§ Amendments reported (according to Order).
§ Clause 2:
§ General powers of Minister.
§ 2.—(1) Subject to the provisions of this subsection, the Minister shall have power—
§ Provided that the powers of the Minister under this subsection shall not be exercised in relation to the supply to any other Government Department of any articles required by that Department for the purpose of the discharge of its functions, unless the powers of that Department in relation to the supply of 1095 those articles are for the time being transferred to or made exercisable by the Minister under the next following section of this Act.
§ 4.26 p.m.
THE MINISTER FOR THE CO-ORDINATION OF DEFENCE (LORD CHATFIELD) moved to add to subsection (1):
and, without prejudice to any powers transferred or made exercisable as aforesaid, the powers of the Minister under this subsection of manufacturing or otherwise producing articles shall not be exercised after the expiration of a period of three years beginning with the date of the passing of this Act, except in respect of such classes of articles as His Majesty may specify by Order in Council made not earlier than the commencement of the last six months of that period.
§ The noble Lord said: My Lords, this Amendment standing in my name is in fact very similar to the Amendment moved by the noble Lord, Lord Gain-ford, whom we all regret is not present here to-day to hear what further action is being taken upon the matter that he raised. Lord Gainford's Amendment has also been put down again by him for this stage of the Bill, and is supported by the noble Viscount, Lord Samuel. The Amendment that I am now moving provides that the Minister's power of "manufacturing or otherwise producing" shall lapse after three years, with two exceptions. These exceptions are as follows. In the first place, at the end of the three years from the date of the passing of this Bill, powers of manufacturing, etc. possessed by other Government Departments will have then been transferred to the Minister under Clause 3—that is to say, powers such as the War Office have to manufacture guns at Woolwich Arsenal. These powers will not lapse at the end of the three years, but will be unlimited in duration. That is the effect of the words at the beginning of the Amendment "without prejudice to any powers transferred." Since the powers already exist, there is no reason why they should lapse, and indeed the noble Lord's own Amendment expressly saves them from lapsing.
§ Secondly, at any time after the middle of the third year, an Order in Council may be made continuing the Minister's power of manufacturing any articles specified in the Order, but under Clause 6 this Order is subject to Parliamentary approval. Either House can refuse to 1096 affirm it, but, if it is approved by both Houses, the Minister will have powers of manufacturing the limited classes of articles specified in the Order. The Amendment expressly provides that the Order shall not be made until towards the end of the three years, in order to ensure that Parliament will have another opportunity of reviewing the matter in the light of the situation at that time. I have endeavoured in consultation with my right honourable friend the Minister of Supply Designate to meet the feeling of your Lordships on this matter as expressed on the Committee stage. In view of this explanation I trust that the Amendment may be regarded as substantially meeting the points raised in Committee on Lord Gainford's Amendment, and will be accepted by your Lordships. I beg to move.
Page 3, line 4, at end insert the said words.—(Lord Chatfield.)
§ VISCOUNT SAMUEL
My Lords, you will be aware that Lord Gainford's absence to-day is due to the fact that he was seized with a sudden indisposition on Tuesday in the precincts of this House, but your Lordships will be glad to learn that it is not a serious matter, and that he is now well on the way to recovery.
§ VISCOUNT SAMUEL
He has requested me to speak on his behalf on this occasion. The Amendment moved by the noble Lord does meet the points which were raised on Lord Gainford's Amendment whilst at the same time avoiding certain possible objections to the Amendment in the form in which it originally stood that were pointed out by the representative of the Government on that occasion. I understand that the Federation of British Industries, at whose instance this matter was originally raised, are advised that the Amendment, as now proposed, sufficiently meets the point which they had in view. In those circumstances, unless any noble Lord who previously took an interest in the matter thinks otherwise, I should propose not to move the Amendment which stands in my name as well as that of my noble friend Lord Gainford.
My Lords, on behalf of my noble friends I wish to express the gratification we feel at hearing the good news about the health of the noble 1097 Lord, Lord Gainford. We are bound to resist this Amendment, for the reasons given by my noble friend Lord Snell on the previous stage of the Bill. We think it is highly desirable, if the Government should be successful in manufacturing, that that should be continued, because it will prevent profiteering by private individuals. We tremble to think of Orders in Council, at the mercy of your Lordships' House, to prevent this desirable practice. I do not know the views of the noble and gallant Lord, Lord Chatfield, on this subject, except, of course, that as a member of the Government he is bound to support this Amendment. What would he say if it was proposed to stop the construction of warships in the Royal dockyards which have been of immense benefit to the State? I think he would resist it at once. We may find, as a result of future experiments, that we shall be able to manufacture articles advantageously in Government factories, but that at the end of three years that will have to be dropped. My Party are bound to resist the Amendment, and we shall do our utmost in another place to defeat it.
THE EARL OF CRAWFORD
My Lords, it is very optimistic to think that the Government can manufacture more cheaply than private people.
THE EARL OF CRAWFORD
That certainly does not apply in other interests like railways, in regard to which the Government have from time to time exercised their ingenuity at the serious expense of the taxpayer. The first two lines of the Amendment as explained by the noble and gallant Lord on the Front Bench meet the very point which the noble Lord opposite has just raised. I would like to ask—perhaps the noble and learned Lord the Lord Chancellor can tell me—why the words "as aforesaid" are put in. It seems to me they refer to the present clause, and not to an Act of Parliament 100 years old or a custom 500 years old which authorises the Army to make its own munitions. After the first two lines the subsection is limited for three years subject to certain conditions.
The powers limited are those of "manufacturing or otherwise producing articles," but the subsection deals with 1098 other processes than manufacturing or otherwise producing. The subsection authorises the Government to store, to transport, to exchange, sell or dispose of articles, to buy articles with a view to exchange for other articles, andto do all such things (including the erection of buildings and the execution of works) as appear to the Minister necessary…The time limit is only in phrase limited to manufacturing or otherwise producing articles. Are the other powers conferred to be continued, and not to be subject to the three years limitation? I should have thought that the whole of the subsection should be limited to three years, with the safeguard which is referred to in the last words of the Amendment that by Order in Council the powers of the subsection might be prolonged six months at a time. Otherwise it seems to me there is a very serious ambiguity. I quite understand that after you have stopped manufacturing goods you must continue to store and transport goods for the purpose of liquidation, but why should not liquidation take place within the ensuing six months, or if it is not completed then within other periods which His Majesty by Order in Council may determine? There is an ambiguity which I would very much like to be cleared up, especially in so far as paragraph (c) is concerned—namely, the erection of buildings which ex hypothesi must be a new act and not the continuance of an old act.
§ THE LORD CHANCELLOR
My Lords, the words "without prejudice to any powers transferred or made exercisable as aforesaid" mean that the only thing to be limited as a result of the introduction of the Amendment are the powers to manufacture or otherwise produce articles. Accordingly there will be still power for the Minister on whom powers are conferred to buy or otherwise acquire articles andto do such things (including the erection of buildings and the execution of works) as appear to the Minister necessary or expedient"—
§ THE LORD CHANCELLOR
"for the exercise of the foregoing powers." That is, powers of manufacturing or otherwise producing shall not be exercised beyond the period of three years except by 1099 Order in Council. It is quite clear. I do not understand that criticism on the last occasion went beyond the powers of manufacturing or otherwise producing articles. Those are the matters dealt with by the Amendment which the noble and gallant Lord in charge of the Bill has moved.
May I ask, would the Minister have power to sell otherwise than for disposing of the surplus at the end of the period?
§ THE LORD CHANCELLOR
He would not sell unless he knew he did not want them. In other words the Amendment does not affect the right to sell articles but only the right to manufacture or produce the articles.
§ On Question, Amendment agreed to.
§ 4.39 p.m.
§ Then, Standing Order No. XXXIX having been dispensed with:
§ Moved, That the Bill be now read 3a.—(Lord Chatfield.)
My Lords, I want to say a few words only with reference to what fell from the noble Earl, Lord Crawford. He will remember very well, as a former First Commissioner of Works, that just after the War the Office of Works built excellent houses, cheaply and well, when there was a tremendous shortage of houses. There was the usual cry of Socialism and this admirable service was dropped. Lord Melchett, who was one of the greatest individualists that our generation of politicians has produced—the first Lord Melchett himself—as a fierce anti-Socialist always said what an admirable Department it was and what a great pity it was that it had to be dropped. That is what I am afraid of, and that is why we object to this Amendment.
§ 4.40 p.m.
§ LORD CHATFIELD
My Lords, on the occasion of the Second Reading your Lordships' House was very pressed for time, and a great many questions were asked by noble Lords who contributed to the debate which I did not have an opportunity at the time to answer. Also on the Committee stage several points were raised into which I promised to inquire 1100 further and to give a reply at a later stage. I should like to detain your Lordships rather unusually long on the Third Reading by answering certain of those points, and at the same time dealing with certain other matters of importance which have been raised.
In the first place I owe an explanation to the noble Viscount, Lord Bertie, in that when the noble Viscount at the Committee stage moved an Amendment, I said that the Law Officers had been consulted about the Amendment which he had proposed. That was an Amendment to Clause 4 (2) to insert the words "or wilfully fail to disclose any material fact." I was in fact mistaken in thinking that the Law Officers had been consulted, and in the circumstances I of course took steps to consult them subsequently to ascertain their opinion. I think I should give the House their opinion, which is as follows:'Untrue representations' covers a case where the falsity arises from a wilful concealment coupled with the circumstances and any statements in fact made. The form of words proposed by the noble Viscount in Committee might cover a wider range, but the case of wilful non-disclosure is covered to the extent set out above, and this is the extent to which we think it right to go in the clause.In order to make the position clear, the foregoing statement expands what I said, but the Law Officers agree that my earlier statement in reply to the noble Viscount was accurate.
The noble Lord, Lord Addison, in his speech on the Second Reading, also raised the question that he thought that the functions of the Minister of Supply should be extended to cover a very wide volume of materials, such as ferrous and non-ferrous metals, and other supplies which are required by all producing Departments and by all the major industries. He added that common user should be extended to such things as scientific instruments. Power is being taken by Clause 2 of the Bill to accumulate stocks of material as necessary both for the purpose of manufacturing supplies for the Services and for the maintenance of civil industry in emergency. There is no doubt that immediate consideration will be given to the question of accumulating supplies, both of ferrous and non-ferrous metals and of other materials that may be needed. Already there have been purchases of reserves on a substantial scale, and control in these matters will be at 1101 once concentrated in the Ministry of Supply. As regards common user articles, it is the intention immediately on the formation of the Ministry to survey the whole field of common user articles in detail, and full consideration will be given to the question of transferring to the Ministry the supply duties concerning other common user articles.
The noble Lord, Lord Mancroft, in Committee asked from what body or bodies arbitrators are to be chosen. I informed my noble friend that I would confirm at a later stage the correctness of the reply which I then gave him as to the composition of the panel. It is the intention that the panel of arbitrators, as I then said, should be drawn from a very wide field, and that it should include representatives of industry and other persons who would be appropriate. The suggestion that was originally made by some members of the other House was that the panel should be drawn from nominees of the President of the Law Society, the President of the Institute of Civil Engineers and the President of the Institute of Chartered Accountants, and it was because that field was not considered sufficiently wide that an undertaking was given that the Minister would select arbitrators from the widest possible field, including lawyers, civil engineers, surveyors, accountants, representatives of other professional bodies, and, above all, representatives of industry. That, I think the noble Lord will remember, bears out what I said more briefly on the previous occasion.
§ LORD CHATFIELD
The noble Lord, Lord Strabolgi, asked why both the Chairman and the Deputy Chairman are to be lawyers. I think he thought that if he or I were Minister of Supply we should probably designate admirals rather than lawyers for that duty! I might explain that this question arose really, as I think I said at the time, from an idea in another place that the Chairman might be nominated or selected by the panel, and this suggestion was discussed to some considerable extent. Considerable pressure was applied from some quarters for the Chairman to be nominated by the Minister, and pressure was applied by the representatives of the industry for an independent choice.
1102 A compromise was made on the appointment by the Minister of a Chairman and Deputy Chairman who should be competent to form a completely unbiased judgment as to the suitability of arbitrators selected from the panel. It was felt that this object would be best achieved by the Minister appointing as Chairman and Deputy Chairman,persons of legal and impartial experience, able to prevent the miscarriage of justice by seeing that the right member is selected to do the right thing.I am there quoting from the OFFICIAL REPORT of another place. The noble Lord, Lord Askwith, asked that the members of the panel should not be appointed for more than a certain number of years, and I promised sympathetically to consider with my right honourable friend the Minister of Supply Designate whether that could be arranged. It has been arranged, and my right honourable friend and I are prepared to agree that members of the panel should be appointed for a limited period, for a certain number of years; and steps will be taken administratively to effect this.
There is one other point of some importance about which I feel I ought to detain your Lordships for a short time. That is the important problem of finance; the compensation and the grants, and how they are going to be applied. It was originally in Clause 12 of the Bill, which is now of course Clause 13. The noble Lord, Lord Barnby, drew attention to what he considered an ambiguity regarding the recovery of expenditure over and above the amount of the 27½ per cent.; that is to say, as regards the contribution of the Contracts Departments towards the remaining 72½ per cent. In the first place the noble Lord mentioned the percentage, believed to be 50 per cent. of recovery, and that rather confused me, because I did not know that there was anything about 50 per cent. in the Bill at all, and I asked if I might answer him at a later stage. Actually, of course, there is no mention of 50 per cent.; he was quoting a figure mentioned in reference to another Bill. The Explanatory Memorandum to this Bill actually makes no remark at all about this matter.
As regards the contributions which are to be made towards the balance of expenditure incurred in order to ensure the due functioning of the essential plant under this Bill, I might perhaps put two 1103 points. First, there is the grant to be paid under the Bill equivalent to the standard rate of Income Tax on reasonable capital expenditure incurred by the contractor in complying with the Minister's requirements. This is an amount equal to the standard rate of Income Tax, and amounts to 27½ per cent of the capital expenditure incurred. It should be noted that no grant is paid on non-capital expenditure because non-capital expenditure is permissible as a deduction for Income Tax purposes and for Armaments Profits Duty, and, therefore, receives consideration under normal Income Tax law, and will receive consideration under the law relating to Armaments Profits Duty.
Secondly, as regards the balance of 72½ per cent. it has been decided that, for a period of two years, Contracts Departments in making contracts may include in prices additional contributions towards all the expenditure incurred by contractors in complying with the Minister's directions. In so far as the grants are grants towards capital expenditure they will be taken in diminution of capital expenditure, and will not be brought into revenue account at all. Hence, as regards this particular expenditure, no question of Income Tax or Armaments Profits Tax arises. In so far as the payments made by Government Departments are grants to non-capital expenditure they are in repayment of expenses incurred by firms, and to the extent, therefore, that non-capital expenditure made by firms is recouped by these grants, the ordinary revenues of a firm will be left unimpaired by the Minister's requirements, and will be liable to taxation in ordinary course as concerns the part of revenue which becomes profit.
It is, nevertheless, true to say that none of the payments made by the Government in respect of expenditure to secure the due functioning of essential plant will be liable, under this Bill, either to Income Tax or to Armaments Profits Duty. I might give one example of the manner in which this tax will work out. There are two things which have to be decided. First, the liability to tax which is based on the total receipts by a firm under armament contracts exceeding, your Lordships will remember, £200,000. That has no relation whatever to profit but is merely a 1104 determining factor as to liability, and I think it will be possible to earmark the contracts in respect of expenditure to secure the due functioning of plant in such a way that they shall not come into the calculation of the minimum amount of receipts which brings a firm within the range of the Armaments Profits Duty. As regards profits which ultimately govern the amount of tax which is leviable, that is entirely a different matter and depends on the balance of revenues after payment of the necessary expenses of the firm. What the Government in effect do in contrbiuting towards such expenditure met from revenue is to swell both revenue and expenditure, leaving the net sum unchanged. That, my Lords, I think explains the somewhat complicated problems which are raised by the financial clauses and which I thought it was perhaps as well to have on some record in answer to the noble Lord who raised this matter.
§ VISCOUNT BERTIE OF THAME
My Lords, I am very much obliged to my noble and gallant friend for having considered the question I raised in Committee and for having read out the Law Officers' finding, which of course I unreservedly accept.
§ On Question, Bill read 3a, with the Amendments, and passed, and returned to the Commons.