussed this question of initial allowances for industry for the greater part of a night in Committee and I remember that I had to move the general Amendment at 7.45 a.m. after that night, so that I would not feel particularly exalted about the idea of having to discuss it again were it not for the fact that we have some very good Amendments on the Order Paper at this stage, which in fact are so enlightened that I feel certain we shall persuade the Government to accept one of them, if not both of them.

The first Amendment has the effect of restoring the position about the initial allowances to the pre-Crippsian era. Sir Stafford Cripps doubled the allowances, and we wish to see them restored to 20 per cent. instead of 40 per cent. We consider that this device of a 20 per cent. rate will achieve what the Chancellor had in mind in moving his Budget, namely, they would at this level have the effect of curbing, to the extent desired, the home investment programme in industry, while at the same time they would retain the value of some system of initial allowances, pending a revision of the out-of-date system of depreciation allowances in general. That system of depreciation allowances under which industry today operates has taken no proper account of the change in the value of money, and we consider it a bankruptcy of statesmanship to remove the initial allowances and at the same time do nothing about altering the out-of-date system of depreciation allowances.

If the Government were to accept our proposal, they would return, perhaps for the first time for many years, to a certain stability in the economic policy of the Government and to a certain reassurance in the minds of industry. To quote the words of O.E.E.C. on our own affairs: The action of the Government will then be less curious in their handling of the initial allowances. No Government have ever made a more deplorable impression not only on the House but on common opinion by their handling of this question than have the present Government. The Chancellor of the Exchequer, in reply to our previous arguments on this subject, made quite a sober and sincere economic case. It was almost completely denuded of political argument, on which even at this stage I should like to congratulate him. He said then that our arguments were not valid, but since he supported our general statement about the investment programme as a whole and its effect on industry as well as its effect on social development, it is necessary for the Economic Secretary, who is to reply, to give us some fresh arguments why he cannot meet us by introducing a more sober policy in regard to initial allowances.

It now appears from the Chancellor's last statement that industry as a whole, in regard to the need for money for replacing assets and the need for capital for future expansion, has to submit, first, to physical controls such as were described in the Chancellor's statement; secondly, to monetary control, because the Chancellor referred to particular forms of monetary devices; and thirdly, to a penal taxation of its profits.

The Chancellor referred to the monetary system of control as "a blunt instrument." As handled in the case of the initial allowances, it is a particularly blunt and rasping instrument which has upset the general stability of industry and is making industry uncertain where it can look in the future for the general money that it needs. The appeal we make to the hon. Gentleman who is to reply is that the Chancellor should substitute for this blunt instrument a rather sharper one, and should accept our first Amendment that the rate should be at 20 per cent. instead of 40 per cent.

When the initial allowances were originally introduced, and when they were doubled by Sir Stafford Cripps, that right hon. and learned Gentleman used the argument that he did so to meet the greatly increased cost of replacing fixed assets and because of the inadequacy of the ordinary depreciation allowance. When we examine the financial position of industry, we find that the reserves available for the emergencies which industry must face are no more than they were in 1930, and yet the value of money has declined to an appreciable extent. For example, taking the sample produced by the Federation of British Industries of more than 90 companies with £1,000 million of assets, the cash represented about 19 per cent. of the total assets in 1945, and represents only 9 per cent. today.

When the Chancellor made his serious reply to us on the previous occasion, he said that he did not accept our view that industry was short of capital for its needs but he has never met our argument that, with the cost of replacing assets three times what it was, with the penal taxation, with the withdrawal of this advanced loan—which is what the initial allowances were—and with the physical controls imposed upon investment, industry's position is far worse than the Government have ever realised.

What, in fact, is happening is not that we are standing here defending, as it were, a privileged section of the community, but that we are seeking to defend the reservoir from which all future employment in this country must come. What is more important, we are defending our future prosperity, our position in the export trade and our survival as an economic power. If the Chancellor thinks he is going to get out of his difficulty this year by these rather small and petty devices, let us tell him quite clearly that he will get into trouble in another year and not very far ahead, if he does not look forward and realise the very real problems of capital need which industry has to face.

Those are, I think, Mr. Speaker, sufficient arguments to justify us in moving the first Amendment on this subject. I will say one or two words about the second Amendment, so that when we come to it we will divide on it without further discussion. Whether the Chancellor accepts or refuses our first Amendment, the second Amendment is particularly useful because it says that the Clause shall not apply in respect of any expenditure under contracts placed before the day of the Budget, that is, 10th April, 1951. That concession has already been given in regard to the shipping industry.

I have here the most voluminous material, with which I could, if necessary, weary the House, from various other industries, indicating that if this concession could be given it would benefit them very much. One, for example is from the machine tool trade. If a contract were made before that date, it is doubtful, because of the length of time required to produce some of our big machine tools, whether the goods could be delivered by the date in April, 1952, before which an order has to be completed if the initial allowance money is to be paid. I hope that the hon. Gentleman who is to reply will turn his attention to the very real need for sparing from this Clause contracts entered into prior to the Budget.

7.15 p.m.

Another very important dialectical reason exists which should make it impossible for the Government not to accept the Amendment. The Chancellor's reason for cutting out the initial allowances was that he wished to check investment by a monetary control. If a contract were entered into before the right hon. Gentleman introduced his Budget, then in any case it has made a claim upon the investment programme, and there is no point in the Chancellor's refusing the concession. Contracts entered into before that date should be free. I hope that any logic which the Economic Secretary to the Treasury learned in the South American country where he spent so much time will lead him to agree that this concession should be given. I hope that the Economic Secretary may indicate that, even at this late hour, the Government have some sense of the urgency of the capital needs of industry.

Mr. Eccles

I support the arguments so comprehensively put by my right hon. Friend. In general, it must be wrong to make these sudden and enormous changes in the law affecting the long-term planning of industry. It is not a matter where taxation ought to be radically changed in order to produce a deflationary or an inflationary policy, as the time may require. The capital programmes of the great majority of firms cannot be turned on and off like taps. It upsets the calculation of boards of directors to do this kind of thing. That is a general objection.

As my right hon. Friend has indicated, the particular reason for not wanting to withdraw the whole of these allowances should be based upon the review of the capital investment programme which the Chancellor brought before the House the other day. The Chancellor proposes a number of measures in order to guide our investments, so that we should have neither inflation nor failure in carrying out the defence programme. The argument for our Amendment is that we do not think the total abolition of the initial allowances a wise move in achieving those two objects of keeping the economy steady and carrying out re-armament.

As to the physical controls mentioned by my right hon. Friend, I think we all agree that when there is a very large project the Government must vet it to see whether it should go forward at a time like the present. Building licences and the allocation of steel are very powerful instruments in the hands of the Government, if they wish to use them. Control over borrowing makes it very difficult for companies to get cash. They have less cash because the Income Tax and the Profits Tax have been put up. Taken together, those are the elements of a very severe deflationary policy. The question is: Where does the argument come in for adding to them the abolition of the initial allowances?

We criticise the Government's deflationary policy on two grounds. First of all, it seems to us that not enough is being done in the non-productive fields of investment. Industry and agriculture are obviously the main victims of the Government's four-fold policy to restrict investment. I believe that the local authorities could make a considerably larger contribution than they are now making and that one of the real mistakes which the Government are making in the investment field is that they do not put productive investment high enough in the priority list.

The second argument against their policy—this is where the initial allowances come in so much—is that it is bound to hit the new small and expanding firm much worse than the old-established firm. Any deflationary policy must make it harder to find money for development. The firm which has large cash reserves or a long-established credit and can go to the banks or insurance companies and get new money will be all right, but the people who get hit by this kind of policy are those who are starting out, especially in the engineering industry and especially in the large range of small firms to whom we must look as sub-contractors for the defence programme.

One of the results of taking away the initial allowances from the people whose cash resources are known to be very small will be that the Government will have to provide special help, as they have said they would, in the way of assistance with capital for approved projects. There is a practical objection to that kind of help, which is a consequence of not allowing these people to get the interest-free loan through the initial allowances, and that is that it takes a long time to go to Whitehall and justify the need for an interest-free loan or a loan under special terms, which so many of these small businesses will want.

I do not know what criterion will be employed for giving back to those firms who need capital to expand in the next few years money which has been, as it were, taken away from them by the abolition of the initial allowances. I fear that, in order not to have too many inquiries for fresh capital, the Government will limit their assistance to defence projects, and yet there are very many other projects connected with the export trade and with putting ourselves on a level of efficiency with foreign countries which ought to be looked at.

I am sure that my hon. Friends would agree that we do not want to have the State coming in as a provider of capital because a foolish measure of taxation has deprived a whole range of companies of the resources that they would otherwise have had. It is a very clumsy way of doing what would be better done by the small companies so far as they can do it out of their own resources. My hon. Friends have already made one effort to remedy this in moving to reduce the rate of Profits Tax on undistributed profits to half its present level. That was done to provide firms with larger cash resources than they have under the present penal rates of taxation. We were defeated and the House would not accept it. We now fall back on this Amendment, which will help firms which have capital schemes in hand.

The conviction behind the Amendment—at least it certainly is mine—is that the Government are not giving production its true place in the investment programme. I never like to take a lesson from the Soviets, but I well remember how they treated their blitzed cities when they liberated them from the Germans. They decreed that the only investment to be done in Stalingrad and such cities was to rebuild the factories. They said, "Work first, and afterwards we will turn to the social amenities and other forms of investment." We have gone too far the other way. The Soviet method was brutal and we should not have wanted to copy it, but we have gone too far the other way.

Our whole standard of life depends so much on encouraging investment that the Government ought to look at the Amendment again. The fact is that Ministers are finding that they cannot have their cake and eat it. They cannot have the high level of non-productive expenditure and also have investment on productive assets anything like big enough for the needs of the country, and therefore they are cutting investment. That is a bad choice. We ought to make a greater effort to let the smaller firms in particular carry out their renewals.

Mr. Jenkins (Birmingham, Stechford)

The hon. Member is putting forward a very interesting case. I hope that before he sits down he will try to deal with a point which puzzles some of us on this side of the House. I do not think that any of his hon. Friends dealt with it in Committee. Why does he advocate the initial allowance, which he rightly says is an interest-free loan, while at the same time he and so many of his hon. Friends advocate a tighter credit policy and probably dearer money, which would have exactly the reverse effect of the proposal he is now putting forward?

Mr. Eccles

I am grateful to the hon. Member for giving me the opportunity to make that explanation. The tighter credit policy affects every borrower over the whole range—local authorities, Government Departments, anybody who has to borrow money. If the interest rate goes up or if there is a general instruction that banks and other institutions shall lend on stiffer terms, whatever the terms may be, every borrower is pinched. I object to the singling out of the initial allowance—it is only a substitute over a narrower sector for using the interest rate—because I object to the singling out of production. The hon. Member will see that we could by a general monetary policy squeeze out people whose claims to new savings today are nothing like as high as those of firms which want to improve productive assets. That is the main reason I support the Amendment.

Mr. Nabarro

Important financial considerations would result from a complete abrogation or withdrawal of industrial initial allowances for Income Tax purposes. Firstly, the increase in the rate of Profits Tax and Income Tax, as a result of the proposals in the Finance Bill, will have the overall average effect upon industrial concerns of every description of mulcting them of an aggregate of approximately 65 per cent. of their gross profits, leaving only 35 per cent. to be employed for the development of their businesses and for productive and working capital. That 35 per cent. is a narrower and a smaller margin than we have ever had in this country and it is at a time when the cost of plant, machinery and equipment and raw materials is indubitably higher than it has ever been before.

Secondly, as a result of the new instructions given by the Chancellor to the Capital Issues Committee there has been a general tightening up of the terms and conditions which become necessary before a sanction can be issued for the provision of new capital for industry. That has taken place only in the last few months. When added to the incidence of the increased rates of industrial taxation, this must have had a restrictive effect on available finances for industrial undertakings seeking to enlarge and expand their production. Thirdly, of course, the withdrawal of these initial allowances must create an immediate financial hardship for many firms who have already contracted for, or have undertaken to provide, new plant to match increased production demands that are being made upon them.

7.30 p.m.

Fourthly, the joint stock banks have, in the course of the last 18 months, been pursuing a course of increased prudence in the day to day advances which they are prepared to give to their customers. Many people have expressed the view to me, since the Committee stage of this Bill, that the loss of the initial allowances could be made good by industrial concerns going along to their bankers and arranging short-term loans. I say to that school of thought that it is no part of the purpose of joint stock banks to provide permanent capital for industry or the financial sinews for increasing or making more efficient industrial plant. That purpose, in my view, would be wholly wrong.

Fifthly, the cost of raw materials deserves a word at this stage. If 65 per cent. of the gross earnings of a business are to be taken by direct taxation there is only a small margin left for working capital, and the inordinately high cost of raw materials today makes financial stringency absolutely inevitable. Perhaps the Economic Secretary would listen to this extreme case. A high percentage of the carpet manufacturing industry of Britain is centred in Kidderminster. The carpet industry can make the claim today, that no less than 80 per cent. of the cost of the finished product is made up of raw materials. That, I say without fear of contradiction, is the highest percentage of raw materials for the finished product of any industry in Britain.

The fact that today cotton is three and a half times the 1947 price, that wool is five to six times the 1947 price, that jute is nearly three times the 1947 price, means that with this added burden of taxation, and yet the withdrawal of initial allowances, every carpet manufacturing business is facing the most extreme financial stringency. What were financial reserves a matter of 18 months or two years ago, have now been converted on the respective balance sheets of the companies concerned, to heavy overdrafts or to a financial situation which can best be described by saying that it is "badly in the red."

My right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler) made a passing reference to the machine tool industry. I might add a word to that because for many years before entering this House I was directly concerned with that industry. I know that my right hon. Friend was not exaggerating the position when he referred to the time lag that exists between the placing of an order today for a machine tool and the date of delivery of that tool. May I give some examples.

The delivery of an ordinary capstan lathe today, essential for the defence programme, vital for a big range of engineering processes, takes approximately three to four years. A wood-working machine tool, such as a four-cutter or a six-cutter or a planing machine, often takes three to four years. In the carpet industry a loom requires a minimum of three years before it is received from the manufacturers. In the case of textile machinery from Britain, that is in world wide demand and there is only a limited flow to the home market—delivery periods are known to run even to five or six years. Therefore, the period of notice before the withdrawal of these initial allowances given by the Chancellor—that period of grace being only eight months from 10th April last until 1st January next—is wholly insufficient.

I believe that there is a strong case, in the interests of the vital requirements of industry, that a concession should be given here, and that machine tools and similar machinery on order on 10th April, 1951, should be allowed to rank for industrial initial allowances for Income Tax purposes, irrespective of the date upon which that machinery happens to fall due for delivery, be it 1952, 1953 or 1954.

May I, in further emphasising a point made by my right hon. Friend, draw the attention of the Economic Secretary once again to the relatively calamitous position in which our British machine tool industry and our machine shops may find themselves in in the course of the next two or three years if he continues to neglect the production aspects of this problem. The Chancellor of the Exchequer made a two-hour speech when he presented his Budget and did not mention production once. From beginning to end he did not mention production at all.

Surely, all hon. Members on either side of the House who make speeches in the country about sustaining or maintaining the standards of living that we have enjoyed, or otherwise, in the last year or two, must recognise that if we are to prevent a fall in that standard it is vital that we superimpose the defence programme on our existing export programme and yet sustain the supply of consumer goods to the home market. That can be done only by increased production.

Will the Economic Secretary recall that the average age of a machine tool in Britain is 22 years? Yet the average age of a machine tool in America is nine years. The reason for the disparity is that the United States of America has pursued, over the last quarter of a century, a realistic and objective fiscal policy to produce the maximum and the highest possible rate of replacement of industrial equipment. We in Britain have been content to allow depreciation allowances and obsolescence combined, over a period of 14 years or more.

When considering these Amendments some concern must be felt in regard to our overall balance of overseas payments during the first six months of this year. At the present time we are running a deficit at the rate of £800 million a year in our overseas payments—as bad as, if not worse than, 1947–100 per cent. worse than last year. Yet the Chancellor insists upon this withdrawal of initial allowances which must strike a death blow to the increasing of rates of productivity of every industrial undertaking which is seeking to modernise or improve its plant and enhance its rate of productivity.

I made a lengthy speech during the Committee stage, and I do not want to repeat any part of it. Then I endeavoured to persuade the Chancellor to withhold from his decision to withdraw initial allowances on all new fuel saving equipment installed in industry with a special eye to the conservation of coal. In the peroration of that speech I said that I was perhaps guilty of a great deal of pessimism in stating that for the first four months of this year—up to 30th April, 1951—although our coal mining production in Britain had increased by 2,300,000 tons compared with the year 1950, our consumption had increased by 2,600,000 tons compared with the previous year.

Two more months have gone by, and that position has become immeasurably worse. So much so that the Minister of Fuel and Power wrote a letter—which was referred to in the national Press this morning—to Lord Hyndley, Chairman of the N.C.B., and to Mr. Horner, General Secretary of the National Union of Mineworkers, saying that unless production improves immediately there will be another winter coal crisis. What is the Chancellor of the Exchequer doing to provide industrialists with the fiscal incentives necessary to install more efficient coal burning equipment? The Chancellor is doing exactly the opposite of what he should do. He is withdrawing the only incentive that existed to those industrialists to install the equipment that would economise in fuel burning in industry.

If the Chancellor will agree to accept these Amendments—which leave untouched 20 per cent. of the initial allowances for Income Tax purposes—he will at least provide a modest incentive to install in industry improved coal and oil fuel burning equipment. Thus he would make a contribution towards averting a crisis which, if it falls upon us next winter in the midst of the defence programme and with this increasing adverse balance of trade, can only be calamitous to the whole of the financial and economic considerations that we have been studying during the Committee stage of this Bill and now also during the Report stage. I plead, therefore, with the Economic Secretary not to brush aside the powerful arguments that have been given from this side of the House for retaining a modicum of the initial allowances but to give the matter a little more than cursory consideration.

The Economic Secretary to the Treasury (Mr. John Edwards)

I say to the hon. Member for Kidderminster (Mr. Nabarro) that it is never my habit to brush aside an argument. On a matter of this kind, which is, I think it is appreciated, of very great importance, we have calmly and objectively to consider the facts and then to decide in the light of our consideration of the facts what it is best for us to do. As I understand it, this matter does not really raise any party political point. It is a matter of studying our economic circumstances and then saying, "What are the methods open to us?"

Considering the large number of words that have already been spoken on this matter since the Budget was introduced, the right hon. Member for Saffron Walden (Mr. R. A. Butler) and his hon. Friends have had a surprising freshness in the way in which they deployed their old arguments. I cannot, however, agree that any new arguments were advanced, and I must admit that I am in exactly the same position as were the right hon. Member and his hon. Friends.

It did, however, interest me that the right hon. Gentleman made one change in his presentation compared with the speech he made in the Committee stage on the Motion that the Clause stand part. Then, when I listened to his speech and as I have read it afterwards, I could find no recognition that there was a problem of curbing investment at all, although his hon. Friend the Member for Chippenham (Mr. Eccles) was very careful to narrow the difference between himself and the Chancellor by agreeing without any equivocation that there was a need to curb investment.

The right hon. Gentleman seemed to suggest that we ought to have stability in economic policy, for the sake of stability. I should have thought that he would have argued that economic policy must be adapted to our changing circumstances. Certainly it by no means follows that the economic policy that was appropriate even a year ago is appropriate in a post-Korean situation and in a situation where we have embarked upon an enormous defence programme.

Therefore, repeating arguments that have been advanced already, and disagreeing absolutely with the hon. Member for Kidderminster, I say that we really must accept the position that we cannot do everything at once; that even given the highest productivity of which the engineering and related industries are capable, we cannot expect them to do everything they were doing before and to meet the needs of the defence programme in addition.

When my right hon. Friend made his statement on the capital investment programme, he put the thing in words which, I think it may be as well to repeat. He said: In consequence, there will in 1951 be no increase in the supplies of plant and machinery available for home industry, while in 1952 and 1953 there must be a substantial reduction, since more and more of the engineering industry will be producing armaments instead. Moreover, of the plant and machinery available for the home market, a much larger share must from now on go to firms engaged on defence production, so that even in 1951 there will be some fall in supplies for purely civil purposes."—[OFFICIAL REPORT, 21st June, 1951; Vol. 489, c. 718.] I believe that that is incontestable. I cannot believe that anyone who studies the economic facts can come to any other conclusion. If the hon. Member for Chippenham would go back to the Chancellor's statement, he would see that the programmes in the public sector are not exempted from cuts any more than the programmes in the private sector of industry.

7.45 p.m.

Of course, it is true, as I grant to the hon. Member for Kidderminster, that if we do not have as much new capital equipment in our industries, we shall not have as high an increase in the productivity as we should were we not confronted with the defence and export programmes. But I cannot accept the view of the right hon. Gentleman that the suspension of initial allowances makes an enormous difference. The statement by the hon. Member for Kidderminster, when he said that this would be the death blow to industry, seemed to me to be an exaggeration of the wildest kind After all, these initial allowances—

Mr. Nabarro

I am sure that the hon. Gentleman would not wish to misquote me. I did not say that it would be the death blow to British industry. I said that it would be the death blow to the rate of expansion of productivity that all of us support if the needs of the defence programme and the export programme, and the sustaining of the standard of living for the home supplies, are to be maintained.

Mr. Edwards

I made a very careful note at the time of what the hon. Member said. Doutbless, when we see HANSARD, we can reconcile the difference. In any event, even to take the mild terms of the right hon. Member for Saffron Walden, I do not think it makes an enormous difference. I agree wholly with what has been said about the importance of corporate saving and about the need for new industrial capital development, but I have never regarded initial allowances as having an effect over the whole of industry. If these initial allowances were a help, they were a limited help to industry; and the suspension of them of course will be a hindrance, but, again, a limited hindrance. The Amendment would leave an inducement—a smaller inducement, but an inducement nevertheless.

Our proposal is to suspend initial allowances because we feel that that is the best and simplest way of curbing investment. I do not suggest that the effect here is enormous or large. As I see it, what will happen will be something like this: firms will reconsider the marginal cases—no more. They may decide not to do what they would have done, or, more likely, not to do as much as they would have done. It is always, as, I think, will be appreciated by anyone of business experience—a matter in busi- ness of the little more or the little less; and success or failure in business depends upon an infinite number of decisions on marginal considerations.

Mr. Eccles

The Economic Secretary says that it has only a small effect, but he will recollect that in a full year, the Chancellor says, the withdrawal of the allowances will be equivalent to £170 million. Does the hon. Gentleman really think that £170 million is a small sum out of the profits of business after taxation? I should be interested to know his view about £170 million in connection with raising the money from other sources.

Mr. Edwards

As the hon. Member appreciates, if one talks about the figure of £170 million, that by no means is to be regarded as the measure of what happens in industry as a result of the suspension of initial allowances. The business man, the directors and the board, will sit down and consider in the light of this position, "What are we going to do?" I would not for a moment suppose that we shall have a proportionate reduction of the same order as the actual interest-free loans, if we can call them such, covered by the present initial allowances. It does not seem to me that it would be good enough for our purpose to have the lower initial allowance when we really want to damp off the demand in this field, and, whether we do it in one way or another, I think it ought to be done.

It has been suggested that if we did not do that at least we should apply the suspension so as to maintain the initial allowances in respect of expenditure under contracts placed before Budget Day. We spent a very long time on Committee stage arguing particular cases some of which clearly cover purposes like that of fuel economy, which have the general backing of the whole House. I then advanced reasons why we ought to reject the claim and, during the long night of the 7th to 8th of June—

Mr. Pickthorn

It was not unusually long.

Mr. Edwards

I was on the bench for nine hours and it seemed long. During that time I rejected claims for all kinds of good causes, save only the claim in the case of shipbuilding, which seemed to me to have unique features. One of the arguments I then used was that if I admitted the claims then put forward I would not know how to reject the claims in general. How right I was is now shown because the official Opposition have now got away from the idea of tabling claims for particular classes and have come right down on behalf of a claim for all contracts made before Budget Day.

Mr. R. A. Butler

May I correct the hon. Gentleman? My Amendment was on the Order Paper for the Committee Stage and was not called, so we have not altered our point of view at all.

Mr. Edwards

At any rate the right hon. Gentleman has received a certain justification for that point of view in the arguments I deployed on those occasions. It has been said that because a contract was entered before Budget Day it ought to be covered by the initial allowance. I do not think we need take it absolutely for granted that all contracts entered into before Budget Day will be implemented. In some cases we shall find that arrangements will be made for them not to be carried out, and to some extent I should think that a desirable thing.

Additional to the general argument I have deployed, there is a particular argument which ought to be borne in mind in this connection. We would have the most serious practical difficulties were we to accept the second Amendment put forward by the right hon. Gentleman. The determination of the date of the orders which may at first be provisional would be an extremely troublesome matter. The question would be bound to arise in a large number of cases whether in varying circumstances there was evidence establishing that at the Budget date there was a contract which could be legally enforced as between the parties. To take only one example, the case of passenger motor vehicles. I do not know how many orders there are on the books, but there must be thousands. Is it really suggested that if the order is not delivered for several years ahead we have to set up enormous administrative apparatus to deal with such cases? That would be really quite impossible.

Although this instrument may be a blunt instrument it would be a good deal blunter if either of these Amendments were adopted. We think this instrument, blunt though it may be—the method Of total suspension of initial allowance—is the best way and the simplest way of helping to do what needs to be done. Whether it will prove entirely adequate or not only time can show but, for our part, we hope that, buttressed and supported by the new allocation schemes, this will be what is wanted. We sincerely hope that, for the alternative, limitation of supplies orders and all that kind of thing is some-

thing we should avoid if at all possible. I hope the House will agree that both these Amendments should be rejected.

Question put, "That the words proposed to be left out stand part of the Bill."

The House divided: Ayes, 280: Noes, 264.

Division No. 161] AYES 7.56 p.m.
Acland, Sir Richard Edelman, M Keenan, W
Adams, Richard Edwards, John (Brighouse) Kenyon, C.
Albu, A. H. Edwards, Rt. Hon. Ness (Caerphilly) Key, Rt. Hon. C W
Allen, Arthur (Bosworth) Edwards, W. J. (Stepney) King, Dr. H. M
Allen, Scholefield (Crewe) Evans, Albert (Islington, S. W) Kinghorn, Sqn Ldr E
Anderson, Alexander (Motherwell) Evans, Edward (Lowestoft) Kinley, J
Anderson, Frank (Whitehaven) Evans, Stanley (Wednesbury) Lang, Gordon
Attlee, Rt. Hon C R Ewart, R. Lee, Frederick (Newton)
Awbery, S. S. Fernyhough, E Lee, Miss Jennie (Cannock)
Ayles, W. H Field, Capt. W J Lever, Harold (Cheetham)
Bacon, Miss Alice Fletcher, Eric (Islington, E.) Lever, Leslie (Ardwick)
Baird, J Follick, M. Lewis, Arthur (West Ham, N)
Balfour, A. Foot, M. M Lewis, John (Bolton, W.)
Barnes, Rt. Hon. A. J Forman, J. C Lindgren, G. S.
Bartley, P Fraser, Thomas (Hamilton) Lipton, Lt.-Col. M
Bellenger, Rt. Hon. F. J. Freeman, John (Watford) Logan, D. G.
Benn, Wedgwood Freeman, Peter (Newport) Longden, Fred (Small Heath)
Benson, G. Gaitskell, Rt. Hon. H. T. N. McAllister, G.
Beswick, F. Ganley, Mrs. C. S MacColl, J. E.
Bing, G. H. C. Gibson, C. W. McGhee, H. G.
Blenkinsop, A. Gilzean, A. McGovern, J.
Blyton, W. R. Glanville, James (Consett) McInnes, J.
Boardman, H Gooch. E. G. Mack, J. D.
Booth, A. Greenwood, Anthony (Rossendale) McKay, John (Wallsend)
Bottomley, A. G. Greenwood, Rt. Hon. Arthur (Wakefield) Mackay, R. W. G. (Reading, N.)
Bowles, F. G. (Nuneaton) Grenfell, Rt. Hon D. R McLeavy, F.
Braddock, Mrs. Elizabeth Grey, C. F. MacMillan, Malcolm (Western Isles)
Brook, Dryden (Halifax) Griffiths, David (Rother Valley) McNeil, Rt. Hon. H.
Brooks, T. J. (Normanton) Griffiths, Rt. Hon. James (Llanelly) MacPherson, Malcolm (Stirling)
Braughton, Dr. A. D. D Griffiths, W. (Manchester Exchange) Mainwaring. W. H.
Brown, Thomas (Ince) Gunter, R. J. Mallalieu, E. L (Brigg)
Burke, W. A. Haire, John E. (Wycombe) Mallalieu, J P W (Huddersfield E)
Burton, Miss E. Hale, Joseph (Rochdale) Mann, Mrs. Jean
Butler, Herbert (Hackney. S.) Hale, Leslie (Oldham, W.) Marquand, Rt. Hon H A
Callaghan, L. J. Hall, Rt. Hon. Glenvil (Colne Valley) Mathers, Rt. Hon G
Carmichael, J. Hall, John (Gateshead, W.) Mayhew, C P
Castle, Mrs. B. A Hamilton. W. W Mellish, R. J
Champion, A. J Hannan, W. Messer, F
Chetwynd, G. R Hardy, E A Middleton, Mrs L.
Clunie, J. Hargreaves, A Mikardo, Ian
Cocks, F S. Hastings, S. Mitchison, G R
Coldrick, W. Hayman, F. H. Moeran, E. W
Collick, P. Henderson, Rt. Hon. A (Rowley Regis) Monslow, W
Cook, T. F. Hewitson, Capt M Moody, A S
Cooper, Geoffrey (Middlesbrough, W.) Hobson, C R Morgan, Dr H B
Cooper, John (Deptford) Holman, P. Morley, R.
Corbet, Mrs. Freda (Peckham) Holmes, Horace (Hemsworth) Morris, Percy (Swansea. W)
Cove, W. G. Houghton, D Mort, D L
Craddock, George (Bradford, S.) Hoy, J Moyle, A
Crawley, A. Hubbard, T. Mulley, F W
Crosland, C A R Hudson, James (Ealing, N) Nally, W.
Crossman, R. H S Hughes, Emrys (S Ayrshire) Neal, Harold (Bolsover)
Cullen, Mrs. A. Hughes, Hector (Aberdeen. N.) Oldfield, W. H.
Daines, P. Hynd, H. (Accrington) Oliver, G. H
Dalton, Rt. Hon H. Hynd, J. B. (Attercliffe) Orbach, M.
Darling, George (Hillsborough) Irvine, A. J. (Edge Hill) Padley, W E
Davies, A. Edward (Stoke, N) Irving, W. J. (Wood Green) Paget, R. T
Davies, Ernest (Enfield, E.) Isaacs, Rt. Hon. G. A Paling, Rt. Hon W (Dearne Valley)
Davies, Harold (Leek) Janner, B. Pannell, T. C
Davies, Stephen (Merthyr) Jay, D. P. T. Pargiter, G A
de Freitas, Geoffrey Jeger, George (Goole) Parker, J
Deer, G. Jeger, Dr. Santo (St. Pancras, S.) Paton, J
Delargy, H. J. Jenkins, R. H. Pearson, A
Diamond, J. Johnson, James (Rugby) Peart, T. F
Dodds, N. N. Johnston, Douglas (Paisley) Popplewell, E
Donnelly, D. Jones, David (Hartlepool) Porter, G
Dugdale, Rt. Hon. John (W. Bromwich) Jones, Frederick Elwyn (West Ham, S.) Price, Joseph T (Westhoughton)
Dye, S. Jones, Jack (Rotherham) Proctor, W. T
Ede, Rt. Hon. J. C. Jones, William Elwyn (Conway) Pryde, D. J.
Pursey, Cmdr. H Strachey, Rt. Hon. J. West, D. G.
Rankin, J. Strauss, Rt. Hon. George (Vauxhall) Wheatley, Rt. Hn. John (Edinb'gh E.)
Rees, Mrs. D. Stross, Dr. Barnett White, Mrs. Eirene (E. Flint)
Reeves, J. Summerskill, Rt. Hon. Edith White, Henry (Derbyshire, N.E.)
Raid, Thomas (Swindon) Sylvester, G. O Whiteley, Rt. Hon. W.
Reid, William (Camlachie) Taylor, Bernard (Mansfield) Wigg, G.
Richards, R. Taylor, Robert (Morpeth) Wilcock, Group Capt. C. A. B
Roberts, Rt. Hon. A. Thomas, David (Aberdare) Wilkins, W. A.
Roberts, Goronwy (Caernarvonshire) Thomas, George (Cardiff) Willey, Frederick (Sunderland)
Robertson, J. J. (Berwick) Thomas, lorwerth (Rhondda, W.) Willey, Octavius (Cleveland)
Rogers, George (Kensington, N.) Thomas, Ivor Owen (Wrekin) Williams, David (Neath)
Royle, C. Thorneycroft, Harry (Clayton) Williams, Rev. Llywelyn (Abertillery)
Shinwell, Rt. Hon. E. Thurtle, Ernest Williams, Ronald (Wigan)
Shurmer, P. L. E. Timmons, J. Williams, Rt. Hon. Thomas (Don V'lly)
Silverman, Julius (Erdington) Tomney, F. Williams, W. T. (Hammersmith, S.)
Silverman, Sydney (Nelson) Turner-Samuels, M. Wilson, Rt. Hon. Harold (Huyton)
Simmons, C. J. Ungoed-Thomas, Sir Lynn Winterbottom, Ian (Nottingham, C.)
Slater, J. Usborne, H. Winterbottom, Richard (Brightside)
Smith, Ellis (Stoke, S) Vernon, W. F Wyatt, W. L.
Smith, Norman (Nottingham, S.) Viant, S. P. Yates, V. F.
Snow, J. W. Wallace, H. W. Younger, Rt. Hon K
Sorensen, R. W. Watkins, T. E.
Soskice, Rt. Hon. Sir Frank Webb, Rt. Hon. M. (Bradford, C.) TELLERS FOR THE AYES:
Sparks, J. A. Weitzman, D. Mr. Bowden and
Steele, T. Wells, Percy (Faversham) Mr. Kenneth Robinson.
Stewart, Michael (Fulham, E.) Wells, William (Walsall)
Aitken, W. T. de Chair, Somerset Hudson, Sir Austin (Lewisham, N.)
Alport, C. J. M. De la Bère, R. Hudson, Rt. Hon. Robert (Southport)
Amery, Julian (Preston, N.) Deedes, W. F. Hudson, W. R. A. (Hull, N.)
Amory, Heathcoat (Tiverton) Digby, S. Wingfield Hurd, A. R.
Arbuthnot, John Dodds-Parker, A. D. Hutchinson, Geoffrey (Ilford, N.)
Ashton, H. (Chelmsford) Donner, P. W. Hutchison, Lt.-Com. Clark (E'b'rgh W.)
Assheton, Rt. Hon. R. (Blackburn, W) Douglas-Hamilton, Lord Malcolm Hutchison, Col. James (Glasgow)
Astor, Hon. M. L. Drayson, G. B. Hyde, Lt.-Col. H. M.
Baker, P. A. D. Drewe, C. Hylton-Foster, H. B.
Baldock, Lt.-Cmdr J. M Dugdale, Maj. Sir Thomas (Richmond) Jennings, R.
Banks, Col. C. Duncan, Capt. J. A L Johnson, Howard (Kemptown)
Beamish, Maj. Tufton Dunglass, Lord Jones, A. (Hall Green)
Bell, R. M. Duthie, W. S. Joynson-Hicks, Hon. L. W
Bennett, Dr. Reginald (Gosport) Eccles, D. M. Kaberry, D.
Bennett, William (Woodside) Elliot, Rt. Hon. W E Kerr, H. W. (Cambridge)
Bavins, J. R. (Liverpool, Toxteth) Erroll, F. J. Kingsmill, Lt.-Col. W H
Birch, Nigel Fisher, Nigel Lambert, Hon. G.
Bishop, F. P. Fort, R. Lancaster, Col. C. G
Black, C. W. Foster, John Langford-Holt, J.
Boles, Lt.-Col. D. C. (Wells) Fraser, Hon. Hugh (Stone) Law, Rt. Hon. R. K.
Bossom, A. C. Fraser, Sir I. (Morecambe & Lonsdale) Leather, E. H. C.
Boyd-Carpenter, J. A Fyfe, Rt. Hon. Sir David Maxwell Legge-Bourke, Maj. E. A. H
Boyle, Sir Edward Galbraith, Cmdr. T. D. (Pollok) Lennox-Boyd, A. T.
Bracken, Rt. Hon. B Galbraith, T. G. D. (Hillhead) Lindsay, Martin
Braine, B. R. Gammons, L. D. Linstead, M. N.
Braithwaite, Sir Albert (Harrow, W.) Garner-Evans, E. H. (Denbigh) Llewellyn, D.
Braithwaite, Lt.-Cr. G. (Bristol, N.W.) Gates, Maj. E. E. Lloyd, Rt. Hn. G. (King's Norton)
Bromley-Davenport, Lt.-Col. W. George, Lady Megan Lloyd Lloyd, Maj. Guy (Renfrew, E.)
Brooke, Henry (Hampstead) Glyn, Sir Ralph Lloyd, Selwyn (Wirral)
Browne, Jack (Govan) Gomme-Duncan, Col. A. Lockwood, Lt.-Col. J. C.
Buchan-Hepburn, P. G T Gridley, Sir Arnold Longden, Gilbert (Herts, S.W.)
Bullock, Capt. M. Grimston, Hon. John (St. Albans) Low, A. R. W.
Bullus, Wing Commander E. E Grimston, Robert (Westbury) Lucas, Sir Jocelyn (Portsmouth, S.)
Burden, F. A. Harden, J. R. E. Lucas, P. B. (Brentford)
Butcher, H. W. Hare, Hon. J. H. (Woodbridge) Lucas-Tooth, Sir Hugh
Butler, Rt. Hn. R. A. (Saffron Walden) Harris, Frederic (Croydon, N.) McAdden, S. J.
Carr, Robert (Mitcham) Harris, Reader (Heston) McCorquodale, Rt. Hon. M. S.
Carson, Hon. E. Harvey, Air Codre. A. V. (Macclesfield) Macdonald, Sir Peter (I. of Wight)
Channon, H. Harvey, Ian (Harrow, E.) Mackeson, Brig. H. R.
Clarke, Col. Ralph (East Grinstead) Harvie-Watt, Sir George McKie, J. H. (Galloway)
Clarke, Brig. Terence (Portsmouth, W.) Hay, John Maclay, Hon. John
Colegate, A. Head, Brig. A. H Maclean, Fitzroy
Cooper, Sqn. Ldr. Albert (Ilford, S.) Heald, Llonel MacLeod, lain (Enfield, W.)
Cooper-Key, E. M. Henderson, John (Cathcart) MacLeod, John (Ross and Cromarty)
Corbett, Lt.-Col. Uvedale (Ludlow) Hicks-Beach, Maj. W W Macpherson, Major Niall (Dumfries)
Craddock, Beresford (Spelthorne) Higgs, J. M. C. Maitland, Cmdr. J. W.
Cranborne, Viscount Hill, Mrs. E. (Wythenshawe) Manningham-Butler, R. E
Crookshank, Capt Rt. Hon H F C Hinchingbrooke, Viscount Marlowe, A. A. H.
Crouch, R. F. Hirst, Geoffrey Marples, A. E.
Crowder, Capt. John (Finchley) Holmes, Sir Stanley (Harwich) Marshall, Douglas (Bodmin)
Crowder, Petre (Ruislip—Horthwood) Hope, Lord John Marshall, Sidney (Sutton)
Cundiff, F. W. Hopkinson, Henry Maude, Angus (Ealing, S.)
Cuthbert, W. N. Hornsby-Smith, Miss P. Maude, John (Exeter)
Darling, Sir William (Edinburgh, S.) Horsbrugh, Rt. Hon. Florence Maudling, R.
Davidson, Viscountess Howard, Gerald (Cambridgeshire) Medlicott, Brig. F.
Davies, Nigel (Epping) Howard, Greville (St. Ives) Mellor, Sir John
Molson, A. H. E. Roberts. Maj. Peter (Heeley) Taylor, Charles (Eastbourne)
Monckton, Sir Waller Robinson, Roland (Blackpool, S.) Taylor, William (Bradford, N.)
Morrison, John (Salisbury) Robson-Brown, W. Teeling, W.
Morrison, Rt. Hon. W. S (Cirencester) Rodgers, John (Sevenoaks) Thomas, J. P. L. (Hereford)
Mott-Radclyffe, C. E Roper, Sir Harold Thompson, Kenneth Pugh (Walton)
Nabarro, G. Ropner, Col. L. Thompson, Lt.-Cmdr. R. (Croydon, W.)
Nicholls, Harmar Russell, R. S. Thorneycroft, Peter (Monmouth)
Nicholson, G. Ryder, Capt. R. E. D. Thorp, Brig. R. A. F.
Noble, Cmdr. A. H. P Salter, Rt. Hon. Sir Arthur Tilney, John
Nugent. G. R. H. Sandys, Rt. Hon. D. Touche, G. C.
Nutting, Anthony Savory, Prof. D. L. Turner, H. F. L
Oakshott, H. D. Scott, Donald Turton, R. H.
Odey, G. W. Shepherd, William Vane, W. M. F.
O'Neill, Rt. Hon. Sir Hugh Smiles, Lt.-Col. Sir Walter Vosper, D. F.
Ormsby-Gore, Hon. W. O. Smithers, Peter (Winchester) Wade, D. W.
Orr, Capt. L P. S. Smithers, Sir Waldron (Orpington) Wakefield, Edward (Derbyshire, W.)
Orr-Ewing, Charles Ian (Hendon, N,) Smyth, Brig. J. G. (Norwood) Wakefield, Sir Wavell (Marylebone)
Orr-Ewing, Ian L. (Weston-super-Mare) Snadden, W. McN. Walker-Smith, D. C
Osborne, C. Soames, Capt. C. Ward, Hon. George (Worcester)
Perkins, W. R. D. Spearman, A. C. M.
Pelo, Brig. C. H. M Spence, H. R. (Aberdeenshire, W.) Ward, Miss I. (Tynemouth)
Pickthorn, K. Spent, Sir Patrick (Kensington, S.) Waterhouse, Capt Rt. Hon. C
Pitman, I. J. Stanley, Capt. Hon. Richard (N. Fylde) Watkinson, H.
Powell, J. Enoch Stevens, G. P. White, Baker (Canterbury)
Price, Henry (Lewisham, W.) Steward, W. A. (Woolwich, W.) Williams, Charles (Torquay)
Prior-Palmer, Brig. O Stewart, Henderson (Fife, E) Williams, Gerald (Tonbridge)
Profumo, J. D. Stoddart-Scott, Col. M. Williams, Sir Herbert (Croydon, E.)
Raikes, H. V. Storey, S. Wills, G.
Rayner, Brig. R. Strauss, Henry (Norwich, S.) Wilson, Geoffrey (Truro)
Redmayne, M. Stuart, Rt. Hon. James (Moray) Winterton, Rt. Hon, Earl
Remnant, Hon. P Studholme, H. G. Wood, Hon. R
Ronton, D. L M. Summers, G S
Roberts, Emrys (Merioneth) Sutcliffe, H. TELLERS FOR THE NOES:
Major Conant and Major Wheatley.

Amendment Proposed: In page 10, line 44, at end, insert:

Provided that this section shall not apply in respect of any expenditure under contracts placed before the tenth day of April, nineteen hundred and fifty-one.—[Mr. R. A. Butler.]

Question put, "That those words be there inserted in the Bill."

The House divided: Ayes, 265; Noes, 280.

Division No. 162.] AYES [8.6 p.m.
Aitken, W. T. Clarke, Brig. Terence (Portsmouth, W.) Galbraith, T. G. D. (Hillhead)
Alport, C. J. M. Colegate, A. Gammans, L. D.
Amery, Julian (Preston, N.) Conant, Maj. R. J. E. Garner-Evans, E. H. (Denbigh)
Amory, Heathcoat (Tiverton) Cooper, Sqn. Ldr. Albert (Ilford, S.) Gates, Maj. E. E.
Arbuthnot, John Cooper-Key, E. M. George, Lady Megan Lloyd
Ashton, H. (Chelmsford) Corbett, Lt.-Col. Uvedale (Ludlow) Glyn, Sir Ralph
Assheton, Rt. Hon. R. (Blackburn, W.) Craddock, Beresford (Spelthorne) Gomme-Duncan, Col. A
Astor, Hon. M. L. Cranborne, Viscount Gridley, Sir Arnold
Baker, P. A. D. Crookshank, Capt. Rt. Hon H F. C. Grimston, Hon. John (St. Albans)
Baldock, Lt.-Cmdr. J. M Crouch, R. F. Grimston, Robert (Westbury)
Banks, Col. C. Crowder, Capt. John (Finchley) Harden, J. R. E.
Beamish, Maj. Tufton Crowder, Petre (Rulslip—Northwood) Hare, Hon. J. H. (Woodbridge)
Bell, R. M. Cundiff, F. W. Harris, Frederic (Croydon, N.)
Bennett, Dr. Reginald (Gosport) Cuthbert, W N. Harris, Reader (Heston)
Bennett, William (Woodside) Darling, Sir William (Edinburgh, S.) Harvey, Air Codre. A. V. (Macclesfield)
Bevins, J. R. (Liverpool, Toxteth) Davidson, Viscountess Harvey, Ian (Harrow, E.)
Birch, Nigel Davies, Nigel (Epping) Harvie-Watt, Sir George
Bishop, F. P. de Chair, Somerset Hay, John
Black, C. W. De la Bère, R. Head, Brig. A. H
Boles, Lt.-Col. D. C. (Wells) Deedes, W. F. Heald, Llonel
Bossom, A. C. Digby, S. Wingfield Henderson, John (Cathcart)
Boyd-Carpenter, J. A. Dodds-Parker, A. D. Hicks-Beach, Maj. W. W
Boyle, Sir Edward Dormer, P. W. Higgs, J. M. C.
Bracken, Rt. Hon B Douglas-Hamilton, Lord Malcolm Hill, Mrs. E. (Wythenshawe)
Braine, B. R. Drayson, G. B. Hinchingbrooke, Viscount
Braithwaite, Sir Albert (Harrow, W.) Drewe, C. Hirst, Geoffrey
Braithwaite, Lt.-Cdr. G. (Bristol, N.W.) Dugdate, Maj. Sir Thomas (Richmond) Holmes, Sir Stanley (Harwich)
Bromley-Davenport, Lt.-Col. W. Duncan, Capt. J. A. L Hope, Lord John
Brooke, Henry (Hampstead) Dunglass, Lord Hopkinson, Henry
Browne, Jack (Govan) Duthie, W. S. Hornsby-Smith, Miss P
Buchan-Hepburn, P. G T. Eccles, D. M. Horsbrugh, Rt. Hon. Florence
Bollock, Capt. M. Elliot, Rt. Hon. W. E Howard, Gerald (Cambridgeshire)
Bullus, Wing Commander E. E. Erroll, F. J. Howard, Greville (St. Ives)
Burden, F. A. Fisher, Nigel Hudson, Sir Austin (Lewisham, N.)
Butcher, H. W Fort, R. Hudson, Rt. Hon. Robert (Southport)
Butler, Rt. Hn. R. A. (Saffron Walden) Foster, John Hudson, W. R. A. (Hull, N.)
Carr, Robert (Mitcham) Fraser, Hon. Hugh (Stone) Hurd, A. R.
Carson, Hon E Fraser, Sir I. (Morecambe & Lonsdale) Hutchinson, Geoffrey (Ilford, N.)
Channon, H. Fyfe, Rt. Hon. Sir David Maxwell Hutchison, Lt.-Com. Clark (E'b'rgh W.)
Clarke, Col. Ralph (East Grinstead) Galbraith, Cmdr. T. D. (Pollok) Hutchison, Col. James (Glasgow)
Hyde, Lt.-Col. H. M. Molson, A. H. E. Snadden, W. McN
Hylton-Foster, H. B. Monckton, Sir Walter Soames, Capt. C.
Jennings, R. Morrison, John (Salisbury) Spearman, A. C. M.
Johnson, Howard (Kemptown) Morrison, Rt. Hon. W. S (Cirencester) Spence, H. R. (Aberdeenshire, W.)
Jones, A. (Hall Green) Mott-Radclyffe, C. E Spens, Sir Patrick (Kensington, S.)
Joynson-Hicks, Hon. L. W. Nabarro, G. Stanley, Capt. Hon. Richard (N. Fylde)
Kaberry, D. Nicholls, Harmar Stevens, G. P.
Kerr, H. W. (Cambridge) Nicholson, G. Steward, W. A. (Woolwich, W.)
Kingsmill, Lt.-Col. W. H Noble, Cmdr. A. H. P Stewart, Henderson (Fife, E.)
Lambert, Hon. G. Nugent. G. R. H. Stoddart-Scott, Col. M.
Lancaster, Col. C. G Nutting, Anthony Storey, S.
Langford-Holl, J. Oakshott, H. D. Strauss, Henry (Norwich, S.)
Law, Rt. Hon. R. K. Odey, G. W. Stuart, Rt. Hon. James (Moray)
Leather, E. H. C. O'Neill, Rt. Hon. Sir Hugh Studholme, H. G
Legge-Bourke, Maj. E. A. H. Ormsby-Gore, Hon. W. D. Summers, G. S.
Lennox-Boyd, A. T. Orr, Capt. L. P. S. Sutcliffe, H.
Lindsay, Martin Orr-Ewing, Charles Ian (Hendon, N,) Taylor, Charles (Eastbourne)
Linstead, H. N. Orr-Ewing, Ian L. (Weston-supcr-Mare) Taylor, William (Bradford, N.)
Llewellyn, D. Osborne, C. Teeling, W.
Lloyd, Rt. Hn. G. (King's Norton) Perkins, W. R. D. Thomas, J. P. L. (Hereford)
Lloyd, Maj. Guy (Renfrew, E.) Peto, Brig. C. H. M Thompson, Kenneth Pugh (Walton)
Lloyd, Selwyn (Wirral) Pickthorn, K. Thompson, Lt.-Cmdr. R. (Croydon, W.)
Lockwood, Lt.-Col. J. C. Pitman, I. J. Thorneycroft, Peter (Monmouth)
Longden, Gilbert (Herts, S.W.) Powell, J. Enoch Thorp, Brig. R. A. F
Low, A. R. W. Price, Henry (Lewisham, W.) Tilney, John
Lucas, Sir Jocelyn (Portsmouth, S.) Prior-Palmer, Brig. O Touche, G. C.
Lucas, P. B. (Brentford) Profumo, J. D. Turner, H. F. L.
Lucas-Tooth, Sir Hugh Raikes, H. V. Turton, R. H.
McAdden, S. J. Rayner, Brig. R Vane, W. M. F.
McCorquodale, Rt. Hon. M. S. Redmayne, M. Wade, D. W.
Macdonald, A. J. F. (Roxburgh) Remnant, Hon. P Wakefield, Edward (Derbyshire, W.)
Macdonald, Sir Peter (I. of Wight) Renton, D. L. M. Wakefield, Sir Wavell (Marylebone)
Mackeson, Brig. H. R. Roberts, Emrys (Merioneth) Walker-Smith, D. C
McKie, J. H. (Galloway) Roberts, Maj. Peter (Heeley) Ward, Hon. George (Worcester)
Maclay, Hon. John Robinson, Roland (Blackpool, S.) Ward, Miss I. (Tynemouth)
Maclean, Fitzroy Robson-Brown, W. Waterhouse, Capt. Rt. Hon. C
MacLeod, lain (Enfield, W.) Rodgers, John (Sevenoaks) Watkinson, H.
MacLeod, John (Ross and Cromarty) Roper, Sir Harold White, Baker (Canterbury)
Macpherson, Major Niall (Dumfries) Ropner, Col. L. Williams, Charles (Torquay)
Maitland, Cmdr. J. W. Russell, R. S.
Manningham-Buller, R. E Ryder, Capt. R. E. D. Williams, Gerald (Tonbridge)
Marlowe, A. A. H. Salter, Rt. Hon. Sir Arthur Williams, Sir Herbert (Croydon, E.)
Marples, A. E. Sandys, Rt. Hon. D. Wills, G.
Marshall, Douglas (Bodmin) Savory, Prof. D. L. Wilson, Geoffrey (Truro)
Marshall, Sidney (Sutton) Scott, Donald Winterton, Rt. Hon. Earl
Maude, Angus (Ealing, S.) Shepherd, William Wood, Hon. R.
Maude, John (Exeter) Smiles, Lt.-Col. Sir Walter
Maudling, R. Smithers, Peter (Winchester) TELLERS FOR THE AYES:
Medlicott, Brig. F. Smithers, Sir Waldron (Orpington) Major Wheatley and Mr. Vosper
Metlor, Sir John Smyth, Brig J. G. (Norwood)
Acland, Sir Richard Burke, W. A. Delargy, H. J.
Adams, Richard Burton, Miss E. Diamond, J.
Albu, A. H. Butler, Herbert (Hackney, S.) Dodds, N. N.
Allen, Arthur (Bosworth) Callaghan, L. J Donnelly, D.
Allen, Scholefield (Crewe) Carmichael, J. Dugdale, Rt. Hon. John (W. Bromwich)
Anderson, Alexander (Motherwell) Castle, Mrs. B. A Dye, S.
Anderson, Frank (Whitehaven) Champion, A. J Ede, Rt. Hon. J. C
Attlee, Rt. Hon. C. R Chetwynd, G. R Edelman, M.
Awbery, S. S. Clunie, J. Edwards, John (Brighouse)
Ayles, W. H. Cooks, F. S. Edwards, Rt. Hon. Ness (Caerphilly)
Bacon, Miss Alice Coldrick, W. Edwards, W. J. (Stepney)
Baird, J. Collick, P. Evans, Albert (Islington, S.W)
Balfour, A Cook, T. F. Evans, Edward (Lowestoft)
Barnes, Rt. Hon A. J Cooper, Geoffrey (Middlesbrough, W.) Evans, Stanley (Wednesbury)
Bartley, P. Cooper, John (Deptford) Ewart, R.
Bellenger, Rt. Hon. F. J Corbet, Mrs. Freda (Peckham) Fernyhough, E.
Benn, Wedgwood Cove, W. G. Field, Capt. W J
Benson, G. Craddock, George (Bradford, S.) Fletcher, Eric (Islington. E)
Beswick, F. Crawley, A. Follick, M.
Bing, G. H. C Crosland, C. A. R Forman, J. C.
Blenkinsop, A. Crossman, R. H S Fraser, Thomas (Hamilton)
Blyton, W. R. Cullen, Mrs A Freeman, John (Watford)
Boardman, H. Daines, P. Freeman, Peter (Newport)
Booth, A. Dalton, Rt. Hon. H. Gaitskell, Rt. Hon. H. T. N
Bottomley, A. G. Darling, George (Hillsborough) Ganley, Mrs. C. S.
Bowles, F. G. (Nuneaton) Davies, A. Edward (Stoke, N.) Gibson, C. W.
Braddock, Mrs. Elizabeth Davies, Ernest (Enfield, E.) Gilzean, A.
Brook, Dryden (Halifax) Davies, Harold (Leek) Glanville, James (Consett)
Brooks, T. J. (Normanton) Davies, Stephen (Merthyr) Gooch, E. G.
Broughton, Dr. A. D. D de Freitas, Geoffrey Greenwood, Anthony (Rossendale)
Brown, Thomas (Ince) Deer. G. Greenwood, Rt. Hon. Arthur (Wakefield)
Grenfell, Rt. Hon. D. R. McGovern, J. Silverman, Sydney (Nelson)
Grey, C. F. McInnes, J. Simmons, C. J.
Griffiths, David (Rather Valley) Mack, J. D. Slater, J.
Griffiths, Rt. Hon. James (Llanelly) McKay, John (Wallsend) Smith, Ellis (Stoke, S.)
Griffiths, W. (Manchester Exchange) Mackay, Rt. W. G. (Reading, N.) Smith, Norman (Nottingham, S.)
Gunter, R. J. McLeavy, F. Snow, J. W
Haire, John E. (Wycombe) MacMillan, Malcolm (Western Isles) Sorensen, R. W.
Hale, Joseph (Rochdale) McNeil, Rt. Hon. H. Soskice, Rt. Hon Sir Frank
Hale, Leslie (Oldham, W.) MacPherson, Malcolm (Stirling) Sparks, J. A
Hall, Rt. Hon. Glenvil (Colne Valley) Mainwaring, W. H. Steele, T.
Hall, John (Gateshead, W.) Mallalieu, E. L. (Brigg) Stewart, Michael (Fulham, E)
Hamilton, W. W. Mallalieu, J. P. W. (Huddersfield, E.) Strachey, Rt. Hon. J.
Hannan, W. Mann, Mrs Jean Strauss, Rt. Hon. George (VauxhaH)
Hardy, E. A. Marquand, Rt. Hon H A Stross, Dr. Barnett
Hargreaves, A. Mathers, Rt Hon G Summerskill, Rt. Hon. Edith
Hastings, S. Mayhew, C. P Sylvester, G. O.
Hayman, F. H. Mellish, R. J Taylor, Bernard (Mansfield)
Henderson, Rt. Hon. A. (Rowley Regis) Messer, F. Taylor, Robert (Morpeth)
Hewitson, Capt M. Middleton, Mrs. L. Thomas, David (Aberdare)
Hobson, C. R. Mikardo, Ian. Thomas, George (Cardiff)
Holman, P. Mitchison, G R Thomas, lorwerth (Rhondda, W.)
Holmes, Horace (Hemsworth) Moeran, E. W. Thomas, Ivor Owen (Wrekin)
Houghton. D. Monslow, W. Thorneycroft, Harry (Clayton)
Hoy, J. Moody, A. S.
Hubbard, T. Morgan, Dr. H. B. Thurtle, Ernest
Hudson, James (Ealing, N.) Morley, R Timmons, J.
Hughes, Emrys (S. Ayrshire) Morris, Percy (Swansea, W.) Tomney, F.
Hughes, Hector (Aberdeen, N.) Mort, D. L Turner-Samuels, M.
Hynd, H. (Accrington) Moyle, A. Ungoed-Thomas, Sir Lynn
Hynd, J. B. (Attercliffe) Mulley, F. W Usborne, H.
Irvine, A. J. (Edge Hill) Nally, W Vernon, W. F
Irving, W. J. (Wood Green) Neal, Harold (Bolsover) Viant, S. P.
Isaacs, Rt. Hon. G. A. Oldfield, W. H. Wallace, H. W
Janner, B. Oliver, G. H. Watkins, T. E.
Jay, D. P. T. Orbach, M. Webb, Rt. Hon M (Bradford, C
Jeger, George (Goole) Padley, W. E Weitzman, D.
Jeger, Dr. Santo (St. Pancras, S.) Paget, R. T. Wells, Percy (Faversham)
Jenkins, R. H. Paling, Rt. Hon. W. (Dearne Valley) Wells, William (Walsall)
Johnson, James (Rugby) Pannell, T. C West, D G.
Johnston, Douglas (Paisley) Pargiter, G. A Wheatley, Rt. Hn. John (Edinb'gh, E)
Jones, David (Hartlepool) Parker, J. White, Mrs. Eirene (E. Flint)
Jones, Frederick Elwyn (West Ham, S.) Paton, J. White, Henry (Derbyshire, N E)
Jones, Jack (Rotherham) Pearson, A. Whiteley, Rt. Hon. W.
Jones, William Elwyn (Conway) Peart, T. F. Wigg, G.
Keenan, W. Popplewell, E Wilcock, Group Capt. C A B
Kenyon, C. Porter, G. Wilkins, W. A.
Key, Rt. Hon. C. W. Price, Joseph T. (Westhoughton) Willey, Frederick (Sunderland)
King, Dr. H. M. Proctor, W. T. Witley, Octavius (Cleveland)
Kinghorn, Sqn. Ldr E Pryde, D. J. Williams, David (Neath)
Kinley, J. Pursey, Commander H. Williams, Rev. Llywelyn (Abertillery)
Lang, Gordon Rankin, J. Williams, Ronald (Wigan)
Lee, Frederick (Newton) Rees, Mrs. D. Williams, Rt. Hon. Thomas (Don V'lly)
Lee, Miss Jennie (Cannock) Reeves, J. Williams, W. T. (Hammersmith, S.)
Lever, Harold (Cheatham) Reid, Thomas (Swindon) Wilson, Rt. Hon. Harold (Huyton)
Lever, Leslie (Ardwick) Reid, William (Camlachie) Winterbottom, Ian (Nottingham, C.)
Lewis, Arthur (West Ham, N.) Richards, R. Winterbottom, Richard (Brightside)
Lewis, John (Bolton, W.) Robens, Rt. Hon. A. Wyatt, W. L.
Lindgren, G S. Roberts, Goronwy (Caernarvonshire) Yates, V F.
Upton, Lt.-Col. M. Robertson, J. J. (Berwick) Younger, Rt. Hon. K.
Logan, D. G. Rogers, George (Kensington, N.)
Longden, Fred (Small Heath) Royle, C. TELLERS FOR THE NOES:
McAllister, G. Shinwell, Rt. Hon. E. Mr. Bowden and
MacColl, J. E. Shurmer, P. L. E. Mr. Kenneth Robinson.
McGhee, H. G. Silverman, Julius (Erdington)

Question put, and agreed to.

8.15 p.m.

Mr. Turton (Thirsk and Malton)

I beg to move, in page 10, line 45, at the end, to insert: on the provision of machinery or plant for the purposes of agriculture or. The effect of this Amendment is that agricultural machinery and plant shall be excluded from the repeal of initial allowances. The ground on which I put this forward is that agriculture is part of the defence programme. On a previous Amendment the Economic Secretary to the Treasury said that there was no party political division on this matter but that it was the view of the Government that expenditure on modernisation should be damped down in certain directions. Is not agriculture part of that defence programme, and is not modernisation of agriculture an essential part of our aim in order to be well defended?

There is certainly a great political division on whether agriculture ought not to have been included in the defence programme to a greater extent. In fact, agriculture has not had a special defence programme since the international tension increased. The Government have been relying on the 1947 five-year plan that was devised for economic and not for defensive reasons. It happens that this five-year agricultural programme is due to reach its peak in the year 1952–53, and yet this particular Clause will first have its effect in that vital year. I ask the Economic Secretary to consider the effect on that programme of including the provision of agricultural machinery and plant in this Clause.

The Economic Survey of this year reported the progress that has been made towards reaching the targets set up in the 1947 agricultural programme. We were told that last year we stepped up from 39 per cent. over the 1936–39 average to 40 per cent. As hon. Members know, the target is 50 per cent. above the 1936–39 production level. That means that we have to obtain 10 per cent. in two years. In other words, we must step up our production by five times the increase of last year. That cannot be done without more modernisation of agriculture and without more machinery and plant.

Another factor also comes into this question. Prior to this year, in order to aid the modernisation of agriculture and help farmers to increase their capital equipment the Government have injected into the price review a certain sum for capital equipment. The White Paper, "Annual Review and Fixing of Farm Prices, 1951," which was published recently noted that in agriculture there had been …reports of increasing credits stringency in the industry… Notwithstanding that fact, the Government cut the capital injection for the current year by £10 million and have said that future provisions for capital injections would be progressively reduced thereafter.

Therefore, we may assume that in the 1947 five-year expansion programme there will be this progressive cut in the capital injection at the same time as the full weight of the abolition of the initial allowances from agricultural machinery and equipment. That will have very serious repercussions on our food defence plan at the present time. The whole business of providing agricultural machinery is one in which there is a constant conflict between export and home demand.

The statistical digest shows that in 1948 the export share of the agricultural machinery output was 40 per cent. In 1949 and 1950 the export share had risen to 50 per cent. That means that although the output of agricultural machinery in this country has expanded, the share that home agriculture was getting of that agricultural machinery was round about the same level last year as it was two years before.

In fact, I think £41 million was spent on agricultural machinery for home agriculture in 1948; it dropped to £37 million in 1949 and went back again to £41 million in 1950. Therefore, the total of the initial allowances lost to agriculture if that level is maintained is £16 million. If we add to that the loss of capital injection, it would appear that the extra cost to agriculture in the direction of modernisation is somewhere in the region of £26 million to £36 million. I believe that is a false economy.

The effect of the exclusion of these initial allowances from agricultural machinery and plant and rising costs must be taken into account in determining the next February Price Review. In other words, modernisation is going to be slowed up and at the same time the burden on the food consumer in this country will be increased as a result of taking this step in the Bill.

I hope the Economic Secretary will consider this matter in those aspects because this will not be a measure of deflation but, from the agricultural point of view, it will have an inflationary effect. That is something which the Chancellor said on the Committee stage in this connection he was very anxious to avoid at the present time. If we are going to increase the British share of agricultural production we must change over to new types of farming in certain respects. To give a very clear illustration, we must have more meat produced in this country if we are to increase the meat ration. That means that we should encourage farmers to introduce certain types of machinery such as grass drying plant, silage machinery and all machinery that is devised for producing more feeding-stuffs at home. This Clause does not have that effect.

There are two alternatives which the Economic Secretary should consider. He ought to consider giving us the whole of our case and excluding agricultural plant and machinery from this Clause, or alternatively he ought to exclude from this Clause those types of agricultural machinery and plant which will assist agriculture to make the change-over from other branches of agriculture to the production of feedingstuffs at home so as to facilitate the production of meat.

There is a great difference between the agricultural industry and other industries in connection with initial allowances. I have listened to all the debates on the subject of initial allowances. Hon. Members have talked of large firms and great businesses. Here we are dealing with the small capitalist who has no capital with which to undertake very large schemes of modernisation. His financial stringency has already been noted by the Government in their last White Paper on the subject, and it is a fact that the banks are very chary about extending their credit to agriculture at present.

In every country in the world special provision is made for agricultural credit, because the agriculturist is a small capitalist who needs considerable help from the Government. Until now we have had these initial allowances on agricultural machinery and plant. By the Chancellor's action in the Budget they are removed. I hope that in his reply the Economic Secretary will make it clear that, on second thoughts, the Chancellor realises that agriculture has a part to play in the defence programme and should be encouraged.

Mr. Snadden (Kinross and West Perthshire)

I beg to second the Amendment.

The Amendment was very ably proposed by my hon. Friend the Member for Thirsk and Malton (Mr. Turton). My basic objection to the abolition of these initial allowances springs from the fact that it will do exactly what the Chancellor intends it should do—it will discourage farmers from purchasing machines and plant at a time when the need to expand our own home food production was never greater and at a time when the agricultural industry is being exhorted to increase its efficiency.

We have only to read the White Paper on farm prices referred to by my hon. Friend to see what is the Government's view on that. I do not say that I disagree with it; I am entirely in favour of increasing efficiency, but there comes a time when rising costs get ahead of technical efficiency, and in my opinion that time has now arrived. The removal of these allowances will affect agricultural efficiency and therefore will act as a brake in the process of bringing costs down. which is of paramount importance today.

Since the inauguration of the expansion programme in 1947, the agricultural industry has admittedly gone a long way in capitalising production to meet the demands of the expansion programme, but I do not think anyone will deny that there is still a very real need for new and modern equipment, made doubly urgent because of the steep rise in the cost of production and also because of the shortage of skilled labour. Here I would say to the Minister that the intending call-up of agricultural workers, to which I personally take no exception, is a relevent factor in this matter, and there is no doubt that in many cases, at any rate in my part of the country, in Scotland, the farmer's only solution to the labour problem and the decreasing number of skilled workers on the land, is to increase efficiency through the medium of labour-saving equipment of the most modern standard.

I am not an economist, but I recognise that at the end of the day, when the farmer comes to sell or scrap his machine, it will not make any difference whether or not he had an initial allowance, because it seems to me that if he has had no initial allowance the depreciation allowance will be larger and the balancing charge will mean that the whole cost of the machine has been allowed. I am subject to correction, but I understand that that is the position.

8.30 p.m.

Nevertheless, the fact remains that the initial allowance which we have enjoyed up to date is a very great help in alleviating the initial burden of buying a machine at highly inflated prices. We have only to look over the range of machinery and prices today to see—as anyone who goes to the Royal Show in Cambridgeshire, if the can get away to do so, will see—how enormously expensive agricultural machinery is today. When I entered the agricultural industry 30 years ago, I could buy a machine for about an eighth of what I have to pay today.

This initial allowance has amounted to a loan tax-free from the Treasury to encourage and assist the purchase of necessary machinery in order to increase agricultural efficiency, and I do not think that the problem is solved by giving a year's notice of the change, because farmers do not necessarily have either the money or the credit to allow them to purchase these machines, and at the same time, there is delay in delivery, and the very fact that a year's notice has been given will cause a scramble for the existing machinery, and I think that is bad.

My hon. Friend the Member for Thirsk and Malton (Mr. Turton) has mentioned one or two points that occur to all of us, and I am not going to repeat what he has said. I would simply say that discontinuance of this allowance so soon after the decision to raise the rate to 40 per cent. would seem to me to be evidence of an extraordinary lack of continuity in Government policy, even after making allowance for re-armament, and I believe that the removal of this allowance will have an adverse effect upon home food production at a time when we all know that overseas supplies are becoming more and more uncertain. I plead with the Government to reconsider this point very seriously, and, if possible, to accept this Amendment.

Sir Ian Fraser (Morecambe and Lonsdale)

The policy of this country of continually increasing the prices which we pay for the products of the land is one which is the subject of substantial argument, and many think that the present prices are not adequate but I want to ask the House to look at this thing from a very broad point of view. That policy cannot go on for ever and indefinitely, because it is clearly a very expensive way of getting production from the less well-equipped or the less well-managed farms. If we are to get continuing and increasing agricultural production, it seems to me that it must come out of two things: one is the bringing into production of land which has not hitherto been profitable, and the other is the making of existing farming more efficient. Either of these two policies depends upon capital investment in agriculture.

All of us want the wages in the agricultural industry to be maintained and, if possible, increased. Every one of us is familiar with the difficulty of the farmer who says that new industries arise in the rural districts which are able to offer more attractive remuneration than that which the farmer can pay, and all of us realise that the costs of every kind of agriculture are increasing. It therefore seems to me that the long-term and the medium-term future of our agricultural industry depend upon a national policy which does everything possible to encourage investment in the land and in farming and in machinery for farming.

This step which has been taken by the Chancellor—his general sweeping away of initial allowances, and his unwillingness up to the present to make an exception in the case of agriculture—seems to me to be a deterrent to the most economical way of getting more food out of British land. For that reason, I beg of him to reconsider his attitude in this matter, and to realise that there is no other way so economical to secure more food to be grown in Britain than to encourage capital investment in the land.

There is no other way in which wages can be maintained and increased so economically as to encourage mechanisation. There is no method available to this nation of getting more food out of the land which will repay us more abundantly than to make it worth the while of the small farmer capitalist to put his money into better machinery and better apparatus. To alter the taxation law so that such a process becomes more burdensome to him is not merely discouraging to him but is contrary to the national interest.

Mr. J. Edwards

Nothing that has been said so far about the importance of agriculture would, I think, be denied on this side of the House. What I would contest is the rightness of the deduction which hon. Members have drawn from the importance of agriculture. I may say, in passing, that I think it a great pity the hon. Member for Thirsk and Malton (Mr. Turton) should have implied that he and his hon. and right hon. Friends were more interested in and more concerned about the welfare of agriculture than we on this side of the house. I am provoked into calling on my memory.

In the early 'twenties I was a young bank clerk in what is now an extremely prosperous agricultural community, and when I look back I remember what was happening to agriculture in those years. While it may doubtless be true that agriculture can still be improved, I believe that agriculture has never been stronger, never been in better heart, and never been better able to meet emergencies than it now is. That is not to say that there is not more to be done, but I believe that to be true. Therefore, I do not hold the rather pessimistic view which hon. Gentlemen opposite have put forward.

Of course it is a pity if we have to do anything which impedes modernisation and the introduction of more and more machinery into agriculture. It is a pity if in industry as well we have to hinder the introduction of these things, and we all regret it. But it will not do for hon. Members opposite to take the line that they are entitled to think of agriculture in this narrow way. I beg of them not to exaggerate. After all, what is the position we are discussing? We are discussing what happens when the farmer contemplates buying a piece of new apparatus and he is faced with the fact that there is to be withdrawn from him from 1952 a loan for about one-quarter of the cost. No one can suggest that the full effect of that will be felt. As I said on a previous Amendment, this is a marginal matter. I am sorry that it has to be done—

Mr. Turton

When the hon. Gentleman says one-quarter of the cost he means 40 per cent. of the cost.

Mr. Edwards

No, not if the tax is reckoned. It is more like one-quarter than anything else at the present level of taxation. If the hon. Gentleman works it out I think he will find that I am right, and that it is about one-quarter. Therefore, do not let it be suggested that everybody will then stop buying machinery. That is not what is going to happen. Marginally there will be changes. We are sorry that they have to be made.

I do not, however, agree that there will be a scramble in the present year for machinery—

Mr. Turton

Since the Budget, the prices of second-hand machinery have gone up by something like 50 per cent.

Mr. Edwards

No doubt people who want machinery will try to get it quickly, but there cannot be a scramble for new machinery when the order books are pretty full and the waiting lists for some things are long.

I beg hon. Gentlemen opposite not to take a narrow view about our exports. If we are to sustain the burden of re-armament, we must try to expand exports where we can. Looked at from the point of view of hon. Gentlemen opposite, who are always telling us about the need of importing coarse grains and so on, I would point out that even the things that agriculture wants can only be secured if we can earn enough by our exports to buy them.

Agricultural machinery cannot be exempted from this need in the present circumstances, important though it is for our agriculture to be modernised. Looked at from the narrow point of view, if I were speaking specifically for the agricultural industry, I should recognise that there must be marginal diversion of resources from home to export if we are to earn the wherewithal to buy the things without which a part, at any rate, of our livestock industry in this country cannot be maintained.

Mr. Hurd (Newbury)

We do not export much agricultural machinery to Russia or the Argentine—the two countries from which we hope to get a good deal of coarse grain.

Mr. Edwards

The hon. Gentleman knows that we do not have to export it to precisely the same countries. We still have a large amount of multilateral trading. What we earn in one place, we may use to buy coarse grains from another place. While I do not want to restate the great difficulties that we have in selecting particular classes of assets which are of particular importance to the national economy as a whole—and what I said in the debate on the Committee stage on this still stands—I think that it would be wrong to do this. Even on narrow agricultural grounds, hon. Members opposite have concentrated on one part of the picture when it is necessary to look at it comprehensively.

Mr. Henderson Stewart (Fife, East)

The Economic Secretary has not, I think, considered another aspect of this problem, the aspect of the agricultural machinery industry itself. I have already intimated to the House that I have an interest in that matter, and I repeat it now. I am speaking because I happen to know a little about this business.

The Economic Secretary talked about the importance of exports. He will know better than most of us the very marked increase in the export side of the British agricultural machinery industry in recent years. Last year I went out with a delegation from the machine industry to Canada, with the approval of the Board of Trade. I will not say that entirely as the result of our efforts, but following upon our efforts, we have shown a very substantial increase in our exports of British-made farming machinery to Canada. As the hon. Gentleman knows, we are now selling British machines to America. We sold a good many last year to the Argentine, and we hope to get a good deal of further trade from the Argentine and the hard currency area.

This is the proposition which I put to the hon. Gentleman. If, indeed, this industry, which is one of the oldest British industries, is now making a substantial contribution to the dollar-earning capacity of our country from these exports, it cannot be sound policy on the part of the Government to decrease the home trade of that industry. This industry, like the motor trade and every other industry, needs an almost guaranteed home market to enable it to expand its export market. That is an economic truth which cannot be disputed.

8.45 p.m.

Mr. J. Edwards

I think the hon. Gentleman will agree that, while the suspension of initial allowances on agricultural machinery will have a relatively small effect on the industry and the amount involved will be trifling, the trifling expansion of exports would be worth having.

Mr. Stewart

That is a matter of opinion. We have not yet reached 1952, so that none of us can say with certainty what the position will be, but there are signs now in all branches of the industry of a certain reluctance to purchase on the part of farmers. It may seem that what I am saying conflicts with some of the things my hon. Friends have said, but in fact it is not so. The enormous increase in the cost of production forces us to increase our selling prices. The prices of farm machinery have undoubtedly risen to a very high figure, and next year they are bound to be still higher. The shortage of material, the difficulty of getting it, the increase in the cost of plate, and so on, all contribute towards those higher prices.

At the same time the farmers' expenses have risen, and I predict, with some slight measure of confidence, that next year farmers will not be able to buy the machinery to the same extent as they buy it now. One of the reasons militating against their doing so is this business of initial allowances. Does the Economic Secretary consider this policy to be wise? I hope that between now and next year, when the policy will come into effect, he will get into touch with the machinery industry, and consult with those who are skilled in this matter, because in a year's time serious consequences to that industry may result.

Mr. Joynson-Hicks

I feel that the House is entitled to protest at the way in which it is being treated. Just now we had an important debate on a question of education and there was no Minister present from his Ministry. Now we are considering a matter of agriculture and there is no Minister whatever from the Ministry of Agriculture. In saying that I do not intend any disrespect to the Economic Secretary, but it is obvious from what he said that he has no personal, direct knowledge of the agricultural industry or of what is going on in it. It would be of the very greatest help to the House if we could have the benefit of the advice of the Ministers who are concerned with these Amendments. I see the hon. Member for Wednesbury (Mr. S. N. Evans) in his place. I do not know whether the Minister of Agriculture has been detained elsewhere at the moment and has sent the hon. Member as a deputy to take notes of what is going on.

Mr. S. N. Evans (Wednesbury)

The right hon. Gentleman is away shaking the feather-bed.

Mr. Joynson-Hicks

Even so, I do not think the House would accept the excuse for the Minister not being here. The hon. Member should be on our side in this Debate, for he is always demanding greater efficiency in the agricultural industry. It is for the sake of efficiency that we are pleading with the Government to grant the agricultural industry this exemption from the decision to abolish initial allowances.

As I understood from the original statement of the Chancellor of the Exchequer, the fundamental reason, quite apart from all the economic arguments which have been advanced since, for the abolition of the initial allowances was to try to cut off the demand on the engineering industry for plant and machinery so as to aid production of machinery for defence orders.

Mr. J. Edwards

And for exports.

Mr. Joynson-Hicks

Yes. If that were so, which I am quite prepared to accept, the argument cannot be applied to the agricultural industry, because that industry is equally important for the defence of this country as any programme which may be advanced by the Government in connection with re-armament. The Government have already seen fit to recognise the essential need to exempt the shipping industry. If the shipping industry, to the extent to which it has been exempted, can be freed from the abolition of initial allowances, so should the agriculture industry. The two industries are complementary parts of the defence programme.

I am very glad that the Minister did not claim that a policy had been pursued by the Government of giving to the industry sufficient capital to enable it to renew plant and machinery without the assistance of this interest-free loan, which, it is recognised, the initial allowance really is. That is not so. There has undoubtedly been from time to time the intention of injecting capital into the industry, but I have never yet found a farmer who recognised, from the figures of his own returns and his bank balance, that that policy had achieved success. What has happened is that while the policy has been followed, it has lagged so far behind rises in prices and increases in costs that the producer in the agricultural industry has had to bear additional costs which have more than absorbed the capital injected into the industry during the past five years.

With regard to what will happen, the Government may be assured that the agricultural industry will do what it has done throughout the whole of its history—

Mr. Gooch (Norfolk, North)

Play the game.

Mr. Joynson-Hicks

Yes, it will play the game. It will do everything within its power, and a great deal more than most people credit it with having the power to do, to achieve the target which has been set for it. Farmers, workers, and the ancillary parts of the industry will collaborate to do everything they can to meet the demand. If the Government make things more difficult, it will lead to disappointment and to an increasing sense of frustration, and the Government will find that the efforts of the industry cannot be converted into results.

In regard to the horticultural industry, I hope hon. Members have taken the opportunity of seeing the show which was put on in London recently. They will have seen the tremendous strides made in quality, grading and packing, which have all been achieved as a result of new and modern machinery. If it is to be continued—it is by no means current practice throughout the industry—and improved further, so that the public in this country are able to enjoy the best quality horticultural produce, it can only be done by the installation of additional machinery. If the Government insist upon removing initial allowances, that will be yet another blow at the advancement, efficiency and improvement of the industry. It will be another disincentive—to use the Government's own expression—to the industry's achieving the result which we all desire.

There is a third point which is particularly important in the agricultural industry. The industry is primarily made up of comparatively small units, which lack the capital necessary for comparatively big capital investment. Therefore, if the whole of their effort is to be concentrated, as it is being concentrated at the present time, upon trying to stock up with machinery, it is interrupting the planning of their programme, which is of a much longer term than the Government's planning, and it is disorganising the whole balance of their production and outlook. For this reason, as well as for many others which could be advanced, I claim that there is a special case for the agricultural industry and one which the Government ought to recognise.

Mr. Maclay (Renfrew, West)

I want to correct a remark made by my hon. Friend the Member for Chichester (Mr. Joynson-Hicks). He implied that the shipping industry had been freed from the abolition of the initial allowance.

Mr. Joynson-Hicks

To an extent.

Mr. Maclay

I should like to make it quite clear to agriculturists who might be casting envious eyes on the shipping industry that we are in exactly the same boat and we feel very sad about it. We need our initial allowances, too.

Amendment negatived.

Mr. J. Edwards

I beg to move, in page 11, line 4, at the end, to insert: or that a contract for the construction of the ship, or of the engines for the ship, for those persons had been entered into by them not later than the said tenth day of April. I should first point out that the proviso to subsection (1) exempts from the suspension of initial allowances any payments, even though they may be made after 5th April, 1952, on account of ships which were actually under construction for a trader on Budget day.

When the question of the position of shipbuilding was discussed during the Committee stage we had before us two Amendments. One which was moved by the hon. and gallant Member for Scotstoun (Colonel Hutchison) sought to preserve the right to initial allowances in respect of ships contracted to be bought before 6th April, 1952, and the other, which was moved by the hon. Member for Renfrew, West (Mr. Maclay), sought to preserve the right to initial allowances in respect of ships contracted to be bought before Budget day.

At the time, I made it clear that we could not accept the principle involved in the first Amendment, but I said that, without finally committing myself, I would consider whether it was possible to agree that ships contracted to be bought before Budget day should get the benefit. We have reviewed the matter, and my right hon. Friend has reached the conclusion that there is good ground for excluding from the suspension of initial allowances cases where a contract for the construction of a ship or the engines for the ship had been entered into not later than Budget day.

At the same time I said that we should welcome discussions with representatives of the industry. Discussions have taken place between the representatives of the shipping industry and the Board of Inland Revenue, and I take this opportunity of expressing my gratitude to the representatives of the industry for the help they have given us. In the Amendment there is a reference to the engines for the ship. It was thought, after consultation with the industry, that if a contract for the ship's engines had been placed before Budget day it was only right to give initial allowances in respect of the expenditure on the provision of the ship, whether the contract for the construction of the ship itself had or had not been entered into before Budget day. The Amendment is in addition to and not in place of the exception under the proviso in subsection (1), because there may be some cases where a ship-owner undertakes the construction of his own ship.

9.0 p.m.

Mr. Maclay

Naturally, those of us who have been very concerned about the effect of the Bill on shipbuilding and the re-building and modernisation of the British merchant marine were worried at the original proposals for the total abolition of initial allowance as they first appeared in the Bill. We were worried that those provisions would have a very serious effect on building within the next few years, and we are grateful to the Chancellor, to the Economic Secretary and to their advisers for the trouble they have taken in devising the wording which now appears on the Order Paper.

It has been a question—we started with the Budget Speech; then we came to Second Reading, and then to the Committee stage, and now we are on Report —of feeling towards a wording which would cover what, I believe, was the Chancellor's intention after the Budget speech, that those ship-owners who before Budget day had made decisions to build ships, believing that they would qualify for the initial allowances, should get those allowances; otherwise, grave inequity would have resulted and, possibly, there would have been a serious distortion of the existing building programme.

I think we have now reached a position where those owners who had placed ships in that belief are covered. It has been difficult to find a way to do so, because the technical conditions in the shipping industry in relation to building are not simple. We on our side thank the Economic Secretary for his courtesy in this rather technical problem, and for arranging also that technical discussions should take place outside the House.

But having said that, and after thanking the Chancellor and the Economic Secretary for the work they have done in this respect, one must come back to the original position, which was argued, I admit, at some length in the late hours of the night and in the early hours of the morning for a very long time.

Mr. Manuel (Ayrshire, Central)

Hear. hear.

Mr. Maclay

The hon. Member says, "Hear, hear." He will, however, admit that the importance of the shipping industry to the nation is such, not only in peace but as an essential part of the defence of the country, as to justify even another 12 hours' discussion had it continued.

Mr. Manuel

I quite agree, as long as we can differentiate the relative importance of the ship-owners and the shipping industry.

Mr. Maclay

I do not think we are quarrelling. The shipping industry is what matters. The individual owner is an individual owner; the industry is vital to the nation, and I am glad that the hon. Member has gone on record to that extent.

There were three things that we hoped might happen, in a certain order. One was that shipping would be taken completely out of the suspension of initial allowances. Even the agriculturists present agree, I think, that shipping is in an even more exceptional position than agriculture, because without shipping neither the Army, the Navy nor the Air Force can function, nor can the coarse grains, which are so dear to the hearts of agriculturists, get into this country.

Mr. Joynson-Hicks

I am quite sure that if the agriculture industry has to find itself in the same boat with any other industry, it would prefer shipping.

Mr. Maclay

That was the first main case that we wanted. The Government have decided in the course of discussions that they cannot exempt the shipping industry, and I must repeat the warning which I have given before, because it should be fully appreciated. The effect of suspending initial allowances on shipping cannot really do anything to ease the pressure on the armament industry and on the investment programme, which is, I understand, the main purpose of the suspension of initial allowances, because the effect will not, and cannot, be felt for two or three years.

Therefore, if we avoid war and if, as we all hope and pray, the pressure of rearmament eases off, all that is being achieved by suspending initial allowances on shipping is the risk of changing the mood which determines building in a very delicate industry; a mood which may, if it is changed, bring the risk that three, four or five years from now there may be unemployment in the yards, which would otherwise not have taken place had these allowances been maintained and the industry had gone on with its long-term replacement programme, as it thought it could do, before the Budget speech. That is what I want to emphasise. We are giving a serious warning that the suspension may have serious consequences, depending on the state of the re-armament programme and whether we are successful in avoiding war.

On the second point, we tried to establish in an earlier debate that a year of grace should be allowed. The Economic Secretary made it clear that he could not grant it. I think a certain case has been made by the Government, but it is hard that people who were just on the point of concluding contracts on Budget day may fall outside this concession because the final decision was made just after Budget day. We hope some latitude will be possible by which a contract to build need not necessarily be a formal document with a stamp on it, but a clear decision on the part of the owners to build and, on the part of the builder, to accept the order to build. There are many varied practices in the shipping industry about placing contracts for ships, and I am sure that there must be a little latitude for determining finally what is a contract.

I have made my main point, that there is a real danger in not exempting shipping altogether from the suspension of initial allowances and, having said that, I repeat my appreciation of the way in which the technical argument has been handled.

Colonel Clarke (East Grinstead)

I support my hon. Friend in regretting that these allowances have been withdrawn. In this connection I was astonished earlier to hear the hon. Gentleman say that these were being withdrawn because of the Korean situation—

Mr. J. Edwards indicated dissent.

Colonel Clarke

I understood him to say that the reason for withdrawing initial allowances was because of the Korean situation. I was surprised that it could relate to ships, because the weakness of the world shipping position was shown up by the war in Korea. That, aggravated by the necessity to import American coal last winter, raised the freight markets in an alarming way and showed up our real weakness in shipping. I also dispute the statement that the withdrawal of a quarter of the money that has to be found for payment immediately on buying anything makes very little difference.

Mr. Edwards

May I interrupt the hon. and gallant Gentleman? I am sorry to do so, but he must realise that when I talked about Korea I was speaking to an Amendment seeking to maintain initial allowances generally. I was not talking about shipping. Of course, I had it in mind that I was going to make a concession on shipping, even if the hon. and gallant Gentleman did not know it. Also, he must not refer now to what I said on agriculture as though it applied to shipping. I made it plain that there was a unique service in shipping.

Colonel Clarke

The hon. Gentleman will have to be kept in compartments, because the impression I had was that he was talking on the general situation when he mentioned Korea. The fact that we have to pay a quarter more immediately in the case of a ship which may cost half a million pounds—not a big ship, but a 10,000 ton freighter—is substantial, especially in view of the enormous rise in costs in the last 10 or 12 years. I know more about coasting tonnage than about deep sea shipping and I know that it rose from £14 a ton in 1934 to £58 in 1948. Although some of it may be because of improvement in design, it is mainly on account of the great increase in costs.

I want to emphasise that I think it a great pity these allowances are being withdrawn and to support what has been said in regard to the fact that the system and method of paying for ships differs from that of a good many other chattels one buys and which can be paid for at once.

Amendment agreed to.