HC Deb 16 June 1954 vol 528 cc1957-2191

3.33 p.m.

Mr. Eric Fletcher (Islington, East)

I beg to move, in page 9, line 21, after "to," to insert: one fifth of the first ten thousand pounds (or less) of the expenditure and thereafter to. It might be for the convenience both of the Chair and of the Committee, Sir Charles, if we discussed at the same time as this Amendment the related Amendments, in page 9, the first Amendment in line 40, in page 10, line 37, and in page 11, line 14.

The Chairman

I am quite in agreement with the hon. Member. The course he proposes would be for the convenience of the Committee.

Mr. Fletcher

The object of this series of Amendments is to increase the investment allowance. The Bill proposes that there should be a new kind of allowance, described as the investment allowance, which is to be 20 per cent. in the case of all new plant and machinery, 20 per cent. on new mining works, 20 per cent. in the case of scientific and research work and 10 per cent. on new industrial and agricultural buildings. Whatever one may think about the investment allowance as a device for stimulating additional capital expenditure in private industry, we must, for the purposes of this discussion, accept the method which the Chancellor himself has chosen. The object of the Amendments is to increase the allowance in certain respects and to give this stimulus to industry a greater flexibility.

It will not therefore be necessary for me to argue the general point whether this is the best method that the Chancellor could have invented for giving effect to what we all desire—that something should be done to correct that feature of our national economy which was shown in the Economic Survey and which has produced a great deal of concern in all who study this matter. There is no doubt that one of the most urgent problems requiring attention this year is how to inject a stimulus into the private sector of industry in order to encourage it to modernise its plant and machinery, to re-equip itself, and, where necessary, to expand. It is only by that method that our industrialists will be able to compete effectively with foreign competitors.

We have not only to compete with America and Continental countries but to face increasing competition from Germany and Japan. When I travel abroad I am not infrequently struck with the degree of re-equipment of plant and machinery there in all kinds of industries as compared with the rate of replacement which is normal in this country.

The Chancellor suggests an allowance of 20 per cent. We would have liked, if the rules of order permitted and it was workable administratively, to have suggested 40 per cent. in the case of what might be roughly described as small businesses. It is necessary to discriminate in this matter in order to give the greatest stimulus and incentive where the need is greatest. It is difficult to make any fine distinctions where one has a range of industrialists from very small to very large, but if one may segregate the group of the smaller and middle-sized industrial concerns, it is obvious that the need for modernisation in those cases is greater and more urgent than in the case of the very large concerns. It is also apparent that it is the relatively small businesses which have the greater difficulty either in building up reserves to enable them to get new plant and machinery or in finding from outside sources the additional capital funds required for that purpose.

It will be observed that these four Amendments do not suggest merely doubling the existing investment allowances all round. It is proposed that the 10 per cent. investment allowance on industrial buildings should be increased to 20 per cent., that the 20 per cent. allowance on plant and machinery should be increased to 40 per cent., and that similar increases should take place in connection with mining or oil concerns and scientific research. We are not suggesting, and deliberately so, that the proposal of the Chancellor for a 10 per cent. investment allowance on agricultural buildings should be increased because we believe that it is adequate and that, broadly speaking, the agricultural industry, in this field at any rate, is not in need of the same stimulus as is the realm of manufacturing industries.

Granted the vital necessity to our national economy of putting industrialists in a position to compete effectively with rival concerns abroad, we feel that the Chancellor has not gone far enough in this 20 per cent. allowance. We feel that the tendency will be for competition to become keener. We feel it to be essential that industry should, in accord with the rising tempo of industrial and scientific change, be in a position to modernise its plant and equipment far more frequently than has been the case in the past in this country.

May I point out a secondary result that will follow from doubling the industrial allowance in the cases we desire? One result of producing a greater demand for new plant and machinery of all kinds will be to stimulate the inventiveness of our scientific workers, of those who are inventing new machinery. Therefore, the greater the demand for new plant and machinery, the greater will become the incentive to research workers in industry to produce the most efficient and up-to-date methods of production.

It may well be asked why we have selected the figure of £10,000. We felt it was necessary to place some such figure to distinguish between the relatively small concern and the larger concern. It will be observed, however, that this proposal is not limited to the small manufacturer. This proposal, if accepted, will mean that the investment allowance will become, in the case of plant and machinery, 40 per cent. instead of 20 per cent. on the first £10,000 of expenditure of any company which takes advantage of it. Therefore, in the case of the company which spends £20,000 a year on new plant and machinery, under the scheme of the Chancellor it will get an investment allowance of £2,000, whereas under this scheme it would get an allowance of £3,000. Therefore, the advantage to the small company is relatively greater than the advantage to the very large concern, which may spend £50,000 or £60,000 a year in new plant and machinery.

3.45 p.m.

I hope that these Amendments will appeal to the Government. We are anxious that the budgetary policy should be made as flexible as possible. I realise that in many senses the mechanism of a Finance Bill cannot be expected to be a particularly refined and delicate instrument for giving effect to what we all want, namely, to produce the greatest measure of equality amongst taxpayers and to give the incentive where it seems necessary to gave it.

We realise, as the Chancellor himself realised, that as a result of any form of investment allowance some companies will benefit needlessly, in the sense that they do not need a stimulus or incentive; that there will be a number of companies which will incur a great deal of expenditure on plant and machinery and new buildings whether they have an investment allowance or not. That is inevitable, because the mechanism of any Budget must be a relatively blind instrument; but we believe that investment allowances should be made far more elastic and that there should be much greater selectivity infused into their operations.

Therefore, as a beginning, the object of these Amendments is to give these additional benefits to the smaller companies which we think are in greater need of the stimulus that the investment allowance is designed to give

Mr. Anthony Crosland (Gloucestershire, South)

As my hon. Friend has pointed out, this is the first of a series of Amendments all of which have the object of making the investment allowances more discriminating than they now are between different types of company and industry. It is gratifying that during the discussion of this first one, which concerns the small business, we have with us in the Committee so many well-known champions of the small business and of the small man. I see the hon. Member for Edinburgh, South (Sir W. Darling) and the hon. Member for Kidderminster (Mr. Nabarro), and therefore we shall look for a good deal of support from them for this Amendment.

These Amendments are part of a series designed to help the small business which have been moved from these benches over the past three years. We have a great deal of lip-service from the other side of the Committee but we have action from this side. For instance, in 1952 there were no fewer than three Amendments moved from this side of the Committee to increase initial allowances for the small man in order to give him relief from Profits Tax. Last year we put down an Amendment designed to give him larger initial allowances than are granted to the rest of industry. In the wisdom of the Chair that Amendment was not called, but it was on the Order Paper as evidence of our good faith.

Every hon. Member on both sides of the Committee is well aware how important still is, quantitatively, the small business. The figures, which are well known, are that out of some 58,600 manufacturing undertakings in Great Britain employing more than 10 people, no fewer than 55,000 of those employ under 500 and 42,000 employ under 1,000. It is true that the majority of the labour force is working in the large businesses, but that does not alter the fact that a substantial proportion are working in small businesses employing 100 people or less. So that there cannot be any doubt that the matter is an important one, as has been stressed in speeches from both sides of the Committee in previous years.

Since we have still a private sector, we on this side of the Committee believe in making it competitive, and we take the view that the greatest possible help should be given to the small business, because we do not want to see a growing concentration of power in British industry in the hands of a few rather monopolistic, very large concerns. We believe that the small businesses still have a lot to offer, that they present a healthy challenge to the large established businesses and that they are a source of fresh blood in the economy. Just as we have always opposed restrictive practices in industry, monopoly agreements and restraint, so we also think that these businesses deserve special help.

We also believe that they have some part to play in the whole matter of innovation, invention and new developments. It is frequently argued that only very large firms with very large resources can afford the funds necessary for this purpose. People draw attention to the enormous cost of developing new inventions today. That is perfectly true in a large number of cases, but we still believe that these small concerns have some part to play in the development of new inventions and that any section of industry which has any part to play in this connection must be supported by this Committee.

It is obvious that new concerns, particularly those which want to grow, are worse hit by our recent levels of taxation. It cannot be said to be true today that large established companies are now held back from spending large sums on capital development by inability to find funds. It was pointed out in the Committee yesterday that the weight of taxation today is exactly the same as it was when Sir Stafford Cripps was Chancellor. It is clear that under the present level of taxation, which the Government seem determined to impose upon the country, these small businesses, particularly growing businesses, are under a severe disability.

They have not been able to accumulate large reserves and they cannot go into the market and launch new issues on the Stock Exchange in the way in which large established firms can do. It is true that there are institutions, both private and public, whose appointed role it is to provide this capital. There is the Industrial and Commercial Finance Corporation in the public sector and certain financial houses in the private sector, but when it comes to a really small business it does not pay institutions of that kind to incur the cost of investigating the business preparatory to giving it a loan or taking up part of its equity. These institutions, valuable as they are, have not solved the problem of the small business in search of funds.

Even if we provide these institutions, as we have done to a certain extent over the last 10 years, the small businessman may not wish to take advantage of their presence. He is very often deterred from going to them because he is afraid that if he relies upon them for the provision of new capital he will lose part of his control, and if there is one thing that this kind of businessman is concerned about it is frequently the keeping of his own control over the business. He feels that he will have to sacrifice his control, as to a certain extent he will, if he goes to a financial institution, and he may be deterred from going to these institutions even if they exist and have the funds available.

We feel, therefore, that the present weight of taxation presents a serious problem which it is our business as a Committee to do something about. We feel that the rate of growth possible for small businesses today is inadequate for these reasons. It may be argued—and if it is it will be a repetition of yesterday's debate—that the simple way out is a general reduction in taxation. We had this argument on the standard rate of Income Tax last night, but our view on this side of the Committee is that one cannot settle this problem by a general reduction of income and profits taxation, because to do so would lead to a backward movement towards inequality of incomes which we on this side of the Committee are not prepared to accept. Furthermore, if the object were to help small businesses as such, it would be a very wasteful method of doing so. We have, therefore, advocated, ever since we have been in Opposition, measures specially designed to assist small businesses.

Mr. Gerald Nabarro (Kidderminster)

Hear hear.

Mr. Crosland

The hon. Member says, "Hear, hear," presumably at the phrase, "when in Opposition." I have pointed out that it is only in the last two or three years that the physical possibility of greatly increasing investment has existed. For two or three years or so the capital goods industries were under a strain and we were threatened with inflation, as we were constantly told from the other side of the Committee. Therefore, the idea of a fiscal measure would have been quite out of place. Now the Economic Survey tells us that we have resources available for increasing investment. Therefore, it is entirely logical and consistent that we should try to do so.

Mr. Nabarro

The hon. Member might have said that the reason we have the resources available for additional investment is nothing else but the success of the economic policy followed by my right hon. Friend the Chancellor of the Exchequer during the last three years.

Mr. Crosland

The reason we have spare resources is that we had a recession 18 months ago, both in exports and consumer goods, from which he have not wholly recovered. The hon. Member calls it success when, after three years of Conservative Government, fixed investment by industry is no higher than it was in 1951. If that is the hon. Member's idea of success, it is certainly not ours on this side of the Committee.

At any rate, this is the position. What are we doing about it? I fully admit, and my hon. Friend the Member for Islington, East (Mr. E. Fletcher) admitted, that as it is now worded the Amendment, to say the least, is far from perfect. It would be very much more precise if it were possible to define the small businesses to which we wanted the concession to go, but this is a difficulty which has faced hon. Members on both sides of the Committee in drafting Amendments on this subject.

How do we define a small business? Is it by the capital employed, the turnover or the number of people employed? Each would give a different kind of definition, and it is fair to say that one cannot find one satisfactory definition of a small business in terms of any one of these things which would not lead to hopeless anomalies of one kind or another. Further, the disadvantage of trying to define a small business in terms of capital employed, or of turnover or of the number of people employed is that one is involved in complicated, tinkering provisions.

Therefore, we decided that it was simpler, though admittedly cruder, to rely on the concept of a certain annual expenditure on plant and new building. We admit that that is crude because, apart from anything else, some part of the concession will inevitably go to large businesses, but the advantage of the concession will be relatively very much greater to small businesses than to the large ones, so in broad terms the Amendment would achieve its object.

Another possible objection, which I think would be valid, is that we have fixed the figure too high if we are really concerned about small businesses. It could be said that £10,000 a year is a somewhat large figure for the object which we have in mind, but it is not hopelessly high and completely unrealistic. One could certainly think of progressive small businesses which spend this sum annually on capital development. I can think of one company, employing under 200 people, which has spent that sum annually since the war. It could be argued, however, that this figure is on the generous side and we would certainly accept any reasonable amendment to it which might be suggested by the Government or from the benches opposite.

4.0 p.m.

The general object of the Amendment is perfectly clear. It is to give a special concession to those smaller businesses. We think that the object of the Amendment is a good one, and it is in approved terms. We hope that we shall not have—as so often we have from the benches opposite and as it appears we shall have today—rather niggling criticisms. Hon. Members opposite are great champions of small businesses, until something comes along in which they can help; then they make little points of niggling criticism and for some reason, as soon as we give them an opportunity to stand up for their views, they fail to support us.

I hope the hon. Member for Edinburgh, South who is much too silent these days on Finance Bills and is an acknowledged authority on economic and financial affairs, will support us. He has greater knowledge of 19th century economy than other hon. Members opposite, and in fact he has not advanced a great deal beyond that; but he is sitting there silent, looking rather pensive and critical. I ask him to stand up and support us this afternoon. We seriously suggest that this Amendment is worthy of support from both sides of the Committee.

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

It would probably be for the convenience of the Committee if I took an early opportunity of answering the most persuasive arguments put forward by the two hon. Gentlemen who have spoken on the Amendment, arguments which followed similar lines to those put forward on similar Amendments in the last two years in Committee on the Finance Bill.

The hon. Member for Islington, East (Mr. E. Fletcher), who moved the Amendment, said that it was put forward on the basis that it was generally agreed on both sides of the Committee that it was a good thing to stimulate further investment in private industry. There is no argument about that, but I would not for a moment accept the suggestion of the hon. Member for Gloucestershire, South (Mr. Crosland) about the relative level of investment in industry generally in this country at present compared with 1951, because one of the main objects of the 1951 Budget was to restrain investment in 1952 and it was successful. But that is not a matter entirely relevant to the argument at the moment.

The question we are considering is whether, accepting the idea of an investment allowance, a special concession or special encouragement should be given to investment up to a level of £10,000 per year. I understood the point of the hon. Member for Gloucestershire, South, that the Amendment put down was of a rather rough—I think he said "crude"—character, it being difficult to devise an Amendment to do precisely what he wanted to do; but if it is difficult for him, it is difficult for everyone else. [HON. MEMBERS: "Parliamentary draftsmen."] We have the benefit of the advice of the same civil servants as hon. Members opposite had in their day, and I see no reason why they should be more fertile now, although the advice is now better used. It is in practice very difficult to define for statutory purposes what is a small business. Because that is difficult it is all the more difficult to put it into a Finance Bill.

The hon. Member also made a very powerful plea on behalf of the small business and explained with great eloquence the advantage of the small business and the way in which it contributes to industry. I hope he will bear that in mind and repeat it when we consider investment allowances in relation to the individual trader and Surtax and when we consider the question of death duties on private businesses. He said, and I agree, that the present level of taxation—in which I am sure he includes death duties—is particularly hard on small private businesses. I hope he will remember that and speak again with his customary courage and persistency when later occasions arise.

To turn to the Amendment, an argument is always attractive to both sides of the Committee for giving special assistance to the small—and, we like to believe, because it is small, the growing—business. But this is not an occasion and not a method which is really suitable for giving additional assistance to the small business. I will explain three reasons why that is so. In the first place, the object of this investment allowance is to increase productive capacity in British industry. There is no reason for saying that a particular machine or tool installed in the factory of a small business will be more productive than if it is installed in the factory of a large business; in fact, it may be that the argument would be the other way round. Therefore, on the ground that it is to increase productivity, I do not think there is an argument for increasing the allowance to small businesses.

If we want to encourage additional investment and give an additional allowance for the first £10,000, we may be giving the allowance for normal investment which would take place anyway. There would be a case for saying, per contra, that we should give an additional extra allowance to the extra investment and not to the first investment. That is another reason why the Amendment runs contrary to the main purpose of the investment allowance.

Finally, there is the question of cost. The figures I have been given show that the cost of accepting this Amendment would be £40 million, and the major part of it would go to the larger and not to the smaller firms. Therefore, we have three reasons which I submit to the Committee why this Amendment is not an appropriate way in which to assist the small business.

Sir Richard Acland (Gravesend)

Could the hon. Gentleman compare that £40 million with what he estimates will be the cost of Clause 15 as it stands?

Mr. Maudling

Forty million pounds in the first year would be £40 million more than the cost of the Clause as it stands because the current cost is nil, or relatively negligible, as the rate of investment allowance over the major part of industry corresponds with the initial allowance, but, if we doubled the rate of the initial allowance there would be that degree of cost to the Exchequer. I can assure the hon. Baronet that the figures are fairly reliable on this point.

For those reasons I suggest that, anxious as we are to assist the small business, this is not the best way of doing so. If we try to encourage productive industry, to put new machinery in a big firm would have the same effect as in a small firm. We want to increase the marginal investment, not the basic investment which would be made anyway. Thirdly, £40 million is far more than my right hon. Friend could contemplate in this connection at present. Therefore, I ask the Committee to reject the Amendment.

Mr. Nabarro

All the points I intended to make in response to the hon. Member for Gloucestershire, South (Mr. Crosland) I shall reserve for the debate on the Motion, "That the Clause stand part of the Bill" because they may be a little more appropriate then than in the somewhat narrow discussion which is taking place on this series of Amendments.

I rise only to correct the hon. Member and ask him to reflect on the inaccuracy of the figure he gave. He said that the level of gross fixed investment in 1953 was the same as it was in 1951. Those were the words he used, and I wrote them down at the time. In fact, the comparison is between £1,863 million in 1951 and an increase of no less than 24 per cent. by 1953 to a figure of £2,312 million. I am quite sure that the hon. Member—monetary values aside, I have no desire to argue that—should study official publications before he makes such wildly inaccurate statements.

Mr. G. R. Mitchison (Kettering)

May I ask the hon. Member for Kiddermintser (Mr. Nabarro) whether, in the course of his studies of those publications, he has noticed that those figures include new housing, which represents a large percentage?

Mr. Nabarro

The hon. Member for Gloucestershire, South referred to gross fixed investment of all descriptions. [HON. MEMBERS: "In industry."] Supposedly, the building industry is an important part of the general industry of the United Kingdom and to say that new housing comprises a major part is manifestly false because, if the hon. and learned Member for Kettering (Mr. Mitchison) will kindly look at page 23 of the Economic Survey, he will find that £630 million is for new housing out of a total of £2,312 million in 1953. That is an amount of very slightly more than a quarter. The hon. and learned Member for Kettering, like his hon. Friend, should study not only the figures themselves but their purport and implications before he gets up to speak.

Mr. Roy Jenkins (Birmingham, Stechford)

The hon. Member for Kidderminster (Mr. Nabarro) was in a very lecturing mood—

Mr. Nabarro


Mr. Jenkins

I think that didactic is a better word. His lecturing to the Committee was founded on a peculiarly imperfect study of the figures about which he spoke. There were several remarkable fallacies in what he said, the first being that investment in housing is industrial investment. It is most remarkable, if that is so, why there is not to be this investment allowance for housing, although that would be very odd indeed.

I thought that my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) said that he was referring to manufacturing industry. It is clear, from the table to which the hon. Member referred, that in the case of manufacturing industry investment in 1951—this is at current market prices—was £523 and in 1953 £545 million.

Sir William Darling (Edinburgh, South)

What was it in 1948?

Mr. Jenkins

I am delighted to have got the hon. Member for Edinburgh, South (Sir W. Darling) to intervene.

Sir W. Darling

The hon. Gentleman has not given us the figure.

Mr. Jenkins

If the hon. Member would like to develop the point further, I will give way to him and resume my speech later. If I may say so, the point needs a certain amount of development. Stated as it was, it appeared to have no relation to the point which we have been discussing.

Sir W. Darling

Mention the figure.

Mr. Jenkins

I can read out figures as long as the hon. Member wishes, but it is possible that the Government Front Bench will be impatient if we go on. The figure is stated as £335 million—

Mr. Nabarro

It is stated as £344 million. The hon. Member cannot read.

The Chairman

This discussion appears to be getting wide of the Amendment.

Mr. Jenkins

I agree that we seem to be getting far away from the Amendment, Sir Charles.

The figure I read is £335 million, but it may be, as I have suspected, that the hon. Member for Kidderminster gets hold of specially doctored copies of Government publications which he produces for use on appropriate occasions. On the figures, the increase, even in money terms, between 1951 and 1953 is quite negligible, and it is clear that in real terms there has been an actual decline, and I do not doubt that what my hon. Friend the Member for Gloucestershire, South said was founded on fact.

I rose to comment not so much on the brief speech of the hon. Member for Kidderminster, however, as the disappointing reply of the Economic Secretary. He leaped to his feet, crowding out the hon. Member for Kidderminster, as though he had some important pronouncement to make, as though he thought that he could satisfy the Committee. I am bound to say that I found his intervention most disappointing by any standards, particularly after the speed with which he made his way to the Dispatch Box.

One most amazing argument which he put before the Committee was that the view of the Government, at any rate on Clause 15, was that a piece of plant and machinery was a piece of plant and machinery and that it was a matter of complete indifference to the Government whether it went into small or big business, that if anything they preferred it to go into big business, where it would probably be rather more efficiently used. I see that the Economic Secretary is frowning in a rather peculiar way. I do not know whether he thinks that what I have said distorts his argument. If he does, I hope he will tell us.

4.15 p.m.

Mr. Maudling

I merely said that it should go in the place where it was most useful.

Mr. Jenkins

The point which the hon. Member made was that he approached this matter from a purely economic point of view, that he had no prejudice of any sort in favour of small businesses as against big businesses or in favour of big businesses as opposed to small businesses. He said that from an economic point of view he did not mind where investment went so long as it produced results.

It is strange that there should be this contradiction between the attitude of the Government on Part III of the Bill and their attitude on Part IV. If the Government have no predilection at all in favour of small businesses, why are we having a special taxation concession given to small businesses when we come to Part IV? It is a most extraordinary position. We cannot have this split mind on the part of the Government, as illustrated in their dismissing this Amendment at one stage of the Bill and then coming along, when we come to another part, with an entirely different and very expensive proposition for giving relief on entirely different grounds.

I thought that from this and all other points of view the Economic Secretary gave a most disappointing reply. He seemed to think that there was some great contradiction between the attitude which we were taking at this stage on small businesses and the attitude which he anticipated, perhaps from a study of the Order Paper, we might be going to take at a later stage. His own attitude was so contradictory that I should have thought there would have been no need for us to defend our consistency, but it is easy for us to do so. Our attitude is perfectly consistent.

Where there is a small business developing under the active management of the man who is building it up, there is a good deal to be said for giving him assistance. We differ about giving a large taxation concession in the form of the remission of death duties in order to ensure that businesses continue to remain in the hands of the heirs of the people who built them up, without regard to whether or not those heirs are competent to go on conducting them. I do not think that is inconsistent in any way.

I think that the hon. Gentleman has been very inconsistent and has brought forward some extremely un-Tory doctrines—that he does not mind in the least what the shape of British industry is provided that he gets the last ounce of efficiency out of each machine. I thought that hon. and right hon. Gentlemen opposite claimed to care a good deal more than that whether we had large or small-scale industry or not, whether we had monopoly or not.

All that has been swept aside by the Economic Secretary in one of his impromptu efforts. I thought that his speech caused a good deal of dismay on the benches opposite. I see that the hon. Member for Edinburgh, South is certainly very dismayed. I should have thought that the Committee would find it extremely difficult to part with this Amendment after such a very disappointing Government reply without further discussion.

Mr. Mitchison

I am rather sorry that the somewhat frivolous point made by the hon. Member for Kidderminster (Mr. Nabarro) has led to a rather light treatment of this Amendment. I am also sorry that the Economic Secretary was unable to give more than the almost standardised reply that we had from him. The Amendment was put forward very clearly as one with a purpose, not one to the precise terms of which we were necessarily tied. The answer was simply "We cannot do it; it is not the right way to do it."

The Economic Secretary seemed to me to give no indication whatever of appreciating the real importance of the question. I thought his comment about the effect of Estate Duties on small businesses was rather revealing. What the Government and their hon. and right hon. supporters seem to like is to remit taxation generally without taking any particular steps to see that it is remitted in the most useful way. I say that deliberately, because what we are considering is investment allowances: that is to say allowances for new expenditure on plant, machinery and the rest of it—investment in the strictest sense of the term.

The Parliamentary Secretary made one extremely interesting comment. He said that one of the objects of the 1951 Budget was to restrain investment in 1952, and that one of the objects of the 1952 Budget was to encourage expenditure in 1953. The fact remains that, so far as investment in manufacturing industries is concerned, investment was exactly the same in the two years, in one of which there was a Budget intended to restrain it and in the other a Budget intended to encourage it.

Mr. Maudling

indicated dissent.

Mr. Mitchison

The Economic Secretary shakes his head. Perhaps I had better pin him down a little, if ever one can pin down the Treasury. He has his own words, which at such a short interval he will not deny, with regard to 1951 and 1952. If he cares to look at the Economic Survey for 1954, he will find in paragraph 69, page 35, that investment in 1953 in private manufacturing industry remained at about the same level as in the previous year, in spite of the relaxation of licensing restrictions on factory building and the special measures taken in the Budget to stimulate investment. The net result is that the Government have apparently been using a weapon with no result at all except exactly the same figure as there was in the preceding year, when the Government were using a weapon for precisely the opposite purpose.

I begin to wonder in those circumstances whether there is not something wrong with the weapon. I talk about "the weapon" because there is a broad similarity between initial allowances and the investment allowances that we are discussing now. One of the things that is wrong with the weapon is that, like so many Tory weapons, it is brandished about without any particular sense of direction in waving it or, indeed, in using it.

That leads me to what I was going to say particularly with regard to small businesses. It is true that the Amendment would have the general effect of increasing investment allowances to some extent all round, but it is a good amendment because that effect, as has been pointed out, would be proportionately greater the smaller the business. I should have thought that, when remitting taxation in any form, one had to look at the need of the taxpayer, and I find it difficult to imagine that the need of the small business to find money for making investment at the moment is anything but considerably more and more difficult to meet than that of the large business.

What I mean is this. If, after all, a large business has to find new plant, new works or whatever it be, it is, to some extent at any rate, a question of selection; it is almost certain to invest something during the year. But the question with the small business is often whether it can invest anything at all. It is to encourage that sort of investment that I should have thought this was a very useful Amendment.

There is another point that I should like to make for the consideration of the Economic Secretary. I do, by deputy, a certain amount of small farming. Taking farming as an instance, it is clear that in farming, as, I think, in industry generally, the tendency is to need more and more machinery, to need more modern machinery and on the whole to need a larger proportion of plant in relation to the labour employed. The result is a corresponding tendency for businesses to get larger in the form of the amount of capital employed in them and for the man who is running literally a one-man or two-man family business to find it harder and harder to keep his plant up to date. That is the general trend of things

In the particular instance of a farm, it is a case of getting things like tractors and of building new sheds and the rest of it, and the need grows continuously. That is the general trend, as I see it, of what is going on in the country. In those circumstances, I should have thought that the need of the small man was at the same time much greater than the need of the large man and also much more difficult for him unaided to carry out.

One has to remember the further point that when literally dealing with the small manufacturing business one must consider the rise in the cost of living under the present Government, the general rise in the price of foodstuffs and all the rest, which come down on these small businesses of the type that this kind of Amendment would help.

Without in any way binding oneself to the precise size of the business, while being ready to accept a different form of Amendment which might indeed deliberately cut out the large businesses from this extra relief, I see no reason why an Amendment on these lines should not be accepted. I see no reason why it should not receive much more serious and sympathetic consideration from the Government benches, with their expressed views on these matters, than it appears to have received when or before the Economic Secretary spoke.

Sir R. Acland

I rise for two purposes. The first is to ask the Economic Secretary for a little more enlightenment about costs. I appreciate that the total cost of Clause 15 in this financial year is likely to be almost negligible. Looking a little further into the future, I wonder whether the Economic Secretary would seriously dispute the estimate made in the "Economist," in its survey of the Budget in the issue immediately following the Budget, when it forecast that on certain not unlikely assumptions the Clause when in full operation might cost in the nature of £125 million a year.

Against that, the cost of the Amendment would be £40 million. I was puzzled whether the Economic Secretary meant that it would cost £40 million this year or whether that also was a figure which would be the cost when the whole of the Clause was in operation. I take it from the hon. Gentleman's gesture that the £40 million, the cost of the Amendment, refers to this year, as against £125 million as being the likely cost of the whole of the Clause, not this year, but at some future time when it is in full working order.

Mr. Maudling

indicated assent.

Sir R. Acland

My second purpose is to make a point of personal explanation of my own position vis-à-vis the Clause in general and particularly in relation to the Amendment. When we come to the Motion "That the Clause stand part of the Bill," it will be found that I am at variance with my right hon. Friends on the Opposition Front Bench who, if not exactly in full agreement with the Clause, will be found to be at any rate not in such profound disagreement with it as to wish to oppose it root and branch. My attitude is that I think the Clause is a typically capitalist instrument, produced by a big business Government as a last despairing effort to do something which capitalist theory is incapable of doing in the present situation.

That being my view in general, it may be asked why one should be concerned with relatively minor Amendments, but it seems to me to be consistent to regard any instrument in the hands of any Government as being misguided and really rather stupid and yet to want to see the instrument improved in detail. It is a little bit like the prayer of the Scilly Islanders, who used to pray, not that there should be a wreck, but that if there must be a wreck it should come to the Scilly Isles.

I say in the same way, not that we should have this kind of instrument of Government, but that if we must have it, let us have it a little less stupid, a little more sharp-edged and a little better directed, where it will do least harm and most good than it will do where the Government have introduced it. In that way, it seems to me to be quite consistent to support minor Amendments on the Clause even though intending to oppose the Clause as a whole, or, at any rate, to argue against it as a whole when the time comes.

4.30 p.m.

I support the Amendment because it seems to be directed to the place where an instrument of this kind might perhaps work at present. There is, after all, a theoretical justification for private capitalism. I do not think that the justification is ever as good as its exponents really thought, but in the 19th Century the facts of British industry as a whole did in a general way correspond to the theory which was brought forward to justify them. I believe that, in general, that has ceased to be true. I believe that if we look at British industry today, at those institutions which really determine the tone and quality of British industrial life, output and morale, the theoretical justification for capitalism no longer corresponds to those facts.

Nevertheless, there still exists among us within the framework of big business—privately owned, large-scale, monopoly, trade associations and so on—a large number of enterprises employing in total a relatively small number of men who are still carrying on their affairs, broadly speaking, within the capitalist theories which in the 19th Century could be applied to almost the whole of our industrial scene.

Therefore, I think that an Amendment to direct the greater part of this relief to that part of our economy to which the capitalist theory applies in some measure is sensible, and I hope that the Treasury Bench, either now or between now and the Report stage, will think again and perhaps accept it or some other Amendment designed to achieve the same objective.

Mr. Douglas Jay (Battersea, North)

We have had an astonishingly disappointing and unsatisfactory response from the other side of the Committee to this very sensible Amendment. Almost the only feature we can welcome is that we have had a Front Bench speech from somebody other than the Financial Secretary who was grossly overworked yesterday. We realise that the Government are in a state of disarray amounting almost to disintegration, but even so, we were astonished to discover yesterday that the decline had gone so far that there was only one member of the Front Bench, for all practical purposes, able to address the Committee throughout the day.

We have already had a speech by the Economic Secretary today and we hope to hear him again. We have also been favoured by the appearance on the Front Bench of the Solicitor-General and the Lord Advocate who has, I believe, recently become a Member of the House.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)

No. He has been a Member for years.

Mr. Jay

We shall look forward confidently to hearing a speech from the right hon. and learned Gentleman later in the day. The Economic Secretary addressed us in a short speech which was astonishingly negative and disappointing. The hon. Member for Louth (Mr. Osborne) has been gagged and indeed even induced to leave his seat, having made an all-too-brief speech yesterday when we should have liked to hear him speak at greater length. Even the hon. Member for Edinburgh, South (Sir W. Darling) has been prevented from speaking, though I distinctly saw him address the Economic Secretary and ask permission to speak. The process has gone a long way when leave to address the Committee is refused by the Tory Front Bench to so distinguished and eminent a supporter as the hon. Member for Edinburgh, South.

Though we welcomed the fact that the Economic Secretary at last rose to his feet, what did he say? All he was able to say was that though there was a certain case for the Amendment this was not the occasion on which to introduce it. Those were his words. It is rather the last refuge of a Treasury spokesman who cannot think of any other argument when he is reduced to saying that

Mr. Boyd-Carpenter

The right hon. Gentleman ought to know.

Mr. Jay

I speak as one who has never used that argument, though I am glad to have the assent of the Financial Secretary to what I am saying. It is the last refuge when his hon. Friend is reduced to saying that this is a very good scheme but this is not the right occasion on which to introduce it. Incidentally, he gave no reason, or no intelligible reason, for saying why June, 1954, was not the appropriate occasion.

The purpose of the Amendment, which does not seem to have been appreciated by hon. Members opposite, is that there really is a serious case for giving some special assistance to the small and the smaller type business. It is true that the Amendment would give some assistance to many larger businesses, and indeed to the largest businesses of all, but it would give proportionately far the greatest help to the very small firms which, in a number of cases, though not all, will also be new firms. It seems very surprising to us that not one hon. Member opposite is prepared to say a word for the small firm, the new firm, and for genuine free private enterprise in the preeminent case which we are considering.

Although the Economic Secretary succeeded in gagging the hon. Member for Edinburgh, South, he did not succeed, although he did his best, in gagging the hon. Member for Kidderminster (Mr. Nabarro) who at the second attempt was able to address a few destructive, doctrinaire and didactic remarks to the Committee; but in those remarks he said absolutely nothing constructive and nothing in the least helpful to the cause of the small firms.

It is astonishing that, after all the propaganda we have heard about free enterprise, we should get absolutely no support by way of speeches from hon. Gentlemen opposite. I do not know whether we shall get any support presently—perhaps we shall—by way of votes from hon. Members opposite for an Amendment which would specifically and pre-eminently help the genuine case of free enterprise by small firms and not the great monopolies whom hon. Members opposite so often seek to assist in the name of helping private enterprise. There are two serious and cogent reasons why we should give a special preference by way of investment allowance to small firms. First, the small firm deserves special help for two reasons. A firm which is starting up, or growing, is often specially qualified to develop new ideas. I do not think that hen. Gentlemen opposite would deny that. It is not always necessarily so, but it is very often just because the new idea exists that the new firm is started.

Secondly, whatever else we may think about a new firm or a small firm, it is more likely to introduce real competition into our industrial process. Here again, we hear a great many praises of competition in the economic world. Now that we have a chance to encourage genuine competition we do not seem to be getting much support from hon. Members opposite. We believe that where we have private ownership we ought to have competition and where we have monopoly we ought to have public ownership. I will not argue the latter part of the statement further this afternoon, but do hon. Members opposite deny that where we have private ownership—that is, ex hypothesi, the case with which we are dealing through the investment allowances today—competition ought to be encouraged?

For those two reasons, I believe that the small firm deserves some extra help by way of these allowances. In addition, the small firm is in need of special assistance and is less able to get it in other ways than is the larger firm. The Economic Secretary did not answer the case made from this side of the Committee which showed that the really small firm meets special obstacles in the way of raising capital for developing new processes and new ideas.

It cannot be denied that those special difficulties exist. I know of a case in my

constituency of a very small firm started by one wage-earner. I am happy to say that it has since developed to a considerable medium scale as a result of developing new ideas. That firm was in very great difficulties in the early stage in raising money in order to proceed to the next stage of growth. It had no reserves put by in the past, as have older and larger firms, and it had not the ability and resources to enable it to make a public issue. My hon. Friend said that this difficulty has been met to some extent by organisations like the I.C.F.C., but I do not think anybody would deny that a small and growing, however enterprising, firm of that kind is in a genuine difficulty.

It also meets obstacles in facing many of the Government Departments and the administrative machine. As any hon. Member who has seen the administrative machine working will agree, there is a tendency for Government Departments almost instinctively to favour what they call the established firms and those which have been long in the trade and are expert in bringing their opinions to bear upon the Department. It is reasonable that we should seek to counteract that advantage by giving special assistance to the small firms through the investment allowances.

I do not know whether we have succeeded in persuading any hon. Members opposite to speak on the subject. The hon. Member for Altrincham and Sale (Mr. Erroll) looks as if he has been pondering the matter thoughtfully and it may be that he has sufficient courage to defy the weapons of torture, or whatever is used by Government Chief Whips downstairs, and will now address the Committee. We should like to hear his views, but if we are not to hear them, I must advise my hon. Friends to support the Amendment in the Division Lobby.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 219; Noes, 239.

Division No. 140. AYES [4.43 p.m
Acland, Sir Richard Bartley, P. Bottomley, Rt. Hon. A. G.
Albu, A. H. Bellenger, Rt. Hon. F. J Bowden, H. W.
Allen, Arthur (Bosworth) Benn, Hon. Wedgwood Braddock, Mrs. Elizabeth
Allen, Scholefield (Crewe) Benson, G. Brockway, A. F.
Anderson, Frank (Whitehaven) Bevan, Rt. Hon. A. (Ebbw Vale) Brook, Dryden (Halifax)
Attlee, Rt. Hon. C. R. Blackburn, F. Broughton, Dr. A. D. D.
Bacon, Miss Alice Blenkinsop, A. Brown, Thomas (Ince)
Baird, J. Blyton, W. R. Burke, W. A.
Barnes, Rt. Hon. A. J. Boardman, H. Burton, Miss F. E.
Butler, Herbert (Hackney, S.) Janner, B. Pryde, D. J
Callaghan, L. J. Jay, Rt. Hon. D. P. T. Pursey, D. J.
Carmichael, J. Jeger, George (Goole) Rankin, John
Castle, Mrs. B. A. Jager, Mrs. Lena Reeves, J.
Champion, A. J. Jenkins, R. H. (Stechford) Reid, Thomas (Swindon)
Chetwynd, G. R. Johnson, James (Rugby) Reid, William (Camlachie)
Clunie, J. Jones, David (Hartlepool) Rhodes, H.
Coldrick, W. Jones, Frederick Elwyn (West Ham, S.) Roberts, Albert (Normanton)
Collick, P. H. Jones, Jack (Rotherham) Robinson, Kenneth (St Pancras, N.)
Craddock, George (Bradford, S.) Jones, T. W. (Merioneth) Rogers, George (Kensington, N.)
Crosland, C. A. R. Keenan, W. Ross, William
Cullen, Mrs. A. Kenyon, C. Royle, C.
Daines, P. King, Dr. H. M. Shackleton, E. A. A
Dalton, Rt. Hon. H. Kinley, J. Shinwell, Rt. Hon. E.
Darling George (Hillsborough) Lawson, G. M. Short, E. W.
Davies, Ernest (Enfield, E.) Lee, Frederick (Newton) Shurmer, P. L. E.
Davies, Harold (Leek) Lee, Miss Jennie (Cannock) Silverman, Julius (Erdington)
Davies, Stephen (Merthyr) Lewis, Arthur Silverman, Sydney (Nelson)
de Freitas, Geoffrey Lindgren, G. S. Simmons, C. J. (Brierley Hill)
Deer, G. Lipton, Lt.-Col. M. Skeffington, A. M.
Delargy, H. J. Logan, D. G. Slater, Mrs. H. (Stoke-on-Trent)
Dodds, N. N. MacColl, J. E. Slater, J. (Durham, Sedgefield)
Donnelly, D. L. McGhee, H. G. Smith, Ellis (Stoke, S.)
Dugdale, Rt. Hon. John (W. Bromwich) McInnes, J. Smith, Norman (Nottingham, S.)
Edelman, M. McKay, John (Wallsend) Snow, J. W.
Edwards, Rt. Hon. Ness (Caerphilly) McLeavy, F. Sorensen, R. W.
Edwards, W. J. (Stepney) MacMillan, M. K. (Western Isles) Sparks, J. A.
Evans, Albert (Islington, S.W.) MacPherson, Malcolm (Stirling) Steele, T.
Evans, Edward (Lowestoft) Mainwaring, W. H. Strauss, Rt. Hon. George (Vauxhall)
Evans, Stanley (Wednesbury) Mallalieu, E. L. (Brigg) Stross, Dr. Barnett
Fernyhough, E. Mann, Mrs. Jean Summerskill, Rt. Hon. E.
Fienburgh, W. Manuel, A. C. Sylvester, G. O.
Fletcher, Eric (Islington, E.) Marquand, Rt. Hon. H. A Taylor, Bernard (Mansfield)
Follick, M. Mason, Roy Taylor, Rt. Hon. Robert (Morpeth)
Foot, M. M. Mayhew, C. P. Thomas, Iorwerth (Rhondda, W.)
Forman, J. C. Messer, Sir F. Thomas, Ivor Owen (Wrekin)
Fraser, Thomas (Hamilton) Mikardo, Ian Thomson, George (Dundee, E.)
Gaitskell, Rt. Hon. H. T. N. Mitchison, G. R Turner-Samuels, M.
Gibson, C. W. Monslow, W. Ungoed-Thomas, Sir Lynn
Gooch, E. G. Moody, A. S. Usborne, H. C.
Gordon-Walker, Rt. Hon. P. C. Morgan, Dr. H. B. W. Viant, S. P.
Greenwood, Anthony Morley, R. Wallace, H. W.
Grenfell, Rt. Hon. D. R. Morris, Percy (Swansea, W.) Warbey, W. N.
Grey, C. F. Morrison, Rt. Hon. H. (Lewisham, S.) Weitzman, D.
Griffiths, Rt. Hon. James (Llanelly) Mort, D. L. Wells, Percy (Faversham)
Griffiths, William (Exchange) Moyle, A. West, D. G.
Hale, Leslie Mulley, F. W. Wheeldon, W. E.
Hall, Rt. Hon. Glenvil (Colne Valley) Nally, W. White, Mrs. Eirene (E. Flint)
Hamilton, W. W. Neal, Harold (Bolsover) White, Henry (Derbyshire, N.E.)
Hannan, W. Oldfield, W. H. Whiteley, Rt. Hon. W.
Hargreaves, A. Oliver, G. H. Willey, F. T.
Harrison, J. (Nottingham, E.) Orbach, M. Williams, David (Neath)
Hayman, F. H. Oswald, T. Williams, Rev. Llywelyn (Abertillery)
Healy, Cahir (Fermanagh) Padley, W. E. Williams, Ronald (Wigan)
Herbison, Miss M. Paling, Rt. Hon. W. (Dearne Valley) Williams, Rt. Hon. Thomas (Don V'H'y)
Hobson, C. R. Paling, Will T. (Dewsbury) Williams, W. R. (Droylsden)
Holmes, Horace Pannell, Charles Williams, W. T. (Hammersmith, S.)
Hoy, J. H. Pargiter, G. A. Willis, E. G.
Hudson, James (Ealing, N.) Paton, J. Winterbottom, Richard (Brightside)
Hughes, Cledwyn (Anglesey) Pearson, A. Woodburn, Rt. Hon. A.
Hughes, Emrys (S. Ayrshire) Popplewell, E. Wyatt, W. L.
Hughes, Hector (Aberdeen, N.) Porter, G. Yates, V. F.
Hynd, H. (Accrington) Price, J. T (Westhoughton)
Hynd, J. B. (Attercliffe) Price, Philips (Gloucestershire, W.) TELLERS FOR THE AYES:
Irving, W. J. (Wood Green) Proctor, W. T. Mr. Wilkins and Mr. John Taylor
Alport, C. J. M. Boyd-Carpenter, Rt. Hon. J. A. Clyde, Rt. Hon. J. L.
Amery, Julian (Preston, N.) Boyle, Sir Edward Cole, Norman
Amory, Rt. Hon. Heathcoat (Tiverton) Brains, B. R. Colegate, W. A.
Anstruther-Gray, Major W. J. Braithwaite, Sir Gurney Conant, Maj. Sir Roger
Arbuthnot, John Bromley-Davenport, Lt.-Col. W. H. Cooper, Sqn. Ldr. Albert
Baldwin, A. E. Brooke, Henry (Hampstead) Cooper-Key, E. M.
Barlow, Sir John Buchan-Hepburn, Rt. Hon. P. G. T. Craddock, Beresford (Spelthorne)
Baxter, Sir Beverley Bullard, D. G. Crookshank, Capt. Rt. Hon. H. F. C.
Beach, Maj. Hicks Burden, F. F. A. Crosthwaite-Eyre, Cot. O. E.
Bennett, William (Woodside) Butcher, Sir Herbert Crouch, R. F.
Bovine, J. R. (Toxteth) Butler, Rt. Hon. R. A. (Saffron Walden) Crowder, Petre (Ruislip—Northwood)
Birch, Nigel Campbell, Sir David Darling, Sir William (Edinburgh, S.)
Bishop, F. P. Cary, Sir Robert Deedes, W. F.
Black, C. W. Channon, H. Digby, S. Wingfield
Bossom, Sir A. C. Churchill, Rt. Hon. Sir Winston Donaldson, Cmdr. C. E. McA.
Bowen, E. R. Clarke, Col. Ralph (East Grinstead) Doughty, C. J. A.
Drayson, G. B. Kerby, Capt. H. B Redmayne, M.
Dugdale, Rt. Hon. Sir T. (Richmond) Kerr, H. W. Remnant, Hon. P.
Duncan, Capt. J. A. L. Lambert, Hon. G. Renton, D. L. M.
Duthie, W. S. Langford-Holt, J. A Ridsdale, J. E.
Eden, J. B. (Bournemouth, West) Leather, E. H. C. Roberts, Peter (Heeley)
Elliot, Rt. Hon. W. E. Legge-Bourke, Maj. E. A. H. Robertson, Sir David
Finlay, Graeme Legh, Hon. Peter (Petersfield) Robson-Brown, W.
Fisher, Nigel Lennox-Boyd, Rt. Hon. A. T Rodgers, John (Sevenoaks)
Fleetwood-Hesketh, R. F. Lindsay, Martin Roper, Sir Harold
Fletcher, Sir Walter (Bury) Linstead, Sir H. N. Russell, R. S.
Ford, Mrs. Patricia Lloyd, Rt. Hon. G. (King's Norton) Ryder, Capt. R. E. D.
Fort, R. Lockwood, Lt.-Col. J. C Sandys, Rt. Hon. D.
Foster, John Lucas, Sir Jocelyn (Portsmouth, S.) Savory, Prof Sir Douglas
Fraser, Hon. Hugh (Stone) Lucas, P. B. (Brentford) Schofield, Lt.-Col. W.
Fraser, Sir Ian (Morecambe & Lansdale) Lucas-Teeth, Sir Hugh Scott, R. Donald
Fyfe, Rt. Hon. Sir David Maxwell Lyttelton, Rt. Hon. O. Scott-Miller, Cmdr. R.
Galbraith, Rt. Hon. T. D. (Pollok) McCallum, Major D. Simon, J. E. S. (Middlesbrough, W.)
Gammans, L. D. Macdonald, Sir Peter Smithers, Peter (Winchester)
Garner-Evans, E. H. McKibbin, A. J. Smithers, Sir Waldron (Orpington)
George, Rt. Hon. Maj. G. Lloyd Maclay, Rt. Hon. John Smyth, Brig. J. G. (Norwood)
Glover, D. Maclean, Fitzroy Snadden, W. McN.
Godber, J. B. Macleod, Rt. Hon. Iain (Enfield, W.) Soames, Capt. C.
Gomme-Duncan, Col. A MacLeod, John (Ross and Cromarty) Spearman, A. C. M.
Gough, C. F. H. Macmillan, Rt. Hon. Harold (Bromley) Speir, R. M.
Gower, H. R. Maitland, Comdr. J. F. W. (Horncastle) Spens, Rt. Hon. Sir P. (Kensington, S.)
Graham, Sir Fergus Maitland, Patrick (Lanark) Stevens, Geoffrey
Grimond, J. Manningham-Buller, Rt. Hn. Sir Reginald Steward, W. A. (Woolwich, W.)
Grimston, Hon. John (St. Albans) Markham, Major Sir Frank Stewart, Henderson (Fife, E.)
Grimston, Sir Robert (Westbury) Marlowe, A. A. H. Stoddart-Scott, Col. M.
Hall, John (Wycombe) Marples, A. E. Strauss, Henry (Norwich, S.)
Harden, J. R. E. Marshall, Douglas (Bodmin) Stuart, Rt. Hon. James (Moray)
Hare, Hon. J. H. Maude, Angus Studholme, H. G.
Harris, Frederic (Croydon, N.) Maudling, R. Summers, G. S.
Harris, Reader (Heston) Maydon, Lt.-Comdr. S. L. C Sutcliffe, Sir Harold
Harrison, Col. J. H. (Eye) Molson, A. H. E. Taylor, Sir Charles (Eastbourne)
Harvey, Ian (Harrow, E.) Mott-Radclyffe, C. E. Taylor, William (Bradford, N.)
Hay, John Nabarro, G. D. N. Teeling, W.
Heald, Rt. Hon. Sir Lionel Neave, Airey Thomas, P. J. M. (Conway)
Heath, Edward Nicholls, Harmar Thompson, Kenneth (Walton)
Henderson, John (Cathcart) Nicholson, Godfrey (Farnham) Thompson, Lt.-Cdr. R. (Croydon, W.)
Higgs, J. M. C. Nicolson, Nigel (Bournemouth, E.) Thornton-Kemsley, Col. C. N.
Hill, Dr. Charles (Luton) Nield, Basil (Chester) Turner-Kemsley, Col. C. N.
Hinchingbrooke, Viscount Noble, Comdr. A. H. P. Turner, H. F. L.
Hirst, Geoffrey Nutting, Anthony Turton, R. H.
Holland-Martin, C. J. Oakshott, H. D. Vane, W. M. F.
Holt, A. F. O'Neill, Hon. Phelim (Co. Antrim, N.) Vaughan-Morgan, J. K.
Hope, Lord John Ormsby-Gore, Hon. W. D. Vosper, D. F.
Hopkinson, Rt. Hon. Henry Orr, Capt. L. P. S. Wakefield, Edward (Derbyshire, W.)
Hornsby-Smith, Miss M. P Orr-Ewing, Charles Ian (Hendon, N.) Wall, Major Patrick
Horobin, I. M. Orr-Ewing, Sir Ian (Weston-super-Mare) Ward, Hon. George (Worcester)
Horsbrugh, Rt. Hon. Florence Osborne, C. Ward, Miss I. (Tynemouth)
Howard, Hon. Greville (St. Ives) Page, R. G. Waterhouse, Capt. Rt. Hon. C.
Hudson, Sir Austin (Lewisham, N.) Perkins, Sir Robert Watkinson, H. A.
Hulbert, Wing Cdr. N. J. Peto, Brig. C. H. M. Webbe, Sir H. (London & Westminster)
Hurd, A. R. Peyton, J. W. W. Wellwood, W.
Hutchison, Sir Ian Clark (E'b'rgh, W.) Pickthorn, K. W. M Williams, Rt. Hon. Charles (Torquay)
Hyde, Lt.-Col. H. M. Pilkington, Capt. R A Williams, Gerald (Tonbridge)
Hylton-Foster, H. B. H. Pitman, I. J. Williams, Sir Herbert (Croydon, E.)
Iremonger, T. L. Pitt, Miss E. M. Williams, R. Dudley (Exeter)
Jenkins, Robert (Dulwich) Powell, J. Enoch Wills, G.
Jennings, Sir Roland Price, Henry (Lewisham, W.) Wilson, Geoffrey (Truro)
Johnson, Eric (Blackley) Prior-Palmer, Brig. O. L. Wood, Hon. R.
Johnson, Howard (Kemptown) Profumo, J. D.
Jones, A. (Hall Green) Raikes, Sir Victor TELLERS FOR THE NOES:
Kaberry, D. Rayner, Brig R Mr. T. G. D. Galbraith and
Mr. Robert Allan.
Mr. H. Rhodes (Ashton-under-Lyne)

I beg to move, in page 9, line 21, to leave out "one-tenth," and to insert "one-fifth."

The Temporary Chairman (Sir Gordon Touche)

I think it will be convenient if with this Amendment we discuss the two Amendments in the name of the hon. and learned Member for Kettering (Mr. Mitchison), in page 9, line 22, leave out "instead of," and insert "in addition to." and in line 27, leave out "instead," and insert "also." The Amendment in the name of the right hon. Member for Colne Valley (Mr. Glenvil Hall) in page 9, line 39, at the end, insert and (c) if the person entitled to an investment allowance under this subsection so elects by notice in writing given to the surveyor within one year after the end of the year of assessment mentioned in subsection (3) of section two hundred and sixty-five of that Act (which provides for initial allowances), the investment allowance shall be made by way of five annual allowances each equal to one-fiftieth of the expenditure of which allowances the first shall be made for the said year of assessment and the remaining for the four next following years of assessment. The Amendment in the name of the right hon. Member for Leeds, South (Mr. Gaitskell), in page 9, line 39, at the end, insert: (3) (a) The person entitled to an investment allowance under the last preceding subsection may, by notice in writing given to the surveyor within one year after the end of the year of assessment mentioned in subsection (3) of section two hundred and sixty-five of the Income Tax Act, 1952 (which provides for initial allowances), elect to have substituted for that investment allowance either the first alternative investment allowance or the second alternative investment allowance hereinafter mentioned; (b) the first alternative investment allowance mentioned in the last preceding paragraph shall be equal to one-fifth of the expenditure and any such provision of the Income Tax Acts as is referred to in subsection (2) of this section shall apply to the first alternative investment allowance with the exceptions mentioned in the said subsection, but so that the exception under paragraph (a) of that subsection shall have effect with the substitution of the words "one half of the amount of a first alternative investment allowance" for the words "the amount of an investment allowance"; (c) the second alternative investment allowance mentioned in paragraph (a) of this sub-section shall be equal to one-tenth of the expenditure and any such provision of the Income Tax Acts as is referred to in subsection (2) of this section shall apply to the second alternative investment allowance with the exceptions mentioned in the said subsection and with the further exception that the annual allowance referred to in subsection (1) of section two hundred and sixty-six of the Income Tax Act, 1952, shall for each of the first five years of assessment for which that annual allowance is made be equal to one-twenty-fifth of the expenditure and for sub-sequent years to one-fiftieth thereof. and the two Amendments in the name of the hon. Member for Altrincham and Sale (Mr. Erroll), in page 10, line 31, leave out "instead of," and insert "as well as." and in page 10, leave out lines 43 and 44, and insert: (c) for any expenditure for which an investment allowance is granted the initial allowance shall be one-fifth of the expenditure.

Mr. Rhodes

During the debate on the Budget I pointed out a serious weakness in the structure of this Clause. It seems to me that the weakness stems from our traditional attitude towards the depreciation of buildings. Since the war we should have been thinking afresh on the matter of the re-equipment and rebuilding of our industries. It is remarkable to discover that the first time that wear and tear allowances for machinery were made in this country was in 1878, and that the first time there was an authentic and a statutory depreciation allowance for buildings was in 1945.

I think that the delay in the introduction of a statutory allowance for buildings until 1945 is indicative of our attitude towards bricks and mortar. If it has taken us until 1945 to progress that bit in our attitude towards buildings which accommodate machinery which, in turn, creates the livelihoods of so many millions of our people, it really is time that we made some revolutionary change in our attitude to the matter.

Take the question of the replacement of buildings. The situation is not much better than if industry was still in the attics of West Riding villages, with people still making products with their hands as they used to do in the old days. We have progressed a little from 1878 in terms of the allowances that we have obtained for machines, but even so, we have an antiquated method of assessing them. There is a complicated schedule whereby machines of different types and even of the same type receive different kinds of allowances. I am making a sincere and, I hope, a successful appeal to the Chancellor to rectify the position.

I firmly believe that there is a future in our older industries if we apply our minds to the subject. But the same old thinking of which we have been guilty with respect to buildings applies also to industry. Even now we are still thinking in terms of a divided textile industry in Lancashire and Yorkshire. We should not.

The introduction of synthetic fibres is having the effect of making a common denominator for the manufacturers of all textiles. As time goes on, the process will increase considerably. I am speaking today more particularly about the assistance which could be given to many of our older industries, because I sincerely believe that we have within our grasp an industrial renaissance in the older industries if we tackle the job in the right way.

5.0 p.m.

Today, we are aiming to make an improvement on the provisions of the Chancellor in Clause 15, because, as they stand, they represent no improvement on the initial allowances which were granted last year. Those initial allowances caused quite a lot of argument and quite a lot of false statements, because the effect of the initial allowance was nothing more than bringing together the amounts expended in several years so that that total could be allowed in the first year. If we bring together into the first year what really represents a number of years at the 2 per cent. rate, which is the one we are discussing, the benefit conferred on the investor depends on how many years the 2 per cent. is allowed.

The provision made last year worked out on the basis of a 10 per cent. initial allowance, and what that did was this. If we suppose that there was an expenditure on buildings of £100, it meant that in the first year there was an allowance out of profits of 10 per cent., and the 2 per cent. allowance continued for 45 years, bringing it up to 90 per cent. This year, we are asked to agree that the investment allowance is an improvement on that system.

On an earlier occasion, I sought to show that the former basis was quite a good thing, so long as it is accompanied by an appropriate period of years to suit the benefit which is to be derived. Again, if an expenditure of £100 is taken, we now have to assume that it is £110, and we knock off the 10 per cent. in the first year. In this Clause as it stands, we are allowing only 2 per cent. for 50 years, which means that no benefit will accrue to the person who builds a new factory until the last five years of its life. What good is that as an incentive to people to build factories in this day and generation?

I ask the Chancellor to consider this group of Amendments to see whether he can possibly find any one of them which he can use. I do not mind if he spurns the Amendment in my name and says that it is no good, if he will do something about the others. The Chancellor has plenty of scope, because we have put down these Amendments in tempting variety. We have mentioned the 10 per cent. initial allowance, the 10 per cent. investment allowance, and have given the right hon. Gentleman an opportunity to choose whatever period of years will bring the figure to the right amount.

I should, however, like the Chancellor to look seriously at the first of these Amendments, which is the one that really tackles the job and brings the matter into line with the machinery of the investment allowance, which provides for a 20 per cent. allowance in the first year and an allowance of 2 per cent. per annum for 50 years afterwards.

I am fortified, in presenting this argument, by practice. In the days when we had building licences, and when they were difficult to obtain, and the Treasury thought it was a good thing that there should be alterations to buildings, instead of building new, it seemed to me that we allowed, in Section 300 of the Income Tax Act, 1952, more than we should perhaps allow this year if we were faced with the alternative between the investment allowance and what we did then. It suited the time, but it is still intact, because what is done in this Bill will take unto itself the same kind of discrimination that we carried out in the 1952 Act.

I should like to draw the attention of the Chancellor to the provisions of Section 300 of that Act: Where a person carrying on a trade incurs capital expenditure on alterations to an existing building incidental to the installation of machinery or plant for the purposes of the trade, the provisions of this Chapter shall have effect as if the said expenditure were expenditure on the provision of that machinery or plant and as if the works representing that expenditure formed part of that machinery or plant. I have checked this up, and I have asked those in responsible quarters what would happen in the case of a manufacturer erecting a building to cover a certain number of looms. Let us suppose that the manufacturer has 500 ordinary looms, and that, because of his changing trade, be desires to put in 500 Jacquard looms.

As the Jacquard looms are rather tall, their installation necessitates more height in the building, so what does the manufacturer do? He rebuilds his factory and puts in the looms, the size of the roof corresponding with the height of the new looms. He goes to the Income Tax authorities, and is told, "That is all right; under Section 300 of the 1952 Act, we are allowing that." But at what rate? At the current rate of the initial allowance of the year in which the alteration was made.

This means that the looms are allowed a 7½ per cent. allowance, plus 2¼ per cent. allowance, plus the initial allowance of 20 per cent. Therefore, the allowance on the new looms would be 30 per cent. in the first year. If I am wrong in my figures, I hope someone will correct me. Thereafter, the allowance is one of practically 10 per cent. until the expenditure is written off.

Where is the fairness in this discrimination? Could we not give this allowance for the erection of new factories now? We need the factories. In my part of the country we have to earn our living in factories. My district is a poor farming area and not much farm labour is required there. Consequently, we all have to earn our living in a mill or a factory under a roof, and we want it to be a good one. Unless we have the best, we cannot free the engineers to make the machines which we shall need for the purpose of competing with other countries in succeeding decades.

I am an optimist in this matter. I believe that we can have an industrial renaissance; it is ours if all will bend to the task and do a good job in their own fields. I ask the Chancellor to consider whether a major operation is not necessary to set the rebuilding going, because time is running out and if we do not take this opportunity we may find that it is too late.

What does this Clause mean in terms of inducement to build? I do not believe that this is the best way of dealing with the matter. However, if I made the speech which I previously made I should be out of order. I urge the Chancellor to make a serious attempt to do something about the problem this year. In making the suggestion, I am aware of the possibility of abuse. I have thought very seriously and sincerely about the subject, and I nearly withdrew my name from the Order Paper when I heard this week of one case relating to the rebuilding of a factory. Five tenders were sent out for constructional steel; and each one contained the same original mistake; yet the five replies all gave the same price to a penny.

I put the proposal to the Chancellor fully mindful of the possible abuses and opportunities of cashing in through the rings and cartels which exist in the building industry, but we cannot hold back from doing the right thing simply because we believe that someone may abuse it. I appeal to the Chancellor to consider the matter, and I hope that he will again turn his mind to the question of the cost of factories, because it is no use giving relief on the one hand if somebody is taking advantage of it upon the other.

5.15 p.m.

Mr. F. J. Erroll (Altrincham and Sale)

I hope that the Committee will forgive me if I do not attempt to follow what has been said by the hon. Member for Ashton-under-Lyne (Mr. Rhodes), to some of whose remarks I should prefer to reply later the Question, "That the Clause stand part of the Bill." I am anxious to discuss the Amendments in my name.

In the Finance Bill last year, certain benefits were given to the mining industry whereby, when the system of initial allowances was reintroduced, an additional and greater percentage allowance was given in respect of mining works. The reason for giving that to the mining industry was stated by the Chancellor when he introduced the Finance Bill. He said: In view of the great importance to our national economy of extractive industries and especially of new mining development, and the unique character of some of the expenditure, I propose that the rate of initial allowance for capital expenditure, both at home and overseas, on new mining works … shall be at 40 per cent. instead of the 10 per cent. that was formerly granted."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 50.] That was a great encouragement to the mining industry. The industry is, therefore, somewhat disappointed at the treatment that it has received this year at the hands of the same Chancellor because, except in the case of mining works, the rate of the proposed investment allowance this year is similar to the rate of the initial allowance as reintroduced last year, namely, 20 per cent.

Mining works, however, because of the preferential position afforded to them last year, are given an option, which is either to retain the 40 per cent. initial allowance which they were granted last year and have no investment allowance, or to have an investment allowance at the rate of 20 per cent. and no initial allowance.

At first sight, that might seem to be a fair deal for the mining industry, but it is anything but fair for the following reasons. If the initial allowance is chosen, the obvious long-term advantage of the investment allowance is lost. If, on the other hand, the investment allowance is chosen, the taxpayer—that is, the mining company—finds himself in the position of having to pay more tax in the early stages. Therefore, under the new dispensation the mining companies are to that extent disadvantaged compared with the special benefits which they were accorded last year.

In view of the avowed purpose of the introduction of the investment allowance, I feel that this is a somewhat strange procedure. My Amendments are designed to overcome the disadvantages. They are designed to ensure that a taxpayer with mining works does not find himself in a worse cash position from the point of view of payment of tax as a result of the introduction of the investment allowance.

At the same time, my Amendment does not require that the allowance should be increased beyond the 20 per cent. fixed in the Finance Bill. I bring this about in my Amendments by retaining one-half of the initial allowance as well as granting an investment allowance at the rate of 20 per cent. That enables mining undertakings to be in the same position as they were previously and at the same time to get the benefit of the investment allowance which ought properly to be accorded to them.

I do not imagine that a concession such as this would make much difference to the Revenue, but it would be of very real importance to the mining concerns affected. If there is anything in what the Chancellor said last year about the importance of stimulating mining development both at home and overseas—I am sure there is—I hope that he will not go back on his achievements of last year by according poorer treatment to mining undertakings this year. By accepting my Amendments, my right hon. Friend can keep faith with the mining industry and give it substantial and useful benefit.

Mr. Mitchison

I hope that the hon. Member for Altrincham and Sale (Mr. Erroll) will excuse me for not following him in any detail. I am bound to say that I feel a great deal of sympathy for the proposition put forward by him, and I think that the Economic Survey for this year indicates that mining, unlike other manufacturing industries, showed a considerable increase in its investment between 1952 and 1953, and perhaps the good work begun by the initial allowances may usefully be continued.

I rise to speak to the other Amendments, including the one first spoken to by my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes). I am bound to say that as he was speaking there passed before my eyes—and I dare say those of others in the Committee—the vision of the buildings in industrial Lancashire and Yorkshire, the old mills and factories that were thought to be good enough in their day, but which few would claim to be good enough now.

I remembered that it was fundamentally on an industry where the buildings are of more than usual importance, and in which they have a more than usually large share of the capital, that the industrial fortunes of this country were very largely built in the past, and many millions of our citizens depend for their living today. When I listened to the hon. Gentleman, I seemed to hear the voice of the counties for which he sits, and in one of which he lives and works, asking us in this Committee to make it easier for them to modernise the buildings about which I have spoken.

I know that there are many kinds of industrial buildings concerned, but in my own constituency there is a very extensive boot and shoe industry where, again, modernisation of buildings would play a very useful part and where the industry is so arranged that the actual machinery and plant is largely hired, and the buildings, accordingly, play a particularly prominent part in the commitments of the actual industrial manufacture.

I would say, further, about buildings, that in this country first one Government and then another, from one point of view or another, have occupied themselves actively and extensively with housing. While I agree that a great deal has been done for factory building, it remains the case that the effort has never been on the same scale, and, while I do not wish to introduce other controversies into this debate, it is certainly the case at present that there has been no such acceleration in factory building and the like under the present Government as they claim to have made with regard to private housing. I think it fair to say that factory building is not only important, but has been just a little bit of a lost child in the development of the country since the war. One recognises the necessity for that, but I think, as a broad generalisation, that is true.

I wonder whether one ought to apologise beforehand in a debate in Committee on the Finance Bill for being about to make some very dull remarks, because I certainly feel that I am about to make some such remarks. However, I will do my best to cut them as short as possible, although I think it as well to put to the Committee, quite shortly, what we are trying to do in the various Amendments.

The Bill itself proposes with regard to these industrial buildings to have an investment allowance of 10 per cent., and then the usual 2 per cent. capital allowance, as it is called, spread over 50 years. The object of the first Amendment, the one in line 21, is simply to double the investment allowance. Therefore, while the Bill, by a very remarkable innovation in our system of taxation, would for the first time give anyone who has spent some money 110 per cent. by way of allowances against his spending, we, by the first Amendment, would go further and give him 120 per cent. on his 100 per cent.

I am glad to see that the Financial Secretary is not looking quite as shocked as he would have done before he himself introduced investment allowances. I feel certain that any of us who had had to consider them a year or two ago would have regarded them, whatever their merits or disadvantages, as a somewhat startling innovation. However, here they are brought in by a Tory Government. As I say, what we propose to do under this Amendment is to double the allowance.

The next Amendment is different. The Amendments in line 22 and line 27, in effect, maintain the original Government investment allowance of 10 per cent. and then simply alter the 50 years at 2 per cent. to an initial allowance of 10 per cent. and 45 years at 2 per cent. The result would be to give to the man, in the first instance, 20 per cent.—half of it by way of investment allowance and half by way of initial allowance—and then to run the 110 per cent. out for 45 years at 2 per cent.

The effect of that, of course, would be to give the man much what the Govern- ment propose, plus an initial allowance at the beginning. It is a combined operation, investment allowance and initial allowance, but neither this Amendment nor any of the other following Amendments increases the total payment of 110 per cent. which the Government have in mind. The intention in every case is to increase the amount in the earlier years, and I will give my reasons for that in a moment.

The next Amendment, that in page 9, line 39, proposes to give the person making the expenditure an option to take, instead of the investment allowance of 10 per cent. at one go, 2 per cent. extra spread over the first five years. The effect of that, in terms of percentages again, is to give 10 per cent. at the beginning, 4 per cent. for the first five years and 2 per cent. for 40 years afterwards. It is another form of giving more at the beginning of the period, and giving it at the taxpayers' option.

Then there is what I might call a very juicy Amendment—if one can call an Amendment juicy—at the foot of page 3290, in page 9, line 39, which gives the person entitled to an investment allowance what I might call a double option. That sounds very much like a racing term, but I do not know whether it is or not, because I am not well enough versed in these things. The double option means, in effect, that in the first instance the person concerned would have an investment allowance of 10 per cent. and also an initial allowance of 10 per cent.—it is a kind of hybrid arrangement—and again 45 years at 2 per cent. In effect, therefore, it resembles, although it is not exactly the same as, the Amendment in line 22. The second alternative, again, rather resembles the other point which I put forward. It is, in effect, an investment allowance of 110 per cent., and then 4 per cent. for five years and 2 per cent. for 40 years.

5.30 p.m.

Those are the flies that we are casting over the Chancellor. It is a rather long string of them. I hope he will rise to one or other, but I have noticed with Ministers before now that in one respect they do resemble fish—too many flies cast over them sometimes frighten them a little. I feel sure, however, that the Government would not shrink from making a choice merely because they had to think a little before making it. The general principle throughout is the same. It is that the investment allowance, in its present form, is not likely to be a sufficient immediate inducement. If it is intended to do the job, then, having regard to what we have seen in the past, more must be done about it.

Mr. Ellis Smith (Stoke-on-Trent, South)

If the Chancellor did accept these proposals, is my hon. and learned Friend optimistic enough to believe that in two key exporting industries like pottery and cotton it would result in the kind of modern building now so urgently needed?

Mr. Mitchison

I cannot say that any one of these will be a complete success. Perhaps an inducement is the most that we can hope for.

I am glad that my hon. Friend asked his question, because it is quite clear from what has happened in the last year or two that initial allowances have not done the job. One would have expected them to have had at any rate some slight effect on the investment in manufacturing industries but, as the Economic Secretary told us just now, when capital investment was at a certain figure in 1952 measures were introduced to encourage capital investment. They had no effect at all on manufacturing industry. As is shown in the Economic Survey, investment in 1953 was precisely the same as in 1952.

Broadly speaking, although we are not given any detailed figures, that appears to be the case in building. In the Economic Survey one finds that although there was an increase in the fuel and power industries, there does not appear to have been any corresponding rise in new building work done for private manufacturing industry. The Economic Survey says that it was running at a higher level at the end of 1953 than at the beginning, so it may be that there was some small improvement.

In general, initial allowances certainly did not have the expected effect on the manufacturing industry. I imagine that the Chancellor has considered, and has been advised, that none the less that was the right sort of line to follow. We on this side of the Committee do not quarrel with that, and, therefore, do not quarrel with the idea of an investment allow- ance. What we say, however, is that if there is to be anything of this sort at least it must be on a scale sufficient to get the desired result. To get the result intended more must be done than to give a 10 per cent. investment allowance.

Sir Edward Boyle (Birmingham, Handsworth)

Has the hon. and learned Member worked out how much these ingenious alternatives would cost?

Mr. Mitchison

I am no great hand at economics or at statistics. Nor do I know that anybody outside the Treasury has the information on which to calculate it and I cannot see quite where I should begin—if I may put it that way. I would suppose that the alternatives would differ quite a lot. Some would cost more than others. From what was said before it is quite obvious that to make it 20 per cent. instead of 10 per cent. would cost quite a bit. We shall no doubt hear about that from those with the necessary knowledge.

Apart from the general considerations which I have put forward there is one special reason for trying to give rather extra encouragement to industrial building. People are extraordinarily frightened of building. They seem to be much more frightened of building than of installing machinery and plant. I think that we all know that the cause is the idea—I do not know what foundation it has—that building costs will certainly come down. That may or may not be so, but why they should differ in that respect from expenditure on machinery and plant I do not understand.

I suggest to the Chancellor that among these various very gentle and mild Amendments he might find one to fit the needs of the case and to give extra encouragement to get on with the work. I call them "gentle and mild" because, with the exception of the first Amendment, all the others are purely a question of time, but, in the long run, they add up to the same amount—the 110 per cent. which the Government itself proposes to give. We have thrown the flies; it is now up to the Government to rise.

Mr. Nabarro

I would not dispute for a moment that a large number of the industrial buildings of the United Kingdom are sadly in need of replacement. Nor would I dispute that a glaring example of this is to be found in certain sections of the textile industry. In that material regard, I am very much in sympathy with what was said by the hon. Member for Ashton-under-Lyne (Mr. Rhodes).

I also agree with the hon. and learned Member for Kettering (Mr. Mitchison) that the initial allowance system has never been very satisfactory. I have always been extremely lukewarm in any support I have given to it. The principal merit which may attach to the proposal under Clause 15 of the Bill is that it is no longer a manipulation of wear and tear allowance, or depreciation, but a direct remission of tax as an incentive to industrialists to replace their old buildings or in certain circumstances to modernise them.

I rise because I want either the Chancellor or the Financial Secretary to try to clarify two particular aspects of the proposals under Clause 15 so far as they are applied to industrial buildings. The first is in the statement made by the hon. Member for Ashton-under-Lyne that the benefits attaching to the investment allowance would not be felt—and I quote him—"until about the forty-sixth, forty- seventh, forty-eighth, forty-ninth or fiftieth years."

That is not my interpretation of the proposals contained in the Clause. The Clause makes it perfectly clear not only that the investment allowance supplants the initial allowance in relation to industrial buildings but, so far as I am able to tell from the somewhat difficult text of the Clause, that the general terms of applicability are the same. If one turns to the Income Tax Act, 1952, one finds that the application of initial allowances is governed, in Section 268 (2), by the following words: Where an initial allowance is made in respect of the expenditure, the amount of that allowance shall be treated as written off as at the time when the building or structure is first used. That seems to connote that the initial allowance is given in the chargeable accounting period in which the building is first used. As the investment allowance supplants the initial allowance, it follows that the investment allowance should also be given in the year in which the building is first used.

Whether or not that is the correct interpretation, it is most certainly the interpretation which industry has attached to my right hon. Friend's proposals. It is for that reason that I ask the Treasury spokesman to make it clear whether the hon. Member for Ashton-under-Lyne is correct in saying that the investment allowance benefits apply in the forty-sixth, forty-seventh, forty-eighth, forty-ninth and fiftieth years—in which case I am perfectly prepared to agree that the benefits derived would become quite nugatory—or whether these benefits may be felt in the chargeable accounting period in which the building is first used.

Mr. Hugh Gaitskell (Leeds, South)

Surely the hon. Member has misunderstood what my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) was saying? There is no dispute that the 10 per cent. investment allowance in the first year replaces the 10 per cent initial allowance. The point is that after that first year, under the investment allowance system, one still has one's 100 per cent, to write off instead of only 90 per cent., and if that 100 per cent. is written off at 2 per cent. a year it takes 50 years and not 45 years. The difference arises in the last five years.

Mr. Nabarro

The right hon. Gentleman is helping my argument. What I want to establish—because this matter is engaging the attention of industry generally—is whether the benefit is felt at the beginning at the life of the asset or is applicable at the end of that life. The hon. Member for Ashton-under-Lyne implied that the benefit accrued in the forty-sixth, forty-seventh, forty-eighth, forty-ninth and fiftieth years, which means that it is applicable at the end of the life of the asset, assuming that life to be 50 years.

Mr. Gaitskell

Will the hon. Member say whether he agrees with my statement of the position? If he does, it shows that the benefits accrue in the last five years and not at the beginning.

Mr. Nabarro

I do not agree with that, because the information I have obtained from all that has been written and said about this very complex matter is that the benefit is applied at the beginning of the term. My second point, which is a consequential one, is in regard to depreciation or wear and tear allowances. The speeches which have been made by hon. Members opposite have rather oversimplified the procedure. The hon. Member for Ashton-under-Lyne and the hon. and learned Member for Kettering constantly referred to "45 years at 2 per cent. or 50 years at 2 per cent.," those terms flowing from the provisions of the Finance Act, 1945, when initial allowances were first introduced.

Is that the correct interpretation of the position? In the case of depreciation or wear and tear allowances, is it not the case that the 2 per cent. is applied to a reducing balance year by year? If so the reduced balance is never finally extinguished until the asset is scrapped or becomes obsolescent, in which case an obsolescence allowance equal to the final reduced balance is granted in order to aggregate 100 per cent., being the historical cost of the asset.

5.45 p.m.

It is, therefore, misleading for hon. Members opposite to refer to so many years at a fixed rate of reduction, as that does not always occur, either with buildings or with plant and machinery, and it cannot be uniformly applicable to the proposals in connection with the investment allowance.

Mr. Mitchison

The hon. Member may find some spiritual assistance if he reads Section 266 (1) of the Income Tax Act, 1952. There he will find that the annual allowance to which he has referred is to be equal to one-fiftieth of the original expenditure.

Mr. Nabarro

I can only say that the Inland Revenue, in respect of fixed assets, allows an amount per centum for the rates of depreciation on the basis of the reducing balance, and not a fixed amount per annum. If the hon. and learned Gentleman is correct there would not be any need for an obsolescence allowance, because the length of life of the plant is invariably in excess of the period which the Inland Revenue reckons for depreciation purposes.

The two questions which I am anxious to have answered by the Treasury spokesman are, first, whether the investment allowance benefits in respect of a building are applied during the chargeable accounting period in which the asset is created or at the end of its life, and, secondly, whether a reducing balance basis is to be applied in the case of buildings as it is in the case of plant and machinery. I, personally, would deprecate adding any further complexities to the already extremely involved position arising from wear and tear arrangements, and depreciation, obsolescence, initial and investment allowances.

If the proposals put forward by hon. Members opposite, for a sort of hybrid—as the hon. and learned Member for Kettering called it—or an agglomeration of investment and initial allowances, were accepted the position would be quite incomprehensible to anybody in business or industry who was trying to understand the purpose and implications of these financial statutes. I hope, therefore, that this series of Amendments—with the exception of the one moved by my hon. Friend the Member for Altrincham and Sale (Mr. Erroll) for special mining reasons—will be rejected.

Mr. Mitchison

Does not the hon. Member realise that the Amendment of his hon. Friend suffers from exactly the defect to which he objects?

Mr. Nabarro

The hon. and learned Gentleman should realise that in the case of mining investments special arrangements are necessary. This fact has been recognised by successive Chancellors, and special provisions have been made in the Finance Acts. It would not, therefore, be out of line with precedents to adopt the proposal put forward by my hon. Friend.

Mr. J. Grimond (Orkney and Shetland)

If the hon. Member for Kidderminster (Mr. Nabarro) is right a great deal of the argument for these Amendments must fall to the ground. But I think he is wrong. My own opinion may not be of so much value, but I have been advised by two firms of accountants who have had considerable experience of these allowances and they are of like opinion. Surely the correct position is that put forward by the right hon. Member for Leeds, South (Mr. Gaitskell), that the time is extended and the benefit therefore primarily falls in the last additional years.

It will be within the recollection of the Committee that the arguments on investment and the initial allowances were put at some length in the Budget debate by the hon. Member for Ashton-under-Lyne (Mr. Rhodes), who argued that as far as buildings were concerned the benefit would fall in the forty-seventh, forty-eighth, forty-ninth or fiftieth year. On Second Reading of the Bill the Chancellor indicated that he had considerable sympathy with that argument, and we were led to think he was going to do something about it. I find that very encouraging, and in the light of it, and in the light of what has been said on this side of the Committee, I do not think I need to make a very long speech.

However, there is a question about cost. Whichever of these Amendments the Chancellor chooses to accept, with the exception of the first, it will not add to the total cost. The Amendments would, however, increase the cost in the earlier years. The question was asked, how much the increase would be. I agree with the hon. and learned Member for Kettering (Mr. Mitchison) that it is, no doubt, very difficult to work out.

The Financial Secretary, in answer to a question, has indicated that at present he finds it very difficult to estimate what the cost of the present proposals will be until about 1959 to 1960, when he expects the cost to be about £30 million. I think it is fair to assume that the cost of accepting any one of the alternative Amendments would not be in excess of £30 million and would probably be very much less.

The purpose of all these Amendments is to bring forward the benefit, and surely the answer to the hon. Member for Kidderminster (Mr. Nabarro), who says that it will complicate accountancy still further, is that unless we are prepared to accept some sort of complication—and I do not think the complication is very great—we shall not achieve the Chancellor's intention.

The Chancellor's intention, surely, is to get more investment now. In the industries that, I think, will probably benefit, such as the shipbuilding industry, and, to some extent, the textile engineering industry, it is now that some encouragement to investment is wanted. They have liquid resources, but there is a danger that they will fall behind their competitors in other countries.

So far as building is concerned, presumably the resources devoted to house building will gradually be reduced. I agree with the hon. and learned Member for Kettering that we are coming to a period when it is important that resources should be switched from the building of houses to the building of factories. Many factory buildings are old, and many others that are good buildings are badly sited. The position of many is extremely inconvenient to the development of towns.

As far as very big companies are concerned, it may be that this allowance will not have a very great effect. Some company chairmen have said that their investment programmes are already laid out, and that while the allowance is a useful bonus it is not very much more. From personal experience in a small company I very much doubt whether, in its present form, the allowance is sufficient, because this benefit, although it is a benefit, will accrue not now but in the fairly remote future, and what is wanted by small companies is some help now. That is the one weakness of the scheme.

The scheme is ingenious, however. It allows some latitude to industry. Without encouraging inflation it allows some remission of taxation. It is remission of taxation in the long run. It is more than a permit to industry to write off machinery and buildings. However, it is now that we want the help if we are to have the industrial renascence about which the hon. Member for Ashton-under-Lyne spoke.

Furthermore, I should have thought that there was something to be said against the Treasury's mortgaging a comparatively large sum in the future: in 1959 or 1960, £30 million. I do not know whether any more accurate figures have been worked out for later years. It may be that at that time the need for investment will not be so great, and there may then be other and better remissions of taxation that could be offered. I think there is something to be said against mortgaging the revenue even four or five years ahead, and I think, also, that we should not always assume that new investment of any sort is necessary and desirable. We can quite easily over invest. We do not want a rigid programme; it is a thing that we want to change from time to time.

I reiterate that it is now that there is insufficient investment in certain parts of private industry, and that it is now that the Chancellor wants to give the utmost stimulus to the building of factories, and to the shipbuilding and textile industries.

Mr. Boyd-Carpenter

We have had a very interesting and, I think, a very helpful debate with, as far as the objectives are concerned, remarkably little difference of opinion between the two sides of the Committee. The hon. Member for Ashton-under-Lyne (Mr. Rhodes), in moving his Amendment, dangled before my right hon. Friend a whole series of alternative Amendments as if he were trying to stage a sort of judgment of Paris act, indicating that he would be happy if my right hon. Friend would favour any of his candidates.

With the exception, of course, of the quite distinct pair of Amendments of my hon. Friend the Member for Altrincham and Sale (Mr. Erroll), the debate has concentrated itself on the adequacy or inadequacy of the proposed rate of investment allowance in respect of industrial buildings, and that is the nub of the debate.

In view of one or two observations that have been made, I should like to comment that we are conducting the debate against the background of the proposals made in the cause of assisting and stimulating investment in industrial building. Therefore, there is no disagreement on object between us on either side of the Committee. We are concerned, as I understand it, only with whether the method and degree of the Government's present proposals are likely to be adequate or inadequate to the end that we want.

The effect, as the hon. Member for Ashton-under-Lyne himself said, of accepting his Amendment would be to place industrial buildings on the same rate of investment allowance as is proposed for plant and machinery. I do not feel that it is necessary for me to be at all dogmatic either way as to whether there is or is not need for a greater degree of incentive to investment in buildings as distinct from machinery.

It is the fact, from the commonsense point of view, that in most cases we are dealing with the same people in respect of both. It is a common-place that industrial buildings are built to put industrial plant and equipment in, and although there can, of course, clearly be cases where the operation is distinct, broadly speaking we are concerned with industry in general. I think that that is a consideration that is worth bearing in mind in this connection.

Another is the fact, to which the hon. Member himself referred, that the history of the initial allowance shows a quite distinct degree of discrimination in favour of plant and machinery as against buildings. He referred to it as a tradition. I think one of his hon. Friends interjected, "A Tory tradition." Whether we regard that as a favourable or an unfavourable comment it is not true. The history is that the initial allowance was introduced in the Income Tax Act, 1945—though made for some purposes retrospective to 1944—at 10 per cent. for buildings and 20 per cent. for plant and machinery; and that the late Sir Stafford Cripps, in 1949, thought it desirable to double the rate for plant and machinery to 40 per cent but left buildings—and there is, perhaps, some significance in this—at 10 per cent.

6.0 p.m.

Therefore, the differential in the rates proposed in the Clause is certainly not an innovation. It follows, in a more modest degree as far as the rates are concerned, the line previously taken by two successive Governments in respect of initial allowances, and I think we must therefore concede that there has been a certain body of opinion over the years consistently in support of the view that a higher degree of incentive is required in respect of plant and machinery. It is perfectly true that when we were introducing this novel system, as the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison) described it—indeed, he seemed rather conservatively shocked at its innovating quality—it was right to look at it and see whether the general frame of mind of the Government's predecessors in this matter were founded on sound consideration.

There is another fact which I think the, Committee would like to bear in mind in considering this matter. If one takes the first Amendment, which wants a doubling of the rate of investment allowance on industrial undertakings, it will be seen that the increased cost is significant. If it were acceptable it would increase the cost to the Exchequer of the investment allowance by £4 million in the financial year 1955–56 and by about £7 million in 1956–57 and onwards. That, again, is a figure which, I think the hon. Member for Orkney and Shetland (Mr. Grimond) would agree, is of significance in our calculations.

That is the background to the debate. It is true, of course that if one adopts the alternatives—if I may be allowed to say so, the most ingenious alternatives which hon. Members opposite have evolved—which leave the investment allowance at the proposed rate and retain an additional initial allowance, then the ultimate cost is not increased, but, as has already been pointed out, the cost in the earlier years is increased. If one takes the proposal to retain the straight initial allowance on top of the investment allowance, then the figures in the earlier years are the same as if one adopted the main proposal and doubled the investment allowance. There again, the financial difference develops at the end of the period, but in the earlier years the financial loss is the same.

I propose to deal specifically with the points which are raised in some of the other Amendments which we are discussing with this one. The proposal of the hon. and learned Member for Kettering to add the initial to the investment allowance would have the financial effects which I have already indicated, but it is worth considering whether it is really desirable to seek to operate two separate systems to the same end in respect of the same asset.

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.

The Amendment in the name of the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall), to which reference was made by at least one hon. Gentleman, is a slightly separate issue. I think it would be largely unnecessary in practice, because, if profits in a particular year are insufficient to cover the full investment allowance it is already open, under the Clause, to carry the unrelieved part of the allowance to subsequent years. The circumstances in which it might benefit the individual or the company if taxation were raised in subsequent years also arises.

It might be of advantage to keep the allowance, and if the day should ever come when the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) became Chancellor of the Exchequer again and increased the rate of taxation, then they might benefit. But I do not think that one wants to put into the Bill means of encouraging speculation of that kind.

The Amendment in the name of the right hon. Gentleman contains three choices and there is the effect on costs. In that respect it is similar to the Amendment of the hon. and learned Gentleman the Member for Kettering in so far as it provides for the operation simultaneously of the two alternative systems at the same time in respect of the same tax, and it is subject to the same difficulty to which I referred in regard to an earlier Amendment.

My hon. Friend the Member for Kidderminster (Mr. Nabarro), with his usual vigour, became involved in a discussion with one or two hon. Gentlemen opposite about the type of benefit in these proposals. I think that the misunderstanding between him and right hon. and hon. Gentlemen opposite springs from the fact that they are looking at this matter in two different ways. If we view the issue from the standpoint that investment and initial allowances are looked at as one operation with a substitution this year of the investment allowance for a large part of the initial allowance, then I would suggest that the benefit of the allowance can be accepted as taking place at the beginning of the period.

Mr. Nabarro

Hear, hear.

Mr. Boyd-Carpenter

I do not think we need get very excited about this, because, if I may say so, I think we are all right. If we look at this problem from the point of view of hon. Members opposite of the additional advantage given by the investment over the initial allowance, then I think it is equally right to say that the additional advantage accrues at the end. [HON. MEMBERS: "Hear, hear."] Therefore, we are in the happy position in this Committee of being right provided we look at the matter from the standpoint from which on different sides of the Committee we appear to look at it.

Mr. Roy Jenkins

But would the right hon. Gentleman not agree that from the practical point of view the suggestion put forward by my right hon. Friend is the right one and the view put forward by the hon. Gentleman the Member for Kidderminster (Mr. Nabarro) is wrong in the sense that as a result of this change no one will be paying less tax until the forty-fifth year?

Mr. Boyd-Carpenter

It depends on what the hon. Gentleman means by this change, as the late Professor Joad would have said. If we take the operation as a whole—restoration of initial allowances and substitution of investment allowance—people will pay less tax at the beginning. [HON. MEMBERS: "No."] There is no need to get excited about this; we must remember that no initial allowance was the state of affairs which the right hon. Gentleman the Member for Leeds, South left behind when he quitted office.

Mr. Gaitskell

The Financial Secretary should try to pull himself together and deal with the subject properly. What we are discussing is the change to be brought about by the introduction of investment allowances in place of initial allowances. We understand that the Government want to do this to stimulate investment, and the question that matters is whether it is going to stimulate investment. We cannot know the answer until we know where the benefits come in and when. It is perfectly clear from what the right hon. Gentleman has said that his hon. Friend now knows that he was wrong and we were right.

Mr. Boyd-Carpenter

There is no need for the right hon. Gentleman to get so excited about this. I thought we were getting along very happily on the basis that we were all right and, indeed, we are. It does not help for the hon. Gentleman the Member for Stechford (Mr. Jenkins) to interject as he did. It is perfectly proper and appropriate, if one so wishes, to look at this as a further development of the operation which my right hon. Friend initiated last year. If we look at it from that point of view we are perfectly entitled to suggest that the benefit will accrue at the beginning. But if we look at it from the point of view of the additional benefit accruing, then, as I have said, I am in complete agreement with the right hon. Gentleman, and we need not get excited about it.

We can, of course, if we wish, put a figure on the present value of that future remission. It might interest the Committee to know that, taking the simple example of an investment in building of £100,000, the present value of the additional benefit would be about £1,185. That is, of course, additional and we could take it as being the present value of the change that is made. [Interruption.] I am trying to help the right hon. Gentleman.

Mr. Gaitskell

And I am trying to help the Financial Secretary.

Mr. Boyd-Carpenter

I think I am being the more successful of the two.

Before I come to the conclusion of the matter, I perhaps ought to turn aside and refer specifically to the separate Amendments in the name of my hon. Friend the Member for Altrincham and Sale. He is quite right in saying that under the initial allowance proposals of last year, mining works were treated differently and very favourably. It is, of course, worth remembering that the initial allowance merely anticipates depreciation allowances in subsequent years and, therefore, can well be so framed as to take into account the estimated life of the assets, which in the case of mining works is apt to be particularly short.

The same considerations do not necessarily apply to investment allowances where we are concerned with the question of incentives and the degree of incentive required. I do not think that it would be justifiable for the industry, as my hon. Friend suggests, to feel that, as he put it, it had received bad treatment this year. It has now, under the provisions of the Clause, the alternative of retaining its existing position of an initial allowance of 40 per cent. or coming into the new investment allowance of 20 per cent. Although it is always possible to take the view that if one has a certain relative position at one time, one would naturally like to preserve it at other times, it is not fair to suggest that the industry has been badly treated when its present position has been preserved and it has been given an alternative which, I have little doubt, many people in the industry will find it advantageous to take.

One fully understands from the human point of view the feeling that can arise when it appears that the relative position has been changed. I think the real essence of the case which has been put is the expression of doubt as to whether this is enough in this direction of building to get the amount of investment that we want. I think that we ought in that context to pay some attention to the remarks which were made by the hon. and learned Member for Kettering (Mr. Mitchison) when he was extremely hard on the initial allowances and suggested they had not had any effect.

I do not really think that is borne out by the facts. I am sure that the hon. and learned Gentleman appreciates the fact that people do not instantaneously take a decision to build a new factory, and it was not to be expected that, immediately my right hon. Friend restored the initial allowances, decisions would be taken which would result in bricks and mortar appearing immediately, or even for weeks and months. Indeed, the figures which have been quoted—two sets of figures have been quoted—from the Economic Survey in respect of investment in new buildings and works do again show that we are all right on both sides. One figure is the 1952 market price and the other is the current market price. If one takes these figures there is an apparent upward tendency in investment in other new buildings and works. I think that it is clear that, these being, of course, annual figures, there has been something of an upward trend towards the end of the year, which is healthy so far as it goes.

6.15 p.m.

I am not saying to the Committee that it has gone as far as we would like it to go. If it had, it would not be necessary, perhaps, to introduce this Clause at all. I think that in fairness to the initial allowances which my right hon. Friend restored it is wrong and gives a false background to the debate which we are now having on the investment allowance to take the view, which the hon. and learned Gentleman appeared to take, that they have failed.

Mr. Rhodes

The Financial Secretary says that it has not developed and gone as far as he would like. If it has not gone as far as he would like during this last year with all the favourable circumstances of the remission of tax and the rest of it, how does he expect it to go up next year when he has not, despite the disingenuous remarks which he has made in stone-walling the Departmental point of view, written into this Clause one penny piece for the man who does what the Chancellor wants and what the Chancellor before and the Chancellor before that wanted him to do? He has not put a bit of encouragement into this Clause and yet he is claiming that the encouragement is there. It is not.

Mr. Boyd-Carpenter

That is more a second speech by the hon. Gentleman than an intervention. If the hon. Gentleman will contain himself, I will endeavour to deal with that point. I think that his intervention was founded on a fallacy. The case which I am endeavouring to put to him is that the initial allowances have had some beneficial effect, and I would suggest to him that, in the light of what I have said, both as to timing and so on, there is solid evidence for that view. The hon. Gentleman interjects with all his characteristic vigour—shaking his finger at me—and asks why we have not done something which gives a penny piece more. The short answer is, of course, that the investment allowance is from this point of view an improvement on the initial allowance; that is why it is being introduced.

The only question between us is whether this addition is of itself enough. If it is an addition, then the hon. Gentleman's rhetorical "not a penny piece more" is really beyond dispute, and I hope that we can discuss this on the basis of whether the modest additional amount is enough—that is the point with which we are concerned. It is not a matter on which I would wish to be dogmatic, and I think that we have had a most interesting and helpful debate.

Mr. Mitchison

May I ask the Financial Secretary to deal with one particular figure before he leaves this point? In 1950 the amount for new buildings and works was £546 million at 1952 prices; in 1953 it was £540 million. Surely in those circumstances it is rather difficult to say that the initial allowances have had much success.

Mr. Boyd-Carpenter

The hon. and learned Gentleman will recall that his right hon. Friend removed the initial allowances in 1951. The subsequent downward trend has been arrested by the upward movement since my right hon. Friend restored the initial allowances. I am most grateful to the hon. and learned Gentleman, who is a most skilled advocate, in putting my case better than I was able to do. I do not want to be dogmatic about it. We have had an interesting debate and I hope that the Committee will agree that I have tried to explain the very real difficulties in favour of the different specific proposals which have been put forward.

It seems difficult, in the light of them, to conclude that a case has been made for going further. Perhaps there is something to be said for putting the proposals in the Clause into operation—bearing in mind that they provide some additional stimulus—and seeing whether they are sufficient for their purpose. It is, of course, very much a matter of opinion, and ultimately of judgment, as to precisely the degree of stimulus which is required. It is a matter upon which opinions can and ought legitimately to differ. Equally, as I say, the difficulties in the way of going further are real and make it difficult to accept the precise proposals put forward on the whole so persuasively and interestingly.

Mr. Gaitskell

It seems to me that the compulsory course of slimming yesterday imposed on the right hon. Gentleman—

Mr. Boyd-Carpenter

I hope the right hon. Gentleman is not suggesting that it is necessary.

Mr. Gaitskell

—is having a bad effect upon his Parliamentary performance. I am bound to say that the combination of a bad case and a starvation diet has led to a defence of the Government point of view which I can only describe as one of the worst we have had from the benches opposite for a long time. We cannot allow this no doubt well-intentioned attempt to protect and shield his hon. Friend the Member for Kidderminster (Mr. Nabarro) to pass without some comment.

The issue between the hon. Member for Kidderminster and my hon. Friends was perfectly clear and was also referred to by the hon. Member for Orkney and Shetland (Mr. Grimond). I do not think that anyone who listened to the debate can have the slightest doubt about the answer to the question put by the hon. Member for Kidderminster, when he asked whether the additional benefit did not really accrue at the start. I do not think there is any doubt that it does not accrue at the start, but only right at the end.

Mr. Nabarro

indicated dissent.

Mr. Gaitskell

If the hon. Member denies that, is he questioning the statement of the Financial Secretary and would he like to try to explain to the Committee what he was supposing actually happened? When I put to him the particular case, when I suggested that the advantage accrued only after 45 to 50 years, and asked whether he agreed, he said that he did not. But it is perfectly evident from what the Financial Secretary has said that I was absolutely right.

Mr. Nabarro

I would only reply by saying that the defence of my right hon. Friend is not a disingenuous point of view about this matter at all. If there are legitimate differences of interpretation, the interpretation I place on it is the most favourable one, which is that the benefit accrues at the beginning, and that is the opinion held very largely by chartered accountants.

Mr. Gaitskell

The hon. Member is, in fact, questioning his own Front Bench.

Mr. Boyd-Carpenter

indicated dissent.

Mr. Gaitskell

That is all it comes to. This is a matter of great importance. If we are right—and I say that we are—the hon. Member for Kidderminster should be supporting the Amendment; and we may hope that later on he will explain why, if we are wrong, it was important that the Government should accept the Amendment. I hope that we shall also have the view of the Chancellor on this important matter.

The Financial Secretary said that he thought that we agreed in the object, but judging by his reply I do not think that we are. I do not think that he takes sufficiently seriously the importance of giving an adequate stimulus to industrial building at the present time. His remark that, after all, if we stimulate the purchase of additional plant and machinery we also stimulate additional building, is one of those half-truths which in present circumstances I can only regard as dangerous.

The whole burden of the case advanced by my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) was that, if we wish to encourage industrial efficiency, we should give some encouragement to people to build factories properly, with adequate space, in order that the proper type of machinery could be installed and the workers provided with adequate room to carry out the processes.

The Financial Secretary made no reference to that whatever. It is evident that he does not appreciate the importance of it. He fell back on the fact that in past years, since the initial allowances have been introduced, industrial building has always been less favourably treated than plant and machinery. That is perfectly true, but there was a good reason why in 1948 Sir Stafford Cripps did not increase the allowance for industrial building when he increased it for plant and machinery. At that time, as the right hon. Gentleman, and indeed all hon. Members well know, the building resources of the country were strained to the utmost. In fact, we were engaged in holding down industrial building. We had to do so largely because of the immense burden falling on the building industry in the way of repairs or bomb damage and the need to catch up with arrears which developed during the war. It would have been absurd, at a time when we were severely licensing industrial building, to have given an additional incentive to it.

I think—and I hope that the Chancellor will make some comment upon it—that it is extremely important to give encouragement to industrial building in present circumstances. The Chancellor said yesterday that there was additional capacity available. I do not know whether he meant that in reference to the building industry, or does he say that the industry is over-strained at the moment, in the sense that he does not want any additional resources of any kind used for industrial building? Obviously there is no purpose in the investment allowance in those circumstances. But I think the Chancellor would agree that he has introduced these allowances specifically to encourage investment; and when at the end the Financial Secretary seemed to be questioning whether it was necessary to have industrial building, we were left in complete confusion about what are the intentions and desires of the Government in this matter.

At least we on this side of the Committee believe that industrial building should be encouraged. The burden of every one of the Amendments which we are considering together is that if we compare the way in which the investment allowance works out in connection with plant and machinery, on the one hand, and industrial building, on the other, we find that there is far more incentive in the case of plant and machinery than in the case of industrial building. The reason for that was precisely the point raised by the hon. Member for Kidderminster. The fact is that if we take industrial building in the present situation, that is to say, where there are initial allowances, we get an initial allowance of 10 per cent. in the first year and 2 per cent. for 45 years thereafter. That is where there is an initial allowance.

When we come to introduce the investment allowance, we still get the same 10 per cent. in the first year. It has now become an investment allowance instead of an initial allowance, but at that stage there is no difference. It does not affect the Revenue or the taxpayer any differently. But, in the new circumstances provided by this Clause, we have an allowance of 2 per cent. not for 45 but for 50 years. If I am wrong, I am sure that the Financial Secretary or the Chancellor will correct me, but I think these are completely correct figures.

It cannot be said that an incentive which consists of giving people an allowance 45 years ahead at the rate of 10 per cent. spread over five years constitutes any serious incentive at all. That cannot be argued, even if we do work out that £10,000 is the full value of an investment allowance on £100,000 and say that the discounted value today is £1,100, or a little more. I suggest that the Government should try to think up a better argument than that if they propose to reject the Amendment.

We say that if that situation is compared with the investment allowance on plant and machinery we find a completely different situation. There the benefit is spread over the whole life of the machinery and plant. There is, of course, the additional point that that life is much shorter in the case of plant and machinery, and much nearer the point at which the investment takes place, than is the life of the building we are now considering.

6.30 p.m.

Our conclusion therefore, when looking at the Clause, was that something must be done to increase the incentive. We were encouraged in that thought by the remarks of the Chancellor on Second Reading. Our one difficulty was that in the case of building the incentive was not adequate, was not as great as it should be.

We have put forward a series of alternatives in these Amendments. I need not go over them in detail. The first involves a simple doubling of the investment allowance for buildings and costs more than the others. We believe there is a good case for it on the ground that it would give the substantial additional incentive now of a further 10 per cent. on the cost of the buildings at the time when the investment was made.

The other Amendments are of varying merit, but they all have the one thing in common that they bring the advantage of the allowance nearer to the point in time at which the investment is made. I am inclined to favour the double option in the Amendment standing in my name. I do not see why we should not give an option in these matters, so that a tax-payer preferring one system can choose that, and if he prefers another he can choose that. The second Amendment in this series simply reintroduces the initial allowances and has a great deal to commend it.

I can see that the third Amendment, the one between the two, has certain difficulties about it, to which the Financial Secretary has referred. I should have thought that either of the others would be most worthy of serious consideration by the Government. These are not a question of cost. In the later Amendments we are not asking that the total Government expenditure or the total remission of taxation should be any greater. They are purely a matter of shifting the burden in time. We believe that that must be done if the incentive is to be granted.

The plain fact is, from what we have heard from the Government, that there is either no answer to the arguments put forward on this side of the Committee, or not a single answer worthy of consideration. The facts are not in dispute. There is only a remote incentive to anybody who is contemplating industrial building. If the first Amendment is too expensive, the Government should consider some of the others. I therefore ask the Chancellor to reconsider the matter and to give us a more favourable reply than we have had.

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

In response to the right hon. Gentleman, I should like to make a few simple observations without going into technicalities. First of all, this is a genuine point which we had observed before the Second Reading, when it was brought sharply to our attention by the hon. Member for Ashton-under-Lyne (Mr. Rhodes). Secondly, it was not introduced into the Bill by mistake. It was our intention to give priority to plant and machinery, to give them greater favour than buildings. It has not been done without realisation of what it means.

Thirdly, we did not underestimate the importance of buildings. The debate has further accentuated that importance. I assure the right hon. Gentleman, the hon. Member for Ashton-under-Lyne, the hon. Member for Orkney and Shetland (Mr. Grimond), my hon. Friend who spoke from my side of the Committee, and others, that we wish to see development in industrial buildings because that is the part of the general ground of what the right hon. Gentleman described as our industrial renaissance.

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, I say that this is a priority and that in any case the matter is important.

Now we come to the real difficulty about buildings, which is that the method of depreciation is calculated on the straight-line basis and not on the reducing-balance basis. I am getting to the core of the matter. I am not an expert accountant, but it is my business to try to understand these matters. If the depreciation were calculated on the reducing-balance basis, the benefit would be approximately—shall we say, in broad figures?—three times as much as it would be by the present 10 per cent. calculated on the straight-line basis. The position, therefore, is that I have been considering during this debate, and after hearing the right hon. Member for Leeds, South (Mr. Gaitskell) on the Second Reading—and in between—whether I could give buildings the option of passing from the straight-line basis to the reducing-balance basis.

I am assured by my advisers that there would be such complexities in altering the legislation on this subject that we could not possibly have it done for this year. I believe, to use an American expression, that the system whereby buildings are depreciated on the straight-line rather than on the reducing-balance basis, is "built in" the system. We have considered the matter, in order to give some advantage to buildings, but I certainly cannot adopt it this year. I cannot impose it on the machine—if I may use so unhuman an expression for such human people as operate the drafting and official machine—before the Report stage. I want to leave no doubts about what I have in mind. I do not think that that would necessarily be the best solution. It would be excessively complicated legislation which would keep us up many nights next year, or whenever we introduced it.

In the case of shipping—which does not come in under these Amendments, but I have to consider the effect of them on other interests—it is possible to change from the straight-line to the reducing-balance basis. If they are not satisfied with an investment allowance on the straight-line basis, it is possible for them to change over and get what would appear to them as of greater benefit.

What other possibilities are there? I want to meet the points of view of hon. Gentlemen opposite on these matters. What are the possibilities of the Amendments? I do not like the double option Amendments. I do not like the second alternative of reintroducing the initial allowances. The only possibility which makes sense in trying to solve this problem is increasing the percentage on building, either to the 20 per cent. that has been thought of or to a lower percentage. In the case of the 20 per cent. the cost would be very considerable, £4 million in 1955–56, rising to nearly double that amount later, and then becoming a very considerable feature of the cost of the investment allowance as a whole in the years to come.

I am sorry that we cannot give an exact figure of the liability until we know the amount that is to be invested. That is why we have not been able to do more than give a figure of £30 million for the years ahead. That is not assessed on the 20 per cent. on building which would add a very considerable sum to the cost. If we gave a lesser concession—and I am sure the mathematics of hon. Gentlemen opposite will work it out—the cost would be in proportion. If we gave only half the concession, the cost would only be half. I hope I am making the matter crystal clear. This is a genuine point and there is no sinister motive in ourselves, because we are keener to give the incentive than perhaps some hon. Gentlemen who have spoken.

The next objection about making a concession on this point is that, if we give it, we shall have considerably more pressure to come in from other interests who are at present not included, and I am not at present convinced that we could hold the line. I will be quite frank with the Committee: there is the question of commercial buildings. I am not keen to extend the concession already given in that sphere, because I am trying to keep the investment allowance for productive purposes. I believe I can hold the line in regard to agricultural buildings because they get the 10 per cent. annual allowance which results in the benefit to them coming to more than the industrial buildings would get if we leave the Bill as it is.

Therefore, I am chary about making a concession, first, because it would make it difficult to hold the line I have adopted; secondly, because I do not want to add £4 million to the cost; thirdly, because I do not want to indulge in the complicated legislation to do it the other way round and change buildings from the straight-line basis to the reducing-balance basis; and fourthly, because I still think that the plant and machinery want the investment allowance and not the buildings.

The only honourable way out of it is as follows. I think that hon. Gentlemen opposite must regard this debate as not being entirely satisfactory from their point of view; that is to say, I do not want words of mine to stop them from going to a Division if they so wish. However, in view of the complexity of this matter, the fact that is is a genuine point, put forward in an honourable way, and the difficulties that have been put sincerely by my right hon. Friend the Financial Secretary—and I hope clearly and sincerely by myself in supplementing his much more able and comprehensive survey of the matter; in view of all that, I hope we may bring the debate to an end.

If hon. Gentlemen opposite wish to divide, it will only show their intensity of purpose on the subject. I cannot give a definite promise for the four reasons I have given. 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.

Mr. Crosland

We on this side of the Committee would have been prepared to conclude the debate and go to a Division now if even the negative answer from the Chancellor had been more thorough and convincing. However, this is very much an off-day of the Treasury Bench. First, we had from the Financial Secretary a speech which, judged by his usual extremely high standard, was a deplorable performance. Now we have had a speech from the Chancellor which, as always, was couched in most agreeable language and was courteous in tone, but which contained less solid argument than any speech I have heard from the right hon. Gentleman in the last three years.

The Chancellor started by telling us what everybody in the Committee already knew, except the hon. Member for Kidderminster (Mr. Nabarro), that buildings are depreciated on a straight-line basis and that there would be great complications in going over to a reducing-balance basis. But nobody on this side of the Committee asked him to do that, and it was not an answer to any of the arguments put forward from this side.

Mr. Butler

I am certainly not of the same high standard as the hon. Member, but I have tried to distil a great deal of material on this subject in as clear a way as possible, and one of the ways of solving the building programme is an alteration from the straight-line basis to the reducing-balance basis. So please let the hon. Member give my arguments the validity that they may or may not deserve.

6.45 p.m.

Mr. Crosland

I always attach the maximum possible importance to the arguments of the right hon. Gentleman. When he said just now that he was not up to the standard of the hon. Member, if he referred to the hon. Member for Kidderminster, I can assure him that he comes up to a much higher standard.

The next specific point which the Chancellor made was that in his view there was not enough industrial building. Apparently we are all agreed on this point. What is to be done about it? My hon. Friend said that initial allowances had not done the job and, replying to that, the Financial Secretary said reasonably that we cannot expect initial allowances to do the job, as far as building is concerned, overnight or in two, three or six months. Nevertheless, the fact remains that the Government are not prepared to give initial allowances a long chance because they have replaced them this year by investment allowances.

Now the point here is not just one that a lot of people in the Labour Party are making. It was made recently by Mr. S. P. Chambers, with all the vigour used by my hon. Friend and with no party element in it. The point is that, as compared with initial allowances, investment allowances are of no advantage until the 46th year. What came over the hon. Member for Kidderminster this after-noon, I do not know, because normally he intervenes in our debates—some people would think over-frequently—but, at any rate, in a thoroughly well-informed manner. Today the hon. Gentleman appeared to have got himself confused about a simple matter of accountancy. In fact, the position is perfectly clear and should have been made so by his right hon. Friend the Financial Secretary who was, however, so anxious to prove that the Government have done something this year that he himself explained it obscurely.

There cannot be any misunderstanding about the position. If we compare a situation in which we have neither initial nor investment allowances with one in which we have either, it is true that the gain is all in the first year, as the hon. Member for Kidderminster said. But we are not interested in hypothetical discussions, we are not philosophers; we are discussing the position after this Finance Bill and the position before it. It is clear that, taking the position after this Finance Bill with the investment allowances, and comparing it with the position before, there is no gain until the 46th, 47th, 48th, 49th and 50th years of the life of the building. The hon. Member for Kidderminster will have to consult one or two of his hon. Friends who are accountants, because on this point they agree with what we are saying.

Mr. Geoffrey Stevens (Portsmouth, Langstone)

I am afraid that this colleague of the hon. Member for Kidderminster (Mr. Nabarro) is not disposed to agree with the hon. Gentleman the Member for Gloucestershire, South (Mr. Crosland). I have never been strong on mathematics, but it seems to me that amortisation over 50 years requires a lesser annual sum than over 45 years.

Mr. Crosland

But the hon. Gentleman has quite forgotten the nature of the initial allowance. It is a simple sum, and in a quarter of an hour I think the hon. Gentleman will not dissent with the point of view that we put forward; certainly no other leaders of the accountancy profession have done, so far. Is he proposing to be the sole reprobate on this point?

This is the point with which the Committee has to deal. The Chancellor wants to increase industrial building, he admits that initial allowances are not sufficient and so has abolished them and has put in their stead something which gives no advantage for 45 years. This cannot be considered satisfactory, so what are we to do? We on this side of the Committee have put forward a number of suggestions, any one of which the Chancellor could accept. The Chancellor and the Financial Secretary tried to find objections to some of them. The first one, a most obvious one, merely doubles the rate of investment allowance on buildings. This the Chancellor said that he could not accept because it would cost too much. If he says that, we are bound to accept his judgment and it was for precisely this reason that we did not confine ourselves to that one suggestion but put forward three more, the cost of which would be much less; in fact, in the long run would be zero.

It does not matter which one of those we take, but I prefer the first one, as does my right hon. Friend. It suggests that, in addition to the 10 per cent. investment allowance, we should preserve the 10 per cent. initial allowance. This is a perfectly serious proposition which would have the advantage of bringing the gain forward from the forty-sixth year to the first year and would therefore achieve the effect which I imagine we all want. Why did we not have from either right hon. Gentleman any proper reason for rejecting this proposition? The Chancellor said, "I do not like that Amendment." Really this is a somewhat arrogant Chancellor who dismisses a serious Amendment by just saying, "I do not like it."

That might not have been so bad if the Financial Secretary had gone into somewhat more detail, but he only said about three sentences. All he said was that it would be rather confusing to mix a system of initial allowance and investment allowance. Confusing to whom? We are not dealing with a lot of people like the hon. Member for Kidderminster but with highly skilled accountants like the hon. Member for Langstone (Mr. Stevens). He is perfectly capable of dealing with a situation where a building attracts these two allowances at the same time. It is not a task beyond the wit of man.

I hope that even if right hon. Gentlemen on the Treasury Bench say that they will not accept our double allowance because it costs too much, they will at least give rather better reasons for turning down the other suggestions that we made precisely because we thought that they might object to the cost of our first suggestion. The Treasury Bench has put up performances in the past which, if not satisfactory to this side of the Committee, at any rate have not been wholly disgraceful, but this afternoon, for the first time, we had a reply from both the Chancellor and the Financial Secretary which wholly failed to grapple

with the issue. I hope that at least we shall have a rather more specific assurance that this matter will be seriously considered between now and the Report stage. There is no reason to think that with a sufficiently serious effort an answer cannot be found.

Amendment negatived.

Amendment proposed: In page 9, line 22, leave out "instead of," and insert "in addition to."—[Mr. Gaitskell.]

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

The Committee divided: Ayes, 246; Noes, 234.

Division No. 141.] AYES [6.53 p.m.
Aitken, W. T. Duthie, W. S. Johnson, Eric (Blackley)
Allan, R. A. (Paddington, S.) Eden, J. B. (Bournemouth, West) Johnson, Howard (Kemptown)
Alport, C. J. M. Elliot, Rt. Hon. W. E. Jones, A. (Hall Green)
Amery, Julian (Preston, N.) Finlay, Graeme Kaberry, D.
Amory, Rt. Hon. Heathcoat (Tiverton) Fisher, Nigel Kerby, Capt. H. B.
Anstruther-Gray, Major W. J. Fleetwood-Hesketh, R. F. Kerr, H. W.
Arbuthnot, John Fletcher-Cooke, C. Lambert, Hon. G.
Assheton, Rt. Hon. R. (Blackburn, W) Ford, Mrs. Patricia Langford-Holt, J. A.
Baldock, Lt.-Cmdr. J. M. Fort, R Leather, E. H. C.
Baldwin, A. E. Foster, John Legge-Bourke, Maj. E. A. H.
Barber, Anthony Fraser, Hon. Hugh (Stone) Legh, Hon. Peter (Petersfield)
Barlow, Sir John Fraser, Sir Ian (Morecambe & Lonsdale) Lennox-Boyd, Rt. Hon. A. T.
Baxter, Sir Beverley Fyfe, Rt. Hon. Sir David Maxwell Lindsay, Martin
Beach, Maj. Hicks Galbraith, Rt. Hon. T. D. (Pollok) Linstead, Sir H. N.
Bell, Philip (Bolton, E.) Galbraith, T C. D. (Hillhead) Lockwood, Lt.-Col. J. C.
Bell, Ronald (Bucks, S.) Gammons, L. D. Lucas, Sir Jocelyn (Portsmouth, S.)
Bennett, Dr. Reginald (Gosport) Garner-Evans, E. H. Lucas, P. B. (Brentford)
Bennett, William (Woodside) George, Rt. Hon. Maj. G. Lloyd Lucas-Tooth, Sir Hugh
Bevins, J. R. (Toxteth) Glover, D. Lyttelton, Rt. Hon. O.
Birch, Nigel Godber, J. B. McAdden, S. J.
Bishop, F. P. Gomme-Duncan, Col. A. McCallum, Major D.
Black, C. W. Gough, C. F. H. Macdonald, Sir Peter
Bossom, Sir A. C. Gower, H. R. McKibbin, A. J.
Boyd-Carpenter, Rt. Hon. J. A. Graham, Sir Fergus Mackie, J. H. (Galloway)
Boyle, Sir Edward Grimston, Hon. John (St. Albans) Maclay, Rt. Hon. John
Braithwaite, Sir Albert (Harrow, W.) Grimston, Sir Robert (Westbury) Maclean, Fitzroy
Braithwaite, Sir Gurney Hall, John (Wycombe) Macleod, Rt. Hon. lain (Enfield, W.)
Brooke, Henry (Hampstead) Harden, J. R. E. MacLeod, John (Ross and Cromarty)
Buchan-Hepburn, Rt. Hon. P. G. T Hare, Hon. J. H. Macmillan, Rt. Hon. Harold (Bromley)
Bullard, D. G. Harris, Frederic (Croydon, N.) Maitland, Comdr. J. F. W. (Horncastle)
Bullus, Wing Commander E. E. Harrison, Col. J. H. (Eye) Maitland, Patrick (Lanark)
Burden, F. F. A. Harvey Air Cdre, A. V. (Macclesfield) Manningham-Buller, Rt. Hn. Sir Reginald
Butcher, Sir Herbert Harvey, Ian (Harrow, E.) Markham, Major Sir Frank
Butler, Rt. Hon. R. A. (Saffron Walden) Harvie-Watt, Sir George Marlowe, A. A. H.
Campbell, Sir David Heald, Rt. Hon. Sir Lionel Marples, A. E.
Cary, Sir Robert Heath, Edward Marshall, Douglas (Bodmin)
Channon, H. Henderson, John (Cathcart) Maude, Angus
Clarke, Col. Ralph (East Grinstead) Higgs, J. M. C. Maudling, R.
Clyde, Rt. Hon. J. L. Hill, Dr. Charles (Luton) Maydon, Lt.-Comdr. S. L. C.
Cole, Norman Hinchingbrooke, Viscount Medlicott, Brig. F.
Colegate, W. A. Hirst, Geoffrey Mellor, Sir John
Conant, Maj. Sir Roger Holland-Martin, C. J. Molson, A. H. E.
Cooper, Sqn. Ldr. Albert Hope, Lord John Mott-Radclyffe, C. E.
Cooper-Key, E. M. Hopkinson, Rt. Hon. Henry Nabarro, G. D. N.
Craddock, Beresford (Spelthorne) Hornsby-Smith, Miss M. P. Neave, Airey
Crookshank, Capt. Rt. Hon. H. F. C Horobin, I. M. Nicholls, Harmar
Crosthwaite-Eyre, Col. O. E. Horsbrugh, Rt. Hon. Florence Nicholson, Godfrey (Farnham)
Crouch, R. F. Howard, Hon. Greville (St. Ives) Nicolson, Nigel (Bournemouth, E.)
Crowder, Sir John (Finchley) Hudson, Sir Austin (Lewisham, N.) Nield, Basil (Chester)
Crowder, Petre (Ruislip—Northwood) Hulbert, Wing Cdr. N. J. Noble, Comdr. A. H. P.
Darling, Sir William (Edinburgh, S.) Hurd, A. R. Nugent, G. R. H.
Deedes, W. F. Hutchison, Sir Ian Clark (E'b'rgh, W.) Nutting, Anthony
Digby, S. Wingfield Hutchison, James (Scotstoun) Oakshott, H. D.
Donaldson, Cmdr. C. E. McA. Hyde, Lt.-Col. H. M. O'Neill, Hon. Phelim (Co. Antrim, N.)
Donner, Sir P. W. Hylton-Foster, H. B. H. Ormsby-Gore, Hon. W. D.
Doughty, C. J. A. Iremonger, T. L. Orr, Capt. L. P. S.
Drayson, G. B. Jenkins, Robert (Dulwich) Orr-Ewing, Charles Ian (Hendon, N.)
Duncan, Capt. J. A. L. Jennings, Sir Roland Orr-Ewing, Sir Ian (Weston-super-Mare)
Osborne, C. Ryder, Capt. R. E. D. Thomas, P. J. M. (Conway)
Page, R. G. Sandys, Rt. Hon. D. Thompson, Kenneth (Walton)
Perkins, Sir Robert Savory, Prof. Sir Douglas Thompson, Lt.-Cdr. R. (Croydon, W.)
Peto, Brig. C. H. M. Schofield, Lt.-Col. W. Thornton-Kemsley, Col. C. N
Pickthorn, K. W. M Scott-Miller, Cmdr. R. Turner, H. F. L
Pilkington Capt. R. A. Shepherd, William Turton, R. H.
Pitman, I. J. Simon, J. E. S. (Middlesbrough, W.) Vane, W. M. F.
Pitt, Miss E. M. Smithers, Peter (Winchester) Vaughan-Morgan, J. K.
Powell, J. Enoch Smithers, Sir Waldron (Orpington) Wakefield, Edward (Derbyshire, W.)
Price, Henry (Lewisham, W.) Smyth, Brig. J. G. (Norwood) Wall, Major Patrick
Prior-Palmer, Brig. O. L. Snadden, W. McN. Ward, Hon. George (Worcester)
Profumo, J. D. Soames, Capt. C. Waterhouse, Capt. Rt. Hon C
Raikes, Sir Victor Spearman, A. C. M Watkinson, H. A.
Rayner, Brig. R. Speir, R. M. Webbe, Sir H. (London & Westminster)
Redmayne, M. Spens, Rt. Hon. Sir P. (Kensington, S.) Wellwood, W.
Rees-Davies, W. R. Stevens, Geoffrey Williams, Rt. Hon. Charles (Torquay)
Remnant, Hon. P. Steward, W. A. (Woolwich, W.) Williams, Gerald (Tonbridge)
Renton, D. L. M. Stewart, Henderson (Fife, E.) Williams, Sir Herbert (Croydon, E.)
Ridsdale, J. E. Stoddart-Scott, Col. M. Williams, R. Dudley (Exeter)
Roberts, Peter (Heeley) Storey, S. Wills, G.
Robertson, Sir David Summers, G. S. Wilson, Geoffrey (Truro)
Robson-Brown, W. Sutcliffe, Sir Harold Wood, Hon. R
Rodgers, John (Sevenoaks) Taylor, Sir Charles (Eastbourne)
Roper, Sir Harold Taylor, William (Bradford, N.) TELLERS FOR THE AYES:
Russell, R. S. Teeling, W. Mr. Studholme and Mr. Vosper.
Acland, Sir Richard Evans, Albert (Islington, S.W.) Lewis, Arthur
Adams, Richard Evans, Edward (Lowestoft) Lindgren, G. S.
Albu, A. H. Evans, Stanley (Wednesbury) Lipton, Lt.-Col. M.
Allen, Arthur (Bosworth) Fernyhough, E. Logan, D. G.
Allen, Scholefield (Crewe) Fienburgh, W. MacColl, J. E.
Anderson, Frank (Whitehaven) Fletcher, Eric (Islington, E.) McGhee, H. G.
Attlee, Rt. Hon. C. R. Follick, M. McGovern, J.
Bacon, Miss Alice Foot, M. M. McInnes, J.
Baird, J. Forman, J. C. McKay, John (Wallsend)
Barnes, Rt. Hon. A. J Fraser, Thomas (Hamilton) McLeavy, F.
Bartley, P. Gaitskell, Rt. Hon. H. T. N. MacMillan, M. K. (Western Isles)
Bellenger, Rt. Hon. F. J. Gibson, C. W. MacPherson, Malcolm (Stirling)
Born, Hon. Wedgwood Gooch, E. G. Mainwaring, W. H.
Benson, G. Grey, C. F. Mallalieu, E. L. (Brigg)
Beswick, F. Griffiths, Rt. Hon James (Llanelly) Mallalieu, J. P. W. (Huddersfield, E)
Bevan, Rt. Hon. A. (Ebbw Vale) Griffiths, William (Exchange) Manuel, A. C.
Blackburn, F. Grimond, J. Marquand, Rt. Hon. H. A
Blenkinsop, A. Hale, Leslie Mason, Roy
Blyton, W. R. Hall, Rt. Hon. Glenvil (Colne Valley) Mayhew, C. P.
Boardman, H. Hamilton W. W. Messer, Sir F.
Bottomley, Rt. Hon. A. G Hannan, W. Mikardo, Ian
Bowden, H. W. Hargreaves, A. Mitchison, G. R
Bowen, E. R. Harrison, J. (Nottingham, E.) Monslow, W.
Braddock, Mrs. Elizabeth Hastings S. Moody, A. S.
Brockway, A. F. Hayman, F. H. Morgan, Dr. H. B. W.
Brook, Dryden (Halifax) Healy Cahir (Fermanagh) Morley, R.
Broughton, Dr. A. D. D. Henderson, Rt. Hon. A. (Rowley Regis) Morris, Percy (Swansea, W.)
Brown, Thomas (Ince) Herbison, Miss M. Morrison, Rt. Hon. H. (Lewisham, S.)
Burke, W. A. Hobson, C. R. Mort, D. L.
Burton, Miss F. E. Holman, P. Moyle, A.
Butler, Herbert (Hackney, S.) Holmes, Horace Mulley, F. W
Callaghan, L. J. Holt, A. F. Nally, W.
Carmichael, J. Hoy, J. H. Neal, Harold (Bolsover)
Castle, Mrs. B. A. Hudson, James (Ealing, N.) Noel-Baker, Rt. Hon. P. J
Champion, A. J. Hughes, Cledwyn (Anglesey) Oldfield, W. H.
Chetwynd, G. R Hughes, Emrys (S. Ayrshire) Oliver, G. H.
Clunie, J. Hughes, Hector (Aberdeen, N.) Orbach, M.
Coldrick, W. Hynd, H. (Accrington) Oswald, T.
Collick, P. H Hynd, J. B. (Attercliffe) Padley, W. E.
Cove, W. G. Irvine, A. J. (Edge Hill) Paling, Rt. Hon. W. (Dearne Valley)
Craddock, George (Bradford, S.) Irving, W. J. (Wood Green) Paling, Will T. (Dewsbury)
Crosland, C. A. R. Janner, B. Pannell, Charles
Cullen, Mrs. A. Jay, Rt. Hon. D. P. T. Pargiter, G. A.
Daines, P. Jeger, George (Goole) Parker, J.
Dalton, Rt. Hon. H. Jenkins, R. H. (Stechford) Paton, J.
Davies, Ernest (Enfield, E.) Johnson, James (Rugby) Pearson, A.
Davies, Harold (Leek) Jones, David (Hartlepool) Popplewell, E.
Davies Stephen (Merthyr) Jones, Frederick Elwyn (West Ham, S.) Porter, G.
de Freitas, Geoffrey Jones, Jack (Rotherham) Price, J. T. (Westhoughton)
Deer, G. Jones, T. W. (Merioneth) Price, Philips (Gloucestershire, W.)
Delargy, H. J. Keenan, W. Proctor, W. T.
Dodds, N. N. Kenyon, C. Pryde, D. J.
Donnelly, D. L. Key, Rt. Hon. C. W Pursey, Cmdr. H
Dugdale, Rt. Hon. John (W. Bromwich) King, Dr. H. M. Rankin, John
Ede, Rt. Hon. J. C. Kinley, J. Reeves, J.
Edwards Rt. Hon. Ness (Caerphilly) Lawson, G. M. Reid, Thomas (Swindon)
Edwards, W. J. (Stepney) Lee, Frederick (Newton) Reid, William (Camlachie)
Rhodes, H. Sparks, J. A. Well, Percy (Faversham)
Robens, Rt. Hon. A. Steele, T. Weft, D. G.
Roberts, Albert (Normanton) Stokes, Rt. Hon. R. R. Wheeldon, W. E.
Robinson, Kenneth (St. Pancras, N.) Strauss, Rt. Hon. George (Vauxhall) White, Mrs. Eirene (E. Flint)
Rogers, George (Kensington, N.) Stross, Dr. Barnett White, Henry (Derbyshire, N.E.)
Ross, William Summerskill, Rt. Hon. E. Whiteley, Rt. Hon. W.
Royle, C. Swingler, S. T. Wilcock, Group Capt. C. A. B.
Shackleton, E. A. A. Sylvester, G. O. Willey, F. T.
Shinwell, Rt. Hon. E. Taylor, Bernard (Mansfield) Williams, David (Neath)
Short, E. W. Taylor, John (West Lothian) Williams, Rev. Llywelyn (Abertillery)
Shurmer, P. L. E. Taylor, Rt. Hon. Robert (Morpeth) Williams, Ronald (Wigan)
Silverman, Julius (Erdington) Thomas, Iorwerth (Rhondda, W.) Williams, Rt. Hon. Thomas (Don V'll'Y)
Silverman, Sydney (Nelson) Thomas, Ivor Owen (Wrekin) Williams, W. R. (Droylsden)
Simmons, C. J. (Brierley Hill) Thomson, George (Dundee, E.) Willis, E. G.
Skeffington, A. M. Thornton, E. Winterbottom, Richard (Brightside)
Slater, Mrs. H. (Stoke-on-Trent) Turner-Samuels, M. Woodburn, Rt. Hon. A.
Slater, J. (Durham, Sedgfield) Ungoed-Thomas, Sir Lynn Wyatt, W. L.
Smith, Ellis (Stoke, S.) Usborne, H. C. Yates, V. F.
Smith, Norman (Nottingham, S.) Viant, S. P. Younger, Rt. Hon. K.
Snow, J. W. Wade, D. W.
Sorensen, R. W. Warbey, W. N. TELLERS FOR THE NOES:
Soskice, Rt. Hon. Sir Frank Weitzman, D Mr. Wallace and Mr. Wilkins.
Mr. Maudling

I beg to move, in page 9, line 39, at the end, to insert: ;and (c) paragraph (b) of subsection (1) of Section two hundred and seventy-eight of that Act (by virtue of which the expenditure treated as incurred on a building or structure does not include expenditure on preparing, cutting, tunnelling or levelling land) shall not apply, but any investment allowance shall be disregarded for the purposes of subsection (3) of that section. The purpose of this Amendment is to make some extension in the scope of the investment allowance by bringing within the scope of the allowance expenditure on cutting, tunnelling and generally preparing land for industrial structures. Expenditure of this kind does not at present rank for ordinary depreciation allowance and it does not therefore at present, in the Bill as drafted, rank for the new investment allowance.

The industries concerned put forward representations to the first Millard Tucker Committee on Taxation and Profits and to the Royal Commission on Taxation to the effect that this expenditure should be entitled to rank for annual allowance and that question is still before the Royal Commission. It seemed to my right hon. Friend the Chancellor that the fact that the question of an annual allowance was still being considered by the Royal Commission was no reason why he should not take action to include this expenditure within the scope of the investment allowance because the arguments are different.

The argument in the case of the annual allowance is that land that has been cut or tunnelled does not depreciate. The purpose of the investment allowance is to encourage industrial investment and it seems quite clear that industrial expendi- ture of this kind, particularly in the work of constructing a new dry dock, is the sort of expenditure which this Bill and the new investment allowance were designed to cover.

Therefore, my right hon. Friend put forward this Amendment to bring this expenditure within the scope of the investment allowance. The Amendment will cover excavation costs of new dry docks, water works, railway tunnels and so forth and will cover the purposes in the minds of my hon. Friends the Members for Langstone (Mr. Stevens) and Altrincham and Sale (Mr. Erroll), both of whom put forward Amendments to achieve this, or a slightly more limited, purpose.

I should perhaps say that since the Finance Bill was introduced the Financial Secretary has received representations from the Dry Dock Owners and Repairers Association and he is grateful for their information and for the clear and thoughtful way in which they have put forward the case for this investment allowance. Without doubt it will be of value to this group of industries and I am certain that it will be acceptable to the Committee, because it is entirely within the general purposes of the investment allowance—namely, to stimulate valuable and useful investment in productive industry in this country.

Mr. A. Blenkinsop (Newcastle-upon-Tyne, East)

I wish to congratulate the Minister on introducing this very valuable Amendment. Certainly in constituencies concerned with dry dock preparation it can be of some value. This matter has been raised on many occasions by hon. Members representing shipbuilding areas, and I hope that this Amendment will be of real value to their areas. I know that on Tyneside there are several shipyards which have been considering dry-dock developments. Whether this proposal will be fully satisfactory to them or not I cannot say, but I think it will make some contribution towards solving their problems.

The cost of developing a new dry dock, in order to meet the needs of new oil tankers in particular, is very great today. Some years ago the hon. Lady the Member for Tynemouth (Miss Ward)—whom I do not see in her place—raised the question in connection with dry docks at the mouth of the Tyne. She was then referring to oil tankers of a capacity of 30,000 tons, but today the size of oil tankers is steadily increasing and is a great deal more than that. Oil tankers today are over 40,000 tons, and proposals put forward some years ago for development of dry docks now need complete reconsideration. If the proposal of the Government in any way assists shipyards to make necessary alterations, I am sure that it will be gladly received.

Mr. Stevens

On behalf of my colleagues and myself, I want to thank my hon. Friend and my right hon. Friend for making this concession. I am also specially charged to say thank you on behalf of my hon. Friend the Member for Tynemouth (Miss Ward), who cannot be with us this afternoon, but who has campaigned for an allowance of this kind for many years. I am very glad that her efforts have now been crowned with success.

My hon. Friend the Economic Secretary said that cut land does not depreciate, but, as the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) indicated, it may nonetheless lose in value by reason of the change in shape of the thing which has to use that cut land, and this investment allowance will give some assistance in the matter. I very much hope that the Royal Commission will study this debate and the attitude of mind of the Chancellor in making this concession so that it may learn of our views in regard to dry docks, water undertakings and so forth.

Mr. Glenvil Hall (Colne Valley)

As the Committee will have realised from what my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) said, we approve of this Amendment. It fills a gap. The only query which arises is that which was raised by my hon. Friend—whether, in fact, it goes all the way to assist the undertakings which were referred to by the Economic Secretary. I take it that there were consultations before this Amendment was put down, and that the Government are satisfied that it would achieve the purpose for which it is being made. If we could have that assurance, I think we could pass on to the other Amendments. which are on the Order Paper.

I should like to congratulate the Government on achieving, for the first time today, something that is really valuable. They have had a very poor time up to now on this Clause. Here they are doing something of which I think all parts of the Committee approve. I congratulate them on having put down the Amendment. We should like to be assured by the Economic Secretary, if he can do so, that it really achieves in full the purpose for which it has been tabled.

Mr. Maudling

I gladly give the assurance that, to the best of my understanding, and I understand that everyone else who has studied it agrees, the Amendment will assure that those forms of capital expenditure will receive investment allowances. The question of annual allowances would be outside the scope of the Clause, and will no doubt be considered as soon as we have received the report of the Royal Commission.

Amendment agreed to.

The Temporary Chairman (Mr. George Thomas)

The next Amendment to be called is that in the name of the hon. Member for Edmonton (Mr. Albu), in page 9, line 40, and I think it is agreeable that the following Amendments on that page should be considered with it.

Mr. Austen Albu (Edmonton)

I beg to move, in page 9, line 40, after "one-fifth," to insert: or, in the case of machinery or plant intended for use in the manufacture of machine tools, one-quarter. If it is for the convenience of the Committee, we might perhaps discuss at the same time the remaining Amendments on that page of the Order Paper: In page 9, line 40, after "one-fifth," insert: or, in the case of machinery or plant intended for use in the manufacture of scientific, surgical and photographic instruments, one-quarter. In line 40, after "one-fifth," insert: or, in the case of machinery or plant intended for use in any process certified by the Board of Trade as likely to reduce the need for an imported raw material, one-quarter. In line 40, after "one-fifth," insert: or, in the case of machinery or plant intended for use in a person's trade in which not less than three-quarters of the total sales over the previous three years has been exported, one-quarter. In line 40, after "one-fifth," insert: or, in the case of machinery or plant intended for use in the manufacture of ships and marine engines, one-quarter. I understand that the Amendment on the next page in the name of my hon. and learned Friend the Member for Kettering (Mr. Mitchison), in page 10, line 30, at the end, to insert: Provided also that if any expenditure on the provisions of new machinery or plant is certified by the Treasury under the provisions of the Schedule (Investment allowances on certain machinery and plant) to this Act to be in the national interest, the investment allowance made under this subsection shall be equal to one-fourth instead of to one-fifth of that expenditure.

is also to be discussed at the same time.

It might seem a little confusing that we are discussing, as we did on the previous series of Amendments put down by Members on this side of the Committee, such a large number of Amendments together, but there is method in the apparent madness. All these Amendments deal with a particular point of view already expressed on this side of the Committee during the discussions on the Budget and on the Second Reading of the Finance Bill.

It has already been indicated in those debates that on this side of the Committee there is general support for the idea of investment allowance, whatever we may feel about the reason that have led to its need. The need for such an allowance raises some very interesting questions about the way in which we are to get the required expansion and change of direction in our industry. Neverthe- less, we agree that in the present circumstances investment allowances should be supported.

As was indicated by several of my hon. and right hon. Friends during those debates, we feel that it would have been far better to have made the allowances more selective. This will be no new point of view to the Committee. We had a somewhat similar series of debates last year when the Government reintroduced the initial allowance, when we thought there would have been some advantage in making the allowance more selective. The whole of this series of Amendments is directed towards giving the Government the power to select particular industries for particular reasons for the encouragement of investment.

7.15 p.m.

It would have been better and more desirable had we been able to recommend that some industries be omitted and that others receive the investment allowance, but that would not be within the rules of order. What we have done instead is to recommend some increase in the investment allowance for particular industries, or under particular conditions, so as to achieve something to the same effect.

There are some economists who argue that at the present time any investment is good investment and that all investment should be encouraged, wherever it takes place. I am not one of those who hold that point of view. The economy, as the Chancellor of the Exchequer yesterday emphasised several times, is fully employed; he thinks that there is some spare capacity in some industries, but that there is not, on the whole, a great deal. It may well be that a scheme of investment allowances which is all embracing, not selective in any way, may mean that the amount available for investment and the initiative for investment will be directed into channels which are not the most suitable for the economy.

I believe that we are still in a position in which it is necessary to have a selective expansion of the economy, that we cannot afford to give up the policies adopted through the post-war years by my right hon. Friends, when we who are now on this side of the Committee were in office, of expanding the economy in particular directions, expanding particular industries, and paying particular attention to the problems of our balance of payments and, therefore, of our exports and imports.

The Government have recently been making rather sweeping claims that they are in some way responsible for the present relatively satisfactory position in which we find ourselves, particularly, of course, in regard to that ever present sword of Damocles, the balance of payments problem. It is true that in the last 12 months we have been in a relatively satisfactory position. It would be out of order for me to discuss all the reasons why we are in that position.

It is in order, however, when we are discussing the question of investment and selective allowances for investment, to draw attention to the fact that if we are in a satisfactory position today it must be very largely due to the policy of the Labour Government during the post-war years of directing investment, by all sorts of means, into channels which would expand our exports and save imports. This was done in a number of ways by a number of controls, some of which were inherited from the war and some of which were instituted by my right hon. Friends.

Since that time a large number of those controls have been removed, and if the Committee agrees with the arguments I am putting forward, that it is still necessary to have selective expansion of industry, that we want some industries to expand more than others, it follows that we must find other means of getting that selective expansion. Many of the controls no longer exist. Therefore, it is even more important, if by the incentive method of remission of taxation—it is freely admitted that is what investment allowances are—we are to get the expansion we require, this method must be a selective one. There can be no doubt that the methods employed by the Labour Government after the war were very successful, and that they have resulted in what I am interested to see is now described as a new British industrial revolution.

I am particularly interested in this phrase, because I almost invented it when I was lecturing in the United States last year for British Information Services. As the Government paid my expenses on that occasion, I cannot altogether blame them for having pinched the idea and now claiming that they are not only responsible for the phrase but for the actual revolution itself. So much so, that I see that one of the American newspapers, I think "Newsweek." has also taken up the same idea.

I notice what the Government are doing now in the Board of Trade Journal. In passing, however, I must again refer to the fact that whenever in our debates in this Committee we have important discussions affecting industry and trade, there is never a representative of the Board of Trade present. This has happened time after time. It has happened on every Finance Bill since the Government have been in office while we have discussed items which are not merely matters of taxation. The Economic Secretary will agree that this is not a taxation question, but is a question of investment incentives. It is one in which, I should have thought, the Board of Trade would have been particularly interested, but no Member of the Department is here.

I was interested to see that even in the very small period during which some concession was made to the shipbuilding industry, the Civil Lord of the Admiralty was present, which shows that he, at any rate, understood what was being discussed. It is extraordinary that there are at present in the Board of Trade Ministers who neither are interested nor apparently understand what is being done by the Government in this field.

To return to what I was saying about what I have described as the new British industrial revolution, the Board of Trade Journal has now caught up with the idea and on 1st May published an interesting article. Under the title of, "The Growth of New Export Industries in the United Kingdom" it claimed that substantial changes had been taking place in the nature of our production and exports.

The Board of Trade Journal published some very interesting figures. It divided these industries into those which were "new exports," those which were "virtually new exports" and those which were "greatly expanded exports." The "new exports" were mainly in the fields of electrical equipment and apparatus, and included also certain types of engineering products, chemicals and, of course. the new synthetic fibres. "Greatly expanded exports" covered things like domestic electrical refrigerators, agricultural tractors, accounting machinery, excavating and earth-moving machinery, and so on, and, of course, plastic products and, very important indeed, refined petroleum. The "virtually new exports" were mainly engineering products of a fairly wide variety.

The figures are very interesting because they show that as a proportion of all United Kingdom exports, the total of these categories now amounts to about 11 per cent. This is satisfactory as far as it goes, but most of us feel that it has not gone nearly far enough.

If we have reached a relatively satisfactory position, it must be because, first, we have reduced our need for imports by, for instance, very greatly expanding the refining of petroleum in this country. Investment in petroleum refining was a part of the policy of the Labour Government. We have greatly expanded our agricultural production, and we have produced at home other materials which would otherwise have to be imported, in some cases not entirely doing away with exports, but reducing the need for them very greatly, by, for instance, increasing the production of rayon and other regenerative or synthetic fibres, which use much less imported raw material than ordinary natural fibres.

In that way we have reduced our need for exports. At the same time, as the figures show, we have very greatly expanded investment in, and the production of, a whole range of new industries, particularly those which have a high scientific content or a high content of technological knowledge and skill, the combined results of which are not only good exports, but exports which have a relatively low import content and have a high conversion ratio. These are extremely valuable.

The question that the Committee has to ask itself is whether it is still necessary to continue selective measures of this sort or whether it is now necessary only to have a general expansion of investment. Before that question can be answered, we have to look ahead and estimate what is likely to happen in the future—and in the not so far distant future either. I cannot believe that we have reached a sort of plateau in which our balance of payments is relatively safe, that our terms of trade are now relatively constant, that our markets abroad are equally constant or capable of expansion indefinitely, and that each of these things can continue without any one of them changing and so affecting the others.

My own view is that it is more likely that in the next few years we shall find that the terms of trade, for instance, will turn relatively against us compared with the immediate present, and that our possibilities of exports will become more difficult as Germany begins to expand its industrial production and to export at something like its pre-war level. After all, Germany's exports are very much lower than our own. The United States now has a higher proportion of the world's exports than ever before, and there is no reason to think that they will go down. No doubt, if the Government pursue their policy of convertibility, we shall find even greater difficulties for our export trade in the future.

Therefore, it would be very unwise indeed to assume that we will remain as we are at present. If any of these things that I have suggested takes place, or if the Government's policies of freeing trade are continued, it will be more necessary than ever to ensure that our industries are in a position to compete not only by price, but by the nature of the products which they are able to sell. The type of products which the world is demanding and which we will be able to sell abroad is changing rapidly.

Having attacked the Board of Trade, I was interested to see that a short time ago, and once or twice since, the Minister of State, Board of Trade, has drawn attention to the changing nature of our export markets and has pointed out that we cannot in the future rely on our traditional exports but must embark on new types of export products. We have, therefore, still to use methods which pursue a policy of saving imports and expanding exports.

I am supported in my arguments by the most recent issue of the Bulletin for Industry, published by the Treasury, which in a rather cautious and slightly pessimistic article entitled "More and Freer Imports," having pointed out how the Government have removed controls and freed imports, goes on to issue what looked to me like very serious warnings.

This Treasury Bulletin points out that A one point rise in the index of production, spread evenly, might normally, and at present prices, require a rise of £15 to £;20 million in imported materials. Referring to the fact that the United Kingdom was able to increase the volume of its imports without any large reduction in its balance of payments surplus because import prices were falling steadily, the Bulletin says: It seems unlikely that this fall will go on much longer; the index of wholesale prices of basic materials has stopped falling, and indeed rose about 2½ per cent. between February and April; the import prices index often follows a month or so later. It is obvious that the Treasury, whatever its representatives say in public and political speeches, is still anxious about the situation of our balance of payments.

The volume of our imports, the Bulletin points out, is almost back to its 1951 peak and is still rising. If the terms of trade had been anything like what they were when my right hon. Friends were last in office, we should be in a very unfortunate position indeed; but even if the prices of our imports rise to some extent, if that is added to the rise in the volume of imports we may again be in a difficult position.

7.30 p.m.

This is very likely because, as the Chancellor has pointed out, it looks as if the American recession may be passing and that that their own production and consumption may be rising, and, therefore, the prices of commodities will rise as well. I believe that it is still necessary to encourage import saving and export industries. This is still a paramount need of our economy and any incentives given by any means whatever should be directed to this objective.

Our Amendments are rather similar to those we put down last year. They are of three types. Some refer to certain industries which are examples of the type of industries which we think are most suitable for expansion, especially for the export markets or for import saving. To some extent they follow the principles which seem already to have been accepted by the Government as, for instance, represented by the speech made some time ago by the Minister of State. Board of Trade.

Another group specifically refer to import saving—plant intended for processes which will save imports—or to firms which have been expanding their exports. The third type of Amendment, such as that in the name of my hon. and learned Friend the Member for Kettering (Mr. Mitchison), gives the Treasury power to vary the investment allowance in the national interest, as set out in the Schedule headed "Investment allowances on certain machinery and plant." That Schedule sets out the type of conditions which are also laid down by the Capital Issues Committee.

It is generally agreed that we need a considerable expansion of the manufacture of machine tools in Great Britain. The industry has been severely criticised in recent years both by the Select Committee on Estimates and by British productivity teams. This is an appropriate industry to assist. The market for its products must continue to expand. It is an industry which requires a high degree of skill, scientific research and technical development. The same applies to scientific instruments, the manufacture of which has been developed considerably since the war. There, again, there is room for further expansion.

Several of my hon. Friends are much better qualified to speak about machinery and plant for use in shipbuilding. There is a good case for special incentive. Methods of building ships have changed considerably in the last few years. We frequently hear of the difficulties of British shipbuilders because of costs compared with those in Continental yards. No doubt one of the most useful methods of reducing costs is greatly to expand the new system of building which some of the most progressive firms have employed.

A couple of years ago I went back to the firm with which I served my time as an apprentice in Newcastle, and I was amazed at the changes which had taken place in their shipyard. They employ a new method of prefabricating under cover which requires extensive new plant and machinery but which, if adopted universally in British shipbuilding, would undoubtedly bring down costs. That is one of the reasons why the industry has been included.

I hope that the Economic Secretary will say whether he still considers that it is necessary to have an expansion of certain industries and that we should both save imports and expand exports. If the Government intend to do this by a method of selective allowances and if they are giving up all types of control, how on earth are we to achieve our objective? How can we ensure that the investment which takes place does not go into channels which will not assist in our future balance of payments problems?

I do not know whether the Economic Secretary takes a complacent attitude. In the last few months the Government have been extremely complacent. For political reasons they can claim that we are now in a favourable balance of payments position. They do not have to argue the reason why or to talk of what position we may be in in a year or two. Anybody who looks at the possible changes in the world economy over the next few years must be anxious about the position of this country unless we are able to take very much further the new industrial revolution which has taken place in Great Britain since the end of the war. We have to take it much further and much faster. That process can be helped considerably by a method of selective investment allowances, though I believe that many other actions will also be required.

Mr. Aubrey Jones (Birmingham, Hall Green)

The hon. Member for Edmonton (Mr. Albu) has extolled the principle of selectivity in the field of direct taxation. That is a principle which meets with his favour but it arouses certain misgivings. I thought it significant that the hon. Gentleman was concerned entirely with economic considerations. He talked of nothing else. I should not deny that certain economic gains may well follow from the application of a principle of selectivity, but I suggest that the short-term gains may well be offset by disadvantages of an administrative order and, even more so, of a moral order.

The Amendment raises far wider issues than the hon. Gentleman recognises. I acknowledge that the Clause itself enshrines the principle of selectivity. It distinguishes between productive and non-productive investment. We find exactly the same distinction later on in Clause 25. I do not think that there is any difference of principle in the Clause and the Amendment but I suggest that there is a very important difference of degree.

The doctrine of non-selectivity, non-discrimination, in direct taxation is commonly associated with the Inland Revenue. That in itself is highly significant, for the Board of Inland Revenue, whatever we may think of it, is the body with direct contact with the taxpayer and from its nature it is driven to protect itself against pressures to which it is ordinarily subject. The doctrine of nondiscrimination is the product of administrative experience, whereas the doctrine of selectivity, of discrimination, is not. The great defect of the doctrine advanced by the hon. Gentleman is that it is really impossible to discriminate on the basis of any principle of justice or apparent justice. That is a very great difficulty indeed.

There are only two possible ways in which we can discriminate. The first is the method enshrined in the Clause. We pick out broad categories—productive investment and non-productive investment. Inevitably we fall into the difficulty that within the privileged category there must be undeserving cases and within the excluded category there must be deserving cases. There must be goats in the one and sheep in the other. We cannot help it. Indeed, I am not at all sure whether the distinction between productive investment and non-productive investment is a valid one. After all, the purpose of industry is not to produce. The purpose of industry is to sell; and it may well be that investment directed to selling might be more fruitful—the word used by the hon. Member for Edmonton —to the national economy than investment directed to producing.

I will give a hypothetical example. My hon. Friend the Member for Handsworth (Sir E. Boyle) and I sit for different corners of a city which may be regarded as a centre of the engineering exporting area of this country. Once a year potential foreign purchasers come to the city to try to buy the engineering goods of the Midlands, but, alas, this great and distinguished city is almost destitute of hotels, and when the potential foreign purchasers come to the B.I.F. they view the wares of the Midland area in a very chilled spirit. It might well be that the national economy would benefit more by investment in a first-class hotel in Birmingham than by investment in some piece of manufacturing industry.

Mr. Frederick Mulley (Sheffield, Park)

Does not the hon. Gentleman therefore think that selective allowances for hotels are more likely to produce a hotel than simply to place hotels, as they are at the moment, on the same footing as anything else?

Mr. Jones

That is precisely the point I am coming to. The hon. Member is advancing to me a method of overcoming the difficulties which I suggest lie in the Clause. I suggest to him, in turn, that the method which he recommends leads to still greater difficulties.

The only method of overcoming the difficulty which I have described is to do what the hon. Member for Edmonton has done in his Amendment—to particularise, to select detailed branches from the whole economy and to try to benefit these as against others. I suggest that by so doing the hon. Member does violence to the whole intricacy and complexity of the economic pattern.

Mr. Frederick Wiley (Sunderland, North)

Is the hon. Member prepared to throw overboard the whole of the Development Area policy, which has been supported by both sides of the Committee and which has been based upon the future estimates for the basic industries?

Mr. Jones

To my recollection—and I am open to correction—the Development Area policy has not been based on the principle of selectivity in direct taxation. This is a new principle which is enshrined in the Finance Bill. It is an innovation.

I suggest that the Amendment of the hon. Member for Edmonton would do violence to the complexity of the economic pattern. I do not think it is fanciful to liken the national economy to a web. Within the area of that web it is impossible to pick out one strand and say, "This strand is more important than another." I will give an example. On the Order Paper we have an Amendment relating to exports whereby an investment allowance would be given to exporting industries which would not be given to others. What about the indus- tries which themselves do not export but which are great indirect exporters? The motor-car industry is an exporting industry. The industries providing the paints and the alloys which go to making the motor car, and are a very important part of it, may not be exporting industries. The steel industry is not an exporter but its steel goes into the motor cars. Yet the steel industry would not benefit.

I do not deny that in a very broad way we can say that A is more important than B. There are certain extremes. I suggest that in between we cannot say with any justice or any semblance of justice that this is more important than that. The more we attempt to particularise in the way the hon. Member for Edmonton has suggested, the more grievance and resentment we shall arouse among the generality of taxpayers.

The right hon. Member for Bishop Auckland (Mr. Dalton), who has left the Chamber, yesterday discussed the general rate of taxation and suggested that the general burden of taxation was not in itself an evil. The contention of this side of the Committe was that it is an evil. Regardless of whether or not the general burden of taxation is an evil, what surely is an undisputed and unmitigated evil is the arbitrariness of the distribution of the tax burden. I suggest that arbitrariness is introduced into the Clause. It is introduced by Clause 25 and it is introduced in an even greater degree by the Amendment. I put it to the Committee that whatever may be the short-term economic gains, in the long run the effect of this arbitrariness must be to undermine the whole moral basis of our taxation system.

Mr. Albu

Surely the hon. Member will agree that the principle of what he calls "arbitrariness," the distinction between types of taxpayer, is very old. There has always been a difference between the basis of agricultural taxation and the basis of industrial taxation. Surely he would consider that the derating of industry was a selective, almost an arbitrary, method as between ratepayers.

Mr. Jones

I would not defend the derating of industry, which I think was a bad thing. I claim no knowledge of agriculture, but I believe there is a difference in the method of valuing in that case. I believe that applies, in particular, to the Estate Duty. In the Bill we carry the principle much further. The hon. Member's Amendment would carry it further still. In its extreme form I suggest that it runs straight up against the difficulties to which I have endeavoured to draw his attention.

7.45 p.m.

Mr. Willey

The hon. Member for Hall Green (Mr. Aubrey Jones) has expressed his views very effectively, but I think they are avid and old-fashioned. What I am about to say will be most offensive to him, for I intend to plead for preferential treatment for shipbuilders.

I gather, Mr. Thomas, that you do not wish me to move my Amendment but to speak to it—the Amendment dealing with the manufacture of ships and marine engines. I am very disappointed that this Amendment has not attracted the support of the hon. Member for Sunderland, South (Mr. P. Williams). I do not wish to traverse the general grounds, because I am quite sure that the Economic Secretary and the Committee have read the previous speeches which I have made to this Parliament on this theme. May I pay a tribute to the Economic Secretary, who has been sympathetic towards this industry? So has the Chancellor, as we witnessed this afternoon and I concede at once that the general concession which the Chancellor is making is particularly advantageous to shipping and, therefore, to the shipbuilding industry, but notwithstanding that, I am pleading for exceptional and preferential treatment.

The case was deployed when we last debated shipbuilding on 9th March. I then said that shipbuilding, and if necessary shipping, demands preferential treatment from the Government. On that occasion the hon. Member for Sunderland, South said there was no question of any preferential treatment. I appreciate the reasons which prevent him from attending this afternoon, but it is a pity that he cannot say why he holds that view. I think it is a duty which he owes to his constituents to say why in his opinion shipbuilding does not merit preferential treatment.

Strictly, this is not a party issue. I remember that during the time of the last Labour Government this issue, although not quite in the same form, was debated, and I then voted against the proposal made by the Opposition because I did not think it was opportune at that time.

Squadron Leader A. E. Cooper (Ilford, South)

Would it not be more correct to say that the hon. Member voted against it because the Government Whips insisted that he should?

Mr. Wiley

That would be a most inadequate reason for voting against a proposal directly affecting the interests of my constituents. I will explain in a moment why I thought that my decision was right then and why I think the proposal which we now make is right on this occasion.

To refer briefly to that debate, I remember that Sir Arthur Salter, as he was then, speaking from the Opposition Front Bench—and this will particularly offend the hon. Member for Hall Green—said that a special case could be made out for special consideration for shipbuilding. He said that this was not a political issue which divided us on party grounds.

I would briefly remind the Committee of the argument put forward by Members at present on the Government benches when they were on this side of the Committee. Sir Arthur Salter argued that there was insufficient ordinary tramp shipping. That argument still obtains. The yards which would construct the tramp shipping are the yards which would get the benefit of the concession for which we are now asking. The Conservative Opposition then argued that preferential treatment should be given to shipbuilding because of the demand for the modernisation and re-equipment of the industry and because this was essentially in the defence interests of the country. In fact, it was interesting to note that the present Under-Secretary of State for War put forward this view. We could appreciate it coming from him because he is a shipbuilder, but the present Secretary of State for War also intervened in the debate and put forward the same argument.

A third argument that was advanced then was that ships of all nations compete in the same freight market—I am traversing these grounds briefly—and it is well known that, because of this, we are at a disadvantage in view of the preferential treatment given to shipbuilding in competing countries. That factor still obtains. A further point was made by Mr. Gage, whom we all regret is no longer a Member of this House, who, speaking for the Belfast yards, said that during the last six or seven years there. had been a bigger revolution in the manufacture of ships than ever before in the history of shipping, and this was making peculiarly heavy demands on the yards because they had to match their present productive method with the new designs of shipping. Finally, the Secretary of State for the Colonies wound up the debate by saying that shipping was perhaps the most desirable of all invisible exports and that, therefore, preferential treatment should be granted to shipping and shipbuilding.

Therefore, I think that on the general case as made out the matter would be sympathetically considered whichever party occupies office, and has been to a degree sympathetically considered by the present Government. The issue before us really is not whether there should be preferential treatment for shipbuilding but whether, in view of all the competing claims upon the Chancellor and in view of the general circumstances obtaining, he ought at this time to make a concession to this particular industry.

In the interval since that debate there was a boom in freight rates, an unprecedented order book and great profitability in both the shipping and shipbuilding industries. We raise this matter today because these factors no longer obtain. I say at once that I am not talking about production. Production at the moment is most satisfactory and, as I am trying to get the support of the Economic Secretary, let me say that improved steel supplies have helped and present output is good.

These are the factors that have changed. There has been a drastic fall in the profitability of shipping. This is worldwide. I am talking of the international freight market, and it affects the whole outlook of the world's shipping. I would again urge—and this is another reason I am disappointed that the hon. Member for Sunderland, South is not here to argue his case—that we should endeavour to protect this vital national industry against the vagaries of world trade. We cannot complacently say that it must inevitably suffer in consequence.

To return to the particular point about tramp shipping, I would say that the argument remains. We have got to do something about tramp tonnage, and I hope that the Economic Secretary, if he is not persuaded by all I say will at any rate study this problem. The yards producing the tramp tonnage would benefit from the concession which we are suggesting. Freight rates, which are the all-important factor affecting shipping and consequently shipbuilding, are now half the rates of January, 1952, and in fact the present rates are 10 points less than they were 12 months ago.

We all hoped that there would be an improvement. There has been a very slight improvement, but the position seems to be that there is no early prospect of any substantial recovery. In this context, the question of building costs is important, and anything that can be done to help to reduce costs would be of vital importance to the industry today, in view of the collapse in world freight rates.

To turn to the question of strategic and national considerations, I think it will be agreed that these factors have been accentuated during the last few years. They have been accentuated in a manner which affects the industry and affects particularly the point which I am putting to the Committee by way of this Amendment. Because the world position has deteriorated, the countries which were already aiding their own shipbuilding in their national interests have gone further in this respect. We only have to consider Sweden, France, Italy, Japan and Western Germany to see that these countries are accepting the view that the shipbuilding of their own countries demands preferential treatment, in many cases by financial expedients, and we have to remember that our shipping is competing against shipping and shipbuilding which are so aided.

I remember mentioning in our last debate on this subject the fact that one of the main advantages we had over the West German yards was the fact that our steel was £10 a ton cheaper. But I notice now that there is some prospect of the Germans subsidising steel to offset that advantage which our yards have enjoyed. Therefore, the factor of a much more competitive market has become accentuated, and I think that there is a burden on us nationally to recognise our responsibility to this vital industry.

The third change which has occurred—I will not elaborate it because it is conceded in all quarters of the Committee—is that there is a drastic alteration in the order books. Whereas in 1951 4 million gross tons were put on the books, in 1953 only half a million tons were put on the books, and against that we have to offset a quarter of a million tons by way of cancellation. I asked a Question last month about the returns of the first quarter. In the first quarter of this year the net amount of tonnage put on the order books was less than 6,000 tons.

I know that this is a point which I put with some circumspection. but it is against this declining order book that our increase in production which we would welcome aggravates the problem. Contemporaneously with this background we have to recognise that our share of world output has fallen, and again not only have the competing yards received direct or indirect assistance from the countries in which they are situated, but in many of these countries the yards are fortunate in having new capacity.

8.0 p.m.

This applies particularly to what is rapidly becoming our main competitor—Western Germany. I remember when in Hamburg seeing the shipyards which had been devastated—the Bloehm and Voss yards and others—which now possess a great advantage arising from new methods of construction, new designs and having newly laid out yards. After all, for a shipbuilding industry, which is a large prefabricated assembling industry, to have an entirely new production line is a tremendous advantage, and that is what these German yards enjoy.

It is unfortunate for us, because we have to think of our yards on the Clyde or the Wear, where we build ships on the very narrow river with its many bends and turns, and where the capital investment required in order to match our production against that of the Western German yards and others is a very serious toll on the industry. I have mentioned our narrow winding rivers, but we also have to recognise the factor of new design, and particularly the 45,000 tonners which can be loaded and unloaded in nine hours. If we have to fight for our existence in this highly competitive market, we shall have to have as much capital investment as is possible in the shipyards of this country.

There is one final consideration which affects the Amendment to which I am speaking. I notice that the Admiralty have made their estimate of the capacity of the industry, and anyone who has had anything to do with the industry must realise that there will eventually be problems of redundancy. In the national interest, we do not want to return to the National Shipbuilders' Security, Ltd., arrangement, but we do want—and this is the difficult problem—modernised redundant capacity. If that capacity is there, it will be a vital element of security in the national interest, but it must be first-class shipbuilding capacity.

At a time when demand and the order books are declining, we must encourage shipyards to modernise and expand their capacity, and I will concede at once what a difficult job it is to provide alternative work for shipbuilders. It is a poor return on the capital which has to be invested in the industry. Certainly, a case is made out for preferential treatment for the shipbuilding industry, though I would concede that this industry has reinvested a great deal. In the case of my own area of the Wear, Doxford's and Thompson's, for example, have carried out considerable improvements so that they can do their best to match foreign competition. We recognise this, but we have to regard this matter in the light of our own Development Area approach. This is an essential basic industry which exists in the Development Areas, and we now say that the case is made out for preferential treatment of this industry.

I would warn the Economic Secretary at once that this is only a beginning. This, in itself, will not be enough to meet the basic difficulties of the industry, but at any rate it will be an earnest of the Government's recognition of the exceptional position of this vital national industry, and I hope that the hon. Gentleman will at least give us this consolation—that, whether he accepts the Amendment or not, he will, between now and Report stage, consider the claims of this vital national industry, which in the next few years will have to face very real difficulties, which we cannot afford to be allowed to reflect upon the capacity of the industry. I hope he will give serious consideration to this matter. While I fully appreciate the sympathetic view and action which he has taken in regard to this industry in the past, I hope he will realise that that is not enough, and that we are entitled to expect him to do more.

Squadron Leader Cooper

I disagree to a certain extent with my hon. Friend the Member for Hall Green (Mr. Aubrey Jones), and I think that we have to consider the question of a distinction between the various branches of our industrial life where matters of taxation are concerned. I am not too familiar with American taxation practice as far as industry is concerned, but I think it is a fact that there is a system whereby plant and machinery can be written off in a very short time—one, two, or three years from the date of installation—and, of course, the advantages which industry receives as a result of such a concession are enormous.

If we asked the average businessman in this country how he thought the Government could help him most, I think we should find that he would say that accelerated depreciation was the most satisfactory way. He would also say that the taxation of both distributed and un distributed profits was far too high at present. Dividends are very low in relation to the profitability of industry, and, when depreciation allowance is taken away, the amount of money which is left to industry with which to re-equip itself is far too small.

I think the difficulty about this Amendment is that it specifically lays down certain industries which are to receive benefit. Immediately we make such distinctions, we exclude all those industries which are left outside the concession, whereas what we should do is to accept the principle of accelerated depreciation and lay down certain rules which the Treasury would have to observe in dealing with this problem.

For example, if there was a small firm concerned in the manufacture of synthetic bubbles for children, and they were expanding their plant to produce these things, they would get the concession provided in this Clause, but, surely, nobody would accept the view that that particular manufacturer would be making any contribution whatever to the national interest. On the other hand, we may get cases such as those put forward by the hon. Member for Edmonton (Mr. Albu), such as scientific industries or manufacturers of machine tools, which can make an enormous contribution and would receive substantial benefits if depreciation could be cut down to a greater extent than it is now.

I should like the Chancellor to look again at this whole question of depreciation from the point of view of the national interest. How is the nation best served? How can we achieve greater productivity and a higher rate of exports if we differentiate between industry and industry? I would suggest that if we can show that industry could benefit then the case would be made out for many of the Amendments now on the Order Paper.

Mr. Blenkinsop

I rise to put a constituency case, and I make no apology for doing it, because it is a constituency case which is also very much in the general national interest. I wish to support the speech made by my hon. Friend the Member for Sunderland, North (Mr. Willey) and others of my hon. Friends who have spoken to the Amendment which refers to shipbuilding and the machinery required in the shipbuilding industry. My hon. Friend the Member for Sunderland, North has gone into some detail in explaining the particular reason why we on this side of the Committee—and I should have thought hon. Members on the other side as well—wish to give it general support.

Like my hon. Friend, I have been looking at earlier debates on subjects similar to this, and I found that many hon. Members on the other side of the Committee put forward rather similar views. I am sure they sincerely put their strong arguments before the Committee in favour of special treatment for the shipbuilding industry. There was general agreement about the virtues of the shipbuilding industry, which I do not think I need stress here except to point out, once more, that not only is it a question of the building of ships for foreign owners and the immediate return to our export trade, but there is also the matter of the much greater revenue brought into the country by invisible exports because of the returns from our own ships. That is something which hon. Members on both sides of the Committee will view with general agreement.

It has always been the view in the Committee that the shipbuilding industry should be given special consideration in view of the very special contribution which it can make to our prosperity, and it seems only right that on this occasion we should press the Government to go somewhat further than they have already gone. I was interested to hear my hon. Friend the Member for Edmonton (Mr. Albu) referring to the great changes that have taken place in recent years in one shipbuilding yard with which he is familiar as compared with the position he knew some years ago when he himself served an apprenticeship in it.

The particular yard to which he was referring is in my constituency. and over several years big changes have been carried out in it until today it has become a very modern, efficient yard on a prefabricated basis. There are neighbouring yards of equal importance, and in my constituency are two of the largest yards of their kind in the country. One of them, belonging to Swan Hunter, of Tyneside, is at present engaged on a big scheme of conversion costing many millions of pounds. How far that firm will go in a scheme of conversion and modernisation depends a good deal upon the attitude taken by the directors in the future and also upon the treatment that the Government propose to mete out to the industry.

I am glad to say that so far the two firms of which I am thinking particularly have not sat back when faced with smaller order books, as is now general in the shipbuilding industry, but have given an increased spur to their activities. I am afraid, however, that the growing evidence of reduced orders and the grave doubts about freights tends to discourage these firms from the full implementation of their schemes of improvement which, I believe, are all important. The added incentive asked for in this Amendment might very well make all the difference between a firm such as Swan Hunter carrying out its full scheme of conversion and stopping somewhat short of the best.

A problem I referred to a little earlier has been covered to some extent to the Amendment which we had from the Government side of the Committee in relation to dry docks. Part of the shipyard facilities available from the firm I have mentioned includes dry docking, and I mentioned that as one of the problems with which we are faced today in our need for servicing very much larger ships, particularly in the tanker class, than was done a few years ago.

It is extremely important that the yards, whether on Tyneside or elsewhere, should be fully equipped to meet the repairing and the building needs of modern shipowners, and it is important, also, to prevent repairing jobs and new orders going abroad to foreign yards, as has been the case in recent years with large tankers, which mean that the value of these orders is lost to areas like Tyneside which, in spite of the development of industry, still depend to a large extent upon the shipbuilding industry.

8.15 p.m.

It is of national importance that we should encourage every shipbuilding firm to carry out the fullest scheme of remodelling in its yards with the introduction of modern equipment of all kinds which is needed today for efficient work on a pre-fabricated basis. For this reason it seems to me that there is every reason why we should press for the Amendment we have on the Order Paper.

I do not think any of us can be happy about the general order position in the shipbuilding industry. We recognise that the only way to meet that position is to have even more efficiency than we have today. I fully admit that great strides were made during the war and since the war, but I am quite sure that very much more needs to be done. It might very well mean that the slight extra incentive being asked for here would make all the difference between a full job well done and a job only half done.

I would, therefore, urge the Economic Secretary to consider this Amendment with the very greatest sympathy. Even if he is not able to announce that he will accept it now, I hope he will be able to say that he will consider the matter further in the hope of being able to accept it at a later stage. Like others, I am a little disappointed that some of those hon. Members who are particularly concerned with an Amendment such as this are not present. We welcome those who are present, and I am sure on the Treasury Bench we welcome, in particular the right hon. and learned Gentleman the Solicitor-General. We should like to have had a representative of the Admiralty here because it is vitally concerned in this matter, though I welcome the interest it has taken in the past in the subject.

I am sorry that many of those who contributed such valuable speeches in the past on this topic have not found it possible to be present during this debate. I am thinking of the hon. Member for Tynemouth (Miss Ward), who was so vocal on this and, indeed, on other matters. No doubt she may be able to get in fore this debate concludes and make her contribution to it.

In any event, whether hon. Members opposite continue to press this matter as they did in years past or not, I hope it can be accepted that the view which we are putting forward is not necessarily that of one side of the Committee alone, but that we are expressing the views of both sides, because hon. Members on all sides are anxious to do all that they can to improve the prospects of this industry in Tyneside and in other shipbuilding areas.

Mr. Maudling

We are having an extremely interesting debate and if so far the shipbuilding industry has taken a rather large proportion of the time we have devoted to the discussion, that no doubt is nothing more than an echo of the tremendous and traditional significance of that group of industries in our national economy. This is an interesting and clearly a very important and serious topic.

My right hon. Friend, in a speech on the Second Reading of the Bill, said that while the Budget proposals were being drafted he and his colleagues gave considerable thought to the possibility of making these allowances more selective, but that after a very great deal of consideration he came to the conclusion that that was not, in fact, practicable.

The hon. Member for Edmonton (Mr. Albu) went a little wide in dealing with the general features of our economy, though I do not think I dissent from very much that he said both about the importance of our balance of payments position and the fact that, although we have made great improvements in our prospects, we are by no means out of the wood yet. We have at all times to concentrate upon our balance of payments problems, but when the hon. Gentleman comes to the methods of dealing with these problems that is where I part company with him, because here, I think, is a very definite cleavage of opinion between the two sides of the Committee on economic policy. There is a very definite difference between the two sides as to the extent to which the Government should seek to interfere with or to direct the detailed activities of industry.

As I understand it, the hon. Gentleman holds the view that in order to increase our exports and to reduce our imports it is necessary and desirable to have a fairly widespread system of Government control. Indeed, I think he rather regrets that some of the controls which were previously in use have been abandoned by the Government. We have pursued the policy of deliberately getting away from controls and restrictions on exports, imports, production, prices and on all forms of our economic life, because we believe that is the method by which we can best solve the problem which we regard as the most important problem for this country.

I think that some of the things quoted by the hon. Gentleman strengthen our point of view rather than his own. He talked about export flexibility and flexibility in meeting the demands of customers. He is absolutely right in that. We have to meet the requirements of our customers both at home and abroad, and for that we need flexibility and adaptability. The hon. Gentleman quoted examples of industries which had considerably expanded their exports. He spoke of office machinery, plastics and refrigerators, but I am not sure that they are the sort of industries that we would have chosen if five years ago we had decided to give certain industries particular opportunities because they were likely to expand their exports.

It is not possible to predict these things with the certainty which the hon. Gentleman must assume if the argument underlying this Amendment is valid. The Government consider that it is most important to bear in mind the great disadvantages of introducing too much selectivity, too many distinctions, into our tax system. My hon. Friend the Member for Hall Green (Mr. Aubrey Jones) referred to some of them with great force. Our tax system, with its complications and its weight upon the individual, depends to a great extent for efficiency upon the sense of justice and fair play as between taxpayer and taxpayer which exists in this country to an extent which I do not think exists elsewhere. If we make it too selective, then we are doing something to undermine the fairness of the system.

The more we complicate the tax system, the more difficulties we are creating both for administration and for the taxpayer. Surely the more we introduce artificial incentives or motives of this kind into the economy, the more we distort its natural pattern. That is the policy which the right hon. Member for Bishop Auckland (Mr. Dalton) and his colleagues pursued until 1950—

Mr. Hugh Dalton (Bishop Auckland)

Very successfully.

Mr. Maudling

—and that is why we do not want to do it. One of the basic differences between the two sides of the Committee is really the extent to which we think the Government should interfere in the detailed working of industry.

Coming to what is proposed in these Amendments, what, in practice, does it involve to give special incentives to one firm or to one activity which are not given to another? Take, for example, the question of exports, to which the hon. Member for Edmonton referred. The Government have been engaged for some time in trying to get general agreement within Europe to remove special tax incentives to exporters. There has been a race over giving these incentives between the industrial nations of Western Europe, and when my right hon. Friend went to Bonn recently he was able to get the German Government to agree not to renew their special tax incentives to their exporters. To do what the hon. Gentleman suggests in this case would be, in fact, to give a special incentive to our exporters, which is precisely the sort of thing we are trying to get withdrawn throughout Europe, and in which we are succeeding, by general agreement.

Mr. Blenkinsop

Is the hon. Gentleman aware that, in fact, discussions are taking place in Germany about the special concessions mentioned by my hon. Friend the Member for Sunderland, North (Mr. F. Willey) concerning steel prices for shipbuilding in Germany, which seems to be in conflict with what he is now saying?

Mr. Maudling

I will look into that, because it may be contrary to what we have agreed. The last German tax review which was introduced did away with a lot of substantial tax concessions to German shipbuilders and brought a reduction over the range of industry as a whole.

The same point applies to shipping as to exports. The British shipping industry is faced with the many difficulties to which hon. Members opposite have referred. It is faced with discrimination and subsidised activities abroad, and it has been the policy of successive Governments to try to eliminate or to restrict these activities by other countries in subsidising their shipping.

We have to choose between two policies. Are we to enter into a subsidy race, or should we try to stop subsidies elsewhere? Quite seriously, I think that were we to give a special tax incentive of this kind to the shipbuilding industry alone, it would be very difficult effectively to argue against other countries who wished to subsidise their shipping.

Mr. Jay

Am I not right in thinking that on Second Reading the Financial Secretary denied that the investment allowance was a subsidy in any sense? Is the hon. Gentleman now departing from that?

Mr. Maudling

Quite the opposite. While the allowance is given to all productive industries, it cannot be considered a subsidy, but if it is given to exporters then it clearly becomes a subsidy. If it is selective and discriminatory, it helps one person at the expense of another. but, as I say, if it is an allowance given to all generally it cannot be described as a subsidy.

To go further into the question of choosing particular forms of machinery to which to give a higher allowance than to others, how in practice would one effectively discriminate between one industry and another? It is all very well to cite machine tools, shipbuilding. machinery or scientific instruments. What about aircraft, chemicals, plastics and some of the new food processes? What about some of the new textiles? For all these and countless other industries, a very strong case could be made out. They, too, contribute to our export trade and the general well-being of the country.

Are we to distinguish between the type of machinery or the type of firm? If we do it on the basis of machinery, how are we to get over the difficulties when the same machine may be used by one firm for export orders and by another for producing something relatively inessential for the home market? How can we justify giving a special allowance for machine tools and not in respect of power installations? How are we going to distinguish between the industry which produces the finished product, such as the machine tool, and the common service industries which produce steel, coal and other things? I do not see, if we look into it in practice, how we can sensibly try to draw an order of priority as between the different individual industries or the different individual machines used in industry.

8.30 p.m.

It is true that there is already a degree of selection within our tax system. There is between one machine and another a different rate of depreciation, just as there is between buildings and machinery but that is based on the natural life of the asset in each particular case. There is, I agree, a difference in principle between commercial buildings and buildings used in productive industry—a difference to which some of my hon. Friends rather object. But that is quite a different thing from trying to distinguish between the categories within individual industries.

As I have said, before my right hon. Friend took his final decisions on the Budget he considered very carefully this question of introducing further selectivity in the investment allowance. For all these reasons—because of the difficulty in principle of introducing tax discrimination of this kind and because of the difficulty, which we consider unsound in theory, of trying to introduce Government protection and influence very closely into the intimate details of industry—my right hon. Friend did not think that he could adopt it in his Budget; and despite the persuasiveness and confidence with which the case has been argued, the Government do not feel that they can accept this departure from the existing principles of taxation.

Mr. Dalton

I do not want it to be thought that I am the last speaker on this group of Amendments. It may be that others of my hon. Friends may wish to resume the subject, but I think that the remarks of the Economic Secretary are such as to call for an immediate reply from this bench. But before I come to the merits of this matter I should like to touch upon another aspect of selectivity.

We are all delighted to see one of our youngest Privy Councillors present—the Solicitor-General, whose name was linked with that of Mr. Arthur Deakin in the recent Honours List. Earlier today a relatively unfamiliar face was to be detected on the Treasury Bench, and looking up the book of reference containing pictures, we found that it was the present Lord Advocate. While I am glad that we are to be assisted by his potential legal advice, we do miss the Board of Trade.

It has been said before, and I think it proper to say again, that one of these Amendments expressly brings in the Board of Trade and I shall speak about it in a moment in relation to the merits of the case which we are arguing.

As one of these Amendments, in the name of my hon. Friend the Member for Edmonton (Mr. Albu) and others, deals with …the case of machinery or plant intended for use in any process certified by the Board of Trade as likely to reduce the need for an imported raw material. would it not have been both prudent and courteous for a Board of Trade Minister to be here? I think it would.

In the days of the Labour Government we took more care about these things. As I said this afternoon, the Admiralty, with their innate sense of fitness which causes them to outshine many civilian Departments were represented here by the Civil Lord. I formally make complaint on behalf of the Opposition that the Board of Trade are absent. I have a special interest in the Board of Trade. When I was President, either I or one of my assistants were always present on such occasions, and I ask the Economic Secretary to be so kind as to convey the grave disappointment of the Opposition that we have not had the pleasure of seeing the face, or hearing the voice, of any representative of this great Department.

Coming to the subject of these Amendments, I must say that I thought the word "doctrinaire" had been in use for a long time in our debates, and it used to be continually flung at Members of the Labour Party, but it has now returned, like a boomerang, continually to smite the spokesman of the Government. I have seldom heard a more doctrinaire declaration than that which the Economic Secretary made tonight. "Doctrinaire" by persons who use this term in an offensive or perjorative sense is designed to convey the thought that the person speaking is the victim of false general ideas unrelated to actualities, and thus is handicapped in dealing with practical matters. This use of the term completely fits the speech to which we have just listened.

The argument also helped along by the thought, if such a term may be used, that the effect would be to "distort" the national economy. It is this which the Economic Secretary says the Government are unwilling to do. These subsidies—as they now call the investment allowances which we are seeking to make more selective and to grant to shipbuilding and other selected branches of industry—these, as I think, miscalled subsidies are now refused by the Economic Secretary on the ground that the principle embodied in the Amendments of my hon. Friends would distort the national economy.

Such a phrase means nothing. It is meant to create an atmosphere of distaste and opposition, but, literally, it means nothing. What we propose here— I will use not an atmosphere creating word, but a perfectly neutral word—is to influence for the public advantage the pattern of the national economy. We hold the very simple view—and the Economic Secretary has admitted that the balance of payments still preoccupies his mind, as is very natural and right—that to help continually to solve, as we go along, this most grave problem of the balance of payments it is desirable deliberately to influence branches of the national economy, which will assist to increase exports or diminish imports.

That is a very simple thought, and it is upon that simple thought that all these proposals are made by my hon. Friends. I have been profoundly shocked and deeply disappointed at the brusque, inadequate rejection of these proposals by the Treasury spokesman. Of course, the Treasury can make—and I speak here with knowledge gained over some years—an admirable brief, once they can get a glimpse of the Minister's mind. If his mind is so cloudy that it is difficult to get a glimpse—and such cases have been known in the distant past—they still do their best. But in this case I am afraid that they have had a glimpse of the minds of the present occupants of the Treasury Bench which reveals, as I have already indicated —well, I am trying to find words that will not be abusive—a certain indolence, a certain disinclination to effort, a certain lack of energy in confronting these very difficult problems which our country must now solve if it is effectively to survive.

I come back, therefore, to the very simple view—after the speech of the Economic Secretary we shall divide the Committee on this Amendment—that in our present difficult economic situation it is most desirable to do whatever we can—and here through this investment allowance is one way in which we can do something—to stimulate our exports and to save imports into this country.

With regard to the particular case of shipbuilding which has been mentioned I wish to say a further word in support of the proposal made by my hon. Friend the Member for Sunderland, North (Mr. Willey). It was not supported, I regret to say, by the hon. Member for Sunderland, South (Mr. P. Williams), who might have been supposed to take an equal interest in the matter, but who appears to be absent from our debate today. It was, however, supported by my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop). Those hon. Members represent their constituents dutifully, on such occasions. Shipbuilding surely occupies a special position—

Mr. F. A. Burden (Gillingham)


Mr. Dalton

There are many other places which could be mentioned, certainly South Shields—and the great shipbuilding centre of Edinburgh is at any rate well represented.

We hope that he will raise his voice in support of this proposal still further and help this vital industry—and here I am very serious—because it has passed through very dark days in the past. By reason of the fact that this industry makes highly durable goods in the form of ships, it is liable from time to time to excessive fluctuations. It is a natural victim of any trade fluctuation that may be taking place, and it is particularly important, therefore, to safeguard it and look after it. If we do not look after it, we find in the bad years that the skilled personnel will be dispersed from this industry more fatally than from any other. That is just because the goods it makes, the ships that it builds, are of such durability. For these reasons, it is worthy of very special assistance and support.

My hon. Friends have drawn attention to the great advances now being made in design in shipbuilding, in the layout of yards, and so on. I should have thought that there was an overwhelming case on national grounds for special assistance to this industry such as could easily be given in the way suggested in the Amendments that we have been discussing. The shipbuilding industry is to a great extent carried on in what are still development areas, where the general threat of unemployment is more menacing than in the rest of the country; and that is a supplementary reason for giving assistance to it.

In arguing against such assistance, the Economic Secretary, both in this case and in other cases, has said that he hoped—I think I took his words down correctly—that we should succeed in getting rid of the various special advantages, subsidies and the like given in certain foreign countries. The case of Germany has been particularly mentioned—

Mr. Ellis Smith

While we go on subsidising shipping at the expense of the skilled men.

Mr. Dalton

Yes. I am sure that my hon. Friend's views and mine on the subject of Germany are not dissimilar.

There have been comings and goings, and the Chancellor of the Exchequer has lately been in conversation with a doctrinaire called Dr. Erhardt. Is the Economic Secretary quite sure that he has persuaded that doctrinaire to abandon the particular doctrine to which he seems to be very devoted, of fostering by all means German exports and shipbuilding? Are we quite sure that we are right in rejecting the proposal to assist British shipbuilding simply on the ground that we hope that the Germans will abandon the attempt they are making to stimulate their shipbuilding industry by special advantages?

Mr. Maudling

The right hon. Gentleman should look up the very clear statement made by my right hon. Friend the Chancellor of the Exchequer on this subject. It is quite clear. The Germans gave a clear undertaking not to renew their law of special assistance to exports which expires in 1955.

Mr. Dalton

Not in any form?

Mr. Maudling


Mr. Dalton

If it expires in 1955 would it not be reasonable that we should introduce a special allowance up to the end of 1955? How would that be? It appears to me that we are once more being outwitted by foreign Powers with whom we have entered into negotiation. I regret very much the confession that has just been made. We have an undertaking that as from the end of next year certain discriminatory practices will be discontinued, but, meanwhile, they will be continued, and we are rejecting a proposal to do this particular good deed on the ground that we hope that the Germans will desist a year and a half hence from their present practices.

This is a most unsatisfactory arrangement. I am delighted that the Economic Secretary was drawn to his feet in order to expand a little the statement to which he referred. This is not at all a good omen for Her Majesty's Government's negotiations in the financial and economic fields. In fact, I do not accept the view that we can properly describe an extension of the investment allowances as a subsidy in any derogatory sense.

The Economic Secretary said, quite rightly, that if this were given to shipbuilding only, and to no other branch of industry, a case might be made against it, but this group of Amendments does not propose that. We propose that these advantages should be given to a wide range of British industries, all of which have the characteristic either that they stimulate exports or diminish the need for imports.

8.45 p.m.

Therefore, it might well be that, if the principle of these Amendments were accepted, something could be worked out by the time we get to the Report stage which would give a wide extension of selective additional investment allowances in such a way that it could no longer be said that the shipbuilding industry was being particularly picked out for advantage, but that these were being shared by a wide range of industries, all of which satisfied one or other of the two conditions which I have mentioned.

The approach made to the matter by the Economic Secretary is exceedingly disappointing. We do not feel that it is in the best interests of British industry; it is not in the best interests of maintaining full employment in this country because it endangers employment, particularly in the shipbuilding areas and perhaps in others; it is certainly not to the advantage of the solution of our balance of payments problem, and it appears to me to be a doctrinnaire neglect of essential national industry.

The Chairman

I hope the Committee is ready now to come to a decision.

Several. Hon. Members


The Chairman

Mr. Chetwynd.

Mr. George Chetwynd (Stockton-on-Tees)

I make no apology, Sir Charles, for continuing this debate because we have had a most inadequate reply from the Economic Secretary. He has not lived up to his reputation as Economic Secretary but has given us a 19th or even 18th century approach to this problem, namely, leave things alone and they will work out under the present arrangements.

I want to ask the hon. Gentleman this question: Does he believe that the present pattern of industry serves the best interests of the nation today or does it still, as we believe, need some corrective which the ordinary business standards do not supply? If the hon. Gentleman believes that it needs some corrective, it is his duty to tell us what that corrective should be, instead of brushing it off as far too intricate and complicated to be settled in the way that these Amendments seek to settle it.

We are not discussing the problem of the general investment allowance, because we have given general support to that, but in these Amendments we are discussing the question of giving an additional allowance in certain clear and selective fields which we believe will act as a fresh stimulus to equipment in those fields in the national interest. Obviously we are concerned with questions of priority because the success of our economic system today depends upon where we give priority. That is why I feel that the Economic Secretary was so inadequate in his reply, because he sought to give us no guidance as to where the Government feel that those priorities ought to be. Instead we have had a blanket capital investment allowance which does not cover adequately the real places where special assistance is needed.

I do not want to cover the case of special interest, although my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) said that he was making a constituency case. I only wish I could do so as far as shipbuilding and marine engineering are concerned. We had once in my constituency four flourishing shipyards and a flourishing marine engineering works. Those no longer exist. The shipyards are covered with grass and the marine engineering works is now making plywood doors and windows, mainly as a result of the operation of Shipbuilders Securities in the period between the wars.

It is because I do not want to see that destruction afflicting the constituencies of some of my hon. Friends, where there are now flourishing shipyards and marine engineering works, that I press with the utmost vigour for extra assistance to be given to the marine engineering and shipbuilding industries.

We are concerned with trying to solve the problem of our balance of payments and the industries which we have selected in our Amendments can make the greatest contribution to the solution of that problem. Moreover, they can make the best use of our resources and manufacturing capacity and can channel investments into those fields of expansion which we think are right in the national interest. We must stress the over-riding claims of the export industries and those industries which can help us to avoid bringing in imports.

We must also stress the great contribution that shipbuilding has made in the field of invisible exports. If the Amendments were accepted, the financial inducement given would make for greater progress in shipbuilding and the modernisation of existing yards. It would also help to lower the cost of shipbuilding so that we could compete adequately with continental producers. On those grounds alone the Amendments should be accepted.

I cannot accept the Economic Secretary's argument about subsidies. He cannot have it both ways—that the investment allowance itself is not a subsidy but that to extend it to certain specialised fields is a case of subsidy. As my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) said, it is in no way illegitimate to assist our industries in this way, if we spread the assistance widely. If the Economic Secretary is not satisfied that we have named a sufficient number of industries on the Order Paper to qualify for the provision, he can add aircraft production and chemicals, for example, if he so wishes. We have merely mentioned in our Amendments those industries which we think most merit urgent priority at the present time. I am most disappointed that the Economic Secretary has not seen fit to agree with us, and I hope that we shall press this matter to a Division.

Mr. Frederick Mulley (Sheffield, Park)

I make no apology for speaking after the Government spokesman has replied to the case for these Amendments, partly because the reply was so very disappointing and partly because it was timed so early in the debate. We are discussing Amendments which not only concern a large number of major industries—and speeches so far from this side of the Committee have dealt only with one of those industries, important though that is—but which also get to the roots of the main problems of our economy.

It is necessary to point out to the Economic Secretary that he spent a long time in producing every argument that he could think of against this set of Amendments without realising that a large number of the arguments cancelled out ones which he had formerly advanced. He said earlier, and, indeed, the Chancellor mentioned the same matter in a Second Reading speech, that the Chancellor had spent a great deal of time in trying to make investment allowances more selective.

Then, later, the Economic Secretary said that any form of selectivity would introduce an element of injustice into the taxation system. Are we to assume that the Chancellor spent a great deal of his time trying to introduce—

Mr. Maudling

The case for the Opposition was put with so much eloquence that I thought it necessary for me to answer it.

Mr. Mulley

The Economic Secretary indicated that any form of selectivity was a form of taxation dishonesty. If the Chancellor sought and found ways of making it selective then, on the hon. Gentleman's argument, the Chancellor must have been finding ways of making some unjust distinctions in the taxation system.

Mr. Ellis Smith

Let the farmers arbitrate on it.

Mr. Mulley

I agree. The farmers obviously would not object to a distinction in matters of taxation or subsidy, but, as the Economic Secretary admitted, there is an important distinction already embodied in the Clause between production and commercial building. This, as the hon. Member for Hall Green (Mr. Aubrey Jones) said, is a distinction. I do not see how a matter of principle can be embodied in the Amendments we put on the Paper. It is only an extension of the principle which is already in the investment allowance itself and certainly there are many distinctions of a similar character in our taxation system.

On the question of indirect taxation why should we have Purchase Tax at three different levels? Why should some industries be exempt from Purchase Tax? Purchase Tax influences the export potential of certain industries in a number of cases. In the code itself, of which the hon. Member for Hall Green made a lot of fuss, any hon. Member who has had experience will realise there is considerable discrimination in favour of Schedule D taxpayers as opposed to Schedule E taxpayers in matters they can claim by way of expenses. In practically every phase of our taxation system there is some selectivity. I am not protesting about that, but I am saying that to argue, as the Economic Secretary did, that it leads to injustice in the system is simply nonsense. By far the most alarming part of the speech was his bland dismissal of any kind of economic planning. He gave the impression, in fact he said, as he said a year ago, that the Government were not in the least interested in any particular details of the economy. He may correct me if I am wrong, but the impression I got from him was that there is no intention so to create a general climate. The balance of payments problem would be solved by the individual efforts of individual manufacturers and there was no need for the Government to intervene.

That was said by the Economic Secretary within a few minutes of the hon. Member for Hall Green saying that Birmingham manufacturers in the whole of that district have not had sufficient initiative, collectively or individually, over the years to build a decent hotel so that people could be induced to visit that district for the purpose of placing foreign orders. We have constantly had brought home to us the fact that industry will not take the necessary initiative in certain circumstances without a lead and some direct form of Government planning. It may be that we have a difference as to the extent in which we should use fiscal means of planning, but certainly do not let us also find the present Government abandoning all forms of fiscal planning. That really is what the speech of the Economic Secretary amounted to.

Having heard the speech of the hon. Member for Hall Green and the speech of the Economic Secretary, one would have imagined that the Coalition Government did not issue the White Paper on Full Employment in 1944. I do not see how any Government can pretend to be quite unconcerned with the performances and export figures of individual industries in present circumstances. Without Government planning and direction how can we expect firms to undertake difficult export work when there are easy profits to be made in the home market? The reason why there is no decent hotel in Birmingham is, I suppose, because no one thought there was a sufficient amount of profit to be gained by building such an hotel.

Mr. Roy Jenkins

What about Sheffield?

Mr. Mulley

We have a very good hotel in Sheffield. Sheffield industry would be sufficiently interested in getting export orders to build an hotel if one did not exist. I do not pretend that Sheffield capitalists are likely to go in for export orders if they can make plenty of money on the home market.

Does the Economic Secretary imagine for a moment that the motor industry would have achieved an increase of 75 per cent. in exports in the years immediately after the war, when motor cars could be sold new for twice their list price, if they had not had the direction to achieve such figures and physical support to make them do it?

9.0 p.m.

My tutor in economics at Oxford—I mention this because he may perhaps persuade the Economic Secretary of the wrongness of his ways—Mr. Harrod, although we did not see eye to eye on a number of matters, gave me some sleepless nights when he said that what kept him awake at night was the fact that he could not see how any firms could be expected to export when they could make more money by selling their goods at home. That is a problem which the Economic Secretary apparently does not appear to recognise. He presumably says that the very modest contribution which we ask him, in these Amendments, to make, particularly that in the Amendment regarding exports, is not necessary.

He again brought out the argument about the export subsidy, but as my hon. Friend the Member for Stockton-on-Tees (Mr. Chetwynd) said, he cannot have it both ways. The Financial Secretary has said that these investment allowances are not subsidies yet apparently if they are applied to exports, they are. There was the great bargaining which the Chancellor achieved with Dr. Erhardt, who professed to have the same kind of economic doctrinaire outlook, reminiscent of at least one century, possibly two centuries ago, but who is certainly shrewd enough to see that some assistance must be given to his key industries. The right hon. Gentleman came back with a piece of paper which said that at the end of 1955 these practices may stop. It would provide a sound bargaining argument for us if we started a few of these practices to see if we cannot get rather better terms.

The Amendment concerning exports should not be rejected solely on this export subsidy argument. If it is, however, surely the same effect as is sought could be obtained by giving export industries a very large initial allowance, which would go a long way towards meeting the same point. Initial allowances, as we have already had explained to us, certainly do not give any advantage in terms of cash in the long run, and could certainly not be classified as a subsidy.

The answer of the Economic Secretary is, briefly, that he is not concerned to look at these Amendments on their merits. The Treasury has formed the opinion that any kind of discrimination would be rather difficult to operate administratively. It seems the three Ministers of the Treasury each have different ideas, not only as to what investment allowances are and what they are meant to do. but also concerning the planning of the economy. That really is the essential point.

We on this side of the Committee, and I thought until tonight it was the view of the Government, regard the Budget as being more than simply to meet the Government's outgoings, that it is an attempt to plan the economy so that internally and externally we are able to achieve the maximum prosperity. As I say, I thought until tonight that that was the Government's view. It may be the Chancellor's view but quite clearly, from the remarks of the Economic Secretary, it is not his view.

If the Government cannot accept these Amendments, I ask them at least to do a little thinking about the matter so that we may know at the Report stage what they understand the investment allowances to be and for what purpose they have been inserted in the Finance Bill. Since I do not wish to end on an uncharitable note, I compliment the Minister of State, Board of Trade, on being here and say that it has been a matter of great regret to us that we have not had a representative of the Board of Trade present at an earlier stage of our proceedings.

Mr. M. Philips Price (Gloucestershire, West)

The Economic Secretary put his finger very well upon the point which is at issue and which shows the real difference between the two sides of the Committee. Hon. Members opposite take the view that the State should not intervene, or should do so only very rarely and very gingerly, to influence economic policy. We on this side take the view that that is the very thing that the State should be called upon to do. particularly in the Budget. The debate on these Amendments show clearly the difference between the two sides of the Committee.

My hon. Friend the Member for Edmonton (Mr. Albu), who moved the Amendment, referred to one matter which I regard as interesting. I was for some years Chairman of the Parliamentary Scientific Committee, which comprises Members of this House and of another place and of the learned and scientific societies. The Amendment proposes an alleviation by increasing the investment allowances on scientific and surgical equipment and implements.

If anything is to stimulate our industry and put it in the forefront of the industries of the world, it will be our scientific attainments. It is that which still makes British goods the best in the world and will gain us markets where others perhaps will not get a foothold.

Mr. Ellis Smith

Do not forget the men who make those goods.

Mr. Price

That is just the very thing that through the Budget a Clause of this kind could do something to encourage.

I had occasion last year to see something of the position of our industry in the Middle East and how severe was the competition with Germany and how it will increase. I do not doubt that we can meet it, but we need every possible assistance. If, as I think is possible under the Amendments which my hon. Friends have put down, some encouragement can be given to investment in the latest machinery and scientific appliances and in factories, that surely is legitimate in the Budget.

I cannot agree with the Economic Secretary, who takes the line that there is nothing in Clause 15 which does anything in that respect. This is not simply a question of the variation in the initial allowances depending upon the rate of wear and tear; it is more than that. Under one subsection, farm and forestry works and buildings are given one-tenth higher investment allowances than hitherto. Clearly, the Chancellor of the Exchequer takes the view that farm and forestry buildings require encouragement. There is, therefore, a policy of encouraging those who wish to erect modern buildings on farms and to engage in forestry operations.

It is not, therefore, true that the Clause in its present form does not give some incentive. All that we on this side ask in our Amendments is to extend the principle which is already there in embryo in the Clause. A proper balance of payments is vital to the future of the country, and anything we can do in the Budget to encourage that, by pushing our export trade and keeping up the very highest standards, is surely worth doing.

Mr. Roy Jenkins

I intervene mainly because the Minister of State, Board of Trade, has at last joined our debate. We are extremely glad to see him. I am sure that, busy as he is, though he was unable to attend earlier he has not merely dropped in to pass a few idle minutes sitting on the Treasury Bench but because he wishes to apply his mind to the Amendment which deals specifically with the Board of Trade.

I do not know whether he realises that before he was here the Economic Secretary to the Treasury, who, I thought, made a rather wild speech, went out of his way to say that Government Departments, including the Board of Trade, could not possibly do certain things which we were asking them to do. I have no idea whether that commands the agreement of the Minister of State, Board of Trade. We ask in one Amendment that the investment allowance should be increased to one quarter in the case of machinery or plant intended for use in any process certified by the Board of Trade as likely to reduce the need for an imported raw material.

Before we proceed to a Division we ought to have the views of the Minister of State, Board of Trade, upon this. If he could argue to us convincingly from his Departmental experience that this was an impracticable suggestion our attitude on that Amendment might be modified. In any case, we should not like to leave him in the position to which he was committed by his hon. Friend without having the chance to answer.

The only other point I wish to make is about the speech of the Economic Secretary. Junior Ministers of the Treasury are having a rather unfortunate day today. It is particularly unfortunate that during his speech, which, I take it, was largely unpremeditated, he not only made sweeping statements about the whole of the Government's policy on planning, apparently abandoning planning, but also on the narrow and important front he made an entirely new statement about the relationship of the investment allowance to a subsidy to industry. He was taken up about that by my right hon. Friend the Member for Battersea, North (Mr. Jay) who mentioned what was said by the Financial Secretary on Second Reading.

The hon. Gentleman sought to get out of the difficulty by saying that there was no contradiction, because he did not argue that the investment allowance was necessarily a subsidy and that so long as it was general it was not a subsidy at all. He said that it only became a subsidy if it was applied to a particular industry.

It is important that we should recall exactly what the Financial Secretary said on Second Reading. It bore no relation to the argument which the hon. Gentleman put before the Committee today. The Financial Secretary said: Study of the Clause will make it clear to all concerned that this in a true sense is a tax remission and not in any sense—as suggested outside this House—a subsidy. It is perfectly clearly a reduction in taxation in respect of certain activities. It seems to me that there is all the difference in the world between making someone pay less tax as a result of certain action that he takes and paying that person a subsidy in respect of certain action that he takes. Not only is there a definite difference in principle, but a very practical difference in application. In the case of a subsidy, one gets it anyhow, but in the case of a tax concession, such as this, one gets it only if in fact one is liable to a tax. That seems to be the crucial answer to anyone outside who might describe this as a subsidy."—[OFFICIAL REPORT, 3rd May, 1954; Vol. 527, c. 39–40.]

Mr. Maudling

I was speaking of other countries in Europe and the type of export subsidy, so called, to which we have been taking exception and which we have been getting withdrawn. It consists of tax remissions given to exporters and not to people selling in the home market. I was dealing with exports, with the tax remission given to exporters only and not to other people. I should like that on the record from the point of view of the discussions which have been taking place between ourselves and other Governments on this matter.

Mr. Jenkins

I do not wish to say anything which will embarrass the hon. Gentleman or the Government in their difficulties with other countries in which we are all anxious to help, but it is important to remember that the Financial Secretary argued—and argued as I thought at the time and as I think now very persuasively—that there was not a subsidy, and that this was reducing the amount of money which these people were forced to give to the Government. That is quite a different matter.

I am sure that it could not possibly be argued that selectivity, if it were accepted, would in any way invalidate what the Financial Secretary said. I think that there is a contradiction here. I do not wish to press the point too hard because I can see that it might be embarrassing to the hon. Gentleman and to the Government. I think that on consideration the hon. Gentleman will agree that he was extremely foolish to introduce the subsidy argument into the debate today and I hope he will withdraw it.

9.15 p.m.

Mr. E. Fletcher

Surely we shall have some observations from the Minister of State, Board of Trade. While my hon. Friend the Member for Stechford (Mr. Roy Jenkins) was speaking, the Minister was moving nearer and nearer to the Dispatch Box, and I intervene because I earnestly hope that before we conclude the debate on this series of Amendments we shall hear from the Minister what he thinks about the Amendment.

It seems to me that the case made by my hon. Friends for this principle of selectivity is overwhelming, as are their arguments for an additional investment allowance to particular industries which face the keenest competition. My hon. Friend referred specifically to machinery or plant intended for use in any process certified by the Board of Trade as likely to reduce the need for an imported raw material… One of the most important duties assigned to the Minister is to tour the globe, visiting other countries to ascertain what kind of products we can produce in this country to reduce our imports. That is essential to our economy. It is a long time since we had any guidance from him and since we heard the results of the research which he has been making in these tours.

The balance of payments is vital to our economy. It is not a matter for last year, this year and next year only; it will be with us for some time. There are those industries which we want to succour, nourish, encourage and support with some additional investments. Why not increase the investment allowance in those industries from 20 per cent. to 25 per cent. There is nothing in that suggestion which conflicts with what the Economic Secretary or the Financial Secretary said about subsidies.

Nevertheless, I did not intervene particularly to stress that point. I am very much concerned about the manufacture of "scientific, surgical and photographic instruments." I am conscious of the growing competition which this country faces in this field from Germany, Switzerland, France and many other European countries. British industries are to be congratulated on the immense progress which they have made in recent years in the field of "scientific, surgical and photographic instruments," but the degree of competition will grow in the next two or three years. Indeed it has been growing rapidly in the last 12 months. France, Switzerland and Germany have been making rapid strides in this direction.

In these industries, which make an important contribution to our economic stability, some additional assistance is required, and we believe that the Government's budgetary policy should be aimed at introducing the maximum flexibility into our financial arrangements and at giving greater assistance where it is presumably wanted. We have heard no argument from the Government benches which invalidates our suggestion.

These selected industries in particular need of assistance should be given that degree of assistance which may make all the difference in their competitive struggle to obtain markets both here and overseas I very much hope that, if we do not have a more satisfactory reply from the Government Front Bench—and I shall be very disappointed if we do not hear from the Minister of State—[Interruption.] The Minister of State. Board of Trade, has been listening very patiently and carefully, and all the time has been getting nearer and nearer to the Dispatch Box. I do not blame him; I am very glad to think that he is here. I do not complain of the delay; indeed, I am glad of the one sinner that repenteth.

I hope that the representatives of the Board of Trade are taking seriously the arguments which, for the last two and a quarter hours, we have been trying to address to the benches opposite. The Parliamentary Secretary to the Board of Trade, who has just returned to the Front Bench, and who is very quick in the uptake, will very rapidly learn from his hon. Friend, and, no doubt, in turn, he will move along the Bench towards the Dispatch Box in order that, when the Minister responds to the invitations which we have addressed to him to reply, the right hon. Gentleman may have the assistance from the Parliamentary Secretary of detailed information.

I am very glad to think that we are to have a reply from the Minister of State, Board of Trade, because it would be quite intolerable if the Committee were to part with this very important series of Amendments, affecting the trade of this country and dealing with matters for which the Board of Trade has a special responsibility, without a reply from a representative of the Board of Trade.

It is not good enough to leave these matters to the Treasury Ministers alone. I am making no reflections on the competence or assiduity of the Treasury representatives. I know that they have their limitations, but, after all, the Minister of State, Board of Trade, has been courteous and patient enough to listen to the arguments which my hon. Friend the Member for Stechford (Mr. Roy Jenkins) and others have addressed to him. The right hon. Gentleman has listened to what we have had to say, has been able to consult the Economic Secretary, and I am sure that you, Sir Gordon, will agree that we are now entitled to have some responsible guidance from the Board of Trade as to what the Board of Trade think about our suggestions for giving assistance to British manufacturers and industrialists who are particularly interested in assisting the export trade of this country and in reducing imports.

We hope that the Board of Trade will now appreciate that one of the main purposes of this series of Amendments is to assist this country in overcoming the competition of foreign countries and build up its export trade, thereby reducing its balance of payments problem.

Mr. Gaitskell

We are seriously concerned about the relationship which seems to be developing between the Treasury and the Board of Trade. We have observed today how extremely exhausted the Treasury Ministers are. They have put up an extremely bad series of performances, and it is obvious that this has nothing to do with their personal disqualifications, but is simply due to the fact that they are overworked. Why, in those circumstances, do we have a Treasury Minister replying on a Board of Trade matter? It may be thought that this is rather unfair, in the light of the fact that I myself was once a Treasury Minister, but I must point out that I was also a civil servant at the Board of Trade, so that I am well aware how officials of the Board of Trade feel about the Treasury. The Minister of State ought to be thinking about that, as his prestige with his own officials is involved.

While the right hon. Gentleman is thinking up what he is going to say in reply to the most cogent speeches made from this side of the Committee, and particularly on this question of saving imports, about which I always understood the Board of Trade were very concerned—I am glad to see that the right hon. Gentleman is getting out his pencil—I should like to take up once again this question of export subsidies.

This is a matter which also concerns the Board of Trade, and we shall hope to have the views of the Minister of State upon it as well; but the Economic Secretary told us that the practice of which we complain and in which the Germans were indulging was that of tax remissions to exporters. The Economic Secretary took the view that such tax remissions to exporters must be classified as export subsidies. I think I am correct in supposing that that is what he was saying. Is he not, therefore, saying that a tax remission does amount to a subsidy, because otherwise there is no possible argument against the Germans?

Mr. Maudling

My point was that any tax remission of any kind, whether by investment allowance or anythng else, given to one person and not to another, is a subsidy to the one at the expense of the other.

Mr. Gaitskell

Not everybody gets the same tax allowances. Some get more and some get less, according to what they are.

The point is this. In admitting, as I think they are right in doing—and, indeed, not merely admitting, but contending—that a tax remission is a subsidy, the Economic Secretary has torn to shreds the argument of the Financial Secretary. He has proved up to the hilt what we have said all along, that this is a subsidy. I leave it at that, because I do not wish, any more than do any of my hon. Friends, to embarrass the Minister in his negotiations with the Germans. The hon. Member has a point here so far as one of these Amendments is concerned, and therefore we might leave that one and pass on to some of the others.

I am sorry to see that the Parliamentary Secretary to the Board of Trade, to whom I was about to address a few remarks, appears to have disappeared again. I hope that arrangements will be made to bring him back, but while he is being searched for I should like to come back to this import question. We have had no arguments as to why there should not be special inducements in this direction. I am sure that the Minister of State, Board of Trade, recalls that cogent article by Professor Austin Robinson about the

difficulties we are going to have in importing a volume of goods on a scale to which we are accustomed and at the same time allowing industrial expansion. The whole tenor of the argument in that review was to the effect that we would have to go in for more import economies.

I think that we must have from the Department which is responsible for this and which is supposed to be carrying out this policy some explanation of why there is this objection to giving, not perhaps a very big, but certainly some inducement to import saving, and now that the Chancellor has come back I hope that he will act as the coordinating Minister and will explain to us how it is that we have had no Board of Trade statement on this collection of Amendments, although every single one of them is, of course, a matter of particular concern to the Board of Trade.

We have been hoping that the Minister of State, Board of Trade, would have said a few words on these serious matters of export subsidies, import saving and the special cases of machinery or plant intended for use in the manufacture of scientific instruments and so on. If he would do that and give us more adequate answers to the Amendments which have been so cogently argued, I am sure the Committee would be very grateful.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 229; Noes, 252.

Division No. 142.] AYES [9.30 p.m.
Acland, Sir Richard Brown, Thomas (Ince) Donnelly, D. L.
Adams, Richard Burke, W. A. Ede, Rt. Hon. J. C.
Albu, A. H. Burton, Miss F. E. Edwards, Rt. Hon. Ness (Caerphilly)
Allen, Scholefield (Crewe) Butler, Herbert (Hackney, S.) Edwards, W. J. (Stepney)
Anderson, Frank (Whitehaven) Callaghan, L. J. Evans, Albert (Islington, S.W.)
Bacon, Miss Alice Carmichael, J. Evans, Edward (Lowestoft)
Baird, J. Castle, Mrs. B. A. Evans, Stanley (Wednesbury)
Barnes, Rt. Hon. A. J. Champion, A. J. Fernyhough, E.
Bartley, P. Chetwynd, G. R. Fienburgh, W.
Ballenger, Rt. Hon. F. J. Clunie, J. Finch, H. J.
Benn, Hon. Wedgwood Coldrick, W. Fletcher, Eric (Islington, E.)
Benson, G. Collick, P. H. Follick, M.
Beswick, F. Cove, W. G. Foot, M. M.
Blackburn, F. Craddock, George (Bradford, S.) Forman, J. C.
Blenkinsop, A. Crosland, C. A. R. Fraser, Thomas (Hamilton)
Blyton, W. R. Cullen, Mrs. A. Gaitskell, Rt. Hon. H. T. N.
Boardman, H. Dalton, Rt. Hon. H. Gooch, E. G.
Bottomley, Rt. Hon. A. G. Davies, Ernest (Enfield, E.) Gordon-Walker, Rt. Hon. P. C.
Bowden, H. W. Davies, Harold (Leek) Greenwood, Anthony
Braddock, Mrs. Elizabeth Davies, Stephen (Merthyr) Grey, C. F.
Brockway, A. F. de Freitas, Geoffrey Griffiths, David (Rather Valley)
Brook, Dryden (Halifax) Deer, G. Griffiths, Rt. Hon. James (Llanelly)
Broughton, Dr. A. D. D. Delargy, H. J Griffiths, William (Exchange)
Brown, Rt. Hon. George (Belper) Dodds, N. N Hale, Leslie
Hall, Rt. Hon. Glenvil (Colne Valley) Manuel, A. C. Simmons, C. J. (Brierley Hill)
Hamilton. W. W. Marquand, Rt. Hon. H A Skeffington, A. M.
Hannan, W. Mason, Roy Slater, Mrs. H. (Stoke-on-Trent)
Hargreaves, A Mayhew, C. P. Slater, J. (Durham, Sedgfield)
Harrison, J. (Nottingham, E.) Mellish, R. J. Smith, Ellis (Stoke, S.)
Hastings, S. Messer, Sir F. Smith, Norman (Nottingham, S.)
Hayman, F. H. Mikardo, Ian Sorensen, R. W.
Henderson, Rt. Hon. A. (Rowley Regis) Mitchison, G. R. Soskice, Rt. Hon. Sir Frank
Herbison, Miss M. Monslow, W. Sparks, J. A.
Hobson, C. R. Moody, A. S. Steele, T.
Holman, P. Morgan, Dr. H. B. W. Stokes, Rt. Hon. R. R.
Holmes, Horace Morley, R. Strauss, Rt. Hon. George (Vauxhall)
Hoy, J. H. Morris, Percy (Swansea, W.) Stross, Dr. Barnett
Hubbard, T. F. Mort, D. L. Summerskill, Rt. Hon. E.
Hudson, James (Ealing, N.) Moyle, A. Swingler, S. T.
Hughes, Cledwyn (Anglesey) Mulley, F. W. Sylvester, G. O.
Hughes, Emrys (S. Ayrshire) Nally, W. Taylor, Bernard (Mansfield)
Hughes, Hector (Aberdeen, N.) Neal, Harold (Bolsover) Taylor, John (West Lothian)
Hynd, H. (Accrington) Noel-Baker, Rt. Hon. P. J. Taylor, Rt. Hon. Robert (Morpeth)
Hynd, J. B. (Attercliffe) Oldfield, W. H. Thomas, Iorwerth (Rhondda, W.)
Irvine, A. J. (Edge Hill) Oliver, G. H. Thomas, Ivor Owen (Wrekin)
Irving, W. J. (Wood Green) Orbach, M. Thomson, George (Dundee, E.)
Janner, B. Oswald, T. Thornton, E.
Jay, Rt. Hon. D. P. T. Padley, W. E. Turner-Samuels, M.
Jeger, George (Goole) Paling, Rt. Hon. W. (Dearne Valley) Ungoed-Thomas, Sir Lynn
Jeger, Mrs. Lena Paling, Will T. (Dewsbury) Usborne, H. C.
Jenkins, R. H. (Stechford) Pannell, Charles Viant, S. P.
Johnson, James (Rugby) Pargiter, G. A. Wallace, H. W.
Jones, Frederick Elwyn (West Ham, S.) Parker, J. Warbey, W. N.
Jones, Jack (Rotherham) Paton, J. Wells, Percy (Faversham)
Jones, T. W. (Merioneth) Peart, T. F. Wells, William (Walsall)
Keenan, W. Popplewell, E. West, D. G.
Kenyon, C. Porter, G. Wheeldon, W. E.
Key, Rt. Hon. C. W. Price, J. T. (Westhoughton) White, Mrs. Eirene (E. Flint)
King, Dr. H. M. Price, Philips (Gloucestershire, W.) White, Henry (Derbyshire, N.E.)
Kinley, J. Proctor, W. T. Whiteley, Rt. Hon. W.
Lawson, G. M. Pryde, D. J. Wigg, George
Lee, Frederick (Newton) Pursey, Cmdr. H. Wilcock, Group Capt. C. A. B
Lewis, Arthur Rankin, John Wilkins, W. A.
Lindgren, G. S. Reeves, J. Willey, F. T.
Logan, D. G. Reid, Thomas (Swindon) Williams, David (Neath)
MacColl, J. E. Reid, William (Camlachie) Williams, Rev. Llywelyn (Abertillery)
McGhee, H. G. Rhodes, H. Williams, Ronald (Wigan)
McGovern, J. Robens, Rt. Hon. A. Williams, Rt. Hon. Thomas (Don V'll'y)
McKay, John (Wallsend) Roberts, Albert (Normanton) Williams, W. R. (Droylsden)
McLeavy, F. Robinson, Kenneth (St. Pancras, N.) Willis, E. G.
MacMillan, M. K. (Western Isles) Rogers, George (Kensington, N.) Winterbottom, Richard (Brightside)
McNeil, Rt. Hon. H. Ross, William Woodburn, Rt. Hon. A
MacPherson, Malcolm (Stirling) Royle, C. Wyatt, W. L.
Mainwaring, W. H. Shackleton, E. A. A Yates, V. F.
Mallalieu, E. L. (Brigg) Short, E. W. Younger, Rt. Hon. K.
Malllieu, J. P. W. (Huddersfield, E.) Shurmer, P. L. E.
Mann, Mrs. Jean Silverman, Julius (Erdington) TELLERS FOR THE AYES:
Mr. Pearson and Mr. Arthur Alter.
Aitken, W. T. Brooke, Henry (Hampstead) Donner, Sir P. W.
Allan, R. A. (Paddington, S.) Brooman-White, R. C. Doughty, C. J. A.
Alport, C. J. M. Browne, Jack (Govan) Drayson, G. B.
Amery, Julian (Preston, N.) Buchan-Hepburn, Rt. Hon. P. G. T. Drewe, Sir C.
Amory, Rt. Hon. Heathcoat (Tiverton) Bullard, D. G. Duncan, Capt. J. A. L
Anstruther-Gray, Major W. J. Bullus, Wing Commander E. E. Duthie, W. S.
Arbuthnot, John Burden, F. F. A. Eden, J. B. (Bournemouth, West)
Assheton, Rt. Hon. R. (Blackburn, W.) Butcher, Sir Herbert Elliot, Rt. Hon. W. E
Astor, Hon. J. J. Butler, Rt. Hon. R. A. (Saffron Walden) Finlay, Graeme
Baldock, Lt.-Cmdr. J. M. Campbell, Sir David Fisher, Nigel
Baldwin, A. E. Cary, Sir Robert Fleetwood-Hesketh, R. F
Barlow, Sir John Channon, H. Fletcher-Cooke, C.
Baxter, Sir Beverley Clarke, Col. Ralph (East Grinstead) Ford, Mrs. Patricia
Beach, Maj. Hicks Clyde, Rt. Hon. J. L. Fort, R.
Bell, Ronald (Bucks, S.) Cole, Norman Fraser, Hon. Hugh (Stone)
Bennett, Dr. Reginald (Gosport) Colegate, W. A. Fraser, Sir Ian (Morecambe & Lansdale)
Bennett, William (Woodside) Conant, Maj. Sir Roger Fyfe, Rt. Hon. Sir David Maxwell
Bevins, J. R. (Toxteth) Cooper-Key, E. M. Galbraith, Rt. Hon. T. D. (Pollok)
Birch, Nigel Craddock, Beresford (Spelthorne) Galbraith, T. C. D. (Hillhead)
Bishop, F. P. Crookshank, Capt. Rt. Hon. H. F. C Gammans, L. D.
Black, C. W. Crosthwaite-Eyre, Col. O. E. Garner-Evans, E. H.
Bossom, Sir A. C. Crouch, R. F. George, Rt. Hon. Maj. G. Lloyd
Bowen, E. R. Crowder, Sir John (Finchley) Glover, D.
Boyd-Carpenter, Rt. Hon. J. A. Crowder, Petre (Ruislip—Northwood) Godber, J. B.
Boyle, Sir Edward Darling, Sir William (Edinburgh, S.) Gomme-Duncan, Col. A
Brains, B. R. Deedes, W. F. Gough, C. F. H.
Braithwaite, Sir Albert (Harrow, W.) Digby, S. Wingfield Gower, H. R.
Braithwaite, Sir Gurney Donaldson, Cmdr. C. E. McA Graham, Sir Fergus
Grimond, J. McKibbin, A. J. Roper, Sir Harold
Grimston, Hon. John (St. Albans) Mackie, J. H. (Galloway) Russell, R. S.
Grimston, Sir Robert (Westbury) Maclay, Rt. Hon. John Ryder, Capt. R. E. D.
Hall, John (Wycombe) Maclean, Fitzroy Savory, Prof. Sir Douglas
Harden, J. R. E. Macleod, Rt. Hon. lain (Enfield, W.) Schofield, Lt.-Col. W.
Hare, Hon. J. H. MacLeod, John (Ross and Cromarty) Scott-Miller, Cmdr. R.
Harris, Frederic (Croydon, N.) Macmillan, Rt. Hon. Harold (Bromley) Shepherd, William
Harrison, Col. J. H. (Eye) Macpherson, Niall (Dumfries) Simon, J. E. S. (Middlesbrough, W.)
Harvey, Air Cdre. A. V. (Macclesfield) Maitland, Comdr. J. F. W. (Horncastle) Smithers, Peter (Winchester)
Harvey, Ian (Harrow, E.) Maitland, Patrick (Lanark) Smithers, Sir Waldron (Orpington)
Harvie-Watt, Sir George Manningham-Buller, Rt. Ha. Sir Reginald Smyth, Brig. J. G. (Norwood)
Heald, Rt. Hon. Sir Lionel Markham, Major Sir Frank Snadden, W. McN.
Heath, Edward Marlowe, A. A. H. Soames, Capt. C.
Henderson, John (Cathcart) Marples, A. E. Spearman, A. C. M.
Higgs, J. M. C. Marshall, Douglas (Bodmin) Speir, R. M.
Hill, Dr. Charles (Luton) Maude, Angus Spens, Rt. Hon. Sir P. (Kensington, S.)
Hinchingbrooke, Viscount Maudling, R. Stanley, Capt. Hon. Richard
Hirst, Geoffrey Maydon, Lt.-Comdr. S. L. C. Stevens, Geoffrey
Holland-Martin, C. J. Medlicott, Brig. F. Steward, W. A. (Woolwich, W.)
Hollis, M. C. Mellor, Sir John Stewart, Henderson (Fife, E.)
Holt, A. F. Molson, A. H. E. Stoddart-Scott, Col. M.
Hope, Lord John Mott-Radclyffe, C. E. Storey, S.
Hornsby-Smith, Miss M. P Nabarro, G. D. N. Stuart, Rt. Hon. James (Moray)
Horobin, I. M. Neave, Airey Studholme, H. G.
Horsbrugh, Rt. Hon. Florence Nicholls, Harmar Summers, G. S.
Howard, Hon. Greville (St. Ives) Nicholson, Godfrey (Farnham) Sutcliffe, Sir Harold
Hudson, Sir Austin (Lewisham, N.) Nicolson, Nigel (Bournemouth, E.) Taylor, Sir Charles (Eastbourne)
Hulbert, Wing Cdr. N. J. Nield, Basil (Chester) Taylor, William (Bradford, N.)
Hurd, A. R. Noble, Comdr. A. H. P. Teeling, W.
Hutchison, Sir Ian Clark (E'b'rgh, W.) Nugent, G. R. H. Thomas, P. J. M. (Conway)
Hutchison, James (Scotstoun) Nutting, Anthony Thompson, Kenneth (Walton)
Hyde, Lt.-Col. H. M. Oakshott, H. D. Thornton-Kemsley, Col. C. N.
Hylton-Foster, H. B. H. O'Neill, Hon. Phelim (Co. Antrim, N.) Turner, H. F. L.
Iremonger, T. L. Ormsby-Gore, Hon. W. D. Turton, R. H.
Jenkins, Robert (Dulwich) Orr, Capt. L. P. S. Vane, W. M. F.
Jennings, Sir Roland Orr-Ewing, Charles Ian (Hendon, N.) Vaughan-Morgan, J. K.
Johnson, Eric (Blackley) Orr-Ewing, Sir Ian (Weston-super-Mare) Vosper, D. F.
Johnson, Howard (Kemptown) Osborne, C. Wade, D. W.
Jones, A. (Hall Green) Page, R. G. Wakefield, Edward (Derbyshire, W.)
Joynson-Hicks, Hon. L. W. Perkins, Sir Robert Wall, Major Patrick
Kerby, Capt. H. B. Peto, Brig. C. H. M. Ward, Hon. George (Worcester)
Kerr, H. W. Pickthorn, K. W. M. Ward, Miss I. (Tynemouth)
Lambert, Hon. G. Pilkington, Capt. R. A. Waterhouse, Capt. Rt. Hon. C.
Lambton, Viscount Pitman, I. J Watkinson, H. A.
Langford-Holt, J. A. Pitt, Miss E. M. Webbe, Sir H. (London & Westminster)
Leather, E. H. C. Powell, J. Enoch Wellwood, W.
Legge-Bourke, Maj. E. A. H. Prior-Palmer, Brig. O. L Williams, Rt Hon. Charles (Torquay)
Legh, Hon. Peter (Petersfield) Profumo, J. D. Williams, Gerald (Tonbridge)
Lennox-Boyd, Rt. Hon. A. T. Raikes, Sir Victor Williams, Sir Herbert (Croydon, E)
Lindsay, Martin Rayner, Brig. R. Williams, R. Dudley (Exeter)
Linstead, Sir H. N. Redmayne, M. Wills, G.
Lockwood, Lt.-Col. J. C. Remnant, Hon. P. Wilson, Geoffrey (Truro)
Lucas, Sir Jocelyn (Portsmouth, S.) Renton, D. L. M. Wood, Hon. R.
Lucas, P. B. (Brentford) Ridsdale, J. E.
Lucas-Tooth, Sir Hugh Robertson, Sir David TELLERS FOR THE NOES:
McCallum, Major D. Robson-Brown, W. Mr. Kaberry and
Macdonald, Sir Peter Rodgers, John (Sevenoaks) Mr. Richard Thompson.
The Temporary Chairman (Sir Gordon Touche)

The next Amendment selected is the one in the name of the right hon. Member for Leeds, South (Mr. Gaitskell), in page 10, line 25. It might be convenient to discuss with it a subsequent Amendment in the name of the same right hon. Gentleman, in page 11, line 35, at end, insert: Provided that an initial allowance equal to two-fifths of the expenditure may be made, at the option of the person entitled, and not an investment allowance.

Mr. Roy Jenkins

I beg to move, in page 10, line 25, to leave out "no investment," and to insert: an initial allownce equal to two-fifths of the expenditure may be made, at the option of the person entitled, and not an investment allowance: Provided also that no investment or initial. This is an Amendment of some importance. It seeks to extend an option to companies affected by the Clause so that, if they wish, they may have either the investment allowance or an initial allowance increased to 40 per cent., instead of the existing 20 per cent. It is common ground on both sides of the Committee, in dealing with the Clause, that we are facing an urgent need to increase the level of investments in the private sector. That is why my hon. Friends give general support to the investment allowance. We are prepared to take fairly drastic steps with regard to the investment allowance. That being so, we want the incentive to invest to be as effective as possible and over as wide a range of productive industry as possible. Our fear is that the Clause and the device as drafted may only substantially help one of the two broad categories into which industrial companies fall at the present time.

Obviously, the level of investment is not what we should like it to be. There are two main reasons why that might be so. So far as one category of companies is concerned, it is the lack of the incentive to go ahead and undertake the risk of the investment. The investment allowance as it stands will go some way to meet the problems of that group of companies. There is, however, another group which is mainly composed of the smaller companies, perhaps private companies as opposed to the big well-known public companies which, in contradistinction to the general range of British industry at present, not only lack incentives but are handicapped by shortage of money.

The figures indicate that at present, over the range of industrial companies as a whole, there is no shortage of funds for investment. They have more funds available than they are using, but I think that it would be also agreed—and the Economic Secretary has expressed him self in this sense in the past—that this general picture is not necessarily true of all and that there is a group of companies which is short of money.

9.45 p.m.

The difficulty about the investment allowance as an incentive to greater investment over the whole range of companies is that in the first year, in which the investment is actually to take place, it does not make any more money available to the company undertaking the investment. The investment allowance proposed under the Bill has to be compared with the existing situation with initial allowances. Of course, if we take up the point expressed earlier by the hon. Member for Kidderminster (Mr. Nabarro) and say that we ought to be comparing the situation as it will be under the Bill with the situation a few years ago, that would not apply; but it is entirely unrealistic.

We are concerned with the comparison between the position as it will exist after the Bill is passed into law and the position previously. The difficulty is that no more money is made available in the year in which the investment is taking place. Where there is a shortage of cash, the position under the Clause will not help a company in any way. Perhaps I might illustrate this by an example showing that the position will be exactly the same in the first year as with the existing 20 percent initial allowances.

Let us take the example of a company buying a piece of machinery costing £1,000, of which, let us say for the purposes of the example, the depreciation rate is 28 per cent. In the first year the company would get £200 initial allowance and £281 wear and tear allowance, which would give a total allowance of £481 in the first year and a tax saving, on account of income and undistributed profits, of £228 in that year. In other words, the company would pay less tax to the extent of £228 in that year as a result of installing that particular piece of equipment than it would have done if it had not installed it.

Under the new system, the £200 will be called "investment allowance," the total allowance on account of the new investment allowance and of the wear and tear allowance at the previous rate would still be £481 and the tax saving would still be £228. There would not be a penny more made available to the company in the year in which the investment was actually undertaken. Of course, advantages come into play later, because of the different system of depreciation adopted in the case of plant from that which is adopted in the case of buildings. There is, in the case of plant, depreciation on the reducing-balance basis which comes into play after a time. It would start in the second year, from which the equipment would be depreciating at 72 per cent. instead of 52 per cent., which would be the figure under the depreciation rate as it formerly was. There would not be any improvement at all in the first year, and therefore we do nothing at all to help the firm which is short of cash to undertake investment.

If, on the other hand, the Government were to accept our Amendment and give companies an option of choosing an initial allowance increased to 40 per cent. instead of the investment allowance, we would give to the company which exercised the option more money in the first year, in which the investment was actually undertaken. In the example which I took earlier of plant costing £1,000, the company would be allowed to write off £681 in the first year, which would mean a tax saving of £323, and it would give the company another £95 in cash in the year in which the investment took place.

It would not involve making any greater concession to the company from the long-term point of view; in fact, from that point of view the Government would be more than repaid for the immediate concession given in the first year. As many hon. Gentlemen opposite have pointed out, in their view the initial allowance is essentially an interest-free-loan, and nothing more, so far as companies are concerned. That point of view was refuted conclusively by my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) in an article which he wrote in "The Banker" about six or nine months' ago. It was refuted by my hon. Friend because he looked at it not from the point of view of a company buying one piece of plant or equipment, but from the point of view of industry as a whole, and he made certain assumptions about the continuing rate of investment and the continuing intentions of Government policy.

For the purpose of our argument tonight, however, we need not accept the point of view put forward by my hon. Friend. For this purpose we can accept the argument always adduced so strenuously from the opposite side of the Committee, and which we have heard today, that the initial allowance is an interest free loan. Therefore, if we gave to all companies the option to take this increased initial allowance instead of the investment allowance, the Government would not in the long run be losing it: in fact, from a long-term point of view, so far as one piece of equipment is concerned it could be argued that the company would pay more tax than if it had the investment allowance, and large numbers of companies might not be attracted by this alternative but would prefer to stick to the investment allowance with its immediate tax incidence.

If the option is not taken up by the majority of companies, no harm is done in allowing the option to be put into the Bill. If, on the other hand, certain companies find themselves more short of immediate cash than they are short of incentive, and prefer to have the initial allowance and the immediate cash, that is entirely desirable. The Government do not lose in the long run, they have extended the scope of the concession which is designed to step up the rate of investment, they have made it more effective from the point of view of a limited section of industry. Therefore, I should have thought that what we have put forward in this Amendment would commend itself to the Treasury, and I hope that we shall have a more helpful and less negative reply than we have had hitherto.

Mr. Crosland

It is gratifying to see that we now have the Minister of State. Board of Trade, with us, and not merely present but equipped, as he was not equipped previously, with a copy of the Bill which we are discussing—

The Minister of State, Board of Trade (Mr. Heathcoat Amory)

Not the Bill.

Mr. Crosland

Or a copy of the Amendments to it. Unfortunately, this Amendment is not one which concerns the Board of Trade, and if the right hon. Gentleman would like to take an hour's leave from our deliberations and come back later, that will be perfectly all right.

This is one of a series of Amendments designed to make this Clause more flexible. As my hon. Friend the Member for Stechford (Mr. Roy Jenkins) has pointed out, it gives to businesses an option which they otherwise would not have between a 40 per cent. initial allowance and a 20 per cent. investment allowance. It is important to realise that this would give some companies some advantage. Of course, it is clear that in practically every case in the long run a company would be better off by choosing the 20 per cent. investment allowance because such advantage as it gets from the initial allowance must in the end taper off; whereas in the case of the investment allowance there is a greater advantage with every investment, so that from a tax point of view it would be better off with the 20 per cent. investment allowance.

But it is only companies which are fairly comfortably placed which can always afford to take the long-term view. Some companies are forced to take a short-term view and then there is no doubt that the 40 per cent. initial allowance can greatly benefit some of them. My hon. Friend stated the case very moderately when he said that a company could gain from the option only in the first year. In fact, it may easily go on for many more years than one. A company investing in a new machine every year for 10 years or so would be much better off in that period of years with the 40 per cent. initial allowance than with the 20 per cent. investment allowance, because for each year it would be attracting an allowance of 40 per cent. on the cost of each machine purchased annually; so that in fact the advantage might persist for some way beyond the first year, though it is only the first year in which we are interested. This advantage will only be immediate to those companies which find it difficult to get the necessary funds for investment.

Therefore, the whole basis on which this Amendment rests is that there are companies still short of funds to which this option would be an advantage. We on this side of the Committee have consistently argued that this position, this shortage of liquid funds, does not apply at the present time to the bulk of industry. But that does not mean that it does not apply to some firms. We say that it does, and in this we have the support of the Economic Secretary himself who, during the debate on the Budget proposals, said: The liquid position of companies as a whole has considerably improved in the last two years. … But what is true in total of companies is certainly not true in every case. While many companies have better cash resources than they had, there are many industries where shortage of liquid cash is still a deterrent to further productive effort."— [OFFICIAL REPORT, 8th April, 1954; Vol. 526, c. 553.] That is a perfectly clear statement which I do not think anyone would attempt to controvert. If that is true, and if we have a substantial number of companies, mainly the smaller ones, dotted up and down the country whose greater productive effort is held back through a shortage of liquid cash, why not put them in the position of having more liquid cash in the first year by granting them the option of the 40 per cent. initial allowance? I should have thought that the Economic Secretary has made our case for us by this statement during the debate on the Budget proposals.

It cannot be said that the idea of giving this option is something which is revolutionary. It cannot be said that it is an idea which has not occurred to the Government because, of course, some companies—I admit they are special cases, mining companies and the like—are already given the option. Consequently no argument based on administrative impossibility can be sustained against us. If this proposal is administratively practicable in the case of mining companies, it is also administratively practicable in the case of ordinary businesses. The case for it, which is made by the Economic Secretary himself, would seem to me to be overwhelming.

I might just add the point that we have had a longish debate, and it may be that we shall go on even for 30 or 40 minutes longer this evening, but we have gone through this important and complicated Clause without one hint of a concession from the Chancellor. Here we are putting forward a moderate proposal and I hope that now we shall have the first concession from him.

10.0 p.m.

Mr. Albu

I would suggest to the Chancellor another argument for accepting this Amendment. We are working very much in the dark when discussing what are in fact incentives to investment. We have used the initial allowance, we have played around with the tax system as a whole, and now the Government have come forward with a completely new proposal for investment allowances. We really do not know what are the relative effects of these different methods to attract and stimulate investment.

We all know that we are dissatisfied with the level of investment. The right hon. Member for Blackburn, West (Mr. Assheton) said that the whole level of taxation and distribution of income in our economy is a disincentive. Even that is a theoretical argument and there is very little, in fact no factual, evidence to support it.

Here we have a very good opportunity to try out two methods at the same time. If this Amendment were accepted, we would get a very large number of companies accepting the initial allowance and we would have another large number of companies accepting the investment allowance. Of course, the distribution of those companies would vary. I am not at all sure whether all the large companies would take one form or the other, or all the small companies would take one form or the other, but it would be extremely interesting to see in the course of the next two or three years which method was chosen and what effect it had in different industries.

On a previous batch of Amendments the Economic Secretary talked of the necessity for flexibility. This Amendment would introduce another element of flexibility and a free choice for companies in arranging their tax allowances. It is not the first time that that sort of thing has been done. We had a long discussion as to whether buildings were depreciated on the straight-line basis or the diminishing-balance basis. There are still alternatives for plant and equipment, although I think the diminishing-balance basis is usually used.

I suggest it would be very interesting to see what the result of the adoption of this method would be, because we are working very much in the dark. There are all sorts of try-outs and no one knows what their effect would be. We have been very critical of industry in general and of concessions given in last year's Budget because they seemed to have had so little effect on the investment in industries. Now the Government are trying out a new idea, and I am extremely sceptical whether it will have any real, effect at all; it may well be that something more drastic is required.

I should have thought that the opportunity to make a choice would have been certainly valuable, particularly as this choice is one which would be most important—as was pointed out by my hon. Friend in moving the Amendment —for the smaller companies which, in the early stages of their lives, find it most difficult to get finance. The average covers a large number of extremes and the fact that some companies are not short of money does not mean that there are not some companies which are short of money. In view of the great need for innovations and new ideas and the fact that many of the industries which are most valuable at present—electronics, scientific instrument making and industries such as that—start on a small basis and are suitable for a number of young scientists and technician to get going— we all know of examples, of that type of industry—anything which would courage the building up of new small businesses would be valuable.

The really extraordinary thing is that in the last two or three Budget debates we on this side of the Committee have consistently put forward Amendments to assist this type of growing business. It is interesting that when the Government want to help small businesses, or what are generally considered to be small businesses, they introduce Clauses in the Finance Bill to assist not the new business but the family business, the inherited business. The fact that we are opposed to inherited businesses does not mean that we are opposed to small businesses or new businesses. We are very much in favour of new growth.

This Amendment, if accepted, would be most encouraging to new growth, which is what we want. For these two reasons—the first that it would be extremely interesting to have the opportunity of comparing the two methods of incentive to investment, and seeing whether either of them is really going to be effective, and the second that it would be most valuable in encouraging new growth—I hope that the Chancellor will accept it. It will not in the end cost him money but will save him money. For that reason alone it may be that he will look upon this proposal in a more favourable manner than has been the case in regard to previous Amendments.

Mr. Maudling

This is a very attractive suggestion, attractively put, and I find it harder to argue against it when it is supported by quotations from previous speeches of mine. There are, however, practical difficulties which I shall explain. The course of investment in the last two or three years has been much discussed, and I will not go into it again, but, clearly, the restoration of the initial allowances in the 1953 Budget had an effect on the trend of investment, which was going down but which, in the latter half of the year, began to climb again.

It was right for my right hon. Friend, in this year's Budget, to aim at giving a further stimulus to investment in private industry. The question was, what sort of stimulus should be given, what was the most useful form it might take and what could be afforded in the context of this year's Budget? These are two important points.

Hon. Members opposite have been making the point that some companies are deterred from investing by reason of shortage of funds, others not because of shortage of funds but because they reckon that the net gain, after taxation, which they will make on their investments will not be sufficient to justify the risk. I do not think it is possible to arrive at exact proportions; the one reason applies to some companies, the other reason to others.

Apart from the investment allowances, among the possibilities which my right hon. Friend considered was the possibility of doubling the initial allowances. That would undoubtedly help the companies which are immediately short of cash. On the other hand, the new investment allowances, in the long-term, as the hon. Member for Gloucestershire, South (Mr. Crosland) said, is noticeably more to the advantage of the company. We have worked out some calculations which suggest that on a capital investment of £1,000 for a plant with a 12½ per cent. reducing balance, the normal depreciation rate for plant as a whole, the advantage of a 20 per cent. investment allowance compared with the 40 per cent. initial allowance is 6 per cent. on £1,000, which is quite a substantial advantage.

It is quite clear, taking the life of the asset as a whole, that in almost every conceivable case the company will gain a greater advantage from the 20 per cent. investment allowance than from a 40 per cent initial allowance. It is equally true that many companies may be more concerned with the immediate cash position. Here we come to my right hon. Friend's cash position. He had very little room for manoeuvre in this year's Budget, and had little opportunity for large tax concessions. Unfortunately, the cost of doubling the initial allowance would be £70 million. Therefore, there was no question whatever of introducing that in this year's Budget. If the cost for doing that for industry as a whole was £70 million, the cost of this alternative suggestion would also be very large. One cannot calculate the exact size, but hon. Members opposite, who supported the Amendment, themselves suggested that in their opinion a very large number of companies would probably avail themselves of this opportunity.

Mr. Crosland

Small companies.

Mr. Maudling

Yes, small companies; but a large number of small companies amounts to a fairly substantial amount of the present national industrial investment.

Any substantial proportion of £70 million would obviously be a sum which my right hon. Friend had to contemplate in the context of the Budget. The great advantage of the investment allowances is that it throws no immediate strain upon the Budget. The actual cost in terms of tax revenue will increase progressively year by year, but it will increase, and to the extent to which it is successful in its purpose of stimulating further investment it will thereby bring into being further income-creating and thus tax-producing assets. In fact, it will to some extent pay for itself as it goes along.

Certainly, in the context of a Budget finely drawn and with little room for large concessions or movements in either direction, the investment allowance is more attractive than the initial allowance. It would be quite impossible for my right hon. Friend to give an option to the taxpayer in these circumstances which might cost him literally tens of millions of pounds. That is the practical reason why my right hon. Friend could not adopt this suggestion and cannot now adopt the Amendments put forward by hon. Members opposite.

I agree that from the administrative point of view I see no reason why the proposal should not be worked. It contains many attractions, but the fact is that it might be very expensive. It certainly would be quite uncertain for some time how expensive it would be, and in the context of this year's Budget my right hon. Friend does not think that he could possibly undertake such a large additional obligation upon the revenue.

Mr. Gaitskell

The Economic Secretary has made a very strange speech. He began by agreeing with everything that my hon. Friends had said. Indeed, there was nothing with which he disagreed. He accepted the cogency of my hon. Friends' arguments and was impressed by the fact that they had quoted from one of his earlier speeches, and the hon. Gentleman appears still to hold the views that he expressed on that occasion. At the end of it all, however, there is no possibility of accepting the Amendment because of grounds which seem to me extraordinarily feeble.

We are told that the effect of the initial allowances last year was not inconsiderable. Surely, that in itself is an argument for allowing this instrument and stimulus to operate. But no, it is not to be allowed to operate, because the Amendment would cost too much money. Exactly what is involved? As my hon. Friends have said, and as the Economic Secretary again agrees, the number of cases in which companies would prefer the option of the 40 per cent. initial allowance compared with the 20 per cent. investment allowance is almost certainly pretty small.

Mr. Maudling

indicated dissent.

Mr. Gaitskell

The hon. Gentleman disagrees.

Mr. Maudling

The right hon. Gentleman's colleagues behind him suggested that the number of companies would almost certainly be fairly large.

Mr. Gaitskell

Oh, no. My hon. Friends the Members for Stechford (Mr. Roy Jenkins) and Gloucestershire, South (Mr. Crosland) said that there were probably obvious advantages in opting for the investment allowances, and so there are. The Economic Secretary gave the figures involved. Quite clearly, in the case of the investment allowance, there is some thing which is a gift or a subsidy, or a definite and final remission of taxation, whatever one likes to call it, whereas in the case of the initial allowance, if I may say so in the presence of my hon. Friend the Member for Gloucestershire, South, there is always the possibility, at any rate, that one might have to repay, so to speak, the credit which is advanced. I do not think there is any doubt that there is a clear gain in cash terms over the period as a result of the investment allowance. Therefore, on that ground alone, I do not think that the cost argument is very impressive.

Not merely is it not impressive for that reason, but it is not impressive because in the long run, in so far as there are any firms which opt for the 40 per cent. initial allowance, the Treasury and the Chancellor of the Exchequer stand to gain from it as compared with the Bill in its present form. I do not think the Economic Secretary will disagree.

What we are really told, therefore, is that the Chancellor cannot afford to take any kind of a risk with the immediate position. He is only concerned with that; he is not concerned with the more distant position. That seems to me to be extraordinarily short-sighted, and I am surprised that such an argument should be put forward. In some conditions it might be called dishonest. It is suggested that all they are concerned with is the immediate situation and that they are in fact deliberately deciding to fortify the Revenue at the moment at the expense of the Revenue later on. That is what it amounts to.

10.15 p.m.

I think that the Economic Secretary will agree that if a firm opts for the initial allowance in the first period, which might be quite a long period if it goes on buying new machinery year by year, then it pays less tax but it is almost certainly going to have an increase in its undistributed profits. Unless it decides to use the benefit which it obtains as a result of the lower taxes by paying out increased dividends, that is bound to be the case. I do not know whether the hon. Gentleman seriously argues that the gain which a firm gets in the first year as a result of opting for the initial allowance will all be dissipated in dividends. If he is not saying that, then clearly the money which the Exchequer forgoes will be saved. It must be one or the other.

Mr. Maudling

Surely the point is that it would be spent on new investment.

Mr. Gaitskell

The Economic Secretary seems to be a little muddled. We are discussing the initial allowance as against the investment allowance. In either case the new equipment is bought. The question is whether the financial loss to the Treasury in the case of the initial allowance, which I concede is larger in the first year, is or is not offset by an increase in corporate saving. If the companies concerned did not pay in increased dividends the benefits they obtained in remission of taxation, they must in fact have saved them.

Indeed, I have used this argument from the Treasury Bench myself, and I do not think that the hon. Gentleman objected to it then. The truth is that, by and large, assuming no increase in dividends, what the Treasury may lose by the initial allowance will be offset by an increase in corporate savings. Therefore, there is no financial argument here at all.

I am surprised that the hon. Gentleman should have been briefed in this way. Even if the officials of the Treasury did not understand it, the officials of the economic section certainly do understand it and frequently put forward this argument themselves. One is left with no argument which is worth anything at all in opposition to the Amendment.

Let me briefly resume the powerful arguments, as we believe them to be, in favour of giving the option. First, we agree on the need for doing everything we can to stimulate additional investment in plant and machinery. We do not need to have any argument about the sincerity of the Government in seeking to achieve this objective, as we had an argument about their sincerity over industrial building.

Secondly, there is already in the Bill an option in the case of mining and shipbuilding. If it exists for those industries—and I admit that probably the case or the preference for the initial allowance would be rather stronger there than in some other cases—why should not it also apply in other industries as well? What conceivable reason is there for limiting this option to those two industries alone, especially as I do not expect many people will take advantage of it? It is precisely the people who need it and who are rather short of cash who will take advantage of it. They will be prepared to make the sacrifice involved in not adopting the investment allowance. I do not see that the reply which we have had is very much better than the reply we had on industrial building. I did not like that reply from the Chancellor, and it is no better when it comes from the Economic Secretary.

This is an Amendment which, as my hon. Friend rightly stressed, would be of special benefit to small businesses. The Government rejected an earlier Amendment which went a good deal further and which we admitted had certain disadvantages because it also conceded additional investment allowances to businesses which were not small. Here we have something of which advantage will be taken only by those who really need it. It will essentially be for the benefit of smaller businesses which are involved in heavy capital expenditure.

The amount of the additional immediate loss of revenue which the Chancellor might suffer is in any case bound to be very small, and it will be precisely or very nearly precisely offset by an increase in company savings. It cannot be seriously suggested that to accept the Amendment would have any inflationary consequences except in so far as it might lead to an additional investment, which in any case the Chancellor wants to see.

For all those reasons, I feel that the case is overwhelming. I hope that the Chancellor will not continue in his stubborn manner. We have had no response at all to this series of constructive Amendments. We are fortunately in agreement about the objective, which is to increase investment.

I hope the Chancellor will look at this matter again. It is a simple affair; there is no question of complexity. I do not know whether when he looked at how much this would cost him it was pointed out that it would be offset by a rise in company savings. I do not know whether that point has been put to him by the specialists. If not, I ask him to seek their advice. This is a strong Amendment and unless the Chancellor gives way I shall certainly advise my hon. Friends to press it to a Division.

Mr. Roy Jenkins

It is a little disappointing not to have had a word from the Chancellor himself on this matter, not because the Economic Secretary did not apply himself to the points raised earlier but because the Economic Secretary admitted—which was rather unusual—that there was no administrative difficulty about the Amendment, that he accepted our arguments and that it was purely a Budgetary matter, a matter of the Chancellor's decision that we could not afford to do this.

I do not know whether the Chancellor remembers—I expect he does—that yesterday when he was speaking about Income Tax he gave us his view—they were rather unusual words—that we were not yet quite "collared up" to our resources. In his view there was a little slack in the economy. That was an important announcement and one with which we on this side of the Committee do not disagree. In view of that import

ant announcement and of the Economic Secretary's free admission that this would probably stimulate investment in small companies, does not the Chancellor feel able to make some sort of concession in this direction?

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

The Committee divided: Ayes, 225; Noes, 211.

Division No. 143.] AYES [10.24 p.m.
Aitken, W. T. Galbraith, Rt. Hon. T. D. (Pollok) Manningham-Buller, Rt. Hn. Sir Reginald
Alport, C. J. M. Galbraith, T. G. D. (Hillhead) Markham, Major Sir Frank
Amery, Julian (Preston, N.) Garner-Evans, E. H. Marlowe, A. A. H.
Amory, Rt. Hon. Heathcoat (Tiverton) George, Rt. Hon. Maj. G. Lloyd Marples, A. E.
Anstruther-Gray, Major W. J. Godber, J. B. Marshall, Douglas (Bodmin)
Arbuthnot, John Gomme-Duncan, Col. A. Maude, Angus
Assheton, Rt. Hon. R. (Blackburn, W.) Gower, H. R. Maudling, R.
Astor, Hon. J. J. Graham, Sir Fergus Maydon, Lt.-Comdr. S. L. C
Baldock, Lt.-Cmdr. J. M Grimston, Hon. John (St. Albans) Medlicott, Brig. F.
Baldwin, A. E. Grimston, Sir Robert (Westbury) Mellor, Sir John
Barlow, Sir John Hall, John (Wycombe) Molson, A. H. E.
Baxter, Sir Beverley Hare, Hon. J. H. Mott-Radclyffe, C. E.
Beach, Maj. Hicks Harris, Frederic (Croydon, N.) Nabarro, G. D. N.
Bell, Ronald (Bucks, S.) Harrison, Col. J. H. (Eye) Neave, Airey
Bennett, Dr. Reginald (Gosport) Harvey, Air Cdr. A. V. (Macclesfield) Nicholson, Godfrey (Farnham)
Bennett, William (Woodside) Harvey, Ian (Harrow, E.) Nicolson, Nigel (Bournemouth, E.)
Birch, Nigel Harvie-Watt, Sir George Noble, Comdr. A. H. P.
Bishop, F. P. Heald, Rt. Hon. Sir Lionel Nutting, Anthony
Black, C. W. Heath, Edward Oakshott, H. D.
Bossom, Sir A. C. Henderson, John (Cathcart) O'Neill, Hon. Phelim (Co. Antrim, N.)
Boyd-Carpenter, Rt. Hon. J. A. Hill, Dr. Charles (Luton) Ormsby-Gore, Hon. W. D.
Boyle, Sir Edward Hinchingbrooke, Viscount Orr-Ewing, Charles Ian(Hendon, N.)
Braine, B. R. Hirst, Geoffrey Osborne, C.
Braithwaite, Sir Albert (Harrow, W.) Holland-Martin, C. J. Page, R. G.
Braithwaite, Sir Gurney Hollis, M. C. Perkins, Sir Robert
Bromley-Davenport, Lt.-Col. W. H. Hope, Lord John Peto, Brig. C. H. M.
Brooke, Henry (Hampstead) Hopkinson, Rt. Hon. Henry Pickthorn, K. W. M.
Brooman-White, R. C. Hornsby-Smith, Miss M. P. Pilkington, Capt. R. A
Browne, Jack (Govan) Horobin, I. M. Pitman, I. J.
Buchan-Hepburn, Rt Hon. P. G. T. Horsbrugh, Rt. Hon. Florence Pitt, Miss E. M.
Bullard, D. G. Howard, Hon. Greville (St. Ives) Price, Henry (Lewisham, W.)
Bullus, Wing Commander E. E. Hudson, Sir Austin (Lewisham, N.) Prior-Palmer, Brig. O. L.
Burden, F. F. A. Hurd, A. R. Profumo, J. D.
Butcher, Sir Herbert Hutchison, Sir Ian Clark (E'b'rgh, W.) Raikes, Sir Victor
Butler, Rt. Hon. R. A. (Saffron Walden) Hylton-Foster, H. B. H. Rayner, Brig. R.
Campbell, Sir David Iremonger, T. L. Redmayne, M.
Cary, Sir Robert Jenkins, Robert (Dulwich) Remnant, Hon. P.
Channon, H. Jennings, Sir Roland Renton, D. L. M.
Clarke, Col. Ralph (East Grinstead) Johnson, Eric (Blackley) Ridsdale, J. E.
Clyde, Rt. Hon. J. L. Johnson, Howard (Kemptown) Roberts, Peter (Heeley)
Cole, Norman Kaberry, D. Robertson, Sir David
Colegate, W. A. Kerby, Capt. H. B. Robson-Brown, W.
Conant, Maj. Sir Roger Kerr, H. W. Rodgers, John (Sevenoaks)
Cooper-Key, E. M. Lambert, Hon. G. Roper, Sir Harold
Craddock, Beresford (Spelthorne) Lambton, Viscount Russell, R. S.
Crookshank, Capt. Rt. Hon. H. F. C. Langford-Holt, J. A. Ryder, Capt. R. E. D.
Crosthwaite-Eyre, Col. O. E. Leather, E. H. C. Savory, Prof. Sir Douglas
Crouch, R. F. Legge-Bourke, Maj. E. A. H. Schofield, Lt.-Col. W.
Crowder, Sir John (Finchley) Legh, Hon. Peter (Petersfield) Scott-Miller, Cmdr. R.
Crowder, Petre (Ruislip—Northwood) Lennox-Boyd, Rt. Hon. A. T. Simon, J. E. S. (Middlesbrough, W.)
Darling, Sir William (Edinburgh, S.) Lindsay, Martin Smithers, Peter (Winchester)
Deedes, W. F. Linstead, Sir H. N. Snadden, W. McN.
Digby, S. Wingfield Lockwood, Lt.-Col. J. C. Soames, Capt. C.
Donaldson, Cmdr. C. E. McA. Lucas, Sir Jocelyn (Portsmouth, S.) Spearman, A. C. M.
Donner, Sir P. W. Lucas, P. B. (Brantford) Speir, R. M.
Doughty, C. J. A. Lucas-Tooth, Sir Hugh Spens, Rt. Hon. Sir P.(Kensington, S.)
Drayson, G. B. McCallum, Major D. Stanley, Capt. Hon. Richard
Drewe, Sir C. Macdonald, Sir Peter Stevens, Geoffrey
Duthie, W. S. McKibbin, A. J. Steward, W. A. (Woolwich, W.)
Elliot, Rt. Hon. W. E. Mackie, J. H. (Galloway) Stewart, Henderson (Fife, E.)
Finlay, Graeme Maclay, Rt. Hon. John Stoddart-Scott, Col. M.
Fisher, Nigel Maclean, Fitzroy Storey, S.
Fleetwood-Hesketh, R. F. Macleod, Rt. Hon. Iain (Enfield, W.) Stuart, Rt. Hon. James (Moray)
Fletcher-Cooke, C. MacLeod, John (Ross and Cromarty) Summers, G. S.
Ford, Mrs. Patricia Macpherson, Niall (Dumfries) Sutcliffe, Sir Harold
Fort, R. Maitland, Comdr. J. F. W. (Horncastle) Taylor, William (Bradford, N.)
Fraser, Sir Ian (Morecambe & Lonsdale) Maitland, Patrick (Lanark) Teeling, W.
Fyfe, Rt. Hon. Sir David Maxwell
Thomas, P. J. M. (Conway) Wakefield, Edward (Derbyshire, W.) Williams, Gerald (Tonbridge)
Thompson, Kenneth (Walton) Wall, Major Patrick Williams, R. Dudley (Exeter)
Thompson, Lt.-Cdr. R. (Croydon, W.) Ward, Hon. George (Worcester) Wills, G.
Thornton-Kemsley, Col. C. N. Ward, Miss I. (Tynemouth) Wilson, Geoffrey (Truro)
Turner, H. F. L. Waterhouse, Capt. Rt. Hon. C. Wood, Hon. R.
Turton, R. H. Watkinson, H. A.
Vane, W. M. F. Webbe, Sir H. (London & Westminster) TELLERS FOR THE AYES:
Vaughan-Morgan, J. K. Wellwood, W. Mr. Studholme and
Vosper, D. F. Williams, Rt. Hon. Charles (Torquay) Mr. Robert Allan.
Acland, Sir Richard Hayman, F. H. Pargiter, G. A.
Adams, Richard Henderson, Rt. Hon. A. (Rowley Regis) Parker, J.
Albu, A. H. Herbison, Miss M. Paton, J.
Allen, Scholefield (Crewe) Hobson, C. R. Pearson, A.
Anderson, Frank (Whitehaven) Holman, P. Pearl, T. F.
Bacon, Miss Alice Holmes, Horace Porter, G.
Baird, J. Holt, A. F. Price, J. T. (Westhoughton)
Bartley, P. Hoy, J. H. Price, Philips (Gloucestershire, W.)
Bellenger, Rt. Hon. F. J. Hubbard, T. F. Pryde, D. J.
Benn, Hon. Wedgwood Hughes, Cledwyn (Anglesey) Pursey, Cmdr. H.
Benson, G. Hughes, Emrys (S. Ayrshire) Rankin, John
Beswick, F. Hughes, Hector (Aberdeen, N.) Reeves, J.
Blackburn, F. Hynd, H. (Accrington) Reid, Thomas (Swindon)
Blenkinsop, A. Hynd, J. B. (Attercliffe) Rhodes, H.
Blyton, W. R. Irvine, A. J. (Edge Hill) Robens, Rt. Hon. A.
Boardman, H. Irving, W. J. (Wood Green) Roberts, Albert (Normanton)
Bottomley, Rt. Hon. A. G. Janner, B. Robinson, Kenneth (St. Pancras, N.)
Bowden, H W. Jay, Rt. Hon. D. P. T. Ross, William
Bowen, E. R. Jeger, George (Goole) Royle, C.
Braddock, Mrs. Elizabeth Jeger, Mrs. Lena Shackleton, E. A. A.
Brockway, A. F. Jenkins, R. H. (Stechford) Short, E. W.
Brook, Dryden (Halifax) Johnson, James (Rugby) Shurmer, P. L. E.
Broughton, Dr. A. D. D. Jones, David (Hartlepool) Simmons, C. J.(Brierley Hill)
Brown, Thomas (Ince) Jones, Frederick Elwyn (West Ham, S.) Skeffington, A. M.
Burke, W. A. Jones, Jack (Rotherham) Slater Mrs. H. (Stoke-on-Trent)
Burton, Miss F. E. Jones, T. W. (Merioneth) Slater, J. (Durham, Sedgefield)
Butler, Herbert (Hackney, S.) Keenan, W. Smith, Ellis (Stoke, S.)
Callaghan, L. J. Kenyon, C. Smith, Norman (Nottingham, S.)
Carmichael, J. Key, Rt. Hon. C. W. Snow, J. W.
Castle, Mrs. B. A. King, Dr. H. M. Sorensen, R. W.
Champion, A. J. Lawson, G. M. Soskice, Rt. Hon. Sir Frank
Chetwynd, G. R. Lee, Frederick (Newton) Sparks, J. A.
Coldrick, W. Lewis, Arthur Steele, T.
Collick, P. H. Lindgren, G. S. Stokes, Rt. Hon. R. R.
Cove, W. G. Logan, D. G. Strauss, Rt. Hon. George (Vauxhall)
Craddock, George (Bradford, S.) MacColl, J. E. Summerskill, Rt. Hon. E.
Crosland, C. A. R. McInnes, J. Sylvester, G. O.
Cullen, Mrs. A. McKay, John (Wallsend) Taylor, Bernard (Mansfield)
Dalton, Rt. Hon. H. McLeavy, F. Taylor, John (West Lothian)
Davies, Ernest (Enfield, E.) MacMillan, M. K. (Western Isles) Taylor, Rt. Hon. Robert (Morpeth)
Davies, Harold (Leek) McNeil, Rt. Hon. H. Thomas, Iorwerth (Rhondda, W.)
Delargy, H. J. MacPherson, Malcolm (Stirling) Thomas, Ivor Owen (Wrekin)
Dodds, N. N. Mainwaring, W. H. Thomson, George (Dundee, E.)
Donnelly, D. L. Mallalieu, E. L. (Brigg) Thornton, E.
Edelman, M. Mallalieu, J. P. W. (Huddersfield, E.) Ungoed-Thomas, Sir Lynn
Evans, Albert (Islington, S.W.) Mann, Mrs. Jean Usborne, H. C.
Evans, Edward (Lowestoft) Manuel, A. C. Wallace, H. W.
Evans, Stanley (Wednesbury) Marquand, Rt. Hon. H. A. Warbey, W. N.
Fernyhough, E. Mason, Roy Weitzman, D.
Fienburgh, W. Mayhew, C. P. Wells, William (Walsall)
Finch, H. J. Mellish, R. J. West, D. G.
Fletcher, Eric (Islington, E.) Mikardo, Ian Wheeldon, W. E.
Foot, M. M. Mitchison, G. R. White, Mrs. Eirene (E. Flint)
Forman, J. C. Monslow, W. White, Henry (Derbyshire, N.E.)
Fraser, Thomas (Hamilton) Moody, A. S. Whiteley, Rt. Hon. W.
Gaitskell, Rt. Hon. H. T. N. Morgan, Dr. H. B. W. Wing, George
Gibson, C. W. Morley, R. Wilcock, Group Capt. C. A. B.
Gooch, E. G. Morris, Percy (Swansea, W.) Wilkins, W. A.
Gordon-Walker, Rt. Hon. P. C. Mort, D. L. Willey, F. T.
Greenwood, Anthony Moyle, A. Williams, David (Neath)
Grey, C. F. Mulley, F. W. Williams, Rev. Llywelyn (Abertillery)
Griffiths, David (Rother Valley) Nally, W. Williams, W. R. (Droylsden)
Griffiths, Rt. Hon. James (Llanelly) Neal, Harold (Bolsover) Willis, E. G.
Griffiths, William (Exchange) Noel-Baker, Rt. Hon. P. J. Winterbottom, Richard (Brightside)
Grimond, J. Oldfield, W. H. Woodburn, Rt. Hon. A.
Hall, Rt. Hon. Glenvil (Colne Valley) Oliver, G. H. Wyatt, W. L.
Hamilton, W. W. Orbach, M. Yates, V. F.
Hannan, W. Oswald, T. Younger, Rt. Hon. K.
Hargreaves, A. Padley, W. E.
Harrison, J. (Nottingham, E.) Paling, Rt. Hon. W. (Dearne Valley) TELLERS FOR THE NOES:
Hastings, S. Paling, Will T. (Dewsbury) Mr. Popplewell and Mr. Rogers.

10.30 p.m.

Mr. Jay

I beg to move, in page 10, line 30, at the end, to insert: or (b) furniture or furnishings. I should like to give notice straight away that this is an Amendment which affects the Board of Trade because it concerns the furniture industry. The Committee has been treated in rather an extraordinary way by the Government this afternoon. I said at the beginning of the debate that the Government seemed to be in some state of disarray, and I think the whole procedure since then has proved the truth of what I said.

The Treasury Ministers are obviously overworked and in a state of exhaustion. Two Board of Trade Ministers came in and then went out again without making any contribution on their own subject, and we have had the first appearance in this debate of the Lord Advocate who, I understand, has been a Member of this House for some years, although we were not all aware of that earlier. Perhaps he will make his maiden speech on this Amendment.

It may be due to this curious position of the Government that absolutely no concession has been made so far by the Chancellor in the whole course of the proceedings on this Finance Bill. I mention that because this Amendment is an eminently modest, moderate, sensible and reasonable one which the Government are almost bound to feel anxious to accept. It is unusual in the course of a Finance Bill for the Chancellor to make no concessions at all, but so far his attitude seems to have been that he has made up his mind on all these matters and he will not listen to anything which the House of Commons says.

Mr. Stevens

For the sake of accuracy, an earlier Amendment on this Clause dealing with tunnelling and excavating was a concession made by the Chancellor.

Mr. Butler

Furthermore, the right hon. Gentleman will realise that I deliberately said that the Amendments and the speeches on the matter of buildings would be studied by the Government, so he is rather exaggerating his language.

Mr. Jay

That shows how easily the Chancellor can come to meet us in the present case, also.

What this Amendment seeks so modestly to do is to exclude furniture and furnishings from the scope of the investment allowance although it would leave the ordinary wear and tear allowance and the initial allowance still to be enjoyed by furniture and furnishings. Up till now in this debate we have been seeking in certain directions to extend the scope of the investment allowance because in our view there are some cases in which it should be extended, but there are others, such as this, where it should be to a slight degree restricted.

Since this allowance is an innovation in our tax law, we should be clear what it is that the Committee is being asked to do. The investment allowance is not confined to manufacturing industry and agriculture. It applies, in effect, to any business, and that includes the distributive trades, commerce, banking, insurance companies and, I imagine, the accountancy profession about which there was a certain discussion between the hon. Gentleman the Member for Langstone (Mr. Stevens) and my hon. Friend the Member for Sowerby (Mr. Houghton) yesterday. Without going into the ethics of that argument, I think the hon. Gentleman will agree that his profession is also included in the investment allowance.

Secondly, it affects all plant and not just machine tools and industrial equipment in the sense in which we normally think of it. The right hon. and learned Gentleman the Solicitor-General appears to be about to reply to this Amendment, and he can tell me if I am right, but, as I understand, the allowance will include not merely industrial equipment and plant in the ordinary sense, but typewriters, calculating machines, office furniture and furnishings.

The Committee should realise, therefore, that this Bill gives the investment allowance—which amounts to a subsidy—to office furniture in the office of a bank, insurance company, accountant's office or in a distributive business. It seems to us highly questionable if that is what this Committee, or even the Chancellor himself, really seeks to do by the allowance. Indeed, I think we are in danger here of doing what, looking back on it, I think was mistakenly done by the Government immediately after the war when the initial allowance was first introduced, namely, of including business motor-cars, so-called, within its scope. What we then did, and what the House did when it approved the allowance, was to think of automatic looms and such things; but while we had that intention, our action also gave the benefit of initial allowances to ordinary passenger motor-cars used partly or wholly in any business of any kind. We have seen, and I think that the Chancellor agrees with me, the astonishing effect which the initial allowances had on the production of passenger cars in this country. The Economic Survey shows that after the restoration of the initial allowances, the total value of the increase of sales in the home market exceeded the rise in all industrial investment in the year after allowances were restored

The Chancellor has admitted the force of that argument by omitting motor-cars from the scope of the investment allowances; and by doing that he has, incidentally, admitted that it is possible to discriminate in the case of investment allowances between the different types of plant, if one can use the word in this sense, to which they should apply. Yet, in spite of this experience, I believe that we are in danger of making a similar mistake in the case of office furniture.

It is an admirable thing to have up-to-date and cheerful furniture in the office as well as efficient and modern machinery in the factory; and I am glad to see that the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) and the hon. Member for Langstone agree with me. But that does not prove the case for proposing to grant what amounts to a subsidy to that furniture through the medium of investment allowances.

Our proposal is an exceedingly moderate one. We agree with the Chancellor—and we have not included type-writers—that typewriters in a bank, or shop, or professional office, should get the new investment allowance in addition to the ordinary wear and tear allowance. We agree that the furniture should get the initial allowance in addition to the wear and tear allowance, but what we then suggest is that the furniture should not, in addition to the wear and tear allowance and the initial allowance, get the investment allowance as well. I have said that our proposal is a moderate one. It is also a most diffident and sensible proposal and I am astonished at my own moderation in advancing it. I cannot see that any of the varied array of Ministers on the Government Front Bench could have the "face" to get up and object.

Mr. Erroll

I do hope that my right hon. Friend the Chancellor will resist the blandishments of the right hon. Member for Battersea, North (Mr. Jay) because, although his proposal may seem superficially attractive, it does not hold water. Surely if it is right to extend the investment allowances to typewriters, then it is also right to extend them to the desks on which those typewriters stand; or to the chair on which the typists sits.

We are always hearing that British industry is being urged to greater productivity, and surely the furniture of the production clerks and the production engineers which they must use in the course of their work is important; and it would be classed as office furniture. I know what lies behind this proposal; it is jealousy lest the manager may get a new desk. Such acrimony should not be allowed to creep into this subject.

Furniture is just as much a part of the equipment of industry as any other tools or equipment. I hope, therefore, that it will continue to qualify for the investment allowance, as it properly should do. I have always thought it rather comic that one should capitalise furniture. In the way it is knocked about it is much more of a revenue item, but since the Revenue has decided that it is a capital item it is only right that the investment allowance should apply to it.

10.45 p.m.

Mr. Mitchison

It depends upon the use to which the furniture is put. It is just like a motor-car in that respect. There was once a financier—no name, no pack-drill, for the man subsequently served a sentence—who had particularly magnificent offices. They were so magnificent that a shrewd friend of mine, on going to visit him, foretold his early end, and one ought to save that from happening if possible. One has a little difficulty about defining "furniture or furnishings," but there is a corresponding difficulty about defining "machinery or plant." I hope that the Solicitor-General will bear out some of the stories about what is plant.

In the past, when the horse did a lot more work than at present, for some obscure reason the horse that pulled a canal boat was plant, but the one that pulled a cab was not. The only clear decision was given in the case of a certain taxpayer who fell ill. As his business was taking shorthand notes he claimed that his body was plant and that he was entitled to medical expenses as a wear and tear allowance. I regret to say that he failed to get it.

One has to rely for a definition of "furniture or furnishings" upon the parallel of the elephant, which is singularly difficult to define and singularly easy to recognise. So, on the whole, is "furniture or furnishings." Having regard to the misuse to which furniture, like motor-cars, can be put by way of bamboozling the prospective investor, and having regard to our need for economy and therefore the discouragement of excessive expenditure on furniture, it sums to me not altogether unreasonable that furniture or furnishings should be exempted from what is, after all, a very special concession.

I have not carefully studied the rules for writing down furniture, but I should have thought that, on the whole, it was not likely to last very long and that a request for an investment allowance on something of that sort, even if for some purposes it has to be capitalised, was rather different from a request for an investment allowance on most kinds of plants and machinery and things like buildings.

I would not put the Amendment forward as a very logical sort of Amendment, but as a rather attractive one and an inducement towards that Spartan way of life after which, from time to time, the Tory Party has hankerings, usually for others rather than itself. I would expect to have some support from hon. Members opposite for this charming evening Amendment, if I may so call it.

Mr. Richard Adams (Wandsworth, Central)

I should like to say a few words in support of this very reasonable Amendment, and, since we are, I gather, to get a reply from the right hon. and learned Solicitor-General that will, at any rate, be a change from the other replies we have had today. There is always the hope that, as the other replies have all been in the negative, the Solicitor-General will surprise us all by giving an answer in the affirmative. Until he replies, we shall live in the hope that that may be so.

I see that we have with us the right hon. Gentleman the Minister of Health. It may even be that he may say a word or two on this subject, since his hospitals and other organisations are affected by this Amendment. But quite obviously, just as it is found reasonable on this occasion to exclude motor-cars from this provision, it follows logically that furniture, and furnishings likewise, should be removed, because they are open to the same kind of objection.

One could logically argue from the business point of view that the private motor-car used by the traveller and the director is much more essential and useful to the business than any form of furniture and furnishings. Therefore, if cars are excluded from this provision, in the same way furniture and furnishings ought to be excluded, because the door is wide open to refurnishings, and getting furniture which is not really necessary, just because of this additional investment allowance.

In fact, I think it would have this effect: as the Solicitor-General knows, furniture and furnishings are subject to the lowest rate of writing off under the terms of renewals; therefore, they must be regarded as less necessary than machinery and other plant and equipment. The result of bringing this extra 21 per cent. in the first year will be to encourage people to rush in and get unessential furniture and furnishings, in the same way as, as few years ago, they rushed in to buy private motor-cars, because there is this tremendous opportunity of the writing off in the first year. It is, therefore, reasonable to hope that the learned Solicitor-General will say that this is a small, unimportant, but very necessary Amendment, and that he has great pleasure in accepting it.

Mr. Cyril W. Black (Wimbledon)

I hope that the Amendment will not be accepted by the Committee, because the arguments which have been made in support of it have been based largely on the assumption that furnishing is a kind of luxury, and an unessential expenditure, and that, therefore, it is not anything to which any concession of this kind ought to be granted. That entirely ignores, for instance, the position of an industry such as the hotel industry, which is capable of being a very large dollar-earner, and which can only fulfill its part as a dollar earner and a servant of the public by maintaining its standard of furnishing at a very high level.

Any Member of this Committee who has any experience of the hotel business—as we all have from time to time when staying in hotels, if that is the only extent of our interest—must realise that there is a very great need in this country for our hotels to undertake quite extensive refurnishing to put themselves in the position to serve the public in the way in which the public ought to be served, and earn the dollars which they are capable of earning.

Mr. Jay

Does not the hon. Member think that is an argument for precisely the discrimination between different industries which we were advocating earlier this afternoon?

Mr. Adams

Would it not be the fact in the case of hotels that the furniture and fittings would be written off generally because they would be treated as part of the plant?

Mr. Black

No, I do not think so at all. It really is not possible in the field of furniture to differentiate between furniture bought for the purposes I have described and furniture bought for the kind of purposes which hon. Members opposite have wrongly described as unessential. I think it would be very damaging indeed to the purposes which this Committee should have in view in wishing to get the furnishings of the hotel industry of this country into a satisfactory and modern condition if the Amendment were accepted and I hope it will not be.

Mr. Crosland

The hon. Member for Wimbledon (Mr. Black) has mentioned hotels and we are all interested in hotels as dollar earners and hotels in which, in the course of our political duties, we have to stay. I entirely agree that anything we can do to help hotels to earn more dollars the better. But what single reform in British hotels would enable them to earn more dollars? It would not be anything to do with furniture. I can think of five different reforms in our hotel system which would attract more dollars and one would be reform of the licensing laws, which the hon. Member would rapidly oppose.

The Deputy - Chairman (Sir Rhys Hopkin Morris)


Mr. Crosland

I apologise, Sir Rhys, for going astray, but I was led astray by the suggestion that more comfortable beds or deeper armchairs in hotels would earn more dollars.

We are getting the question of the investment allowance out of perspective. On grounds of cost, the Treasury Bench has turned down Amendments to extend the system of investment allowance to small businesses, certain important industries, and so on. We have had a series of Amendments designed to give higher investment allowance to certain types of industry and all have been turned down on the ground that the Chancellor cannot afford them. Surely, if we are to see the question in perspective, it would be better for the Chancellor to make a little money available by not granting these allowances to furniture, but by making more available for the machine tool industry or small industries generally.

It is not a question of being anti-managerial and thinking that office furniture is of no importance at all—wanting people to sit on the floor—but a question of which we think is most important, new office furniture or new machinery for industry? The Solicitor General has not heard our debates today, but no doubt he has been informed of what has gone on and the number of suggestions which have been refused on the ground of cost. I hope he will say which he thinks more important, more office furniture or more machine tools?

Sir William Darling (Edinburgh, South)

The hon. Member for Gloucestershire, South (Mr. Crosland) seems to be misleading hon. Members who have not been here throughout the discussion on the Bill today, as he and I have been, by suggesting that no concession has been made to small businesses. The concession is made to small businesses equally with large businesses. The suggestion the hon. Member put forward that the Government are denying concessions to small businessess is not true; they are given the same concession as the large and the discrimination is made by the Opposition.

The Government are willing to give the maximum benefit to all and the Opposition is putting forward special pleadings of individual interests, for shipbuilding or machine tools. The Government are right in offering investment allowance to all industries. The suggestion of the Opposition now is preposterous in attempting to select a small part of industry. I am connected with the engineeering industry and for many years we have received the would-be purchaser of plant in a corrugated iron shed. Perhaps to the hon. Member for Maryhill (Mr. Hannan) this will not, in the circumstances, seem too hard.

11.0 p.m.

Hon. Members opposite say that it is good enough for engineers to do their business under an iron shed, but as our business has progressed we have found certain rising standards, and would-be purchasers of our machinery have insisted on having suitable rooms in which to see the plans and designs of our plant. Not only that, but the place must be appropriately furnished, and not just a bare floor and a picture of George Lansbury on the wall. To gentlemen from the Soviet Union, Stalin and Lenin might seem more appropriate. Our customers are drawn from a slightly wider and more profitable arena, so we must have a more appropriate place than the yard of a factory in which to present our products.

That is true not only of engineering, but of fashion goods. They cannot be sold from a stall or a barrow, but must be sold from a showroom in which the goods can be presented, with ladies wearing the garments and parading in front of the visitors. What the Opposition seek to do, therefore, is to hinder the development of our export trade. Their Amendment, if accepted, would do away entirely with the value of presentation; and presentation is just as important as production. Unless goods are adequately presented, they will not appeal to the buyer and will not be sold.

I notice that the hon. and learned Member for Kettering (Mr. Mitchison) has left the Chamber. In his usual ponderous way, affected by ponderous argument, he put forward what he thought was a very convincing argument. He told us of a would-be wealthy financier in the City of London who had a very elaborate and splendidly furnished office. This office fell under the bane of the criticism of the hon. and learned Member for Kettering. But if it was adequately and properly furnished, as it should have been, this financier would not have had the misfortune which, apparently, befell him. A better equipped office would have secured his stability and a great financial house might well have been established in the City of London.

I therefore hope that the powerful arguments of my hon. Friends on this side will not require any reply from the Solicitor-General. The absurdity of the arguments put forward by the Opposition defeats themselves, and I hope that without further ado we will defeat the Amendment.

Mr. Jay

Before he sits down, can the hon. Member tell us whether he agrees with the Government's decision to exclude motor-cars from the investment allowance? We should very much like to have his views.

Sir W. Darling

The right hon. Gentleman must not interrogate me—

The Temporary Chairman (Mr. George Thomas)

The hon. Member will be out of order if he pursues the question.

Sir W. Darling

On a point of order. Should your rebuke, Mr. Thomas— I admit it was deserved—not be addressed to the right hon. Member for Battersea, North (Mr. Jay) and not to me?

The Temporary Chairman

If the hon. Member thinks it over, I think he will find that it was.

Mr. Roy Jenkins

I am extremely sorry, Mr. Thomas, that you did not feel able to allow the hon. Member for Edinburgh, South (Sir W. Darling) to reply to that important intervention, but even though we were not able to have his speech, as it were, rounded off in the way that we would have liked by an answer to that important question, it was extremely agreeable to have him intervening in our debates after a long period of silent attendance this afternoon. I hope that he will not feel inhibited later in the night from speaking frequently and, if necessary, at greater length than he has done up to now.

There is only one point on which the hon. Member seems to be confused. He thought that my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) was a product of Balliol. In view of the strictures which the hon. Member for Louth (Mr. Osborne) felt it necessary to bring forward in the Committee yesterday against people who had had this misfortune, I must hasten to defend my hon. Friend and to assure the hon. Member for Edinburgh, South that my hon. Friend has never been near Balliol.

I am a little confused as to where we stand on the Amendment. Certain arguments have been adduced from the other side relating to the hotel industry and, so far as the hon. Member for Edinburgh, South was concerned, to the distributive trades and to retail selling.

Sir W. Darling

And wholesale.

Mr. Jenkins

All right; wholesale as well.

Sir W. Darling

And finance.

Mr. Jenkins

The hon. Member draws the net very wide indeed, but I think it is also true that when he was talking about the selling of fashions, he was not thinking primarily of the engineering trade or even of finance, but mainly about the retail and wholesale trades.

I am not sure where we stand without this Amendment, so far as the hotel business and the retail and wholesale businesses are concerned. I hope the Solicitor-General will give us information about this. When the hon. Member for Wimbledon (Mr. Black) says that it is extremely important that the hotel business should be encouraged, and that this Amendment would be a deterrent, we must remember that we start from a position in which the Chancellor, as I understand, has deliberately decided that he does not wish to give the hotel industry, or the wholesale and retail trades the same advantages which he is giving to the manufacturing industries. He does not allow the Clause to apply to their buildings. It applies to manufacturing buildings, but not to buildings of the retail trade or the hotel industry.

Therefore, the Chancellor has in mind some discrimination against enterprises of this sort. I am not sure how far the discrimination goes at present. If this Amendment were not carried, would furniture in hotels, carpets in departments, tables in bookshops, be able to attract investment allowance? There was some force in what the hon. Member for Wimbledon said. The argument of the right hon. Member for Battersea, North (Mr. Jay) did not introduce a new principle of discrimination. It is already there. It is merely a question of to what one extends the discrimination.

The Solicitor-General (Sir Reginald Manningham-Buller)

We have had an entertaining debate on the exclusion of furniture and furnishings from the provisions of this Clause. The hon. Member for Stechford (Mr. Roy Jenkins) said he did not know where he stood. I hope I shall be able to make clear what the effect of this Amendment would be. Then I hope the Committee will agree that it cannot properly be described as a modest, sensible, or reasonable Amendment.

While it may not come as a surprise to the hon. Member for Wandsworth (Mr. Adams), I fear that the Government cannot accept the Amendment. Its effect would be to treat furniture and furnishings, no matter for what purpose they were used, in precisely the same way as private motor-cars, so that no investment allowance would be obtainable in respect of any purchase of such items.

To be able to bring purchases of furniture and furnishings within this Clause one would have to establish that the furniture and furnishings were to be regarded as plant or machinery for tax purposes. Whether or not furniture and furnishings can be so regarded must depend in every case on the nature of the business and the items concerned, and the use to which they are put. It will be, in disputed cases, a matter for the Commissioners, and ultimately, perhaps, for the courts to determine whether particular items of furniture and furnishings can be treated as plant or machinery for a particular business.

The hon. and learned Member for Kettering (Mr. Mitchison) asked whether horses were or were not plant or machinery. He indicated that in some cases and for some purposes they were and for some purposes they were not. Horses cannot be described as either furniture or furnishings; however slowly a race horse may run, it could never receive the benefit of investment allowances, as far as one can see.

It seems that, in practice, the result would be that most items which could be regarded as constituting plant or machinery would fall into two categories—either what one might call furniture and furnishings for the offices, canteens and rest rooms of businesses generally of furniture and furnishings generally for the hotel and catering trade. Those are the two classes.

The right hon. Gentleman referred only to the first class and seemed to think that it would be a mistake to make an investment allowance available in respect of expenditure on office furniture. I entirely disagree with him. I do not think it is necessary for me to repeat the cogent arguments advanced on the point by my hon. Friends the Members for Altrincham and Sale (Mr. Erroll) and Wimbledon (Mr. Black). [HON. MEMBERS: "And Edinburgh, South."] The important part of the speech of my hon. Friend the Member for Edinburgh, South (Sir W. Darling) was the emphasis which he placed on the necessity to present goods of any description properly.

Furniture of the kind to which I have referred qualifies for initial allowances and in my submission is not less deserving of the greater inducement to modernisation and expansion which is to be provided by the investment allowances than, for instance, a cinema. No logical reason has been advanced for excluding furniture of that category for hotels from the benefit of the investment allowances, and hon. Members opposite have put forward no reason for discrimination against the hotel industry. I am sure that such discrimination would be opposed not only by those in that industry, but also by those concerned with earning foreign exchange from the tourist trade.

Mr. Adams

If that argument is valid, why are not the allowances given to hotel buildings?

The Solicitor-General

That has been discussed earlier and there is no reason for me to go into it further.

Mr. Jay

Surely this is relevant. Why does the right hon. and learned Gentleman not apply the argument which he is now using to hotel buildings?

The Solicitor-General

Because I am dealing with an Amendment which proposes that the investment allowance should not be given to furniture or furnishings. If I accepted the right hon. Gentleman's invitation, you might have the same sort of observation to make to me, Mr. Thomas, as you made to one of my hon. Friends.

Mr. Jay

In what respect does the argument which the right hon. and learned Gentleman is now advancing apply to furniture but not to buildings— or, for that matter, to motor-cars? That is obviously relevant to this debate.

The Solicitor-General

I am endeavouring to answer arguments which have been advanced by the right hon. Gentleman and others. He said nothing about buildings, and if I were to deal with buildings now I should be out of order.

I will come to the second question which was raised as an argument in favour of the Amendment. I have dealt with the effect of the acceptance of the Amendment. It would exclude from all possibility of investment allowance all types of office, canteen and restaurant furniture and furniture for the hotel and catering industries.

11.15 p.m.

One argument which was advanced is that it is open to abuse, just as the inclusion of motor-cars would be. When we come to examine it, the two cases are not on all fours. There is a very limited possibility of abuse because, I would emphasise, first of all, that the investment allowance can only be claimed in relation to plant or machinery in use in a trade or business, etc. It would not be possible for anyone letting a house furnished, for instance, who bought new furniture to put in the house before he let it, to claim an investment allowance, because he would not be engaged in a trade or business, but would be taxed in respect of casual earnings in respect of the rent and no question of an investment allowance would arise.

There may be a possibility of a private use of motor-cars owned by a business, but there is very little possibility of the misuse of office furniture or, indeed, of the private use of hotel furniture by the proprietor—a very limited possibility compared with the use of motor-cars.

Again, there is a very little likelihood of buying for re-sale, because if furniture is bought for resale, the second-hand value is normally considerably less than the new value. But there is a possibility, which one must face, of a collusive arrangement being made, whereby one person buys furniture to get the allowance, and it does constitute plant for his business—otherwise, he would not get the allowance—and then sells it to someone with whom he is in association. That person sells it on. There is that limited possibility, and if that did occur—it might perhaps take place once or twice—it might escape notice, once or twice, but then there is machinery in the Second schedule, Paragraph 1 (2, d), for dealing with that situation.

We have, naturally, carefully considered this proposal and having regard to its effect on the hotel industry and in relation to the other furniture to which I have referred, we say there is no special need to discriminate, as the party opposite wishes, against furniture and furnishings which come within the description of plant or machinery. We see no reason at all to depart here from the general rule that capital expenditure on new plant which qualified for the initial allowance should also qualify for the investment allowance.

I am sorry to disappoint right hon. and hon. Gentlemen opposite, but I hope I have been able to convince them that this Amendment, which was called moderate, sensible and reasonable, has some far-reaching implications in respect of certain industries and that there is no valid reason for the discrimination they propose.

Mr. Roy Jenkins

The learned Attorney-General has not answered one of the points which I endeavoured to put. It arises within something which the hon. Gentleman for Edinburgh, South (Sir W. Darling) said, relating to wholesale and retail distribution, where equipment of the nature of furniture is used for display purposes. Would that attract an investment allowance without this Amendment and if the Amendment were accepted would that have the effect of excluding it?

The Solicitor-General

If the articles in question constituted plant and machinery and the Clause stood as it is now then the investment allowance would be obtainable. If the articles constituted furniture or furnishings, and the Amendment were accepted, those articles would not qualify for the investment allowance.

Mr. Gaitskell

We appreciate the Solicitor-General's courteous and thorough reply, but I remain unconvinced that it is really necessary to extend the investment allowance to furniture and furnishings. Our impression is that the purpose of the investment allowance is to stimulate industrial investment. We all know pretty well what is intended by that. The fact that it is concentrated on industry is made evident by the refusal of the Government to extend the investment allowance on building to the retail or distributive trades or, for that matter, to hotels. It seems to be quite inconsistent to say, "We do not want to encourage the building of hotels despite the tourist trade but at the same time we want to encourage the buying of furniture for hotels, because that is good for the tourist trade."

Mr. Geoffrey Stevens

Is it not a fact that the question whether or not Part X allowances should be extended to non-industrial buildings is before the Royal Commission now and that, therefore, to extend the investment allowance to the same non-industrial buildings would be taking these allowances out of line with the ordinary Part X allowances?

Mr. Gaitskell

I am not familiar with the exact place to which the Royal Commission have got in these matters, but that does not dispose of my point that in the Bill there is that distinction.

Motor-cars are excluded, though, incidentally, they still receive the initial allowance. Rightly the Government draw a distinction between the initial allowance and the investment allowance. They are prepared to allow people to get the initial allowance on motor-cars but not the investment allowance. They do that because obviously they are afraid of misuse, abuse and evasion. It is easier to move a motor-car than it is to move furniture. Nevertheless, there is a possibility of some abuse, as in the case of a person who has a flat, in effect, in his office building and uses for the flat the furniture which he buys with the help of the investment allowance. It is possible that some kind of a racket could develop whereby the furniture was resold. There is the possibility of it being transferred to a private residence.

It is true that in the Second Schedule the problem of evasion and how it is to be prevented is dealt with, but we all agree that the difficulty of preventing evasion is greatly enhanced if the temptations to evade are strong. Undoubtedly if we make it attractive to people to buy and resell furniture and to make a profit with the help of the investment allowance, it will not be easy, despite the Second Schedule, to prevent the development of that kind of racket.

In all the circumstances, although I recognise that the Government have put

forward some arguments, on balance I am disposed to the view that it would be better to omit furniture and furnishings from the investment allowance, leaving them to get the initial allowance. On that ground I think that we should now take the matter to a Division.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 170; Noes, 193.

Division No. 144.] AYES [11.25 p.m.
Acland, Sir Richard Hargreaves, A. Price, J. T. (Westhoughton)
Adams, Richard Hayman, F. H. Price, Philips (Gloucestershire, W.)
Albu, A. H. Henderson, Rt. Hon. A. (Rowley Regis) Proctor, W. T.
Allen, Scholefield (Crewe) Herbison, Miss M. Pryde, D. J.
Bacon, Miss Alice Hobson, C. R. Pursey, Cmdr. H.
Baird, J. Holman, P. Rankin, John
Benn, Hon. Wedgwood Holmes, Horace Rhodes, H.
Benson, G. Hughes, Cledwyn (Anglesey) Robens, Rt. Hon. A.
Beswick, F. Hughes, Hector (Aberdeen, N.) Roberts, Albert (Normanton)
Blackburn, F. Hynd, H. (Accrington) Robinson, Kenneth (St. Pancras, N.)
Blenkinsop, A. Hynd, J. B. (Attercliffe) Ross, William
Blyton, W. R. Irvine, A. J. (Edge Hill) Royle, C.
Boardman, H. Janner, B. Shackleton, E. A. A.
Bottomley, Rt. Hon. A. G. Jay, Rt. Hon. D. P. T. Short, E. W.
Braddock, Mrs. Elizabeth Jeger, George (Goole) Shurmer, P. L. E.
Brockway, A. F. Jeger, Mrs. Lena Simmons, C. J. (Brierley Hill)
Brook, Dryden (Halifax) Jenkins, R. H. (Stechford) Skeffington, A. M.
Broughton, Dr. A. D. D. Johnson, James (Rugby) Slater, Mrs. H. (Stoke-en-Trent)
Brown, Rt. Hon. George (Belper) Jones, Frederick Elwyn (West Ham, S.) Slater, J. (Durham, Sedgfield)
Burke, W. A. Jones. Jack (Rotherham) Snow, J. W.
Burton, Miss F. E. Keenan, W. Sorensen, R. W.
Butler, Herbert (Hackney, S.) Kenyon, C. Soskice, Rt. Hon. Sir Frank
Callaghan, L. J. King, Dr. H. M. Stokes, Rt. Hon. R. R.
Castle, Mrs. B. A. Lawson, G. M. Strauss, Rt. Hon. George (Vauxhall)
Champion, A. J. Lewis, Arthur Summerskill, Rt. Hon. E.
Chetwynd, G. R. Lindgren, G. S. Sylvester, G. O.
Coldrick, W. Logan, D. G. Taylor, Bernard (Mansfield)
Collick, P. H. MacColl, J. E. Taylor, John (West Lothian)
Cove, W. G. McInnes, J. Thomas, Iorwerth (Rhondda, W.)
Craddock, George (Bradford, S.) McLeavy, F. Thomas, Ivor Owen (Wrekin)
Crosland, C. A. R. MacMillan, M. K. (Western Isles) Thomson, George (Dundee, E.)
Cullen, Mrs. A. MacPherson, Malcolm (Stirling) Thornton, E.
Dalton, Rt. Hon. H. Mallalieu, E. L. (Brigg) Ungoed-Thomas, Sir Lynn
Davies, Ernest (Enfield, E.) Mann, Mrs. Jean Usborne, H. C.
Davies, Harold (Leek) Marquand, Rt. Hon. H. A. Wallace, H. W.
de Freitas, Geoffrey Mason, Roy Warbey, W. N
Delargy, H. J. Mayhew, C. P. Weitzman, D.
Dodds, N. N. Mellish, R. J. Wells, William (Walsall)
Donnelly, D. L. Mikardo, Ian West, D. G.
Edelman, M. Mitchison, G. R. Wheeldon, W. E
Evans, Albert (Islington, S.W.) Monslow, W. White, Henry (Derbyshire, N.E.)
Evans, Stanley (Wednesbury) Moody, A. S. Whiteley, Rt. Hon. W.
Fienburgh, W. Morgan, Dr. H. B. W. Wigg, George
Finch, H. J. Morley, R. Wilcock, Group Capt. C. A. B.
Fletcher, Eric (Islington, E.) Morris, Percy (Swansea, W.) Wilkins, W. A.
Foot, M. M. Moyle, A. Willey, F. T.
Forman, J. C. Mulley, F. W. Williams, Rev. Llywelyn (Abertillery)
Fraser, Thomas (Hamilton) Nally, W. Williams, Ronald (Wigan)
Gaitskell, Rt. Hon. H. T. N Neal, Harold (Bolsover) Williams, W. R. (Droylsden)
Gibson, C. W. Noel-Baker, Rt. Hon. P. J. Willis, E. G.
Gooch, E. G. Orbach, M. Wintetbottom, Richard (Brightside)
Gordon Walker, Rt. Hon. P. C Oswald, T. Wyatt, W. L.
Greenwood, Anthony Pargiter, G. A. Yates, V. F.
Grey, C. F. Parker, J. Younger, Rt. Hon. K.
Griffiths, David (Rather Valley) Pearson, A.
Griffiths, William (Exchange) Pearl, T. F. TELLERS FOR THE AYES:
Hall, Rt. Hon. Glenvil (Colne Valley) Popplewell, E. Mr. Bowden and Mr. Rogers.
Hannan, W. Porter, G.
Aitken, W. T. Hall, John (Wycombe) Oakshott, H. D.
Alpert, C. J. M. Hare, Hon. J. H. O'Neill, Hon. Phelim (Co. Antrim, N.)
Amery, Julian (Preston, N.) Harris, Frederic (Croydon, N.) Ormsby-Gore, Hon. W. D.
Amory, Rt. Hon. Heathcoat (Tiverton) Harrison, Col. J. H. (Eye) Osborne, C.
Anstruther-Gray, Major W. J. Harvey, Air Cdre. A. V. (Macclesfield) Page, R. G.
Arbuthnot, John Harvey, Ian (Harrow, E.) Perkins, Sir Robert
Assheton, Rt. Hon. R. (Blackburn, W.) Heald, Rt. Hon. Sir Lionel Pitman, I. J.
Astor, Hon. J. J. Heath, Edward Pitt, Miss E. M.
Baldock, Lt.-Cmdr. J. M. Henderson, John (Cathcart) Powell, J. Enoch
Barlow, Sir John Higgs, J. M. C. Price, Henry (Lewisham, W.)
Baxter, Sir Beverley Hill, Mrs. E. (Wythenshawe) Prior-Palmer, Brig. O. L.
Beach, Maj. Hicks Hinchingbrooke, Viscount Profumo, J. D.
Bennett, Dr. Reginald (Gosport) Hirst, Geoffrey Raikes, Sir Victor
Bennett, William (Woodside) Holland-Martin, C. J. Rayner, Brig. R.
Birch, Nigel Hollis, M. C. Redmayne, M.
Bishop, F. P. Holt, A. F. Remnant, Hon. P.
Black, C. W. Hope, Lord John Renton, D. L. M.
Bossom, Sir A. C. Hopkinson, Rt. Hon. Henry Ridsdale, J. E.
Bowen, E. R. Hornsby-Smith, Miss M. P. Roberts, Peter (Heeley)
Boyd-Carpenter, Rt. Hon. J. A. Horobin, I. M. Robson-Brown, W.
Boyle, Sir Edward Horsbrugh, Rt. Hon. Florence Rodgers, John (Sevenoaks)
Braine, B. R. Hudson, Sir Austin (Lewisham, N.) Roper, Sir Harold
Braithwaite, Sir Albert (Harrow, W.) Hurd, A. R. Russell, R. S.
Bromley-Davenport, Lt.-Col. W. H. Hutchison., Sir Ian Clark (E'b'rgh, W.) Ryder, Capt. R. E. D.
Brooke, Henry (Hampstead) Hylton-Foster, H. B. H. Schofield, Lt.-Col. W.
Brooman-White, R. C. Iremonger, T. L. Scott-Miller, Cmdr. R.
Buchan-Hepburn, Rt. Hon. P. G. T. Jenkins, Robert (Dulwich) Shepherd, William
Bullard, D. G. Johnson, Eric (Blackley) Simon, J. E. S. (Middlesbrough, W.)
Burden, F. F. A. Johnson, Howard (Kemptown) Smithers, Peter (Winchester)
Butler, Rt. Hon. R. A. (Saffron Walden) Kaberry, D. Soames, Capt. C.
Campbell, Sir David Kerby, Capt. H. B. Spearman, A. C. M.
Cary, Sir Robert Kerr, H. W. Speir, R. M.
Channon, H. Lambert, Hon. G. Spens, Rt. Hon. Sir P. (Kensington, S.)
Clarke, Col. Ralph (East Grinstead) Langford-Holt, J. A. Stanley, Capt. Hon. Richard
Cole, Norman Legge-Bourke, Maj. E. A, H. Stevens, Geoffrey
Colegate, W. A. Legh, Hon. Peter (Petersfield) Steward, W. A. (Woolwich, W.)
Conant, Maj. Sir Roger Lennox-Boyd, Rt. Hon. A. T. Stoddart-Scott, Col. M.
Cooper-Key E. M. Lindsay, Martin Stuart, Rt. Hon. James (Moray)
Craddock, Beresford (Spelthorne) Linstead, Sir H. N. Studholme, H. G
Crookshank, Capt. Rt. Hon. H. F. C. Lockwood, Lt.-Col. J. C. Summers, G. S.
Crosthwaite-Eyre, Col. O. E. Lucas, Sir Jocelyn (Portsmouth, S.) Taylor, William (Bradford, N.)
Crouch, R. F. McCallum, Major D. Teeling, W.
Crowder, Petre (Ruislip—Northwood) Macdonald, Sir Peter Thomas, P. J. M. (Conway)
Darling, Sir William (Edinburgh, S.) McKibbin, A. J. Thompson, Kenneth (Walton)
Deedes, W. F. Mackie, J. H. (Galloway) Thompson, Lt.-Cdr. R. (Croydon, W.)
Digby, S. Wingfield Maclean, Fitzroy Thornton-Kemsley, Col. C. N.
Donner, Sir P. W. MacLeod, John (Ross and Cromarty) Turner, H. F. L
Doughty, C. J. A. Macpherson, Niall (Dumfries) Turton, R. H.
Drayson, G. B. Maitland, Comdr. J. F. W. (Horncastle) Vane, W. M. F.
Drewe, Sir C. Maitland, Patrick (Lanark) Vaughan-Morgan, J. K.
Elliot, Rt. Hon. W. E. Manningham-Buller, Rt. Hn. Sir Reginald Vosper, D. F.
Fisher, Nigel Marlowe, A. A. H. Wakefield, Edward (Derbyshire, W.)
Fleetwood-Hesketh, R. F. Marples, A. E. Wall, Major Patrick
Fletcher-Cooke, C. Marshall, Douglas (Bodmin) Ward, Hon. George (Worcester)
Ford, Mrs. Patricia Maude, Angus Ward, Miss I. (Tynemouth)
Fort, R. Maudling, R. Waterhouse, Capt. Rt. Hon. C.
Fraser, Sir Ian (Morecambe & Lonsdale) Maydon, Lt.-Comdr. S. L. C. Webbe, Sir H. (London & Westminster)
Galbraith, Rt. Hon. T. D. (Pollok) Medlicott, Brig. F. Wellwood, W.
Galbraith, T. C. D. (Hillhead) Mellor, Sir John Williams, Gerald (Tonbridge)
Garner-Evans, E. H. Molson, A. H. E. Williams, R. Dudley (Exeter)
Godber, J. B. Mott-Radclyffe, C. E. Wilson, Geoffrey (Truro)
Gomme-Duncan, Col. A. Nabarro, G. D. N. Wood, Hon. R.
Graham, Sir Fergus Neave, Airey
Grimond, J. Nicholson, Godfrey (Farnham) TELLERS FOR THE NOES:
Grimston, Sir Robert (Westbury) Nicolson, Nigel (Bournemouth, E.) Mr. Wills and Mr. Robert Allan.
Noble, Comdr. A. H. P.
Mr. Gaitskell

I beg to move, "That the Chairman do report Progress, and ask leave to sit again."

We have had another long day's debate on a number of Amendments of very great importance. The Government have not responded to our proposals in the way that they should have done. They have given us a series of dusty answers. Nevertheless, we think that very con- siderable progress has been made, even if it has been unsatisfactory from the point of view of the Opposition. In any case, this is the hour of the evening when hon. Members rather like to know where they stand—or rather where they are going to sleep—and I think it would be appropriate if the Chancellor were to give us some idea of what his intentions are.

Hitherto in this year's Finance Bill, and I think I am right in saying in last year's Finance Bill, we have been able to end each day's proceedings not later than 11.30 p.m. It would be very regretable if the Chancellor had to break the excellent precedent which he has set in this matter and we had to go on any later. I know that he will agree that Clause 15, while still not quite completed, is a very difficult Clause, and that, if he insists, we shall be going on to the Second Schedule which is also, as Schedules always are, very complicated.

I hope, therefore, that the right hon. Gentleman will follow his usual custom, and although he may not have made all the progress that he would like, will feel that, after all, progress is seldom as fast as Ministers wish it to be; so I hope that he will now decide that we might adjourn further consideration of the Bill, go home in peace, and come back next week to consider the rest of Clause 15 and the Schedule with fresh minds and rather more willing hearts.

This afternoon we have detected a good deal of weariness on the Treasury Bench. Even the Solicitor-General had to speak just now because the others had left the Chamber. Although the right hon. and learned Gentleman did very well and gave us quite a long speech on the subject of furniture, it is no use imagining that he will be able to take part in these proceedings on every occasion this evening. I am afraid, therefore, that the Chancellor will have to do a lot of speaking himself, and he has other things to do, such as the important O.E.E.C. negotiations which are coming along and are of great significance for the country, being concerned with convertibility. For all these reasons, therefore, the right hon. Gentleman would be well advised to agree to the adjournment of the debate now.

Mr. Butler

I must put the right hon. Gentleman and the Committee out of pain at once. I regret to say that I could not possibly accept this Motion. It has been the practice from time to time to finish at half-past eleven, but on this occasion we have not made sufficient progress if the Finance Bill is to fulfil its normal programme of being finished by a certain time of the year. The Committee will remember that we have not only to finish the Committee stage, but we have also to take the Report stage and leave an interval between those two stages. Then the Bill has to go to another place, and then it has to become law by a certain date.

There is no complaint on this side of the Committee about the manner in which business has been conducted. We are not asking the Committee to sit late out of cussedness, but we must make considerable progress with the Bill tonight. Otherwise, when we come to the important questions of Estate Duty, the aggregation Clauses, and the 61 new Clauses which have been put on the Order Paper and the remainder of the Schedules, we shall not be able to perform our duty as a Committee in finishing the Finance Bill at the right period of the year.

The year before last we had to have an occasional all-night sitting, last year we managed to avoid it, but it so happens that this year we need not necessarily stay all night. If we are sensible—it depends on hon. Gentlemen opposite—we may make sufficient progress not to sit all night, but we must go further than Clause 15. The Schedule is difficult, but it may be possible to take one or two of the issues on the Schedule with the debate which the right hon. Gentleman himself wishes to institute on the Surtax aspect. If we show sense, I do not anticipate that the issues concerned with Clause 15 need take more than two or three more debates.

The Committee has certainly not been reticent in the length of speeches, either today or on previous days. I am not referring to so old a Parliamentarian as the right hon. Gentleman, but some other hon. Members have been very intent on the question and have dilated upon the issues involved: Moreover, we shall have had no less than eight debates on one Clause and every aspect and every facet of it has been considered. So I sincerely hope that if we continue and make progress, while there are issues here which clearly need to be ventilated, it may be done with the utmost expedition so that the Committee may not be kept late.

The right hon. Gentleman made one or two remarks about the physical condition and capacity of Treasury Ministers; and he suggested that my right hon. and learned Friend the Solicitor-General should be called in. Possibly he is thinking of his own period of administration, for there was then one night when he hardly appeared at all and the Solicitor-General conducted the business throughout the whole night.

Mr. Gaitskell

It was a different Solicitor-General.

Mr. Butler

Yes, but in our case we temper the wind to the shorn lamb and divide the work between the Law Officers and the exceptionally competent team of Treasury Ministers. If the right hon. Gentleman would like to see the Solicitor-General more often—and none would be more pleased about that than myself— then he has only to help us to make progress. As for the Board of Trade, the Minister of State gives us his support, but it is not often necessary for him to speak. We understand each other; his thoughts help to inspire our every action, and the right hon. Gentleman need not feel that the team is physically debilitated or temperamentally unsound, or in any way unwilling to see the business through.

It is an important duty of Parliament to look after the finances of the nation. We have got well into Clause 15. We know what it means by now, and we have done our best on this side of the Committee. We have not been so accommodating as right hon. and hon. Gentlemen opposite might have wished, but we have tried to bring to our labours the right sort of spirit, and although I am sorry to keep the Committee sitting, I am sure it is the right thing to do.

Mr. Jay

We thank the Chancellor for his remarks, and perhaps I could help him out of his difficulties and at the same time meet the wishes of the whole Committee. I understand that the Leader of the House proposes to devote two days of Parliamentary time next week to the Television Bill. That is a Bill which nobody wants, and indeed it is fairly well known that it is a Bill which even the Chancellor himself does not greatly love.

I agree with him that it is very important that the Committee should give full and careful examination to the Finance Bill, and in particular to Clause 15, which I should not have thought he wanted us to pass over in any careless spirit. Therefore, surely it would be better, in the interests of this Finance Bill, if those two days next week were devoted to this Bill which is of the greatest importance and which needs thorough examination, rather than that they should be wasted on further argument on the Television Bill which is not wanted by the majority of the House, nor by anybody outside.

Mr. Edward Shackleton (Preston, South)

Like my right hon. Friend, I think that the more we look at the Television Bill the more meaningless it becomes.

The Temporary Chairman (Mr. George Thomas)

Order. It is one thing to make a passing reference to the Television Bill, but to discuss it is another. The hon. Gentleman is quite out of order.

Mr. Shackleton

I am sorry, Mr. Thomas. but it was only a passing reference that I was making. We have still not had many of the important Amendments from the Government for the Report stage, and I do hope that the Leader of the House will give some consideration to the real needs of the nation by thinking seriously of what my right hon. Friend has said.

Lieut.-Colonel Bromley - Davenport (Knutsford)

Having listened to the concentrated balderdash from the lobby fodder opposite—[Interruption.] Keep quiet—let us now get on with the all-night sitting.

11.45 p.m.

Mr. Adams

I regret very much that I was unable to understand what the hon. and gallant Member for Knutsford (Lieut.-Colonel Bromley-Davenport) said, but I gather from what the Chancellor said that we seem to be in for a very late sitting. I draw the right hon. Gentleman's attention to the fact that there are far more hon. Members present now who are interested in the Motion to report Progress rather than in the contents of Clause 15. The right hon. Gentleman might give attention to the great interest of hon. Members in getting home early and meet what I am sure would be the general wish of the Committee that we should end now and go home with clear minds ready for the difficult Bill that is to come before us tomorrow.

We are only half-way through Clause 15 and there are several difficult matters to be discussed, as well as the Schedule. If the Chancellor insists that we should proceed more deeply into these difficult matters and the Schedule, it is likely to be the early hours of the morning, if not dawn, before we finish. Today we have worked through three Ministers from the Treasury. We have now reached the Solicitor-General, who has given one reply, though negative as usual, and can only last another 'hour or so. We shall be left with the fact that if the debate is to be continued it must be with fresh assistance. Earlier in the day the Minister of State, Board of Trade, looked in but remained silent. Obviously he has not been briefed yet. If we continue he must be roused and provided with a brief. Similarly the Parliamentary Secretary to the Board of Trade looked in but did not dare stop in case he should be called to reply.

These are serious matters which need a clear mind and it would be most unwise to try to thrash them all out in the late hours of the night and early hours of the morning. Having done useful work, it would be best for all of us now to call it a day and make another start next week. I reinforce the serious plea made to the Chancellor that, in the best interest of getting the Bill through in a spirit of comradeship—though perhaps that would be the wrong word to use—we should remain good friends by rising now and making another start next week.

Mr. R. A. Butler

The hon. Member said that there were more hon. Members present now to support the view that we should go home than there were present to discuss the technicalities of the Clause,

but that seems typical of human nature. I should like to go home as much as anybody else, but I suggest seriously that if we get on now there is more chance of finishing soon.

Mr. Gaitskell

The Chancellor's two replies have been very disappointing. He has not even told us how far he wants to get tonight. If he had given us some idea of how long we must sit, it would have been a great help. I have some sympathy with his point that the Finance Bill must be got through Parliament early in August and that it must leave the House of Commons three weeks or so before that date, but it is all very well for the Chancellor to plead with us that he must get the Bill through by a certain date. What has caused all the delay up to now? The delay has arisen because the House of Commons has been concerned with other business. It is the Television Bill that has held us up.

If we are really in difficulties with the time-table, why should we not sit in Committee on the Finance Bill on four, days next week? I am sure that my hon. Friends would agree to sit and consider the Bill every day if that is what the Chancellor wants. If he feels that he needs all four days to complete the Committee stage, I see no reason why that should not be arranged. There would be no occasion then for an all-night sitting. All that would be involved would be the postponing of other legislation which is not only less important but is thoroughly undesirable. In view of the Chancellor's unsatisfactory replies, I propose to my hon. Friends that we should divide the Committee.

Question put.

The Committee divided: Ayes, 125 Noes, 152.

Division No. 145.] AYES [11.50 p.m
Acland, Sir Richard Butler, Herbert (Hackney, S.) Donnelly, D. L.
Adams, Richard Callaghan, L. J. Edelman, M.
Albu, A. H. Castle, Mrs. B. A. Evans, Albert (Islington, S.W)
Baird, J. Champion, A. J. Evans, Stanley (Wednesbury)
Benn, Hon. Wedgwood Chetwynd, G. R. Fienburgh, W.
Benson, G. Collick, P. H. Finch, H. J.
Beswick, F. Craddock, George (Bradford, S.) Fletcher, Eric (Islington, E.)
Blackburn, F. Crosland, C. A. R. Foot, M. M.
Blenkinsop, A. Cullen, Mrs. A. Gaitskell, Rt. Hon. H. T. N.
Boardman, H. Dalton, Rt. Hon. H. Gibson, C. W.
Bowden, H. W. Davies, Ernest (Enfield, E.) Gordon Walker, Rt. Hon. P. C.
Braddock, Mrs. Elizabeth Davies, Harold (Leek) Greenwood, Anthony
Broughton, Dr. A. D. D. de Freitas, Geoffrey Grey, C. F.
Brown, Rt. Hon. George (Belper) Delargy, H. J. Griffiths, William (Exchange)
Burton, Miss F. E. Dodds, N. N. Hall, Rt. Hon. Glenvil (Colne Valley)
Hannan, W. Morris, Percy (Swansea, W.) Stokes, Rt. Hon. R. R.
Hargreaves, A. Moyle, A. Strauss, Rt. Hon. George (Vauxhall)
Hayman, F. H. Mulley, F. W. Summerskill, Rt. Hon. E.
Henderson, Rt. Hon. A. (Rowley Regis) Nally, W. Sylvester, G. O.
Herbison, Miss M. Noel-Baker, Rt. Hon. P. J. Taylor, John (West Lothian)
Hobson, C. R. Oswald, T. Thomas, Ivor Owen (Wrekin)
Holmes, Horace Pargiter, G. A. Thomson, George (Dundee, E.)
Hughes, Cledwyn (Anglesey) Parker, J. Thornton, E.
Hughes, Hector (Aberdeen, N.) Pearson, A. Usborne, H C.
Hynd, H. (Accrington) Peart, T. F. Wallace, H. W.
Irvine, A. J. (Edge Hill) Popplewell, E. Warbey, W. N.
Janner, B. Price, Philips (Gloucestershire, W.) Weitzman, D.
Jay, Rt. Hon. D. P. T. Proctor, W. T. Wells, William (Walsall)
Jeger, George (Goole) Rhodes, H. West, D. G.
Jenkins, R. H. (Stechford) Robens, Rt. Hon. A. Wheeldon, W. E.
Jones, Frederick Elwyn (West Ham, S.) Robinson, Kenneth (St. Pancras, N.) Whiteley, Rt. Hon. W.
Jones, Jack (Rotherham) Rogers, George (Kensington, N.) Wigg, George
Keenan, W. Ross, William Wilcock, Group Capt. C. A. B
King, Dr H. M. Shackleton, E. A. A. Wilkins, W. A.
Lawson, G. M. Short, E. W. Willey, F. T.
MacColl, J. E. Shurmer, P. L. E. Williams, Rev. Llywelyn (Abertillery)
MacMillan, M. K. (Western Isles) Silverman, Julius (Erdington) Williams, Ronald (Wigan)
Mallalieu, E. L. (Brigs) Simmons, C. J. (Brierley Hill) Williams, W. R. (Droylsden)
Marquand, Rt. Hon. H. A. Slater, Mrs. H. (Stoke-on-Trent) Wyatt, W. L.
Mellish, R. J. Slater, J. (Durham, Sedgefield) Younger, Rt. Hon. K.
Mikardo, Ian Snow, J. W.
Mitchison, G. R. Soskice, Rt. Han. Sir Frank TELLERS FOR THE AYES:
Morgan, Dr. H. B. W. Mr. James Johnson and Mr. J. T. Price.
Aitken, W. T. Hare, Hon. J. H. Nicolson, Nigel (Bournemouth. E.)
Allan, R. A. (Paddington, S.) Harris, Frederic (Croydon, N.) Noble, Comdr. A. H. P.
Alpert, C. J. M. Harrison, Col. J. H. (Eye) Oakshott, H. D.
Anstruther-Gray, Major W. J. Harvey, Air Cdre A. V. (Macclesfield) O'Neill, Hon. Phelim (Co. Antrim, N.)
Arbuthnot, John Harvey, Ian (Harrow, E.) Ormsby-Gore, Hon. W. D.
Assheton Rt. Hon. R. (Blackburn, W.) Heald, Rt. Hon. Sir Lionel Page, R. G.
Astor, Hon. J. J. Heath, Edward Pitman, I. J.
Baldock, Lt.-Cmdr. J. M. Henderson, John (Cathcart) Pitt, Miss E. M.
Barlow, Sir John Higgs, J. M. C. Powell, J. Enoch
Baxter, Sir Beverley Hinchingbrooke, Viscount Price, Henry (Lewisham, W.)
Beach, Maj. Hicks Holland-Martin, C. J. Prior-Palmer, Brig. O. L.
Bennett, Dr. Reginald (Gosport) Hollis, M. C. Profumo, J.D.
Bennett, William (Woodside) Holt, A. F. Raikes, Sir Victor
Birch, Nigel Hope, Lord John Rayner, Brig. R.
Bishop, F. P. Hornsby-Smith, Miss M. P. Redmayne, M.
Black, C. W. Horobin, I. M. Remnant, Hon. P.
Bossom, Sir A. C. Hudson, Sir Austin (Lewisham, N.) Renton, D. L. M.
Bowen, E. R. Hylton-Foster, H. B. H. Ridsdale, J. E.
Boyd-Carpenter, Rt. Hon. J. A. Iremonger, T. L. Rodgers, John (Sevenoaks)
Boyle, Sir Edward Jenkins, Robert (Dulwich) Russell, R. S.
Braine, B. R. Johnson, Eric (Blackley) Ryder, Capt. R. E. D.
Bromley-Davenport Lt.-Col. W. H. Kaberry, D. Schofield., Lt.-Col. W.
Brooman-White, R. C. Kerby, Capt. H. B. Scott-Miller, Cmdr. R.
Buchan-Hepburn, Rt. Hon. P. G. T. Kerr, H. W. Shepherd, William
Butler, Rt. Hon. R. A. (Saffron Walden) Leather, E. H. C. Simon, J. E. S. (Middlesbrough, W.)
Campbell, Sir David Legge-Bourke, Maj. E. A. H. Smithers, Peter (Winchester)
Cary, Sir Robert Legh, Hon. Peter (Petersfield) Stevens, Geoffrey
Channon, H. Lennox-Boyd, Rt. Hon. A. T. Steward, W. A. (Woolwich, W.)
Clarke, Col. Ralph (East Grinstead) Lindsay, Martin Stoddart-Scott, Col. M.
Colegate, W. A Linstead, Sir H. N. Studholme, H. G.
Conant, Maj. Sir Roger Lucas, Sir Jocelyn (Portsmouth, S.) Summers, G. S.
Craddock, Beresford (Spelthorne) McCallum, Major D. Teeling, W.
Crookshank, Capt. Rt. Hon. H. F. C. Macdonald, Sir Peter Thomas, p. J. M. (Conway)
Crosthwaite-Eyre, Col. O. E. McKibbin, A. J. Thompson, Lt.-Cdr. R. (Croydon, W.)
Crouch, R. F. Mackie, J. H. (Galloway) Thornton-Kemsley, Col. C. N.
Crowder, Petre (Ruislip—Northwood) Maclean, Fitzroy Turner, H. F. L.
Darling, Sir William (Edinburgh, S.) Maitland, Patrick (Lanark) Turton, R. H.
Deedes, W. F. Manningham-Buller, Rt. Hn. Sir Reginald Vane, W. M. F
Digby, S. Wingfield Marlowe, A. A. H. Vaughan-Morgan, J. K.
Donner, Sir P. W. Marples, A. E. Wakefield, Edward (Derbyshire, W.)
Drayson, G. B. Marshall, Douglas (Bodmin) Wall, Major Patrick
Drewe, Sir C. Maude, Angus Ward, Miss I. (Tynemouth)
Fleetwood-Hesketh, R. F. Maudling, R. Ward, Hon. George (Worcester)
Fletcher-Cooke, C. Maydon, Lt.-Comdr. S. L. C. Waterhouse, Capt. Rt. Hon. C.
Fort, R. Medlicott, Brig. F. Wellwood, W.
Garner-Evans, E. H. Mellor, Sir John Williams, Gerald (Tonbridge)
Godber, J. B. Molson, A. H. E. Wills, G.
Gomme-Duncan, Col. A. Mott-Radclyffe, C. E. Wilson, Geoffrey (Truro)
Graham, Sir Fergus Nabarro, G. D. N.
Grimond, J. Neave, Airey TELLERS FOR THE NOES:
Grimston, Sir Robert (Westbury) Nicholson, Godfrey (Farnham) Mr. T. G. D. Galbraith and Mr. Vosper.
Hall, John (Wycombe)
Mr. Erroll

I beg to move, in page 10. line 44, at the end, to insert: (5) An investment allowance equal to one-fifth of the expenditure shall be made in respect of expenditure on exploration in the case of which an allowance may be made under Chapter III of the said Part X or under section nineteen of the Finance Act, 1952, except that—

(a) an investment allowance in respect of any expenditure under Chapter III of the said Part X shall be made only for the first year of assessment for which the allowance under section three hundred and seven of the Income Tax Act, 1952, falls to be made; and

(b) where the expenditure falls to be dealt with under section nineteen of the Finance Act, 1952, it shall nevertheless be treated for the purpose of this subsection as capital expenditure falling within Chapter III of the said Part X.

I think it would be convenient to refer to the other proposed Amendment in the name of my hon. Friend the Member for Langstone (Mr. Stevens) and myself, in page 11, line 35, at the end, to insert: (7) An investment allowance equal to one-fifth of the expenditure shall be made in respect of capital expenditure in the case of which an allowance may be made under section twenty-two of the Finance Act, 1952 (which relates to capital sums contributed by mining concerns to building or works outside the United Kingdom), except that an investment allowance in respect of any expenditure shall be made only for the first year of assessment for which the allowance under section twenty-two of the Finance Act, 1952, falls to be made.

In order to appreciate the full importance of these two Amendments, it is necessary to say a brief word on the background of the position of the British overseas mining industry. It is customary to think of the British overseas mining industry as flourishing, whereas in fact British-controlled overseas mining has undergone and is still undergoing a serious decline in size and importance.

To give one or two examples, while overseas Governments encourage mining industries by incentive legislation—particularly in Canada—the reverse is the case in regard to the United Kingdom. Not a single new overseas mining company directed from this country has been registered since 1939, and it is estimated that, of a total of £260 million worth of capital raised in the London market for overseas mines during the post-war period —from 1946 to 1952, inclusive—only £15 million was invested as additional capital in overseas mines directed from the United Kingdom. Moreover, of this £15 some £4 million was raised by companies which have later migrated to the countries where their mines are situated.

12 midnight. Why has there been this steady decline? It has taken place because of the tax burden placed upon British directed and controlled mines—not the tax burden as compared with other British industries, because it is no more severe than that placed on other British industries, but severe compared with mines controlled by other companies overseas which are much more favourably placed than British controlled and directed mines.

The result has been that new mining ventures are encouraged and developed by other countries, whose taxation arrangements are more favourable, and British directed mines are in some cases actually discouraged from going into overseas territories and preferential treatment is accorded to the mines belonging to those countries which regard their mining enterprises much more favourably from a taxation point of view.

To give two brief examples, one is the case of uranium mines in Australia. The Australian Government gives exemption of profits from uranium mining to those companies which are controlled as to 75 per cent. by individual shareholders resident in Australia. That is specifically directed against United Kingdom controlled mines, because Australia knows that if that retention of profit were given to such mines, the United Kingdom Treasury would take all the profit and it would not be available for further development or exploration work.

Much the same state of affairs applies in Southern Rhodesia, where the percentage depletion allowance has been introduced, but this advantage is available only to United States and Canadian companies operating in Rhodesia. It it were given to United Kingdom companies, the Treasury would be the beneficiary and not the companies themselves. Thus United Kingdom companies attempting to operate in Southern Rhodesia are placed at a disadvantage compared with their competitors, who have come from other countries where the taxation arrangements are more favourable.

That is the gloomy position as it is today. My two Amendments are designed to go a small way towards remedying the evil. I tried earlier today to secure another benefit for British controlled overseas mining, but it was turned down by my right hon. Friend the Financial Secretary, who cannot have had the opportunity to have studied the subject as fully as its importance warrants, because he thought it would accord unfair preference to British controlled mining overseas; whereas, in fact, there is nothing like equality of treatment between British overseas mines and the overseas mines of other countries. We are far worse treated, and we are a long way from getting anything like equality of treatment. I hope, therefore, that these two further Amendments will be regarded with more favour and possibly accepted by our own Front Bench.

The first of the two Amendments would extend the investment allowance to exploratory work carried out by mining companies. The object of the investment allowance is to encourage new investment in productive industry, and the, best stimulus to investment in the mining industry is to encourage the discovery of new sources of raw material, without which the industry must decline. It is not sufficient merely to grant the investment allowance on mining work. Large expenditures have to be made on drilling and other methods of detailed search for mineralised areas before there can be any question of normal development which would qualify for the investment allowance.

Last year, the Chancellor recognised the pre-eminent need for stimulating the overseas mining industry by granting an initial allowance for mining works at 40 per cent. The rest of industry, however, only got 20 per cent. off machinery and 10 per cent. off buildings. This preferential treatment for the industry was undoubtedly the result of recognising the decline which was taking place. The need for the expansion of this declining Industry is greater than ever. The incentive investment allowance should be given at the only point where expansion is possible; that is, for the intensification of search for new deposits.

The other Amendment deals with a different type of expenditure, but a type of expenditure which in overseas mining is just as essential as that on exploratory work and the development of property Hon. Members who have read the Amendment will have seen that it deals largely with what might be described as amenity expenditure. It is expenditure on the provision of hospitals, accommodation, canteen facilities, drainage, sewerage and water supply schemes for mining townships. Such expenditure in the United Kingdom would not normally nowadays have to be provided by a mining undertaking, because of the social development which has taken place in this country. These sums which are needed overseas for housing, drainage, power, educational facilities, hospitals and for other community requirements must be provided by the companies to attract and hold the labour force in remote communities for the existence of which there would be no reason apart from the mining enterprise.

The money which has to be paid out for these things can be substantial. It may be a considerable proportion of the total investment required in the enterprise. Without the provision of these capital sums the modern mining community cannot exist. Nowadays it is often a requirement of overseas Governments that a proper community shall be built by a company if it is to continue to hold a licence to mine the properties it possesses. In opening up a mineral deposit a considerable amount of the company's capital must be sunk in providing industrial, commercial and community facilities. In view of the size of this expenditure, it is only right that investment allowance should be extended to cover overseas expenditure of this sort. It is as important to ensure a water supply to the quarters of the staff as to ensure a water supply to the plant which treats the ore. While the provision of a water supply for the treatment of the ore qualifies for investment allowance, similar provision for the men who manage the plant does not qualify. The two must stand or fall together. In my submission, the two ought to qualify for investment allowance.

I will not detain the Committee longer. I hope I have shown how serious is the position of the British-controlled mining industry and I have given an opportunity to the Chancellor of the Exchequer, or whoever is to reply, to give a much-needed boost to this hard-pressed industry.

Mr. Douglas Marshall (Bodmin)

There are two points which I want to make before the Solicitor-General replies. I fully support my hon. Friend the Member for Altrincham and Sale (Mr. Erroll). The Solicitor-General will realise that there is another case, as far as the first Amendment is concerned where this allowance might be helpful—that is, in developing the mineral wealth which lies hid in the Cornish hills. I am sure that the Solicitor-General of all people, with his knowledge of Cornwall, will be sympathetic with that.

Secondly, the Chancellor has properly told us that he wants to do everything he can to promote the export trade. In developing mineral wealth, whether it is in the United Kingdom or outside, the best machinery which is made—and acknowledged the most expert—for developing mineral wealth is made in the United Kingdom. The allowance would give an added boost to those who are making that machinery and consequently increase our export trade.

Mr. Jack Jones (Rotherham)

I am in the extraordinary position of rising to support the plea made by the hon. Member for Altrincham and Sale (Mr. Erroll); it is probably the first time in our political careers that we have agreed about anything at all.

The question of incentives to look for mineral wealth is of vital importance to this country. I come from an industry which, as everybody knows, is beset by tremendous competition, increasing week by week and even day by day. Other countries are being encouraged by their Governments to find and exploit the new minerals without which the steel industry of this country will not survive for very much longer. The old idea of steel being made from the iron ore of this country has long since gone overboard. The newer types of steels and new alloys can be produced only by getting the raw materials from other countries. Two countries provide 90 per cent. of the world's supply of manganese—Russia and India; and unless this country finds alternative supplies, then if either of those two countries decided to stop supplying manganese ore to this country, our steel industry could pack up overnight.

I suggest to the Solicitor-General that the horse-sense of this proposal should appeal to him, not the theoretical political arguments. This country must find the materials which are vitally necessary if we are to meet the competition of those nations which at present are setting about the task in no uncertain fashion. People who went to Germany during the Whitsun Recess were amazed at what they saw. The Germans are running rings around this country in that facet of the work. They are subsidising the exploitation and finding of these new minerals in all parts of the world. I hope the horse-sense of the matter will appeal to the right hon. and learned Gentleman —the sheer necessity for new companies and more companies to go out, find and exploit these minerals which, in turn, will give great advantage to whichever Government is in power in this country. I hope the right hon. and learned Gentleman has listened carefully to the arguments and, if possible, will grant this concession.

The Solicitor-General

My hon. Friend the Member for Altrincham and Sale (Mr. Erroll) drew attention to the position as he saw it of the overseas companies in the mining industry and also to the differences in the law of various countries relating to taxation. I dare say we could add considerably to the number of those differences.

These Amendments deal with two very narrow points and simply with the question whether the initial allowance should be given first of all for what is called exploration expenditure. I assume from that phrase in the Amendment that my hon. Friend means to refer to the language in Section 305 (1) (a) in the Income Tax Act, 1952, which refers to expenditure on searching for or on discovery and testing deposits and winning access to mineral deposits which are subsequently worked. Of course, expenditure in that category already qualifies for annual and balancing allowances against the profits of the source on the usual basis applicable to mining works, but it does not qualify for initial allowances. I also assume that by his first Amendment my hon. Friend intends to include expenditure on abortive exploration. Provision is made already in relation to such expenditure by Section 19 of the Finance Act, 1952. It declares that it can be allowed as a revenue expense.

12.15 a.m.

In neither case is such expenditure allowable for an initial allowance. The principle running behind this Clause is that the investment allowance should not be given, except where the initial allowance could be obtained—when I say "could be obtained," I ought to have added "or could have been obtained but for special arrangements." While it is possible to depart from a general rule, departure in this instance, it is considered, might have embarrassing repercussions, because it would mean a departure from the rule that has been recognised hereto-fore in relation to initial allowances, that distinction should be drawn between expenditure which resulted in the creation of tangible assets and expenditure which did not do so.

It is for those reasons that the Government are not able to accept the first Amendment. The second Amendment we also cannot accept for similar reasons. The expenditure to which my hon. Friend referred, in relation to that Amendment —expenditure on water supplies, cost of works, etc.—has been provided for under Section 22 of the Finance Act, 1952. Relief can be obtained for the firm in the qualifying contribution in 10 equal instalments. No initial allowance is obtainable in relation to the expenditure and, in accordance with the general principle of this Clause, the Government regret that they cannot extend investment allowances to this form of expenditure, for which provision is already made, and in relation to which an initial allowance is not allowed.

Mr. Erroll

In view of the full and detailed reply which I have received, I shall beg to ask leave to withdraw the Amendment. [Interruption.] I do not know whether it is favourable or un-favourable until I examine it in more detail. That is why I beg to ask leave to withdraw the Amendment, so I can study the reply more carefully at a more reasonable hour of the day.

Amendment, by leave, withdrawn

Mr. Jenkins

I beg to move, in page 12, line 35, at the end, to add: (13) The amount of an investment allowance shall not be deducted in computing the profits of a trade or business for the purposes of surtax.

We have now reached a very detailed and complicated stage of the Bill, and certainly the Amendment which I move deals with a complicated matter, so complicated that I had expected the Solicitor-General would have been called upon to deal with it, but I see, on the contrary, that he is now leaving the Chamber. I take it, therefore, that we are to have the assistance of the Financial Secretary in this matter. I dare say he will be more lucid than the Solicitor-General sometimes is.

This Amendment is an attempt to deal with a very curious anomaly which arises in the provisions relating to the investment allowance. The anomaly is this: in so far as the investment allowance applies, not only to limited companies but also to sole traders, or individuals, it is possible for the individual, if he be a very high Surtax payer, actually to make a profit by the installation of machinery.

Of course, it has always been the case, at any rate since we had fairly high rates of direct taxation, that when expenditure was incurred on plant or machinery it was the case that the Revenue paid a substantial part of the cost of that instalment of machinery, or whatever it might be, and the taxpayer himself, whether company or individual, only paid perhaps a relatively small part. Certainly, even before, in the case of the fairly high Surtax payer only a small proportion of the cost of installing a piece of plant was actually paid by the taxpayer himself out of his own disposable income.

Until we came to the new provision of the investment allowance, it was always the case that the taxpayer had to give up a certain amount of his disposable income in order to install any piece of equipment. Even in the extreme case of the rich farmer, to whom probably this most applies, paying Income Tax and Surtax at the highest rate of 19s. in the pound, the piece of plant or machinery had to be worth to him one-twentieth of its total cost before he could possibly think of installing it.

The old position which arises under the investment allowance is that we depart from that principle. We now put the very high Surtax payer in the position in which he himself does not have to make any sacrifice whatever—not even one-twentieth of the total cost of the piece of equipment—in order to install it. On the contrary, he can actually make a cash profit out of installing machinery which he does not need and which he does not want for its own sake.

That is because the investment allowance brings about this new principle that one can charge for tax purposes an amount in excess of the total cost of the piece of plant or machinery. I should like to quote an example to show how this works out. I am indebted for the example to the "Accountant" which published this in its issue of 17th April of this year. It took the example, admittedly an extreme one, of a farmer paying Income Tax and Surtax at the highest rate of 19s. in the pound and installing a new tractor at a total cost of £1,000. The rate of depreciation on this piece of machinery was taken, for the purpose of the example, as being just over 28 per cent.

What might happen is illustrated by the following figures. The tractor cost £1,000. The wear and tear allowance in the first year would be £281. There would also be the investment allowance accruing in the first year and amounting to £200, so that the total allowances to be set against tax in the first year come to £481. Let us assume that in the second year our rich farmer sells his tractor second-hand at its written-down value of £719—that he gets exactly its written- down value for it, though later I will deal with the position in which he might not be able to get its written-down value.

That being so. the net cost of the tractor to him is £281—£1,000 less £719 —but the amount by which his tax will be reduced as a result of the purchase of the tractor, which is the total allowance multiplied by 19 over 20, is £457. That is to be set against a net cost of £281, thus allowing an actual cash profit on the whole transaction of no less than £176.

On this basis it would clearly pay a farmer, or some other trader in this position, to buy as many tractors as he could lay his hands on, sell them as quickly as possible, and maximize his income by an almost limitless amount. He could add £176 for every tractor he disposed of in this way. It might be objected that he might fail to sell the tractors at their written-down value, and that if a great number of farmers or other traders were engaged in this sort of transaction the market for secondhand tractors might become rather doubtful. But the position, in fact, is still more favourable to this particular class of taxpayer than would appear from this example, for the farmer does not need to be able to sell the tractor at all—he can let it rot in a field and still make a profit.

Sir W. Darling

Tractors do not rot; they rust.

Mr. Jenkins

We prefer to have the contributions of the hon. Member for Edinburgh, South (Sir W. Darling) in the form of speeches, but I am glad to know that I am carrying him along with me to that extent at least, and I hope he will follow the other example which I will illustrate, and give us his comment on this important situation.

The only difference if the tractor is riot sold is that, instead of getting the £719 written-down value in cash, it would be disposed of at a nil price and the farmer would be allowed his £719 as a basis for allowance and his tax would be reduced by 19/20ths of that amount. He would not be doing quite so well, but he would still be able to make a profit on the whole transaction—not of £176 when selling it at the written-down value, but of £148 where he cannot find any kind of purchaser. Whether the tractors rot or rust, it will certainly be to the advantage of taxpayers in this category to get hold of a stock, store them, and show a handsome profit.

I admit that I have taken the extreme example of the taxpayer paying at the rate of 19s. 6d. in the pound but the case applies a little lower down the scale, as far down as a rate of 16s. 6d. in the pound. When you get a combined rate of 16s. 6d. you enter a bracket where you can make a profit. You do not make the maximum profit as at 19s. 6d. but you do make a profit at 16s. 6d. for the simple arithmetical reason that 16s. 6d. over £1 is equivalent to 100 per cent. over 120 per cent., 100 per cent. being the cost of the machinery and 120 per cent, the amount of the cost which is allowed to be charged for tax purposes.

12.30 a.m.

I said at the beginning that our Amendment, which was designed to close this loophole, which I hope I have outlined in a fairly comprehensible way, does it in a rather rough-and-ready way. It does it in a rough-and-ready way for two reasons. The first is that by excluding Surtax from the operation of the investment allowance altogether, and by making the investment allowance an allowance not for the purposes of sale but only for the purposes of Income Tax in the case of the individual, it detracts from the advantage of this allowance not only to the larger Surtax payer but also to the comparatively low Surtax payer whom we certainly want to encourage to do some investing. It puts him at what may be regarded perhaps as an unfair disadvantage vis-à-vis certain limited companies in so far as the investment allowance is there to charge both for the purposes of Income Tax and for the purposes of Profits Tax.

The other disadvantage which applies to this Amendment is that, most surprisingly in some ways, it does not entirely close the loophole. In other words, even if we exclude Surtax from the operation of the investment allowance, we still make it possible in certain marginal cases for the taxpayer to make a profit on a transaction such as that which I have described. I found it very difficult to believe at first that this could be the case. but it is a fact. We raise the rate of tax which the individual has to pay in order to make such a profit from this previous level of 16s. 6d. in the £ to something a little over 18s., but we still make it possible in certain circumstances for him to make a profit.

If one refers back to the example of the figures which I gave previously, the position as it works out is this. We still have the wear and tear allowance of £281 in the first year. We still have the investment allowance of £200 in that year; but in calculating the total tax allowance to be set against the net cost we cannot, as we did previously, just take 19/20ths of the total sum of £481. We can only take 19/20ths of the £281 normal wear-and-tear allowance, and only 9/20ths of the investment allowance of £200. We therefore then get a figure of £357 as against the previous figure of £457, and a net profit of £76 as against the previous net profit of £176.

I do not suggest that this Amendment is perfect. Indeed, my hon. and learned Friend the Member for Kettering (Mr. Mitchison) and my hon. Friend the Member for Islington, East (Mr. E. Fletcher) put down certain rather more subtly drafted Amendments to the Schedule which were designed to make a closer approximation to closing this loophole in exactly the way that we would wish to do it. I believe that they were so subtly drafted, Sir Charles, that you yourself found it difficult to understand them, and I must confess that I and some of my hon. Friends found it equally difficult to understand them. But I believe that my hon. and learned Friend is going to say something about them on this Amendment.

Therefore, subject to what my hon. and learned Friend has to say later on, what we want particularly from the Government in reply to this Amendment is a recognition that there is a real difficulty here; that in putting people in the position, even if only a small category, in which they can make an actual cash profit out of buying limitless quantities of plant and machinery which they do not want or need in the conduct of their business, they are doing something which is highly undesirable from a tax point of view.

I hope that in the reply of the Financial Secretary we shall not have any echo of the words of the Economic Secretary earlier this afternoon when the latter, in replying to the first Amendment relating to small businesses, implied scornfully that later in the day we were bringing forward a lot of Amendments, contradictory to that one, which were very harmful to small businesses. This Amendment is in no way a spiteful or frivolous Amendment, but a serious one intended to deal with a situation of limited but serious importance. What we want from the Government, if they cannot accept the Amendment, is a recognition that this is a serious problem, that they want to close the loophole, and will seek to do so by means of a well-drafted Amendment.

Mr. Mitchison

I do not think that I could possibly improve on what has been said by my hon. Friend, because I have never heard a clearer exposition of what is a rather difficult matter and one more convincing for the reasons that he gave.

The root of this trouble is giving people allowances of 120 per cent. for 100 per cent. expenditure. If we do that, with any high rate of Income Tax and Surtax combined, we are bound to get into the difficulty of which my hon. Friend has given an instance. I agree that the simplest way of dealing with the matter would be to deal with not quite the whole of it but most of it by this Amendment.

If I may, however, I propose to refer to two Amendments to the Second Schedule which represent what are amateur attempts to try to deal more fully with an exceedingly complicated matter. They are both to Schedule 2, page 39, line 37. The first, if I may take the instance given by my hon. Friend, would simply lop off that amount of the proceeds of this transaction which represents the excess of the sale price—in his case the £719 plus the Income Tax and Surtax profits, if I may use deliberately the wrong word—of £281 over the original expenditure.

That, of course, by the terms of the Amendment, is limited to sales or transfers within the three years which occur otherwise in the Clause. It has the merit of comparative simplicity, and I say at once that, as indeed I think my hon. Friend has said, one must not exaggerate the extent of this. But these are fairly large figures in proportion to the expenditure and depend on a high rate of writing off and, in the case of the individual spender, a high combined rate of Income Tax and Surtax. They exist none the less, and although high figures would apply only to a particular case, there are other cases where similar figures would apply with corresponding reductions in the rate of writing off and in the combined rate of Income Tax and Surtax suffered by the taxpayer.

In regard to the second Amendment, I have to make, quite frankly, two apologies: first, for an abominable grammatical slip in the third line, and secondly, for having quite inadvertently made a slip in line 10. The figure ought there to be the amount of the expenditure without the amount of the investment allowance. I expect that whoever is answering will say that it is only possible to deal with the Amendment as it appears on the Order Paper and that if people put down nonsense they cannot expect much of a reply.

Mr. R. A. Butler

If I may interrupt, I should like to say that I understood that this Amendment had not been selected by the Chair; and, therefore, we have not "worked it up." We shall not be able to give a detailed answer, but if the Chair is permitting, quite legitimately, a discussion on it, I hope that the hon. and learned Gentleman will not think that because we do not reply in detail we have not considered it.

Mr. Mitchison

I must thank the Chancellor for his customary courtesy, or rather, even more than his customary courtesy. I am indebted to an accident inherent in our procedure whereby, if I may use the expression, he may be deprived of the chance of "wiping the floor with me." But I was going on to say something which I hope is a little more helpful, although when hon. Members of the Opposition are trying to draft Amendments, particularly to the Finance Bill, they find themselves in very considerable difficulty. It is about the hardest job, and if there are, from time to time, slips which creep in, I hope that the Government will take them in the right spirit and without undue regard for the strict wording.

Mr. Butler

We would gladly accept the hon. and learned Gentleman as an honorary drafting adviser, as we know that he acts in that capacity for the other side.

Mr. Mitchison

I am indebted to the Chancellor. What I was going to say is that there are ways and means of meeting this particular case. It is not a case where one can say it cannot be met because of difficulty of finding a definition, or because of the variety of circumstances, or whatever may be the excuse of the Government of the day.

Furthermore, this is not an expensive matter, and it is not going to cover a very large number of cases—[Interruption.] I believe that the hon. Member for Edinburgh, South (Sir W. Darling) said "Hear, hear," and I agree with him. But even if there is only one injustice it is worth remedying; and here there is an obvious and flagrant injustice by which a number of people will profit. It is an injustice which has not failed to be noticed. It has been commented upon in the technical Press, and what I want to ask hon. Members opposite is this simple question. Are they prepared to say that they will allow this sort of thing to go on for lack of an Amendment to meet it? What I have in mind is that, as a result of the Bill if carried through in its original form, it is possible, for certain people, by no means poor, since it depends on the rate of Income Tax and Surtax that they pay, to make a positive profit out of the taxation system.

12.45 a.m.

Viscount Hinchingbrooke (Dorset, South)

Could the hon. and learned Member supply us with the names of individuals who have bought a number of tractors and have allowed them to rot and rust in the fields and gained a lot of money?

Mr. Mitchison

I hope that the noble Lord will not think me offensive if I say I have rarely heard a more puerile objection. Tractors are mentioned, but any other machinery with a high rate of deterioration would have served as well. We have taken an instance only. To ask for the names of all the people in the country who pay Surtax at 19s. in the £ and who have owned tractors is to be slightly ridiculous.

Viscount Hinchingbrooke

The Amendment is concerned with a pure hypothesis.

Mr. Mitchison

I have no wish to take up the time of the Committee beyond saying that nobody puts this forward as a very large matter. The amount involved from the point of view of the Revenue or the taxpayer is not very large, but this involves quite a definite injustice which favours a class of people who are not entitled to any particular protection or leniency from us. It ought to be put right. This is probably a point which the Chancellor and his advisers may not have fully noticed when the provisions were originally inserted in the Bill. Now that it has been brought to the notice of the Treasury, both by the accountants and by means of this debate, I earnestly hope that we shall not be told that it is impossible to meet the point or that it is not worth dealing with it.

Mr. E. Fletcher

I rise to support the Amendment. I was really rather shocked by the intervention of the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke). It was quite obvious that he had not listened to the very lucid speech of my hon. and learned Friend the Member for Kettering (Mr. Mitchison). This is a very serious point. It is a complicated matter and I thought that my hon. and learned Friend endeavoured to put in the simplest possible language a point with which the Treasury will wish to deal.

It was either the Chancellor in introducing the Budget or the Financial Secretary on Second Reading of the Finance Bill who realised, as the draftsmen of this Clause realised, that there was inherent in this system of the investment allowance the possibility of abuse by any persons who might be sufficiently unscrupulous to abuse it. It is for that very reason that the Second Schedule, which is related to the Clause, contains a very elaborate provision to prevent the possibility of abuse. I do not know what the extent of the abuse may be.

It is no use the noble Lord the Member for Dorset, South inviting us to give a list of people concerned, because the Bill has not yet been passed and the allowance does not take effect until the Bill has been passed. I am sure that the noble Lord will not deny the possibility that in this world there may be people sufficiently malignant to abuse the investment allowance if the opportunity is flagrantly presented to them.

As my hon. Friend has pointed out, and as he has quoted from the technical Press, there is such a flagrant opportunity in the Bill for the possibility of abuse of a most pernicious kind. I would give the Chancellor credit for not having noticed, until it was pointed out to him, the possibilities that will arise unless this particular loophole is checked. This is something entirely novel in our finance law arrangements. I am not criticising the principle of giving investment allowance, the essence of which is that if some trader buys something worth £1,000 it is treated for tax purposes as worth £1,200, and when he comes to make up his tax return he can set off, not this cost of £1,000, but the wear and tear allowance, all based on the hypothesis that it cost him much more than it really cost.

There follows the inevitable consequence that if it is a company paying high taxation or an individual paying a particularly high rate of Surtax, he gets not merely a considerable additional benefit over a non-Surtax payer, or a Surtax payer who does not pay a particularly high rate of Surtax, but an actual net profit, because by being able to pretend that something really costing £1,000 cost £1,200 enables him to save not £100 but £300 or £400 when he comes to make up his tax returns at the end of the year. I am sure that is a consequence of this investment allowance which the Chancellor could not possibly have foreseen or noticed until it was pointed out to him, and that now it has been pointed out he will want to correct it.

Personally, I am not particularly enamoured of the actual terms of the Amendment on the Order Paper. I think it is the wrong way to deal with the matter, and I think it goes too far. I appreciate the technical difficulties of framing an Amendment to deal with the precise problem, but in my opinion—and here I differ from my hon. Friend—one must recognise that if we are to have investment allowances available to private individual traders as well as to companies, it is inevitable that the more a Surtax trader pays the greater advantage he will get from the incentive of the investment allowance.

In some respects I think it is an essential part of the scheme that one should give that incentive both to the high Surtax payer and to all other classes of the community. Therefore, I think that if all Surtax payers were deprived of the benefit of the investment allowance, pro tanto one would take away from that class of the community the incentive which the investment allowance is designed to give. I gather that in that I have the Chancellor's assent.

Mr. R. A. Butler

indicated assent.

Mr. Fletcher

I am glad that we are on common ground. That reduces us to the crux of the problem which my hon. Friend has outlined, and that is, to design a remedy for what will otherwise become a really glaring abuse.

There are two kinds of persons concerned; there is, in crude language, the person who will derive a real monetary profit out of this investment allowance by buying some plant and machinery and selling it. If he buys it with the object of selling and if he is able to circumvent the provisions and safeguards within the Second Schedule, that would be a deliberate act of evasion, and I think the Chancellor would agree that we should tighten to the maximum the provisions necessary to check that deliberate evasion. But, as my hon. Friend pointed out, there is the person who will get an uncovenanted monetary benefit out of this investment allowance by buying some plant and machinery, not selling it, hut just keeping it whether he wants it or not.

I hate to quote figures, but, in addition to those quoted by my hon. Friend, I must quote three specific illustrations which have been given me, because this is a matter which I am sure the Chancellor and his advisers will wish to consider most carefully between now and the Report stage. Take the person whose rate of Income Tax and Surtax is 19s. in the £. He could buy a machine for £1.000 on which the ordinary wear-and tear rate is 22½ per cent. He could sell it the following year at £1,000, and he would make a profit on the transaction of £190 cash.

As a second illustration, there is a person whose rate of Income Tax and Surtax is 19s. in the £ who could buy a machine for £1,000. The ordinary rate of wear and tear is 22½ per cent. In the following year he could dispose of it even at a nil price. He may have a friend who would make some adventitious gain and he would make a profit of £140. I want to show that this is not confined to Surtax payers.

Thirdly, there is the person whose rate of tax is 9s. in the £. If he got a machine for £1,000, again his wear-and-tear allowance would be 22½ per cent., and if he sold it in the following year, he would make a profit on the transaction of £90.

I have dealt with cases of persons who have bought machinery and sold it. I want to give two illustrations of persons who buy plant and machinery and do not sell it. The first case was given me by a very distinguished accountant who has taken a great deal of trouble to work out these illustrations for my benefit. The person's rate of Income Tax and Surtax is 16s. 6d. and his expenditure on plant and machinery is dealt with an a renewals basis. He could claim an allowance of 120 per cent. of his renewals expenditure and 20 per cent. thereof as the initial allowance. His relief, assuming renewals expenditure of £100, will be £120 at 16s. 6d., which equals £100. He will recover from the Revenue the whole expenditure in full. That is the marginal case to which my hon. Friend referred.

My last illustration is a person paying Income Tax and Surtax at 9s. in the £ and expenditure on plant and machinery is dealt with on a renewals basis. He can claim an allowance of 120 per cent. of his renewals expenditure—again. 100 per cent. of the expenditure and 20 per cent. thereof as the initial allowance. His relief, assuming his renewals expenses are £100, is £120 at 19s. in the £, which equals £114, so that he recovers his expenditure in full and makes a profit of £14. In this example, had the renewals expenditure been £1,000, the profit would be £140.

1.0 a.m.

There can be no denial of that. It has been published in the trade papers and it is inherent in the system of investment allowances that persons paying Income Tax and Surtax at the highest rates and buying a lot of property for £1,000, and being able in their tax returns to treat it as if they had paid £1,200 for it, must save a great deal of tax. There is, therefore, an open invitation to them to buy whatever they can, whether they like it or not. The mere operation of buying it saves them money and saves them tax. It means that farmers, for instance, can buy not only tractors, but anything for their farms. If one is in the happy position of paying Income Tax and Surtax at a combined rate exceeding 16s. 6d. in the £, the mere fact of purchasing something for one's farm saves one tax.

I am sure the Chancellor will agree that that is a consequence which he cannot possibly desire, because it does not make sense. It is not an incentive for people to develop their property, whether it is a manufacturing or an agricultural business; it is just a glaring invitation to wasteful, meaningless expenditure at the expense of the Revenue; and that cannot be right.

The Chancellor is entitled to ask what is the appropriate remedy. It is for him and his advisers, and not for me, to devise the appropriate remedy. What I ask the Chancellor to do, and I am sure he will be willing to do it, is to face this loophole, which has been exposed in an otherwise worthy, meritorious proposal, as I regard it, of the investment allowance. I invite the right hon. Gentleman to accept the criticism and to say that he will find the appropriate remedy which closes this obviously vicious defect in the machinery but which does not in any way detract from the inducements and incentive which he wants to give to the trading community to develop and invest in capital expenditure designed for the legitimate expansion and modernisation of their businesses.

Mr. Boyd-Carpenter

The Amendment which the Committee has been discussing relates solely to the question of Surtax and seeks to provide that the benefit of the investment allowance shall not run in respect of Surtax. As I understood the hon. Member for Islington, East (Mr. E. Fletcher), he did not feel that the abuses which he feared were likely to arise only in the Surtax field. Indeed, he was not, so far as he was concerned, supporting this Amendment on the basis that it would cure the abuses which he feared.

The fact is that my right hon. Friend, in the Second Schedule to the Bill, has provided at considerable length and in considerable detail for the prevention of possible abuses. It is, therefore, quite clear to hon. Members on both sides of the Committee that my right hon. Friend has no desire whatever that this considerable step forward, which is embodied in the Clause, should be grossly or wildly abused. So far, therefore, I do not think that there is very much source of disagreement between us.

It is, of course, possible for views to differ on what is an abuse. The hon. Member for Stechford (Mr. Roy Jenkins) seemed to be alarmed about anyone making a profit. I am not sure that I would go so far as to regard making a profit as being of itself a necessary indication of abuse. It is possible that a trader may make a profit when he sells an asset which has qualified for investment allowance. That is, in a way, an illustration of the fact that investment allowance is a tax-free benefit and is, as such, capable of realisation at some time. Therefore, I hope we shall not approach this matter from the point of view that, investment allowance being profitable in a particular case, this shall necessarily be regarded as a clear indication that there is an abuse.

I am bound to say that one or two of the examples which have been given during the discussion seemed rather over- drawn. Those which related to resale all depended for their validity upon a sale at an adequate second-hand price being obtained. The hon. Member for Stechford went to great trouble to point out the second-hand price which, for his example, was required. It is no good—

Mr. Gaitskell

Did the right hon. Gentleman not notice—

Mr. Boyd-Carpenter

I am in the middle of a sentence. I will give way when I have finished it. I am giving the right hon. Gentleman an opportunity to take instructions from his hon. Friend, for which he should be grateful. Several of the examples which were given depend upon an adequate price being obtained upon resale. If they did not, there was no reason for the hon. Member for Stechford wasting the time of the Committee giving in great detail the resale price. It is clear that the price is a material factor.

Mr. Gaitskell

Now that the hon. Gentleman has come to the end of that rather long sentence, I would ask whether he did not notice that in one of the examples the plant was sold at a nil price. The profit in that case arises from the balancing allowance.

Mr. Boyd-Carpenter

Perhaps the right hon. Gentleman will now let me proceed. Some of the examples quoted were founded upon certain assumed prices upon resale. That is surely beyond dispute. Therefore, the degree of alarm which hon. Members feel about the possibilities of abuse must to some extent be affected by the likelihood, or otherwise, of its being possible for resale of this sort to take place. If hon. Members look at this reasonably, that must be apparent.

This ability to make a profit out of the allowance is not confined to the Surtax field. As a number of hon. Members have seen fit to give examples, let me give an imaginary possibility, this time in the company field. It would be possible, in the case of a company paying Income Tax and Profits Tax totalling 10s. in the £, for the company to buy plant for £1,000 and shortly afterwards to sell that plant for £900. With investment allowance of £200 and balancing allowance of £100, there will be a saving of tax on £300. That is £150 in cash.

I want the Committee to realise that if there is a risk of abuse here it is quite wrong to believe that the abuse is concentrated solely in the Surtax field. because if the making of a profit on a resale is in itself an abuse, it is possible to construct examples in the company field of taxation as plausible as those which hon. Members opposite have constructed. It is possible to construct them completely outside the Surtax field. I suggest that that of itself is a strong reason for believing that if there is a serious risk of abuse, it cannot be met by the proposal before the Committee.

Mr. Roy Jenkins

The right hon. Gentleman has now argued himself into a slightly contradictory position. A little time ago he said that our arguments were not altogether valid because they depended upon postulating a selling price which perhaps was likely to be a false price. It is true that in one example I postulated such a price, but I also postulated a nil sale price, as my right hon. Friend the Member for Battersea, North (Mr. Jay) said, and the amount of profit produced was not very much smaller than in the other case.

The right hon. Gentleman goes on to the case not of high Surtax payers but of the company field; but there anybody who would benefit through investment allowance can be said to make a profit only if we postulate a selling price—and a very high selling price. The position where one can be certain of making a profit by selling at any price or even at nil arises only with the high Surtax payers. The right hon. Gentleman cannot have it both ways. He cannot say that our case falls because we postulate a selling price about which we cannot be sure and then have the argument the other way round by applying it to a case where it is necessary to postulate a selling price.

Mr. Boyd-Carpenter

I do not think that far-from-brief intervention takes us very much further. In the middle of it the hon. Member was forced to admit The only contention which I am arguing at this point—that it is not possible to deal with the contingency which he fears solely by attacking the Surtax provisions. As I understand it, that is what his intervention came to—that he agrees with me on that point.

Some interesting possible examples have been given to the Committee, including that extracted from "The Accountant, "which, of course, I too had seen. The question is whether those examples are sufficiently realistic to raise doubt as to the possibility of serious abuse. It is always possible, in respect of any tax provisions, to construct ingenious theories as to possibilities of abuse and to argue from the theories that the whole tax provisions require radical change, but we have to proceed in a realistic way in these matters, and I suggest to the Committee that we have to proceed on the basis that we must not assume that the making of a profit out of a provision of this sort is of itself evidence of abuse.

We have to go further than that. We have had the rather elaborate suggestion of the hon. Member for Stetchford of someone who was apparently collecting tractors in the same way that others collect stamps, storing them in large quantities and apparently not making the profitable use of them which could be made. We have reached that rather extreme case. We have to go further than that before we say, "This is what might be regarded as a serious abuse. "The question which we have to consider is whether in practice we face real difficulties. I am inclined to think we do not, but I think it would be perfectly proper, in view of the fact that a number of hon. Gentlemen have taken the contrary view. I am sure perfectly sincerely, to look at this and see whether, in the light of these examples, we are satisfied that the Clause, and the Schedule which goes with it are satisfactory.

1.15 a.m.

One thing, however, I am perfectly clear about, and that is that this Amendment will not do. It is, after all, the principle of the allowance to relieve of tax 20 per cent. or, as the case may be, 10 per cent., of the cost of the new asset, so as to encourage investment, and from that point of view it seems to me that the fact that the person conducting the enterprise is either a sole trader or a partner, and so subject to Surtax, is immaterial. It is arguable that trading enterprises in such form, individual or partnership, paying high rates of Surtax, themselves require at least as much incentive to invest as anybody else.

There can well be cases in which the cash difficulty would be very much greater—cases of enterprises of that sort which, ex hypothesi, are being taxed at far higher rates than any company could be called upon to pay. It would be utterly wrong to adopt the expedient suggested in this Amendment and deprive the enterprise, so far as Surtax is concerned, of the benefits of this allowance.

If one is to deprive enterprises of this sort of relief in respect of Surtax, what is one going to do in respect of companies with heavy Profits Tax obligations? The very logic of the arguments adduced in favour of this Amendment leads to suggesting some limitation in respect of companies. Or let us take the converse. If, in the case of individuals and partnerships we are to be limited to Income Tax at the standard rate, what are we going to do in the case where Income Tax is paid at the lower rates? In the logic of the argument, one is going to gross that up so that if the taxpayer pays at the lower rates, the value of the concession is grossed up to 9s. 0d. That is the logical conclusion to which this particular proposal leads.

Therefore, it does seem to me that it would be wholly wrong to the individual trader, and to the partnership, to adopt this proposal, quite strangely contrary to the concern for these individuals which the hon. Member for Gloucestershire, South (Mr. Crosland) was evincing at such considerable length on an earlier Amendment today. What the position comes to is this—this Surtax proposal is unacceptable. I do not think that will surprise hon. Gentlemen opposite because some of them at least showed remarkably little enthusiasm for it themselves.

We come, then, to the question whether any further other action is required in respect of threatened abuses. On that I do not want to be dogmatic. I am inclined to think the provisions already em- bodied in the Second Schedule are adequate to check any really likely form of abuse, but my right hon. Friend the Chancellor of the Exchequer would like, in the light of the examples to which hon. Gentlemen attach importance, to examine them in order to see whether our view that the present protection against abuse is adequate, on examination at leisure, in the light of these further cases, does stand, or whether it requires modification.

I think from that it will be clear to the Committee that my right hon. Friend has no intention whatever of allowing serious abuses to arise and we are therefore restricted to the rather narrow question of fact which I have—[Interruption.] I hope I am not interrupting hon. Gentlemen on the back benches. I was indicating, I hope seriously, in reply to observations to which some of the hon. Friends of the right hon. Gentleman the Member for Battersea, North (Mr. Jay) appear to attach importance, that my right hon. Friend would like the opportunity to study the possibilities, or alleged possibilities, which hon. Gentlemen opposite have in mind, in order to reassure himself that the safeguards embodied in the Clause and the Second Schedule are adequate.

Mr. Mitchison

When the matter is being studied further, will the right hon. Gentleman consider this not as a question of abuse—I am inclined to agree that the Second Sechdule goes a long way to meet abuses—but as a question of the necessary operation of these allowances in certain circumstances?

Mr. Boyd-Carpenter

I am not absolutely certain what the hon. and learned Gentleman means by "certain circumstances." If he means anything like the original Amendment about the whole Surtax field, then I have indicated that I do not think that we can cut that out. The operation of the allowance from the point of view of the possibility of abuse is what I had in mind. If that is what the hon. and learned Gentleman had in mind, I shall be glad to give the assurance.

Mr. Mitchison

Will the right hon. Gentleman bear in mind the "certain circumstances" that have been described to him at considerable length, and the points that make this injustice that have also been put to him? I hope that he will remember that there is such a thing as a balancing allowance.

Mr. Boyd-Carpenter

If the hon. and learned Gentleman was referring to the alleged examples, naturally all circumstances connected with them will be considered.

Mr. Gaitskell

It is really too bad that for the second time since we started our discussions yesterday afternoon the Chancellor has put the Financial Secretary in to represent the Government on such a terribly bad case. I must say to the right hon. Gentleman, whose skill as a debater we all admire, that I have seldom heard a more jejune, shifty, evasive answer than the one we have just heard. My hon. Friends had posed with great clarity what I think is perfectly clearly an extremely serious problem for the Treasury.

I say at once to the right hon. Gentleman and to the Chancellor that I very much regret that this position should arise. On the whole, we have supported the investment allowances. We think that there is a great deal to be said for them. It was with some dismay that we discovered this rather serious consequence which followed from the legislation as it now stands. We put the Amendment forward to try to elicit from the Government some clear statement about what they propose to do about it.

My hon. Friend the Member for Stechford (Mr. Roy Jenkins) admitted that the Amendment which we happen to be considering now in anticipation of the Amendment to the Schedule is open to certain objections, though if it does go a little too far I am not at all sure that I would not prefer the Amendment to nothing being done at all by the Government. All we get is a vague statement, intended to be reassuring, that, after all, perhaps this is not a very serious matter and perhaps there will not be abuses of this kind.

I agree with my hon. and learned Friend the Member for Kettering (Mr. Mitchison) that it is not a question of abuses. We are not complaining that somebody or other will misbehave. The question is what they are entitled to do under the law as proposed in the Bill, and what they will do. The Financial Secretary must be aware that a large number of officials under his control spend many hours dealing with people who are avoiding or evading taxes. Those officials know that many people are concerned to see how they can avoid tax payments. It is extraordinary that the Financial Secretary, knowing that, should dismiss so casually what one can only describe as the most obvious way to avoid taxes—legally, of course—that one could possibly imagine.

As far as I understood it, the right hon. Gentleman did not question that the facts as set out in "The Accountant," which has been quoted, were accurate. There can be no doubt in these circumstances that it would be possible for a person in the situation as suggested in this example to make on the purchase of some item of equipment for £1,000 a clear profit of £176. Perhaps the word "profit" is misleading, because what in fact he is doing is increasing his own net income after tax. There is no question of the profit in this case being taxed. It is an extra amount that he is going to retain for himself. There is, therefore, a very special incentive towards making that kind of profit, and that is all the more reason for the Government to consider very carefully what they are going to do in order to prevent this.

The essential point is this: we all accept that, in granting the investment allowance, the Chancellor is trying to provide incentives. He is therefore in this sense trying to make it more profitable for people to install machinery and plant or to build. No one questions that. If, in consequence of additional investment, plus the investment allowance. being carried out in the normal way as a basis for higher productivity, an extra profit is made, being subject of course to tax, I do not think we would object.

We accept the implication which stems from the proposal itself; but here we are dealing with the case where that net gain of tax-free income is obtained when no real investment in that sense takes place. As my hon. Friend the Member for Islington, East (Mr. E. Fletcher) said, the mere act of purchasing and holding the article for a time enables a person to get this reduction in the tax he pays. If this is correct, I cannot conceive how the Government can be so complacent. It is an utterly indefensible situation.

The explanation and vague half-promise of the Financial Secretary in these circumstances is totally unacceptable. If the Chancellor is prepared to say, first of all, that he recognises that there is this problem, and secondly, that he will between now and the Report stage put down whatever Amendment is appropriate to deal with it, then I am sure my hon. Friend will be glad to withdraw the Amendment but if we cannot get a really firm assurance I think we ought to press the matter further, because it can only be because the Treasury Bench do not understand the problem. In that case it would be helpful if my hon. Friends and others were to give them a little tuition in this very difficult problem.

Mr. R. A. Butler

I think the Treasury Bench do understand the position, and I think the right hon. Gentleman did less than justice to the Financial Secretary who did traverse all the arguments and went to the trouble of showing that the Amendment did not cover the whole problem, which indeed it does not do. If there is to be abuse, we must examine the possibility among taxpayers at 9s. in the pound as well as Surtax payers. The Financial Secretary made an attempt to show that if there is an abuse it is wider than the Amendment indicates, and he said that he will examine the arguments and see whether anything can be done. Having said that, he does not deserve the strictures, because he was making a perfectly legitimate intervention and trying to be as helpful as possible. At any rate, that was his intention.

Mr. Glenvil Hall

I was here the whole time, and surely the Chancellor will remember that the Financial Secretary indicated that these people were entitled to make this profit. He said it more than once.

1.30 a.m.

Mr. Butler

He said that if there was abuse it would be investigated in the light of this debate, and that is precisely the attitude of the Government, and I endorse what the Financial Secretary has said.

But I will now follow up a little further the argument and perhaps help the right hon. Gentleman to see what the position is. When the initial allowance was raised to 40 per cent., the right hon. Gentleman and his hon. Friends let it run for Surtax. That is comprehensible. They allowed it to run for Surtax, and it went right through the range. The inclination of ourselves being morally no less pure than the right hon. Gentleman, when we came to consider the new allowance, was to allow it to run in the same way.

The right hon. Gentleman may well say, "That is all very well, but the investment allowance does not merely anticipate depreciation allowance; it is a tax allowance over and above the net cost." I am trying to be as fair as possible to hon. Members opposite. The trouble is that the deduction that we have drawn from that in framing this Bill, dealing with this extremely difficult matter, is that if it is a tax allowance over and above the net cost, it must be treated as a tax allowance and must run over the whole range. As the Financial Secretary said, it runs for companies, for Income Tax and for Profits Tax, and it runs for individual traders, unincorporated partnerships and so forth.

Let us just see the range of the abuse to which the Amendment, to which the right hon. Gentleman refers, applies. I am informed that the scale of this problem is indicated by the fact that 9/10ths of the cost of that investment allowance would apply to companies and about 1/10th to individuals. So the problem is reduced to 1/10th of the whole of this Amendment, on the range that we are considering.

Mr. Gaitskell

Surely the right hon. Gentleman would not suggest that there is just as much possibility, not of abuse—I have not used that word—but of this net gain to the taxpayer without any real investment taking place? The right hon. Gentleman surely would not suggest that that was equally likely in the case of the company paying 10s. in the £ tax and the individual paying 19s. in the £?

Mr. Butler

No, I was applying myself to the range and size of the problem involved. As it relates to individuals, it relates to about one-tenth of the problem of investment allowance. Nobody can deny that, because I have got these figures direct from Somerset House, and I got them in answer to the right hon. Gentleman's speech because I thought that he would like to hear the latest news. Of this, one-eighth of one-tenth applies to Surtax, and so it is one-eightieth of the ultimate cost. Or, taking the year 1959–60, for which we gave the figure of £30 million for the investment allowance, it is one-eightieth or £300,000 which is really at stake in this Amendment.

If we make the addition of the initial allowance which survives for Surtax, the maximum figure which we can regard as within the scope of this Amendment is the figure of £1 million. The maximum, if we took the figure literally, would be £300,000. This shows that the range of this particular discussion is not so far reaching as the Committee might have supposed.

I presume that the Amendment was put down in order to raise the principle that there should not be the type of abuse to which the hon. Member for Stechford (Mr. Roy Jenkins) referred. The real difficulty that I have in dealing with the point raised by the hon. Member for Stechford is that we have a Second Schedule, drafted on the advice of those very people whose main desire in life is to prevent tax evasion, in order to prevent abuses of the investment allowance. If hon. Members look at the Second Schedule, which I hope we shall be able to consider very shortly, they will see that paragraph 1 (2) lays down very stiff provisions for the sort of interchange or traffic to which the hon. Member for Stechford referred.

It was our intention in drafting the Schedule to deal with the maximum degree of evasion. But what I cannot get away from is that if this is a tax allowance, it should apply over the whole range of taxation. Here I agree with the hon. Member for Islington, East (Mr. E. Fletcher) that if we are to encourage investment, which is the object of the investment allowance, it is a great pity that we should not encourage it in the higher ranges as well as in the lower ranges of income, within the companies as well as within the partnerships. That is the difficulty we are in, and on that there may well be a difference of opinion between the two sides of the Committee. But it shows that not only in framing the Schedule, but in the whole tax range that we have known since the war, we regard this as a tax allowance and not as a subsidy.

If it is to be regarded as a subsidy, we must readjust the whole range so as to have equity at the bottom range in proportion to what they get at the top range. If it is a tax allowance, hon. Gentlemen opposite are quite legitimate in saying that it must be variable, because a tax allowance naturally operates in proportion to the amount of tax that a person pays. Therefore, we on this side of the Committee in our general philosophy on these affairs do not object if a certain person who pays a lot gets a certain degree of tax allowance.

However, there may well be a genuine difference of opinion on that point, but subject to that difference of opinion being established—in which case we had better divide on it—I am ready to endorse what the Financial Secretary has said. We will examine the Second Schedule between now and the next stage to see whether there are any practices that are undesirable and which we intended to avoid. If there are, then when we come to the next stage we will do our best to deal with them.

Mr. Jenkins

But does the Chancellor subscribe to the surprising view which the Financial Secretary put forward, that it is all right in certain circumstances for an individual or a company—it is much more likely to apply to an individual— to make an actual profit out of such an undertaking; in other words, to buy a piece of machinery and to receive some money for doing so? Does he want that? Or, if he can devise a practical method of stopping it, will he deal with it?

Mr. Butler

The Second Schedule was designed to stop a deliberate traffic in gains at the time that the investment allowance was taken by the beneficiary. One point which I am not sure was brought out is that if this tool is used for production, if it is transferred, even then it is possible for the Government to envisage that the investment allowance has been well-spent because the tool is used for production, and therefore it is doing some good for the country.

Hitherto I have not been able to devise a method of stopping a transfer at a later date, after the time that the investment allowance was taken by the beneficiary; so hon. Members are legitimate in differing from me in saying that the Second Schedule does not achieve that. If we can see a way of achieving that which does not stop ordinary transactions between man and man—which cannot be entirely controlled from Whitehall—I will look at it. However, hon. Gentlemen must realise that it will be virtually impossible to stop the transfer at a later date of a tool to B which was owned originally by A.

Mr. E. Fletcher

The right hon. Gentleman is anxious to meet the difficulties expressed on this side of the Committee, and I wonder whether he would be good enough to say if he realises that the implication of what he says is that any individual trader, whether in agriculture or in industry, can under this arrangement buy enough plant and machinery to reduce his effective rate of Surtax to 16s. 6d. in the £? Does the Chancellor regard that as a good thing or a bad thing? Is that the kind of remission lie wants to give?

Mr. Butler

When one gets to the few remaining cases of Surtax payers at that very high level—and there are not so many of them left now as hon. Members opposite appear to believe—there might be one man Who sets up an office in order to buy plant and machinery for the purpose of obtaining the investment allowance and who then leaves the machinery lying about in garages and fields; then I agree there might be an exceptional position. But if one is a normal person Who gets an investment allowance to buy a tool, one also thinks twice before spending capital. An ordinary person thinks twice before spending capital on a tractor or a piece of machinery; and a sum of money has to be spent—the relief does not come until afterwards. That may not be an important consideration to the very high Surtax payer, but it is very important to a great many people in a State which is much more egalitarian than the hon. Gentleman seems to know.

I do not see any way of drafting to avoid this extreme case which the hon. Gentleman raises, but, although I do not say that we shall do it early tomorrow morning—or rather this morning—because we should like to have a little sleep, we will look at it after we have recovered from an all-night sitting.

Mr. Adams

I must say that we had a most astonishing reply from the Financial Secretary, although the Chancellor has done his best to whitewash it and restore the confidence of the Committee in our proceedings. So far as I could follow it, the argument of the Financial Secretary seemed to run like this. There may be some abuses, but if there are only a few there is no reason why the Government should do anything about them. Surely it is wrong for the Government to admit that it recognises that there are abuses, or evasion of tax, and then to say that while there are a few people going in for that evasion there is nothing much which can be done about it. If the Financial Secretary reads over what he has said, I think that he will realise that it was a poor attempt. But the Chancellor did his best to restore the position by telling the Committee that he would see what could be done.

I believe it has been pointed out that this problem arises for the first time, and that is because this is the first time that the Committee has dealt with property or machinery where there is a fixed notional value of 120 per cent. instead of the 100 per cent. actually involved. The Financial Secretary said that in the case of a company which sells at a good second-hand price, and with the help of the balancing charge, then at the standard rate a profit could be made. But at the higher rate of

surtax which is paid as one goes up the scale one can still make a profit by reason of this additional 20 per cent. value above the actual purchase cost. The Chancellor must find a way of bringing back that 20 per cent. in some manner comparable to the system of balancing charges.

I am quite sure that if the Chancellor looks at the matter carefully he will ignore the advice of the Financial Secretary that, since this abuse will not operate on a large scale, we need not bother about it, particularly as the Financial Secretary gave a simple illustration of how every company could benefit from the provision. If it is open to every company that is quite legitimately selling machinery to make this extra gain, surely it cannot be confined to a very few persons. What is confined to a few persons is the maximum gain to be obtained by a payer of a high rate of Surtax, but it is open to every company selling machinery second-hand and obtaining a good price for it to benefit. If the Chancellor looks at the matter again with the help of his expert officials, I am sure that he will find some way of removing this additional gain which results in certain circumstances from the early sale of capital equipment.

Question put, "That those words be there added."

The Committee divided: Ayes, 111: Noes, 133.

Division No. 146.] AYES [1.45 a.m.
Acland, Sir Richard Finch, H. J. Marquand, Rt. Hon. H. A.
Adams, Richard Fletcher, Eric (Islington, E.) Mellish, R. J.
Albu, A. H. Foot, M. M. Mikardo, Ian
Baird, J. Gaitskell, Rt. Hon. H. T. N. Mitchison, G. R.
Benn, Hon. Wedgwood Gibson, C. W. Morgan, Dr. H. B. W.
Benson, G. Gordon Walker, Rt. Hon. P. C. Morris, Percy (Swansea, W.)
Blackburn, F. Greenwood, Anthony Moyle, A.
Blenkinsop, A. Grey, C. F. Mulley, F. W.
Bowden, H. W. Griffiths, William (Exchange) Nally, W.
Braddock, Mrs. Elizabeth Hall, Rt. Hon. Glenvil (Colne Valley) Noel-Baker, Rt. Hon. P. J
Broughton, Dr. A. D. D. Hannan, W. Oswald, T.
Brown, Rt. Hon. George (Belper) Hargreaves, A. Pargiter, G. A.
Burton, Miss F. E. Hayman, F. H. Parker, J.
Butler, Herbert (Hackney, S.) Henderson, Rt. Hon. A. (Rowley Regis) Pearson, A.
Callaghan, L. J. Herbison, Miss M. Pearl, T. F.
Castle, Mrs. B. A. Hobson, C. R. Popplewell, E.
Champion, A. J. Holmes, Horace Price, J. T. (Westhoughton)
Chetwynd, G. R Hughes, Cledwyn (Anglesey) Price, Philips (Gloucestershire, W.)
Collick, P. H. Hughes, Hector (Aberdeen, N.) Proctor, W. T.
Craddock, George (Bradford, S.) Hynd, H. (Accrington) Rhodes, H.
Crosland, C. A. R. Janner, B. Robens, Rt. Hon. A.
Dalton, Rt. Hon. H. Jay, Rt. Hon. D. P. T Robinson, Kenneth (St. Pancras, N.)
Davies, Ernest (Enfield, E.) Jeger, George (Goole) Rogers, George (Kensington, N.)
Davies, Harold (Leek) Jenkins, R. H. (Stechford) Ross, William
Delargy, H. J. Johnson, James (Rugby) Shackleton, E. A. A
Dodds, N. N. Jones, Frederick Elwyn (West Ham, S.) Short, E. W.
Edelman, M. Jones, Jack (Rotherham) Shurmer, P. L. E.
Evans, Albert (Islington, S.W.) Keenan, W. Silverman, Julius (Erdington)
Evans, Stanley (Wednesbury) King, Dr. H. M. Simmons, C. J. (Brierley Hill)
Fienburgh, W. Lawson, G. M. Slater, Mrs. H. (Stoke-on-Trent)
Slater, J. (Durham, Sedgefield) Usborne, H. C. Williams, Rev. Llywelyn (Abertillery)
Snow, J. W. Warbey, W. N. Williams, Ronald (Wigan)
Soskice, Rt. Hon. Sir Frank Wells, William (Walsall) Williams, W. R. (Droylsden)
Strauss, Rt. Hon. George (Vauxhall) West, D. G. Wyatt, W. L.
Summerskill, Rt. Hon. E. Wheeldon, W. E. Younger, Rt. Hon. K.
Thomas, Ivor Owen (Wrekin) Whiteley, Rt. Hon. W.
Thomson, George (Dundee, E.) Wilkins, W. A. TELLERS FOR THE AYES:
Thornton, E. Willey, F. T. Mr. Wallace and Mr. John Taylor.
Aitken, W. T. Heath, Edward Page, R. G.
Allan, R. A. (Paddington, S.) Henderson, John (Cathcart) Pitman, I. J.
Alport, C. J. M. Higgs, J. M. C. Pitt, Miss E. M.
Anstruther-Gray, Major W. J. Hinchingbrooke, Viscount Powell, J. Enoch
Arbuthnot, John Hirst, Geoffrey Price, Henry (Lewisham, W.)
Assheton, Rt. Hon. R. (Blackburn, W.) Holland-Martin, C. J. Prier-Palmer, Brig. O. L.
Baldock, Lt.-Cmdr. J. M. Hollis, M. C. Raikes, Sir Victor
Baxter, Sir Beverley Hope, Lord John Rayner, Brig. R.
Birch, Nigel Hornsby-Smith, Miss M. P. Redmayne, M
Bishop, F. P. Hudson, Sir Austin (Lewisham, N.) Remnant, Hon. P.
Black, C. W. Hylton-Foster, H. B. H. Renton, O. L. M.
Bossom, Sir A. C. Iremonger, T. L. Ridsdale, J. E.
Boyd-Carpenter, Rt. Hon. J. A. Jenkins, Robert (Dulwich) Rodgers, John (Sevenoaks)
Boyle, Sir Edward Johnson, Eric (Blackley) Russell, R. S.
Braine, B. R. Kerby, Capt. H. B. Ryder, Capt. R. E. D.
Bromley-Davenport, Lt.-Col. W. H. Leather, E. H. C. Schofield, Lt.-Col. W.
Brooman-White, R. C. Legge-Bourke, Maj. E. A. H. Scott-Miller, Cmdr. R.
Buchan-Hepburn, Rt. Hon. P. G. T. Legh, Hon. Peter (Petersfield) Shepherd, William
Butler, Rt. Hon. R. A. (Saffron Walden) Lennox-Boyd, Rt. Hon. A. T. Simon, J. E. S. (Middlesbrough, W.)
Campbell, Sir David Lindsay, Martin Smithers, Peter (Winchester)
Channon, H. Linstead, Sir H. N. Stevens, Geoffrey
Clarke, Col. Ralph (East Grinstead) Lucas, Sir Jocelyn (Portsmouth, S.) Steward, W. A. (Woolwich, W.)
Colegate, W. A. Macdonald, Sir Peter Studholme, H. G.
Conant, Maj. Sir Roger McKibbin, A. J. Summers, G. S.
Cooper-Key, E. M. Mackie, J. H. (Galloway) Teeling, W.
Craddock, Beresford (Spelthorne) Maclean, Fitzroy Thomas, P. J. M. (Conway)
Crookshank, Capt. Rt. Hon. H. F. C. Maitland, Patrick (Lanark) Thompson, Lt.-Cdr. R. (Croydon, W.)
Crosthwaite-Eyre, Col. O. E. Manningham-Buller, Rt. Hn. Sir Reginald Thorton-Kemsley, Col. C. N.
Darling, Sir William (Edinburgh, S.) Marlowe, A. A. H. Turner, H. F. L.
Deedes, W. F. Marples, A. E. Turton, R. H.
Digby, S. Wingfield Marshall, Douglas (Bodmin) Vane, W. M. F.
Donner, Sir P. W. Maude, Angus Vaughan-Morgan, J. K.
Drayson, G. B. Maudling, R. Vosper, D. F.
Fleetwood-Hesketh, R. F. Maydon, Lt.-Comdr. S. L. C. Wakefield, Edward (Derbyshire, W.)
Fletcher-Cooke, C. Medlicott, Brig. F. Wall, Major Patrick
Fort, R. Mellor, Sir John Ward, Hon. George (Worcester)
Galbraith, T. G. D. (Hillhead) Molson, A. H. E. Ward, Miss I. (Tynemouth)
Garner-Evans, E. H. Nabarro, G. D. N. Waterhouse, Capt. Rt. Hon. C.
Godber, J. B. Neave, Airey Wellwood, W.
Gomme-Duncan, Col. A. Nicholson, Godfrey (Farnham) Williams, Gerald (Tonbridge)
Graham, Sir Fergus Nicolson, Nigel (Bournemouth, E.) Wills, G.
Grimston, Sir Robert (Westbury) Noble, Comdr. A. H. P. Wilson, Geoffrey (Truro)
Hall, John (Wycombe) Oakshott, H. D.
Harris, Frederic (Croydon, N.) O'Neill, Hon. Phelim (Co. Antrim, N.) TELLERS FOR THE NOES:
Harrison, Col. J. H. (Eye) Ormsby-Gore, Hon. W. D. Sir Cedric Drewe and Mr. Kaberry.
Harvey, Ian (Harrow, E.)

Question put, and agreed to.

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

Sir Richard Acland (Gravesend)

I am very glad to have an opportunity of speaking on the Motion. I feel sure that you, Sir Gordon, and all others who have attended throughout this fairly long debate will agree on three points, namely, that the Amendments which have been discussed have been important in themselves, that they have all been discussed with reasonable expedition, and thirdly, that I was quite right in saying at approximately 3.55 p.m. yesterday that every one of the Amendments was introduced on the assumption that in principle it was correct to have an investment allowance. It would not have been in order on any one of the Amendments we have so far discussed to have argued that it was wrong in principle to have an investment allowance of any sort or kind.

I therefore welcome the opportunity of arguing that point in principle on this the first occasion on which it has been in order to do so. As I foreshadowed briefly about 3.50 yesterday, on this matter there is not exactly a split in the Labour Party, but there is a distinct divergence of view as between myself and the majority of right hon. and hon. Members on this side of the Committee. Therefore, let it be clear that whereas my remarks are, of course, as always, addressed to you, they are addressed through you to those who sit on this side of the Committee in an attempt to convert them to the view that the Labour Party ought to vote against the Clause standing part of the Bill now and on the Report stage. If I fail to convince my hon. Friends, I shall not do anything so stupid as to run a tiny rebel division lobby with such hon. Members as will come with me, but I hope that they will listen to my arguments and consider this matter, particularly in the light of the question whether we do or do not get satisfaction from the reconsideration which the Chancellor of the Exchequer promised in reply to the very important points raised by my hon. Friends on the last Amendment.

I am sure it will be agreed in all parts of the Committee that this Clause is by far the most important Clause in the Bill and that if there is any Clause which deserves to receive a serious discussion in principle this is the Clause. After all, for an industrial community in the 20th Century there hardly can be a matter more important than the way in which it keeps its industrial and economic equipment fully up-to-date. This is not some trivial matter which we are discussing, such as whether a speed limit be allowed for heavily laden lorries, which can be settled one way or the other without going to the roots of the community. This is something which is of such fundamental importance as what is the kind of community we want to establish. We must briefly consider that before considering what is the right way to try to provide, or to induce other people to provide, the wherewithal for capital investment.

2.0 a.m.

On this side, we have been accustomed to saying that we are trying to create a welfare State. I am not sure that that phrase has not been a little bit overworked. I believe that our aim should be to create a responsible community. It is in the light of that that I want to ask whether this investment allowance is an appropriate instrument for tackling the problem, which any community would have to tackle, of providing for the efficient capital equipment of its industries.

I must insist that, whatever may be said from the Government benches, this investment allowance is essentially a sub- sidy. I think I am not wrong in believing that the Economic Secretary did not dispute the calculation, made in the "Economist" of 10th April, that when the scheme is in full operation the extent of the subsidy will be approximately one-eighth of a billion pounds per annum, or —125 million if hon. Members prefer that. One-eighth of a billion pounds is the magnitude of the subsidy which we are here considering. The fact that it will cost nothing, or almost nothing, this year merely means that what we are doing is to introduce the thinnest edge of the most massive wedge that I have ever seen, introduced into the body politic.

This is, in fact, a bribe. It is different from anything that we have done before in this connection. It is different, not in degree but in kind, from the initial allowances, which were, after all, an interest-free loan at the very most, a rearrangement of the ways in which, and the dates at which, particular people would pay their taxes. On the contrary, as was shown up with glaring clarity in the discussion on the last detailed Amendment, this is a gift of cash. It is all very well to say that it takes the form of a tax remission, but whether a tax remission amounts in effect to a subsidy or not depends upon the view which we happen to take about the nature of taxation.

There are various views on the subject of taxation, one of which was expressed, very vividly and picturesquely, on 8th April by the Economic Secretary. I should like to remind him of the words he used: I think it was Plato who said that it can be described as a pleasure when one stops banging one's head against a wall, but it is a strange form of pleasure. Similarly, this— that was, the Chancellor's proposal— is a strange form of subsidy. If a modern highway robber should take away the clothes of the right hon. Member for Leeds, South, except for his shirt, he would be warmer than if he had lost all his clothes, but he would not be subsidised."—[OFFICIAL REPORT, 8th April, 1954; Vol. 526, c. 554.] A Parliamentary Secretary of my party lost his job because he accused his chief of being a feather-bedder. The present Economic Secretary retains his job after accusing his chief of being a highway robber. It is typical of Tory mentality to regard taxation as akin to highway robbery and to think that a remission of taxation is not a gift but is no more than allowing a man to retain what is his own. Honourable and able businessmen from Kidderminster, and their friends, no doubt take a view on this matter which is different from mine. I am not hoping to convert them. I am only hoping to convert hon. Members on this side of the Committee.

The attitude of the businessmen when he sees an increase in his bank balance is that all the increase is his; that he has made it by his effort; that he is entitled to all of it because of his ability to make money. It is seldom appreciated that the businessman can only make his income because he is part of an immensely complex community. Without the community around him the businessman could only make a few blackberries and gain such rabbits as he could shoot with bow and arrows.

The Deputy-Chairman

The hon. Member is getting a little wide of the Motion, which is "That the Clause, as amended, stand part of the Bill."

Sir R. Acland

With respect, Sir Rhys, this is the essence of the matter. The outlook one takes upon taxation affects one's view whether this is a subsidy, a gift or a bribe, or whether it is returning to the businessman something which was his own if only the highway robber had not taken it from him.

The Deputy-Chairman

I do not think that this Clause raises the general question of major taxation.

Sir R. Acland

I am merely advancing the proposition that taxation is not akin to highway robbery, as the Economic Secretary made out in his speech, but that it is an expression of the fact that we live in a complex community; and that the income which remains to a businessman as his is only the income he may have after paying for his raw materials, paying the wages of his workmen, and paying taxation. It is an expression of the fact that he lives in a complex community without which he would not be able to earn anything more than blackberries or rabbits. Therefore, if the community, through such an instrument as this investment allowance, repays part of the taxation, it means that the community is paying the taxation for him; it is as much a gift, as much a subsidy, as if the community had stepped in and offered to pay part of the cost of the businessman's raw materials or to pay part of his wages bill.

We propose to give this massive subsidy of one-eighth of a billion pounds to the shareholders. In some cases—numerous but relatively small from the point of view of the total value of the factories and workshops controlled—it will not be shareholders but a private owner who owns the whole of this enterprise. But the great bulk of this subsidy or bribe will go to the shareholders, and it is no answer to say, "It will not go to the shareholders; it will go to industry." It is no answer to say that it will go to capital investment in industry. As I have said once or twice in the House, it is a very wrong process to depersonalise the social life of our community and to speak of industry in the vague as if we could give £100 to a blast furnace or £1,000 to an electrical condenser.

It is always essential to look at the persons who stand behind the institutions. We are giving this subsidy to shareholders. If it is said that in the first instance it goes only to those companies which are spending money on capital improvements to their plant and machinery, I will answer that sooner or later those capital improvements are reflected in bonus issues or take-over bids. In either case they go to the functionless shareholders. I remind hon. Members that although we have asked the question on numerous occasions, we have never had an answer: what do the shareholders do in our big industries?

The Deputy-Chairman

This is too remote from the Question, "That the Clause, as amended, stand part of the Bill."

Sir R. Acland

It is a little difficult to consider whether it is appropriate to give a massive subsidy to shareholders if we cannot even for a moment consider the question of what the shareholders do.

The Deputy-Chairman

What the shareholders do will not come within the province of this Clause.

Sir R. Acland

Perhaps I may answer the question which I am asking.

The Deputy-Chairman

The hon. Baronet would be out of order to proceed further on this point.

Sir R. Acland

With great respect, Sir Rhys, I find it difficult to follow your Ruling.

The Deputy-Chairman

The hon. Baronet is now dealing with what the shareholders do, and that has nothing to do with the provisions of the Clause.

Sir R. Acland

The Clause makes shareholders beneficiaries of the subsidy which, within a few years' time, is to run to £125 million. We are considering in principle whether it is proper to pass a Clause which will have the effect of giving these people such a gift. It must, therefore, be in order to consider for a few moments what it is that these favoured people are supposed to do to deserve this subsidy.

2.15 a.m.

The Deputy-Chairman

I must point out to the hon. Baronet that this does not appear to have any connection whatsoever with the provisions of this Clause.

Sir R. Acland

I find it very difficult to follow. If we were discussing wage rates in relation, say, to the railways in a debate on transport—say, the wage rates for engine drivers—and if somebody suggested that engine drivers really did not do anything at all, they would be incorrect, but it would be a relevant point to argue what engine drivers did for their remuneration. We are considering, in effect, the remuneration of shareholders. Perhaps, to save argument with you, Sir Rhys, I will pass from that point—and I hope I have sufficiently made it—that the shareholders perform no function at all.

We are giving to these people, and to the managers whom they nominate and who, under the control of the shareholders, determine the capital expenditure of our large companies, a massive bribe to induce them to do what they ought to do in any case. I would remind hon. Members, on this side of the Committee at any rate, that what we are trying to establish can correctly be described, if one wants to pick two words to describe it, as a responsible community, a community in which men and women at all social and economic levels do their duty out of a sense of responsibility to the community as a whole.

I believe that some hon. Gentlemen opposite would agree that a responsible community is something we ought to try to create. It is extremely important that the community should be responsible up at the top. The structure of the community should be one which creates and encourages that sense of responsibility. It is reasonable to look to directors and managers of vast enterprises to show that sense of responsibility to the whole community in the decisions they make about investment policy. After all, we expect that the arguments addressed to responsibility will become effective at the lower levels of economic, industrial and social life. We on this side of the Committee think that a responsible trade union movement is an essential part of any community.

The Deputy-Chairman

It may very well be, but I do not see how it concerns this Clause.

Sir R. Acland

I know that hon. Members disagree with me. To try to argue that the object which this party has in mind for the whole community—

The Deputy-Chairman

I really must ask the hon. Baronet to direct his mind to the Clause.

Sir R. Acland

I submit that I am entitled to direct my remarks to an attempt not to convert the Government side, which I know is a hopeless proposition, but to persuade hon. Members on this side of the Committee that the kind of instrument with which we are dealing now is an instrument which leads us inevitably to the very kind of society, the irresponsible society, which is the exact opposite to what hon. and right hon. Gentlemen on this side are trying to build up.

If I were trying to argue with hon. Gentlemen opposite, my remarks might have no relevance at all, one would naturally expect them to roll off their backs like water off a duck; but these matters are important to hon. Members on this side at a time—the only time that has been given to us—at which we are entitled to debate whether this instrument which the Government propose is one which we on this side should let pass or whether it is one which we should now oppose.

I think that I am entitled to suggest that this is an instrument which is only valid if it is assumed that shareholders, and the managers and directors of big enterprises whom they nominate, are entitled to run their lives on a level of irresponsibility, on a level of "Make it pay me and then I will do it or if you do not then I will not do it," which we would not tolerate if it were suggested as being the proper outlook for a trade union leader or any rank-and-file member of the trade union movement. We expect a certain level of responsibility among our people as a whole, and we have a right to expect that same level of responsibility—and indeed even a higher one—from those who are the most wealthy and who have the greatest measure of power over our economic destiny.

It seems to me quite wrong that we should run the capital development policy of our community not in the least on the idea that the leaders of massive undertakings will pursue a policy based upon responsibility to the community, whether it happens to pay their own tax pockets or not, and that we should tolerate it and they should adopt the attitude that if the Government make it pay then they will do the job that the community needs doing, but if the Government will not make it pay then they will ca-canny or turn aside and not do it at all.

There is one further point which is relevant. I want hon. Members on this side, and perhaps hon. Members opposite too, to consider what is the process by which the money for capital expansion is today for the most part accumulated. The process is quite different from that which was common in the 19th Century, so common then as to be almost universal and certainly typical. In the 19th Century money required for capital expansion was mostly accumulated by the personal stint, the austerity and belt-tightening of individual little business men each one running his own show. They were mighty careful to blow out the candle as early as possible to save tallow and the halfpence to put into their businesses. As the hon. Member for Edinburgh, South (Sir W. Darling) would say, that was typical of the rugged and splendid days of individualistic capitalism at its toughest, roughest and most energetic. For the most part, that is not how money for capital is accumulated today. The I.C.I. report explains the way in which resources for capital expansion are accumulated.

The Deputy-Chairman

I do not really know what this has to do with this Clause.

Mr. Percy Shurmer (Birmingham, Sparkbrook)

Blow out your candle.

Sir R. Acland

If the hon. Member for Sparkbrook (Mr. Shurmer) does not want to see the light, let him proceed in his own way.

Here we are considering the appropriate way for the community to arrange for the capital development which we undoubtedly require to be put in hand. The Government think they have an inducement which is appropriate to the situation and presumably morally right to introduce. I am grieved to find that my hon. and right hon. Friends are at any rate not in sufficient disagreement with the Government to divide on this Clause. I am trying to persuade my Front Bench to change their minds.

The Deputy-Chairman

As long as the hon. Baronet seeks to get his Front Bench to change their minds, within the confines of the Clause, that is all right, but he has not so far done so.

Sir R. Acland

Surely it must be in order, through the Chair, to ask that the Front Bench, in considering whether this Clause is a suitable instrument, should bear in mind what is the typical means by which the great and decisive industries accumulate the resources which they deploy for capital expansion, and to point out that these resources are no longer accumulated as in the old days by the personal stint of the individual entrepreneur.

I was going to point out in relation to a specific industry, typical of the great industries which employ the great bulk of the population and which are responsible for the well-being or ill-being of the whole of our industrial economy, that I.C.I. report that the capital cost of their expansion since the war and up to 31st December, 1953, has been of the order of £210 million and that out of that, £150 million has not come out of the personal stint of shareholders but out of the earnings of the company. I want to argue with hon. Gentlemen opposite and my own Front Bench that that £150 million is not private money at all, and that it is utterly inappropriate for the community to offer, as it were, an enormous bribe to the so-called owners of that money to induce them to do what they ought to do in any event. My argument is that that £150 million, accumulated out of the earnings of such a company as I.C.I., is in fact public money. It has been provided out of the money which the public has paid for chemicals. In the conditions of the 19th Century the argument which I am offering would have been divorced from reality because in those days there was competition—

2.30 a.m.

The Deputy-Chairman

Order. The hon. Baronet is in order in so far as he is pointing out that the allowances should not be granted to people for doing what they ought to do in any case, but his historical reference to how they accumulated capital is completely out of order.

Sir R. Acland

The point that I am making. Sir Rhys, is that they are not accumulating the capital at all. It is the public which accumulates—

The Deputy-Chairman

That matter, in my view, is quite irrelevant, whether they are accumulating capital or whatever they are doing. The other point. that they are not the sort of people who ought to benefit from these allowances, is relevant.

Sir R. Acland

With respect, Sir Rhys, I submit that the matter is relevant, for this reason. The great bulk of the money which is put into industry today is accumulated by the private stint of individual savers. It may well be a proper, wise and moral thing to do to offer those individual savers a cash inducement to allow their own private money to be used for the public purposes which this country requires to be carried through. But if, as I am trying to show, at this moment in our industrial history and more and more each decade the funds becoming available for the capital expansion of our industry are not in any real or genuine sense private funds at all, but are public money in the sense that there is today no serious price competition between the great companies, and that the earnings of the big companies—

Mr. Arthur Colegate (Burton)

On a point of order, Sir Rhys. This Clause refers to "New provision for 'investment allowances.'" It has nothing to do with the subject which the hon. Baronet is discussing.

Mr. Nabarro

Further to that point of order, Sir Rhys. May I draw your attention to the fact that this Clause contains a reference to the fact that the investment allowance shall only be earned in respect of investment after the sixth day of April, 1954? In those circumstances, how can it possibly be relevant to discuss capital formation over the last three centuries?

The Deputy-Chairman

I have made that point to the hon. Baronet more than once.

Sir R. Acland

I was discussing the habits of capital formation, as for example in I.C.I., which are typical of what all major companies have been doing in the last four or five years.

The Deputy-Chairman

The hon. Baronet has now repeated the same argument several times. I really must ask him to confine his speech to the Clause itself.

Sir R. Acland

I assure you, Sir Rhys, that the argument would have taken much less time if its validity, which I submit to you is quite unchallangeable, had not so frequently been challenged by interventions from hon. Gentlemen opposite.

Viscount Hinchingbrooke

On a point of order, Sir Rhys. The hon. Baronet continually reopens his argument by debating your Ruling with you. Is that in order?

The Deputy-Chairman

It is not in order. I have made my Ruling clear and the hon. Baronet, I think, understands it quite well. I hope that he will observe it and direct his mind to the Clause itself.

Sir R. Acland

I will observe it, Sir Rhys. Naturally a Private Member has to obey even when he does not—

The Deputy-Chairman

Order. I am seeking to carry out the rules of the House to the best of my ability. It is not in order to discuss all that the hon. Baronet has been discussing.

Sir R. Acland

I appreciate that you are carrying out the rules and that being so, Sir Rhys, I obey. I must therefore content myself with discarding a number of points which had seemed to me to be relevant, and to say that in the light of the way in which the funds available for capital development are now coming forward, it seems to me to be entirely consonant with the principles of the party opposite that we should offer, as we are in this Clause, a great cash inducement to the nominees of the big shareholders to do the things that they ought to do; but, by contrast, it seems to me to be the exact opposite of the principles which ought to inspire hon. Members on this side of the Committee.

It seems to me that we on our side of the Committee, when we consider capital development, ought to be considering the ways in which the servants of the community may find ways of insisting that what are, after all, public funds, shall be used for the purposes which the public require, and that it is entirely—I appreciate, Sir Rhys, that I shall be wildly out of order if I try to develop the ways in which that might be done. Therefore, I can only refer to it as a signpost to point in the direction in which we ought to go. I think that we are going in the diametrically opposite direction if for a moment, even by abstaining, we seem to give our sanction to the kind of bribery which, as I see it, is enshrined in the Clause we are discussing.

One thing more I want to put to hon. Gentlemen opposite and to hon. Members on this side of the Committee before I conclude, and that is a warning about the future. This Clause will not work. It will not succeed in inducing the nominees of private owners of big business to put through the capital expansion programme which this country requires. And in a year's time, or it may be in two years' time, or whenever the party opposite is next in power, they will come along to us and they will say that in this Clause they did their utmost, by inducement, to bring about the rate of capital expansion which is required in this community consistent with the welfare State.

They will tell us that, because this inducement has failed to produce the rate of capital expansion which our country undoubtedly requires, it has become necessary for them to begin seriously dismantling not the outworks but the core and centre of the welfare State in order to provide, as "The Times" said in an article on this subject on 13th March last year, the inducement and the wherewithal which will enable the private owners of industry to carry through the necessary expansion.

They will say this no doubt with crocodile tears, and they will taunt us on this side of the Committee that on the day when they put through this inducement, we did not even go into the Lobby against it.

Mr. Crosland

Some forty-five minutes ago, when the Committee started discussion on the motion "That the Clause, as amended, stand part of the Bill," I thought that I retained some small grasp of investment allowances; but after my hon. Friend's excursion into ethics, metaphysics and sociology, I must admit that I feel more bewildered than at the start. But I am glad that he has spoken, because he has shown that there is an issue of principle here and that there are strong feelings on this side of the Committee.

At the same time, there is one thing which I regret. I received the impression—perhaps a false impression—from my hon. Friend that in his view those who feel against investment allowances have a monopoly of morality: and I must say that he made it rather sound as though those who support investment allowances in principle were betraying our beliefs on this side and were behaving in some morally wicked or pro-capitalist manner. I see no justification for that.

But despite the fact that it is nearly a quarter to three in the morning, this discussion is on the most important single item in this Finance Bill. Every single commentator on this Bill has said that the one important item was the introduction of investment allowances; commentators apart from my hon. Friend have said it, and we have had today many Amendments on different aspects of investment allowances. Yet we have not had one single minute of discussion until now on the principle of those allowances. I am glad that my hon. Friend has raised the question of principle.

I apologise for taking the time of the Committee at this very late hour, but the Chancellor has introduced a completely new fiscal device of great moment. It is one not seen before, but one which will be criticised and supported in the years ahead, and it would be wrong if we left this Clause without discussion on the principle. The fact that the Chancellor has introduced this Clause is, I think it is fair to say, something which causes little surprise to hon. Members on this side of the Committee, because last year. when he restored initial allowances at 10 and 20 per cent. respectively on buildings and machinery, we on this side, throughout the debates on the Finance Bill, said that we did not think that would do the job he wanted, which was to get an increase in the rate of investment. We put down Amendments to double the rate of the initial allowances because we said that what was proposed was insufficient for the job, and we were correct. The initial allowances have not done the job for which they were intended, and this year the Chancellor has vindicated us by introducing the investment allowances.

But the welcome for this Clause by a large part of the City Press, and the criticism levelled at it by my hon. Friend, are both based largely on a misapprehension. Both those who support investment allowances and those who oppose them claim that they represent a new and radical departure from the principle of initial allowances. There has been argument again and again today about how initial allowances were only an interest-free loan. That, too, was always the burden of the comment in the City Press. It has been said that initial allowances gave no permanent benefit because what was gained in one year was lost in the next; that the gain to industry in the long run was zero, and the loss to the Treasury also zero.

2.45 a.m.

I should not have thought that this view could be held any longer. It has been discussed in great detail in one or two publications in the last year and it surely has now become clear, and ought to be accepted, that initial allowances were much more than an interest-free loan. If one takes a single machine, of course, they are an interest-free loan repaid in later years, but taking the continuous process of investment that most firms undertake, when new initial allowances are being drawn year after year, it is perfectly clear that they are much more than an interest-free loan and that industry gained over the long run very substantial sums.

If there were any doubts about the theory of the thing, the matter was finally proved last year when the Financial Secretary told us—and it surprised a great number of people—that initial allowances would be a net cost to the Exchequer of £435 million or so over a period of 10 years, and in all a net cost to the Exchequer of £675 million over a long period of some 60 years. Once these figures were given, it became perfectly clear that initial allowances were not just an interest-free loan but a substantial remission of taxation on industrial profits. To that extent much of the welcome given to investment allowances on the one hand, and much of the criticism, on the other, was based on the false assumption that they represented a major concession to industry, whereas initial allowances were not.

It is perfectly clear, of course, that investment allowances represent an even larger remission of taxation. One question the answer to which alone would justify having a debate on this Motion is whether the Financial Secretary will give us an idea, which can only be a rough one, of the long-run cost of investment allowances, similar to that which he gave last year about the long-run cost of initial allowances. Very wild figures have been quoted on this by, among others, my hon. Friend the Member for Gravesend (Sir R. Acland). There is not only him. My hon. Friend is in company with the "Financial Times," not with the "Economist"—I shall refer to the quotation from that journal in a moment.

The "Financial Times" and my hon. Friend have made what must be false estimates of what the long-run cost will be. The "Financial Times" said that the long-run cost of the new investment allowances will be the tax on 20 per cent. of the gross capital formation of the whole of British industry. This cannot possibly be true. For one thing, not all capital formation attracts the allowance at a rate of 20 per cent. Building attracts it at the lower rate of 10 per cent. and certain things do not attract it at all. The estimate is also wrong for the much more important reason that it assumes that initial allowances cost nothing. If, as the Financial Secretary said last year, initial allowances cost £675 million in the long run, the cost of investment allowances added to that must be very much less than the "Financial Times" supposes in its calculation. The same applies to the calculation of my hon. Friend the Member for Gravesend. I must say that he gave it in a very emotional manner when he spoke about one-eighth of a billion pounds. That was putting it in what the logicians would call an extremely emotive and persuasive manner—we can surely agree to call it, more simply, £125 million. But that sum of £125 million does not represent the cost of investment allowances in any normal sense of the term. If my hon. Friend had read on in the paragraph from the "Economist" he would have noticed that one must not forget that initial allowances would cost £86 million a year. Therefore, the increased cost is not £125 million but that minus the very large sum of £86 million, according to the "Economist" on the basis of the calculation which it was making. So all these calculations of the additional cost of the investment allowances over the cost of the initial allowances have been very much overstated.

Nevertheless, there is a gain to industry, due to the fact that no repayments are ever made on any machinery as they were made in the case of the initial allowance, and to the fact that balancing charges are much less and balancing allowances much higher when machinery comes to be sold second-hand.

Now the view of most of us on this side of the Committee is that, first of all, something should be done to encourage private investment. I do not know what my hon. Friend wants. He may argue that if we were in power we would eliminate the private sector altogether and nationalise the whole of it overnight. Of course, that is a logical point of view, for then we should have no responsibility for what happened in this sector.

But it is no good a party like the Labour Party, which will shortly be in office, washing its hands of all responsibility for the private sector. We are going to have a private sector for a long time to come and we have got to have a policy for it. We cannot let that sector and investment in it run down, when we go on our platforms every week-end making great promises about new social services and the like, all of which depend on higher productivity. It is our responsibility as a Labour Party, if we want to fulfil our promises, to decide what ought to be done in the private sector in order to raise its productivity.

My view is that this year it was absolutely right—since something has got to be done about private investment by the Labour Party as well as by the Conservative Party—to make the change from initial allowances to investment allowances. Initial allowances clearly are of the greatest help when industry needs liquid cash. That is not, as we all agree, the case with the bulk of industry at the moment, and industry needs the incentive to invest rather than the funds to invest; so clearly from that point of view investment allowances are a better device than initial allowances. I believe the Chancellor was right to make the change, though we have argued that the change ought to be more generous in certain ways.

But I would agree that it is only right that we should recognise the cost to the Exchequer of getting private industry to make the investment that we want it to make, because, after all, this is not the first taxation concession to private industry in the last two or three years. By next year the Excess Profits Levy will have disappeared altogether, which means a fall in the tax burden on private industry of about £215 million a year. We have the investment allowance this year, adding a small net cost at once and thereafter a growing one; we have lower Profits Tax than three years ago, and a lower standard rate. So my hon. Friend was right to draw attention to the fact that a high price does have to be paid in order to get private industry to invest in the right amounts.

All the same, I want to insist to my hon. Friend that capital allowances of this kind are much better than any of the alternatives which would be suggested to him from the benches opposite. What are the two obvious alternatives to investment or initial allowances as concessions to industry at the moment? There is the old favourite argument between the two sides of the House of going over to a replacement cost basis of accounting, or of assets, which most of us on this side of the Committee think, with the Millard-Tucker Committee Report, would help the wrong firms in the wrong way, would help the existing firms and the stagnant firms but not the expanding and new firms.

The other possible alternative to investment allowance—this is a point directly relevant to the Clause—would be a general reduction in profits taxation. If we did that, all the remarks made about benefits going direct to shareholders would have much more justification because the great advantage of an investment allowance, just as of the initial allowance, is that we only give remission of taxation to industry to the extent that it invests. For every £100 of taxation relief we get £100 of investment.

It therefore seems that in principle investment allowances are right in giving general encouragement to invest. They cannot go directly into higher dividend payments and they discriminate according as to how rapidly investment takes place. The general influence is in the right direction. We on this side of the Committee, subject to the reservations we have made and to some doubts as to whether this will succeed—it would be absurd to be dogmatic, as we do not know how the whole thing will work—believe that in principle these are the right methods of helping private investment. So long as we recognise the cost we have to pay in terms of tax receipts in order to get the higher investment, I believe this is a much better method than any of the alternatives.

Mr. Maudling

I should like to give the hon. Member the answer to the important question he asked on the cost of the new investment allowance. It is, of course, impossible to make a very accurate calculation for a number of reasons which he will understand, including the effect on the Revenue of profits generated by the allowance. The cost in the first year is negligible, in the second year, about £4 million and by about 1965–1966—10 years hence—it would probably amount to £50 million or £55 million a year. That is the best estimate we can give, and it is very different from the one given by the hon. Baronet.

Mr. Gaitskell

Is that the additional cost over and above what the initial allowance would have cost?

Mr. Maudling

That is the additional cost of making the change from one system to the other, and, as the hon. Member for Gloucestershire, South (Mr. Crosland) said, it represents the additional alleviation of the burden of tax on industry and that is what it was intended to do. As the hon. Member said, this is a very large reduction of tax to encourage a proper level of investment, and that shows the intense burden placed on industry in previous years.

One point of view has been put with great eloquence by the hon. Baronet and the opposite point of view has been put with very great eloquence by the hon. Member for Gloucestershire, South. I doubt whether if I tried I could improve on the argument he has put forward. I am glad to know that the hon. Member welcomes this as a device to improve investment in private industry. We are convinced that this will have the effect which the hon. Member thinks it will, and we value it all the more because we regard the private sector as by far the most important of our national economy.

Mr. Harold Davies (Leek)

May I get this crystal clear? This is £55 million on top of the initial allowance we gave on previous occasions—did the hon. Gentleman say that was the amount?

Mr. Maudling

I said that the best estimate we could make is that by 1965–1966, that is, more than 10 years hence, the additional cost of the change embodied in this Clause will be of the order of £50 million to £55 million.

Mr. Davies

That means that by 1960 we, are giving to industry concessions to the tune of £500 million?

Hon. Members


3.0 a.m.

Mr. Philips Price

Although we in the Opposition have moved a number of Amendments to the Clause, it is clear from the course of the debate that in general we have been in support of the principle of the Clause. But it is also clear from the last Amendment, moved very ably by my hon. Friend the Member for Stechford (Mr. Roy Jenkins), that there are dangers, that things will have to be watched and that possibly there may be abuses in the operation of the Clause. Nevertheless, we feel that it is a step in the right direction, and that if we are to give assistance to private industry, if private industry is to play a part, which we all agree that it must, at any rate in the present state of our economy, it must be given the opportunity to work most efficiently and generally in the national interest. It is the duty of the State to encourage industry, even if it is private industry, to work in the most efficient manner possible.

That is where we on this side disagree with some hon. Members opposite, who incline to the view that the State should leave private industry alone and let it fill its pockets from the public purse. The line that we take is that remission of taxation can be used as an incentive to bring private industry up to scratch and enable it to fulfil its function and serve the interests of the State. As far as the Clause does this, we on this side support it.

The Budget is particularly the instrument by which that aim can be achieved. It is not only an instrument of raising taxation and revenue for State expenditure, but also it has become in recent years an instrument for the control of the national economy. It would no doubt shock our fathers and grandfathers that the Budget of today has acquired a "New Look," and I am sure that present-day Conservative Chancellors of the Exchequer would shock their forebears and great Conservative statesmen like Disraeli and Lord Salisbury by using the fiscal instrument in the way that they do.

The Deputy-Chairman

I do not think that the nature of the Finance Bill and its historic development comes within the Clause.

Mr. Price

I am sorry, Sir Rhys. I was using that as an illustration.

My right hon. Friend the Member for Leeds, South (Mr. Gaitskell), when Chancellor of the Exchequer, used the Profits Tax to encourage investment by making a lower level of Profits Tax for profits which were not distributed and were invested in the industry, and a higher level of tax on profits which were distributed in dividends. The initial allowances have worked in the same direction, and now the Clause goes still further and encourages the ploughing back of profits into industry for the purpose of investment in improvements in machinery and buildings of all kinds. The Amendments which have been introduced by my hon. Friends on this side were moved for the purpose of strengthening that aim.

I am sorry that the Government have not accepted many of these Amendments. I hope that between now and the Report stage they will see whether they can accept a number of them. I am glad that under a subsection of this Clause agricultural works and improvement of buildings and forestry works and improvements are given increased investment allowance. If agriculture and forestry are to play the part which the nation wishes them to play, it is vital that farmers and forest owners should bring their properties to the highest efficiency in the matter of buildings, drainage, roads and equipment. I am certain that those concerned will respond to this encouragement.

Mr. Peter Remnant (Wokingham)

Industry is puzzled about what is meant by the word "second-hand" used in the definition. Most of us use this word loosely, and industry is puzzled about whether it is meant in that sense, or whether it should have the stricter interpretation given to it in certain trades, where they use the terms second and third-hand, and even fourth-hand. I hope that what is meant by the word "secondhand" can be made clear, either now or later.

An illustration will make the matter clearer. I understand that the Inland Revenue interpretation of "unused" is machinery which has not been in the possession of a person other than the manufacturer or his agent. If the Ministry of Supply has, say, 150 capstan lathes which it wishes to dispose of, it is easier for the Ministry to sell them to a merchant who will dispose of them singly or in small numbers. Is the buyer of one of those new capstan lathes from the merchant debarred from the investment allowance?

Although I regret that the Minister has not found it possible to include secondhand plant in the benefit of this investment allowance, I do not follow why he appears to believe that second-hand plant expenditure does not add to the resources invested in industry as a whole. I am wondering whether that is accurately reported as his opinion, especially as he said earlier that a firm selling a secondhand machine was doing some good to the country.

There must be a number of cases in which the existence of a second-hand market is a material factor as to whether a firm buys a new machine or not. Presumably that new machine adds to the efficiency of the firm and at the same time the discarded machine is bought by somebody else, with the improvement taking place all down the ladder. If, of course, there is some other reason for refusing to make this concession, such as expense, which I doubt, I would simply say that I am grateful to my right hon. Friend for what he is doing for industry. I believe it will have a marked effect on industry and will be thoroughly appreciated by industry.

Mr. William Warbey (Broxtowe)

Both sides of the Committee have agreed that the Clause introduces a remarkable innovation to our fiscal system, and it is therefore fitting that we should devote at least a few minutes to a consideration of the principles involved.

I was a little surprised to hear my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) say that we ought to allow the Clause to be included in the Bill. My right hon. and hon. Friends have been saying all the afternoon and evening that if there were to be investment allowances they should not take the form of a wholesale subsidy to industry in general but should be used as a discriminatory means of distinguishing between different types of investment—that they should form a tool of economic planning. I am not at all surprised that the Government reject that view, because they are an anti-planning Government. Although the Chancellor strikes an ambivalent attitude somewhat between Lord Keynes and Mr. Hayek, a somewhat ungainly and uncomfortable posture, by and large the Government are anti-planning. We on this side of the Committee believe in economic planning.

I can see the case put by my hon. Friends for using investment allowances in order to direct investment into channels which are beneficial to the national interest, which may assist small businesses which find it difficult to accumulate capital for investment, or which may assist in the promotion of exports, the development of the machine tool industry or other particular aspects of our economy which need specific encouragement. The Government have rejected every one of these Amendments and have made it clear that they do not favour the use of this tool in order to discriminate and to direct investment but simply want to give a wholesale subsidy to big business. In other words, this is nothing else but what my hon. Friend the Member for Gravesend (Sir R. Acland) in effect described as a dole to big business. I am sure that no one will object to the description of the investment allowance as a dole or subsidy.

It has been suggested that it is merely a form of tax remission, but the Financial Secretary blew the gaff on that when he said that the investment allowances will confer a tax-free benefit capable of realisation and that in certain circumstances people will be able to make a profit out of them; and as long as there is no abuse he sees no harm in their making a profit out of them. A tax-free benefit capable of realisation is a subsidy. It is a gift. The effect of the proposal is that approximately one-tenth of the cost of the installation of every new piece of plant and machinery and one-twentieth of the cost of every new building will be given to the recipient. In other words, we are having a free gift to industry from the Exchequer.

3.15 a.m.

I must say that I am rather surprised that hon. Members on this side of the Committee should permit a Government of this character, with its record in the matter of treatment of other sections of the community, to single out a particular section, a section which is, on the whole, most comfortably placed, to be the recipients of a dole of this character. We have had from this Government an attack upon the standards of living of the people, a direct attack in the form of the substantial cutting of the food subsidies. Yet the very Government which has cut food subsidies and thereby deprived the poorer section of the population and lowered their standard—

The Deputy-Chairman

I do not think the hon. Gentleman can pursue the matter of the food subsidies under this Clause.

Mr. Warbey

I was merely making the comparison between granting subsidies to a particular section of the community, namely, the business interests, and actually withdrawing subsidies from the great mass of the population. That is what the Government are doing through this Clause and, of course, their other activities. I press the point that we ought not to permit the Government, which have denied so much to the masses of the people, to give free grants to the business sections of the country.

Mr. Albu

I want to remind my hon. Friend the Member for Broxtowe (Mr. Warbey) that the Labour Party has gone on record as being entirely in favour of a very great increase in investment in this country, and I think it would be quite impossible for us to vote against this Clause. Although I am very sceptical of its effects, nevertheless it is attempting to carry that out. Nothing is more important than that there should at this moment be greater investment.

Mr. Warbey

My hon. Friend himself has put forward many excellent proposals for promoting investment in the private sectors of industry very different from the ones we are now considering.

Mr. Albu

Many of the proposals I have not been able to put forward, but I still think this proposal cannot be opposed by us at the present time. Although it is a reduction of taxation on industry, it is a reduction directly related to investment.

I did not rise to continue the argument at great length. The case was extremely well put by my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) and I only wanted to thank the Chancellor of the Exchequer for including subsection (6), in relation to scientific research expenditure, in which, as he knows, many of us in the Committee have a very great interest, as he has himself. I think this subsection will be extremely useful.

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

Mr. Gaitskell

I beg to move, "That the Chairman do report Progress, and ask leave to sit again."

It is nearly four hours since a Motion of this kind was last considered. In the meantime we have managed to complete the rest of Clause 15, including the discussion on the Question "That the Clause stand part of the Bill." It seems to me that this is the moment when the Chancellor may well feel that it would be appropriate to adjourn and to leave the Bill for the time being, returning to the Schedule in a rather fresher state of mind. It is true that the Schedule contains some complicated matters and that there are a number of Amendments down which are of some importance. That I submit is really an argument for delaying our proceedings and for not attempting to carry the matter any further now.

I hope that the Chancellor will agree with my suggestion. If he does not, it would be a great help to the Committee if he would give us an idea how far he intends to go.

Mr. R. A. Butler

I really do not think that it would be reasonable not to make progress. We have to consider exactly the same points, only with a different inflexion, on the Schedule. As we have the points in our minds it would not be businesslike to stop now. I should like to take the Schedule and to make some further progress while we are here. We have a very heavy programme before us. We have an enormous number of new Clauses. Unless we make some progress now we shall be very much behind with this year's Bill. I am sorry that this should be the position, but I am sure that this is the wiser course. I should like, in due course, to be able to propose that we take the Schedule. I do not think that it would inconvenience the right hon. Gentleman and his hon. Friends to follow straight on so that we can make some progresss.

Mr. Gaitskell

I am not clear whether the Chancellor indicated that he would be satisfied if we succeeded in getting through the Schedule. If that is his view, although I should have preferred to adjourn now, I think it is not unreasonable because of the connection between the Clause and the Schedule, and I should not feel it necessary to suggest that we should divide on the Motion. Perhaps the right hon. Gentleman will give the Committee a little clarification on the point.

Mr. Butler

I had proposed to make more progress. I think that the best way to settle the matter is to review the position again when we have dealt with the Schedule. [HON. MEMBERS: "Oh."] If we can make further progress I think that we should use the time to do so. It is all very well hon. Members being distressed, but the work has to be done at some time. Despite the appeal I made about the length of speeches, they have been longer. We had two speeches which lasted about an hour when we discussed the Question "That the Clause stand part of the Bill," and that was after debating the Clause for between 8 and 10 hours. We have, therefore, spent about 12 hours on one Clause, ending up with speeches of that length, which really means if we are to get through the rest of the business we have to have a sense of work and really set about doing it. Again, I am not complaining of the attitude of hon. Gentlemen, but

the debate has been very dilatory and at this rate we shall not get the Bill by the required date.

Mr. Gaitskell

The Chancellor's answer is quite unsatisfactory. I agree that there was one long speech, but there were relatively few speeches. But this is by far the most important Clause in the Bill and in the circumstances I suggest that we divide.

Question put.

The Committee divided: Ayes, 104: Noes, 128.

Division No. 147.] AYES [3.26 a.m.
Acland, Sir Richard Greenwood, Anthony Pearl, T. F.
Adams, Richard Grey, C. F. Popplewell, E.
Albu, A. H. Griffiths, William (Exchange) Proctor, W. T.
Baird, J. Hall, Rt. Hon. Glenvil (Colne Valley) Rhodes, H.
Bean, Hon. Wedgwood Hannan, W. Robens, Rt. Hon. A.
Benson, G. Hargreaves, A. Robinson, Kenneth (St. Pancras, N.)
Blackburn, F. Hayman, F. H. Rogers, George (Kensington, N.)
Blenkinsop, A. Herbison, Miss M. Ross, William
Bowden, H. W. Hobson, C. R. Shackleton, E. A. A.
Braddock, Mrs. Elizabeth Holmes, Horace Short, E. W.
Broughton, Dr. A. D. D. Hughes, Cledwyn (Anglesey) Shurmer, P. L. E.
Brown, Rt. Hon. George (Belper) Hughes, Hector (Aberdeen, N.) Silverman, Julius (Erdington)
Burton, Miss F. E. Hynd, H. (Accrington) Simmons, C. J. (Brierley Hill)
Butler, Herbert (Hackney, S.) Janner, B. Slater, Mrs. H. (Stoke-on-Trent)
Callaghan, L. J. Jay, Rt. Hon. D. P. T. Slater, J. (Durham, Sedgefield)
Castle, Mrs. B. A. Jeger, George (Goole) Soskice, Rt. Hon. Sir Frank
Champion, A. J. Jenkins, R. H. (Stechford) Summerskill, Rt. Hon. E.
Chetwynd, G. R. Johnson, James (Rugby) Taylor, John (West Lothian)
Collick, P. H. Jones, Frederick Elwyn (West Ham, S.) Thomas, Ivor Owen (Wrekin)
Craddock, George (Bradford, S.) Jones, Jack (Rotherham) Thomson, George (Dundee, E.)
Crosland, C. A. R. Keenan, W. Thornton, E.
Dalton, Rt. Hon. H. King, Dr. H. M. Usborne, H. C.
Davies, Ernest (Enfield, E.) Lawson, G. M. Wallace, H. W.
Davies, Harold (Leek) Marquand, Rt. Hon. H. A. Warbey, W. N.
Delargy, H. J. Mellish, R. J. West, D. G.
Dodds, N. N. Mikardo, Ian Wheeldon, W. E.
Evans, Albert (Islington, S.W.) Mitchison, G. R. Whiteley, Rt. Hon. W
Evans, Stanley (Wednesbury) Morgan, Dr. H. B. W. Willey, F. T.
Fienburgh, W. Morris, Percy (Swansea, W.) Williams, Rev. Llywelyn (Abertillery)
Finch, H J. Moyle, A. Williams, Ronald (Wigan)
Fletcher, Eric (Islington, E.) Nally, W. Williams, W. R. (Droylsden)
Foot, M. M. Noel-Baker, Rt. Hon. P. J. Wyatt, W. L.
Gaitskell, Rt. Hon. H. T. N. Oswald, T. Younger, Rt. Hon. K.
Gibson, C. W. Pargiter, G. A.
Gordon-Walker, Rt. Hon. P. C. Parker, J. TELLERS FOR THE AYES:
Pearson, A. Mr. Wilkins and Mr. J. T. Price.
Aitken, W. T. Colegate, W. A. Graham, Sir Fergus
Allan, R. A. (Paddington, S.) Conant, Maj. Sir Roger Grimston, Sir Robert (Westbury)
Alport, C. J. M. Cooper-Key, E. M. Hall, John (Wycombe)
Anstruther-Gray, Major W. J. Craddock, Beresford (Spelthorne) Harris, Frederic (Croydon, N.)
Arbuthnot, John Crookshank, Capt. Rt. Hon. H. F. C. Harrison, Col. J. H. (Eye)
Baldock, Lt-Cmdr. J. M. Crosthwaite-Eyre, Col. O. E. Harvey, Ian (Harrow, E.)
Baxter, Sir Beverley Crouch, R. F. Heath, Edward
Birch, Nigel Darling, Sir William (Edinburgh, S.) Henderson, John (Cathcart)
Bishop, F. P. Deedes, W. F. Hinchingbrooke, Viscount
Black, C. W. Digby, S. Wingfield Hirst, Geoffrey
Bossom, Sir A. C. Donner, Sir P. W. Holland-Martin, C. J.
Boyd-Carpenter, Rt. Hon. J. A. Drayson, G. B. Hollis, M. C.
Boyle, Sir Edward Drewe, Sir C. Hope, Lord John
Brains, B. R. Fleetwood-Hesketh, R. F. Hornsby-Smith, Miss M. P.
Brooman-White, R. C. Fletcher-Cooke, C. Hudson, Sir Austin (Lewisham, N.)
Buchan-Hepburn, Rt. Han. P. G. T. Fort, R. Hylton-Foster, H. B. H.
Butler, Rt. Hon. R. A. (Saffron Walden) Galbraith, T. G. D. (Hillhead) Iremonger, T. L.
Campbell, Sir David Garner-Evans, E. H. Jenkins, Robert (Dulwich)
Chanson, H. Godber, J. B. Johnson, Eric (Blackley)
Clarke, Col. Ralph (East Grinstead) Gomme-Duncan, Col. A Kaberry, D.
Kerby, Capt. H. B Nicolson, Nigel (Bournemouth, E.) Studholme, H. G.
Leather, E. H. C. Noble, Comdr, A. H. P. Summers, G. S.
Legge-Bourke, Maj. E. A. H. O'Neill, Hon. Phelim (Co. Antrim, N) Teeling, W.
Lennox-Boyd, Rt. Hon. A. T Ormsby-Gore, Hon. W. D. Thomas, P. J. M. (Conway)
Lindsay, Martin Page, R. G. Thompson, Lt.-Cdr. R. (Croydon, W.)
Linstead, Sir H. N. Pitman, I. J. Thornton-Kemsley, Col. C. N.
Lucas, Sir Jocelyn (Portsmouth, S.) Powell, J. Enoch Turner, H. F. L.
Macdonald, Sir Peter Price, Henry (Lewisham, W.) Turton, R. H.
McKibbon, A. J. Prior-Palmer, Brig. O. L. Vane, W. M. F.
Mackie, J. H. (Galloway) Raikes, Sir Victor Vaughan-Morgan, J. K
Maclean, Fitzroy Rayner, Brig. R Vesper, D. F.
Maitland, Patrick (Lanark) Redmayne, M. Wakefield, Edward (Derbyshire, W.)
Manningham-Buller, Rt. Hn. Sir Reginald Remnant, Hon. P. Wall, Major Patrick
Marlowe, A. A. H. Ridsdale, J. E. Ward, Hon. George (Worcester)
Marples, A. E. Rodgers, John (Sevenoaks) Ward, Miss I. (Tynemouth)
Marshall, Douglas (Bodmin) Russell, R. S. Waterhouse, Capt. Rt. Hon. C.
Maude, Angus Ryder, Capt. R. E. D. Wellwood, W.
Mouthing, R. Schofield, Lt.-Col. W. Williams, Gerald (Tonbridge)
Maydon, Lt.-Comdr. S. L. C Scott-Miller, Cmdr. R. Wills, G.
Mellor, Sir John Shepherd, William Wilson, Geoffrey (Truro)
Molson, A. H. E. Simon, J. E. S. (Middlesbrough, W)
Nabarro, G. D. N. Smithers, Peter (Winchester) TELLERS FOR THEE NOES:
Neave, Airey Stevens, Geoffrey Mr. Oakshott and Mr. Legh
Nicholson, Godfrey (Farnham) Steward, W. A. (Woolwich, W.)

Question put, and agreed to.

Mr. R. A. Butler

I beg to move.

That consideration of Clauses 16 to 31. of new Clauses and of Schedule 1 be postponed till after consideration of Schedule 2.

This Motion has the effect of bringing up the Schedule relating to Clause 15 so that we can deal with the same questions that we have been dealing with. which is common sense. I hope we shall be able to handle these matters expeditiously, as that will make it all the more easy to decide what progress we make thereafter.

Mr. Gaitskell

In spite of the un-necesarily cautious words of the Chancellor, which might have led me to make a long speech on this proposal, we have no desire on this side of the Committee to obstruct the passage of the Bill, and we agree that, on the whole, it is wise that the Schedule should be considered immediately after the Clause. We therefore offer no opposition to the Motion.