Clause 37.—(ANNUAL ALLOWANCES FOR MINERAL DEPLETION IN THE UNITED KINGDOM.)

HC Deb 26 June 1963 vol 679 cc1485-549

Mr. More

I beg to move, in page 34, line 39, at the end to insert: (1A) Where a person entitled to a mineral asset grants a lease or licence of a mineral asset to another in return for a rent or royalty, he shall be entitled for any year of assessment in which any such rent or royalty is received by him to an annual allowance in charging

his profits or gains from such lease or licence, and save for subsections (1B), (12), (13) and (14) the provisions of this section shall not apply to allowances under this subsection.

(1B) The annual allowance under subsection (1A) of this section for a year of assessment shall be equal to the fraction mentioned below of the rent or royalty received in the year of assessment, that is to say—

1. (a) where the first rent or royalty was received less than ten years before the year of assessment, one-half;
2. (b) where the first rent or royalty was received less than twenty but not less than ten years before the year of assessment, one quarter;
3. (c) in any other case, one-tenth.

I would begin by destroying one illusion that appeared to be in the mind of the hon. Member for Cardiff, South-East (Mr. Callaghan)—that back benchers on this side had been encouraged by the Government to move Amendments. I am not conscious of having had any such encouragement, notwithstanding the transcendent importance of this Amendment.

When this Clause was discussed in Committee, it rightly received a paean of praise from the hon. Member for Southampton, Itchen (Dr. King), who recalled the efforts made by back benchers to secure this amendment of the law for the benefit of mineral operators. He quoted the recommendation of the Royal Commission on the Taxation of Income and Profits in 1955, which stated: In future a depletion allowance should be given in respect of the cost of acquisition of mineral rights or areas…

The hon. Member's words were echoed by my hon. Friend the Economic Secretary in a graceful speech which ended agreeably, if slightly inconsequently, with his memories of "Old Gurney" and the Somerset County Cricket Club. This Amendment relates to the position in which the Bill in its present form leaves the owner of mineral assets. I have referred to this in connection with a previous Amendment to Clause 24.

Having quoted the words of the Royal Commission of 1955, which have given rise to the Amendment, I want very briefly to lead the House slightly further back in Income Tax history, and trace the process by which the law now appears in what I contend is a highly anomalous form. I want to take the House back to 1920, when we had a Report of the Royal Commission on the Income Tax, reading which one is reminded of what afterwards became famous as the "Lime house" speech, the coal strike of 1919, and other matters then very much before the public eye.

When this Royal Commission came to the question of allowances for depletion of minerals, and addressed itself to the position of those who owned minerals and those who operated minerals, one gets the impression that it thought it prudent to decide in advance what its principles would be as a basis for its conclusions. Paragraph 191 of the Report reads: The second or main principle we have followed is that no allowance should be granted to any asset other than an inherently wasting material asset which has been created by an expenditure of capital. The allowance must not be granted in respect of a right to the income derived from any asset…

Having started with that assertion of principle, the Commission apparently thought it desirable to produce some reasons to support it. Those reasons, I think, are sufficiently remarkable to justify an airing after being in cold storage for 43 years.

The first reason was that if a reform was made on these lines the Revenue would lose a lot of money. That is clearly an important reason, but it is not unique to reforms of this kind. Secondly, the Commission produced the momentous reason that the administrative difficulties would be great. That may be true, but it is certainly not original in regard to any speeches on Income Tax reform. Thirdly, it said that people buying properties of this kind knew the tax liability and therefore paid less for them. That is a solemn truth and a solemn thought, but it does not necessarily follow that people buying such property on a particular date know what the rates of tax will be in five, ten or twenty years' time.

Nevertheless, having enunciated those principles, the Commission had put itself in the satisfactory position that from then on it could proceed on what might be called an a priori basis, and five paragraphs later it arrived at its grand conclusion that In accordance with the principle stated in paragraph 191, we are of the opinion that no allowance should be granted to incomes arising from wasting assets which consist of the proprietorship of natural resources in this country. But there again the Commission seemed to have had afterthoughts and to have thought that perhaps reasons should be given.

Three more reasons were produced, which again I think deserve an airing. The first was that assets of this kind had not been created by the expenditure of capital. That, I suppose, is true. If mineral assets were created by anybody they were created by Almighty God. Secondly, and this was a pressing reason, income derived from them had always been subject to Income Tax. Thirdly, and this was almost adding insult to injury, it was said that the imposition of a further tax, called Mineral Rights Duty, which at that time had recently been introduced, showed that assets of this kind had been regarded as particularly suitable subjects for special taxation rather than special exemption.

Therefore, we reach the position that, having first decided on its principle, the Commission arrived at its conclusion and this is fortified with a number of reasons based largely on loss and invenience to the Revenue and largely on the fact that it had always been taxed and that, anyhow, it had been found so suitable a subject for tax that the Government had even added another tax to the ordinary tax.

The Amendment attempts to put the mineral owner on precisely the same basis as the mineral operator in relation to the Clause. In moving an Amendment to Clause 24, I have already pointed out the alternatives which face a mineral owner, and my hon. Friend the Financial Secretary was good enough to suggest an alternative method which might be available in a case of this kind. But it ought to be pointed out in this connection that where mineral assets are leased to an operating company on what for many years in this country has been the normal basis, that is, a lease in consideration of rent or royalty, it is really a false argument to say that this is income in the ordinary sense of that word.

In aid of that, one might quote an extract from the same Royal Commission of 1955, on which Clause 37 is based, which says: It requires a strong weight of argument to maintain a position under which the tax authority is entitled to exact tax upon the basis of a profit which is absolutely unreal. This profit, in every context except the present context, has been long regarded as absolutely unreal in the sense of being truly income. One has only to look at the position under the Settled Land Acts, the whole object of which is to distinguish income from capital, to see that it is the inherent basis of that legislation that a proportion, which may be 25 per cent. or 75 per cent., shall be allocated to capital and not treated as income. It is, therefore, on that point of principle that this Amendment is put forward, bearing in mind, and for the reasons I have given, that in spite of the important concession which this new Clause 37 has given, it leaves the work incomplete, and in order to put the law on a complete and logical basis it is really necessary that this Amendment should be included.

11.0 p.m.

Mr. du Cann

My hon. Friend the Member for Ludlow (Mr. More) was generous and kind enough to say that on the main Question on Clause 37 I made an agreeable speech. I am afraid that he may not say the same after he has heard what I have to say this evening.

Mr. Paul Williams (Sunderland, South)

My hon. Friend made an agreeable speech.

Mr. du Cann

I will certainly say that my hon. Friend made an agreeable one. He always does. It was very lucid, but I totally disagree with the logic of what he said. I should like my hon. Friend to know that we looked into this matter with great care. I appreciate that perhaps not a very large number of people are affected, but one can well understand the importance of the matter to them, and certainly the question has been given every attention.

I should like to enveadour to explain to my hon. Friend shortly, for the convenience of the House, why it is that we find his proposal unacceptable. The first point is this. Relief under Clause 37 is at present limited to a person carrying on the trade of working a source of United Kingdom minerals who incurs capital expenditure on its acquisition. My hon. Friend's Amendment proposes a large extension. It seeks to extend relief to landowners who lease mineral-bearing land to an operator in return for an annual rent or royalty, which is normally based upon the output which he wins.

The relief sought by the Amendment differs from that in the Clause in an important particular. As the House will well remember, under the Clause a series of annual allowances is given while the mine is being worked, but the total relief allowable to an operator is limited to the net cost of acquiring the source. On the other hand, the relief sought by the Amendment is not related to cost at all—a point upon which my hon. Friend commented—but only to the royalty received, and no balancing adjustment is provided for. The two things are entirely different.

I turn to a fresh point. It is plain that there is a substantial difference between the principle behind the Clause and the Amendment proposed by my hon. Friend. I have already made the point that the Clause puts right, so to speak, the position of traders. The Clause is, in fact, based upon the assumption that the minerals won by an operator represent his trading stock. Until 1963–64 he has not been able to charge the cost of this stock against his taxable profits, and in this he differed from other traders.

My hon. Friend was right to remind the House that this has been a matter of concern while I have been a Member and various of us on both sides of the House have made common cause in urging it upon the Administration. It has now been accepted. Certainly the idea has been warmly recommended, first by the first Millard Tucker Committee in 1951 and, secondly, by the Royal Commission in 1955. But my hon. Friend's point is not so recommended in anything like the same sense, and I suggest to him entirely frankly that a landowner leasing mineral land for a royalty is certainly not in the same position as a trader. He is not himself concerned with turning over stock, but allows another person temporary use of an asset which he owns in return for income which no doubt contains an element to represent the diminution of the value of the asset as minerals are extracted.

The principle behind the Amendment is that relief should be given for a wasting asset simply because it wastes, but this is not the principle which has been implemented by the Clause. As all hon. Members who have taken an interest in the matter know very well indeed, it has proved very difficult to find a method to give the sort of fiscal allowance that should be given to mineral operators, and this method has been chosen certainly as a temporary method.

If it were suggested—although it is not suggested by my hon. Friend—that there was some analogy between capital allowances provided under this Clause or capital allowances provided in any other way to traders, I should have been bound to reject that proposition strongly. But the two things are not the same by any means.

I had the impression from what my hon. Friend said that he had not taken sufficient cognizance of the fact that most agreements would certainly provide an element in the rent to take account of the fact that the landlord is owning a wasting asset, and I had the impression, too, that he had overlooked the fact that most leases today contain restoration provisions. It is not as if, therefore, at the end of the useful life of the pit or whatever it may be the landlord would be left simply with a hole in the ground. If that were not so, if most leases did not contain restoration provisions, certainly planning permission is rarely given these days for the extraction of a mineral unless there is a firm and clear undertaking to restore this land after the working has been complete.

Therefore, although we are ready to sympathise with the position of those who are involved, if I felt that it was appropriate to propose special action on their behalf, certainly I am entirely clear that the action which my hon. Friend proposes is not, as he suggested, a logical follow-through on Clause 37, for the argument in favour of Clause 37 is entirely different from the argument which he has put forward in favour of this Amendment. The two things are entirely separate, and for those reasons, although I am interested to hear his remarks, to which certainly we will pay attention, I must reluctantly advise the House, none the less definitely, to reject the Amendment, and I hope my hon. Friend will not seek to press it.

Mr. Houghton

We on these benches concur in the remarks of the Economic Secretary. There is a saying which is perhaps opposite to this case—"Much wants more."

Amendment negatived.

Mr. du Cann

I beg to move, in page 35, line 28 after "charge", to insert "on an amount".

This is merely a drafting Amendment in order to incorporate certain standard wording. The point about it is that if different phraseology, or phraseology to which the lawyers are not ordinarily accustomed, were used in this place or in any other, there might well be doubts as to interpretation. We hope, therefore, that the House agrees that we should make this small insertion.

Again I say to the hon. Member for Sowerby that this was a point suggested by the Inland Revenue. My own opinion of it—and I hope the House will concur—is that it is an admirable suggestion.

Amendment agreed to.

The Solicitor-General

I beg to move, in page 38, line 2, to leave out "a lease" and to insert "an asset".

I think it might be convenient to deal at the same time with the Amendments in page 38, line 7, and in page 38, line 10.

Mr. Deputy-Speaker

That will be convenient.

The Solicitor-General

These Amendments are purely consequential on what the House has already approved in the Amendment in Clause 29, page 26, line 31. The Amendments in Clause 37, page 38, line 7, and page 38, line 10, which we are taking together with this Amendment, speak for themselves. They merely substitute references to the proposed new Schedule—"Allowance of Trading Deduction where Premium Etc. Paid"—for the reference to Clause 29.

Since there has been this relief given in the amended Clause 29, it will be no longer appropriate to refer to "a lease", and the wider term "asset" is substituted by the Amendment to page 38, line 2, which I am now moving.

Amendment agreed to.

Further Amendments made: In page 38, line 7, leave out "section 29 (3) of" and insert: Schedule (Allowance of trading deductions where premium &c. paid) to". In line 10, leave out "the proviso to the said section 29 (3)" and insert: paragraph 5 of that Schedule".—[The Solicitor-General.]

Clause 38.—(ANNUAL ALLOWANCES FOR NEW MACHINERY AND PLANT IN DEVELOPMENT DISTRICTS.)

Amendment made: In page 39, line 12, after "allowances", insert:

"under Chapter II of Part X of the Act of 1952".—[Mr. Barber.]

Mr. Barber

I beg to move, in page 39, line 19, to leave out the percentage of that amount and to insert: so much of that amount as is". This Amendment and the Government Amendment in Clause 39, page 41, line 32, to which we shall shortly come, are drafting Amendments which were brought to our attention by the Scottish chartered accountants, to whom we are very grateful.

Mr. Callaghan

I do not understand this. The whole of subsection (1) of the Clause is a very difficult provision indeed. It contains more than 20 lines, and as far as I could see when I looked at it quickly an hour or so ago, it contains no full-stop anywhere. I just do not follow what leaving out "the percentage of that amount" and inserting "so much of that amount as is" really means. I should be grateful for an explanation.

Mr. Barber

Certainly. As I said, the need for these Amendments had not occurred to me or to those who advise me until the matter was brought to our attention by the Scottish chartered accountants. I can tell the hon. Member for Cardiff, South-East (Mr. Callaghan) that I still have some doubt myself as to whether they are really necessary. But I will explain why we thought it wise to make them.

Clause 38, as the hon. Gentleman knows, provides for free depreciation for certain new plant and machinery in development districts. Clause 39, with which the other Amendment deals, provides for free depreciation for new mining works and exploration plant and machinery for use in those districts. This is done by substituting for the annual allowance provided for in the Acts the percentage of expenditure specified by the taxpayer.

It was suggested to us by the chartered accountants of Scotland that the word "percentage" might enable a taxpayer to claim more than the full expenditure in a case governed by Clause 39 because, so it is said, the taxpayer might specify a percentage of more than 100. I should have thought it rather unlikely that this argument would commend itself to any court if the matter were taken to appeal. I imagine that the court would be unlikely to accept that a percentage could be more than 100, but I think—I hope that the House will agree—that it is desirable not to leave the point open.

The point was put tome. There is room for a difference of opinion. Who am I to put forward my own particular point of view in these circumstances? As there may conceivably be some doubt about it, and the Scottish chartered accountants who made the point to us are, as the hon. Member for Glasgow, Craigton (Mr. Millan) knows full well—I am sorry he is not here—a most respectable body of people well versed in these matters, we thought it right and proper to make the Amendments.

Mr. Mitchison

We on this side of the House would have much liked a little pen picture of the scene. What happened is quite obvious. It was the collocation of a fraction in line 18 and a percentage in line 19 which upset the intelligence and inflamed the imagination of the Scottish chartered accountants who called upon the hon. Gentleman. I am sorry that the Government are so wild nowadays that they found this somewhat improbable assumption one which they were prepared to consider and to meet.

Mr. Barber

With the leave of the House, perhaps I ought to say that it is not necessary to make this change in Clause 38, but we thought we had better do so to keep the two in conformity.

Amendment agreed to.

11.15 p.m.

Mr. Douglas Jay (Battersea, North)

I beg to move, in page 40, line 20, at the end, to insert: (b) if it is adjacent to a development district so defined and for that reason and because of conditions of local employment, transport or housing ought in the opinion of the Board of Trade to be treated for the purposes of this and the next following section (but for no other purposes) as included with the development district or.

Mr. Deputy-Speaker

I think that it would be convenient with this Amendment to take also the following Amendments: In page 40, line 26, at end insert: (6) In relation to any new town outside a development district which draws or will draw its population mainly from the district, this section shall apply as if the new town were included in the district, and a certificate given by a person authorised in that behalf by the Minister of Housing and Local Government, or (where the new town is in Scotland) the Secretary of State, and stating whether or not a new town draws or will draw its population mainly from a specified district shall be conclusive for the purposes of this subsection. In page 41, line 23, at end insert: new town" means an area designated under the New Towns Act 1946 as the site of a new town. and the Amendments in the name of the hon. Member for Ormskirk (Sir D. Glover) to leave out "and (6)" and insert "(6) and (7)" in line 1, and leave out "(6)" and insert "(7)"in line 3, and the Amendment by the Chancellor of the Exchequer in Clause 39, page 42, line 6, leave out subsection (3) and insert: (3) Subsections (5) and (6) of the foregoing section shall apply for the purposes of this section as they apply for the purposes of that section, but so that the said subsection (6) shall apply as if references to machinery or plant included references to works expenditure on the construction of which is expenditure to which the said Chapter III applies, and as if, in the application of paragraph (c) of that subsection to such works, references to a building or structure were omitted.

Mr. Jay

This Amendment not merely raises a point of substance, but is also easier to understand than some Amendments which we have recently discussed. By the Amendment, we seek to extend to areas neighbouring on development districts the concession on free depreciation and mining allowances contained in Clauses 38 and 39. It seems to us unreasonable, when one is dealing with large areas of population, where people may travel considerable distances to work in one way or another, to refuse the benefit of this free depreciation arrangement to one part of such a large, populated area just because it falls outside the boundary of the development district.

The Financial Secretary to the Treasury will, I am sure, realise that in putting forward this proposal, we are merely following the principles of the Local Employment Act, 1960, of which the Chancellor of the Exchequer was the principal author. That Act lays down that the considerable powers of assisting development districts contained in that Act—which may not be considerable enough, but are much more considerable than the free depreciation with which we are tonight concerned—may be exercised not merely in development districts alone, but in certain other districts.

Section 1(4) of the Act states: Any reference in the following provisions of this Act to a development district shall have effect as if—(a)…(b)…(c)…formed part of the development district. That is to say, all the powers are exercisable in the three types of additional areas, (a), (b) and (c). Area (a) is any county district which in relation to the development district, or to that locality and any other area, is a receiving district within the meaning of the Town Development Act, 1952. That corresponds roughly with the Amendment in page 40, line 26. Area (b) in Clause 1(4) of the Local Employment Act, 1960, is any burgh or county the council of which are, in relation to the development district, or to that locality and any other area, a receiving authority within the meaning of Part II of the Housing and Town Development (Scotland) Act, 1957". Area (c), which is most relevant to our Amendment, is any place so situated that workers living in the development district, or in any such county district, burgh or county as aforesaid, can conveniently work at that place. This means that under the Local Employment Act it is possible to use powers for giving assistance to industry in a particular spot which, although it is outside the development district, nevertheless may draw workers from within the development district. This is an arrangement which was agreed to by the House at the time of passing the Local Employment Act.

If, therefore, the Bill is enacted in its present form without our Amendment, one would get the curiously anomalous situation that the other powers under the Local Employment Act are exercisable at the discretion of the Board of Trade outside a development district on these defined conditions, whereas the free depreciation would be exclusively confined to the development district. I see no reason for legislating in that anomalous fashion. If our Amendment is adopted, and the following one in page 40, line 26, the substantial effect would be that the free depreciation powers could also be applied in the areas neighbouring the development districts as well as the main substantial powers under the Local Employment Act. I should have thought that it would have been both more logical, as well as giving more scope to the Government to assist the expansion of employment in these areas.

Of course, this point would not matter so much if the present Government had followed the previous policy of scheduling the main areas of industry and population such as the North-East Coast or Merseyside as overall development districts, without any bits and pieces excluded within them, but the Government are not operating that policy. Under the Local Employment Act we have small development districts here, and then an area there which is not a development district. For instance, in the course of the late winter, under the curious administration of the party opposite, we had periods when the south bank of the Tyne was a development district and the north bank of the Tyne was not. If that had been the arrangement in force when these powers were being exercised, we should have had free depreciation operating on one side of the Tyne and not operating on the other. I see the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) here. It would also be possible, under this scheme of things, to have Liverpool a development district with free depreciation applying, and Birkenhead excluded. I think at the moment the whole of Merseyside is a development district.

I should much prefer to see a reversion to that situation, where whole of large industrial areas like the North-East Coast and South Wales were scheduled as development areas, and then all these awkward difficulties would not arise, but, unfortunately, the Government have not adopted that system. They insist on adhering to separate little areas. If we are going to do that, I do submit to the House that it would be much more logical to treat the free depreciation powers in exactly the same way, or, at any rate, in nearly the same way, as the main powers under the Local Employment Act.

I do not think we ought to be complacent about the present employment, or rather unemployment, situation in these areas. Of course, there has been a reduction in unemployment between February and June, but the significant thing about the figures is, I think, this, that over the United Kingdom as a whole there were 80,000 more unemployed in June, the present month, this year than there were in June a year ago, and at this moment there are 200,000 more unemployed than in June two years ago. Therefore, I do not think we should be complacent. At this moment, in June, 1963, the unemployment percentage is 4.3 on the North-East Coast and 4.3 in Scotland; unemployment on the North-East Coast is one-third higher than it was in June two years ago. Therefore, I do not think there is any ground for complacency.

I hope that the Government, for this reason, and for the sake of legislative logic and tidiness, will be ready to accept the Amendment.

Mr. Ian Percival (Southport)

I beg to move the Amendment in page 40, line 26—

Mr. Speaker

No. The hon. Member cannot move it now, but he can discuss it now.

Mr. Percival

I beg your pardon, Mr. Speaker.

I understand that it is for the convenience of the House to consider also with the Amendment under discussion the Amendment in page 41, line 23, standing in the name of my hon. Friend the Member for Ormskirk (Sir D. Glover) and that that can be discussed now. I further understand that it will be for the convenience of the House if the further Amendment in the name of the Chancellor of the Exchequer, in page 42, line 6, is discussed at the same time, and also the Amendments, in the name of my hon. Friend the Member for Ormskirk, to that Amendment.

It might be convenient for the House if they were discussed in the reverse order. All that need be said about the last one is that it is a necessary consequence of the first one. Let me take the one in the middle, because all that need be said about that is that it is a necessary advance to give effect to the intention of the first one, if the first one be accepted.

That brings me to the first Amendment. This overlaps the Amendment proposed by the right hon. Member for Battersea, North (Mr. Jay). It is very tempting at this early hour to pick up the points which the right hon. Gentleman made and to discuss them, but it would also be to the convenience of the House if I confined myself to stating very briefly the reasons why my hon. Friends and I hope that our Amendments will be accepted.

My hon. Friends and I fully appreciate the importance of limiting the free depreciation to areas within boundaries clearly established and firmly accepted, and we also fully appreciate that help must be concentrated if the areas in the greatest need are to benefit to the full. But we suggest that, without infringing these principles, there is one small extension to free depreciation which should be allowed, and that is in the case of a new town which is not in itself a development district—because if it is in a development district the provision already applies—but which is virtually starting from scratch; that is, one which is not building up on an already existing town but which draws of will draw virtually all its population from a development district. Ex hypothesi, such a new town has no fund of existing industry to start with. The people who come there from a development district will need jobs when they arrive. When such a new town is wholly designed to help that development district, I respectfully suggest that there is much to be said for giving industry in it the same special benefits as are applied to the development district from which virtually all its inhabitants will come.

The Amendment, I do not hesitate to say, was framed with the new town of Skelmersdale especially in mind, and it is hoped that if it is accepted by the Government, Skelmersdale will be certified as an area under the relevant provisions. Skelmersdale is perhaps a very good illustration of the common sense of this Amendment, for while there are varying views about where a new town should be established, I think everyone will agree that once it has been decided to have a new town in order to help a development district, it is plain common sense to do as much as one can to get that new town off to a good start.

In this instance, by way of an example, it would be very undesirable that people should be moved from a development district to this new town and then find that there were no jobs for them in the new town, and for them perhaps to have to go to Southport looking for employment when there are possibly not enough jobs there already. This Amendment seeks to avoid that sort of difficulty and to assist new towns which are starting from scratch to get off to a good start, I very much hope that my hon. and right hon. Friends will accept it.

Mr. Selwyn Lloyd (Wirral)

I want not to make a point of general interest or general principle but to put forward a constituency interest—the effect of the Clause as it stands on Ellesmere Port. Ellesmere Port is a thriving, prosperous town in my constituency with little or no unemployment, but under the 1952 Act it has made an arrangement to take overspill from Liverpool. Under Section 1 (4,a) of the Local Employment Act, 1960, to which reference was made by the right hon. Member for Battersea, North (Mr. Jay), it qualifies for assistance. Therefore, industrialists extending or locating new plant can qualify for assistance under that Act, because the overspill receiving areas are treated in the same way as the exporting areas.

11.30 p.m.

But there is quite a different position under the Chancellor's present proposals. For Ellesmere Port to qualify for assistance under the Bill, it would have to be designated as part of a development district. The right hon. Gentleman is wrong in saying that the whole of Merseyside is so designated. Ellesmere Port is excluded from the Merseyside development district. It is very difficult to ask that Ellesmere Port should be put into the Merseyside development district, because there is no unemployment in the borough.

My hon. Friend the Member for Southport (Mr. Percival) has put forward the case with regard to the new towns. I cannot see any reason why that should not be broadened to include Ellesmere Port and such places, because it is de facto, if not de jure, anew town. Since the war it has grown from a village into a progressive and forward-looking borough, and I cannot see why the same principle should not be applied to a case such as that as to a new town.

I must tell my right hon. Friend that the consequences if no provision can be made to deal with a case like this is that a brake may well be imposed on the rate at which Liverpool overspill can be accepted in Ellesmere Port. Owing to the distances involved if those people come to live in Ellesmere Port, they cannot be expected to work in Liverpool. It is not a practicable proposition. It would take them too long to get there. Therefore, it is necessary to provide in the new borough employment as well as housing. I do not think one can expect any borough to import into itself unemployment. It must want to provide the facilities within the borough which employ the people who are being asked to come and live there.

Under the Bill the trouble is that every inducement is given to industry not to come to Ellesmere Port. If one takes the next-door borough of Bebington which is within the area, there is every inducement to industry to come there or to other parts of Merseyside, but not to Ellesmere Port. It is difficult to expect such a borough to go on accepting overspill. It has willingly accepted a rôle in relation to the problem of getting people out from Liverpool into the overspill areas, but I do not think one can expect a borough, however well-intentioned it is, to go on doing this if it means importing into its own area the problem of unemployment.

The consequence of this, if it stands as it does at the moment, is that it will slow down the rate at which the overspill from Liverpool can be accepted into the borough. I do not think that that is really the intention of my right hon. Friend. If it is, I do not think that my right hon. Friend the Minister of Housing and Local Government will approve it very much. It is a serious problem. I hope that my right hon. Friend will find it possible in some way to meet what is a very practical difficulty. It is a difficulty not only of new towns as such but of places like Ellesmere Port, which are de facto new towns although they may not be de jure so.

Mr. Mitchison

There are two Amendments under consideration. Is not the position that Ellesmere Port would be, or might be, covered by our Amendment but could not be covered, because it is not a new town, by the Amendment submitted from the Government back benches?

Mr. Lloyd

With the clarity of perception which I expect of the hon. and learned Gentleman, he is quite right. That is the position. I hope that I may have an assurance of some sort from my right hon. Friend.

Mr. Barber

The provisions for free depreciation for development districts and Northern Ireland introduced by my right hon. Friend have not only been widely welcomed but are recognised, I think, as an important departure from the general principles which apply in taxation matters of this kind. The fact that my right hon. Friend was prepared to embark on this new venture at all will, I am sure, have convinced hon. Members on both sides of the House that he would be prepared to go further if it were desirable.

The Amendment in the name of the hon. Member for Cardiff, South-East (Mr. Callaghan), moved by his right hon. Friend the Member for Battersea, North (Mr. Jay), and the series of Amendments in the name of my hon. Friend the Member for Ormskirk (Sir D. Glover) and referred to by my hon. Friend the Member for Southport (Mr. Percival), both provide in differing degrees for some extension of the areas which are to qualify for free depreciation.

It seems to me that there are really two basic principles which have to be accepted, or which would be accepted by most hon. Members. The first is that if the provision for free depreciation is to be effective—if it is going to make a real impact on those parts of the country where the problem of high and persistent unemployment is most pressing—it must be rigorously selective. The success of the proposal will depend to a considerable extent on the very fact that the areas which qualify for free depreciation will have a significant tax advantage over the rest of the country. It follows that in the interests of development districts and of Northern Ireland the relief must not be spread too widely.

The second principle which most people would accept is that in matters of taxation, certainty is very important. I realise that this is not a conclusive argument, but it is an important factor which hon. Members would wish to take into account. There are circumstances where the granting of discretion to Ministers in matters of taxation might be necessary and might override the fiscal principle that there should be lines clearly drawn and approved by this House which establish where liability to taxation begins and ends. All I say is that one should not lightly bestow upon the Executive discretion in important matters of taxation, particularly where the exercise of that discretion would be open to argument, and where different people might well quite sincerely exercise their judgment in different ways.

Mr. Callaghan

Surely the whole test under subsection (5) relies upon the district being within the provisions of the Local Employment Act. The definition of what is covered by that Act is an administrative definition, taken by a Minister, so that one stage removed this will be an administrative decision, and there can be no certainty even in the Clause as drafted.

Mr. Barber

I entirely agree with the hon. Member. I hoped that I had made it clear. I said that there were occasions when the granting of discretion to Ministers might override the basic fiscal principle to which we normally adhere. This is certainly the case. But there are questions of degree. How far are we to go?

All I say is that with these principles in mind, which are certainly not conclusive, we should consider the various Amendments. The Amendment moved by the right hon. Member for Battersea, North, would extend free depreciation beyond development districts to adjacent districts if the Board of Trade thought fit, having regard to local conditions of employment, transport and housing.

On the face of it this is a very attractive idea. It would in practice make areas in which free depreciation was available comparable to some extent with areas to which the Board of Trade can have regard for the purposes of capital grants. The Local Employment Act, 1960, includes, as part of a development district, for these purposes, what are called travel-to-work areas, areas so situated that persons living in development districts and receiving districts can conveniently travel to work in them.

In committee various suggestions were made for extending this relief. Some hon. Members suggested that we should look to growth points for areas of high unemployment and extend these taxation facilities to those areas. Others suggested county boroughs, with a substantial amount of unemployment, and others suggested areas where the average wages were low. The right hon. Gentlement referred to larger areas. He wanted to see larger areas rather than development districts as at present defined.

When my right hon. Friend first informed the Committee of this measure he pointed out that the relief, to be effective, must not be spread too widely, and that for administrative reasons it was highly desirable to have lines which are clearly drawn. He therefore advised the Committee to accept the Clause as it stood, although he undertook to keep the matter under review and that if, in the light of experience, changes were required, changes would be made. After all, free depreciation is a new and very powerful fiscal incentive aimed at the elimination of areas where high unemployment tends to persist. It is clear that it must at least be aimed at those areas themselves. If it goes lightly, obviously in general it will have less force and lose the sharpness of its incentive effect.

The right hon. Gentleman said that he was merely proposing that we should follow the Local Employment Act. There is a very important difference between the proposals in the Opposition Amendment and the way in which the Local Employment Act works out. The Board of Trade is not merely concerned about these problems of delimiting areas, nor is the Board of Trade unduly exercised about the fact that particular overspill areas may not be deserving of assistance under its system of grants and loans. The reason is that the Board of Trade's system under the Local Employment Act is entirely discretionary. It can decline to assist any venture that it does not think will be a useful one in relieving unemployment in the development districts. It can, as it were, tailor its grants to enterprises in overspill or travel-to-work areas by reference to the proportion of the workers likely to be drawn from development districts.

I should not have thought that anybody would suggest that the Inland Revenue could exercise the same discretion or ought to do so. Under the Amendment, the relief would go indiscriminately to persons in these adjacent areas qualifying for it, however undeserving—I use the word in inverted commas, as it were—they might appear. I appreciate the objective behind the Opposition Amendment, but for the reasons I have mentioned I cannot advise the House to accept it.

The other Amendments which you, Mr. Speaker, said that we might discuss with this Amendment raise a somewhat narrower paint. They would extend the free depreciation provisions of Clause 38 to capital expenditure on new industrial plant and machinery in a new town which is to draw its population mainly from a development district. The Minister of Housing and Local Government or the Secretary of State for Scotland would certify that a new town is to draw its population from a specified development district and the new town would thereupon be treated as if it were included in that district. If the district concerned ceased to be a development district, the free depreciation provisions would cease to apply to the related new towns as well, subject to the safeguards of general application in subsection (6).

This proposal is more specific than that which the right hon. Gentleman moved. The proposed extension would affect Skelmersdale only, as matters stand at the moment. There are no other new towns already designated to which it could apply. In particular, it is of interest to note that all the four existing new towns in Scotland are already in development districts.

We have considered very carefully the proposal contained in the Amendments in the names of my hon. Friend the Member for Ormskirk and my hon. and learned Friend the Member for South-port and have come to the conclusion that the proposal is justified.

I turn for a few moment to the question of Ellesmere Port, which was raised by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). The Chancellor of the Exchequer appreciates the concern of my right hon. and learned Friend about this matter. Indeed, they have discussed it together. Perhaps I can mention some of the difficulties of acceding to my right hon. and learned Friend's request. One starts from the basis that Ellesmere Port is not a development district. Ex hypothesi, it is not an area of high and persistent unemployment. Indeed, as my right hon. and learned Friend said, it is a thriving, prosperous town with little or no unemployment. This is not conclusive, and I quite recognise the argument that he made on the basis that Ellesmere Port was a thriving town.

11.45 p.m.

If free depreciation were to be extended to Ellesmere Port it would of necessity apply not only to new industry, which it is sought to attract there, but to all the existing industry in the town. In this respect Ellesmere Port is different, at any rate for all practical purposes, from Skelmersdale. The reason is that Skelmersdale has at present virtually no industry. It follows, therefore, that as a practical matter free depreciation for Skelmersdale can be regarded as applying to new projects.

There is a third problem to be faced. If provision were made to apply free depreciation to Ellesmere Port, one could not rest there. It would mean opening up the possibility of free depreciation being given to all towns which are overspill areas. In all those towns free depreciation would be extended to all existing businesses and, as we know, many of these overspill areas, like the one to which my right hon. friend referred, are flourishing communities with little or no unemployment.

Mr. Jay

It would affect only overspill areas from development districts; not all of them.

Mr. Barber

It would be difficult to distinguish between the two.

Mr. Jay

I meant to say that it would not, for example, affect the new towns around London.

Mr. Barber

No. I was referring to overspill from development districts. I misunderstood the right hon. Member. As I mentioned in answering the right hon. Member for Battersea, North, the same problem does not arise with Board of Trade grants because the Board of Trade can exercise considerable discre- tion and it does, in fact, frequently decline to give financial assistance to a project in an overspill area.

As a result of the approach made to my right hon. Friend the Chancellor, he has asked me to say, having given the matter considerable thought, that the claim of free depreciation is a new one, so far it is untried and it may be that in a number of respects, which at present we cannot foresee, experience will point to the need for changes. If this turns out to be so, changes will be made. But at the moment my right hon. Friend does not feel able to go further than to accept the proposal in the name of my hon. Friend the Member for Ormskirk mentioned by my hon. Friend the Member for Southport. I must, therefore, advise the House to accept that proposal and to reject the Amendment in the name of the hon. Member for Cardiff, South-East.

Mr. Mitchison

The Financial Secretary said that the Amendment he proposes to accept applied only to Skelmersdale. But what about Corby, which is a new town and which draws its population mainly from the development districts in Scotland? It contains very substantial existing machinery which is now being added to in Messrs. Stewarts and Lloyds works and which would, therefore, appear to be affected by the Amendment. While the Financial Secretary said that it would apply only to Skelmersdale, has this point been considered?

Mr. Barber

I mentioned that, so far as I know, it would apply only to Skelmersdale. I can assure the hon. and learned Member that if Corby satisfies the criteria laid down in the new subsection, then Corby will qualify. I cannot, off the cuff, deal with the position of every new town, but I thought that it would apply only to Skelmersdale at present.

Mr. Emlyn Hooson (Montgomery)

I support the Amendment in the name of the hon. Member for Cardiff, South-East (Mr. Callaghan). The Financial Secretary was right when he said that certainty is important in tax relief matters. But certainty can be bought at too high a price. Whereas, generally, discretion should not lightly be bestowed on the Executive, if the free depreciation allowances are to be really effective, there must be discretion in the Board of Trade. The incentive provided by Clause 38 is much more likely to be effective if the Amendment is accepted.

I might illustrate the point by the reference of the right hon. and learned Member for the Wirral (Mr. Selwyn Lloyd) to Ellesmere Port. I happen to know a little about the Merseyside, and it seems to me that Ellesmere Port is a natural growth point in the Merseyside, and that any incentive for the increase of industry in Ellesmere Port area very naturally relieves unemployment in Merseyside generally. It seems foolish that Ellesmere Port should be excluded from the benefits to be derived from the free depreciation allowances when, by bringing in the "grey" areas at the discretion of the Board of Trade, the Clause would be very much more effective. For that reason, I support the Amendment.

Mr. William Ross (Kilmarnock)

I found the Minister's speech very disappointing, and rather alarming in many respects. He referred to overspill. We have the noble Lord, Lord Craigton, the Minister of State, going round all the Scottish local authorities trying to sell overspill—"If you have overspill from Glasgow it will bring industry"—but one of the reasons for the comparative failure of the overspill programme in Scotland is that those authorities that have signed an overspill agreement have not got the industry.

Those overspill areas not scheduled under the Local Employment Act will now be under a greater disadvantage, because there is less likelihood of industries leaving Glasgow, where they will have the free depreciation allowance, and going to Haddington, Kilmarnock, Newmilns or Galston, none of which is in a scheduled area, and all of whose councils have signed overspill agreements, or are thinking of doing so.

The implication is that things have not been properly thought out, and it cannot be argued that it is not just new developments that will get the benefit of the concession but that industries already established will also benefit. That stems from the original conception, which does not apply only to new developments brought into the area but to industries in the area. It is therefore unfair to claim as a strength in respect of the original scheme a weakness when we seek to apply a logical extension. I am very sorry that the Financial Secretary does not see fit to accept the Amendment of my hon. Friend the Member for Cardiff, South East (Mr. Callaghan).

The Chancellor will remember that, as President of the Board of Trade, one of the first things he had to do in the administration of the Local Employment Act that he piloted through the House, was to see me and the chairman of a firm that had been brought to Kilmarnock who was proposing to make a fourth extension to his factory. It was discovered that in the period from the conception of the extension to getting it off the drawing-board, Kilmarnock had been descheduled with the introduction of the new legislation.

The right hon. Gentleman will remember that I produced for him figures of where the people in that factory and in other factories lived. The point is that those men and women who are unemployed in scheduled areas or districts are registered there because of residence, but their unemployment stems from somewhere outside those areas.

The right hon. Gentleman will remember that he used the powers given to him under the Local Employment Act to ensure that benefits were given for this development to Kilmarnock which had been descheduled. That was a proper use of the flexibility granted under that Act. It is a great pity that the right hon. Gentleman has not continued in office as President of the Board of Trade for a long time, because we have had much the same kind of development since. Someone was prepared to come from London and settle in Kilmarnock on the very same estate, but we received a letter from the Board of Trade to say that it could not be done because there were too many unemployed in Kilmarnock.

This is a wonderful way of working. The former President of the Board of Trade was prepared to do this when there were fewer unemployed in Kilmarnock, but the present President is not prepared to do it because there are more, and too many, unemployed there. The argument is that the new firm would be taking labour from outside Kilmarnock. Five miles away from this industrial estate, which is not now in a development area, a new firm has cropped up, making much the same product as the firm in Kilmarnock. I doubt whether there are a hundred people living in the intervening area and the firm draws its labour from Kilwinning, Irvine and Ardrossan in the same way as Kilmarnock does. Why should one get the benefit, and not the other, when the unemployment in Kilmamock is worse than it is in the development district?

If we are prepared to have the travel-to-work arrangement under the Local Employment Act, we should do it in respect of this provision. There was no logic and considerable danger in the reply we received to this debate. I foresee great difficulties in areas adjacent to these districts. This applies equally to Grangemouth, Newmilns, the areas which are growth centres and which may suffer as a result of the administration of this provision. What is supposed to be of advantage to great areas of Scotland may prove in the end to be entirely disadvantageous.

I hope that the Chancellor of the Exchequer will think again about this. He has shown himself a man of practical ability with a determination to grasp this problem. He will remember the words which he used when we debated the Schedule to the Local Employment Act. He said that he was sure that the Bill would meet with success. There is more unemployment in the development districts today than there was when we passed that Act. There is 50 per cent, more in Scotland. If the right hon. Gentleman wants the full advantage of this provision he should spread its application a little farther to those areas which presently employ people, within the travel-to-work area, who reside within areas which themselves are scheduled. He will then have considerable advantage from the policies which he hoped would succeed.

Mr. Dalyell

Is the Financial Secretary in a position to give us an assurance that the advantages which he is extending to Skelmersdale will also be extended to those towns which are at present in scheduled areas but areas which might be descheduled? I admit that I have an axe to grind. What happens, for instance, to Livingstone if the areas round about it are descheduled?

Mr. Callaghan

I confess to surprise that the Government have accepted the Amendment in the name of the hon. and learned Member for Southport (Mr. Percival). I congratulate him on it, but I think that we want to examine a little more what it means. It is quite clear that the Financial Secretary was under the impression that it referred only to Skelmersdale to start with. Then the possibility was raised by my hon. and learned Friend the Member for Kettering (Mr. Mitchison) that it might conceivably apply to Corby. I have consulted my hon. Friend the Member for Pontypool (Mr. Abse) as to whether Cwmbran would come under this.

12 m.

If I may take Cwmbran, which I know better than Corby, it is not in a development district itself, but it can well be argued—and I am sure my hon. Friend with his eloquence would very easily argue a case—that most of the new employment has been, or will be, drawn from declining industries in the development districts. That being so, it seems to me that we are getting into a very novel position in tax matters, because on the fiat of the Minister of Housing and Local Government the Minister will be able to determine whether, say, the firm of Girlings in Cwmbran is going to have the advantage of free depreciation or not.

Do we know what we are doing here? When the Financial Secretary was resisting Amendments just now on the basis of the need for certainty, on the one hand, and, secondly, on the fact that it is important that everyone should know what is going to happen, it seemed to me very extraordinary that a Minister should be put in the administrative position where he can determine the amount of an individual firm's liability. If I have misunderstood, then I will give way so that we need not waste time on it, but I shall not have a further opportunity of speaking, though others will.

It seems a point of very great importance which should not be slid over this evening. I cannot believe that there has ever been a case before in taxation history where on the certificate of a Minister it will be decided whether a particular firm or group of firms will be entitled to free depreciation or not. I think that we ought to recognise fully what we are doing and we ought to have the considered view of the Government. I am not suggesting that the matter has not been considered fully, but I was surprised when it was accepted as it was. Look at the room for speculation and argument at the way in which the Minister will lay himself open to charges of political judgment in a matter like this. I am not suggesting that the Chancellor of the Exchequer would do so, but I say that he lays himself open to the charge.

Let us look at the words. I think it is worth while taking up the time of the House in the matter. The Amendment reads: In relation to any new town outside a development district"— I take Cwmbran— which draws or will draw its population mainly from the district"— that is the development district. What does that mean? I assume it means the development district. There is a development district very close to Cwmbran which has declining industries, and there is no doubt that a number of workers from that development district have moved into Cwmbran and are working there. So I think it can be argued that Cwmbran—I am not saying it would—would fall within the section. The Amendment goes on to say: …this section shall apply as if the new town were included in the district"— that is to say, it will get the free depreciation— and a certificate given by a person authorised in that behalf by the Minister of Housing and Local Government.… So a person, presumably the regional controller of the Ministry of Housing and Local Government in South Wales, is going to decide whether firms in Cwmbran are going to be given for this purpose free depreciation.

Then the Amendment goes on to say, so far as I understand it, that this certificate shall be conclusive. I am no lawyer, but that means that it cannot be challenged, presumably, in the courts. I do not know. I think that this needs a degree of consideration before the Government put themselves in this position, and we should like to have some further answer from the Government on this point.

It is quite clear that the Financial Secretary was under the impression that he was talking about Skelmersdale only, but there are other places which will feel that they have claims to come in. Corby may well be one. I am told that when one goes to Corby it is only Scotsmen whom one meets and that they celebrate Hogmanay in Corby more than they celebrate Christmas. If that is so, we may well find Stewarts and Lloyds in Corby being provided with the most substantial financial inducements, with free depreciation, which will make their position vastly different from that of a great many other companies. I am not sure about this—I am raising questions about it—but I think it opens up a very wide field of speculation.

I turn to one or two other matters. I am disappointed that the Financial Secretary turned down our new Clause, but not so disappointed as I would be if I did not remember the history of last year. Last year we moved—but, of course, not in such splendid prose, nor at such great length, nor with so few punctuation marks—the substance of Clause 38, and it was rejected. The Government told us that they could not do it. Now it appears on the Order Paper and we are happy to assent to it. Now we move a new Clause dealing with areas outside development districts, and we are given the same answer as we were given last year. I should not be at all surprised if next year we saw our Clause pop up and the Government claiming all the credit for it once again, and we shall feel that we have been able to do something useful in a matter of this sort. Of course, I do not know if hon. Members opposite will be there next year, and I do not think they know either.

On the question of unemployment, I thought that the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) put his finger on the spot, although he did not draw the same conclusions as I am going to draw about this question of unemployment in relation to his own constituency. He said that we could not expect Ellesmere Port to be included in this under the Local Employment Act because there was no real unemployment there—at any rate, not to a substantial degree—and therefore, he said, this must be different. This shows a fundamental difference of approach between the Government and ourselves to this question of development areas and development districts.

Mr. Selwyn Lloyd

The hop. Gentleman has got it wrong. It is already covered by the Local Employment Act. It cannot be designated as a development district.

Mr. Callaghan

I am sorry if I did not make it clear. Therefore, it does not get free depreciation. The right hon. and learned Gentleman was arguing that it was not entitled, under the definition of the Local Employment Act, to be included as a development district—at any rate, according to the administrative decisions of Ministers on this matter. This shows a fundamental difference, and I make the plea once more that the Government should accept something along the lines of our Clause because we believe they are fundamentally wrong in considering these development districts as tiny, isolated spots whose only purpose is to overcome any unemployment that may exist. We believe it is important that we should look at these areas on a much wider basis. In fact, the development districts should be much more equivalent to the old development areas, and we say that because we look beyond the problem of unemployment in these areas to the need for the development of a spirited life and a healthy community that will be spread fairly and equitably throughout the British Isles.

I was talking to a great expert on this subject only last week, and he told me—I suppose this is the sort of generalisation that people make—that in 30 years' time if we go on as we are, we shall need another London in the South-East. This is a fantastic thought. I must say that the thought of having to bear another London in the South-East makes me feel glad that I am now in the second half of my century. I do not think that there can be anyone in the House who wants to see another London in the South-East. If it is a choice between that and developing the regions on a healthy basis, there will be unanimity about which we should try to do.

The Government's policy is shown to be not adequate at all to deal with this great problem. They are still thinking in terms of how to get rid of spots of unemployment. We want them to think more widely than that, and we have, therefore, put this Amendment down. Admittedly, it does not go nearly as far as I should like, but we have to keep within the terms of the Clause as drafted.

The Financial Secretary did not put the picture accurately when he said that the effect of our Amendment would be indiscriminate. Not at all. These districts must be defined by the Board of Trade in exactly the same way as they are now defined for the purposes of the development district procedure under the Local Employment Act. There would be nothing indiscriminate about it. It would be an extension of the development district procedure.

We believe that there is much to be said for areas like Ellesmere Port being treated as we propose. They are outside the development districts, and they will, therefore, find themselves being overlooked by new industries. There will be no attraction to go there. This is one of the difficulties which we always foresaw in this type of legislation, and it will be overcome only if we take large enough areas, much larger than the present proposed areas. No one should disguise the difficulties which exist at the boundary points.

The Amendment has one very attractive consequence. We are all looking forward to seeing how the right hon. and learned Member for Wirral will vote tonight. If he thinks of the interests of his constituency, he will vote for our Amendment. Perhaps I was wrong in the thought which passed through my mind when I saw the Patronage Secretary talking to him just now. I hope, for his sake, that the Patronage Secretary has not got another revolt on his hands. It would really be too much to add to his worries to have the right hon. and learned Gentleman against him. From his beaming and cherubic countenance, it looks as though he has persuaded his right hon. and learned Friend not to go into the Lobby. This will be a disappointment to me because I should like nothing more than the pleasure of walking through the Lobby with the right hon. and learned Gentleman in defence of a constituency interest. Now, we shall have to put him to the test. Which will he place first—his loyalty to the Government or his loyalty to his constituency?

Mr. Barber

With the leave of the House, may I reply briefly to what has been said? I went over the ground fairly well earlier, and I do not wish to repeat myself.

The hon. and learned Member for Montgomery(Mr. Hooson) thought that my argument was not sound in suggesting that it was not, perhaps, advisable to give too much discretion to the Executive in matters of taxation. I reiterate what I said before. There may well be circumstances in which, on balance, one has to give the Executive a certain amount of discretion, as, indeed, we are doing by the provisions of Clause 38 as it stands. It is all a question of degree, and I am sure that the hon. and learned Gentleman himself would not wish to go too far in that regard.

The hon. Member for Kilmarnock (Mr. Ross) complained that those outside development districts who would not qualify for free depreciation would be worse off. It is inevitable that the greater the incentive one provides for areas of high and persistent unemployment—known as development districts—the less is the incentive to manufacturers to develop outside. This, I fear, is inevitable. On the other hand, my right hon. Friend and the Government generally have been pressed in previous years to do something on the lines which my right hon. Friend has introduced this year. The hon. Member for Cardiff, South-East (Mr. Callaghan) has taken some credit for the fact that, in his view, what we are doing was something on the lines proposed by the Opposition last year, although, of course, he would like us to go further.

12.15 a.m.

The hon. Member for West Lothian (Mr. Dalyell) asked what happens if there is a new town in a development district, which would, therefore, qualify for free depreciation, and the development district is de-listed, if that is the right word to use. Then, the new town would not be in a development district, but if it satisfied the new subsection (6) of Clause 38, it would, in turn, qualify for free depreciation. If it did not satisfy the provisions of the new subsection (6), it would not so qualify.

The hon. Member for Cardiff, South-East asked three questions. The first was about other places; he mentioned Corby and two other places in particular and he asked whether they would or would not benefit under this provision. As, I think, the hon. Member will fairly understand, I cannot give him a definite answer in relation to other new towns. It all depends on whether they satisfy the criteria which are laid down in the new subsection (6).

I referred, because I thought it right—this has been raised by my hon. Friend the Member for Ormskirk (Sir D. Glover)—to the particular case of Skelmersdale, because on the information which I have before me it seemed tome that clearly it satisfied the criteria which are laid down. As stated in the subsection, however, it will be for my right hon. Friend the Minister of Housing and Local Government or my right hon. Friend the Secretary of State for Scotland to provide the necessary certificate.

Mr. Mitchison

Will it be? The subsection lays down certain conditions which have to be fulfilled. If the conditions are fulfilled, no doubt it is very convenient to have a certificate, for that would be conclusive. If, however, the conditions are fulfilled and no certificate is forthcoming, why would not the taxpayer get the relief to which he is entitled under the two of them?

Mr. Barber

Obviously, that situation will not arise, because if the criteria are satisfied, the appropriate Minister will issue the certificate. Somebody has to exercise a certain discretion. It has been suggested by several hon. Members opposite that this is a proper thing to do.

The second point raised by the hon. Member for Cardiff, South-East, was that he did not think it a good thing the Minister of Housing—one person—should have the discretion which he has under the new subsection. The discretion is very limited. What the Minister has to decide in the main is whether the population in question comes mainly from the development district. Certainly, if we were to adopt an approach on the lines of that laid down in the Opposition's Amendment, far more discretion would be given to Ministers or, in this case, the Board of Trade, because only in the vaguest terms are there references to local employment, transport, housing, and so on. I recognise that this may be an approach which some people would favour, but certainly more discretion would be involved in those cases.

Mr. Loughlin

Will the hon. Gentleman explain a point which arises from his remarks? It seems to me that the principle of the Amendment has been accepted by the Government. If one looks at the Clause, the advantages are to be derived provided that the place is within Northern Ireland. Surely, in some part of Northern Ireland there must be at least one place that does not qualify in the normal sense as a development district. Why is the hon. Gentleman applying it in that sense and not accepting the Amendment?

Mr. Barber

So far as I know, they do not have development districts in Northern Ireland. I thought, from the discussion we had previously on Clause 38, that it was the general desire of hon. Gentlemen opposite, as well as of my hon. Friends, that Northern Ireland should qualify for this great benefit. I thought that that was universally acceptable. Certainly I have heard no word to the contrary until the hon. Gentleman raised the point.

Mr. Loughlin

I accept it for Northern Ireland—the same principle.

Mr. Barber

The same principle does not apply, as I understand it, because in fact there are no such things as designated development districts in Northern Ireland. Therefore, if we did not refer to it it would be wholly excluded.

Clause 38 is a most important departure which I think hon. Gentlemen opposite as well as my hon. Friends consider to be in the right direction. Whatever differences we may have as to the extent to which my right hon. Friend has gone, the Clause itself is widely to be welcomed, and indeed, I should have thought that the whole House would have welcomed the extension, small though it may be, which I advise the House to accept, the extension proposed in the Amendments in the name of my right hon. Friend.

Mr. Jay

By leave of the House, I would ask a brief question of the Financial Secretary. Is he really quite sure that the Amendment in page 40, line 26, does not mean a good deal more than he appears to think it means? The words are In relation to any new town outside a development district which draws or will draw its population mainly from the district". The words are not a new town "adjacent to a development district" which is the form used in our Amendment. Stevenage is outside a development district; Basildon is outside a development district. It is not quite obvious what the "district" would be in relation to such a town as those. It seems to us that the words are somewhat loose. I agree it is a new town which draws or will draw its population mainly from the district but the use of the words "will draw" means that this tax concession surely would be dependent on something which has not happened but which may happen in future. Would not my hon. and learned Friend be right, and if Corby were mainly drawing its population from Mother well or Coatbridge it could qualify for this concession? Is the Financial Secretary quite sure that, even if the objectives of his hon. Friend's Amendment are laudable, he is not accepting it in a form in which the wording is rather loose and might go much further than any of us intends?

Mr. Barber

I can assure the right hon. Gentleman that we have looked at the wording very carefully and are satisfied that it fulfils the purpose intended.

Mr. Houghton

On a point of order Mr. Deputy-Speaker. My right hon. Friend the Member for Battersea, North (Mr. Jay) has moved the Amendment in page 40, line 20. When the hon. and learned Gentleman the Member for Southport (Mr. Percival) said he wished to move his Amendment, in page 40, line 26, Mr. Speaker said that he could not move it; it could be discussed along with the Amendment in page 40, line 20; and it was on that basis that the hon. and learned Gentleman made his contribution to the debate. We have since been urged by the Financial Secretary to accept something which has not been moved and which, in strict form, is not before the House. Only the arguments and considerations in connection with it came before the House in the course of the debate; but that Amendment in terms has not come before the House. So presumably, Mr. Deputy-Speaker, we are still debating the Amendment moved to page 40, line 20, and it is on that that the decision of the House has now to be taken. Perhaps you will guide the House by telling us what happens after that.

Mr. Deputy-Speaker

The hon. Member will recollect that it is quite often the practice of the House to discuss more than one Amendment at the same time. The only Question before the House, of course, is on the first Amendment of the series, but there is nothing after that, when that has been disposed of, to prevent the subsequent Amendments which have been discussed, from being moved. The hon. Member knows that that is often done, and when this Amendment has been disposed of I would propose to call for the formal moving of the other Amendments, and then let the House decide upon them.

Mr. Callaghan

No one wants to put you in a difficulty, Mr. Deputy-Speaker, but we thought that the selection of new Clauses and Amendments was made by Mr. Speaker before the debate started and, on the basis of such information as we were given, we understood that you would allow the hon. and learned Member's Amendment to be discussed but not to be moved. That is frequently done. There are three cases which we normally have: where a new Clause or Amendment is moved; where a new Clause or Amendment is discussed with another new Clause or Amendment but cannot be moved, which is the category into which the hon. and learned Member's Amendment falls; and where a new Clause of Amendment is discussed with another new Clause or Amendment and you allow a Division on both.

Your predecessor in the Chair indicated to the hon. and learned Member for Southport that he could discuss his Amendment but it would not be called. [Hon. Members: "No"] Most hon. Members who shout "No" were not here at the time. That is the position as we have understood it since 3.30 p.m. Are you saying that although our understanding on the whole has been accurate up to this point in the whole of the 10 days' debate on the Finance Bill, it is now inaccurate and that you always intended to call the hon. and learned Member's Amendment? In that case, the guidance which we have received must have gone astray.

Mr. Deputy-Speaker

I can deal only with the position as it is now. It will be in order for the Amendments which have been discussed to be moved. I remind the hon. Member for Cardiff, South-East (Mr. Callaghan) that the selection of Amendments which is announced is provisional; it is always carefully stated that it is provisional. I also remind him—and this has happened on both sides of the House—that there have been occasions on which it has been understood that an Amendment had not been selected for a Division, but hon. Members who were interested have asked for a Division and this has been permitted.

Mr. Callaghan

I must press you a little about this, Mr. Deputy-Speaker, because we want to get it clear. I think that no one would raise an objection if you were to say that you had decided to alter the original intention and to allow the Amendment to be moved because you understand it to be acceptable to the Government. That is a point of view which I think the House would accept. But we ought to know whether that is the way in which your mind has moved and whether you have decided to permit the Amendment to be moved because you understand it to be acceptable to the Government.

Mr. Deputy-Speaker

The original selection by Mr. Speaker was provisional, but I understand that he had decided to allow other Amendments to be moved formally after a discussion had taken place.

Mr. Callaghan

You, Sir, cannot know what was said by your predecessor in the Chair, but those who were present heard your predecessor tell the hon. and learned Member for Southport that he could discuss his Amendment but not move it. No indication was given then, or earlier. that he would be allowed to move it later. [Hon. Members: "Oh."] I know what I am talking about, and I am only trying to get the position clear. If the Chair, quite properly—and it is entirely at the discretion of the Chair—decides to allow an Amendment to be called, I raise no objection, but we are entitled to know as a House—and the whole House is concerned—whether this is a new decision of the Chair which reverses a previous decision. That is all I am asking, and it seems to me a perfectly fair question.

Mr. Deputy-Speaker

I cannot help wondering whether there has been some misunderstanding, and that what was meant to be conveyed to the hon. and learned Member when the discussion was taking place on this Amendment was that he could talk about his Amendment but could not move it at that stage.

Question put, That those words be there inserted in the Bill: —

The House divided: Ayes 62, Noes 123.

Division No. 152.]	AYES	[12.29 a.m.
Abse, Lea	Hill, J. (Midlothian)	Oram, A. E.
Bennett, J. (Glasgow, Bridgeton)	Holman, Percy	Probert, Arthur
Blackburn, F.	Hooson, H. E.	Redhead, E. C.
Bottomley, Rt. Hon. A. G.	Houghton, Douglas	Rees, Merlyn (Leeds, S.)
Bowden, Rt. Hn. H.W. (Leics, S.W.)	Hoy, James H.	Reynolds, G. W.
Bradley, Tom	Hughes, Cledwyn (Anglesey)	Robertson, John (Paisley)
Callaghan, James	Hynd, John (Attercliffe)	Robinson, Kenneth (St. Pancras, N.)
Carmichael, Neil	Janner, Sir Barnett	Rodgers, G. H. R. (Kensington, N.)
Castle, Mrs. Barbara	Jay, Rt. Hon. Douglas	Ross, William
Dalyell, Tam	Jenkins, Roy (Stechford)	Skeffington, Arthur
Dempsey, James	Jones, T. W. (Merioneth)	Small, William
Diamond, John	King, Dr. Horace	Soskice, Rt. Hon. Sir Frank
Duffy, A. E. P.	Lawson, George	Spriggs, Leslie
Edelman, Maurice	Lever, L. M. (Ardwick)	Taverne, D.
Fitch, Alan	Loughlin, Charles	Watkins, Tudor
Fletcher, Eric	MacColl, James	Wilkins, W. A.
Foot, Dingle (Ipswich)	Manuel, Archie	Willis, E. G. (Edinburgh, E.)
Galpern, Sir Myer	Mendelson, J. J.	Winterbottom, R. E.
Griffiths, W. (Exchange)	Millan, Bruce
Hale, Leslie (Oldham, W.)	Mitchison, G. R.	TELLERS FOR THE AYES:
Hannan, William	Noel-Baker,Rt.Hn.Philip(Derby,S.)	Mr. Ifor Davies and Mr. Grey.
Herbison, Miss Margaret	O'Malley, B. K.
NOES
Allan, Robert (Paddington, S.)	Gammans, Lady	McLaren, Martin
Allason, James	Gibson-Watt, David	Maclay, Rt. Hon. John
Awdry, Daniel (Chippenham)	Gilmour, Sir John (East Fife)	Maclean, Sir Fitzroy(Bute&N.Ayrs)
Barber, Anthony	Gower, Raymond	Macmillan, Maurice (Halifax)
Barter, John	Grant-Ferris, R.	Matthews, Gordon (Meriden)
Batsford, Brian	Green, Alan	Maudlins, Rt. Hon. Reginald
Bennett, F. M. (Torquay)	Grosvenor, Lord Robert	Maydon, Lt.-Cmdr. S. L. C.
Biffen, John	Gurden, Harold	Mills, stratton
Biggs-Davison, John	Hall, John (Wycombe)	Miscampbell, Norman
Bishop, F. P.	Hamilton, Michael (Wellingborough)	More, Jasper (Ludlow)
Black, Sir Cyril	Harris, Frederic (Croydon, N.W.)	Nabarro, Sir Gerald
Bourne-Arton, A.	Harrison, Col. Sir Harwood (Eye)	Page, Graham (Crosby)
Boyd-Carpenter, Rt. Hon. John	Hastings, Stephen	Pannell, Norman (Kirkdale)
Bromley-Davenport, Lt.-Col. Sir Walter	Hendry, Forbes	Pearson, Frank (Clitheroe)
Brown, Alan (Tottenham)	Hirst, Geoffrey	Peel, John
Chataway, Christopher	Hobson, Rt. Hon. Sir John	Percival, Ian
Chichestar-Clark, R.	Holland, Philip	Pickthorn, Sir Kenneth
Clark, Henry (Antrim, N.)	Hollingworth, John	Pilkington, Sir Richard
Clark, William (Nottingham, S.)	Hope, Rt. Hon. Lord John	Prior, J. M. L.
Cleaver, Leonard	Hornby, R. P.	Rawlinson, Sir Peter
Cooper-Key, Sir Neill	Hornsby-Smith, Rt. Hon. Dame P.	Redmayne, Rt. Hon. Martin
Corfield, F. V.	Howard, John (Southampton, Test)	Rees, Hugh (Swansea, W.)
Crawley, Aidan	Hughes-Young, Michael	Ridley, Hon. Nicholas
Dalkeith, Earl of	Hurd, Sir Anthony	Ridsdale, Julian
d'Avigdor-Goldsmid, Sir Henry	Irvine, Bryant Godman (Rye)	Roots, William
Deedes, Rt. Hon. W. F.	Johnson, Eric (Blackley)	St. Clair, M.
Donaldson, Cmdr. C. E. M.	Johnson Smith, Geoffrey	Scott-Hopkins, James
du Cann, Edward	Jones, Arthur (Northants, S.)	Seymour, Leslie
Elliot, Capt. Walter (Carshalton)	Kerans, Cdr. J. S.	Sharples, Richard
Emery, Peter	Kershaw, Anthony	Shepherd, William
Errington, Sir Eric	Kitson, Timothy	Skeet, T. H. H.
Finlay, Graeme	Legge-Bourke, Sir Harry	Smith, Dudley (Br'ntf'd & Chiswick)
Fisher, Nigel	Lewis, Kenneth (Rutland)	Smithers, Peter
Fletcher-Cooke, Charles	Longden, Gilbert	Steward, Harold (Stockport, S.)
Foster, John	Loveys, Walter H.	Stodart, J. A.
Fraser, Ian (Plymouth, Sutton)	Lucas-Tooth, Sir Hugh	Storey, Sir Samuel
Studholme, Sir Henry	van Straubenzee, W. R.	Wells, John (Maidstone)
Summers, Sir Spencer	Vickers, Miss Joan	Wolrige-Gordon, Patrick
Teeling, Sir William	Vosper, Rt. Hon. Dennis	Worsley, Marcus
Thompson, Sir Richard (Croydon, S.)	Walker, Peter
Turner Colin	Wall, Patrick	TELLERS FOR THE NOES:
Turton, Rt. Hon. R. H.	Ward, Dame Irene	Mr. MacArthur and Mr. Pym

Mr. Deputy-Speaker

Does the hon. and learned Member for Southport (Mr. Percival) formally move the Amendment in page 40, line 26?

Mr. Ian Percival (Southport)

Yes. Mr. Deputy-Speaker. I beg formally to move, in page 40, line 26, at the end to insert: (6) In relation to any new town outside a development district which draws or will draw its population mainly from the district, this section shall apply as if the new town were included in the district, and a certificate given by a person authorised in that behalf by the Minister of Housing and Local Government, or (where the new town is in Scotland) the Secretary of State, and stating whether or not a new town draws or will draw its population mainly from a specified district shall be conclusive for the purposes of this subsection.

Mr. G. W. Reynolds (Islington, North)

On a point of order. May I draw your attention, Mr. Deputy-Speaker, to the fact that at 10.40 this evening we had a vote on the question whether the debate should be adjourned, and that 40 Members who voted in favour of staying on have since left?

Mr. Houghton

On a point of order. Mr. Deputy-Speaker, you have just called the hon. Member for South-port (Mr. Percival) formally to move—and the hon. Member has formally moved—his Amendment in page 40, line 26. If the House approves the Amendment it will be written into the Bill. May I therefore ask whether the House is now free to ask further questions about the Amendment, and to probe a little further what exactly it means, and the extent to which it may influence, in an important respect, the economic development of the areas involved?

I submit that we have not debated this matter, as a substantive Amendment. [Interruption.] Despite the discouragement that I am receiving, I submit that there is a big difference between formally moving an Amendment on which a Division takes place for demonstration purposes and writing a new provision into the Bill, in substantive form. I wish with your permission, if you rule that I can do so, to ask the Government a few more questions about this Amendment.

Mr. Deputy-Speaker

These arrangements rest on an understanding. At the commencement of this discussion I happened to be in the Chair and I suggested that it would be for the convenience of the House to take all these Amendments together. That was accepted by the House. Therefore, that is the future understanding. It would not be out of order to allow the hon. Gentleman to ask some more questions upon the Amendment, although, according to the previous understanding of the House, it would only be moved formally.

The only thing I would say to the House is that, if we have these understandings and then they are broken, it makes things very difficult. There will be nothing out of order, and if the hon. Gentleman is very anxious to put more questions I will permit it, but I must add that it makes things very difficult if understandings which have been come to and agreed to by the House are then not adhered to.

Mr. Callaghan

With great respect, Mr. Deputy-Speaker, I should not like the House to think that there was to be any broken understanding about this, especially as I notice that some Ministers, including the Chief Secretary, are apparently cheering that observation. The right hon. Gentleman still seems to think so.

Mr. Boyd-Carpenter

indicated assent.

Mr. Callaghan

The right hon. Gentleman was not here during the previous discussion, but we will leave him alone. I want to put it on record—we must get these things right—that there is no broken understanding on this side of the House. [Interruption.] I think some hon. Members opposite want to stay all night. They can have their wish, if they want it. I want to make it quite clear, as you have raised this point, Mr. Deputy-Speaker, that we did not understand that you would allow the Amendment to be moved. If there was a mistake on our part, I accept responsibility for it, but I am bound to say to you that I do not think there was a mistake on our part in that connection. We were quite clear in our understanding that the hon. and learned Member for Southport (Mr. Percival) was not to move it. We do not wish to resist that. I made that clear before the Division took place. If you had not now referred to the danger of breaking understandings, I would not be on my feet now. If my hon. Friend the Member for Sowerby (Mr. Houghton) has some new points and wishes to put them, he is entitled to do so, as you have said. I would not want them to be put in an atmosphere that he is breaking an understanding, because it was the original understanding that was broken and my hon. Friend is not breaking it now.

Mr. Deputy-Speaker

I think that there has been some misunderstanding about the understanding. I am only the servant of the House. In the circumstances I suggest that the hon. Member for Sowerby (Mr. Houghton) should put his points, but in view of what has happened I would merely make the suggestion, with all respect, that they might perhaps be put as concisely as possible.

Mr. Houghton

Mr. Deputy-Speaker, I am very much obliged to you. The last thing I would wish is that either you or the House should think that I was imposing on your good will and indulgence. It is customary on occasions such as these for new Clauses or Amendments to be discussed in association with the one which is called, but it is generally understood in such circumstances that there is no real business to be done on those which are discussed in association with the main Amendment or new Clause before the House or the Committee.

Mr. Ross

rose—

Mr. Houghton

I must complete my point. The understanding I had in this matter was that the usual understanding prevailed. We now find that it does not. I am not complaining about that; and since you have given me the opportunity to pursue my points a little further, Mr. Deputy-Speaker, I promise not to detain the House more than a few minutes.

12.45 a.m.

Mr. Leo Abse (Pontypool)

So that there will be no further understandings or misunderstandings, I hope that my hon. Friend is not expressing a view on behalf of all hon. Members, for the Clause we are discussing closely concerns my constituency and I hope that he will not consider binding other hon. Members who may wish to raise points of considerable importance.

Mr. Houghton

I am speaking only for myself. I have no desire to exclude any of my hon. Friends from making their contributions.

The Amendment states: In relation to any new town outside a development district which draws or will draw its population mainly from the district… I urge hon. Members to note the words …development district which draws or will draw…". That means that, for some indefinite period in the future, it is expected that this new town will draw its population from the—I emphasise the word "the"—district. Thus there is not only an expectation that the new town will draw its population, which would be a normal expectation, but that it will draw it mainly from "the" district.

Consider a new town like Stevenage. It is probably not drawing its population from any one district. It may be drawing some of its population from the London or near-London area, which is not a development district. It may be attractive to many people who prefer to live in Stevenage to continuing their life in London. I sympathise with their point of view if they hold it as a basis for moving to Stevenage. Others may be going there from Scotland.

My hon. and learned Friend the Member for Kettering (Mr. Mitchison) referred to Corby, which is a kind of Scottish enclave in England. It may be that Corby is or will be drawing its population mainly from one or more development districts in Scotland. We want to clear this matter up because the Amendment refers to drawing …its population mainly from the district…". "The" seems an extraordinary word to use in connection with any district. I can only hope that the hon. Member for Southport (Mr. Percival) had the customary help from the Parliamentary drafts- men in getting the Amendment in the sort of shape the Government could accept without having to change a word or a comma. It is a strange word and I want to be clear about its use.

As I understand it, it does not mean that a new town, to qualify, must be or will be drawing its population from an adjacent district. It can draw, as long as it is mainly drawing it from one or more districts. If Stevenage or a new town like it is drawing or will draw its population from district A, B, C, or E it then qualifies for the benefits of free depreciation because it is drawing from all and sundry development districts.

We want this matter cleared up because some of my hon. Friends, as my hon. Friend the Member for Pontypool (Mr. Abse) indicated, have new towns in their constituencies and they want to know whether their new towns are drawing or will draw their populations mainly from the district; which will give them status under the Amendment.

I am sure that this is not being tiresome; we just want to be clear about what we: are doing, and as we have until breakfast time—or longer, if necessary—to find out, I do not apologise for delaying the House for a few minutes, because this is probably the only practical piece of business we will do, apart from murmuring approval to a number of long additions to the Bill moved by the right hon. Gentleman.

Mr. Willis

On a point of order, Mr. Deputy-Speaker. An hon. Member opposite appears to be in a state of coma, and I am not quite sure whether he is ill, and requiring attention. Perhaps that could be seen to. The hon. Member is still in a state of coma, and I think it only right that we should see whether he is well because, if he is ill, we should assist him.

Mr. Abse

Representing, as I do, the constituency which has in it the new town of Cwmbran, I am particularly concerned that there should be no ambiguity in a Clause which quite clearly affects the whole economic district which I represent. I confess that I am utterly perplexed by the meaning of the Clause as it stands. Cwmbran is a new town which is drawing, and is likely in the future to draw, a considerable portion of its population from declining areas in the north of the county. I would naturally be eager and anxious to have benefits endowed upon Cwmbran wherever they might come from, but I am equally anxious that the endowments it receives should be made in an equitable manner.

Is it seriously suggested that industries that may be thriving and prosperous and doing very well—and I am pleased to say that many of them are—will suddenly be able to take advantage of this provision, whilst other industries that may be just outside the confines of the new town and not doing well, or doing equally well, will get no benefit at all, although the population upon which they draw may equally be coming from development districts?

We are talking here of a comparatively small area of the county, and anomalies must arise in such a situation precisely because the Government are not accepting our view that one should not deal with this problem in this absurdly fragmented way but should consider a larger area. What troubles me very much about the Clause is that, apart from the fact that there may be these quite unjust differences in the treatment of an industry that may be just within the borders of a new town and those that may be just outside them, I observe that by the terms of the Clause the person who will determine these factors will be the Minister of Housing and Local Government who, perforce, has a very great interest in a new town.

The Minister of Housing and Local Government will not necessarily have the same interest, nor can he be expected to have, in industries that may lie in a gap between the periphery of the new town and the development districts which are in existence, or may likely come into existence, as in my own case in the north of Monmouthshire. He is the Minister responsible for the new town, unlike the President of the Board of Trade, who will quite clearly have a limited interest in a particular area.

Is it seriously being suggested that we are to give powers to the Minister of Housing to give special preparation benefits to industries within a new town while, within a few miles of that new town, there may be industries that will be debarred from these benefits just because they are outside the limits of a development district and, equally, just outside the new town?

This is the sort of situation which can easily arise in South Wales in this new town where there are bound to be development districts within striking distance of it. I hope that this matter will be cleared up. As far as the Clause is grammatical and intelligible at all, it lacks clarity and is likely to cause confusion. We do not want to be importuned by firms in the area about its meaning. There may be glimmerings of new benefits to the newtown in the Clause, but it will cause more confusion because the Government are not prepared to accept the obvious answer that the whole area should be considered and not a place here and a place there, which only makes confusion worse confounded.

Mr. Ross

If we do not put this matter right tonight we never will put it right, because there is no reconsideration of a Clause once it has been amended on Report. The Bill cannot be amended in another place, because it is a financial Measure.

I do not think that I am breaking any understanding in what I am about to say, because when there is an understanding about discussing an Amendment that is made clear. The hon. and learned Member for Southport (Mr. Percival) proceeded to move his Amendment and was told he could not move it, the reason being that one Amendment having been moved we cannot discuss two things at once. Obviously it would have been out of order for an hon. Member to have referred to the hon. and learned Member's Amendment when he was moving his own and therefore the usual understanding did not apply in this case.

I am concerned about the wording. It reads: In relation to any new town outside a development district… I do not see the President of the Board of Trade or any representative of that Department here, but I understand that there are about 160 development districts. Any new town which is not inside a development district must therefore be outside 160 districts. If that is so, how can we identify and specify the new town which draws or will draw its population mainly from the district?

This is further extended if we jump a few lines to the authorisation that must be given from somebody in the Department. That person must state whether or not a new town draws or will draw its population mainly from a specified district… The whole thing is hopelessly confused. It might pass the House of Commons sitting as a Committee but I assure the House that it would not pass the Scottish Standing Committee. We would not tolerate the language used here.

What do the Government intend to do about this? Clearly and emphatically the first two lines are absolute nonsense. It is not just a case of ambiguity. The expression "the district" means one district. But that district is not specified at all. The only thing specified is the new town. But the new town is not outside a development district; it is outside as many development districts as there are. The first two lines are wrong, and the implication of the last two lines is that the new town is outside a specified, a particular, development district.

1.0 a.m.

In actual fact, however, we have the new town of Livingston which has been designated. As far as I know, the new town of Livingston is not going to take its population from one area which is a development district. It is going to draw from very much wider areas. Indeed, it would be ruled out from being embraced in this Amendment if it took its population from two development districts, because the last line says "a specified district."

Suppose that its population came mainly from part of the Lothians that was not a development district, which it could be, or from Glasgow which is another development district. Despite the fact that it is helping development districts, it would not get the advantage, although if it takes it from only one it will. The thing is utter nonsense, and this arises from the rather thoughtless way in which the Government have regarded this whole group of Amendments.

If the Government really make up their mind that they want an Amendment that is something that is a considerable improvement to a Bill, they do not leave it to the chance selection of either the Chairman of Ways and Means in Committee or to Mr. Speaker on Report. They add their names to the Amendment, and, having added their names, they make sure that the Amendment is rightly worded. How often have we heard an Amendment accepted in principle and the Government undertake to introduce their own Amendment in order to meet the point. But they cannot make a change now unless by way of a manuscript Amendment. I suggest that they do it quickly and make the change by manuscript Amendment.

I suggest it is essential that we should discuss the matter in order to find out what the Government have in mind. Do they really mean this and think that it will stand up in law, because I am convinced that it will not? I sincerely hope that we are going to hear from the Government. We cannot send for the Lord Advocate.

Mr. Loughlin

Heaven forbid.

Mr. Ross

It is most unfair for my hon. Friend to say that. After all, he is like me, he has never seen the Lord Advocate.

Mr. Loughlin

Will my hon. Friend give way? The reason why I said "Heaven forbid" is that I have had experience in Standing Committee of his hon. Friends from Scotland demanding the attendance of the Lord Advocate, and then, when he appeared, of his making the position worse by some of the most wonderful stretches of the imagination that I have ever heard from a lawyer.

Mr. Ross

We can shout as loudly as we like, but the Lord Advocate cannot confuse us because he is not a Member of the House. We could ask for the Solicitor-General for Scotland to give us his interpretation, but with no more success. It is essential that these Law Officers should be able to do this because, after all, the Secretary of State for Scotland and his Department are concerned in relation to this matter. They have to interpret this, and the Scottish courts will certainly be concerned. But the Solicitor-General for Scotland, alas, cannot find any con- stituency in Scotland to adopt him. It shows what little faith the Scottish Tories have in the Solicitor-General for Scotland in the matter of law in relation to Parliamentary that they do not allow him to come and tell us just exactly what this Amendment means.

I do not know if the English Law Officer will try to sort this out and tell us what he thinks. I should be very grateful if he would give us the benefit of his knowledge and tell us how he would interpret these words. Will he tell us whether, in his opinion, they make sense and whether there is any tie-up between the first two lines and the last two? I cannot see how any enlightened lay Member of Parliament who is awake at this time of night, who is able to read this with one eye, can make sense of it. I am satisfied that it does not. The Government should admit it and tell us what they are going to do about it.

The Government have already agreed to accept the Amendment, and but for the intervention of my hon. Friend—to whole intervention many hon. Members opposite objected—it would have been passed into law with the rest of the preceding parts of the Bill. The Government are going to be in a bit of a pickle if they now want to make a change in something which 10 minutes ago they were willing to accept.

Mr. Mitchison

I make no apology for asking some questions about this Amendment, for it is bound to have a considerable indirect effect on the lives and employment of a considerable number of people.

I cannot resist the conclusion that the present acceptance results from a muddle at some stage or other, and I propose to indicate why. I want an explanation, and I hope I shall have it, not from any of the Treasury Ministers, with great respect, but from the Law Officer of the Crown who is sitting on the Front Bench and who ought to be able to tell us what the subsection in this Amendment means.

The Amendment begins by saying: In relation to any new town outside a development district which draws or will draw its population mainly from the district… A new town can be inside only one development district but it will be outside a large number of development districts, and in those circumstances I read this Amendment as meaning: In relation to any new town which draws or will draw its population mainly from a development district within which that new town is not… If that is the wrong construction, I shall be most grateful if the Solicitor-General will indicate what the right construction is, but that is the construction as I understand it.

The first point that arises is this. These development districts are numerous. They vary from time to time. The test for them is an administrative test. There is no reason whatever why a couple of development districts should not be contiguous. Whether they are or not at the moment I do not know; at any time they might be. In that case, it is purely a matter of administrative decision or convenience; it is the opinion of the Board of Trade—nothing more—as to whether we have one or two development districts there. Yet if I am right in this construction, the fortunes of a considerable number of people, their jobs and lives depend upon a ridiculous administrative decision as to whether there are one or two development districts within a given area.

I want the Solicitor-General to consider that point. May I repeat it to him. It is perfectly possible that a given area may be one, two or three development districts if they are contiguous with one another. That is purely a question of the opinion of the President of the Board of Trade and the decision he gives under the Local Employment Act. Yet, as I read the Amendment, the area which falls to be considered for the purposes of producing population for the new town will be large or small according to whether it is divided or not divided into a number of development districts. If I have not made my point perfectly clear to the hon. and learned Gentleman, I hope that he will tell me. That is the first point. So far, I have dealt only with "draws".

Now, the next point—"or will draw its population". I pause here to say something else. I do not myself accept the conclusion—I want the hon. and learned Gentleman to give us his opinion and advice about it—that, if a certificate is refused, that is conclusive. No doubt, if a certificate is given, that is conclusive, but supposing that the taxpayer seeking relief establishes in the proper way, either, in the first instance, to the inspector or, ultimately, perhaps, in a court, that there is, in fact, a new town outside a development district which draws its population mainly from that district, is he to be refused the promised tax relief because the Minister will not give him a certificate?

There is a dilemma here. If, in fact, he establishes this, or could establish it, but he is then deprived of his rights by the refusal of an executive Minister to give him the certificate although the conditions for that certificate are fulfilled, that is, as I see it, giving to Ministers a power over taxation for which I know no parallel whatever, and it seems to me to be fundamentally unjust. The conditions will then be fulfilled. The intention of Parliament will have been fulfilled. Simply the ipse dixit of a Minister or Secretary of State will deprive the taxpayer of the relief to which he appears to be entitled on that state of facts.

I suggest to the hon. and learned Gentleman, therefore—I want him to be good enough to give his views on the question—that that cannot be so and that the position must be as follows. If, in fact, the taxpayer establishes the facts in the first leg of the Amendment, it does not really matter whether he gets a certificate or not, except, of course, for the convenience of it. If he gets the certificate, that is conclusive, but, even in that case, I suggest, the effect of the certificate is to make the Minister the judge of the facts. I do not know why that is done.

I am the more puzzled about it from this point of view. Apparently, the Minister who has to give the certificate is not the Minister who deals with the development district but the Minister who deals with the new town. Consequently, to take the case of Corby, for example, the Minister there concerned is the English Minister although, in fact, the main part of the population may come from a Scottish development district. This is no academic point. I assure the hon. and learned Gentleman that it will be a close question of fact whether or not the population of that particular new town does or does not come from a particular Scottish development district.

Mr. Jay

Or will come.

Mr. Mitchison

I have not forgotten that. It is "does or does not come" at present. And the certificate, the conclusive certificate, is to be given by an English Minister. How is the Minister to know where those people come from? Men are sent to Corby—many of them skilled men—under arrangements made by Scottish employment exchanges. Others are recruited by private firms up in Scotland. What does the English Minister of Housing and Local Government know about all this? How will be find out? Will he send an inquiry round the town and ask them all where they came from?

1.15 a.m.

I turn from that—I am still addressing myself to the Solicitor-General—to this remarkable matter of prophecy. It is not only where the place now draws its population mainly from, but there is also a question of where it will draw its population mainly from. I have often heard of certificates about facts, but I have never heard of a certificate about the future. I should have thought that it verged on the blasphemous, even in the hands of a Minister.

On what grounds does a Minister of the Crown certify that the population of a given place, remarkably few of whom may have arrived yet, ever will arrive from anywhere and, if so, where they will come from? What kind of certificate is it? Has the hon. and learned Gentleman ever before met a certificate like this about the future? This is poaching on prophets with a vengeance. This is a demarcation dispute of the most serious character.

Ministers are to tell us about the future and, more than that, to certify conclusively about the future. The prophets will all be out of work. This is fantastic. If the future goes wrong afterwards, it will not have gone wrong in the eves of the Minister or the eyes of the law. It must have happened like that; the Minister had certified so.

What is the sense of this? Surely, the only conclusion that one can draw is that the Minister's certificate will be a convenient aid in some cases, and no more. If that is the position, the taxpayer—and this is relief to a taxpayer—has to go to the court and establish the future. How will he do that? It would be convenient if the Minister can do it, but how will the taxpayer do it? It means that if it can be shown that a certain new town will draw its population from a certain development district, there will be payment of a given figure of £ s. d. which would not otherwise have been made. I do not know how it is done. I hope that the Solicitor-General will explain the facilities for proving in law courts the future of new town populations. That presents a number of considerable difficulties.

I hope that I have made my points clear. The Clause contains every possible element of certainty that a Clause in a Finance Bill could contain. It gives to the Executive powers which are so ridiculous that no self-respecting Minister ought ever to have them inflicted upon him. It places on the taxpayer the burden of proving the impossible as a condition of getting the relief which, apparently, the Government intend him to have. To put the matter quite shortly, it is sheer nonsense.

Mr. Barber

Before the hon. and learned Member for Kettering (Mr. Mitchison) spoke, other hon. Members who raised much the same points as he has done addressed their observations to me. Therefore, I will try in the first instance to answer the hon. and learned Member, especially as in his remarks he was concerned with certain aspects of policy as well as with the interpretation of the words.

The hon. and learned Member seemed to think that there was something odd in the two words "will draw" appearing in the new subsection. The reason for those words is to cover situations such as at Skelmersdale, where, I understand, very little development has so far taken place, although it is hoped by all concerned that a great deal will take place. Therefore, it is necessary to look at that new town and at any other new town which may come within the ambit of the subsection and where it is likely to draw its population from in the future. I hope that we shall all remember, when we are considering the detail of this subsection, that all that my right hon. Friend is trying to do in accepting this series of Amendments is to help new towns like Skelmersdale. I am sure that is something we are all in favour of.

As to the difficulty of reaching a conclusion as to where a new town will draw its population from, that, as the hon. and learned Gentleman hinted, is a matter of judgment. I think he called it prophecy, but it will be a judgment, made by the Minister of Housing and Local Government or the Secretary of State for Scotland, based on the facts which are available. Of course, as the hon. and learned Gentleman knows, when one is talking of new towns and development districts, there is a great deal of long-term planning which goes on in connection with new towns, and I should have thought that there would be ample facts available to enable the Minister concerned to reach a conclusion.

The hon. and learned Gentleman asked what is to happen if the Minister went berserk or something like that, and refused to give a certificate, although a private individual with sufficient interest were able to establish that the new town in question drew or would draw its population mainly from a development district which he specified. As I understand it, and I have consulted my hon. and learned Friend on this point, if a certificate were not given and the criteria laid down in the subsection were established, then indeed the new town would qualify for free depreciation, but it was thought to be of convenience to have provision for a certificate to be issued by one of these two Ministers, and I should have thought that an advantage.

The other point raised by the hon. and learned Gentleman was the meaning of the words "the district". I think I can best explain what is meant by the subsection in this way. One takes a new town and is considering whether or not it falls within the ambit of this subsection. Then one considers any single development district and whether the new town draws or will draw its population mainly from that particular district. As the hon. and learned Gentle- man pointed out to us, there is towards the end of the subsection a reference to "a specified district". Therefore, one has to consider, in accordance with this subsection, the position of the new town in relation to any particular district. Having done that, one comes to the conclusion that it draws or will draw its population mainly from that particular district, or that it does not. If one finds that it does not come from that particular district one looks to see if it comes from another.

Mr. Mitchison

"Will draw." I wish the hon. Gentleman would deal with this more seriously. What the Minister is going to certify is that the new town "will draw" its population from a particular development district. He is also, presumably, going to consider whether or not that development district will be there in a year or two's time, and it is not only a year or two but longer. He is going to consider whether the conditions which will attract the population from that district will exist. At the end of it all there will be peculiar injustice if the same number of people come from the same area. It depends on whether that area is one or two development districts whether the relief is given to the taxpayer.

Mr. Barber

I will elaborate that point if I may. I think it is perfectly clear from the wording that the district referred to must be a development district. Therefore, all one has to do is to look at any particular existing development district to see whether the population of the new town is either coming from or will come mainly from that particular development district. If the Minister comes to the conclusion that the new town will draw its population mainly from the existing development district the fact that it may be descheduled, or whatever the phrase is, in a year or two's time certainly would not preclude the Minister from designating the new town as being eligible for free depreciation.

Mr. Jay

We are not objecting to the purpose which the hon. and learned Member for Southport (Mr. Percival) and the Government have in mind. We are arguing that the Clause as drafted may produce effects quite different from those intended. The difficulty arises from the ambiguity of the word "outside". The crucial phrase is a new town outside a development district. The hon. and learned Member, or whoever drafted the Clause, had in mind Skelmersdale outside Merseyside or East Kilbride outside Glasgow in the sense of a new town which was near to a development district. But the word "outside" has not only that sense. One could say that Berlin is outside the United States or that Melbourne is outside Russia, so that the Clause would apply not only to new towns such as Cwmbran, Skelmersdale and East Kilbride but to Corby, Stevenage or Basildon, because they are outside a development district. If a new town is not in a development district, obviously it is outside a development district.

Applying the Minister's argument, Corby and Stevenage are new towns outside a development district. If it were established that a new town in the South of England was likely to draw its population mainly from Scotland or the North-East Coast, then, according to the Minister's interpretation, Corby, Stevenage and similar new towns would qualify for free depreciation. That is not what the hon. and learned Member intends, and I am sure that it is not what the Chancellor intended, for the concession would be used to achieve exactly the reverse of the object of the Local Employment Act, and the Budget. It would mean that free depreciation was being used as a magnet to draw population from Scotland to some new town in the South.

Mr. Ross

This is giving the Government too much credit. They must be drawn from only one development district in Scotland. Scotland is not a development district.

Mr. Jay

I was dealing with the Financial Secretary's interpretation. If a new town in the south of England drew population from one, or according to the Minister's interpretation more than one, development district, it would qualify for the concession.

Is the Chancellor satisfied that if we adopt the Clause in this form it would not apply to new towns in the Midlands or around London which were drawing population from one or more of the development districts? If it could have this effect—as appears to be the case from the Financial Secretary's interpretation—would it not be better to find some way to reconsider the wording?

Mr. Maudling

The discussion has gone rather wide. There is a specific problem which is difficult. I said in my Budget statement that we were introducing a new principle of differentiation in taxation which was quite a new principle to our law, and I said that it would be important to draw pretty exact lines. We therefore drew the exact line around the development districts as such and we did not go into the "grey" area which is covered by the specific grants of the Board of Trade.

1.30 a.m.

There is one point which the Amendment brings forward, that there are certain new towns—not so much expanded towns—which are really extensions of existing towns. Skelmersdale is probably the best example. People from Liverpool are being housed in Skelmersdale. The population of the new town will be transferred from a development district in these circumstances, and, therefore, it is sensible that the same privileges or advantages should apply to them in their new city as would have done in their old city.

I understand the feeling behind the proposal, which is that where there are new towns whose purpose is in practice to receive population from anexisting development district, that new town should have the advantages. I think I am right in saying that in the North-East all the new towns are in development districts. In Scotland, by and large, all are in development districts. Thus, as far as I can see, in practice Skelmersdale is the only example where we shall have a new town linked with a development district and drawing its population from a development district, Liverpool—which is the purpose of building the new town.

The Amendment desires to deal with a simple practical problem which is worth dealing with. I see no reason why the proposal should be extended beyond this. The Amendment refers to "the district" and "a specified district," and does not extend beyond that.

Mr. Jay

While we agree with the aims, can the right hon. Gentleman explain how the words in the Amendment would not apply to, for instance, Corby if it were drawing its population mainly from a development district in Scotland?

Mr. Maudling

If that were so, it would apply, but I do not think it does.

Mr. Willis

To take a specific example, if the new towns of East Kilbride or Livingston were descheduled, they might take workers from Glasgow or North Lanark. As I understand the right hon. Gentleman, if either of these new towns was linked with a specified development district, such as Glasgow, and the majority of the population came from the neighbouring development district, the new town would not be entitled to the payments under the Clause. As I understand it, the Secretary of State will tie a new town to a specific area—North Lanark or Glasgow, contiguous areas—but if the majority of the population came from a development district which had not been tied to the new town—which is possible because of the high unemployment in either area—it would not be eligible for the grants under the Clause.

Mr. Dalyell

Will my hon. Friend accept that this is not a hypothetical problem but an actual problem? The area which contains Livingston has been scheduled, de-listed and scheduled again, and that might happen again in the future.

Mr. Willis

I was dealing with it not as a hypothetical problem but as a very real problem. I fail to understand why a new town should be disqualified from receiving grants simply by virtue of the fact that it happens to be taking unemployed from Glasgow rather than from North Lanark or from North Lanark rather than from Glasgow. What is the purpose of this provision? Surely it is quite wrong. I should have thought that in order to have been effective it should have had rather a different interpretation from that which it was given by the hon. Member.

It appears to me to be desirable for the Government to frame a Clause which would embrace this kind of circumstance. I do not see how the Secretary of State for Scotland can decide from where a new town is to draw its population if it is situated in central Scotland. Everyone knows the situation in the west of Scotland, and appreciates that population is likely to come from a number of develpoment districts. It might even come from Fife, which is a development district.

Under this provision a new town will receive the grant only if the Secretary of State happens to be a good guesser and guesses the right district to which to tie the new town. That is hardly a suitable foundation upon which to base fiscal policy. I should have thought that the Chancellor of the Exchequer would hardly like to base his fiscal policy on the guesses of the Secretary of State for Scotland. One could hardly think of a more unsatisfactory method of distributing assistance. The provision appears to be quite unsuitable from that point of view.

We all agree that the Government are trying to extend this assistance. That is a very good thing. But we question whether the provision provides the best method of proceeding. I should have thought that in the circumstances I have outlined, which are very practical circumstances, and quite likely to arise in Scotland, the provision does not do that.

I agree with the other criticisms that have been made, but in order not to waste the time of the House I have not said anything about them. But this difficulty, which is made all the clearer by the explanation which has been given by the Chancellor, seems to present a real difficulty and to give rise to serious problems and also to the question why the town should be dependent upon this choice in an area where several choices can be made by the Minister concerned.

Mr. Callaghan

I do not know whether my hon. Friends feel like torturing the Government any longer on this matter. What we have done is to expose the slipshod way in which this provision has been drafted, and to bring up a number of obvious anomalies which will become clearer as time goes on. I am not sure whether I am being fair to the hon. and learned Member for Southport (Mr. Percival). When hon. Members on this side of the House draft Amendments we are always told by the Government that our drafting is wrong, and even when they accept the principle they make us withdraw them in order that better-worded Amendments can be moved.

The drafting in this case is slipshod, and I appreciate the difficulties under which the hon. and learned Member labours. I am surprised that the Chancellor should have accepted a provision worded in this way, and which has no doubt been worded in this way because the hon. and learned Member has not had at his disposal the tools that the Government have. I am surprised that the Chancellor should not have said to his hon. and learned Friend, "Withdraw the Amendment, and we will see what we can do about it". That would have been the best thing to do—unless assistance was given to the hon. and learned Member in the drafting of the provision. The responsibility now rests on the Government. It is they who are putting the Clause through. It is they who are recommending its acceptance. It looks as though they may well be inviting a number of court actions to be decided if the facts are not conclusive. It is clear that they have opened the door much wider than they intended. I do not know that we need resist it and I do not know that we need go on reminding the Government, at any rate this year, of what they have done.

I draw attention to one further difficulty which the Chancellor has led himself into by the wording he proposes that we should accept. It is the intention of the Labour Party, if we win the next General Election, to build a new town in Mid-Wales. We hope that the population of that town will come from other parts of Wales. I put it to the right hon. Gentleman that it will be extremely difficult for the new town to get this free depreciation allowance, unless it can prove that it will draw all or the majority of its workers from the relatively small number of development districts. This is absurd, since the necessity of Mid-Wales, as everybody who knows it will agree, is to encourage industry to go there and establish itself there. We shall have to go to great pains with the aid of slate and crayons, census enumerators combined with birth certificates, and goodness knows what, to prove to the Minister of Housing and Local Government that all the workers will come from a particular district. This is madness. I do not believe the Clause will stand up beyond 12 months. I am willing to venture, outside the Chamber, considerable odds that the Government will come forward with Amendments to the Clause to make it more workable next year.

Mr. Ross

They will not be there then.

Mr. Callaghan

I yield to that. My hon. Friend is obviously right. Let us let them have their provision, wallow in the mire, and discover their own mistakes, which through lack of foresight they have been unable to see until we pointed them out to them, and let us move to the next Amendment.

Amendment agreed to.

Mr. Barber

I beg to move, in page 40, to leave out lines 29 to 32 and to insert: the following machinery or plant as if the district had continued to be a development district, that is to say—

1. (a) machinery or plant which at that time is within, and has before that time been used in, the district;
2. (b) machinery or plant provided for use in the district under a contract entered into before that time;
3. (c) machinery or plant provided for use in the district under a contract entered into within two years after that time and in the case of which the following conditions are satisfied—
   1. (i) that it is for use in or about a building or structure provided for use for industrial purposes under a contract entered into after the 3rd April 1963, or is for use in conjunction with other machinery or plant so provided, and
   2. (ii) that its provision was required for the fulfilment of the purpose for which the building or structure or, as the case may be, the other machinery or plant was provided, and
   3. (iii) that contracts for the provision of a substantial proportion of the assets required for the fulfilment of that purpose had been entered into before the district ceased to be a development district."

I think it will be convenient to discuss with this Amendment the Amendment in Clause 39, page 42, line 6, which is consequential upon this Amendment.

This is an important Amendment which, as things have turned out, was rightly requested by several of my hon. Friends when we first considered Clause 38. The Amendment extends the provisions for free depreciation on new plaint and machinery so as to provide some safeguard for a trader who, when a district ceases to be a development district, is in a practical commercial sense committed to expenditure on plant and machinery but is not actually committed to it by a binding contract at that time. In its present form the Clause provides in subsection (6) that, when a place ceases to be a development district, the free depreciation provision will still run in two cases. The first is for plant and machinery then in the district which has alreday been put into use in the district. This covers the case where the trader had not claimed the full amount available by the time the district ceased to be a development district. The second case is for plant and machinery provided for use in the district under a contract entered into before the district ceased to be a development district.

1.45 a.m.

The new proposal embodied in the Amendment covers the case where a trader has embarked on a project which would take some time to complete and has already contracted for substantial capital expenditure, while the district was still a development district, but has left over the ordering of some plant and machinery which is necessary to complete the project. He may, for example, have entered a contract for the construction of a new factory, or the factory may be under construction when the district ceases to be a development district. He may have left over ordering the necessary plant and machinery for good commercial reasons; perhaps to see how prices would go or how a particular machine would prove itself.

In such a case he must go on with the purchase of plant and machinery and the Amendment would give him a further two years in which to enter the necessary contracts to secure the title to free depreciation. It was a proposal somewhat on these lines which was suggested by hon. Members when we considered this matter in Committee. We have, in the light of that discussion, looked at the matter further and I am sure that the Amendment will commend itself to the House.

Mr. Mitchison

One does not want to find too many difficulties in a Clause of this sort, which is designed to deal with a position which may vary considerably between one case and another. However, considering the part which represents the new portion of the Clause, I find the timing rather curious. A period of two years is allowed and the Financial Secretary seemed to assume that that was reasonable. It seems a rather long period and there is no question of having a shorter period and discretion to extend it or anything like that. It is an absolute right.

Considering the conditions to be satisfied, one sees that the first condition is that it must be (c) machinery or plant provided for use in the district under a contract entered into within two years after that time and in the case of which the following conditions are satisfied—

• (i) that it is for use in or about a building or structure provided for use for industrial purposes under a contract entered into after the 3rd April 1963…"

Can we be told why the date 3rd April, 1963, has been selected and whether an alternative was considered, providing a somewhat stricter frame than the one in the Amendment; a frame giving a discretionary power to extend it in appropriate cases?

Mr. Barber

It is a question of judgment as to whether two years is the right period. I think it is generally agreed that some period is desirable to cover the case where a manufacturer has not entered into a binding, legal contract to purchase plant or machinery but where he is, for all practical purposes, committed to do so because he has started to build.

Considering the time it takes to erect a factory and order the necessary plant—and,as I said, there may be sound reasons why the ordering has been deferred—I should have thought that two years was a reasonable period. It is a matter of judgment and other people may have taken a different view about the timing.

Mr. Deputy-Speaker

The Financial Secretary, if he is making a full second speech, can do so only with the leave of the House.

Mr. Barber

I apologise, Mr. Deputy-Speaker, and I ask for the leave of the House to speak again.

The hon. and learned Member for Kettering (Mr. Mitchison) asked why reference was being made to a contract entered into after 3rd April, 1963. The reason is simply to keep this in line and consistent with the whole basis of free depreciation. As announced by my right hon. Friend, it would, in general, apply to the purchase of plant and machinery and to contracts entered into after 3rd April. This is part of the whole basis of the Clause and this is just a reflection of it.

Amendment agreed to.

Further Amendment made: In page 41, line 23, at end insert: new town" means an area designated under the New Towns Act 1946 as the site of a new town.—[Mr. Percival.]

Clause 39.—(ANNUAL ALLOWANCES FOR NEW MINING EXPENDITURE IN DEVELOPMENT DISTRICTS.)

Amendments made: In page 41, line 32, leave out "the percentage of that residue" and insert:

"so much of that residue as it."

In page 42, line 6, leave out subsection (3) and insert:

(3) Subsections (5) and (6) of the foregoing section shall apply for the purposes of this section as they apply for the purposes of that section, but so that the said subsection (6) shall apply as if references to machinery or plant included references to works expenditure on the construction of which is expenditure to which the said Chapter III applies, and as if, in the application of paragraph (c) of that subsection to such works, references to a building or structure were omitted.—[Mr. Barber.]