HC Deb 26 June 1957 vol 572 cc355-71
Mr. John Arbuthnot (Dover)

I beg to move, in page 15, line 31, to leave out the second "the" and to insert "such".

The Deputy-Chairman

It may be convenient to discuss with this Amendment, that in page 15, line 32, to leave out "produced by it".

Mr. Arbuthnot

As the Bill stands, Clause 21 (1) only allows a company producing commodities overseas to sell its own production through brokers or agents in this country. It seems to us that if a company buys products of the same type as it produces itself and sells those, those products having been bought overseas, the company will for that reason lose its overseas trade corporation status, if the Clause is left as it stands. In our view there is no reason to differentiate in this respect between what a company produces itself and what, of the same type of product, it buys overseas. It ought to be able to sell at home produce bought overseas without forfeiting its status as an overseas trade corporation.

10.30 p.m.

The change that we suggest in the two Amendments still restricts the benefit of the proviso to producer companies. The benefit will not be extended to companies which are purely merchants. We therefore hope that my right hon. Friend the Chancellor of the Exchequer will be able to look favourably upon the Amendments, which would be an improvement to the Bill.

Mr. Powell

There is no good reason why an overseas trade corporation should be restricted to selling through general brokers in this country exclusively its own produce and should be disqualified if it sells any produce of the same kind produced by, possibly, indigenous producers operating in the same territory. I therefore advise the Committee to make the minor alteration which is suggested in the two Amendments.

Mr. G. R. Strauss (Vauxhall)

Many of my hon. Friends are surprised that the Financial Secretary has accepted the Amendments. They may, indeed, go much further than the Chancellor has in mind, and far beyond the purpose which he has suggested to the Committee, in permitting companies to get these tax concessions.

We are told that the purpose of these concessions is to enable our overseas trading companies to operate on equality with resident companies and not to be at a handicap with companies from other countries who are operating in the same locality. The Amendments, however, go much further. It may well be that a company which is operating abroad and is selling its produce on a recognised market in London could do a substantial business in selling the produce of other companies on that same terminal market.

It is quite possible, for example, for a company that is producing rubber to sell it, quite properly according to the principles underlying the Bill, on the London Commodity Exchange, but it might do a substantial and profitable business in dealing with rubber produced by other companies and selling it on the Commodity Exchange through the agents there. Is it proposed that such profits, for example, should be exempt from Income Tax and Profits Tax, as proposed in the Bill?

It would seem that if the Government accept the Amendments, profits which have nothing to do with overseas trading by a company in a certain area, which produces goods in that area and ships them to this country or elsewhere, will be exempt front Profits Tax and from Income Tax. This goes far beyond the purpose which the Chancellor has told us is the object of the Clauses in this Part of the Bill. Therefore, I invite the Financial Secretary to give some further explanation and to comment on the points which I have made, otherwise we will surely have to divide against this proposal.

Mr. Powell

The right hon. Member for Vauxhall (Mr. Strauss) quite correctly said that the object of these provisions is to place a resident company of a defined kind on the same footing as a non-resident company. It is true that non-resident companies producing, for example, rubber in the same area in which an overseas trade corporation is carrying on a trade might sell those commodities directly or indirectly on a general market in this country; but no revenue would be lost and no disadvantage suffered if that rubber is sold by an overseas trade corporation, because the profits arising on the operations of those non-resident companies are in any case outside the scope of United Kingdom Income Tax.

Mr. Strauss

An overseas trading company which is selling on a London terminal market produce not produced by itself normally gets some profit by so doing. It would get some commission. Maybe it would share the commission with the broker on the commodity exchange, and would make some profit for its pains, get some recompense, which might be substantial. Surely that is quite beyond what the Chancellor of the Exchequer has in mind or has put before the Committee?

Mr. Powell

The terms of the proviso are so drawn as to exclude sales where an agent or broker could be charged in respect of profits or gains arising to the company from its sales—for the specific reason the right hon. Gentleman has mentioned.

Mr. Edward du Cann (Taunton)

I congratulate my hon. Friend on accepting the Amendment, which will be very helpful, particularly, for example, to firms in Australasia which are engaged in the pastoral business and will have the task of selling their clients' wool in this country in the forthcoming wool sales. Had the position not been dealt with, companies would have had to form subsidiary companies and that would have meant some difficulty for them, and they would, perhaps, have lost goodwill. This is not an important matter to those companies because of the tax itself, but it is important to them in providing a customary and looked-for service to their clients, and I repeat my congratulations to my right hon. and hon. Friends.

Mr. Mitchison

I cannot take part in these congratulations, for this Part of the Bill is already a sieve, and I did not expect the Government to go drilling large holes in it even at this late hour of the night. What exactly is this about? It is not a question whether the Treasury does or does not lose Income Tax on this or that transaction. This is a very special concession to be extended to companies which carry on a trade in this country. Having in Clause 20 more or less prevented or attempted to prevent that from happening, we find that this subsection of this Clause first says that that is not to happen and then provides a single exception. The single exception is a company which is producing commodities of some kind or another abroad and selling those commodities through a broker in a "recognised market." whatever that may be, in this country. That is the one exception.

Now that company is to be allowed to carry on an entirely different and much wider business by selling commodities of the same kind not produced by itself. The result is, since there is no quantitative restriction, and a company may produce commodities on quite a small scale abroad, that it may sell those commodities on quite a small scale in this way in this country and it may sell the produce of half a dozen other companies or produce coming from somewhere else altogether. The company is in fact as much—or more—a merchanting company as a producing one, and will get the benefit of this concession simply because the Government, having started to give a tax concession for one purpose, are wholly unable to restrain their untimely and excessive generosity towards their friends in the City. I see no reason whatever for a concession of this sort. I think it remarkable that the Amendment should even have been moved, and inconceivable that a Government, having any sense of proportion or really intending to work for the purpose they gave as their reason in the first place, should have accepted it even at this late hour of the night. I shall have no hesitation in voting against the Amendment.

Sir P. Spens

I hope that the Chancellor will give us this concession. The hon. and learned Member for Kettering (Mr. Mitchison) has not really explained what the proviso does. This is a proviso of disqualification, not a proviso of qualification. This is a case of a producer company which produces abroad and, to the advantage of everybody in this country, normally sells its goods through one of the recognised markets in this country. If, unfortunately, it sends £1 worth of somebody else's goods with its own products

to be sold, it automatically disqualifies itself as an overseas trade corporation. This is a disqualification Clause far too strict in its wording and it would be reasonable to make the Amendment.

Mr. Mitchison

Does not the proviso limit the disqualification, and is not the effect of it that if a company sells £1 worth of its own produce and £1 million of other people's produce of the same kind it is still to be treated as an overseas trade corporation?

Sir P. Spens

The hon. and learned Member can take that absurd example if he likes and can assume that everybody will abuse every advantage given to them to increase our trade but, as worded, this is a strict disqualification Clause. One slip on the part of the consigner to the market here can result in a company being disqualified for good as an overseas trade corporation.

Question put, That the second "the" stand part of the Clause:—

The Committee divided: Ayes 179, Noes 225.

Division No. 145.] AYES 10.41 p.m.
Ainsley, J. W. Ede, Rt. Hon. J. C. Jeger, Mrs. Lena (Holbn & St. Pncs, S.)
Allaun, Frank (Salford, E.) Edelman, M. Jenkins, Roy (Stechford)
Allen, Scholefield (Crewe) Edwards, Rt. Hon. Ness(Caerphilly) Johnson, James (Rugby)
Awbery, S. S. Edwards, W. J. (Stepney) Jones, Rt. Hon. A. Creech(Wakefield)
Bacon, Miss Alice Evans, Albert (Islington, S.W.) Jones, David (The Hartlepools)
Baird, J. Fernyhough, E. Jones, Elwyn (W. Ham, S.)
Balfour, A. Fienburgh, W. Jones, J. Idwal (Wrexham)
Bence, C. R. (Dunbartonshire, E.) Finch, H. J. Jones, T. W. (Merioneth)
Benson, G. Fletcher, Eric Kenyon, C.
Beswick, Frank Forman, J. C. King, Dr. H. M.
Blackburn, F. Fraser, Thomas (Hamilton) Lee, Frederick (Newton)
Blenkinsop, A. Gibson, C. W. Lee, Miss Jennie (Cannock)
Blyton, W. R. Gooch, E. C. Lewis, Arthur
Boardman, H. Gordon Walker, Rt. Hon. P. C. Logan, D. G.
Bottomley, Rt. Hon. A. G. Grenfell, Rt. Hon. D. R. Mabon, Dr. J. Dickson
Bowden, H. W. (Leicester, S.W.) Grey, C. F. McInnes, J.
Boyd, T. C. Griffiths, David (Rother Valley) McKay, John (Wallsend)
Braddock, Mrs. Elizabeth Griffiths, William (Exchange) MacMillan, M. K. (Western Isles)
Brookway, A. F. Hale, Leslie MacPherson, Malcolm (Stirling)
Broughton, Dr. A. D. D. Hall, Rt. Hn. Glenvil (Colne Valley) Mahon, Simon
Brown, Rt. Hon. George (Belper) Hannan, W. Mallalieu, E. L. (Brigg)
Burke, W. A. Hayman, F. H. Mann, Mrs. Jean
Butler, Mrs. Joyce (Wood Green) Henderson, Rt. Hn. A. (Rwly Regis) Marquand, Rt. Hon. H. A.
Carmichael, J. Herbison, Miss M. Mason, Roy
Champion, A. J. Hewitson, Capt. M. Mayhew, C. P.
Chetwynd, G. R. Hobson, C. R. (Keighley) Mikardo, Ian
Coldrick, W. Holmes, Horace Mitchison, G. R.
Collick, P. H. (Birkenhead) Houghton, Douglas Monslow, W.
Collins, V.J.(Shoreditch & Finsbury) Hoy, J. H. Moody, A. S.
Corbet, Mrs. Freda Hubbard, T. F. Mort, D. L.
Craddock, George (Bradford, S.) Hughes, Emrys (S. Ayrshire) Moyle, A.
Cronin, J. D. Hughes, Hector (Aberdeen, N.) Mulley, F. W.
Crossman, R. H. S. Hunter, A. E. O'Brien, Sir Thomas
Cullen, Mrs. A. Hynd, H. (Accrington) Oram, A. E.
Dalton, Rt. Hon. H. Hynd, J. B. (Attercliffe). Orbach, M.
Davies, Harold (Leek) Irvine, A. J. (Edge Hill) Oswald, T.
Deer, G. Isaacs, Rt. Hon. G. A. Owen, W. J.
de Freitas, Geoffrey Janner, B. Paling, Rt. Hon. W. (Dearne Valley)
Delargy, H. J. Jay, Rt. Hon. D. P. T. Palmer, A. M. F.
Dye, S. Jeger, George (Goole) Pannell, Charles (Leeds, W.)
Pargiter, G. A. Skeffington, A. M. Ungoed-Thomas, Sir Lynn
Parker, J, Slater, Mrs. H. (Stoke, N.) Usborne, H. C.
Parkin, B. T. Slater, J. (Sedgefield) Watkins, T. E.
Pearson, A. Smith, Ellis (Stoke, S.) Wells, William (Walsall, N.)
Pentland, N. Snow, J. W. Wheeldon, W. E.
Plummer, Sit Leslie Soskice, Rt. Hon. Sir Frank White, Henry (Derbyshire, N.E.)
Popplewell, E. Sparks, J. A. Willey, Frederick
Price, Philips (Gloucestershire, W.) Steele, T. Williams, David (Neath)
Probert, A. R. Stewart, Michael (Fulham) Williams, Rev. Llywelyn (Ab'tillery)
Randall, H. E. Stonehouse, John Williams, W. R. (Openshaw)
Redhead, E. C. Stones, W. (Consett) Willis, Eustace (Edinburgh, E.)
Rhodes, H. Strachey, Rt. Hon. J. Wilson, Rt. Hon. Harold (Huyton)
Roberts, Albert (Normanton) Strauss, Rt. Hon. George (Vauxhall) Winterbottom, Richard
Roberts, Goronwy (Caernarvon) Summerskill, Rt. Hon. E. Woodburn, Rt. Hon. A.
Robinson, Kenneth (St. Pancras, N.) Swingler, S. T. Woof, R. E.
Rogers, George (Kensington, N.) Sylvester, G. O. Yates, V. (Ladywood)
Royle, c. Taylor, Bernard (Mansfield) Zilliacus, K.
Short, E. W. Taylor, John (West Lothian)
Silverman, Julius (Aston) Thomas, Iorwerth (Rhondda, W.) TELLERS FOR THE AYES:
Silverman, Sydney (Nelson) Thornton, E. Mr. J. T. Price and Mr. Wilkins
Simmons, C. J. (Brierley Hill) Timmons, J.
Aitken, W. T. Fletcher-Cooke, C. Lambert, Hon. G.
Allan, R. A. (Paddington, S.) Fraser, Hon. Hugh (Stone) Langford-Holt, J. A.
Alport, C. J. M. Fraser, Sir Ian (M'cmbe & Lonsdale) Leather, E. H. C.
Arbuthnot, John Freeth, Denzil Leavey, J. A.
Armstrong, C. W. Gammans, Dame Ann Muriel Legge-Bourke, Maj. E. A. H.
Ashton, H. Garner-Evans, E. H. Legh, Hon. Peter (Petersfield)
Atkins, H. E. George, Lady Megan Lloyd(Car'then) Lindsay, Hon. James (Devon, N.)
Baldock, Lt.-Cmdr. J. M. Gibson-Watt, D. Lindsay, Martin (Solihull)
Baldwin, A. E. Glover, D. Linstead, Sir H. N.
Balniel, Lord Godber, J. B. Lloyd, Maj. Sir Guy (Renfrew, E.)
Barber, Anthony Gomme-Duncan, Col. Sir Alan Lucas, Sir Jocelyn (Portsmouth, S.)
Barlow, Sir John Goodhart, Philip Lucas, P. B. (Brentford & Chiswick)
Barter, John Gough, C. F. H. Lucas-Tooth, Sir Hugh
Barter, Sir Beverley Gower, H. R. Macdonald, Sir Peter
Bell, Philip (Bolton, E.) Graham, Sir Fergus Mackeson, Brig. Sir Harry
Bennett, F. M. (Torquay) Grant, W. (Woodside) Mackie, J. H. (Galloway)
Bevins, J. R. (Toxteth) Green, A. McLean, Neil (Inverness)
Bidgood, J. C. Gresham Cooke, R. MacLeod, John (Ross & Cromarty)
Biggs-Davison, J. A. Grimston, Hon. John (St. Albans) Macmillan, Maurice (Halifax)
Birch, Rt. Hon. Nigel Grosvenor, Lt.-Col. R. G. Maitland, Hon. Patrick (Lanark)
Bishop, F. P. Gurden, Harold. Manningham-Buller, Rt. Hn. Sir R.
Black, C. W. Hall, John (Wycombe) Markham, Major Sir Frank
Body, R. F. Harris, Frederic (Croydon, N.W.) Marples, Rt. Hon. A. E.
Boothby, Sir Robert Harrison, Col. J. H. (Eye) Marshall, Douglas
Bowen, E. R. (Cardigan) Harvey, Sir Arthur Vere (Macclesfd) Mawby, R. L.
Boyd-Carpenter, Bt. Hon. J. A. Harvey, Ian (Harrow, E.) Maydon, Lt.-Comdr. S. L. C.
Boyle, Sir Edward Harvey, John (Walthamstow, E.) Medlicott, Sir Frank
Braine, B. R. Heald, Rt. Hon. Sir Lionel Milligan, Rt. Hon. W. R.
Bromley-Davenport, Lt.-Col. W. H, Heath, Rt. Hon. E. R. G. Molson, Rt. Hon. Hugh
Brooman-White, R. C. Henderson, John (Cathcart) Morrison, John (Salisbury)
Bullus, Wing Commander E. E. Henderson-Stewart, Sir James Mott-Radclyffe, Sir Charles
Burden, F. F. A, Hesketh, R. F. Nabarro, G. D. N.
Butcher, Sir Herbert Hill, Mrs. E. (Wythenshawe) Neave, Airey
Channon, Sir Henry Hill, John (S. Norfolk) Nicholls, Harmar
Chichester-Clark, R. Hinchingbrooke, Viscount Nicholson, Godfrey (Farnham)
Clarke, Brig. Terence (Portsmth, W.) Hirst, Geoffrey Nicolson, N. (B'n'm'th, E. & Chr'ch)
Cole, Norman Hobson, John(Warwick & Leam'gt'n) Nugent, G. R. H.
Conant Maj. Sir Roger Holland-Martin, C. J. Oakshott, H. D.
Cooke, Robert Hornby, R. P. O'Neill, Hn. Phelim (Co. Antrim, N.)
Cooper, A. E. Hornsby-Smith, Miss M. P. Page, R. G.
Cordeaux, Lt.-Col. J. K. Horobin, Sir Ian Pannell, N. A. (Kirkdale)
Corfield, Capt. F. V. Howard, Hon. Greville (St. Ives) Partridge, E.
Craddock, Beresford (Spelthorne) Howard, John (Test) Pickthorn, K. W. M.
Crosthwaite-Eyre, Col. O. E. Hudson, W. R. A. (Hull, N.) Pike, Miss Mervyn
Cunningham, Knox Hurd, A. R. Pilkington, Capt. R. A.
Currie, G. B. H. Hutchison, Michael Clark (E'b'gh, S.) Pitt, Miss E. M.
Dance, J. C. G. Hylton-Foster, Rt. Hon. Sir Harry Pott, H. P.
D'Avigdor-Goldsmid, Sir Henry Iremonger, T. L. Powell, J. Enoch
Deedes, W. F. Irvine, Bryant Godman (Rye) Prior-Palmer, Brig. O. L.
Digby, Simon Wingfield Jennings, Sir Roland (Hallam) Profumo, J. D.
Donaldson, Cmdr. C. E. McA. Johnson, Dr. Donald (Carlisle) Raikes, Sir Victor
Drayson, G. B. Johnson, Eric (Blackley) Ramsden, J. E.
du Cann, E. D. L. Jones, Rt. Hon. Aubrey (Hall Green) Rawlinson, Peter
Eden, J. B. (Bournemouth, West) Joseph, Sir Keith Redmayne, M.
Elliott, R.W.(N'castle upon Tyne. N.) Kaberry, D. Rees-Davies, W. R.
Errington, Sir Eric Keegan, D. Remnant, Hon. P.
Farey-Jones, F. W. Kerby, Capt. H. B. Rippon, A. G. F.
Finlay, Graeme Kerr, Sir Hamilton Robinson, Sir Roland (Blackpool, S.)
Fisher, Nigel Kimball, M. Robson Brown, Sir William
Rodgers, John (Sevenoaks) Storey, S. Vickers, Miss Joan
Roper, Sir Harold Studholme, Sir Henry Wade, D. W.
Ropner, Col. Sir Leonard Summers, Sir Spencer Wakefield, Edward (Derbyshire, W.)
Schofield, Lt.-Col. W. Sumner, W. D. M. (Orpington) Walker-Smith, Rt. Hon. Derek
Scott-Miller, Cmdr. R. Taylor, Sir Charles (Eastbourne) Wall, Major Patrick
Sharples, R. C. Taylor, William (Bradford, N.) Ward, Rt. Hon. G. R. (Worcester)
Shepherd, William Teeling, W. Ward, Dame Irene (Tynemouth)
Simon, J. E. S. (Middlesbrough, W.) Temple, John M. Whitelaw, W. S. I.
Smithers, peter (Winchester) Thomas, Leslie (Canterbury) Williams, Paul (Sunderland)
Spearman, Sir Alexander Thompson, Kenneth (Walton) Williams, R. Dudley (Exeter)
Spence, H. R. (Aberdeen, W.) Thompson, Lt.-Cdr. R. (Croydon, S.) Wills, G. (Bridgwater)
Spens, Rt. Hn. Sir P. (Kens'gt'n, S.) Thorneycroft, Rt. Hon. P. Wood, Hon. R.
Stanley, Capt. Hon. Richard Tilney, John (Wavertree) Woollam, John Victor
Stevens, Geoffrey Turton, Rt. Hon. R. H. Yates, William (The Wrekin)
Steward, Harold (Stockport, S.) Tweedsmuir, Lady
Steward, Sir William (Woolwich, W.) Vane, W. M. F. TELLERS FOR THE NOES:
Stoddart-Scott, Col. Sir Malcolm Vaughan-Morgan, J. K. Mr. Bryan and Mr. Hughes-Young.

Word "such" there inserted.

Further Amendment made: In page 15, line 32, leave out "produced by it".—[Mr. Arbuthnot.]

Mr. Gordon Walker

I beg to move, in page 15, line 37, to leave out from the beginning to the first "a" in line 38.

It would perhaps be convenient for the Committee to discuss at the same time the subsequent Amendment, in line 42, to leave out from "Corporation" to the end of the subsection.

The effect of these Amendments would be to leave out the mere sale of exports overseas from the tax exemption that will be given to overseas trade corporations. There is a conflict of argument on the Amendments. In economic principle there is something to be said for encouraging exports. The balance of payments would be better if we could find some means of encouraging exports without encouraging investment of overseas capital, from the pure point of view of the balance of payments.

Although there is an economic case for the encouragement of exports by the means proposed in the Bill, we feel that the arguments against it become overwhelming. The Royal Commission was very uncertain whether or not exports should be included. In Paragraph 662 of its Report it said: …if any advance towards exemption of overseas profits were decided upon"— it was not at that stage certain— it would be well to start with those concerns the profits of which were most obviously a wholly foreign product. That means oil, cocoa and things overseas, and not exports from this country. Therefore the Royal Commission was in favour of excluding exports, at any rate to start with, and of starting with things that are grown in plantations abroad.

Our main objection to the inclusion of exports is that it complicates administration of this Measure almost beyond endurance.

The inclusion of exports leads to the necessity for these anti-avoidance Clauses in the Bill, which will complicate our tax system very greatly and which we believe will be very largely ineffective, because without much difficulty people will be able to evade them. Once we bring in exports as a thing the profits of which will be exempt from tax, we have to bring in the artificial pretence of trading at arms length when really two departments of the same firm are concerned. That is why there are so many anti-evasion measures in the Bill. We have to pretend that a manufacturing company here and its exporting subsidiary are trading at arms length when everyone knows that they are one and the same thing. Because we have to do that we get all these difficulties.

The Board of Inland Revenue gave very powerful arguments directed in the main to saying that if we include exports we shall get an intolerable administrative problem. It said that in many cases profits can be allocated practically at will when dealing with two companies pretending to be trading at arms length, but which are not. Memorandum 109, paragraph 16, said: The type of case likely to give moss trouble would be that of the manufacturer in this country who exported from a permanent establishment overseas That means in terms of this Bill an overseas trade corporation. The Board says this very thing would cause administrative difficulty.

The international complications of including exports would be very great. The Bill has provisions the purpose of which is to keep us within the terms of the G.A.T.T., but everyone will know, foreign traders and Governments will know, that those provisions will be largely inoperative and they will be able to quote the Board of Inland Revenue to that effect. It will be extremely difficult, everyone knows it always is, to enforce these pretended deals at arms length which are not genuine deals at arms length.

So far as I see, if we include exports we shall have broken a pledge the Government gave very recently. It is quoted in the Eighth Report of O.E.E.C.—"Europe Today", in page 77. That is a decision to which, presumably, we were a party and it says: To promote fair competition in international trade a decision of January, 1955, prohibited the extension of artificial aids to exports and provided that a number of specifically designated aids should be abolished before the 1st January, 1956. When we look at the aids which were being abolished to which we were a party we find that it says: The remission calculated in relation to exports of direct tax… That is exactly what the Bill does; it remits taxes calculated in relation to exports. Can the Chancellor tell us how, presumably having given our word to abolish this sort of thing in January, 1955, to come into operation in 1956, in this Bill we are flatly breaking it?

Although there is something to be said for it on economic grounds, we feel that the case against including exports is overwhelming administratively and internationally. We therefore agree with the Royal Commission that we should start this sort of thing, if we are to do it at all, by leaving exports out. We base ourselves on the recommendations of the Royal Commission and, unless we get a satisfactory explanation, we shall express our view in the Division Lobby.

11.0 p.m.

Mr. Thorneycroft

As I understand it, there is a broad measure of agreement as to what we ought to do if we can. The right hon. Gentleman said very clearly in his opening remarks that if it is possible to help the hived-off export organisation, the help should be given. He went further and said that as far as he was concerned it should be No. 1 in the economy. After all, he said, it is a very good thing to help investment, but from the point of view of the balance of payments, what we should be concentrating on is doing our level best to help exports. We are thus in the happy position that we are all trying to do the same thing.

Having decided what his objective should be, the right hon. Gentleman recoiled somewhat from the obstacles and complexities which stood between him and its attainment. May I urge him to have a little courage in this matter and not to be deterred by memoranda from the Inland Revenue, even though that is a great organisation? As I am sure he discovered when he was a Minister, there are a hundred-and-one reasons against doing anything in this world which one wants to do. Much has happened since then, much new thought has been devoted to the question and a Report has been made by the Royal Commission. He need not worry about the Royal Commission; it expressly recommended this. It was the minority who dissented from that recommendation.

Mr. Gordon Walker

The majority recommended that it should be started without exports.

Mr. Thorneycroft

If the hon. Member will look at paragraph 676 he will see, as I read the paragraph, that the recommendation was that it should be done. Some of the difficulties were set out. At any rate, it was the view of the minority that the majority had recommended it, because they put in a minute of dissent. I think the position is reasonably plain.

In any event, do not let us worry too much about either the memoranda or the Royal Commission but consider the matter ourselves, as a Committee, because on our decision is decided what is to be done. The right hon. Gentleman is shocked a little at the administrative difficulties. Of course there are administrative difficulties, but the Ministers who plead administrative difficulties are often criticised, and sometimes rightly criticised. The object of Ministers should be to try to get over the administrative difficulties.

It is true that the introduction of the exports subsidiary raises certain problems of its own, but there are a great number of problems in this, quite apart from the exports side. There are all the switching cases which we were considering earlier. In those cases we found that we had to insert certain provisions to prevent tax evasion.

The right hon. Gentleman is right in saying that when we reach Clause 28—we will not debate it now because we shall have an opportunity to do so later—we have to put in special provisions for ensuring that these two parties deal at arms length, and it is perfectly true that in subsection (2) of this Clause we lay down certain provisions to ensure that no element of subsidy enters into this at all. The right hon. Gentleman referred to the O.E.E.C. Report. I am fairly familiar with what happens at the O.E.E.C., and I can assure him that there is no element here of subsidy such as he mentioned in that Report. Any foreign company could buy on precisely the same terms as this overseas subsidiary. It could buy free on board a British ship on exactly the same terms.

Indeed, I am grateful to the right hon. Gentleman for drawing attention to what is an important point. It gives me an opportunity of stating publicly that we do not intend to administer the provisions of our tax law so as to snatch an unfair or subsidised advantage over any of our competitors. We are prepared to trade with others as we ask them to trade with us—on fair terms and in open competition.

I hope the whole Committee agrees with the right hon. Gentleman that we ought to do this if we can. If we are agreed that we ought to do something if we can, and if the Inland Revenue, the Treasury and the Chancellor of the Exchequer are prepared to attempt it, I think we should try to do it.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 218, Noes 172.

Division No. 146.] AYES [11.6 p.m.
Aitken, W. T. Donaldson, Cmdr. C. E. McA. Hornsby-Smith, Miss M. P.
Allan, R. A. (Paddington, S.) Drayson, G. B. Horobin, Sir Ian
Alport, C. J. M. du cann, E. D. L. Howard, Hon. Greville (St. Ives)
Arbuthnot, John Eden, J. B. (Bournemouth, West) Howard, John (Test)
Armstrong, C. W. Elliott, R. W. (N'castle upon Tyne. N.) Hudson, W. R. A. (Hull, N.)
Ash ton, H. Errington, Sir Eric Hughes-Young, M. H. C.
Atkins, H. E. Farey-Jones, F. W. Hurd, A. R.
Baldock, Lt.-Cmdr. J. M. Finlay, Graeme Hutchison, Michael Clark (E'b'gh, S.)
Baldwin, A. E. Fisher, Nigel Hylton-Foster, Rt. Hon. Sir Harry
Balniel, Lord Fletcher-Cooke, C. Iremonger, T. L.
Barber, Anthony Fraser, Hon. Hugh (Stone) Irvine, Bryant Godman (Rye)
Barlow, Sir John Fraser, Sir Ian (M'cmbe & Lonsdale) Jennings, Sir Roland (Hallam)
Barter, John Freeth, Denzil Johnson, Eric (Blackley)
Baxter, Sir Beverley Gammans, Lady Ann Muriel Jones, Rt. Hon. Aubrey (Hall Green)
Bell, Philip (Bolton, E.) Garner-Evans, E. H. Joseph, Sir Keith
Bevins, J. R. (Toxteth) George, J. C. (Pollok) Kaberry, D.
Bidgood, J. C. Gibson-Watt, D. Keegan, D.
Biggs-Davison, J. A. Glover, D. Kerby, Capt. H. B.
Birch, Rt. Hon. Nigel Godber, J. B. Kerr, Sir Hamilton
Bishop, F. P. Gomme-Duncan, Col. Sir Alan Kershaw, J. A.
Black, C. W. Goodhart, Philip Kimball, M.
Body, R. F. Gough, C. F. H. Lambert, Hon. G.
Boothby, Sir Robert Gower, H. R. Langford-Holt, J. A.
Bowen, E. R. (Cardigan) Graham, Sir Fergus Leather, E. H. C.
Boyd-Carpenter, Rt. Hon. J. A. Grant, W. (Woodside) Leavey, J. A.
Boyle, Sir Edward Green, A. Legge-Bourke, Maj. E. A. R.
Braine, B. R. Gresham Cooke, R. Legh, Hon. Peter (Petersfield)
Brooman-White, R. C. Grimston, Hon. John (St. Albans) Lindsay, Hon. James (Devon, N.)
Bullus, Wing Commander E. E. Grosvenor, Lt.-Col. R. G. Lindsay, Martin (Solihull)
Burden, F. F. A. Gurden, Harold Linstead, Sir H. N.
Butcher, Sir Herbert Hall, John (Wycombe) Lloyd, Maj. Sir Guy (Renfrew, E.)
Channon, Sir Henry Harris, Frederic (Croydon, N.W.) Lucas, Sir Jocelyn (Portsmouth, S.)
Chichester-Clark, R. Harrison, Col. J. H. (Eye) Lucas, J. B. (Brentford & Chiswick)
Clarke, Brig. Terence (Portsmth, W.) Harvey, Sir Arthur Vere (Macclesfd) Lucas-Tooth, Sir Hugh
Cole, Norman Harvey, Ian (Harrow, E.) Macdonald, Sir Peter
Conant, Maj. Sir Roger Harvey, John (Walthamstow, E.) Mackeson, Brig. Sir Harry
Cooke, Robert Heald, Rt. Hon. Sir Lionel Mackie, J. H. (Galloway)
Cooper, A. E. Heath, Rt. Hon. E. R. G. McLean, Neil (Inverness)
Cordeaux, Lt.-Col. J. K. Henderson, John (Cathcart) MacLeod, John (Ross & Cromarty)
Corfield, Capt. F. V. Henderson-Stewart, Sir James Macmillan, Maurice (Halifax)
Craddock, Beresford (Spelthorne) Hesketh, R. F. Manningham-Buller, Rt. Hn. Sir R.
Crosthwaite-Eyre, Col. O. E. Hill, Mrs. E. (Wythenshawe) Markham, Major Sir Frank
Cunningham, Knox Hill, John (S. Norfolk) Marshall, Douglas
Currie, G. B. H. Hinchingbrooke, Viscount Mathew, R.
Dance, J. C. G. Hirst, Geoffrey Mawby, R. L.
D'Avigdor-Goldsmid, Sir Henry Hobson, John (Warwick & Leam'gt'n) Maydon, Lt.-Comdr. S. L. C.
Deedes, W. F. Holland-Martin, C. J. Medlicott, Sir Frank
Digby, Simon Wingfield Hornby, R. P. Milligan, Rt. Hon. W. R.
Molson, Rt. Hon. Hugh Rippon, A. G. F. Temple, John M.
Morrison, John (Salisbury) Robinson, Sir Roland (Blackpool, S.) Thomas, Leslie (Canterbury)
Mott-Radclyffe, Sir Charles Rodgers, John (Sevenoaks) Thompson, Kenneth (Walton)
Nabarro, G. D. N. Roper, Sir Harold Thorneycroft, Rt. Hon. P.
Neave, Airey Ropner, Col. Sir Leonard Tilney, John (Wavertree)
Nicholls, Harmar Schofield, Lt.-Col. W. Turton, Rt. Hon. R. H.
Nicholson, Godfrey (Farnham) Scott-Miller, Cmdr. R. Tweedsmuir, Lady
Nicolson, N. (B'n'm'th, E. & Chr'ch) Sharples, R. C. Vane, W. M. F.
Nugent, G. R. H. Shepherd, William Vaughan-Morgan, J. K.
Oakshott, H. D. Simon, J. E. S. (Middlesbrough, W.) Vickers, Miss Joan
O'Neill, Hn. Phelim (Co. Antrim, N.) Smithers, Peter (Winchester) Wakefield, Edward (Derbyshire, W.)
Page, R. G. Spearman, Sir Alexander Walker-Smith, Rt. Hon. Derek
Pannell, N. A. (Kirkdale) Spence, H. R. (Aberdeen, W.) Wall, Major Patrick
Partridge, E. Spens, Rt. Hn. Sir P. (Kens'gt'n, S.) Ward, Rt. Hon. G. R. (Worcester)
Pike, Miss Mervyn Stanley, Capt. Hon. Richard Ward, Dame Irene (Tynemouth)
Pilkington, Capt. R. A. Stevens, Geoffrey Whitelaw, W. S. I.
Pitman, I. J. Steward, Harold (Stockport, S.) Williams, Paul (Sunderland, S.)
Pott, H. P. Steward, Sir William(Woolwich, W.) Williams, R. Dudley (Exeter)
Powell, J. Enoch Stoddart-Scott, Col. Sir Malcolm Wills, G. (Bridgwater)
Prior-Palmer, Brig. O. L. Storey, S. Wood, Hon. R.
Profumo, J. D. Studholme, Sir Henry Woollam, John Victor
Ramsden, J. E. Summers, Sir Spencer Yates, William (The Wrekin)
Rawlinson, Peter Sumner, W. D. M. (Orpington)
Redmayne, M. Taylor, Sir Charles (Eastbourne) TELLERS FOR THE AYES:
Rees-Davies, W. R. Taylor, William (Bradford, N.) Lieutenant-Commander Richard
Remnant, Hon. P. Tee ling, W. Thompson and Mr. Bryan.
Ainsley, J. W. Grey, C. F. Mulley, F. W,
Allaun, Frank (Salford, E.) Griffiths, David (Rother Valley) O'Brien, Sir Thomas
Allen, Scholefield (Crewe) Griffiths, William (Exchange) Oram, A. E.
Awbery, S. S. Hale, Leslie Orbach, M.
Bacon, Miss Alice Hall, Rt. Hn. Glenvil (Colne Valley) Oswald, T.
Baird, J. Hannan, W. Paling, Rt. Hon. W. (Dearne Valley)
Bence, C. R. (Dunbartonshire, E.) Hayman, F. H. Palmer, A. M. F.
Benson, G. Henderson, Rt. Hn. A. (Rwly Regis) Pannell, Charles (Leeds, W.)
Beswick, Frank Herbison, Miss M. Pargiter, G. A.
Blackburn, F. Hewitson, Capt. M. Parker, J.
Blenkinsop, A. Hobson, c. R. (Keighley) Parkin, B. T.
Blyton, W. R. Holmes, Horace Pearson, A.
Boardman, H. Houghton, Douglas Pentland, N.
Bottomley, Rt. Hon. A. G. Hoy, J. H. Plummer, Sir Leslie
Bowden, H. W. (Leicester, S.W.) Hubbard, T. F. Popplewell, E.
Boyd, T. C. Hughes, Emrys (S. Ayrshire) Price, Philips (Gloucestershire, W.)
Braddock, Mrs. Elizabeth Hughes, Hector (Aberdeen, N.) Probert, A. R.
Brock way, A. F. Hunter, A. E. Randall, H. E.
Broughton, Dr. A. D. D. Hynd, H. (Accrington) Redhead, E. C.
Brown, Rt. Hon. George (Belper) Hynd, J. B. (Attercliffe) Rhodes, H.
Burke, W. A. Irvine, A. J. (Edge Hill) Roberts, Albert (Normanton)
Butler, Mrs. Joyce (Wood Green) Isaacs, Rt. Hon. G. A. Roberts, Goronwy (Caernarvon)
Carmichael, J. Janner, B. Robinson, Kenneth (St. Pancras, N.)
Champion, A. J. Jay, Rt. Hon. D. P. T. Rogers, George (Kensington, N.)
Chetwynd, G. R. Jeger, George (Goole) Royle, C.
Coldrick, W. Jeger, Mrs. Lena (Holbn & St. Pncs, S.) Short, E. W.
Colliok, P. H. (Birkenhead) Jenkins, Roy (Stechford) Silverman, Julius (Aston)
Collins, V. J. (Shoreditch & Finsbury) Johnson, James (Rugby) Silverman, Sydney (Nelson)
Corbet, Mrs. Freda Jones, David (The Hartlepools) Simmons, C. J. (Brierley Hill)
Craddock, George (Bradford, S.) Jones, Elwyn (W. Ham, S.) Skeffington, A. M.
Cronin, J. D. Jones, J. Idwal (Wrexham) Slater, Mrs. H. (Stoke, N.)
Crossman, R. H. S. Jones, T. W. (Merioneth) Slater, J. (Sedgefield)
Cullen, Mrs. A. Kenyon, c. Smith, Ellis (Stoke, S.)
Dalton, Rt. Hon. H. King, Dr. H. M. Soskice, Rt. Hon. Sir Frank
Davies, Harold (Leek) Lee, Frederick (Newton) Sparks, J. A.
Deer, G. Lee, Miss Jennie (Cannock) Steele, T.
de Freitas, Geoffrey Lewis, Arthur Stewart, Michael (Fulham)
Delargy, H. J. Logan, D. G. Stonehouse, John
Dye, S. Mabon, Dr. J. Dickson Stones, W. (Consett)
Ede, Rt. Hon. J. C. Molnnes, J. Strauss, Rt. Hon. George (Vauxhall)
Edelman, M. McKay, John (Wallsend) Summerskill, Rt. Hon. E.
Edwards, Rt. Hon. Ness (Caerphilly) MacMillan, M. K. (Western Isles) Swingler, S. T.
Edwards, W. J. (Stepney) Macpherson, Malcolm (Stirling) Sylvester, G. O.
Evans, Albert (Islington, S.W.) Mahon, Simon Taylor, Bernard (Mansfield)
Fernyhough, E. Mallalieu, E. L. (Brigg) Taylor, John (West Lothian)
Fienburgh, W. Mann, Mrs. Jean Thomas, Iorwerth (Rhondda, W.)
Finch, H. J. Marquand, Rt. Hon. H. A. Thornton, E.
Fletcher, Eric Mason, Roy Timmons, J.
Forman, J. C. Mayhew, C. P. Ungoed-Thomas, Sir Lynn
Fraser, Thomas (Hamilton) Mikardo, Ian Usborne, H. C.
Gibson, C. W. Mitchison, G. R. Watkins, T. E.
Gooch, E. G. Monslow, W. Wells, William (Walsall, N.)
Gordon Walker, Rt. Hon. P. C. Moody, A. S. Wheeldon, W. E.
Grenfell, Rt. Hon. D. R. Moyle, A. White, Henry (Derbyshire, N.E.)
Willey, Frederick Wilson, Rt. Hon. Harold (Huyton) Yates, V. (Ladywood)
Williams, David (Neath) Winterbottom, Richard Zilliacus, K.
Williams, Rev. Llywelyn (Ab'tillery) Woodburn, Rt. Hon. A.
Willis, Eustace (Edinburgh, E.) Woof, R. E. TELLERS FOR THE NOES:
Mr. Wilkins and Mr. J. T. Price.

Mr. EDWARD WAKEFIELD (Lord Commissioner of the Treasury) and Mr. JAMES SIMMONS, who acted as Tellers in Division No. 144, came to the Table.

Mr. Wakefield

We have to report that in the Division at twenty minutes past Ten o'clock we erroneously stated the number of "Noes" to have been 215 instead of 204, which was the correct number.

The Deputy-Chairman (Major Sir William Anstruther-Gray)

I direct the Clerk to correct the number in the Journal accordingly.

To report Progress and ask leave to sit again.—[Mr. P. Thorneycroft.]

Committee report Progress; to sit again Tomorrow.