HC Deb 07 July 1959 vol 608 cc1172-82

Exemption shall be granted from tax chargeable under Schedule D in respect of the profits of a trade set up after the fifth day of April, nineteen hundred and fifty-nine, which consists of the working of a non-ferrous metalliferous mine within the United Kingdom but such exemption to tax shall only apply to the profits derived from this operation of the mine during the period of thirty-six months commencing with the day on which the mine first came into regular production of ore: In this section "regular production of ore" means production in reasonable commercial quantities and shall not be deemed to apply to ore extracted in the development period in searching for or in discovering and testing deposits or in winning access thereto.—[Mr. D. Marshall.]

Brought up, and read the First time.

Mr. D. Marshall

I beg to move, That the Clause be read a Second time.

Would it be convenient, Mr. Deputy-Speaker, to take with this proposal the following new Clause (Profits tax: non-ferrous metal mines in United Kingdom)?

Mr. Deputy-Speaker

Yes.

Mr. Marshall

Hon. Members who have studied these Clauses will observe that there is no necessity to speak to the Second new Clause because, if the Government should agree with the principle that lies behind the first, the second Clause would be agreed to automatically.

The last time that I had the opportunity in the House to raise the subject matter of this proposal was about three years ago. The reaction which has been shown to it has been strange. The reaction of the Socialist Government was exactly similar to that of the present Government. The strange thing is that when a solitary bird is on the back benches, whether Socialist or Conservative, great sympathy and understanding is always shown towards this matter, but as soon as he becomes part of a covey on the Front Benches, the keepers of the Chancellor of the Exchequer and the Economic Secretary come in and say that the proposal should be resisted.

The last time that it was resisted the Economic Secretary used a very strange argument against it. He said that the proposal was so drafted that it might cause considerable difficulty to those interested in mining overseas. I pointed out at the time that the Clause was so drafted as to limit its effect to the United Kingdom and that it was so stated in the Clause. He was good enough to say that he had not noticed that and it was not part of the argument—although at the time it was part of the argument.

The object of this proposal is simple. Technical experts on this subject sincerely believe that lying hidden in the United Kingdom is considerable mineral wealth which has not yet been discovered or developed and that its development would prove a source of considerable wealth to this country. All hon. Members are aware that there was a time when, in Cornwall, the amount of tin extracted formed one of the greatest means of wealth for the nation. It is interesting to remember and to reflect on the fact that that source of wealth did not cease. Mining did not stop because the supply of tin ran out. It stopped because alluvial workings were started in Malaya and elsewhere and tin was produced at a price with which we in this country could not compete.

The experts believe that over the next twenty years the production from metalliferous mines in the world is likely to be insufficient to meet world need. Consequently, it is now a question whether it may be possible, by the use of new and modern methods of extracting these minerals, not only to compete with other sources of supply in other part of the world but to secure a reserve of wealth which would be available to us. This principle has been recognised by other countries, including Canada and Australia. It has been recognised in the United States, and two or three years ago it was recognised in Eire as well. The Governments of those countries passed legislation more or less similar to that contained in these Clauses to deal with the situation. It is sad to think that the legislation put on the Statute Books in those countries is more or less the same as that which I and other hon. Members have, over the last fourteen years, endeavoured to persuade Her Majesty's Governments to accept.

6.15 p.m.

If we were in some way trying to lessen the amount of revenue which the Chancellor desires to have, I assure hon. Members that I would not be guilty of hypocrisy by attempting to move this Clause. But the truth is that everyone has agreed that more or less the extraction by tax of £400 million less is approximately the right figure, and, consequently, there has been little in the different arguments in the House over the Finance Bill where sums of considerable size have been involved and make no sense of the Budget balance if it alters £400 million.

These new Clauses and their provisions would not involve any relief of taxation during the financial year. We are not asking for any relief for taxation over a considerable period of years. We ask that those people who sincerely believe that there may be wealth lying hidden in the hills in this land should be given an opportunity to speculate with a view to developing that wealth and that for three years after production has started they should have a tax-free holiday. That proposition has been accepted by Canada-Australia and Eire. After that period whatever profit may be earned as a result of such a venture would be liable to the full tax burden.

We suggest that this provides a way to get additional wealth for this country. It has been estimated that it might provide £400 million per annum. That is not my figure but one quoted by the experts. We suggest that in a few years the Chancellor of the Exchequer would have that amount upon which to levy taxation and thereby relieve the overall tax figure.

I have an idea that, once again, the Economic Secretary to the Treasury will advance the reasons why this should not be done. Year after year we have heard that argument from Treasury Ministers. I shall be sorry if that is so and if, once again, we miss the opportunity to give the initiative to people to develop the natural wealth of the United Kingdom.

Mr. Geoffrey Wilson (Truro)

I beg to second the Motion.

I do so because I believe that the acceptance of this and the following Clause would have a material affect on the unemployment problem in Cornwall. As all hon. Members will know, in Cornwall we have the misfortune to have a higher rate of unemployment than the national average and anything we can do, however small may be the effort, to reduce that rate would be appreciated.

As my hon. Friend the Member for Bodmin (Mr. D. Marshall) said, the reason for the decline in the mining of tin and other non-ferrous metals in Cornwall was not because supplies ran out but because of under-selling and the development of mining in other countries. The production costs have gone up in other countries and it has been suggested that we might investigate the possibilities of resuming mining in this country. We know that there is plenty of material to be mined, but, mostly, it lies rather deep in areas which have been mined for generations and which are honeycombed with old workings.

Anyone proposing to start a new mine is liable to meet with difficulties because of flooding and it could prove a costly business. Therefore, under existing conditions of taxation people are not prepared to take the risk. But were such people given a tax-free holiday over a period of three years in order to see what they could do, it is quite possible that someone would be prepared to develop mining in Great Britain, and, as a Cornishman, I have particularly in mind the possibilities in Cornwall. The development might prove substantial and become an eventual source of revenue.

I cannot understand why these Clauses which have been put forward before have not been accepted. Their acceptance would not cost the Revenue anything. Nobody is starting new mining industries in Cornwall or elsewhere in Britain at the present time. Certainly I know of no non-ferrous mining as a new venture at the moment, and one would not suppose that if a new venture were started the Revenue would lose anything.

These new Clauses are an inducement for people who want to take an adventurous course to embark on it in circumstances which might be of considerable benefit not only to the Revenue at some later date but as an immediate source of providing employment in an area where unemployment is above the average.

Mr. F. H. Hayman (Falmouth and Camborne)

I support the Clause because, as a Cornish Member, I am interested in this mining industry. As a Cornishman I have known the mining industry all my life and my constituency used to be known as "the mining constituency". The purpose of the Clause is to ease the position of companies which may want to prospect for fresh sources of metal in Cornwall.

About an hour and a half ago the Parliamentary Secretaries of the Board of Trade and the Ministry of Labour received a deputation from the Cornish group of trades councils about the high unemployment in Cornwall, and this question of the taxation of mines was put forward. We badly need fresh industry. This is one of the oldest industries in the United Kingdom and if we are to relieve our unemployment position in Cornwall we must get fresh industry. I feel that the Government ought to go further and arrange to prospect themselves for the mineral which is said by experts to be there. I hope, therefore, that not only will some relief be given to metalliferous mining but to quarrying as well because we need to take advantage now of the indigenous sources of raw material in the county.

Mr. D. Marshall

It is not a question of relief; it is a question of incentive This incentive is given in other mining parts of the world but is not given in this country.

Mr. Hayman

It is a relief from taxation now as an incentive for fresh mining enterprises.

Mr. Erroll

I have great sympathy with my hon. Friend the Member for Bodmin (Mr. D. Marshall) over his repeated attempts to move the new Clause and have it accepted. I have shared his experience in a number of my own Amendments which I used to move when I was a back bencher. While I sympathise with him to the full, I doubt if I can give him very much comfort this afternoon, much as I would like to do so.

The present treatment of mines for taxation purposes is really quite generous. Their trade receipts are credited and ordinary revenue expenditure is debited in the normal way. Allowances are given to write off capital expenditure on machinery and plant, industrial buildings and mining works, to replace buildings, surface roads, and the like, and also for exploration and development. Furthermore, abortive exploration expenditure is allowed as a trading expenditure at the time when the search is abandoned. Capital expenditure generally within the scheme is effectively written off over the life of the source; and any capital loss relating to such expenditure which may result from the special hazards of mining is thus allowed off for taxation purposes.

My hon. Friend very frankly and honestly called the proposal a three-year tax holiday, which is just what it is. He suggested that it might well have an important effect on the development of new non-ferrous mines. That must be a matter for conjecture. It may be that a stimulus of this sort would have the effects he predicts, but it may be that a three-year tax holiday would not be sufficient to cause enterprises to undertake new work.

Mr. D. Marshall

I said that I did not mind if it were five years.

Mr. Erroll

My hon. Friend's interruption illustrates our difficulty. If we were to concede three years, it would not be very long before we were being asked to concede a five-year tax holiday, and we might get to the stage where mining in this country did not have to bear tax at all.

I was interested in the point made by my hon. Friend the Member for Truro (Mr. G. Wilson). He pointed out that it would not cost the Revenue anything if we accepted the Clause. That throws some light on whether the Clause, if accepted, would be as effective as the proposer would hope. The Royal Commission on the Taxation of Profits and Income went into the whole question of the tax treatment of mining concerns. It did not come out in favour of any scheme for special depletion allowances such as operate in Canada and elsewhere.

Mr. G. Wilson

Nothing would be lost because nothing is going on now. Something might be gained because this might be an inducement to provide the help to start something new which would not otherwise be done. The people concerned would go to Spain or Ireland, or some other place.

Mr. Erroll

I accept that. I did not wish unwittingly to turn my hon. Friend's point against the proposer of the Clause. I only wanted to illustrate how necessarily speculative any conjectures about the effects of such a new Clause would be if it were accepted.

My hon. Friend mentioned the favourable tax treatment accorded in Australia, the United States, Canada and Eire. He pointed out that this tax help was granted in those countries. It is always easy to pick out a favourable piece of tax treatment from the taxation laws of another country and suggest that it ought to be applied to our own taxation system, but I think that to make a proper comparison one should examine not only the whole system of taxation of mining enterprises in this country, but also the way in which the mining industries grew up, and the circumstances surrounding the nature of the systems of taxation that have been adopted.

We would be right to stick to the views given by the Royal Commission. While the Commission was actually referring to depletion allowances, what paragraph 445 of the Report says applies equally to my hon. Friend's proposal. The Report says: … we do not consider that the circumstances of a mining venture are sufficiently peculiar to warrant its operator being granted a form of depreciation allowance which is of a different nature from that granted to the rest of industry and commerce under our system. While the Royal Commission was referring to depletion allowances, I think what it said applies equally to the concept of a three-year tax holiday.

Mr. Jay

It is a fact that the Royal Commission did not consider the specific suggestion now being made by hon. Gentlemen opposite.

6.30 p.m.

Mr. Erroll

I accept that. The Royal Commission did, however, go into the question of mining taxation very thoroughly. Its conclusion on this point has particular relevance to the concept of a tax holiday, which is a concept quite outside our present taxation arrangements.

My hon. Friend the Member for Bodmin referred to the occasion when he last raised this matter in 1956. He may, therefore, remember what my right hon. Friend the Prime Minister, then Chancellor of the Exchequer, said. My right hon. Friend said that he must ask the Committee to think seriously before we start applying to other and developing industries a principle which is quite contrary to all our tradition. Whatever might be the best means of assisting these industries, I do not think it would be right for the Committee to use a method so unusual and with such possible dangerous repercussions."—[OFFICIAL REPORT, 19th June, 1956; Vol. 554. c. 1398.] My right hon. Friend did, however, say that he would consider whether further assistance of any kind could be given towards the exploitation of mineral resources. That consideration has since been made and the whole question has been further examined. The Government, however, have decided that they could not agree to a discriminatory form of taxation relief such as that proposed, which is quite foreign to our United Kingdom tax system and quite unrelated to the capital expended. I am sorry to have to disappoint my hon. Friend, whom I would very much like to have been able to meet, but on this occasion I am sorry to say that we cannot accept his Clause.

Mr. Jay

The Economic Secretary is rather unsympathetic and negative in turning down this suggestion quite as flatly as he has done this afternoon. He said that these mines enjoy the ordinary Income Tax arrangements for depreciation allowance, and so on. Of course they do. We all recognise that. The argument of the hon. Member for Bodmin (Mr. D. Marshall), however, was that some special relief or incentive should be given in this case.

The Economic Secretary also said that if we have a tax holiday of three years, somebody may come afterwards and suggest that it should be five years and, therefore, we must not have a tax holiday at all. That argument could be advanced against the proposal that the Economic Secretary himself made in our last discussion relating to bearer securities. It could be said that if somebody suggested a minimum of a certain figure and that were accepted, there would then be a proposal to go still lower, so, therefore, we should not agree to anything at all.

There was no substance in that part of the Economic Secretary's argument. He quoted the Royal Commission referring to a quite different proposal relating to depreciation allowances. The Royal Commission may or may not be correct about that, but it did not specifically consider the suggestion for the tax holiday which the hon. Member for Bodmin is now making.

The suggestion which has been made this afternoon is not identical but more or less analogous to the investment allowance. It is similar to the suggestion for having a selective investment allowances for particular industries as an incentive to investment and development. That is what the hon. Member for Bodmin is really suggesting. Therefore, it is nothing other than a quite respectable proposition which is being put before the House. If the proposition is to be sustained, it must be sustained not on the purely tax law sort of arguments with which the Royal Commission was mainly concerned and with which the Economic Secretary dealt entirely in his reply. It has to be argued on economic grounds.

The hon. Member for Bomdin and his hon. Friend the Member for Truro (Mr. G. Wilson), who supported him, had a good deal of reason and substance on their side. The proposition simply is that we should seek by this special method to develop particular metal resources of the United Kingdom which hitherto may not have been discovered or exploited.

Without going into the whole argument, I would have thought that for the United Kingdom there is an extremely strong argument on all grounds for trying to discover and use such natural resources as we have in these islands. We have, perhaps, both the most difficult balance of payments problem and the biggest problem of paying for imports of almost any country in the world. We are also very little blessed with natural raw materials in any great demand thoughout the world today. That prima facie establishes a strong case for giving a special incentive on economic grounds for people searching for minerals of this kind in our own islands.

My hon. Friend the Member for Falmouth and Camborne (Mr. Hayman) and the other hon. Members who have spoken put a cogent point when they reminded us that it so happens that the areas where these minerals are, or are likely to be, found in these islands are areas suffering from an unemployment problem. That is true of Cornwall in the tin areas and also parts of Wales where metals have been mined in the past and where, the hon. Member for Bodmin may be right in supposing or people may be right in guessing, metals exist which have not yet been discovered or exploited. On unemployment grounds, also, one could establish a special case for this proposal, which, naturally, the Royal Commission did not take into account.

Will the Economic Secretary be prepared to accept this proposal in a slightly modified form? As I understand it, the Clause would grant a tax holiday to the mining concern for the first three years from the date at which production started. Presumably, therefore, if the two Clauses were inserted in the Bill and if production had begun before the present Bill became law but it became law within the three-year period, that concern would get the relief proposed in the Clause. Since we are trying to give an incentive to things that have not yet happened, and not an award to those who have taken the decision already, it would be possible, I suppose, in modified form to say that we accept the proposal but that it shall not apply in any case where the three-year period has already begun when the Bill becomes law.

To help the Economic Secretary's conscience as well as to meet the points made by the hon. Members who have supported the Clause, would the Economic Secretary be willing to consider that slightly modified form of this proposal?

Mr. Austen Albu (Edmonton)

I want briefly to bring a powerful voice from outside the Chamber in support of the argument. I do not know whether the Economic Secretary read the report in the Observer of the observations of Mr. S. P. Chambers, who recently became Chairman of I.C.I. He is reported to have said that he considered that the present rather good situation for our exports is not likely necessarily to continue for long. He therefore holds the view that we should do all we can to reduce the amount of our imports.

It is not surprising that Mr. Chambers, now the chairman of our largest manufacturers of fertilisers, is interested that we should increase the amount of our home production of food. His arguments, however, were genuine and they strongly support the case that any incentive, however small, towards making ourselves rather more self-sufficient in raw materials as well as in foodstuffs is desirable. These are powerful arguments coming from a source which is by no means necessarily friendly to what is called dirigisme, or restrictive arguments or policies.

I hope that even if the Economic Secretary's own back benchers and the power of the Opposition is not strong enough to change the views of the Treasury, perhaps a very large Income Tax payer such as I.C.I. may make the hon. Gentleman change his mind.

Question put and negatived.