§ Before I turn to the third facet of savings, that is, the rôle which public saving must in our present circumstances continue to play through the medium of the Budget surplus, I must ask the indulgence of the Committee for a short while to describe certain minor provisions, designed to maintain and strengthen the tax code, which are to be included in the Finance Bill.
§ The Finance Bill will, of course, contain the Clauses to give effect to the Government's decision to suspend investment allowances which has already been announced. Hon. Members will recall that in my February statement I made two exceptions to the general rule—these were shipping and scientific research. There, the investment allowances will remain. To these, I now propose to add approved fuel-saving equipment which is installed by way of replacement or modification in existing industrial premises. I think that these three have an absolute priority today. The Bill will also contain legislation to correct 884 defects in the Profits Tax law, which were revealed by decisions of the courts last year in cases known to the initiated as "Heelex" and "Universal Grinding Wheel".
§ I propose to carry out the Royal Commission's recommendation that expenditure on what is known as cutting and tunnelling in connection with an industrial building or structure—and this will include dredging—should qualify for capital allowances including the initial allowance. This will be of particular importance to the construction of dry docks. I propose, also, certain changes, based broadly on the recommendations of the Royal Commission, in the basis of taxation of foreign employments; and a change in the residence rules so that in future an employee of a company who goes to work wholly abroad will have his tax liability dealt with on the same basis, whether or not he continues to maintain a home in this country. I think that that has considerable importance from the export point of view.
§ In the Estate Duty field, I propose to remove a hardship which can arise where an annuity is charged on settled property, and to carry out an undertaking of my predecessor to grant relief from duty in certain cases of compulsory purchase of land. There will be a number of other minor proposals in the field of direct taxation with which I need not bother the Committee now, but which can be studied when the Bill is published.
§ There are also one or two minor matters relating to Customs and Excise with which I propose to deal. The first concerns cider and perry. These drinks have for many years been excluded from the scheme of duties on alcoholic drinks, and I do not propose to introduce a duty on cider or perry as such. However, there has recently been a rapid growth in the production of certain special types of cider and perry, of an alcoholic strength much above that of the ordinary product, and comparable in that and other respects with dutiable British wines. In order to protect the Revenue and to remove an unfair competitive advantage, I propose to extend the British wine duty to include cider and perry of a strength of 15 degrees of proof spirit or more.
§ I am advised that, in general, cider and perry made by the ordinary processes do not exceed this strength; but to avoid any possible hardship, particularly to 885 farm-house producers, I propose to provide for the exclusion of cider and perry from the duty even if this limit is exceeded, provided it is established that they have been made wholly by simple fermentation of natural apple or pear juice. This distinguishes those traditional beverages from more sophisticated products, made—I am told—from a wide variety of fruit and vegetables. This change will operate as from 18th April, 1956. It is estimated that the Exchequer will benefit to the extent of about £400,000 in a full year and £350,000 this year.
§ Secondly, I propose to close a loophole in the law of a very different kind. I am informed that an increasing number of people have been able to acquire motor cars of the shooting brake type in such a way as to avoid, in whole or in part, the Purchase Tax to which these vehicles are liable. I am including a Clause in the Finance Bill to stop this form of evasion.