§ Mr. Mitchison
I beg to move, in page 27, line 17, at the end, to insert:recognised market" means a market declared by an order of the Board of Trade for the time being in force to be a recognised market for the purposes of this Part of this Act.
I think that it would be convenient if this Amendment were discussed with that in page 27, line 22, at the end to insert:(2) No order shall be made by the Board of Trade under the last foregoing subsection except with the consent of the Treasury and an order so made shall be in the form of a statutory instrument and subject to annulment by a resolution of the Commons House of Parliament
§ Mr. Mitchison
Yes, Sir Gordon.
These two Amendments are designed, first of all, to give some practical sense to the phrase "recognised market" by giving the Board of Trade, with the consent of the Treasury, power to declare by Order what a recognised market is. If the Committee wants a precedent for that, there is a very rough one in the "recognised stock exchange" defined in the same sort of way in the Prevention of Frauds Act, though, naturally enough, there is no Treasury consent required in that case. The second effect of the two Amendments is that when the Board does declare that, it has to do it in the form of a Statutory Order, and that Order shall be subject to annulment.
The phrase "recognised market" occurs in Clause 21 (1), and it is highly important in connection with the sale of commodities—either, as the Bill originally stood, commodities produced abroad by an overseas trade corporation or, as the Bill now stands, commodities of the kind produced abroad by an overseas trade corporation.
The object of the reference to a "recognised market" is to limit the sales 570 here to sales through agents or brokers of a market of that kind in this country, and not to allow an overseas trade corporation to go beyond that and have what one may call some particular selling or some more elaborate selling. I would say at once that I can think of quite a number of instances where there obviously is a recognised market, but I come to all sorts of cases where it is much more doubtful whether there is or is not a recognised market.
The very large question, of course, is what does "recognised" mean. Does it mean recognised in the trade in question? Does it mean recognised by the general public? Does it mean recognised in some form or another by the tax authorities? If it has the latter meaning, then I cannot see how they have had to consider the question before. Therefore I rather reject that one.
What is the real object of having a "recognised market" of this kind? It is, as I understand it, to bring the sales into the category of a type of sale made in tolerably large numbers, in tolerably similar conditions, made, perhaps, according to the rules of some trade association, made in some tolerably well-known place, and not up and down the country—things of that sort are intended. There are all sorts of difficulties. Take the last point I mentioned. It is true that if one is looking for a particular centre for sales, say, of cotton or tea, one can find it, but if one looked for a particular centre for timber, I think it would be a great deal harder to find it.
Is there, or is there not, in those circumstances a "recognised market," both for tea and cotton on the one hand, and for timber on the other? Then again, what is the sphere of a "recognised market"? Is it a "recognised market" if it is controlled by one or two concerns and the price is more or less dictated by them—altered from time to time, no doubt, in relation to the demand—but still very much a one-man matter? Take a metal like copper: what is the position there? The right hon. Gentleman, the Chancellor of the Exchequer, has forgotten more about this than I have ever known, because he has recently been President of the Board of Trade, but I wonder if he would tell us whether or not there is a "recognised market" in copper, and if it is a sort of open market of the kind he wishes to recognise here, or if it is a 571 matter that is largely regulated by a few large copper producers.
What about diamonds? I am not in the habit of buying them myself, because I cannot afford to do so, but the right hon. Gentleman is. [HON. MEMBERS: "Oh!".] If it is diamonds that we are considering, is there or is there not a "recognised market"? I have always understood that one goes round to a body called the diamond corporation, or something like that, and that it sells one diamonds. On the other hand, I am told that there are a lot of dealers. I always see a delightful picture of men in bowler hats, walking about in Hatton Garden with little bags carrying diamonds worth millions of pounds. I have never met any of them, and have not been to Hatton Garden very often, and then never for the purpose of business but merely because it happened to be between one place and another, but I should like to know whether there is a "recognised market" in diamonds.
These overseas trade corporations may have to deal with all kinds of other things, and the picture is altogether fascinating. But this is the distinction that will make a difference to very many of these bodies—whether they do or do not get the advantages supposed to be offered them under this part of the Bill. Therefore, it is exceedingly important and, indeed, a vital decision. More than that, it is up to them to do it right, because if they do not, we will have the awful possibility, disclosed to us a short time ago, that they will discover that when they were dealing in toothpicks, or whatever it was, in what they thought was a recognised market, they had in fact been dealing in toothpicks in an unrecognised market, and for that reason for six years past they had been getting an advantage to which they were not entitled. It is not satisfactory that so much should turn on such a vague phrase, and I have come to the conclusion that the Government themselves do not know what they mean by it.
I suggest that if there is to be any other ground of decision than the convenience of particular people who choose to say that something is a recognised market, the Board finding no particular 572 reason to deny it, the matter ought not to be decided so much by definition in the Bill—I recognise that one cannot properly do that since it is something so changeable and various—as by a power in the Board of Trade to decide it. After all, the Board of Trade is the body for this purpose, to say what is or what is not a recognised market.
I earnestly hope that the right hon. Gentleman the Chancellor will accept the Amendment, and not view with too much horror and suspicion the entry of his old friend the Board of Trade into a Finance Bill. There is, after all, something so august about the Treasury that it really knows nothing, except everything; for that reason, it is better to have the more specialised knowledge of another Department brought to bear upon the matter.
§ Mr. Birch
I am grateful to the hon. and learned Gentleman for moving the Amendment. He has made a very reasonable point. I think that there should be some closer definition of what the term means. We do not want to accept his actual form of words, but we should like to consider the matter further, before Report. It clearly is the duty of the Board of Trade to draw up the list, in consultation, of course, with the Treasury. Whether the device of a Statutory Instrument is rather too ponderous a one, I do not know, but if the hon. and learned Gentleman would be good enough to withdraw the Amendment, we will consider the matter and raise it again on Report.
Mr. H. Wilson
We are all grateful to the right hon. Gentleman the Economic Secretary for what he has just said. This is a very glaring, if minor, gap in the Bill. My hon. and learned Friend has put the arguments, and I need not repeat them. It is very difficult to know in certain marginal cases whether there is a recognised market or not. We know that some markets are simply the result of a number of chaps getting together over the telephone, buying and selling. I imagine that, in most cases, those would be excluded from the list the Government have in mind.
What we are particularly anxious to ensure, so far as I can see from the Bill, is that there should be a definite and 573 more or less predetermined price, established by quotations from the market and Press, and all the rest of it, so that there is no possibility of an overseas corporation selling to any associated company at a price which might or might not be a result of the famous "arms' length" business. My hon. and learned Friend did mention one or two special examples. I hope that when we come to the Report stage, the Government spokesman will, in addition to producing an Amendment, give some information on the kind of markets which will be included and those which will be excluded. Copper was mentioned. There is a copper market, of course, and we know that prices are fixed from time to time, a few weeks ahead, by the two principal Rhodesian companies.
Further, I should be glad if the right hon. Gentleman the Chancellor and his hon. and right hon. Friends would look at the expression "recognised market" in relation to bulk buying. If I am right in assuming that the reason for this is to ensure that the price for the goods is determined quite outside the control of any parent companies at home. it being an ascertainable and independent fixed price, there is, of course, also the matter of bulk buying to be considered. I do not want, certainly at this time of night, to get into an argument about any possible resumption of bulk buying in certain of these commodities, though before very long, I think, the Chancellor will find that he really cannot encourage Commonwealth trade, as I am sure he would like to do, except by a resumption of bulk buying. But, in case that should happen, it should be made quite clear that the term "recognised market" would include a Government or other form of buying agency.
There is, as far as I know, one commodity which is still bulk bought by the Government in this country, namely jute. Does the jute control constitute a recognised market for the purpose of this Clause? I think that the Government would have to agree that the existence of a jute control fulfils the conditions perfectly. I should be glad if the Chancellor would look at this point and, if necessary, make certain that "recognised market" includes an independent bulk buying authority.
574 We welcome the fact that the Chancellor has made this small concession, and if it is the wish of the Committee, we shall be glad to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 11.15 p.m.
§ Mr. Stevens
I beg to move, in page 27, line 25, to leave out "more than one half" and to insert "one half or more." This proposal is not as trivial as it might appear. A subsidiary company is defined in as one of which more than one half of its ordinary share capital is owned by another company. It is the fact that in certain cases local pressures or regulations make it impossible for a company to obtain 51 per cent. or more of its share capital. I think that the words should be "one half or more." It is true that this might mean that a company might be a subsidiary of two parent companies at one and the same time. I do not think that would be of any particular significance in this context, because then any dividends received from the subsidiary company would be trading income in the pockets of both parent companies.
I hope that the Chancellor will be able to accept the Amendment.
§ Mr. Mitchison
I hesitate to say that I hope the Government will not accept the Amendment, because when I do, they always accept it. Perhaps it would be better not to say anything, but my feelings are sufficiently strong to allow valour on this occasion to outrun prudence.
I earnestly hope that the Government will not accept the Amendment. When the Committee discussed Clause 32, we agreed that some of the advantages there depended on a subsidiary company really and truly being a subsidiary company, and that it might lead to very dangerous and difficult consequences if one could have a company—to take the instance I gave at the time—which was owned by three companies together.
The whole framework of this scheme is so tied up with a subsidiary having its natural mien—that of a company owned 575 and controlled by another company—that to open this particular door would be much too dangerous. I hope that the Government will not knock a second large hole in the sieve at this late hour of the night and in this particularly dangerous way.
§ Mr. Powell
I am sure that my hon. Friend the Member for Langstone (Mr. Stevens) appreciates the importance of the definition of a subsidiary company. It is important for two reasons; for the reason mentioned by the hon. and learned Member for Kettering (Mr. Mitchison), that it is essential that there should be real control between the principal and the subsidiary companies, and also because it is essential to ensure that the holding of the principal company in the subsidiary is for trading, and not merely for investment purposes. The definition is, therefore, one which we have to scrutinise very carefully. My hon. Friend has indicated that there may be cases where local requirements would not permit a 51 per cent. holding while they would permit a 50 per cent. holding, though in the circumstances that would give the same degree of practical control and would still be a trading holding as much as if it were 51 per cent.
My right hon. Friend would like to take the opportunity of the interval between this stage and Report for examining in detail cases of that kind with a view to ascertaining how they might best be met, and I hope my hon. Friend will feel, in view of this assurance, that he would be justified at this stage in withdrawing his Amendment.
§ Mr. Mitchison
If that is going to happen, it just shows the result of allowing valour to outrun discretion. I am sure the Financial Secretary would not have said what he has said if I had not suggested that he should not say it. Now that we are to have that arrangement, we shall have to wait and see what emerges, but I would ask the Financial Secretary at the same time to consider the possibility, for the reason that he himself gave, that in the majority of cases there ought to be more and not less than a 51 per cent. control, and to consider also whether the natural meaning of a subsidiary is not something rather more than bare control when what is required to do is to 576 differentiate between investment and trading.
I do not expect the hon. Gentleman to do anything about it. I am just asking him to think a little more. We seriously recognise that he has done a lot of thinking about this Bill; a little more thinking would be very good for him.
§ Mr. Stevens
On behalf of my hon. Friends and myself, I must express our very deep sense of gratitude to the hon. and learned Member for Kettering (Mr. Mitchison) for his very helpful interjection which has had such happy results with my hon. Friend the Financial Secretary, in view of whose assurance I most decidedly beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause ordered to stand part of the Bill.
§ Clause 34 ordered to stand part of the Bill.
§ To report Progress and ask leave to sit again.—[Mr. P. Thorneycroft.]
§ Committee report Progress: to sit again Tomorrow.