§ 5.12 p.m.
§ LORD LYLE OF WESTBOURNE rose to call attention to the conflicting policies of His Majesty's Government in relation to pioneer development in Colonial Territories by private enterprise; and to move for Papers. The noble Lord said: My Lords, the purpose of this Motion is to draw your Lordships' attention to certain anomalies which occur owing to the present method of charging United Kingdom taxation on overseas income, which is stultifying the measures taken by certain British Colonies to further their economic development—a cause which has the blessing and the declared support of His Majesty's Government. The facts arc that, in order to attract capital into the development of new industries, certain West Indian Colonial Governments have introduced legislation which exempts from taxation for a specified number of years, known as the tax holday, the profits from any pioneer industry established in the Colony.
§ Before developing the case further, I feel that I should declare my interest—that was always the procedure in another place where I sat, and I feel I should like to do so now. The legislation to which I have referred does not affect sugar, and the growing and the manufacture of sugar are my interest. It does not affect my business because we are not a pioneer industry: sugar has been established for a long time. Therefore, I can say that, to that extent, I am not interested. Bat there are certain prospective developments in the Colonies in which it is quite possible I may be interested in the future. To give an illustration: there is a suggestion for the manufacture of paper pulp, a matter which is very much to the fore at the moment and which concerns a problem which is causing grave uneasiness. One knows (it has been proved; it is beyond a matter of doubt) that paper pulp can be produced from what we in sugar call bagasse, which is the fibre of the cane. That is something which relates to the future, and one cannot say more about it, but it is a subject which certainly should interest us very much because it is of such grave importance at the present time. That is a matter which might well develop under the scheme which these Colonies have introduced.171
§ I think it is generally conceded that there is an imperative need to increase our industries throughout the Colonial Empire, and particularly in the West Indies. The establishment of new industries must be gone into seriously if the rapidly expanding populations are to be absorbed. As your Lordships know or may have heard, many people compute the population in, for instance, Jamaica as likely to double itself in a period of thirty-five years. Therefore it is of the utmost concern that more industries should be developed in that Colony. The Colonies themselves have no illusions about the need to attract outside capital. They have, indeed, shown imagination and foresight in taking exceptional measures to attract the capital required. As I have said, these measures take the form of legislation which provides exemption from taxation for a specified number of years, known as the tax holiday, on profits from any pioneer industry established in the Colony which is approved by the local Government as being in the interests of the development of the Colony. That industry is then scheduled as a pioneer industry and in many cases obtains exemption from taxation for a period of five years.
§ The tax exemption also extends to the dividends paid out of profits earned during the tax holiday period. Capital on the scale required is not available locally. It has to be found principally from the great industries, institutions and companies of this country. On the face of it, one might think that the tax holiday granted in the Colony would prove a great incentive to the prospective British investor, but here I come to the anomaly which I mentioned a few moments ago. The tax holiday arrangements offer no inducement whatever, for the reason that the tax which rightly belongs to the Colony, but which is voluntarily forgone as an inducement to investment in the Colony for the development of the Colony, is transferred by a simple but effective process of arithmetic to the British Exchequer. Let me make my point perfectly clear. This tax would not be payable in the United Kingdom but for the exemption given in the Colony. For instance, supposing the income tax in Jamaica is 7s.—it is approximately that—then the tax over here is 172 2s. 6d.; that is all we take. We take up to 9s. 6d. only; there is no payment of double income tax. But, if the Colonial Government, in order to Give an incentive to British business to go and develop in the Colony, say: "We will let you off the 7s.", the British Government say: "You have not paid any tax at all: therefore, you must pay us 9s. 6d." Those are actual facts.
§ I should like also to emphasise that the extra tax taken in this country does not apply only to income received over here. If the Colonial enterprise is controlled in this country, as it almost certainly will be, because normally the bulk of the capital is supplied from here and therefore the control would be here, then the whole of the profits earned in the Colony, including the share attributable to local investors who have participated in the enterprise, also becomes liable. The whole purpose of the tax holiday is nullified and, what is more, at the expense of the Colony's revenue. I should hesitate to prophesy what might happen, but here we have a case where the whole effort of the Colony in granting this tax holiday is being nullified. If we do not put this matter right, it is most likely that we shall get the extraordinary thing happening that these loyal and magnificent British Colonies will make special terms against Britain and give preferential treatment to foreign nations, because in the case of the United States, this liability to further taxation does not apply. As I have said, the whole purpose of the tax holiday has been nullified. I do not wish to use strong language in your Lordships' House, but I feel I am entitled to say that it is a monstrous state of affairs and is in sharp contrast to His Majesty's Government's declared policy of Colonial development. I submit to your Lordships that it should not be allowed to continue for one moment. It is not merely a question of doing justice to the British investor; it is a question of removing a great injustice to the Colonies. I make a most strong and urgent appeal to His Majesty's Government to tackle this question and to give the necessary relief without delay. I beg to move for Papers.
§ 5.23 p.m.
§ LORD LLEWELLIN
My Lords, in a few short sentences I should like to support my noble friend in the plea which 173 he has made to His Majesty's Government. The noble Lord who is to reply may take one of three courses. He may turn down the request; he may say that the Government will think it over; or he may say that the Government will meet the point which the noble Lord has so forcefully made. I should have liked to speak after the noble Lord, Lord Ogmore, for the simple reason that I look upon him as a sensible man and I should have liked to be the first to congratulate him on accepting the proposition that has been put forward, and on announcing the good news that His Majesty's Government were going to meet this case. Although the noble Lord, Lord Ogmore, has gone to the Ministry of Civil Aviation (and perhaps I may congratulate him on that appointment), his acceptance of this proposition would show that he still has his feet firmly on the ground.
What is this unanswerable case which I am hopeful that the noble Lord will meet? We all want development in the Colonial Empire—I think that is common ground between us. We should all like to encourage these pioneer enterprises, particularly in a country like Jamaica, where, as I understand it, there is considerable unemployment at the present time. We should all like that pioneer enterprise to be conducted with British capital. I notice noble Lords opposite assenting to those propositions, but I may not get their assent to my next proposition: that most of us would rasher see that done by free capital than by the Colonial Development Fund, or by the Overseas Food Corporation, two organisations which may properly come in where other capital is not available. That is to say, if we can do it by f tee enterprise let us do it in that way; but if there are gaps, let the Colonial Development Fund come in and fill them.
As I understand the case, the Jamaican Government have offered for a period of years, the pioneer period, to remit any income tax on these pioneer enterprise concerns. The simplest way of running one of these concerns is for a company which already has dealings in a place like Jamaica to run it under a headquarters staff, and Lo retain the control here in London. If the control is kept in London, there is not the slightest doubt that the remission of the Jamaican income tax, by which the Jamaican Government are 174 trying to get these pioneer ventures started in their country, will be completely nullified, because the Treasury will say, "There is no double taxation, and therefore you must pay the full 9s. 6d. in the £, and although the Jamaican Government may have let you off their 7s. we are not going to let you pay any less than 9s. 6d." As a result, of course, one can see the Colonial Government, who are sensible people, saying, "Why should we remit our 7s. taxation to benefit the taxpayer in the United Kingdom and not ourselves?"
I am told that this matter does not work in the same way in regard to United States taxation, and that American capital may well be encouraged there by this 7s. remission which the American companies will receive. The noble Lord, Lord Ogmore, will tell me if I am wrong; but, if that is the position, it seems to me an unanswerable proposition that we should try still to encourage development there by British capital, and that we should make the same concessions to our people who start new enterprises there as are given to American citizens doing the same thing. I hope that that is the line the Government will take. It is no good priding and preening oneself that we have full employment in this country, as I am glad we have, if we have considerable patches of unemployment in the Colonial Empire, for which His Majesty's Government are equally responsible. I should like to see these concessions made, because I am afraid (I am not going to discuss it now; indeed I should be out of order if I were to do so) that, by legislation which will shortly be coming to us, the Government are rather showing that they do not mind weakening the position of London and this country as the issuing centre of the world, and as a place from which capital ought to flow. And that capital should flow especially to the extremities of the Empire, so that they may be financed and guided from here—as, indeed, they have been through the centuries—and enabled to develop.
It is for these reasons that I say that there is an unanswerable case. I do not say that the Chancellor of the Exchequer has already shown himself inclined to grant the request which is made. But the least that we hope to hear from the noble Lord, Lord Ogmore, is that he thinks—and these words car be used here, although perhaps not is another place— 175 that there is at any rate a good prima facie case to be placed before the Chancellor of the Exchequer, and that he is prepared to put it. If he will do that, then encouragement will be given to the people of Jamaica and to those people in this country who still want to use their brains and their money to develop our Colonial Empire. For these reasons, I have very much pleasure in supporting the case so ably made by my noble friend Lord Lyle of Westbourne.
§ 5.31 p.m.
§ LORD TEVIOT
My Lords, I intervene for a few moments only to support my noble friend who moved this Motion. Instances have been brought to our notice of questions which arise in the Colonies which, in my view, ought never to arise at all. And the reason they arise, so far as I can make out, is that there is not sufficient intimate liaison between the Government here and our Colonial Governments. As your Lordships will remember, in the course of a certain debate which I raised in this House a little while ago I spoke about Barbados. I feel certain that if there had been a more intimate relationship between the Government here and the Government of Barbados, the situation which I described would never have arisen. My noble friend has referred to the possibility that, in the event of matters remaining as they are, Colonial Governments may look elsewhere for assistance in developing the natural resources which are of such great importance to them. In the particular case which I have in mind, it actually happened that an American company was offered better terms than a British company. I do not know whether Lord Llewellin referred to this matter—I did not quite catch what he said—but it is a fact that the American Government go out of their way to give relief in taxation in cases in which American industry and American companies go out to develop in other countries oil and other national resources. That, of course, immediately puts American industry and the American contractor in a preferential position as compared with ourselves.
At the present time, as many of us well know, there is in certain Colonies antagonistic feeling towards the Government here. The reason for that antagonism is clear: there is not enough 176 liaison. The people in those Colonies find that certain things which affect them happen here without their ever being consulted. An instance I give—though in this connection there may have been a reason for the lack of consultation—is that of devaluation. So far as I know, there is no evidence to show that our Colonial Empire was consulted at all in that matter. It may be said: "You cannot consult other people on a question of that sort." I understand, however, that in one Colony the people were furious about devaluation. They knew nothing whatever about what was happening; all they knew was that an assurance had been given, on the highest authority, that devaluation was not going to take place; and then, within a fortnight or three weeks, it was launched upon them. That is the sort of thing that annoys anyone. When there are such occurrences, which affect not only industries of the Colonies but the whole existence of Colonial peoples, without their ever being consulted, it is, I feel, a very grave matter. It is a matter which should certainly engage the most serious attention of the Government.
I should like to see definite arrangements made for an annual conference with the whole of our Colonial Empire, a conference at which would be discussed matters of high moment, such as the one raised to-day by my noble friend Lord Lyle. If this were done, everyone would be contented and happy, and business would flow to this country, whereas, so far as I can see, in present conditions it is bound to go elsewhere. If we had an annual conference, at which all the Colonies were represented, to discuss matters of high moment affecting them, I believe that soon we should find a very much better feeling growing up throughout the whole Colonial Empire in regard to many questions which now cause irritation. I put that point to the Government for their consideration.
Nothing, in my view, should be done here to discourage capital investment within the Empire, particularly as in many cases the Government here will not—and I put this very strongly—be a party to any freely negotiated scheme and will not be called upon to provide the finance. The analogy I draw in regard to this matter is that of a farmer who has a cow and a milkmaid who milks the cow, while the Government step in and lap up 177 the cream. That is the sort of thing that is going on to-day. I hope that the noble Lord who is to reply will pay serious attention to this very important Motion. I was very glad to see in the Press this morning a report that delegates from Jamaica, Barbados, Trinidad and British Guiana have arrived here. I hope that this debate will give a line for the Government to follow in their discussions with these delegates on matters of trade. That is all I have to say, except that I wish, most sincerely and with all the force at my command, to support my noble friend's Motion.
§ 5.39 p.m.
§ LORD MILVERTON
My Lords, in rising to make a brief contribution to this debate, I should like to start by expressing my unmixed appreciation of the artistic economy, however foreign it may have been to him, with which the noble Lord who moved this Motion set forth the facts and then loft them, without much comment, to stand there in all their naked iniquity. I was rather struck by the line taken by the noble Lord, Lord Teviot, who complained of lack of liaison between the Government in Whitehall and the Colonial Governments. I should like to look at this matter from a different angle: the lack of liaison between members of the same Government in this country. In dealing with the Government of the day, at times I am rather confused to know whether I am dealing with the right honourable Ali Baba or the forty gentlemen generally associated with his name. There is so marked a difference between what is said by one Minister and what is done by his colleagues who have it within their power to help carry those policies into effect. I should like to give one or two instances of this, and then offer a few general comments on the Motion.
The policy of the present Government in Colonial matters, as from time to time declared by the right honourable gentleman the Secretary of State for the Colonies, scorns to me to he unexceptionable. It is the policy that all are welcome; that the harvest is truly plentiful and labourers are few. We all recognise that. But do the Secretary of State's ministerial colleagues subscribe to this doctrine. I should say that experience gives the reply, "Certainly not." I should like to male reference to what is now known throughout the West Indies as the 178 Black Pact—the contemplated agreement between His Majesty's Government and Cuba (or has it already been signed?). That pact threatens one pioneer industry, the Jamaica cigar industry, with extinction. I recently asked a Question concerning this industry in this House and received what seemed to me to be an unsatisfactory reply, which said that the Jamaican interests would be fully taken into consideration. We now know much better what that reply was worth.
In the Black Pact it is proposed to allow the importation into the United Kingdom of Cuban cigars to the value of 500,000 dollars in 1952–53, and in 1953–54; and thereafter, from 1954–55 onwards, perhaps in unlimited quantities. Is it any wonder that there are headlines in the leading West Indies papers which read: "Jamaica betrayed." Before Mr. Bottomley revealed what was going on, the leading West Indies paper contained this statement:Mr. Bottomley must tell us exactly how far down the river we have been sold, so that we can in good faith discuss with him how to get back into the fuller economic freedom which British statements led us to believe we enjoyed as reciprocating partners in Commonwealth trading arrangements.They now know the answer to that question. Later on, the same paper wrote:We agree with the West Indies spokesmen in Barbados who consider the present British trade proposals with Cubs a betrayal of the British Caribbean.Incidentally, if that matters, so do I. I am dealing with only one section of this agreement, that affecting the cigar industry, because it is a pioneer industry. In its present form it is only twelve years old, and I should have thought it would have had the particular care of any British Government. I am prompted to ask whether the Socialist Party are the friend of the Colonial working men and women only when in opposition. When they are in power, and able to give or withdraw employment from so many thousands of working men in a Colony like Jamaica, why should they apparently go out of their way to throw these people out of employment?
The Black Pact will mean thousands of more unemployed in Jamaica in the cigar industry alone. This industry grew up after 1939, based on the chance given by the exclusion of Cuban cigars from the British market. I speak here with a 179 certain amount of knowledge, because I was Governor of that country at the time. Apart altogether from things like this new Pact, what has happened since that time to encourage this infant industry? The British duty on tobacco has gone up from 14s. 2¼d. to 64s. 9⅝d. per lb., and the preference given to Jamaica has sunk from 22 to 4.35 per cent. This alone hits the Jamaican tobacco farmer, worker and factory owner, by hitting the British smoker, who, faced with an oppressive increase in price, because of the duty, buys fewer and fewer cigars. Incidentally, but for Government policy in this country there is no reason at all why cigars should be a luxury. They are not so in America, or in many other countries; and there is nothing, save Government policy, which causes them to be so here.
Let me return to Cuba and look at that side of the question. The Cuban cigar industry has a heavily protected and secure market in the United States, where it enjoys a preference of 60 per cent., compared with the British preference to Jamaica of 4.35 per cent. This advantage will enable Cuba, once the British market is thrown open to her, to operate on the basis of making profits in the secure American market and underselling Jamaican cigars in Britain. Cuba, of course, has also the good will of 150 years of advertisement and tradition in the cigar trade, as against the past ten years in which Jamaica has been painfully trying to build up this infant industry. She has been reasonably successful in improving the quality of her products. To strengthen my statement that this Pact will mean the extinction of this pioneer industry in Jamaica, I might also mention that the Cuban Government have recently given permission for the importation of cigar-making machines. One operator can produce 5,000 cigars a day on a machine, as against a daily average of 150 when made by hand, so it would not be long before Cuba could completely capture the entire British market. It will be clear that every assistance is being given to Cuba to do this, because there is no limit to the number of cigars that she may export to Britain under the Pact, which says that we may import 500.000 dollars' worth; and it is left to Cuba to decide at what price it may suit her to dump cigars in this country, and so put her rivals out of this market.
180 Two years ago the United States did what we are told the British Government cannot do: they dealt a serious blow to the Jamaican rum industry by increasing the import duty on rum by 2 dollars 50 cents a case, and then remitting to the Puerto Rican exporters the value of the new duty levied in return for a corresponding reduction of price by the Puerto Rican to American buyers. That was preference in a new guise. We are told that that is not possible for the British Government. The United States and France help their friends and relations in this way, and apparently the United Kingdom cannot do so. I have selected the cigar industry as a most striking recent instance of this deep gulf, to which attention is called in this Motion, between the professions of the Government here, the desires expressed in some quarters, and what actually happens in the operations of other Ministries.
I should like to quote from an editorial in the Daily Gleaner of Jamaica on May 22. The writer said:The United States treats her political Colonies almost identically with the metropolitan country: France does the same. But Britain, the greatest of all Colonial powers, the nation which above all has created a tradition of justice and equity, treats her Colonies, when she chooses, as mere appendages. Yet if Britain were to adopt a policy designed to achieve a vital expansion of Colonial production and wealth, she could restore her strength and her power more rapidly than by any other method.That, surely, is the real gist of the matter. If this Government were to go out and to protect by every means within their power these pioneer industries, that would be the way to prosperity. It is, surely, mere mockery to complain that private enterprise is not enterprising, when the Government spend their ingenuity in paralysing the power to be enterprising, and only too often in denigrating the past achievements of private enterprise. It is not merely the desire and, in a narrow field, the intention to encourage pioneer industries, but the whole field that has to be considered. After all, the encouragement of pioneer enterprises in the Colonies cannot be isolated from the political conditions of the Colony and the political stability there, without which nothing much can be expected—as, indeed, they 181 are indispensable to any sane expectation that commercial companies will take the risk of pioneering work there.
Furthermore, the matter of communications is essential to development. I mention all these things to show the diversity to which this Motion calls attention in the two sides of our policy. There is, on the one side, the Colonial policy of the Government, upon which we all agree, in favour of development; and, on the other, there is the fact that the various Ministries which could do so much to bring that policy into effect fail to do it, Again, in the Caribbean so much hangs on shipping communications. It is no use having Evans Reports, and talking grandiloquently about Colonial development, if the ship ring is not there to carry away the produce when it is grown, and to serve the import and export and passenger needs. I see here little evidence of overall planning. Indeed, it seems to me that the overnight dreams of the Secretary of State for the Colonies are negatived by the next morning's indifference of his colleagues. In the last publication (Command 8243) entitled The Colonial Territories 1950–51, we read on page 86:West Indies. The passenger position on the West Indies route showed a little improvement during the year. The French lines introduced the reconditioned 'Colombie' on the run to the Eastern Caribbean in November. It is hoped that two new French liners will he ready for service on the route late in 1951 or in 1952. The Government has continued to explore the possibility of providing additional British services between the United Kingdom and the West Indies, but no suitable scheme has yet been submitted by the shipping industry. The problem is still under active consideration.The French possessions in the Caribbean area have about 600,000 inhabitants, with an area of 36,000 square miles the Dutch have 275,000 inhabitants, with an area of 55,000 square miles; and the Americans have 1,900,000 inhabitants, with an area of 6,600 square miles. Britain has the responsibility for a population of 3,000,000 inhabitants, occupying 103,000 square miles. Yet the shipping lines of these other countries serve their possessions—and ours, too—far more adequately than do British lines. Are the British Government simply letting things drift, in the hope that foreign shipping lines will ultimately improve their services sufficiently to meet the requirements of the British Caribbean? If so, it is a sad day for British maritime prestige, and 182 for the prosperity of the Caribbean Colonies.
I have concentrated this evening on the Caribbean area, but it would not be difficult to make out for other areas of the Colonial Empire a similar case, illustrating the divorce between words and deeds, between the crusading eloquence of public speeches and the valiant indifference of public action. Ministers of the Crown who deal with these territories overseas do not seem to act in collaboration, or with proper liaison with each other, to carry out the Colonial policy of the Government. In conclusion, I would say that a split personality is a considerable handicap to the inspiration of confidence in the individual; and surely political schizophrenia is no basis for confidence in a Government. I beg to support the Motion.
§ 5.59 p.m.
My Lords, the Motion moved by the noble Lord, Lord Lyle of Westbourne, is drawn in wide terms, and this debate could readily resolve itself into a debate on the economic development of the Colonial Empire generally. But the noble Lord has confined his remarks to one particular issue—namely, that of taxation—which is so flagrant in its injustice to British enterprise in the Colonies as really to need no further elaboration. He quoted only one case—that is, a case where a company (say the subsidiary of a company in this country) as a result of the action of the Treasury will not enjoy the benefit of the reduction or remission of taxation in the Colony itself.
One possible way out which might have occurred to a Colony which found itself in that position vis-á-vis our Treasury here would have been to pay an equivalent amount in subsidy in place of the remission of taxation, but it is only reasonable and Tight to draw attention to the fact that, under the present proposals in the Finance Bill, that way out will also be effectively closed, because there is an interesting and important provision which reinforces the contention which has been advanced of inconsistency in fiscal policy in relation to Colonial development. I am referring in particular to a provision which makes it possible for the Treasury here to tax a subsidiary in the Colonial Empire which, as a result of local conditions, is enabled to sell at 183 a lower rate than the parent company would have been able to sell in its operations in this country. In other words, not only does the present application of the provisions in regard to double taxation have the effect which Lord Lyle described, but powers have been taken to make the difference taxable if a subsidiary of a company in this country were to enjoy a subsidy in the Colonial Empire which would enable it to produce and sell more cheaply.
§ THE MINISTER OF CIVIL AVIATION (LORD OGMORE)
My Lords, I am much obliged to the noble Lord for allowing me to intervene. Is the noble Lord alluding to the various clauses—Clause 32 in particular—of the Finance Bill which is now going through another place? If he is, I am wondering to what extent I shall be able to deal with a matter of that kind in reply. I understand that that Bill has not yet passed through another place, and no doubt it will be considered here in due time. Of course, various alterations may be made in its progress in another place. I do not want to be hampered in giving a full reply to whatever the noble Lord is going to say, and I should like to be sure that I am not going to be hampered in dealing, with this matter.
I am obliged to the noble Lord for his intervention. He will be aware that in the course of a debate in your Lordships' House about ten days ago we discussed certain provisions in the Finance Bill. An answer was given on a specific point by the noble Lord, Lord Pakenham, that the matter was being considered, and subsequently statements were made in another place. This is an analogous case but it deals, as a matter of fact, with another clause. I bring it forward as an example, because it seems to me that powers are being taken and are being exercised in this country by the Treasury to nullify any advantage which may be extended in other places to pioneer development in particular.
We have had numerous statements made in the course of debates, such as that on the Colonial Development Corporation, in regard to Colonies who are dependent solely on one product, or mainly on one product, and who might find themselves in serious economic difficulties 184 if that product failed or there was a lack of demand for it. It has been said that the policy of His Majesty's Government is to try and encourage the production of other commodities in those areas. That is precisely the case to which the noble Lord, Lord Lyle, was referring. He mentioned the creation of new industries—in other words, pioneer industries. If they are successful, they are not going to be allowed to enjoy the benefits which the Colonies are perfectly prepared to extend to them. My point in quoting the particular provision on which the noble Lord, Lord Ogmore, has replied, is that it is not confined solely to the application of double taxation. It goes further than that, and it may well be that where a concern in the course of developing a pioneer industry in Colony A can produce more cheaply than it can in another place, the benefit of this cheaper production will not be allowed to enure to the benefit of that enterprise. That seems to me to display precisely the inconsistency to which Lord Milverton referred.
Indeed, by anomaly it goes even further. We have been told that the Colonial Development Corporation will, in the event of establishing a successful enterprise which makes profits, pay the taxes which are necessary and are requested in the area. We therefore get into the rather anomalous position of finding a national company, sponsored by the Government, not enjoying the benefits which it might enjoy in the Colony in which the enterprise has been promoted, because the Treasury in this country remove the benefit from the hands of one Department of the Government to the hands of another.
It seems to me that the case has been fully made out this evening for a review of the application of taxation in the Colonial Empire and the policy which governs the collection of taxes in this country where an enterprise in this country is involved, either by way of subsidiary or by direct enterprise, in the Colonial Empire. I feel, therefore, that I should go rather further than the noble Lord, Lord Lyle, and ask the noble Lord who is to reply not only what steps His Majesty's Government are considering taking in this specific case of double taxation and the reduction of taxation in the Colony, but whether they will review the provisions for taxation in this country of 185 Colonial enterprises in the light of the taxation in the Colonies themselves. In the past there has been a great deal of independent thinking which has led to the anomalies to which the noble Lord, Lord Lyle, has referred. In these circumstances, I feel very strongly that the Motion which he has moved should receive the support of noble Lords on all sides of the House.
§ 6.8 p.m.
§ LORD OGMORE
My Lords, I should first like to thank the noble Lord, Lord Llewellin, for his references to myself. Although I am not sure that I am going to take any of the three courses he outlined, at least I hope I shall give him some slight satisfaction—though perhaps he may regard it as only slight—before I sit down. When I first looked at this matter, when the noble Lord, Lord Lyle, mentioned it to me, I must admit that my reaction was somewhat the same as that of many of the noble Lords who have spoken this evening. I thought there seemed to be a considerable difference of view between Colonial development, on the one hand, and the requirements of the inland Revenue—with whom we are all in contact from time to time—on the other.
Being much more friendly towards Colonial development than to the Inland Revenue, I at first looked at the matter with a certain amount of trepidation. In fact, I thought I should have to follow the example of a well-known and somewhat eccentric counsel who practised on the home circuit about 100 years ago. I am sure that the noble Viscount on the Woolsack will know of this, because it is a perfectly true story. This counsel's name was Codd. He was defending a man on a charge of larceny—he was charged with stealing a duck. When he came before the jury—the Chairman of the Quarter Sessions being the then Marquess of Salisbury—he said he had seven defences. The first was that his client had bought the duck; the second was that his client had been given the duck; the third was that he had been asleep and someone had put the duck in his pocket; and so on for seven defences. At the end Lord Salisbury said: "Mr. Codd, any one of these defences seems to be a perfectly good one, but they are not compatible. Which do you propose to put to the jury?" Mr. 186 Codd said: "I do not mind; the jury can choose whichever they like." The jury were a little confused by this time, and acquitted the accused. I did not think your Lordships would wish me to treat you to-day in the same manner as Mr. Codd treated the jury—appearing on the one hand in the name of the Treasury and on the other hand for Colonial development, and allowing the House to choose.
And, of course, the case is different. There is much more compatibility between the two points of view than would appear at first sight. In the first place, the Colonies concerned, Trinidad and Jamaica, in order to attract capital for development, have made these concessions to pioneer industries; and, as the noble Lord, Lord Lyle, has rightly said, Colonial tax is allowable as a credit against United Kingdom income tax. Where there is no Colonial income tax, where there has been a remission of all income tax, then, of course there is no income tax to credit and therefore none is credited, and the company which is operating from this country has to pay the full amount of tax. That is common ground between us. The answer to that point is that it is no part of the system of relief for double taxation that a United Kingdom company operating in a Colony should be relieved of tax which it would bear if it were operating in the United Kingdom. In other words, we cannot give to a company which for a period operates from this country in a Colony a credit which it would not get if it were operating in the Metropolitan area. The double taxation agreement has, I am glad to say, already made a considerable contribution to Colonial funds and it has resulted in Colonial Governments retaining an amount of the order of £5,000,000 more than they previously retained as a result of the old Dominion Income Tax relief provisions.
The Government's view is that Colonial Governments are perfectly free to enact this legislation—that is to say, the pioneer legislation of which Lord Lyle spoke. The Secretary of State does not, in these cases, recommend any disallowance, and does not enter into the picture at all. These Governments are perfectly free to make the allowances if they so desire. Besides making allowance for taxation, the legislation to which the noble Lord 187 has referred does contain a provision for freeing material for capital development from import duties in the two Colonies; and the tax concessions themselves, although of no immediate benefit to United Kingdom companies which propose to distribute the dividends immediately, are nevertheless of considerable benefit to local companies which are registered in the Colonies and which operate in one or other of the two. They are also of benefit to local subsidiaries of a United Kingdom company where those local subsidiaries do not distribute the profits as dividends but plough them back in their early years.
§ LORD LLEWELLIN
Is the noble Lord quite right in that last statement? Subsidiary companies have to show all profits in the consolidated accounts of the parent company.
§ LORD OGMORE
I am grateful to the noble Lord for that observation. As there is some little doubt I will look into the matter and will get in touch with the noble Lord. But that is what I am advised by the Treasury.
Lord Teviot and one or two other noble Lords referred to the position concerning the United States Government. It is perfectly true that the United States Government do allow for tax purposes remission such as Lord Lyle would like to see granted in the case of United Kingdom companies. But the position is different, because there are very few companies there compared with the number of companies in this country operating in these Colonies.
§ LORD OGMORE
They are few in proportion to the aggregate number of companies in the United States, as compared with the aggregate number of companies in this country. It may be more in total, but as a percentage I am advised that it is much fewer.
§ LORD LYLE OF WESTBOURNE
I am merely trying to say that under the scheme as worked by the British Government there will be a good many more American companies.
§ LORD OGMORE
That may be so, but the impact upon the United States economy through remission of this kind would not be as great as it would in this country. Therefore, as there are not nearly so many companies operating from the United States in these Colonies as there are British companies, it is a very small matter so far as the United States is concerned, though a considerable matter so far as the United Kingdom Treasury—and, of course, the Inland Revenue—is concerned.
§ LORD OGMORE
I am afraid there are not any figures available. I tried to get exact figures, but was informed that it would mean writing to the Colonies concerned, finding out what were the individual figures and then making an aggregate—and there has not been sufficient time to do that.
The comparison made by the noble Lord, Lord Milverton, between United Kingdom and United States policy was, in my view, very unfair. Taking the position broadly, we act in a perfectly just and honourable manner towards the Colonies. We try to help them and they try to help us. Our policy as a whole is certainly quite as good as that of the United States towards the territories for which they are responsible. I think it is unfair to hold us up as being in any way behind or inferior to the Americans in our treatment of these dependent territories. As a matter of fact, a considerable number of new industries have been started in Jamaica and Trinidad in the last year or two. In Jamaica a new factory for the production of cement is due to go into operation shortly. There are various other manufactures. The manufacture of gypsum plasters and blocks, which are a kind of plaster board, for the building industry, and laundry blue, has started, while in Trinidad new industries have been started for the manufacture of textiles, boxes and cartons, and there is a new brewery.
The noble Lord, Lord Milverton, has also referred to the cigar industry. I should like to point out that we are most anxious to do everything we possibly can to support the economy of Jamaica. I do not recall that the noble Lord, Lord Milverton, with his intimate knowledge of 189 Jamaica, gave any figures showing the position before the war and the position as it is to-day. Before the war, the Jamaican cigar industry was a very small one. It exported to the United Kingdom cigars to the value of about £6,000 a year. During the war, in order to cut down dollar expenditure, we prohibited the import of Cuban cigars into the United Kingdom, and the trade in Jamaican cigars has now reached the value of about £200,000. So, to represent the position in the cigar industry before the war, when the noble Lord was Governor, as being a flourishing one and the position to-day as being a deleterious one, is, I think, rather unfair; in fact, it is not quite compatible with the facts.
§ LORD MILVERTON
I think the noble Lord must have misunderstood me. What I was endeavouring to say was exactly what he has said now: that in those days of 1939 there was a negligible industry with one factory, and then, within three or four years, there were six factories. When the noble Lord says that it has risen from £6.000 or £7,000 to £200,000, he omits to say to what height it did rise. Did it not rise to be the third or fourth industry in Jamaica? Did it not rise to something nearer £1,000,000 than £200,000? Has it not sunk since and is it not still sinking?
§ LORD OGMORE
At all events, whether it has sunk or whether it is sinking, it is nothing to do with Cuba, with which the noble Lord linked it, because as yet no agreement has been reached with Cuba. The "Black Pact," as the noble Lord called it, is riot a pact in being at all. If and when agreement is reached, then no doubt the noble Lord will be able to make his comments, properly and rightly, upon it; but it is a little early—I hope the noble Lord will not interrupt me; I did rot interrupt him—I suggest, to state that this Jamaican cigar industry has been in any way affected by the Cuban pact, which has not yet been entered into.
Although it is rather off the general line, I must refer to a statement of the noble Lord, which no doubt will be very widely reported in the Colonial Press in the West In lies, and in the Caribbean. The noble Lord, Lord Milverton, talked about our attitude towards the West 190 Indies and the Caribbean. He said that when we are out of power we want to do everything for the working people in the Colonies, but that when we get in we do not care about them. That is really a most outrageous thing to say. The noble Lord himself knows perfectly well that all Parties in this country are most anxious to develop the Colonial territories, and to do their best for the economic welfare of the people. All Parties may dispute the best methods, and may have differences of opinion as to how the object can best be brought about; but I suggest that the desire is in no way in issue. It has always been said by both sides in this House that both sides are anxious for the betterment of the Colonial peoples, and both sides are doing their best, according to their lights, to bring about that end. I hope that the noble Lord, Lord Llewellin, will not dispute that fact.
It depends on how one looks at these things. I will here bring in a personal note. Before I was a Minister, I was a director of the Jamaican Banana Producers Company. That was not an office of profit; we did not get paid for it. It was a purely advisory and honorary position. At that time the noble Lord, Lord Milverton, was Governor of Nigeria, and lie was a sort of bugbear of ours. Of course, he acted in an entirely honourable and straightforward way. I am not suggesting that he acted otherwise than he should have done, according to his lights; but we looked upon him as being one of the most narrow-minded and arrogant Governors ever to appear in the Colonial Empire since his predecessor, old Henry Morgan. He wag looking purely and simply at his own parish, the Cameroons. He was not prepared to help Jamaica. He did not care what happened there—this is what we thought. I am not saying that we were right or that he was wrong, but we felt that the noble Lord, Lord Milverton, was not prepared to help the poor people of Jamaica. He was not prepared to help the peasant proprietors who were trying, under great difficulties, to grow bananas in Jamaica. Why?—because he wanted to develop the banana industry in the Cameroons. I am only instancing this to show that it depends on how you look at these things and which hat you have on when you look at them.
§ LORD MILVERTON
May I say one word? Is not the noble Lord overlooking one fundamental difference: that it is no part of the duty of the Government of Nigeria, which I represented, to engage in philanthropy in other parts of the Empire? It is difficult enough at home, but it is the duty of the metropolitan mother country to do that.
§ LORD OGMORE
I remember asking the question of the noble Lord at that time. I said: "Are you interested in the British Empire or only in the Cameroons?" I felt at that time that the whole was greater than the part, and that even though one was Governor of one part one had a responsibility for the Empire as a whole. I repeat, I do not want in any way to suggest that the noble Lord, Lord Milverton, was wrong or that we were right, and I will leave it at that.
I can assure the House that these matters of the development of Jamaica and the Caribbean are always in our minds. Noble Lords know that it is one of the most difficult areas with which to deal. There are many scattered islands, differing in many ways, having their own local troubles and problems. The shipping question which the noble Lord, Lord Milverton, mentioned is a hardy annual. The Colonial Office are looking into this matter. It depends very much on what area of the Caribbean or the West Indies, or what traffic one is dealing with. I think this is a matter that could be debated on a separate Motion, because it is an entirely separate matter. I should get into rather deep water if I tried to distinguish between the inter-island traffic and the trans-ocean traffic. It is an interesting subject, and one that I should be glad to debate at some time, but I do not think that now is the proper time. I should like to finish answering the noble Lord.
§ LORD OGMORE
In a debate of this sort, if the noble Lord frames his Motion widely enough, other noble Lords are fully entitled to raise their own points; and, when they are raised, I must answer them, because, as I say, these debates in your Lordships' House are, properly and 192 rightly, widely reported, especially in the Colonies. If no answer is given to these important questions, especially from noble Lords like Lord Milverton, who has great Colonial experience, then often the wrong impression is given in those territories. All I can say to the noble Lord on this point is that, after listening carefully to all the noble Lords who have spoken, I will bring this matter before both my right honourable friend the Chancellor of the Exchequer, and my right honourable friend the Secretary of State for the Colonies. I cannot hold out any great hope—it would be misleading if I did—that my right honourable friends will change their views. But at least I will bring before them the views of noble Lords who have spoken on this matter, and I shall ask them to give very careful consideration to those views. I am sure your Lordships would not expect me to do more than that to-night. In fact, I am sure you will clearly realise that I could not possibly do more; but that I will do.
§ LORD LLEWELLIN
Before the noble Lord sits down, may I ask him one thing? He referred to the United States having a much smaller problem if they were to remit this tax from their companies than we should have. But does he realise that we are asking only that where a Colony remits this taxation of its own accord—and of course the Treasury would not get the money if the tax were paid in the Colony—some arrangement should be made to help those pioneer companies in Trinidad and Jamaica, so that the Treasury do not come in and grab what the Colony was entitled to but decided, in its own interests, to give up?
§ LORD OGMORE
My Lords, I appreciate the point of the noble Lord, Lord Llewellin; indeed, it is the main burden of Lord Lyle's Motion. The point of view of the Treasury is that this raises a very much wider principle, and it may be that acceptance of the point would bring in all sorts of other places and other conditions, which would cost the taxpayer in this country a considerable amount of money. The Treasury regard it as a matter of principle. As I have said, I will definitely and clearly put to my right honourable friends the point which the noble Lord has just put to me.
§ 6.33 p.m.
§ LORD LYLE OF WESTBOURNE
My Lords, I should like to thank Lord Ogmore for his courtesy and his kindness in getting all these facts together and giving us such an interesting and entertaining speech. He certainly amused us, and we appreciated it; but I can tell him that this is really a very serious matter. He even brought out the point that it was a small matter to the United States to arrange their duties in a certain way and to lose a certain amount of revenue, but that it might be a very big matter to us. My Lords, I think that is begging the whole question. The noble Lord talked about honour. I believe he would desire to be the most honourable man in the whole world in regard to this matter. But are we acting in an honourable way in taking advantage of money which properly belongs to a Colony and adding it to our Exchequer? That is the point I have been arguing, and I venture to think that if this great British nation does that, it is doing something which savours of dishonesty. If you search your soul and ask yourself the question, "Is this an honest thing we are doing, to take from the Colony the equivalent of the benefit that they arc remitting?", I believe your answer will be that it is as good as taking their money. Goodness knows! they want money from us far more than we need it from them, though we need it pretty badly, too.
My Lords, I cannot do more to-night. I thank the noble Lord for his speech, for the trouble lie has taken, and for what I believe to be his obvious sympathy with us. But I cannot thank the members of the Government who supplied him with his reply. I am not satisfied with the answer, and I do not think that anybody in this country or the many people on the other side of the ocean who believe in the Empire will be satisfied. My friends and I will choose another opportunity to bring forward this matter again. I beg leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.