FINANCE (No. 2) BILL

HC Deb 15 June 1965 vol 714 cc293-391

Again considered in Committee.

[Mr. H. HYND in the Chair]

Question again proposed, That the proposed words be there inserted.

6.12 p.m.

Mr. Noble

My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) pointed out that it was common knowledge, and only too often visible, that the Chancellor of the Exchequer was at loggerheads with the First Secretary. He might have added that the First Secretary was at loggerheads with the Minister of Technology, but that is neither here nor there.

We who come from north of the Border have been complaining that the Secretary of State for Scotland is not much more often visibly at loggerheads with the Chancellor of the Exchequer. What we have seen and what the Committee have heard time and again, almost ad nauseam, in the past five to 10 years has been the Secretary of State and the Minister of State—who were in their places a while ago but, like the other hon. Gentlemen opposite who represent Scottish constituencies, have now left the Chamber—

Hon. Members

Where are they?

Mr. Noble

I shudder to think. They are probably afraid that if they hear some words of wisdom about Scotland they might find themselves in the wrong Lobby and in trouble with the Patronage Secretary.

As my right hon. Friend said, all the words which have been poured out in Parliament—many of them by the Chancellor himself—by hon. Gentlemen opposite who represent Scottish constituencies have always been to the effect that specific things must be done for Scotland. However, after eight or nine months in office, not one action has come from the Secretary of State or the Government that is specifically designed to help the position in Scotland. No wonder the Press in Scotland refer to the right hon. Gentleman as "Silent Willy". He at least has had the sense, unlike the First Secretary, not to blame his rapidly increasing unpopularity on the Press.

The position in Scotland is beginning to look rather serious. The F.B.I., which made a report on a survey on all industry in Scotland, stated that there was beginning to be a slowing down in the considerable improvement which had been taking place in Scotland in recent years. Mr. George Middleton who, like the First Secretary, is never very slow in making his voice heard and whose face is very well known throughout Scotland, assured the Scots a day or two ago that they need not worry. Things were not really too bad, he said. That is the sort of remark, coming from somebody like Mr. George Middleton, which gives the whole show away.

It is perfectly true that things are not too bad. It is also perfectly true that by last October Scotland was beginning to make its first really serious industrial break-through for 15 or 20 years, perhaps longer. It was largely due to the actions of my right hon. Friend the Member for Bexley (Mr. Heath) and my right hon. Friend the Member for Barnet (Mr. Maudling), when they were at the Board of Trade and the Treasury, in trying to create conditions in Scotland where business could flourish and go ahead faster than in other parts of the country,

Mr. David Steel (Roxburgh, Selkirk and Peebles)

While I do not disagree with the general tenor of the right hon. Gentleman's remarks, would he not agree that the Amendment is the first sign from his party of an attempt at legislation to apply specifically to Scotland something which the Liberal Party has urged for a long time? Would he, therefore, not agree that this welcome sign shows that the loss of 13 seats in six years has had some good results?

Mr. Noble

The hon. Gentleman has not been in Parliament long enough to recall that as recently as last November a similar project was put forward for Scotland and was not supported or signed by any hon. Members of the Liberal Party.

As I was saying, due to the actions of the former Chancellor of the Exchequer and the former President of the Board of Trade the really first serious and continued industrial upsurge in Scotland was visible. Hon. Gentlemen opposite may say, "We told you that these things should be done. We have been telling you about it for years". If they want to have that satisfaction, let them have it. When they took office the position in Scotland was visibly better than it had been for 20 or 30 years. This was due entirely to the actions of the former Government and last year the area which produced the fastest growth rate in industry was Scotland. It was perhaps the first time that that had happened for a generation.

After all the Government have said, what is our position after their first nine months? We have had what has probably been the fiercest credit squeeze the country has seen, with its very high Bank Rate. We have had a very steep rise in petrol tax. We have had all the symptoms of a very fierce stop-go movement—something which the party opposite promised the electorate above everything else they would avoid. Those who live in the north of Scotland know very well that if a stop-go policy is operated in Whitehall, Scotland inevitably feels the pinch more than does any other part of the kingdom.

I listened with some interest to the hon. Member for Middlesbrough, West (Dr. Bray). I see that he has gone to blow his nose—it was certainly necessary. He apologised for the fact that he could not be heard. It was indeed difficult to follow what he said. The hon. Gentleman—perhaps unintentionally, but certainly effectively—spoilt the whole tenor of his argument by trying to go into too much detail which he did not fully understand. He spoke of the discounted cash level—we all know the scientific approach to these things.

The hon. Gentleman made some very interesting and, I think, typical remarks. He said that if his assumptions were correct—and it is a fairly big "if"—the damage that the Chancellor's action was doing to firms was only—only—of the order of 3½ per cent. He also said that a great many firms did not understand what it was all about—the normal arrogance of the considerable scientist. He told us that 50 per cent. of the investment in the United Kingdom was done on rational grounds—50 per cent.

I do not know whether that is right or wrong, but the point that he missed, and the point the Chancellor himself must have missed, is that if one is to get industry going in the development districts and keep it going there—whether in Wales, the North-East, the North-West or Scotland—the essential first thing is to create confidence.

If 50 per cent. of United Kingdom firms do not make their investment on the most rational grounds—perhaps as well as I.C.I.—and if many firms do not understand its nature, I can only say that throughout our series of debates on the Finance Bill it has been clear that very often members of the Treasury Bench did not understand, either.

The point I want to make as clearly as possible to the right hon. Gentleman the Chief Secretary is that he may be able to argue that the damage is only 3½ per cent., or 5 per cent., or 8 per cent.—I do not really care. If he will talk to people in Scotland and in the development districts he will find that a great many businesses, perhaps not as brilliantly managed as we would like them to be, have lost confidence because of the action that the Chancellor of the Exchequer has taken.

It is certainly true that the free depreciation allowances that my right hon. Friend brought in two years ago took a year or more to be fully understood—and as I think the hon. Member for Middlesbrough, West said, some of them are not fully understood yet. Nevertheless, growing use was being made of them, and firms were expanding and becoming more modern. I do not object if the Chief Secretary feels that this is not the best form of help for Scotland or the development districts. I would not care too much if he adopted the suggestion of his hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and, instead, gave investment grants. What I feel very strongly about is that throughout the whole of this Bill practically nothing has been done to try to make our industry more competitive and more efficient.

In Scotland, we have a good many types of industry which need to become more modern, more competitive and more efficient, but not only has nothing been done to help them but no specific attempt has been made to ease the very serious problems created in the North-West and in Scotland and many other parts of Britain by the rapid changes in industry which have taken place over the last ten or fifteen years, and for which Chancellors in Finance Bill after Finance Bill have pleaded. I hope that the Chancellor or the Chief Secretary will not only be able to do something to recreate the confidence that existed in Scotland but something positive to help.

My hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) spoke of the shipping industry,—an industry that stretches right across the borders of these areas—the Clyde, the Tyne, Barrow-in-Furness, and so on. If something could be done even there it would be a help, but something more is needed—

Dr. Bray

Before the right hon. Gentleman turns his remarks from the development districts, I am sure that he must have heard his right hon. Friend the Member for Bexley (Mr. Heath) say that the free depreciation provision was not working. Has he therefore no better suggestion to offer from that side of the Committee?

Mr. Noble

If the hon. Member had been in his place earlier he would have heard what, in fact, I said about free depreciation allowance.

Mr. J. Grimond (Orkney and Shetland)

I intervene briefly in this debate because I believe that we should guard against undoing the good which some policies lately pursued may be doing in some areas by introducing other policies which may be at variance with them. There has been a new determination to help certain areas which suffer from a high rate of unemployment or a high rate of depopulation, and the measures taken are very welcome. It has been argued that, amongst those measures, depreciation allowances or investment allowances are not the most important, but if that is the case now I think that they may become increasingly important in the future. I believe that industrialists are examining these provisions more closely, and I would be very sorry to see any lessening of investment in the development districts due to this Finance Bill.

It is quite true that there may be better ways of encouraging investment in the development districts—and I am particularly interested in Scotland—than by providing investment allowances. Investment grants may be a superior way of meeting the need. At any rate, we should like to hear whether the Government have any proposals to make good any possible decrease in the value of the investment allowances.

I imagine that the Government will argue that companies can now cut down their distributions and in that way pay less tax. I take it that the Government's argument is, "Naturally, if you decrease the taxation you decrease the value of the allowances." I am assured that this is unrealistic, and the changes are unlikely to work in this way; and that the effect of a Corporation Tax of, say, 37½ per cent. on a £1 million purchase of a ship is to increase the charge for taxation by £85,000, and on plant and machinery by £56,250. The Government may also by discouraging investment directly give the impression to industrialists that the outlook is not as certain as they would like it. There may already be a tendency to hold off investment decisions this autumn and next winter, and this may be a bad moment to do anything to discourage confidence, particularly in the development areas.

I have always argued that the easiest way to help these areas is to give them some tax concession. This can be done in various ways, and I am not particularly tied to this form of tax concession. The fact is that if we want to redistribute our industry and employment, one of the easiest ways to do so is to make some tax differential as between one area and another. That was accepted by the Chancellor of the Exchequer about 18 months ago, and I hope it will continue.

If it is said that this is interfering with the normal flow of investment, I draw the attention of the Government to the fact that in Sweden companies can put on deposit with the central bank reserves on which they pay no taxation but can draw on them for investment purposes. I am not saying that this is the only method or necessarily the most desirable method of encouraging investment, but there is an increasing tendency in the world at large to subsidise investment in one way or another. The Chancellor made this very much the theme of his Budget statement. It has been argued that the taxation charges are for the purpose of encouraging investment. I should have thought there was a danger that the Government were with their left hand undoing policies which they were pursuing with their right hand.

6.30 p.m.

In fact, broadly speaking, we all want to encourage investment. I think it is accepted by everyone that if we are to do so we have to give some incentive by way of grant as is already sometimes done or by capital depreciation. In Scotland, this is important at a time when there are very welcome signs of increased employment there which we want to continue into the coming winter. In spite of what has been said about the rosy position in Scotland, which I am very glad to see, with unemployment figures lower than they have been for some time, we are particularly subject to any general recession in the country. Usually a recession hits us with Northern Ireland and a few other places dependent on heavy industry much worse than the south-east of England which seems to attract light industries and the head offices of so many businesses.

I view the coming autumn and winter with some disquiet. It will be extremely disquieting if we are to be overtaken again by the type of recession from which we have suffered so much in the past and which is often brought about not by overheating in the economy in Scotland but through overheating which takes place in South-East England which the Government then consider they must damp down.

Mr. Higgins

There are some vitally important matters we should discuss in connection with this Amendment. It has been suggested from the other side of the Committee that the criterion in considering the effect of these Amendments should be the economic welfare of the State. I could not agree more. That is the criterion we should adopt in deciding whether to accept the Amendments, in particular Amendment No. 321, which is concerned with the development district allowances and Amendment No. 322, which is concerned with shipbuilding.

A point which is perfectly clear is that we have been trying in our economy ever since the war to balance on a knife edge between inflation on the one hand and unemployment, on the other. Whenever we have taken deflationary measures we have tended to generate unemployment in the development districts and whenever we have endeavoured to offset this and to balance the economy we have found that before we mopped up the unemployment we were confronted with inflation in other parts of the country. We have been continually balancing on this knife edge and the whole point about the problem is that it is a regional problem. Therefore, anything we can do to balance the regions we should do as strongly and as enthusiastically as we can.

This point was clearly recognised by the previous Government when they brought in regional investment allowances. We should be quite clear that this was not done easily. The principle of non-discrimination in taxation between regions had been very pervasive in previous generations and it was a considerable step forward to take specific action in particular development districts where the level of unemployment tended to become high whenever we attempted to curtail inflation. The previous Government were absolutely right in taking the action they did. It meant that we could blunt the knife edge on which we were poising so precariously and so operate the whole economy on a higher level of employment than otherwise would be possible.

It is most important to encourage investment in the North-East, in the North-West and in Scotland, where traditional industries have tended to decline. Development district investment allowances have been one of the means by which we have done this. The point should be made that the effect of Corporation Tax must be to reduce the real level of these incentives. Whether taxation in general is going up or down is not relevant in this context. If we look at it from the point of view of the welfare of the economy the question we have to answer is whether investment will be less in development districts as a result of Corporation Tax or not. Unless we accept Amendment No. 321 or something comparable to it we shall find that the incentive to investment in those districts will be lessened. Therefore I hope that the Government will be glad to accept these Amendments because our whole object is to improve the legislation. Clearly it has been drafted in a hurry without regard to many of its effects and, therefore, it is right for the Government to accept this Amendment.

Arguments which have been put forward from the other side of the Committee against these Amendments have relied almost entirely on the view that investment allowances are not very effective anyway because businessmen do not know how to calculate their value. Businessmen tend to use very out-of-date budgeting techniques such as a simple rate of return criterion for a single year before tax, and so forth. Such practices have been rightly deplored by some hon. Members opposite and more strongly from this side of the Committee. But if investment allowances are not used for this reason acceptance of the Amendment would not involve the Government in any extra expenditure. In fact, more and more the value of these allowances are being calculated in the correct manner as businessmen are beginning to use discount cash flow techniques. They are beginning to take into account all investment allowances in the manner in which they should do.

I am very suspicious of the suggestion put forward by one hon. Member opposite that this kind of capital budgeting technique can be employed on a cook book basis. I suggest that we cannot merely produce a pamphlet to tell people how to use better capital budgeting techniques and hope that that will produce right results immediately. Experience has shown that if one tries to use a cook book—I use that term in the sense of a recipe book and not in any way as a reflection on companies concerned—perfect capital budgeting will not be achieved.

But, as a result of the N.E.D.C. pamphlet and debates in this House businessmen are using techniques which can take into account investment allowances and that is helping to balance the economy in the way in which we wish by encouraging investment in the development districts. That process will be reduced unless Amendment No. 321 is accepted.

In an intervention the hon. Member for Middlesbrough, West (Dr. Bray) suggested that my right hon. Friend the Member for Bexley (Mr. Heath) had said that the free depreciation allowance was not working. That was not what my right hon. Friend said. He said that it was difficult to take account of free depreciation unless one used proper capital budgeting techniques, whereas investment allowances introduced some years earlier are more readily allowed for in the kind of techniques which all businessmen use.

If the Chief Secretary refuses, as I hope he will, to shelter behind the argument that businessmen do not know how to calculate the value of investment allowances he will no doubt accept the Amendment. If he insists on doing so I hope that he will tell us what alternative he can put forward, perhaps in terms of straight subsidies, so that there will continue to be incentives to invest in development districts. It is important that the incentive to invest in development districts should not be lessened in, say, the next nine months. We now have an incomes policy which has been reduced to a farce. Wage claims will, therefore, run headlong into the Government's budgetary policies, which tend to be deflationary. There is a real danger that by October there will be hyper-inflationary pressure in the economy and rising unemployment in development districts. In these circumstances, it would be highly undesirable if any action were taken now which would discourage investment in development districts. For this reason I ask the Chief Secretary, if he does not intend to accept the Amendment, to tell us what positive measures he proposes to take to ensure that investment in development districts is not reduced as a result of the implementation of the Corporation Tax.

Amendment No. 322 is concerned with investment allowances for shipping. It is clear that shipping has been treated as a special case in the past primarily because it makes export earnings. There is no doubt that our shipping industry produces an enormous amount of foreign exchange in spite of the difficult conditions which have persisted in shipping and in spite of the competitive state of the market. The fact of the matter is that since the war our shipping industry, particularly the tramp shipping industry, has been confronted with overseas competitors, some of whom have been adopting what are know as flags of convenience.

This means that they register ships in countries where the tax burden is much less onerous than it is here. Our shipping industry also has had to contend with competition from countries which indulge in flag discrimination, which is the practice of a country to say that some of its trade shall be carried in ships registered in that country. Thirdly, our shipping industry has had to contend with foreign ships which are heavily subsidised, whether it be in terms of building subsidies, which even some years ago were as high as 50 per cent. in the United States, or whether it be in terms of operating differential subsidies, which can also be very large.

The overall effect has been that our shipping industry has been under great pressure and has been subjected to competition, which has not been fair in the normal sense of the word. Our shipping industry would no doubt be much happier if the Government could negotiate agreements with other countries so that flag discrimination was eliminated or subsidies were limited. Failing this, if our shipping industry is to maintain its share of world trade and fight unfair competition, it deserves to have the investment allowances effectively maintained at their present level.

The Government should accept the Amendments, particularly Nos. 321 and 322, because to balance the economy we need to maintain the value of development district investment allowances and the value of shipping investment allowances to ensure that our export earnings are maintained. These are two areas where the unfortunate effects of the Corporation Tax should be offset.

6.45 p.m.

Mr. Barnett

I am pleased to follow the hon. Member for Worthing (Mr. Higgins) who said much that I can agree with. I wish that more speeches had been made this afternoon along the lines of the speech made by the hon. Gentleman. Unfortunately, the right hon. Member for Altrincham and Sale (Mr. Barber) felt it necessary to deal with the matter purely and simply from the aspect of making as much party political capital out of it as he could. He did not deal specifically with the problem which concerns us, which is whether the effect of the Corporation Tax will be a disincentive and be generally harmful to development districts and industry generally.

The burden of the case is whether an investment allowance as such is an incentive. There are also other factors. For example, additional funds are provided to companies, inasmuch as if additional tax relief of any sort is granted companies, particularly large ones, need put less into tax reserves and can have more available for use, either for investment in plant and machinery or for moving into development districts.

I had hoped that the right hon. Member for Altrincham and Sale would have said more on this aspect of the case. He did not deal with the question whether we should discriminate between one class of investment and another. He merely moved an Amendment which would give an overall increase in tax relief across the board. The Finance Bill has rightly been criticised in other respects—for example, as to the effect on overseas companies and the fact that it will hurt all sorts of companies, whether they are serving the national economy or not. If Amendments such as these were accepted, or if the idea of the investment allowances we have now were accepted, we should get away from the way I would like to see this type of relief work.

Mr. Barber

Since the hon. Gentleman has graciously referred to what I said, I should like to make it clear that I am not a rigid adherent to the present system. What I object to is the Chancellor's saying that he has not made up his mind, that he will study the matter during the coming year, that he is not satisfied about the incentive character of the investment allowance, and then his taking action, because of the way in which he has introduced the Corporation Tax, which very substantially reduces the cash value of the investment allowances. I will not go into great detail, but I quoted the statement by the Minister of Technology yesterday that the Government recognised the value of the incentive. It would be much better to retain the incentive until the Chancellor has made up his mind. He said that he would make up his mind during the coming year.

Mr. Barnett

I am sure that the right hon. Gentleman would want the Chancellor to have sufficient evidence about the value of the incentive and about how companies make their decisions. It is not for me to defend my right hon. Friend the Chancellor. Indeed, I want to criticise him in certain respects. The right hon. Gentleman said that he moved the Amendment because he wanted to make a contribution to industry, but he said nothing to help industry or show how we could help industry in any other way. In fact, the right hon. Gentleman did not speak closely to the Amendment.

It is not sufficient to say, as the Amendment does, that we should increase by 40 per cent. the amount on which we should give the investment allowances, without referring to capital allowances generally, which on the right hon. Gentleman's argument are also reduced in value. We know that capital allowances generally in one sense are a form of loan to those who obtain the benefit from them. But in the case of the balancing allowances or the actual loss over the period of use of the machine or vehicle, this is also affected by any reduced taxation.

Why, therefore, is the right hon. Member for Altrincham and Sale referring only to investment allowances? If he had followed the argument through he should have moved an Amendment affecting the whole range of capital allowances. But it is true that if one reduces the rate of taxation one thereby reduces the allowance which has been given. This is self-evident, but the cost to the Exchequer at present of investment allowances, annual allowances and capital allowances is reaching such astronomical figures that we as a Committee are entitled to ask whether this is the best method of giving relief.

I am disappointed that only two hon. Members, both on this side of the Committee, in the course of this debate have examined in any way the case for a system other than the whole range of initial allowances, annual allowances and investment allowances. The only research that has been undertaken has shown at least that most companies take no great cognisance of the effect of investment allowances. This has not been a surprise to me because I know from experience that most boards of directors look at their profits before tax.

I ask the Committee to consider whether we can go on increasing investment allowances, annual allowances and initial allowances across the board regardless of whether they are being given for a piece of furniture in a house or for a computer or a machine tool. We should ask ourselves what we should be doing with this great amount of money, which has reached over £300 million in investment allowances and over £700 million for capital allowances generally. These are figures to which any responsible Chancellor of the Exchequer must give consideration. I hope that my right hon. Friend will do so when he has received the results of the research which is now being undertaken.

I listened carefully to the arguments adduced by hon. and right hon. Members opposite for giving assistance to the development areas. We would all want to give them assistance. I am glad to say that my own area of Lancashire is not a development area, but if we are all pleading for different areas I would quickly plead for Lancashire and, in particular, for my own constituency of Heywood and Royton which has certainly suffered enough in the past.

Mr. Gower

Is not the position more serious than that? Is it not a question of giving assistance to development areas but of reducing the assistance which development areas are already enjoying—a much more sinister thing.

Mr. Barnett

I leave the hon. Member to refer to sinister matters and will deal with investment allowances which I was talking about. I do not deny that this must have the effect of reducing relief, but should we now go back and give this type of relief to the development areas?

Before we use this method of giving relief we are entitled to look at it closely and consider whether or not it is within our powers to devise a method of giving rather better relief to the development areas, and particularly to a specific industry which of itself could boost the economy generally and in that sense also assist the development areas.

It is possible that investment grants might be the answer, though I would not go further than to say that they are a possibility. I certainly could not go all the way with my hon. Friend the Member for Middlesbrough, West (Dr. Bray) who spoke about a 30 per cent. investment grant in the first year. His argument was complex and I will not go into it again, but I should not have thought it likely that we would be able to give 30 per cent. investment grants in one year. I should have thought that this was treading on dangerous ground.

We should consider the effect of the annual allowance and investment allowance on boards of directors when they make their decisions about investing. Incidentally, I am glad that at least today we are spared the argument of the terrible effect on small companies. This would have been too much, because very small companies are not affected anyway. They allocate profits by way of directors' salaries and bonuses and they would not be paying Corporation Tax. The next scale of small companies, that is those with profits of from, say, £2,000 to £30,000 have many other considerations in mind when they make their investment decisions.

If we are to give relief from taxation to this extent we are entitled to ask if it is having the maximum effect that we expect, and we are entitled to inquire into the reasoning of boards of directors when they make their decisions. I believe that there are a number of considerations. Firstly, they decide on the amount of funds available at a given time. Another factor, and an important one, is the slothfulness or otherwise of boards of directors. Many have large funds available to invest which they do not invest, or invest very badly. Then foremost in the minds of directors is the forecast trends of their own industry.

Among these criteria there is only one—that relating to the amount of funds available—which is relevant to this method of relief. Even then it is not a direct incentive. It is merely that to a small percentage the directors would have more funds available if we gave them a higher investment allowance and higher capital allowances, in the sense that, taking this year's accounts, instead of allocating to their tax reserve £X they would allocate a small percentage less. Therefore, in this sense there is an incentive, because they have more money available, and directors using this as one of their criteria might be prepared to invest that money.

Mr. Higgins

Would not the hon. Member agree that if we calculated, let us say, the internal rate of return on the present value this would appear more favourable if the kind of Amendment which we propose were accepted?

Mr. Barnett

I would not disagree with the hon. Member. I was merely pointing out in what respect more funds would be available and attempting to show this type of investment or capital allowance would be an incentive in one small sense only, and that the main criterion in judging it must be whether or not it would be an incentive.

I support much of what has been said about the need to give assistance in specific parts of industry and to development areas, but I do not believe that we have examined this matter anything like sufficiently. I hope that the Chancellor, in making his review, will proceed with considerable urgency. I hope that he will not leave the matter, when he comes to a decision, to next year's Budget. I am sure that we can have sufficient sense of urgency to find an answer to the problem long before next April, and I hope that by the autumn of this year it will be possible to decide what should be done. I see no reason why the Chancellor should not then say that he has the answer and knows as a result of his research what industry and the country need and act accordingly without waiting until next year to implement it.

7.0 p.m.

Mr. R. Chichester-Clark (Londonderry)

This debate has become temptingly regional. We have heard from Scotland and from the North-East—

Dame Irene Ward

No.

Mr. Chichester-Clark

I have no doubt that we shall hear very loudly from my hon. Friend later—I look forward to what she has to say—but I feel that I should make my voice heard in speaking for Northern Ireland.

On 22nd February last, we discussed economic development and regional planning in Northern Ireland. We discussed Professor Thomas Wilson's Report on Economic Development in Northern Ireland, and I said—if I may be forgiven for quoting from a speech of my own— The Wilson Report says that the seemingly generous grants towards the capital expenses of industry, in Northern Ireland and elsewhere, are greatly reduced in effective value because the value of the grants is deducted from sums allowed against tax in the form of investment, initial and ordinary depreciation allowances. Is the margin of advantage enough?"—[OFFICIAL REPORT, 22nd February, 1965; Vol. 707, c. 56.] What the Wilson Report, a very valuable document, said on the subject was this: In the Development Districts and in Northern Ireland, 100 per cent. accelerated depreciation is allowed, and further assistance may be obtained with capital expenditure and to some extent with other costs. The list of measures is impressive, but it would be an error to suppose that the benefits conferred are simply additive. To a greater extent than may be generally appreciated, additional assistance under one heading may reduce the claim for assistance under another. The main reason is that when the State makes a grant to a firm the Inland Revenue regards this grant as directly taxable or as deductible from other allowances against tax. Rather more succinctly, Professor Wilson said in his concluding recommendation: If the United Kingdom Government were to introduce legislation which would protect the standard grants from the Inland Revenue, there would be greater clarity of thought about these matters and more coherence in public policy. This Report was widely acclaimed at the time of its appearance. Winding up the debate on 22nd February, the Joint Under-Secretary of State for Economic Affairs replied in these terms: The Wilson Report goes a good deal further than any Report of that time in suggesting the sort of policy which might be pursued in Northern Ireland which would meet the problem referred to by the hon. Member. I am sure that taking the Wilson Report as our text is the best means of trying to deal with the problem now."—[OFFICIAL, REPORT, 22nd February, 1965; Vol. 707, c. 101.] That is really the point of what I say now to the Government. I hope that they will stick to that text because it is that text which is, to some extent at least, contained in these Amendments.

Mr. Gordon Campbell (Moray and Nairn)

I shall address myself to Amendment No. 534 which has been put down by my right hon. Friend the Member for Argyll (Mr. Noble) and several of my hon. Friends and myself representing Scottish constituencies. The effect of the Corporation Tax proposals is to reduce the investment allowances. This cannot be a step in the direction of modernisation. It is a proposal to reduce the allowances which are encouraging and which would further encourage the setting up of new and modern equipment in place of older plant and machinery.

There has been reference to the free depreciation allowances introduced in the Budget of 1963. I fully recognise the force of what was said by my right hon. Friend the Member for Bexley (Mr. Heath, that it took a bit of time for these allowances to be understood and their effect to be appreciated, but I can tell the Committee that in Scotland they have been a special factor, which, perhaps, they have not been generally elsewhere, in encouraging firms to come to Scotland. Since the 1963 Budget, the free depreciation allowance has been available in development districts for the installation of industrial plant and machinery.

Two points were raised by the introduction of the free depreciation allowance. First, it introduced a new principle of differential taxation. This was something which many of us in Scotland had been pressing for as a new help and incentive, but, of course, it can be appreciated that to take a new step and establish a precedent by adopting this principle was a major change liable to be opposed as creating a precedent leading to an immediate flood of water over the fall, starting all kinds of new ideas, and so on. But it was done. Secondly, as I have said, it was of particular value in Scotland and has encouraged firms to settle and expand there. Free depreciation has been one of the factors in the success of the Conservative Government's policy of bringing new firms and industries to Scotland.

It is noteworthy that, at the end of last year and the beginning of this year, there was quite a lot of comment in the financial and other Press about the improved state of the industrial scene in Scotland. Such papers as the Sunday Times, the Financial Times and the Economist have reported on the new developments there as a result of firms moving in. I draw particular attention to the electronics industry, which appears to have found conditions particularly suitable in the east and north-east of Scotland. Yesterday, when the Minister of Labour was answering Questions, there were many references to shortages of labour in the Midlands and south of England. There are not such shortages of labour in Scotland, and it is necessary to have incentives to bring about a more reasonable distribution of labour in the country as between the over-active and congested areas of the South and the areas in the North where industries have been contracting and there is unemployment.

The fruits of progress in development in Scotland are now to be seen, but the continuation of this process is hampered by the credit squeeze of the last seven months and now, on top of that, by the proposal to reduce the investment allowances. This is not what Scottish people expected as a result of the pre-election statements of the party opposite about regional development and planning.

The Secretary of State for Scotland (Mr. William Ross)

Will the hon. Gentleman explain why in the first four months of this year the number of projects is greater than it was in the first four months of last year, why the amount of factory space taken is practically double what it was last year, and why the same is true of the number of jobs in prospect in the first four months of this year compared with last, the very period to which he has referred?

Mr. Campbell

If the right hon. Gentleman had read some of the articles I have mentioned, he would have known that all of them pointed out that this was the result of starts and work done months or a year or two years before. It takes time for firms to get into action on the ground after the original measures are taken and people decide to move to Scotland. I am most disappointed that the Secretary of State should say something like that because it shows that he has not really understood the process.

However, I was referring to the comparison between what was said by the Labour Party before the election and what it is actually doing in office. The Labour Party manifesto stated that for Scotland, Wales and Northern Ireland and regions of England there would be inducements to firms to move to areas where industry is declining in order to check the drift to the South. It was also stated that a policy statement had already been issued for Scotland, entitled "Signposts for Scotland". On page 8 of that pamphlet the party opposite said: At the same time inducements of various kinds, including special investment allowances and other tax reliefs, will be offered to industrialists who are prepared to take more jobs to job-hungry areas. There is nothing in that passage to indicate a reduction in investment allowances. On the contrary, the clear impression is that they are to be added to or increased in value.

The hon. Member for Middlesbrough, West (Dr. Bray), who is not here at the moment, said that the amount suggested in our Amendment would not exactly retain the value of the present investment allowances. But it is not a question of the exact value. From that passage in "Signposts for Scotland" we get an indication that values are to be increased. Surely it is not a matter of working out exactly what equivalents would be in the circumstances now proposed for the Corporation Tax.

I want to ask the Minister without Portfolio—perhaps the Secretary of State for Scotland will be able to advise him—a number of questions. First, do the Government consider that, in these proposals or any other, they are carrying out that election policy statement about investment allowances and other tax reliefs in areas that require them in Scotland? Secondly, did the Government understand, when they were formulating these proposals for Corporation Tax, that they would have this effect of reducing the investment allowances? Thirdly, if they did not understand that at the time, or if they always knew what the effect would be, are they nevertheless, despite what they said before the election, going to press ahead with these proposals in complete disregard of their previous statements?

7.15 p.m.

Mr. Gower

My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) stated a very strong case for the Amendments. From hon. Members opposite we have heard a number of interesting but, in an academic way, rather remote suggestions for substituting some other method of making up and compensating for the reduction in the value of these investment allowances. But when all the verbiage is removed, if the Bill is passed without these Amendments the effect must be a net reduction in allowances which have now been enjoyed by industry for a considerable time.

Some doubts have been expressed as to the value of the allowances. I feel sure that many of my hon. Friends have, like myself, discussed them with industrialists and firms throughout the country, and in nearly every case the directors and managers to whom I have Spoken have expressed deep appreciation of the importance and value of the allowances.

No case has been made out to substantiate the suggestion of the hon. Member for Middlesbrough, West (Dr. Bray) that these are of doubtful value. Indeed, so obvious has been the value of the allowances that, during many years when we were in office, the party opposite constantly pressed for increases in this kind of concession. They constantly argued not only for increase in value but for extension of allowances to different parts of the country.

The Government seem in danger of discovering a single new answer to every problem. They appear to take the view that all our difficulties and all our future problems will be settled easily by the simple expedient of the introduction of the Corporation Tax. This is the magic sesame to a new world. It will make our industry more efficient, more competitive. It will enable us to sell in new markets. That is the exaggerated impression that some right hon. and hon. Members opposite have created, perhaps unwittingly.

If they think carefully about it they must recognise that, whatever improve- ment this new form of tax may effect for the national bookkeeper or accountancy, great problems will remain which will not be solved by this alone. The fact that this tax may bring positive benefits I am prepared to concede, but beyond that the Government should not assume too much. To suggest that the loss of investment allowances now will be compensated for by the introduction of the Corporation Tax in future which our industrialists will learn to live with it in due course is a gross exaggeration.

There can be no immediate compensation for the loss of these allowances. I imagine that in Scotland, as my right hon. Friend the Member for Argyll (Mr. Noble) suggested, there will be great despondency about failure of the Government to accept the Amendments. I imagine that there will be serious despondency in many development districts. The Labour Party has boasted about the decline of the Conservative vote in parts of the country and the loss of seats in Scotland. Certainly, there will be despondency about the Government's failure to accept the Amendments in Rutherglen and many other parts of Scotland.

I am sure that my hon. Friend the Member for Tynemouth (Dame Irene Ward) will agree that there will also be despondency in many parts of the north-east of England. The people there were not led to expect this kind of thing in Sunderland or The Hartlepools and many other districts. There will be acute disappointment at the failure of the Government to honour their pledges, made clearly in opposition and during the election campaign.

The loss to companies will be a gain to the Exchequer. The Chief Secretary owes it to the Committee to state what other method the Government will adopt immediately—not in the future—to compensate our industries for the loss of these allowances which they have enjoyed for many years. What is the alternative now? We do not want pie in the sky. We do not want to hear of some new subsidy out of the working of the new tax. What fiscal or financial concession will be made by the Government to compensate now for the loss of these allowances?

The effect of the loss of these allowances will be felt most acutely in the development districts—in Scotland, in the North-East, in Wales and in Northern Ireland. That is where the impact will be most severe. At the same time we know that the economy is in difficulties. We know the difficulty revealed today by the publication of the latest trade figures. We sympathise with the Government in their difficulties, but we do not believe that they will help to solve those other difficulties by exacerbating the problems of the areas of above-average unemployment.

This is hardly a modern looking Government. It is hardly a Government which will encourage industry to modernise and to introduce new equipment. It is now immediately removing one of the major incentives to that kind of modernisation, and I hardly believe that the Minister of Technology is a suitable alternative.

Although this loss of aid to firms may be relatively small, in some parts of the country it is a savage blow at the efficiency of the modern competitive British industry. It is a disappointment to development areas and to industries like shipbuilding. My right hon. Friend the Member for Altrincham and Sale put forward a case which the Government should accept. Certainly if they cannot accept the broad Amendment, the blanket Amendment, they should accept that relating to development areas and that relating to shipbuilding, and I hope that my hon. Friends will all take this view and vote emphatically in favour of these Amendments.

Mr. John Rankin (Glasgow, Govan)

So far as I understand its effect, I agree that Corporation Tax will mean that taxation will fall more equitably on the individual and the companies and corporations affected by it, and to that extent I support it. I believe that it will be more just than the present system, because, according to my information, there are companies and corporations which pay practically no tax whatever. If that is the case, it is unjust when tax is falling so heavily on the individual.

It has been said that the debate has tended to segment itself. That is inevitable. It always happens when, as now, many interests are represented. The interest which has drawn me to my feet tonight is that of shipbuilding. It is the main interest in Govan and if anything affects Govan detrimentally, I shall talk about it and, whether under this or a Conservative Government, I shall condemn it, just as I spent nearly 13 years in Opposition condemning the inactivity of the Tory Government which preceded the present Government, to which I am proud to belong.

However, I do not believe that there will be the gap in the operation of the Corporation Tax which the hon. Member for Barry (Mr. Gower) foresaw. I want to be assured that if there is to be a reduction in investment allowances it will not make the position of shipbuilding in Govan worse. I want to be, and I am entitled to be, assured of that. I have lived through the experience of 13 years of Tory misrule in Govan and I have seen the shipbuilding yards there reduced from three to two.

In 1951 we had three thriving active shipbuilding yards in my constituency. By 1961 we had only two. We used to have 10,000 men and women employed in those three shipbuilding yards, but by 1961, after 10 years of Tory misrule, there were only 5,000.

Mr. Edward M. Taylor (Glasgow, Cathcart)

Would the hon. Gentleman accept that, because of the activities of the previous Government, the two shipyards in Govan now have longer order books than at any time since the war, that they can hardly get the skilled men they need and that both yards are looking for skilled men?

Mr. Rankin

The hon. Gentleman must not try to make my speech for me. One thing which is essential in my audience is that it should listen to me and interrupt me as infrequently as individual temperaments permit. The hon. Gentleman has stolen a little of the speech which I have not yet completed. I shall come to that very point.

I was explaining the change which had occurred in my constituency in 10 years when the number employed had been reduced from 10,000 to 5,000. All through that time the then Government did very little to remedy the situation. However, I concede that towards the end of their period of rule the then Government introduced a grant of about £80 million for shipbuilding and that grant helped the industry. We have now achieved reasonable stability and both Fairfield and the yard at the other end of my constituency tell me that orders are good. Fairfield has two years of work on its order books and the other shipyard is equally well circumstanced.

That is a situation which I do not want to be diminished in any way. That is why I want my right hon. Friend to assure me and the people of Govan that this reduction in investment allowances will carry with it some compensation which will not interfere with the position now achieved, not only in Govan but in the shipbuilding industry throughout the country.

Shipbuilding does not live unto itself. It supports a whole bevy of trades—joiners, furnishers, painters, cleaners and furbishers of all kinds. Therefore, unemploment or threatened unemployment can create chaos in any shipbuilding area because so many are threatened. I hope that my right hon. Friend will assure me and the constituency which I have represented for nearly 20 years, and which has been faithful to Labour for nearly 50 years, that a Labour Government will be faithful to Govan and that in the long run this tax will be beneficial not only to Govan but to Great Britain and that it will assure stability and still further development of this great shipbuilding industry.

7.30 p.m.

Dame Irene Ward

The purposes behind the various Amendments and the new Clause which we are now discussing have been very adequately and very well put by my right hon. and hon. Friends. I shall not go into details, but I want to add one or two specific points to emphasise the problems which will arise if the Amendments which we propose are not accepted by the Chancellor of the Exchequer. There is one Amendment and one new Clause in which I am specifically interested and that is the decision of the Government with regard to the reduction of investment allowances in developing areas and the problems which arise out of the introduction of the Corporation Tax and the withdrawal of the investment allowances in relation to shipbuilding and shipping.

I want, first of all, to deal with development districts. Mr. George Chetwynd, who is now the Secretary General of the North-East Development Council, has quite specifically stated that the introduction of the Corporation Tax will he a disincentive to new industries to seek their future in the development districts. That comes, as I am sure the Committee realises, from one of our ex-colleagues who was the Labour Member for Stockton-on-Tees before resigning his seat and taking up the secretaryship of this very important Council.

Though Mr. Chetwynd and myself were on opposite sides of the House, and were opposed in the fundamental philosophies which exist between our parties, I should like to pay tribute to the excellent work that he has done for the North-East Coast since he took up his appointment. He has made a great deal of difference to the virility, vitality and the livelihood in the area. I think that the fact that both industrialists and trade unionists have worked together in unity for the area deserves to be placed on record in the House.

When it is said by Mr. George Chetwynd that the introduction of the Corporation Tax will be a disincentive to the development of the North-East Coast most people there, in spite of the speech made by the hon. Gentleman the Member for Middlesbrough, West (Dr. Bray), will accept what he says. I put down a Question to the Chancellor of the Exchequer as soon as I heard of Mr. Chetwynd's statement about the disincentive aspect of the Corporation Tax. Subsequently I followed this up by writing to the Financial Secretary to the Treasury. Part of the problem of this "modern" Government is that there are so many Ministers that one never really knows which Minister is dealing with which problem.

The Chief Secretary to the Treasury (Mr. John Diamond)

If the hon. Lady would forgive me saying so, there is one less at the Treasury than there was during the whole of the previous Government.

Dame Irene Ward

Yes, but the quality of those who are in the Treasury is all important. Certainly, I never had any difficulty when my party was on that side of the House in ascertaining which Minister was dealing with which problem. If I am here long enough I hope I shall find out a little more about the present occupants of the Treasury posts.

I wrote to the Financial Secretary to the Treasury and I wish to read out what he said because it lends weight to the Amendment we are moving in regard to investment allowances. This letter was written on 14th of June. You mention in your letter of the 19th May George Chetwynd's recent comments on the effect of the Corporation Tax on the North-East, and you will, no doubt, remember that when he answered your Question in the House on that subject the Chancellor said that he did not share the views expressed. … Of course, I might say that Mr. George Chetwynd knows a great deal more about the North-East Coast, having represented it as well as being the Secretary for the North-East Development Council, than the Chancellor of the Exchequer, who, I think, does not know very much about it. [An HON. MEMBER: "Or anything else."] The letter continued: … the Chancellor said he did not share the views expressed, since a considerable margin of preference will be retained by the North-East. That is the way the Chancellor answers the question. I think that it reinforces the point that has been made by my hon. and right hon. Friends that the reduction of the investment allowance is a factor in the future life of the North-East because this refers to the fact that there will be a margin left. The point is that it does destroy the confidence of industrialists looking for sites in various development districts. This is a confidence that has been built up over a period by the Conservative Party when we have done everything possible to encourage industrialists to move from congested areas to areas where jobs and sites were available.

The destruction of confidence in almost every field of Government has been the signature tune of the Socialist Administration. I hope that when the Chief Secretary replies he will not spend all his time in talking about the kind of speech that was made by the hon. Member for Middlesbrough, West, but that he will address his remarks to dealing with pledges specifically given by all the members of the Government at the time of the General Election.

There were many quotations which I shall not repeat. I am absolutely stunned to see the emptiness of the Socialist benches in this very important debate.

Mr. Rankin

But look at the quality.

Dame Irene Ward

When we go into the Division Lobby I shall be very interested to see whether the Chairman of the Parliamentary Labour Party will be supporting us, along with those who support him from the North-East Coast, since this Amendment deals with development districts.

The Financial Secretary went on to say: I do not think there can be any doubt about our continuing concern for the North-East and the other development districts and I know that the banks are well aware of the need to have regard to our policy on regional development. I do not want the hon. and learned Gentleman to have any particular interest in what the banks are doing. What I want to know is what the Government are doing, because this is their responsibility. If a proper lead is given by the Government to the banks to help in the development districts, we shall be only too grateful. But, as soon as it is possible, Ministers rush to put the blame on somebody else. This is another aspect of Government policy. They say that every man is out of step except the Government.

The Financial Secretary continued: The guidance to the banks was couched in general terms, and it is for the banks themselves to take it into account, together with all the other relevant factors, when they are dealing with specific applications for advances. The relationship between the banks and their customers"—

The Deputy-Chairman (Sir Samuel Storey)

Order. There is nothing about the banks in these Amendments.

Dame Irene Ward

I quite understand that. Sir Samuel, but there is something to do with the general financial policy of the Government. Therefore, when I make a complaint about the withdrawal of the investment allowance and the imposition of the Corporation Tax, if the Financial Secretary likes to take up the position of the banks as a defence for himself—

The Deputy-Chairman

Order. The hon. Lady must not be misled by the Financial Secretary into getting out of order now.

Dame Irene Ward

I imagine that it is very difficult for the Financial Secretary ever to be in order. However, I have made my point.

Would the Chief Secretary deal with the pledges which have been made? It has been very well put by my right hon. and hon. Friends that there was no suggestion whatsoever before the election that there was to be a possible alteration about investment allowance policy. Having year in and year out from this side of the Committee attacked the policies of the Conservative Party and the extent of the allowances made to the development districts by the Government which I supported, I should have thought that before making the pledges which were made at the General Election and in speeches on various Finance Bills in the House the shadow Chancellor of the Exchequer would have already made up his mind, if he did not agree with investment allowances, what he was prepared to put in their place if his party was fortunate enough to win the General Election.

There has been no decision, no plan, no results from this talk about the Labour Party being poised for action. All we have had is words, words, words, which are the easiest thing on earth for politicians to produce. I want the Chief Secretary to deal with the pledges which were made by the Labour Party, and I want to know how he proposes to answer the criticisms of Mr. George Chetwynd and how he proposes to restore confidence to industrialists before they consider making a move to the development districts. The effect of the Corporation Tax and the reduction of the investment allowances is to say to industrialists, "Members of the Socialist Government did not mean one word of what they said during the General Election or in the speeches which they made in the House".

7.45 p.m.

I now come to my second point. I was absolutely stunned that the hon. Member for Middlesbrough, West paid no attention to the very important speech made by Sir John Hunter, Chairman of Swan Hunter and Wigham Richardson, on the views of his company and himself and his board of directors about the introduction of Corporation Tax. My hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) put very clearly the views of the Chamber of Shipping, and we have heard the views of a leader of British shipbuilding.

There is no need for me to develop in detail the points made about shipping and shipbuilding, but I want, once again, to point out that until we put forward our Amendments on, I think, Clause 46, no hole of any kind had, apparently been dug by the Treasury Ministers to deal with the problem of shipping and shipbuilding.

It is very disconcerting to great industries like shipping and shipbuilding, with all the implications about invisible exports and the balance of payments, that no attention had been paid to their needs before the introduction of the Finance Bill. I am bound to say that the Minister of State answered our Amendment in very smooth, honeyed words. What he said was very acceptable because he gave us great encouragement, and it has been very well received by the Chamber of Shipping which believed—I hope that it was right—the words spoken by him.

The Minister of State answered our Amendment on 3rd June, since when there has been some time in which the Government could have made up their mind about what they proposed to do to help these great industries. I do not think that the Chief Secretary, who is a technician of great standing in his own right, would disagree with me when I say that in industrial matters it is a very good thing to take notice of what the professional people who have to run the industries feel are necessary for their advancement. I therefore commend to the Chief Secretary the proposed new Clause and the Amendment dealing with the shipping industry, which has the acceptance and support of those who earn a livelihood, not only for themselves but for the nation as a whole.

Several Hon. Members rose—

Dame Irene Ward

I am always glad when hon. Members are longing for me to sit down, but I have waited a very long time to speak. I have listened to Scotsmen, Welshmen and Irishmen putting forward views on behalf of the areas which they represent. I therefore see no reason why I should not put forward views on behalf of the area which I represent, even though on the North-East Coast we have no Privy Councilors prepared to speak up because, as I have said, the right hon. Member for Easing-ton (Mr. Shinwell) has not graced the Chamber during this very important debate.

The Minister without Portfolio said: It is within that context"— he was referring to what he said about shipping— that we have to consider whether there is anything that can be done within the four corners of the Finance Bill to help the shipping industry. As has been said, some of my hon. Friends and I have had discussions with representatives of the shipping industry. We are grateful to them for the suggestions they have made on how we can help them. We are anxious in this Committee to consider how far anything on the lines of these Amendments would be of value to the shipping industry. This is the problem."—[OFFICIAL REPORT, 3rd June, 1965; Vol. 713, c. 2075.] This is the problem. There comes a moment when any Government must make up their minds.

When I listen to hon. Members of the Liberal Party talking on these matters, their argument is that everything must judged on its merits. That is a good phrase to British ears. There comes a time, however, when the judgment has to be made. I regret to say that the Government are falling into the Liberal way of life. We hear in these honeyed phrases that the Government are anxious to help the shipping industry and that they are trying to find what they can do within the terms of the Bill.

The professional people who are concerned with shipping, and, incidentally, with shipbuilding, have offered professional advice to the Government. If the Government are not willing to accept professional advice, those of us who are interested in the future progress of the shipping and shipbuilding industries will be anxious to know what the Government would put forward—

Sir D. Glover

My hon. Friend's speech is so compelling that the right hon. Member for Easington (Mr. Shin-well) has now come in.

Dame Irene Ward

I have always known that the right hon. Gentleman really likes me in private. He has been made a Companion of Honour, so he is now both a Privy Councillor and a Companion of Honour. I am sure that the award by Her Majesty gave great pleasure to a great many people. [HON. MEMBERS: "Hear, Hear."] The country always likes to see acknowledgment of those who have served the interests of the nation, although not always in the way that I would like them to be served, and especially someone who has always been a figure in the House of Commons. I should like also to add my congratulations to the right hon. Gentleman the Chief Secretary.

Now that the right hon. Member for Easington has come into the Chamber, perhaps I might repeat what I said before. I am looking forward to seeing him strike a blow for the North-East Coast. Many a blow have I struck, and I am looking forward to him for once following my lead, even though he has become so distinguished.

I am looking forward to the right hon. Gentleman going into the Lobby tonight with those of the Tory Party who have spoken up for the shipping industry and for shipbuilding. The right hon. Gentleman gets on very well with those industries. That is the curious thing. I notice that the men of the industries are always agreeable to the right hon. Gentleman, and that he is always agreeable to them.

On this occasion, when the Minister without Portfolio is seeking for a way to give real assistance and help to this vital industry for the progress of the country, for our invisible exports, for the maintenance of employment and for keeping our yards up-to-date, alive and in full employment, I am looking forward to the right hon. Member for Easington leading his flock from the North-East Coast into the Lobby for an area where we have some very vocal Tory Members, but not so many Tory seats.

Mr. Robert Maxwell (Buckingham)

Thank goodness.

Dame Irene Ward

That is not what the North-East Coast thinks just now. The North-East Coast would like a great many more Tory Members.

I conclude my speech by saying that this was what the Minister without Portfolio said on 3rd June. The case for the shipping industry has been well deployed by my hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) and I am looking forward to the Chief Secretary telling us, now that the Government have had time over the Whitsun Recess and, perhaps, when they were closeted in Chequers, what their proposals are. If they can better the proposals put forward by the professional interests, we on this side of the Committee will be very pleased indeed to hear them.

Mr. Stanley R. McMaster (Belfast, East)

I should like to add a few comments to those made by my hon. Friend the Member for Londonderry (Mr. Chichester-Clark). All of us in Northern Ireland are familiar with a document published on behalf of the Labour Party called "Signposts to the New Ulster". This was published as part of their election campaign and it no doubt contained a true statement of their intention about assisting Northern Ireland.

That document referred, among other things, to incentives and inducements which would be introduced by the Labour Party if they came to power, to the high interest rates which they had had under Tory rule and to how the Tories had created a slow and sluggish economy. I wonder how many of the electorate who read that pamphlet would realise that it was the same Government who advocated those things in that pamphlet who have now been in office for eight months. We are now entering upon the third 100 days. We all heard from the Leader of the Labour Party what wonderful things would be done in the first 100 days.

As to Amendments Nos. 320 and 321, I should like the Government to consider whether this is not, perhaps, the first opportunity for them to show their true intentions by bringing into effect some of the things they talked about in "Signposts to the new Ulster", as they did in their other documents relating to Scotland and Wales. If they want to create incentive and inducement, is their action in the Finuance Bill a true example of such incentive and inducement?

I wonder where the Government's planning that they talked about so boldly before the election has gone. In many debates on Finance Bills and other matters during the six years since I first entered the House of Commons, I have advocated strongly that the Finance Bill would be a suitable vehicle to help such areas as Scotland and Northern Ireland.

In those days, I always had tremendous support from hon. Members opposite, but it seems now to have evaporated.

The free depreciation which was introduced a year ago has been of considerable help in attracting new industry to Northern Ireland. Instead of this free depreciation, we find in the Bill provision relating to investment allowances which, instead of assisting our industries in Northern Ireland and instead of offering new industries inducements to go there, will deter industry from expanding, either in Northern Ireland or elsewhere.

The effect of Clause 52 is to reduce investment allowances—

Mr. Diamond

The hon. Member is all wrong.

Mr. McMaster

How can I be all wrong?

Mr. Diamond

The hon. Member has been talking about giving full relief and giving freedom for special depreciation, which is not affected. We are talking about investment allowances only and I am anxious to hear any new ideas that the hon. Member has on that subject.

8.0 p.m.

Mr. McMaster

The right hon. Gentleman has failed to answer the question. I said, and it has not been controverted, that investment allowances would be reduced as a result of the Bill. If I am wrong, I am willing to give way to the Chief Secretary so that he can explain why I am wrong. I see that he does not wish to intervene, so presumably he accepts that investment allowances will be reduced.

Northern Ireland has the highest rate of unemployment in the United Kingdom. At the moment, between 6½ per cent. and 7 per cent. of the population there is unemployed. We require 30,000 new jobs, and this at a time where there is over-full employment in the south of England. What better method is there than using this Finance Bill to induce industries to go to Northern Ireland where they can provide work for these 30,000 people who need it? The amount of capital invested on each person employed is rising rapidly year by year and there would have to be a substantial investment of capital to provide employment for these people. Each of the new industries which has gone to Northern Ireland in the past 15 years has led to a large investment in such things as the production of synthetic fabrics and synthetic filaments, and if we want to attract more industries of a similar type, we must make it worth while for these high capital investment industries to go there.

I should like to deal particularly with the Amendment relating to shipping. The effect of this Clause will vary according to the rate of Corporation Tax. If the rate of tax is only 35 per cent. as was mentioned by the Chancellor on 6th April, the combined yield will be the equivalent of about 8s. 3d. in the £. If, on the other hand, the rate of tax is as high as 40 per cent.—and the Chancellor said that it would not exceed that, but the exact figure is not known—the amount of the investment allowance will be reduced. Amendment No. 322 has been tabled to ensure that investment allowances remain the same under this Finance Bill as they were previously. It says: Provided always that the expenditure on the provision of ships in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent. The shipping industry today is operating on a very narrow margin of profit, and this is another factor which will affect the value of the investment allowance which is covered in the Bill. The companies covered have a low profit margin, and it is particularly important that they should receive the full benefit of the Bill so that they can compete against other countries which have a more liberal taxation system, particularly in relation to their shipping industries.

I am sorry that hon. Gentlemen opposite do not appear to be paying any attention to the arguments being put forward on behalf of the shipping industry.

Mr. Maxwell

We have heard them all before.

Mr. McMaster

Hon. Gentlemen opposite are ready to interrupt and to allege that what I am saying is incorrect, but they are not prepared to listen to the arguments. I find this rather appalling.

When shipowners in Britain decide to build new ships, they take into consideration the amount of the investment allow- ance. Many of the decisions to order new ships were taken some time ago, and the financial details were carefully worked out. If the Bill reduces the value of the investment allowance, the decisions will be rendered false, and the companies concerned may lose money. Perhaps I might remind the Committee that about 86 per cent. of the orders received by British shipyards last year came from British owners, and when these owners are contemplating ordering more ships, they must be able to know with some degree of certainty what the value of the investment allowance will be. I suggest that the Amendments which we have tabled should be accepted by the Government to provide them with an easy way of fulfilling their promise to assist our shipping industry.

The amount of the investment allowance will vary with the profitability of the company, and also with the rate of Corporation Tax. I should like the right hon. Gentleman to give us an assurance that he will give favourable consideration to these Amendments, first, in relation to the development districts and areas of high unemployment, and, secondly, in relation to the shipping industry, not only because of the direct help which will be given to our shipowners if they are accepted, but also because, by helping them, we might help our shipbuilding industry.

Many of the main centres of shipbuilding are in depressed areas of high unemployment, such as Scotland, the North-East Coast and Northern Ireland. Although the order books are perhaps a little fuller, and look a little brighter than they did a few months ago, due to the work of the E.C.G.D., these orders will carry us forward for only about 12 months. The best customer of the British shipbuilding industry is the British shipowner, and I therefore suggest with all the force at my command that the Government should give favourable consideration to these Amendments.

Mr. E. Shinwell (Easington)

I had not intended to take part in the debate on the Bill. It is much too technical for my liking. Indeed, occasionally when I have come into the Chamber and listened to the debates I have wondered whether any right hon. or hon. Member was familiar with every detail of the Bill. I say that with great respect even to the Chief Secretary, who has put up a magnificent performance.

It would be very churlish of me if I were to decline the invitation extended to me by the hon. Lady the Member for Tynemouth (Dame Irene Ward) to take part in the debate and say a word on behalf of the British mercantile marine. I should like to offer my grateful thanks to the hon. Lady for her very kind observations about the honour which has just been conferred on me. It may be that some day the hon. Lady will be the recipient of a C.H. I can never hope to emulate her by becoming a Dame. That is a rather complex subject—almost on the verge of the pathological. Nevertheless, I am grateful to her and to hon. and right hon. Gentlemen on both sides of the Committee who have exhibited some degree of pleasure—I will not say manifestations of enthusiasm—at the honour that 1 have received.

Over the past years few hon. Members have worked harder than I have to persuade successive Governments to render service to the mercantile marine. Innumerable questions have I asked from the Opposition benches. Frequent speeches have I made, supported by the hon. Lady, the hon. Member for Belfast East (Mr. McMaster) and other hon. Members who are interested in the shipping industry. In parenthesis, I would say that there have been occasions when we have succeeded in inducing successive Tory Governments to agree to debates and when very few Members on either side of the House have attended. There were occasions when a few of our gallant band, on both sides of the House, spoke up on behalf of the mercantile marine in an empty Chamber—with the greatest respect to the right hon. Member for Bexley (Mr. Heath)—without being able to evoke a satisfactory response.

8.15 p.m.

After the passage of time we succeeded, by pressing the case against the background of serious depressions in the North-East, Ulster and on Merseyside, in persuading one Conservative Government to agree to the provision of credits. This has given an impetus to the revival of shipbuilding, and we look forward to even greater progress in the future.

But let us be clear about the situation. All the financial incentives in the world, whether they be in the form of investment allowances or credits of one kind or another, will never provide for the British mercantile marine what can be provided by a reorganisation of the multiplicity of shipping concerns.

Some people have talked in terms of the proposed nationalisation of the shipping industry. The Labour Party is not proposing to nationalise the mercantile marine. That is not its policy. But it ought to be said that there has been an element of nationalisation in the mercantile marine in the past. This has happened in the Australasian Continent. It would not be unusual if that project were developed. I leave it at that. That is not on the carpet at the moment.

For many years all parties have sought to improve our mercantile marine and protect it not from elements in this country, but from outside elements—for example, the United States of America. I am by no means anti-American. The hon. Lady asked us to strike a blow on behalf of the British mercantile marine. The most deadly blow that has been struck against it in the past 12 or 15 years, since the end of the war, was the action of the American Mercantile Commission in deciding to adopt the flags of convenience and of discrimination policies. Indeed, it subsidised the American mercantile marine, which could not have carried on without heavy subsidy, thus militating against the success—

The Temporary Chairman (Sir Herbert Butcher)

Order. I hope that the right hon. Gentleman will fairly soon come to the matters before the Committee.

Mr. Shinwell

I suspected that I was getting out of order, Sir Herbert, but I thought that it was necessary to say these things.

The Chamber of Shipping has sent me its memorandum, and I have had conversations with its members. I know these people very well. They are influential, highly intelligent, and very enlightened. We cannot ignore their propositions. But I am prepared to rely upon the assurance given by my hon. and right hon. Friends on the Government Front Bench that they will do everything that they can to lift up the shipping industry and to provide every practical encouragement to promote our shipbuilding industry.

I cannot speak about the Amendment with any knowledge, because I have not studied it. I deplore having to make such a confession. The hon. Lady and the hon. Member for Belfast, East are very industrious on behalf of the shipbuilding industry in their home towns. I can understand this, just as I can understand the efforts of my colleagues from Durham and Northumberland, who do everything they can to serve the interests of their constituents. That is the proper thing to do.

I make no complaint about the observations of the hon. Member for Belfast, East and the hon. Member for Tyne-mouth, but I ask them to understand that there is much more to consider than the provision of investment allowances, or the addition of those allowances to what is now provided for our mercantile marine, if we are to maintain the power and influence of the shipping industry, upon which we rely for our invisible exports—perhaps the only invisible exports we have, except for what we receive in the way of insurance commissions, and so on. If we are to help our mercantile marine we must rely not only upon Government assistance, but upon the shipping industry itself, which must make itself more efficient by a process of reorganisation.

Mr. Lubbock

I offer my sincere congratulations to the right hon. Member for Easington (Mr. Shinwell) on his recent honour. I also congratulate the Chief Secretary. It is particularly appropriate, in view of the fact that he seems likely to have a hard day's night, that his appointment as a Privy Councillor appeared in the same list as that which contained the Beatles.

I shall not say a great deal, because some of the speeches have been of inordinate length, and most points have been well covered. There are, however, one or two points which I should like to underline. We have come a long way from the investment allowances in the last few speeches. I would remind the Chief Secretary that the Royal Commission defined them as being intended to provide a fair incentive to investment in certain kinds of fixed assets. We cannot get away from this, whatever the Richardson Commitee has said about the lack of incentive effect of the investment allowances, and whatever the N.E.D.C. may now say about the calculations employed by industrialists in deciding on their capital investment programmes.

It is perfectly true, and there is overwhelming evidence to prove it, that the investment allowances have not wholly succeeded in the effect which the Royal Commission defined, but they have partially succeeded. None of these authorities has tried to maintain that, in no case, has the existence of the investment allowances had some marginal effect in persuading an industrialist to invest in a particular piece of plant. I am sure that, in the case of the shipbuilding industry, which was argued in the last few speeches, this is particularly true, because one is faced with a piece of equipment which is of high value where the investment allowance is likely to be of great importance in coming to a decision.

The right answer to this is the education of management, which is a gradual process extending over a number of years. The right hon. Member for Bexley (Mr. Heath) said that perhaps managements have not had time to appreciate the advantages of the free depreciation allowances in the development districts, and no doubt this is true. But the investment allowances have been in existence for a number of years and one might therefore expect that accountants are gradually educating boards in the advantages they bring. Sooner or later I have no doubt that the same thing will happen with the free depreciation allowances. Just because not every industrialist has taken advantage of this, I do not think that it justifies the general contention on the other side of the Committee—expressed in the first few speeches—that investment allowances have failed and that they should be replaced by another system.

That is not what we are talking about. We must take this Finance Bill as we find it and either put forward proposals for improving the investment allowances, or—as I dare say the Government will say—leave them as they are. There may be something in the arguments of the hon. Members for Ashton-under-Lyne (Mr. Sheldon) and Middlesbrough, West (Dr. Bray), that a system of investment grants would have a greater effect. Psychologically this is true, and if one were able to give the same amount of concession by means of a grant rather than by the investment allowances, it would be more likely to be taken into account in the calculation of the industrialists. But that is not the point which we are discussing. We must await a further Finance Bill, when, perhaps, these hon. Members could put down an Amendment. Considering how strongly they appeared to feel, I am surprised that they did not do so on this occasion.

The use of discriminatory allowances, I think, also has something to commend it. We were reminded again by the hon. Member for Middlesbrough, West that this was one of the recommendations of the Royal Commission. We should perhaps narrow down the field within which investment allowances are granted at certain levels. We might discriminate, for example, between computers and numerical control equipment, machine tools and so on. This will be an extremely difficult job, because one will have somehow to decide whether one piece of productive equipment is of greater value to the national economy than another.

The right hon. Gentleman may tell me that he thinks that it would be more advantageous for a machine shop to have a Cincinnati milling machine than a Victoria milling machine and that he will grant the investment allowances at a rate of 25 per cent. on one and 20 per cent. on the other. It would be a very invidious task for any Chancellor of the Exchequer to try to distinguish between certain categories, although I think that it could perhaps be done within very broad categories, such as, for example, computers, which one wants particularly to encourage in the national interest.

As I say, this is for some future Finance Bill, and one has to consider the effect of the Corporation Tax on the investment allowances as we find them. The hon. Member for Middlesbrough, West said that he was not sure whether hon. Members on this side of the Committee were arguing about the profitability for the shareholder or that of the companies which they were discussing in putting forward this series of Amendments. I should like to give the Chief Secretary an example. These figures are taken from those of an actual company, though standardised for the sake of simplicity, and they show that, whether one looks at it from the shareholder's point of view or from that of the company, they will be worse off under the new system.

This is a company in which we shall take the profits as being £100 and the tax profits—that is, after the investment allowances—as being £80. With the existing system of Income Tax at 41¼ per cent. and Profits Tax at 15 per cent., there is a net of £55 and this company retains for development, we shall say, £22, leaving a net dividend for the shareholder of £33. As the Chief Secretary knows, in presenting this, it would be grossed up and it would be presented as a £56 gross dividend, less tax of £23—net cash, £33. I should like to tell the right hon. Gentleman what will happen to this company if one keeps either the retentions or the distributions at the same level, and I will show him that, in either instance, the amount of tax paid by the company will increase.

Again, we have profits per the accounts of £100 and the profit on which the taxation is calculated after investment allowances of £80. I am assuming that Corporation Tax will be at 40 per cent. One has to take some figure and I think that it would be wise—considering that the Chancellor has not said that the Corporation Tax will definitely be at a lower level than 40 per cent.—to take this percentage in making one's reservations for the next year rather than 35 per cent., which we have been given the impression is more likely. We then have, first, the Corporation Tax, leaving £68 and we shall assume—that the same amount is ploughed back—which, I said, was £22. That leaves a gross dividend to the shareholder of £46, as opposed to £56 in the case of the existing taxation system.

Therefore, the decrease in the net dividend in the example which I have quoted—if the retention is the same—is 18.1 per cent. Now let us see what happens in the case of maintaining a dividend at the same level. Again, we have profits per accounts of £100, profits on which tax is calculated of £80 and Corporation Tax of £32. It will be remembered that I said that the gross dividend under the existing system was approximately £56, so we deduct that £56 from £68 and we are left with roughly £11.8 retained, as opposed to £22 in the first case. The decrease in the retention is, therefore, 46–2 per cent.

I will give the Chief Secretary the figures if he finds them difficult to follow, but I assure him that in the example I have quoted the company cannot win, whether it decides to keep its retentions the same or to keep the dividends the same. In either case it will pay more taxation.

This gives the lie to hon. Gentlemen opposite, including the hon. Member for Middlesbrough, West, who say, "Why should companies worry about the investment allowances when the overall amount of taxation which will be demanded from them will be less and when they will be free to plough more back?" In many instances this will not be true and the future productive investment programmes of these companies will be damaged. That is why I support the Amendment.

8.30 p.m.

Mr. Diamond

We have had a very long debate indeed on a most important topic. Hon. Members are interested in both the general principles involved and the effects of the provision on the industries and areas with which they are particularly concerned. It would probably be convenient if I now gave the Government view on the various Amendments we are discussing, since the Committee has spent about four hours on them and since I am sure that all hon. Members want to get on with the Bill. We do not want it with us for too long.

I thank the right hon. Member for Altrincham and Sale (Mr. Barber) for the courteous remarks he made about me, and, more important, I join with him in the felicitations which he offered to the Chairman of Ways and Means. Perhaps nobody more than I knows how pleasurable he must find his present situation.

I am bound to spend some time in replying to the debate because of the variety of points which have been raised and the variety of industries which are affected, but, in particular, because I have the difficult task of adjusting minds to the facts and arguments which hon. Gentlemen opposite are showing a strong disinclination to accept. I hope, therefore, that, if I go over some of the things which have been said before, the Committee will understand that I do so because the speeches which have been made today—and I have listened to every one of them—have expressed the same arguments which have been adduced time and again and which are based on a refusal to recognise the impartial evidence which is before us.

All hon. Members, without exception, are anxious to encourage investment. That is the starting point. We want to encourage it by the best possible method. We are today involved in the constructive task of examining whether the present method is ideal, whether the advantages which are alleged to arise from the present method should be increased, or whether there should be other methods which would be more helpful in achieving the agreed objective of increasing the level of investment.

We must, first, look carefully at the extent to which the investment allowances provide the kind of inducement, stimulus and incentive to invest which they were hoped to be and which they were held out to be when they were introduced by the party opposite in 1954, and the rates of which have been varied from time to time. I remind the Committee of the conclusions which have been reached and the evidence which is available to us. The evidence is strong and it is all one way. I also remind the Committee of what was said by the Radcliffe Committee. The F.B.I., in its evidence, said that only 23 per cent. of about 1,600 firms which it had questioned … stated that their investment decisions since 1957 had been materially affected by favourable changes in investment and initial allowances and 15 per cent. by unfavourable changes". Then the Richardson Committee reported on turnover taxation and stated that almost all the witnesses who had appeared before it had said … that factors other than taxation largely determined investment decisions". Then, in an article published in the November, 1964, issue of the National Institute Economic Review entitled "Replacement Policy" Mr. Robert Neild drew the conclusion from an inquiry which he had conducted that 82 per cent. of companies did their calculations for replacement decisions on a pre-tax basis; that is, that they did not take into account the tax saving from capital allowances and any opportunity from investment allowances, although the objective of the latter was to help in this sphere.

Then there was the examination carried out by Mr. D. C. Corner, University of Exeter, and Mr. Alan Williams, University of York, who reported in February of this year similar results to those of the F.B.I. survey in 1957 to which I have referred. I must draw the Committee's attention to the dates because the feeling has been expressed in many speeches that although it takes a little time to get used to the fact and realise that there are such things as investment allowances—and, more recently, free depreciation—as the years go by people in making their decisions have regard to the whole of the facts including, very largely, the investment allowances. We therefore find that the 1957 Report is repeated almost exactly.

Finally, and this is the most disappointing report of all, the Management Consultants' Association in a survey authorised by the N.E.D.C. and the Machine Tool Trades Association, found that 95 per cent. of the sample engineering companies it interviewed last year said that tax allowances had little or no direct influence on their investment decisions—95 per cent. It would be wrong to ignore the whole of that evidence. It covers a long period, it is precise, it goes to reliable sources and it all points tile same way. It is no use our jumping to conclusions about what should be done; it is far better to have regard to what has been done, and what is still being done.

What, then, are the general criteria, if they are not tax considerations exclusively—and I do not think that anybody would any longer allege that they are—on the basis of which these decisions to invest or replace are made? The Richardson Committee dealt with this point fully and carefully. It said: … all our witnesses … were broadly agreed … that factors other than taxation largely determine investment decisions. Witnesses put these factors in various ways: the compelling need to keep capital equipment up to date and, if possible, ahead technically of that of competitors; the need to improve product quality and manufacturing efficiency and to reduce costs; the growth and potential of a particular market; the general growth and development of the business". These are all very relevant considerations, and everyone who has had experience in this field knows that they enter into such decisions. The Committee goes on: We asked witnesses specifically whether they looked, in judging investment projects, at the net return after payment of tax which the investment was expected to produce. Three witnesses said they looked principally at the return after payment of tax. The remainder said that they looked principally at the return before payment of tax. … We think"— that is, the Richardson Committee— that most medium-sized and smaller companies would also look principally at the return before payment of tax. Witnesses justified this way of looking at the return mainly on two grounds: they felt that it was the profitability of a project before tax which provided the financial motive to proceed with it, and if it proved successful the profits provided the funds out of which to pay the tax. Some witnesses also said that in making investment decisions it was necessary to look ahead over a period of years and, since it was impossible to forecast tax changes, it was better to leave this element of uncertainty out of the calculations. I do not say for one second that these criteria are irrelevant or not worth taking into account. On the contrary, I think that they are all extremely valid. I believe that businessmen who reach decisions on this basis are fully justified in making their decisions in this way. I regret that they do not fully take into account further matters relating to the investment allowances. I regret that it is not open to all of them to use the latest methods such as the discounted cash flow rate and to be advised in that respect. But it is wholly wrong, and it would be moralising which no one would stand for a second, to say that businessmen should be doing something or other and that it is wholly wrong of them to run their businesses in a particular way. We have to recognise that this is the method by which they reach their decisions—

Mr. Ian Lloyd (Portsmouth, Langstone)

I thank the right hon. Gentleman for giving way, but are we not in danger of reaching a rather dangerously biased conclusion on the question of the use of discounted cash flow? Of all the surveys to which the right hon. Gentleman has referred, not one has attempted, to my knowledge, to quantify the capital invested by the proportion of firms which do use these techniques, and as most of these things generally follow a log normal distribution one could expect from the F.B.I. survey that 23 per cent. of the firms probably accounted for 85 per cent. of the capital investment.

Mr. Diamond

No. I do not think one can jump to those conclusions. But certainly I readily accept what the hon. Member said in principle, that numbers of firms do not mean a fair comparison in size, or a fair comparison in assets used, or in investments made or in numbers employed. It would be astonishing if some of the biggest firms in the country did not make use of some of the up-to-date methods of taking every relevant consideration into account. All I am saying is that one is bound to recognise what is going on and what has been going on for a very long time.

Mr. McMaster

Did the Richardson Committee, or the other Committee, take any evidence from shipowners on this question?

Mr. Diamond

I am coming to the question about shipowners later. The point about the Richardson Committee is that the witnesses did not regard their practices as at all antiquated. They justified them. They said, "This is a sensible thing to do." They did not say, "Oh, this is a brilliant idea to take account of tax. We did not think of that; we ought to have done." They said that it is unwise, having regard to possible variations in tax and experience of the variations of tax and rates of investment allowance which have taken place since 1954, to place too much reliance on this, and the sensible thing is to have regard to pre-tax profits if a profit is made and one is taxed on it.

There is a great deal to be said for that. No one is attempting to moralise. All one is doing is looking at the situation and saying that these are the facts and this is perfectly understandable. I regard it as extremely understandable when one takes account of the tax code which has existed hitherto. One is saying to businessmen that they must be stimulated by the most remote and abstruse calculation of a tax relief which is going to help them possibly some years after the consideration they are giving it at the present time. If we think of an investment re- quiring a year's advance consideration—which is not a very long time for a major investment but a short time—after the time the decisions are considered there will be a year's lapse before payment is made and after the payment is made there will be on average 18 months or perhaps two years before any relief is given in tax. The relief given is so complicated that the sum which the hon. Member for Orpington (Mr. Lubbock) read out is absolutely straightforward by comparison.

I should weary the Committee if I tried to explain the different kinds of capital allowances and recurrent allowance, initial allowance and recurrent allowance, which relate to Income Tax and Profits Tax and to separate periods for accounting. It is beyond the capacity of any businessman in the country to say in regard to any investment he is making what measure of relief it will have for his tax bill and his bank account. I am glad to receive professional nods of agreement from my hon. Friend on a back bench, the hon. Member for Heywood and Royton (Mr. Barnett).

Mr. Heath

Is it not a confession of failure both by the Chief Secretary and his hon. Friend to say that they cannot make it perfectly plain to a firm that it is to its own benefit to take an investment allowance?

8.45 p.m.

Mr. Diamond

We can all take jocular remarks. Sitting on this bench we have to learn to take them. The serious point about what the right hon. Gentleman has said that it is implicit that he agrees with me that the non-technically qualified businessman—I mean "technically qualified" in terms of taxation—is unable to say what the measure of tax relief under the present system will be in respect of an investment he is about to make. He merely knows that it will be long postponed, that it is wholly remote, and that it is impossible for him to calculate it. If it is alleged that those are the three ingredients of a direct stimulus to investment, I invite the Committee to think again. Of course they cannot be, and the evidence is that they are not.

The real question is: what incentive effect do investment allowances have and why is everybody so keen on them? There is no question but that people are keen on them. All the speeches made by hon. Members opposite today have been in favour of, not against, investment allowances. I am saying that there is not a direct, recognisable and valuable inducement in terms of the amount of money involved, which I shall come to in a moment. They are not a valuable inducement and stimulus to investment. What they are a stimulus to is tax saving. That is what is involved. That is why they have gone up.

Let me indicate what has been happening about investment allowances over the years. First, their spread. When the House of Commons first introduced investment allowances, they were intended for such things as plant and equipment. We all knew the sort of things we were endeavouring to encourage. They now cover a whole variety of things quite legally, as a result of interpretations by the courts. I do not know whether hon. Members on both sides fully appreciate that they cover, for example, knives and forks in hotels. They cover gaming machines.

Sir D. Glover

Why not?

Mr. Diamond

They cover perishable stores, such as ropes and tarpaulins. They cover foundation garments. With the Corporation Tax at 35 per cent., these fringe or extraneous items cost about £50 million in tax. I do not think that it was the intention of Parliament that this kind of item should rank for investment allowance.

It is not only the question of direct sales. There is the problem of leasing. By leasing, a lessor who carries a stock of plant of some kind or other and who leases it out is entitled to the investment allowance. He gets the investment allowance and accordingly passes it on by a reduced rent to the lessee. The lessee may not be a person who would be entitled to the investment allowance. He may be using the plant in an entirely different way. As a result of this perfectly legal right to the lessor to have the investment allowance there has been a tremendous spread of the practice of leasing such things as television sets, washing machines and similar items. I do not think that it was the intention of the House of Commons that vast numbers of television sets which go into homes all over the country should be the subject of an investment allowance.

The cost has mounted very considerably. I am talking about the investment allowance today. The tax rate is then applied. In 1954 the cost of the investment allowance was about £100 million. In 1964, 10 years later, it had risen fivefold; it was over £500 million. It is estimated that in 1965 it will amount to more than £550 million. That is the combination of the spread of the items and the increase in the rates. The rates have risen, too.

As a result, the cost to the Exchequer was over £300 million in the past year. I conclude from all this that large sums of taxpayers' money are involved and it is very questionable whether the kind of stimulation which these allowances are intended to give is being given. Therefore, one has to start to consider, having regard to this vast amount of money, whether we are getting value for it, in terms of the Estimates Committee, for example, or whether we should consider some other method.

Mr. Keith Stainton (Sudbury and Woodbridge)

The Chief Secretary has posed the question whether we get value for money, in tax presumably, on certain items such as television sets which by process of leasing qualify. Could the right hon. Gentleman kindly break down for us into these undesirable elements and the desirable ones this total cost to the Exchequer of £300 million? Only if he breaks it down this way can he sustain his arguments.

Mr. Diamond

I thought that I had already indicated that fringe items cost £50 million. I have not the figure for leasing, but it is much smaller than £50 million.

Mr. Heath

A cost of £50 million to the Exchequer?

Mr. Diamond

Yes.

The Earl of Dalkeith (Edinburgh, North)

How much of this extra cost to the Exchequer of £300 million is in respect of allowances which were introduced by the previous Administration to enable the Scottish economy to expand and improve?

Mr. Diamond

I could not say that. The previous Administration could not say this. Nobody could say that. I am afraid that the answer to a silly question is bound to be a silly answer. [HON. MEMBERS: "Oh."] I am sorry to put it in those terms. I am sure that the noble Lord will realise that it is quite impossible to separate the economic effect of any of these allowances in terms of Scotland and England when we have a united economy. All the arguments put forward today have been based on a complete fallacy and misunderstanding, as if one could endeavour to extract from every single item its effect separately on England, Scotland and Wales. I hope that the noble Lord will realise that I was not being personally discourteous but was trying to show that that kind of question is impossible to answer however anxious one might be to answer it.

Mr. J. Bruce-Gardyne (South Angus)

Has the right hon. Gentleman considered examining the Inland Revenue reports? Those contain a clear breakdown of allowances to individuals, to partners, to companies and to local government in Scotland. The figure, for instance, for 1962–63 was £139 million. This is a specific figure and surely is precisely what my noble Friend the Member for Edinburgh, North (The Earl of Dalkeith) was asking about.

Mr. Diamond

Quite to the contrary. What I said to the noble Lord is the right answer. It is quite meaningless to pretend that one can relate the effect of an investment allowance on a particular item of plant to its use in Scotland or in England when we have a united economy. Unless we put up a complete barrier between England and Scotland it is quite impossible.

We have therefore got to the stage where we are spending a great deal of taxpayers' money on a purpose which is clearly not being achieved as was intended, and we now have to consider what is the best way to move from that point. The Opposition think that we should move in the way suggested in the Amendments. They think that we have a number of problems and that we should accentuate them by putting on 40 per cent. That is no answer. Incidentally, it would cost £80 million in tax if we were to adopt the proposed Amendments.

Mr. Barber

Will the right hon. Gentleman tell the Committee what the saving to the Exchequer is on investment allowances as a result of the Corporation Tax?

Mr. Diamond

I have already given way eight times. The right hon. Gentleman sets a bad example to his hon. Friends because he anticipates the rest of my speech. If he will be good enough to contain himself in the same courteous way as he has hitherto, he will find that all these questions will be answered. Perhaps I may be allowed to carry on with my speech.

I am dealing, first, with the proposal contained in the various Amendments as to how we could deal with the unsatisfactory situation which I have explained. I have explained that simply to make an increase of 40 per cent., as a method of having the "value"—I put the word in inverted commas—of the investment allowances retained at their present value, assuming a 40 per cent. Corporation Tax, is no way to deal with the situation. It introduces additional problems. It introduces the problem of having a different rate for companies, for partnerships and for individuals. It makes the matter more complicated. It would have to be a rate varying each year if the Corporation Tax itself varied. There would have to be a varying percentage in order to keep it in line. It is only an approximation. Moreover, it is an entirely premature proposal because it is based on a 40 per cent. Corporation Tax, and nobody knows what the rate of Corporation Tax will be.

Sir D. Glover

Oh?

Mr. Diamond

Yes, that is so.

Those are the minor arguments, but beyond them there is the major argument that the Opposition's proposal is based on a completely fallacious argument. It is based on the assumption that investment allowances are a subsidy. They are not. They are a tax relief. They vary with the standard rate just as any other allowance varies with the standard rate. The child allowance varies with the standard rate. No one will pretend that, if one alters the standard rate, the child allowance should each time be increased or reduced by a percentage so that its so-called value remains constant. Take any item in one's profit and loss account. For example, the "value" of the rates which a businessman pays alters if the standard rate alters.

It is an impossible approach to say that one must take just this side of the equation and say that as any particular allowance varies according to the standard rate here is an implicit argument that it should be maintained constant and be altered each time. When the Chancellor announced in November that the standard rate of Income Tax would go up from 7s. 9d. to 8s. 3d., I heard no cheers or cries of "Good; our investment allowances will now be increased". Yet this is what the whole argument is based on. A few moments ago, the right hon. Member for Altrincham and Sale asked me about saving. There is no saving. There is no cost. We are proposing one method of taxation in place of another. In calculating the tax and the relief, a certain procedure is followed. It does not make any difference in the end. This is why I said that I should have to explain the matter carefully because hon. and right hon. Members opposite are so engulfed in their fallacious thinking that they will not open their minds to the facts.

Let us take the simple example of a company which is making a profit which is exactly equalled by its investment allowances. It makes a profit of £100,000 and its investment allowances are £100,000. It has no tax to pay. Whether the rate is 35 per cent., or whether it is one system or another system makes no difference whatever. We shall never get this matter straight until everyone realises that what we are talking about is the method of calculating a relief, and it is not a subsidy. I agree that it is a very odd form of relief. To have any relief over 100 per cent. is an odd thing to do. It was done by the Government in 1954 and we supported it, but it is a very odd thing to do and it brings all sorts of anomalies in its train. If one wants to get to the root of the matter and see what should be done, the first thing to realise is that it is not a subsidy but a method of calculating a relief given by way of taxation.

9.0 p.m.

As I have said there is the difficulty that we are spending a great deal of money but are not achieving the objective that we want to achieve. There are certain unsatisfactory results and the Amendments would not serve the purpose. Thus, the question I shall be asked is what the Government intend to do about it. We intend to do two things.

First, we shall encourage every corporation to invest more by its tax being calculated in such a way as to give it the greatest possible inducement to invest. That is the Corporation Tax. As a result of the Corporation Tax collecting the same total value that would be collected under the present system, every company having paid its Corporation Tax, will have approximately half as much again available for investment, if it wants to invest, than it has at the moment. That will be the first stage.

A corporation will make its profits. It will pay the Corporation Tax and will have left to it a figure almost precisely 50 per cent. more than is left over at present, which it can use as it wishes—to pay dividends, to invest or plough back. It will not be under any great difficulty about meeting its dividends as it has hitherto done. Any company which covers dividends about 1.45 times will be able to continue the same dividend.

A high distributor will have to pay more tax; a low distributor will have to pay less. All low distributors will pay less. All those concerned more to plough back than to distribute will pay less. That is the basis of the Corporation Tax. That is the greatest possible inducement or incentive—having the cash there to further investment.

Secondly, we propose to do what my right hon. Friend has already said—to conduct a very full review of the alternative methods, many of which have been discussed today, of encouraging investment in all industries, including shipping. If more than £300 million is not producing the results we want, it would be irresponsible of us to continue a method of that kind and, therefore, as my right hon. Friend has said, we are reviewing the whole position.

It is not a simple matter to see whether we should or should not have some entirely different method of encouraging investment. Various means have been suggested by hon. Gentlemen on both sides of the Committee. It is suggested that the method should be more direct, that we should have something much more like grant or subsidy, that it should be more specific, that perhaps it should be varied in rate, that perhaps there should be regional variations, that it should be selective with regard to items which are more efficient than others.

All these are difficult questions which must be looked at. Then there is the question of whether business men as a whole would want variations of this kind. Certainly, the present system is unsatisfactory and we must look at something entirely different. That is under examination at the present time.

Having dealt with the general problem I will now deal more specifically with the Amendments, but shortly because I think that the general arguments have dealt with the main problem. One Amendment deals with development districts. Here, there has been a complete misunderstanding. The real comparison is between the present situation and the new situation. It concerns what marginal advantage there is in comparing development districts with non-development districts and how that marginal advantage will be affected by the Corporation Tax.

Putting it simply—and this is a simple calculation which I am now making—the present advantage in terms of plant and machinery in development as opposed to other districts is approximately 2.6 per cent. at the present rate of tax. With Corporation Tax at 35 per cent., that marginal advantage of 2.6 per cent. would be more than doubled to 5½ per cent. The answer to the hon. Lady the Member for Tynemouth (Dame Irene Ward) is that the present advantage which development areas have in respect of plant and machinery will be more than doubled by the institution of Corporation Tax. With buildings, the present marginal advantage is 8.8 per cent. and that will be nearly doubled to 15 per cent. The effect of introducing Corporation Tax is more than to double the marginal advantage for plant and machinery and nearly to double it for buildings. Therefore, there is no difficulty in answering her question—the proposals in the Bill will improve the situation and not the reverse.

Mr. Higgins

Of what are the percentages which the right hon. Gentleman has just quoted percentages? Would he not agree that the effect of the Corporation Tax without the Amendments must be to reduce the incentive to invest in development areas?

Mr. Diamond

Of course I do not agree. I have given figures calculated in a rather unsophisticated way. I have taken all the advantages as being current and I have not discounted them over the period—which is the problem with investment allowances—and, including all the preferential allowances given to development districts, with present tax rates there is a marginal advantage of 2.6 per cent. while with Corporation Tax at 35 per cent. that marginal advantage will be 5. per cent., more than double. I hope that I have made the position clear.

Mr. Higgins

Percentage of what?

Mr. Diamond

Percentage advantage in terms of investment as compared with other areas.

Mr. Higgins

Percentage of what?

Mr. Diamond

If the hon. Gentleman will read my speech tomorrow, I think that he will understand.

Mr. Higgins

Percentage of what?

Mr. Diamond

Can I put it in even simpler terms? At the moment there is an advantage to businessmen to go to development areas and to invest there. That advantage will be approximately doubled as a result of the introduction of the Corporation Tax. I hope that that has made it clear.

I now turn to the subject of shipping. All hon. Members are anxious to see that we have a healthy shipping industry, and we do not at the moment. The present position is that shipping profits are running at about 2 per cent. of capital invested, as the hon. Member for Dorset, West (Mr. Wingfield Digby) said. That is not in a particular year but is an average yield. The investment allowances give total allowances of 140 per cent. of the investment made—the investment allowance on a ship is 40 per cent. and with the other allowances that gives 140 per cent. of the investment made. It is not surprising, therefore, that investment allowances are greater than the profits being made.

What is happening at the moment is that shipping companies are accumulating enormous sums in unused credit, as it were, of allowances of which they are unable to make use, because they are not making the profits against which to set them. In fact, at the moment the figure, as given by the Chamber of Shipping, is more than £150 million credit notes which the companies cannot use. What is now proposed by the Opposition is that those credit notes should be doubled, trebled, or in some other way increased.

Mr. John Tilney (Liverpool, Wavertree) rose—

Mr. Diamond

The hon. Gentleman wants to say that that is absolute nonsense.

Mr. Tilney

That is not absolutely true of all shipping companies. One on Merseyside has paid £5¾ million in taxation in the last 10 years.

Mr. Diamond

I am not saying it is true of every single company. I am just taking the average at the moment. The hon. Member for Dorset, West who spoke on behalf of the shipping industry made the point that the average return was 2 per cent. and said that the way to deal with it, therefore, was to increase the investment allowances as a result of which the unused credit notes would pile up more and more. At the moment there are over £150 million. All I am saying to the hon. Gentleman, and I do not want to stimulate him into a long speech, is that we both want to help the shipping industry. I do not think that is the best way of helping it.

Mr. Wingfield Digby

Does the right hon. Gentleman not recognise that the shipping industry has been through a number of difficult years? Does he really say it can never expect to be highly profitable again? We all hope this figure of 2 per cent. will rise much higher.

Mr. Diamond

We all hope it will, but the figure of 2 per cent. is the hon. Gentleman's own figure, and the right figure. It covers an average period of years and we hope it will rise. But it is not the job of the Government to sit upon its seat and continue to hope. It is the job of the Government to do something. The thing to be done is not to accept the Amendment which will not help the shipping industry at all. It will merely give it a lot more credit notes with which to paper the walls of its offices. That is no use to the shipping industry. There are one or two cases where profits are being made, but they are few and far between. Some companies are making profits sufficient to absorb the investment allowance and pay the tax as well, but I do not think that this is a group of Amendments which would help investment, the shipping industry and, as I have explained, Scotland.

We have here the real problem of encouraging investment. A great deal of money is being spent on it and I think the industry and businessmen deserve more of us than that we should go on with a method that is not serving their interests and accept Amendments which are based on a wholly mistaken view of the real nature of the investment allowance.

Mr. McMaster

Is the right hon. Gentleman not aware that to take an average like this is grossly unfair? If there is an average of 2 per cent. it means that at least more than half of the companies concerned are making more than 2 per cent. We want to encourage the successful companies and it will only be the successful companies who can afford to invest, and by passing this Amendment we will be helping the successful companies.

Mr. Diamond

I want to help shipping companies in Northern Ireland just as much as the hon. Gentleman and the answer to that suggestion is "No", otherwise one would not have a situation in which more than £150 million of unused credits exists already.

Dame Irene Ward

When the Treasury received representatives from the Chamber of Shipping and put that case to them what was their reply in view of the fact that they required and desired this Amendment?

Mr. Diamond

The hon. Lady had best consult the Chamber of Shipping. We are having conversations with it. Several conversations have already taken place and it is the desire of the Government that the shipping industry should be helped in a much more realistic way than this paper method suggested by the Opposition.

Mr. Geoffrey Lloyd

I fear I cannot congratulate the right hon. Gentleman the Chief Secretary to the Treasury on his maiden speech as a Privy Councillor. It was, first of all, marred by a gratuitous piece of discourtesy to my noble Friend the Member for Edinburgh, North (The Earl of Dalkeith) who asked a very reasonable question about the application of these figures to Scotland. It was said by the right hon. Gentleman that it was a silly question. My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) then pointed out that the Inland Revenue is not used to producing figures simply as silly figures but that it produces figures that are very much to the point.

9.15 p.m.

The right hon. Gentleman said that we are embedded in our fallacies and that we cannot come out of them. On the contrary, we feel that he is arguing in a circle from a series of fixed propositions which, admittedly, the Government agree with but which we do not accept. This is the real reason why we are unable to accept the deductions that he seems to think follow so easily from the propositions which he asserts.

I thought that my hon. Friend the Member for Portsmouth, Langstone (Mr. Ian Lloyd) put his finger on one of the greatest weaknesses in the case of the Chief Secretary. In dealing with the question of the attitude of a particular company to the investment allowances, he asked about the number of very large companies which had been said to be uninfluenced or influenced by these allowances. The Government base their whole case for the principle of the Corporation Tax on the idea that it will encourage companies to retain profits and to invest for the benefit of the economy. In fact, the effect of their action on investment allowances is to strike a blow at some of the biggest and most progressive companies engaged in the capital intensive industries which are the spearhead of the progress of our economy. This is an argument which is right outside the theoretical prohibitions that the right hon. Gentleman has sought to impose on us.

As the Chief Secretary is a chartered accountant, and as I have also taken advice on this subject, I should like to state the theory of my position before I deal with specific figures of companies which are in this advancing and progres- sive investment field. The right hon. Gentleman knows better than I do that the average rate of 56 per cent. which a company pays in Income Tax and Profits Tax is very much reduced in the case of a company which invests heavily, particularly in the development districts. In those cases, the rate of tax, instead of being 56 per cent. or 56¾ per cent., can be as low as 40 per cent.

A company in this situation will not get the full benefit of the reduction of the rate of tax on company profits, as the right hon. Gentleman is arguing, from 56¼ per cent. to 40 per cent., the proposed Corporation Tax rate. Instead, the reduction, when related to the book profits is from 40 per cent. to 28 per cent., being Corporation Tax at 40 per cent. applied to 70 per cent. of the book profits. The extra tax which it will pay on dividends is not affected. The consequence is that the break-even point to which the right hon. Gentleman referred as being 1.89 per cent. becomes, in the case of a company like this, as high as 3.51 per cent. This affects not merely one company but a range of the most progressive companies which are investing largely in the development districts.

May I take Courtaulds as my first example? I have the figures in relation to the magic figure of 35 per cent. Corporation Tax on which the Chief Secretary insists. The Chairman of Courtaulds has told us that, on the basis of the firm's latest accounts, its investment allowances will be reduced by £1,566,000. The right hon. Gentleman always talks about retentions increasing, but the retentions of Courtaulds will be reduced by £574,000. In this case, I have given the figure in relation to a 35 per cent. Corporation Tax. The right hon. Gentleman will agree that I am taking, from his point of view, a more conservative figure if I use a figure of 40 per cent., because this obviously reduces the differential. The figures have also been calculated for Courtaulds, in whose case the reduction on a 40 per cent. Corporation Tax would be, not as much as £1½ million, but £1,198,000. Their retentions, for reasons which the right hon. Gentleman, as a chartered accountant, will realise, would be reduced by £1,632,000.

May I take the case of Stewarts and Lloyds, whose figures I have had extracted from the latest published accounts? Under the present system, the investment allowances are £2,179,000. They would be reduced under a Corporation Tax of 40 per cent., which in this case is a conservative figure, to £1,550,000, and their retentions, which at present are £4,744,000, would be reduced to £2,888,000.

I will not go over many other cases but I will simply take the further example of the British Motor Corporation—

Mr. Diamond

The right hon. Gentleman has not told us the rate of dividend declaration and distribution.

Mr. Lloyd

I am coming to that. I hope that the right hon. Gentleman will allow me to say that I hope that he will not anticipate my speech.

In the case of the British Motor Corporation, the present investment allowance is £1,327,000. Under a 40 per cent. Corporation Tax that would be reduced to £944,000 and the present retentions of £5,580,000 would be reduced to £4,368,000. All these figures are on the assumption that the effective rate of dividend to the shareholders is maintained.

That is the important point, because the right hon. Gentleman has all the time said that under his system the company and the taxpayer are two entirely different things and that they must not be related. In our view, this is the central fallacy of the right hon. Gentleman's position.

Mr. Diamond

The right hon. Gentleman said that he would be good enough to let me know, otherwise I should not have interrupted again, the rate of dividend—how many times covered and of what proportion of the net profit.

Mr. Lloyd

My first instance was a company whose dividend on the present basis would be 1.89 times covered and under Corporation Tax of 40 per cent. the cover would admittedly go up to 3.51. It does not, however, depend upon the actual rate of dividend, because we could follow this in separate companies and everybody knows that, with all the infinite variations, one would need a staff of chartered accountants. Every hon. Member would need to have several chartered accountants advising him.

The real point, however, is a question of principle. The right hon. Gentleman will say that under his system he is not suggesting that the company should maintain its net effective rate of dividend to the shareholders at what it was before the tax came into operation. Very well. It might not be able to do so. It might decide that it would have to keep up its retentions and reduce its dividend. This is the point with which I want to face the right hon. Gentleman from the viewpoint of the company.

I know that the right hon. Gentleman's party is not particularly interested in shareholders, but in our view shareholders perform a real function. One of the functions which they perform, as I showed in an earlier speech to the Committee, is that in the faster growing companies retentions alone are not sufficient to finance their rate of investment and they have to go to the market and raise more money from the shareholders. If the companies choose to try to maintain their retentions by reducing their effective rate of dividend to shareholders, nothing is more certain than that the price of the shares on the market will fall.

The right hon. Gentleman knows probably better than anyone else in this Committee that in those circumstances it is more costly for a company to raise further equity capital by going to the market, because it has to pay the going rate. Although it is in order, in fact it is not due to this particular Clause of the Finance Bill. With regard to overspill we know that some companies have already fallen from an effective yield of about 4 per cent. to an effective yield of something approaching 6 per cent. Look at the enormous increase in the ratio of what would have to be paid by the company for the extra capital that it would need in circumstances like that.

I am not suggesting that in the case that we are discussing tonight the effect would be so dramatic as that, but it would, nevertheless, be appreciable. I therefore venture to suggest that the Committee should not listen to these specious, symmetrical, ingrowing accountancy arguments of the right hon. Gentleman, because they do not deal with the practical life of business and the market place in which industry has to live, and that these measures, particularly in relation to companies investing very fast in the most modern machinery, and particularly in the development districts, will harm them when they want to get the necessary extra capital to increase their operations. In any case, it is the fact that while the Government are injuring these companies, which are some of the most valuable and important pace-setting companies in the country, and while they are talking about some alternative, they have reduced an encouragement and have so far put nothing whatever in its place.

Sir D. Glover

I cannot congratulate the Chief Secretary, although I would like to do so on a personal basis, because I do not think that he has had a very good day since he has been raised to his high position as a right hon. Gentleman. My right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) ripped the right hon. Gentleman's speech to ribbons. He tore all his arguments to pieces, using the examples of Courtaulds, B.M.C., Stewart and Lloyds, and other forward-looking progressive companies with which we are dealing in these Amendments.

Of course, other factors apart from investment allowances influence a company's investment policy, but there must be a point in time, and a point when the balance shifts to its disadvantage and makes it less keen on investment than we on this side of the Committee want it to be. Nothing that the right hon. Gentleman has said, and nothing that anyone on the benches opposite has said today, has removed the real truth of this Finance Bill, and that is that it is a disincentive to investment, and not an increase in the incentives which we all want to provide.

The hon. Member for Ashton-under-Lyne (Mr. Sheldon) talked about these incentives being more selective. It is easy enough, during the Committee stage of a Bill, to talk about investment allowances being more selective. Who is to decide which companies should get these allowances? Some hours ago the hon. Gentleman talked about it being a good thing to invest in computers but perhaps a bad thing to invest in one-armed bandits.

I am sure that if there was a debate in this House about providing incentives to individual firms, or to individual types of industry, nobody would speak in favour of the one-armed bandit, but it is quite likely that the firm making one-armed bandits has a far better export perform- ance than the firm making computers. This is where the difficulty lies. It lies in trying to bring in these direct incentives to individual firms or individual industrialists in any investment allowance field.

9.30 p.m.

All the arguments that we have heard today, especially from the right hon. Gentleman, have been based on calculations which have entirely ignored dividends. As my right hon. Friend has made clear, this is not a case of meeting a countryman and asking him the way, and of his saying, "I would not have started from here". But that is exactly the way in which the Government are approaching the problem. We are dealing with a nation which has an old-established industrial fabric and tradition. It is no use starting, as the Government appear to think they can, from square one and to building an edifice as a going concern. All these companies have reached their present positions in our national life by means of policies based on dividends paid to shareholders, and those shareholders are expecting roughly the same dividend from the same effort and success of those companies in the years ahead.

Are the Government saying that they want to see a cut in dividends? If so, they should say so forthrightly. That is the one thing that the right hon. Gentleman did not say in his reply to our long debate. That is the only way in which he can pretend that this Corporation Tax, and this reduction in the investment allowances, will be to the advantage of any company. This consideration applies particularly to larger companies, such as Courtaulds and I.C.I.

When my right hon. Friends formed the Government they brought in these allowances, which I believe have done a good job. The only complaint I make is that they could have done a better job. If there has been any fault to find with the previous Tory Government it has been that they have hidden their light under a bushel and have not made it sufficiently clear, especially to medium-sized firms, that great advantages could be gained from the various investment allowances and such other arrangements that have been in force.

Not a single speech—including that of the right hon. Gentleman—that has been made tonight has made me believe that the Government are not vindictively hostile to the growth of British industry and commerce.

I want to quote what was said in the recent General Election by the hon. Member for Liverpool, Exchange (Mrs. Braddock), the hon. Member for Dartford (Mr. Sydney Irving), who is now a Whip, and the hon. Member for Farnworth (Mr. Thornton), who is now a Minister. They said that taxation would be used to stimulate enterprise and not to penalise it. What a hollow mockery that is, after eight months of Socialism. What a hollow, sickening mockery it is of what was said by the Prime Minister, namely, that a Labour Government would bring in special taxation incentives for progressive firms so that they would gain the benefit of their initiative and drive.

What do we find? We find that because these firms are to invest their investments will not receive the same allowances as they received in the past. What an encouragement to firms to go on investing! Does the right hon. Gentleman mean to say that £300 million worth of investment allowances—and that is his own figure—is not an incentive to industry? He is talking as though the people who man industry are not human. He has the audacity to say that £300 million is not an incentive.

Why do not the Government take it all away? If their argument means anything, it means that they do not believe in incentives at all. Why are not the Government honest in their proposals? If their argument is that investment allowances are not an incentive to investment, why not scrap the lot? Why do not they "come clean"?

The Government say that they will have a review. They are having so many reviews that Raymond's Revue Bar is now out of date. Whenever they are considering something, they come to the Dispatch Box and say, "This is rather a difficult problem and we shall have a review into all the circumstances." They are becoming even less respectable than the organisation to which I have just referred.

Let us be quite clear. The arguments put by my right hon. Friend the Member for Suit on Coldfield in a remarkable speech, swept completely away the whole case which the Govern- ment have made today. The arguments about the shipbuilding industry, and the right hon. Gentleman knows it, are wrong. In fact, every argument put up against our Amendments today is "phoney"; it is riddled with inconsistencies. The only hon. Member who tried to make a case today was the hon. Member for Middlesbrough, West (Dr. Bray). He came here as a don and lectured the schoolboys, discovered that the schoolboys on this side of the Committee knew as much as he did, and became less assertive and realised that he was talking a lot of rubbish which we had seen through before he had finished, so he folded his tent and stole quietly away.

That was the only speech which explained what was in the Government's mind. If what the hon. Member explained is what is in the Government's mind, it makes my determination to get the Government out even more urgent than it was before.

Mr. Ian Lloyd

This debate started on a somewhat canine tack. We had Newton's dog, which is probably associated with gravity, then Diamond's dog which should properly have been called Newton's dog, but Newton's dog would probably have a tail which wagged the dog. Then we had Brown's dog, which is the dog that bites the hand that feeds it. This probably accounts for the fact that the First Secretary, when declaiming about the incomes policy in Trafalgar Square, keeps his arm in a sling, to obscure from his left hand what his official right hand is doing.

We are not concerned with such matters but with the more important points about investment allowances and, in particular, the relationship of these allowances to industries such as shipping and shipbuilding. Before I come on to this specifically I should like to mention an interesting series of observations made by the hon. Member for Middlesbrough, West (Dr. Bray). He started by saying that discounted cash flow techniques were not used by computer salesmen in this country. As chairman of a computer company who has been involved, certainly for the past 18 months to two years, in a considerable amount of thought about discounted cash flow techniques, not only in the purchase of computers but in the sale of the techniques which the computer can offer, I found this not only an astonishing observation, but an astonishingly inaccurate one.

Secondly, there is the use of these techniques by shipping. The shipping industry today could not survive unless almost all its serious financial and economic calculations took into consideration all the way along the line the whole question of investment allowances. There is no possible alternative to that conclusion. The hon. Member for Middlesbrough, West also made the point of referring to differences in return of capital of only 3 per cent., as if 3 per cent. were a rather insignificant figure. We have already heard this afternoon that 3 per cent. represents about the return on capital of the whole shipping industry. If 3 per cent. is insignificant, how can we possibly aim at a more discriminating pattern of investment encouragement and flow in this country? Obviously, we cannot.

The Chief Secretary made the rather interesting observation that the whole of this change in the structure of taxation was designed to encourage—I hope that I have got his phrase correct—"every single company" in this country. Surely this is not what we want to encourage. We should encourage every efficient company. That is a different matter.

If one relates this to the document "Investment Appraisal" it will be seen that the efficient companies are using these techniques and that these are the companies which we should encourage. Those which do not use them should not be encouraged. Therefore, when one accepts that these techniques should be extended one immediately realises that all the general arguments of the Government fall to the ground.

I will give an example of the operation of investment allowances in the shipping industry. My hon. Friend the Member for Dorset, West (Mr. Wingfield Digby) referred to Clause 32 and, in turn, I will refer to a specific case concerning methane tankers. This must be considered in relation to the general criticism of the backwardness of the shipping industry and the praise that has been heaped on the company to which I am referring for having broken new ground in bringing British shipping into a completely new sphere of operations—something which, by and large, the British shipowner has been seriously criticised for not doing.

What happens? We find that a company chooses carefully, in consultation with the Government, and decides to employ a technique of financing which, by and large, is anti-inflationary because it has the net effect of distributing the investment allowance in the form of lower prices—in the case I have in mind to the Gas Council and thus, indirectly, to the community. This is a perfectly and definitely anti-inflationary measure.

Mr. Diamond

I do not wish to shorten the hon. Gentleman's speech, but if he will be good enough to look up the OFFICIAL REPORT he will find that this point is covered.

Mr. Lloyd

I am well aware of what the right hon. Gentleman has said previously. I have studied his remarks in the OFFICIAL REPORT closely and I intend to refer to them.

Many shipping companies operating the same techniques have been able to offer lower freight rates as a basis of creating business. If they cannot offer lower freight rates their business falls away. I would be the first to admit—and I am sure that those who are involved in the Methane Tanker Finance business would agree—that there are certain circumstances in which, as a result of an anomaly, tax can be recovered twice. I refer to the tax that is not paid on that portion of the allowance which is not distributed and the tax that is reclaimed. But in the case of the Methane Tanker Finance company, such shareholders amount to 7 per cent. of the total holding and in such a company there is no question of any parent company being involved.

As the Chief Secretary may be aware, if the parent company method of financing had been used the net effect on the Revenue would have been exactly the same over a period of years. This was carefully calculated and it was not used because the whole operation of this company was much improved by using the perfectly legal, accepted and satisfactory method of financing which I have described.

The Chief Secretary referred to the capital of this company being a mere £20,000. Is he not aware that the B.I.S.C.O.R. Company, which imports all the iron ore in this country, has a capital of only £100? I hope that he realises that he did not adduce a relevant argument.

I particularly wish to refer to the net effect on the method which the tanker finance organisation uses of the proposed change in the tax system. I have received a memorandum which has been prepared by the management of the company to which I am referring. I regret that the Chief Secretary has left the Chamber because, in this connection, I intend to refer to some remarks which he made and which are reported in the OFFICIAL REPORT.

The right hon. Gentleman referred to precisely this kind of company, although the Select Committee on Public Accounts made this criticism that some of the companies paid dividends to parent companies and in these cases the gross dividends used by the parent companies for claims exceeded by £32 million the total profits on which the subsidiaries had paid tax. My comment is that in relation to the methane companies this statement is totally untrue. They have no parent company, and only 7 per cent. of the shares held by them are held by companies which have no tax liability.

Their final conclusion on this point is very relevant to this discussion. They say: This organisation was certainly organised in full accordance with the law as it then existed, and although it was realised that there were possibilities of a change in existing taxation it never occurred to these companies that it would be made without proper transitional provisions to avoid hardship. At present, the methane companies will suffer more than hardship; unless some action is taken, they will face complete and utter disaster. This is an existing situation, and the Government have no doubt taken into consideration the effect of their proposals on this type of operation as it now exists. They have a lot of experience and information about it, but they will doubtless be aware of the impact of the balance of trade figures on the general pattern of confidence in the country, and will equally be concerned to explore, perhaps a good deal more rigorously than hitherto, new methods for improving balance of payments.

May I illustrate with a particular case, of which I have details, the precise type of effect the Government's proposals have had on a shipping enterprise. The Grace Chemical Company of America put out to tender an operation involving a 12,000-ton anhydrous ammonia carrier. Ocean Gas Transport, an associated company of Methane Tanker Finance, decided to try to secure this business. In association with Hawthorn Leslie, it designed a highly suitable ship and, on the basis of the best possible estimates it could make, came within 7 per cent. of the winning tender.

9.45 p.m.

It did not win the contract, but what is pointed out here is that While the threat of the Corporation Tax hangs over this subsidiary, we are quite unable to achieve the economic levels of operation which will enable us to secure this business. The effect on the nation's finances are of more than passing interest, because if this company had been successful the country would have benefited in foreign exchange to the extent of a 100,000 dollars a month for the next 20 years. This business has been completely and totally lost, and lost for the very simple reason that the impact of a Draconian tax system has driven the proprietors of this organisation right off the position from which they could secure the business.

The Government have a very serious case to answer here. This applies to the shipping industry, but it applies very much more widely than that. It is a serious matter, and it is hitting the balance of payments. If it is allowed to be developed further it will hit the balance of payments much harder, and the case that might have the most limited justification as an internal domestic re-organisation will have no justification whatever in terms of the global context within which the economy must always be considered.

Mr. Tilney

I want to support as strongly as I can my hon. Friends the Members for Portsmouth, Langstone (Mr. Ian Lloyd) and Belfast, East (Mr. McMaster). The Chief Secretary has said that he realises that shipping ought to be encouraged. Shipping is of immense importance to the Merseyside which, despite all the other industrial developments, still relies on it very much and on commerce generally. The Chief Secretary has also said that factors other than taxation affect investment decisions, but I would urge him to bear in mind that there is little doubt that in any likely combination of circumstances the amount of cash taken from the shipping industry by means of Corporation Tax will be increased and that, therefore, the real value of the investment allowances will be reduced.

This certainly applies to the company that I have already mentioned which, over the last 10 years, has paid £5¾ million in taxation. I hope that he will bear in mind that that particular company—I ought to declare an interest in it as a small shareholder—ordered, 12 months ago, no fewer than eight ships of specialised and expensive design. The company took full account of the impact of taxation, as the N.E.D.C. has urged industrialists to do. On any reasonable assumption the high cost of those specialised ships could have been partially offset by the benefit of investment allowance. The company deliberately chose to order six of the ships in Britain despite, I regret to say, the remarkably lower cost of ships which could be obtained abroad.

The reduction of the worth of the allowance on the payments still outstanding will add 3 or 4 per cent. to the total cost of the ships. The Chief Secretary may not think this a great deal, but he has mentioned that the total profit is only 2 per cent. on much shipping, so it is of importance. What is of greater importance is the undermining of future confidence in at least the short-term fiscal stability on which investments have to be determined.

I hope that the Chief Secretary will bear this very much in mind in whatever he does to help the shipping industry in future.

Mr. Edward M. Taylor

I had intended to make a very long speech tonight, but as the Secretary of State for Scotland, the hon. Member for Glasgow, Govan (Mr. Rankin) and the right hon. Member for Easington (Mr. Shinwell) have left the Chamber, all the incentive to making a long speech has gone.

I wish to make some brief points on the Chief Secretary's speech. He said that he was making no saving through the reduction of investment allowances. At the same time, he suggested that if he accepted these Amendments, which are designed to take us back to the status quo, it would cost the Government £80 million. He cannot have it both ways. We are entitled to an explanation. Is industry to lose £80 million? If not, how would it cost £80 million to accept these Amendments? The basis of the right hon. Gentleman's argument was that investment allowances were not doing what they were designed to do. They were not encouraging investment or were not doing so in the right way.

This may be the attitude of the Chief Secretary, but as a Scottish hon. Member I feel very bitter that throughout the election campaign, and, in particular, in the official Labour Party document, "Signposts for the Sixties", it was claimed that the Government intended to deal with the particular problem of Scotland by increasing investment allowances in the job-hungry areas. It may be that the Government now take a different view, but it seems dishonest for this to have been put forward as the basis of policy for the development districts and areas of high unemployment.

It has been suggested by the Chief Secretary—in fact it was the only argument he put forward—that the investment allowances are not of real value to the shipping industry because it has accumulated so many credits over a very long period. This denies that it is a cyclical industry and that the whole point of the investment is to prepare for a better time which undoubtedly will be coming. Shipping is a vital industry and Britain still has the largest shipping fleet in the world, greater than that of the whole European Economic Community. On the Clyde, which is an area of high unemployment, no fewer than 100,000 depend directly or indirectly on the industry for a livelihood.

In those circumstances, I hope the right hon. Gentleman will reconsider his attitude to this very urgent matter.

Mr. Heath

We are very glad to welcome the Chancellor back to the Committee. Since he left us we have spent a very worthwhile time discussing the question of investment allowances. It has been a long debate, because a large number of industries, constituencies and regional questions have been involved. I hope that the Chief Secretary does not think that it has been too long. We have spent five and a half hours over it. I looked up the record and found that when the present Chancellor and his hon. Friends discussed this question in 1962 they discussed together two Clauses of a very much more limited kind in which the right hon. Gentleman pressed for increases of investment allowances and discrimination in their use. That debate alone took three hours. Today we have discussed four Amendments and one new Clause together, and we have covered the whole subject of investment allowances. Therefore, I think that the Committee will feel that the debate has been fully justified.

I think that of the many interesting debates we have had on the Finance Bill this has been one in which, in a way, the most intense interest has been displayed. On the other hand, I do not think that anybody who has listened to the debate all day—I have heard almost all the speeches; indeed, my hon. Friends who have spoken in the last half-hour have been sitting here all day, like myself, without having any food—would in any way challenge the view of the right hon. Member for Easington (Mr. Shinwell) that there is a certain complexity about this subject. This was probably best displayed by the speech of the hon. Member for Middlesbrough, West (Dr. Bray) who at times moved in the spheres of higher mathematics and, indeed, the calculus. At times I felt that the hon. Gentleman was absolutely lost without a blackboard on which he could have demonstrated to the Committee the proof of his thesis.

The speech of the Chief Secretary, which had its usual lucidity, was at times complex. This justifies those who hold the view that the implications of changes such as these can be properly discussed only on a White Paper which sets them out very clearly, not as an annotation of Clauses, but as an account of the actual accountancy and technical problems involved. This is what we have lacked in the past. It is a great pity.

I should like, in what I hope will be a very brief speech from the Front Bench now, in view of the admirable speech of my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) in moving the Amendment, to emphasise what seem to me to have been the main points which have emerged in the debate.

First, it seems to me that what is happening under the Bill to investment allowances is not a policy in itself. It is not put forward as a policy. It is not put forward as the answer to the particular problems which the Chief Secretary raised and which have been emphasised in the Committee. This is an indirect result of the Corporation Tax which has been instituted for other reasons. This is what we have been debating all day.

My first submission to the Committee is that it is wrong to change a matter of this kind now without being able to put forward an alternative policy. I am trying to be fair. The Chief Secretary has not claimed that there is an alternative policy. The Chancellor did not claim that there was an alternative policy. He said in his speech on the Budget that he would consider the matter after a year. What we submit to the Committee is that it is wrong to tackle this problem in this way, in which it is an indirect result of a major change and in which no alternative policy is put in its place.

Our objective in tabling these Amendments is broadly to maintain the status quo until a new policy is settled. It may be said that the figure of 40 per cent. which we have chosen is not exactly what the figure should be. On the other hand, I suggest to the Chief Secretary that by stating 40 per cent. we have chosen the lower form of revaluation which is required. I hope that the Chief Secretary will agree with that.

The Chief Secretary said that one of the difficulties about the Amendments is that they introduce anomalies. The position he is establishing as a result of the Finance Bill produces anomalies, because the position of the individual using gaming machines remains the same. He can still claim the amount of investment allowance which he is claiming at the moment. It is the company which is subject to Corporation Tax which will be affected by these changes. So, as a result of the Bill introduced by the Chief Secretary and his colleagues, there are the very anomalies which he condemned as being brought about by our Amendments which seek to maintain the status quo. I therefore hope that the Chief Secretary will be prepared to accept that his own policy is producing just as difficult anomalies.

One of the features of this situation is that it in no way pursues the proposals put forward by the Chancellor and his right hon. Friends when they were in opposition. Above all, it does not introduce any element of discrimination in the use of investment allowances. Hon. and right hon. Members on both sides of the Committee have emphasised the need for discrimination in investment allowances and hon. Members opposite who have done their best to support the Chancellor have often said that a change in the situation is needed. The hon. Member for Heywood and Royton (Mr. Barnett) emphasised that the change must come in less than a year. I submit that we should be slightly cautious about the form of discrimination which should be adopted.

10.0 p.m.

It may well be that discrimination for areas can be nothing but beneficial but I am not so convinced about attempting discrimination for different types of machinery, plant and equipment. I judge from my experience at the Board of Trade when, because of my interest in computers, numerical control and automated control, I looked carefully into the question whether there should be discrimination for those types of machinery. But I was convinced that to other industries the modernisation of mechanical equipment is just as important as the introduction of computers and numerical control. Therefore, I did not believe finally that the case was proved for introducing a discriminatory element as to the types of machinery. It is an extremely difficult task for the Chief Secretary and his colleagues to determine how this should be done. I therefore issue my own word of caution about it.

The Chief Secretary cited a good many arguments to show that industrialists are not making full use of these investment allowances. What he was proving was not that investment allowances should be dispensed with but that there should be either a new system of dealing with them which could be better understood or that there should be better education and propaganda among industrialists so that they make full use of them. This is the conclusion of his argument and not the conclusion that one should devalue the allowances by this considerable percentage.

The right hon. Gentleman said that there was difficulty of definition of investment allowances but his solution has not dealt with this difficulty. He has given two-thirds of the present allowances to things which he objected to, among them gaming machines, ropes, and all the other examples which he quoted. The right hon. Gentleman then said that it was a complicated business, but as I intervened he said rather lightheartedly that this was a job for accountants to handle. I believe that it is. The logical conclusion of the right hon. Gentleman's argument is that all firms who have accountants capable of handling them should keep investment allowances and that all those firms who do not have such accountants should have the allowances abolished. This has only to be stated to see how ridiculous an argument it is.

I do not see therefore that any of the points which the right hon. Gentleman raised have any great impact. The marginal effect of investment allowances should be considered. There are of course other major considerations in investments, but investment allowances are a marginal consideration which influence whether or not investment takes place and therefore there is prima facie a powerful argument for their retention. This is my conclusion, stated as fairly as I can put it.

All the things which the Chief Secretary has said today have contradicted the view which he took in opposition and I find it difficult to see why there should be this sudden conversion in this way. We have always accepted the argument that investment allowances are bound to vary with changes in taxation, but the Chief Secretary has never accepted in this context that this is not just a change in taxation but a fundamental change in the form of taxation, with the consequences of the rate that goes with it. In his other moments, when he is saying that the life of the businessman from now on will be simplicity itself, and so on, he tells us that this is a fundamental change in taxation—"Look how clever we are to have thought of it and how bold we are to carry it through". But when he comes to investment allowances, he always says that this is just the same as a change of 6d. up or down in the standard rate and one must accept it in one's stride. With respect, it is not an argument worthy of the right hon. Gentleman.

The right hon. Gentleman went on to an argument about the cost, saying that it was £300 million, the saving by the Corporation Tax would be £100 million, the fringe items being £50 million. But he later said that there was no saving and no cost. I regard this as a metaphysical argument, and I think, judging by the expression on his face at the time, that the right hon. Member for Easington found it completely incomprehensible. It was a metaphysical argument which the whole Committee found the greatest difficulty in understanding. I certainly did.

The figures were given by my right hon. Friend the Member for Altrincham and Sale, with specific examples of what the results will be. We seem to be getting the worst of all possible worlds. The Chief Secretary tells us that there is no gain and no saving of any kind, yet we hear that companies, some of them large, important and powerful companies, have lost or will lose large amounts. It is a remarkable achievement. If I may say so, this is the difficulty we have been in all the way through our discussions on the Corporation Tax. Very dogmatically, the Chief Secretary said that we had a major problem, it was costing us a lot of money, but not producing the results. His right hon. Friend the Chancellor was much more cautious about it in his Budget speech. I have noticed how, during our debates, the dogmatism has grown in the statement that we are not getting the results and it is costing us a lot of money.

The Chief Secretary said that the Government were introducing the Corporation Tax and would find another method. These were the two points he gave as their policy. But, of course, to return to my previous point, saying that we have got the Corporation Tax is no answer in an existing industrial structure. In an existing industrial structure in which there are existing dividend rates, the relation to the market and everything else, one cannot make the kind of broad assumption across the whole field which the right hon. Gentleman makes that companies will have so much more money to play about with and, therefore, to invest if they choose, so that we can adept the indirect consequence of the reduction of investment allowances. In fact, one can show that, in many companies, if one is to be able to compensate, there will have to be quite substantially reduced dividends. It is generally agreed now that companies will not, in fact, decide to reduce dividends, because of the existing structure, but they will reduce investment. But this is exactly the reverse of what the right hon. Gentleman says he is trying to do—we accept his motives, of course—what we on this side want to do, and what, in the light of the trade figures today, everyone ought to be absolutely determined to do.

But what one cannot put into the Chief Secretary's mind is that, when companies have to make these decisions in existing industrial structure, this is the way decisions are likely to go, as was demonstrated absolutely clearly by my right hon. Friend the Member for Altrincham and Sale. If only the Chief Secretary will recognise that there is this danger, the Committee will feel rather happier about his approach to the whole matter.

The right hon. Gentleman said that the Government would find an alternative policy. This was emphasised by his hon. Friend the Member for Middlesbrough, West, who, I am sorry to see, is not in his place at the moment. We all respect the hon. Gentleman for his great intelligence and for the attention he gives to these matters. As we know, he was associated with I.C.I., one of the greatest companies, and he had a certain responsibility for its investment decisions. It is interesting that the Chairman of I.C.I. has flatly contradicted the thesis of the hon. Member for Middlesbrough, West, saying that he does not accept his view. He said: In spite of what has been said about business men ignoring taxation in their investment decisions I am sure that large companies do take taxation into account. We certainly do. I also believe that the number of companies who do so is growing rapidly". Then the Chairman went on to details.

It seems to me that the argument of the hon. Member for Middlesbrough, West, for a large part of the time did not hold water. He said that what we need is an immediate incentive—an incentive which makes an immediate impact on a firm—if we are to get investment. But his thesis was that firms must look at the life of the investment over a 15-year period, if necessary, the discounted cash flow and the other things associated with it. That is the lesson of the N.E.D.C. pamphlet and in that the hon. Gentleman is right. But one cannot, in my view at any rate combine these two things. The important thing is to get education of business and industry into the way suggested by the N.E.D.C.

From the industrial point of view, the impact on industry of the Government's proposal can be bad because, first, it has to plan some way ahead and at the moment is in a state of uncertainty about what is to happen in the long term from the Chancellor's investigations. All it sees is that investment allowances are being considerably devalued and it does not know what is to happen in future. This will, therefore, affect industry adversely.

I believe that the development districts will also suffer. The view of Mr. Chetwynd has been quoted by my hon. Friend the Member for Tynemouth (Dame Irene Ward). In Scotland the Government proposal will have some deleterious effect on industrial investment. It is not enough to keep the same proportion between investment in development districts and the rest of the country. It is necessary also to have an absolute degree of incentive to people to invest. It is not sufficient to say that the relationship between development districts and the rest of the country will still apply to the advantage of development districts. One has first to have an absolute amount of incentive or people will not invest. That is the marginal factor. It was my experience in dealing with individual firms. Certainly, the development districts will suffer and that is undesirable.

The right hon. Member for Easington speaks with great experience of the shipping industry and he emphasised the harm which flag discrimination has done and our desire that this should be handled effectively. The fact is that all Governments since the war have been unable to handle it effectively. Indeed, that applies to any Government in any country as far as I know. The right hon. Gentleman mentioned the action of the U.S. Maritime Commission. He will agree that the last British Government did bring about a change of view there, although it was not concerned with flag discrimination. If we cannot help the industry through flag discrimination controlled throughout the world then we can at least help it through investment allowances. I accept the Chief Secretary's overall figure about the amount of credit building up but it does not help individual firms much which can and do benefit from allowances, and surely encouragement of individual firms is what we want to bring about through their investment decisions.

Finally, there is the question of the advice that the Chief Secretary has received about the attitude of firms. Earlier, the Chancellor quoted the advice given to the N.E.D.C. What is the view of the N.E.D.C. itself now about investment allowances? Does it believe that they should be devalued? Of course, neither the Chancellor nor the Chief Secretary can answer that question because they are not allowed to be members of the N.E.D.C., but I understand that the very recent view of the N.E.D.C. is that it does not want the investment allowances to suffer in this way. I believe that to be a right judgment. It is not desirable that this change should be brought about in the investment allowances when there is no alternative policy to put in its place.

Even if we accept all the objections put forward by the Chief Secretary, which we do not—and I have tried to point out why we do not accept some and why his arguments would apply as much to his own policy—that would not justify bringing about a change of this importance—£300 million overall and a saving of £100 million—as an indirect process of taxation change without being able to apply an alternative policy in its place.

I submit to the Committee that the Amendments and the new Clause which we have been discussing all day are a justifiable attempt to restore the status quo and I strongly urge the Committee to support it.

Question put, That the proposed words be there inserted:—

The Committee divided: Ayes 189, Noes 194.

Division No. 172.]	AYES	[10.16 p.m.
Agnew, Commander Sir Peter	Goodhew, Victor	Morrison, Charles (Devizes)
Anstruther-Gray, Rt. Hn. Sir W.	Gower, Raymond	Munro-Lucas-Tooth, Sir Hugh
Astor, John	Grant, Anthony	Murton, Oscar
Atkins, Humphrey	Gresham Cooke, R.	Noble, Rt. Hn. Michael
Awdry, Daniel	Griffiths, Peter (Smethwick)	Nugent, Rt. Hn. Sir Richard
Baker, W. H. K.	Grimond, Rt. Hn. J.	Onslow, Cranley
Barber, Rt. Hn. Anthony	Gurden, Harold	Orr-Ewing, Sir Ian
Barlow, Sir John	Hall, John (Wycombe)	Page, John (Harrow, W.)
Batsford, Brian	Hall-Davis, A. G. F.	Page, R. Graham (Crosby)
Bell, Ronald	Hamilton, M. (Salisbury)	Pearson, Sir Frank (Clitheroe)
Bennett, Sir Frederic (Torquay)	Harris, Reader (Heston)	Peel, John
Berry, Hn. Anthony	Harrison, Brian (Maldon)	Percival, Ian
Bessell, Peter	Harrison, Col. Sir Harwood (Eye)	Peyton, John
Biffen, John	Harvey, Sir Arthur Vere (Macclesf'd)	Pickthorn, Rt. Hn. Sir Kenneth
Biggs-Davison, John	Harvey, John (Walthamstow, E.)	Pitt, Dame Edith
Bingham, R. M.	Hawkins, Paul	Powell, Rt. Hn. J. Enoch
Birch, Rt. Hn. Nigel	Heald, Rt. Hn. Sir Lionel	Price, David (Eastleigh)
Black, Sir Cyril	Heath, Rt. Hn. Edward	Prior, J. M. L.
Bowen, Roderic (Cardigan)	Higgins, Terence L.	Rawlinson, Rt. Hn. Sir Peter
Box, Donald	Hiley, Joseph	Redmayne, Rt. Hn. Sir Martin
Boyd-Carpenter, Rt. Hn. J.	Hill, J. E. B. (S. Norfolk)	Ridley, Hn Nicholas
Boyle, Rt. Hn. Sir Edward	Hobson, Rt. Hn. Sir John	Ridsdale, Julian
Brewis, John	Hooson, H. E.	Roberts, Sir Peter (Heeley)
Brinton, Sir Tatton	Hordern, Peter	Rodgers, Sir John (Sevenoaks)
Bromley-Davenport,Lt.-Col. Sir Walter	Hornsby-Smith, Rt. Hn. Dame P.	Shepherd, William
Brown, Sir Edward (Bath)	Hunt, John (Bromley)	Sinclair, Sir George
Bruce-Gardyne, J.	Hutchison, Michael Clark	Smith, Dudley (Br'ntf'd & Chiswick)
Bryan, Paul	Iremonger, T. L.	Spearman, Sir Alexander
Bullus, Sir Eric	Irvine, Bryant Codman (Rye)	Stainton, Keith
Campbell, Gordon	Jenkin, Patrick (Woodford)	Steel, David (Roxburgh)
Carlisle, Mark	Johnston, Russell (Inverness)	Studholme, Sir Henry
Carr, Rt. Hn. Robert	Jopling, Michael	Talbot, John E.
Cary, Sir Robert	Joseph, Rt. Hn. Sir Keith	Taylor, Sir Charles (Eastbourne)
Chataway, Christopher	Kaberry, Sir Donald	Taylor, Edward M. (G'gow,Cathcart)
Chichester-Clark, R.	Kerby, Capt. Henry	Taylor, Frank (Moss Side)
Clark, Henry (Antrim, N.)	Kershaw, Anthony	Temple, John M.
Clark, William (Nottingham, S.)	Kimball, Marcus	Thompson, Sir Richard (Croydon, S.)
Cole, Norman	King, Evelyn (Dorset, S.)	Thorpe, Jeremy
Cooke, Robert	Kirk, Peter	Tiley, Arthur (Bradford, W.)
Cooper, A. E.	Lambton, Viscount	Tilney, John (Wavertree)
Costain, A. P.	Lancaster, Col. C. G.	Turton, Rt. Hn. R. H.
Crawley, Aidan	Legge-Bourke, Sir Harry	Tweedsmuir, Lady
Crosthwaite-Eyre, Col. Sir Oliver	Lewis, Kenneth (Rutland)	van straubenzee, W. R.
Curran, Charles	Litchfield, Capt. John	Vaughan-Morgan, Rt. Hn. Sir John
Currie, G. B. H.	Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)	Vickers, Dame Joan
Dalkeith, Earl of	Lloyd, Ian (P'tsm'th, Langstone)	Walder, David (High Peak)
Davies, Dr. Wyndham (Perry Barr)	Longbottom, Charles	Walker, Peter (Worcester)
Dean, Paul	Lubbock, Eric	Walters, Dennis
Deedes, Rt. Hn. W. F.	McAdden, Sir Stephen	Ward, Dame Irene
Digby, Simon Wingfield	Mackie, George Y. (C'ness & S'land)	Webster, David
Dodds-Parker, Douglas	McLaren, Martin	Wells, John (Maidstone)
Elliot, Capt. Walter (Carshalton)	Maclean, Sir Fitzroy	Whitelaw, William
Elliott, R. W.(N'c'tle-upon-Tyne,N.)	Maginnis, John E.	Williams, Sir Rolf Dudley (Exeter)
Emery, Peter	Marten, Nell	Wills, Sir Gerald (Bridgwater)
Errington, Sir Eric	Mathew, Robert	Wilson, Geoffrey (Truro)
Eyre, Reginald	Maude, Angus	Wise, A. R.
Fisher, Nigel	Maxwell-Hyslop, R. J.	Wolrige-Gordon, Patrick
Fletcher-Cooke, Charles (Darwen)	Maydon, Lt.-Cmdr. S. L. C.	Wood, Rt. Hn. Richard
Fletcher-Cooke, Sir John (S'pton)	Meyer, Sir Anthony	Wylie, N. R.
Fraser, Ian (Plymouth, Sutton)	Mills, Peter (Torrington)	Yates, William (The Wrekin)
Gardner, Edward	Miscampbell, Norman	Younger, Hn. George
Gibson-Watt, David	Mitchell, David
Gilmour, sir John (East Fife)	Monro, Hector	TELLERS FOR THE AYES:
Glover, Sir Douglas	More, Jasper	Mr. MacArthur and Mr. Pym.
NOES
Abse, Leo	Bellenger, Rt. Hn. F. J.	Brown, Hugh D. (Glasgow, Provan)
Allaun, Frank (Salford, E.)	Bennett, J. (Glasgow, Bridgeton)	Brown, R. W. (Shoreditch & Fbury)
Alldritt, Walter	Blackburn, F.	Buchan, Norman (Renfrewshire. W.)
Allen, Scholefield (Crewe)	Blenkinsop, Arthur	Buchanan, Richard
Atkinson, Norman	Boardman, H.	Callaghan, Rt. Hn. James
Bacon, Miss Alice	Bowden, Rt. Hn. H. W. (Leics S.W.)	Carmichael, Neil
Bagier, Gordon A. T.	Boyden, James	Carter-Jones, Lewis
Barnett, Joel	Braddock, Mrs. E. M.	Castle, Rt. Hn. Barbara
Baxter, William	Bray, Dr. Jeremy	Chapman, Donald
Beaney, Alan	Brown, Rt. Hn. George (Belper)	Conlan, Bernard
Cousins, Rt. Hn. Frank	Jeger, George (Goole)	Pursey, Cmdr. Harry
Craddock, George (Bradford, S.)	Jenkins, Rt. Hn. Roy (Stechford)	Randall, Harry
Crawshaw, Richard	Johnson, James (K'ston-on-Hull,W.)	Rankin, John
Crossman, Rt. Hn. R. H. S.	Jones, Dan (Bumley)	Rees, Merlyn
Cullen, Mrs. Alice	Jones, J. Idwal (Wrexham)	Rhodes, Geoffrey
Dalyell, Tam	Jones, T. W. (Merioneth)	Roberts, Goronwy (Caernarvon)
Darling, George	Kenyon, Clifford	Robertson, John (Paisley)
Davies, C. Elfed (Rhondda, E.)	Kerr, Mrs. Anne (R'ter & Chatham)	Robinson, Rt. Hn.K.(St. Pancras,N.)
Davies, Harold (Leek)	Lawson, George	Rodgers, William (Stockton)
Davies, Ifor (Gower)	Leadbitter, Ted	Rogers, George (Kensington, N.)
Davies, S. O. (Merthyr)	Lee, Miss Jennie (Cannock)	Rose, Paul B.
de Freitas, Sir Geoffrey	Lomas, Kenneth	Rowland, Christopher
Delargy, Hugh	McBride, Neil	Shore, Peter (Stepney)
Diamond, John	McCann, J.	Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Doig, Peter	MacColl, James	Short, Mrs. Renee (W'hampton,N.E.)
Donnelly, Desmond	MacDermot, Niall	Silkin, S. C. (Camberwell, Dulwich)
Driberg, Tom	McKay, Mrs. Margaret	Silverman, Sydney (Nelson)
Duffy, Dr. A. E. P.	Mackenzie, Gregor (Rutherglen)	Slater, Mrs. Harriet (Stoke, N.)
Dunn, James A.	MacMillan, Malcolm	Slater, Joseph (Sedgefield)
Edwards, Rt. Hn. Ness (Caerphilly)	Marion, Peter (Preston, S.)	Small, William
Ennals, David	Mahon, Simon (Bootle)	Snow, Julian
Ensor, David	Mallalieu,J.P.W.(Huddersfield,E.)	Stewart, Rt. Hn. Michael
Evans, loan (Birmingham, Yardley)	Manuel, Archie	Stonehouse, John
Fernyhough, E.	Mapp, Charles	Stones, William
Finch, Harold (Bedwellty)	Marsh, Richard	Summerskill, Hn. Dr. Shirley
Fletcher, Sir Eric (Islington, E.)	Maxwell, Robert	Swain, Thomas
Fletcher, Ted (Darlington)	Millan, Bruce	Swingler, Stephen
Fletcher, Raymond (Ilkeston)	Miller, Dr. M. S.	Symonds, J. B.
Foot, Sir Dingle (Ipswich)	Milne, Edward (Blyth)	Taverne, Dick
Ford, Ben	Molloy, William	Taylor, Bernard (Mansfield)
Fraser, Rt. Hn. Tom (Hamilton)	Monslow, Walter	Thomas, George (Cardiff, W.)
Galpern, Sir Myer	Morris, Alfred (Wythenshawe)	Thomas, lorwerth (Rhondda, W.)
Garrett, W. E.	Morris, Charles (Openshaw)	Thornton, Ernest
Garrow, A.	Morris, John (Aberavon)	Tinn, James
Ginsburg, David	Newens, Stan	Tomney, Frank
Gourlay, Harry	Noel-Baker,Rt.Hn.Philip(Derby,S.)	Urwin, T. W.
Greenwood, Rt. Hn. Anthony	Norwood, Christopher	Varley, Eric G.
Gregory, Arnold	Oakes, Gordon	Wainwright, Edwin
Grey, Charles	Ogden, Eric	Walden, Brian (All Saints)
Griffiths, David (Rother Valley)	O'Malley, Brian	Walker, Harold (Doncaster)
Hamilton, James (Bothwell)	Oram, Albert E. (E. Ham, S.)	Wallace, George
Hamilton, William (West Fife)	Orme, Stanley	Warbey, William
Hannan, William	Oswald, Thomas	Watkins, Tudor
Harper, Joseph	Owen, Will	White, Mrs. Eirene
Harrison, Walter (Wakefield)	Padley, Walter	Whitlock, William
Hart, Mrs. Judith	Page, Derek (King's Lynn)	Wigg, Rt. Hn. George
Hattersley, Roy	Paget, R. T.	Willey, Rt. Hn. Frederick
Hazell, Bert	Palmer, Arthur	Williams, Alan (Swansea, W.)
Holman, Percy	Park, Trevor (Derbyshire, S.E.)	Williams, Albert (Abertillery)
Homer, John	Pavitt, Laurence	Willis, George (Edinburgh, E.)
Howarth, Harry (Wellingborough)	Pearson, Arthur (Pontypridd)	Wilson, William (Coventry, S.)
Howell, Denis (Small Heath)	Pentland, Norman	Winterbottom, R. E.
Hoy, James	Perry, Ernest G.
Irving, Sydney (Dartford)	Popplewell, Ernest	TELLERS FOR THE NOES:
Jackson, Colin	Price, J. T. (Westhoughton)	Mr. Howie and Mi. Fitch.
Jay, Rt. Hn. Douglas	Probert, Arthur

Amendment proposed: In page 63, line 25, at end insert: Provided always that the expenditure incurred in the provision of new machinery or plant for use in a development district in respect of which investment allowances are calculated shall for the purpose of corporation

tax be deemed to be increased by 40 per cent. —[Mr. Heath.]

Question put, That those words be there inserted:—

The Committee divided: Ayes 189, Noes 195.

Division No. 173.]	AYES	[10.27 p.m.
Agnew, Commander Sir Peter	Goodhew, Victor	Morrison, Charles (Devizes)
Anstruther-Gray, Rt. Hn. Sir W.	Gower, Raymond	Munro-Lucas-Tooth, Sir Hugh
Astor, John	Grant, Anthony	Murton, Oscar
Atkins, Humphrey	Gresham Cooke, R.	Noble, Rt. Hn. Michael
Awdry, Daniel	Griffiths, Peter (Smethwick)	Nugent, Rt. Hn. Sir Richard
Baker, W. H. K.	Grimond, Rt. Hn. J.	Onslow, Cranley
Barber, Rt. Hn. Anthony	Gurden, Harold	Orr-Ewing, Sir Ian
Barlow, Sir John	Hall, John (Wycombe)	Page, John (Harrow, W.)
Batsford, Brian	Hall-Davis, A. G. F.	Page, R. Graham (Crosby)
Bell, Ronald	Hamilton, M. (Salisbury)	Pearson, Sir Frank (Clitheroe)
Bennett, Sir Frederic (Torquay)	Harris, Reader (Heston)	Peel, John
Berry, Hn. Anthony	Harrison, Brian (Maldon)	Percival, Ian
Bessell, Peter	Harrison, Col. Sir Harwood (Eye)	Peyton, John
Bitten, John	Harvey, Sir Arthur Vere (Macclesf'd)	Pickthorn, Rt. Hn. Sir Kenneth
Biggs-Davison, John	Harvey, John (Walthamstow, E.)	Pitt, Dame Edith
Bingham, R. M.	Hawkins, Paul	Powell, Rt. Hn. J. Enoch
Birch, Rt. Hn. Nigel	Heald, Rt. Hn. Sir Lionel	Price, David (Eastleigh)
Black, Sir Cyril	Heath, Rt. Hn. Edward	Prior, J. M. L.
Bowen, Roderic (Cardigan)	Higgins, Terence L.	Rawlinson, Rt. Hn. Sir Peter
Box, Donald	Hiley, Joseph	Redmayne, Rt. Hn. Sir Martin
Boyd-Carpenter, Rt. Hn. J.	Hill, J. E. B. (S. Norfolk)	Ridley, Hn. Nicholas
Boyle, Rt. Hn. Sir Edward	Hobson, Rt. Hn. Sir John	Ridsdale, Julian
Brewis, John	Hooson, H. E.	Roberts, Sir Peter (Heeley)
Brinton, Sir Tatton	Hordern, Peter	Rodgers, Sir John (Sevenoaks)
Bromley-Davenport,Lt.-Col.Sir Walter	Hornsby-Smith, Rt. Hn. Dame P.	Shepherd, William
Brown, Sir Edward (Bath)	Hunt, John (Bromley)	Sinclair, Sir George
Bruce-Gardyne, J.	Hutchison, Michael Clark	Smith, Dudley (Br'ntf'd & Chiswick)
Bryan, Paul	Iremonger, T. L.	Spearman, Sir Alexander
Bullus, Sir Eric	Irvine, Bryant Godman (Rye)	Stainton, Keith
Campbell, Gordon	Jenkin, Patrick (Woodford)	Steel, David (Roxburgh)
Carlisle, Mark	Johnston, Russell (Inverness)	Studholme, Sir Henry
Carr, Rt. Hn. Robert	Jopling, Michael	Talbot, John E.
Cary, Sir Robert	Joseph, Rt. Hn. Sir Keith	Taylor, Sir Charles (Eastbourne)
Chataway, Christopher	Kaberry, Sir Donald	Taylor, Edward M. (G'gow,Cathcart)
Chichester-Clark, R.	Kerby, Capt. Henry	Taylor, Frank (Moss Side)
Clark, Henry (Antrim, N.)	Kershaw, Anthony	Temple, John M.
Clark, William (Nottingham, S.)	Kimball, Marcus	Thompson, Sir Richard (Croydon, S.)
Cole, Norman	King, Evelyn (Dorset, S.)	Thorpe, Jeremy
Cooke, Robert	Kirk, Peter	Tiley, Arthur (Bradford, W.)
Cooper, A. E.	Lambton, Viscount	Tilney, John (Wavertree)
Costain, A. P.	Lancaster, Col. C. G.	Turton, Rt. Hn. R. H.
Crawley, Aidan	Legge-Bourke, Sir Harry	Tweedsmuir, Lady
Crosthwalte-Eyre, Col. Sir Oliver	Lewis, Kenneth (Rutland)	van Straubenzee, W. R.
Curran, Charles	Litchfield, Capt. John	Vaughan-Morgan, Rt. Hn. Sir John
Currie, G. B. H.	Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)	Vickers, Dame Joan
Dalkeith, Earl of	Lloyd, Ian (P'tsm'th, Langstone)	Walder, David (High Peak)
Davies, Dr. Wyndham (Perry Barr)	Longbottom, Charles	Walker, Peter (Worcester)
Dean, Paul	Lubbock, Eric	Walters, Dennis
Deedes, Rt. Hn. W. F.	McAdden, Sir Stephen	Ward, Dame Irene
Digby, Simon Wingfield	Mackie, George V. (C'ness & S'land)	Webster, David
Dodds-Parker, Douglas	McLaren, Martin	Wells, John (Maidstone)
Elliot, Capt. Walter (Carshalton)	Maclean, Sir Fitzroy	Whitelaw, William
Elliott, R. W.(N'c'tle-upon-Tyne,N.)	Maginnis, John E.	Williams, Sir Rolf Dudley (Exeter)
Emery, Peter	Marten, Nell	Wills, Sir Gerald (Bridgwater)
Errington, Sir Eric	Mathew, Robert	Wilson, Geoffrey (Truro)
Eyre, Reginald	Maude, Angus	Wise, A. R.
Fisher, Nigel	Maxwell-Hyslop, R. J.	Wolrige-Gordon, Patrick
Fletcher-Cooke, Charles (Darwen)	Maydon, Lt.-Cmdr. S. L. C.	Wood, Rt. Hn. Richard
Fletcher-Cooke, Sir John (S'pton)	Meyer, Sir Anthony	Wylie, N. R.
Fraser, Ian (Plymouth, Sutton)	Mills, Peter (Torrington)	Yates, William (The Wrekin)
Gardner, Edward	Miscampbell, Norman	Younger, Hn. George
Gibson-Watt, David	Mitchell, David
Gilmour, Sir John (East Fife)	Monro, Hector	TELLERS FOR THE AYES:
Glover, Sir Douglas	More, Jasper	Mr. Ian Mac Arthur and
		Mr. Francis Pym.
NOES
Abse, Leo	Allen, Scholefield (Crewe)	Bagier, Gordon A. T.
Allaun, Frank (Salford, E.)	Atkinson, Norman	Barnett, Joel
Alldritt, Walter	Bacon, Mist Alice	Baxter, William
Beaney, Alan	Hannan, William	Park, Trevor (Derbyshire, S.E.)
Bellenger, Rt. Hn. F. J.	Harper, Joseph	Pavitt, Laurence
Bennett, J. (Glasgow, Bridgeton)	Harrison, Walter (Wakefield)	Pearson, Arthur (Pontypridd)
Blackburn, F.	Hart, Mrs. Judith	Pentland, Norman
Blenkinsop, Arthur	Hattersley, Roy	Perry, Ernest G.
Boardman, H.	Hazell, Bert	Popplewell, Ernest
Bowden, Rt. Hn. H. W. (Leics S.W.)	Holman, Percy	Price, J. T. (Westhoughton)
Boy den, James	Horner, John	Probert, Arthur
Braddock, Mrs. E. M.	Houghton, Rt. Hn. Douglas	Pursey, Cmdr. Harry
Bray, Dr. Jeremy	Howarth, Harry (Wellingborough)	Randall, Harry
Brown, Rt. Hn. George (Belper)	Howell, Denis (Small Heath)	Rankin, John
Brown, Hugh D. (Glasgow, Provan)	Hoy, James	Rees, Merlyn
Brown, R. W. (Shoreditch & Fbury)	Irving, Sydney (Dartford)	Rhodes, Geoffrey
Buchan, Norman (Renfrewshire, W.)	Jackson, Colin	Roberts, Goronwy (Caernarvon)
Buchanan, Richard	Jay, Rt. Hn. Douglas	Robertson, John (Paisley)
Callaghan, Rt. Hn. James	Jeger, George (Goole)	Robinson, Rt. Hn.K.(St. Pancras,N.)
Carmichael, Neil	Jenkins, Rt. Hn. Roy (Stechford)	Rodgers, William (Stockton)
Carter-Jones, Lewis	Johnson, James(K'ston-on-Hull,W.)	Rogers, George (Kensington, N.)
Castle, Rt. Hn. Barbara	Jones, Dan (Burnley)	Rose, Paul B.
Chapman, Donald	Jones, J. Idwal (Wrexham)	Rowland, Christopher
Conlan, Bernard	Jones, T. W. (Merioneth)	Shore, Peter (Stepney)
Cousins, Rt. Hn. Frank	Kenyon, Clifford	Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Craddock, George (Bradford, S.)	Kerr, Mrs. Anne (R'ter & Chatham)	Short, Mrs. Renée (W'hampton,N.E.)
Crawshaw, Richard	Lawson, George	Silkin, S. C. (Camberwell, Dulwich)
Crossman, Rt. Hn. R. H. S.	Leadbitter, Ted	Silverman, Sydney (Nelson)
Cullen, Mrs. Alice	Lee, Miss Jennie (Cannock)	Slater, Mrs. Harriet (Stoke, N.)
Dalyell, Tam	Lomas, Kenneth	Slater, Joseph (Sedgefield)
Darling, George	McBride, Neil	Small, William
Davies, G. Elfed (Rhondda, E.)	McCann, J.	Snow, Julian
Davies, Harold (Leek)	MacColl, James	Stewart, Rt. Hn. Michael
Davies, Ifor (Gower)	MacDermot, Niall	Stonehouse, John
Davies, S. O. (Merthyr)	McKay, Mrs. Margaret	Stones, William
de Freitas, Sir Geoffrey	Mackenzie, Gregor (Rutherglen)	Summerskill, Hn. Dr. Shirley
Delargy, Hugh	MacMillan, Malcolm	Swain, Thomas
Diamond, John	Mahon, Peter (Preston, S.)	Swingler, Stephen
Doig, Peter	Mahon, Simon (Bootle)	Symonds, J. B.
Donnelly, Desmond	Mallalieu,J.P.W.(Huddersfield,E.)	Taverne, Dick
Driberg, Tom	Manuel, Archie	Taylor, Bernard (Mansfield)
Duffy, Dr. A. E. P.	Mapp, Charles	Thomas, George (Cardiff, W.)
Dunn, James A.	Marsh, Richard	Thomas, Iorwerth (Rhondda, W.)
Edwards, Rt. Hn. Ness (Caerphilly)	Maxwell, Robert	Thornton, Ernest
Ennals, David	Millan, Bruce	Tinn, James
Eneor, David	Miller, Dr. M. S.	Tomney, Frank
Evans, Ioan (Birmingham, Yardley)	Milne, Edward (Blyth)	Urwin, T. W.
Fernyhough, E.	Molloy, William	Varley, Eric G.
Finch, Harold (Bedwellty)	Monslow, Walter	Wainwright, Edwin
Fletcher, Sir Eric (Islington, E.)	Morris, Alfred (Wythenshawe)	Walden, Brian (All Saints)
Fletcher, Ted (Darlington)	Morris, Charles (Openshaw)	Walker, Harold (Doncaster)
Fletcher, Raymond (Ilkeston)	Morris, John (Aberavon)	Wallace, George
Foot, Sir Dingle (Ipswich)	Newens, Stan	Warbey, William
Ford, Ben	Noel-Baker, Rt.Hn.Phllip(Derby,S.)	Watkins, Tudor
Fraser, Rt. Hn. Tom (Hamilton)	Norwood, Christopher	White, Mrs. Eirene
Galpern, Sir Myer	Oakes, Gordon	Whitlock, William
Garrett, W. E.	Ogden, Eric	Wigg, Rt. Hn. George
Garrow, A.	O'Malley, Brian	Willey, Rt. Hn. Frederick
Ginsburg, David	Oram, Albert E. (E. Ham, S.)	Williams, Alan (Swansea, W.)
Gourlay, Harry	Orme, Stanley	Williams, Albert (Abertillery)
Greenwood, Rt. Hn. Anthony	Oswald, Thomas	Willis, George (Edinburgh, E.)
Gregory, Arnold	Owen, Will	Wilson, William (Coventry, S.)
Grey, Charles	Padley, Walter	Winterbottom, R. E.
Griffiths, David (Rother Valley)	Page, Derek (King's Lynn)
Hamilton, James (Bothwell)	Paget, R. T.	TELLERS FOR THE NOES:
Hamilton, William (West Fife)	Palmer, Arthur	Mr. W. Howie and Mr. Alan Fitch.

Amendment proposed: In page 63, line 25, at end insert: Provided always that the expenditure on the provision of ships in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent.—[Mr. Heath.]

Question put, That those words be there inserted:

The Committee divided: Ayes 190, Noes 196.

Division No. 174.]	AYES	[10.37 p.m.
Agnew, Commander Sir Peter	Barlow, Sir John	Biggs-Davison, John
Anstruther-Gray, Rt. Hn. Sir W.	Batsford, Brian	Bingham, R. M.
Astor, John	Bell, Ronald	Birch, Rt. Hn. Nigel
Atkins, Humphrey	Bennett, Sir Frederic (Torquay)	Black, Sir Cyril
Awdry, Daniel	Berry, Hn. Anthony	Bowen, Roderic (Cardigan)
Baker, W. H. K.	Bessell, Peter	Box, Donald
Barber, Rt. Hn. Anthony	Biffen, John	Boyd-Carpenter, Rt. Hn. J.
Boyle, Rt. Hit. Sir Edward	Heald, Rt. Hn. Sir Lionel	Pearson, Sir Frank (Clitheroe)
Brewis, John	Heath, Rt. Hn. Edward	Peel, John
Brinton, Sir Tatton	Higgins, Terence L.	Percival, Ian
Bromley-Davenport,Lt.-Col.SirWalter	Hiley, Joseph	Peyton, John
Brown, Sir Edward (Bath)	Hill, J. E. B. (S. Norfolk)	Pickthorn, Rt. Hn. Sir Kenneth
Bruce-Gardyne, J.	Hobson, Rt. Hn. Sir John	Pitt, Dame Edith
Bryan, Paul	Hooson, H. E.	Powell, Rt. Hn. J. Enoch
Bullus, Sir Eric	Hordern, Pater	Price, David (Eastleigh)
Campbell, Gordon	Hornby, Richard	Prior, J. M. L.
Carlisle, Mark	Hornsby-Smith, Rt. Hn. Dame P.	Pym, Francis
Carr, Rt. Hn. Robert	Hunt, John (Bromley)	Rawlinson, Rt. Hn. Sir Peter
Cary, Sir Robert	Hutchison, Michael Clark	Redmayne, Rt. Hn. Sir Martin
Chataway, Christopher	Iremonger, T. L.	Ridley, Hn. Nicholas
Chichester-Clark, R.	Irvine, Bryant Godman (Rye)	Ridsdale, Julian
Clark, Henry (Antrim, N.)	Jenkin, Patrick (Woodford)	Roberts, Sir Peter (Heeley)
Clark, William (Nottingham, S.)	Johnston, Russell (Inverness)	Rodgers, Sir John (Sevenoaks)
Cole, Norman	Jopling, Michael	Shepherd, William
Cooke, Robert	Joseph, Rt. Hn. Sir Keith	Sinclair, Sir George
Cooper, A. E.	Kaberry, Sir Donald	Smith, Dudley (Br'ntf'd & Chiswick)
Costain, A. P.	Kerby, Capt. Henry	Spearman, Sir Alexander
Crawley, Aidan	Kershaw, Anthony	Stainton, Keith
Crosthwaite-Eyre, Col. Sir Oliver	Kimball, Marcus	Steel, David (Roxburgh)
Curran, Charles	King, Evelyn (Dorset, S.)	Studholme, Sir Henry
Currie, G. B. H.	Kirk, Peter	Talbot, John E.
Dalkeith, Earl of	Lambton, Viscount	Taylor, Sir Charles (Eastbourne)
Davies, Dr. Wyndham (Perry Barr)	Lancaster, Col. C. G.	Taylor, Edward M. (G'gow,Cathcart)
Dean, Paul	Legge-Bourke, Sir Harry	Taylor, Frank (Moss Side)
Deedes, Rt. Hn. W. F.	Lewis, Kenneth (Rutland)	Temple, John M.
Digby, Simon Wingfield	Litchfield, Capt. John	Thompson, Sir Richard (Croydon, S.)
Dodds-Parker, Douglas	Lloyd,Rt.Hn.Geoffrey (Sut'nC'dfield)	Thorpe, Jeremy
Elliot, Capt. Walter (Carshalton)	Lloyd, Ian (P'tsm'th, Langstone)	Tiley, Arthur (Bradford, W.)
Emery, Peter	Longbottom, Charles	Tilney, John (Wavertree)
Errington, Sir Eric	Lubbock, Eric	Turton, Rt. Hn. R. H.
Eyre, Reginald	McAdden, Sir Stephen	Tweedsmuir, Lady
Fisher, Nigel	MacArthur, Ian	van Straubenzee, W. R.
Fletcher-Cooke, Charles (Darwen)	Mackie, George Y. (C'ness & S'land)	Vaughan-Morgan, Rt. Hn. Sir John
Fletcher-Cooke, Sir John (S'pton)	McLaren, Martin	Vickers, Dame Joan
Fraser, Ian (Plymouth, Sutton)	Maclean, Sir Fitzroy	Walder, David (High Peak)
Gardner, Edward	Maginnis, John E.	Walker, Peter (Worcester)
Gibson-Watt, David	Marten, Neil	Walters, Dennis
Gilmour, Sir John (East Fife)	Mathew, Robert	Ward, Dame Irene
Glover, Sir Douglas	Maude, Angus	Webster, David
Goodhew, Victor	Maxwell-Hyslop, R. J.	Wells, John (Maidstone)
Gower, Raymond	Maydon, Lt.-Cmdr. S. L. C.	Whitelaw, William
Grant, Anthony	Meyer, Sir Anthony	Williams, Sir Rolf Dudley (Exeter)
Gresham Cooke, R.	Mills, Peter (Torrington)	Wills, Sir Gerald (Bridgwater)
Griffiths, Peter (Smethwick)	Miscampbell, Norman	Wilson, Geoffrey (Truro)
Grimond, Rt. Hn. J.	Mitchell, David	Wise, A. R.
Gurden, Harold	Monro, Hector	Wolrige-Gordon, Patrick
Hall, John (Wycombe)	Morrison, Charles (Devizes)	Wood, Rt. Hn. Richard
Hall-Davis, A. G. F.	Munro-Lucas-Tooth, Sir Hugh	Wylie, N. R.
Hamilton, M. (Salisbury)	Murton, Oscar	Yates, William (The Wrekin)
Harris, Reader (Heston)	Noble, Rt. Hn. Michael	Younger, Hn. George
Harrison, Brian (Maldon)	Nugent, Rt. Hn. Sir Richard
Harrison, Col. Sir Harwood (Eye)	Onslow, Cranley	TELLERS FOR THE AYES:
Harvey, Sir Arthur Vere (Macclesf'd)	Orr-Ewing, Sir Ian	Mr. R. W. Elliott and
Harvey, John (Walthamstow, E.)	Page, John (Harrow, W.)	Mr. Jasper More.
Hawkins, Paul	Page, R. Graham (Crosby)
NOES
Abse, Leo	Buchanan, Richard	Driberg, Tom
Allaun, Frank (Salford, E.)	Callaghan, Rt. Hn. James	Duffy, Dr. A. E. P.
Alldritt, Walter	Carmichael, Neil	Dunn, James A.
Allen, Scholefield (Crewe)	Carter-Jones, Lewis	Edwards, Rt. Hn. Ness (Caerphilly)
Atkinson, Norman	Castle, Rt. Hn. Barbara	Ennals, David
Bacon, Miss Alice	Chapman, Donald	Ensor, David
Bagier, Cordon A. T.	Conlan, Bernard	Evans, Ioan (Birmingham, Yardley)
Barnett, Joel	Cousins, Rt. Hn. Frank	Fernyhough, E.
Baxter, William	Craddock, George (Bradford, S.)	Finch, Harold (Bedwellty)
Beaney, Alan	Crawshaw, Richard	Fitch, Alan (Wigan)
Bellenger, Rt. Hn. F. J.	Crossman, Rt. Hn. R. H. S.	Fletcher, Sir Eric (Islington, E.)
Bennett, J. (Glasgow, Bridgeton)	Cullen, Mrs. Alice	Fletcher, Ted (Darlington)
Blackburn, F.	Dalyell, Tam	Fletcher, Raymond (Ilkeston)
Blenkinsop, Arthur	Darling, George	Foot, Sir Dingle (Ipswich)
Boardman, H.	Davies, G. Elfed (Rhondda, E.)	Ford, Ben
Bowden, Rt. Hn. H. W. (Leics S.W.)	Davies, Harold (Leek)	Fraser, Rt. Hn. Tom (Hamilton)
Boyden, James	Davies, Ifor (Gower)	Galpern, Sir Myer
Braddock, Mrs. E. M.	Davies, S. O. (Merthyr)	Garrett, W. E.
Bray, Dr. Jeremy	de Freitas, Sir Geoffrey	Garrow, A.
Brown, Rt. Hn. George (Belper)	Delargy, Hugh	Ginsburg, David
Brown, Hugh D. (Glasgow, Provan)	Diamond, John	Gourlay, Harry
Brown, R. W. (Shoreditch & Fbury)	Doig, Peter	Greenwood, Rt. Hn. Anthony
Buchan, Norman (Renfrewshire, W.)	Donnelly, Desmond	Gregory, Arnold

Grey, Charles	Maxwell, Robert	Short, Mrs. Renée (W'hampton,N.E.)
Griffiths, David (Rother Valley)	Millan, Bruce	Silkin, S. C. (Camberwell, Dulwich)
Hamilton, James (Bothwell)	Miller, Dr. M. S.	Silverman, Sydney (Nelson)
Hamilton, William (West File)	Milne, Edward (Blyth)	Slater, Mrs. Harriet (Stoke, N.)
Hannan, William	Molloy, William	Slater, Joseph (Sedgefield)
Harper, Joseph	Monslow, Walter	Small, William
Harrison, Walter (Wakefield)	Morris, Alfred (Wythenshawo)	Snow, Julian
Hart, Mrs. Judith	Morris, Charles (Openshaw)	Stewart, Rt. Hn. Michael
Hattersley, Roy	Morris, John (Aberavon)	Stonehouse, John
Hazell, Bert	Newens, Stan	Stones, William
Holman, Percy	Noel-Baker,Rt.Hn.Philip(Derby,S.)	Summerskill, Hn. Dr. Shirley
Horner, John	Norwood, Christopher	Swain, Thomas
Houghton, Rt. Hn. Douglas	Oakes, Gordon	Swingler, Stephen
Howarth, Harry (Wellingborough)	Ogden, Eric	Symonds, J. B.
Howell, Denis (Small Heath)	Oram, Albert E. (E. Ham, S.)	Taverne, Dick
Howie, W.	Orme, Stanley	Taylor, Bernard (Mansfield)
Hoy, James	Oswald, Thomas	Thomas, George (Cardiff, W.)
Irving, Sydney (Dartford)	Owen, Will	Thomas, Iorwerth (Rhondda, W.)
Jackson, Colin	Padley, Walter	Thomson, George (Dundee, E.)
Jay, Rt. Hn. Douglas	Page, Derek (King's Lynn)	Thornton, Ernest
Jeger, George (Goole)	Paget, R. T.	Tinn, James
Jenkins, Rt. Hn. Roy (Stechford)	Palmer, Arthur	Tomney, Frank
Johnson, James(K'ston-on-Hull,W.)	Park, Trevor (Derbyshire, S.E.)	Urwin, T. W.
Jones, Dan (Burnley)	Pavitt, Laurence	Varley, Erie G.
Jones, J. Idwal (Wrexham)	Pearson, Arthur (Pontypridd)	Wainwright, Edwin
Jones, T. W. (Merioneth)	Pentland, Norman	Walden, Brian (All Saints)
Kenyon, Clifford	Perry, Ernest G.	Walker, Harold (Doncaster)
Kerr, Mrs. Anne (R'ter & Chatham)	Popplewell, Ernest	Wallace, George
Lawson, George	Price, J. T. (Westhoughton)	Warbey, William
Leadbitter, Ted	Probert, Arthur	Watkins, Tudor
Lee, Miss Jennie (Cannock)	Pursey, Cmdr. Harry	White, Mrs. Eirene
Lomas, Kenneth	Randall, Harry	Whitlock, William
McBride, Neil	Rankin, John	Wigg, Rt. Hn. George
MacColl, James	Rees, Merlyn	Willey, Rt. Hn. Frederick
MacDermot, Niall	Rhodes, Geoffrey	Williams, Alan (Swansea, W.)
McKay, Mrs. Margaret	Roberts, Goronwy (Caernarvon)	Williams, Albert (Abertillery)
Mackenzie, Gregor (Rutherglen)	Robertson, John (Paisley)	Willis, George (Edinburgh, E.)
MacMillan, Malcolm	Robinson, Rt. Hn.K.(St. Pancras.N.)	Wilson, William (Coventry, S.)
Mahon, Peter (Preston, S.)	Rodgers, William (Stockton)	Winterbottom, R. E.
Mahon, Simon (Bootle)	Rogers, George (Kensington, N.)
Mallalieu,J.P.W.(Huddersfield,E.)	Rose, Paul B.	TELLERS FOR THE NOES:
Manuel, Archie	Rowland, Christopher	Mr. Brian O'Malley and
Mapp, Charles	Shore, Peter (Stepney)	Mr. McCann.
Marsh, Richard	Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)

Amendment proposed: In page 63, line 25, at end insert: Provided always that the expenditure in Scotland in respect of which investment allowances are calculated shall for the purpose of corporation tax be deemed to be increased by 40 per cent.—[Mr. Heath.]

Question put, That those words be there inserted:—

The Committee divided: Ayes 190, Noes 196.

Division No. 175.]	AYES	[10.46 p.m.
Agnew, Commander Sir Peter	Bruce-Gardyne, J.	Emery, Peter
Anstruther-Gray, Rt. Hn. Sir W.	Bryan, Paul	Errington, Sir Eric
Astor, John	Bullus, Sir Eric	Eyre, Reginald
Atkins, Humphrey	Campbell, Gordon	Fisher, Nigel
Awdry, Daniel	Carlisle, Mark	Fletcher-Cooke, Charles (Darwen)
Baker, W. H. K.	Carr, Rt. Hn. Robert	Fletcher-Cooke, Sir John (S'pton)
Barber, Rt. Hn. Anthony	Cary, Sir Robert	Fraser, Ian (Plymouth, Sutton)
Barlow, Sir John	Chataway, Christopher	Gardner, Edward
Batsford, Brian	Chichester-Clark, R.	Gibson-Watt, David
Bell, Ronald	Clark, Henry (Antrim, N.)	Gilmour, Sir John (East Fife)
Bennett, Sir Frederic (Torquay)	Clark, William (Nottingham, S.)	Glover, Sir Douglas
Berry, Hn. Anthony	Cole, Norman	Goodhew, Victor
Bessell, Peter	Cooke, Robert	Gower, Raymond
Biffen, John	Cooper, A. E.	Grant, Anthony
Biggs-Davison, John	Costain, A. P.	Gresham Cooke, R.
Bingham, R. M.	Crawley, Aidan	Griffiths, Peter (Smethwick)
Birch, Rt. Hn. Nigel	Crosthwalte-Eyre, Col. Sir Oliver	Grimond, Rt. Hn. J.
Black, Sir Cyril	Curran, Charles	Gurden, Harold
Bowen, Roderic (Cardigan)	Currie, G. B. H.	Hall, John (Wycombe)
Box, Donald	Dalkeith, Earl of	Hall-Davis, A. G. F.
Boyd-Carpenter, Rt. Hn. J.	Davies, Dr. Wyndham (Perry Barr)	Hamilton, M. (Salisbury)
Boyle, Rt. Hn. Sir Edward	Dean, Paul	Harris, Reader (Heston)
Brewis, John	Deedes, Rt. Hn. W. F.	Harrison, Brian (Maldon)
Brinton, Sir Tatton	Digby, Simon Wingfield	Harrison, Col. Sir Harwood (Eye)
Bromley-Davenport.Lt.-Col.SirWalter	Dodds-Parker, Douglas	Harvey, Sir Arthur Vere (Macclesf'd)
Brown, Sir Edward (Bath)	Elliot, Capt. Walter (Carshalton)	Harvey, John (Walthamstow, E.)
Hawkins, Paul	Marten, Neil	Spearman, Sir Alexander
Heald, Rt. Hn. Sir Lionel	Mathew, Robert	Stainton, Keith
Heath, Rt. Hn. Edward	Maude, Angus	Steel, David (Roxburgh)
Higgins, Terence L.	Maxwell-Hyslop, R. J.	Studholme, Sir Henry
Hiley, Joseph	Maydon, Lt.-Cmdr. S. L. C.	Talbot, John E.
Hill, J. E. B. (S. Norfolk)	Meyer, Sir Anthony	Taylor, Sir Charles (Eastbourne)
Hobson, Rt. Hn. Sir John	Mills, Peter (Torrington)	Taylor, Edward M. (G'gow,Cathcart)
Hooson, H. E.	Miscampbell, Norman	Taylor, Frank (Moss Side)
Hordern, Peter	Mitchell, David	Temple, John M.
Hornby, Richard	Monro, Hector	Thompson, Sir Richard (Croydon, S.)
Hornsby-Smith, Rt. Hn. Dame P.	More, Jasper	Thorpe, Jeremy
Hunt, John (Bromley)	Morrison, Charles (Devizes)	Tiley, Arthur (Bradford, W.)
Hutchison, Michael Clark	Munro-Lucas-Tooth, Sir Hugh	Tilney, John (Wavertree)
Iremonger, T. L.	Murton, Oscar	Turton, Rt. Hn. R. H.
Irvine, Bryant Godman (Rye)	Noble, Rt. Hn. Michael	Tweedsmuir, Lady
Jenkin, Patrick (Woodford)	Nugent, Rt. Hn. Sir Richard	van Straubenzee, W. R.
Johnston, Russell (Inverness)	Onslow, Cranley	Vaughan-Morgan, Rt. Hn. Sir John
Jopling, Michael	Orr-Ewing, Sir Ian	Vickers, Dame Joan
Joseph, Rt. Hn. Sir Keith	Page, John (Harrow, W.)	Walder, David (High Peak)
Kaberry, Sir Donald	Page, R. Graham (Crosby)	Walker, Peter (Worcester)
Kerby, Capt. Henry	Pearson, Sir Frank (Clitheroe)	Walters, Dennis
Kershaw, Anthony	Peel, John	Ward, Dame Irene
Kimball, Marcus	Percival, Ian	Webster, David
King, Evelyn (Dorset, S.)	Peyton, John	Wells, John (Maidstone)
Kirk, Peter	Pickthorn, Rt. Hn. Sir Kenneth	Whitelaw, William
Lambton, Viscount	Pitt, Dame Edith	Williams, Sir Rolf Dudley (Exeter)
Lancaster, Col. C. G.	Powell, Rt. Hn. J. Enoch	Wills, Sir Gerald (Bridgwater)
Legge-Bourke, Sir Harry	Price, David (Eastleigh)	Wilson, Geoffrey (Truro)
Lewis, Kenneth (Rutland)	Prior, J. M. L.	Wise, A. R.
Litchfield, Capt. John	Pym, Francis	Wolrige-Gordon, Patrick
Lloyd,Rt.Hn. Geoffrey (Sut'nC'dfield)	Rawlinson, Rt. Hn. Sir Peter	Wood, Rt. Hn. Richard
Lloyd, Ian (P'tsm'th, Langstone)	Redmayne, Rt. Hn. Sir Martin	Wylie, N. R.
Longbottom, Charles	Ridley, Hn. Nicholas	Yates, William (The Wrekin)
Lubbock, Eric	Ridsdale, Julian	younger, Hn. George
McAdden, Sir Stephen	Roberts, Sir Peter (Heeley)
Mackie, George Y. (C'ness & S'land)	Rodgers, Sir John (Sevenoaks)	TELLERS FOR THE AYES:
McLaren, Martin	Shepherd, William	Mr. R. W. Elliott and
Maclean, Sir Fitzroy	Sinclair, Sir George	Mr. Ian MacArthur.
Maginnis, John E.	Smith, Dudley (Br'ntf'd & Chiswick)
NOES
Abse, Leo	Delargy, Hugh	Howie, W.
Allaun, Frank (Salford, E.)	Diamond, John	Hoy, James
Alldritt, Walter	Doig, Peter	Irving, Sydney (Dartford)
Allen, Scholefield (Crewe)	Donnelly, Desmond	Jackson, Colin
Atkinson, Norman	Driberg, Tom	Jay, Rt. Hn. Douglas
Bacon, Miss Alice	Duffy, Dr. A. E. P.	Jeger, George (Goole)
Bagier, Gordon A. T.	Dunn, James A.	Jenkins, Rt. Hn. Roy (Stechford)
Barnett, Joel	Edwards, Rt. Hn. Ness (Caerphilly)	Johnson, James(K'ston-on-Hull,W.)
Batter, William	Ennals, David	Jones, Dan (Burnley)
Beaney, Alan	Ensor, David	Jones, J. Idwal (Wrexham)
Bellenger, Rt. Hn. F. J.	Evans, Ioan (Birmingham, Yardley)	Jones, T. W. (Merioneth)
Bennett, J. (Glasgow, Bridgeton)	Fernyhough, E.	Kenyon, Clifford
Blackburn, F.	Finch, Harold (Bedwellty)	Kerr, Mrs. Anne (R'ter & Chatham)
Blenkinsop, Arthur	Fitch, Alan (Wigan)	Lawson, George
Boardman, H.	Fletcher, Sir Eric (Islington, E.)	Leadbitter, Ted
Bowden, Rt. Hn. H. W. (Leics S.W.)	Fletcher, Ted (Darlington)	Lee, Miss Jennie (Cannock)
Boyden, James	Fletcher, Raymond (Ilkeston)	Lomas, Kenneth
Braddock, Mrs. E. M.	Foot, Sir Dingle (Ipswich)	McBride, Neil
Bray, Dr. Jeremy	Ford, Ben	MacColl, James
Brown, Rt. Hn. George (Belper)	Fraser, Rt. Hn. Tom (Hamilton)	MacDermot, Niall
Brown, Hugh D. (Glasgow, Provan)	Galpern, Sir Myer	McKay, Mrs. Margaret
Brown, R. W. (Shoreditch & Fbury)	Garrett, W. E.	Mackenzie, Gregor (Rutherglen)
Buchan, Norman (Renfrewshire, W.)	Garrow, A.	MacMillan, Malcolm
Buchanan, Richard	Ginsburg, David	Mahon, Peter (Preston, S.)
Callaghan, Rt. Hn. James	Gourlay, Harry	Mahon, Simon (Bootle)
Carmichael, Neil	Greenwood, Rt. Hn. Anthony	Mallalieu, J.P. W. (Huddersfield,E.)
Carter-Jones, Lewis	Gregory, Arnold	Manuel, Archie
Castle, Rt. Hn. Barbara	Grey, Charles	Mapp, Charles
Chapman, Donald	Griffiths, David (Rother Valley)	Marsh, Richard
Conlan, Bernard	Hamilton, James (Bothwell)	Maxwell, Robert
Cousins, Rt. Hn. Frank	Hamilton, William (West Fife)	Millan, Bruce
Craddock, George (Bradford, S.)	Hannan, William	Miller, Dr. M. S.
Crawshaw, Richard	Harper, Joseph	Milne, Edward (Blyth)
Crossman, Rt. Hn. R. H. S.	Harrison, Walter (Wakefield)	Molloy, William
Cullen, Mrs. Alice	Hart, Mrs. Judith	Monslow, Walter
Dalyell, Tam	Hattersley, Roy	Morris, Alfred (Wythenshawe)
Darling, George	Hazell, Bert	Morris, Charles (Openshaw)
Davies, G. Elfed (Rhondda, E.)	Holman, Percy	Morris, John (Aberavon)
Davies, Harold (Leek)	Horner, John	Newens, Stan
Davies, Ifor (Gower)	Houghton, Rt. Hn. Douglas	Noel-Baker, Rt.Hn.Philip (Derby,S.)
Davies, S. O. (Merthyr)	Howarth, Harry (Wellingborough)	Norwood, Christopher
de Freitas, Sir Geoffrey	Howell, Denis (Small Heath)	Oakes, Gordon

Ogden, Eric	Rodgers, William (Stockton)	Thornton, Ernest
Oram, Albert E. (E. Ham, S.)	Rogers, George (Kensington, N.)	Tinn, James
Orme, Stanley	Rose, Paul B.	Tomney, Frank
Oswald, Thomas	Rowland, Christopher	Urwin, T. W.
Owen, Will	Shore, Peter (Stepney)	Varley, Eric G.
Padley, Walter	Short, Rt.Hn.E.(N'c'tle-on-Tyne,C.)	Wainwright, Edwin
Page, Derek (King's Lynn)	Short, Mrs. Renée (W'hampton,N.E.)	Walden, Brian (All Saints)
Paget, R. T.	Silkin, S. C. (Camberwell, Dulwich)	Walker, Harold (Doncaster)
Palmer, Arthur	Silverman, Sydney (Nelson)	Wallace, George
Park, Trevor (Derbyshire, S.E.)	Slater, Mrs. Harriet (Stoke, N.)	Warbey, William
Pavitt, Laurence	Slater, Joseph (Sedgefield)	Watkins, Tudor
Pearson, Arthur (Pontypridd)	Small, William	White, Mrs. Eirene
Pentland, Norman	Snow, Julian	Whitlock, William
Perry, Ernest G.	Stewart, Rt. Hn. Michael	Wigg, Rt. Hn. George
Popplewell, Ernest	Storehouse, John	Willey, Rt. Hn. Frederick
Price, J. T. (Westhoughton)	Stones, William	Williams, Alan (Swansea, W.)
Probert, Arthur	Summerskill, Hn. Dr. Shirley	Williams, Albert (Abertillery)
Purvey, Cmdr. Harry	Swain, Thomas	Willis, George (Edinburgh, E.)
Randall, Harry	Swingler, Stephen	Wilson, William (Coventry, S.)
Rankin, John	Symonds, J. B.	Winterbottom, R. E.
Rees, Merlyn	Taverne, Dick
Rhodes, Geoffrey	Taylor, Bernard (Mansfield)	TELLERS FOR THE NOES:
Roberts, Goronwy (Caernarvon)	Thomas, George (Cardiff, W.)	Mr. Brian O'Malley and
Robertson, John (Paisley)	Thomas, Iorwerth (Rhondda, W.)	Mr. McCann.
Robinson, Rt. Hn.K.(St. Pancras,N.)	Thomson, George (Dundee, E.)

Mr. Diamond

I beg to move, in page 64, line 34, to leave out "that income" and to insert "those profits".

This is a purely drafting Amendment on the same lines as an earlier one, which the Committee will recall I explained at some length. The subsection refers to "those profits" on several occasions but,

in the last line but one the words "that income" has crept in. The Amendment corrects that.

Amendment agreed to.

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

The Committee divided: Ayes, 189; Noes, 181.

Division No. 176.]	AYES	[10.57 p.m.
Abse, Leo	Diamond, John	Jay, Rt. Hn. Douglas
Allaun, Frank (Salford, E.)	Doig, Peter	Jeger, George (Goole)
Allen, Scholefield (Crewe)	Donnelly, Desmond	Jenkins, Rt. Hn. Roy (Stechford)
Atkinson, Norman	Driberg, Tom	Johnson,James(K'ston-on-Hull,W.)
Bacon, Miss Alice	Duffy, Dr. A. E. P.	Jones, Dan (Burnley)
Bagier, Gordon A. T.	Dunn, James A.	Jones, J. Idwal (Wrexham)
Barnett, Joel	Edwards, Rt. Hn. Ness (Caerphilly)	Jones, T. W. (Merioneth)
Baxter, William	Ennals, David	Kenyon, Clifford
Beaney, Alan	Ensor, David	Kerr, Mrs. Anne (R'ter & Chatham)
Bellenger, Rt. Hn. F. J.	Evans, Ioan (Birmingham, Yardley)	Lawson, George
Bennett, J. (Glasgow, Bridgeton)	Fernyhough, E.	Leadbitter, Ted
Blackburn, F.	Finch, Harold (Bedwellty)	Lee, Miss Jennie (Cannock)
Blenkinsop, Arthur	Fitch, Alan (Wigan)	Lever, Harold (Cheetham)
Boardman, H.	Fletcher, Sir Eric (Islington, E.)	Lomas, Kenneth
Bowden, Rt. Hn. H. W. (Leics S.W.)	Fletcher, Ted (Darlington)	McBride, Neil
Boyden, James	Fletcher, Raymond (Ilkeston)	McCann, J.
Braddock, Mrs. E. M.	Foot, Sir Dingle (Ipswich)	MacColl, James
Bray, Dr. Jeremy	Ford, Ben	MacDermot, Niall
Brown, Rt. Hn. George (Belper)	Fraser, Rt. Hn. Tom (Hamilton)	McKay, Mrs. Margaret
Brown, Hugh D. (Glasgow, Provan)	Galpern, Sir Myer	Mackenzie, Gregor (Rutherglen)
Brown, R. W. (Shoreditch & Fbury)	Garrett, W. E.	MacMillan, Malcolm
Buchan, Norman (Renfrewshire, W.)	Garrow, A.	Mahon, peter (Preston, S.)
Buchanan, Richard	Ginsburg, David	Mahon, Simon (Bootle)
Callaghan, Rt. Hn. James	Greenwood, Rt. Hn. Anthony	Mallalieu,J.P.W.(Huddersfield,E.)
Carmichael, Neil	Gregory, Arnold	Marsh, Richard
Carter-Jones, Lewis	Griffiths, David (Rother Valley)	Maxwell, Robert
Castle, Rt. Hn. Barbara	Hamilton, James (Bothwell)	Millan, Bruce
Chapman, Donald	Hamilton, William (West Fife)	Miller, Dr. M. S.
Conlan, Bernard	Hannan, William	Milne, Edward (Blyth)
Cousins, Rt. Hn. Frank	Harper, Joseph	Molloy, William
Craddock, George (Bradford, S.)	Harrison, Walter (Wakefield)	Monslow, Walter
Crawshaw, Richard	Hart, Mrs. Judith	Morris, Alfred (Wythenshawe)
Crossman, Rt. Hn. R. H. S.	Hattersley, Roy	Morris, Charles (Openshaw)
Cullen, Mrs. Alice	Hazell, Bert	Morris, John (Aberavon)
Dalyell, Tam	Horner, John	Newens, Stan
Darling, George	Houghton, Rt. Hn. Douglas	Noel-Baker,Rt.Hn.Philip(Derby,S.)
Davies, G. Elfed (Rhondda, E.)	Howarth, Harry (Wellingborough)	Norwood, Christopher
Davies, Harold (Leek)	Howell, Denis (Small Heath)	Oakes, Gordon
Davies, Ifor (Gower)	Howie, W.	Ogden, Eric
Davies, S. O. (Merthyr)	Hoy, James	O'Malley, Brian
de Freitas, Sir Geoffrey	Irving, Sydney (Dartford)	Orme, Stanley
Delargy, Hugh	Jackson, Colin	Oswald, Thomas
Owen, Will	Rowland, Christopher	Thornton, Ernest
Padley, Walter	Short, Peter (Stepney)	Tinn, James
Page, Derek (King's Lynn)	Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)	Tomney, Frank
Paget, R. T.	Short, Mrs. Renée (W'hampton,N.E.)	Urwin, T. W.
Palmer, Arthur	Silkin, S. C. (Camberwell, Dulwich)	Varley, Eric G.
Park, Trevor (Derbyshire, S.E.)	Silverman, Sydney (Nelson)	Wainwright, Edwin
Pavitt, Laurence	Slater, Mrs. Harriet (Stoke, N.)	Walden, Brian (All Saints)
Pearson, Arthur (Pontypridd)	Slater, Joseph (Sedgefield)	Walker, Harold (Doncaster)
Perry, Ernest G.	Small, William	Wallace, George
Popplewell, Ernest	Snow, Julian	Watkins, Tudor
Price, J. T. (Westhoughton)	Stewart, Rt. Hn. Michael	White, Mrs. Eirene
Probert, Arthur	Stonehouse, John	Whitlock, William
Pursey, Cmdr. Harry	Stones, William	Wigg, Rt. Hn. George
Randall, Harry	Summerskill, Hn. Dr. Shirley	Willey, Rt. Hn. Frederick
Rees, Merlyn	Swain, Thomas	Williams, Alan (Swansea, W.)
Rhodes, Geoffrey	Swingler, Stephen	Williams, Clifford (Abertillery)
Roberts, Goronwy (Caernarvon)	Symonds, J. B.	Willis, George (Edinburgh, E.)
Robertson, John (Paisley)	Taverne, Dick	Wilson, William (Coventry, S.)
Robinson, Rt. Hn.K.(St. Pancras, N.]	Taylor, Bernard (Mansfield)	Winterbottom, R. E.
Rodgers, William (Stockton)	Thomas, George (Cardiff, W.)
Rogers, George (Kensington, N.)	Thomas, Iorwerth (Rhondda, W.)	TELLERS FOR THE AYES:
Rose, Paul B.	Thomson, George (Dundee, E.)	Mr. Harry Gourlay and
		Mr. Charles Grey.
NOES
Agnew, Commander Sir Peter	Glover, Sir Douglas	Meyer, Sir Anthony
Anstruther-Cray, Rt. Hn. Sir W.	Goodhew, Victor	Mills, Peter (Torrington)
Astor, John	Gower, Raymond	Miscampbell, Norman
Atkins, Humphrey	Grant, Anthony	Mitchell, David
Awdry, Daniel	Gresham Cooke, R.	Monro, Hector
Baker, W. H. K.	Griffiths, Peter (Smethwick)	More, Jasper
Barber, Rt. Hn. Anthony	Grimond, Rt. Hn. J.	Morrison, Charles (Devizes)
Barlow, Sir John	Gurden, Harold	Munro-Lucas-Tooth, sir Hugh
Batsford, Brian	Hall, John (Wycombe)	Murton, Oscar
Bell, Ronald	Hall-Davis, A. G. F.	Noble, Rt. Hn. Michael
Bennett, Sir Frederic (Torquay)	Hamilton, M. (Salisbury)	Nugent, Rt. Hn. Sir Richard
Berry, Hn. Anthony	Harris, Reader (Heston)	Onslow, Cranley
Bessell, Peter	Harrison, Brian (Maldon)	Orr-Ewing, Sir Ian
Biffen, John	Harrison, Col. Sir Harwood (Eye)	Page, John (Harrow, W.)
Biggs-Davison, John	Harvey, Sir Arthur Vere (Macclesf'd)	Page, R. Graham (Crosby)
Birch, Rt. Hn. Nigel	Harvey, John (Walthamstow, E.)	Pearson, Sir Frank (Clitheroe)
Bowen, Roderic (Cardigan)	Hawkins, Paul	Peel, John
Box, Donald	Heald, Rt. Hn. Sir Lionel	Percival, Ian
Boyd-Carpenter, Rt. Hn. J.	Heath, Rt. Hn. Edward	Peyton, John
Boyle, Rt. Hn. Sir Edward	Higgins, Terence L.	Pickthorn, Rt. Hn. Sir Kenneth
Brewis, John	Hiley, Joseph	Pitt, Dame Edith
Brinton, Sir Tatton	Hill, J. E. B. (S. Norfolk)	Powell, Rt. Hn. J. Enoch
Bromley-Davenport, Lt.-Col.Sir Walter	Hobson, Rt. Hn. Sir John	Price, David (Eastleigh)
Brown, Sir Edward (Bath)	Hooson, H. E.	Prior, J. M. L.
Bruce-Gardyne, J.	Hordern, Peter	Pym, Francis
Bryan, Paul	Hornby, Richard	Rawlinson, Rt. Hn. Sir Peter
Bullus, Sir Eric	Hornsby-Smith, Rt. Hn. Dame P.	Redmayne, Rt. Hn. Sir Martin
Carlisle, Mark	Hunt, John (Bromley)	Ridley, Hn. Nicholas
Carr, Rt. Hn. Robert	Hutchison, Michael Clark	Rodgers, Sir John (Sevenoaks)
Cary, Sir Robert	Iremonger, T. L.	Shepherd, William
Chataway, Christopher	Irvine, Bryant Godman (Rye)	Sinclair, Sir George
Chichester-Clark, R.	Jenkin, Patrick (Woodford)	Smith, Dudley (Br'ntf'd & Chiswick)
Clark, Henry (Antrim, N.)	Johnston, Russell (Inverness)	Spearman, Sir Alexander
Clark, William (Nottingham, S.)	Jopling, Michael	Stainton, Keith
Cole, Norman	Joseph, Rt. Hn. Sir Keith	Steel, David (Roxburgh)
Cooke, Robert	Kaberry, Sir Donald	Studholme, Sir Henry
Cooper, A. E.	Kerby, Capt. Henry	Talbot, John E.
Costain, A. P.	Kershaw, Anthony	Taylor, Sir Charles (Eastbourne)
Crawley, Aidan	Kimball, Marcus	Taylor, Edward M. (G'gow,Cathcart)
Crosthwaite-Eyre, Col. Sir Oliver	King, Evelyn (Dorset, S.)	Taylor, Frank (Moss Side)
Curran, Charles	Kirk, Peter	Temple, John M.
Dalkeith, Earl of	Lambton, Viscount	Thompson, Sir Richard (Croydon,S.)
Davies, Dr. Wyndham (Perry Barr)	Lancaster, Col. C. G.	Thorpe, Jeremy
Dean, Paul	Legge-Bourke, Sir Harry	Tiley, Arthur (Bradford, W.)
Deedes, Rt. Hn. W. F.	Lewis, Kenneth (Rutland)	Tilney, John (Wavertree)
Digby, Simon Wingfield	Litchfield, Capt. John	Turton, Rt. Hn. R. H.
Dodds-Parker, Douglas	Lloyd, Rt.Hn. Geoffrey (Sut'nC'dfield)	Tweedsmuir, Lady
Elliot, Capt. Walter (Carshalton)	Lloyd, Ian (P'tsm'th, Langstone)	van Straubenzee, W. R.
Elliott, R. W. (N'c'tle-upon-Tyne,N.)	Longbottom, Charles	Vickers, Dame Joan
Emery, Peter	Lubbock, Eric	Walder, David (High Peak)
Errington, Sir Eric	McAdden, Sir Stephen	Walker, Peter (Worcester)
Eyre, Reginald	Mackie, George Y. (C'ness & S'land)	Walters, Dennis
Fisher, Nigel	Maginnis, John E.	Ward, Dame Irene
Fletcher-Cooke, Sir John (S'pton)	Marten, Neil	Webster, David
Fraser, Ian (Plymouth, Sutton)	Mathew, Robert	Wells, John (Maidstone)
Gardner, Edward	Maude, Angus	Whitelaw, William
Gibson-Watt, David	Maxwell-Hyslop, R. J.	Williams, Sir Rolf Dudley (Exeter)
Gilmour, Sir John (East Fife)	Maydon, Lt.-Cmdr. S. L. C.	Wills, Sir Gerald (Bridgwater)

Wilson, Geoffrey (Truro)	Wylie, N. R.	TELLERS FOR THE NOES:
Wise, A. R.	Yates, William (The Wrekin)	Mr Martin McLaren and
Wolrige-Gordon, Patrick	Younger, Hn. George	Mr. Ian MacArthur.
Wood. Rt. Hn. Richard

Clause, as amended, ordered to stand part of the Bill.

Clause 53 ordered to stand part of the Bill.