HC Deb 08 July 1954 vol 529 cc2353-401

3.58 p.m.

Mr. Hugh Gaitskell (Leeds, South)

I beg to move, in page 11, line 19, to leave out "instead of," and to insert "in addition to."

We make no apology for returning to this important Clause on investment allowances. The Amendment I am moving was discussed in the Committee as one of a number of Amendments put down by my hon. and right hon. Friends. We have selected this particular one as, on the whole, the most attractive of the various alternatives which we put to the Government in Committee.

The purpose of the Amendment is to allow the initial allowance to continue in addition to the investment allowance in the case of industrial building. The Chancellor of the Exchequer gave us an undertaking in Committee that he would look at the whole question of allowances for industrial building between the Committee and the Report stages. He said: I may be of the same opinion on Report, but as this is a point on which we wish to keep the goodwill of industry and get an improvement in investment, I will give the undertaking to look at all the speeches and all the Amendments again before the Report stage."—[OFFICIAL REPORT, 16th June, 1954; Vol. 528, c. 2035.] We had hoped that, as a result of that examination, the Chancellor of the Exchequer would have felt able to put down a Government Amendment to meet us on the point that we are making, but as he has not done so we are once again arguing that some change should be made in the Bill as regards allowances for industrial building.

I do not need to go over the argument at great length but, briefly, this is our case. We believe that it is right that industrial building should be stimulated. I should like particularly to refer to the, not one but several, speeches of my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes), who has stressed the great importance to industry of being given some encouragement in this direction. He has gone into this matter in detail and has made a number of suggestions, including, for instance, that there should be greater standardisation of types of factories for particular purposes. I understand that his suggestions have been very well received in industry generally.

4.0 p.m.

Therefore, I say that industrial building should be encouraged. I do not think that the Government are at odds with us in that. It is true that the Chancellor of the Exchequer said in Committee that the Government gave priority, as it were, to investments in plant and machinery, but he certainly also wished to stimulate industrial building.

The question then arises as to how an increase in industrial building is possible on physical grounds. Obviously, if the Government had been able to show that in present circumstances there was really no possibility of additional building resources being made available for industrial building, that would have been a good argument against providing any further stimulus: but that is not the position according to the Chancellor of the Exchequer. This is what the right hon. Gentleman said on 16th June: The right hon. Gentleman asked whether industrial building was living up to its resources or whether there was any slack. Unfortunately there is more slack in the building industry than in other industrial sectors. It is possible and important that this sector of the building industry, namely, industrial building, should come to the front whether there is slack or not. It is important to encourage it for the sake of industrial output, While I am not acknowledging that there is much slack in the building industry"— that was slightly contradictory to what the right hon. Gentleman had said before— I say that this is a priority and that in any case the matter is important."—[OFFICIAL REPORT, 16th June, 1954; Vol. 528, c. 2032–3.] It is quite evident, therefore, that, so far as physical capacity is concerned, the Chancellor is satisfied that it is available.

The next question is whether the provisions of the Bill are designed or are likely to encourage industrial building. I do not think that now there can be any doubt about what the effects of the change-over from investment allowances to initial allowances amount to. We have stressed continually from this side of the House and in Committee that the change from initial allowance to investment allowance leaves the industrialist who wishes to build, as before, with the 10 per cent. allowance in the first year. In the case of the investment allowance, all that it does is to add an extra five years at 2 per cent. from the forty-fifth to the fiftieth years of the life of the building. I cannot see how anybody can argue that this small concession, to be enjoyed 45 years hence, is likely to have any significant effect on the willingness of any industrialist to go in for new building.

I am not criticising the Government wholly for the fact that there is so little stimulus. There is no doubt that the law as it stands has, in recent years certainly, given greater encouragement to the purchase of plant and equipment than to industrial building. I said in Committee that there were good reasons for that because of the tightness of the building industry and the scarcity of resources which was natural after the war. But whatever the reason may be, there is an enormous difference in the kind of encouragement which the investment allowance gives to introduce new plant and machinery, not only because it is a higher rate—20 per cent.—but also because of the way in which the depreciation is calculated, on a steadily reducing basis, and because the rate of life of the plant and machinery is so much shorter.

Therefore, there can be no doubt that there is this difference between the encouragement given by the investment allowance as it now stands to industrial building, on the one side, and to the introduction of plant and machinery, on the other side. The series of Amendments that we moved last time were designed to correct that. We were encouraged by what the Chancellor had to say on this subject during Second Reading to put down our Amendments. He made it plain that he recognised that we had a point of considerable substance, and we were very disappointed when he agreed to none of the Amendments during the Committee stage. Now, we return to this particular Amendment, which on the whole we prefer to the others.

What the Amendment does is to allow the initial allowance to continue so that, in effect, the industrialist who decides to go in for new building is now able to obtain, not only the investment allowance at 10 per cent. in the first year, but also an initial allowance of the same amount of 10 per cent. Against that, he would lose the last five years of the capital allowance, which he would receive under the Bill as it now stands. In other words, the industrialist gets the writing off in the first year—the full 10 per cent.—instead of the 2 per cent. in each of the years between the forty-fifth and the fiftieth years. I do not think there can be much doubt that that is bound to be much more attractive as a proposition to any industrialist who contemplates new building.

When we put this proposal forward among the other alternatives in Committee, we had no adequate answer whatever from the Government. All that the Chancellor said was: I do not like the second alternative of reintroducing the initial allowances. The reason he did not like it was never disclosed. The Financial Secretary had given a rather more elaborate but equally unconvincing explanation why the Government would not accept it. Speaking of the method of having the initial allowance and investment allowance both applying, the Financial Secretary said: It would be a somewhat complicated and cumbersome method which would involve those engaged in industry in a great deal of trouble and, as my right hon. Friend explained at an earlier stage, it is one of the main purposes of this Clause to substitute the investment for the initial allowance over a very large part of the field in which the initial allowance is at present operating."—[OFFICIAL REPORT, 16th June, 1954; Vol. 528, c. 2034, 2021] The second part of that explanation was merely to repeat that it was the purpose of the Clause to replace the one allowance for the other, but it was not an explanation why that should be done. As for the argument that this proposal is a "somewhat complicated and cumbersome method," I do not think the right hon. Gentleman can have meant that seriously. As compared with the complexities of capital allowances generally in relation to taxation, this is certainly a minor matter. The right hon. Gentleman would agree that it is not very difficult to calculate the extra 10 per cent. that would be allowed in the first year in place of the 2 per cent. between the forty-fifth and fiftieth years. We cannot accept that as a serious explanation of the Government's refusal to accept the Amendment. It is, in fact, insulting both to the Inland Revenue and to industrialists to suppose that they could not possibly work the system or that there was any particular difficulty about it.

The only other argument that has been used is that of cost. The cost, we are told, in the first year would be £4 million and in the second and some subsequent years £7 million. But since this is a case of reintroducing the initial allowance, that, at any rate, is something which in theory, at least, is ultimately repayable to the Treasury. In other words, there would be a reduction, as I have said, in the extent to which the industrialists could write off the buildings a long time ahead. It is arguable that by then some other new buildings would be being built and, therefore, that the Treasury would always be out of pocket. But the Government themselves accept this distinction between initial allowances and investment allowances—and I do not want to go into that argument any more—so they cannot argue very seriously that this is an exceptionally heavy expense.

If the Government still press that argument, I would very strongly stress two points. First, I do not think that in terms of inflationary pressure there will be any danger of the increased expenditure here giving rise to anything that we really need worry about. As I have argued previously it would be offset by an increase in undistributed profits—in corporate saving. I think that there need be no anxiety on that account.

Secondly, if we are right in this—and I think that we have good reason to believe that we are—to the extent that the initial allowance does stimulate a little more industrial building it will be abundantly worth while. It will be just as worth while as the increase in investment in plant and machinery which it is the object of the 20 per cent. allowance to bring about.

We feel that up to now we have had no satisfactory answer whatever to this particular proposal. We think that the Government have simply paid lip-service—and only lip-service—to the very legitimate complaint that, as this now stands in law and as it is in the Bill, industrial building simply will not get the encouragement that it ought to get. I hope that even at this very late stage the Government will change their minds. This is a simple Amendment. There can be no argument as to drafting; there would be no difficulty in the Government accepting it on those grounds. I very much hope they will see their way to do this.

Mr. Anthony Crosland (Gloucestershire, South)

I have never been able to understand why, if the Chancellor wants to hurry the Finance Bill through, he does not offer a substantial monetary bribe to those of us on the back benches always to persuade our right hon. Friend the Member for Leeds, South (Mr. Gaitskell) to open the debates. He does so in such an admirable manner that there is very little left to be said by those of us who previously thought of intervening. I shall therefore speak only briefly to underline one or two of his remarks.

Like him, I was both surprised an disappointed that no Amendment was put on the Order Paper by the Chancellor himself, in view not only of his encouraging hints during the Second Reading debate but of the course the debate took in Committee. I think no detached and fair-minded observer who listened to our debates on the various Amendments on industrial building which we put down in Committee could possibly have denied that the Government had very much the worse of those debates. An extremely strong case was made out from these benches.

The Financial Secretary's reply was so inadequate that the Chancellor was compelled to intervene half an hour later, and his own speech was neither thorough nor very convincing. From the extent to which our arguments prevailed, and from the Chancellor's own words, I think that everyone in the Committee was left with the impression that something would be done between that stage and the Report stage. It was therefore disappointing, to say the least, to see the Order Paper empty of any Government proposal.

So far as I know, the position is not in dispute at all. Everyone wants more industrial building than we are now getting, not only for the reason which my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) has always stressed, in order to modernise our industrial buildings, but also for the reason that clearly we shall not get an increase in production over the next 10 years with-our expansion of capacity. There is no dispute about that. I imagine that there is little dispute that the present trend in industrial building is not sufficiently upward for anybody to be able to say that the problem is being solved and that we need not do anything to assist.

4.15 p.m.

If there is no dispute that we need more industrial building than we are getting under our present taxation system, why do the Government so resolutely refuse to make one of the changes we are urging? It is not as though they can say that in the Finance Bill as presented to the House there is already a large incentive to industrial building. The position, as my right hon. Friend said, is that in this year's Finance Bill there is virtually no new incentive to industrial building of any kind whatever. So it seems a passive attitude for the Government to adopt.

The pressure for a concession towards industrial building does not merely come from this side of the House. It has been discussed in the financial Press over the last two months and many in the industrial world—and Mr. Chambers very obviously—have pressed for this most strongly. It is not just a party dispute; our attitude has very strong backing from leaders of industry.

I wonder whether the Economic Secretary realises that the investment allowance Clause as it stands gives to certain industries virtually no help whatsoever. I will take, if I may, an industry in which my hon. and learned Friend the Member for Kettering (Mr. Mitchison), who is not in his place at the moment, is also interested—the boot and shoe industry. The new 20 per cent. allowance on plant and machinery is of no assistance to that industry. It is not one which buys new equipment but, almost entirely rents it from the British United Shoe Machinery Company. The boot and shoe firms therefore get no assistance from the 20 per cent. allowance on plant and machinery and virtually none from the 10 per cent. investment allowance on industrial building, which takes no effect until the 46th year. That industry is wholly unaffected by this Clause. It is an industry which, like the industries to which my hon. Friend the Member for Ashton-under-Lyne has so often referred, badly needs an improvement in its present standard of industrial building.

As my right hon. Friend pointed out. our Amendment in effect brings forward the 10 per cent. investment allowance from years 46 to 50 to the first year. In other words, if one looks over the whole 50-year period during which the building is written off it does not increase the allowance but brings it forward from right at the end to right at the beginning of that period.

In Committee we had from the Treasury Bench not one argument against the proposal—none of significance, at least. From the Chancellor we only had this extraordinary phrase. "I do not like it"—a descent from a rational level of argument to a merely petulant level.

From the Financial Secretary we had the statement that what we proposed was too complicated and cumbersome to be carried through. That is hardly a point to be taken very seriously. All we ask the accountants to do is to add the 10 per cent. investment allowance to the 10 per cent. initial allowance in the case of industrial building, which is not a task of monumental arithmetical difficulty. In the case of industrial building, it surely cannot be beyond the wit of man to put those two together. That is really all we heard against what we are now suggesting in our Amendment.

The only other point was an historical one made by the Financial Secretary that, under the scheme of initial allowances introduced by the Labour Government, plant and machinery had always had more favourable treatment than had industrial building. Of course, that is the case and it has never been denied. For most of the period plant and machinery drew an initial allowance at double the rate of that for industrial building, and for a brief period it was higher still. This has never been denied.

Today the position is completely diffent from what it was five years ago. Five years ago these industries were under such strain that we had an elaborate system of building licences which had the effect of keeping building below what it would have been otherwise. The Government pride themselves that in the last few years they have been gradually relaxing the system of building licences. Presumably that means it is their positive objective to encourage a great deal more industrial building. They take the view that the resources are available and that industry should be encouraged to use them. If by relaxing the system the Government are giving industry encouragement, why should they not also give it inducement? Arguments based on the historical pattern of a few years ago are irrelevant in the completely altered conditions of today.

In Committee the Chancellor said that he agreed that industrial buildings ought to be given a high priority, yet he is not prepared now to do anything about it. When he replies, the Economic Secretary must say whether he thinks the investment allowances, considering this change from the years 1946 to 1950, do give any additional inducement over what existed before. If he admits, as I think he is bound to admit, that they do not, is there any meaning at all in all the statements made by the Chancellor that this really important matter should be attended to? I ask the Economic Secretary not to take refuge merely in very detailed calculations and arguments, but to come face to face with this essential point. Does he think investment allowances will be any substantial inducement at all? If not, why on earth does the Chancellor not do as we ask?

Mr. J. Grimond (Orkney and Shetland)

I think we are entitled to have from the Government some further explanation of why they resist this Amendment and why they resisted Amendments in a similar strain which were moved in Committee. Apparently there is a considerable change in the outlook of their collective mind between the Second Reading and today. In the Second Reading debate the Chancellor showed that they were very much impressed by the case put by the hon. Member for Ashton-under-Lyne (Mr. Rhodes) and seemed to suggest that he would do something in the direction of giving further inducement to industrial building.

There are usually two reasons why Governments may resist Amendments of this kind on the Finance Bill. One is because of the cost involved. It has been suggested that the cost in this case would not be more than £7 million and, in the long run, it would be nothing. I cannot help feeling that if there were lost to the Revenue £7 million in the near future which would be compensated by a lesser amount deducted from the Revenue in the far future that would be well worth while for the object we have in mind. Secondly, the Government might urge that the purpose is carried out by the Clause as it stands, but I do not think that can be said seriously. In point of fact there will be practically no inducement to undertake new industrial building if the Clause is left as it is.

In the Committee debates the Financial Secretary tried to pour a certain amount of oil on troubled waters by saying that everyone was right. In the view of some hon. Members opposite there would be a concrete advantage at once but in the view of hon. Members on this side of the House the advantage would be postponed for nearly 50 years. To paraphrase George Orwell, some were more right than others. There is no doubt that among those who were more right were the people who argued that in point of fact this would not benefit anyone until about 50 years hence. I have a very small personal experience of the effect because I happen to be connected with discussions on whether some new building should be carried out or not. The fact that 50 years hence some advantage may accrue has a very small effect on our minds today. We have to give people something more than that. An advantage to what we might call our lineal descendants is rather too remote.

It may be that big businesses have planned their capital development and some company chairmen have argued that these investment allowances, while they enable people to keep a certain amount of money, may not have a great effect on capital programmes. I think. however, they will have an effect on the smaller companies. But when we come to the question of buildings, I do not think it sufficient to apply an inducement which will not take effect for 50 years. We want to make these investment allowances effective before that. We want to spur on the Government to have the courage of their convictions. Their convictions are that industry should be encouraged to put more money into building and new machinery, and so on. Can they honestly tell us that this Clause as it stands will be enough? I believe this Amendment would go a long way to tip the balance of those companies considering whether it is worth laying out a certain amount on new buildings or not.

The point has already been made, and is a very strong one, that the time has been reached at which we should divert resources from house building to factory building. Many people still live in very bad housing conditions, but employment is also extremely important and, looking to the future of those very people, I think the time has come when we must make a change and concentrate to some extent on factory building.

For all these reasons—which have been argued at length, but not really answered by the Government—I hope the Amendment will be accepted, or that we shall be given some stronger reasons than we have had for rejecting it.

Mr. Gerald Nabarro (Kidderminster)

I intervene for one moment because the whole case put by the Opposition today and previously in Committee seems to rest on a premise that there is a need to encourage and stimulate new industrial building and that there is a shortage of industrial buildings. In fact, I can find no evidence at all to support that view. One has only to study the national or provincial Press, any day of the week, to find innumerable factories offered for sale. I am not suggesting that they are always necessarily in the right places or of the right construction, but there is evidently no overall evidence whatever of a pressing shortage of factory space.

The second point I want to make is in connection with many speeches on this subject by the hon. Member for Ashton-under-Lyne (Mr. Rhodes). He often tells us of the urgent need for reconstruction of 'buildings used in the textile industry. Of course, in a measure, that is true because the textile industry is a very old industry both in the branches of the industry in the hon. Member's constituency and elsewhere in Lancashire and also in the case of another branch of the textile industry, in Kidderminster, which has suffered because many of its buildings are old.

But I would remind the hon. Member and those of his hon. Friends who support his arguments that an increase in the investment allowance, or a duality of initial and investment allowances such as this Amendment proposes, would not necessarily have the stimulating effect which the hon. Member desires, because a large part of the cost of the reconstruction of old buildings in the textile industry and other industries is reckoned, in any event, as a revenue charge on company accounts. It is not by any means always considered as a capital charge.

What this Amendment is purporting to do, if anything at all—I challenge whether it would do anything at all in view of the general factory situation—is to encourage the construction of new factories. Not only do I believe the Amendment would be ineffectual because there is evidently no overall shortage of factory space in this country taking into account the normal development going on year by year, but a second consideration which is equally important is that a large part of the normal reconstruction, modernisation and rehabilitation of factories goes on year by year in order to match changes in the machinery, lay-out and improvements in machine tools installed. That type of building reconstruction is often a revenue charge, anyway, and thus would not become the subject of initial or investment allowances, such as the combination proposed in this Amendment.

Therefore, I am driven to the conclusion—and this is a view similar to that which I expressed in Committee—that no additional fiscal stimulus is needed for new industrial building, and that my right hon. Friend is right in concentrating much greater stimulus in the Bill—it is twice as great—upon plant and machinery.

4.30 p.m.

Mr. H. Rhodes (Ashton-under-Lyne)

I am not surprised at the remarks made by the hon. Member for Kidderminster (Mr. Nabarro). Such remarks have been made in my part of the world for about 100 years, and that is why the Opposition feel so strongly and are determined to do something about this. Does not the hon. Member realise that we are discussing something which goes a small way—of course it does not go all the way—to stimulate investment in the private sector of industry, about which the Chancellor of the Exchequer complained bitterly when he opened his Budget? We have here a small opportunity to stimulate the Government to do a little more generously what we want done in the country generally.

If we do not have stimulation of this kind of investment in the private sector—I know there would have to be a fine balance to ascertain the cost of doing it—we shall have to have compulsion in time in the old industries, or else in the long run, if we do not have compulsion—I am warning the House about this—we shall have a stampede like we did in the case of Jarrow and many other Development Areas when we tried to do so much in such a short time. We did it very well, but it was at a terrific cost which the country would probably not be able to afford again when the time came. We have here an opportunity to press forward what we believe to be right.

Hon. Members have already been into the mechanics of the Amendment. I saw the hon. Member for Kidderminster shaking his head at references to the 46th, 47th, 48th, 49th and 50th years. The advantage, or the lack of advantage, of this proposal over the initial allowance is that it does not come into operation until the 46th year. In Committee we made a case for bringing the investment allowance into line with the allowance in respect of machinery, but it was not acceptable. Here we propose to marry the old initial allowance and the investment allowance. This keeps the Chancellor's figure where it was; all it does is to concertina the allowance in the first year to the extent of five years' capital allowance.

There are many chief inspectors of taxes who already allow just as much as is allowed in the Bill for machinery when a manufacturer who is putting in machinery builds a factory incidental to the installation of the machinery. In such a case not only does the investment allowance apply but also the amount allowed per year runs exactly in line with that allowed for machinery. We know that we are pushing at a half-open door here. I urge the Economic Secretary to act as a good host this afternoon and open the door wide to a good idea or two. He should accept our proposal as a small instalment for the future and as an inducement to private industry to invest more.

My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) mentioned the remarks which I made when we debated the Budget. What I then said about the means whereby large-scale operation could be made has attracted considerable attention. In one instance it was said that those ideas would be extremely valuable for new towns. I am not concerned so much about new towns but about old towns. If the Economic Secretary or the Chancellor would accompany me home one Friday and, during the railway journey, see what is happening in Mossley, which is part of my constituency, it would not be long before he would be thoroughly convinced.

There we have new houses being erected in a district where very few houses were built before the war. The situation was that even the local authority advertised for new industries to come there on the basis that the wages which they would be required to pay would be little more than dole. The reason why there was no rush by industry to take advantage of that was that new industries could not be housed in the district. There have since been some developments and one or two good factories have been erected, but, by and large, there is a dreary succession of old buildings along the valley. As I said in Committee, one cannot go into agriculture in my part of the world; one must have a roof over one's head to do a job of work. However, we are putting up fine houses, but yet we are neglecting the very thing to which the Government ought to be paying attention.

There are countries which have tackled the problem the other way round. I remember speaking to someone who went to Stalingrad when that great city was being developed. The workers were under the corrugated iron roofs of factories which were adaptable to all manner of industries. That approach has not been our approach. There is no doubt that a tremendous amount of work and capital have been put into housing, and I plead for a little bit of a turn round. To have fine houses on the hillside and in the valley miserable buildings in which new industries cannot possibly be housed, is an anachronism.

I suppose it is true that private enterprise discards a marginal investment at any time. If it cannot make a profit from the money it borrows, it gives up, and that certainly appertained before the war. But we cannot discard human beings any more. They will not stand for it, and we cannot switch populations from one part of the country to another any more. Therefore, we must have buildings into which industries can go in order to provide a living for the people on the spot. The capital is already being put into the houses, and it is about time the capital was put into the factories as well.

There is a terrific job which must be tackled before very long in Lancashire and Yorkshire. It is time that we stopped thinking in terms of the results of the activities of the old joint stock companies. My remarks apply not only to Lancashire but over the border too. People who want to see the picture as it affects industry should consult the joint committee report on the spacing of machinery, which was brought out in 1949. That bears very much on this problem, although nothing was ever done about it, because it was not possible in those days.

I wonder if the Economic Secretary realises that in that report the whole of the textile industry was divided into three parts—the A's, the B's and the C's. The A's were new factories or altered R.O.F. factories which were turned over to the wool industry; the B's were the ones which could be converted with some expenditure; and there was the big C group which the joint committee of employers and trade unionists gave up. They could not do anything with them at all. Those were factories where oil was seeping through the floor and which were all of a jitter when the engines started up. Those are the factories where new machinery cannot he introduced because it will not fit.

This state of affairs is not confined to this country. We find the same story if we read about the shift of population and of industry in America. Last year there was published a report which had been made at the instigation of five governors in New England. If we substituted Lancashire for Fall River, and altered the names of other places in the report to suit various parts of this country, we should get the picture of the situation as it occurred here. In fact, that is what the "Manchester Guardian" said in a review of this report.

But the Americans had the big advantage that they were able to export pools of cheap labour elsewhere. They moved a lot of this labour down below the Mason-Dixon line. But it does not alter the fact that those people who lived in Fall River are still there. That is why they are doing the very thing that we are asking the Government to do today—that is to encourage new building. In settling populations, that is most essential, and it is also a human thing to do.

Although we do not claim that this Amendment will effect the necessary cure—there will have to be a major operation some time—this Amendment is an earnest of what every right-thinking person has in mind.

4.45 p.m.

The Economic Secretary to the Treasury (Mr. R. Maudling)

As the right hon. Member for Leeds, South (Mr. Gaitskell) said in moving this Amendment, this subject was discussed fully in Committee and a number of speeches were made, particularly by the hon. Member for Ashton-under-Lyne (Mr. Rhodes). My right hon. Friend said that he would consider the subject again in the light of those speeches, but he had already said that he was chary of making a concession and he gave four reasons which weighed and still weigh in my right hon. Friend's mind in considering this matter.

He said that he was chary about making a concession, first because it would make it difficult to hold the line that he had adopted; secondly, because it would add £4 million to the cost; thirdly, because he did not want to indulge in the complicated legislation needed to do it the other way round and change buildings from the straight-line basis to the reducing-balance basis; and fourthly because he still thought that it was plant and machinery which particularly required the investment allowance and not the buildings.

In accordance with the undertaking which my right hon. Friend gave, he has studied again very carefully this whole problem in the light of what was said by hon. Members in Committee, but he has come to the conclusion on balance—it was not a very definite balance one way or the other, but, as I have said, he reached that conclusion on balance—that it would be better not to make any change in the proposals as originally introduced in the Finance Bill. It is perfectly true that the stimulus given to investment in new plant and machinery is greater than that given to investment in new buildings. No one would deny that. But I would ask hon. Members opposite not to write off entirely the benefit of this investment allowance in respect of industrial buildings.

It is true that in terms of the annual taxation bill, the difference between an investment allowance and an initial allowance does not make itself felt until the 45th year, but I should have thought—although I cannot admit to as much practical experience as many other hon. Members—that in considering an investment in a new industrial building, the question in the mind of the investor is the period over which the initial cost will be written off. The fact that the benefit does not actually accrue in terms of tax assessment for 45 years does not mean that it is not of some benefit.

Secondly, I cannot help thinking that, while there may be differences between industry and industry, and area and area, it is a little artificial to make too much of a distinction between an industrial building and plant and machinery. The purpose of the building it to hold the plant and machinery, and surely, when considering what to do to stimulate new productive investment as a whole, we want to consider what would be the effect on a potential investor of an allowance which would affect his new investment as a whole—that is, plant and machinery and buildings taken together.

Mr. Rhodes

That is precisely what we have been doing; we have been considering that aspect of the matter. But if, as the Economic Secretary has said, he attaches tremendous importance to the machinery, we say that the full benefit of investment in machinery cannot be obtained until the receptacle is ready for the installation. That is why we want to speed it up.

Mr. Maudling

I do not think I have made my point sufficiently clear. My point is that the investor, deciding whether to invest in a new factory, will consider the tax allowance which he will get in respect of machinery and in respect of the building as a single whole. If it is said that one should be more generous than the other, I think that that is an artificial argument, because what weighs with the investor is not the allowance he gets on the plant or the allowance he gets on the building, but the total allowance he gets on the two together. Of course, I agree that that does not apply to all industries.

My right hon. Friend has considered this matter very carefully, but he has come to the conclusion that he cannot accept this Amendment. Of the four reasons which I have mentioned, the one relating to the legislation for changing buildings from the straight-line basis to the reducing-balance basis does not apply to this Amendment. The question of the relative importance of plant and machinery and buildings I have attempted to deal with. The other two reasons are the most relevant to this Amendment.

The first is because, as my right hon. Friend said, to accept an Amendment of this kind would make it more difficult to hold the line he had adopted, namely, the line drawn between industrial building and commercial building. He has been anxious not to give away the position adopted by this Government and preceding governments that the important thing to do is to stimulate industrial building.

My right hon. Friend did feel that there is an argument that there is an unfair discrimination against commercial building, and that if he were to increase still further the allowance on industrial building, the case for admitting commercial building as well would become in practice, if not in theory, more compelling. That is, briefly, what he had in mind in coming to a decision.

On the question of cost, the cost of accepting this Amendment and having an initial allowance as well as an investment allowance would be £4 million in the first year and £7 million in subsequent years. It would be difficult to say what is actually the cost to the Budget of an initial allowance. I think that the right hon. Gentleman was at slight variance with the hon. Member for Gloucester, South (Mr. Crosland) on this point. If the hon. Member for Gloucester, South is right, then, of course, what the Treasury and the revenue loses by way of initial allowance is, in practice, lost once and for all to the Exchequer.

So far as the right hon. Gentleman's argument is concerned, I cannot accept his argument about the economic effects of the initial allowance. I think that his point was that if we granted an initial allowance in addition to the investment allowance, we might have a transfer of savings from public savings to corporate savings. I cannot help feeling that if his object in granting an initial allowance is to provoke more expenditure on investment, he cannot simultaneously provoke the same amount of additional savings.

Whatever the economic effects of this proposal, the Budgetary effects would be to impose on the Budget an additional charge of £4 million for the first year and £7 million in subsequent years. I do not think that there is any argument, on either side, that the more stimulus we can give to investment in British industry the better. This is really a question of judging whether we can afford to give this stimulus in the light of the cost and the light of possible repercussions in

respect of other types of building, particularly commercial building.

My right hon. Friend considered this with great care, and he came to the conclusion that on balance he would not be justified at the present moment, in the present circumstances, in accepting the Amendment. He is grateful to hon. and right hon. Members opposite for the arguments and suggestions which they have advanced on this matter, and he hopes that by refusing to accept the Amendment he has not given the impression that he does not value the suggestions which have been made, but, on balance, he feels that he is not justified in accepting the Amendment at the present time.

Question put, "That 'instead of,' stand part of the Bill."

The House divided: Ayes. 263; Noes, 230.

Division No. 194.] AYES [4.54 p.m.
Aitken, W. T. Crowder, Petre (Ruislip—Northwood) Hirst, Geoffrey
Allan, R. A. (Paddington, S.) Darling, Sir William (Edinburgh, S.) Holland-Martin, C. J.
Alport, C. J. M. Davidson, Viscountess Hopkinson, Rt. Hon. Henry
Amery, Julian (Preston, N.) Deedes, W. F. Hornsby-Smith, Miss M. P
Amory, Rt. Hon. Heathcoat (Tiverton) Digby, S. Wingfield Horobin, I. M.
Anstruther-Gray, Major W. J. Dodds-Parker, A. D. Horsbrugh, Rt. Hon. Florence
Arbuthnot, John Donaldson, Cmdr. C. E. McA Howard, Gerald (Cambridgeshire)
Assheton, Rt. Hon. R. (Blackburn. W.) Donner, Sir P. W Howard, Hon. Greville (St. Ives)
Baldock, Lt.-Cmdr. J. M. Doughty, C. J. A. Hudson, Sir Austin (Lewisham, N.)
Baldwin, A. E. Douglas-Hamilton, Lord Malcolm Hulbert, Wing Cdr. N. J.
Banks, Col. C. Drayson, G. B. Hurd, A. R.
Barlow, Sir John Dugdale, Rt. Hon. Sir T. (Richmond) Hutchison, Sir Ian Clark (E'b'rgh, W.)
Baxter, Sir Beverley Duncan, Capt. J. A. L. Hyde, Lt.-Col. H. M.
Beach, Maj. Hicks Duthie, W. S. Hylton-Foster, H. B. H.
Bell, Ronald (Bucks, S.) Eccles, Rt. Hon. Sir D. M. Iremonger, T. L.
Bennett, F. M. (Reading, N.) Eden, Rt. Hon. A. Jenkins, Robert (Dulwich)
Bennett, Dr. Reginald (Gosport) Eden, J. B. (Bournemouth, West) Johnson, Eric (Blackley)
Bennett, William (Woodside) Erroll, F. J. Johnson, Howard (Kemptown)
Birch, Nigel Finlay, Graeme Jones, A. (Hall Green)
Bishop, F. P. Fisher, Nigel Joynson-Hicks, Hon. L. W.
Boothby, Sir R. J. G. Fleetwood-Hesketh, R. F. Kaberry, D.
Bossom, Sir A. C. Fletcher-Cooke, C. Kerby, Capt. H. B
Boyd-Carpenter, Rt. Hon. J. A. Ford, Mrs. Patricia Kerr, H. W.
Boyle, Sir Edward Fort, R. Lambton, Viscount
Braine, B. R. Foster, John Lancaster, Col. C. G
Braithwaite, Sir Albert (Harrow, W.) Fraser, Hon. Hugh (Stone) Langford-Holt, J. A.
Braithwaite, Sir Gurney Fraser, Sir Ian (Morecambe & Lonsdale) Leather, E. H. C.
Brooke, Henry (Hampstead) Fyfe, Rt. Hon. Sir David Maxwell Legge-Bourke, Maj. E. A. H.
Brooman-White, R. C. Galbraith, Rt. Hon. T. D. (Pollok) Legh, Hon. Peter (Petersfield)
Browne, Jack (Govan) Gammans, L. D. Lennox-Boyd, Rt. Hon. A. T.
Buchan-Hepburn, Rt. Hon. P. G. T George, Rt. Hon. Maj. G. Lloyd Lindsay, Martin
Bullard, D. G. Glover, D. Linstead, Sir H. N.
Bullus, Wing Commander E. E. Godber, J. B. Lloyd, Rt. Hon. G. (King's Norton)
Burden, F. F. A. Gomme-Duncan, Col. A. Lloyd, Maj. Sir Guy (Renfrew, E.)
Butcher, Sir Herbert Gough, C. F. H. Lockwood, Lt.-Col. J. C.
Butler, Rt. Hon. R. A. (Saffron Walden) Gower, H. R. Longden, Gilbert
Campbell, Sir David Grimston, Hon. John (St. Albans) Low, A. R. W.
Carr, Robert Grimston, Sir Robert (Westbury) Lucas, Sir Jocelyn (Portsmouth, S.)
Cary, Sir Robert Hall, John (Wycombe) Lucas, P. B. (Brentford)
Channon, H. Hare, Hon. J. H. Lucas-Tooth, Sir Hugh
Clarke, Col. Ralph (East Grinstead) Harris, Frederic (Croydon, N.) McCorquodale, Rt. Hon. M. S.
Cole, Norman Harrison, Col. J. H. (Eye) Macdonald, Sir Peter
Colegate, W. A. Harvey, Ian (Harrow, E.) Mackeson, Brig. Sir Harry
Conant, Maj. Sir Roger Harvie-Watt, Sir George Mackie, J. H. (Galloway)
Cooper, Sqn. Ldr. Albert Hay, John Maclay, Rt. Hon. John
Cooper-Key, E. M. Heald, Rt. Hon. Sir Lionel Maclean, Fitzroy
Craddock, Beresford (Spelthorne) Heath, Edward Macleod, Rt. Hon. Iain (Enfield, W.)
Crookshank. Capt. Rt. Hon. H. F. C Higgs, J. M. C. MacLeod, John (Ross and Cromarty)
Crosthwaite-Eyre, Col. O. E. Hill, Dr. Charles (Luton) Macmillian, Rt. Hon. Harold (Bromley)
Crouch, R. F. Hill, Mrs. E. (Wythenshawe) Macpherson, Niall (Dumfries)
Crowder, Sir John (Finchley) Hinchingbrooke, Viscount Maitland, Patrick (Lanark)
Manningham-Buller, Rt. Hn. Sir Reginald Ramsden, J. E. Summers, G. S.
Markham, Major Sir Frank Rayner, Brig. R Sutcliffe, Sir Harold
Marlowe. A. A. H. Redmayne, M. Taylor, William (Bradford, N)
Marples, A. E. Rees-Davies, W. R Teeling, W.
Marshall, Douglas (Bodmin) Remnant, Hon. P. Thomas, Rt. Hon. J. P. L. (Hereford)
Maude, Angus Ronton, D. L. M. Thomas, Leslie (Canterbury)
Maudling, R. Ridsdale, J. E. Thompson, Lt.-Cdr. R. (Croydon, W.)
Maydon, Lt.-Comdr. S. L. C Roberts, Peter (Heeley) Thornton-Kemsley, Col. C. N
Medlicott, Brig F. Robertson, Sir David Tilney, John
Mellor, Sir John Robinson, Sir Roland (Blackpool, S.) Touche, Sir Gordon
Molson, A. H. E. Robson-Brown, W. Turner, H. F. L.
Moore, Sir Thomas Rodgers, John (Sevenoaks) Turton, R. H.
Morrison, John (Salisbury) Roper, Sir Harold Tweedsmuir, Lady
Nabarro, G. D. N. Ropner, Col. Sir Leonard Vane, W. M. F.
Neave, Airey Russell, R. S. Vaughan-Morgan, J. K.
Nicholls, Harmar Ryder, Capt. R. E. D. Vosper, D. F.
Nicolson, Nigel (Bournemouth, E.) Savory, Prof. Sir Douglas Wakefield, Edward (Derbyshire, W)
Nield, Basil (Chester) Schofield, Lt.-Col. W. Wakefield, Sir Wavell (St. Marylebone)
Noble, Comdr. A. H. P Scott, R. Donald Walker-Smith, D. C.
Nugent, G. R. H. Scott-Miller, Cmdr. R. Wall, Major Patrick
Nutting, Anthony Shepherd, William Ward, Hon. George (Worcester)
Oakshott, H D. Simon, J. E. S. (Middlesbrough, W.) Ward, Miss I. (Tynemouth)
Odey, G. W. Smithers, Peter (Winchester) Waterhouse, Capt. Rt. Hon. C.
O'Neill, Hon. Phelim (Co. Antrim, N.) Smithers, Sir Waldron (Orpington) Watkinson, H. A.
Orr, Capt. L. P. S. Snadden, W. McN. Webbe, Sir H. (London & Westminster)
Orr-Ewing, Charles Ian (Hendon, N.) Soames, Capt. C. Wellwood, W.
Orr-Ewing, Sir Ian (Weston-super-Mare) Spearman, A. C. M Williams, Gerald (Tonbridge)
Page, R. G. Speir, R. M. Williams, Sir Herbert (Croydon, E.)
Peake, Rt. Hon. O. Spens, Rt. Hon. Sir P. (Kensington, S.) Williams, Paul (Sunderland, S.)
Peto, Brig. C. H. M. Stanley, Capt. Hon. Richard Williams, R. Dudley (Exeter)
Pickthorn, K. W. M. Stevens, Geoffrey Wills, G.
Pilkington, Capt. R. A Steward, W. A. (Woolwich, W.) Wilson, Geoffrey (Truro)
Pitman, I. J. Stewart, Henderson (Fife, E.) Wood, Hon. R.
Pitt, Miss E. M. Stoddart-Scott, Col. M.
Powell, J. Enoch Storey, S. TELLERS FOR THE AYES:
Price, Henry (Lewisham, W.) Strauss, Henry (Norwich, S.) Sir Cedric Drewe and
Prior-Palmer, Brig. O. L Stuart, Rt. Hon. James (Moray) Mr. T. G. D. Galbraith.
Raikes, Sir Victor Studholme, H. G.
Acland, Sir Richard Davies, Ernest (Enfield, E.) Henderson, Rt. Hon. A. (Rowley Regis)
Albu, A. H. Davies, Harold (Leek) Herbison, Miss M.
Allen, Arthur (Bosworth) Davies, Stephen (Merthyr) Hobson, C. R.
Allen, Scholefield (Crewe) de Freitas, Geoffrey Holman, P.
Anderson, Frank (Whitehaven) Deer, G. Holmes, Horace
Attlee, Rt. Hon. C. R. Delargy, H. J. Holt, A. F.
Awbery, S. S. Dodds, N. N. Houghton, Douglas
Bacon, Miss Alice Donnelly, D. L. Hoy, J. H.
Balfour, A. Dugdale, Rt. Hon. John (W Bromwich) Hubbard, T. F.
Beattie, J. Ede, Rt. Hon. J. C Hudson, James (Ealing, N.)
Bence, C. R. Edelman, M. Hughes, Emrys (S. Ayrshire)
Benn, Hon. Wedgwood Edwards, Rt. Hon. John (Brighouse) Hughes, Hector (Aberdeen, N.)
Benson, G. Edwards, Rt. Hon. Ness (Caerphilly) Hynd, H. (Accrington)
Bing, G. H. C. Edwards, W. J. (Stepney) Hynd, J. B. (Attercliffe)
Blackburn, F. Evans, Albert (Islington, S.W.) Irving, W. J. (Wood Green)
Blenkinsop, A. Evans, Edward (Lowestoft) Isaacs, Rt. Hon. G. A.
Blyton, W. R. Fernyhough, E. Janner, B.
Boardman, H. Fienburgh, W. Jeger, George (Goole)
Bottomley, Rt. Hon. A. G Fletcher, Eric (Islington, E.) Jeger, Mrs. Lena
Bowden, H. W. Follick, M. Jenkins, R. H. (Stechford)
Bowles, F. G. Forman, J. C. Johnson, James (Rugby)
Braddock, Mrs. Elizabeth Fraser, Thomas (Hamilton) Jones, David (Hartlepool)
Brockway, A. F. Freeman, John (Watford) Jones, Frederick Elwyn (West Ham, S.)
Brook, Dryden (Halifax) Freeman, Peter (Newport) Jones, Jack (Rotherham)
Broughton, Dr. A. D. D. Gaitskell, Rt. Hon. H. T N Keenan, W.
Brown, Rt. Hon. George (Belper) Gibson, C. W. Kenyon, C.
Brown, Thomas (Ince) Glanville, James Key, Rt. Hon. C. W
Burke, W. A. Gordon Walker, Rt. Hon. P. C King, Dr. H. M
Burton, Miss F. E. Greenwood, Anthony Kinley, J.
Butler, Herbert (Hackney, S.) Grey, C. F. Lawson, G. M.
Castle, Mrs. B. A. Griffiths, Rt. Hon. James (Llanelly) Lee, Frederick (Newton)
Champion, A. J. Grimond, J. Lee, Miss Jennie (Cannock)
Clunie, J. Hale, Leslie Lever, Leslie (Ardwick)
Coldrick, W. Hall, Rt. Hon. Glenvil (Colne Valley) Lindgren, G. S.
Collick, P. H. Hall, John T. (Gateshead, W.) Lipton, Lt.-Col. M
Corbet, Mrs. Freda Hamilton, W. W. MacColl, J. E.
Cove, W. G. Hannan, W. McInnes, J.
Craddock, George (Bradford, S.) Hardy, E. A. McLeavy, F.
Crosland, C. A. R. Hargreaves, A. MacPherson, Malcolm (Stirling)
Crossman, R. H. S. Harrison, J. (Nottingham, E) Mallalieu, E. L. (Brigg)
Cullen, Mrs. A. Hastings, S. Mallalieu, J. P. W. (Huddersfield, E.)
Daines, P. Hayman, F. H. Mann, Mrs. Jean
Dalton, Rt. Hon. H. Healey, Denis (Leeds, S.E.) Manuel, A. C.
Darling, George (Hillsborough) Healy, Cahir (Fermanagh) Marquand, Rt. Hon H. A
Mason, Roy Pryde, D. J. Thomas, George (Cardiff)
Mayhew, C. P. Pursey, Cmdr. H. Thomas, Iorwerth (Rhondda, W.)
Mellish, R. J. Reid, Thomas (Swindon) Thomas, Ivor Owen (Wrekin)
Messer, Sir F. Reid, William (Camlachie) Thomson, George (Dundee, E.)
Mikardo, Ian Rhodes, H. Thornton, E.
Mitchison, G. R Richards, R. Timmons, J.
Monslow, W. Robens, Rt. Hon. A. Tomney, F.
Moody, A. S. Roberts, Goronwy (Caernarvon) Ungoed-Thomas, Sir Lynn
Morley, R. Robinson, Kenneth (St. Pancras, N.) Usborne, H. C.
Morris, Percy (Swansea, W.) Rogers, George (Kensington, N.) Warbey, W. N
Morrison, Rt. Hon. H. (Lewisham, S.) Ross, William Weitzman, D.
Moyle, A. Royle, C. Wells, Percy (Faversham)
Mulley, F. W. Shackleton, E. A. A. Wells, William (Walsall)
Noel-Baker, Rt. Hon. P. J Shinwell, Rt. Hon. E. West, D. G.
Oldfield, W. H. Short, E. W. Wheeldon, W. E.
Oliver, G. H. Shurmer, P. L. E. White, Mrs. Eirene (E. Flint)
Orbach, M. Silverman, Sydney (Nelson) Whiteley, Rt. Hon. W.
Oswald, T. Simmons, C. J. (Brierley Hill) Wigg, George
Padley, W. E. Skeffington, A. M. Wilcock, Group Capt. C. A. B.
Paget, R. T. Slater, Mrs. H. (Stoke-on-Trent) Willey, F. T.
Paling, Rt. Hon. W. (Dearne Valley) Slater, J. (Durham, Sedgefield) Williams, Rev. Llywelyn (Abertillery)
Paling, Will T. (Dewsbury) Smith, Ellis (Stoke, S.) Williams, W. R. (Droylsden)
Palmer, A. M. F. Smith, Norman (Nottingham, S.) Willis, E. G.
Pannell, Charles Sorensen, R. W. Wilson, Rt. Hon. Harold (Huyton)
Pargiter, G. A. Soskice, Rt. Hon. Sir Frank Winterbottom, Ian (Nottingham, C.)
Parker, J. Sparks, J. A. Winterbottom, Richard (Brightside)
Parkin, B. T Steele, T. Woodburn, Rt. Hon. A.
Paton, J. Strachey, Rt. Hon. J. Wyatt, W. L.
Pearson, A. Strauss, Rt. Hon. George (Vauxhall) Yates, V. F.
Pearl, T. F. Summerskill, Rt. Hon. E. Younger, Rt. Hon. K.
Popplewell, E. Swingler, S. T.
Porter, G. Sylvester, G. O. TELLERS FOR THE NOES:
Price, J, T. (Westhoughton) Taylor, Bernard (Mansfield) Mr. Wilkins and Mr. John Taylor
Proctor, W. T. Taylor, Rt. Hon. Robert (Morpeth)
Mr. Crosland

I beg to move, in page 11, line 44, after "one-fifth," to insert: or, in the case of the fuel-saving machinery or plant mentioned in the next following subsection, one quarter. This Amendment is intended to give to certain types of plant and machinery designed to save fuel an investment allowance of 25 per cent, instead of one of 20 per cent. It will be remembered that we had a debate on a rather similar Opposition Amendment last year, to which the Chancellor replied by making one of his less felicitous speeches in which he descended from the very high moral tone which he usually adopts, and which, to use his own words in reference to another speech, created no intellectual stir in the Chamber, or indeed stir of any other kind, if it comes to that. I hope that he will make his speech this year on a rather higher level, and will go into the question rather more thoroughly.

This is a particularly propitious, or perhaps unpropitious moment—I am not sure which—to be discussing questions of fuel economy in the light of the National Union of Mineworkers' Conference which has been going on this week and in the light of the very sombre warnings given to that conference. The decisions on various other matters discussed at the conference give pain in some quarters and pleasure in others. But they are not our concern, at any rate not this evening.

This conference has listened to extremely grave warnings about the coal position both from its own officers, Mr. Jones and Mr. Horner, and also from Sir Hubert Houldsworth himself. There can be no question that the coal position is extremely alarming. Both sides of the House said last year that the situation was serious even then, but it is clearly a great deal more serious now.

We have had this year an increase in output of a little over 1 million tons. Exports are about the same as last year which, I think, nobody considers large enough. If our exports of coal could be considerably increased, it would be of great benefit to the country. Stocks are about the same as last year, but they ought to be larger, because industrial consumption is increasing. Therefore, last year's figures are inadequate.

What is really serious is the fact that, compared with the increase in output of only 1 million tons, consumption has gone up by over 3 million tons. Nobody doubts that the coal position during this coming winter is going to be a very unsatisfactory one. Once again we have announced that we shall import coal from abroad, and that is something which nobody likes.

Of course, it could be said by whichever Minister replies that any concessions to fuel saving equipment in July will not have much effect on the position this winter, because some forms of this equipment take, possibly, two or three years to instal and another year before any appreciable effect is felt from their use. I do not think that is a sufficient argument against accepting the concession this year, because there is every indication that the coal picture is going to be as bleak in five, 10 or 15 years' time as it is in 1954.

I think that every committee and every body which has studied the long-term position is agreed on how difficult the outlook is. The Ridley Committee said that the home demand for coal in some 10 years' time would amount to 230 million tons. The Federation of British Industries, which I should have thought had more reason on their side, put the figure of the home demand in about 10 years' time at 260 million tons. The Ridley Committee and the National Coal Board have both been talking in terms of exports in 10 years' time being about 30 million tons. That figure is a good deal lower than our export figure in the 1920s, and is one which the Economic Commission for Europe certainly thinks can be exceeded, since its own calculation was that by that time there will be a European coal gap of no less than 50 million tons.

It does not matter which calculation we take. It is perfectly clear that, looking ahead, the demand for coal, both for home industry and also for export, is going to be very much greater than the amount of coal which, even on the most favourable assumptions, we can produce in this country. If it is the case that in a few years' time the demand for coal is going to be a great deal greater than we can supply, then, obviously, it is right that we should emphasise the question of fuel economy.

This is not a party matter, and except for the hon. and gallant Member for New Forest (Colonel Crosthwaite-Eyre) who intervened rather unexpectedly in the debate last year, it is not an issue upon which there is any disagreement at all. Everybody is agreed that large savings of fuel can be made in industry. Indeed, the hon. Member for Kidderminster (Mr. Nabarro) has made this point again and again in this Chamber.

The hon. Member for Garston (Sir V. Raikes) said last year that in five years or so, industry could certainly save 9 or 10 million tons of coal by fuel economies. The Ridley Committee reported in exactly the same terms, and I do not think there is any dispute that large savings can be made. Nor is there any dispute about the fact that industry needs an incentive if it is to save coal, because, except in the case of three or four notable industries, fuel costs are an extremely small proportion of total costs.

Last year, in reply to a debate on an Amendment which we then put down to give 100 per cent. initial allowances to certain fuel equipment, the Chancellor rejected our plea while admitting that the matter was of the greatest possible importance. He rejected it not in one of his rather patriotic, idealistic and ethical sounding speeches, but in one of his rather more debating speeches, taking refuge very largely in the fact that the wording of the Amendment was bad. I have this morning re-read the speeches on that occasion, and I have come to the conclusion that he misread the Amend-milt, but that is not particularly germane at the moment.

The Chancellor of the Exchequer (Mr. R. A. Butler)

Is the hon. Gentleman suggesting that I cannot be forensic and patriotic at the same time?

Mr. Crosland

I am sure that the Chancellor is one of the very few people who can come within sight of this duality of character. But more normally he is a Jekyll and Hyde character and adopts either one or other of his rather contrasting personalities.

Assuming we have got the right hon. Gentleman in a patriotic and moralising attitude this afternoon, I hope he will not take refuge in the fact that there may be some flaws in the drafting of our Amendment. Of course, it is difficult to draft an Amendment perfectly when in Opposition, and this year we have had less time than usual between the Committee stage and the Report stage. I do not think, however, there is a great deal wrong with it, or if there is that it is very serious. But, if the Chancellor is willing to accept the principle, he can say it is badly drafted if he likes, provided he agrees with the substance of it.

Last year the right hon. Gentleman admitted the great importance of the subject and admitted that the existing loan scheme of the Ministry of Fuel and Power had largely broken down. Out of £1 million loans provided under that scheme, only some 4 per cent. had, in fact, been taken up. Therefore, the Chancellor, in collaboration with the Minister of Fuel and Power, did make a small concession in respect of the loan scheme. He extended the category of equipment to which it should be applied, and extended the period of repayment. He made it two years instead of one year interest free.

We have now observed how this scheme has worked, and the Minister of Fuel and Power has given the House, on more than one occasion, figures of how much of this money has been loaned. The last figure that he gave was on 28th June this year when, in answer to a Question, he said: Under the new Government loan scheme I have approved 51 schemes amounting to £339,000."—[OFFICIAL REPORT, 28th June, 1954: Vol. 529, c. 876.] Those are better than the figures in the previous scheme, but can this really be considered a rapid rate of improvement? We on this side of the House think not.

It might be argued that the scheme was only operating for a year and, therefore, why not give it another year. That, I think, would be a powerful argument if the thing appeared to be going full steam ahead and if the loans were being made at a rapid rate. But on the basis of the figures we have been given I do not think that progress under this scheme is really such that we can be happy about our present arrangements.

There is this further point about it. If we were going to ask what kind of inducement ought to be given to industry to instal this equipment, I could understand that at a time when industry was short of cash, a loan scheme was the natural way of dealing with the matter. Two years ago it could be argued—indeed, it was argued—that industry was then short of cash. Nobody thinks that today. The Economic Secretary in a previous debate admitted that the great majority of firms are not short of cash.

I cannot think that a loan scheme of any kind is a strong inducement to firms that are not short of cash. Apart from the fact that there are two years' interest free, the offer of loans on favourable terms will not make the installation of equipment more profitable than it would otherwise be. It would only make the money available to most firms, and money available now through a loan scheme is not relevant to a position such as that in which we find ourselves today.

What we require today is not to offer loans but to make the installation of this type of equipment more profitable to industry. That is exactly what we are seeking to do in this Amendment. The fact is that an investment allowance does give an additional return on any investment, and we are seeking to increase this still further on this particular kind of investment. I hope that whoever replies to this debate will deal with this point, which is fundamental. The concept of a loan was obviously the correct approach at a time when industry was short of cash, but now that industry is not short of cash a loan is an irrelevant type of approach and what is wanted is something to increase the net return and the profitability on this sort of equipment. That is what we are pressing for.

5.15 p.m.

What objections can be used against this suggestion? First of all, we can have the old familiar objection that there are practical difficulties. The Ridley Committee wanted to advocate a concession, not of this exact kind but somewhat parallel. It was, in fact, a 100 per cent, initial allowance. They did not do so, however, because after discussion with the Inland Revenue, they were convinced that there were great practical difficulties.

The Inland Revenue, with all due respect to my hon. Friend the Member for Sowerby (Mr. Houghton), have a rather professional vested interest in creating practical difficulties when a Minister asks whether some new scheme should be adopted or not. Whatever the position two years ago, it cannot be said that there are practical difficulties about defining the sort of equipment which we have in mind, because it is already defined by the Ministry of Fuel and Power for the purposes of the loan scheme. Clearly, if this type of equipment and plant can be identified for the purpose of giving firms loans, it can be identified for the purpose of giving firms a higher investment allowance. It really would not be fair to take seriously now the argument that there were great practical difficulties in defining and identifying the type of equipment that we have in mind.

It might be objected that a comparatively small concession of this kind will not save much coal. I might say that the only reason why we suggested a small concession is that, in view of the Chancellor's mood of obstinacy during the whole of the proceedings on this year's Finance Bill, we thought it would be a waste of time to suggest a concession involving a more substantial amount. We have tried to attract his interest by making it comparatively small and not costly.

But, in any case, I would suggest to the Committee that, supposing it is stated that this kind of concession will only save 500,000 tons or a million tons of coal, it does not, therefore, mean that this is not worth doing. A small marginal saving of coal can be of the greatest possible importance because we are working on such a narrow margin the whole time. A million tons of coal may not sound very important when we think that our total consumption of coal is 220 million tons, but that one million tons might easily make the difference between having a coal crisis and not having a coal crisis.

The value to the country of one million tons of coal is its equivalent in industrial output which would be lost by its not being there. One million tons of coal could make a difference in one year of 5 per cent. in industrial output. In 1947, for a brief period there was a very small coal shortage which was reflected in a huge drop in industrial output. So I hope that hon. Members will not say that, because the saving in terms of coal is comparatively small, therefore the saving to the country is not of the greatest possible importance.

Lastly, I suppose the principal objection that will be brought forward is the objection that we cannot discriminate in favour of a single industry. Despite the fact that both this year on the investment allowance and last year on the initial allowances we asked for discrimination for a number of separate industries, I personally have a great deal of sympathy with the argument that the Treasury cannot discriminate over the whole field of taxation. I think my hon. Friend the Member for Sowerby very naturally takes a similar view.

I think, therefore, that it is very natural for the Treasury Bench to say on the various Amendments from this side of the House—I think there were from five to ten this year—asking for larger investment allowances for this and that industry, that this is a degree of discrimination which will make the whole thing really hopeless.

I hope that they will notice that this year at this stage, we were careful not to put this fuel saving Amendment on the Order Paper with other Amendments proposing discriminating treatment which we put forward on the Committee stage, but have brought it forward separately on Report. We made the differentiation in order to make the point that we regard this is a separate issue. In other words, if a concession were made on this point we would not say that the Government should make a concession on machinetools or shipbuilding and various other things. I hope that whoever answers the debate will not take refuge behind the general argument about discrimination, but will accept the fact that we put this on quite a different level from other cases which we have argued.

Even the argument against discrimination can be pressed very much too far. This Government, following the example of previous Governments, have themselves discriminated in initial allowances and investment allowances. Initial allowances were given for mining works and extractive industries at a rate double that given to other industries. This year, when the change was made to investment allowances, again the mining and extractive industries, alone of all industries, are given the choice between a 20 per cent. investment allowance and a 40 per cent. initial allowance. Therefore, there is already in Government policy a perfectly clear discrimination in favour of mining works and we might say that the principle has been accepted. It would not involve establishing some quite new and revolutionary principle now to give the discrimination that is given in the case of mining works also to fuel saving equipment.

Again, the Government discriminate in favour of the coal industry by having a loan scheme at all. They do not offer loans on these exceptionally favourable terms to the chemical, engineering or textile industries. Therefore, I do not think that the Minister can say that the Government cannot discriminate in favour of this kind of plant, machinery and equipment when the Minister of Fuel and Power, with the support of the entire House, already discriminates in its favour.

Although I have a horrible feeling that we shall hear about the discrimination argument and that that will constitute 50 per cent. of the case against us, I hope that, at any rate, the case will be put rather more subtly than it was put last year. I hope that the Economic Secretary will not content himself with saying in a rather high falutin' fashion that all discrimination of any kind is bad. I hope that he will address himself to the fact that the Minister of Fuel and Power already does this, and that even in the sphere of investment allowances and initial allowances there is already discrimination in favour of certain types of industry.

I am sorry that the Chancellor is not replying to this debate. Considering all that has been said about the coal situation in recent days, I would have hoped that he would have signalled the importance which he attaches to the subject by replying himself, as he did last year, Although last year we did not get a very sympathetic reply, at least we did have a reply from him. He said last year that he was going to give the loan scheme a trial for a year and that he would report to the House or to the Committee when the next Finance Bill was discussed whether he thought that it was functioning adequately or not. Therefore, I would have hoped that we should have an interim report from the Chancellor and a statement on whether he thinks something further should be done. Taking the long view, I think the House might reasonably conclude that the loan scheme, although useful and an improvement on its predecessor, is still not enough and that something additional should be done.

Mr. Austen Albu (Edmonton)

I beg to second the Amendment.

In seconding this Amendment, I hope that I shall not sound as pessimistic as my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) did towards the end of his speech, because I hope that we shall have a more satisfactory reply than the one last year. I should like to say how very pleased we are to see the Parliamentary Secretary to the Ministry of Fuel and Power here. His presence shows an attitude towards these debates which is very different from that which we have come to expect from the Board of Trade. When we discuss industry in general we very rarely have a representative from the Board of Trade in the Chamber. It is an indication of the seriousness with which this matter is taken that the Parliamentary Secretary to the Ministry of Fuel and Power has left his other very serious duties to be here.

I am sure that we all admire the persistence with which my hon. Friend the Member for Gloucestershire, South has pressed this matter year after year. There is no doubt about its seriousness or that he feels very strongly about it, as we all do on both sides of the House. As he said, although such a concession, small as it is, can hardly have much effect on the position this year, nevertheless the situation is one which we have to envisage for quite a number of years ahead.

I know that there are hon. Members and people outside who think that in a few years' time we shall have atomic energy generation and that anxiety about coal will not matter. That is the most arrant nonsense, because it will be years before we can substitute power generation by atomic energy for the existing methods, and the capital required for such a programme will be far too great to envisage it in short-term. There are others who say that we should and could turn over to increasing use of oil. There is already a very substantial turnover to oil on the railways and in industry, but the House will not be unaware of the view which I hold about the future of our balance of payments problem and the continuing necessity to save imports.

When we bear in mind that our net imports last year were of the value of £240 million, we can see that any substantial substitution of petroleum for coal or an increase in home consumption of petroleum must inevitably have a serious effect on our balance of payments. I agree that the position would be very much worse if, owing to the shortage of coal, industry had to close down. I should be certainly in favour of importing oil in those circumstances; but that is not the argument. The argument is whether we can afford to import at that rate and lose the exports of coal to which my hon. Friend the Member for Gloucestershire, South referred.

There are very few hon. Members on the benches opposite at the moment. We happen to be discussing investment in industry and not Estate Duty, when no doubt the House will fill up. When we are discussing the expansion of our industries, few hon. Members of the party opposite are here. There are hon. Members opposite who speak very freely about coal production with knowledge based only on experience of the subject, when the economic situation, and particularly the manpower situation, was very different indeed. In the best circumstances, even with the most brilliant management, the most enthusiastic workers, and the highest standard of investment, can we imagine that there will be a radical increase in coal production in the next 10, 15 or 20 years?

We hope that when the present capital plans of the Coal Board come to fruition there will be a substantial increase in production, but we have to remember that even today the output per man-shift is rising and has continued to rise. As the "Manchester Guardian" points out in a very interesting leading article today, …the miners are regularly attending a much larger number of shifts, year in, year out, than ever in any period of years in the 1930s, and probably than ever in history. It is true, of course, that very rarely before in the history of the coal industry has there been continuous employment in all pits. Now there is, and the truth is, as the "Manchester Guardian" points out, …we do not really know what is a reasonable number of shifts to ask a man to maintain…. in the pits. Before the war, in many districts the demand was high enough for work to be continuous, and it is quite likely, as the figures seem to indicate, that absenteeism was higher than it is today.

5.30 p.m.

It is, therefore, no good reading moral lessons to the miners, attacking management and administration, and thinking that by some magic twist we can revert to a situation where the production of exports is very much lower, there is considerable unemployment and, therefore, very many more workers in the mines. We must realise that we shall never go back to freely available and cheap coal, any more than we shall to freely available and cheap food, in the sense that we had it before the war. We shall never go back to a situation where the community exploits miners and agricultural workers.

That being so, we must put a true value upon the use of coal. Some people think that coal is too cheap. My hon. Friend the Member for Gloucestershire, South has sometimes almost seemed to take that view, and I am not sure that I do not agree with him. After all, our coal is cheaper than it is anywhere else in Europe. In any case, the price of coal does not prevent many industrial firms from wasting it.

There are some industries in which coal is responsible for a very high proportion of the cost, but in the vast majority of industries that is not so, and the owners do not think it is worth while to make a special effort to save it. They are showing their ignorance, because if they cared to make the necessary estimates many of them would find that they could make considerable profits, even without any loan or investment allowance from the Government. Works and employment managers are so concerned to see that the cost of their heating and steam production is not a very high proportion of their total costs that they are unwilling to go to the trouble of installing simple equipment to save coal.

In this case we need both a stick and a carrot. We must have the stick of higher prices for the coal industry and the carrot supplied by the Amendment. Hon. Members have no doubt seen the report of the survey of the use of steam and power made by the Ministry of Fuel and Power, which shows that only about one-third of the potential electric power that could be generated by the use of back pressure engines or turbines is being generated at the present time. This is a complicated and difficult type of installation, which involves not only the cost of plant and machinery but of consultancy, skilled engineering, and technical advice. A firm must think very seriously about this type of installation before going ahead with it, because the calculations are not easy. Nevertheless, it is quite clear that in many cases it would be of very great value.

It does not appear as that the Government's loan scheme is offering a sufficient inducement—although one would have thought that no inducement were needed. Besides the highly complicated scheme which I have just mentioned there are much more simple ones which could be put into operation, but which are still ignored. One would think that it was only common sense that not only buildings but piping and even some plant and machinery and equipment should be insulated, but one can go into many factories where the pipes are not insulated or lagged, and there is nothing on the roof but the bare tiling, or whatever the covering happens to be. The loss of heat because of this is absolutely appalling.

We need to make a much stronger drive to persuade industry to save fuel. My hon. Friend the Member for Gloucestershire. South has gone through all the objections that can be raised. I do not entirely agree with him that the Government cannot be more discriminatory than they are at present. I realise the difficulties, but I believe that in some cases, especially with regard to definitions, they are not so great as they may appear. This Amendment is an example not of discrimination between industries, but in the use of quite well known types of plant and equipment, or types of building work, which are quite simply and easily described.

I can think of the kind of comparison that we had during the war. I know that in those days money was much less of an object, but a scheme existed for the relighting of factories, whereby we could get the whole cost of relighting our factories from the Ministry of Supply. The factory which I managed did so. It was a quite separate arrangement. The relevant regulation said that under certain conditions of light measurement the whole cost of improving the lighting in a factory engaged in war production would be paid for by the Treasury. That is quite a simple scheme. It does not discriminate between industries, but it is an incentive to the installation of certain equipment. That is exactly what the Amendment seeks to achieve.

It is not as if the Government have not considered the question of making rather more discriminatory allowances. My hon. Friend has referred to some examples, and the Economic Secretary, during the Committee stage, in reply to the debate upon our Amendment to make the investment allowance more discriminatory, said that very serious consideration was being given to the matter. It is not as if it was something altogether outside the minds of the Government. Nor can some of the other arguments put forward by the Economic Secretary on that occasion be used today. In this case there is no element of an export subsidy or loan.

If the Government are serious about this matter and hold the same view of the future prospects as that of my hon. Friend and myself, they ought to make this concession. It is not a very great one, but if it were made it would be an indication of the seriousness with which the Government view the matter, and the importance which they attach not only to increased coal production but to coal saving and fuel saving as a whole.

Mr. Nabarro

The hon. Member for Gloucestershire, South (Mr. Crosland) said that my right hon. Friend the Chancellor gave an unsympathetic reception last year to the proposal put forward by hon. Members opposite for increasing the fiscal incentives for installation of industrial fuel efficiency equipment. I should like to refute that suggestion at once. I had long and earnest conversations with m) right hon. Friend and with his Inland Revenue officials over a period of some months before the introduction of the 1953 Budget, and throughout those conversations it was evident to me that my right hon. Friend was extremely sympathetic in the matter of the need for making arrangements to provide an added incentive for greater industrial fuel efficiency. It was also evident, however, that very grave practical difficulties were involved.

Nevertheless, my right hon. Friend made one important concession last year. to which neither the hon. Member for Gloucestershire, South nor the hon. Member for Edmonton (Mr. Albu) has made adequate reference this afternoon. My right hon. Friend extended substantially the scope of the loans scheme for industrial fuel-saving equipment. Furthermore, by arrangement with the Ministry of Fuel and Power, he did something of much greater importance from the fiscal point of view, and something which has a direct relationship to the Amendment. The period for repayment of the industrial fuel efficiency loans was extended in order that it should be made the same period as that allowed by the Inland Revenue for wear and tear purposes upon the plant installed.

The practical effect of such an arrangement is not sufficiently realised in industry, and is not. I think, completely understood in the House. What it means is this: if an industrialist spends £10,000 upon a piece of fuel-economising equipment and obtains a Government loan for it, and if, as is normal in the case of such equipment, he arranges with the Inland Revenue that the period of wear and tear allowances to apply to that piece of plant and machinery shall be 20 years, then, under the loan scheme, the period of repayment of the loan will also be 20 years. It follows that each annual repayment against the loan is a sum equal to the annual amount of the wear and tear allowance granted by the Inland Revenue. One cancels the other out or it is an absolute equation.

Thus, the only cost of the new equipment to the industrialist is the net amount of the interest charged on the loan after deduction of Income Tax. That is a relatively small annual charge, and is more than adequately covered by the additional profit which is earned by the industrial undertaking as a result of the economy in coal at today's relatively—I stress "relatively"—high cost. It is therefore not correct to say that the loan scheme does not carry with it an adequate incentive for the installation of industrial fuel-saving equipment. In its purely fiscal aspects, it has a direct relationship to the proposal of the hon. Member for Gloucestershire, South.

There is a second point which is of great importance. We inaugurated the loans scheme for industrial fuel-saving equipment on the present more comprehensive basis a matter of only six or eight months ago. Since then, as a result of the proposals made by the Ridley Committee, and later by the Pilkington Committee, an autonomous fuel efficiency organisation for industry has been established, called the National Industrial Fuel Efficiency Service. It is autonomous and largely financed by the National Coal Board, the British Electricity Authority and the nationalised gas industry. That organisation covers every aspect of industrial fuel efficiency and is often responsible for examining schemes submitted for these loans, which are later approved or otherwise by the Ministry of Fuel and Power.

This fuel efficiency organisation has been in being only since 1st May, 1954. The loans scheme, on its enlarged basis, has been in being for only a little longer. In my view, it would be a grave mistake to try so soon to alter the whole basis of encouraging and stimulating industrial fuel efficiency by changing to the type of incentive which is proposed b) the hon. Member for Gloucestershire, South, supported by the hon. Member for Edmonton. I want to give this new basis, the industrial fuel organisation, and the loans scheme a fair run, at least for 18 months or two years.

Moreover, as a simple point for the hon. Member for Gloucestershire, South, the effect of the present loan scheme, the lengthened period of repayment and the relating of each annual repayment to the amount of each year's wear and tear allowance on the industrial fuel-economising equipment installed is precisely what he advocated last year. The practical effect of it is a 100 per cent. initial allowance, because it means that the industrialist has to find no money to meet the capital cost of the equipment at all, and year by year has to find no money out of net resources for the repayment of the loan.

For all those reasons, I hope that my right hon. Friend will think that this Amendment does not represent a suitable means, at this moment, of encouraging industrial fuel efficiency. I hope he will rely upon the schemes already in force. Nothing which I have said should be taken as being in any way derogatory to the cause, which I am glad to say is a non-party political cause, of stimulating greater efficiency in the burning of coal—our single raw material asset in this country and a wasting asset at that—by the very large number of industrial undertakings which have to use it for generating power, for raising steam, for heating and processing, and for a multiplicity of other purposes.

5.45 p.m.

Mr. Douglas Houghton (Sowerby)

I want to say a few words about administration. We in the House understand policy much better than we understand administration, especially when we are administering the law, in which there can be no ad hoc decisions and no gounds for dealing with taxpayers or other citizens purely on the basis of expediency. Every taxpayer whose circumstances are similar to those of another taxpayer is entitled to expect the same treatment under the Income Tax law as that accorded to the other man, and that is what makes discrimination in tax relief so difficult to administer.

We should all agree that tax reliefs as a system of economic policy must be used with great care and only when there is an overwhelming case for doing so. I believe that there are much stronger grounds for using tax reliefs as a system of social policy than for using them as a means of economic policy, especially in a society in which industry is largely in the hands of private enterprise.

There will obviously be difficulties about administration if there is too much discrimination and unless there are ways and means by which the taxpayer can prove his title to the allowance. My hon. Friend the Member for Gloucestershire, South (Mr. Crosland) said that there had been a certain amount of restraint in the course of the Committee stage of the Finance Bill this year, and we are confining ourselves to this single proposal in favour of a measure of tax relief in a direction which right hon. and hon. Members on both sides of the House will agree is important.

Perhaps the salvation of the Amendment from the administrative point of view is that the Ministry of Fuel and Power would come into it. It seems to me that there are to be some means of satisfying the Inland Revenue—which in terms of practical day-to-day work means the local inspector of taxes—that the money has been so spent and that it has been spent in the manner intended by the Act; and that there is no reason to doubt the facts of the matter. These are the grounds on which some form of discrimination becomes extremely difficult to administer unless we have a staff of technicians and specialists of one kind or another who, by physical inspection, are able to bring the necessary evidence to the Inland Revenue on which it can make its decision.

Many years ago, when I first went into the Inland Revenue, there was a tax known as Inhabited House Duty, and there was a physical inspection of shops which it was claimed were lock-up shops in order to make sure that there was no living accommodation which was accessible from the business part of the premises. That was repealed many years ago, but I give it as an illustration of the problems which exist when the Inland Revenue does not know whether the facts are as stated by the taxpayer and there are no practical means of finding out.

If the Inland Revenue says that there are difficulties about this sort of thing, who am I to say that there are not? I have never found that the Inland Revenue exaggerated the difficulties of administration. The chief complaint of the staff is that it underrates them and makes promises to the Chancellor which are extremely difficult to carry out or does not advise him properly of the difficulties of what he proposes to do.

Any reasonable person looking at this Amendment could say that there are safeguards which will make the Amendment practicable from the point of view of administration, and I trust that in giving the reply which he is already impatient to make—I hope it will be favourable—the Economic Secretary will not devote too much time to the administrative difficulties but will attend to the other and more serious points which support the Amendment moved by my hon. Friend.

Mr. Maudling

I accept the advice of the hon. Member for Sowerby (Mr. Houghton) about administrative difficulties in this matter, and I prefer to base my arguments on a rather different approach.

The hon. Member for Edmonton (Mr. Albu) perhaps went a little wide of this Clause in dealing with the problems of the coal-mining industry and the reasons for them. It would be interesting to debate them, but I feel that this is not the time to do so. I shall try to deal with this Amendment, bearing in mind the warning which I receive from time to time from the hon. Member for Gloucestershire, South (Mr. Crosland) to be neither highfalutin nor sub-intellectual. I shall try to follow his own model of brevity and discretion.

The proposal here is to give to this particular form of plant and machinery, fuel-saving equipment, a higher investment allowance than to other forms. There is obviously no dispute about the fact that the whole situation gives rise for concern and that coal should be used as economically as possible. The argument is whether this is the right way to encourage more economy in the use of coal by industry.

My real objection to this proposal is that it introduces discrimination in circumstances in which it is difficult to justify it. During our discussions in Committee we spoke at length on the principle of discrimination and I advanced various reasons why the Government have decided that it is wrong to introduce that principle into the tax structure in circumstances such as these. In moving the Amendment, the hon. Member pointed out that the general question of discrimination is not at issue here, and so I shall not repeat the arguments which I used then. Leaving that on one side, his argument is that here is a very special case on its own, where special tax allowance should be given for this form of equipment because of the great shortage of coal.

I wonder whether it is as special as all that. Supposing one made this special tax and investment allowance, it would be a net gain to the taxpayer and not merely anticipation. If we gave special concessions in the case of machinery designed to save coal, what about machinery designed to save dollar-costing goods, Petroleum, for example, as was mentioned by the hon. Member for Edmonton. Although the problem of obtaining coal in this country is very great, there is also the problem of ensuring that we get the imports we require.

Mr. Albu

If we gave a concession of this sort it would save imported petroleum exactly as it would save coal.

Mr. Maudling

That is exactly my point. The people saving imported petroleum by other methods would ask why they should not receive the same treatment, and I should find it very difficult to argue against that.

In this case there is special provision made by the Government to encourage firms to install fuel-saving machinery. The hon. Member for Gloucestershire, South used that as an argument that discrimination was already admitted. I cannot accept his argument. The position I have tried to maintain on previous occasions is that it is wrong to discriminate in the tax structure between one taxpayer and another. If we have different rates of investment allowances those rates should clearly apply to different things. Obviously, buildings should be treated differently from plant and machinery, because there is so much difference in the period of life of buildings and of plant and machinery. Here hon. Members are suggesting discrimination between two different kinds of machinery, and it is the opinion of the Government that it is wrong to do that by means of tax concessions.

But it may be right to assist one form of machinery by special schemes such as loans. Reference has been made this afternoon to the loan scheme, particularly by my hon. Friend the Member for Kidderminster (Mr. Nabarro) who illustrated in a most interesting manner the way in which this loan arrangement works out in the minds of industrial investors. The latest figures reveal that 55 schemes have been approved for loan, amounting to £377,000, and a further 47 schemes, involving £247,000, are under consideration. I think that it is clear, therefore, that considerable progress is being made in that direction.

What is the position of an industrialist who installs fuel-saving equipment of an efficient kind? I think that it is quite clear from the figures that machinery of this kind—one cannot particularise too much, but broadly speaking I would say fuel-saving equipment of this kind—should pay for itself in terms of fuel economy in four or five years. The industrialist investing in this type of machinery gets the regular capital allowance; a special loan, with the great advantage involved to which my hon. Friend referred; and in addition, under this year's Budget, he will get the investment allowance. So already there is an incentive to an efficient industrialist to install machinery of this kind.

My conclusion is that what is required is not further financial incentives, but far wider publicity about what is already available. I gained the impression that my hon. Friend the Member for Kidderminster would agree with that point of view, in that he stressed that the present advantages are not sufficiently known among industrialists. He referred to the National Industrial Fuel Efficiency Service, and I understand that they are now promoting a wide publicity campaign to encourage firms to take greater advantage of the Government's loan scheme. I am sure that that is the right way to go about this matter. There are great advantages for industrialists and companies from the installation of this type of machinery.

Mr. Nabarro

I agree that the National Industrial Fuel Efficiency Service is promoting a vast publicity campaign, but will my hon. Friend call in aid the Treasury information unit? Surely that is the appropriate body to explain the fiscal points to which I referred, by which an industrialist can recover, over a period of years, practically the whole initial cost of the plant and machinery?

Mr. Maudling

I will certainly consider that suggestion, which I regard as a valuable one.

I would sum up the attitude of the Government to this Amendment in this way. Here we have fuel-saving plant, and its installation is, generally speaking, a good business proposition for the company concerned. We have a Government scheme involving special loans to encourage industrialists to install that type of machinery. In addition, we have the allowances, and I do not feel that we should be justified in going further, when obviously the advantages already in existence are not fully known.

I suggest that we concentrate on informing industry of the existing advantages to be obtained from making full use of the Government scheme and from investing in fuel-saving machinery. I am sure that this debate will prove of considerable assistance in furthering that process of education, which is the right way to encourage the use of this equipment.

Mr. Gaitskell

During the debate on the last Amendment, my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) referred in terms, which might have been complimentary or reproachful, to the way in which I moved the Amendment. He described it as "thorough." I will return him the compliment, or the reproach, by saying that he has done a good job with this Amendment.

It is not necessary for me to argue the points over again, but I wish to comment on some of the things which the Economic Secretary has said. He rejected this Amendment first, on the ground that if we gave special concessions to the installation of fuel-saving and coal-saving machinery, we ought to do the same for oil. I had some experience in this field as Minister of Fuel and Power, and the fact is that the waste of solid fuel is always far more serious than the waste of oil fuel. I think that is recognised by everyone.

6.0 p.m.

We are really concerned here with the out-of-date installations for burning solid fuel. I do not think that the Minister can ride off on the ground that really we ought to do it for oil as well. There has not been a problem with oil but there has been one with solid fuel. There has been not only the problem of the shortage of coal, but the knowledge that coal was being very wastefully used.

The hon. Gentleman also put forward the usual argument that we could not have discrimination on fiscal matters of this kind. He did not deal adequately with the examples given by my hon. Friends where there is already such discrimination. There is discrimination in the case of ships. The owners are allowed the 40 per cent. initial allowance or the investment allowance, as they think fit. There is no special circumstance there. One cannot call a ship an installation, but it is certainly a form of capital expenditure. Here we have another form.

I do not accept the argument that we must beware of discrimination. I do not think that it is any more than an anxiety, which I understand, on the part of the Treasury and the officials of the Inland Revenue, that by reason of discrimination in favour of one type of installation they may be driven to having to make similar concessions to others and that the whole matter will get so hopelessly complicated that it will be difficult to administer.

But as my hon. Friends have pointed out, in this instance we have a very simple criterion to apply. The matter is covered by the second of the two Amendments, namely, the fact that the Ministry of Fuel and Power have all the machinery for deciding whether a piece of fuel-burning equipment does or does not fall within the class which should be encouraged. I do not accept the hon. Gentleman's argument in that respect.

The third argument was that, while the Government did not see their way to produce discrimination in this field, nevertheless they believed in fuel economy and they were helping out in other ways. The hon. Member for Kidderminster (Mr. Nabarro) made great play with what has been done through the loan scheme. The loan scheme is predominantly for those who are short of capital. That would be a reasonably good argument, in the light of what the hon. Member said, in comparison with initial allowances, but the whole purpose of the investment allowance was to deal with the lack of incentive and not the shortage of capital.

Though I do not wish in any way to decry the loan scheme, I would say that the difficulty is that it does not provide the incentive. It is all very well to say that industrialists are stupid and that they do not understand that there would be great advantages. That may be true, but the fact remains that industry generally has not gone as far as we would like it to go in this direction. I am not making reproaches now. As a matter of fact, successive Governments over the years have done a very good job on fuel efficiency. The work began during the war and it was carried on later.

Mr. Nabarro

Would the right hon. Gentleman also admit that successive Governments have pleaded that they cannot give any greater incentives, because that would lead to discrimination? It was the right hon. Gentleman himself who turned down my plea during the consideration of the Finance Bill in 1951 on the very ground of discrimination.

Mr. Gaitskell

We have had occasional references—and I do not object—

to the 1951 Budget. I can only repeat that the circumstances in which that Budget was brought in were quite exceptional and refer to the enormous increase in expenditure which we had to face in that year as well as the heavy pressure involved in the early stages of the defence programme on the whole of the engineering industries. That constituted a special situation.

Now we have a coal situation which is recognised to be causing anxiety in the Government and in the country generally. We know that it is caused by a very sharp increase in coal consumption. There has been an increase in the first half of this year of over 3 million tons. An annual rate of increase of 6 million tons a year is a formidable one to meet, especially if at the same time the National Coal Board has to devote, as it must, a good deal of its resources to long-term development such as the sinking of new pits, reconstruction, and so on.

It is overwhelmingly clear that a very special effort should be made in fuel economy. Here is an opportunity which I thought the Government would take. They might reasonably have said that this would not be enough that this could not do the trick. Then I should have said that they should try it anyhow, because it is desperately important that we should save fuel. I should have thought that the Government would have jumped at the opportunity to give the additional incentive. There is no need to decry anything else that has been done, but why not do this as well?

In view of the answer which the Economic Secretary gave, which seemed to us unconvincing in the light of the situation, I suggest to my hon. Friends that we should divide the House.

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

The House divided: Ayes, 224; Noes, 262.

Division No. 195.] AYES [6.7 p.m.
Acland, Sir Richard Benn, Hon. Wedgwood Brockway, A. F.
Albu, A. H. Benson, G. Brook, Dryden (Halifax)
Allen, Arthur (Besworth) Bing, G. H. C. Broughton, Dr. A. D. D.
Allen, Scholefield (Crewe) Blackburn, F. Brown, Rt. Hon. George (Belper)
Anderson, Frank (Whitehaven) Blenkinsop, A. Brown, Thomas (Ince)
Attlee, Rt. Hon. C. R. Blyton, W. R. Burke, W. A.
Awbery, S. S. Boardman, H. Burton, Miss F. E.
Bacon, Miss Alice Bottomley, Rt. Hon. A. G Butler, Herbert (Hackney, S.)
Balfour, A. Bowden, H. W. Castle, Mrs. B. A.
Beattie, J. Bowles, F. G. Champion, A. J.
Bence, C. R Braddock, Mrs. Elizabeth Clunie, J.
Coldrick, W. Irving, W. J. (Wood Green) Rhodes, H.
Collick, P. H. Isaacs, Rt. Hon. G. A. Richards, R.
Corbet, Mrs. Freda Janner, B. Roberts, Goronwy (Caernarvon)
Cove, W. G. Jeger, George (Goole) Robinson, Kenneth (St. Pancras, N.)
Craddock, George (Bradford, S.) Jeger, Mrs. Lena Rogers, George (Kensington, N.)
Crosland, C. A. R. Jenkins, R. H. (Stechford) Ross, William
Crossman, R. H. S. Johnson, James (Rugby) Royle, C.
Daines, P. Jones, David (Hartlepool) Shackleton, E. A. A.
Dalton, Rt. Hon. H. Jones, Frederick Elwyn (West Ham, S.) Shinwell, Rt. Hon. E.
Darling, George (Hillsborough) Jones, Jack (Rotherham) Short, E. W.
Davies, Ernest (Enfield, E.) Keenan, W. Shurmer, P. L. E.
Davies, Harold (Leek) Kenyon, C. Silverman, Julius (Erdington)
Davies, Stephen (Merthyr) Key, Rt. Hon. C. W. Silverman, Sydney (Nelson)
de Freitas, Geoffrey King, Dr. H. M. Simmons, C. J. (Brierley Hill)
Deer, G. Kinley, J. Skeffington, A. M.
Delargy, H. J. Lawson, G. M. Slater, Mrs. H. (Stoke-on-Trent)
Dodds, N. N. Lee, Frederick (Newton) Slater, J. (Durham, Sedgefield)
Donnelly, D. L. Lee, Miss Jennie (Cannock) Smith, Ellis (Stoke, S.)
Dugdale, Rt. Hon. John (W. Bromwich) Lever, Leslie (Ardwick) Smith, Norman (Nottingham, S.)
Ede, Rt. Hon. J. C. Lindgren, G. S. Sorensen, R. W.
Edwards, Rt. Hon. John (Brighouse) Lipton, Lt.-Col. M. Soskice, Rt. Hon. Sir Frank
Edwards, W. J. (Stepney) McInnes, J. Sparks, J. A
Evans, Albert (Islington, S.W.) McLeavy, F. Steele, T.
Evans, Edward (Lowestoft) MacPherson, Malcolm (Stirling) Stokes, Rt. Hon. R. R.
Evans, Stanley (Wednesbury) Mallalieu, E. L. (Brigg) Strachey, Rt. Hon. J.
Fernyhough, E. Mallalieu, J. P. W. (Huddersfield, E.) Strauss, Rt. Hon. George (Vauxhall)
Fienburgh, W. Mann, Mrs. Jean Summerskill, Rt. Hon. E.
Fletcher, Eric (Islington, E.) Manuel, A. C. Swingler, S. T.
Fellick, M. Marquand, Rt. Hon. H. A Sylvester, G. O.
Forman, J. C. Mason, Roy Taylor, Bernard (Mansfield)
Fraser, Thomas (Hamilton) Mayhew, C. P. Taylor, John (West Lothian)
Freeman, John (Watford) Mellish, R. J. Taylor, Rt. Hon. Robert (Morpeth)
Freeman, Peter (Newport) Messer, Sir F. Thomas, George (Cardiff)
Gaitskell, Rt. Hon. H. T. N. Mikardo, Ian Thomas, Iorwerth (Rhondda, W.)
Gibson, C. W. Mitchison, G. R. Thomas, Ivor Owen (Wrekin)
Glanville, James Monslow, W. Thomson, George (Dundee, E.)
Gordon Walker, Rt. Hon. P. C. Moody, A. S. Thornton, E.
Greenwood, Anthony Morgan, Dr. H. B. W. Timmons, J.
Grey, C. F. Morley, R. Tomney, F.
Griffiths, Rt. Hon. James (Llanelly) Morris, Percy (Swansea, W.) Ungoed-Thomas, Sir Lynn
Hale, Leslie Morrison, Rt. Hon. H. (Lewisham, S.) Usborne, H. C.
Hall, Rt. Hon. Glenvil (Colne Valley) Moyle, A. Warbey, W. N.
Hall, John T. (Gateshead, W.) Mulley, F. W. Weitzman, D.
Hamilton, W. W. Oldfield, W. H. Wells, Percy (Faversham)
Hannan, W. Oliver, G. H. Wells, William (Walsall)
Hargreaves, A. Orbach, M. West, D. G.
Harrison, J. (Nottingham, E.) Oswald, T.
Hastings, S. Padley, W. E. Wheeldon, W E.
Hayman, F. H. Paget, R. T. Whiteley, Rt. Hon W
Healey, Denis (Leeds, S.E.) Palmer, A. M. F. Wigg, George
Healy, Cahir (Fermanagh) Pannell, Charles Willey, F. T.
Henderson, Rt. Hon. A. (Rowley Regis) Pargiter, G. A. Williams, Rev. Llywelyn (Abertillery)
Herbison, Miss M. Parker, J. Williams, Rt. Hon. Thomas (Don V'll'y)
Hewitson, Capt. M. Parkin, B. T. Williams, W. R. (Droylsden)
Hobson, C. R. Paton, J. Willis, E. G.
Holman, P. Peart, T. F. Wilson, Rt. Hon. Harold (Heyton)
Holmes, Horace Plummer, Sir Leslie Winterbottom, Ian (Nottingham, C.)
Houghton, Douglas Popplewell, E. Winterbottom, Richard (Brightside)
Hoy, J. H. Porter, G. Woodburn, R. Hon. A.
Hubbard, T. F. Price, J. T. (Westhoughton) Wyatt, W. L
Hudson, James (Ealing, N.) Proctor, W. T. Yates, V. F.
Hughes, Emrys (S. Ayrshire) Pryde, D. J. Younger, Rt Hon. K.
Hughes, Hector (Aberdeen, N.) Pursey, Cmdr. H.
Hynd, H. (Accrington) Reid, Thomas (Swindon) TELLERS FOR THE AYES:
Hynd, J. B. (Attercliffe) Reid, William (Camlachie) Mr. Wallace and Mr. Wilkins.
Aitken, W. T. Bishop, F. P. Butcher, Sir Herbert
Alian, R. A. (Paddington, S.) Black, C. W. Butler, Rt. Hon. R. A. (Saffron Walden)
Alport, C. J. M. Boothby, Sir R. J. G. Campbell, Sir David
Amery, Julian (Preston, N.) Bossom, Sir A. C. Carr, Robert
Amory, Rt. Hon. Heathcoat (Tiverton) Boyd-Carpenter, Rt. Hon. J. A. Cary, Sir Robert
Anstruther-Gray, Major W. J. Boyle, Sir Edward Channon, H.
Arbuthnot, John Braine, B. R. Clarke, Col. Ralph (East Grinstead)
Assheton, Rt. Hon. R. (Blackburn, W.) Braithwaite, Sir Albert (Harrow, W) Clarke, Brig. Terence (Portsmouth, W.)
Baldwin, A. E. Braithwaite, Sir Gurney Cole, Norman
Banks, Col. C. Brooke, Henry (Hampstead) Colegate, W. A.
Barlow, Sir John Brooman-White, R. C. Conant, Maj. Sir Roger
Baxter, Sir Beverley Browne, Jack (Govan) Cooper, Sqn. Ldr. Albert
Beach, Maj Hicks Buchan-Hepburn, Rt. Hon. P. G. T Cooper-Key, E. M.
Bell, Ronald (Bucks, S.) Bullard, D. G. Craddock, Beresford (Spelthorne)
Bennett, F. M. (Reading, N.) Bullus, Wing Commander E. E Crookshank, Capt. Rt. Hon. H. F. C
Birch, Nigel Burden, F. F. A Crosthwaite-Eyre, Col. O. E
Crouch, R. F. Iremonger, T. L. Raikes, Sir Victor
Crowder, Sir John (Finchley) Jenkins, Robert (Dulwich) Ramsden, J. E.
Crowder, Petre (Ruislip—Northwood) Johnson, Eric (Blackley) Rayner, Brig. R.
Darling, Sir William (Edinburgh, S.) Johnson, Howard (Kemptown) Redmayne, M.
Davidson, Viscountess Jones, A. (Hall Green) Rees-Davies, W. R.
Davies, Rt. Hn. Clement (Montgomery) Joynson-Hicks, Hon. L. W. Remnant, Hon. P.
Deedes, W. F. Kaberry, D. Renton, D. L. M.
Digby, S. Wingfield Kerby, Capt. H. B Ridsdale, J. E.
Dodds-Parker, A. D. Kerr, H. W. Roberts, Peter (Heeley)
Donaldson, Cmdr. C. E. McA Lambton, Viscount Robertson, Sir David
Donner, Sir P. W. Lancaster, Col. C. G Robinson, Sir Roland (Blackpool, S)
Doughty, C. J. A. Langford-Holt, J. A. Rodgers, John (Sevenoaks)
Douglas-Hamilton, Lord Malcolm Leather, E. H. C. Roper, Sir Harold
Drayson, G. B. Legge-Bourke, Maj. E. A. H. Russell, R. S.
Drewe, Sir C. Legh, Hon. Peter (Petersfield) Ryder, Capt. R. E. D.
Dugdale, Rt. Hon. Sir T. (Richmond) Lennox-Boyd, Rt. Hon. A. T. Savory, Prof. Sir Douglas
Duncan, Capt. J. A. L. Lindsay, Martin Schofield, Lt.-Col. W.
Duthie, W. S. Linstead, Sir H. N. Scott, R. Donald
Eccles, Rt. Hon. Sir D. M Lloyd, Maj. Sir Guy (Refrew, E.) Scott-Miller, Cmdr. R.
Eden, Rt. Hon. A. Lockwood, Lt.-Col. J. C. Shepherd, William
Eden, J. B. (Bournemouth, West) Longden, Gilbert Simon, J. E. S. (Middlesbrough, W.)
Erroll, F. J. Lucas, Sir Joseph (Portsmouth, S.) Smithers, Peter (Winchester)
Finlay, Graeme Lucas, P. B. (Brentford) Smithers, Sir Waldron (Orpington)
Fisher, Nigel Lucas-Tooth, Sir Hugh Snadden, W. McN.
Fleetwood-Hesketh, R. F McCorquodale, Rt. Hon. M S Spearman, A. C. M.
Fletcher-Cooke, C. Macdonald, Sir Peter Speir, R. M.
Ford, Mrs. Patricia Mackeson, Brig. Sir Harry Spens, Rt. Hon. Sir P. (Kensington, S.)
Fort, R. Mackie, J. H. (Galloway) Stanley, Capt. Hon. Richard
Foster, John Maclay, Rt. Hon. John Stevens, Geoffrey
Fraser, Hon. Hugh (Stone) Maclean, Fitzroy Steward, W. A. (Woolwich, W.)
Fraser, Sir Ian (Morecambe & Lonsdale) Macleod, Rt. Hon. Iain (Enfield, W.) Stewart, Henderson (Fife, E.)
Galbraith, Rt. Hon. T. D. (Pollok) MacLeod, John (Ross and Cromarty) Stoddart-Scott, Col. M.
Galbraith, T. G. D. (Hillhead) Macmillan, Rt. Hon. Harold (Bromley) Storey, S.
Gammans, L. D. Macpherson, Niall (Dumfries) Strauss, Henry (Norwich, S.)
George, Rt. Hon. Maj. G. Lloyd Maitland, Patrick (Lanark) Stuart, Rt. Hon. James (Moray)
Glover, D. Manningham-Buller, Rt. Hn. Sir Reginald Summers, G. S.
Godber, J. B. Markham, Major Sir Frank Sutcliffe, Sir Harold
Gomme-Duncan, Col. A Marlowe, A. A. H. Taylor, William (Bradford, N.)
Gough, C. F. H. Marples, A. E. Teeling, W.
Gower, H. R. Marshall, Douglas (Bodmin) Thomas, Rt. Hon. J. P. L. (Hereford)
Graham, Sir Fergus Maude, Angus Thomas, Leslie (Canterbury)
Grimond, J. Maudling, R. Thornton-Kemsley, Col. C. N.
Grimston, Hon. John (St. Albans) Maydon, Lt.-Comdr. S. L. C. Tilney, John
Grimston, Sir Robert (Westbury) Medlicott, Brig. F. Touche, Sir Gordon
Hall, John (Wycombe) Mellor, Sir John Turner, H. F. L.
Hare, Hon. J. H. Molson, A. H. E. Turton, R. H.
Harris, Frederic (Croydon. N) Moore, Sir Thomas Tweedsmuir, Lady
Harrison, Col. J. H. (Eye) Morrison, John (Salisbury) Vane, W. M. F.
Harvey, Ian (Harrow, E.) Nabarro, G. D. N. Vaughan-Morgan, J. K.
Harvie-Watt, Sir George Neave, Airey Vosper, D. F.
Hay, John Nicholls, Harmar Wade, D. W.
Head, Rt. Hon. A. H. Nicolson, Nigel (Bournemouth, E.) Wakefield, Edward (Derbyshire, W.)
Heald, Rt. Hon. Sir Lionel Nield, Basil (Chester) Wakefield, Sir Wavell (St. Marylebone)
Heath, Edward Noble, Comdr. A. H. P. Walker-Smith, D. C.
Higgs, J. M. C. Nugent, G. R. H. Wall, Major Patrick
Hill, Dr. Charles (Luton) Nutting, Anthony Ward, Hon. George (Worcester)
Hill, Mrs. E. (Wythenshawe) Oakshott, H. D. Ward, Miss I. (Tynemouth)
Hinchingbrooke, Viscount Odey, G. W. Waterhouse, Capt. Rt. Hon. C.
Hirst, Geoffrey O'Neill, Hon. Phelim (Co. Antrim, N.) Watkinson, H. A.
Holland-Martin, C. J Orr, Capt. L. P. S. Webbe, Sir H. (London & Westminster)
Holt, A. F. Orr-Ewing, Charles Ian (Hendon, N.) Wellwood, W.
Hopkinson, Rt. Hon. Henry Orr-Ewing, Sir Ian (Weston-super-Mare) Williams, Gerald (Tonbridge)
Hornsby-Smith, Miss M. P. Page, R. G. Williams, Sir Herbert (Croydon, E.)
Horobin, I. M. Peake, Rt. Hon. O. Williams, Paul (Sunderland, S.)
Horsbrugh, Rt. Hon. Flerence Peto, Brig. C. H. M. Williams, R. Dudley (Exeter)
Howard, Gerald (Cambridgeshire) Peyton, J. W. W. Wills, G.
Howard, Hon. Greville (St. Ives) Pickthorn, K. W. M. Wilson, Geoffrey (Truro)
Hudson, Sir Austin (Lewisham, N.) Pilkington, Capt. R. A. Wood, Hon. R.
Hulbert, Wing Cdr. N. J. Pitman, I. J.
Hurd, A. R. Pitt, Miss E. M. TELLERS FOR THE NOES:
Hutchison, Sir Ian Clark (E'b'rgh, W.) Powell, J. Enoch Mr. Studholme and
Hyde, Lt.-Col. H. M. Price, Henry (Lewisham, W.) Mr. Richard Thompson.
Hylton-Foster, H. B. H. Prior-Palmer, Brig. O. L.