§ [SECOND READING.]
§ Order of the Day for the Second Reading read.
§ LORD ASHBY ST. LEDGERS
My Lords, this is a Bill to amend the Act of 1893 under which co-operative societies are constituted. There is no new principle introduced. The Bill merely deals with certain minor points. Its object is to extend the facilities which co-operative societies enjoy, and in the main to bring them up to the level of the advantages at present enjoyed by the friendly societies. It also has the laudable object of tightening up the provisions as to auditing and triennial returns and such like machinery, and it also removes one or two anomalies that exist in the present Act. This Bill is introduced at the instance of the Treasury, very largely at the request of the Co-operative Union, and the Registrar of Friendly Societies has been consulted throughout upon the measure. The co-operative societies at present in existence in this country number no less than 3,278, with a membership of 2,800,000 and of these societies the Co-operative Union, who are mainly interested in promoting this Bill, represent 1,550 societies with a membership of over 2,000,000.
49 I will allude briefly to the clauses in the Bill before I say a word upon a possible objection which may be raised to the Bill as a whole. Clause 1 increases the limit of holding which an individual may have in a co-operative society from £200 to £300. Clause 2 enables two societies to combine for any purpose without having resort to the present evasion to overcome the difficulty of the seven shareholders who are needed to form a company under the law as it stands. Clause 3 enforces a public auditor. Clause 4 deals with the date of the annual return, and Clause 5 makes a triennial return necessary. This is done in the interests of the shareholders and with a view to checking any possible fraud on the part of the officials of the society. Clause 6 is concerned with a certain privilege which co-operative societies enjoy—that of nomination. Nomination is really a testamentary right. The member has a right of nomination up to £100. The clause enables the member of a society to bequeath such interest as he may hold in the society to his heir or anybody else whom he may name. It is an important and very much valued privilege. This clause removes certain anomalies which exist in the present Act. Clause 7 is merely a drafting clause. Clause 8 deals with insanity. Clause 9 amends an oversight in the Act of 1893. Clause 10 overcomes certain conveyancing difficulties which sometimes arise on the dissolution of a society. Clause 11 deals with expenses; and Clause 12 renders individual members and officials of a society liable to penalties which arise on the commission of certain offences which now only have relation to the society as a body. Your Lordships will see that this is merely a Bill to remove certain anomalies in the present law and to grant slight extensions of privileges to co-operative societies.
The only possible objection that I can conceive being raised to the Bill would be the objection put forward by the Traders Association before the Income Tax Committee of 1905, of which the late Lord Ritchie was chairman. It is often said that the co-operative societies do not pay Income Tax, and the traders assert that owing to that these societies have an unfair advantage over individual traders. I think it is worth while in this connection to give your Lordships the finding of the Committee which sat in 1905. The Com- 50 mittee point out, in the first place, that the co-operative societies do pay Income Tax under Schedules A and B—that is to say, on land and buildings; and, secondly, that the exemption which they have under Schedules C and D—that is, on profits—is more apparent than real. It is important to remember that there is no such thing as profit arising under the management of a co-operative society. What a co-operative society really does is to charge its members rather more than the cost price of the articles with a view of keeping something in hand for expenses of management, and so forth. They do not pay a dividend to their members; they merely return at the end of a certain period that margin which was charged to the members above the cost price, and the Income Tax Committee are quite clear that no profit or dividend exists in the case of co-operative societies. But, in any case, the vast majority of members of co-operative societies are individuals who are in receipt of far less than £160 a year, the limit of Income Tax taxation, and therefore it would be necessary to return to these individuals at great cost to the Treasury what had been deducted at the source in the shape of Income Tax. As a matter of fact, co-operative societies do have to pay Income Tax on transactions conducted with individuals who are not members of the society, and the leakage, if there is a leakage, in Income Tax is very small. The Committee concluded—We do not think, therefore, that any case for an alteration of the Income Tax law was made out by the Traders Association; certainly none is required in the interests of the revenue.I thought it worth while to give that finding of the Committee in case it may be said that in view of their exemption from Income Tax under Schedules C and D co-operative societies should not be given further facilities for extending their useful work. I feel sure your Lordships are in general sympathy with the movement, and I hope you will agree to give this Bill a Second Reading.
§ Moved, That the Bill be now read 2a.—(Lord Ashby St. Ledgers.)
§ On Question, Bill read 2a, and committed to a Committee of the Whole House on Monday next.