HC Deb 19 June 1951 vol 489 cc315-31

(1) Where on or after the sixth day of April, nineteen hundred and fifty-one, a person carries on a trade which consists of or includes the working of a mine, oil well or other source of mineral deposits of a wasting nature there shall be made to him in each basis period an allowance in respect of the depletion of such property.

(2) The allowance to be made shall he an amount equivalent to fifteen per cent. of the gross income from the property in each basis period.

(3) For the purpose of this section "gross income" means the proceeds receivable from the mineral deposits when extracted and from the ordinary treatment processes normally applied to obtain the commercially marketable mineral product or products.

(4) For the purpose of the preceding subsection "ordinary treatment processes" shall include crushing, grinding, concentration and similar processes, but shall exclude smelting and refining.—[Mr. H. Fraser.]

Brought up, and read the First time.

7.0 p.m.

Mr. Hugh Fraser (Stafford and Stone)

I beg to move, "That the Clause be read a Second time."

The object of this Clause is to encourage the production of more raw materials, such as oil, tin, copper, zinc, and all the other essentials we need by companies registered in this country. I think the Committee is well aware of the present shortages. We are only too well aware of the temporary and local shortages which exist owing to re-armament, and hon. Members of all sides of the Committee are also aware of the longer term shortages which either exist now or which will shortly exist in the raw materials which are rapidly becoming near precious metals.

One of the troubles is that this country is fast dropping behind in the development of new fields. All the raw materials, such as non-ferrous metals and fuel such as oil and coal, which we use come from fields which were largely depleted before the 1914 war. Therefore, it is perfectly clear that unless a great new boost is given to the production of these raw materials throughout the Commonwealth, and, indeed, in this country and in the Colonial Empire, there is a considerable likelihood that we shall be left far behind in the race.

It is already quite clear that we are being forced to buy from the United States and other dollar areas raw materials which should be available to us within our own territories and possessions. The Government Front Bench is doubtless well aware that last year alone some 150 million dollars had to be expended on raw materials which could possibly have been obtained within our own area of control. Further, I am sure that hon. Members on all sides realise that should anything go wrong with our Persian oil agreement we shall immediately be faced with an added dollar bill of some 400 million dollars a year in order to replace that oil.

The raw materials situation cannot be exaggerated, and the Clause seeks to give proper encouragement to those engaged in the discovery, mining and production of this great variety of raw materials by bringing taxation in this country into line with world practice. Hon. Members who are knowledgeable about mining matters or about mining taxation know that this is a matter of considerable complexity. In 1945, and again in 1949, some advantages were given to British companies mining overseas or in this country. But those advantages by no means mean that this country is in line with world practice.

What this Clause sets out to do, quite simply, is to change the present basis of depreciation of capital employed in a concern to one of allowing a depletion allowance in respect of matter extracted from the mine or oil well so that the company or persons concerned will have liquid funds available with which to carry out further exploration. That may seem to hon. Members opposite something of a revolutionary move. There are theoretical arguments against granting at this time such new allowances, and there is perhaps the obvious Socialist argument that oil and mineral shares on the Stock Exchange are having a boom.

There is also the question of equity as between the various types of industrial companies and the mineral exploiting or oil seeking types of companies. But there are also theoretical arguments in favour of this Clause. I shall not weary the Committee with such arguments, but will rather turn to the overriding necessity of seeing that this country is adequately supplied with these scarce raw materials, and, at the same time, of seeing that we view the problem which faces us today, not merely as it was once put of having to export or die, but with the necessity of either importing raw materials or perishing.

This Clause requests the Government to give preference to persons engaged in these various industries so as to bring their advantages in the world into line with those offered to other companies, notably American, Canadian, Swiss and companies of other nationalities who are trying to exploit the world's mineral deposits. It suggests that there should be a 15 per cent. depletion allowance, which is something far less than is given at the moment to Canadian and American companies competing in the world market.

As the Attorney-General doubtless knows, 20 per cent. depletion allowance is given on certain strategic raw materials extracted in Australia. In new mines in Canada, whether they be mining the more difficult raw materials like cobalt or nickel or the more common materials like bauxite or iron ore, once a certain tonnage has been mined the mine is free of any form of Income Tax or taxation over three years of its life. After that period it is allowed 33 per cent. depletion allowance on the profit it makes.

If it be a gold mining company it is allowed a 40 per cent. depletion allowance on the gold it extracts. In the U.S.A. a 15 per cent. depletion allowance is permitted on all minerals, with 23 per cent. on sulphur, and 27 per cent. is permitted on oil. I am glad to see the Attorney-General is now checking his figures on this subject. There is also a 5 per cent. depletion allowance on coal.

This, of course, gives an immense advantage to some of these American and Canadian companies. We know that in this country the Government are now aware of the difficulties of procuring and finding these raw materials. We know that the ex-Minister of Works has just been allowed to graduate through the Fun Fair to become Minister responsible for raw materials. But unless the Government deals with the basic question of producing raw materials and giving encouragement to their production it merely becomes a matter of having a Minister whose chief job is asking the boss rather than the brother to spare a dime. If that is to be the case, it would be better to employ a film star in that capacity. At least his face would be well known in the United States.

The Committee is faced by the danger that unless action is taken now we shall find ourselves with raw material deposits that are becoming exhausted and the companies without the funds to carry out the necessary exploration. The basic problem of all mining and drilling, whether for oil, lead, molybdenum, sand or gravel, whether on a world basis or on a company basis, is not the working of established deposits but the discovery of new deposits which can be worked.

Mining means risk and it means plenty of risk capital. No one is prepared to undertake these risks unless two conditions can be fulfilled—a good return for the risk capital involved and the possibility of a continuation of development of new mining or oil wells. That is precisely what the present British level of taxation does not permit. It allows for no expenses proper to exploration. The whole basis of successful mining or oil-seeking ventures is continuous exploration. Under the present system of taxation there is no surplus capital available for that purpose.

The Millard Tucker Report has commented on this and has pointed out the absurdity, under the present ingenious and complex tax arrangement, of limiting the field of operation which can be written off to the field where the initial development was made. That means to say that a company searching for zinc in Australia is not able to write off its exploration expenses unless its operations are undertaken in the same field, that is, in Australia. If it searches for zinc in Northern Ireland, as American companies are now searching for minerals there, it is not allowed to write off its expenses.

As hon. Members are aware, oil has been discovered in an area of some score and more miles under the sea in the Gulf of Mexico. The actual expenditure undertaken to date by American oil companies on that exploration and discovery alone is 240 million dollars and the return so far has been a mere six million dollars. We have to face the fact that there is grave danger that there is no risk capital flowing into British mining or oil boring to the extent to which it should be flowing. If one looks at short-term speculation on the Stock Exchange one finds it is the speculation of people buying already established stock. The number of new companies floated off successfully since the war is negligible compared with the mass in America and the scores of companies in Canada floated off for mine and oil discovery.

7.15 p.m.

The danger is that British companies will become less adventurous and less speculative, except those still working the richer seams or richer fields which are available on the surface of the earth. Canadian, American and even Swiss and Belgian companies will begin to take the lead, and that means, of course, that this country will not have the same claim on these precious raw materials as it had in the past.

After all, it is not very long ago that the main source Of the world's copper supply was the island of Anglesey, and it is not very long ago that this country controlled the world's mining market and could bring into this country all the raw materials and oil it required. But that is no longer true and unless the Government look at this matter seriously even the present position will be gravely endangered.

When one looks at our existing mining companies one often finds that their reserves are running low and that, owing to taxation, they have not been able to build up sufficient reserves to carry out exploration to make sure that mining and production continues. After a few hundred or even a few score of years the richer lodes and seams are worked out and one finds that more and more control is falling into the hands of Americans, Canadians and possibly other foreign nations. Perhaps that does not worry those who believe they have control through the price mechanism.

But they will find that under the American Foreign Assistance Act, 1948, every American company working overseas is forced by American law to render to the American Government as much minerals as the American Government may decide should be rendered under what is called the Klug Act of that year. The expansion of American investment in this field can be realised when it is remembered that in that very year, 1948, the "small" sum of 700 million dollars was invested in mining. Unless we can bring mining taxation into some relation with American practice that process is bound to go on to the detriment of this country.

There are other arguments which also make this new Clause of some importance. The first is concerned with administration. The 1945 Act as it applies the present formula which is an ingenious but complex one is liable to error owing to the fact that it is based on two uncertainties; one the final price of the mineral, the other the amount of the ore body within the mine. Therefore, there is a possibility that both the tax collector and the taxpayer are uncertain. There are other simplifications of the whole question of mining taxation that seem to be needed, and something along the lines I have suggested is surely the quickest and most successful way of ridding the system of the complexities which now surround it.

The next argument is the one of common sense. As the law of taxation is interpreted more advantages are given to a British company registered in this country mining tin in Bolivia than to a British company registered in this country mining tin in Cornwall. I know that in 1949 the Attorney-General produced some forensic arguments with great skill to prove his point. We know that the point which he set out to prove was a perfectly good legal one but surely in these times it is fantastic that we should not be able to encourage the development of our resources in this island, which are considerable, because that is an interpretation of the law which while correct can be got rid of by producing a new law, to the advantage of all engaged in oil, tin, copper and molybdenum production in the whole British Empire.

The final argument which I wish to put forward on this issue is that the tax as it stands puts an intolerable strain on British subjects who are competing in the world mining market. It means, first, that foreigners are unwilling to enter into contracts with this country or with companies registered in this country, because they know that the rate of taxation on mines and oil wells is far higher here than anywhere else. Therefore, they are unwilling to see our people developing their resources, and they prefer to see Americans or Canadians doing so, because they know full well there will be more money in the kitty from which they can have a "cut."

If one looks at what has happened in Persia, do the Government consider that one of the root troubles in Persia has been the rate of taxation in this country? If they look at the figures and see that the Persians were receiving in royalties only one-third of what was paid in tax to this Government, they might think again, because what has happened in Persia might happen elsewhere. If the American system of taxation had applied to our oil companies operating in Persia, if there had been this depletion allowance rather than a depreciation allowance, it would have meant that the standard of royalties that the company could have afforded to pay would have been infinitely higher.

We can see the same thing happening in other connections. Throughout the world today British and American companies in certain areas are working or trying to work in harmony. I can think of two major oilfields in which British and American capital is working jointly to produce oil. With the present level of taxation in America on oil production—there is a 27 per cent. depletion allowance, compared with no depletion allowance in this country—it stands to reason that the American side of the partnership more and more demands that the company should come under American registration. It stands to reason that for American capital it is fantastic to have to pay British rates of taxation. That is a great danger. Without mentioning any names, I know that the Attorney-General and the Treasury must be fully informed about the two areas where there is a danger of that happening.

Those of us who have put forward this Clause realise that we are asking for a very large allowance which over a period of years will cost the Government a large sum of money; of that there is no doubt. If this Clause, or something like it, is accepted it will cost the Government probably more than a score of millions of pounds. But if we do not bring our taxation of mines and oil wells and the rest into line with American and world practice we face two dangers. One is that our wells and mines will not be developed; the other is that they will fall into foreign though friendly hands, which, in this day and age, I believe is something that we cannot afford to allow to happen.

The problem is very grave. We can see how changes in taxation have been carried out in the past and recent past. In 1918 we saw the whole system of taxation changed and the system of depreciation brought in—

The Chairman

The hon. Member cannot go into all these details on this new Clause. He has been given a good deal of latitude, and I hope that he will not go into other matters which are remote from the Clause.

Mr. Fraser

I will conclude, Major Milner, by saying that this issue is very grave. The price that the Government will have to pay in granting this or some other similar concession will immediately be high, but unless such a concession is granted, and granted soon, the result for our mining and oil industries will be disastrous.

Sir Edward Boyle (Birmingham, Handsworth)

This is not the first time that this subject has been discussed on the Finance Bill. Hon. Members may recall that two years ago my hon. Friend the Member for Bodmin (Mr. D. Marshall) put forward a similar proposal last year during the Report stage which was perhaps rather more limited in scope than this new Clause. Those of us who have put our names to this Clause agree that it represents a new and, on the face of it, perhaps a revolutionary principle from the point of view of the Inland Revenue.

We quite understand that hon. and right hon. Gentlemen opposite may look at it with some suspicion at first sight, both from the financial and the legal points of view. But I hope that they will at all events carefully consider the suggestion made, because those of us who have put down our names to the Clause think that it will only be by allowing producers in the mining industry to build up tax-free funds, based on a depletion allowance, that the work of discovering new mines can be carried on.

In the mining industry today the burden of replacement costs is possibly even more severe than in the manufacturing industries. The costs of geophysical exploration and prospection are steadily rising, and this work can only be financed from the funds of mines which are at present successfully in operation. These mines are all wasting assets. When a similar Clause was discussed two years ago, it was suggested that there was an alternative solution—namely, that there should be an allowance in respect of all the capi- tal expenditure which had been incurred in getting a new mine going. That is obviously an alternative for consideration, but I would point out that the tax system only makes contact with mines that are successful. The funds from existing mines have to finance not only new mines which turn out to be successful, but also the empty prospects which have to be written off as losses.

I should like to deal with one classic objection to the principle of the depletion allowance. It is often suggested that if a mine is successful a depletion allowance might mean that a company could recoup its original capital over and over again in other words, that the funds gained from a depletion allowance might be very much greater in the long run than all the money which had originally been laid out in capital expenditure on the mine. One can only say that, where this administrative expedient has been tried, as in Canada and the United States, it has not worked out like that in practice. In those countries, the tax-free depletion funds have provided both the incentive and the finance for new enterprises to be undertaken by the mine producers.

7.30 p.m.

As my hon. Friend has said, we are faced today with a serious raw materials position, and unless we want to go cap in hand for these materials, we must increase the number of producing mines which are controlled from this country. Faced with this serious position, there seems to be a very strong case for a full and careful consideration of the bold administrative experiment which we suggest in this Clause.

Mr. Ormsby-Gore (Oswestry)

I, too, wish to support this Clause, moved so eloquently by my hon. Friend. I do not think anyone in the Committee will deny that a definite stimulus to the opening up of new sources of supplies of raw materials is a very urgent necessity for this country at the present time, and all this Clause seeks to do is to provide that very necessary stimulus.

I should first like to make it quite clear that we do not accept that mining operations are in any way comparable with ordinary manufacturing operations. In no other industry, for instance, is there the state of affairs where to increase pro- duction one has rapidly to bring nearer the day when the most important and valuable asset becomes entirely valueless. We therefore believe that in industries involving the working of natural deposits of a wasting nature special taxation and special fiscal methods are urgently required. These could be provided in three different ways, and I want to indicate quite briefly why we have decided on this particular method.

The first method the Government could introduce would be to increase and extend depreciation allowances. Certainly proposals of that kind are included in the Millard Tucker Report. We believe that those recommendations are extremely desirable, but they are really only tinkering with the problem, and, while we entirely support them, we think that they would do no more than give justice to mining interests vis-à-vis other industrial and manufacturing interests. These concessions on depreciation allowances alone would not be in accordance with our fundamental proposition that mining operations and extracting operations of this kind are quite different from ordinary industrial undertakings.

The second method the Government could adopt would be a method which has been widely canvassed, and which was mentioned by my hon. Friend, and that is the allowing of tax-free profits for the first three years of operation. That, of course, would assist mainly entirely new companies, and I think everyone would agree that in the near future it is to existing and well-established mining companies that we must look for an increase in the supply of raw materials.

We come, therefore, to the third method, of depletion allowances, which we have selected and embodied in this Clause. It is a method which, as we all know, already operates with success in the United States, Canada, Australia and other countries. It provides a definite and urgent incentive to all types of undertakings, both old and well-established ones as well as new ones, and I think it is to the expansion, exploration, surveying and proving by existing companies that we must look for the most significant results in the years directly ahead.

We on this side do not dispute that this is a proposal to give a very special consideration to a special section of industry, but I hope that the right hon Gentleman and his advisers will take a long view of this and consider whether it might not be better to take a slightly smaller slice out of the ever-expanding cake rather than a very large slice out of a diminishing cake—because that is the tendency that we shall see under existing taxation.

I know that this kind of argument is rather difficult for certain hon. Gentlemen opposite to follow, and I appreciate that they have some difficulty in looking on this kind of proposal in the right light. For instance, last week we had a rather extraordinary outburst from the hon. Member for Kirkdale (Mr. Keenan), although admittedly it was towards the end of a very long session, when he interrupted one of my hon. Friends and said:

The point that not merely amuses some of us hut disgusts us is that for two nights and a day we. have had discussions of proposals for protecting property and finance."—[OFFICIAL REPORT, 12th June, 1951; Vol. 488. c. 2207.] That has been the long-sustained opinion of some of his hon. Friends, who are apparently very deeply moved by it. Such an attitude indicates that they believe that if only the Chancellor would really knock property about and do it some really serious damage, all the wage earners would be better off. That is a purely Marxist conception of our economic life, and one which we on this side of the Committee entirely repudiate.

We do not accept the proposition that what is good for capital is automatically bad for labour, and I hope that the Chancellor and his advisers have abandoned that kind of old-fashioned restrictive Marxist thinking for a more modern and expansionist outlook. I therefore urge the right hon. Gentleman to give really serious consideration to this Clause, which I believe will in the long-run help to increase the security and prosperity of this country, while at the same time helping—and this is just as important—to increase the, prosperity and security of the poorest people in this country.

The Attorney-General

The three speeches to which we have listened were directed to different aspects of the problem raised by this Clause. The hon. Member for Stafford and Stone (Mr. H. Fraser) directed his speech to the general urgency of some proposal of this sort. He referred to the situation in Persia, and so on, and said it was of extreme urgency that we should do the most we could to stimulate the development of mineral resources here and abroad. On that aspect of the matter I say nothing. I do not say that I disagree with him, and I do not say that he had not a great deal to commend his argument when he stressed the importance of these matters. But because I think they dealt with the immediately relevant issue raised by his Clause, I wish to direct my observations principally to the two speeches which followed.

The hon. Members for Birmingham, Handsworth (Sir E. Boyle), and Oswestry (Mr. Ormsby-Gore) both directed their argument to the contention that, being of urgent necessity, it is right to adopt this completely new form of taxation. It has been adopted abroad, but it is a new form here, having regard to our own taxation structure. We feel very serious difficulties in the way of adopting that suggestion, and I shall endeavour to say why.

To begin with, of course, this Clause simply provides, without any qualification, for a 15 per cent. allowance on gross income. Hon. Members know that already a great many allowances are given against capital expenditure. There are capital depreciation allowances under the Income Tax Act, 1945, and there are special allowances for mining works in the case of mineral deposits. To begin with, the allowance which is now proposed is in addition to those.

Mr. D. Marshall

The right hon. and learned Gentleman mentioned the depreciation allowances under the Income Tax Act, 1945, but would he not agree that with the reduced purchasing power the depreciation allowances have depreciated out of all existence?

The Attorney-General

I accept that the value of money has diminished—nobody would gainsay that—but that is not at all relevant to the point I am trying to make. I am simply trying to point to what seem to me to be defects in this proposal. The defect of which I am at present speaking is that this is an overall allowance in the form of a 15 per cent. exemption of Income Tax which is given in addition to all capital depreciation allowances, not only those which are obtainable in respect of plant and machinery but to special ones—

Mr. H. Fraser rose

The Attorney-General

May I finish this point and then I will give way. My speech will be more incoherent than usual, if I am interrupted in the middle of a point.

I was saying that this is an allowance in addition to all capital depreciation allowances, not only those which are obtainable in respect of plant and machinery but the special allowances which are given in the case of mining works. That is the first objection.

Mr. Fraser

I am sorry to interrupt the Attorney-General. I only wanted to save him the trouble of speaking further on this point. As I tried to point out in my speech, this Clause would have the opposite effect to what the Attorney-General is saying.

The Attorney-General

I can only say that it would not. It may be that the hon. Member intended it so to do, but all his Clause does is this. I am not trying to make any debating technical point about it, but I assumed from his speech that his intention was that there should be this additional allowance and that it should be an additional exemption of 15 per cent. on top of the capital depreciation allowance. He tells me that that is not his intention, but if that is so then his Clause needs re-casting. As it stands, not only does it do what I have said, but it would also be an addition to the allowance in respect of capital expenditure on the acquisition of mineral sources which was introduced, I think, in last year's Act in relation to foreign mineral deposits.

As hon. Members know, this is an allowance against capital expenditure available to the first purchaser, to the full extent of the amount which he has incurred by way of capital expenditure in acquiring the overseas deposit. This allowance would be in addition to that. The hon. Member says that he wants to sweep those aside, but even if we do sweep those aside and say that we are going to substitute this allowance for those allowances I would say that it is a complete departure from the whole of our tax structure. The whole of our tax structure has been based upon the principle that allowances are given against the actual capital expenditure.

This proposal has a vice which, at any rate, in our view is difficult to condone. It amounts to a preferential allowance on Income Tax rates. It means that persons who run mining undertakings are going to be taxed at a lower Income Tax rate than anyone else. Once we introduce that principle where are we going to stop? The hon. Member for Stafford and Stone devoted his speech to the importance of developing mining resources. Other hon. Members may point to other sectors of our industry which are extremely important and which also require stimulating.

If one is going to adopt the principle that a preferential rate of Income Tax should be given to a particular sector of industry, what is one's answer to be when other sectors of industry ask for the same relief? If that preferential rate were allowed for one sector of industry and not for others, we should have a higgledy-piggledy system of taxation and we should have different sectors of industry taxed at different standard rates. I am sure the hon. Member would not desire that result. It would lead to complete chaos in our Income Tax structure.

7.45 p.m.

The hon. Member for Oswestry (Mr. Ormsby-Gore) said that, at any rate, that had not happened in other countries. In the case of the United States I am able to point to one extract from a report which appeared in? The Times" in January, 1950. It is headed "Mr. Truman's Tax Message To Congress." The report said: Mr. Truman said he knew of no loop-hole in the tax laws so inequitable as the excessive depletion exemptions now enjoyed by oil and mining interests. That, at any rate, is a fairly stringent stricture upon the system as it has been found to operate in the United States.

Mr. H. Fraser

I would point out that there is a move at the moment to reduce the oil depletion allowance from 27 per cent. to 15 per cent.

The Attorney-General

Even if it is reduced I am not sure how far that would meet the criticism that it is a loop-hole. I suppose if the allowance of 27 per cent. were reduced to 20 per cent., it would be a less profitable loop-hole, but that would not prevent its being a loop-hole.

Mr. Ormsby-Gore

In Canada the Government have increased the depletion allowance from 25 per cent. to 33 per cent. on their own initiative.

The Attorney-General

I have not searched the newspapers for comments which have been made on the operation of the same system in Canada. I am not in a position to say whether the experience of the operation of the system in Canada is different from the experience to which President Truman refers in his speech.

At first sight it seems to us that it is quite out of the question to accept this proposal, for the reasons I have given. It is simply a proposal to give a preferential tax rate which would lead to the most hopeless chaos. If we are to act fairly as between different classes of taxpayer, we must say that as one class is entitled to a preferential tax rate so must we consider the claims of other sectors of the tax paying community to see whether we ought similarly to extend to them such preferential rates of tax.

Reference has been made to the Millard Tucker Committee. That Committee recorded the view that business profits of a mining concern could not be properly computed without an allowance for capital expenditure. They went on to say that the problem was one of a class where the taxation treatment of the owner of a business could not be considered in isolation from the treatment of other classes of taxpayer.

They said it would be wrong to recommend an allowance to the purchaser without examining the question whether there should be a corresponding charge on the seller and what effect the transactions would have upon the Schedule "A" liability of the parties. In other words, they were limiting their consideration prima facie to allowances on purely capital expenditure, but they went on, having posed the questions and having indicated those questions which would need consideration, to say that it was not really within their terms of reference and that it was one—and in this I would respectfully agree—which would be proper for consideration of the Royal Commission under Lord Justice Cohen.

I have ventured to criticise the proposal but, as I say, in due course the question of depreciation allowances in connection with mineral rights will, no doubt, form part of the subject which the Royal Commission takes into its consideration, and this suggestion, if it is put before the Royal Commission, would no doubt also be carefully investigated by them. At the moment, I hope the Committee will agree that, at any rate, I have given reasons why we should not accept the Clause as it stands.

Incidentally, as the hon. Member who moved the Clause has suggested, it would involve a very considerable expenditure. I am told that in the year it would cost approximately £25 million. We could not possibly accept the Clause as it stands on the Order Paper. What may eventuate as a result of the findings of the Royal Commission, if they investigate this suggested departure from our taxation schemes, I cannot say, and I can give no kind of undertaking; but I hope the Committee will agree with me that, for the reasons I have given, we could not accept the Clause in its present form.

Several Hon. Members rose

The Chairman

I hope the Committee will agree to come to a decision. The time which I was assured this Clause might take has already passed and the right hon. and learned Attorney-General has given a reply. I hope that the Committee will come to a decision soon.

Mr. D. Marshall

I wish to make only two points, and I will be brief. I certainly do not wish to detain the Committee for very long but, having heard the argument which the right hon. and learned Attorney-General has just given to the Committee, I thought there was a point which perhaps he had not taken into consideration. He based his argument upon the fact that there should not be a different standard of tax on this industry from that imposed on another. But surely he would be the first to agree that the principle of Purchase Tax in itself with its different rates makes such a difference in taxation.

The Attorney-General indicated dissent.

Mr. Marshall

The right hon. and learned Gentleman shakes his head, but in the case of Purchase Tax there is a difference in the amount of taxation charged.

The Attorney-General

I was dealing with the standard rate of tax on income; that is the difference.

Mr. Marshall

That may be so, but at the same time there is a difference in tax in the example I gave.

The point I wanted to emphasise was this—and I said that I would not detain the Committee for any length of time: there is no hon. Member in the Committee who does not agree that one of the greatest difficulties which confronts us now and which will confront us for many years to come is the shortage of raw materials. The right hon. and learned Gentleman himself accepted the principle which was argued by my hon. Friend. The question is whether anything can be done to stimulate the production of these raw materials. But it is quite certain that if action is not taken by way of relief from taxation, nothing will be done to encourage the production of raw materials from our own soil. A few years ago I raised the same question in connection with Cornish tin production.

I think the right hon. and learned Gentleman can see for himself that, with the rate of taxation at its present level and without any stimulus by way of relief of taxation at all, it is quite absurd to expect adventurers, such as we mean by the old use of the term, in the Cornish tin industry, to explore the possibilities of obtaining the extra mineral wealth from our own soil.

I sincerely trust that when the Royal Commission has been set up it will look into this matter fully, as the right hon. and learned Gentleman rightly suggested, and will look into the possibilities of stimulating the production of mineral wealth in our own country. I trust, too, that it will look into methods of achieving that end. In my view the only method is by using a form of relief of taxation which will quicken interest and will provide an incentive to explore the possibilities of obtaining that extra mineral wealth.

Mr. H. Fraser

In view of the right hon. and learned Gentleman's inability to do anything further today without redrafting of the Clause, and pending the further report of the Cohen Committee. I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.