HC Deb 18 June 1952 vol 502 cc1416-31
Mr. Mitchison

I beg to move, in page 57, line 35, to leave out "of metal."

Mr. Deputy-Speaker

It will probably be for the convenience of the House to discuss with this Amendment the next four Amendments in the name of the Chancellor of the Exchequer—

In line 35, after the second "of." to insert "coal or."

In line 35, after "wells," to insert" or asbestos."

In line 43, to leave out "Provided that," and to insert: (2) The Board of Referees may, on an application made in that behalf, by order direct, as respects a source of mineral deposits of a wasting nature of any kind other than those mentioned in the preceding subsection, that where a body corporate's trade or business consists of or includes the working of such a source, each of the percentages referred to in the provisions mentioned in the preceding subsection shall be deemed to be increased to such extent, not being more than six per cent., as the Board think necessary having regard to the extent to which, by reason of the wasting nature of the source, the benefit of capital expenditure incurred in that trade or business may be exhausted at a greater rate than in the case of other classes of trades or businesses. (3).

In line 44, to leave out "the source," and to insert: such a source as is mentioned in the preceding provisions of this section.

Mr. Mitchison

The original Clause gave certain additional percentages in cases where a body corporate's trade or business consisted of or included the working of any source of mineral deposits consisting of mines of metal or oil wells. When the matter was raised during the Committee stage a number of cases were put to the Chancellor in which there appeared to be an exactly similar claim on the ground that they were also cases of the mining of wasting materials. It was pointed out that the reference to "wasting materials" was irrelevant because any mining must necessarily be of wasting materials.

2.15 a.m.

The instances given were coal and asbestos, which now appear in the Chancellor's Amendments, and also industrial diamonds, which was urged by the hon. Member for Altrincham and Sale (Mr. Enroll). Consideration of these matters was promised, and the suggestion was made that that did not cover the whole question. The substance of the matter is that where there is a rate of wasting greater than that in the working of ordinary plant or machinery in any factory, as there is almost inevitably in any mine, coupled with the additional factor that there is an absolute wastage—that which is mined is taken out of the ground and disappears once and for all—then there is some claim to relief. I can think of no exception to that.

That is quite clearly recognised not only in the Millard Tucker Report, which was of course not dealing directly with this tax but with the general question of taxing wasting assets of this kind, but also in the Income Tax legislation itself, which provides for special relief in annual allowances in dealing with mines and oil wells. There is no special preference given to metals, and when the matter came to be considered by the Millard Tucker Committee there was no special preference given to metals. It was recognised that any mining involves this question of wasting assets, that any oil well involves exactly the same question, and that there could be no real distinction.

All of us on this side of the House recognise that what is now proposed by the Chancellor's longer Amendment—that referring to the Board of Referees having a discretion, on evidence, to give relief not exceeding that given in the cases specified in the Bill—is a concession of some value that goes some way to meet the points put forward. But we repeat the Amendment put down originally in the name of the hon. Member for Altrincham and Sale to make the concession cover all cases of mines to the same extent.

Let me give our reasons for still preferring that Amendment, while feeling grateful for the concession made as regards the Board of Referees, so far as it goes. First, it is much simpler; second, it is in line with Income Tax legislation as regards mines, oil wells, etc., and annual allowances; third, it is in line with the treatment of the matter by the Millard Tucker Committee. Lastly, speaking for myself, I feel some doubt about the Board of Referees.

I know that the Board have a statutory existence. They have certain functions under the Income Tax Acts, and we were told that as regards the rather similar point under the Excess Profits Duty they had considered some cases. But do they meet often? Who are they? They have no statutory qualification except, so far as I know, independence and appointment by the Treasury. I am told that in practice they are independent businessmen and are set up to decide on these matters. I should like to know how active their proceedings are and why this particular duty is to be entrusted to them rather than to any other of the bodies concerned in adjudicating upon Income Tax questions.

I have an uneasy suspicion that what we may be trusting this somewhat important matter to, under the Chancellor's Amendment, could be not unfairly described as a board of dodoes who are defunct for most other purposes. I am all for dodoes in their proper place, but I do not want to revive those extinct birds when there are already a great many competent fowl engaged on Income Tax questions.

We are told the great merit of this Budget is its simplicity. Well, it is late at night to make any general comment about that, and it would undoubtedly be out of order, but really matters have reached such a stage that it would be better not to introduce any further complication unless it is really necessary to do so.

When I look at what I hope I may quite politely call—because after all these gentlemen do not actually exist until they are appointed—the"Board of Dodoes," I am very puzzled as to what exactly they are to do when they have to decide the question which the Chancellor proposes to leave to them. They are not to exceed an increase of 6 per cent., but they are to give something having regard to the extent to which by reason of the wasting nature of the source, the benefit of capital expenditure incurred in the trade or business may be exhausted at a greater rate——

Mr. Deputy-Speaker

I do not quite understand. I think that the hon. and learned Gentleman is speaking to the wrong Amendment. I thought the Amendment he was moving was that in Clause 52, page 57, line 35, to leave out "of metal."

Mr. Mitchison

I was taking the four Amendments together.

What I was going to say was, as regards the wasting nature of the sources, it is obvious that all mines and oil wells are wasting. They cannot carry the matter any further. As regards the length of time over which the source will subsist, it seems that there is already provision under Clause 52 (1) designed to deal with that aspect. I find it difficult to see how the gentlemen who have to adjudicate upon this matter cannot be influenced by the provisions in that Clause and, indeed, it would be somewhat unfair if they did not follow it pretty closely. Under those circumstances it seems to me that the directions as to what they are to do are distinctly uncertain, and the advantage of having them do it somewhat doubtful.

Having made these criticisms, I should like to say once again that, notwithstanding my preference for our own Amendment to apply the matter to mines generally instead of merely to mines of metal, we do recognise the concessions that have been made by the Chancellor in the arrangements which he proposes for the Board of Referees. These go a long way to meet the criticisms made in Committee. In short they are very much better than nothing. They meet the substance of what we are asking for, and while we prefer our own Amendment, that does not prevent us being grateful if the Amendment is rejected and the "Board of Dodoes" is revived or restored to increased vigour for this particular and, I think, rather peculiar purpose.

Mr. E. Fletcher

I beg to second the Amendment.

I also much prefer this Amendment to the series of Amendments which have been put down by the Chancellor of the Exchequer as a result of the useful discussion during the Committee stage, when it was recognised that the Bill did not go far enough and that some changes were necessary. It will be appreciated that in taxation matters there is a considerable difference between companies that are engaged in any kind of mining activity, extracting things from the soil which are necessarily a wasting asset, and those companies engaged in productive activities like the production of textiles and other manufactured goods. Therefore, it has always been recognised that in taxation some concession of a capital nature is necessary to mining companies.

The objection we felt to this Clause as originally drafted was that for some quite obscure reasons concessions were limited to companies which were engaged in mining metals or in dealing with oil. We thought that the appropriate way of eradicating a quite unnecessary distinction would be to leave out the words "of metal." That is the simple nature of the Amendment which we propose. We see no reason why there should be any difference in this respect between mines of metal and mines of any other commodity. There are various non-metal mines which are equally deserving of this concession.

It is perfectly true that the Chancellor's Amendments seek to deal with certain specific commodities that were mentioned during the Committee stage. Coal and asbestos, for example, are dealt with specifically. But there are a number of other substances, some of which were mentioned on the Committee stage, for example salt, china clay, fluorspar, anhydrites, gypsum, pitchblende and others, all of which stake out the same kind of claim for relief, based upon the wasting nature of the commodity which is extracted from the earth.

It seems to us quite immaterial whether the commodity is a metal or a non-metal. The essential factor is that it comes out of the earth and there is a limited quantity in the earth, and that therefore there should be some allowance for capital depreciation. Our Amendment has also the merit that it is in line with existing taxation statutes and, as has been pointed out, in line with the recommendations of the Millard Tucker Committee. Knowing how much importance the Government attach to any Royal Commission or Committee which makes any recommendation, I should have thought that they would have welcomed recommendations coming from such an august body.

I do not like the suggestion that the companies should be given the right to go to the Board of Referees. Surely, it is for us to decide these matters; and these non-metal mining companies ought to know where they stand and ought to have the same advantages as metal mining companies. Why should china clay companies, for example, have to go to the Board of Referees?

Does any hon. Member know who comprise this Board of Referees, what it does, or what its qualifications are? And what expenditure and inconvenience are involved in staking a claim before the Board of Referees? My hon. and learned Friend the Member for Kettering (Mr. Mitchison) called it the "Dodoes." I do not want to make any disparaging remarks about the Board, but we think it is much better that this House should legislate and take responsibility and not continually refer matters to some outside extraneous body. Therefore, for these reasons, I hope that the House will accept our Amendment in preference to those of the Chancellor.

2.30 a.m.

The Solicitor-General

If I may say a word about the position under the old Excess Profits Tax, the House may remember that when E.P.T. was in existence, various industries could put forward claims for increased percentages. These claims were adjudicated upon by a board of referees. The hon. and learned Member for Kettering (Mr. Mitchison) has referred to the Board of Referees in somewhat derogatory terms. I do not think that those terms are in the least degree justified. The Board of Referees consists of persons drawn from a panel of businessmen, to whom questions of this character are from time to time referred.

What happened under the Excess Profits Tax legislation was that in relation to a number of industries, claims for extra percentages were granted by the Board of Referees. They could only give an increase only so far as they think necessary to allow for the consideration that by reason of the wasting nature of the natural source in question, the benefit of capital expenditure incurred by the persons carrying on such trades or businesses may be exhausted at a greater rate than in the case of other classes of trades or businesses. This Clause with two minor exceptions, began by giving an automatic increase to all those industries which established their claims under the Excess Profits Tax legislation for increased percentages. The two exceptions were coal and asbestos, and the first two Amendments, in my right hon. Friend's name, are to add these two industries to the lists of industries which will automatically get the increase specified in Clause 52 (1).

It follows that those industries which have made out their claim to an increased percentage under the Excess Profits Tax legislation will not now have to go before the Board of Referees to make out their claim again. They will get that increased percentage as of right under subsection (1). In the Committee stage, the right hon. and hon. Gentleman and others on both sides of the House raised questions regarding other industries, some of which had claimed before the Board of Referees for an increased percentage and had failed, and some of which had not, for one reason or another, put forward claims.

On consideration, we thought the right course to take, and it is the course which these Amendments seek to adopt, was to revive the Excess Profits Tax system in relation to the Excess Profits Levy: that is to say, to make provision for any industry, which wishes to go before the Board of Referees and seek to establish its claim to an increased percentage.

There is no limitation upon the type of industry which can come forward, whether it is sand or ballast. But, when I say type of industry, it must relate to mineral deposits of a wasting nature. Whether it is sand or ballast or anhydrites, any industry of that character can come forward and seek to make out its case just as under the Excess Profits Tax legislation they could seek to make out their case.

If these Amendments are accepted, we shall be brought back to the position which worked quite well during the war under the Excess Profits Tax, with this variation that the claims which were established under that tax during the war are recognised as being entitled to the increased percentage without having again to be established before the Board of Referees. I hope that that makes clear what is the object of these Amendments, and bearing in mind that this will enable the various industries to which reference was made during the Com- mittee stage to put forward their claims if they so desire, I hope that the House will find it possible to accept the Amendments.

Mr. Nabarro (Kidderminster)

I greatly welcome the interpolation of the word "coal" into this series of Amendments, for I raised this particular issue on the Committee stage and drew attention then to the fact that although the overwhelming bulk of the coal industry in the United Kingdom is indeed in public ownership, there were provisions in the Act of 1946 for the private licensing of pits which were deemed too small to be operated by the Coal Board. The position today is that there are some 300 pits which are operating under private licences. Out of the various divisions of the National Coal Board only one, the South-Eastern Division, has not got any licenced pits in its area.

Coal is, of course, the classic example of a wasting asset, and should figure prominently in the provisions for exceptional treatment in the Excess Profits Levy matters in this Clause. The 1946 Act refers specifically to those pits which produce only coal. But there is a parallel consideration which ought to be placed on record, and that is in the case of what are called B licences granted by the National Coal Board in the various divisions. They refer, under Section 39 (2, b) of the Act of 1946, to conditions where coal is worked alongside other products of a mineral character, such as, for instance, fireclay which perhaps cannot be extracted without the extraction of coal, or vice versa.

That is, perhaps, one good example of why it is so absolutely necessary to have an independent board to which cases of a controversial character can be referred for adjudication. The Board of Referees would be able, in cases of this sort, to determine whether such products as fireclay extracted from the pits alongside coal would rank for the exceptional provisions in the Excess Profits Levy matters under this Clause.

I think it is futile to say that the Board of Referees has no important task to perform. There are a large number of borderline cases which are certain to arise—for instance, the exploitation of oil shale, the examination of prospects for extracting many new minerals and materials from beneath the soil of this country, all of which in the passage of time might be deemed to warrant consideration under the Excess Profits Levy provisions in this Clause. I welcome this series of Government Amendments, which I consider do a great deal to improve the original Clause.

Sir Herbert Williams (Croydon, East)

1 am interested in this matter because of certain Amendments which I have tabled to the next Clause, and which it may not be necessary for me to move. I am not quite clear what the effect of this Amendment will be. What is a mine for this purpose? Is a mine anything where one extracts things without going underground to get them out? I am not quite clear about that. The Clause does not refer, I think, in the main to operations carried out in this country. There are a number of oil wells in this country, and there are a few metal mines. I do not know whether the opencast operations in Oxfordshire for the extraction of iron ore are mining operations. I am not certain what is meant. Is opencast working of coal mine-working?

Mr. Nabarro

Yes.

Sir H. Williams

I am glad to hear my hon. Friend's assertion, but I do not think he knows, and I do not know. What is a mine? Is it a place one goes down into by way of a pit shaft? Is it some sort of open quarry such as a slate quarry? I do not know. Let us get a precise definition. We are dealing with what will be an Act of Parliament. What does it mean? Several people have interrupted me, but I do not know what it means, and I do not think they do.

Mr. Nabarro

Will my hon. Friend allow me? There is an interesting precedent about opencast mining, for the House passed last year the Mineral Workings Act, and in the passage of that Act it was specifically stated that opencast operations would be deemed for the purpose of that Act to be mining operations.

Sir H. Williams

I know, but I do not know whether the interpretation provision gives us guidance in this matter, and whether a mine is the same thing as a quarry—a slate quarry, for instance. Is that a mine? I do not know whether there are any legal experts here who know what the word "mine" really means.

If the Chancellor of the Exchequer has his way we shall insert "coal or." Does that mean opencast coal or coal from a deep mine? I am not quite sure. Then he talks about asbestos. I do not know of any asbestos mines in this country. Therefore, in the main this Clause does not refer to operations carried out in this country at all but to overseas operations—and properly: I think it is quite right that it should; but let us realise what we are discussing. I should be delighted to know what all this means.

The Solicitor-General made some reference to sand and ballast. I am not interested, but I am associated with them, as I mentioned on Committee stage. These are wasting assets, and I am told by those who have studied the matter that my right hon. Friend's Amendment to insert a new subsection (2) to the Clause will not really be of much advantage to the people engaged in sand and ballast extraction, because if they increase their output, which is what it may be wished they should do under the defence programme, they will pay more tax. May be I can say more on this subject when we get to the next Clause.

Mr. R. A. Butler

May I point out to my hon. Friend that I could not assist him and remain in order, because we discussed output on another Clause?

Sir H. Williams

Quite right. But what I want to know is, what does this Amendment mean? I do not know. What does the insertion of "asbestos" mean? Are we discussing production in this country or production in other countries, where the owners are corporate bodies in this country? It would be rather useful if we could be told.

2.45 a.m.

Mr. Gaitskell

I think that when this Clause was discussed in Committee we experienced one of the Solicitor-General's silent periods; we could not get much of an explanation as to why the words "of metal" were included in the Clause. However, we are grateful for the concessions made by the Chancellor, and they certainly vindicate the speeches made on all sides protesting against the very limited character of the concessions in this Clause in the original Bill.

But I support the hon. Member for Croydon, East (Sir H. Williams) in his remarks about the definition of mines; because, if he is right, and the definition is limited to deep mining, then this concession is much less valuable than if it also applied to opencast and strip mining. I hope that the Solicitor-General will give us an assurance on this point.

At the same time, I am bound to say that this method of dealing with mineral deposits which has been chosen by the Chancellor is not a really satisfactory one We have not, for example, had any explanation as to why it is necessary to draw this distinction between oil wells, metal mining, coal, and asbestos on the one side—there are now those four in the one group—and everything else on the other. We are told by the Solicitor-General that the Government have taken out those industries which were successful in making application to the Board of Referees under the old Excess Profits Tax arrangement; but that assumes that the conditions operating to-day are exactly as when that duty was in operation as far back as the days of the last war, and I do not see why.

It is important now that we should increase supplies of sulphur for our industries, and the need to-day is for expanding our raw material resources both here and in the Commonwealth. That is more keenly appreciated than ever before, and it is difficult to know why these difficulties are put in the way of mineral operators in working coal, metal or asbestos, as well as drilling for oil. Could we have some further explanation of the basis for this distinction?

The Chancellor intervened during our earlier debate, and gave an undertaking that he would look at the whole matter again. He has done so, and, as I have already said, we are grateful; but I am sure he does not want any unnecessary bureaucracy. Yet, to bring in the Board of Referees here is bound to have that effect, as against the original, simple Amendment which, incidentally, was moved by the hon. Member for Altrincham and Sale (Mr. Enroll), who I wish was in his place now to see the success he has achieved. That seemed to me a much more agreeable way of dealing with the matter, and what has been said so far about this restriction on the commodities which, for some reason or other are excluded from, shall we say, the favoured few, is something that I do not understand.

The Solicitor-General

By the leave of the House, I will endeavour to answer the points which have been made by the right hon. Member for Leeds, South (Mr. Gaitskell), and by my hon. Friend the Member for Croydon, East (Sir H. Williams). The House will see that whereas subsection (1) of the Clause does refer specifically to the mining of metal, subsection (2) is more widely drawn, and it is quite clear that under subsection (2) an application can be made in respect of any source of mineral deposits of a wasting nature.

There is no limitation which would exclude any form of extraction; that is to say, as far as subsection (2) is concerned it makes no difference whether the mineral is extracted as a result of a mining operation or as a result of surface excavation, such as happens in Northamptonshire in relation to iron ore.

Sir H. Williams

Does this refer to subsection (2) of the Bill or subsection (2) of the Amendment proposed?

The Solicitor-General

I am sorry if I did not make that clear. I was referring to subsection (2) which we are proposing, and which is on the Order Paper. If the hon. Gentleman will read that he will see, in the second line, that it is quite clear that there is no restriction at all. Subsection (1) is meant to cover—and I think it succeeds in so doing—those cases in which the claims were made out under the Excess Profits Tax law. The right hon. Member for Leeds, South suggests that it is by no means clear that they could make out the same claim now.

Mr. Gaitskell

I suggested that it was by no means clear that the others could make equally good claims now.

The Solicitor-General

The others can make a claim again.

Mr. Gaitskell

They do not get the concession automatically?

The Solicitor-General

They do not get it automatically. We cannot see that there is any reason why they should get it automatically. They have to make out their case. We are providing facilities for them to make out their case in exactly the same way as those who are getting it automatically made out their case. The same test is applied.

The wording of subsection (2) is similar to the wording under Excess Profits Tax legislation. If they satisfy the test the ones who have not got the increased percentage—those who have not claimed before or who have claimed unsuccessfully—can claim again, and if they can satisfy the Board of Referees they will get the same percentage. Applying the test that by reason of the wasting nature of the source in question the assets of the persons concerned may be exhausted at a greater rate than in the case of other classes of trades or businesses, if they can satisfy that test they will be entitled to a commensurate percentage.

I hope that I have made it clear, because Clause 52 (1) ought to save a great deal of trouble. The test being the same, it does not seem likely that those who succeeded last time before the Board of Referees would, if they had to claim again, fail this time.

Mr. Mitchison

As I understand it the annual allowances, under Sections 305, 306 and 307 of the Income Tax Act are automatic in the case of a trade which consists of or includes the working of any mine, oil well or other source of mineral deposits of a wasting nature. Is there really any distinction in principle between those provisions and these provisions?

The Solicitor-General

Interesting though it is, I do not think that question arises, with respect to the hon. and learned Member for Kettering (Mr. Mitchison), in relation to these Amendments, which are concerned with whether the increased percentage should be given to these specific industries. I am afraid that I cannot carry in my mind those particular Sections of the Income Tax Act to which the hon. and learned Gentleman referred; therefore I cannot pursue the matter any further at the moment.

Mr. Douglas Marshall (Bodmin)

I presume that the china clay industry is included among these specific industries?

The Solicitor-General

I must apologise to my hon. Friend the Member for Bodmin (Mr. D. Marshall) for omitting that most important industry of Cornwall, namely the china clay industry. That industry, in common with that of sand and ballast, and any other industry which deals with mineral deposits, can claim under the proposed new subsection (2).

Mr. Geoffrey Wilson (Truro)

As one who represents a division which produces china clay I should like to thank the Chancellor of the Exchequer for mentioning this commodity. All connected with the industry will be grateful to him for the concession.

Amendment negatived.

Amendments made: In page 57, line 35, after second "of," insert "coal or."

In line 35, after "wells," insert "or asbestos."—[Mr. R. A. Butler.]

Mr. R. A. Butler

I beg to move, in page 57, line 43, to leave out "Provided that," and to insert: (2) The Board of Referees may, on an application made in that behalf, by order direct, as respects a source of mineral deposits of a wasting nature of any kind other than those mentioned in the preceding subsection, that where a body corporate's trade or business consists of or includes the working of such a source, each of the percentages referred to in the provisions mentioned in the preceding subsection shall be deemed to be increased to such extent, not being more than six per cent., as the Board think necessary having regard to the extent to which, by reason of the wasting nature of the source, the benefit of capital expenditure incurred in that trade or business may be exhausted at a greater rate than in the case of other classes of trades or businesses. (3).

Sir H. Williams

We did not discuss the text of this Amendment when we had the general discussion.

Mr. Butler

I think I ought to remind the House that there was an agreement that if a general discussion took place there would not be discussion later. I submit myself to your Ruling on that, Mr. Deputy-Speaker.

Mr. Deputy-Speaker (Sir Charles MacAndrew)

That was agreed.

Sir H. Williams

I did not agree.

Mr. Deputy-Speaker

I did not hear the hon. Member express any objection at the time. I said that that was my intention, and no one said a word. I therefore cannot allow discussion now.

Sir H. Williams

I was not present then.

Mr. Deputy-Speaker

I am not going to have this Ruling discussed. No one took exception at the time, and I am not going to allow it to be discussed now.

Amendment agreed to.

Further Amendments made: In page 57, line 44, leave out "the source" and insert: such a source as is mentioned in the preceding provisions of this section.

Page 58, line 1, after "of," insert "subsection (1) of."—[Mr. R. A. Butler.]

The Solicitor-General

I beg to move, in page 58, line 18, at the end, to insert: (4) The Commissioners may by statutory instrument make regulations with respect to the making of applications to the Board of Referees under subsection (2) of this section and the procedure on such applications. Any statutory instrument made under this subsection shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament. This Amendment is similar to the provision in the Excess Profits Tax law providing that the Commissioners may, by Statutory Instrument, make regulations with respect to applications by the Board of Referees. Any Statutory Instrument so made will be subject to annulment in pursuance of a resolution of the Commons House of Parliament.

Mr. E. Fletcher

I want to ask the learned Solicitor-General why the Statutory Instruments are made by the Commissioners. Would it not be more natural for the Treasury to make them? The Solicitor-General says this is in line with the Regulations in respect of the Excess Profits Tax. There have been considerable changes in our general method of dealing with delegated legislation. The Statutory Instrument as such was not known when that law was made, and in view of the tightening up since then I would have thought it would have been more in accord with normal practice for the Statutory Instruments to be made by the Treasury.

3.0 a.m.

The Solicitor-General

If I may speak again by leave of the House, the power possessed by the Commissioners is exactly the same as that previously possessed by them. I see nothing irregular or odd in the Commissioners having the power to make regulations.

Amendment agreed to.