EXTENT OF EXCLUSION FROM CHARGE TO INCOME TAX OF TRADING INCOME ARISING TO AN OVERSEAS TRADE CORPORATION

HC Deb 27 June 1957 vol 572 cc467-505

should be discussed with this Amendment.

Mr. Gordon Walker

Yes, it would be very much more convenient to discuss that Schedule with this Amendment which, indeed, is just put down to bring in the Schedule.

This is a major Amendment from our point of view. Granted that the principle of the Bill is being accepted, this is the best we can do with it, and I hope that the Chancellor will pay serious attention to the arguments we use. So far, he has been a bit slap-happy and reckless, not to say frivolous, in his attitude to our Amendments He says that it does not matter what the Board of Inland Revenue says and it does not matter what the Royal Commission says. He says that it does not matter what the effect on our balance of payments is. All that matters is something called overseas trade, which sounds rather good—one can make a patriotic appeal about it—but which, apparently, really means that things now manufactured in this country will be manufactured abroad with the blessing and encouragement of the Government. That is really the essence of the Chancellor's argument so far. It is really not good enough for him to brush everything else aside and work on a sort of instinct, giving no reasons at all for what he is doing, and certainly not troubling to controvert, if he can, the arguments we put forward.

6.0 p.m.

I will not go through the things we have to say about the general principle of the Bill, but it is clear that we are very doubtful about the whole project of setting up overseas trade corporations. We do not believe that the country commands the necessary resources to be diverted on such a scale to overseas investment at the moment, and we think that it will damage our balance of payments. Indeed, the Chancellor is in agreement with us about that; at any rate, in the short run—and we really do not know how long will be the run—the Government's proposal, he admits, will have a bad effect on our balance of payments. It is, moreover, clear that certain sorts of overseas trade will have a worse effect on our balance of payments than others.

Holding those views, we have put down the proposed new Schedule, the purposes of which is, first, to scale down the whole extent of this concession and, secondly, to discriminate between one sort of undertaking in overseas trade and another, partly for political reasons, in order to give preference to trade in the Commonwealth, and partly for economic reasons, because there are certain sorts of overseas trade which are less harmful to our balance of payments in the short run than other forms of overseas investment.

The principle we adopt is to differentiate by percentage of United Kingdom tax remitted and by reference to the area in which the trade is taking place. There are many examples in the world of these two methods being used, either separately or in conjunction, and it cannot, therefore, be argued that what we propose is unworkable. It may be argued that it is undesirable, but it cannot be argued that it is unworkable. The United States, for instance, does just this; it gives a percentage reduction against home tax and it discriminates according to the area in which the overseas trade is taking place.

American trade in the Western hemisphere, but not elsewhere, is given between 27 and 30 per cent. rebate against local United States tax. That is very much the same as we are proposing in our Amendment. Trade in the United States possessions is given 100 per cent. remission of United States tax. The Americans. therefore, are doing just what we suggest we should do; they are discriminating by percentage rebate according to areas and the political importance of the trade for the United States or United States possessions.

We ourselves in our own legislation have drawn this distinction between Commonwealth and non-Commonwealth or extra-Commonwealth trade by the very same device of a percentage in the unilateral double taxation relief provided for in Section 348 of the Income Tax Act, 1952. If one is trading with a Commonwealth country with which we have not got a double taxation agreement and we therefore give unilateral double taxation relief, 75 per cent. of United Kingdom tax is remitted; whereas if one is trading in similar circumstances in a foreign country, not in the Commonwealth, the rebate for double taxation is only 50 per cent. It will be seen that we ourselves already, in our own existing legislation, make the distinction by variable percentage between Commonwealth and non-Commonwealth trade. New Zealand gives concessions only to overseas trade in other Commonwealth countries, not in foreign countries. Belgium does it by percentage, giving 20 per cent. relief. France gives special reliefs in the French Union.

There are plenty of examples of the method being used. Indeed, the way it is proposed to do it in the Bill really seems to be unique. When one looks at what other nations do, one does not find that any of them have picked that way. Practically all other countries which use this sort of device have, in fact, done it more or less along the lines which we propose in our new Schedule. We argue, therefore, with conviction, that our proposals are at least practicable and workable, and they will stand up.

The actual way in which we apply the principles is really very simple. Every overseas trade corporation would get a basic rate of 20 per cent. of its United Kingdom tax remitted to it for overseas trade, which happens to be the level that Belgium gives to her overseas trade corporations. We, however, add to that, namely that if the overseas trade corporation is trading in the Commonwealth it shall have double the basic rate, namely a 40 per cent. remission of United Kingdom Income Tax. Then we give a bonus of 10 per cent. over and above that in both cases to all overseas trade corporations dealing in plantations, mines, oil wells, public utilities and similar things. In other words, for such overseas trade corporations as deal in extractive industries of one sort or another, the basic remission of Income Tax would be 30 per cent. and, if trading in the Commonwealth, 50 per cent.

The reason for the bonus is that undertakings engaged in the sort of operations referred to are the best from the point of view of our balance of payments. They are operations of a kind designed to produce imports into this country at as cheap a rate as possible. If one is going to do this at all, there is a good deal to be said for encouraging investment particularly in the sort of undertakings which are more likely to turn the terms of trade in our favour. If there is to be. as the Chancellor has admitted, at any rate an ill effect in the short run upon our balance of payments, it is better to try to arrange mattes so that that bad effect is as small as possible.

Notice taken that 40 Members were not present:

House counted, and, 40 Members being present:—

Mr. Gordon Walker

In our proposed Schedule, we recognise what has been argued from both sides of the Committee, that there is a special reason for giving full benefit to what we call pioneer companies, companies which are given pioneer relief in some Colony. We provide that, where there is pioneer relief of this sort, the British company concerned shall get the full extent of that relief should it be more than it would get otherwise under our proposed Schedule according to the type of trade it is conducting.

This proposal, therefore, is a workable one. It is very much more sensible than the Government's proposal. It is related to the true needs and interests of the nation and of the Commonwealth. It is extremely important, when discriminating in this way, to give a clear preference in favour of the Commonwealth, and this we do in our Schedule. The Government stubbornly and stoutly refused to do it, though, of course, they have today every opportunity of doing so by accepting our Amendment.

If the Chancellor or the Economic Secretary advise the Committee to reject the Amendment, they will be asking the Committee to reject the whole principle of giving preference to the Commonwealth when dealing with this sort of thing. In our view this is a constructive, carefully thought-out proposal which is greatly preferable to the one at present in Part IV.

Mr. Bernard Braine (Essex, South-East)

I would not have risen but for the observations made repeatedly throughout the debate yesterday that the Amendment and its attendant Schedule were to be the great feature of the debate and that those of us who were deeply attached to the cause of Commonwealth development should find ourselves in the Lobby with the right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker).

Mr. Gordon Walker

The hon. Member is wrong. Our real proposal is in a new Clause. This method is merely assuming that it has to be done the way the Government want it. The new Clause should really attract the hon. Member, because it would give the entire help to the Commonwealth.

Mr. Braine

The right hon. Gentleman at least began his remarks by saying that this was a most important Amendment. If he now wishes to run away from that, I am in company with him, because while I am always ready to support any proposal which effectively discriminates in favour of Commonwealth interests, I do not think that this proposal would do so.

There may well be a case for giving selective reliefs. Certainly, throughout our discussions so far, the balance of payments has loomed large and I well see the motive behind the argument which has been advanced from the benches opposite. I should have thought, however, that if any particular trades were to be given selective reliefs, basing the case for doing so on the balance of payments argument, they should be those earning dollars and hard currency.

There is a fallacy, which perhaps the Committee has noticed, in the right hon. Gentleman's arguments. The provisions of the Amendment and the Schedule apply only to overseas trade corporations—that is to say, to companies trading overseas and resident in the United Kingdom. If that be so, they cannot apply to the subsidiaries of British companies trading overseas. Yet the Schedule draws attention to the frustration of pioneer reliefs and the whole purpose of the proposal, I take it, is that that frusttration should, in part at least, be removed.

Mr. Gordon Walker

Wholly removed.

Mr. Braine

Agreed. But the point with which the right hon. Gentleman is not seized is that pioneer concessions are given in British Colonial Territories—at least, in the main, if not wholly—to companies registered abroad, which are wholly excluded from the Bill and which are not overseas trade corporations and are, therefore, quite outside the scope of these proposals. Thus, the Schedule is complete nonsense.

As I understand it, the proposal here is that benefits arising from overseas trade corporation status should be enjoyed on a discriminatory basis, the maximum benefit being 50 per cent. in the case of certain companies and certain kinds of trade. It is interesting to observe, therefore, that the party opposite wishes in respect of these companies to whittle down by half the concession which my right hon. Friend is willing to extend to them. That is an odd way of helping the Commonwealth.

6.15 p.m.

I ask the Committee, however, to observe something else in order to get the matter in perspective. The argument used by the right hon. Gentleman—it was implied throughout everything said by him and his hon. Friends yesterday—is that this proposal was designed to help the Commonwealth. I should point out that while such companies operating in foreign countries would get a 50 per cent. relief, other companies operating in the Commonwealth will get only a 40 per cent. relief or less. This is not only a discriminatory provision, but in some respect it discriminates against companies operating in the Commonwealth. Because of that, I consider the right hon. Gentleman's proposal mean, restrictive and cumbersome and I hope that the Committee will reject it.

Mr. Roy Jenkins

Which foreign countries would get 50 per cent.?

Mr. Braine

If the hon. Member looks at the new Schedule, he will see Class C: Of the description in class A and carrying on a trade arising wholly or mainly out of the ownership or management of a foreign plantation, mine or oil well The words foreign plantation, mine or oil well can only mean undertakings outside the Commonwealth.

Mr. Birch

The right hon. Member for Smethwick (Mr. Gordon Walker) was, I thought, glowing with the pride of authorship when he made his speech. It is certainly an ingenious proposal and it is a pleasure to see hon. Members opposite seeking to give some preference to the Commonwealth. That, of course, is a great change from the past. So many Socialist idols have fallen that they now find it necessary to lay their votive gifts at the feet of Lord Beaverbrook. At any rate, it is something that we can welcome.

The first point to be noted if one wants to benefit the Commonwealth is that the effect of accepting the Amendment would be to reduce the amount of relief granted to those companies. Secondly, it departs entirely from the principle both of the Royal Commission Report and of the Bill, that is, the principle of jurisdiction. In other words, the tax is levied in the country where the company is operating. The Amendment departs from that and it goes in for a large amount of discrimination—one might say discrimination with a vengeance. The right hon. Gentleman yesterday was very severe about discrimination. He said: …we do not like the radical departure from the basic tax principle of this country, that there should not be discrimination between taxpayers."—[OFFICIAL REPORT, 26th June, 1957; Vol. 572, c. 310.] The Amendment would bring about very considerable discrimination, and, in the nature of the case, that discrimination would be bound to be arbitrary. For example, the taxation on mining companies operating outside the Commonwealth would be higher than on those mining companies operating inside the Commonwealth, regardless of whether the metal that the mine produces was available in the Commonwealth. For example, borax is not, I think, available in the Commonwealth. This provision would penalise the production of something which is of immense importance to this country.

We all want to help the Commonwealth, but we cannot invest in the Commonwealth unless we have money to invest, and we cannot get that money unless we can trade all over the world. We cannot live in the Commonwealth simply by taking in each other's washing. Therefore, discrimination of this sort would not only be against the principle of the Bill and against what was said in the Royal Commission's Report, but it would also diminish our capacity to help the Commonwealth by reducing our trade, our world wide balance of payments and our economic strength. It is on our economic strength that our ability to help the Commonwealth depends.

Mr. John Cronin (Loughborough)

I am rather surprised at the Economic Secretary's reply. I agree that yesterday we on this side of the Committee said that we were against discrimination, and I agree that our Amendment produces discrimination, but, if the right hon. Gentleman will recollect, we were yesterday opposed to the whole principle of Part IV of the Bill, and our point is that if we have to accept Part IV then let the discrimination be in the most favourable way for the Commonwealth.

I should like to refer to three aspects of the Amendment, namely, the partial relief, the Commonwealth preference and the discrimination in favour of the extractive and agricultural industries. The Chancellor said yesterday that he was a hundred percenter. He showed that he had a bold and buccaneering spirit, and he was loudly cheered by his supporters. This is very encouraging. It has an almost schoolboyish charm about it, but, of course, this bold spirit is being shown at the expense of other people's money and at the expense of the right hon. Gentleman's own responsibilities. Therefore, it is not quite as commendable as it might at first seem to be.

I suggest to the Chancellor that when he is indulging in a completely unknown and unforeseeable type of fiscal measure he should proceed cautiously, and to proceed cautiously here is to make these reliefs partial. The right hon. Gentleman must bear in mind that there will be regulations in other countries. It is quite likely that other countries will start making concessions to their overseas corporations, or their equivalent, and will therefore nullify the measures that we are taking today.

If, on the other hand, our measures are of a partial nature they are not likely to cause such a stir and such a strong reaction on the part of other countries. The Chancellor must bear in mind that in many countries where there are overseas trade corporations there is a strong feeling of nationalism. A sudden sweeping 100 per cent., such as is proposed in the Bill, might well give the impression that there is to be a wholesale invasion of those countries by British firms, and it might result in nationalistic disapproval.

As to the aspect of caution, from the purely budgetary point of view if we have these discriminatory percentages they can be varied from year to year in accordance with the conditions of world trade. All Chancellors over the past few years have been painfully familiar with the sudden and repeated variations which there can be in world trading conditions. Here, by means of the Amendment, we on this side of the Committee are providing a mechanism for varying discrimination so as to obtain the maximum advantage.

Obviously, there is a strong argument for giving preference to the Commonwealth because it occupies such a high place in our export trade, and the sterling area is in a constant state of capital shortage. If the Chancellor accepted the Amendment he would certainly ensure that capital would be exported to those places where it would produce the maximum advantage both to ourselves and to the sterling area. The Chancellor will also find that the constant problem that he has to face is that of the sterling balances. Our Amendment would ensure that such capital as is exported would tend to go into the sterling area rather than outside it, and would tend on the whole to ease that problem.

The Chancellor is already aware that Commonwealth trade is considerably weakened. There have been difficulties in our trade with Australia and New Zealand and a very big decrease in Commonwealth trade as opposed to world trade as a whole. Therefore, here again our Amendment will have a very helpful effect. The right hon. Gentleman must also bear in mind that there is a definite psychological value in any Amendment which gives Commonwealth preference, because Commonwealth ties have been rather painfully weakened in the last year through unhappy events into which we will not now go in detail.

The other aspect of the Amendment is the preference for the extractive and agricultural industries. That is an obvious advantage in that these industries produce substances of which we have a great need in this country and of which there is a world shortage. Therefore. anything that tends to increase their production will be valuable. In addition, capital invested in extractive industries and agricultural production will cheapen those products. Thereby, there will he an improvement in our terms of trade and consequent benefit to our balance of payments. On the other hand, if the Chancellor's concessions are given to manufacturing, processing and distributing industries, there will be a tendency for those industries to sell their goods at considerably lower prices without any increased productivity, and that will have an opposite effect of making the terms of trade move against us. Again, there will be a tendency for the interests of British workers to be prejudiced if Part IV of the Bill is passed completely unamended.

Another matter which the Chancellor should particularly bear in mind is that there will be competition between various countries to obtain British capital. The result will be that the poorer countries, which will be unable to give tax concessions, will tend to fall away in the race and they will suffer. That, from an elementary point of view of humanity, anyone who has any familiarity with the standard of living in some of the Commonwealth and Colonial territories will certainly take very seriously in mind.

The Amendment, therefore, is something of a watershed. It is the dividing point. The Committee should be told quite clearly what the Chancellor's intentions are. Does he intend that Part IV should be of real value to our balance of payments position and to world trade generally, or is Part IV simply another concession to the shareholders and to the upper income groups, rather like his Surtax concession? Here we on this side of the Committee are providing an Amendment which will have a logical effect and will make sure that the benefits of Part IV, such as they are, will be distributed in the manner most acceptable to our balance of payments and to our Commonwealth generally.

Yesterday the Chancellor made a statement which should receive a prize as the under-statement of the Session when he said that he was not shocked by shareholders benefiting. Is that the keynote to Part IV? Is it first and foremost a question of shareholders benefiting, or does the right hon. Gentleman want to produce a useful Measure that will produce ultimate prosperity for the country?

6.30 p.m.

Mr. Douglas Houghton (Sowerby)

The Amendment under discussion relates to Clause 22, which is really the main operative Clause in Part IV of the Bill. First we had Clause 20 which gave us the definition of an overseas trade corporation. then Clause 21 gave us the disqualifications, and Clause 22 gives us the main Income Tax relief on overseas trade corporations.

I can understand the Treasury Bench feeling so weary of all this at this stage for it is a wearisome and complicated task. This is the kind of provision in the Finance Bill which can go through without adequate discussion because it is so complex. and it is so difficult to grasp that it might easily escape critical examination in this Committee. Yet under this Clause there are more millions of tax relief, I think I am right in saying, than in any other Clause in the Bill. That shows how important it is. I will not say that this is the Clause under which—

The Deputy-Chairman (Sir W. Anstruther-Gray)

We are not discussing the Question that the Clause stand part we are discussing a specific Amendment.

Mr. Houghton

Yes, Sir William. I was coming to the Amendment in a moment. I thought I had better first say what the Clause did before I discussed what the Amendment tried to do with it. It probably takes a little longer but I will get there very soon. I was about to say that the Royal Commission on the Taxation of Profits and Income devoted about twenty-four pages of its report to the matter with which this Clause deals and which our Amendment seeks to alter.

There is no doubt that the Royal Commission had great difficulty in making up its mind on this matter. If we re-read Chapter 24 of that report which deals with overseas profits, we appreciate that the arguments and the counter-arguments and the analyses of the taxation aspects of this matter gave the Royal Commission a good deal of trouble. It is a form of discrimination in our tax system which the House of Commons always looks at very critically. The Clause proposes one way of doing it, the Royal Commission examined an alternative as well as the method adopted in the Clause, and the Amendment suggests another way of doing the same thing.

What we are dealing with is a matter of opinion based on examination of the administration problems involved and the purposes of the tax relief which it is proposed to give. It depends on consideration of all those matters as to what conclusion we reach. In paragraph 666 the Royal Commission said that there were two main alternatives in the methods of granting exemption. One was to define a particular kind of profit as overseas profit and to exempt that in the hands of the taxpayer. The other was to define a particular kind of corporation as an overseas trader and to exempt all the profits or, perhaps, all the income and profits of that corporation.

There are difficulties about both, both as matters of policy and of administration. The Amendment suggests a third way of channelling this tax relief into overseas activities in the Commonwealth. The Economic Secretary has raised some objections to it. There are objections to be raised to almost anything one can think of in this context, and it is a matter of the balance of considerations which leads to the final conclusion.

The main point, however, is what are we trying to do? The Chancellor seems to be in no doubt about what he wants to do. He wants to give this relief to overseas trade activities on a very wide scale. It can be questioned whether the full extent of the Chancellor's purpose is necessary to bring about that incentive to the development of overseas trade, which is the only purpose of this tax relief. There are few grounds for this relief by reference to considerations of equity.

Their economic purpose is really the mainspring of these proposals, and when the Royal Commission reached certain conclusions under the heading of "The Action Recommended" on page 206 of the report, it said: Any scheme that is put into operation on these lines touches economic issues of great importance. We have tried to identify and analyse those issues in the earlier part of this Chapter. Such a scheme can only be justified in the long run by its contribution towards success in the handling of those issues. It is by this that it will have to be judged rather than by theoretical arguments of equity. It is by reference to that criterion that we have to judge the Chancellor's proposals and the alternative to them in the Amendment. However doubtful we may feel as to the case for this relief in general, there is no doubt that we should feel more enthusiastic about it if the relief were being given to help overseas trade in the Commonwealth. That, at least, is something which has great sentimental interest as well as an economic and Commonwealth purpose, and is to be warmly welcomed.

The Chancellor's proposals, of course, go much further and really amount to a wide discrimination in favour of capital which is employed outside the United Kingdom and not necessarily within the Commonwealth. I know some people think that it is a bad principle to discriminate between the home and the export trade in any circumstances. There are also criticisms which can be levelled against proposals which compel firms in this country with overseas activities to go through complicated processes of hiving off their overseas trading activities in order to bring them within the scope of this relief, involving reorganisation, extensive professional advice, the creation of fresh companies and the like, none of which will increase the national income in this country by a single penny—though the Chancellor no doubt says in his mind that eventually he not only hopes he will, but feels confident that he will achieve this result.

There are administrative difficulties which can be raised against our Amendment. There are administrative difficulties which can be raised against the Clause and any alternative to the Clause. Indeed it is no secret now, it appears, that the Board of Inland Revenue addressed themselves at great length to the Royal Commission on a great number of them. It is unfortunate that their evidence to the Royal Commission on matters covered by this Clause and by this Amendment have become available in such a queer fashion.

The Financial Secretary reminded me last night that documents prepared by the Inland Revenue and submitted to the Royal Commission were dealt with in a certain way by the Royal Commission, and copies of these documents were deposited in the British Museum, the National Library of Scotland and other libraries mentioned in paragraph 12 of the Final Report of the Royal Commission. No mention was made about the documents being in the Library of the House of Commons. I went to the Library a few moments ago and got hold of the last copy. Hon. Members who want to look at the memoranda will be at a disadvantage because there will be no copies in the Library. I do not think that is the proper way to do business.

I do not want to quote from any of the memoranda, because I think that in a way they were privileged documents. The Inland Revenue addressed itself not only to the difficulties of administration of the Clause and anything resembling our Amendment, but to the policy of the matter as well. I am not questioning its right to do so. It is fully entitled to say that those who are claiming relief under Clause 22 have failed to make out their case for it if that opinion is based on the evidence and information in the possession of the Department. I am not quarrelling with that.

However, I am not sure whether that view should be available for publication and quotation unless the consent of the Inland Revenue has been obtained and unless it is available for all to see and it is not merely confined to libraries or those hon. Members who may have visited our Library a little earlier than I did. All I would say on that is that some hon. Members are better equipped than others to deal with the problems arising on the Clause and our Amendment, and this is solely due to the memoranda being given a restricted circulation instead of their having the full benefit of publication.

Leaving that aside, I think we can go to the main bible of this and other matters in Part IV, and that is the Report of the Royal Commission. Extended consideration was given to the subject. The headings in Chapter 24 are suggestive: General observations. The problem ascertained. The case for exemption. The case against exemption. Further differences of view on the general argument. We have not finished yet. Even when we have stated all the arguments for exemption and all the arguments against it, there is more to be said, and it was said under the heading: Further differences of view on the general argument. Other headings were: Possible methods of exemption. The charge on distributions. The action recommended. The Chancellor has adopted in the Clause the recommendation, if it can be called that, of the Royal Commission, though it says in coming down on that side of the fence—that is, discrimination in favour of an Overseas Trade Corporation rather than discrimination in favour of particular types of overseas income or profit— We have decided to base our recommendation on a scheme of this kind because it is the one that would receive the largest measure of support among the signatories to this Report, of whom some would not be ready to recommend a more comprehensive measure. So the Royal Commission was hesitant and even divided right to the last in making its recommendation.

6.45 p.m.

We have to ask ourselves whether this very large tax relief is necessary or justified for the whole range of overseas trade corporations, written down by the disqualifications in the preceding Clause, in the present economic situation. On that, as we were saying yesterday, opinions will differ considerably. The narrow issue on the Amendment is whether those reliefs should be given to overseas trade activities in the Commonwealth and not generally, and even then there would be variations in the amount of the relief according to the type of company or activity undertaken.

All our reservations against the scheme as a whole come out once more on this Clause. The Government have said that they will not accept the Amendment Presumably, in a few moments we shall pass to a discussion on the Clause, which is the real issue of Part IV. There is a large body of opinion in the country and among those who have been discussing these matters intelligently that it would have been better, as a beginning at all events, to give the relief a more restricted scope than that proposed in the Clause and to give greater emphasis to Commonwealth development in doing so.

Mr. Roy Jenkins

I wish to return to the points put before the Committee by the hon. Member for Essex, South-East (Mr. Braine) and the Economic Secretary.

We all followed the speech of the hon. Member for Essex, South-East very closely, and were grateful for it. It has been rare even to see a Government back bencher, and the privilege of both seeing and hearing one is so remarkable that we do not allow it to go by default. Apart from that, his words would have commanded attention on their own merit.

None the less, I thought there were one or two fallacies in the hon. Member's points. He reverted to a point on which he was very eloquent yesterday and said that the Schedule was nonsense because it tried to help pioneer companies without dealing with the case of a company which was not resident in this country. As I pointed out in an aside at the time, to the extent that the Schedule is nonsense in that respect, the Bill is equally nonsense. The Chancellor, with whom I am in full agreement on the point, dealt is completely with the issue yesterday. It is one which has a certain amount of force behind it, but it is untrue to say that no help is given to pioneer companies unless the particular point of view of the hon. Member is accepted.

With regard to another point, I think that the hon. Member has not read the Schedule. I had read it carefully, but I have read it even more carefully since his intervention. I also thought, even more surprisingly, that the Economic Secretary had not read it, because he implied that there were circumstances in which an extractive company outside the Commonwealth would be more favourably treated than any company within the Commonwealth could be.

Mr. Birch

It is exactly the opposite.

Mr. Jenkins

Might we again have what the right hon. Gentleman said on that point?

Mr. Birch

It is all in HANSARD.

Mr. Jenkins

HANSARD is not available at this stage. Perhaps we may have what the hon. Member for Essex, South-East said, and maybe it will work out.

Mr. Braine

The hon. Gentleman referred to something I said and I am glad that he has asked for clarification. I am greatly relieved to hear that the party opposite does not regard Colonial Territories as foreign. If the learned Gentleman looks at line 24 of the Schedule he will see the word "foreign" used there. Amendments and Schedules put before the Committee ought to be couched in language which is clear. Will the hon. Member confirm that the effects of this discrimination might be regarded by the Commonwealth Governments concerned as an attempt by the United Kingdom Government to interfere with, to dictate to or to shape their economies, and that this might invite retaliation? This is really a most dangerous proposal.

Mr. Roy Jenkins

In the course of explaining why he misunderstood the Schedule in the first place, the hon. Member has raised an entirely new matter. The use of the phrase foreign plantation, mine or oil well arises entirely because we were referring to language used in a previous Act in this respect.

Clearly, there are two sets of qualifications which we are seeking to apply. First, we are dividing companies into those which operate in the Commonwealth and those which do not. Secondly, we are dividing companies into those which operate plantations, mines or oil wells, broadly speaking, extractive companies, and those which are not extractive companies. On the whole, we are more in favour of Commonwealth countries than non-Commonwealth countries, and more in favour of extractive companies than non-extractive companies. Leaving aside pioneer relief, the type of company which will get the maximum relief, 50 per cent. under our Schedule, is one which fulfils both qualifications, being a Commonwealth company and an extractive company. One which is one or the other, a Commonwealth company but not an extractive company, gets a slightly lower rate, 40 per cent.; one which is an extractive company, but not a Commonwealth company gets a still lower rate, 30 per cent.; one which is neither gets 20 per cent. I hope that we are all clear on that, including the Economic Secretary. This seems to be a sensible basis of discrimination.

A perfectly fair point made by the Economic Secretary and which must be met is that yesterday my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) and other hon. Members on this side of the Committee made much of saying that discrimination in tax matters was of itself dangerous. The Economic Secretary thought that he could therefore say today that our discriminatory Schedule was in contradiction to what we had been saying yesterday. That is a point which must be met and which can be met.

We are confronted with Part IV of the Bill which is extremely discriminatory among companies which, roughly speaking, have an equivalent ability to pay. However, we are not framing our own scheme, but seeking to amend a series of Clauses put forward by the Government themselves and which are very discriminatory. The degree of discrimination does not depend on the number of classes of discrimination. It depends on the difference between those which are chosen and those which are not chosen.

Our Amendment reduces the difference between those chosen and those not chosen and also puts it on a basis which would be more helpful to our economy and to the purposes which we wish to serve. Nothing we said yesterday should be taken to mean that we believe that discrimination in the tax system can be avoided in all circumstances. What it can be taken to mean is that discrimination is in itself a bad thing and that before one does it one must be sure that there are strong economic arguments in favour of doing it. The Schedule does not cut across the general principles which we put forward yesterday.

There is something to be said for discrimination in favour of Commonwealth countries, even though under our arrangement the amount of relief permitted, even to Commonwealth countries, is not as great as that under the Chancellor's flat provision. One of the things about which we are concerned is the channelling of capital into countries overseas, particularly into Commonwealth countries. Yesterday I made it clear that I doubted whether the Bill went too far in offering incentives for the export of capital. Leaving that point aside, it is surely the case, if we are dealing with the export of capital, that if we have discrimination in favour of Commonwealth countries, then, even if the absolute rate of relief is lower than under the Chancellor's proposals, the effect is that more favourable treatment is being given to Commonwealth countries than to non-Commonwealth countries, which means that under our arrangement such capital as is exported is more likely to go to Commonwealth rather than to other countries than would be the case under the Chancellor's flat rate arrangement.

With our other form of discrimination in favour of extractive industries as opposed to processing, manufacturing, and other categories of industries, we are concentrating upon those industries, the

development of which is more likely to improve than to damage our balance of payments and our trading position in the future.

Those are powerful reasons for accepting this carefully worked out Schedule. We are presented with a position in which the Chancellor is trying to do something, the objects of which we do not dislike, but by methods which we cannot accept. We are circumscribed at this stage to move within the framework which the Chancellor has laid down. We believe that this method would be less harmful to the Revenue and to the balance of payments and more beneficial to the Commonwealth and to the type of industries we want to encourage. I hope that my hon. Friends will carry this matter into the Division Lobby.

Question put, That those words be there inserted:—

The Committee divided: Ayes 186, Noes 239.

Division No. 148.]	AYES	[6.58 p.m.
Ainsley, J. W.	Fernyhough, E.	Kenyon, C.
Allaun, Frank (Salford, E.)	Flenburgh, W.	Key, Rt. Hon. C. W.
Allen, Arthur (Bosworth)	Fletcher, Eric	King, Dr. H. M.
Allen, Scholefield (Crewe)	Forman, J. C.	Ledger, R. J.
Awbery, S. S.	Fraser, Thomas (Hamilton)	Lee, Frederick (Newton)
Bacon, Miss Alice	Gaitskell, Rt. Hon. H. T. N.	Lee, Miss Jennie (Cannock)
Bellenger, Rt. Hon. F. J.	Gibson, C. W.	Lewis, Arthur
Benn, Hn. Wedgwood (Bristol, S.E.)	Gordon Walker, Rt. Hon. P. C.	Lindgren, G. S.
Benson, G.	Greenwood, Anthony	Lipton, Marcus
Beswick, Frank	Grey, C. F.	Logan, D. G.
Blackburn, F.	Griffiths, David (Rother Valley)	MacColl, J. E.
Blenkinsop, A.	Griffiths, Rt. Hon. James (Llanelly)	McInnes, J.
Blyton, W. R.	Hale, Leslie	McKay, John (Wallsend)
Boardman, H.	Hall, Rt. Hn. Glenvil (Colne Valley)	MacMillan, M. K. (Western Isles)
Bottomley, Rt. Hon. A. G.	Hamilton, W. W.	MacPherson, Malcolm (Stirling)
Bowden, H. W. (Leicester, S.W.)	Hannan, W.	Mahon, Simon
Bowles, F. G.	Hastings, S.	Mallalieu, E. L. (Brigg)
Boyd, T. C.	Hayman, F. H.	Mann, Mrs. Jean
Brockway, A. F.	Healey, Denis	Marquand, Rt. Hon. H. A.
Brown, Rt. Hon. George (Belper)	Henderson, Rt, Hn. A. (Rwly Regis)	Mellish, R. J.
Brown, Thomas (Ince)	Hobson, C. R. (Keighley)	Messer, Sir F.
Burton, Miss F. E.	Holmes, Horace	Mikardo, Ian
Callaghan, L. J.	Houghton, Douglas	Mitchison, G. R.
Champion, A. J.	Howell, Charles (Perry Barr)	Monslow, W.
Chapman, W. D.	Hughes, Cledwyn (Anglesey)	Moody, A. S.
Chetwynd, G, R.	Hughes, Emrys (S. Ayrshire)	Morris, Percy (Swansea, W.)
Clunie, J.	Hughes, Hector (Aberdeen, N.)	Moyle, A.
Coldrick, W.	Hunter, A. E.	Mulley, F. W.
Collick, P. H. (Birkenhead)	Hynd, H. (Accrington)	Noel-Baker, Rt. Hon. P. (Derby, S.)
Collins, V. J.(Shoreditch & Finsbury)	Hynd, J. B. (Attercliffe)	Oliver, G. H.
Cove, W. G.	Irvine, A. J. (Edge Hill)	Oram, A. E.
Craddock, George (Bradford, S.)	Irving, Sydney (Dartford)	Orbach, M.
Cronin, J. D.	Isaacs, Rt. Hon. G. A.	Oswald, T.
Darling, George (Hillsborough)	Janner, B.	Owen, W. J.
Davies, Ernest (Enfield, E.)	Jay, Rt. Hon. D. P. T.	Padley, W. E.
Davies, Harold (Leek)	Jeger, Mrs. Lena(Holbn & St. Pncs. S.)	Palmer, A. M. F.
de Freitas, Geoffrey	Jenkins, Roy (Stechford)	Pannell, Charles (Leeds, W.)
Delargy, H. J.	Johnson, James (Rugby)	Pargiter, G. A.
Dodds, N. N.	Jones, Rt. Hon. A. Creech(Wakefield)	Parker, J.
Dugdale, Rt. Hn. John (W. Brmwch)	Jones, David (The Hartlepools)	Parkin, B. T.
Edwards, Rt. Hon. John (Brighouse)	Jones, J. Idwal (Wrexham)	Paton, John
Evans, Albert (Islington, S.W,)	Jones, T. W. (Merioneth)	Pearson, A.
Peart, T. F.	Slater, Mrs. H. (Stoke, N.)	Wells, William (Walsall, N.)
Pentland, N.	Slater, J. (Sedgefield)	West, D. G
Popplewell, E,	Sorensen, R. W.	Wheeldon, W. E.
Prentice, R. E.	Soskice, Rt. Hon. Sir Frank	White, Mrs. Eirene (E. Flint)
Price, J. T. (Westhoughton)	Sparks, J. A.	White, Henry (Derbyshire, N.E.)
Price, Philips (Gloucestershire, W.)	Steele, T.	Wilcock, Group Capt. C. A. B.
Probert, A. R.	Stewart, Michael (Fulham)	Wilkins, W. A.
Proctor, W. T.	Stonehouse, John	Willey, Frederick
Pryde, D. J.	Stones, W. (Consett)	Williams, Rev. Llywelyn (Ab'tillery)
Randall, H. E.	Strachey, Rt. Hon. J.	Williams, Ronald (Wigan)
Rankin, John	Strauss, Rt. Hon. George (Vauxhall)	Williams, Rt. Hon. T. (Don Valley)
Redhead, E. C.	Swingler, S. T.	Williams, W. R. (Openshaw)
Rhodes, H.	Sylvester, G. O.	Willis, Eustace (Edinburgh, E.)
Roberts, Goronwy (Caernarvon)	Taylor, John (West Lothian)	Wilson. Rt. Hon. Harold (Huyton)
Robinson, Kenneth(St. Pancras, N.)	Thomson, George (Dundee, E.)	Winterbottom, Richard
Rogers, George (Kensington, N.)	Thornton, E.	Woof, R. E.
Ross, William	Tomney, F.	Yates, Victor (Ladywood)
Royle, C.	Ungoed-Thomas, Sir Lynn	Younger, Rt. Hon. K.
Shinwell, Rt. Hon. E.	Viant, S. P.
Simmons, C. J. (Brierley Hill)	Warbey, W. N.	TELLERS FOR THE AYES:
Skeffington. A. M.	Wells, Percy (Faversham)	Mr. Short and Mr. Deer.
NOES
Agnew, Sir Peter	Fell, A.	Johnson, Dr. Donald (Carlisle)
Aitken, W. T.	Finlay, Graeme	Johnson, Eric (Blackley)
Allan, R. A. (Paddington, S.)	Fisher, Nigel	Johnson, Howard (Kemptown)
Amery, Julian (Preston, N.)	Fletcher-Cooke, C.	Joynson-Hicks, Hon. Sir Lancelot
Arbuthnot, John	Foster, John	Keegan, D.
Armstrong, C. W.	Fraser, Sir Ian (M'cmbe & Lonsdale)	Kerby, Capt. H. B.
Ashton, H.	Freeth, Denzil	Kerr, Sir Hamilton
Atkins, H. E.	Gammans, Lady	Kershaw, J. A.
Baldock, Lt.-Cmdr. J. M.	Garner-Evans, E. H.	Kimball, M.
Baldwin, A. E.	George, J. C. (Pollok)	Lagden, G. W.
Barlow, Sir John	Glover, D.	Lambton, Viscount
Barter, John	Godber, J. B.	Lancaster, Col. C. G.
Baxter, Sir Beverley	Gomme-Duncan, Col. Sir Alan	Leather, E. H. C.
Beamish, Maj. Tufton	Goodhart, Philip	Leavey, J. A.
Bell, Philip (Bolton, E.)	Gower, H. R.	Legge-Bourke, Maj. E. A. H.
Bell, Ronald (Bucks, S.)	Graham, Sir Fergus	Legh, Hon. Peter (Petersfield)
Bevins, J. R. (Toxteth)	Grant, W. (Woodside)	Lindsay, Hon. James (Devon, N.)
Bidgood, J. C.	Grant-Ferris, Wg Cdr. R.(Nantwich)	Lindsay, Martin (Solihull)
Biggs-Davison, J. A.	Green, A.	Linstead, sir H. N.
Birch, Rt. Hon. Nigel	Grimond, J.	Lloyd, Maj. Sir Guy (Renfrew, E.)
Bishop, F. P.	Grosvenor, Lt.-Col. R. G.	Low, Rt. Hon. A. R. W.
Body, R. F.	Gurden, Harold	Lucas, P. B. (Brentford & Chiswick)
Bossom, Sir Alfred	Hall, John (Wycombe)	Lucas-Tooth, Sir Hugh
Bowen, E. R. (Cardigan)	Harris, Frederic (Croydon, N.W.)	McAdden, S. J.
Braine, B. R.	Harris, Reader (Heston)	Macdonald, Sir Peter
Brooman-White, R. C.	Harrison, Col. J. H. (Eye)	Mackeson, Brig, Sir Harry
Bryan, P.	Harvey, Sir Arthur Vere (Macclesfd)	Mackie, J. H. (Galloway)
Bullus, Wing Commander E. E.	Harvey, John (Walthamstow, E.)	McLaughlin, Mrs. P.
Burden, F. F. A.	Heald, Rt. Hon. Sir Lionel	Maclean, Fitzroy (Lancaster)
Butler. Rt. Hn. R. A.(Saffron Walden)	Heath, Rt. Hon. E. R. G.	McLean, Neil (Inverness)
Carr, Robert	Henderson, John (Cathcart)	Macleod, Rt. Hn. Iain (Enfield, W.)
Cary, Sir Robert	Henderson-Stewart, Sir James	Macmillan, Rt. Hn. Harold(Bromley)
Channon, sir Henry	Hesketh, R. F.	Macmillan, Maurice (Halifax)
Chichester-Clark, R.	Hicks-Beach, Maj. W. W.	Macpherson, Niall (Dumfries)
Clarke, Brig. Terence (Portsmth, W.)	Hill, Rt. Hon. Charles (Luton)	Maddan, Martin
Cole, Norman	Hill, Mrs. E. (Wythenshawe)	Maitland, Cdr. J. F. W. (Horncastle)
Cooke, Robert	Hill, John (S. Norfolk)	Maitland, Hon. Patrick (Lanark)
Cooper, A. E.	Hinchingbrooke, Viscount	Manningham-Buller, Rt. Hn. Sir R.
Cooper-Key, E. M.	Hirst, Geoffrey	Markham, Major Sir Frank
Cordeaux, Lt.-Col. J. K.	Holland-Martin, C. J.	Marlowe, A. A. H.
Corfield, Capt. F. V.	Holt, A. F.	Marshall, Douglas
Craddock, Beresford (Spelthorne)	Hope, Lord John	Mathew, R.
Crowder, Sir John (Finchley)	Hornby, R. P.	Mawby, R. L.
Crowder, Petre (Ruislip—Northwood)	Hornsby-Smith, Miss M. P.	Maydon, Lt.-Comdr. S. L. C.
Cunningham, Knox	Horobin, Sir Ian	Milligan, Rt. Hon. W. R.
Currie, G. B. H.	Howard, Hon. Greville (St. Ives)	Morrison, John (Salisbury)
Dance, J. C. G.	Howard, John (Test)	Mott-Radclyffe, Sir Charles
Davidson, Viscountess	Hudson, W. R. A. (Hull, N.)	Nabarro, G. D. N.
D'Avigdor-Goldsmid, Sir Henry	Hughes Hallett, Vice-Admiral J.	Neave, Airey
Deedes, W. F.	Hughes-Young, M. H. C.	Nicolson, N.(B'n'm'th, E. A Chr'ch)
Dodds-Parker, A. D.	Hurd, A. R.	Orr-Ewing, Charles Ian(Hendon, N.)
Doughty, C. J. A.	Hutchison, Sir Ian Clark(E'b'gh, W.)	Orr-Ewing, Sir Ian (Weston-S-Mare)
Drayson, G. B.	Hutchison, Sir James (Scotstoun)	Osborne, C.
duCann, E. D. L.	Hutchison, Michael Clark (E'b'gh, S.)	Page, R. G.
Dugdale, Rt. Hn. Sir T. (Richmond)	Hylton-Foster, Rt. Hon. Sir Harry	Pannell, N. A. (Kirkdale)
Eden, J. B. (Bournemouth, West)	Iremonger, T. L.	Partridge, E.
Elliott, R. W.(N'castle uponTyne, N.)	Irvine, Bryant Godman (Rye)	Peyton, J. W. W.
Erroll, F. J.	Jenkins, Robert (Dulwich)	Pickthorn, K. W. M.
Farey-Jones, F. W.	Jennings, J. C. (Burton)

Pike, Miss Mervyn	Sharples, R. C.	Tilney, John (Wavertree)
Pilkington, Capt. R. A.	Shepherd, William	Turner, H. F. L.
Pitman, I. J.	Simon, J. E. S. (Middlesbrough, W.)	Turton, Rt. Hon. R. H.
Pitt, Miss E. M.	Smithers, Peter (Winchester)	Tweedsmuir, Lady
Pott, H. P.	Spearman, Sir Alexander	Vane, W. M. F.
Powell, J. Enoch	Spence, H. R. (Aberdeen, W.)	Vickers, Miss Joan
Price, Henry (Lewisham, W.)	Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)	Wade, D. W.
Raikes, Sir Victor	Stanley, Capt. Hon. Richard	Wakefield, Edward (Derbyshire, W.)
Ramsden, J. E.	Stevens, Geoffrey	Wall, Major Patrick
Rawlinson, Peter	Steward, Harold (Stockport, S.)	Ward, Rt. Hon. G. R. (Worcester)
Redmayne, M.	Storey, S.	Ward, Dame Irene (Tynemouth)
Rees-Davies, w. R.	Studholme, Sir Henry	Watkinson, Rt. Hon. Harold
Remnant, Hon. P.	Summers, Sir Spencer	Webbe, Sir H.
Renton, D. L. M.	Sumner, W. D. M. (Orpington)	Whitelaw, W. S. I.
Rippon, A. G. F.	Taylor, Sir Charles (Eastbourne)	Williams, Paul (Sunderland, S.)
Robinson, Sir Roland(Blackpool, S.)	Teeling, W.	Wills, G. (Bridgwater)
Rodgers, John (Sevenoaks)	Temple, John M.	Wood, Hon. R.
Roper, sir Harold	Thomas, Leslie (Canterbury)	Woollam, John Victor
Ropner, Col. Sir Leonard	Thompson, Kenneth (Walton)	Yates, William (The Wrekin)
Russell, R. S.	Thompson, Lt.-Cdr. R.(Croydon, S.)
Schofield, Lt.-Col. W.	Thorneycroft, Rt. Hon. P.	TELLERS FOR THE NOES:
Scott-Miller, Cmdr. R.	Thornton-Kemsley, C. N.	Mr. Oakshott and Mr. Barber.

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

Mr. Houghton

The Committee will be glad to know that most of what I have to say in the debate on the Question, "That the Clause stand part of the Bill", I contrived to say in my speech on the last Amendment. This Clause exempts the trading income of an overseas trade corporation from Income Tax. It does not exempt its investment income, and it prohibits the setting off of trading losses against investment income. It also provides that, notwithstanding the tax relief given in the provisions of this part of the Bill, companies making distributions of profits must deduct Income Tax at the standard rate.

We do not complain about the latter provision. We do not complain about the prohibition against the setting off of trading losses against investment income, nor about the exclusion of investment income itself from the concession. But the main provision of the Clause is to exempt from Income Tax the trading income of those companies which qualify under the Bill for status as overseas trade corporations.

This is the biggest "give away" in the Bill. I must be careful in using that phrase, because the Chancellor objects to people saying that he is giving away money when he relieves people of taxation. He prefers to put it that he is allowing the taxpayer to retain more of his own income by the tax relief given. The right hon. Gentleman can have it how he likes, but the fact is that this is a very substantial tax relief indeed, and, in the context of the Budget as a whole, represents approximately one-quarter of the £100 million tax reliefs given. Therefore, we are discussing a Clause of no small importance. In fact, the whole issue of Part IV of the Bill centres upon the tax relief given and the way of giving it.

I suppose the first question to ask is whether the tax relief should be given at all. Then, if the answer is "Yes", we consider what is the most appropriate way of giving it. If I were to utilise all the information at my disposal against the principle of the Clause I should have to quote from the memoranda, which I have said I will try not to do. After hearing the evidence of the Board of Inland Revenue and of many other people in trade and in the professions, of economists and others, the Royal Commission, with some hesitation and division of opinion among its members, which seems obvious, came down in favour of the method of giving relief which the Chancellor has adopted.

I cannot say that the alternative which the Commission examined would have been freer of administrative complications, although I think that it would have enabled the Chancellor to be a little more pointed in his discriminatory policy. The Committee will remember that the two alternatives were, first, to define the kind of income from overseas activities which should be exempted and, secondly, to exempt all income of a particular type of corporation. The former would be highly selective; it would involve a judgment of the economic value of particular activities and discrimination as between one form of trade and another.

On that basis I should say that the trading activities of the Sao Paulo Company of Brazil—which, we understand, is merely a glorified estate agency or property-owning company—would not be high on the list of the Chancellor's priorities if he were looking at the first of the alternatives, namely, to exempt particular kinds of profit from overseas activities. So the Chancellor has rejected that alternative. The Royal Commission felt that there were great difficulties about it and preferred the method which the Chancellor has now adopted.

The general economic arguments have been canvassed pretty fully and there is little that one can add to them, other than to go on asking questions and providing the best possible answers upon all the available evidence. The big question is: Does the economy of the country need this tax concession? Will it benefit our balance of payments in the manner anticipated? Is it essential to encourage capital investment overseas, at a time when restraints are still put upon capital investment at home? These are all factors which we have to weigh in our minds.

Britain cannot earn her living wholly or even mainly from profits earned overseas; we have still to do a great deal here to earn our living, and that can be done only if our industries at home are modernised, re-equipped and put into the sort of shape which will enable them to compete in the markets of the world. There are growing fears that some sections, at least, of British industry will certainly have to modernise themselves and make themselves more efficient if they are to go into the European Free Trade Area with confidence that they will be able to maintain their position against competition from other European countries within that Free Trade Area. Before long some industries may regret the fact that they have not invested more of their profits in capital development.

7.15 p.m.

We have to hold the balance between the needs of overseas investment and the need for investment at home. The Chancellor himself will recall his regrets at not being able to restore investment allowances over the whole range of home investment, and at having to restrict that additional incentive to investment to a highly particular type of industry.

In the course of the debate much has been said by way of questioning the doc trine that this tax relief is necessary to enable us to undertake overseas trade activities in a bigger and bolder way, and to earn more of the national income through overseas trade activities. There are possible dangers, some of which were referred to by the Royal Commission itself. My hon. Friend the Member for Loughborough (Mr. Cronin) alluded indirectly to one of them, namely, the fact that when overseas territories knew what tax relief was being given in Britain to these overseas trade corporations they might feel that they could impose additional taxation upon them locally, and that we should therefore be transferring the benefit from the overseas trade corporations to the Exchequers of the areas in which they were operating. Those are possible dangers, which may mean that the overseas trade corporations will finish up little or no better than before, although the Chancellor has forgone very considerable revenue here in order to meet what he believes to be their needs.

Our reservations upon the Clause must therefore express themselves in the traditional way. The major criticism of the method adopted by the Chancellor is that it will give this relief to overseas trade corporations who are already making big profits and doing very well, and who do not need this tax incentive or benefit to further their operations or to increase the scope of their activities.

The Clause now stands before us for final judgment. When we consider the tax reliefs given here, without a convincing case having been made out for them and given in a highly concentrated form, mostly to those in the higher income brackets, and relate them to the need for tax reliefs generally at home, the Bill appears to be a very unbalanced one in the matter of providing relief for the hard-pressed taxpayer.

But the Chancellor, in that engaging and—if I may say so without disrespect—juvenile way, says that all taxes are bad; that ours are worse than most; that they are all too high, and that as long as he is there he will pull them down. Never were such words from the Chancellor received with such wild enthusiasm—and never were comments made by a Chancellor made more wildly than were his. I must say that he knows how to keep up the spirits of his supporters—which is one of the great qualifications of a Chancellor of the Exchequer. But the chickens will come home to roost, and the Chancellor will find that the relief given in the Clause will be looked at more critically by an intelligent community than he realises.

Although many of the indirect benefits from this may be hard to discern, I hope that there will be those of us who will have the necessary application and penetration to find out the effect of all this upon the companies concerned and upon our national income and general prosperity. At present, we are so doubtful about it that we cannot support the Chancellor's proposals and we should prefer that the whole of Part IV were left aside for the moment so that it might be further examined in the light of the needs of the present situation. However, as the Chancellor has already confessed that he is a "whole-hogger", I do not suppose he will do any such thing, and there will be no alternative left for us but to register our opinion in the customary way and say that we do not like it and that we cannot go into the Lobby to support it.

Sir Patrick Spens (Kensington. South)

As I heard the speech of the hon. Member for Sowerby (Mr. Houghton) and listened to hon. Members opposite retracting the good will expressed last year, and observed that even the most enthusiastic hon. Members opposite have continually voted against the Government, I was filled with regret. On the other hand, as was said by the hon. Member for Sowerby, the Chancellor is determined to go ahead. I wish that he was determined to go further ahead.

The only comment I wish to make about this Clause is that it makes a distinction for the first time between trading and investment income, and in investment income, of course, is included the income from trading subsidiaries registered overseas. As I said last night, I am staking out a claim for the future. I hope the time will come when the income from trading subsidiaries overseas will be treated as trading income. From a practical point of view there is no difference whether one carries on trade through a branch or through a subsidiary company established overseas. For that reason, and from the trading and practical point of view, it is really a theoretical difference which should not exist when the income is derived from an actual overseas trade corporation, or when it comes from a subsidiary corporation which exists wholly in order to assist the trade of a group of companies.

I am grateful for the scheme. I think it bold and I believe it will be useful. I do not believe in these anxieties about how it will affect capital at home and that sort of thing. I think it necessary for the development of the trade of the country as a whole. I hope that it will meet the practical needs of businessmen and that these distinctions between strict overseas corporations and subsidiary companies, created or acquired for the purpose of carrying on part of the same trade of the same group of companies will he removed, and that ultimately the income will be treated as trading income, which of course it is.

Mr. E. Fletcher

I am tempted to intervene because in his opening remarks the right hon. and learned Member for Kensington, South (Sir P. Spens) accused my hon. Friends of inconsistency between the line we adopted during the debate last year and the debate this year.

Sir P. Spens

Less enthusiasm.

Mr. Fletcher

I wish to deal with the accusation as I understand it because it has been made in other quarters. I am not content merely with going through the Lobbies every time the Division bell rings; I should like to express what I feel.

I consider that there is no inconsistency between the support which I gave to the new Clause put on the Order Paper last year in the names of some of my hon. Friends, whereby the Chancellor was urged to introduce a measure of relief regarding companies engaged abroad in what, for the want of a better term, may be described as pioneering activities. I think that a genuine case was made out for that. It was that where companies, whether British. American or of any other nationality, trading and operating in an overseas country, were subject to local laws specially designed to give some attraction and advantage to pioneering efforts in that country, British companies found themselves at a manifest and obvious disadvantage compared with those companies registered in other countries, whether America, Germany, France, Belgium, Holland or elsewhere.

On those grounds, I think there is a case for removing from the British companies the discrimination under which they labour at present. It was with that objective that we put down the Clause last year, and it is with precisely the same objective that we have made similar proposals this year.

I agree with my hon. Friend the Member for Sowerby (Mr. Houghton) that this Clause is the central feature of the Chancellor's first Budget. I do not wish to pay a compliment to the Chancellor on his Budget or any part of it. The right hon. Gentleman would not expect me to do so. We have to try, firstly, to form an objective judgment about whether or not this set of proposals is necessary; secondly, sensible; thirdly, equitable and fourthly, workable. I have read carefully both the majority and the minority Reports of the Royal Commission; I have read the observations of the Board of Inland Revenue and I have listened to the speeches made yesterday and today. I can appreciate how the difference of opinion arises, but I feel that the balance of argument and the whole of the weight of evidence available is against the proposals of the Chancellor.

I am prepared, if necessary, to put aside the observations of the Board of Inland Revenue that they are unworkable and may lead to a great deal of evasion, anomalies and difficulties. After all, the Chancellor will be responsible for seeing that attempts at evasion, or to obtain undue advantage over and above what he intends to concede, are prevented, and that any loopholes are closed. We wish him success in his endeavours and we shall give him all possible assistance. But, surely, the real question is whether, in the interests of the country's economy, it is necessary at this stage to make such a vital and serious inroad into the principles of equality of taxation which have hitherto been one of the cardinal tenets of our fiscal policy.

I am not persuaded that it is necessary. My experience is that under the present law British companies have not managed too badly in finding opportunities for overseas investment during the last few years. There are the opportuni ties provided by forming subsidiary companies with managements abroad, and so on. Statistics show that in the last few years there has been a substantial amount of overseas investment on the part of British companies. From the point of view of the national economy that it is questionable whether the limited amount of capital which this country has available for investment should not be wholly concentrated in this country rather than permitting and, indeed, encouraging a large amount of it to be utilised to obtain tax benefits offered by this scheme.

That is a matter of economic judgment, but with regard to the fiscal questions, the taxation questions, with which we are primarily concerned, what I think worries a great many people is that in this Finance Bill we are introducing a very serious precedent; we are discriminating between one kind of taxpayer and another. We are departing from the principle of treating all taxpayers and taxpaying companies alike.

7.30 p.m.

To introduce such a departure may well have serious repercussions. In any event, it is bound to create a great deal of heart-burning and a great deal of injustice on the part of those companies and shareholders in those companies who are not favoured by these concessions. They—particularly those engaged in export—might equally well stake out claims for differential and more beneficial treatment on the ground that by their industrial and commercial efforts, they are also making important contributions to the national economy. The danger is that once that principle is conceded, once it is conceded that the Chancellor of the Exchequer in framing his Budget proposals can discriminate in favour of one kind of taxpayer or against one class of company on the ground that the work which it is doing or the business enterprise in which it is engaged is of greater importance to the national economy, we are embarking on the slippery slope and are treading very dangerous ground.

That is the major criticism of the Chancellor's proposal. As the Royal Commission pointed out, any proposal of this kind, by reducing taxation to the extent of £35 million, or perhaps very much more, on this particular class of companies engaged in this particular kind of trade must inevitably produce as a corollary the effect that other taxpayers will have to bear an additional burden. Whether that additional burden falls on all other companies or has to be met by old-age pensioners, or produces the result that the Chancellor cannot accord reliefs and allowances of one kind and another which we think are more deserving, the fact remains that this relief to the extent of £35 million has to be found in some way or another by all other taxpayers. It is for these reasons, because I do not think that the case has been made out on fiscal ground, on workability or on grounds of national economy that I am opposed to these proposals.

Mr. Jay

I do not know whether the Chancellor intends to say anything himself on this Clause, but before we part with it I wish to refer to one matter which has not been much discussed in these debates. That is the very considerable capital gains which the Chancellor has presented to the luckier shareholders in these companies as a result of this action in the Budget.

My hon. Friend the Member for Sowerby (Mr. Houghton) said that the Chancellor did not like speaking of having given away revenue by his tax actions. I thought the Chancellor was being a little unkind to his last predecessor but one, the Lord Privy Seal, because the present Lord Privy Seal, in his Budgets of 1955, constantly referred to himself as having given away large amounts of revenue. Therefore, when the Chancellor casts aspersions on that conception, I am afraid he is again making attacks on his predecessor, the Lord Privy Seal, who is again in trouble in the office to which he has removed himself, or has been removed.

This is a Clause which gives remission of Income Tax on the trading profits retained in the business of these overseas trade corporations, but at the same time imposes Income Tax on dividends paid to the shareholders of the companies. Presumably, the Chancellor must have realised that as a result it encourages the corporations to put profits to reserve and over a period of time that is bound to mean capital appreciation for the shareholders. I have a much higher opinion of the Inland Revenue than either the Chancellor or my hon. Friend the Member for Sowerby—although I do not think either of them would get very far without it—but I propose in this case to rest my argument not so much on its authority as on that of the Financial Times.

I do not know whether the Chancellor noticed it, but at the very beginning, on the publication of the Bill, the Financial Times pointed out that this provision would give some very agreeable capital appreciation to Surtax-payers in particular. On 1st May, after having described the way in which the concession would work, one of its first comments was: Although this does increase the scope for higher dividends, there will be a clear incentive to retain profits to the greatest extent possible; the main investment appeal is to the surtax-payer interested in steady capital appreciation. Indeed, in so far as the general object of the proposals is to encourage the retention of profits, their most interesting investment implications are for surtax-payers. Not only are they likely… That is the concessions— to promote a steady rise in asset values, but distribution of liquidation (after the return of tax-free capital) will be subject only to income tax, not to surtax or profits tax. Perhaps the Chancellor thinks that is a minor effect of this concession, but, quite apart from the major effects in the rest of the Bill, a very attractive field for tax-free gains has been opened up. The Economist, on 4th May, also commented on the same point, rather more briefly: As the concession encourages the growth of assets, its investment appeal is to the surtax-payer interested less in dividends than in capital appreciation. Of course, the behaviour of the Stock Exchange over the last few months has borne out, as one would have expected it would, the truth of these observations in the financial Press. There has been a remarkable rise in the shares of the companies which are believed, at any rate in the City, to be likely to gain substantially by this concession. To take one example, I do not know whether the Chancellor observed the behaviour of Unilevers ordinary shares, not merely in the weeks since the Budget, but, strangely enough, most notably in the weeks immediately preceding the Budget. It would appear that there were very confident expectations in the City, as with Entertainments Duty, that something of this kind was to be done. The rise in Unilever shares at the beginning of the year was one of about 50 per cent. That seems "a bit steep", which is a Parliamentary expression, in this connection.

Perhaps my hon. Friends were going a little too far in describing the Chancellor as reckless or frivolous, but I suppose he might say in the light-hearted, or light-headed, fashion in which he tosses these arguments aside, that the large profits might have been made by someone on the Stock Exchange who happened to have an idea that this would be put forward and be beneficial to Unilevers or some other company trading overseas but, "What does that matter? That is one of the minor consequences of this action."

I do not think we can look at it quite as lightheartedly as that. This illustrates a principle which is of much more general application. We believe that these capital gains are much too easy to secure and are much too free of taxation already. We think that avenues for such tax-free gains should be limited rather than further opened up. It is true in the case not merely of overseas trade corporations but of companies manufacturing in this country that if we enable them to build up their capital by this process of reinvestment of existing profits we are practically bound over any long period to present capital gains which are at present tax-free to the private shareholder.

For those reasons, we think that some method will have to be discovered of building up reserves and capital both for companies operating abroad such as we are now discussing and over the whole field of industry other than this method of self-financing, company saving or whatever one calls it, which, though very beneficial on the one hand in that it means national savings, is much less beneficial on the other in that it means capital gains for private shareholders.

I should like to ask the Chancellor—I do not think he will deny that this has been one of the results of his action—whether he is quite happy about the effects of this discrimination in bringing to operators on the Stock Exchange such immediate benefits, which are, incidentally, nothing to do with overseas trading or extra capital employed in overseas trading but are immediate speculative benefits.

The Chancellor of the Exchequer (Mr. Peter Thorneycroft)

Perhaps I might say a few words in conclusion on the debate on the Clause, if only because, as the hon. Member for Sowerby (Mr. Houghton) said, it is the effective central Clause of this group of proposals associated with the overseas trade corporations.

It is a good Clause. I venture to think that it is an effective Clause which will make a considerable contribution to the building up of the reserves and the general investment in British companies trading overseas. I dare say that because of that the capital value of the companies will rise, but if—

Mr. Jay

Discrimination.

Mr. Thorneycroft

—one were to flinch from making tax reductions simply because in some circumstances there might be capital gain, one would have a sorry job as Chancellor of the Exchequer. There are not only capital gains in this matter. Many people will gain—the people who work for the companies, the territories overseas where they are situated, and the economy of this country. Whatever may be said about interim or short-term balance of payments, what is wanted is that we should have these trading operations carried on effectively, rightly capitalised, and investment put into them. As the hon. Member for Stechford (Mr. Roy Jenkins) very fairly said about that investment, one cannot invest a deficit. In the long run it depends on what we do here at home, how we build up surpluses, and matters of that kind.

I am surprised to find the Labour Party hesitant about this investment. Hon. Members opposite have made a lot of it in their speeches in the country, particularly in regard to the Commonwealth, saying that a large proportion of the gross national product should be devoted to it. When they are presented with a practical proposition for reinforcing success—in many cases these are companies or operations which are already established and going ahead—and we give an opportunity to plough back profits free of tax, I should have thought that hon. Members opposite would have welcomed such a practical application of the very policies which they have in some measure advocated in the country.

7.45 p.m.

The right hon. Member for Battersea, North (Mr. Jay) thought that any form of discrimination was abhorrent and should be avoided. Listening to him, I thought that the sternest minds in the Inland Revenue could not have bettered him in his approach to matters of this kind. He said that in no circumstances whatever would he put one taxpayer into a position in any way different from any other. It sounded all right at the time, but it did not fit in with some of the things we heard earlier when all kinds of discrimination between different types of trade and those in the Commonwealth and those outside it were being urged upon us. Moreover, in the case of investment allowance and so on I have heard discrimination urged as a positive virtue in trade matters. I do not urge that absolute consistency should be held all the way through, but some of the things which the right hon. Gentleman has said may be held a little against him.

Mr. Jay

Surely the right hon. Gentleman will agree that some discrimination may be good and some bad.

Mr. Thorneycroft

The right hon. Gentleman was going a little further than

that. He was the high priest of non-discrimination. No form of discrimination at all was to be allowed. All I am asking for is a little of the broader, more liberal view which the right hon. Member has put forward.

The right hon. Gentleman is right in saying that some discrimination can be good and some bad. The truth in this Clause and on the facts which confront us is that there is bound to be discrimination. There is discrimination today, but it is discrimination as between British companies trading overseas and their competitors. It is that discrimination which we seek to end or at least very much to mitigate. It is because we desire to end that discrimination against our British traders that we have incorporated these provisions in the Bill, and it is on those grounds that we ask the Committee to accept the Clause.

Question put, That the Clause stand part of the Bill:—

The Committee divided: Ayes 229, Noes 178.

Division No. 149.]	AYES	[7.46 p.m.
Agnew, Sir Peter	Cooper-Key, E. M.	Hall, John (Wycombe)
Aitken, W. T.	Cordeaux, Lt.-Col. J. K.	Harris, Frederic (Croydon, N.W.)
Allan, R. A. (Paddington, S.)	Corfield, Capt. F. V.	Harris, Reader (Heston)
Amery, Julian (Preston, N.)	Craddock, Beresford (Spelthorne)	Harvey, Sir Arthur Vere (Macclesfd)
Amory, Rt. Hn. Heathcoat (Tiverton)	Crowder, Sir John (Finchley)	Harvey, John (Walthamstow, E.)
Arbuthnot, John	Crowder, Petre (Ruislip—Northwood)	Heald, Rt. Hon. Sir Lionel
Armstrong, C. W.	Cunningham, Knox	Heath, Rt. Hon. E. R. C.
Ashton, H.	Currie, G. B. H.	Henderson, John (Cathcart)
Atkins, H. E.	Dance, J. C. G.	Henderson-Stewart, Sir James
Baldock, Lt.-Cmdr. J. M.	Davidson, Viscountess	Hesketh, R. F.
Baldwin, A. E.	D'Avigdor-Goldsmid, Sir Henry	Hicks-Beach, Maj. W. W.
Balniel, Lord	Deedes, W. F.	Hill, Rt. Hon. Charles (Luton)
Barber, Anthony	Dodds-Parker, A. D.	Hill, Mrs. E. (Wythenshawe)
Barlow, Sir John	Doughty, C. J. A.	Hill, John (S. Norfolk)
Barter, John	Drayson, G. B.	Hirst, Geoffrey
Baxter, Sir Beverley	du Cann, E. D. L.	Holland-Martin, C. J.
Bell, Philip (Bolton, E.)	Dugdale, Rt. Hn. Sir T. (Richmond)	Holt, A. F.
Bell, Ronald (Bucks, S.)	Eden, J. B. (Bournemouth, West)	Hope, Lord John
Bevins, J. R. (Toxteth)	Elliott, R.W.(N'Castle upon Tyne, N.)	Hornby, R. P.
Bidgood, J. C.	Farey-Jones, F. W.	Hornsby-Smith, Miss M. P.
Birch, Rt. Hon. Nigel	Finlay, Graeme	Horobin, Sir Ian
Bishop, F. P.	Fisher, Nigel	Howard, Hon. Greville (St. Ives)
Black, C. W.	Fletcher-Cooke, C.	Howard, John (Test)
Body, R. F.	Foster, John	Hudson, W. R. A. (Hull, N.)
Bossom, Sir Alfred	Fraser, Sir Ian (M'cmbe & Lonsdale)	Hughes Hallett, Vice-Admiral J.
Bowen, E. R. (Cardigan)	Freeth, Denzil	Hurd, A. R.
Boyd-Carpenter, Rt. Hon. J. A.	Gammans, Lady	Hutchison, Sir Ian Clark (E'b'gh, W.)
Braine, B. R.	Garner-Evans, E. H.	Hutchison, Sir James (Scotstoun)
Brooman-White, R. C.	George, J. C. (Pollok)	Hutchison, Michael Clark (E'b'gh, S.)
Bryan, P.	Glover, D.	Hylton-Foster, Rt. Hon. Sir Harry
Bullus, Wing Commander E. E.	Godber, J. B.	Iremonger, T. L.
Burden, F. F. A.	Gomme-Duncan, Col. Sir Alan	Irvine, Bryant Godman (Rye)
Butler, Rt. Hn. R. A. (Saffron Walden)	Goodhart, Philip	Jenkins, Robert (Dulwich)
Carr, Robert	Gower, H. R.	Jennings, J. C. (Burton)
Cary, Sir Robert	Graham, Sir Fergus	Johnson, Dr. Donald (Carlisle)
Channon, Sir Henry	Grant, W. (Woodside)	Johnson, Eric (Blackley)
Chichester-Clark, R.	Grant-Ferris, Wg Cdr. R. (Nantwich)	Johnson, Howard (Kemptown)
Clarke, Brig. Terence (Portsmth, W.)	Green, A.	Joynson-Hicks, Hon. Sir Lancelot
Cole, Norman	Grimond, J.	Keegan, D.
Cooke, Robert C.	Grosvenor, Lt.-Col. R. G.	Kerby, Capt. H. B.
Cooper, A. E.	Gurden, Harold	Kerr, Sir Hamilton
Kershaw, J. A.	Nugent, G. R. H.	Stanley, Capt. Hon. Richard
Kimball, M.	Oakshott, H. D.	Stevens, Geoffrey
Lagden, G. W.	Orr-Ewing, Charles Ian (Hendon, N.)	Steward, Harold (Stockport, S.)
Lambton, Viscount	Osborne C.	Storey, S.
Lancaster, Col. C. C.	Page, R. G.	Studholme, Sir Henry
Leather, E. H. C.	Pannell, N. A. (Kirkdale)	Summers, Sir Spencer
Leavey, J. A.	Partridge, E.	Sumner, W. D. M. (Orpington)
Legge-Bourke, Maj. E. A. H.	Peyton, J. W. W.	Taylor, Sir Charles (Eastbourne)
Legh, Hon. Peter (Petersfield)	Pickthorn, K. W. M.	Teeling, W.
Lindsay, Hon. James (Devon, N.)	Pike, Miss Mervyn	Temple, John M.
Lindsay, Martin (Solihull)	Pilkington, Capt. R. A.	Thomas, Leslie (Canterbury)
Lloyd, Maj. Sir Guy (Renfrew, E.)	Pitt, Miss E. M.	Thompson, Kenneth (Walton)
Lucas, P. B. (Brentford & Chiswick)	Pott, H. P.	Thompson, Lt.-Cdr. R. (Croydon, S.)
Lucas-Tooth Sir Hugh	Powell, J. Enoch	Thorneycroft, Rt. Hon. P.
McAdden, S. J.	Price, Henry (Lewisham, W.)	Thornton-Kemsley, C. N.
Macdonald, Sir Peter	Raikes, Sir Victor	Tilney, John (Wavertree)
Mackeson, Brig. Sir Harry	Ramsden, J. E.	Turton, Rt. Hon. R. H.
Mackie, J. H. (Galloway)	Rawlinson, Peter	Tweedsmuir, Lady
McLaughlin, Mrs. P.	Redmayne, M.	Vane, W. M. F.
Maclean, Fitzroy (Lancaster)	Remnant, Hon. P.	Vaughan-Morgan, J. K.
McLean, Neil (Inverness)	Renton, D. L. M.	Vickers, Miss Joan
Macmillan, Rt. Hn. Harold (Bromley)	Rippon, A. C. F.	Wade, D. W.
Macmillan, Maurice (Halifax)	Robinson, Sir Roland (Blackpool, S.)	Wakefield, Edward (Derbyshire, W.)
Macpherson, Niall (Dumfries)	Rodgers, John (Sevenoaks)	Wall, Major Patrick
Maddan, Martin	Roper, Sir Harold	Ward, Rt. Hon. G. R. (Worcester)
Maitland, Cdr. J. F. W.(Horncastle)	Ropner, Col, Sir Leonard	Ward, Dame Irene (Tynemouth)
Maitland, Hon. Patrick (Lanark)	Russell, R. S.	Webbe, Sir H.
Manningham-Buller, Rt. Hn. Sir R.	Schofield, Lt.-Col. W.	Whitelaw, W. S. I.
Markham, Major Sir Frank	Scott-Miller, Cmdr. R.	Williams, Paul (Sunderland, S.)
Marlowe, A. A. H.	Sharples, R. C.	Wills, G. (Bridgwater)
Marshall, Douglas	Shepherd, William	Woollam, John Victor
Mathew, R.	Simon, J. E. S. (Middlesbrough, W.)	Yates, William (The Wrekin)
Mawby, R. L.	Smithers, Peter (Winchester)
Milligan, Rt. Hon. W. R.	Smyth, Brig. Sir John (Norwood)	TELLERS FOR THE AYES:
Nabarro, G. D. N,	Spearman, Sir Alexander	Colonel J. H. Harrison and Mr. Hughes-Young.
Neave, Airey	Spence, H. R. (Aberdeen, W.)
Nicolson, N.(B"n'm'th, E. & Chr'ch)	Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)
NOES
Ainsley, J. W.	Fraser, Thomas (Hamilton)	Lee, Miss Jennie (Cannock)
Allaun, Frank (Salford, E.)	Gaitskell, Rt. Hon. H. T. N.	Lewis, Arthur
Allen, Arthur (Bosworth)	Gibson, C. W.	Lindgren, G. S.
Allen, Scholefield (Crewe)	Gooch, E. G.	Logan, D. G.
Awbery, S. S.	Gordon Walker, Rt. Hon. P. C.	MacColl, J. E.
Bacon, Miss Alice	Greenwood, Anthony	McInnes, J.
Benn, Hn. Wedgwood (Bristol, S.E.)	Grey, C. F.	McKay, John (Wallsend)
Benson, G.	Griffiths, David (Rother Valley)	MacMillan, M. K. (Western Isles)
Beswick, Frank	Griffiths, Rt. Hon. James (Llanelly)	MacPherson, Malcolm (Stirling)
Blackburn, F.	Hale, Leslie	Mahon, Simon
Blenkinsop, A.	Hall, Rt. Hn. Glenvil (Colne Valley)	Mallalieu, E. L. (Brigg)
Blyton, W. R.	Hamilton, W. W.	Mann, Mrs. Jean
Boardman, H.	Hannan, W.	Marquand, Rt. Hon. H. A.
Bottomley, Rt. Hon. A. G.	Hastings, S.	Mellish, R. J.
Bowden, H. W. (Leicester, S.W.)	Hayman, F. H.	Messer, Sir F.
Bowles, F. C.	Healey, Denis	Mikardo, Ian
Boyd, T. C.	Henderson, Rt. Hn. A. (Rwly Regis)	Mitchison, G. R.
Brockway, A. F.	Hobson, C. R. (Keighley)	Monslow, W.
Brown, Thomas (Ince)	Houghton, Douglas	Moody, A. S.
Burton, Miss F. E.	Howell, Charles (Perry Barr)	Morris, Percy (Swansea, W.)
Champion, A. J.	Hughes, Cledwyn (Anglesey)	Moyle, A.
Chapman, W. D.	Hughes, Emrys (S. Ayrshire)	Mulley, F. W.
Clunie, J.	Hughes, Hector (Aberdeen, N.)	Noel-Baker, Rt. Hon. P. (Derby, S.)
Coldrick, W.	Hunter, A. E.	Oliver, G. H.
Collick, P. H. (Birkenhead)	Hynd, H. (Accrington)	Oram, A. E.
Collins, V.J.(Shoreditch & Finsbury)	Hynd, J. B. (Attercliffe)	Orbach, M.
Corbet, Mrs. Freda	Irving, Sydney (Dartford)	Oswald, T.
Cove, W. G.	Janner, B.	Owen, W. J.
Craddock, George (Bradford, S.)	Jay, Rt. Hon. D. P. T.	Padley, W. E.
Cronin, J. D.	Jeger, Mrs. Lena (Holbn & St. Pncs. S.)	Palmer, A. M. F.
Davies, Ernest (Enfield, E.)	Jenkins, Roy (Stechford)	Pannell, Charles (Leeds, W.)
Davies, Harold (Leek)	Johnson, James (Rugby)	Pargiter, G. A.
Deer, G.	Jones, Rt. Hon. A. Creech (Wakefield)	Parker, J.
de Freitas, Geoffrey	Jones, David (The Hartlepools)	Parkin, B. T.
Delargy, H. J.	Jones, Jack (Rotherham)	Paton, John
Dodds, N. N.	Jones, J. Idwal (Wrexham)	Pearson, A.
Dugdale, Rt. Hn. John (W. Brmwch)	Jones, T. W. (Merioneth)	Peart, T. F.
Edwards, Rt. Hon. John (Brighouse)	Kenyon, C.	Pentland, N.
Evans, Albert (Islington, S.W.)	Key, Rt. Hon. C. W.	Popplewell, E.
Fernyhough, E.	King, Dr. H. M.	Prentice, R. E.
Fienburgh, W.	Ledger, R. J.	Price, Philips (Gloucestershire, W.)
Fletcher, Eric	Lee, Frederick (Newton)	Probert, A. R.
Forman, J. C.		Proctor, W. T.

Pryde, D. J.	Sparks, J. A.	White, Mrs. Eirene (E. Flint)
Randall, H. E.	Steele, T.	White, Henry (Derbyshire, N.E.)
Rankin, John	Stewart, Michael (Fulham)	Wilcock, Group Capt. C. A. B.
Redhead, E. C.	Stonehouse, John	Wilkins, W. A.
Rhodes, H.	Stones, W, (Consett)	Willey, Frederick
Roberts, Goronwy (Caernarvon)	Strachey, Rt. Hon. J.	Williams, Rev. Llywelyn (Ab'tillery)
Robinson, Kenneth (St. Pancras, N.)	Swingler, S. T.	Williams, Ronald (Wigan)
Rogers, George (Kensington, N.)	Sylvester, G. O.	Williams, Rt. Hon. T. (Don Valley)
Ross, William	Taylor, John (West Lothian)	Williams, W. R. (Openshaw)
Royle, C.	Thomson, George (Dundee, E.)	Willis, Eustace (Edinburgh, E.)
Shinwell, Rt. Hon. E.	Thornton, E.	Wilson, Rt. Hon. Harold (Huyton)
Short, E. W.	Tomney, F.	Winterbottom, Richard
Simmons, C. J. (Brierley Hill)	Ungoed-Thomas, Sir Lynn	Woof, R. E.
Skeffington, A. M.	Viant, S. P.	Yates, V. (Ladywood)
Slater, Mrs. H. (Stoke, N.)	Warbey, W. N.
Slater, J. (Sedgefield)	Wells, Percy (Faversham)	TELLERS FOR THE NOES:
Sorensen, R. W.	West, D. G.	Mr Holmes and Mr. J. T Price.
Soskice, Rt. Hon. Sir Frank	Wheeldon, W. E.

Clause ordered to stand part of the Bill.