Clause 25.—(TERMINATION AND AMENDMENT OF EXCESS PROFITS LEVY.)

HC Deb 17 June 1953 vol 516 cc1039-75

Mr. Boyd-Carpenter

I beg to move, in page 26, line 17, at the end, to insert: (2) Where the functions of a body corporate consist wholly or mainly in the holding of investments, the body corporate, by notice in writing given to the Commissioners of Inland Revenue at any time within twelve months after the end of the period of charge to the excess profits levy, or such longer time as the Commissioners in their discretion may allow,—

1. (a) may, if it is not a member of a group within the meaning of the Twelfth Schedule to the Finance Act, 1952, elect that section fifty-two of that Act (which makes special provision for calculating excesses and deficiencies of profits in the case of investment companies) shall not apply or be deemed ever to have applied to it;
2. (b) may, if it is the principal member of a group within the meaning of that Schedule, being a group in which the functions of each of the members consist wholly or mainly in the holding of investments, elect that the said section fifty-two shall not apply or be deemed ever to have applied either to it or to any other member of the group;
3. (c) may, if it is the principal member of a group within the meaning of that Schedule, not being such a group as aforesaid but being a group such that substantially the whole of the functions of a single body corporate which combined all the functions of the members of the group would consist in the holding of investments, elect that subsection (2) of the said section fifty-two shall 1040 not prevent or be deemed ever to have prevented the section from applying either to it or to any other member of the group;

and such additional assessments, reductions of assessments and repayments of tax shall be made as are necessary to give effect to the election: Provided that, where an election is made by a body corporate under paragraph (b) or (c) of this subsection, there shall not by virtue of the election be recoverable from any other body corporate any greater amount of tax or any greater sum under paragraph 20 of the said Twelfth Schedule (which enables the principal member of a group to recover from another member sums paid by the principal member on account of the tax in respect of the profits of the other member), than would have been recoverable if the election had not been made. This and the proposed Amendment in page 26, line 20, to leave out from the beginning to the end of line 29, are linked closely together, and no doubt it would be convenient to discuss them at the same time.

The combined effect of these Amendments, as the Committee will have appreciated, is to take out the present paragraph (a) of subsection (2) and to substitute the words on the Order Paper. Both the Bill as it stands and the Bill as it will read if the Committee are good enough to accept my right hon. Friend's Amendments, are designed to implement one of the two undertakings which were given in the course of debates last year on the Excess Profits Levy. As the Committee will remember, at an earlier stage of our debates my right hon. Friend indicated that, in view of the approaching demise of this tax. he was not proposing any changes in it other than two, of which this is one. which resulted from the undertaking he gave last year.

I can very briefly explain the effect of this Amendment. The Committee will recall that last year there was some discussion on what is now Section 52 of last year's Finance Act on the subject of franked investment income. The outcome of that debate was that my right hon. Friend agreed that a concession should be made in this respect, but only to investment trusts and not to trading companies. During the course of the debate, my hon. Friend the Member for Lang-stone (Mr. Stevens) raised the question whether, in connection with certain groups mainly but not exclusively consisting of investment trusts the benefit of that concession might not be less by reason of the existence of some quite small trading company in the group.

On behalf of my right hon. Friend I gave an undertaking that we would watch the position, and on Second Reading I mentioned that the result of that consideration of the position and our watch upon it was to discover that one or two cases had arisen—I gave one example on Second Reading—in which the intention of my right hon. Friend's concession was largely frustrated in its application to a particular group or groups of companies by reason of the fact that, although the group consisted overwhelmingly of investment trusts, there was some company with quite small trading activities in the group. Consequently, both the Clause as it was originally drafted and the Clause as it will read if the Committee are good enough to accept this Amendment provide for those cases.

The words we propose which are particularly material on that aspect of the matter are those which appear in paragraph (c) of the Amendment. The test applied, which is set out in that paragraph, is where, if the group were a single company, it would be found that substantially the whole function of that single company was the holding of investments. That, of course, is designed to take care of just those marginal cases to which my hon. Friend the Member for Langstone drew attention last year.

6.45 p.m.

The main change which will be effected, however, if this Amendment is accepted, as compared with the Clause as drafted, arises on another aspect. My hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) drew our attention to the fact that the Clause as originally drafted might, where deficiencies arise, actually have the effect of increasing the tax burden. Section 52 of the Finance Act, 1952, is, of course, intended to be a relieving and not a taxing Section, and we have therefore provided in this Amendment, in order to deal with that contingency, that either the individual investment trust or the group shall have the option whether they shall be dealt with as proposed or as they originally would have been under Section 52 of the 1952 Act. That, we feel, with the necessary administrative safeguards embodied in it, is a fair way to deal with this matter, and I submit it to the Committee as being a proper method of implementing the undertaking which I gave on my right hon. Friend's behalf last year.

Sir F. Soskice

I should like to raise a short point with the Financial Secretary on this Clause. He says that the object —as indeed appears from the Amendment —is to provide for the case of a group of companies in which there is one company whose trading activities would be substantially, shall I say, non-existent, so that substantially the functions of the single company would be the holding investments. What I should like to ask him—because it causes some disquiet to my mind—is whether he really thinks it will be practically and legally possible to give effect to the words which deal with that situation; that is to say, the words substantially the whole of the functions of a single body corporate … would consist in the holding of investments. I cannot really conceive what that means. How is it measured? One assumes the group and then coalesces the group into a single company; one of the members of the group is a trading company, and having notionally coalesced the group into one, the question then is whether substantially all its functions are the holding of investments. It seems to me an extremely difficult legal and practical concept.

If the Financial Secretary tells me that his legal advisers have advised him that it really is possible to give practical effect to such a provision, so be it; but I should like him to tell me whether those who have advised him on the legal aspects of this have pointed to any other similar provisions in the Income Tax code or the Excess Profits Tax code. I see the Minister seeking for sustenance from the Box, so perhaps I had better go on talking until he has got it.

The Minister knows what I really want to know. I cannot call to mind—and I say this to him quite seriously—any similar phrasing elsewhere in the Income Tax code. It may be that there is quite a lot. but it seems to be very difficult to see how practical effect is given to it. How is it to be measured? How is the turnover to be measured? How is the shareholding to be measured? How can one look at the broad substance of it? What is going to be done? How are they to know that there are a number of companies which operate as one group and that substantially all the operations of the group consist wholly in the holding of investments?

I hope the hon. Gentleman will be able to reassure me on these two questions. Is he advised that it will be practically possible to give legal effect to this, and can he point to any precedent of similar wording? Can he give me the reference to any authority in which wording of this sort has been construed? If he can, I should be perfectly content. When he has got his advice from the Box, I will sit down and hope that he will give me the information for which I seek.

Obviously if the result of putting a provision of this sort into any taxing code is simply to create confusion, one makes things worse than they are without the Clause there. I hope that due consideration was given to this point before the Clause was drafted, so that once it is part of the tax code it will not give rise to a whole progeny of new decided cases, all of which will go to a very high tribunal which will ultimately confess it is in difficulties in construing the words. Now that the right hon. Gentleman has got the information, I will sit down and give him the opportunity to reply.

Mr. E. Fletcher

It may be convenient while the Minister is considering his reply, if he is able to make one, to the very serious point which my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) has raised if the Committee would examine for a moment the very unusual position in which it has arrived with regard to this Clause.

This Clause is dealing with the Excess Profits Levy, which we are all glad to say, is coming to an end this year, and what the Chancellor is now trying to do, as I understand it, is to amend the provisions of the Excess Profits Levy which is due to come to an end this year, and to amend them retrospectively. I am wondering whether we shall ever reach finality in connection with this levy.

We remember the trouble which we had last year. When the Finance Bill was introduced last year, there was a series of Clauses dealing with the Excess Profits Levy and on the day on which we were due to discuss the Excess Profits Levy, the Chancellor put down a whole series of Amendments, some 75 in all, which he invited the Committee to consider at a few hours' notice. On that occasion, the debate was adjourned for a couple of days so that hon. Members might try to understand the substance of the Chancellor's Amendments.

Mr. R. A. Butler

I think that it is time I intervened. The Financial Secretary has already drawn attention to the fact that I made a statement about this in my Budget speech. These particular points are in answer to promises made by myself on behalf of Her Majesty's Government. It may seem strange to hon. Members opposite, but we believe in fulfilling our promises, and that is all that we are doing.

Mr. Fletcher

I really cannot allow that to pass. Since the Chancellor's Budget statement we have had a speech by the Financial Secretary in moving the Second Reading of this Bill, and in particular, when dealing with this Clause, he gave an explanation which will be found in the OFFICIAL REPORT of 7th May. He then tried to explain to the Committee what the Chancellor is now trying to explain. On 7th May, in the Second Reading debate, the Financial Secretary said that he was then introducing as part of this Clause something designed to change the provisions of the Excess Profits Levy, pursuant to undertakings which were given last year, and the Financial Secretary expounded at great length the merits of Clause 25 (2) which he is now asking the Committee to withdraw.

Mr. Boyd-Carpenter

No.

Mr. Fletcher

Oh, yes. At the moment we are considering two Amendments on the Order Paper in the name of the Chancellor of the Exchequer. I am considering the second one. The second Amendment in the Chancellor's name is that we should leave out from the beginning, to the end of line 29; in other words, we should leave out the whole of subsection (2, a) of Clause 25.

About a month ago, the Financial Secretary argued to us at great length why Clause 25 (2, a) should be introduced, and he said then what the Chancellor has now said, that Clause 25 (2, a) was intended to give effect to certain undertakings given last year. What has happened since 7th May to make it necessary for the Financial Secretary to want to omit from the Bill the whole provision which he thought necessary on 7th May and to introduce an entirely new form of words?

The only clue that we have been given to that, as I understand it, is that the Financial Secretary has had a communication from the hon. Member for Scarborough and Whitby (Mr. Spearman). We have not seen it. I do not know what it is. I do not know whether any other Member of the Committee knows what it is. It does not seem to me to be treating the Committee with respect that on the Second Reading of the Bill we should be told that it is necessary to amend the Finance Act, 1952, in one part, and when we come to the Committee stage we should have no clear explanation why a different Amendment is necessary. It is all very well for the Chancellor to say that this is in pursuance of an undertaking given last year, but that is another matter of complaint.

The Chancellor has had a whole year since the discussions on the Finance Bill last year in which to try to get the Excess Profits Levy into order. We thought that it was in order when this Bill was produced. We thought that Clause 25 was at last getting it in order. Now there is another Amendment. How many more Amendments will be wanted, which are all retrospective, before this levy comes to an end this year? I think that the Chancellor must recognise that the Excess Profits Levy has had a very unhappy fate. I know that is not his fault. We all know that he was driven to introduce the Excess Profits Levy last year because of a passage in the Conservative Party's manifesto for which he was not responsible. But his having introduced it, and, as it went on, having amended it from time to time, places Members of the Committee in a very great difficulty.

This Amendment was put on the Order Paper only quite recently. We have had only a very short time in which to consider it. The Financial Secretary did not tell the Committee what was the communication from his hon. Friend. He did not explain why the Amendment was necessary. Does it widen the scope of the Bill? Has he now found that he was not giving full effect to the undertaking which he gave last year and to the form of words he introduced in his Second Reading speech? What has hap- pened since 7th May to make it necessary that we should have an entirely new form of words, couched in what, I think, is very slipshod English, introducing, as my right hon. and learned Friend the Member for Neepsend said, into our tax laws phrases which have never occurred before? I think that the Committee will want to probe this Amendment much further before they can accept it.

I want also to pursue the question of merit, to which my right hon. and learned Friend referred. How are we to tell which is the principal member of the group? What is to happen when there are two or more members of a group of companies each equal in status and in size? How are we to tell precisely how these phrases on trading are to be interpreted? Is the whole of this Clause to be retrospective in its operation? What has happened to make it necessary at this very late hour in the unhappy history of the Excess Profits Levy, just on the eve of burial, to have this entirely novel provision?

I am sure that hon. Members of the Committee, who have taken a great interest in the Excess Profits Levy during the last 12 months in trying to understand it, as the Government have changed their mind about it, want to know far more about it before we can allow Clause 25 to pass in its proposed form.

Mr. I. Mikardo (Reading, South)

In intervening in this argument which up to now has been between lawyers, I feel a little like a caterpillar which has strayed into a vegetarian salad. When I read this Amendment, I was struck, although in a much less clear and less learned way, by the same points as were made by my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) about the difficulty within an organisation of comparing the relevant importance of two quite different activities which use two quite different standards of measurement.

I know little about the law, but I know a little about statistics, and one of the first rules of statistics is generally simply expressed by saying that one cannot add apples and pears, which is a simple way of saying that one cannot, by making a simple addition of numbers, add together two things which are measured in different units. Nor can one subtract them, nor, most important of all, can one compare them.

7.0 p.m.

We are here faced with the problem of what unit will be used by whoever has to decide which of the two activities of a group of companies is more important than the other. Take the simple point about the employment of labour. It might be argued that one can measure the relative part played by two activities in the same organisaion by the ratio of the number of people employed in the two activities. If one had an organisation or group of companies some of whose work was the holding of investments but the rest of whose work was the manufacture of basic products, one would probably find that, even if the company were doing fairly well, its profit per employee on the manufacturing side might well be no more than £300 or £400, or even £200 or less per annum, whereas one employee with the very simple records required to be kept for the holding of investments, and the very small amount of work done per unit of turnover and per unit of investment held by investment companies, can turn over an enormous volume of business measured in sterling, probably being responsible for a profit to the organisation of many thousands of pounds.

One might very well have a group of companies employing an equal number of people on a manufacuring function and on an investment-holding function. Almost certainly in such a circumstance the profits of the group from the holding of investment would be many times greater—perhaps 10 or 20 or even 30 times greater—than the profits which it drew from its manufacturing activities. If whoever has to decide whether the manufacturing function is or is not a substantial part uses the criterion of profit, he will say "Since the manufacturing function accounts for only, say, 5 per cent. of the profit, it is not substantial and the overwhelmingly main business of the group is the holding of investments." But if he chose to measure whether it is substantial or not by the number of people employed in it, he might well find that the activity which accounted for only 5 per cent. of the profits of the group absorbed 40 or 50 per cent. of the employees of the group.

I do not see any guidance in the Amendment as it is drafted to enable anybody to decide which of those two criteria he should use. Indeed, they are not the only criteria which may be used. The amount of capital tied up, the amount of turnover and all sorts of other considerations might enter into a decision about the relative importance of the two activities. Unless there is some precedent, which I do not know, which gives guidance, it seems to me as a poor layman that the administration of the Clause might present very serious difficulties indeed, and I should like to know what is proposed in that connection.

Mr. Stevens

When I raised this point during the Committee stage of the Finance Bill last year, I asked my hon. Friend the Economic Secretary to the Treasury what Her Majesty's Government meant by "substantial." Speaking from recollection, the answer I received was that the interpretation placed upon "substantial" was something of the order of 95 per cent. If that is the yardstick by which the Government interpret the word, I feel that most of the difficulties which have been postulated by the Opposition during the last half-hour automatically disappear, for the simple reason that the number of companies or groups of companies to which the proviso can apply will be very small indeed. I believe that in practice the difficulties will be found to be less real than they appear to be at the moment.

I wish to take this opportunity of thanking the Chancellor for honouring the undertaking which he gave me last year to look at the point again. Clearly, experience has shown that the point which I raised has inflicted hardship on a very small group of companies, but there is no reason why the rights of minorities should be overlooked, and thus I am grateful to my right hon. Friend.

Mr. A. J. Irvine (Liverpool, Edge Hill)

I can claim to have been in the Committee only a short time this afternoon, but when I entered the Chamber I heard the arguments of my right hon. and learned Friend the Member for Neep-send (Sir F. Soskice) on this point, and, not for the first time with his arguments, I was impressed by their cogency and force.

There was a time when the Financial Secretary enjoyed a distinction which he cannot claim today, the distinction of practising in the law. I have no doubt that at that time he devoted a substantial part of his undoubted gifts to such a problem as that of determining whether or not a "substantial part" of rent was attributable to furniture and to services. He will recall what a considerable amount of argument and discussion was involved before those words were construed and how in the result the courts came to the conclusion that, in order to give the words adequate sense, very elaborate formulae and figures ought to be applied.

When that is the inevitable consequence of an expression in a statute, it is in principle desirable that the definition— the necessary definition, as it proves to be—should be given in Parliament, for Parliament knows what it means. Rather than that time should be unnecessarily expended by the courts in trying to determine what Parliament means, it is desirable that Parliament's intentions should be made clear in the law. The hon. Member for Langstone (Mr. Stevens) has proposed a figure. He understands that "substantial" in this context will mean 95 per cent.

Mr. Stevens

I did not propose the figure. I said that my recollection was that that was the figure.

Mr. Irvine

I am much obliged to the hon. Member. His understanding is that "substantial" in this context will mean 95 per cent. That is an indication of the hon. Member's understanding of the matter. If that is the understanding of the Government, a figure or something more explicit than the form of words in the Clause ought to be incorporated in the Bill.

Mr. Boyd-Carpenter

The two points which have arisen in the debate are that raised by the right hon. and learned Gentleman the Member for Neepsend (Sir F. Soskice) on the use of "substantially" and that raised by the hon. Member for Islington, East (Mr. E. Fletcher) as to why we thought it necessary to propose to the Committee the alteration to the provisions of Clause 25. I should like first to deal with the second point.

I thought I had succeeded, when moving the Amendment, in putting forward clearly but without undue length the reason we thought it necessary to make the change, but apparently I have not succeeded in the case of the hon. Member for Islington, East, so I will try again.

The Clause, as originally proposed on Second Reading, and as it will read if the Committee accept the Amendment, will carry out an undertaking which I gave on my right hon. Friend's behalf on a point raised by my hon. Friend the Member for Langstone (Mr. Stevens) that we would deal with any difficulty which arose from the provision in last year's Act that to secure the advantages of Section 52 a group must be composed entirely of investment companies. That is carried out by the Clause as amended and by the original Clause, but, as I said in moving the Amendment, it was drawn to our attention by my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) that the form of words we were using to carry out that undertaking could have the effect in a theoretical and not impossible situation of not relieving from tax but of imposing an additional tax.

It was not our intention in Section 52 last year, nor is it our intention this year, to use this particular provision for the imposition of extra taxes. It is indeed a relief provision, and it is in order to prevent the Clause having the effect of imposing additional taxation that we suggested to the Committee that it should go into the Bill in this amended form.

The right hon. and learned Gentleman the Member for Neepsend raised the question of the word "substantially," and, if he will allow me to say so, in general I agree with him that the word "substantially" is one which can give rise to a certain amount of difficulty, as indeed has been suggested from his own experience by the hon. Member for Edge Hill (Mr. A. J. Irvine) in another context. Equally, it is in our view the appropriate word to use here in these particular circumstances, for the reasons which I will now give.

The object of this Amendment is to relieve a very small number of cases— I agree with my hon. Friend the Member for Langstone that there are very few which have come to our attention—of a possible injustice on the complete investigation of a company's position and trading. It will not be in very many cases, and I understand that no difficulty will arise, or is likely to arise, in the Commissioners deciding what "substantially" means in this context. I can give the right hon. and learned Gentleman the assurance that before putting these words into the Amendment we considered this aspect of the matter, and, indeed, how the very use of the word "substantially" would tend to put a good many people to inquiry, but we came to the conclusion on the advice available to us that the difficulty would not arise.

The right hon. and learned Gentleman very properly asked for precedents. At that time I had not a file beside me, though, of course, I did make inquiries. The best and the nearest one that I can give is that in last year's Finance Act on this very topic of the Excess Profits Levy. As many hon. Members will recall, last year's Finance Act contained the Eleventh Schedule, and in it there are provisions for transfer, and in particular the actual word concerned appears in paragraph 2. As the right hon. and learned Gentleman will recall, the words provide that: Where the transfer … is not a transfer of the whole or substantially the whole of the transferor's trade or business, sub-paragraph (1) of this paragraph shall have effect in relation to the transfer but as if … and so on. Therefore, in response to the right hon. and learned Gentleman, I can point out that in last year's Act on this topic this same word was used.

I am not seeking to argue—and I realise I should not convince the right hon. and learned Gentleman—that this is a particularly good or bad word to use. I know that it can give rise to difficulty, but it seems to us that, in dealing with this small number of awkward cases, it is the appropriate and most efficient word to use. If we were to adopt the suggestion of the hon. Member for Edge Hill and put a percentage in the Bill, we would find one case which on merits ought to be dealt with but was just over the average. That is the reason for the use of this word, and I do not take any exception whatever to the very proper desire of the right hon. and learned Gentleman to question it. Indeed, had our positions been reversed and I had seen it, I hope that I would have had the good sense to do the same.

7.15 p.m.

Mr. Austen Albu (Edmonton)

The difficulty the Committee is in is that, although it has had the explanation from the Financial Secretary, the Amendment is really based on some communication he has received from his hon. Friend the Member for Scarborough and Whitby (Mr. Spearman). But the hon. Member for Scarborough and Whitby has not taken any part in our discussions so we do not know what it was he said to his hon. Friend, and it is difficult for us to know what are the reasons for this change. The hon. Member is not, I believe, a lawyer and we have heard lawyers discussing this at some length.

One of the things that puzzles me is that in one subsection of the amended Clause the words "wholly or mainly" are used and in the other part the word "substantially." I suppose there is a significant different, but the Financial Secretary said that it would be impossible to accept the proposal of my hon. Friend the Member for Edge Hill (Mr. A. J. Irvine) to put in any figure. On the other hand, his hon. Friend the Member for Langstone (Mr. Stevens) understood that the figure was 95 per cent.

Mr. Stevens

Once again I say that I did not say that I understood it or that it was my impression. I said it was my recollection, which might well be at fault.

Mr. Albu

The hon. Member's support for the Amendment was based on his recollection of some previous occasion, and the figure of 95 per cent. was given as representing the sort of figure that the word "substantially" would mean in this context. As my hon. Friend the Member for Reading, South (Mr. Mikardo) has already pointed out, it depends on what the 95 per cent. is on.

The hon. Member for Langstone says there is only a small minority of companies which might suffer hardship if this Clause were not passed and if this Amendment were not carried. Of course, one considers the question of hardship to individuals or to individual companies, but we have also to consider the Revenue and the protection of the Revenue from activities which are intended to get round what the Treasury intends. I therefore think that it is very important to know what really is intended by this Clause, and particularly why it has to be amended.

In the next Clause we shall be discussing a particular type of investment company, and I do not know whether the Iron and Steel Holding and Realisation Agency is coming under that, but we can discuss it later on, and it would be interesting to know.

Amendment agreed to.

Further Amendment made: In page 26, line 20, leave out from beginning, to end of line 29.—[Mr. Boyd-Carpenter.]

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

Mr. Jay

We support the main purpose of this Clause. What, in substance, it does is to terminate the Excess Profits Levy, and, like most hon. Members opposite, we are very glad to see it go. Before it goes we ought to make clear our reasons for being glad to see the last of it. I suppose the disappearance of E.P.L. this year represents a victory for the Chancellor of the Exchequer over the Prime Minister. Perhaps it is because the Prime Minister is now concerned with foreign affairs that the Chancellor is at last allowed to get his own way in this matter. At any rate, we are glad to see the last of it.

I would only qualify our pleasure in one sense. Do not let the Committee overlook the fact that whereas E.P.L. is disappearing, the reduction which the Chancellor made last year in the Profits Tax is not disappearing. Therefore, the net effect of this operation on Profits Tax and E.P.L. is a lowering of the total taxation on profits. Let the Committee also take note that this has been carried out in the same two years in which the Government have imposed health charges on quite a substantial scale and, of course, have made a large reduction in the food subsidies. The total effect of this operation is a considerable transfer of the burden of taxation on to the poorer members of the community. That is the first lesson we have to learn from the disappearance of E.P.L. from this Clause.

The second is one which is perhaps even more familiar to us. That is the lamentable lack of planning that goes on in the Tory Party, both when it is in opposition and when it is in power. What has really happened to explain this extraordinary story of the E.P.L.? It all began back in the autumn of 1951 before the General Election when the present Prime Minister was on holiday, so we were told, somewhere in Italy. The Tory Party programme was sent out to the right hon. Gentleman and, reading it by the seaside, he inserted in it this promise to introduce an Excess Profits Levy.

The evidence that the right hon. Gentleman was the source of it is quite clear from the fact that it appeared in the middle of two sentences about the wild extravagance and the dissolute, improvident expenditure, and so on and so forth, of the previous Government. [HON. MEMBERS: "Hear, hear."] I would point out to hon. Gentlemen who cheer that we were then spending a good deal less than the figure which the present Government are spending and which the Prime Minister calls "prudent husbanding of our resources." As, no doubt, the Prime Minister does not know what the figure is in either case, I do not think we need pay much attention to his claim.

However, without any consultation with those of his colleagues who study these matters, that pledge was inserted in the document and then, after the Election, the Chancellor found himself in his present position. Maybe he did not expect to be there because he had not taken a great part in our financial debates over the previous few years. Anyway there he was, with this albatross hanging around his neck. He was compelled by his devotion to the Prime Minister to come down and introduce this absurd tax which was condemned by everybody on both sides of the House.

What reason did the right hon. Gentleman ever give for bringing it before us and forcing it down the throats of his hon. Friends? The only thing he ever said was that he had to do it because the Tory Party had promised it. It is clear that this cannot have been the real reason, because there was hardly any other promise which they had made which they had not by that time already broken, not least among which was the pledge on food subsidies which the Chancellor, in a well-known speech, had indeed himself given in addition to various other people.

I believe the real reason was that the Chancellor, at that time anyway—now things seem to be improving—had never had the real co-ordinating authority in the Government which previous Chancellors have had and which he ought to have been given if he was to have any chance of doing his job. I suppose the trouble was that he was not a member of the other place, like Lord Cherwell, Lord Leathers, Lord Woolton and the others, who were given supreme coordinating authority. Do not let us forget, therefore, that the present Chancellor has never been given that authority so far as we know, even to the present day. Of course, if there has been a major change, no doubt the Chancellor will choose this moment, in the Committee stage of the Finance Bill, at dinner time, to announce it to us. That would be typical of the way things are done in this Government.

Mr. R. A. Butler

It would not be typical of the order preserved in this Committee were I to give a description of the machinery of Government on a Clause dealing with the Excess Profits Levy.

Mr. Jay

That may be, but I do not know whether it would be wholly in conformity with the traditions of this Government always to remain within the rules of order. As I was saying, this tax was introduced because the Chancellor never had the same authority in the Government as Lord Cherwell, Lord Leathers, Lord Woolton and the rest of them. He brought in a tax a year ago in which he did not himself believe, which was condemned not merely by every hon. Member on this side but by every hon. Gentleman opposite, I think without exception. They had to defend it and they had to travel through the Lobbies night after night to vote for it. Respected Members of the party opposite, like the hon. Member for Edinburgh, South (Sir W. Darling), had to walk round and round voting for this tax, in which they did not believe. Indeed, even the hon. Gentleman the Member for Kidderminster (Mr. Nabarro) had to do the same, and I would remind the hon. Gentleman that we voted against it.

The more serious part of the story is this. After all, those debates, although they were lengthy, only went on for hours or days, but in addition enormous labour and torment was imposed on the officials of the Inland Revenue who, month after month, have had to carry out the assessment and the collection of this absurd tax. And not merely they, but accountants throughout industry and, no doubt, secretaries of companies and thousands of persons in the business world have been engaged in working it out all for nothing, although they no more believed in it than did hon. Members of this House.

Now, of course, the Chancellor, having argued only a year ago that all this was absolutely necessary, that it was to carry out a solemn promise, and having forced it on all of us against our wills, comes along and tells us, without any real pretence or shred of serious argument, that we can now do without it and he advises the Committee to terminate it, as I am sure we shall do tonight. I suggest that this is a lamentable story of muddle, miscalculation and confusion.

As I say, the real reason must be that the Prime Minister is otherwise occupied. Lord Cherwell, I suppose, is now engaged on foreign affairs. So far as we know. Lord Leathers seems to have vanished into the dim distance for he does not even conduct his own Bills on transport in the House of Lords; and Lord Woolton appears to be doing absolutely nothing. I conclude by trying to derive some small lesson out of this unhappy story by recommending to the Chancellor on behalf of the whole Committee that he should ask the Prime Minister to terminate now not merely the Excess Profits Levy but the whole system of overlords in this Government as well.

7.30 p.m.

Mr. Mikardo

In one respect I must differ from the observations of my right hon. Friend the Member for Battersea, North (Mr. Jay). In his careful analysis of the motives of the Chancellor for introducing this tax last year and getting rid of it this year, my right hon. Friend was far too charitable. He called it a lamentable story of muddle, miscalculation and confusion. To my mind it is much worse than that. It is a lamentable story of deception.

The plain fact of the matter is this. The present Government, true to the traditions of their party, base the whole of their economic and financial policy on the idea of relieving taxation upon those who are well off and who do not work for a living by the process of increasing the burden on those who do work for a living and who are not so well off. One of the steps in carrying out that transfer was to reduce the Profits Tax, but the Government knew perfectly well that if in the Budget of 1952 they had nakedly proposed a reduction of the Profits Tax at the same time that they were increasing the price of food by cutting food subsidies in defiance of all their pledges, their hand would have been too easily discernible to the whole country and they would have faced a great storm of protest. So they found a "pretty pretty" way out of the difficulty.

Mr. Gerald Nabarro (Kidderminster)

What about Sunderland?

Mr. Mikardo

I observe that the subterranean volcano of the hon. Member for Kidderminster (Mr. Nabarro) is in one of its phases of intermittent eruption, and I think the Committee will get on better without him. I was referring to what was taking place in the Chancellor's mind in framing his Budget in 1952.

Mr. Nabarro

Will the hon. Gentleman allow me——

Mr. Mikardo

In a minute. The event to which the hon. Member for Kidderminster wants to draw the Committee's attention with his usual irrelevance did not take place until long after the Budget debates of 1952, so as usual he is talking through his hat. Now he can talk a bit more through his hat.

Mr. Nabarro

I am grateful to the hon. Gentleman for giving way. He is suffering from his usual lapse of memory. Surely the Sunderland by-election took place after——

The Chairman

Order. This has nothing to do with this Clause.

Mr. Mikardo

I repeat what I said a little while ago. The hon. Gentleman, as usual, is suffering from a lapse of concentration. What I said was that the Sunderland by-election did not take place ——

The Chairman

We cannot discuss that now. We are concerned with Clause 23, as amended.

Mr. Mikardo

I quite agree, Sir Charles, but I did not start it. "Them as starts it must take the consequences."

The Chairman

I do not know who started it but I must stop it.

Mr. Mikardo

Very good, Sir Charles. I can now resume my argument, I hope. I am very sorry that I shall have to repeat part of it in order to take up the sequence again. I would have preferred not to delay the Committee in this way, but one is diverted by these irrelevant interruptions.

What I was saying was that what the Chancellor would like to have done in his Budget of 1952—I repeat for the benefit of the hon. Member for Kidderminster, the Budget of 1952—would be straightforwardly to reduce the Profits Tax. He dare not do it because he knew that if he had done it, the Government's policy of transferring money from the less well off people who work for their living to the better off people who do not work would have been too nakedly revealed and would have aroused a storm of protest.

Therefore, a highly ingenious method was thought out for cutting the Profits Tax in a manner by which it was hoped that people would not notice that the Profits Tax had been cut. What they did was to say, "We will put on an Excess Profits Levy, but as we are putting on an Excess Profits Levy we will reduce the Profits Tax a bit." That sounded quite reasonable. A year later the Excess Profits Levy is taken off, and as, my right hon. Friend the Member for Battersea, North has pointed out, the reduction in the Profits Tax which was made specifically to compensate for the imposition of the Excess Profits Levy, nevertheless is not adjusted when the Excess Profits Levy is taken off.

At the cost of only delaying the process for a year, what the Chancellor has done, in fact, is to get away with a reduction in the Profits Tax by a mechanism which made it appear as though the taxation on profits was made heavier instead of being made lighter. I hate to use strong words in this Committee, or elsewhere, but the least that can be said of this manoeuvre is that it is an extremely shabby one. When people get around to understanding it they will share that view of it.

Mr. Roy Jenkins (Birmingham, Stechford)

As my right hon. Friend the Member for Battersea, North (Mr. Jay) has said, this is the end of the rather brief life of the Excess Profits Levy, and I am glad to see that the Chancellor and the hon. Member for Kidderminster (Mr. Nabarro), who are the only two Members of the Committee who last year tried to support the Levy on its merits, have both turned out to give it a fairly good funeral today.

Mr. Nabarro

I have been here throughout our deliberations on every day on which the Committee stage of the Finance Bill has been debated.

Mr. Jenkins

The hon. Gentleman is assiduous both in his attendance and in his interruptions and I would not suggest that anything other was the case.

We ought to ask the Chancellor at this stage whether he thinks this has all been worth while. After all, we had 28 Clauses in the last Finance Bill. We had a record number of Amendments, and then there was this proposal which he introduced so inconveniently and at short notice in the midst of our deliberations. It caused a great deal of trouble to all sorts of people, and I should like to know whether the Chancellor thinks it has been worth while to have the Excess Profits Levy. Whatever else happens, I hope that the Chancellor is not congratulating himself on the good that he has done by getting rid of it at the present time.

The hon. Member for Kidderminster made a most extraordinary speech on that point a few nights ago. He said that things were greatly improving and that there was a better future for industry because of three or four things which the Government have done. One of the things he said had been done was the removal of the Excess Profits Levy, which was having such a bad effect. It is as though the Government, when coming into office, had proceeded to lock up all my right hon. and hon. Friends on the Front Bench and a year later, after having let them out again, asked to be congratulated on having made possible the introduction of free speech and public discussion. There can be no room for congratulation here.

As my hon. Friend the Member for Reading, South (Mr. Mikardo) has said, one is bound to consider the link-up of this tax with the Profits Tax, and this afternoon I read what the Chancellor had to say about the relationship of these two taxes when he introduced the Excess Profits Levy a year ago, actually on the Clause which was bringing about the consequential reduction in the Profits Tax.

It is true to say, as I am sure he will remind us when he speaks, that he has made it clear that he did not want to keep the Profits Tax at the level at which it previously was indefinitely. Like hon. Members opposite, he believes in reducing taxation upon industry when he thinks it can be done. But even though he may bring forward that argument in his own defence, this tax which he introduced with a good deal of moral fervour a year ago has, in effect, acted as a smoke-screen for the reduction of the total rate of tax upon profits.

The effect of the changes in two years has been to bring about a substantial reduction in the Profits Tax, both on retained profits, to which we might not object too much, and on distributed profits, without the Chancellor having to justify before this Committee a straightforward reduction in the Profits Tax. That certainly has made things very much simpler from his point of view. As I say, he introduced the Excess Profits Levy a year ago with a great deal of moral fervour, talking about merchant adventurers and saying that he was surprised that they did not make a greater appeal in this House, and he ought to say whether he thinks it desirable that, in effect, if not in intention, it should serve as a smoke-screen for the reduction in the total taxation upon profits without his having directly justified it.

Mr. Frederick Mulley (Sheffield, Park)

I do not wish to detain the Committee for long, but I think that the termination of the Excess Profits Levy at this stage is one of the most important items in the Finance Bill that we have to consider. I agree with both my hon. Friends the Members for Reading, South (Mr. Mikardo) and Stechford (Mr. Roy Jenkins) that the Chancellor last year did a very astute manoeuvre. It may be that he was actuated by a pledge, which seems to have been only a very temporary pledge, in the Election programme on which the Government were elected, but whether or not it was to fulfil a pledge or whether it was a subterfuge to reduce the total volume of taxation on industry it was certainly very effective.

In considering this Clause, the Committee should have before it the figures of total taxation on profits for 1952–53, in other words the year before the Excess Profits Levy came fully into force. The Committee appreciates that all profits taxes are a year in arrear. The total amount of Profits Tax and Excess Profits Levy combined was £379 million, made up of Profits Tax £376 million and Excess Profits Levy £3 million. In the next financial year, the only year apparently in which we are to have the Excess Profits Levy, the total estimated receipts from Profits Tax and Excess Profits Levy is £315 million, made up of £215 million from Profits Tax and £100 million from Excess Profits Levy. So even with the Levy the Chancellor has succeeded in reducing on the quiet the incidence of taxation of profits by £64 million.

To give the Committee some idea of the volume of that amount, I would say that it is exactly the same as the profit which the Iron and Steel Corporation made last year, as shown in the accounts just reported. That is a very serious matter for the Committee to consider. When we put forward a suggestion which would cost £1 million or £1½ million—I know it is a lot of money—it is always turned down; yet the Chancellor can get rid of £64 million without there being a proper debate or discussion about it in this House. What is to happen to the £100 million provided by the Excess Profits Levy? If the Profits Tax is not restored to the level at which it was before the Levy was imposed the Profits Tax will drop by a further £100 million; it will be just about half what it was when this Government came into office.

I see approving nods from the hon. Member for Kidderminster (Mr. Nabarro), so at least one hon. Member opposite would like to see the Excess Profits Levy go without there being any change in the present rate of Profits Tax. Before we are asked to take this important step, I think that, unpleasant as we thought the Levy to be, we should have some assurance from the Chancellor that he is at any rate going to see that profits continue to bear a fair share of the burden of the taxation of the country, because any tax is always a burden to anyone who pays it.

I do not want to be shot down in a very casual way, as is sometimes the way of Treasury spokesmen when they reply to debates. It may be argued that one reason for the estimated yield of profits taxation in 1953–54 may be because the Treasury take a very pessimistic view as to the out-turn of the country's national income and prosperity for the year. If that is the explanation why the yield is estimated to be so very low—because businesses are doing very badly and not making profits—that is a point which should also be publicised as an achievement on the part of a Conservative Government, that businesses cannot, under Conservative Administration, make a reasonable profit, and they will be better off being more heavily taxed but making more profit on which to be taxed under a Labour Administration.

7.45 p.m.

Mr. Anthony Crosland (Gloucestershire, South)

I do not wish to follow the general remarks on profits taxation which have been so effectively deployed by my hon. Friends. I wish to make just one comment on that subject, that is, to draw the attention of the Committee to the difference between the enthusiasm with which hon. Gentlemen opposite greet this reduction, which is what it is, of profits taxation tonight and their lack of enthusiasm last night for raising initial allowances to 40 per cent.

I say that because there is only one very striking difference between remitting taxation on industry by means of initial allowances and reducing the weight of profits taxation. In the one case the remission is gained by increased capital expenditure, and the other is something for companies to dispose of as they wish. I do not think that the difference between the attitude of hon. Gentlemen last night and tonight should pass without notice.

We are being asked to agree to Clause 25 standing part of the Bill. The most important part of the Clause is the first sentence, which states: The period of charge to the excess profits levy shall end with the year nineteen hundred and fifty-three; … I do not see how hon. Members can possibly answer the question whether we should vote for or against this Clause at the moment because we are very much without information as to how the Excess Profits Levy has worked. A number of my hon. Friends, perhaps more hasty in temperament than I am, have plainly stated tonight that the Excess Profits Levy has been a bad tax and should be abolished. Before I make up my mind there is a good deal of information I should like which I think the Chancellor will be good enough to give when he replies to the debate.

The part of the Levy and the Clause which I am particularly concerned with is that regarding the special concessions given to various kinds of mineral workings. I should like to refer to Sections 55 and 56 of the Finance Act, 1952, because I should like to ask certain questions about the working of those Sections.

Section 55 is one of the E.P.L. Sections of the Finance Act, 1952. Without knowing how it has operated, I shall be unable to make up my mind whether this Clause should now stand part of the Bill. This was the Section about one of the most important parts of the Levy, which allowed to certain mineral working companies a so-called additional standard. Originally, this concession was made, as hon. Members will remember, because this took up a great deal of time in our discussions last year, to mines of metals and oil wells.

We then had a lengthy debate on the extent of the scope of the concessions out of which the Solicitor-General came distinctly badly. A number of hon. Members on both sides of the Committee asked that the concession should be extended to a great number of minerals many of which I confess I had not at the time heard of but which from what they said were evidently of great economic importance. The hon. Member for Croydon, East (Sir H. Williams) asked about sand and ballast. The hon. Member for Kidderminster asked about coal, and we had interesting dissertations on industrial diamonds, gypsum, fluospar and other things.

As a consequence of the pressure exercised on both sides of the Committee the Chancellor made a certain concession when we came to the Report stage last year; or, to be accurate, he made two concessions. The first was to agree, in Clause 55 (1), which creates the additional standard in an absolutely unqualified manner, that in addition to mines of metal and oil wells there should be added coal and asbestos. The further concession which he made, which is the one on which I should like information, was that he agreed to insert a new subsection (2) in Clause 55. This led on Report stage to a most interesting discussion.

Hon. Members will remember that subsection (2), included at the Chancellor's insistence, on Report, was the one by which—I quote: 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 is, other than metal mines, oil wells, coal and asbestos. The Board might then decree certain things; it may then decide that the additional standard concession would apply to them. In other words, the Board of Referees was given a discretionary power to extend the additional standard concession to any other kind of mineral working whatsoever; and it was made clear by the Solicitor-General on the Report stage that all these various things which had been mentioned—gypsum, coal, sand and ballast, industrial diamonds and the like —would be eligible to apply to the Board of Referees and would be eligible for this concession. If we are to make up our minds tonight as to whether Clause 25 should stand part of the Bill, it is important to know how this concession has worked. I am surprised that it has not been mentioned before.

A great deal of criticism was raised at the decision to give this discretionary power to the Board of Referees. My hon. and learned Friend the Member for Kettering (Mr. Mitchison), whose speeches in the Committee are only spoilt by certain violence of language, referred to the Board of Referees as a "collection of defunct dodoes" and animadverted against them in a number of extremely sharp passages. He doubted, first, whether they existed as a physical fact, and, if they did exist, he was certain that they were incompetent and ignorant of the matters put up to them for decision. We must know whether my hon. and learned Friend's jeremiads on this subject have or have not been proved correct. Have the Board of Referees over the last year proved to exist? It must now be a matter for physical proof one way or the other whether these chaps are actually alive. That is the first thing on which we require information.

Assuming that the Board of Referees does, in fact, exist and that it meets and has an office, telephones, secretaries and the like, I should like to ask three specific questions of the Chancellor. How many applications have been made to the Board of Referees under subsection (2) of Section 55 of the 1952 Act? It obviously is interesting to know whether they have had five applications or whether they have had 55. Without knowing these figures, one cannot tell how damaging or otherwise Section 55 was or how helpful or otherwise this last-minute concession has been.

Secondly, I should like to know—for obvious reasons, the answer may be the same as to my first question—how many separate types of mineral deposits, workings, or materials are affected by the concession made under Section 55. In other words, what proportion of the total number of applications made to them were accepted by the Board of Referees? Have hardly any additional minerals other than coal, asbestos, metal mines and oil qualified for this important concession, or, have the majority of minerals qualified? It is important to know that in order to get some quantitative idea of how the Section has operated. I hope I am not putting anyone to any inconvenience in asking these questions, but they are questions of such importance that there must be somebody here who is armed with the answers to them.

This is the third rather interesting question which I should like to ask. Assuming that some concessions have been made under Section 55 (2), what is the approximate cost of those concessions? If we are armed with the total number of concessions made and the cost of those concessions, we can then decide whether the insertion of subsection (2) on the Report stage last year has been of any great use to the national economy or whether it was virtually a waste of time. That is the first series of questions which I want to ask. They are not questions which anybody could consider unreasonable.

I should like now to pass to Section 56 of the Finance Act, 1952, which also concerns the same broad issue, with which I am very much concerned, of the special concessions made to minerals.

The Temporary Chairman (Mr. H. Hynd)

The hon. Member is, of course, entitled to ask what has been the result of last year's legislation, but I hope he is not going into the same amount of detail as to last year's discussions as when asking his last series of questions.

Mr. Crosland

You place me in difficulty, Mr. Hynd, but I shall certainly try to keep my questions rather briefer on Section 56 than on Section 55. I must be on stronger ground on Section 56 of last year's Act because it is, in fact, mentioned in the Clause which we are discussing.

The Temporary Chairman

The hon. Member expressed the hope that he was not putting anyone to inconvenience. He was certainly beginning to put the Chair to some inconvenience, and I am only warning him.

Mr. Crosland

In that case, I shall confine my remarks to a rather narrower subject. I will address myself directly to the Question. "That the Clause stand part of the Bill." The part of it with which I am particularly concerned is subsection (2, b). That subsection says that section fifty-six (which relates to the allowance for additional output of certain minerals) may be applied to any mineral. Let me give briefly the history of the insertion in the Clause of subsection (2, b). The last thing I want to do in giving hon. Members an outline of the history is to go into too much detail about our debates last year. Section 56 of the 1952 Act, an addition to which we are now being asked to accept, was introduced as a Clause which was intended to encourage the production of minerals. It was one which had a very curious history, which I cannot go into at length now. I can only say that, briefly, Section 55 was introduced as a new Clause and, despite the effect of coming in at that late stage of the Bill, the definition of what was eligible for this second concession was very narrowly drawn. It was because the narrowness of the application of the Clause was a great deal criticised that the Chancellor has now added subsection (2, b) of Clause 25.

I should like to ask a number of questions on subsection (2, b), which concerns Section 56 in last year's Act. Why—I should find it hard to know into which Lobby to go without knowing the answer —is there no reference in subsection (2, b) to the Board of Referees?

Mr. Strachey

They do not exist.

Mr. Crosland

This may suggest, as my right hon. Friend reminds me, that they do not exist, that it has been discovered that they are a wholly mythical body and, therefore, no allusion is made to them this year. But it is, on the face of it, curious that the concession made under Section 55 was discretionary to the Board of Referees. The concession made now retrospectively, to be added under Section 56, contains no mention whatever of the Board of Referees. This time the Treasury are to certify whether additional minerals are or are not to qualify. This, of course, largely concedes the points which were made from this side of the Committee last year. My hon. and learned Friend the Member for Kettering spoke very heartily, contrasting the Board of Referees unfavourably with the Treasury. His sentiments on the subject won widespread approval on this side of the Committee.

Why, then, has the Chancellor suddenly adopted what we were saying last year in the concession which he is making this year? Does this mean that the Board of Referees have proved wholly unsatisfactory in the way in which they have operated in respect of Section 55? Is there something wrong with the Board of Referees, something that we do not know, to which the Committee's attention ought to be drawn? This is important, and perhaps I will extend my remarks on it a little to make sure of getting an answer. It is important that we should have a definite statement from the Chancellor as to whether he is for or against the Board of Referees and to explain the inconsistency of inserting reference to them in Section 55 of last year's Act and not inserting them now in Section 56.

I should like some guidance as to how the Chancellor anticipates that subsection (2, b) of the Clause will operate. The Treasury has to certify that an increase in the output of certain materials is in the national interest. Hon. Members will remember that this was the form of words originally used in Section 56, but only applied to metals, mines, oil wells and asbestos. It is the same form of words which is now in subsection (2, b) which we are discussing, and the Treasury may certify in addition that the increase in output of other materials is in the national interest.

8.0 p.m.

What is in the mind of the Chancellor about this? Does he propose that under this retrospective concession he is now making a great number of minerals will be certified and get the concession given by Section 56, or only a very few? What has he in mind? Will he give it to coal and not to gypsum, to industrial diamonds and not to fluorspar? There must be a kind of guiding principle which the right hon. Gentleman has in mind to help him to operate the concession he is now making.

It would also be interesting to know— this again is essential to our being clear to decide on this in a few moments' time —of how many metals the Treasury have already certified that an increase in output is in the national interest. That is to say, to what extent has subsection (1) of Section 56 of last year's Act in fact been used? This information may have been made public; if so, I confess that I have not seen it. I see an hon. Member opposite with close knowledge of this subject. We clearly cannot decide whether or not to accept subsection (2, b) as part of Clause 25 today unless we know whether subsection (1) of Section 56 of last year's Act has been operated and what force and importance the Chancellor attaches to these matters.

I think it fair to say that during the discussions on the Excess Profits Levy last year, on Committee stage and Report, Sections 55 and 56 took up an enormous proportion of the total time and all hon. Members agreed that these were among the most important Sections of that Act. I apologise if I have trespassed on the time of the Committee, but I think all hon. Members will agree that without an answer to the very definite and factual questions I have put we shall be in great difficulty in considering which way to vote, or if we can vote at all.

Mr. R. A. Butler

It will be quite easy to dispose of the simple points put by the hon. Member for Gloucestershire, South (Mr. Crosland). I will therefore not detain the Committee long upon them before replying to the more bellicose observations of the hon. Member for Reading, South (Mr. Mikardo).

The hon. Member for Gloucestershire, South asked me some questions on Section 55 and Section 56 of last year's Finance Act, and in particular applied his attention to the subsection of which we have been hearing a great deal (2, b) of Clause 25 of the present Bill. Dealing first with Section 55, he asked some questions about what applications had been made to the Board of Referees. He asked three questions—first, what was the number of applications; secondly, the nature of the minerals affected; and thirdly, what was the cost. I can give the answer to those questions straight away. Only one or two applications under subsection (2) of Section 55 have reached the Revenue, and so far no decision has been made upon them. That means that it is not possible to give a computation of the cost, and I am not in a position tonight to give the nature of the applications. That is broadly the reply to the questions on Section 55.

The hon. Member, owing to his personal interest in this matter, will be as fully aware as are the experts that Section 55 refers in general to a wasting asset and Section 56 to the public interest. That is the difference between the two Sections, which the hon. Member appeared not to know, but needed to know, before going into the Lobby. His reference to the Lobby makes me realise that hon. Members opposite have decided to vote against abandonment of the Excess Profits Levy. If so, I hope the public will pay due attention to the fact of the reversal of opinion which has been allowed to slip out of the bag via the hon. Member. If the hon. Member is in all this complexity, I think the Committee will be prepared to leave him in it. If he does not realise the difference between Section 55 and Section 56 of the 1952 Act, there is no reason why we should further enlighten him.

The hon. Member is, however, entitled to an answer to his question as to which types of mineral are referred to in this paragraph. Under Section 56 relief will have to be subject to the overriding consideration that the Treasury are satisfied and certify that an increase in the output of the mineral in question over output at the normal rate is in the national interest. The hon. Member asked what types of mineral were involved. It might well be necessary for Ministers to make a statement on this matter at a suitable date. I can give an indication that they comprise such things as china clay anhydrite, gypsum, pyrites, pitchblende, fuller's earth, and so on, and include ballast, sand and gravel, about which we have had discussions. In the light of what the hon. Member has brought forward, I will investigate whether any further statement is necessary so that people will know where they are; but that, I think without any undue trouble gives the answer he wanted to his perfectly legitimate question.

I come now to the rather more bellicose observations of some other hon. Members. This debate has been remarkable for the various birds which have flitted into our midst. They have included dodoes and albatrosses, but the most noble of all is the plumage of the right hon. Member for Battersea, South (Mr Jay) himself. I understand that it is very bad luck to destroy an albatross, but the same does not apply to the bird sitting opposite me. I will at once take up this challenge.

The right hon. Member attempted to make out, in the opening remarks of his spritely speech, that the Government have a deep and sinister motive in all these elaborate changes in our taxation system which, as he said, had been combined with the increase in the health charges, and by some sinister method included a reduction of the profits tax cloaked by the original introduction of the Excess Profits Levy. This is a naked and unashamed attempt to bring the class war into the placid waters of the Finance Bill during an exceptionally technical discussion.

When the right hon. Member brought in the Italian holiday of the Prime Minister and an entirely apocryphal account of how E.P.L. was invented, and then lapsed into a discussion of food subsidies, I am not surprised that the Committee became somewhat confused before he fortunately resumed his seat. The position, as I see it, is that a definite charge has been made by the hon. Member for Reading, South that E.P.L. was introduced originally with the minister object of reducing the Profits Tax under cover of a smokescreen. If I were as clever as that, I would change places with the hon. Member on the board of the "Tribune."

Mr. Mikardo

I want to bring the Chancellor up to date in all matters. Perhaps I may be allowed to inform him that I am not a member of the board of the "Tribune." He is no more accurate about that than about some other observations he has made to the Committee.

Mr. Butler

I must not advertise the great extent of the hon. Gentleman's influence, but I sympathise with his disappointment at not having reached the apex of his career as yet.

The hon. Member dared to say that I was responsible for a shabby trick and he led up to the culmination amidst a deathly silence in the Committee. It is, of course, possible to interpret every action, including the most honourable, in a shabby way. There is no denying that Profits Tax was adjusted at the time of the introduction of the E.P.L., and for the very good reason that if we had superimposed E.P.L. on top of the great weight of industrial taxation which already existed, the burden would have been quite intolerable for the industries of this country.

As it is, by the time I finished with last year's Budget, our industrial taxation, leaving aside all question of taxation under the ordinary system, was the highest in the world and it was bearing most unfairly on industry at a difficult time. We therefore did make the adjustment in the Profits Tax, and in particular we made a very heavy reduction in the rate of tax on undistributed profits. We did that on purpose. But when we had finished, the weight of industrial taxation was still the heaviest in the world. It amounted to 60 per cent. and, in the case of certain companies, to over 80 per cent., if they happened to fall in the wrong category under E.P.L. So much for the position then.

When I came to review this year's Budget, I looked at all the methods—as I declared in my Budget statement—of trying to relieve companies and in particular of trying to relieve the developing companies and those involved in the export trade. I was quite open and frank with the Committee. Every one of those companies said that the greatest impediment against expanding and developing and taking part in the export trade was the Excess Profits Levy. I therefore came to the only honourable conclusion I could come to, to see whether we should end this levy at a future date.

I must say, despite the speeches which have been made this evening, which have been completely in the ordinary way of political controversy, that I think the Committee as a whole have been very generous about this action and understand the genuine motive behind it. It has not been a complete waste of time. We have gained £100 million and we shall gain £100 million next year. This is at a time when our defence programme was and is particularly heavy, and when we are carrying great burdens in the social field. The British people are probably carrying a greater burden than has ever been carried before, and during this exceptionally difficult period, for two years running, we shall have an extra £100 million in revenue from the Excess Profits Levy.

It may be said that it was a pity to introduce it this year, from the point of view of the complexity of the tax and the burden on the Revenue, accountants and everyone else. That is because it has again been shown—because there was a feeling even before this tax—that the attempt to compensate exactly for excess profits has, in the history of the world, whether in America or Britain or anywhere else, proved to be almost beyond the ingenuity of the human mind. We have discovered that in fact the tax has been very complicated and extremely difficult to bring into force and to operate in an entirely fair manner. But I am pleased that it has been of some service to our national welfare.

Hon. Members will remember that in the course of my Budget statement I made the further remark that before the Excess Profits Levy comes off, and before the next Budget, it will be possible to review the whole burden of industrial taxation in relation to the national burdens we are carrying and the economic situation. It is quite clear that anyone holding my responsibilities would have been obliged to do that. I say that so as to show that when the time comes we can see what the effect of this removal will be and what will be the effect upon the economy in the future. I say it to indicate that there is no intention of making any change, either in the Profits Tax or in any other tax, without its having the full glare of the attention of the House and of the public focused upon it. If this debate has not served that purpose, there will be future opportunities of showing what type of taxation and what burden of taxation is tolerable in the future.

8.15 p.m.

Of one thing I am certain, that there appears to be a radical difference of opinion between hon. Members opposite and those on this side of the Committee. So far hon. Members opposite who have spoken have seemed almost to regret any tendency to reduce taxation. We, on the other hand, feel that with this burden of taxation it is impossible to get the drive and spurt forward which our economy so much needs. With the present position in regard to American aid, and with the present burdens we are carrying, I can assure hon. Members that, provided we can balance our Budget, the main need is to lighten the load upon our adventurous industrialists and to give them the opportunity to compete.

We are up against a very difficult time with the new competition from Japan, Germany and elsewhere. We have managed to produce a better balance of payments situation, but it is no good saying we are yet out of our difficulties. A great national effort is needed. One thing which has encouraged me is the spirit in which this Finance Bill has been discussed. If we discuss these problems in that spirit, we can go ahead to make things even better than they are at present, and save ourselves by our own endeavours.

Mr. Strachey

The Chancellor has used an argument in his reply which I do not think the Committee should let pass. He has taunted hon. Members on this side of the Committee with dragging in the class war—[HON. MEMBERS: "Hear, hear."]—and that remark of his is supported.

Let me recall to the Committee what has actually happened by that series of taxation changes last year. Whatever the motives —and we need not describe them —the net effect of these changes, as several of my right hon. and hon. Friends have conclusively shown, was the counter-redistribution of the national income. A certain amount of the real net income of poorer sections of the community was transferred to the richer sections by the adjustment of the Profits Tax, by the adjustment of food subsidies and the like.

It may be, and it is argued by hon. Gentlemen opposite, that that was the right thing to do. That was what was done and this tax, the abolition of which we are discussing, covered that to some extent. Again, whatever may have been the possible motives for that procedure, that was what was done. When we on this side of the Committee point this out, when we point out the simple arithmetic of the matter, we are accused of dragging class war into the argument.

The difference between the two sides of the Committee is simple. We on this side may sometimes talk about the class war, but hon. Members on that side of the Committee do not talk about it— they wage it. They are very wise in their generation. The quietly go on increasing their own incomes at the expense of the mass of the population; and when attention is called to it, that, of course, is an outrage; that is dragging in this dreadful class war.

That will not deter us for one moment from pointing out what is being done. This quiet counter-redistribution of the national income—which had in a small way been redistributed for the first time in the history of this country against the incomes of the rich to the incomes of the poorer sections of the community—is being done slowly, quietly and very discreetly. I can understand the dislike of hon. Members opposite when these facts are pointed out. This tax, which was imposed last year, had the other effect. The net balance—even when the tax was in existence—of all the provisions of last year's Budget was to do that. When this tax is removed, the counter-redistribution is very much more substantial.

The Committee is, therefore, in a real difficulty to know what to do and which way to vote on this Clause. Although this measure in itself was redistributory, it was of such a complex, clumsy, and undesirable character that one really can hardly mourn its passing. My hon. Friend the Member for Gloucestershire, South (Mr. Crosland) showed some of its complications and the Chancellor, in replying to the debate, merely underlined what those complications were.

Therefore, it is almost impossible for us on this side of the Committee to oppose its demise. This is not the proper way to redistribute the national income. A simple Profits Tax is an incomparably better way. The justification for this tax was defence expenditure. Is it suggested that defence expenditure is now less?

Mr. R. A. Butler

The difference is that we thought that defence expenditure would be a short, sharp burst and it has now come to a long-drawn-out haul. That is the main difference.

Mr. Strachey

That is an argument which I could take up. The fact remains that the level of defence expenditure which it was said last year necessitated the imposition of this discriminatory, complicated and almost unworkable tax is higher this year than it was last year. The fact that that special high level of defence expenditure is now expected to continue longer than was anticipated would be an argument for retaining the tax.

The net effect left on the mind of the Committee must be what is unquestionably a fact—that this was a political tax. This was a tax put on for its supposed political effect, and the Chancellor is undoubtedly right from his point of view to get rid of it when he thinks that it has served its purpose in that respect. It is a bad tax. It is discriminatory in the wrong way. One cannot discriminate in this way. Therefore, in spite of the broader considerations on the distribution of the national income which I have mentioned, I do not see how we on this side of the Committee can mourn its passing.

Question put, and agreed to.

Clause, as amended, ordered to stand part of the Bill.