Sitting of 7 July 1937

Preamble
The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.
ORAL ANSWERS TO QUESTIONS.

  SPAIN.
  Mr. Wedgwood Bennasked the Secretary of State for Foreign Affairs whether he can make any statement concerning the detention in a French port of the steamers "Seabank" and "Axpe Mendi"?
  The Secretary of State for Foreign Affairs (Mr. Eden): The steamship "Seabank" carrying, it is believed, a number of securities and valuables from Bilbao arrived at the French port of La Pallice about a month ago. I understand that legal steps have, in the meantime been instituted in the French courts by various concerns who claim to be the rightful owners of the goods in question. As a result of these legal proceedings the competent French judicial authority at La Rochelle issued an order placing the vessel and its cargo under embargo. I understand that a portion of the cargo from the "Seabank" was transferred to the Spanish ship "Axpe Mendi" and that the embargo has consequently extended to this ship as well.
  Mr. Cocksasked the Secretary of State for Foreign Affairs whether His Majesty's Government, either alone or in conjunction with other Governments, will accept the Spanish Government's offer to give them every facility to verify that Government's claim that all Spanish submarines were in port at the time of the alleged attack on the "Leipzig" on 15th and 18th June?
  Mr. Eden: As the hon. Member will be aware, subsequent to the incident referred to, His Majesty's Government themselves proposed a full investigation of all the relevant circumstances. This proposal was
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  not accepted by the German and Italian Governments.
  Mr. Cocks: Would it not ease the mind of the German Government, if it were shown that the alleged attack on the "Leipzig" did not take place?
  Mr. Speaker: The right hon. Gentleman cannot speak for the German mind.
  Mr. Cocks: May I put it this way? In view of the serious international position created by this incident, will not the Government take the first opportunity of ascertaining the facts?
  Mr. Eden: We have suggested an inquiry, and if that inquiry is not acceptable to the German Government, I can see no useful purpose in attempting to insist upon it.
  Mr. Benn: Is it necessary that the German Government should participate in an inquiry as to the whereabouts of Spanish submarines?
  Mr. Eden: German agreement would be necessary.
  Mr. Benn: Why is German agreement necessary to investigate the truth of a statement made by the Spanish Government that their submarines were in a certain place at a certain time?
  Mr. Eden: Quite clearly, in this case German participation in such an inquiry would be necessary.
  Mr. Arthur Henderson: Seeing that the German Government is in the position of a prosecutor, why should it not be possible for people who are neutral to make the investigation?
  Mr. Cocksasked the Secretary of State for Foreign Affairs whether the volume of evidence of Italian intervention in Spain published by the Spanish Government and examined by the British Government shows whether or not any complete units of the Italian army have been sent to Spain under official orders, commanded by Italian generals, and with messages of encouragement from the head of the Italian Government; and what steps he proposes to take in view of the pledge given by Italy to forbid the sending of arms and volunteers to Spain?
  Lieut.-Commander Fletcherasked the Secretary of State for Foreign Affairs

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  whether his attention has been drawn to a statement in the Italian Government organ "Popolo d'Italia" that only Italian volunteers are fighting in Spain, over whom the Italian Government has no power of control; and whether His Majesty's Government have any evidence that troops and aeroplanes of the Italian regular forces have been despatched to Spain by the Italian Government and are engaging in the fighting there.
  Mr. Eden: The document published by the Spanish Government which is referred to has been placed in the Library of the House. So far as I am aware there is no evidence in this document that Italian combatants have been despatched to Spain since the entry into force of the ban on foreign combatants, though, as the House is aware, in the earlier stages of the conflict foreign personnel reached both parties in the conflict in considerable numbers. As the House is already aware, His Majesty's Government attach the greatest importance to the withdrawal from Spain of all foreign combatants who are already there, and they will continue to do their utmost to bring this about.
  Mr. Cocks: Did not the Italian Government pledge itself last Autumn not to send arms to Spain; and is it suggested that these gallant troops were sent to Spain without arms or ammunition?
  Mr. Noel-Baker: Does the right hon. Gentleman suggest that aviators have not arrived since them?
  Mr. Eden: I do not think I suggested that.
  Mr. Benn: In that case, how can it be said that foreigners have not arrived? Did not the right hon. Gentleman himself inform me that the air control had never been effective?
  Mr. A. Hendersonasked the Secretary of State for Foreign Affairs whether he is aware or the allegations contained in the controlled Italian Press to the effect that volunteers, officers and men, arms, airplanes, and ammunition had been sent to Spain from this country; and whether he proposes to take any action in the matter?
  Mr. Eden: His Majesty's Ambassador at Rome has already been instructed to take this matter up with the Italian Government.
  Mr. G. Straussasked the Secretary of State for Foreign Affairs on what grounds visas were refused to Mr. J. Strachey and Mr. W. Auden to go to Valencia to attend a writers' conference?
  Mr. A. Hendersonasked the Secretary of State for Foreign Affairs why visas were refused to a number of British writers who desired to attend a writers' conference at Valencia commencing on 4th July?
  Mr. Eden: The House will be aware, from the reply which I gave to my hon. Friend the Member for Fairfield (Sir E. Brocklebank) on 10th March last, of the nature of the regulations at present in force with regard to the issue of visas for British subjects desiring to visit Spain and of the conditions in which it is possible to give special consideration to applications for such visas. These conditions were not held to be applicable to the case in question. I would, moreover, point out that the question of the protection of British subjects in Spain must, in existing circumstances, be a source of increasing anxiety to His Majesty's Diplomatic and Consular Officers in that country, who have already pointed out to me their difficulties in this regard. I am sure that the House will agree that it is essential that the burden already imposed on these officers should not be unduly increased by visits of British subjects to Spain, save in the most pressing circumstances.
  Mr. Strauss: Can the Foreign Secretary say whether any conditions were proposed and not agreed to by these two well-known writers; and, if not, why was this ban put upon these people and not upon other people?
  Mr. Eden: There is no question of a ban being put upon some people and not on others. At present visas are only granted to Spain for certain approved categories—for bona fide business reasons, for humanitarian purposes or for accredited correspondents of established newspapers.
  Mr. Henderson: Were not these people prepared to take the risk, and was it not up to them to decide?
  Mr. Eden: Not entirely, because we must have some responsibility for British subjects in any country abroad.
  Mr. H. G. Williams: Is it not the case that the pen is mightier than the sword, and might not this be a dangerous form of intervention?
  Miss Rathbone: Is the right hon. Gentleman aware that the vast majority of the British workers engaged in journalistic and philanthropic work in Spain are in Madrid, and that there is no British representative there to look after their safety; and is he also aware that they have been there all the winter and that not one of them has been killed or hurt?
  Mr. Rileyasked the Secretary of State for Foreign Affairs whether he can make any statement with regard to the present position and jurisdiction of the Non-Intervention Committee regarding the war in Spain?
  Mr. Eden: I cannot at present add anything to the statements which I made on this subject yesterday and on Monday.
  Mr. Riley: In view of the anxiety which prevails as to the present position of the Committee, can the right hon. Gentleman say when he will be in a position to make a statement on the matter?
  Mr. Eden: After the Committee has met on Friday.
  Mr. Benn: May I ask a general question? Can the right hon. Gentleman assure the House that proposals made to the Non-Intervention Committee will be made in consultation with, and jointly with, the French Government?
  Mr. Eden: Perhaps I may tell the right hon. Gentleman at once, that we have no intention of putting any fresh proposals before the Non-Intervention Committee on Friday.
  Mr. Cocksasked the First Lord of the Admiralty the number of submarines included in the Spanish Navy before the outbreak of the rebellion; the number of these that remained loyal to the Government and the number that went over to the side of General Franco; and whether he has any information as to the number of submarines now possessed by the insurgents?
  The First Lord of the Admiralty (Mr. Duff Cooper): According to the information at my disposal, there were 12 submarines in commission in the Spanish Navy before the outbreak of the rebellion, and all these submarines at first remained loyal to the Government. Subsequent reports have been received to the effect that one, and possibly two, of the submarines have gone over to the insurgent side; and it is also believed that another submarine which was sunk by the insurgents in December, 1936, has since been salved, and is now in the insurgent service.
  Mr. Cocks: Can the First Lord say whether these two submarines are not doing more than the usual work of two submarines; and has he any information as to whether General Franco has been lent some of these submarines, which kept bobbing up around Malta a year or so ago?
  Mr. Cooper: I have no definite or official information about that.
  Sir Nairne Stewart Sandeman: Has the right hon. Gentleman any information as to whether any more submarines have gone over to General Franco? Is there any reason to be surprised at two having gone over and is it not expected that more will follow?
  Lieut.-Commander Fletcherasked the first Lord of the Admiralty what naval forces, respectively, the contending parties in Spain dispose of; and what units of the Italian and German navies are operating in Spanish waters?
  Mr. Cooper: As the answer includes a number of figures, I will, with the hon. and gallant Member's permission, circulate it in the OFFICIAL REPORT.
  Mr. Benn: How can it include a number of figures since the Foreign Secretary told us yesterday that there were no German warships in the Mediterranean?
  Following is the information:
  According to the information available, the strengths of the Spanish naval forces on either side and of the German and Italian naval forces in Spanish waters are as follow:

  SPANISH FORCES.

  Government.

  Insurgents.

  Cruisers.

  Three 6-inch cruisers

  Two 8-inch cruisers.

  (one non-effective).

  Two 6-inch cruisers

  (one non-effective).

  Destroyers.

  Fifteen

  One.

  (three non-effective).

  Torpedo Boats.

  Seven.

  Six.

  Gunboats.

  One.

  Four.

  Minelayers.

  Nil.

  Four.

  Armed Merchant Cruisers.

  Four.

  Eleven.

  Armed Trawlers.

  Twenty-one

  Twenty-nine

  (approximately).

  (approximately).

  As regards submarines, I would refer the hon. and gallant Member to the answer which I am giving to-day to the hon. Member for Broxtowe (Mr. Cocks).
  GERMAN.
  One armoured ship, one cruiser, four destroyers, three submarines.
  ITALY.
  One cruiser, five destroyers.
  Mr. Noel-Baker(by Private Notice) asked the First Lord of the Admiralty whether he can give the House any information concerning the stopping of the British steamship "Gordonia" five miles off Santander by an insurgent warship; why instructions had been given to British merchant vessels not to enter the port of Santander; why instructions inconsistent with the pledge of His Majesty's Government to give naval protection to British and other vessels evacuating the refugees from that port were issued; whether, in view of the terrible conditions of the refugees in the Santander province, the Government would immediately cancel the instructions given to British vessels and would take all the measures necessary to make the naval protection for British and other vessels fully effective?
  Mr. Cooper: According to reports which I have received, the British steamship "Gordonia" was stopped yesterday morning in a position approximately five miles north-east of Cabo Mayor by the Spanish insurgent torpedo boat No. 7,
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  supported by the Spanish cruiser "Almirante Cervera." Shortly afterwards, His Majesty's Destroyers "Escapade" and "Bulldog" arrived on the scene. Having regard to the grave risk which clearly existed that the "Gordonia" would be captured if she entered Spanish territorial waters, the naval authorities told the master not to proceed, whilst the situation was reported to the Admiralty and the owners. I understand that the owners decided to order the ship to proceed in the direction of Bayonne.
  I am very glad to be afforded this opportunity of emphasising that His Majesty's Government have not issued instructions to the owners of British merchant ships not to enter the port of Santander, but it is known that there is a grave risk that their ships will be captured if they attempt to do so, and warnings have been repeatedly issued through the Board of Trade to make this fact clear to them. If, however, shipowners desire to proceed in spite of these warnings, they have complete discretion to do so, and they will be protected by the British Navy up to the limit of territorial waters.
  Mr. Noel-Baker: In view of the fact that the Prime Minister a fortnight ago promised that naval protection should be given to all these ships, and that for a large part of that time Admiralty warnings amounting to a paper blockade imposed at Bilbao have prevented British ships from going in, is it not plain that the Government are indirectly, and perhaps contrary to their will, assisting General Franco to make war on refugees?
  Mr. Cooper: No, Sir. The Parliamentary pledge is being completely carried out. Seven British ships carrying refugees have been protected when coming from Santander, and one French ship has been accorded similar protection. At the same time these orders have been issued, and the fact that they are necessary is proved by the capture of a French ship two days ago.
  Mr. Noel-Baker: Is it not a fact that the French ship was released by General Franco after a protest from the French Government; and will our Government give an assurance that they will take the same course which the French Government have pursued, thereby getting rid of the danger which the right hon. Gentleman foresees?
  Vice-Admiral Taylor: Is not the evacuation of refugees an act of intervention?
  Mr. Crossley: Is not the main duty of the Government to our own shipping?
  Mr. A. Henderson: Does not this interference on the part of Spanish cruisers constitute an act of piracy contrary to international law; and what do His Majesty's Government propose to do in that regard?
  Mr. Cooper: The position of His Majesty's Government has always been perfectly plain. They will protect British ships on the high seas, but they cannot afford that protection in territorial waters.
  Mr. Gallacher: Why not?
  Mr. Cooper: Because of international law. As to the point of international law, that is not a point on which I am concerned to reply without notice.
  Mr. Gallacher: There are no belligerent rights, and therefore it is piracy inside territorial waters.
  Mr. De la Bère: Peace, perfect peace!

  PORTUGUESE COLONIES (NATIVE LABOUR).
  Lieut.-Commander Fletcherasked the Secretary of State for Foreign Affairs whether any reports have recently been received by the League of Nations concerning conditions of native labour in the Portuguese colonial possessions?
  Mr. Eden: So far as I am aware, no report of this character has recently been received by the Secretary-General of the League of Nations.
  Lieut.-Commander Fletcher: Can the right hon. Gentleman say whether any improvement has taken place in labour conditions in these colonies since 1929, when the then Foreign Secretary informed the House that he was unable to state that any improvement had taken place since 1914?
  Mr. Eden: I should have notice of that question. I was only asked as to League reports on the subject.

  ROYAL NAVY.

    VOCATIONAL TRAINING.
    Sir Nicholas Grattan-Doyleasked First Lord of the Admiralty what steps his Department takes to train men, about to become time-expired, at the vocational centres in such a way as to enable them to be re-settled in civil life as chefs and skilled workers in the catering trades and private houses with well-paid permanent employment in situations usually filled by foreigners?
    Mr. Cooper: Naval vocational training centres provide instructional courses in food and cookery, elementary cookery, butlering and valeting, and canteen work. I shall be glad to consider whether these courses can be extended to cover a wider field of employment.

    HIS MAJESTY'S SHIP "RAMILLIES."
    Major Neven-Spenceasked the First Lord of the Admiralty why the recent visit of His Majesty's Ship "Ramillies" to Lerwick was curtailed suddenly?
    Mr. Cooper: The recent visit of His Majesty's Ship "Ramillies" to Lerwick had to be curtailed owing to bad weather. I can assure my hon. and gallant Friend that the necessity for the premature departure of the ship was regretted both by her officers and company and by the Board of Admiralty.

    KENYA (HUT AND POLL TAX).
    Mr. Banfieldasked the Secretary of State for the Colonies whether he has considered the complaint from the North Kavirondo Central Association against the fact that, whereas in 1924 the imposition of the hut and poll tax on old men, women, and the lame, blind, or otherwise disabled was revoked at a meeting attended by the senior officials, in 1936–37 the district officer renewed the collection of taxes from such persons; and what steps it is proposed to take in the matter?
    The Secretary of State for the Colonies (Mr. Ormsby-Gore): I have not received any such complaint from the association or any other source. The hon. Member may be assured however, that sympathetic use is made by all district officers of the power conferred upon them to

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    allow the remission of the whole or a portion of hut and poll tax in cases where the persons liable to pay are in their opinion without sufficient means.
    Mr. Banfield: Will the right hon. Gentleman consider the complaint if I send him a copy of it, and will he take it from myself that the complaint is most pathetic and that old people are being forced into terrible circumstances, apparently without either justification or even authority?
    Mr. Ormsby-Gore: I do not like to accept what may be called ex parte statements. The proper course is for any complainant to address a petition to me, or a letter to me, through the Governor, and then he can investigate it and report to me what are the facts. If the hon. Member will inform the petitioner that he should approach me through the Governor, it will be much more satisfactory and save time.
    Mr. Banfield: Will the right hon. Gentleman inquire from the Governor whether it is not a fact that he has received this petition?
    Mr. Ormsby-Gore: Yes, gladly.
    Mr. Lunn: Is the action of this district officer in accordance with the recommendations of Sir Alan Pim, which were accepted by the right hon. Gentleman?
    Mr. Ormsby-Gore: Yes, certainly. Not only did the district officer have my orders, but the responsibility and the right to vary the tax in special circumstances.

  NORTHERN RHODESIA.

    FINANCIAL SITUATION.
    Mr. Palingasked the Secretary of State for the Colonies whether he can give any information on the special reasons for the setting up of a commission of inquiry into the financial position of Northern Rhodesia?
    Mr. Ormsby-Gore: The decision to set up a Commission of Inquiry was taken about nine months ago at a time when the adequacy of the Northern Rhodesian revenue to meet the growing demands for expenditure on desirable development was in doubt. The financial situation has since undergone a change for the better owing to the prosperity of the copper mining
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    industry, but the inquiry is still necessary, particularly to advise on the economic development of the Territory and the distribution of its expenditure. It is for that reason that an agricultural expert has been appointed a member of the Commission.

    COPPER BELT (NATIVE WORKERS).
    Mr. Creech Jonesasked the Secretary of State for the Colonies whether he can report any improvement in the social and industrial conditions of Africans employed in the copper belt of Northern Rhodesia since the Commission on Disturbances (Cmd. 35); and whether the Government has adopted any measures to secure a statutory minimum in health, housing, sanitary, industrial and educational conditions for mine workers?
    Mr. Ormsby-Gore: I can assure the hon. Member that the best means of improving the social and industrial conditions of Africans employed in the copper belt are under the constant care of the Government of Northern Rhodesia. Many of the matters to which he refers have been investigated by the Native Industrial Labour Advisory Board which was set up by the Government in 1935, and in many instances the Government has been able to accept, or ensure acceptance by the mines of, the board's recommendations.
    Mr. Creech Jones: Can the right hon. Gentleman say what is actually being done? In view of the reports of disturbances and the growing industrialisation of these natives, is it not desirable that at least there should be some statutory minimum in regard to social and industrial conditions below which the natives should not be allowed to fall?
    Mr. Ormsby-Gore: All those things are the very things that are covered by my answer. It is quite impossible, within the limits of a Parliamentary reply, to give details of the very many measures, with regard to housing, food, sanitation, health, and other services, that have been taken.
    Mr. Paling: But was not one of the special recommendations in regard to housing particularly, and has anything been done in that respect, seeing that it is so bad?
    Mr. Ormsby-Gore: Yes, a great deal has been done.
    Mr. Noel-Baker: Is the right hon. Gentleman satisfied with the conditions there?
    Mr. Ormsby-Gore: Of course, there is always room for improvement. When you get a sudden industrial expansion, which means an enormous volume of labour employed and a vast increase of effort, especially in the heart of the Province, it is not so much a case of individual action as of continuous action to improve the conditions in the mining areas.

    NYASALAND (AGRICULTURAL AND MINERALOGICAL SURVEYS).
    Mr. Ammonasked the Secretary of State for the Colonies whether the agricultural and mineralogical surveys recommended by him in his despatch of last September to the Governor of Nyasaland have yet taken place; and when a report may be expected?
    Mr. Ormsby-Gore: The mineralogical survey has been proceeding since 1934, and it is expected that it will be completed by the end of 1938. Periodical reports on the survey have already been published. The agricultural survey of the Northern Province has started, and it will probably be finished by the end of this year.
    Mr. Ammon: Is that the survey referred to by the right hon. Gentleman in September last?
    Mr. Ormsby-Gore: Yes. The search for possible minerals has been going on for some time, and I referred to that. It is being speeded up. Arising out of the Lacey Report on labour, we had a special agricultural survey instituted in the Northern Province, where the distress was the most severe, and I expect that by the end of this year.

    OCEAN ISLAND (PHOSPHATES).
    Mr. de Rothschildasked the Secretary of State for the Colonies the provisions under which the British Phosphates Commissioners carry out the working of the phosphate deposits on Ocean Island; the annual profits of the Commissioners over the past three years; and the amount of any contributions made by the Commissioners to the revenues of the colony or for purposes of native welfare?
    Mr. Ormsby-Gore: As the answer is a long one, I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.
    Following is the answer:
    The operations of the British Phosphate Commissioners on Ocean Island are governed by Ordinance No. 4 of 1928 of the Gilbert and Ellice Islands Colony, and by a licence granted originally to the Pacific Phosphate Company, Limited. As regards the second part of the question, the principles governing the sale of phosphates from the mandated territory of Nauru apply also in the case of Ocean Island, and for the most part the output is sold on a cost price basis, as provided for in the agreement scheduled to the Nauru Island Agreement Act, 1920, to which I would refer the hon. Member. In respect of Ocean Island the Commissioners contribute a royalty of 6d. a ton to the revenues of the Gilbert and Ellice Islands Colony, and in the three years 1933 to 1936 the amounts received were £4,780, £5,174, and £6,547. Up to the end of the year 1933–34 the Commissioners paid local taxes, customs duties, etc., in the normal way, but I have not figures to show what sum was so paid in that year. Since then, under Ordinance No. 3 of 1934, the Commissioners have been exempted from such payments and in lieu have contributed to revenue sums representing the difference between Government's other revenue and expenditure; the sums so contributed amounted to £17,342 in 1934–35, and £14,629 in 1935–36. In addition, the Commissioners pay further royalties at the rate of 10½d. a ton, the proceeds of which are held on trust by the Government for the benefit of the local natives; during the years 1933 to 1936 these payments amounted to £6,772, £7,329. and £9,416.

  PALESTINE.

    FAWZI KAWAKJI (SYRIA).
    Colonel Wedǵwoodasked the Secretary of State for the Colonies whether he has any information as to the amnesty given by the French Government in Syria to Fawzi Kawakji; and whether the Palestine Government have been consulted on the matter and have approved?
    Mr. Ormsby-Gore: It has been ascertained that there is no truth in the report that this man has been granted an amnesty.

    ANNUAL. REPORT.
    Colonel Wedgwoodasked the Secretary of State for the Colonies whether the report to Geneva by the Palestine Administration dealing with the disturbances was communicated to the Colonial Office first; and will he place a copy in the Library?
    Mr. Ormsby-Gore: No separate report on the disturbances by the Palestine Administration has been made to the League of Nations. The usual annual report on the administration of Palestine and Transjordan for the year 1936, which includes some factual account of die disturbances which took place in that year, has been communicated to the Council of the League through the usual channel and was published on 21st June. The annual report does not attempt to deal with either ca uses or policy, which are dealt with in the report of the Royal Commission. A copy of the annual report will be placed in the Library, and the report of the Royal Commission will be available to hon. Members in the Vote Office at 8 p.m. to-day.
    Colonel Wedgwood: The right hon. Gentleman has not answered my question as to whether this report was passed by the Colonial Office here before it was published. Will he tell me that?
    Mr. Ormsby-Gore: Yes. The Palestine Government always send it to the Colonial Office for transmission to the League, and we always pass it and send it on.
    Colonel Wedgwood: Are we to understand that this report, which has given so much offence to the Jews in Palestine, is in the nature of an apologia or a defence of his conduct by the High Commissioner?
    Mr. Ormsby-Gore: Certainly not. There is no question of any defence. The whole of the questions about the disturbances and their causes and everything connected with them are dealt with in the Peel Report. This is a purely objective statement of facts which has been submitted by the Palestine Government purely as a record. I do not think it has any significance as compared with the report of the Royal Commission.
    Colonel Wedgwood: Has the right hon. Gentleman read it?
    Mr. Ormsby-Gore: No, I have not read it personally.
    Captain Cazalet: Can my right hon. Friend say how much the report of the Royal Commission will cost, and will he see that an edition at a reasonable rate will be issued?
    Mr. Speaker: That is another question
    Mr. de Rothschild: Will the right hon. Gentleman say whether the facts as stated in this report to the League of Nations were passed and certified as correct by the Colonial Office, or as believed to be correct?
    Mr. Ormsby-Gore: Believed to be correct.

    ANTI-BRITISH PROPAGANDA.
    Mr. Creech Jonesasked the Secretary of State for the Colonies whether there is reason to apprehend further disorder in Palestine; whether there is evidence of increased anti-British propaganda among the Arab population; and why it was thought necessary that the battle-cruiser "Repulse" should proceed to Haifa?
    Mr. Ormsby-Gore: So far as my information goes, there is no immediate cause for apprehension and no special evidence of any recent increase of anti-British propaganda. The movement of a ship to Haifa was a purely precautionary measure.
    Lieut.-Commander Fletcher: Can the right hon. Gentleman say whether, following upon the recent representations to the Italian Government, there has been a diminution of Italian anti-British propaganda in Palestine?
    Mr. Ormsby-Gore: I do not think that that arises out of the question. It certainly has no connection. When the hon. and gallant Gentleman reads the report of the Royal Commission, he will see this matter in its right proportion.

    ROYAL COMMISSION'S REPORT.
    Mr. Leckieasked the Prime Minister whether he will give an opportunity to the House of Commons to discuss the report of the Royal Commission on Palestine and the views of the Government thereon, before their proposals are placed before the League of Nations for confirmation?
    The Prime Minister (Mr. Chamberlain): The Permanent Mandates Commission of the League of Nations meets for discussion of Palestine affairs on 30th July. In the course of the Debate on the Colonial Office Vote on 2nd June, my right hon. Friend the Secretary of State for the Colonies indicated that there would be a further opportunity of debating that Vote, which is still open, and that Palestine questions could be raised on that occasion.
    Mr. Attlee: Are we to have the opinion of the Government on this report before the matter is brought up at the League of Nations?
    The Prime Minister: Yes, Sir.
    Mr. Attlee: On what date will it be published?
    The Prime Minister: It will be published in the form of a White Paper.

    TRINIDAD (LABOUR DISPUTES).
    Mr. Creech Jonesasked the Secretary of State for the Colonies whether, at the time of the recent disturbances in Trinidad, there was in the Colony any governmental machinery established by law for official conciliation in settling industrial disputes; whether any minimum wage legislation or other industrial statutory regulation of wages exists; what restrictions are imposed on the organising of trade unions and their functioning in accordance with recognised and legitimate practice as exists in Great Britain; and why the Government in the Colony failed to act in time to prevent the disputes?
    Mr. Ormsby-Gore: Legislation exists relating to industrial disputes, minimum wages, and trade unions, and I will have copies of the relevant Ordinances placed in the Library of the House. The question whether the Government might have taken steps to prevent the sudden outbreak of the present disputes will be a matter for inquiry in due course.
    Mr. Creech Jones: Is this operative legislation or just on the Statute Book? Further, can the right hon. Gentleman say when this inquiry is likely to be set up, and can he give the terms of reference?
    Mr. Ormsby-Gore: I am considering the form and nature of the Commission, which, I think I may say, will be partly composed of persons appointed by me from here and partly of people from Trinidad. With regard to the operation of the legislation to which the hon. Gentleman referred, whereas trade unions were formed and registered under the Trade Unions Act, they ceased to exist, not because of any action of the Government of Trinidad or of any of the employers, but the trade unions dissolved themselves and became a political party so that the Ordinances under the Act for the registration of trade unions could be complied with.
    Sir. N. Grattan-Doyleasked the Secretary of State for the Colonies whether he has any information as to labour conditions in Trinidad; and whether, as the result of Government intervention, a settlement of the labour dispute in the oilfields there has been effected?
    Mr. Ormsby-Gore: According to the latest information in my possession the return to work is now general, and the strike situation appears to be ended. The Governor has fixed a minimum wage and established an eight-hour day for unskilled Government workers and has promised to investigate the claims and grievances of the better-paid grades. He also proposes to ask the local Legislature to resolve that a Commission under a chairman from this country should be appointed to investigate the whole position.
    Captain Arthur Evans: Can the right hon. Gentleman tell the House the number of regular troops normally stationed at Trinidad and what volunteer troops are available to assist the civil authorities to maintain law and order?
    Mr. Ormsby-Gore: There are no regular troops ever stationed in Trinidad. There is a volunteer force in case of need, but I think it is largely a case of special constables, and the police in the main bear the burden. As is usual in the West Indies, the Royal Navy can go to the aid of the civil authorities.
    Mr. George Griffiths: Can the right hon. Gentleman say what the minimum wage is?
    Mr. Ormsby-Gore: No, I have no idea.
    Mr. Lunn: Does there have to be a disturbance before the Government will act?
    Mr. Ormsby-Gore: No, Sir. The surprising thing is the sudden and unexpected outbreak of these disturbances, which spread so rapidly from a single industrial dispute in the oilfield.

  ROYAL AIR FORCE.

    CONTRACTS (FAIR WAGES CLAUSE).
    Mr. McEnteeasked the Under-Secretary of State for Air whether he is aware that the alleged violation of the Fair Wages Clause by Messrs. F. W. Rigby and Company was first reported to his Department on 13th March last; that for some time since the union concerned has been paying strike pay to those members who have ceased work; that the long delay in coming to a decision regarding the complaint is having the effect of aiding and abetting this firm in their anti-trade union policy; and whether he can give any assurance that a decision will be reached without further delay?
    The Under-Secretary of State for Air (Lieut.-Colonel Muirhead): I regret that the complicated issues involved in the investigation of the complaint have not made it possible to bring this matter to a conclusion. I can assure the hon. Member that every endeavour is being made to reach a decision as early as possible.

    ENLISTMENT.
    Mr. Dayasked the Under-Secretary of State for Air the number of men who have offered themselves for enlistment with the Royal Air Force during the three months ended to the last convenient date?
    Lieut.-Colonel Muirhead: The number in the three months ended 30th June, 1937, who completed Form 429, was 5,501.
    Mr. Day: How many of these were accepted and how many are awaiting final medical examination?
    Lieut.-Colonel Muirhead: Perhaps the hon. Gentleman will put that down.
    Mr. Gallacher: Can the Minister say how many are awaiting political examination?

    LAND PURCHASE (RIPPLE, WORCESTER -SHIRE).
    Captain Conantasked the Under-Secretary of State for Air whether negotiations for the purchase of land have recently been completed, or whether the purchase of land is contemplated, by the Air Ministry in the neighbourhood of Ripple, Worcestershire?
    Lieut.-Colonel Muirhead: The purchase of a small area of land near Ripple is in contemplation as a site for a small storage unit.

  AVIATION.

    ELMDON AIRPORT.
    Mr. Simmondsasked the Under-Secretary of State for Air whether he has decided to provide at the new Elmdon airport the radio-electric services which have been requested of him by the Corporation of Birmingham?
    Lieut.-Colonel Muirhead: No decision has yet been reached.
    Mr. Simmonds: When will a decision be reached, because the development of this airport, which was initiated at the behest of the Secretary of State, is completely held up?
    Lieut.-Colonel Muirhead: I could not give the hon. Member a date. We cannot have an unlimited number of these wireless stations, and I think I am right in saying that 14 other stations have to be considered along with Birmingham.
    Mr. Simmonds: Is it not a fact that there is not a single station of this nature in the Midlands?

    SUBSIDISED SERVICES (FOREIGN AIRCRAFT).
    Mr. Simmondsasked the Under-Secretary of State for Air on what date he gave to British Airways, Limited, permission to use German and American aircraft on air services subsidised by the Exchequer; and by what date he will require these foreign aircraft to be replaced by air liners of British manufacture.
    Lieut.-Colonel Muirhead: The dates asked for in the first part of the question are 8th December and 24th December, 1936, respectively. As regards the second part, I regret that I cannot add to the reply which I gave to my hon. Friend on the 9th of last month.
    Mr. Simmonds: In view of the very serious matter raised in this question, and the effect it is having on British engineering prestige, I beg to give notice that I shall raise it on the Adjournment at an early date.

    AIR LINERS (EXPERIMENTAL DEVELOPMENT).
    Mr. Simmondsasked the Under-Secretary of State for Air whether he will appoint a committee representative of the British operators of air liners to formulate the specifications of the principal types of air liners which will be required during the next five years; and whether he will consider assisting financially the construction of prototype aircraft to these specifications.
    Lieut.-Colonel Muirhead: It has always been, and will continue to be, the practice of the Air Ministry to consult the principal civil aircraft operating companies in regard to experimental types of civil air liners, and it is not considered that the formation of such a committee is necessary. Provision has been regularly made in Air Estimates for experimental development of civil aircraft types and appropriate provision will continue to be made in the future.
    Mr. Simmonds: Is not the reason we are using German and American aircraft on the subsidised air lines that the procedure adopted is unsatisfactory, and will not my hon. and gallant Friend reveiw his question and get the co-operation of all concerned?
    Lieut.-Colonel Muirhead: We have always this matter before us. I do not think the procedure is unsatisfactory.

    AFRCAN-AUSTRALIAN SERVICE.
    Mr. Joelasked the Under-Secretary of State for Air whether, with regard to the proposed establishment of an African-Australian air service, he can state the proposed stopping places of such a service?
    Lieut.-Colonel Muirhead: Stopping places that have been mentioned in this connection are, I understand, the Keeling Islands, Diego Garcia and Seychelles, but no reconnaissance has been made with a view to establishing the practicability of using those islands for such a purpose, nor has any Government approval been given for the project.

  TRANSPORT.

    SPEED LIMIT.
    Mr. H. G. Williamsasked the Minister of Transport whether his attention has been drawn to the inadequate indications of the fact that the speed limit is in operation on those roads to which it has been applied and which are not built-up areas; and whether he will issue instructions that the restriction sign should be exhibited at frequent intervals along such roads in order to prevent unintentional breaches of the law and consequent prosecution?
    The Minister of Transport (Mr. Burgin): I do not regard these indications as inadequate. Prominent signs 18 inches in diameter are placed on both sides of roads to indicate the beginning and end of a 30 miles per hour speed limit; and I should be reluctant to add unnecessarily to the already large number of signs on roads.
    Mr. Williams: Is my right hon. Friend aware that you can travel for a considerable distance along some roads which give no indication that they are restricted, and that a number of persons have been prosecuted after they have acted in complete ignorance?
    Mr. Burgin: I am not aware of that.
    Sir George Mitchesonasked the Secretary of State for the Home Department how many persons have been prosecuted for exceeding the speed limit on restricted roads not in built-up areas?
    The Secretary of State for the Home Department (Sir Samuel Hoare): The general statistics of offences relating to motor vehicles do not distinguish separately those occurring on particular stretches of road, and I regret, therefore, that the information asked for is not available.

    RAILWAY COACHES (CONSTRUCTION).
    Mr. E. J. Williamsasked the Minister of Transport whether, arising out of the Swanley and Battersea accidents, he will institute a thorough inquiry into the merits of wood and steel coaches?
    Mr. Burgin: Coaches of modern design embody steel to the extent of 75 to 80 per cent. of their weight. I do not think any useful purpose would be served by instituting a special inquiry. The

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    question is constantly under review, and the position was explained at some length in another place on 20th April last.

    LONDON UNDERGROUND RAILWAYS (PASSENGER ACCOMMODATION).
    Mr. Dayasked the Minister of Transport the result of his communications with the London Passenger Transport Board on the question of providing more frequent trains of greater capacity upon the routes where congestion is most acute during the peak hours; and whether any arrangements are being made to increase the travelling accommodation on the lines serving the Elephant and Castle and South London districts?
    Mr. Burgin: With regard to the first part of the question, I stated the result of my communications in the reply which I gave to the hon. Member on 23rd June. As regards the second part, I am informed by the Board that, on the Bakerloo line, work is about to commence on the lengthening of the station platforms to enable longer trains to be run; and, in the case of the Morden line, new rolling stock is now under construction which will increase the accommodation of the trains on that line.
    Mr. Day: Has the Minister received from the London Passenger Transport Board any definite date when these extensions will take place?
    Mr. Shinwell: Is the right hon. Gentleman aware that on the South London Railway, particularly the Morden line, the scenes at the rush hour are unprecedented, and that the crushing amounts to a perfect scandal? Cannot he make representations to the Transport Board to have men on the platform in order to organise the traffic?
    Mr. Burgin: I think that a far better method than having people on the platform to organise the traffic is to have longer carriages and longer trains. If the hon. Gentleman will read my answer he will see that that is the solution preferred.
    Mr. Shinwell: Is the right hon. Gentleman aware that the trains are long enough already and sometimes extend beyond the platform? Will he not go into the question of organising the traffic and make representations?
    Mr. Burgin: I understand that the Ministry of Transport Vote is put down for Friday. Perhaps the opportunity
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    will then be given for dealing with this matter in debate. It is hardly possible to deal with it by way of question and answer. There are differing views as to the best method of dealing with the traffic. I am as alive as the hon. Gentleman to the difficulty to be contended with. I think that the right method is to lengthen the platform and the trains, but we can perhaps give the reasons for that better in debate.

    OMNIBUSES, LONDON.
    Mr. Keelingasked the Minister of Transport whether he is aware that the London Traffic Commissioner and the Commissioner of Police have expressed the view that omnibus stations should be established on the periphery of the central area, so that omnibuses now running right across London may be turned round at those points and a reduction made in the number of omnibuses, at present only partially filled, inside that area; and what action is proposed?
    Mr. Burgin: The routeing of vehicles other than contract carriages operated by the London Passenger Transport Board, in the Metropolitan area is a matter for the Traffic Commissioner who acts in consultation with the Commissioners of Police. I have no jurisdiction in the matter save where an appeal is made to me against the Commissioner's decision in any particular case.
    Mr. Louis Smith: Will the right hon. Gentleman consider using his observers to find out how many omnibuses are running half empty, and whether so many omnibuses are needed in the streets at the present time?
    Mr. Burgin: I think I have information on both those points, but I will bear the matter in mind.

    MAIN ROAD (CASUALTIES, NOTICES).
    Sir Gifford Foxasked the Minister of Transport whether he will consider extending the practice of putting up notices showing the number of people killed and injured on the main roads of the country, as is now done on Eastern Avenue to Southend; and whether the effect of these notices has been to reduce the number of accidents?
    Mr. Burgin: So far the information available does not permit of definite conclusions as to the general usefulness of notices of this nature, but I am watching

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    this and other similar experiments with interest.

    ROAD SCHEME (HIGHLANDS).
    Mr. Malcolm MacMillanasked the Minister of Transport what progress has been made in each of the Highland counties with the five-year plan for Highland roads; what amount of money has been paid in 100 per cent. grants under the scheme up to the present; what amount has been allocated to the Isle of Lewis so far and what amount to the rest of the Outer Hebrides; and whether progress under the scheme has been satisfactory?
    Mr. Burgin: Up to the present II contracts have been let for works to be carried out in the area referred to under the direct control of the Ministry of Transport, representing an estimated total cost of £743,000. In addition five schemes have recently been put in hand by the county council at an estimated cost of £280,000. The amount paid out to date is £326,000. The allocation is to the crofter counties as a whole and each proposal is considered and dealt with as it arises. The contracts already let include over £140,000 in respect of road A.859 in Lewis and Harris.
    Mr. MacMillan: Is the Minister satisfied that the scheme, which was described as a five-year plan to spend £4,250,000, is progressing satisfactorily?
    Mr. Burgin: I am quite content with the progress of the scheme.

    ELECTRICITY SUPPLY (SCOTLAND).
    Mr. Malcolm MacMillanasked the Minister of Transport whether he has any policy and programme for the extension of the grid system to the North of Scotland; and whether he can say when this work will be undertaken and when the supply will be available for industrial purposes.
    Mr. Burgin: It falls to the Electricity Commissioners to prepare any scheme for extending the Grid system to North Scotland; and the question of adopting and carrying into effect the scheme is one for the Central Electricity Board. I understand that the Commissioners, after consultation with the Board from time to time, have been satisfied hitherto that
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    no advantage would result from the preparation of a Grid scheme for this area, but they keep the position under constant review.
    Mr. MacMillan: Is the right hon. Gentleman aware that one-fifth of the whole area of Great Britain is awaiting development along these lines, and have the Government no policy to deal with it?
    Mr. Burgin: That has nothing in the wide world to do with the question.
    Mr. MacMillan: I think it has a lot to do with it.

    INTERNATIONAL CO-OPERATION.
    Mr. Priceasked the President of the Board of Trade whether he is aware that the President of the United States has declared his readiness to assist a general economic settlement with European countries; whether, therefore, he is now able to state that, as a first step in this direction, the commercial treaty now being negotiated between the United States and Great Britain will shortly be concluded.
    Mr. R. S. Hudson (Secretary Overseas Trade Department): I presume the hon. Member refers to the joint statement recently issued by the President of the United States and the Belgian Prime Minister, of the terms of which I am aware. As regards the second part of the question, I would refer the hon. Member to the answer given yesterday by my right hon. Friend to the hon. Member for Bassetlaw (Mr. Bellenger).
    Mr. Price: Can the hon. Member say what reason is hindering the conclusion of an Anglo-American agreement?
    Mr. Hudson: None as far as I know. My right hon. Friend said that explorations are taking place at the present time to find whether there is a basis for such an agreement.
    Mr. A. Hendersonasked the Prime Minister whether he has any statement to make following his interview with the Belgian Prime Minister in relation to the work of rebuilding international trade, cooperation in monetary matters, and the reduction of armaments?
    The Prime Minister: At my interview with the Belgian Prime Minister, at which the Foreign Secretary was also present,

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    M. Van. Zeeland reported the results of his conversations with the President and others in the United States of America. It was agreed between us that M. Van Zeeland should proceed with his inquiries with a view to ascertaining in the first instance how far it was possible to obtain agreement on certain general principles of economic policy among a number of States, including the signatories of and adherents to the Tripartite Currency Agreement.
    Mr. Henderson: In view of the fact that President Roosevelt and M. Van Zeeland issued a joint statement expressing the respective points of view of their particular Governments, would it not be desirable for His Majesty's Government, in conjunction with the Belgian Government, to do the same thing?
    The Prime Minister: A communiqué has been issued as to the results of the interview, and I do not think anything further is necessary.
    Mr. Shinwell: May I ask the right hon. Gentleman—[Interruption.]
    Mr. Kirkwood: What is the matter, Mr. Speaker? Can you not keep them in order?
    Mr. Shinwell: May I ask the right hon. Gentleman whether in this very important matter M. Van Zeeland is regarded as the only intermediary between the United States Government and ourselves, and the only vehicle of United Kingdom expression?
    The Prime Minister: No, Sir. M. Van Zeeland was invited by the French Government and His Majesty's Government jointly to undertake a mission of preliminary exploration and examination, and it is in that capacity that he has been conducting these investigations.

    INDUSTRIAL POPULATION DISTRI BUTION (ROYAL COMMISSION).
    Mr. Lawsonasked the Prime Minister whether he is now in a position to state the terms of reference and the personnel of the Royal Commission to inquire into the question of the geographical distribution of the industrial population?
    Mr. W. Joseph Stewartasked the Prime Minister whether he can now make any announcement as to the Royal Com-
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    mission which is to be set up to inquire into the question of the geographical distribution of the industrial population?
    The Prime Minister: Yes, Sir. The King has been pleased to approve the setting up of a Royal Commission to inquire into the question of the geographical distribution of the industrial population. The Terms of Reference are:
    "To inquire into the causes which have influenced the present geographical distribution of the industrial population of Great Britain and the probable direction of any change in that distribution in the future; to consider what social, economic or strategical disadvantages arise from the concentration of industries or of the industrial population in large towns or in particular areas of the country; and to report what remedial measures if any should be taken in the national interest."
    The members of the Commission are:

    The Rt. Hon. Sir Montague Barlow, Bt., K.B.E., LL.D. (Chairman).

    Professor Leslie Patrick Abercrombie, F.R.I.B.A.

    Ernest Bevin, Esq.

    Francis D'Arcy Cooper, Esq.

    Mrs. Hermione Hichens, A.R.R.C.

    Mrs. Margaret Neville Hill.

    Professor John Harry Jones.

    Sir Francis Joseph, K.B.E., J.P., D.L.

    Parker Morris, Esq.

    Sir Arthur Robinson, G.C.B., C.B.E. Sydney Arthur Smith, Esq., F.S.I., F.A.I.

    George W. Thomson, Esq.

    Sir William Whyte, O.B.E.

    Mr. Lawson: In view of the very wide terms of reference, may I ask whether the primary duty of the Commission is to inquire into the location of industry?
    The Prime Minister: Yes, Sir, I think that is directly covered by the terms of reference.
    Mr. Gallacher: Would it not be desirable to put on the Commission one or two representatives of those who have been moved from derelict areas into the areas where there is employment? They will be able to give some valuable information.
    The Prime Minister: There is no reason why they should not appear and give evidence.
    Mr. Shinwell: Will the right hon. Gentleman circulate in the OFFICIAL REPORT some of the qualifications of these gentle-

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    men who have been appointed on the Commission?
    The Prime Minister: I shall be very happy to do that.
    Mr. James Griffiths: Is the right hon. Gentleman satisfied that these persons, any or all of them, have a deep, intimate knowledge of the depressed areas? In view of the importance of this matter to the depressed areas, and the necessity for confidence being felt in the Commission has he given consideration to whether any of the members have any vital intimate knowledge of the depressed areas?
    Mr. Magnay: Is is not a fact that Mr. Bevin was defeated at Gateshead in 1931?
    Mr. Gallacher: Is the right hon. Gentleman not aware that men such as I suggest would not only be able to give evidence but would understand better than some of the others the particular questions to ask in order to get evidence, and that, therefore, they ought to be on the Commission?
    Mr. J. Griffiths: May I ask for a reply to my question?
    The Prime Minister: I have forgotten what the hon. Member's question was.
    Mr. Griffiths: I asked the right hon. Gentleman whether he is satisfied that any of the members have a deep, intimate, personal knowledge and experience of the problems of the depressed areas; and as this Commission was announced as part of the programme to deal with the depressed areas, is not the absence of any such members a serious omission?
    The Prime Minister: I cannot accept that view of the objects of the Commission as announced by the Government. This is a much wider question than that of the depressed areas, although it no doubt has a bearing on the depressed areas. It is taking altogether too small a view of the importance of this matter to associate it merely with the depressed areas.
    Mr. Gallacher: Why are you afraid to put some workers on it?
    Following are the particulars promised by the Prime Minister:
    The Rt. Hon. Sir Montague Barlow, Bt., K.B.E., LL.D., F.S.A. (Chairman).
    Minister of Labour, 1922–24; M.P. (Salford), 1910–23; Chairman or Director of several public companies.
    Professor Leslie Patrick Abercrombie, F.R.I.B.A.
    Professor of Town Planning, University College, London; Professor of Civic Design, University of Liverpool, 1915–35.
    Ernest Bevin, Esq.
    General Secretary of the Transport Workers' Union; Chairman of the Trades Union Congress General Council.
    Francis D'Arcy Cooper, Esq.
    Chairman of Unilever, Ltd.; Mac-Fisheries, Ltd.; Moor Park, Ltd.; T. Wall & Sons. Ltd.; and a Director of other companies.
    Mrs. Lionel Hichens, A.R.R.C.Member of Oxfordshire County Council and of the Oxfordshire Education Committee.
    Mrs. A. V. Hill.
    A member of the Hornsey Borough Council; Chairman of the Hornsey Housing Trust, the Highgate Child Welfare Society and the Hornsey Home Helps Association, and member of other committees.
    Professor John Harry Jones.
    Professor of Economics, University of Leeds since 1919; has been a member of Trade Boards and of several Government Committees; author of works on economics.
    Sir Francis Joseph, K.B.E., J.P., D.L.
    A Director of A. & S. Henry & Co.; Birmingham Railway Carriage and Wagon Co., Ltd.; L.M.S. Railway; Midland Bank; and of other companies. Formerly a member of the Liverpool City Council; President of the Federation of British Industries, 1935, and of the North Staffordshire Chamber of Commerce.
    Parker Morris, Esq., LL.B.
    Town Clerk of Westminster; Secretary of the Metropolitan Boroughs Joint Standing Committee.
    Sir Arthur Robinson, G.C.B., C.B.E. Secretary of the Ministry of Health,1920–35; Chairman of the Supply Board since 1935.
    Sydney Arthur Smith, Esq., F.S.I., F.A.I.
    A member of the firm of Messrs. Wetherall, Green & Smith (Surveyors and Estate Agents); a Vice-President of the Auctioneers and Estate Agents Institute.
    George W. Thomson, Esq.
    An official of the Association of Engineering and Shipbuilding Draughtsmen; a member of the T.U.C. General Council.
    Sir William Whyte, O.B.E., F.R.S.E., J.P.
    Formerly Clerk and Treasurer of the Middle Ward of Lanark; hon. Chairman, Town Planning Institute, Scottish branch; has been a member of many Government Committees; author of works on local government.

    INDO-BRITISH TRADE.
    Mr. Shinwellasked the President of the Board of Trade whether he can report progress as regards the negotiation of a new Indo-British trade treaty in place of the treaty arrived at as the result of the Ottawa Conference?
    Mr. R. S. Hudson: I regret that I am not in a position at present to make a statement on the subject of these negotiations.
    Mr. Shinwell: Is the Minister aware that there is considerable anxiety as to the working of the existing treaty, and is it not possible to expedite the making of a new arrangement?
    Mr. Hudson: Negotiations are continuing, and already several meetings have been held. It would obviously be premature to make a statement until much nearer the conclusion.
    Mr. Burke: Will the Minister keep in mind the position of the cotton trade?
    Mr. Hudson: Yes, Sir, and all other trades as well.

    STOCK EXCHANGES (MEMBER - SHIP).
    Mr. Leachasked the President of the Board of Trade whether, in view of the strong recommendation in favour of members of the Stock Exchange which is contained in the Board of Trade warning circular dated April, 1937, he will take steps to ensure that reputable brokers who desire to join the Stock Exchange shall not be debarred from doing so for reasons not affecting their qualifications and financial standing?
    The Parliamentary Secretary to the Board of Trade (Captain Euan Wallace): The London and other stock exchanges are voluntary associations, and their conditions of membership are domestic matters over which the Government have no control.
    Mr. Leach: Is the hon. and gallant Member aware that these private clubs —for they are not more—can bar legitimate applicants from membership, thereby very seriously interfering with their status in the financial markets, and should not something be done about it?

    DEFENCE (CALCIUM CARBIDE).
    Mr. Sextonasked the Minister for the Co-ordination of Defence whether any decision has been reached on the manufacture of calcium carbide; and whether the claims of the Special Area of South-West Durham, with its abundance of raw material and power for such manufacture, have been considered?
    The Minister for the Co-ordination of Defence (Sir Thomas Inskip): I regret that I can add nothing to the replies as to the procedure of this committee which I gave on 23rd June to the hon. Members for Stoke (Mr. E. Smith), Maryhill (Mr. Davidson) and Cardigan (Mr. 0. Evans).
    Mr. M. MacMillan: May we have an assurance that the area in which this production was originally contemplated is receiving full consideration?
    Sir T. Inskip: The committee have certain terms of reference to inquire into all schemes submitted to them for the establishment of an industry for making calcium carbide, and I have every reason to believe that they are carrying out their task to the best of their ability.
    Sir Archibald Sinclair: Can the Minister give us any idea. when they will be able to report?
    Sir T. Inskip: The committee have been informed that there are certain steps that may have to be taken after their advice is received, and I am sure they will produce their report at the earliest moment, having that fact in view.

    TRAWLER SKIPPER'S CERTIFICATE SUSPENSION.
    Mr. Thorneasked the President of the Board of Trade whether he can give the House any information as to the suspension of the certificate of the skipper of the trawler "Favorita"; what was the cause of the suspension; and any other information about the matter?
    Captain Wallace: The certificate of the skipper of the trawler "Favorita" was suspended on 2nd July, for nine months from that date, by a court of formal investigation set up under the Merchant Shipping Act, 1894, to investigate the cause of the loss of the trawler. The "Favorita" stranded in fine, clear weather at 10.30 p.m. on 6th March at Skagi Reef, Utskalar, Iceland, when returning to Grimsby from Iceland, and she subsequently became a total loss. The court found that the casualty was caused by the wrongful act or default of the skipper.

    PLUMS (PROCESSING INDUSTRIES).
    Mr. De la Bèreasked the Minister of Agriculture whether the Government would be prepared to consider preparing some scheme for the control of prices of plums sold to canners and jam manufacturers?
    The Minister of Pensions (Mr. Ramsbotham): I have been asked to reply. It is for producers themselves to consider, in the first instance, what, if any, steps should be taken to deal wtih the prices at which their fruit is disposed of to the processing industries. If responsible organisations of producers have any suggestions to make with this end in view, my right hon. Friend will be glad to look into them.
    Mr. De la Bare: Is the Minister aware that plums are selling at a halfpenny per
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    pound in Evesham and Pershore, and can nothing be done to increase the demand for this valuable fruit among the public at such a low price?
    Mr. Ramsbotham: If that suggestion is made to my right hon. Friend he will be very glad to consider it.
    Mr. De la Bère: Would he consider the suggestion that the British Broadcasting Corporation should publish the fact that a very large supply of the fruit is available for the public?
    Viscountess Astor: Do the Government think that it is a very good scheme that a committee of producers should always decide at what price they will sell their commodity, and is that conducive to getting the cheapest food for the people?
    Mr. Ramsbotham: That is obviously a matter for the producer to consider first.

    THIRD WITHAM INTERNAL DRAIN AGE BOARD (RATING DEMAND).
    Mr. H. Haslamasked the Minister of Agriculture whether he is aware that Mr. Sidney Moore, of Wood Enderby, Horncastle, Lincolnshire, an agricultural worker, received a demand note issued by the Third Witham Internal Board for the sum of 16s. 1d., made up as follows: 7s. 4d. for arrears of rates, fines 1s. 5d., and the current rate 7s. 4d.; whether he is aware that Mr. Moore had received no notice and no demand in regard to the amount stated to be in arrear; and whether he will have inquiry made into the circumstances in which this fine was levied?
    Mr. Ramsbotham: My right hon. Friend has no information with regard to the matters referred to in the first part of the question. He will, however, make inquiries of the drainage board and will communicate with my hon. Friend in due course.
    Mr. Haslam: May I ask the hon. Gentleman whether his right hon. Friend is aware that very considerable feeling exists in certain parts of the Horncastle area because of the heavy burden of rates levied by the Third Witham Internal Drainage Board and that the efforts of the Ministry, continued for some time, have failed to allay that feeling?
    Mr. Ramsbotham: I will place the matter before my right hon. Friend.

    UNEMPLOYMENT ASSISTANCE, SCOTLAND (RENT REBATES).
    Mr. Leonardasked the Secretary of State for Scotland how many local authorities in Scotland have had conversations with the divisional officers of the Unemployment Assistance Board regarding the policy to be pursued in the application of rent rebates?
    The Parliamentary Secretary to the Ministry of Labour (Mr. Butler): I have been asked to reply. I regret that the information asked for is not available. My hon. Friend the Parliamentary Under-Secretary of State for Scotland is, however, writing to the hon. Member in answer to the question he asked on this subject during the recent Debate on the Estimates of the Department of Health.

    BRITISH ARMY (LAND PURCHASE).
    Captain Conantasked the Secretary of State for War whether negotiations for the purchase of land have recently been completed, or whether the purchase of land is contemplated, by the War Office in the neighbourhood of Ripple, Worcestershire?
    The Financial Secretary to the War Office (Sir Victor Warrender): The answer to both parts of the question is, No, Sir.

    WEEK-END TOURIST TRAFFIC (PASSPORTS).
    Mr. Loftusasked the Home Secretary whether he will authorise the granting of facilities for week-end tourist traffic without passports from Great Yarmouth to Ostend?
    Sir S. Hoare: I presume my hon. Friend is referring to an application by the New Medway Steamship Company, which is a subsidiary of the General Steam Navigation Company, for an exemption from the provisions of the Aliens Order in respect of an excursion service from Yarmouth to Ostend. This company has been granted facilities for carrying day excursionists of certain nationalities without passports; but it is impossible, consistently with a proper control of alien traffic, to grant the same facilities for week-end excursions as for day excursions. Although the Home Office is always anxious to encourage and
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    grant reasonable facilities for excursion traffic, it is necessary for the proper enforcement of the Aliens Order to confine the grant of "no passport" facilities in respect of week-end traffic to those ports where the passenger traffic is sufficient to justify keeping a staff of immigration officers available for supervising the traffic. As Yarmouth is not such a port, I regret it is not possible to comply with the company's application in respect of week-end excursions from that port.
    Mr. Gallacher: Is no consideration being given to the question of abolishing passports altogether?

    PUBLIC MEETINGS AND DEMON STRATIONS (PROSECUTIONS).
    Mr. Sorensenasked the Home Secretary whether he will give particulars respecting the 320 prosecutions for offences in connection with public meetings or demonstrations during the past 12 months, both as to their nature and the penalties inflicted?
    Sir S. Hoare: The bulk of these cases resulted in charges of insulting words and behaviour, obstructing the police and assault. In 27 cases, sentences of imprisonment were imposed; in 149, there were fines of varying amount; 32 were dismissed with or without an order for payments of costs; four are still outstanding; and in the remainder the defendants were bound over, or dealt with under the Probation of Offenders Act.

    EXPLOSION, ECCLESFIELD.
    Mr. Thorneasked the Home Secretary whether he can give the House any information in connection with an explosion at the works of the Thorncliff Coal Distillation Company, on Sunday last, at Ecclesfield, near Sheffield, where one man was killed and two injured; what was the cause of the explosion; and will he give any other information about the matter?
    Sir S. Hoare: I have received a preliminary report on this accident which caused the death of one man and injuries, not I understand serious, to two others. The explosion occurred in the exhauster attached to a coke-oven plant, but it has not yet been possible, because of the fire which followed, to dismantle the

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    plant, and until that is done no definite opinion can be formed as to the cause of the explosion.

    LIFT ACCIDENT, LONDON.
    Mr. Thorneasked the Home Secretary whether he can give the House any information in connection with a lift accident at the Victoria Restaurant, Victoria Street, S.W., at which a kitchen man was killed; and whether he can say what was the cause of the accident, and can give any other information about the matter?
    Sir S. Hoare: I have received a report from which it appears that the deceased man was entering the lift by clambering through a goods shutter at the back of the lift when the lift was set in motion from another floor and he was crushed, the injuries being fatal. The lift was not provided with interlocking mechanism and alternative safety devices which had been provided were apparently out of action. The premises are outside the scope of the Factory Acts.

    IMPERIAL AIRWAYS, LIMITED (SHARE ISSUE).
    Mr. Garro Jonesasked the Chancellor of the Exchequer whether His Majesty's Government advised Imperial Airways, Limited, to make its recent issue of shares at 30s. on the ground that an issue on bonus terms was undesirable; whether he is aware that this precaution was ineffective, and that the whole of this concern could have been bought outright at a price less than the aggregate amount which has been paid in subsidies; and why it is necessary to continue to pay such heavy subsidies to this company instead of acquiring it outright as a State concern at less annual cost?
    The Financial Secretary to the Treasury (Lieut.-Colonel Colville): My right hon. Friend explained the Government's position in relation to the recent issue in the answer which he gave on 1st July to the hon. Member for the Tamworth Division (Sir J. Mellor). The hon. Member for Aberdeen, North (Mr. Garro Jones) appears to think that, if the State itself were operating these services, they could do so without any charge on public funds, and that the payment of subsidy to the
    352
    company is, therefore, waste of money. That, of course, is a complete misapprehension; the subsidy would continue to be payable, though in a different form. The hon. Member will find the financial basis of the new agreement with the company explained in Command Paper No. 5414.
    Mr. Garro Jones: May I inform the Financial Secretary that I am not under any misapprehension on that point; and would he answer the more specific point of my question, as to whether the Chancellor of the Exchequer sought to prevent the issue of shares at more than 30s. because it meant that the shareholders would receive a bonus? If tha be so, is the Financial Secretary aware that that precaution failed?
    Lieut.-Colonel Colville: Perhaps the hon. Gentleman will await the next question.
    Mr. Garro Jonesasked the Chancellor of the Exchequer whether he is aware that, in the recent issue of shares by Imperial Airways, Limited, the attempt of the Government to rule out a capital bonus to existing shareholders was frustrated, in that the Stock Exchange Committee held that the shareholders' rights were negotiable and in that they were, in fact, negotiated at 8s. per share; that some shareholders, in addition to their 8 per cent. dividend and their realisation of 8s. per share on renunciation of rights, have enjoyed capital appreciation in the last few years up to 200 per cent. or more; and whether he is satisfied to allow these profits to continue to be made out of State subsidies?
    Lieut.-Colonel Colville: No, Sir. The Government desired the issue to be made at the highest practicable price, but it was for the Board, in the exercise of their responsibilities, to decide what was the highest price at which they could properly invite the public to subscribe. The valuation of a share of this kind is largely a matter of opinion, and the fact that the shares command a premium over the issue price merely shows that the market is willing to take an optimistic view of the future of the company. In the financial negotiations with the company leading up to the new agreement, the Government's object has been

    353
    to keep down the subsidy to the lowest figure at which the company could be reasonably expected to undertake the heavy and speculative obligations imposed on them by the agreement. In this my right hon. Friend believes they have been successful; and, while he takes no responsibility for the market's valuation of the shares in recent months, he sees nothing inconsistent with this policy in the fact that the company were able last year, while they were still operating under the old agreement, to declare a dividend at the rate of 8 per cent. per annum for the first time. I must remind the hon. Member that the average dividend paid by the company since its formation has only been 4⅛ per cent., and that provision is made in the new agreement for apportioning the expectations of profit equitably between the company and the Government, partly through the latter's holding of the deferred shares with participating rights after a dividend at the rate of 10 per cent. per annum has been earned on the ordinary shares, and partly by the provision under which savings effected in prime cost are to be shared between the two parties.
    Mr. Garro Jones: Is the Financial Secretary aware that what he calls the inflated price has been brought about, not only by market sentiment but by the rapidly rising rates of dividend declared by the company on the basis of the Government subsidy; and does he intend to impose any limit on the rise in rates of dividend?
    Lieut.-Colonel Colville: I cannot add to the very full answer which I have given.
    Sir John Mellorasked the Chancellor of the Exchequer the number of new ordinary shares of Imperial Airways, Limited, applied for by His Majesty's Government and the number allotted?
    Lieut.-Colonel Colville: It is not the policy of His Majesty's Government to extend their interest in Imperial Airways beyond their present holding of deferred shares. No application was, therefore, made by them for new ordinary shares under the terms of the recent issue. I may remind my hon. Friend that the authority of Parliament would have been required for subscription for new shares in cash.
    Mr. Thurtle: Did the Government sell their right to these new shares when they sold the rights that they had?
    Mr. Thorne: If the company's profits are over £2,000 a year will they be taxed in accordance with the Chancellor's statement?
    Lieut.-Colonel Colville: They will, of course.
    Sir Percy Harris: Do not the Government consider that they are sacrificing the interests of the taxpayer in not taking advantage of this premium, as they are entitled to do?
    Lieut.-Colonel Colville: It is not the duty of the Government to look for investments, but to further a policy of Imperial air communications, and that is the basis of my answer.
    Mr. Attlee: Are we to understand that the Government are willing that any private individual should make profits, but that they will never make a profit themselves?
    Lieut.-Colonel Colville: No doubt the right hon. Gentleman's view is that this service would be more economically and properly run under the State. We do not agree.

    EXCHEQUER AND AUDIT DEPART MENTS ACT, 1866 (REQUISI TIONS FOR CREDITS).
    Mr. H. G. Williamsasked the Chancellor of the Exchequer whether he will publish the Treasury Minute issued under the authority of Section 34 of the Finance Act, 1936; and the names of the prescribed officers who are authorised in the absence of Lords Commissioners to sign applications to the Comptroller-General?
    Lieut.-Colonel Colville: I am circulating in the OFFICIAL REPORT a copy of the Treasury Minute dated 17th August, 1936, appointing the Second Secretary and the Under-Secretaries to the Treasury, all for the time being, for the purposes of Section 34 of the Finance Act, 1936.
    Mr. Williams: Has there been any case in which these powers have been used?
    Lieut.-Colonel Colville: I think not.

    355
    Following is the Minute:
    TREASURY MINUTE dated 17th August, 1936.
    Whereas by Section 34 of the Finance Act, 1936, it is enacted that any requisition for a credit under Section 13 or Section 15 of the Exchequer and Audit Departments Act, 1866, may:

    (a) if not more than one of the Commissioners of the Treasury is available, be signed by one of the said Commissioners and either by one of the Secretaries of the Treasury or by one of such officers as the Treasury may from time to time appoint to that duty; and

    (b) if none of the said Commissioners is available, be signed either by two of the said Secretaries or by one of the said Secretaries and one of the said officers.

    Now therefore We, being Two of the Lords Commissioners of His Majesty's Treasury, under the power conferred on Us by the said Section 34 of the Finance Act, 1936, and every other power enabling Us in that behalf hereby direct that the Second Secretary and the Under Secretaries of the Treasury, all for the time being, shall be the officers appointed to sign requisitions in the circumstances mentioned in the said Section.
    (Sgd.) JAMES BLINDELL.
    (Sgd.) J. HENRY MORRIS-JONES.
    This 17th day of August, 1936.
    Treasury Chambers, Whitehall, S.W. 1.

BUSINESS OF THE HOUSE.
Mr. Attlee: May I ask the Prime Minister whether he has any alteration to announce with regard to the business for the remainder of this week.
The Prime Minister: Yes, Sir. It would seem that there is a reasonable chance of concluding the Committee stage of the Agriculture Bill at to-morrow's sitting, and that it will be unnecessary to give Friday for consideration of this Bill. Therefore, on Friday we shall take Supply, when the Ministry of Transport Vote will be considered.
Mr. Attlee: I suppose it is not intended to ask the House to sit to a very late hour to-morrow?
The Prime Minister: We have reason to hope that it will not be necessary to sit late.
Mr. Crossley: Is it intended to take the Stretford Gas Extension Order to-morrow?
The Prime Minister indicated assent.

BUSINESS OF THE HOUSE.

  SHOPS (SUNDAY TRADING RESTRICTION) ACT (1936) AMENDMENT (No. 2).
  Mr. Loftus: I beg to move,
  "That leave be given to bring in a Bill to amend the Shops (Sunday Trading Restriction) Act, 1936, and for purposes connected therewith."
  In seeking to introduce a Bill to amend an Act which has recently come into force, I can assure the House that only the most urgent and compelling reasons force me to do so. I now realise that, when I introduced the Sunday Trading Restriction Act last Session, it was too large and too complicated a Measure for handling by a private Member. I further realise that, as it went through Committee, I was not really a free agent and that there were compelling forces at work shaping the Bill, occasionally in directions which I did not approve. It is true that the Home Office took up an attitude of benevolent neutrality, but I suggest that that neutrality was no stricter than the neutrality observed by the Governments of Russia and Italy in the civil war in Spain.
  The difficulty of the actual operation of the Act has arisen through Clause 11 (1, a, ii). That paragraph was put in on an Amendment moved by the hon. Member for Sedgefield (Mr. Leslie) with the best possible motive of getting the greatest amount of leisure possible for all employés. I felt at the time that it would make the Bill difficult in actual operation and I resisted it, and I was prepared to go to a Division against it, but, acting under imperative advice which I could not disregard, I had to accept it in view of concessions made on another Clause. The paragraph allows an employé to work only three Sundays in one month. There are five Sundays in the coming August. That means that an employé, for 40 per cent. of his time on Sundays in August, is to be off duty. In seaside holiday resorts employment is at the peak in August. There is more business and work done in that month than in any three months of the year, and Sunday is the day when people come in from the surrounding districts and require the usual catering facilities.
  The intention of the Act was in no way to interfere with the usual amenities and facilities given to our people. There is no unemployment in seaside resorts in

  357
  August. There is no spare labour. You cannot possibly get any reserve labour. The catering establishments next month will be deprived of 40 per cent. of their staff. That means that the public will riot be able to get the catering facilities that they have enjoyed for many years past. All the municipalities are up in arms against the provision. The amending Bill is very moderate. It is a one Clause Measure giving power to local authorities to exempt the operation of the provision for the month of August. That means that, if any local authority so desires, it can authorise employés to work for five Sundays during that month. I believe it should be July, August and September, but in my desire to make the Bill utterly non-contentious and to remove every possible cause of objection, I have confined it to the month of August. The other facilities, the half-holidays and whole holidays in the week, still remain. It is only during this peak period, to meet the public demand, that they are allowed to work on all the Sundays. I think that the Act that we passed last Session is on the whole a good one, redressing many grievances. We want it to be welcomed and to be operated to its full extent. Unless we take this step to remedy a genuine grievance, it will become inoperative in many places. If we do not provide this very moderate remedy, public opinion, expressed by local authorities and trade associations, will raise such a clamour that it will force the Home Office next Session to introduce far more drastic Amendments than this one, small, moderate Amendment affecting only one provision in the Act, which I recommended to the House.
  Mr. Rhys Davies: I am sorry to oppose the hon. Member after the very excellent work he did in producing an Act of
  Parliament providing one day's rest in seven for practically all employées in the distributive trades. But I think he is trying to undo his own work. A good deal of the arguments that he has used to-day were employed in the protracted proceedings in Committee. The provisions of the Act covering caterers have not yet come into operation. This is one of the very rare occasions in the history of Parliament when a Member responsible for producing an Act wants to destroy part of it before it has actually come into operation. Whatever the grievances may be against its provisions, they ought to be tried out. We ought to have an experimental period to see what is going to happen.
  Another argument against the proposal is this. If we agree to it, the hon. Member will not be able to stop there. The ice-cream manufacturers, the newsagents, the butchers and the greengrocers will all be standing in a queue in the Lobby of the House of Commons seeking similar exemptions. The whole difficulty with the hon. Member is that, when he receives a deputation from any vested interest, he thinks the whole British Empire is in revolution against him. When he has been here as long as some of us, he will not take as much notice of deputations. This Bill undoubtedly would put the clock back. It would do more than that; it would make Parliament look simply ridiculous, and I oppose the Motion.
  Question put, "That leave be given to bring in a Bill to amend the Shops (Sunday Trading Restriction) Act, 1936, and for purposes connected therewith."
  The House divided: Ayes, 123; Noes, 149.

  Division No. 261.]

  AYES.

  [4.1 p.m.

  Acland-Troyte, Lt.-Col. G. J.

  Chorlton, A. E. L.

  Elmley, Viscount

  Apsley, Lord

  Clarke, F. E. (Dartford)

  Emrys-Evans, P. V.

  Assheton, R.

  Clarry, Sir Reginald

  Fildes, Sir H.

  Balfour, G. (Hampstead)

  Cobb, Captain E. C. (Preston)

  Fleming, E. L.

  Beaumont, M. W. (Aylesbury)

  Colfox, Major W. P.

  Fox, Sir G. W. G.

  Beit, Sir A. L.

  Conant, Captain R. J. E.

  Grant-Ferris, R.

  Blair, Sir R.

  Courthope, Col. Rt. Hon. Sir G. L.

  Gridley, Sir A. B.

  Boulton, W. W.

  Crossley, A. C.

  Grigg, Sir E. W. M.

  Boyce, H. Leslle

  Crowder, J. F. E.

  Groves, T. E.

  Briscoe, Capt. R. G.

  Culverwell, C. T.

  Guinness, T. L. E. B.

  Brocklebank, Sir Edmund

  Davison, Sir W. H.

  Hannah, I. C.

  Brown, Brig.-Gen. H. C. (Newbury)

  De Chair, S. S.

  Harbord, A.

  Bull, B. B.

  De la Bère, R.

  Hartington, Marquess of

  Campbell, Sir E. T.

  Denville, Alfred

  Harvey, Sir G.

  Cary, R. A.

  Doland, G. F.

  Haslam, Henry (Horncastle)

  Castlereagh, Viscount

  Donner, P. W.

  Hepworth, J.

  Cayzer, Sir H. R.(Portsmouth, S.)

  Duggan, H. J.

  Herbert, Capt. Sir S. (Abbey)

  Cazalet, Thelma (Islington, E.)

  Eckersley, P. T.

  Higgs, W. F.

  Channon, H.

  Elliston, Capt. G. S.

  Hills, Major Rt. Hon. J. W. (Ripon)

  Holmes, J. S.

  Patrick, C. M.

  Smiles, Lieut.-Colonel Sir W. D.

  Hurd, Sir P. A.

  Peat, C. U.

  Smith, Bracewell (Dulwich)

  James, Wing-Commander A. W. H.

  Pth ri k, M.

  Somerset, T.

  Joel, D. J. B.

  Pilkington, R.

  Southby, Commander Sir A. R. J.

  Keyes, Admiral of the Fleet Sir R.

  Plugge, Capt. L. F.

  Spears, Brigadier-General E. L.

  Kimball, L.

  Porritt, R. W.

  Storey, S.

  Lambert, Rt. Hon. G.

  Radford. E. A.

  Strickland, Captain W. F.

  Latham, Sir P.

  Ramsbotham, H.

  Sueter, Rear-Admiral Sir M. F.

  Leighton, Major B. E. P.

  Rankin, Sir R.

  Sutcliffe, H.

  Lennox-Boyd, A. T. L.

  Rawson, Sir Cooper

  Tasker, Sir R. I.

  Levy, T.

  Rickards, G. W. (Skipton)

  Tate, Mavis C.

  Lipson, D. L.

  Ropner, Colonel L.

  Taylor, Vice-Adm. E. A. (Padd., S.)

  Lovat-Fraser, J. A.

  Ross Taylor, W. (Woodbridge)

  Wardlaw-Milne, Sir J. S.

  Makins, Brig.-Gen. E.

  Royds, Admiral P. M. R.

  Warrender, Sir V.

  Manningham-Buller, Sir M.

  Russell, S. H. M. (Darwen)

  Waterhouse, Captain C.

  Mayhew, Lt.-Col. J.

  Salmon, Sir I.

  Watt, G. S. H.

  Meller, Sir R. J. (Mitcham)

  Salt, E. W.

  Wells, S. R.

  Meller, Sir. J. S. P. (Tamworth)

  Samuel, M. R. A.

  Whiteley, Major J. P. (Buckingham)

  Mitchell, Sir W. Lane (Streatham)

  Sandeman, Sir N. S.

  Williams, H. G. (Croydon, S.)

  Moreing, A. C.

  Savery, Sir Servington

  Wood, Hon. C. I. C.

  Morgan, R. H.

  Selley, H. R.

  Neven-Spence, Major B. H. H.

  Shaw, Major P. S. (Wavertree)

  TELLERS FOR THE AYES.—

  Nicolson, Hon. H. G.

  Simmonds, O. E.

  Mr Loftus and Captain H. Balfour.

  NOES.

  Acland, Rt. Hon. Sir F. Dyke

  Graham, D. M. (Hamilton)

  Morris, O. T. (Cardiff, E.)

  Adams, S. V. T. (Leeds, W.)

  Green, W. H. (Deptford)

  Morrison, G. A. (Scottish Univ's.)

  Agnew, Lieut.-Comdr. P. G.

  Greenwood, Rt. Hon. A.

  Morrison, R. C. (Tottenham, N.)

  Alexander, Rt. Hon. A. V. (H'Isbr.)

  Grenfell, D. R.

  Muff, G.

  Ammon, C. G.

  Griffiths, G. A. (Hemsworth)

  Nathan, Colonel H. L.

  Astor, Viscountess (Plymouth, Sutton)

  Griffiths, J. (Llanelly)

  Noel-Baker, P. J.

  Attlee, Rt. Hon. C. R.

  Gunston, Capt. D. W.

  Paling, W.

  Bonfield, J. W.

  Hall, G. H. (Aberdare)

  Parker, J.

  Barnes, A. J.

  Hall, J. H. (Whitechapel)

  Parkinson, J. A.

  Barr, J.

  Haslam, Sir J. (Bolton)

  Pritt, D. N.

  Batey, J.

  Henderson, A. (Kingswinford)

  Rathbone, Eleanor (English Univ's.)

  Beauchamp, Sir B. C.

  Henderson, J. (Ardwick)

  Richards, R. (Wrexham)

  Beaumont, Hon. R. E. B. (Portsm'h)

  Henderson, T. (Tradeston)

  Ridley, G.

  Beechman, N. A.

  Hepburn, P. G. T. Buchan-

  Ritson, J.

  Been, Rt. Hon. W. W.

  Hills, A. (Pontefract)

  Roberts, Rt. Hon. F. O. (W. Brom.)

  Birchall, Sir J. D.

  Holdsworth, H.

  Rothschild, J. A. de

  Broad, F. A.

  Hopkin, D.

  Rowson, G.

  Bromfield, W.

  Jenkins, Sir W. (Neath)

  Russell, R. J. (Eddisbury)

  Brown, C. (Mansfield)

  John, W.

  Seely, Sir H. M.

  Brown, Col. D. C. (Hexham)

  Johnston, Rt. Hon. T.

  Sexton. T. M.

  Buchanan, G.

  Jones, A. C. (Shipley)

  Shinwell, E.

  Cartland, J. R. H.

  Jones, Sir H. Haydn (Merioneth)

  Silverman, S. S.

  Charleton, H. C.

  Jones, L. (Swansea W.)

  Simpson, F. B.

  Chat r, D.

  Jones, Morgan (Caerphilly)

  Sinclair, Rt. Hon. Sir A. (C'thn's)

  Cluse, W. S.

  Keeling, E. H.

  Smith, Ben (Rotherhithe)

  Clynes, Rt. Hon. J. R.

  Kelly, W. T.

  Smith, E. (Stoke)

  Cocks, F. S.

  Kennedy, Rt. Hon. T.

  Smith, Rt. Hon. H. B. Lees- (K'ly)

  Cove, W. G.

  Kirkwood, D.

  Smith, L. W. (Hallam)

  Crooke, J. S.

  Lathan, G.

  Smith, T. (Normanton)

  Daggar, G.

  Lawson, J. J.

  Sorensen, R. W.

  Davidson, J. J. (Maryhill)

  Leach, W.

  Stewart, W. J. (H'ght'n-Is-Sp'ng)

  Davies, R. J. (Westhoughton)

  Leckie, J. A.

  Taylor, R. J. (Morpeth)

  Davies, S. O. (Merthyr)

  Lee, F.

  Thorne, W.

  Day, H.

  Lees-Jo es, J.

  Thurtle, E.

  Denman, Hon. R. D.

  Leonard, W.

  Tinker, J. J.

  Dobbie, W.

  Lewis, O.

  Viant, S. P.

  Dower, Major A. V. G.

  Logan, D. G.

  Ward, Irene M. B. (Wallsend)

  Dunn, E. (Rother Valley)

  Lunn, W.

  Watkins, F. C.

  Ede, J. C.

  MacAndrew, Colonel Sir C. G.

  Watson, W. McL.

  Edwards, A. (Middlesbrough E.)

  Macdonald, G. (Ince)

  Welsh, J. C.

  Edwards, Sir C. (Bedwellty)

  McEntee, V. La T.

  Westwood, J.

  Ellis, Sir G.

  McGhee, H. G.

  Whiteley, W. (Blaydon)

  Emmott, C. E. G. C.

  McKie, J. H.

  Williams, E. J. (Ogmore)

  Evans, Capt. A. (Cardiff, S.)

  MacLaren, A.

  Williams, T. (Don Valley)

  Evans, E. (Univ. of Wales)

  Maclean, N.

  Windsor, W. (Hull, C.)

  Fletcher, Lt.-Comdr. R. T. H.

  MacMillan, M. (Western Isles)

  Woods, G. S. (Finsbury)

  Foot, D. M.

  Magnay, T.

  Young, Sir R. (Newton)

  Frankel, D.

  Mainwaring, W. H.

  Gallacher, W.

  Mills, Sir F. (Leyton, E.)

  TELLERS FOR THE NOES.—

  Garro Jones, G. M.

  Milner, Major J.

  Mr. Burke and Mr. Jagger.

  George, Major G. Lloyd (Pembroke)

  Montague, F.

  BILLS REPORTED.
  COULSDON AND PURLEY URBAN DISTRICT COUNCIL BILL [Lords].
  Reported, with Amendments, from the Committee on Unopposed Bills (with Report on the Bill).
  Bill, as amended, and Report to lie upon the Table; Report to be printed.
  MINISTRY OF HEALTH PROVISIONAL ORDER (CLEVEDON WATER) BILL.
  Reported, with Amendments, from the Committee on Group L of Private Bills.
  Bill, as amended, to be considered tomorrow.

ORDERS OF THE DAY.

  FINANCE BILL.
  Considered in Committee [Progress, 1st July.]
  [Captain BOURNE in the Chair.]
  NEW CLAUSE.—(Agricultural property not to be aggregated with other property.)
  Notwithstanding anything in any Act agricultural property within the meaning of paragraph (g) of Sub-section (1) of Section twenty-two of the Finance Act, 1894, shall, for purposes of Estate Duty, be an estate by itself and shall not be aggregated with any other property and the amount of Estate Duty payable in respect thereof shall be charged at the appropriate rate payble under the scale of rates set cut in the Third Schedule to the Finance Act, 1919.—[Lieut.-Colonel Acland-Troyte.]
  Brought up, and read the First time.
  4.10 p.m.
  Lieut.-Colonel Acland-Troyte: I beg to move, " That the Clause be read a Second time."
  There is no doubt that Death Duties bear very heavily on owners of agricultural land and have a detrimental effect on agriculture generally. Although the Government have done a great deal for agriculture, the industry is not in the position in which we all desire it to be, and it cannot bear the constant drain of capital from the land caused by the Death Duties. The result of the Death Duties is that an owner either has to sell a portion of the land or the whole of it, or else he has to retain it in an impoverished condition in his own hands. If he decides to sell, the tenant has to buy the land or turn out. In any case it has to be bought by a farmer. Probably he has to buy it by means of a mortgage and has to pay as much interest on that mortgage as he would have to pay to his former landlord in rent. Not only will he have to mortgage the land and pay the interest but also has to keep his own buildings in repair and pay tithe redemption annuities and other charges. He cannot raise the full amount of money required on mortgage. Therefore, a considerable proportion of the capital which ought to be used for stocking the land has to be used to pay for the remainder of the value of the land. If, on the other hand, the owner
  370
  decides to retain the land, he is in so impoverished a condition that he has not sufficient capital to make the improvements to buildings which are necessary for modern requirements, nor is he able to do the necessary repairs to the property. Masons, carpenters, woodmen and gardeners are thrown out of work, and the whole life of the village is completely dislocated.
  If the new Clause is accepted it will make some alleviation of a very difficult position, although not much. All it will mean is that the Death Duties upon agricultural land will be assessed separately and will pay the smaller rate of duty on agricultural land. This new Clause does not raise any new principle, as agricultural land already pays a lower duty than other forms of property. It will be some help, but it will not go very far. It ought really to have been in addition to and not in substitution for another new Clause which has unfortunately been ruled out of order. When this matter was last brought before the House about three years ago the present Prime Minister, who was then Chancellor of the Exchequer, gave a very sympathetic reply. I know that the present Chancellor of the Exchequer has not had time since he took office to go into the matter closely. If he cannot accept the new Clause now, I hope that before his next Budget he will have time to go into the matter carefully, and that he will then be able to bring forward himself an Amendment which will go further than this new Clause and be more on the lines of the new Clause which was ruled out of order.
  4.14 p.m
  Brigadier-General Clifton Brown: I wish to support the Motion for the Second Reading of this Clause. This matter has been considered before. The Clause would be one way, at very little cost to the Exchequer, of helping to keep agricultural estates together without the discharge of people employed, and would help to keep capital in the land, which is so necessary now. The landowner no longer has the capital with which to pay Death Duties, and if, in a moderate way, we can help him to retain some of his capital so that he can continue to employ the workmen on his estate, it will be a great advantage to the countryside. If we can put agricultural land in a more favourable condition by giving a conces-

  371
  sion of this kind, we shall be doing something in this direction.
  4.16 p.m.
  Mr. Assheton: I do not know whether all hon. Members realise how difficult it is for owners of agricultural properties to find the money with which to pay Death Duties. If a man inherits a property which is invested in funds or in industrial or other shares, all he has to do in order to find the money to meet the Death Duties is to sell part of his stocks or shares. The man who inherits an agricultural estate is in a very different position. He is asked by the Revenue, say, for a sum of £20,000. How is he to find that money? There are only two ways in which to find it, one is by borrowing it, and the other is by selling part of his land. If he is able to sell part of his land he may arrive at a solution of the problem or he may not. Very frequently when part of an estate is sold the whole organisation of the estate is broken up and interfered with and it is a very general detriment to the community.
  Take the very much more frequent case of the owner who is unable to sell his land: he has to borrow the money on mortgage. Out of his revenues the first charge will be the payments of the interest on the mortgage, and that means that the land is being deprived of money which would most likely come back into it, and which is most needed for its improvement. Nowadays owners of agricultural land are being asked to spend a great deal of money. Take, for example, the case of dairy farming. Owners of land who have a great many dairy farms are being put to enormous expense making their buildings comply with regulations for accredited milk production. It is impossible to find the money for this when Death Duties are all the time taking the money out of the land. It is, as I said, an entirely different matter for the man who has his capital in stocks and shares. All he has to do is to sell his stocks and shares, but if he is a landowner he has to take the money out of the land, and all the money taken out of the land means that the land is less productive and the local community has to suffer. I hope, at any rate, the Chancellor of the Exchequer will consider this matter very carefully, and although I daresay he will not be able to do very much for us on this
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  occasion, I think that any Government which seriously considers the state of agriculture must realise that this is a fundamental question.
  Mr. Kirkwood: Nationalise the land.
  4.20 p.m.
  Sir Francis Acland: I wish to say a few words in support of the Clause. I was very much impressed by what my hon. and gallant relative the Member for Tiverton (Lieut.-Colonel Acland-Troyte) said in support of it, and I should have been even more impressed if I had been able to hear what he said more clearly, but that was not his fault. There was a certain amount of general noise going on. The point I would like to make is a very simple one, and it is in agreement with, and backs up, what was said by the hon. Gentleman the Member for Rushcliffe (Mr. Assheton). I know from my own experience how difficult it is to sell half an estate in order to pay Death Duties and to retain the rest of it as an economic unit. One has one's staff doing repairs, and, as was suggested, carrying out the reconstruction of dairy sheds and that sort of thing; so many builders, carpenters, plumbers and so on. But after two or three Death Duties have been paid, you get rapidly down to the point when, to make the estate smaller, it is utterly uneconomic to keep the staff going. That makes a real and practical difficulty for many men whose families have been hit in this way. I agree that if the holding were nationalised there would be a great deal to be said, but at present we allow private ownership to continue.
  On the whole I have no doubt whatever that in the difficult times through which we have been going farmers on estates have been able to get on a good deal better than the men who are freeholders and are simply carrying on by means of their own resources. Wages compared with pre-war have gone from too to 182, and wholesale prices compared with pre-war have gone from 100 to 136, and rents compared with pre-war have gone down from 100 to 90, so that the burden has borne pretty hard on the owner who has done his best by his tenants. In view of the difficulties that have already fallen upon agricultural estates since the Death Duties were put up so high, and considering also that this matter was raised, as the hon. and gallant

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  Member for Tiverton said, once or twice before, it would be a very useful concession if the Chancellor of the Exchequer could see his way to accept the Clause.
  4.23 p.m.
  Sir William Davison: I should like to associate myself with the speeches from nearly every quarter of the Committee in support of the Clause.
  Mr. Kirkwood: Oh, no.
  Sir W. Davison: The hon. Gentleman and his friends are only a small minority, and they must not abrogate to themselves greater influence. They only occupy a small quarter of the House. I desire to associate myself with the arguments which have come from three-quarters of the House, and I would ask the Chancellor of the Exchequer whether the policy of the Government is not inconsistent in this matter. For the last day or so we have been introducing measures to provide subsidies for agriculture to enable it to pay its way, and previously similar measures have been introduced in aid of agriculture because it is unable to pay its way and keep that large body of employment on the land which it is essential in the national interest should be kept there. Here, as has already been pointed out, is something which cripples agriculture more than anything. When the head of an estate or of a big farm is suddenly taken away by death, his successor has to find a large sum of money in the way of Death Duties. It is not only taken on the particular farm or estate, but the amount is made larger by the fact that, if there are stocks or shares or anything else, the rate of duty is taken on the whole. This is a very moderate Clause, and I hope that the Government will give it favourable consideration. There is another point concerning the unfortunate man who owns land which I raised a few weeks ago in the House. The Inland Revenue in valuing properties for Death Duties, if not always, very often consider them ripe for building, and put a very high value upon them.
  The Deputy-Chairman: That would not be affected by this new Clause.
  Sir W. Davison: I am pointing out that the Death Duty, which would be avoided if the proposal in the proposed Clause were carried out, is put upon a very high basis by reason of that practice.
  The Deputy-Chairman: The hon. Gentleman does not seem to realise that the proposal would not affect the valuation of the land.
  Sir W. Davison: I am afraid that I do, but I only say that the grievance is accentuated by the fact that these valuations are put at a very high figure although the Revenue themselves are not prepared to take the land at that high figure. That is another reason why the Government should be inclined to accept the Clause, or to give, at any rate, some assurance with regard to the future, that in these agricultural estates the burden of Death Duties, which is heavy upon the country in every regard, but is especially heavy with regard to agricultural property, should receive very careful consideration.
  4.26 p.m.
  Mr. Kirkwood: I hope that the Chancellor of the Exchequer will pay no attention to the landlords of this country. Ever since I came to this House, for the last 15 years, every Chancellor of the Exchequer has been subjected to the same amount of weeping by the landlords of this country. Agriculture has had £30,000,000 in subsidies, and the major portion of that money has gone to the landlords. [Interruption.] There are only two people to whom it could go, either to the agricultural worker, the producer, or to the landowner. The producer has not had it; no one can deny that. The only individual who has had it is the landowner. As I said in an interjection, the only solution whereby the landlord can be saved from this business is to take the land from him. He has no heaven-born right to the land. It is only because the working classes of this country are so tolerant that they allow the landlords to own the land.
  The Deputy-Chairman: Order.
  Mr. Kirkwood: I do not wish to take advantage of the Chair, but I want the Committee to understand that we on these benches are always watching the landlords. They have the brass face upon every occasion to come to this House and plead as though they were going to the poor house. We just keep our eyes on them. That is all I want to say.
  4.29 p.m.
  Mr. Michael Beaumont: I do not wish to follow the hon. Member for Dumbarton Burghs (Mr. Kirkwood), but I

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  would merely say to him that if he and his colleagues are really keeping their eyes on the landlords, they cannot be keeping their eyes upon them very closely, if they seriously believe that £130,000,000, or whatever figure the hon. Gentleman mentioned, has gone into the pockets of the landlords. That has been successfully answered by the right hon. Member for North Cornwall (Sir F. Acland). I appreciate the point of the hon. Member for Dumbarton Burghs with regard to land ownership, though I do not agree with it, but if there were an argument to induce the Chancellor of the Exchequer or the Government, who do believe in private property, to look well upon this Amendment, it would be the one that the hon. Member has just used. These unwise and grossly ignorant attacks upon landowners must convince anybody that they are being badly treated.
  Mr. Kirkwood: We are not ignorant.
  Mr. Beaumont: I acknowledge the hon. Member's intelligence. I am not saying that he is foolish, but that he is grossly ignorant when he talks on this subject as ignorant as I should be if I started to talk about shipbuilding.
  Mr. Kirkwood: We are not under cross-examination.
  Mr. Beaumont: I want to add one further consideration to the plea made by my hon. Friends in support of the Clause. There has been a great deal of talk lately in this House and outside about the preservation of the countryside, and rural planning. We passed a few years ago a particularly fatuous and unworkable Measure, the Town and Country Planning Act, and I am informed that there is some suggestion of bringing forward another in the not too distant future. It is perfectly futile trying to preserve the countryside when you have this kind of burden on the rural landlord. If the Chancellor of the Exchequer could either now or at some future time give some relief in this matter it would be an inducement to rural landlords to schedule their land for all time for agricultural land, but as things are at present we are in a vicious circle. The local authorities cannot afford to pay the compensation for the scheduling and development of land as rural land and open spaces, while the rural landlord, knowing that when he dies his rela-
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  tives will have difficulty in regard to Estate Duty, when he gets an opportunity of selling his land for development either as residential or factory land, cannot in justice to his heirs refuse to sell.
  Until the question of Death Duties on rural land is finally dealt with and some alleviation is given I do not think that it will be possible to do anything really effective towards preserving the countryside. Whether we can preserve it at all under modern conditions I do not know, but I am certain that we cannot preserve it when these burdens are continually hanging over the heads of landowners.
  4.33 p.m.
  The Financial Secretary to the Treasury (Lieut.-Colonel Colville): It will be convenient to the Committee if I offer a few words on the Amendment at this point. The Debate seems to be widening beyond the actual Amendment. The hon. Member for Dumbarton Burghs (Mr. Kirkwood) raised the old issue of the nationalisation of the land. While I cannot go into that question I might remind him that from the revenue point of view that proposal might be dangerous, because if you nationalise the land it cannot pay taxes to the Exchequer. My hon. and gallant Friend who moved the Amendment regarded it as a proposal for giving further relief from Estate Duty for agricultural land. The Amendment is to secure that for the purpose of Estate Duty agricultural propery should not be aggregated with other property. The law in regard to aggregation is laid down in the Finance Act, 1894, Section 4. I should like to read the relevant Section of that Act, as amended by subsequent legislation:
  "For determining the rate of Estate Duty to he paid on any property passing on the death of the deceased. all property so passing, in respect of which Estate Duty is leviable shall be aggregated so as to form one estate, and the duty shall be levied at the proper graduated rate on the principal value thereof."
  The proposed new Clause—and here I am at issue with the hon. and gallant Member for Tiverton {Lieut.-Colonel Acland-Troyte)—would break new ground, in that it would make agricultural property an estate by itself, even when the deceased had an interest in it. The Clause would have a further effect, which has not been considered by the Committee. Unlike the existing relief which is given in the Finance Act, 1925, Section 23, this Clause applies not only to the agricultural value of agricultural property but to the entire

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  value of such property, including amenity value and building value. Not only does it apply to this entire value the lower rates of Estate Duty which Section 23 of the Finance Act, 1925, only applied to the agricultural value of the property, but the entire value of the property for the purposes of aggregation will be an estate by itself. This would mean that it would operate in relief of all non-agricultural property, real or personal, which passes on death, by reason of the non-aggregation of the agricultural property for the purpose of determining the rate of duty chargeable.
  I am advised—and this is a very cogent reason why my right hon. Friend cannot accept the new Clause—that it would cost nearly £2,000,000. The hon. and gallant Member for Newbury (Brigadier-General Brown) said, and I agree with him, that it is very desirable to keep as much capital as possible in agriculture, that is, in the land. The hon. and gallant Member will also agree with me that at the present time the resources of the Exchequer must be conserved in every possible way, and a proposal which would lose nearly £2,000,000 to the revenue cannot be entertained, apart from the undesirable features which I have sought to explain. I regret, therefore, that it is not possible to accept the new Clause.
  4.38 p.m.
  Mr. Garro Jones: The Financial Secretary has not been unkind in his reply to those hon. Members who have proposed the new Clause. I should not have risen to give additional reasons for the rejection of the Clause had not the hon. Member for South Kensington (Sir W. Davison) assumed that the silence which had been maintained on these benches before my hon. Friend the Member for Dumbarton Burghs (Mr. Kirkwood) spoke was due to acquiescence in the proposal. It was rather due to a feeling that the new Clause ought not to be taken too seriously. The hon. Member for South Kensington appeared to think that the small minority sitting on these benches is not entitled to have its views expressed. It is true that we only represent about 8,000,000 or 9,000,000 workers, and the more enlightened section of the electorate, but on the matter of agricultural land I think our views are entitled to as much weight as those of the landowners.
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  One point which the Minister omitted to emphasise was that in response to every argument brought forward to-day this House passed in 1925 a Measure which gave substantial relief to the holders of agricultural land in regard to Estate Duty. The Financial Secretary mentioned that fact but he skipped very lightly over it. That was the full response to the arguments addressed to us to-day. The Minister said that this Clause would include various amenity values, whereas the concession given under the Act of 1925 did not include amenity value. I think that was putting a minor interpretation upon the concession of 1925 because, for instance, a large and comfortable country house can be included in the benefits and reliefs given under the Act of 1925. That is to say, if I am the fortunate proprietor of an estate comprising 25 farms, and for the better enjoyment of my life I purchase such an estate, which includes a large mansion in the middle of it, then, in spite of the fact that no farm is attached to that mansion, I am able to count that country house as agricultural property and to secure relief upon that portion of the estate although there has not been any single act connected with agriculture carried out from that country house. Therefore, I might include £20,000, £30,000, or £40,000 which will be counted for the benefit given under the Act of 1925. An hon. Member opposite appears to scoff at that statement, but he must know as well as I do that some of these country houses are counted in at a value of £20,000, £30,000 or £40,000 for this purpose.
  Mr. Assheton: I should like to know who would give £40,000 for most of the country houses?
  Mr. Garro Jones: I was not speaking of the majority of country houses but of the extreme case. The average value of the type of house, which is most concerned in these Death Duties and for which the appeal is being made to-day, varies from £8,000 to £12,000, but a considerable number of country houses which derive this benefit are worth up to £40,000. A further argument was that if the estate is cut down by the necessity to find money for paying Estate Duty it will destroy the administrative organisation of the estate. That is a perfectly futile argument, because, like every other

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  organisation, the organisation of an agricultural estate can be modified and reduced to suit the size of the estate. That argument would apply to every conceivable form of human activity, certainly industrial activity. All that has to be done is to reduce the costs and bring them into proportion with the turnover and income from the estate. There is one further method that I would suggest to hon. Members and their friends who find themselves in difficulty, and that is that they can insure against the payment of Estate Duty. That is a method as sound as any of the others which have been given. I hope that we have had an end of landed interests, posing as agricultural interests, dominating the legislative proposals of this House. It is altogether erroneous to suggest that the landed interests are synonomous with the agricultural interests. Land ownership is no essential part of the prosperity of agriculture, and I can concur in the policy mentioned by my hon. Friend the Member for Dumbarton Burghs, that the one solution of these difficulties, which cause such anxiety to the owners of landed property, would be to bring the land under national ownership and control.
  4.43 p.m.
  Sir Edward Grigg: I hope that the reply given by the Financial Secretary, which seemed to me very reasonable and cogent as far as the present year is concerned, does not mean that the Government will not be prepared to give further and sympathetic consideration to a new Clause of this kind in the coming year. I suggest that for a special reason. Hon. Members above the Gangway seem to be convinced that this is a plea entirely for landlords. I do not regard it as such. It is a plea on behalf of the whole agricultural industry. There is one consideration that I should like to put. The Government have been spending a great deal of money in dealing with the acute crisis in agriculture caused by the fall in prices and they have had very great success in dealing with that acute crisis. That crisis is beginning to pass and prices are beginning to rise, but all the time there has been going on in agriculture a much more fundamental crisis, which is due to the fact that the old system of providing capital in agriculture has been falling more and more into disuse and abeyance.
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  The lack of capital in agriculture is due to more than one cause, but one of the main causes is the incidence of Death Duties upon agricultural property, and I suggest that the time is coming when it may be important to spend money rather upon the fundamental crisis and to deal with the fundamental crisis in agriculture, even if it means spending less in the way of subsidies to meet an acute and passing crisis. If the Government say that they cannot consider this new Clause this year and that it would mean the loss of £2,000,000 to the revenue, certainly those of us who have been bringing this matter to the notice of the Government cannot complain, and for that reason I should not agree to our pressing the new Clause to-day, but I hope that the bearing of the whole of this question upon agricultural prosperity will be considered in the coming year.
  4.45 p.m.
  Mr. Gallacher: The intellectual hon. Member opposite who spoke before the Financial Secretary had the temerity to refer to the hon. Member for Dumbarton Burghs (Mr. Kirkwood) as being ignorant and, therefore, I rise in fear and trembling to continue the Debate. The landlords for whom the hon. Member spoke are threatened with dire poverty unless the new Clause is accepted. Is that what we are supposed to presume? Time and again we hear these pleas for these most unfortunate landlords. All sorts of pleas are being made on their behalf and all sorts of suggestions are put forward as to what should be done to meet their difficult situation. How considerate, how tender hearted, are hon. Members opposite when it comes to a question of the landowners. Hon. Members opposite do not suggest or recommend anything when a workman loses his job and goes on the means test. Do you find hon. Members opposite giving any consideration to him? If landlords are faced with such a situation that they find a difficulty in paying their way, let them cut down their mode of living. Have they ever tried that? No. All the time the landlords of this country want special privileges and to be supplied continually with funds, for which they render no service at all.
  I was speaking one night at Perth, the centre of a landed district and partly agricultural, and I had some nice things to say about landlords and the land. After the meeting a gentleman who was

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  a landowner came to me and in something of the same manner as the hon. Member has referred to the hon. Member for Dumbarton Burghs told me that I did not know what I was talking about. He said that there was this and that and the other burden on the land, and as a matter of fact that his land was a liability and he would give it away at any time. I said "Hand over the deeds; I will take it." But did he? No.
  Mr. Everard: I have got some land which I would be prepared to give to the hon. Member if he would take it. There is a heavy drainage rate on it as it is under water for most of the year. I should be delighted for him to have it.
  Mr. Gallacher: I shall be prepared to make arrangements to take over the land, and I shall be very pleased to accept the services which the Government propose to give in connection with land drainage. I can assure the hon. Member that if he wants to get rid of his land I will find him a taker without any difficulty. Those who talk about the pitiful plight of the landlords seem to forget the amount of money which they are able to get for their land whenever building operations are going on. The landlord pays a tax on land which is rated at £2 or £3 per acre, but when a municipality wants the land for building it is not £2 or £3 per acre which is wanted, but £200 and £300. The subsidies which have been paid by the Government, as the hon. Member for Dumbarton Burghs has said, go either to the landlord or to the mortgagee, that is to the big banks. That is where the subsidies are going. In many cases the farmer does not get it, or if he does it is only a small bit, and certainly the agricultural labourers do not get it. This proposal to relieve landowners of the responsibility for paying their taxes has nothing whatever to do with the farmer or with the agricultural labourer. It is the same old policy which has been pursued from time immemorial by the landlords, rob wherever they get a chance and refuse wherever there is an opportunity to meet their obligations. I am glad the Treasury on this occasion is not going to submit to the wailings of the landowners, and is not going to hand over to them any more money. They have been given quite enough.
  4.51 p.m.
  Mr. Radford: I do not propose to occupy more than a few moments because the decision of the Government has been announced by the Financial Secretary. I want to say that I think hon. Members on this side are asking the Government for more than they realise when they ask that the principle of aggregation shall be done away with in regard to a particular item of agricultural property. Since Death Duties were first imposed the principle of aggregation has been recognised, and if we assent to the exclusion of the principle of aggregation in connection with agricultural property, the argument can be advanced that a private business, of which it is difficult to dispose, left by a testator, should also be free from the
  principle of aggregation. A man who leaves £20,000 in agricultural land may also leave £200,000 in gilt-edge securities. Is that £20,000 agricultural estate to escape the duty? That is the immediate result if we agree that it shall not come into the estate. It has been implied in some of the arguments used by my hon. Friend on this side that in many cases the Death Duties can be paid only by raising a mortgage on the agricultural property itself. If that is so then the new Clause which they are moving will be of no value. If the estate is all that the testator is leaving there will be no benefit from aggregation.
  Mr. M. Beaumont: Property does not necessarily go to one legatee. What often happens is that the funds aggregated are left to other relations and the residuary legatee is left the land.
  Mr. Radford: I think the Estate Duty payable in respect of the testator's estate is not a matter for the legatees but is a matter for the trustees. At any rate, I think His Majesty's Government would look at the estate as a whole to see that the Death Duties were paid. However, I have made my point. I think my hon. Friends are asking for something of a very far-reaching character when they ask that a particular part of an estate should be exempt from the principle of aggregation, which has always ruled the application of Death Duties.
  4.54 p.m.
  Captain Heilgers: I want to make only one or two remarks on the observations

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  of the hon. Member for North Aberdeen (Mr. Garro Jones). He emphasised in particular the large incomes from country houses surrounded by farms. Is that entirely true? Is it not the case that the greater part of the country is in the hands of the owner-occupier of his farm, who in many cases are very small men. I am one of them, and in the case of those who have not as much money as I have their farms, when they die, are sold to meet Death Duties.
  Mr. Garro Jones: The hon. and gallant Member has missed my point. The amount of Estate Duty payable by the owner of a small farm is negligible and would not require the farm to be sold up. I was referring to large country houses which do not play any part in the agricultural administration of the estate; nevertheless, it would receive a proportion of relief from Estate Duty given under the Act of 1925.
  Captain Heilgers: My point is that such estates are vanishing quickly and that the greater proportion of the country is in the hands of the small owner-occupier of farms. I do not agree with the hon. Member. If a man leaves, say, £4,000, probably his farm would have to be sold and broken up to meet Death Duties. There is one other point, although it does not really worry me very much because I am a bachelor.
  Mr. Ede: While there is life there is hope.
  Captain Heilgers: I thank the hon. Member for his encouragement. I live in the countryside and I see capital going from the land. One of the things which are very much hampered by this depletion of capital from the countryside is rural housing. You may see many houses going up but they are on private estates, because people cannot afford to put up houses on agricultural estates if they have to face the heavy burden of the Death Duties. I would remind hon. Members that we have to face many extra expenses in the matter of buildings. We have to put up elaborate cow-sheds to conform with the regulations to-day, and in many other ways landlords' expenses are much greater than they were before the War. I put the average outgoings of an estate to-day as something between 15s. to 17s. in the £, and that leaves extremely little
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  margin for the landlord to carry on. If he has to find these Death Duties as well it means that the estate will have to be broken up, with dire results to the countryside.
  It must be remembered that these burdens sometimes come very quickly. I have an instance in my own constituency, the Grafton Estate, a very large estate. The former Duke of Grafton died two years ago, and his grandson who succeeded him was killed in a motor accident within a year of succession. That large estate has had to face the burden of Death Duties twice within a year. In cases like this it does not mean that the landlord alone suffers but that the farmers and workers on the land suffer as well.
  Lieut.-Colonel Acland-Troyte: I cannot understand how this proposal will cost £2,000,000, considering the fact that the total amount received from land is only about £2,000,000. I think there must be something wrong in the calculation of the Financial Secretary. However, in view of the figures he has given and in the hope that the Government will give further consideration to this matter and possibly bring in some alteration next year, I beg leave to withdraw my Motion.
  Motion and Clause, by leave, withdrawn.
  NEW CLAUSE.—(.Relief from double. Taxation.)
  (1) If His Majesty in Council is pleased to declare—

  (a) that any income which is chargeable to British Income Tax is also chargeable to Income Tax payable under the law in force in any foreign state; and

  (b) that arrangements, as specified in the declaration, have been made with the government of that foreign state with a view to the granting of relief in cases where such income is chargeable both to British Income Tax and to the Income Tax payable in the foreign state,

  then, unless and until the declaration is revoked by His Majesty in Council, the arrangements specified therein shall, so far as they relate to the relief to be granted from British Income Tax, have effect as if enacted in this Act, but only if and so long as the arrangements, so far as they relate to the relief to be granted from the Income Tax payable in the foreign state, have the effect of law in the foreign state.
  (2) Any declaration made by His Majesty in Council under this section shall be laid before the Commons House of Parliament as soon as may be after it is made, and, if an address is presented to His Majesty by that House within 21 days on which that House has sat next after the declaration is laid before

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  it praying that the declaration may be revoked, His Majesty in Council may revoke the declaration, and the arrangements specified in the declaration shall thereupon cease to have effect, but without prejudice to the validity of anything previously done there-under or to the making of a new declaration.
  (3) The obligation as to secrecy imposed by any enactment with regard to Income Tax shall not prevent the disclosure to any authorised officer of the foreign state mentioned in the declaration of such facts as may be necessary to enable relief to be duly given in accordance with the arrangements specified in the declaration.—[Mr. Peat.]
  Brought up, and read the First time.
  5.0 p.m.
  Mr. Peat: I beg to move, "That the Clause be read a Second time."
  The proposed new Clause seeks to give the Government power by Order in Council to enter into arrangements with other countries for the relief of double taxation. Such arrangements have already been entered into in specific instances with regard to shipping and agencies. The object of the proposed Clause is that the Government should take powers of a more general character to enter into arrangements for the relief of double taxation where income is subject to it. The question of double taxation has been raised in the House on many occasions and has also been the subject of very careful consideration and investigation by the League of Nations, the International Chambers of Commerce and the Federation of British Industries. When discussing this matter with hon. Members and with people outside the House, I have often been asked what double taxation is. It has been prominent in their mind that taxation is always a difficult subject, and that consequently double taxation must be doubly difficult to understand; and in those circumstances they have been apt to say that the matter is too complicated and they do not want to hear any more about it. In fact, double taxation is fatally easy to understand. Double taxation is where one income is taxed twice, by two States. The other day the Chancellor of the Exchequer, dealing with National Defence Contribution, used the example of a woman who asked her fowls whether they would prefer to be roasted or boiled: double taxation is being both roasted and boiled. I understood from the Chancellor of the Exchequer that a taxpayer could probably survive being either roasted or boiled, but
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  I can assure him that roasting and boiling is completely fatal.
  The importance of double taxation has come very much to the fore in recent times. If the Committee will permit me, I will quote one or two figures dealing with taxation in 1913–14 and the present time. In the United Kingdom in 1913–14 Income Tax was at the rate of 1s. 2d. in the £, and Surtax was, on incomes over £5,000, 6d. in the £ on the excess over £3,000. In 1936–37, Income Tax in the United Kingdom was 5s. in the £, and Surtax, on the excess over £2,000, started at 1s. 1d. in the £, rising to 7s. 2d. on the excess over £30,000 and 8s. 3d. on the excess over £50,000. In the United States of America, in 1913 the individual was taxed about 1 per cent., and in 1936 he was taxed 4 per cent. In 1913, the company was taxed 1 per cent., and in 1936 15 per cent. Surtax on the individual in 1913, on incomes over $20,000 started at 1 per cent., rising to 6 per cent., and in 1936, on incomes over $4,000, started at 4 per cent., rising to 75 per cent. Those figures speak for themselves. In 1913 and 1914 there might have been some reason for treating double taxation as of no importance, but to-day we cannot dismiss it from our minds as though it does not matter.
  The new Clause which I am moving is a general Clause, but in the remarks that I make to the Committee, I shall give examples dealing with the position as between the United States of America and this country, because it is my hope that if the Government take powers in this case, they will use them in the first place as between the United States of America and this country. I will elaborate that side of my argument later. As far as I am concerned, the case is founded on two examples that I will give to the Committee. The first is that of a company, or an individual, who in times past, or even at the present time, has invested money in America. This example is of a company which invested money 50 years ago in a subsidiary company in America in order to sell its products there and to build up our export trade. That company, on every £100 profit that it makes on its American interests, pays £23 10s. in United States Federal Income Tax, and £19 in Income Tax levied by the United Kingdom on the balance which is transmitted to this country. Consequently,

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  out of £100 profit, double taxation takes £42 10., and the miserable investor gets what remains, £57 10s. I submit that that can only be described as penal.
  The other example I will give is one of the investment of brains and long years of hard work. A partnership firm in this country has for upwards of 20 years been developing a specialised patented process which has constantly been improved. Licences for the use of the patents have been granted in America to important manufacturing concerns on a royalty basis. The firm has offices in America, where it maintains a staff which is largely occupied as consultants in supervising the application of the process. Development of the American interests has been proceeding gradually, and has now come to fruition. As the partners in the English firm have a place of business in America, they are liable to be taxed as American residents on the full amount of the profits both from royalties and professional work, supervision and so on. They are thus liable both to the American normal tax and the American Surtax, which is a graduated tax varying with the amount of income. On the balance of profits remaining after payment of the American tax, they are liable to the British tax at the present 'standard rate of 5s., and British Surtax. In this particular case the aggregate taxation may, if the anticipated income is received, amount to approximately 70 per cent. The income in the immediate future is likely to be substantial, but it represents the reward of 20 years work and considerable expenditure in America which is only now becoming productive.
  The result of this double taxation is that one of our best methods of getting export trade, of getting men in this country employed on the products which are sent abroad, and of very usefully investing our capital, is being strangled. It is impossible that people should be taxed to the tune of 70 per cent., or even 43 per cent., on the profits they make. This world is becoming divided and cramped by great barriers to trade, tariffs and so on; but this is a barrier which has grown very high already without the attention of the House or the country being called clearly enough to it. I believe this is one of the most sinister barriers and one which strikes at what is probably the best
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  method we have of improving our export trade. It reacts very strongly on employment, and will certainly become most important when the domestic demand in this country falls off and we find ourselves once more calling for export markets. The United States of America have already realised the danger. American nationals who come over here are allowed relief from double taxation, and the result is that we find American concerns in this country prospering, selling their goods and going ahead in a very successful way. There is thus introduced a complete injustice as between the American business man and our own business men, who are not treated the same.
  I shall be told probably that the Chancellor of the Exchequer cannot afford to give any relief from the point of view of double taxation, that the same is true in other countries, and that it is against the interest of any country that there should be relief from double taxation. In February last, I asked in the House for figures which would indicate what would be the cost if relief were given, but no figures were forthcoming. If I am to be given the same answer again, I hope it will be sustantiated by figures. In this connection, I would very much like to know what it cost this country and the Dominions when relief from double taxation within the Empire was given. That was a first-class action from the point of view of our trade generally and it has made the Empire a united trading concern. That relief from double taxation is by no means complete, as it is only to the extent of about 50 per cent., but what did it cost? Was it a very important item, and if so, what was set off against the cost? Was it the fact that Empire trade could be increased and that we could get our investments and products circulating more freely?
  We are always being told that things will cost too much if they are not vitally important and of political significance. I shall be told that a little think such as this will cost too much. Cannot we for a short time get away from the dead hand of arithmetic, and look ahead and take a long view? I do not at this moment ask the Government to make this sacrifice of taxation, but simply to make a gesture to show plainly to the House and the country that they are prepared at some time or another to relieve this tremendous burden. In considering the matter, I.

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  hope the Government will not be bowed down by the consideration of actual cost without any relation to the effects which would come from giving the relief. I believe that at the present time our trading position depends almost entirely upon our making arrangements for the future, and I think those arrangements for world peace and world trade almost entirely depend upon close co-operation between the British Empire and the United States of America.
  I think that the present trend towards trade agreements and economic relationships between the Empire and the United States of America must have as an essential feature relief from double taxation. The figures which I have given to the Committee make talk of trading agreements, and the like, ridiculous. I want to see world peace, and I believe that a recovery in world trade is essential to world peace; and as I believe that recovery depends upon the situation as it may be made to exist between the Empire and the United States of America, I make a strong plea that relief from double taxation shall at least be given a chance of being put into operation by the acceptance of this proposed new Clause. In support of my arguments, I will quote from the "Times" of 29th June some remarks made by the Prime Minister of Belgium, who said:
  "Either we seize the opportunity boldly, rise to the occasion, liberate international trade from the barriers which strangle it and go forward to a new period of prosperity, or we miss the opportunity and soon find ourselves faced with difficulties similar to those of bitter memory, which were for us the heritage of the last depression."
  Some hon. Members may think that I am overstating the case to-day when I say that relief from double taxation is one of the fundamental things in the freeing of international trade. From my own point of view I believe it most sincerely. In support of that I would quote Mr. Cecil Smith, President of the British Empire Chambers of Commerce, who wrote:
  "In the meantime it has been officially decided that the British Government will participate in the forthcoming World's Fair in New York, and there is continuous talk about a reciprocal tariff treaty. I am still firmly of the opinion that both these steps for improving trade relations between America and the United Kingdom are wasted efforts—if indeed they are sincere efforts—while this taxation situation remains unaltered."
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  There is another important feature. America is willing to enter into reciprocal arrangements and has already done so with France. She has told the world that she is ready to do so by her Revenue Act of 1936. The position in America has become dangerous, because, although they have made this offer and even partially carried it out, they are not prepared to go on for ever playing a one-sided game. I have it on the best authority that Members of Congress and public opinion generally in the United States are becoming restive. They are looking for fresh revenue and one source to which they look is the non-resident alien who is at present taxed to the tune of 10 per cent. on what is remitted to this country. There is a great deal of talk in American business circles to the effect that that should be raised as high as 35 per cent. or 40 pet cent. Such figures may be absurd, but if it were to be raised, say, to 25 per cent. or even 20 per cent., it would make an enormous difference to a large number of people who have done a great deal for the trade of this country by investing money in America in the attempt to sell their products. This Clause is supported by a considerable number of hon. Members and I believe support for it is not confined to one side of the Committee. It is supported almost unanimously by the business community. The chairman of the English Sewing Cotton Company at the annual general meeting of that company in May last referred to the position and said:
  "The new American taxation situation is, I fear, too complicated to be gone into in detail but I assure the shareholders that out of every £100 of profit made by the American Thread Company (one of the subsidiaries) £43 is payable in American and British Income Tax."
  Then we find that Lord Selsdon recently stressed the effect on holding companies and said that the situation in regard to double taxation was now so serious that holding companies might be forced to move their residences from this country to other countries where they would be relieved of this burden. It may be said by hon. Members opposite that that is an idle threat, and that those companies know that it will pay them better to remain here. But when you get up as high as 70 per cent. or even 43 per cent. or whatever it happens to be, this becomes an important item beside which the

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  National Defence Contribution pales into insignificance.
  Mr. Silverman: What limit of income would have to be reached before you would have to bear double taxation to that extent?
  Mr. Peat: I admit that it would be a very high figure. If you were earning 100,000 dollars you might be in the region of 60 to 70 per cent. It seems to me that the proposed new Clause is a moderate one. It does not ask the Government to take any deliberate action at present. It asks them only to continue a policy which has already been inaugurated in two specific cases, and to make that policy general. It asks the Government to arm themselves with powers to carry out those arrangements if and when the time seems ripe for doing so. I cannot conceive any good reason for not accepting the Clause. Are the Government afraid that if they accept it they will be tempted to break away from the restraining hand of Somerset House? Somerset House always says, "We are not here to legislate, but this will cost you so much." Is the Chancellor of the Exchequer afraid that he might be tempted to take a longer view than that of mere pounds, shillings and pence and the immediate result to the Treasury? I, personally, shall not be satisfied on this matter with an answer which merely says that we have made out a very interesting case but that there is nothing doing at present. An answer of that kind must be taken by the business community as a slamming of the door in the face of those who are seeking the redress of this grievance and relief from an unjust and inequitable burden.
  5.22 p.m.
  Sir Alan Anderson: I support the Motion. We have listened to a very full and, I think, an extremely illuminating speech from my hon. Friend the Mover, who speaks with professional knowledge of the subject. Once we get into the consideration of the details of this question the difficulties are immense, but the general point at issue is easy to grasp. I think most of us agree that direct taxation is the best form of taxation that has been or can be devised. It collects more money with less disturbance than any other form of taxation. We have led the world in this respect. By direct taxation we have produced enormous revenue and the whole world has followed
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  our example. Everybody is doing it, more and more every year. But when direct taxation passes a certain point then injustices and inequalities which could be overlooked while a low rate of tax prevailed, become oppressive and intolerable.
  I have not the knowledge possessed by my hon. Friend who spoke last, of the details of taxation, but I have been for many years personally acquainted with the difficulties of trading in several countries. We, the shipowners of Great Britain for some years past have been relieved of this burden by an agreement which was made with a previous Government and I do not think any harm has been done by that agreement while a great deal of difficulty and injustice has been prevented. Here we have another suggestion. The United States are making offers and I join with my hon. Friend in expressing an urgent desire that His Majesty's Government should in the way proposed here and in other ways as well, meet the United States halfway in trying to bring the trade of the world back to its former position and do away with the unnecessary, irritating and obstructive barriers of nationalism.
  I spent last week in Berlin at the meeting of the International Chamber of Commerce. I took away from that Conference what I think was in the minds of all the people from many nations who were assembled there, namely that there is a chance now, but a chance which will not last for ever, for the two great creditor countries, working together, to lead the whole world forward in this matter if we only make a move now. But as I say we may not have that chance very long. This is one of several directions in which we can show that we are forthcoming to meet our neighbours in trade. We are asking the Government to do something to which there can be no logical objection. The only objection which can be taken to this proposal is the huckstering objection that, by being unfair in this matter we gain a little advantage to ourselves. That is a bad argument and I urgently support the plea that the Government should do away with this double taxation as quickly as possible.
  5.26 p.m.
  Lieut.-Colonel Colville: I rise at this stage not because I wish to stifle discussion but because my hon. Friends have raised a very important and interesting issue to which I desire to reply. The pro-

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  posed new Clause is designed to enable arrangements to be made with foreign States for relief from double taxation where profits are liable to tax both in the foreign country and in the United Kingdom. I am doubtful whether the proposal would carry us along the road which my hon. Friends wish to travel, but before coming to the specific proposal, I wish to deal with a more general aspect of this subject. Under the existing law, subject to certain exceptions, a British concern trading in a foreign country may be liable to tax in that country on its profits and the only relief which is given from our Income Tax, in respect of that foreign taxation is the allowance of the foreign tax as a deduction in computing profits. Where a British concern is trading in any part of the Empire and is liable to Dominion or Colonial taxation on its profits, our law provides a system under which relief is given by this country up to an amount not exceeding one-half of the standard rate of British Income Tax, in respect of the double charge of tax. This arrangement for relief from double taxation applies throughout the Commonwealth.
  The proposed Clause is directed, in principle, towards the institution of that or some other form of relief from double taxation in favour of British concerns trading in foreign countries. I have already mentioned that there are some exceptions to the general rule that double taxation relief is given in respect of foreign taxation and that the law already provides for relief—a fact which was, I think, referred to by the hon. Member for the City of London (Sir A. Anderson) —in the case of air transport, shipping and agency business. The Clause is indeed taken, word for word, from the existing Income Tax law In regard to those services. Under Section 18 of the Finance Act of 1923 and subsequent enactments, there is power, by Order in Council, to enter into reciprocal agreements with any country whether a foreign country or a Dominion, for the relief from taxation of profits arising from air transport, shipping and agency business. Under this provision a large number of agreements have been made with foreign countries providing for the reciprocal exemption of profits from taxation on the basis that the country in which the control of the business is situate alone charges the profits to tax. At the
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  present time there are some 20 agreements in force with 14 different countries, including an agreement with the United States as regards shipping.
  The new Clause proposes in effect to extend our powers in regard to the making of agreements so as to enable relief from double taxation to be given for all kinds of businesses and not merely for the particular ones which are covered by the Act. But here comes the difference. Unfortunately, there is no reason to believe that there is an acceptable basis on which any such general arrangement could be made with any foreign country, and I feel that it should be a condition precedent to legislation that there should be some definite idea as to what could be done. My hon. Friend the Member for Darlington (Mr. Peat) and also my hon. Friend the Member for the City of London referred to our trade agreements, of which I have had a good deal of personal experience, which has taught me that it takes two sides to make a bargain, and in this work of securing relief from double taxation that is particularly true. I hope the hon. Member will bear in mind, when he says that the Government must not be inactive, that we must have a reasonable expectation of being able to secure an agreement satisfactory to both sides, not only to the foreign country concerned, but also to ourselves.
  Mr. Peat: Before my hon. and gallant Friend sits down, will he deal with what is, to my mind, the obvious invitation of the United States to enter into such an arrangement?
  Lieut.-Colonel Colville: Perhaps my hon. Friend will allow me to continue. There must be some definite prospect of an agreement with foreign countries on some acceptable basis before Parliament is asked to pass legislation enabling agreements to be made, and I suggest to the Committee that until that stage is reached, it is premature to ask Parliament to give statutory powers enabling agreements to be made. Although the existing provisions for relief in the case of air transport, shipping, and agency businesses have gone a considerable way towards dealing with this problem, the discussions that have been going on for many years—and this is no new, problem, as my hon. Friend knows—particularly in the League of Nations, where this

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  question has been examined by many committees, have not thrown up any solution of the general problem. I am advised that there is no reason for us to believe that foreign countries would accept the system of double-taxation relief which applies within the British Commonwealth, even if we were prepared to extend it to them.
  Some of the solutions that have been suggested—and in this matter the Government have not been lacking in advice, which has come from many quarters—for the settlement of the general question would provide a higher measure of relief to the foreign country, at the expense of our Exchequer, than is given by our system of relief within the Empire, and any solution having that result is not one that would be acceptable to Parliament. Let me give an example. It has been suggested that this country should give the same relief as is given by the United States in favour of its businesses abroad. The United States, to digress for a moment, allow the foreign tax paid by trading concerns in respect of their profits made abroad to be set off against the United States tax payable on those profits. In the case of British concerns which are subject to double taxation within the Empire, relief is given from the United Kingdom tax only up to half the standard rate, whereas in the United States the relief is of the whole amount. It seems quite clear that any extension of the relief to foreign countries must be coordinated in some manner with the relief obtaining within the Empire, so as to ensure that no more favourable relief is given in respect of foreign trade than is given in respect of Empire trade. I hope my hon. Friend will see that there would be a real difficulty attached to extending to firms trading between this country and foreign countries a greater relief than is given to those trading within the Empire.
  I must add that while for the moment we have no evidence to lead us to believe that any acceptable basis for a settlement of the general problem is in sight as regards foreign countries, the Government will be prepared to give the most careful and sympathetic consideration to any proposal that may be made for dealing with this question. The hon. Member for the City of London spoke of a chance. If there is indeed that chance of an international understanding which he believes
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  is in sight, we should not turn away from it. We are most willing to consider any suggestion that any country might wish to make, but until we can see some prospect of reaching agreement on some acceptable principle, we do not think the time is ripe for legislation such as my hon. Friend proposes. I hope he will pay particular attention to this point, that the absence of such provision as the Clause proposes will not hinder in any way the consideration of any proposal that may be put forward for dealing with this question, but we feel that it accords more with the constitutional position of this House in relation to taxation that the Government of the day should ask for statutory powers when they are in a position to explain precisely the use to which they will be put. That is, roughly, the issue between the hon. Member and his friends and ourselves to-day. It is not that we wish to stand in the way of useful and valuable agreements, but we feel that it would be an unconstitutional way of proceeding to take these wide powers unless we are ready to explain to Parliament exactly the way in which they would be used.
  5.39 p.m.
  Mr. Harold Macmillan: I hope my hon. and gallant Friend will not think me unduly critical of his speech if I say that he has once again provided us with an example of those admirable briefs that the Treasury Department prepare for Ministers. He has not taken this matter very much further, and while agreeing that neither this Clause nor the procedure which he has put out constitutes any definite step towards the solution of this problem—the Clause only gives the Government powers to deal with it, and my hon. and gallant Friend says he already has those powers—I hope that he will really give serious attention to this matter and that the Government will press it forward from a slightly different point of view from any which has yet been put before us. I think that many people feel that if there is to be a recovery and a revival of world trade, one of the first and most important aspects of that problem is the restarting of foreign lendings from the City of London. It is almost inconceivable that there should be any real revival of world economy as a single unit without the return of the English practice of lending abroad, and it is undoubtedly the case, particularly with the United States in recent legislation—and possibly

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  in amending legislation it may be more the case—that there is rather a tendency on the part of subsidiary companies to sell out their holdings in America, where they are hard hit by double taxation, and to bring their money home in order to avoid that double taxation, than any pressure on or any inducement to English firms to develop once again the traditional British practice of lending abroad on a large scale.
  I think this is a very important question, and not merely from the aspect that this may be a hardship to individuals. We are all accustomed to that, and anybody who pays Income Tax, at any rate, is accustomed to the hardships that the individual has to suffer, but this is much more important from the point of view of the development of foreign lending by English people. There was a time, at the beginning of the War, when we were very glad to have mobilisable, at short notice, very large amounts of foreign investments. The foreign investments which we hold to-day are a powerful reserve in the event of any danger, and it is to the interests of this country that those foreign investments should be built up again from every point of view. Undoubtedly the present system of double taxation acts as a deterrent rather than as an encouragement to the development of business overseas. The relief which has been given in the Empire has been, as the hon. and gallant Member said, advantageous to British industry and British investments. I am sure the hon. Member who moved this Clause would not suggest that we wanted to give foreign countries a greater degree of relief than we were able to arrange within the Empire, but I think that that argument which my hon. and gallant Friend used was not very powerful. What is important is that this subject should be seriously studied from those two points of view, first, because the strength of this country is immensely enhanced by the growth and power of its foreign investments, and secondly because the re-establishment of world trade is immensely increased by the free power of money to follow invention and intelligence from one country to another.
  The effects of this double taxation when applied to low rates of tax may easily be neglected. When the rates of taxation, as in pre-War days, were very low, it did not very much matter, but at the high rates of taxation which are neces
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  sarily a part of our modern civilised States, it has become a much more pressing problem, and I hope the Government will seriously consider the question from this double point of view, that it is in the interests of this country and in the interests of the general purpose of the revival of the world as a single trading and commercial unit.
  Lieut.-Colonel Colville: I am not clear whether my hon. Friend is supporting this Clause or not.
  Mr. Macmillan: I wish to support the Clause, because I think that if it were added to the Bill, it would be an indication that the Government were prepared to give careful consideration to this problem. There are many problems for many years to which the Government have told us they are giving careful consideration, and nothing particular is going to be done about them, but if this Clause were added to the Bill, it would be more than that; it would be a statement to the world that the Government did intend to give the question practical consideration and to embark, if necessary, upon a series of negotiations towards that end.
  5.43 p.m.
  Mr. Peat: When I moved this Clause, I wanted to get from the Government an admission, first of all, of the importance of relief from double taxation and, secondly, an admission from them that they would take action to relieve double taxation as soon as the conditions were ripe for such action. I was disappointed that my hon. and gallant Friend never referred to the advisability of getting rid of double taxation. He did not admit for a moment, so far as I could gather, that it was a bad thing and an evil which we should try to eradicate. But he has said that if the Government receive an invitation and ascertain that some other nation is willing to play, then the Government will consider this matter very carefully. I have no particular faith in careful consideration on the point of double Income Tax. It has been carefully considered now for some years past, but I can only leave it there. One must accept my hon. and gallant Friend's words as to what he intends to do, and that it is a very genuine statement that the Government intend to take this matter up and to deal with it as soon as they see favourable conditions arise. May I say that I am most surprised that he does

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  not think that the United States Revenue Act, 1936, was an obvious invitation to this country to take some steps in that direction? If that is not a sufficient invitation to him I do not know what is. However, on the understanding that the Government admit it to be a growing evil which wants remedying and that they will take steps as soon as conditions are favourable, I beg leave to withdraw the Motion.
  Motion and Clause, by leave, withdrawn.
  NEW CLAUSE.—(Exemption from duty of agricultural implements and raw materials.)
  Goods imported into the United Kingdom of the categories specified in the Schedule (Agricultural implements and raw materials to be imported free of duty) to this Act, being articles used as implements or mw materials in agricultural production, shall be imported free of any duty.—[Sir F. Acland.]
  Brought up, and read the First time.
  5.46 p.m.
  Sir F. Acland: I beg to move, "That the Clause be read a Second time."
  All the articles set out in the Schedule mentioned in the new Clause are subject to duties, and I will go through them without mentioning those which are subject to only a 10 per cent. duty. They comprise the smaller number of articles. The larger number are subject to the higher duties, and I will mention what they are. These articles are subject to the Ottawa Agreements. Superphosphate is subject to 10s. a ton or 20 per cent., whichever is greater; sulphate of ammonia, £4 a ton; sodium nitrate, 20 per cent.; soya bean meal and cake, 20 per cent.; baskets, 30 per cent.; milk churns, 15 per cent.; forks, shovels, spades, scythes, sickles, hoes, 15 per cent.; hay and grass mowers, milking machines, cream separators, butter churns, 15 per cent.; ploughs, planters and seeders, reapers and binders, sheep shearers and clipping machines, threshers and tractors, 15 per cent.; steam boilers, spray pumps, hay sweeps, harrows, tedders, hay loaders and elevators, 15 per cent.; saddlery and harness, 20 per cent.; wire, 33½ per cent.; barbed wire, 20 per cent.; wire nails, 20 per cent.; wire netting, wire fencing, and wire mesh, 30 per cent.; galvanised hexagonal wire netting, £8 per ton or 20 per cent., whichever is less; and nicotine insecticides, 20 per cent.
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  The object that I have in suggesting that it would be justifiable that these articles should be free from duty is this: We know that under the general system of Protection agriculture normally is not and cannot be so much helped as many other things are. It seems inevitable that that should be so, and some of us felt years ago that it was bound to be so. I used to point that out when I was talking about the probable effects of Protection on agriculture in the years 1903–5. The reason is clear that no Government of a country which is mainly industrial can allow the cost of the main articles of food generally consumed to be steeply increased because of the immediate effect of pushing up the cost of living, bringing with it as it does labour difficulties which we all understand. It is interesting to notice that even as things are, with the low duties on articles of food, the cost of food index figure has gone up between May, 1935, and May, 1937, by the equivalent of 2d. in the shilling, which is a serious increase for unemployed and poorly paid workers. The main point that I am making, that no Government can allow really heavy duties on food, will not be disputed. That being so, the least we can do is to make sure that there shall be nothing in the structure of our fiscal system which will tend to put up the prices that the farmer has to pay. He gets the thin end of the stick from the point of view of his own protection, and it is rather unfair, that being so, that he should have to pay on this large range of articles.
  The matter has a slightly wider aspect than that. There are, in connection with imports of foodstuffs, not only low duties, but restrictions and quotas of various kinds, and if and when the Government come to negotiate trade agreements, as we hope they will some day, either unilaterally or otherwise, we know that more exception will be taken by other countries to the quotas and other quantitative restrictions than are taken to the duties. We shall want, therefore, to be as free as we can be to modify those quotas some of which help the agricultural industry and surely we shall be a great deal freer to modify them if we are able to say to the farmer that he is in the position of not having to pay any duties on the things he needs to carry on his industry.

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  I believe that the agricultural community has always more to gain by general prosperity than it is likely to gain from any system of quotas or duties, or even subsidies. The time may come when it will be necessary to prolong by any means we can adopt that general prosperity which has been having lately a favourable effect on agriculturists. In that connection it is interesting to realise that the wholesale price index of agricultural produce has gone up from June, 1934, to June, 1937, by 20 points, but that only four of those points were gained in the first two years and 16 of them in the last year. That shows that the effect of one year of general prosperity is much greater than the effect of two years of quotas, restrictions and the rest of it.
  In order to prolong that general prosperity it may be, necessary to try to make agreements with other countries for the mutual removal of trade restrictions. If so, it may be desirable to modify some of the quotas which are now helping agriculture. My point is that it will be possible to consider that sort of thing and to do it with a much better grace and much more with the agreement of agriculturists if, by accepting this new Clause, we can convince farmers that they are not having to pay duties on the articles they buy. It may be said in criticism of this suggestion that the amounts which are raised by these duties are very small. If that be so, it is all the more reason for taking the duties off.
  It is difficult for a private Member to calculate the amount of duties which are paid by farmers on the articles in the schedule to my new Clause. The difficulty is caused by the fact that we do not get separate figures in many cases of imports from foreign countries and the Empire. The nearest figure we can get is that the farmer has to pay £3,000,000 a year duties on these articles. That figure supports my argument. I think that, seeing how little, in order to keep the cost of food reasonably low, we can help the industry by Protection, it has a real claim that it should not have the things it is bound to buy made dearer by protective duties.
  5.57 p.m.
  The Parliamentary Secretary to the Board of Trade (Captain Euan Wallace): I am afraid that this new Clause is one that the Government will not be able to accept, and I propose to deal with it on
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  rather narrower lines than those in which the right hon. Gentleman moved it. This proposal is one which would really make a basic alteration in the whole structure of our tariff system. That is the point I wish to explain, and I hope that the Committee will forgive me if I do not follow the right hon. Gentleman in his more general observations, except to say how sincerely I agree with his dictum that agriculture gains more from the general prosperity of the country than from anything else. The basis of our tariff, as laid down in the Import Duties Act, 1932, provides for three things—first, for a general ad valorem duty of 10 per cent. on goods imported from foreign countries; second, for the imposition of additional duties above the general ad valorem duty on the recommendation of the Import Duties Advisory Committee; and third, for the exemption of goods or classes of goods from duty altogether, also on the advice of the Import Duties Advisory Committee. The relative section of the Import Duties Act provides as follows:
  "The Treasury, after receiving a recommendation from the Committee … that goods of any class or description ought to be exempted from the provisions of this section, and after consultation with the appropriate department, may by order direct that goods of all or any of the classes or descriptions specified in the recommendations shall be added to the First Schedule to this Act."
  The First Schedule of the Act contained a list of goods exempted entirely from the general ad valorem duty. The Act goes on to provide that in coming to their decision the Import Duties Advisory Committee
  "shall have regard to the advisability in the national interest of restricting imports into the United Kingdom and the interests generally of trade and industry in the United Kingdom, including those of trades and industries which are consumers of goods as well as those of trades and industries which are producers of goods."
  Therefore, it seems to the Government that there is in existence here appropriate and adequate machinery for dealing with the matter, and that in the circumstances there is no justification for taking what is really an arbitrary list of articles and removing that list entirely from the purview of the Import Duties Advisory Committee. Such a course would be unfair to British manufacturers of the implements which have been mentioned, who might easily be faced with the im-

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  portation of competitive goods at dumped prices. I am perfectly certain that the right hon. Gentleman, who moved this new Clause in such reasonable and moderate terms, would not wish any section of our manufacturers to suffer that kind of prejudice, particularly in view of what he said about all standing-in together. We therefore think it is better to leave things as they are, because there is in existence an expert, impartial tribunal which can consider the question in all its aspects and make recommendations accordingly; and as I have already shown, it is a statutory duty of this Committee to have regard to the interests of consumers as well as producers.
  The law does already recognise that machinery, to which some part of this Clause refers, is in a special position; and Section 10 of the Finance Act, 1932, contains special provisions for the exemption of certain consignments of machinery from duty under the Import Duties Act. Therefore, so far as the items enumerated by the right hon. Gentleman are concerned with machinery, here again there is a provision in existence entitling those goods to be imported free of duty if it is shown that similar machinery is not procurable in the United Kingdom. As to oil-seed cake and maize, we cannot put oil-seed cake or flat white maize on the list, because of our existing trade agreements with India and South Africa. Maize, other than flat white, is already on the free list, and it must remain there so long as the trade agreement with Argentina is in force. For these reasons the Government feel that at best this Clause is a proposal to do certain things the merits of which I do not imagine the Committee would wish me at this moment to discuss, for which there is an effective and adequate machinery already in existence, and I must therefore ask the Committee to reject the Clause.
  6.5 p.m.
  Mr. Wedgwood Benn: The hon. and gallant Gentleman has explained that this new Clause touches the basis of our fiscal policy, and I should like to ask whether it is not usual, when the basis of our fiscal policy is being discussed, for the Chancellor of the Exchequer to be present. It is an extraordinary thing that he should absent himself on the occasion of this particular Clause.
  The Chairman (Sir Dennis Herbert): The hon. Member knows that that is a matter which it is beyond my power to deal with.
  Mr. Benn: In that case, possibly one of the Government Whips would intimate to the Chancellor that the Committee are discussing something which is of basic importance, and ask him whether he can make it convenient to attend the discussion on his own Finance Bill.
  6.6 p.m.
  Mr. Dingle Foot: I had not intended to intervene in this Debate, not being a representative of an agricultural constituency, but I think somebody should say a word of protest against the reply which we have just heard from the Treasury Bench. I do not think I have ever heard a speech like it in answer to a proposal of this kind. Really, it was a most perfunctory reply to what is admitted to be a most important issue. On an issue going to the very basis of our whole fiscal policy the Committee ought not to be fobbed off by a reference to the machinery which is set up under the Act of 1932. My right hon. Friend has, as was pointed out by the Minister, raised very wide general considerations. He raised a grievance of the agricultural community which has been expressed not only from these benches but has often been voiced in agricultural Debates by hon. Members opposite. He proposes to remove the duties on the raw materials of agriculture, and the Minister simply replies that there is machinery for doing this under the Import Duties Act, 1932, and that the farmers, if they think fit, can apply to the Import Duties Advisory Committee. In the first place that committee can deal with only one commodity or one group of commodities at a time. It is exceedingly unlikely that they could judge the broader considerations which have been put forward by my right hon. Friend in moving this Clause.
  The main point I want to make is that the fact that the Import Duties Advisory Committee is in existence does not mean that we can throw off on to it all the responsibilities which ought to devolve upon Parliament. It does not mean that Parliament can abdicate its responsibilities in the matter of fiscal policy and really it is not sufficient, when a proposal of this kind is made, for the Minister to get up and simply say that it is not a matter for

  405
  this House to decide but one for the Import Duties Advisory Committee. These matters should be decided not by a committee of experts, however expert they may be, but by this House, and while I am entirely in favour of the merits of this new Clause, apart from that I shall go into the Lobby against the Government as a protest against the speech we have had.
  6.8 p.m.
  Mr. Benn: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
  I am moving this Motion in view of the obvious decision of the Government that the Chancellor of the Exchequer should not be present on the occasion of the discussion of what the Minister has described as a basic part of our fiscal policy.
  Captain Wallace: I am sure the Chancellor of the Exchequer has not been absent intentionally. He said to me, "Will it be all right if I go away for a
  few moments?" and I thought myself competent to deal with the Clause to the satisfaction of the Committee. I am perfectly certain that the Chancellor had no idea of intentionally absenting himself on such an occasion.
  Mr. Benn: I did take the opportunity of asking that the Chancellor of the Exchequer should be present. The Parliamentary Secretary to the Board of Trade has told us that he has gone out for a moment. The Parliamentary Secretary has nothing to do with the Exchequer. This is a question of finance, and the Chancellor markedly absents himself and, therefore, in accordance with the immemorial practice of this Committee, I have moved to Report Progress.
  Question put, "That the Chairman do report Progress, and ask leave to sit again."
  The Committee divided: Ayes, 127; Noes, 225.

  Division No. 262.]

  AYES.

  [6.10 p.m.

  Acland, Rt. Hon. Sir F. Dyke

  Hall, G. H. (Aberdare)

  Noel-Baker, P. J.

  Acland, R. T. D. (Barnstaple)

  Hall, J. H. (Whitechapel)

  Paling, W.

  Adams, D. M. (Poplar, S.)

  Harris, Sir P. A.

  Parker, J.

  Alexander, Rt. Hon. A. V. (H'Isbr.)

  Harvey, T. E. (Eng. Univ's.)

  Parkinson, J. A.

  Attlee, Rt. Hon. C. R.

  Hayday, A.

  Pritt, D. N.

  Banfield, J. W.

  Henderson, A. (Kingswinford)

  Ridley, G.

  Barnes, A. J.

  Henderson, J. (Ardwick)

  Riley, B.

  Barr, J.

  Henderson, T. (Tradeston)

  Ritson, J.

  Batey, J.

  Hills, A. (Pontefract)

  Roberts, Rt. Hon. F. O. (W. Brom.)

  Ballenger, F. J.

  Holdsworth, H.

  Rothschild, J. A. de

  Benn, Rt. Hon. W. W.

  Hopkin, D.

  Rawson, G.

  Broad, F. A.

  Jagger, J.

  Salter, Dr. A. (Bermondsey)

  Bromfield, W.

  Jenkins, Sir W. (Neath)

  Sanders, W. S.

  Brown, C. (Mansfield)

  John, W.

  Seely, Sir H. M

  Buchanan, G.

  Johnston, Rt. Hon. T.

  Sexton. T. M.

  Burke, W. A.

  Jones, A. C. (Shipley)

  Shinwell, E.

  Cape, T.

  Jones, Sir H. Haydn (Merioneth)

  Silverman, S. S.

  Charleton, H. C.

  Jones, J. J. (Silvertown)

  Simpson, F. B.

  Cluse, W. S.

  Jones, Morgan (Caerphilly)

  Sinclair, Rt. Hon. Sir A. (C'thn's)

  Clynes, Rt. Hon. J. R.

  Kelly, W. T.

  Smith, Ben (Rotherhithe)

  Cocks, F. S.

  Kennedy, Rt. Hon. T.

  Smith, E. (Stoke)

  Cove, W. G.

  Kirkwood, D.

  Smith, Rt. Hon. H. B. Lees- (K'ly)

  Daggar, G.

  Lathan, G.

  Smith, T. (Normanton)

  Dalton, H.

  Lawson, J. J.

  Sorensen, R. W.

  Davies, R. J. (Westhoughton)

  Leach, W.

  Stephen, C.

  Davies, S. O. (Merthyr)

  Lee, F.

  Stewart, W. J. (H'ght'n-le-Sp'ng)

  Day, H.

  Leonard, W.

  Strauss, G. R. (Lambeth, N.)

  Dobbie, W.

  Leslie, J. R.

  Taylor, R. J. (Morpeth)

  Dunn, E. (Rother Valley)

  Logan, D. G.

  Thorne, W.

  Ede, J. C.

  Lunn, W.

  Thurtle, E.

  Edwards, A. (Middlesbrough E.)

  Macdonald, G. (Ince)

  Tinker, J. J.

  Edwards, Sir C. (Bedwellty)

  McEntee, V. La T.

  Viant, S. P.

  Evans, D. O. (Cardigan)

  McGhee, H. G.

  Watkins, F. C.

  Fletcher, Lt.-Comdr. R. T. H.

  MacLaren, A.

  Watson, W. McL.

  Foot, D. M.

  Maclean, N.

  Wedgwood, Rt. Hon. J. C.

  Frankel, D.

  Mainwaring, W. H.

  Welsh, J. C.

  Gallacher, W.

  Maxton, J.

  Westwood, J.

  Garro Jones, G. M.

  Milner, Major J.

  Williams, T. (Don Valley)

  Graham, D. M. (Hamilton)

  Montague, F.

  Windsor, W. (Hull, C.)

  Green, W. H. (Deptford)

  Morrison, R. C. (Tottenham, N.)

  Woods, G. S. (Finsbury)

  Greenwood, Rt. Hon. A

  Muff, G.

  Young, Sir R. (Newton)

  Griffiths, G. A. (Hemsworth)

  Nathan, Colonel H. L.

  Griffiths, J. (Llanelly)

  Naylor, T. E.

  TELLERS FOR THE AYES.—

  Mr. Whiteley and Mr. Groves.

  NOES.

  Acland-Troyte, Lt.-Col. G. J.

  Everard, W. L.

  Mills, Sir F. (Leyton, E.)

  Adams, S. V. T. (Leeds, W.)

  Fildes, Sir H.

  Mills, Major J. D. (New Forest)

  Albery, Sir Irving

  Fleming, E. L.

  Moore-Brabazon, Lt.-Col. J. T. C.

  Amery, Rt. Hon. L. C. M. S.

  Fox, Sir G. W. G.

  Morgan, R. H.

  Anderson, Sir A. Garrett (C. of Ldn.)

  Premantle, Sir F. E.

  Morris, O. T. (Cardiff, E.)

  Anstruther-Gray, W. J.

  Furness, S. N.

  Morrison, G. A. (Scottish Univ's.)

  Apsley, Lord

  Fyfe, D. P. M.

  Munro, P.

  Assheton, R.

  Ganzoni, Sir J.

  Neven-Spence, Major B. H. H.

  Baillie, Sir A. W. M.

  Gibson, Sir C. G. (Pudsey and Otley)

  Nicolson, Hon. H. G.

  Balfour, G. (Hampstead)

  Gledhill, G.

  O'Connor, Sir Terence J.

  Balfour, Capt. H. H. (Isle of Thanet)

  Goodman, Col. A. W.

  O'Neill, Rt. Hon. Sir Hugh

  Balniel, Lord

  Graham, Captain A. C. (Wirral)

  Orr-Ewing, I. L.

  Beamish, Rear-Admiral T. P. H.

  Grant-Ferris, R.

  Palmer, G. E. H.

  Beauchamp, Sir B. C.

  Granville, E. L.

  Patrick, C. M.

  Beaumont, M. W. (Aylesbury)

  Grattan-Doyle, Sir N.

  Peat, C. U.

  Beechman, N. A.

  Gretton, Col. Rt. Hon. J.

  Pickthorn, K. W. M.

  Beit, Sir A. L.

  Gridley, Sir A. B.

  Pilkington, R.

  Bernays, R. H.

  Grimston, R. V.

  Ponsonby, Col, C. E.

  Birchall, Sir J. D.

  Gritten, W. G. Howard

  Porritt, R. W.

  Boothby, R. J. G.

  Guest, Lieut.-Colonel H. (Drake)

  Pownall, Lt.-Col. Sir Assheton

  Boulton, W. W.

  Guinness, T. L. E. B.

  Procter, Major H. A.

  Boyce, H. Leslie

  Hannah, I. C.

  Radford, E. A.

  Bracken, B.

  Harbord, A.

  Rathbone, J. R. (Bodmin)

  Brass, Sir W.

  Harvey, Sir G.

  Rayner, Major R. H.

  Briscoe, Capt. R. G.

  Haslam, Henry (Horncastle)

  Reid, W. Allan (Derby)

  Brocklebank, Sir Edmund

  Haslam, Sir J. (Bolton)

  Rickards, G. W. (Skipton)

  Brown, Col. D. C. (Hexham)

  Heilgers, Captain F. F. A.

  Robinson, J. R. (Blackpool)

  Brown, Brig.-Gen. H. C. (Newbury)

  Heneage, Lieut.-Colonel A. P.

  Ropner, Colonel L.

  Bull, B. B.

  Hepburn, P. G. T. Buchan-

  Ross Taylor, W. (Woodbridge)

  Burton, Col. H. W.

  Hepworth J.

  Royds Admiral P. M. R.

  Butler, R. A.

  Herbert, A. P. (Oxford U.)

  Russell, Sir Alexander

  Campbell, Sir E. T.

  Higgs, W. F.

  Russell, R. J. (Eddisbury)

  Cartland, J. R. H.

  Hills, Major Rt. Hon. J. W. (Ripon)

  Russell, S. H. M. (Darwen)

  Carver, Major W. H.

  Hoare, Rt. Hon. Sir S.

  Salmon, Sir I.

  Cary, R. A.

  Holmes, J. S.

  Salt, E. W.

  Castlereagh, Viscount

  Hope, Captain Hon. A. O. J.

  Sandeman, Sir N. S.

  Cayzer, Sir H. R. (Portsmouth, S.)

  Hopkinson, A.

  Savery, Sir Servington

  Cazalet, Capt. V. A. (Chippenham)

  Hore-Belisha, Rt. Hon. L.

  Shaw, Major P. S. (Wavertree)

  Chamberlain, Rt. Hn. N. (Edgb't'n)

  Hudson, R. S. (Southport)

  Simmonds, O. E.

  Channon, H.

  Hulbert, N. J.

  Simon, Rt. Hon. Sir J. A.

  Chorlton, A. E. L.

  Hume, Sir G. H.

  Smiles, Lieut.-Colonel Sir W. D.

  Christie, J. A.

  Hurd, Sir P. A.

  Smith, L. W. (Hallam)

  Clarke, F. E. (Dartford)

  Hutchinson, G. C.

  Somervell. Sir D. B. (Crewe)

  Clarry, Sir Reginald

  James, Wing-Commander A. W. H.

  Southby, Commander A. R. J.

  Cobb, Captain E. C. (Preston)

  Joel, D. J. B.

  Spears, Brigadier-General E L.

  Colfox, Major W. P.

  Jones, Sir G. W. H. (S'k N'w'gt'n)

  Spans, W. P.

  Colville, Lt.-Col. Rt. Hon. D. J.

  Jones, L. (Swansea W.)

  Stanley, Rt. Hon. Oliver (W'm'I'd)

  Conant, Captain R. J. E.

  Keeling, E. H.

  Strauss, H. G. (Norwich)

  Cooke, J. D. (Hammersmith, S.)

  Kerr, H. W. (Oldham)

  Sueter, Rear-Admiral Sir M.F.

  Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)

  Keyes, Admiral of the Fleet Sir R.

  Sutcliffe, H.

  Courthope, Col. Rt. Hon. Sir C. L.

  Kimball, L.

  Tasker, Sir. I.

  Crooke, J. S.

  Latham, Sir P.

  Tate, Mavis C.

  Crossley, A C.

  Law, Sir A. J. (High Peak)

  Taylor, Vice-Adm. E. A. (Padd., S.)

  Crowder, J. F. E.

  Leckie, J. A.

  Titchfield, Marquess of

  Cruddas, Col. B.

  Lees-Jones, J.

  Tryon, Major Rt. Hon. G. C.

  Culverwell, C. T.

  Leigh, Sir J.

  Wakefield, W. W.

  Dawson, Sir P.

  Leighton, Major B. E. P.

  Wallace, Capt. Rt. Hon. Euan

  De Chair, S. S.

  Levy, T.

  Ward, Lieut.- Col, Sir A. L. (Hull)

  Denman, Hon. R. D.

  Lewis, D.

  Ward, Irene M. B. (Wallsend)

  Denville, Alfred

  Lipson, D. L.

  Warrender, Sir V.

  Doland, G. F.

  Lloyd, G. W.

  Waterhouse, Captain C.

  Donner, P. W.

  Loyal-Fraser, J. A.

  Watt, C. S. H.

  Drewe, C.

  Mabane, W. (Huddersfield)

  Wells, S. R.

  Duckworth, Arthur (Shrewsbury)

  MacAndrew, Colonel Sir C. G.

  Whiteley, Major J. P. (Buckingham)

  Dugdale, Captain T. L.

  McCorquodale, M. S.

  Willams, H. G. (Croydon, S.)

  Duncan, J. A. L.

  MacDonald, Rt. Hon. M. (Ross)

  Wilson, Lt.-Col. Sir A.T. (Hitchin)

  Eastwood, J. F.

  Macdonald, Capt. P. (Isle of Wight)

  Windson-Clive, Lieut.-Colonel G.

  Edmondson, Major Sir J.

  McKie, J. H.

  Winterton, Rt. Hon. Earl

  Ellis, Sir G.

  Macmillan, H. (Stockton-on-Tees)

  Withers, Sir J. J.

  Elliston, Capt. G. S

  Magnay, T.

  Womersley, Sir W. J.

  Elmley, Viscount

  Makins, Brig.-Gen. E.

  Wood, Hon. C. I. C.

  Emery, J. F.

  Manningham-Buller, Sir M.

  Emmott, C. E. G. C.

  Margesson, Capt. Rt. Hon. H. D. R.

  Emrys-Evans, P. V.

  Maxwell, Hon. S. A.

  TELLERS FOR THE NOES.—

  Entwistle, Sir C. F.

  Mayhew, Lt.-Col. J.

  Major Sir George Davies and Mr.

  Errington, E.

  Meller, Sir R. J. (Mitcham)

  Cross.

  Evans, Capt. A. (Cardiff, S.)

  Mellor, Sir J. S. P. (Tamworth)

  Question again proposed, "That the 6.19 p.m. Clause be read a Second time."
  Mr. Benn: I am sorry that I put the Chancellor to the trouble of returning to

  409
  the Committee, but I am sure he will recognise that upon a Motion dealing with subsidies or food prices I thought it would be a good thing that the Chancellor of the Exchequer should be present to explain this very important part of the Government policy. It is, as the Parliamentary Secretary to the Board of Trade said, a basic question. It is one upon which nobody in the Committee has such great experience as the right hon. Gentleman himself. His speeches on this subject have been a liberal education and I have read and studied them for many years. In fact, I was his pupil, in his earlier and salad days, when he let himself go in complete candour on the subject. He used to publish pamphlets about it. One was entitled "The Difficulties of Tariff Reform, a speech by the right hon. Sir John Simon." This was in the old days, before the War.
  The Chancellor of the Exchequer (Sir John Simon): Which war?
  Mr. Benn: It was not before the Crimean War, but before what we prematurely described as the Great War. After six years of Tory Government, the world, as the Prime Minister told us, is preparing for another great war. I wonder what the Chancellor of the Exchequer thinks of this quotation, which I choose for its literary turn and forceful expression as almost one of his best things:
  "Tariff Reform is crumbling, and when it comes down to the dust that will be the end of the greatest imposture that has ever attempted to be foisted on the British people."
  That is a good general description. After the War described as the Great War, from 1914 to 1919, so that there may be no doubt in the Chancellor's mind as to what war is meant, the right hon. Gentleman was also clear—after as well as before the War, although what difference that makes I do not quite know. He said:
  "A policy of Protection always has its votaries among greedy manufacturers and credulous Conservatives. Protection never protects the consumer "—
  that point was adequately made by another hon. Member—
  "and merely raises the level of home prices by making everything more expensive."
  When it came to the General Election, and the right hon. Gentleman was making preparations for changing his allegiance,
  410
  which he promptly proceeded to do —[Laughter.] If that laughter is directed at me I would point out that I have never changed my allegiance to my Free Trade principles—he explained that he was not contesting the election on Free Trade at all.
  Mr. Mabane: Do I understand that the right hon. Gentleman who is addressing the Committee is now a Socialist?
  Mr. Benn: Would it be in order, Sir Dennis, for me to deal with that interruption?
  The Chairman: I am not at all sure that it would be in order, and I take the opportunity of saying that I have my doubts as to where the right hon. Gentleman's present argument is leading.
  Mr. Benn: I will make that clear. My immediate point is that this change in basic policy—as it was described by the representative of the Board of Trade—was denied by the right hon. Gentleman at the critical election in 1931, because he told the electors that he was not seeking a mandate on Free Trade. That is the only relevance of my remark. Chastened by what you say, I will quote a more direct statement by the right hon. Gentleman on this Motion. He says:
  "The Prime Miinster has admitted that Protection might bring about a rise in prices "—
  this is the point that is so much in order—
  "and that the farmer would have to pay more for his agricultural machinery and his fertilisers "—
  those are all in the Schedule—
  "and then, if the proceeds of the tariff were enough to go round, he was to get something back."
  Furthermore, about that date, the right hon. Gentleman, dealing with this Motion, said:
  "Now we have the agriculturists crying aloud that they are being betrayed because it was proposed in this new plan. The British farmer, instead of getting any relief, was going to be penalised. Further, he has to purchase agricultural machinery or bricks "—
  I am not quite sure whether bricks were included—
  "or any other production which he needed for the purpose of carrying on his business."
  I ought to add, in fairness to the right hon. Gentleman that this is not, of course,

  411
  a Conservative and Protectionist Government. It is a national Government, and the right hon. Gentleman is there as a watchdog in order to see that the Protectionist influences of the Conservative party do not go too far. Of the followers of the right hon. Gentleman, 25 per cent., no less then eight, have posts in the Government. If the same proportion were maintained among the Conservative party, there would be 120 Conservative Members of the Government. In anticipation of his reply, I ought to say, again in fairness to him, that we recognise that his position is to put the brake upon this Protectionist policy and I hope that in his reply he will show that he is prepared to accept this proposed new Clause, and so carry out what he is really in the National Government to do.
  6.26 p.m.
  Sir J. Simon: I was naturally a good deal surprised when, having withdrawn for a very few minutes from the Committee at a time when we were discussing this proposed new Clause, which was very naturally dealt with by the spokesman for the Board of Trade, I was told that the right hon. Gentleman opposite was complaining, not that I was treating the Committee discourteously—
  Mr. Benn: No.
  Sir J. Simon: Very well—but on the principle that a Chancellor of the Exchequer should never have a cup of tea. He moved to report Progress, so I naturally came in to find out why. The right hon. Gentleman has a bulky collection of documents in front of him. He is one of the most industrious accumulators of texts and extracts. He has all of us indexed. There is not one gentleman sitting on all those benches opposite who is not in his index, and who, at a particular moment, might not find himself faced with a similar quotation. In the days when I had the good fortune—and I esteemed it great good fortune—to see the right hon. Gentleman more frequently, it was never necessary for me to keep a quotation on any subject, of any date, from any quarter. My friends would ask me: "What are you going to do?" and I would reply:. "Rummage in his files."
  Mr. Benn: I am presuming that all these sheets from my diary are in order.
  412
  I would point out that the rummaging did keep the right hon. Gentleman politically right.
  Sir J. Simon: I make due acknowledgment to the right hon. Gentleman. He often helped me. I always noticed that the best thing about his extracts was that they did not cover the whole political field but consisted only of those which the right hon. Gentleman thought might be useful in his own political efforts in the future.
  Mr. Benn: Never.
  Sir J. Simon: I should like to deal with the proposed new Clause. You, Sir Dennis, have indicated that we might go a little wide, and if the right hon. Gentleman did so, perhaps I might be excused for having a little wandered from the point in making that retort. As for the Clause, all I have to say is that it deals with a very limited point. In fact, it suggests a reversal cf a decision arrived at by a very large majority, and I know of no reason why the functions which Parliament has entrusted to the Import Duties Advisory Committee should be thus curtailed. The arguments against the Clause have been most completely, admirably and succinctly stated by my right hon. and gallant Friend the Parliamentary Secretary to the Board of Trade, and I should be doing a great injustice to his argument, and exposing myself to the danger of being rebuked by the Chair for vain repetition, if I said any more.
  6.30 p.m.
  Mr. Hopkin: I support the proposed new Clause, and also the protest which was made by the hon. Member for Dundee (Mr. Foot) regarding the alleged reply that was made by the Parliamentary Secretary to the Board of Trade. It seems to me to be quite clear that the Parliamentary Secretary had the wrong brief, because everything that he said in speaking to that brief was quite irrelevant to the issue which is now before the Committee. He spoke, for instance, very largely of the position that is occupied by manufactured goods but looking down the list, I see that it includes such items as oats in grain, seeds, bran and pollard, sharps and middlings, oilseeds, all other feeding stuffs, and so on. The whole point of the Parliamentary Secretary's reply was that the Amendment dealt with manufactured goods, and

  413
  manufactured goods only. I support the Clause because, as far as I can see, no Member representing an agricultural Division can possibly vote against it. At present the farmer, when he has to buy any feeding stuffs or machines, has to pay the highest price that the market demands, but when he sends his products into the market for sale, he sells them in a market which is totally unregulated, and in which he has to meet the fiercest competition.
  Take the example of meat. To-day livestock is fetching prices, which have been mentioned in this Committee, as high as 57s. per cwt., but there is not an agricultural Member of the House who will say that, even at 57s. per cwt., there is any very great profit in it, because the cost of feeding stuffs is so high. Again, take the case of milk. Since 1934 the cost of feeding stuffs has gone up by 20 per cent. The other day a Bill was before the House dealing with the position of poultry keepers. It is quite clear that, if the prices of feeding stuffs for poultry were reduced—and they could be reduced if these import duties were taken off bran and other feeding stuffs—the position of poultry keepers would be very much better.
  The Parliamentary Secretary told us that already the farmers can go to the Import Duties Advisory Committee, but they have been before that Committee several times, and each time they have failed. They have failed signally in the matter of milk. An application has been made to that Committee to deal with imports, both from the Dominions and from abroad, but it has failed. It may be right or it may be wrong, but the fact of the matter is that the farmer under these conditions is getting the worst of all possible worlds. He has to pay the highest prices when he buys his machinery and his raw products, but when he goes into the market to sell he has to meet highly competitive prices, and the competition of products from every part of the world.
  Sir J. Simon: Do I understand the hon. Member to be recommending, in the circumstances, a tax on imported milk?
  Mr. Hopkin: With respect, I think that that question is quite irrelevant It is irrelevant because it does not deal with the question that is now before the Com-
  414
  mittee, namely: Is it right that the farmer should pay the highest price when he has to buy his raw materials, and that, when he goes into the market, he should have to meet the free competition of the rest of the world? It may be right or it may be wrong that all food should come into this country free, but from the farmer's point of view both these propositions cannot be right, and it is for that reason that I support the Clause.
  6.36 p.m.
  Lieut.-Colonel Heneage: I represent a constituency which is largely a farming constituency, but in Lincoln, which is not far off, they make agricultural machinery, and I say quite candidly that I should be very sorry to see agricultural machinery excluded from these duties, as it would be if this new Clause were passed. Before there was a duty on imported machinery, the manufacturers of machinery for agriculture in this country were at a very low ebb, and the result was that the farmer was entirely at the mercy of foreign imported machinery, which was going up in price. He was being victimised by the foreign importer, and the House should be made fully aware of that. Again, I am opposed to the new Clause because it would also include such articles as seeds. Various kinds of seed are grown in Lincolnshire, which are used all over the country—
  Sir F. Acland: Soya beans?
  Lieut.-Colonel Heneage: I am dealing at the moment with seeds. The farmers of this country used to be at the mercy of seeds grown on the Continent, mainly in Germany, and to a certain extent in France, and the encouragement of the seed-growing industry in this country has been of the greatest benefit to agriculture The same is generally true in the case of other items mentioned in the Clause—manures and so on; but I would say generally that the British agriculturist does not want to be at the mercy of the foreign producer.
  6.39 p.m.
  Mr. H. G. Williams: Frankly, I was surprised at the speech of the hon. Member for Carmarthen (Mr. Hopkin), who occasionally makes quite good Protectionist speeches for the benefit of agriculture. Surely, the position of agriculture would be very precarious indeed if the industry were deprived of protection. The

  415
  Debate so far has been based on a false assumption, namely, the assumption that the existing duties have in fact raised the prices of the articles set forth in the Schedule. That is not true in general. I think that one case in which it might he alleged that the duty has resulted in some rise in price is that of oats, on which a duty at a very high level was imposed three years ago, because of the distressful condition which then existed among oat growers. That duty was, I think, equivalent ad valorem to about 60 per cent., but apart from that I do not think anyone can contend that the duties have raised the price of the goods. If they have not raised the price of the goods, there is no particular point in the Amendment. The Amendment means that the Mover wants to indulge in a breach of contract. There is a duty on wheat. That is by contract, under the Ottawa Agreement. Does the right hon. Gentleman propose to repeal a contractual duty? Is that the new Liberal philosophy of international friendship? I think that the Schedule as originally drafted included maize, but I am glad to see that its sponsors have modified their proposal as the result of their researches, and have put down:
  "Maize: flat white."
  That also was an Ottawa duty, imposed in order to assist that particular class of maize, which comes from the Union of South Africa, but the bulk of the maize which comes into this country comes in duty free; not more than about 1 or 2 per cent. of the maize entering this country pays any duty at all. Maize is so important a feeding stuff that to a large extent it must necessarily dominate the prices of the other cereals. It exerts a controlling influence on the price of the other commodities. It is perfectly true that the prices of cereals are rising, but they are not rising in this country alone; world prices are rising, and any rise that has taken place in this country since these duties were imposed is a consequence of the general rise in world prices, for which, incidentally, hon. Members opposite were pleading a few years ago.
  It is interesting to read the speeches which they and their Leader made at the time of the World Economic Conference. Viscount Samuel made a most eloquent
  416
  speech in which he said it was vital that the wholesale prices of commodities should be raised, because the poverty of the primary producing countries was so great that they could not buy our goods. Incidentally, in this country there has been no rise in the prices of these commodities, with the possible exception I have mentioned, as the result of these duties, and, if the prices have not been raised, what is the purpose of proposing to abolish the duties? I noticed an interruption from the father of the Clause, if I may use such a disrespectful description of him, on the subject of soya beans. I share his regret that they are not as yet grown in large quantities in Lincolnshire, but, unless I have misread the Clause it does not propose to take any duties off oilseeds—
  Sir F. Acland: I should like to point out that after line 14 of the Schedule there should be the line:
  "Soya bean meal and cake."
  By a printer's error that was omitted.
  Mr. Williams: Even then the right hon. Gentleman has slipped up, because these oilseed cakes are made from oilseeds the bulk of which come from tropical parts of the world—for instance, cotton seeds, palm kernels, and the seeds which schoolboys call monkey nuts, but which I think are known for trade purposes as groundnuts. All these products are quite properly dutiable when they come from foreign countries, because they afford one of the most important preferences that we can accord to our Crown Colonies. It is curious, having regard to the principles that the right hon. Gentleman holds and the theories that he bases on those principles, that he should be proposing to continue the duty on the raw material of oilseed cake while letting the cake itself come in duty-free. That is really an ingenious inverted form of protection which indicates that the Schedule was probably drawn up rather hurriedly one night in the Library—
  Sir F. Acland: Surely, those articles would be covered by the general phrase "All other feeding stuffs." Cake is a feeding stuff.
  Mr. Williams: So far as I am aware, not very many people in my constituency are in the habit of eating groundnuts raw. They are not generally supplied with them

  417
  in that form, and certainly they are not supplied with palm kernels, which would still remain subject to this duty. The real trouble is that the Schedule appears to have been drawn up on this basis: "Let us have a rag; let us tease the Protectionists; let us shove in all the things that might be awkward to everyone, and set the farmers quarrelling with the industrialists. Then we will have a fine time." I am glad to see the right hon. Gentleman the Member for Gorton (Mr. Benn) back among us. To-day he was in his best form, not perhaps very conclusive, but very amusing, and he gave us the best ten minutes that we have had for a long time. But he did not supply us with any of those brilliant arguments in favour of Free Trade of which he showed himself such a master when he was opposing the Budget of the right hon. Gentleman the Member for Epping (Mr. Churchill). Those arguments are now out of date. The real difference between the right hon. Gentleman and the Chancellor of the Exchequer is that the Chancellor of the Exchequer has learned something, and the right hon. Gentleman has learned nothing.
  6.44 p.m.
  Mr. R. Acland: I rise to join issue with the two speakers from the Government Front Bench on the rather important matter of principle which they raised in answer to our proposal. With regard to the speech of the hon. and gallant Member for Louth (Lieut.-Colonel Heneage), I do not see how it is possible to say in one breath that the machinery manufacturers were being ruined by the cutthroat competition of foreigners, and in the next breath to say that the farmers were being exploited by the high prices which foreign manufacturers of machinery were charging. It seemed to me that those were the arguments that he used. Either of them might be correct, but not, I think, both.
  Lieut.-Colonel Heneage: I did not pursue the argument, but the foreign importers were beginning to increase their prices and, if they had continued, they would have had the farmer at their mercy.
  Mr. Acland: That is always the suggestion as to how it happens, but I think there are very few recorded cases of that actually happening. The suggestion in the hon. and gallant Gentleman's original speech was that both processes were going
  418
  on at the same time. As to the hon. Member for South Croydon (Mr. H. G. Williams), I am loth to do battle with anyone of his encyclopedic knowledge of the Trade and Navigation Tables. I imagine that he must know them pretty well by heart. But, if my memory is right, we have heard hon. Members opposite who are interested in esparto grass ask to have that put on the free list because the duty was raising the price, and we have the same thing almost monthly with regard to steel.
  Mr. H. G. Williams: Does the hon. Member say that the duties on steel have raised the price?
  Mr. Acland: I have heard the argument on the other side that these duties ought to be taken off so that steel supplies might be forthcoming in greater quantities and at lower prices. We are going to have another Debate before the end of the Session, and we shall, no doubt, hear it then. The Chancellor of the Exchequer and the Parliamentary Secretary have said that in 1932 we passed an Act by a large majority settling certain principles and leaving details to be worked out by the Import Duties Advisory Committee. I could understand that answer if our Amendment was raising points of detail—if we were asking them to take off the duty now levied on, say, hot water bottles, on account of something particularly relating to hot water bottles, or if we were asking for the removal of the duty on barbed wire, say, on account of something particularly relating to barbed wire. But the principles have been agreed and these matters of detail are settled by the Import Duties Advisory Committee.
  My point is that, although this House is not competent to discuss the details which arise under the accepted principles, surely we are competent from time to time to alter the principles, and that is what we are seeking to do in this Clause. We say that, as the result of experience of the working of certain principles, we ought to alter the principles and adopt a new one, namely, that articles used as raw materials or as machinery by agriculture ought not to be taxed. Unless this House will make a pronouncement, aye or no, on that principle, the Import Duties Advisory Committee is bound to proceed on the old principle accepted in

  419
  1932 that a certain article was a proper subject for taxation if certain things were proved. It might be permissible at the same time, in view of the rising cost of building, to propose a new principle that building materials should not be taxed, though it would be quite wrong to introduce an Amendment that door knockers should not be taxed. We are raising a question of principle that agricultural raw materials should not be taxed. That is a matter that cannot be dealt with by the Import Duties Advisory Committee. It is a matter in which agriculturists and the National Farmers' Union are interested and, before the House is asked to vote, we should like to have an answer from the Government on the question of principle that we have raised.
  6.50 p.m.
  Captain Heilgers: I am delighted to see the Liberal party posing as the champions of agriculture. It is a long time since I found them in that position. Their principle that agricultural machinery should not be taxed would not benefit the farmer, because, though it may be true that the prices of agricultural machinery have risen recently, they are lower to-day than when tariffs were introduced. The hon. Member for Carmarthen (Mr. Hopkin) drew attention to the question of the rise in price of feeding stuffs and pointed out that they had gone up by 20 per cent. He did not point out that if he liked to examine my farm accounts he would find that the price of cakes and other feeding stuffs that I buy is considerably less than when the tariff Act was passed. [An HON. MEMBER: "Why do you get so many subsidies?"] We do not get very many subsidies. The subsidies on housing are double those on agriculture. I am glad that they are high, but the actual subsidies on agriculture this year will amount to something less than £8,000,000. The prosperity of some of our towns depends largely on the making of agricultural machinery. Ipswich is dependent on it, and the prosperity of Ipswich to-day is wonderful
  compared with what it was before tariffs came in. That prosperity is shown throughout the neighbouring countryside, because the people of Ipswich and other agricultural implement-making towns in the Eastern Counties are able to buy more of the farmers' produce.
  6.53 p.m.
  Mr. Charles Brown: The hon. Member for South Croydon (Mr. H. G. Williams) made a vicious attack on the Liberal party because they had moved this new Clause, and he sought to convey the impression that the free list is sacrosanct, and that the things that are on are quite right and the things that are off ought to be off. May I remind him of the occasion when he tried to get hatters' fur on the free list? That was probably due to the fact that he was very well aware that there were so many Protectionist mad hatters about.
  Mr. H. G. Williams: I not only tried; I succeeded.
  Mr. Attlee: Why was the hon. Member so anxious if the foreigner always pays and the price does not go up?
  Mr. Williams: The hon. Gentleman has never taken the trouble to understand the elements of the problem. If you put a duty on and the whole supply is taxed because there is no internal competitive supply, obviously you pay the duty.
  Mr. Brown: Seeing that the hon. Member has reminded me that he succeeded on that occasion, may I ask him how he managed to succeed?
  The Chairman: That does not arise on this question.
  Mr. Brown: Is it not in order for me to seek information?
  The Chairman: I have ruled that the information that the hon. Member was seeking was not a matter for consideration on this Clause.
  Question put, "That the Clause be read a Second time."
  The Committee divided: Ayes, 125; Noes, 219.

  Division No. 263.]

  AYES.

  [6.57 p.m.

  Acland, Rt. Hon. Sir F. Dyke

  Barr, J.

  Buchanan, G.

  Adams, D, M. (Poplar, S.)

  Bellenger, F. J.

  Burke W. A.

  Alexander, Rt. Hon. A. V. (H'Isbr.)

  Benn, Rt. Hon. W. W.

  Cape, T.

  Attlee, Rt. Hon. C. R.

  Broad, F. A.

  Charleton, H. C.

  Banfield, J. W.

  Bromfield, W.

  Cluse, W. S.

  Barnes, A. J.

  Brown, C. (Mansfield)

  Clynes, Rt. Hon. J. R.

  Cocks, F. S.

  Johnston, Rt. Hon. T.

  Ritson, J.

  Cove, W. G.

  Jones, A. C. (Shipley)

  Roberts, Rt. Hon. F. O. (W. Brom.)

  Daggar, G.

  Jones, Sir H. Haydn (Merioneth)

  Rothschild, J. A. de

  Dalton, H.

  Jones, J. J. (Silvertown)

  Rowson, G.

  Davies, R. J. (Westhoughton)

  Jones, Morgan (Caerphilly)

  Salter, Dr. A. (Bermondsey)

  Davies, S. O. (Merthyr)

  Kelly, W. T.

  Sanders, W. S.

  Dobbie, W.

  Kennedy, Rt. Hon. T.

  Sexton, T. M.

  Dunn, E. (Rother Valley)

  Kirkwood, D.

  Shinwell, E.

  Ede, J. C.

  Lathan, G.

  Silverman, S. S.

  Edwards, A. (Middlesbrough E.)

  Lawson, J. J.

  Simpson, F. B.

  Edwards, Sir C. (Bedwellty)

  Leach, W.

  Sinclair. Rt. Hon. Sir A. (C'thn's)

  Evans, D. O. (Cardigan)

  Lee, F.

  Smith, Ben (Rotherhithe)

  Fletcher, Lt.-Comdr. R. T. H.

  Leonard, W.

  Smith, E. (Stoke)

  Foot, D. M.

  Leslie, J. R.

  Smith, Rt. Hon. H. B. Lees- (K'ly).

  Frankel, D.

  Logan, D. G.

  Smith, T. (Normanton)

  Gallacher, W.

  Lunn, W.

  Sorensen, R. W.

  Garro Jones, G. M.

  Macdonald, G. (Ince)

  Stephen, C.

  Graham, D. M. (Hamilton)

  McEntee, V. La T.

  Stewart, W. J. (H'ght'n-le-Sp'ng)

  Green, W. H. (Deptford)

  McGhee, H. G.

  Strauss, C. R. (Lambeth, N.)

  Greenwood, Rt. Hon. A.

  MacLaren, A.

  Taylor, R. J. (Morpeth)

  Grenfell, D. R.

  Maclean, N.

  Thorne, W.

  Griffith, F. Kingsley (M'ddl'sbro, W.)

  Mainwaring, W. H.

  Thurtle, E.

  Griffiths, G. A. (Hemsworth)

  Maxton, J.

  Tinker, J. J.

  Groves, T. E.

  Milner, Major J.

  Viant, S. P.

  Hall, J. H. (Whitechapel)

  Montague, F.

  Watkins, F. C.

  Harris, Sir P. A.

  Morrison, R. C. (Tottenham, N.)

  Watson, W. McL.

  Harvey, T. E. (Eng. Univ's.)

  Muff, G.

  Wedgwood, Rt. Hon. J. C.

  Hayday, A.

  Nathan, Colonel H. L.

  Welsh, J. C.

  Henderson, A. (Kingswinford)

  Naylor, T. E.

  Westwood, J.

  Henderson, J. (Ardwick)

  Owen, Major G.

  Whiteley, W. (Blaydon)

  Henderson, T. (Tradeston)

  Paling, W.

  Williams, T. (Don Valley)

  Hills, A. (Pontefract)

  Parker, J.

  Windsor, W. (Hull, C.)

  Holdsworth, H.

  Parkinson, J. A.

  Woods, G. S. (Finsbury)

  Hopkin, D.

  Price, M. P.

  Jagger, J.

  Richards, R. (Wrexham)

  TELLERS FOR THE AYES.—

  Jenkins, A. (Pontypool)

  Ridley, G.

  Mr. Acland and Sir Hugh Seely.

  John, W.

  Riley, B.

  NOES.

  Acland-Troyte, Lt.-Col. G. J.

  Conant, Captain R. J. E.

  Gridley, Sir A. B.

  Adams, S. V. T. (Leeds, W.)

  Cooke, J. D. (Hammersmith, S.)

  Grimston, R. V.

  Albery, Sir Irving

  Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)

  Gritten, W. G. Howard

  Anderson, Sir A. Garrett (C. of Ldn.)

  Courthope, Col. Rt. Hon. Sir G. L.

  Guest, Lieut.-Colonel H. (Drake)

  Anstruther-Gray, W. J.

  Crooke, J. S.

  Guinness, T. L. E. B.

  Aske, Sir R. W.

  Croom-Johnson, R. P

  Hacking, Rt. Hon. D. H.

  Assheton, R.

  Crossley, A. C.

  Hannah, I. C.

  Astor, Major Hon. J. J. (Dover)

  Crowder, J. F. E.

  Harbord, A.

  Astor, Viscountess (Plymouth, Sutton)

  Cruddas, Col. B.

  Harvey, Sir G.

  Baillie, Sir A. W. M.

  Culverwell, C. T.

  Haslam, Henry (Horncastle)

  Balfour, G (Hampstead)

  Davies, Major Sir G. F. (Yeovil)

  Heilgers, Captain F. F. A.

  Balfour, Capt. H. H. (Isle of Thanet)

  Dawson, Sir P.

  Heneage, Lieut.-Colonel A. P.

  Balniel, Lord

  De Chair, S. S

  Hepburn, P. G. T. Buchan-

  Beamish, Rear-Admiral T. P. H.

  Denman, Hon. R. D.

  Hepworth, J.

  Beauchamp, Sir B. C.

  Denville, Alfred

  Higgs, W. F.

  Beaumont, Hon. R. E. B. (Portsm'h)

  Doland, G. F.

  Hills, Major Rt. Hon. J. W. (Ripon)

  Beit, Sir A. L.

  Donner, P. W.

  Hoare, Rt. Hon. Sir S.

  Bennett, Sir E. N.

  Dower, Major A. V. G.

  Holmes, J. S.

  Bernays, R. H.

  Drewe, C.

  Hope, Captain Hon. A. O. J.

  Boothby, R. J. G.

  Duckworth, Arthur (Shrewsbury)

  Hopkinson, A.

  Boulton, W. W.

  Eastwood, J. F.

  Hore-Belisha, Rt. Hon. L.

  Boyce, H. Leslie

  Edmondson, Major Sir J.

  Hudson, R. S. (Southport)

  Brass, Sir W.

  Ellis, Sir G.

  Hulbert, N. J.

  Briscoe, Capt. R. G.

  Elliston, Capt. G. S.

  Hume, Sir G. H.

  Brocklebank, Sir Edmund

  Elmley, Viscount

  Hurd, Sir P. A.

  Brown, Col. D. C. (Hexham)

  Emery, J. F.

  Hutchinson, G. C.

  Brown, Brig.-Gen. H. C. (Newbury)

  Emmott, C. E. G. C.

  Inskip, Rt. Hon. Sir T. W. H.

  Bull, B. B.

  Emrys-Evans, P. V.

  James, Wing-Commander A. W. H.

  Burghley, Lord

  Entwistle, Sir C. F.

  Joel, D. J. B.

  Burton, Cot. H. W.

  Errington, E.

  Jones, Sir G. W. H. (S'k N'w'gt'n)

  Butler, R. A.

  Evans, Capt. A. (Cardiff, S.)

  Jones, L. (Swansea W.)

  Campbell, Sir E. T.

  Everard, W. L.

  Keeling, E. H

  Cartland, J. R. H.

  Fildes, Sir H.

  Kerr, H. W. (Oldham)

  Carver, Major W. H.

  Fleming, E. L.

  Keyes, Admiral of the Fleet Sir R.

  Cary, R. A.

  Fox, Sir G. W. G.

  Kimball, L.

  Cayzer, Sir H. R. (Portsmouth, S.)

  Furness, S. N.

  Latham, Sir P.

  Cazalet, Capt. V. A. (Chippenham)

  Fyfe, D. P. M.

  Law, Sir A. J. (High Peak)

  Channon, H.

  Ganzoni, Sir J.

  Leckie, J. A.

  Chorlton, A. E. L.

  Gibson, Sir C. G. (Pudsey and Otley)

  Lees-Jones. J.

  Christie, J. A.

  Gledhill, G.

  Leigh, Sir J.

  Clarke, F. E. (Dartford)

  Graham, Captain A. C. (Wirral)

  Leighton, Major B. E. P.

  Clarry, Sir Reginald

  Grant-Ferris, R.

  Lennox-Boyd, A. T. L.

  Cobb, Captain E. C. (Preston)

  Granville, E. L.

  Levy, T.

  Colfox, Major W. P.

  Grattan-Doyle, Sir N.

  Lewis, O.

  Colville, Lt.-Col. Rt. Hon. D. J.

  Gretton, Col. Rt. Hon. J.

  Lipson, D. L.

  422

  423

  Lloyd, G. W.

  Pickthorn, K. W. M.

  Stanley, Rt. Hon. Oliver (W'm'I'd)

  Lovat-Fraser, J. A.

  Ponsonby, Col. C. E.

  Storey, S.

  Mabane, W. (Huddersfield)

  Porritt, R. W.

  Strauss, H. G. (Norwich)

  MacAndrew, Colonel Sir C. G.

  Procter, Major H. A.

  Sueter, Rear-Admiral Sir M. F.

  McCorquodale, M. S.

  Radford, E. A.

  Sutcliffe, H.

  Macdonald, Capt. P. (Isle of Wight)

  Rankin, Sir R.

  Tasker, Sir R. I.

  McKie, J. H.

  Rathbone, J. R. (Bodmin)

  Tate, Mavis C.

  Macmillan, H. (Stockton-on-Tees)

  Rayner, Major R. H.

  Taylor, Vice-Adm. E. A. (Padd., S.)

  Magnay, T.

  Reid, W. Allan (Derby)

  Titchfield, Marquess of

  Makins, Brig.-Gen. E.

  Rickards, G. W. (Skipton)

  Wakefield, W. W.

  Manningham-Buller, Sir M.

  Robinson, J. R. (Blackpool)

  Wallace, Capt. Rt. Hon. Euan

  Margesson, Capt. Rt. Hon. H. D. R.

  Ropner, Colonel L.

  Ward, Lieut.-Col. Sir A. L. (Hull)

  Mayhew, Lt.-Col. J.

  Ross Taylor, W. (Woodbridge)

  Ward, Irene M. B. (Wallsend)

  Mellor, Sir J. S. P. (Tamworth)

  Royds, Admiral P. M. R.

  Warrender, Sir V.

  Mills, Sir F. (Leyton, E.)

  Russell, Sir Alexander

  Waterhouse, Captain C.

  Mills, Major J. D. (New Forest)

  Russell, R. J. (Eddisbury)

  Watt, G. S. H.

  Morgan, R. H.

  Russell, S. H. M. (Darwen)

  Wells, S. R.

  Morris, O. T. (Cardiff, E.)

  Salmon, Sir I.

  Whiteley, Major J. P. (Buckingham)

  Morrison, G. A. (Scottish Univ's.)

  Salt, E. W.

  Williams, H. G. (Croydon, S.)

  Munro, P.

  Savery, Sir Servington

  Wilson, Lt.-Col. Sir A. T. (Hitchin)

  Neven-Spence, Major B. H H.

  Shaw, Major P. S. (Wavertree)

  Windsor-Clive, Lieut.-Colonel G.

  Nicolson, Hon. H. G.

  Simmonds, O. E.

  Winterton, Rt. Hon. Earl

  O'Connor, Sir Terence J.

  Simon, Rt. Hon. Sir J. A.

  Withers, Sir J. J.

  O'Neill, Rt. Hon. Sir Hugh

  Smiles, Lieut.-Colonel Sir W. D.

  Womersley, Sir W. J.

  Orr-Ewing, I. L.

  Smith, L. W. (Hallam)

  Wood, Hon. C. I. C.

  Palmer, G. E. H.

  Somervell. Sir D. B. (Crewe)

  Wright, Squadron-Loader J. A. C.

  Patrick, C. M.

  Southby, Commander Sir A. R. J.

  Peat, C. U.

  Spears, Brigadier-General E. L.

  TELLERS FOR THE NOES.—

  Petherick, M.

  Spens, W. P.

  Mr. Cross and Captain Dugdale.

  FINANCE BILL.

    NEW CLAUSE.—(Exemption where the in come of an individual is not subject to Income Tax.)
    Where the income of any individual is such that he is not liable to payment of Income Tax and the whole or any part of such income is derived from the profits of a body corporate chargeable in respect of the national defence contribution, such individual shall be entitled to recover so much of the national defence contribution paid as is attributable to his holding in the body corporate.—[Mr. C. Brown.]
    Brought up, and read the First time.
    7.5 p.m.
    Mr. C. Brown: I beg to move, "That the Clause be read a Second time."
    I have heard various sections of the Government's supporters pleading for tax relief of one kind and another, and generally they have been speaking for big landowners and big business. Therefore, it is not improper that I should say something for people who occupy humbler spheres of life, and who may be affected by the National Defence Contribution, which is primarily being levied to obtain money. The representatives of the Treasury will not want anyone to propose anything which will encroach on the possible yield of that tax, and already when suggestions of that kind have been made those who moved the Amendments have been told in one case that it would cost £2,000,000 and in another case that it was not known what it would cost. I do not know whether the Financial Secretary will tell us what this proposal will cost, but I have no doubt of the justice of the proposal. I
    424
    well understand the attitude of the Chancellor and the Treasury when they get these complaints from the benches behind them about taxation, and I know how their hearts must bleed for the persons who make those complaints. I know that they are terribly disappointed that they cannot make concessions, but it must be annoying to them to have to listen to these demands for relief, and I want to save them from some annoyance which they may otherwise have in the future. If they listen to our proposals, they may be saved from such annoyance.
    It is generally agreed that profits on armaments and the general prosperity to which rearmament leads should pay its contribution to the demands now being made for the fighting services. No one argues against that, and it may be doubted whether we are calling for all that which some people ought to pay. In regard to the persons I have in mind, there is a case for asking that persons who do not come within the Income Tax field, if they should happen to have shares or holdings in any concern which pays the National Defence Contribution, they should be able to obtain repayment of the proportion which has been obtained from them by the levying of the tax. It would be a real hardship to take money from them. Big business says that it is willing to pay. It grumbled a good deal at first, but it has now got the matter simplified and at the moment is not grumbling much. But we ought to

    425
    avoid levying the tax in any form on individual persons who do not have to pay Income Tax.
    7.10 p.m.
    Mr. Watkins: I support the new Clause. The National Defence Contribution can be regarded as an extension of the Income Tax principle, and therefore it is not unreasonable that the regulation in Income Tax law which exempts low levels of income from the Income Tax should be extended to the National Defence Contribution. One could imagine an instance—I do not think that it could be regarded as an extravagant instance—of a person in lowly circumstances the whole of whose income would be derived from a corporate body which was liable for payment under the National Defence Contribution and, although the income of that person might be less than —100 a year, and as such would not be liable for Income Tax, yet he would be compelled to pay something under the National Defence Contribution, because that something would be deducted from his income before he received it. I do not think that it is the intention of the Government to place this tax on very small incomes, and I hope that they will be able to accept the Clause. I have been wondering exactly what case can be put up against this Clause. I do not think that it can be said that the cost of acceding to it would be very large, and I hope that the Financial Secretary to the Treasury, or whoever replies for the Government, will admit that this is a perfectly reasonable Clause.
    7.13 p.m.
    The Attorney-General (Sir Donald Somerville): Everyone appreciates the motive behind this Clause. I hesitate to say that it is, in fact, contrary to the basic principle of the National Defence Contribution in case some one should move to report Progress. But the principle of the National Defence Contribution has already been approved by the Committee, and the principle is that the tax is one on profits of companies and not on the incomes of those who may participate as shareholders in such profits. There have been suggestions that the Chancellor of the Exchequer ought to have made it a tax on income or an increased Income Tax, but in fact the principle of the National Defence Contribution is that it should be 5 per cent. of the profits earned
    426
    by companies or firms without regard to the incomes, Income Tax liabilities, exemptions or Surtax liabilities of those who participate in the profits of that company. If the Clause were accepted it would alter that principle altogether, because it would, in fact, make it a tax on the income of individuals. If you are exempted or partially exempted from Income Tax, under this Clause you would get, in addition to the declared dividend, a bonus, representing the individual share of the National Defence Contribution. All the people outside the Income Tax limit would get the dividend plus x. The people within the Income Tax limit would get only the dividend. There would be, obviously, a tax on incomes.
    Mr. A. V. Alexander: Are we to understand that it does not in fact work out that way now? Has not the Chancellor of the Exchequer at various times indicated that the incidence of the tax would not fall upon debenture holders and preference shareholders?
    The Attorney-General: That is a different point. This is a proposal to make it fall upon those who pay Income Tax and not to fall upon those who do not. What I was suggesting to the Committee was that the effect was to make it a tax on incomes, and to incorporate in it the liabilities and exemptions, and so on, upon which Income Tax is based would make it a tax on incomes. That would, I suggest to the Committee and to the hon. Gentleman who moved the Clause, be inconsistent with the main principle of the tax. The principle of the tax is that all those who participate in the profits—to adopt the words that have been used by hon. Members opposite—of big business, of armament manufacture and all the rest of it, even though they may only participate to a small extent, and their other resources are small, will, by virtue of that participation, help to pay the contribution, which will not fall on them as individuals, but on industrial concerns before the profits are distributed. For these reasons, we cannot accept the Clause, which would really alter the principle upon which the tax is levied.
    7.17 p.m.
    Mr. Silverman: I think that the Committee will have listened with a good deal of surprise to the reasons that have been

    427
    put forward from the Government Front Bench for rejecting this very reasonable new Clause. To many of us the argument put forward is really a complete negation of the true situation. The argument put forward to the Committee is that if you were to accept the proposal, it would make this tax an Income Tax where it was not an Income Tax before. 'With the greatest respect in the world, I suggest to the hon. and learned Gentleman that that is utter nonsense. The effect of not accepting the proposal now made is to impose for the first time an income Tax upon people, who, under the general Income Tax law, are not subjected to it. It is in order to prevent that result that the proposal has been made. If it is to be said that that is inconsistent with the whole basis of the National Defence Contribution, we are entitled to ask whether, in the opinion of the Government, the true basis of the National Defence Contribution is to place for these purposes an Income Tax for the first time, and for these purposes only, upon persons who are below the Income Tax level.
    The Committee have been invited to listen this afternoon to a great variety of alleged hard cases. We have been told about the inequalities of double taxation and about impecuniosities of firms, and a great many cases have been put forward, reasonably in many ways, whether we agree with them or not, but all based on the assumption that there was something hard in the particular case put forward which entitled that particular class of person to consideration. Without exception, the Committee have rejected every one of those proposals on the sound principle that what matters about the tax most is not what you take away from it so much as what the taxpayer is left with after the State has taken away what it wants. The suggestion was made from the benches opposite that in certain circumstances as much as 70 per cent. might be taken away. The Committee felt that it could only be taken away in circumstances where the income earned was so Very high that the 30 per cent. that was left was still something the taxpayer might be glad to go on earning.
    If you apply that principle here and consider not so much what you are taking away, but what the taxpayer has left after you have taken it away, then I invite the
    428
    Government to consider that, if they are going to take away from people under this proposal some part of the income which is below the Income Tax level, they would be doing something quite new, very harsh, and certainly something which the country would not desire them to do, and what I believe the Government never intended to do at all. It is a very simple Clause to the effect that you shall not allow this new proposal to operate in such a way as to impose an Income Tax upon people who ex hypothesi have incomes which are not subject to Income Tax at all. It is with the very greatest surprise that I have listened to the refusal and to the reasons given for that refusal, and I hope that my hon. Friend will press his Clause to a Division.
    7.23 p.m.
    Sir Geoffrey Ellis: I do not quite follow the argument adduced as to Income Tax. Income Tax is paid only on the profit distributed. The position would be in this case, if you applied the Clause in its logical way, that people who never get any income beyond a certain amount would actually receive a bonus. What would happen would be that the part of the profit not distributed would probably go to reserve. Therefore, the effect of the Clause, if applied to National Defence Contribution, would be that certain people would receive a bonus out of the Reserve which they would not receive in ordinary circumstances.
    7.24 p.m.
    Mr. Gallacher: I want to direct attention to the remarks of the Attorney-General who said that the Clause was in opposition to the principle of the National Defence Contribution. The attitude adopted by the Government on this question is completely contrary to any principle that was ever suggested in connection with National Defence Contribution. The National Defence Contribution was put forward on the principle that, arising out of the great expenditure on armaments, there would he the possibility of excessive profits being made by those who were getting contracts in connection with Government orders. It was essential that those who made excessive profits as a result of the great expenditure the Government were making upon armaments should make a contribution to the National Defence Contribution. The whole idea, when the National Defence

    429
    Contribution was suggested, was to satisfy the country that profiteering arising out of the great expenditure on armaments would not be tolerated.
    We have got to the stage where the Chancellor of the Exchequer and those who are assisting him say that National Defence Contribution will apply to people who are on the means test. Has that anything to do with the principle of National Defence Contribution? Will the Chancellor of the Exchequer or any other Member get up and dare to say that it has anything in common with the principle? I could take you to any number of people on the means test where the little saving that they are making out of organising their purchasing is being taxed. The Chancellor of the Exchequer himself, in his legal estimate said that the income that went to the members of the co-operative movement was no more a question of profit than the case of a man who gave another man £1,000 and sent him to buy a motor car, which he bought for £800, returning the £200 as the commission. That £200 so returned was as much profit as the income of co-operative members.
    The people who are on the means test, because of their methods of purchasing, have at the end of the quarter a certain amount coming back to them. I know from experience in my own home that as a consequence of this method of purchasing, we were able in the most difficult times to get our food, and, at the end of the quarter, have sufficient saved to pay the rent. Here you come along and say that the National Defence Contribution is to apply to profits arising out of Government expenditure on armaments and that these people have to pay a share. Surely, nobody can contend anything like that. It is nothing short of a scandal that the Government, under the pretext of slopping profiteering arising out of the great expenditure on armaments, dare to come along and say that families living on the means test shall pay a share of this tax.
    The families on the means test want defence from the Government. That is the kind of defence they want. I can take you to family after family whose homes have been broken up by the vicious operation of the means test. This cannot possibly be justified. It has nothing whatever to do with the principle of National Defence Contribution or with the statement that the Prime Minister when
    430
    Chancellor of the Exchequer made in introducing the National Defence Contribution. Never was there any thought in anybody's mind that the poor people in the country, those living on the means test and old age pensions should have to pay a share of the National Defence Contribution. Is it possible that there should be such a principle as that and that old age pensioners with 10s. a week should have to pay a share of it? This is not the principle of the National Defence Contribution but a sheer fraud upon the masses of the people of this country, and I ask the Chancellor of the Exchequer to accept the Amendment because he can never, in this House or anywhere else, justify this as having anything whatever to do with the principle of the National Defence Contribution.
    7.30 p.m.
    Mr. Lewis: I find it a little hard to understand how anyone who supports National Defence Contribution can support this Clause. Anyone who opposes National Defence Contribution might reasonably support the Clause on the assumption that if National Defence Contribution is a wrong tax, then the fewer that pay it, the better. As the Attorney-General has pointed out, the essence of National Defence Contribution is that it is a special tax placed upon corporations and firms as such, and not upon individuals. The effect of passing this Clause would be to turn National Defence Contribution into a clumsy form of additional Income Tax. If we desire to do anything of that kind, it would be far better to have a direct increase in Income Tax. The House has already decided that this contribution is a form of taxation which it approves, and in these circumstances it seems to me that all who take that view should oppose this Clause.
    7.31 p.m.
    Mr. Tinker: The strong point in the statement of the Attorney-General was the complications that would arise if this Clause were adopted, that is, the examinations that would have to be made to find out the people who did not come under the Income Tax law, and then to give back to them their share of profits. On the equity of the question, however, I think there can be no answer to our proposal. When this tax was originally put forward, it was understood to be a

    431
    tax on the richer people who were making huge profits, and as some return for the protection they were getting from the warlike preparations, they were to make a contribution towards the manufacture of armaments. I have had letters from my constituents on the subject, one of which I will quote. It relates to the case of a man and his wife who invested their money and were getting some return upon it. That return was about sufficient to keep them, but if there is anything to be taken from it, it will put them in rather difficult circumstances. Some of the interest which they get will be taken away by this tax, and whatever is taken away will mean that there will be so much less for them. It may be only a slight amount, but in their case it will cause a grievance.
    Sir Henry Fildes: They will not be liable unless they have made increased profits.
    Mr. Tinker: The hon. Member is wrong. The Chancellor of the Exchequer has altered that, and now the tax is general. I think I am right in that statement. In the ordinary course of things, the payer of Income Tax would have to pay something while the person who does not pay Income Tax would not have had to pay anything, but by the method that is proposed he has to pay something. Therefore, what we are asking is that where people do not come under Income Tax assessment they should be excused. I agree that the taxation might not affect very many people, but there are hard cases and it is on behalf of those hard cases that we are putting forward our plea. I have looked at this matter from every angle, and I must admit that a strong case has been made out about the intricacies of finding out what the position would be if our Clause were carried. That may be a strong argument, but on the equity of the case I do not think anyone can say a word against it.
    7.34 p.m.
    Mr. Alexander: I do not propose to keep the Committee more than a minute or two, but the Attorney-General has such a pleasant manner in replying to Amendments that unless you are very careful you are misled as to his position. He has a very persuasive manner. He tried to convince the Committee that this
    432
    tax is intended to apply only to the profits of concerns such as companies, corporate bodies and the like, and he tried to persuade us that it has no effect upon the incomes of individuals. That is the case that we want to make. The Attorney-General did not point out that in arriving at the basis of this tax you first of all omit altogether from its ambit large numbers of private traders, because they will not make individual profit of more than £2,000 a year. In relation to every small trader you are treating the basis of this tax as a gradation, just as much a gradation as if you were dealing with the intricacies of Income Tax, but when you come to deal with corporate bodies like building societies or industial societies, composed of large numbers of people, many of whom are below the taxable limit, you make no such gradation and no such exemption as you are making for the small private trader or the small firm and partnership. That is the basis on which we put our new Clause. I believe the hon. Member for Leigh (Mr. Tinker) is right when he says that there may be some difficulty, but if there are difficulties, then the Government might meet us later on.
    7.36 p.m.
    Mr. C. Wood: The argument used by the Attorney-General seemed to be divided into two points. One was that the principle of National Defence Contribution was different from that of Income Tax, but we are assured by the Chancellor of the Exchequer that it is based on the same principle as the Income Tax. If it is based on the principle of the Income Tax, I see no reason why there should not be the relief which we ask for in this Clause.
    Sir J. Simon: The position is this, that in assessing the profits of the undertaking the assessment shall be made on the principles of the Income Tax assessment, with a certain number of adjustments. It is in relation to the way in which the assessment is made that the principles of the Income Tax operate, is it not?
    Mr. Wood: The Chancellor of the Exchequer is asking me a question. I was asking him one. If that is his statement, then it undermines the argument of the Attorney-General. The other argument of the Attorney-General was the argument that there might be difficulties, and

    433
    the suggestion was made that this proposal would mean a bonus to those whose income is below the Income Tax level. There would not be nearly so much difficulty as is suggested. I have never had to make a claim for return of Income Tax on my own account, but some years ago I was an official of an educational body and it fell to my lot regularly to make claims for return of Income Tax. There was no difficulty about it. The Income Tax was deducted at the source and the organisation was not, as is. the case of many individuals, subject to Income Tax. All that I had to do was to fill in the form and in due course the Income Tax was returned, even up to three years back pay. If that is the case with regard to Income Tax, where would the difficulty arise if a similar claim is made in respect of National Defence Contribution by people who are not liable to Income Tax? It would not mean a bonus. It would simply mean that they would have returned to them the amount which they bad paid on the original demand.
    I hope that hon. Members opposite will not look at this matter as a hard, cut and dried business. This is a human business. There are many people who have small investments which represent their life savings. They may have saved £100, £200 or £300, and the interest from that money, added to the old age pension, in many cases saves them from the disgrace, as they think, of going to the public assistance committee. Unless a Clause similar to this is added to the Bill, it means that we shall be compelling these people, many of whom have worked very hard and have had to save on meagre incomes, to come within the operation of National Defence Contribution. I appeal to the Chancellor of the Exchequer and to hon. Members to carry this Clause in the interests of justice and sanity in taxation.
    Question put, "That the Clause be read a Second time."
    The Committee divided: Ayes, 127; Noes, 222.

    Division No. 264.]

    AYES.

    [7.42 p.m.

    Adams, D. M. (Poplar, S.)

    Hall, J. H. (Whitechapel)

    Owen, Major G.

    Alexander, Rt. Hon. A. V. (H'Isbr.)

    Harvey, T. E. (Eng. Univ's.)

    Paling, W.

    Ammon, C. G.

    Hayday, A.

    Parker, J.

    Attlee, Rt. Hon. C. R.

    Henderson, A. (Kingswinford)

    Parkinson, J. A.

    Banfield, J. W.

    Henderson, J. (Ardwick)

    Price, M. P.

    Barnes, A. J.

    Henderson, T. (Tradeston)

    Pritt, D. N.

    Barr, J.

    Hills, A. (Pontefract)

    Richards, R. (Wrexham)

    Batey, J.

    Holdsworth, H.

    Ridley, G.

    Bellenger, F. J.

    Hopkin, D.

    Riley, B.

    Benn, Rt. Hon. W. W.

    Jagger, J.

    Ritson, J.

    Broad, F. A.

    Jenkins, A. (Pontypool)

    Roberts, Rt. Hon. F. O. (W. Brom.)

    Bromfield, W.

    John, W.

    Roberts, W. (Cumberland, N.)

    Brown, C. (Mansfield)

    Johnston, Rt. Hon. T.

    Rowson, G.

    Buchanan, G.

    Jones, A. C. (Shipley)

    Salter, Dr. A. (Bermondsey)

    Burke, W. A.

    Jones, Sir H. Haydn (Merioneth)

    Sanders, W. S.

    Chater, D.

    Jones, Morgan (Caerphilly)

    Seely, Sir H. M.

    Cluse, W. S.

    Kelly, W. T.

    Sexton, T. M.

    Clynes, Rt. Hon. J. R.

    Kennedy, Rt. Hon. T.

    Silverman, S. S.

    Cocks, F. S.

    Kirkwood, D.

    Simpson, F. B.

    Cove, W. G.

    Lathan, G.

    Smith, Ben (Rotherhithe)

    Cripps. Hon. Sir Stafford

    Lawson, J. J.

    Smith, E. (Stoke)

    Daggar, G.

    Leach, W.

    Smith, Rt. Hon. H. B. Lees- (K'ly)

    Dalton, H.

    Lee, F.

    Smith, T. (Normanton)

    Davidson, J. J. (Maryhill)

    Leonard, W.

    Sorensen, R. W.

    Davies, S. O. (Merthyr)

    Leslie, J. R.

    Stephen, C.

    Day, H.

    Logan, D. G.

    Stewart, W. J. (H'ght'n-le-Sp'ng)

    Debbie, W.

    Lunn, W.

    Strauss, G. R. (Lambeth, N.)

    Dunn, E. (Rother Valley)

    Macdonald, G. (Ince)

    Taylor, R. J. (Morpeth)

    Ede, J. C.

    McEntee, V. La T.

    Thorne, W.

    Edwards, A. (Middlesbrough E.)

    McGhee, H. G.

    Thurtle, E.

    Edwards, Sir C. (Bedwallty)

    MacLaren, A.

    Tinker, J. J.

    Fletcher, Lt.-Comdr. R. T. H.

    Maclean, N.

    Viant, S. P.

    Foot, D. M.

    MacMillan, M. (Western Isles)

    Walker, J.

    Frankel, D.

    Mainwaring, W. H.

    Watkins, F. C.

    Gallacher, W.

    Maxton, J.

    Watson, W. McL.

    Graham, D. M. (Hamilton)

    Milner, Major J.

    Wedgwood, Rt. Hon. J. C.

    Green, W. H. (Deptford)

    Montague, F.

    Welsh, J. C.

    Greenwood, Rt. Hon. A.

    Morrison, Rt. Hon. H. (Hackney, S.)

    Westwood, J.

    Grenfell, D. R.

    Morrison, R. C. (Tottenham, N.)

    Williams, T. (Don Valley)

    Griffith, F. Kingsley (M'ddl'sbro, W.)

    Muff, G.

    Windsor, W. (Hull, C.)

    Griffiths, G. A. (Hemsworth)

    Nathan, Colonel H. L.

    Woods, G. S. (Finsbury)

    Groves, T. E.

    Naylor, T. E.

    Hall, G. H. (Aberdare)

    Noel-Baker, P. J.

    TELLERS FOR THE AYES.—

    Mr. Charleton and Mr. Whiteley.

    NOES.

    Acland-Troyte, Lt.-Col. G. J.

    Emrys-Evans, P. V.

    Mills, Sir F. (Layton, E.)

    Adams, S. V. T. (Leeds, W.)

    Entwistle, Sir C. F.

    Mills, Major J. D. (New Forest)

    Agnew, Lieut.-Comdr. P. G.

    Errington, E.

    Morgan, R. H.

    Albery, Sir Irving

    Evans, Capt. A. (Cardiff, S.)

    Morrison, G. A. (Scottish Univ's.)

    Anstruther-Gray, W. J.

    Evans, D. O. (Cardigan)

    Munro, P.

    Aske, Sir R. W.

    Everard, W. L.

    Nall, Sir J.

    Assheton, R.

    Fildes, Sir H.

    O'Connor, Sir Terence J.

    Astor, Major Hon. J. J. (Dover)

    Fleming, E. L.

    O'Neill, Rt. Hon. Sir Hugh

    Astor, Hon. W. W. (Fulham, E.)

    Fox, Sir G. W. G.

    Orr-Ewing, I. L.

    Baillie, Sir A. W. M.

    Furness, S. N.

    Palmer, G. E. H.

    Balfour, G. (Hampstead)

    Fyfe, D. P. M.

    Peat, C. U.

    Balfour, Capt. H. H. (Isle of Thanet)

    Ganzoni, Sir J.

    Petherick, M.

    Balniel, Lord

    Gibson, Sir C. G. (Pudsey and Otley)

    Pickthorn, K. W. M.

    Beamish, Rear-Admiral T P. H.

    Gledhill, G.

    Ponsonby, Col. C. E.

    Beauchamp, Sir B. C.

    Gower, Sir R. V.

    Porritt, R. W.

    Beaumont, Hon. R. E. B. (Portsm'h)

    Graham, Captain A. C. (Wirral)

    Pownall, Lt.-Col, Sir Assheton

    Beechman, N. A.

    Grant-Ferris, R.

    Radford, E. A.

    Beit, Sir A. L.

    Grattan-Doyle, Sir N.

    Rankin, Sir R.

    Bennett, Sir E. N.

    Gretton, Col. Rt. Hon. J.

    Rathbone, J. R. (Bodmin)

    Blaker, Sir R.

    Gridley, Sir A. B.

    Rayner, Major R. H.

    Boothby, R. J. G.

    Grigg, Sir E. W. M.

    Reed, A. C. (Exeter)

    Boulton, W. W.

    Grimston, R. V.

    Reid, W. Allan (Derby)

    Boyce, H. Leslie

    Gritton, W. G. Howard

    Rickards, G. W. (Skipton)

    Brass, Sir W.

    Guest, Lieut.-Colonel H. (Drake)

    Ropner, Colonel L.

    Briscoe, Capt. R. G.

    Guinness, T. L. E. B.

    Ross Taylor, W. (Woodbridge)

    Brocklebank, Sir Edmund

    Gunston, Capt. D. W.

    Royds, Admiral P. M. R.

    Brown, Col. D. C. (Hexham)

    Hacking, Rt. Hon. D. H.

    Russell, Sir Alexander

    Brown, Brig.-Gen. H. C. (Newbury)

    Hannah. I. C.

    Russell, R. J. (Eddisbury)

    Bull, B. B.

    Harbord, A.

    Russell, S. H. M. (Darwen)

    Burghley, Lord

    Harvey, Sir G.

    Salmon, Sir I.

    Burton, Col. H. W.

    Haslam, Henry (Horncastle)

    Salt, E. W.

    Campbell, Sir E. T.

    Haslam, Sir J. (Bolton)

    Samuel, M. R. A.

    Cartland, J. R. H.

    Heilgers, Captain F. F. A.

    Savery, Sir Servington

    Carver, Major W. H.

    Heneage, Lieut.-Colonel A P.

    Selley, H. R.

    Cary, R. A.

    Hepburn, P. G. T. Buchan-

    Shaw, Major P. S. (Wavertree)

    Cayzer, Sir H. R. (Portsmouth, S.)

    Hepworth, J.

    Simmonds, O. E.

    Cazalet, Thelma (Islington, E.)

    Herbert, Capt. Sir S. (Abbey)

    Simon, Rt. Hon. Sir J. A.

    Channon, H.

    Higgs, W. F.

    Smiles, Lieut.-Colonel Sir W D.

    Charlton, A. E. L.

    Hills, Major Rt. Hon. J. W. (Ripon)

    Smith, L. W. (Hallam)

    Christie, J. A.

    Holmes, J. S.

    Somervell. Sir D. B. (Crewe)

    Clarke, F. E. (Dartford)

    Hore-Belisha, Rt. Hon. L.

    Southby, Commander Sir A. R. J.

    Clarry, Sir Reginald

    Hudson, R. S. (Southport)

    Spens. W. P.

    Cobb, Captain E. C. (Preston)

    Hume, Sir G. H.

    Stanley, Rt. Hon. Oliver (W'm'Id)

    Colfox, Major W. P.

    Hurd, Sir P. A.

    Storey, S.

    Colville, Lt.-Col. Rt. Hon. D. J.

    Hutchinson, G. C.

    Strauss, H. G. (Norwich)

    Conant, Captain R. J. E.

    Inskip, Rt. Hon. Sir T. W. H.

    Strickland, Captain W. F.

    Cooke, J. D. (Hammersmith, S.)

    James, Wing-Commander A. W. H.

    Sueter, Rear-Admiral Sir M. F.

    Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)

    Joel, D. J. B.

    Tasker, Sir R. I.

    Courthope, Col. Rt. Hon. Sir G. L.

    Jones, L. (Swansea W.)

    Tate, Mavis C.

    Cranborne, Viscount

    Keeling, E. H.

    Taylor, Vice-Adm. E. A. (Padd., S.)

    Crooke, J. S.

    Keyes, Admiral of the Fleet Sir R.

    Thomas, J. P. L.

    Croom-Johnson, R. P.

    Kimball, L.

    Titchfield, Marquess of

    Cross, R. H.

    Latham, Sir P.

    Tree, A. R. L. F.

    Crossley, A. C.

    Law, Sir A. J. (High Peak)

    Tryon, Major Rt. Hon. G. C.

    Cruddas, Col. B.

    Leckie, J. A.

    Tufnell, Lieut.-Commander R. L.

    Culverwell, C. T.

    Lees-Jones, J.

    Wakefield, W. W.

    Davies, Major Sir G. F. (Yeovil)

    Leighton, Major B. E. P.

    Wallace, Capt. Rt. Hon. Euan

    Dawson, Sir P.

    Levy, T.

    Ward, Lieut.-Col. Sir A. L. (Hull)

    De Chair, S. S.

    Lewis, O.

    Ward, Ire e M. B. (Wallsend)

    Denman, Han. R. D.

    Lloyd, G. W.

    Warrender, Sir V.

    Denville, Alfred

    Lovat-Fraser, J. A.

    Waterhouse, Captain C.

    Doland, G. F.

    Mabane, W. (Huddersfield)

    Watt, G. S. H.

    Donner, P. W.

    MacAndrew, Colonel Sir C. G.

    Wells, S. R.

    Dower, Major A. V. G.

    MacDonald, Rt. Hon. M. (Ross)

    Whiteley, Major J. P. (Buckingham)

    Drewe, C.

    Macdonald, Capt. P. (Isle of Wight)

    Williams, H. G. (Croydon, S.)

    Duckworth, Arthur (Shrewsbury)

    McKie, J. H.

    Wilson, Lt.-Col. Sir A. T. (Hitchin)

    Duncan, J. A. L.

    Macmillan, H. (Stockton-on-Tees)

    Windsor-Clive, Lieut.-Colonel G.

    Eastwood, J. F.

    Macquisten, F. A.

    Winterton, Rt. Hon. Earl

    Eckersley, P. T.

    Magnay, T.

    Womersley, Sir W. J.

    Edmondson, Major Sir J.

    Makins, Brig.-Gen. E.

    Wood, Hon. C. I. C.

    Ellis, Sir G.

    Manningham-Buller, Sir M.

    Wright, Squadron-Leader J. A. C.

    Elliston, Capt. G. S.

    Margesson, Capt. Rt. Hon. H. D. R.

    Elmley, Viscount

    Mayhew, Lt.-Col. J.

    TELLERS FOR THE NOES.—

    Emery, J. F.

    Meller, Sir R. J. (Mitcham)

    Captain Hope and Captain Dugdale.

    Emmott, C. E. G. C.

    Mellor, Sir J. S. P. (Tamworth)

    NEW CLAUSE.—(Abolition of Entertainments Duty on certain entertainments.)
    Entertainments Duty shall cease to be charged on payments for admission to entertainments held on or after the first day of
    436
    January, ninteeen hundred and thirty-eight, which are entertainments specified in Subsection (3) of Section one of the Finance Act, 1935, that is to say, entertainments where all the performers whose words or actions constitute the entertainment are actually present

    437
    and performing and the entertainment consists solely of one or more of the following items, namely, a stage play, a ballet (whether a stage play or a music hall or other variety entertainment), a circus or a travelling show. —[Mr. Denville.]
    Brought up, and read the First time.
    7.52 p.m.
    Mr. Denville: I beg to move, "That the Clause be read a Second time."
    It is with a great deal of satisfaction that I bring before the Committee suggested legislation which has for its purpose the relief of the living stage from any form of taxation. It will be within the memory of hon. Members that the late Chancellor of the Exchequer, now the Prime Minister, a year ago expressed his deep concern with the position of the living stage, and gave certain concessions, which have had a wonderful effect on the fortunes of the living theatre. The number of those who have already gone off the dole and public assistance, who have got work through the increased number of openings in theatres and halls, fully warrants my bringing this matter again before the Committee and suggesting to the new Chancellor of the Exchequer that he should be just as sympathetic as his predecessor and consider this very important point. I have not the slightest doubt that we shall get the same sympathy from the right hon. Gentleman. According to the statistics taken out by the Abolitionist League we find that in the actual tax paid during the last nine months there is a tremendous drop, and judging by the number of people who have gone off the dole and off public assistance it would appear that if the tax was removed entirely the Government would make a profit.
    May I say to the Chancellor of the Exchequer that the theatrical profession as a whole would hesitate to put this proposal before the Committee if the country was in a state of danger? No one has shown more patriotism than those who grace the boards of this country, but this is not a question of patriotism but of common sense. What I mean is that if the figures of the Treasury itself show that they would save money if something like 100 theatres were reopened it is a most desirable thing to do. We would not have brought this matter forward this year but for a specific reason. A memorial was presented to the late Chancellor of the Exchequer signed by 300 Members of this House.
    438
    and I ask the present Chancellor of the Exchequer to accept my word that it was not a canvassed memorial. Hon. Members just before the Budget asked me whether I was going to do anything in the matter this year. "If so," they said, "will you put my name to it? "There are 300 Members of this House who are supporting the total abolition of a tax on the living stage, and I think they are entitled to a certain amount of consideration. Surely they represent the feeling of this House and of the country.
    I suggest that there is evidence to show that employment will be largely increased and much more money saved to the State in the way of employment than is being obtained by this tax. The Government might do what is done in some other countries where they give exemptions to companies where the maximum number of living performers appear in the entertainment. I would not give exemption to any theatre which included a panatrope, but only to theatres which employ an orchestra. It is possible for any theatre to escape Entertainments Duty by using methods which in some cases are not questionable, but which in other cases are questionable. There is the theatre, which is stated not to be run for profit, but as an educational force. A large number of theatres have been exempted from this taxation on this excuse, some of them genuine, but in others one can understand what takes place. Far be it from me to say that I should like to see it stopped. I should like to see it go much further. Then there is the touring company. If it makes a claim that it is not being run for profit it can be exempted from the Entertainments Duty. I would press the Chancellor of the Exchequer to do something to prevent this form of exemption, which if it is allowed will lead to disastrous results, morally and financially.
    Mr. Lovat-Fraser: I support the Motion.
    7.57 p.m.
    Lieut.-Colonel Colville: The hon. Member has made an eloquent plea for the living stage, and I can assure him that his words will not fall on unsympathetic ears. But our sympathy must be governed by its practicability. I would remind hon. Members of the steps which were taken recently to assist the living stage.
    Mr. Denville: With success.
    Lieut.-Colonel Colville: I am glad to have that tribute as to the value of the steps which have been taken. The National Government in 1935 thought fit to abolish the Entertainments Duty altogether on prices below 6d. and in the case of the higher prices to make reductions which gave a preference to the living performers. In looking through the hon. Member's Clause I find that he has not reproduced exactly the Section of the Act which gives that relief. He has left out some words. I am not sure whether it is an intentional or a chance omission, but he has left out the words:
    "performance of music (whether vocal or instrumental) a lecture or a recitation."
    I presume his intention is to give relief to all live performers who were assisted by the Act of 1935.
    Mr. Denville: It was thought that if those words were left in a performance with a hurdy-gurdy might be classed as a musical entertainment. The matter was discussed, but we are not particular so long as you give us relief.
    Lieut.-Colonel Colville: The hon. Member is a little too optimistic; I see that there is something behind the omission of those words. The remission which was made has had a beneficial effect. It was given with that intention. Our sympathy, however, must be attended with practicability, and the proposal of the hon. Member would cost about £370,000 this year and £1,250,000 in a full year. The hon. Member said that if the country were in danger, the artists on the stage would be the last people to refuse to do their part, and I agree with him; but I am bound to say that this year is one of great financial strain, and although we listen sympathetically to this proposal, we regret that we cannot accept it.
    Mr. Denville: Will the right hon. and gallant Gentleman say what would be the saving to the State? Our case is that this proposal would save more than it is costing the Treasury.
    8.1 p.m.
    Mr. Herbert Morrison: It appears to hon. Members on these benches that the purpose of this proposed new Clause is a very good one and that it is calculated to assist the preservation of the stage play
    440
    and of the theatres where the entertainment is given by living performers. I understand from the hon. Member who moved the new Clause that a memorial on this matter had the support of 300 hon. Members, and I hope that those who signed the memorial to the Government will follow it up by supporting the proposed Clause in the Division Lobby. Hon. Members on this side hope there will be a Division, and we shall support the proposed Clause. A Division will be a test as to whether the hon. Member and the 300 memorialists will back up the memorial or not.
    8.2 p.m.
    Mr. Ede: I wish to support the views of my right hon. Friend the Member for South Hackney (Mr. H. Morrison). I had hoped that the right hon. and gallant Gentleman would have said something that indicated that when the time came this matter would receive some practical sympathy instead of the easily-spoken sympathetic words with which the proposed Clause has been turned down.
    Lieut.-Colonel Colville: Does the hon. Member deny that practical sympathy was shown only two years ago?
    Mr. Ede: Full gratitude is only a lively sense of favours to come, and not of things done just before a General Election. The right hon. and gallant Gentleman and his friends have "cashed in" on that. I am sure they all did very much better than they expected, and they know they did much better than they deserved; and to bring that up this evening as an excuse for being unsympathetic now is to show a political naivete of which I should have thought no Scotsman would have been guilty. I feel that the hon. Member for Central Newcastle (Mr. Denville) was entitled to something more from the Government than he received in the speech from the Financial Secretary.
    If my right hon. Friend goes into the Division Lobby in favour of this proposed Clause, I shall go with him, because I sincerely believe that it is in the interests of the intellectual life of the nation. After all, I should not have thought that the National Government, with a Conservative Financial Secretary and an ex-Liberal Chancellor of the Exchequer, would be opposed to somebody making a profit out of the intellectual life of the nation. If we are to see that preserved, I am sure it will have to receive assistance

    441
    at least in the form that is advocated by the hon. Member for Central Newcastle, and I am not sure that we shall not have to follow the example of some foreign countries and see that the best forms of the drama and the ballet are supported from public funds by direct contribution. That is not raised in the proposed new Clause, but in view of the entirely unsympathetic statement that the right hon. and gallant Gentleman gave to the Committee, I shall feel compelled to vote with. my right hon. Friend.
    8.5 p.m.
    Mr. Denville: In view of the not unsympathetic answer of my right hon. and gallant Friend, and feeling that nothing would be achieved by pressing this to a Division, I beg to ask leave to withdraw the Clause.
    Hon. Members: No.
    "Question put, "That the Clause be read a Second time."
    The Committee divided: Ayes, 130; Noes, 192.

    Division No. 265.]

    AYES.

    [8.6 p.m.

    Acland, Rt. Hon. Sir F. Dyke

    Hall, G. H. (Aberdare)

    Paling, W.

    Adams, D. M. (Poplar, S.)

    Hall, J. H. (Whitechapel)

    Parker, J.

    Alexander, Rt. Hon. A. V. (H'Isbr.)

    Harvey, T. E. (Eng. Univ's.)

    Parkinson, J. A.

    Ammon, C. G.

    Hayday, A.

    Price, M. P.

    Attlee, Rt. Hon. C. R.

    Henderson, A. (Kingswinford)

    Pritt, D. N.

    Banfield, J. W.

    Henderson, J. (Ardwick)

    Rathbone, Eleanor (English Univ's.)

    Barnes, A. J.

    Henderson, T. (Tradeston)

    Richards, R. (Wrexham)

    Barr, J.

    Herbert, A. P. (Oxford U.)

    Rickards, G. W. (Skipton)

    Batey, J.

    Hills, A. (Pontefract)

    Ridley, G.

    Ballenger, F. J.

    Holdsworth, H.

    Riley, B.

    Benn, Rt. Hon. W. W.

    Hopkin, D.

    Ritson, J.

    Bracken, B.

    Jagger, J.

    Roberts, Rt. Hon. F. O. (W. Brom.)

    Broad, F. A.

    Jenkins, A. (Pontypool)

    Roberts, W. (Cumberland, N.)

    Bromfield, W.

    John, W.

    Rowson, G.

    Brown, C. (Mansfield)

    Jones, A. C. (Shipley)

    Salter, Dr. A. (Bermondsey)

    Burks, W. A.

    Jones, Morgan (Caerphilly)

    Sanders, W. S.

    Chater, D.

    Kelly, W. T.

    Seely, Sir H. M.

    Cluse, W. S.

    Kennedy, Rt. Hon. T.

    Sexton, T. M.

    Clynes, Rt. Hon. J. R.

    Kirkwood, D.

    Shinwell, E.

    Cocks, F. S.

    Lathan, G.

    Silverman, S. S.

    Cove, W. G.

    Lawson, J. J.

    Simpson, F. B.

    Cripps, Hon. Sir Stafford

    Leach, W.

    Smith, Ben (Rotherhithe)

    Daggar, G.

    Lee, F.

    Smith, E. (Stoke)

    Dalton, H.

    Leonard, W.

    Smith, Rt. Hon. H. B. Lees- (K'ly)

    Davidson, J. J. (Maryhill)

    Leslie, J. R.

    Smith, T. (Normanton)

    Davies, S. O. (Merthyr)

    Logan, D. G.

    Sorensen, R. W.

    Day, H.

    Lunn, W.

    Stewart, W. J. (H'ght'n-le-Sp'ng)

    Dobbie, W.

    Macdonald, G. (Ince)

    Strauss, G. R. (Lambeth, N.)

    Dunn, E. (Rather Valley)

    McEntee, V. La T.

    Tate, Mavis C.

    Ede, J. C.

    McGhee, H. G.

    Taylor, R. J. (Morpeth)

    Edwards, Sir C. (Bedwellty)

    MaoLaren, A.

    Thorne, W.

    Evans, D. O. (Cardigan)

    Maclean, N.

    Tinker, J. J.

    Evans, E. (Univ. of Wales)

    MacMillan, M. (Western Isles)

    Viant, S. P.

    Fletcher, Lt.-Comdr. R. T. H.

    Mainwaring, W. H.

    Walker, J.

    Frankel, D.

    Maxton, J.

    Watkins, F. C.

    Gallacher, W.

    Messer, F.

    Watson, W. McL.

    George, Major G. Lloyd (Pembroke)

    Milner, Major J.

    Wedgwood, Rt. Hon. J. C.

    Graham, D. M. (Hamilton)

    Montague, F.

    Welsh, J. C.

    Green, W. H. (Deptford)

    Morrison, Rt. Hon. H. (Hackney, S.)

    Westwood, J.

    Greenwood, Rt. Hon. A.

    Morrison, R. C. (Tottenham, N.)

    Williams, T. (Don Valley)

    Grenfell, D. R.

    Muff, G.

    Windsor, W. (Hull, C.)

    Griffith, F. Kingsley (M'ddl'sbro, W.)

    Naylor, T. E.

    Woods, G. S. (Finsbury)

    Griffiths, G. A. (Hemsworth)

    Noel-Baker, P. J.

    Groves, T. E.

    Owen, Major G.

    TELLERS FOR THE AYES.—

    Mr. Charleton and Mr. Whiteley.

    NOES.

    Acland-Troyte, Lt.-Col. C. J.

    Beit, Sir A. L.

    Cartland, J. R. H.

    Agnew, Lieut.-Comdr. P. G.

    Bennett, Sir E. N.

    Carver, Major W. H.

    Anstruther-Gray, W. J.

    Blaker, Sir R.

    Cary, R. A.

    Aske, Sir R. W.

    Boothby, R. J. G.

    Cayzer, Sir H. R. (Portsmouth, S.)

    Assheton, R.

    Boulton, W. W.

    Cazalet, Capt. V. A. (Chippenham)

    Astor, Hon. W. W. (Fulham, E.)

    Bower, Comdr. R. T.

    Channon, H.

    Baillie, Sir A. W. M.

    Boyce, H. Leslie

    Clarke, F. E. (Dartford)

    Baldwin-Webb, Col. J.

    Brass, Sir W.

    Clarry, Sir Reginald

    Balfour, G. (Hampstead)

    Briscoe, Capt. R. G.

    Cobb, Captain E. C. (Preston)

    Balfour, Capt. H. H. (Isle of Thanet)

    Brown, Col. D. C. (Hexham)

    Colfox, Major W. P.

    Balniel, Lord

    Bull, B. B.

    Colville, Lt.-Col. Rt. Hon. D. J.

    Beamish, Rear-Admiral T. P. H.

    Burghley, Lord

    Conant, Captain R. J. E.

    Beauchamp, Sir B. C.

    Burton, Col. H. W.

    Cooke, J. D. (Hammersmith, S.)

    Beaumont, Hon. R. E. B. (Portsm'h)

    Campbell, Sir E. T.

    Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)

    Courthope, Col. Rt. Hon. Sir G. L.

    Haslam, Sir J. (Bolton)

    Reid, W. Allan (Derby)

    Crooke, J. S.

    Heilgers, Captain F. F. A,

    Robinson, J. R. (Blackpool)

    Groom-Johnson, R. P.

    Hepburn, P. G. T. Buchan-

    Ropner, Colonel L.

    Cross, R. H.

    Hepworth, J.

    Ross Taylor, W. (Woodbridge)

    Crossley, A. C.

    Higgs, W. F.

    Royds, Admiral P. M. R.

    Cruddas, Col. B.

    Hills, Major Rt. Hon. J. W. (Ripon)

    Russell, Sir Alexander

    Culverwell, C. T.

    Holmes, J. S.

    Russell, R. J. (Eddisbury)

    Davies, Major Sir G. F. (Yeovil)

    Hope, Captain Hon. A. O. J.

    Russell, S. H. M. (Darwen)

    Dawson, Sir P.

    Here-Belisha, Rt. Hon. L.

    Salmon, Sir I.

    De Chair, S. S.

    Hudson, R. S. (Southport)

    Salt, E. W.

    Denman, Hon. R. D.

    Hume, Sir G. H.

    Samuel, M. R. A.

    Doland, G. F.

    Hurd, Sir P. A.

    Savery, Sir Servington

    Donner, P. W.

    Hutchinson, G. C.

    Selley, H. R.

    Dower, Major A. V. G.

    Inskip, Rt. Hon. Sir T. W. H.

    Shaw, Major P. S. (Wavertree)

    Drewe, C.

    James, Wing-Commander A. W. H.

    Simmonds, O. E.

    Duckworth, Arthur (Shrewsbury)

    Joel, D. J. B.

    Simon, Rt. Hon. Sir J. A.

    Duncan, J. A. L.

    Jones, Sir H. Haydn (Merioneth)

    Smiles, Lieut.-Colonel Sir W. D.

    Eastwood, J. F.

    Jones, L. (Swansea W.)

    Smith, L. W. (Hallam)

    Eckersley, P. T.

    Latham, Sir P.

    Somervell, Sir D. B. (Crewe)

    Edmondson, Major Sir J.

    Law, Sir A. J. (High Peak)

    Southby, Commander Sir A. R. J.

    Ellis, Sir G.

    Leckie, J. A.

    Spans. W. P

    Elliston, Capt. G. S.

    Lees-Jones, J.

    Stanley, Rt. Hon. Oliver (W'm'I'd)

    Elmley, Viscount

    Levy, T.

    Tacker, Sir R. I.

    Emery, J. F.

    Lewis, O.

    Taylor, Vice-Adm. E. A. (Padd., S.)

    Emmott, C. E. G. C.

    Lovat-Fraser, J. A

    Thomas, J. P. L.

    Emrys-Evans, P. V.

    MacAndrew, Colonel Sir C. G.

    Titchfield, Marquess of

    Errington, E.

    Macdonald, Capt. P. (Isle of Wight)

    Touche, G. C.

    Evans, Capt. A. (Cardiff, S.)

    McKie, J. H.

    Tree, A. R. L. F.

    Everard, W. L.

    Macquisten, F. A.

    Tryon, Major Rt. Hon. G. C.

    Fildes, Sir H.

    Magnay, T.

    Tufnell, Lieut.-Commander R. L.

    Fleming, E. L.

    Makins, Brig.-Gen. E.

    Wakefield, W. W.

    Fox, Sir G. W. G.

    Margesson, Capt. Rt. Hon. H. D. R.

    Walker-Smith, Sir J.

    Fyfe, D. P. M.

    Marsden, Commander A.

    Wallace, Capt. Rt. Hon. Euan

    Ganzoni, Sir J.

    Mayhew, Lt.-Col. J.

    Ward, Lieut.-Col. Sir A. L. (Hull)

    Gibson, Sir C. G. (Pudsey and Otley)

    Mellor, Sir J. S. P. (Tamworth)

    Ward, Irene M. B. (Wallsend)

    Gledhill, G.

    Mills, Major J. D. (New Forest)

    Warrender, Sir V.

    Gluckstein, L H.

    Morrison, G. A. (Scottish Univ's.)

    Waterhouse, Captain C.

    Gower, Sir R. V.

    Munro, P.

    Watt, C. S. H.

    Grant-Ferris, R.

    Nall, Sir J.

    Wells, S. R.

    Grattan-Doyle, Sir N.

    O'Connor, Sir Terence J.

    Whiteley, Major J. P. (Buckingham)

    Gridley, Sir A. B.

    O'Neill, Rt. Hon. Sir Hugh

    Williams, H. G. (Croydon, S.)

    Grigg, Sir E. W. M.

    Orr-Ewing, I. L.

    Wilson, Lt.-Col. Sir A. T. (Hitchin)

    Grimston, R. V.

    Palmer, G. E. H.

    Winterton, Rt. Hon. Earl

    Gritten, W. G. Howard

    Petherick, M.

    Withers, Sir J. J.

    Guinness, T. L. E. B.

    Ponsonby, Col. C. E.

    Womersley, Sir W. J.

    Gunston, Capt. D. W.

    Porritt, R. W.

    Wood, Hon. C. I. C.

    Hacking, Rt. Hon. D. H.

    Pownall, Lt.-Col. Sir Assheton

    Wright, Squadron-Leader J. A. C.

    Hannah, I. C.

    Radford, E. A.

    Harbord, A.

    Rankin, Sir R.

    TELLERS FOR THE NOES.—

    Harvey, Sir G.

    Rathbone, J. R. (Bodmin)

    Captain Dugdale and Mr. Furness.

    Haslam, Henry (Horncastle)

    Reed, A. C. (Exeter)

    Question, "That the Schedule be read a Second time," put, and agreed to.

    Schedules 1 to 3 agreed to.
    Schedules 4 to 7 disagreed to.

  EIGHTH SCHEDULE.—(Enactments repealed.)
  8.11 p.m.
  Lieut.-Colonel Colville: I beg to move, in page 97, line 27, column 3, at the beginning, to insert "Section seventy-four and."
  This is a purely drafting Amendment.
  Amendment agreed to.
  Schedule, as amended, agreed to.

  NEW SCHEDULE.—(Adaptations of Income Tax provisions as to computation of profits.)
  1. The profits shall be taken to be the actual profits arising in the chargeable accounting period, and the principles of computing profits by reference to any other period and, save as provided in the next following paragraph, of allowing losses sustained in any other period to be carried forward, shall not be followed.
  2.—(1) Where a person carrying on a trade or business either solely or in partnership has, before the beginning of the first of the relevant accounting periods, sustained a loss (as computed for income tax purposes) in the trade or business, he may claim that so much of that loss shall be carried forward and deducted from or set off against the profits arising from the trade or business in any of the relevant accounting periods as could, under section thirty-three of the Finance Act, 1926, as amended by section nineteen of the Finance Act, 1932, be carried forward and deducted from or set off against the assessable income profits of the trade or business for the year of assessment corresponding to that accounting period:
  Provided that, in ascertaining the amount (if any) that could be so carried forward and deducted from or set off against assessable income tax profits for a year of assessment corresponding to an accounting period—

  (a) the amount of the assessable income tax profits for that year shall be taken to be equal to the amount of the profits arising in that accounting period (computed in like manner as profits arising in a chargeable accounting period are computed for

  445
  the purpose of the national defence contribution but before making any deduction for wear and tear under the next following paragraph);

  (b) the amount of the assessable income tax profits for any previous year of assessment corresponding to a previous relevant accounting period shall be taken to be equal to the amount of the profits (computed as aforesaid) arising in that previous accounting period; and

  (c) the amount of the deduction (if any) to be made from the assessable income tax profits under Rule 6 of the Rules applicable to Cases I and II of Schedule D for any year of assessment corresponding to a relevant accounting period shall be taken to be equal to the amount which, under the provisions of sub-paragraph (1) of the next following paragraph, falls to be deducted in computing the amount of the profits arising in that accounting period.

  (2) Where a person carrying on a trade or business either solely or in partnership has, in any relevant accounting period, sustained a loss in the trade or business (to be computed in like manner as profits arising in a chargeable accounting period are computed for the purpose of the national defence contribution) he may claim that that loss shall be carried forward and, as far as may be, deducted from or set off against the profits arising from the trade or business in the next relevant accounting period and, if and so far as it exceeds the profits so arising in that period, against the profits so arising in the next such period, and so on.
  In the application of this sub-paragraph to a loss sustained by a partner in a partnership, references to losses or profits shall be construed as references to that partner's share in those losses or profits.
  (3) For the purpose of this paragraph—

  (a) the expression "assessable Income Tax profits" in relation to any year of assessment means the profits or gains of the trade or business assessable to Income Tax under Schedule D for that year;

  (b) the expression "relevant accounting period" means any accounting period falling wholly or partly within the five years beginning on the sixth day of April, nineteen hundred and thirty-seven;

  (c) the year of assessment following that in which an accounting period ends shall be deemed to correspond to that accounting period.

  3.—(1) There may be deducted in respect of any accounting period a sum (ascertained on the like basis as the amount of a deduction for wear and tear is ascertained under Rule 6 of the Rules applicable to Cases 1 and II of Schedule D) which represents the diminution in value by reason of wear and tear during that period of any plant or machinery in respect of which a deduction could be made under the said Rule 6, plus ten per cent. of that sum.
  (2) Without prejudice to the foregoing provisions of this paragraph. there may, in the case of the first chargeable accounting period, be deducted any sum which, under paragraph
  (3) of the said Rule 6 falls to he added to the amount of the deduction for wear and tear to be made under that Rule in charging the profits or gains of the trade or business to Income Tax for the year 1937–1938:
  Provided that if the amount of the deduction falling to be made under this subparagraph exceeds the amount of profits arising from the trade or business in the first chargeable accounting period, the excess shall, in lieu of being deducted in that chargeable accounting period, be deducted in the second chargeable accounting period if and in so far as there are profits arising in that period, and so on.
  4. The principles of the Income Tax Acts under which deductions are not allowed for interest, annuities, or other annual payments payable out of the profits, or for royalties, or (in certain cases) for rent, and under which the annual value of lands, tenements, hereditaments or heritages occupied for the purpose of a trade or business is excluded, and under which a deduction may be allowed in respect of such annual value, shall not be followed:
  Provided that nothing in this paragraph shall authorise any deduction in respect of—

  (a) any payment of dividend or distribution of profits; or

  (b) any interest, annuity or other annual payment paid to any person carrying on the trade or business, or any royalty or rent so paid;

  and, for the purpose of paragraph (b) of this proviso, where the trade or business is carried on by a company the directors whereof have a controlling interest therein, the directors shall he deemed to be carrying on the trade or business.
  5. Income received from investments or other property shall he included in the profits in the cases and to the extent provided in this paragraph, and not otherwise—

  (a) in the case of the business of a building society, or a banking business, assurance business or business consisting wholly or mainly in the dealing in or holding of investments or other property, the profits shall include all income received from investments or other property except—

  (i) income received directly or indirectly by way of dividend or distribution of profits from a body corporate carrying on a trade or business to which the section of this Act charging the national defence contribution applies; and

  (ii) income to which the persons carrying on the trade or business are not beneficially entitled;

  (b) in the case of any other trade or business, being a trade or business carried on by a body corporate, the profits shall include all income received by way of dividend or distribution of profits from any other body corporate in which the first-mentioned body corporate has a controlling interest and which is not liable to be assessed to the national defence contribution:

  Provided that the profits of a body corporate which has a controlling interest in,

  447
  and directs or is entitled to direct the management of, any other body corporate, being statutory undertakers, shall not in any case include any income received by way of dividend or distribution of profits from those undertakers.
  6. Subject to the provisions of the last foregoing paragraph, the profits shall include all such income arising from the trade or business as is chargeable to income tax under Case I of Schedule D, or would be so chargeable if the profits of the trade or business were chargeable under that Case, except income which is, or would be, exempted from income tax by virtue of section thirty-nine of the Income Tax Act, 1918, or section thirty of the Finance Act, 1921.
  7. No deduction shall be made on account of liability to pay or the payment of income tax or the national defence contribution.
  8. No deduction shall be made in respect of any transaction or operation of any nature if and so far as it appears that the transaction or operation has artificially reduced the profits or created or increased a loss or would artificially reduce the profits or create or increase a loss.
  9. In the case of a trade or business carried on in any chargeable accounting period by a company the directors whereof have a controlling interest therein, the deduction to be allowed in respect of the remuneration of the directors shall not exceed fifteen per cent. of the profits arising from the trade or business in that period (computed before making any deduction in respect of the remuneration of the directors), or fifteen hundred pounds, whichever is the greater, so, however, that the deduction shall in no case exceed fifteen thousand pounds:
  Provided that in relation to a chargeable accounting period of less than twelve months any reference in this paragraph to fifteen hundred pounds or fifteen thousand pounds shall be construed as a reference to a sum which bears the same proportion to fifteen hundred pounds or fifteen thousand pounds, as the case may be, as the length of the period bears to twelve months.
  10. For the purpose of the foregoing provisions of this Schedule—

  (a) the expression "company" means a company within the meaning of the Companies Act, 1929, or the Companies Act (Northern Ireland), 1932;

  (b) the expression "director" has the same meaning as in Section one hundred and forty-four of the Companies Act, 1929, except that it includes any person who—

  (i) is a manager of the company or otherwise concerned in the management of the trade or business; and

  (ii) is remunerated out of the funds of the trade or business; and

  (iii) is the beneficial owner of not less than twenty per cent. of the ordinary share capital of the company;

  and, for the purpose of sub-paragraph (b) of this paragraph the expression "ordinary share capital" means all the issued share capital (by whatever name called) of the company,
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  other than capital the holders whereof have a right to a dividend at a fixed rate, or a rate fluctuating in accordance with the standard rate of Income Tax, but have no other right to share in the profits of the company.
  11. Where the performance of a contract extends beyond the chargeable accounting period, there shall (unless the Commissioners of Inland Revenue owing to any special circumstances otherwise direct) be attributed to that period such proportion of the entire profit or loss which has resulted, or which it is estimated will result, from the complete performance of the contract as is properly attributable to that period, having regard to the extent to which the contract was performed in that period.—[Sir J. Simon.]
  Brought up, and read the First time.
  8.12 p.m.
  Sir J. Simon: I beg to move, "That the Schedule be read a Second time"
  8.13 p.m.
  Mr. Alexander: I understood that on the first day that the Committee dealt with the National Defence Contribution there was an arrangement for a general discussion, but I did not understand that the arrangement was such as to preclude the right hon. Gentleman from making any explanation of the Schedule. I am not quite sure what the arrangement was, but in view of the very great importance of the Schedule and the fact that there are some Amendments to it on the Paper, on which we might like to have the Chancellor's views in advance, will the right hon. Gentleman be good enough to say a few words on the subject?
  8.14 p.m.
  Sir J. Simon: I am sure that neither the right hon. Gentleman nor I wish in any way that the Committee should go beyond the general understanding. I think the understanding was that we should discuss the scheme of the tax as a whole and that when each of its compartments came along, such as this one, we would not have a separate discussion. I think I appreciate the sort of point which the right hon. Gentleman wishes to make, and for which I shall watch. There is, for instance, an Amendment at the bottom of page 1662, in the name of the hon. Member for Twickenham (Mr. Keeling) and other hon. Members—in line 91, leave out "the business of a building society or" —and there is an Amendment before that, in the name of the right hon. Gentleman himself, which raises the question as to whether industrial and provident societies should be specially treated under this scheme or not.

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  If that is the point which the right hon. Gentleman has in mind I had intended to make a statement in reference to it on the Amendment, but I am prepared to fall in with any arrangement which seems good to the Committee.
  For the rest, I agree that the Schedule presents a formidable appearance, but hon. Members will recognise that it deals with a very complicated subject and was a very difficult piece of draftsmanship. As hon. Members are, no doubt, aware, in connection with Income Tax several different methods of computation present themselves. For example, generally speaking the Income Tax authorities look at the figures of the previous year when they are fixing the tax for the current year. In this case I did not want to adopt that method. Again, Income Tax practice requires that you should deal with the 12 months and not with the accounting period. That involves a long and elaborate adjustment and it is in that connection that the provisions in the Schedule have had to be carefully drawn so as to allow both for losses and for wear and tear. The effect of it is that as in the case of Income Tax unabsorbed wear and tear is allowed to be set off, however ancient it may be and, as far as losses are concerned, just as in the ca se of Income Tax, you may go back for six years. That is the general scheme, but I think the point which the right hon. Gentleman opposite and no doubt some of his hon. Friends would like to raise can, most conveniently, be raised on his Amendment, and I certainly would put no obstacle in the way of it being considered then.
  8.18 p.m.
  Mr. Barnes: Do I understand from the right hon. Gentleman that if there is no general Debate on the Second Reading of the proposed Schedule, it will be possible to discuss the question of industrial and provident societies and also the question of building societies on the Amendment to which he refers?
  The Deputy-Chairman: Perhaps we had better deal with that point when we come to the Amendment in question. I am prepared to hear any reason in favour of discussing the two matters to which the hon. Member referred when we reach that point, but it was my intention to call the Amendment standing in the name of the right hon. Gentleman the Member for
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  Hillsborough (Mr. Alexander) in regard to societies registered under the Industrial and Provident Societies Acts.
  Mr. Barnes: I wish to know whether it will not be possible to include a discussion on building societies in the discussion on the other societies? There is considerable interest in the Committee in this question, owing to certain statements which have appeared in the Press to-day, and I am sure no one would wish that discussion in reference to the building societies should be ruled out. There is a separate Amendment relating to them in the name of another hon. Member and I think it would be convenient, as there is some similarity between the two cases, that the two Amendments should be taken together.
  Sir J. Simon: If I may make a suggestion—though this is a matter more for the Chair than for me—when we come to the Amendment in the name of the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) about the co-operative societies, I shall be ready, if it is the desire of the Committee and if you, Captain Bourne, think proper, to make a short statement as to what I have in mind about building societies. May I also say that, having looked up the matter, I find that our agreement in the previous discussion was not limited to the new Clauses of the Bill but included also the new Schedules? On that occasion the Chairman said that he had expressly mentioned the new Schedules because they were as important a part of the machinery of the tax as the new Clause.
  8.21 p.m.
  Mr. Boothby: I beg to move, as an Amendment to the proposed Schedule, in line 45, at the end, to insert:
  "The contribution payable for all relevant accounting periods shall not exceed the amount which would have been paid had the total profits accrued evenly over such periods."
  I move this Amendment for the purpose of remedying an inequality which, it seems to me, exists under this Schedule. In paragraph 2 it is provided that in this computation, the losses in any accounting period shall be carried forward and set against the profits in the subsequent relevant accounting periods. In the Debate of 21st June last the Chancellor of the Ex-

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  chequer said the Income Tax scheme permitted the carrying forward but not backward of losses. I submit that a serious inequality may arise out of this provision. This is a tax for five years. There are five relevant accounting periods. I give one illustration and leave the Committee to judge of the possible results. Take Company A and Company B, each of which has made a profit of £60,000 during the five relevant accounting periods with which we are concerned. But Company A has made a loss of £50,000 in the first two accounting periods and has subsequently made that up by profits of £20,000, £40,000 and £50,000 respectively in the last three periods. That company will only be required to pay £3,000 in National Defence Contribution.
  On the other hand, Company B starts off well and in the first three relevant accounting periods makes profits of £40,000, £50,000, and £20,000 respectively. Then it runs into a slump and suffers losses of £20,000 and £30,000 in the last two relevant accounting periods respectively. But that company will have to pay £5,500 to the National Defence Contribution. I cannot see that such an arrangement is fair. We cannot assume that it is inevitable that there will be a boom at the beginning or a slump at the end of the five-year period, or vice versa. We may be going into a slump—two or three weeks ago many people thought we were. I do not think that my right hon. Friend the Chancellor can justify, in this case, not having a "backwardation" as well as a "forwardation" of losses in this computation, simply on the ground that these companies are going to start badly and end well. We all hope that will be the case, but it will not necessarily be so. It may be that in the last two relevant accounting periods many companies will run into losses. The Amendment is designed to remedy the inequality I have indicated and to put both companies, in such a case as I have described on an equal footing. I hope I have made my point, which is a very complicated one, clear to the Committee.
  8.25 p.m.
  Sir J. Simon: My hon. Friend has made the point, I think, plain to everybody in the Committee, and it is indeed an important point, but as things go it is a fairly simple one. It is just this: Here
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  is a tax intended to be assessed and to be paid annually, year after year, though we are providing that it shall extend over a limited period of five years. We are providing that in arriving at the right amount on which the tax is to be paid, we are to allow deductions in respect of past losses, even losses before the date when the tax begins. The question now is whether we shall also allow in effect deductions in respect of losses after the year in which there has been tax paid on a profit. This is not a new suggestion. It happened in the days of the old Excess Profits Duty. I think it is true to say—I do not wish to charge my memory unduly—but I think it was contemplated in the first form of the National Defence Contribution itself. At any rate, it is not contemplated now. The scheme of this tax is that you should apply the calculation here on the lines of the Income Tax and ascertain, in respect to the first accounting period, whether there is any tax to pay, and, if so. it is to be paid; and the same with regard to the second and third accounting periods. You allow losses even though those losses have arisen before the National Defence Contribution begins, but you could not both allow the taxpayer to get off what would otherwise be his tax, let us say, in the first accounting period because of previous losses, and also allow him later on, because of subsequent losses, to get off this tax then. He cannot have it both ways. You can imagine a case where a man in the year escapes Income Tax because he has previously borne a loss, and in the year 2 he is able to avoid tax because he has not yet exhausted his loss and in the year 3 the business begins to pay and he starts to pay tax. After his return to prosperity, however, the man in his last two or three years make losses. But he will not be entitled, and his executors will not be entitled, to say, "My man has paid too much and you must give him something back." This tax must be dealt with year by year.
  Mr. Boothby: In view of the right hon. Gentleman's explanation, which seems to me to be very clear and adequate, I ask leave to withdraw my Amendment.
  Amendment, by leave, withdrawn.
  8.30 p.m.
  Mr. Alexander: I beg to move, as an Amendment to the proposed Schedule, in line 87, at the end, to insert:

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  "Provided also that in the case of a society registered under the Industrial and Provident Societies Acts, 1893 to 1928, the provisions of sub-section (4) of Section 32 of the Finance Act, 1933, shall apply."
  I was very interested to note in the speech which the Chancellor of the Exchequer has just delivered in reply to the last Amendment that he referred to the fact that the National Defence Contribution in its new form is based upon the principle of the Income Tax. I think it is true to say that the Amendment which I am moving is true to the principles of the Income Tax. We have already, from this side of the Committee, stated our profound objections to mutual surpluses which are not profits being assessed at all in respect to this tax. But now that we come to the Schedule, having disposed, unfortunately to our defeat, of that point, we are entitled to argue, and I think to argue with force, that if industrial and provident societies are to be included within the ambit of National Defence Contribution, the Government should be true to their own statement with regard to the structure of the tax and see to it that, as far as these industrial and provident societies are concerned, they are not treated outside the principles of the Income Tax under which they are assessed to that tax. The effect of the Sub-section of the Act of 1933 to which I have referred will be seen, if I read Sub-section (4), paragraph (a), where it says:
  'A registered society is entitled to have the amount of Income Tax which, but for any relief under this paragraph, it would be liable ultimately to bear for any year of assessment, reduced by a sum representing tax on the amount of share interest or loan interest paid in that year by the society without deduction of tax in accordance with the aforesaid provisions of this Section."
  That secured to the industrial and provident societies at the time when the Government brought these societies within a general assessment to Income Tax that, as they were not permitted—it was not their request; it was the Government's orders—to deduct tax from the interest paid on the shares of their members, they were to be allowed a deduction from their then computation of the amount paid out in share interest, and I take it that the Government at that time settled in their own minds not only that that was to the advantage of the Board of Inland Revenue, but that it was also a recogni-
  454
  tion that that advantage to the Board of Inland Revenue was based upon the fact that the majority of the members of the industrial and provident societies then to be assessed were below the taxable limit. I take it also that the Government, in coming to that arrangement, settled in their own mind—and I want the Chancelor to listen to this, if he will—
  Sir J. Simon: I am very interested.
  Mr. Alexander: I take it that the Government settled in their own mind that the provisions of Section 32, Subsection (4), were, in their view, just, not only in relation to the members of the co-operative societies, but in relation to the rest of the taxable community; and if this tax is now to be paid, as the Chancellor has just stated, on the principles of the Income Tax, we are not asking anything extraordinary, and we are not asking anything unjust—in fact, we are only asking for a redemption of the principle settled by the Chancellor of the Exchequer of the day in 1933 and, secondly, for a redemption of the pledge that this tax would be based on Income Tax principles—when we ask that these societies shall be allowed to claim the benefit of what the National Government in 1933 said they should be allowed to claim in dealing with Income Tax.
  I pass now to my next point. After listening to the various Debates, it is abundantly clear that the effect of the Chancellor's new proposal will be that no company taxed upon its profits for National Defence Contribution will in any circumstances be called upon to pay a larger sum than 20 per cent. of the standard rate of Income Tax for which it is assessed. May I put it this way, that if a company is assessed at 5s. in the £ on a net computation of £100,000, it will pay £25,000 in tax? On that basis the same company on the same computation—arrived at, of course, before the amount of Income Tax is assessed and paid—will, for the purpose of National Defence Contribution, pay £5,000, that is, 20 per cent. of the amount to be paid in Income Tax. When we examine the incidence of this tax on co-operative societies registered under the Industrial and Provident Societies Acts, a different picture presents itself. If we are not able to secure the Amendment for which we are asking, and which will provide that we shall be allowed, as

  455
  in the case of Income Tax, to charge our share interest against the net computations for tax, we shall have a larger field of taxation brought into assessment for National Defence Contribution than, is allowed to be brought into computation for Income Tax. That is an absolute denial of the pledge of the Chancellor that this tax is based upon the principles of Income Tax.
  Suppose we substitute for a company an industrial and provident co-operative society, and suppose again that the net sum to be assessed for Income Tax is £100,000, the tax upon which for Income Tax is £25,000. On the average, from the computation that we have worked out, if we are not allowed the deduction of share interest for which we are asking in this Amendment, instead of our National Defence Contribution being, as in the case of a company, £5,000, it will be nearer £9,000. In other words, instead of paying 20 per cent. of the standard rate of Income Tax as our National Defence Contribution, we shall pay about 35 per cent.—and that in spite of the fact that the very arrangement which the Government entered into in 1933 in regard to industrial and provident societies is proof positive that they recognised that the majority of the shareholders of those societies are below the taxable limit. I say that that is an injustice that ought not to be tolerated. The answer which the Chancellor made to arguments which I and my hon. Friends put up on this question at an earlier stage of the Finance Bill did not satisfy me at all. They certainly brought my societies no relief. In view of the fact that, as my hon. Friend the Member for South East Ham (Mr. Barnes) has mentioned this evening, there appeared in the Press this morning a notice that it is hoped that there will be a concession by the Chancellor to building societies, I hope that the arguments which we are now addressing to the Chancellor may have a more sympathetic and effective hearing than they had when we were speaking in an earlier part of these Debates.
  I want to stress that those of us who are pleading for this elementary piece of justice to industrial and provident societies have no desire to try and prevent the Chancellor from giving equal
  456
  justice to those people who have also had their Income Tax basis settled in the past and who are in the building societies. We have no desire to prevent it; rather we want to see that whatever piece of justice is due to the non-taxable members of the building societies, shall be rendered to them by the Chancellor; but when one comes to the merits of the industrial and provident societies' case, I want to submit that they are just about equal to those of the building societies. I want the right hon. Gentleman to address his mind to the points in which our case resembles so closely the case of the building societies. Let us first look at the nature of the share capital for which we are asking for treatment in National Defence Contribution computation on the same basis as for Income Tax under the 1933 Act. What, after all, is the share capital of industrial and provident societies? It is in no sense the limited fixed share capital that we get in the case of a registered company under the Companies Act. It is not of the nature of a company's shares which go on for ever until the company is liquidated or there is some special order of the Court. The shares of industrial and provident societies are contributed to day by day and week by week, as well as by the more or less fortuitous savings affected by the co-operators in their mutual trading. They are all withdrawable, some at short notice, some upon demand. A very large proportion of the share capital of industrial and provident societies is available to the poorest of the poor by their simply walking into the secretary's office and saying, "I want some money." If there is any case at all for the treatment of building societies on a special basis in that regard, there is 100 per cent. the same case for the treatment of the share capital of the industrial and provident societies.
  The Deputy-Chairman: I realise that it is difficult for the right hon. Gentleman to keep separate his Amendment and the Amendment in the name of the hon. Member for Twickenham (Mr. Keeling) in line 91, to leave out "the business of a building society or." The positions are not the same, but, roughly speaking, both of them under the Income Tax law have certain exemptions by which they pay less Income Tax than a company. I think that it is going to be difficult to

  457
  keep this discussion free from a discussion on building societies, and I suggest that the Committee might take a general discussion on the two Amendments.
  Sir J. Simon: I shall be ready to do that if it is desired. I would only utter a word of warning that I do not take the view that the situations of the cooperative societies and that of the building societies correspond, but that is a matter which we shah have to discuss.
  Mr. Holdsworth: I submit that we should take them separately. I agree that there is a similarity, but there is also a difference, because building societies work under an Act of their own.
  The Deputy-Chairman: If the Committee wish to tike them separately, I have no option but to follow the Committee, but it will be difficult for the right hon. Gentleman to carry on his argument if we say that building societies should not be mentioned on his Amendment.
  8.45 P.m.
  Mr. Barnes: Further to that point of Order. I was rather under the impression that we had largely settled this difficulty by an understanding on all sides of the Committee that on this Amendment the Chancellor would make a statement which would inform the Committee of the terms he proposed for building societies and that the Chair would not adopt too rigid an attitude regarding references to the Chancellor's statement.
  Mr. Holdsworth: I do not press my opposition. I am quite willing to fall in with the suggestion, but I still submit that there is a difference as far as the Act is concerned.
  The Deputy-Chairman: The hon. Member will not be precluded from raising a point which is under the Act dealing with building societies. All I am anxious to do is to secure that we should not have overlapping discussions and the arguments repeated on the Amendment of the hon. Member for Twickenham (Mr. Keeling) and therefore I suggest that we should take the discussion on this Amendment, leaving it open to the hon. Member for Twickenham to move his Amendment formally, because it is very difficult to distinguish these two questions—
  458
  I do not say in detail, but in general principle.
  Mr. Keeling: I am quite agreeable to that suggestion.
  Mr. Alexander: I am very much obliged to the hon. Member for Twickenham. As you, Captain Bourne, have clearly perceived, in view of the announcement in the Press this morning that concessions are to be made to building societies it would be very unfortunate if, after we had discussed and taken a decision on this Amendment, we then had to discuss building societies, because if a concession were given to them we should then have no redress. Therefore, I am obliged to the hon. Member, and I am sure that the decision to deal with the matter in this way will not in any sense injure his case, because my hon. Friends on this side are just as anxious that justice should be done to building societies as we are insistent that justice should be done to the industrial and provident societies. I do not want to repeat my arguments, but I think it is incumbent upon me to emphasise that in its nature and in the handling of it the share capital of an industrial and provident society is in all respects similar to that of a building society. It is within the definition of the well known Dunedin judgment, given in a building society case, but does not come within the usual description of share capital from the point of view of an ordinary company. I stress this—and this is the case the Chancellor has to answer—that whatever concession is made to the share capital of a building society must in justice, if justice is to be done, be given to an industrial and provident society.
  There is this further point, that in the co-operative movement we are exceedingly active in the very class of work which is being done by building societies. We have within the movement the fifth or sixth largest building society, which is working under the Building Societies Act. That by no means ends the interest of the co-operative movement in the problem of housing, because we are just as eager to assist the working classes to provide themselves with houses, and do our best in that direction. From that point of view, also, we claim that whatever concessions may be made to the building societies—and we hope they will be made—shall be made also to the industrial and provident societies.

  459
  I come back to the point to which I referred in my opening remarks. We have been given to understand that the whole structure of the National Defence Contribution is drawn up on the basis of the principles underlying Income Tax. The principles of Income Tax as applied to co-operative societies were settled for us by the Government under the Act of 1933, and it is a gross injustice that that basis should be departed from in this new tax. If the shareholders of a company were persons who, in the main, were below the taxable limit, I have no doubt that the Board of Inland Revenue would be pressing very urgently that companies should be put on the same basis of computation as is applied in the case of industrial and provident societies, but that is not done because the shareholders of companies are in the main not persons below the taxable limit. The shareholders in the case of co-operative societies are in the great majority of cases below the taxable limit, and yet the societies are being asked to bear a higher ratio of National Defence Contribution to their Income Tax Contribution than in the case of a company under the General Companies Act.
  I suggest to the Chancellor that there is a way out for him which would give no cause of offence to any company, building society, industrial or provident society or any other class of taxable citizens. If he wants to achieve that simple method of taxation which he has arrived at in this second edition of National Defence Contribution, let him leave the tax as it is, if he likes, but let him add the rider that in no case shall a firm, company or society be called upon to pay more than one-fifth of the sum it would have to pay by way of Income Tax. In the case of companies that could lose him no revenue. Not a single company will pay more. If in the case of a building society he takes the actual amount of the Income Tax which is paid under the special arrangement for building societies and asks them for no more than one-fifth of that amount as National Defence Contribution, there will be no great cause of complaint. If, in the case of industrial and provident societies, he says, "You will not pay more than one-fifth of the sum which we thought we had justly assessed you for as Income Tax in 1933," he will be treating us exactly
  460
  as he ought to treat us. Then it will be only a very small portion of the justice we ought to have, for what we ought to have is a complete exemption of societies which do not trade for profit and do not make a profit but which return to their members the whole of the surplus which they create in spending their taxed incomes. This concession is only a part of the justice we ought to have, and we hope that the Chancellor will give what I have said very careful consideration.
  8.54 p.m.
  Sir J. Simon: I think it will be for the convenience of the Committee if I say something at once—I have the Attorney-General beside me—because I agree that this is a matter which we shall have to thresh out. I will divide what I have to say as nearly as I can into parts. First I should like to say a word or two on the subject of computing this charge on Income Tax principles. It may be partly my fault, because I think I used rather loose language about this point, but I will use accurate language now, and I hope that I shall be able to satisfy completely any impartial man. The language of the Clause which we have already passed, is:
  "For the purpose of the National Defence Contribution the profits arising from a trade or business in each chargeable accounting period shall be separately computed, and shall be so computed on Income Tax principles as adapted in accordance with the provisions of the Schedule "—
  which we are now discussing.
  I would ask the Committee to observe that, so far as industrial co-operative societies are concerned, you may look at the Schedule from one end to the other, and you will not find any provision in it about industrial and provident societies at all. Nothing has been done, in framing this tax, to alter Income Tax principles, which apply for the purpose of computing the charge against co-operative societies. You will not find anywhere in the Schedule something which says: "But, in the case of co-operative societies, something special must be done." The right hon. Gentleman showed in his speech that he perfectly appreciated that, although we have said nothing about it, unless something is done the co-operative societies will be taxed. It is completely wrong to suggest that we, the Government, have introduced into the Clause some special

  461
  provision to catch co-operative societies. We have never mentioned them from beginning to end in our Schedule, and the language of the Clause applies without any qualification whatever.
  It is not true that our Income Tax law provides that there shall be no charge on the profits made by mutual trading except so far as they are not distributed. The Section which has to be looked at is Section 31 of the Finance Act, 1933, which says:
  "In the application to any company or society of any provision or rule relating to profits or gains, …any reference to profits or gains shall he deemed to include a reference to a profit or surplus arising from transactions of the company or society with its members which would be included in profits or gains for the purposes of that provision or rule if those transactions were transactions with non-members."
  That is to say, in 1933 the Finance Act came along and said—I am not discussing whether rightly or wrongly, and I perfectly understand that the right hon. Gentleman reserves his protest—that notwithstanding that a co-operative society is carrying on its business by way of mutual trading with its members, this is what the law calls profits, and we shall henceforward regard the result of that trading as profits. Section 31 does not say that there shall be no charge of Income Tax against a co-operative society except in so far as they do not distribute their profits; it taxes the whole of their profits. It is not we who have introduced something special about co-operative societies, but the right hon. Gentleman who is seeking to modify the charge. I am sure there is a perfectly genuine misunderstanding.
  After the Finance Act, 1933, had made the charge upon the whole of the profits made by co-operative societies, it went on, in the next Section, to say:
  "A registered society shall be entitled to have the amount of Income Tax which, but for any relief under this paragraph, it would he liable ultimately to bear for any year of assessment, reduced by a sum representing tax on the amount of share interest or loan interest paid in that year by the society without deduction of tax in accordance with the foregoing provisions of this Section."
  That was to say that it is true that the society is charged on the whole of its profits but, none the less, it shall not be required to pay on the whole of them directly but only on the portion which it does not distribute to its shareholders. That left the Inland Revenue to deal
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  with the shareholders who had received their share of profit, who were within Income Tax limits and were themselves liable to the payment of tax. In other words, in the case of a limited company you not only assess it but you make it pay on the whole of its profits. If it distributes part of the profits to its shareholders, when it declares a dividend it is entitled to pay the dividend less tax. The machinery which was adopted in the Finance Act, 1933, did pot charge a cooperative society only on its undistributed profits, but on the whole of its profits. It went on to say that, as a matter of machinery, where the co-operative society paid tax on so much of its profits, that would be sufficient discharge but that the members could be looked to to pay their respective portion of Income Tax themselves, because the dividend was paid free of tax.
  The proposal which I am putting forward is simply an application of the law which says that just as co-operative societies are charged on the whole of their profits, so they shall be charged for the purposes of the National Defence Contribution. The assertion has been so often repeated that I hope I have made it plain that we are not introducing anything exceptional to catch co-operative societies but merely applying what is in the ordinary law. The Finance Act, 1933, said, as a matter of machinery: "Get the tax, first by getting from the co-operative societies themselves the portion charged on the profits that were not distributed, and secondly by going to the individual cooperative society member and collecting the tax from him." I have no doubt that a very large number of co-operative society members would be below the Income Tax limit and that this machinery was felt on the whole to be more convenient. It is only fair to say that.
  At the same time, it does not follow that, because you receive a distribution from a co-operative society as a shareholder, you have not to pay Income Tax on what you receive. You certainly have to pay Income Tax on what you receive, unless you can show that you are below the limit. Therefore, if I may say so, the right hon. Gentleman is in error when he says that the Amendment would apply the Income Tax code. If we were to accept what the right hon. Gentleman now proposes, we should, in the first place,

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  limit the charge against co-operative societies to that portion of their profits which they do not choose to distribute; and, secondly, we should have no remedy against any one of the shareholders who receives his portion of the profits. I think I have shown to the Committee that it is a mistake to suppose that in our proposal we are going out of our way to do something strange at the expense of the cooperative societies. The real question before the Committee is whether the large number of people who are interested in that class of enterprise and who are people of small means who would not be liable to Income Tax can on that account claim to be treated more favourably than the ordinary limited company?
  Mr. Barnes: Not more favourably.
  Sir J. Simon: I will say "differently." The real point for the Committee to decide is whether the co-operative societies, in view of the fact that so many of their members are people of small means, are entitled to get out of the ordinary application of the law. This is not a tax like Income Tax, with elaborate provisions for exemptions and abatements to individuals who are persons with small incomes. It may be said that it would be a better tax if that were the case; it would certainly be a much more elaborate tax, since there would have to be provisions for exemption or abatement as in the case of Income Tax. This tax, however, addresses itself directly to the enterprise, whatever it is—it may be a firm, it may be a limited company, it may be a co-operative society—and it says: "If you, during the next five years, make a profit, I call upon you, the enterprise, to make a contribution which is calculated on that profit. I do not inquire what you are ultimately going to do with that profit. You may be a company which is going to distribute the profit to an enormous number of shareholders each of whom holds one share; or you may be a company which will distribute its profit to a very small number of much richer shareholders; or you may not be going to distribute it to shareholders at all, but may be putting it to reserve. But in the case of an enterprise which makes a profit, in view of the heavy burden that is falling on the country as a result of the special expenditure which we have to incur in connection with the defence of the country, which affects you just as much as it does me, which affects
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  the poor man and the rich man alike, I ask for a certain contribution from the enterprise itself."
  That is what makes it a simple tax on profits. The suggestion has already been made that it might work very hardly on the ordinary shareholder, and I agree. I can imagine the case of a poor man who holds two or three shares in some industrial company, and who, for aught that I know, is quite within his rights in getting exemption or abatement as far as income tax is concerned; but that is not the way in which this tax works. It is much more like what we may call a levy or a licence which is paid by the enterprise itself as a condition of carrying on its profitable undertaking during the next five years, and consequently it would not be in accordance with the nature of the tax to treat the co-operative society as though it were entitled to exceptional treatment owing to the fact, which I agree is a fact, that to a very large extent its members are people of small means.
  I hope I have made plain to the Committee the basis of the tax, because, if we do not understand that, we may get into all sorts of confusion. It is open to anyone to say that it is not the sort of tax that he approves of, but I think that broadly speaking, in the exceptional circumstances, and, I agree, with a certain roughness of administration, it is the right kind of tax to apply. At any rate, I proceed on that basis, and, if it be right, I do not believe there is any case for saying that you have to consider how the money is going to be distributed after it has been taxed. There is no question at all of putting a tax on loans, which are excepted by the general provision which we have made in the case of all enterprises unless they happen to be engaged wholly or mainly in lending money at interest; but I really do not see any justification for making the exception that is now suggested in the natural operation of the law.
  I promised the hon. Member for East Ham, South (Mr. Barnes) that I would take the opportunity of saying how building societies were affected. It is only fair that I should do so now, especially as you, Sir, have allowed the two matters to be dealt with side by side. I quite see that, while the right hon. Gentleman does not wish building societies any harm, if

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  there be an argument to be drawn from any special treatment which they might receive he is entitled to know what it is while we are discussing the co-operative societies. It seems to me that there is one particular in which building societies stand quite apart from the general scheme of the tax. It is not a. question whether the members of a building society are poor people. It is a wholly different point. It seems to me fair for the Committee to consider when the time comes whether or not a building society, which discharges very special and very important functions to the State as a whole in assisting the building and owning of houses, which is a thing which I wish to promote, should come under the full force of the tax. I am not proposing to exempt them, I need hardly say.
  I have heard suggestions that co-operative societies should be exempt, that building societies should be exempt, indeed that all sorts of enterprises should be exempt. But it appeared to me that it might be fair in this case to say, You have three sorts of income. You have first of all the income which is the interest paid by those who borrow from you. There is a large fund coming into the societies in the form of interest on the money that they have lent. In the second place you have interest which you pay in profits to your shareholders, and in the third place you may have a balance which you put to reserve. If you were to apply this National Defence Contribution to building societies without drawing any distinction at all you would not treat the interest that they get from their borrowers as part of their income for this purpose but you would apply 5 per cent. to the profits that they distributed to their members and the profit that they put to reserve. I think that a case is made out having regard to the special functions that building societies perform and the nature of their business, for saying that they ought not to bear the whole burden of the tax. What I have in mind is that we should add to the two items which would bear tax a third, namely, the interest that they receive from borrowers, and then we should apply a substantially lower rate of duty than 5 per cent. to the gross figure. Instead of applying 5 per cent. to the net figure apply a lower percentage to the gross figure.
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  Now I want to discuss with the Committee whether or not that relief which I think it would be fair to give to building societies in itself makes a case which would otherwise not exist for relief to cooperative societies. Of course, it would obviously apply to the great building society to which the right hon. Gentleman referred, the Co-operative Building Society, but a co-operative store is manifestly carrying on a business which is in the most active competition with similar businesses carried on by firms and companies. I should find it very difficult to justify giving co-operative societies relief and at the same time insisting on the full tax being paid by firms and companies in the same business. I know the technical argument—and I do not minimise it—that mutual trading is not really a profit, but once you have Parliament taking the view it has taken ever since 1933 that, notwithstanding that the profits of a co-operative society are mutual, they must be treated as profits for the purpose of Income Tax, I cannot see why you should draw a distinction between these two enterprises. I cannot see why a co-operative boot factory should be favoured as compared with another boot factory belonging to a partnership or a company. I do not see that there is a justification on that ground for exceptional treatment.
  A building society is in quite a different case. A building society is not in active competition with someone else. It is organised under a special Act of Parliament in order to give a particular kind of assistance to people, very often people in humble circumstances, and we are bound to ensure that we do not upset the whole financial foundation of the enterprise. Nothing would be more serious than to force them to increase the rate of interest which they charge to those who borrow from them. Therefore I think there is a perfectly good case for their being treated more lightly, but I do not think that would justify the application of a similar method to co-operative societies. Will the Committee forgive me for a moment? I am told that I made a statement which was not quite right and that I spoke of interest received by building societies from borrowers when I should have said interest paid by the societies.
  Mr. Alexander: On deposit.
  Sir J. Simon: The watchful people who guard me tell me that I made a mistake, and I hope I may be forgiven. Those are the reasons why I think that the method which I suggest is proper. I do not think there would be any justification at all for treating co-operative societies on the basis that for the purpose of the tax the only income that should come under review is their undistributed income. That is one of the reasons why the ingenious formula of the right hon. Gentleman will not do. He says, "Why do you not say that no one is to pay more than a fifth of what they would pay to Income Tax?" I do not think he appreciates that a co-operative society is charged on the whole of its profits.
  Mr. Alexander: What company will pay more than a fifth of its Income Tax?
  Sir J. Simon: The point is that a cooperative society itself is charged to Income Tax on the whole of its profits. To give a simple illustration, if a cooperative society makes £100,000, by Section 31 of the Finance Act it is charged Income Tax on £100,000. The right hon. Gentleman thinks it is only charged with that portion which it chooses to distribute. It is not true. That is the very reason why you do not find in the scheme that I am putting forward any special provision for the purpose of charging National Defence Contribution on the whole profit of the societies. I do not need any. They come into it naturally. The same is true of a limited company. If a limited company makes £100,000 it also will be assessed in the same way. The fallacy of the position of hon. Gentlemen opposite is that they will regard a co-operative society as though it had no responsibility in respect of Income Tax save in regard to that portion of its profits which it does not distribute. That is mere machinery. The law says that all profits of a co-operative society have to be taxed. It then goes on, as a matter of machinery and convenience, to say: "If you will pay tax on that part of your revenue which is not distributed we will look to your members for the part necessary to make up the total." Therefore, the conclusion I have come to is that I do not see any justification, the tax being what it is, a levy or toll or licence on an undertaking which is making profits, why the tax should not be paid by co-operative societies along
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  with their competitors and rivals. But a case can be made in the special circumstances of the building societies, not indeed to relieve them altogether, but to give them a substantial measure of assistance.
  Mr. Broad: Will the right hon. Gentleman tell us clearly what his proposal is in regard to building societies now that he has been corrected?
  Sir J. Simon: Yes. If building societies were to be assessed to the National Defence Contribution just like anybody else you would first of all subtract from the gross total of profits interest paid and you would apply the tax, five per cent., only to the balance. My suggestion is that in the case of building societies you would not allow them to subtract the interest paid to depositors, but you should add that to the balance of profit, making therefore a bigger total, but that having got that bigger total you should charge on that bigger total a smaller percentage. That is my suggestion. I will tell the Committee definitely what sort of percentage it will be as soon as I know precisely. The general effect will be that building societies will be saved a substantial part of the tax which would otherwise fall upon them.
  Major Milner: When the right hon. Gentleman refers to depositors does he mean also those commonly termed shareholders in building societies, or not?
  Sir J. Simon: Profit that will be paid to shareholders on distribution of dividend comes under the tax anyhow.
  9.28 p.m.
  Mr. Barnes: This is the third occasion when I have had the privilege of listening to the Chancellor dealing with this point, and in my judgment the issue has been evaded on every occasion. When we are dealing with the exemption of small businesses earning up to £2,000 a year profits the Chancellor can see and appreciate reasons that should differentiate between this type of business and other enterprises of a similar character. When it comes to the question of enterprises earning up to £2,000 profits the enterprises earning up to £2,500 or £3,000, although they may be in the same type of business and competing with each other the Chancellor can discover plenty of reasons for exempting

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  that type of business. When we were discussing the exemption of the professions, again the Chancellor could see many reasons why persons and concerns—architects, chartered accountants, the medical profession and others—earning large incomes should be exempted from the tax. When we were discussing the exemption of utility companies, although they are engaged in business and in competition with similar undertakings, many of them making large profits, the Chancellor could discover considerable reasons why they should be exempted from the tax. When we were discussing insurance companies the Chancellor could see the reasons why that proportion of the profits returned to policy-holders should be exempted from this tax.
  Now when we arrive at the problem of the building societies, although we have not been given the new calculation, the Chancellor has admitted, but has not stated specifically the functional reason except that they perform the social service of providing housing for the people and giving easy facilities for encouraging decent housing for the people, that he can see adequate reasons for departing from the principle of the 5 per cent. tax and agreeing to a lower computation. I welcome the decision of the Chancellor to make this concession to the building societies. This is not the occasion to discuss his concession, but it appears to me that if he departs from the principle of the 5 per cent. tax—I am glad that he is departing from it in the case of the building societies—I should have thought that it was a stronger reason for putting building societies among the exempted groups completely rather than taxing them 1 or 2 per cent.
  Let me now deal with the equity point I have stressed all the way through these discussions and compare building societies with industrial and provident societies. In the case of building societies there are roughly 2,009,817 share investors and the capital they own is £480,582,675. The average holding of shareholders is £239 2s. 4d. That is for the year 1936. There are 777,031 depositors and the capital liabilities are £141,279,020. The average share is £181 16s. The average shareholding of members of industrial and provident societies for 1935 worked out at £18 3s. per member. I put this to the members of the Committee. There
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  is no dispute from any side of the Committee that building societies should receive this advantage, but does anyone suggest for a moment that, if a case is made out for differentiation in the case of shareholders of building societies— because that is the way it will operate in a case of this kind—the Chancellor of the Exchequer is justified in getting up at that Box and arguing that he is entitled to differentiate in respect of small businesses up to £2,000 profit, wealthy professional people whose incomes may be anything from £5,000 to £20,000 a year, to differentiate when it comes to public utility companies, the shares of which are very often held by exceedingly wealthy people in this country—to differentiate with regard to building societies when the average shareholding, as I have indicated, is £239, or 10 times the average amount of the share investment in the industrial and provident societies. The thing to me is untenable.
  I will deal with the point of machinery. We are not discussing here the general argument on Income Tax law such as the Chancellor of the Exchequer tried to ride off upon, on this issue, but the operation of this tax as the fact. In the case of one co-operative organisation under the Growth of Profits Tax, that society would have paid £40,000, but under this new proposal it will pay £120,000. Can the Chancellor of the Exchequer get up at that Box and defend a position of that kind? This tax was commenced for the purpose of recovering to the State some of the excess profits being made to-day out of the necessity of the country, but owing to the political pressure of big business organisations in this country and the financial interests of the City of London the Government and the Cabinet have been compelled to go back upon their major tax proposal in the Finance Bill and to withdraw it. When the Prime Minister withdrew that tax proposal he said that the principle of the tax on profits would be retained. Now we have the position where we get all these exemptions, and yet the Chancellor of the Exchequer cannot find any ground for differentiating in the case of the Co-operative Society.
  I come back to the machinery point. In 1933, when the principle of mutuality was destroyed as far as industrial and provident societies were concerned—we

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  are not arguing that now; it was settled on the previous Amendment—the Treasury, for their own convenience, as the Chancellor of the Exchequer has pointed out, recognised that, if the average shareholding in this type of organisation is £18, there must be millions whose shareholding amounts to only £1, £2, or £3 as the case may be. If you take a large co-operative society operating in an industrial area in the North of England where the shareholding for voting is £2, you will find thousands of the members of such a society who cannot even qualify for a vote because they do not hold the £2 membership share. That being the case, the Treasury recognise that it was not practicable, and they could not justify bringing this share interest into taxation at the source, and they decided, for the convenience of the State and that membership, that the tax should be levied in the hands of the recipient.
  The Chancellor of the Exchequer has pointed out that because of that practice the State loses nothing, because any shareholder who draws interest from his investment in the co-operative society, if he is liable for the payment of Income Tax, has the interest derived from the cooperative society added to his income, and he pays Income Tax on that particular sum. Therefore, the State does not lose anything in the form of revenue. In the case of a limited liability company, as my right hon. Friend the Member for Hillsborough (Mr. Alexander) pointed out, there is no alteration in practice or in the incidence of this tax, but because of the inconvenience to the Treasury they exempted that large proportion of share interest that is not liable to tax. As a result of this method which is adopted they bring back that share interest into our accounts and levy the tax before that share interest is disbursed, and that is where the differentiation is practised.
  That is the position we are asking the Chancellor of the Exchequer to meet, and that is the position which the Chancellor of the Exchequer so far has deliberately evaded. What difference is there in practice or principle in the Chancellor of the Exchequer meeting that point and meeting the other difficulty of the building societies? I venture to suggest that the Chancellor's meeting of the building
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  societies has nothing to do with the equity of the claim of the building societies at all, and that the main influence is that the Government are afraid to face the hundreds of thousands of depositors and borrowers associated with building societies in this country. It would represent a typical political problem if they had had their rates of interest increased from 4 ½to 5 or 5½- per cent. I suggest that that has been a greater influence in the Chancellor of the Exchequer meeting the problem of the building societies, and is the reason why he will not meet the case of the cooperative societies.
  In the case of the member of the building society the effect of the tax would have been felt immediately with the borrower from the building society, and then you would have seen that the principle of the tax is to pass it on to the consumer. In the case of the borrower from the building society the real difference between this tax and the original National Defence Contribution would have emerged. It is a tax which could be passed on to the user or consumer or the borrower or the buyer, as the case may be. In the case of a borrower from a building society the society would have had to pass it on to the mortgage interest rates and the public would have seen the effect of the tax. I want to remind the Attorney-General that when he was answering that point on a previous Amendment he stated that the principle is a tax on profits and not on individuals; 5 per cent. on the profits of a company. My right hon. Friend the Member for Hillsborough has pointed out that in the case of a cooperative society it amounts to more than 5 per cent. under the sum that they paid under the Income Tax law prior to the introduction of this tax.
  Prior to the introduction of National Defence Contribution the operation of Income Tax law on a co-operative society on its undistributed profits yielded a certain sum. Now in the case of a company the yield under National Defence Contribution will be 5 per cent. and in the case of a co-operative society more than 5 per cent. on the sum paid to the Treasury prior to the introduction of National Defence Contribution. I submit to the Chancellor of the Exchequer that he is evading that issue all the way

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  through, and I sincerely trust that between now and the Report stage he will n ot continue to turn a deaf ear to the reasonable, practicable, equitable case we have made, and that he will again look into the matter; that if he cannot agree to the proposal of my right hon. Friend he should ensure that we shall not pay more than 5 per cent., and that he himself will device some method of a machinery character to avoid this penalisation of industrial and provident societies.
  9.45 p.m.
  Mr. Spens: No one could possibly hope to put more clearly than did the Chancellor of the Exchequer the point that has been raised in connection with the co-operative societies. When one case has been put quite clearly from one side of the Committee, as it was put by the right hon. Member for Hillsborough (Mr. Alexander) and the hon. Member for East Ham, South (Mr. Barnes), and it has been answered quite clearly by the Chancellor of the Exchequer, and there are two entirely different points of view, and it is then said that: the Chancellor of the Exchequer has evaded the point, it is very difficult to try to make the point more explicit to the Committee.
  The hon. Member for East Ham, South, had two main points. He referred to certain cases in which the second edition of National Defence Contribution appears to bear more hardly on companies than the first edition. He referred to one cooperative society where he said the tax on the growth of profits had been £40,000 under the first National Defence Contribution, and under the present edition it will be £120,000. That will be the same for many trading companies throughout the country. Therefore, if co-operative societies are rightly taxable, that is not a matter that is peculiar to them, but is one general to every company and every firm that is being taxed. The main point of the right hon. Member for Hillsborough was the question about that portion of the profits of the societies which goes in paying the interest on the share capital. Let me remind the right hon. Gentleman that when he refers to the holdings of share capital in co-operative societies he is referring only to the holdings of individuals. He is not referring to the holdings of other co-operative societies in co-operative societies. There
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  is no limit of the amount of share capital under the law, I think I am right in saying, in—
  Mr. Barnes: The hon. and learned Member is going astray. The whole capital held by the co-operative societies works out at £18 per member.
  Mr. Spens: I am speaking of the holdings of co-operative societies. It is often said that there is the £200 limit under the Act on the holding of share capital in co-operative societies, but it must be remembered that that is the limit on individual holdings and not on the capital which other co-operative societies may hold in one co-operative society. Dealing with that point, the Chancellor of the Exchequer was perfectly right when he said that that sum of money which is earned profit and which goes to the shareholders as part of the total profit comes under Income Tax law, and it is more convenient that that income should be paid without any deduction of tax, just as you have certain public stocks in this country—I think there are some—on which the income is paid without the deduction of tax, and the Revenue has to collect it from the individual who receives it. So in the case of this particular sum of money which is distributed each year by co-operative societies, it is all assessed for Income Tax, but the Revenue has to collect the Income Tax from the recipients, whereas as regards Income Tax on the undistributed profits it collects that direct from the society.
  It is untrue for members of co-operative societies to suggest that there is anything other than Income Tax principles being applied in the application of National Defence Contribution. I do not want to put it more strongly than that. Exactly the same amount of profits as is assessable for Income Tax is being subject to National Defence Contribution, but inasmuch as National Defence Contribution is a tax not on the individual member of a society or the individual member of a company, but is a tax on the business, the society has to pay the whole amount direct to the Treasury. As regards the Income Tax payable in respect of the society's profits you have two different types of machinery. It is exactly the same for a society under the Industrial and Provident Societies Act as it is for a company under the Companies Act. I

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  think the right hon. Member for Hillsborough and the hon. Member for East Ham, South, both said that the people who would feel this tax would be the shareholders of the societies.
  Mr. Alexander: Hear, hear.
  Mr. Spens: That is true. They will feel it indirectly, but not directly. The right hon. Gentleman realises that. He realises that in almost every society it will be paid out of what is at present the undistributed profits available for other purposes. The societies will continue to pay their interest exactly at the same rate. The individual members of the societies will not suffer from it. What will happen will be that the net undistributed fund of profits in the hands of the society will be less by the amount which has gone to the Treasury under National Defence Contribution. That is what will happen in the case of these societies under the Industrial and Provident Societies Act. Therefore, to try to spread about the country the idea that every single, wretched member of an industrial provident society will directly suffer as a result of this payment, is a gross exaggeration.
  What will happen will be that the society will pay their perfectly fair share of National Defence Contribution in the same way as every other company, and they will have a less net sum left for the purposes for which they employ their undistributed profits, in the same way as any ordinary trading company will have a smaller sum left for reserve. Let me say, I hope without egotism, that I made my maiden speech in favour of a tax on co-operative societies in 1933, and I should like to add to-night what I said then, and I believe it to be the truth now as then, that even if there were a direct burden on the members of co-operative societies in respect of National Defence Contribution, I believe that 90 per cent. of those individuals would like to think that they were bearing their share of the burden.
  9.53 p.m.
  Mr. Keeling: I should like to thank the Chancellor of the Exchequer very much for announcing that he is going to make a concession to building societies, the exact terms of which he will state later.
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  I shall therefore not move the Amendments in regard to building societies which stand in my name, and I hope that that will result in the Committee getting to bed earlier than at one time seemed probable. The Chancellor of the Exchequer had very good reasons for distinguishing between co-operative societies and building societies in this matter, and I am sure that in their desire to do justice to co-operative societies the right hon. Member for Hillsborough and the hon. Member for East Ham will not desire to do less than justice to the building societies. In fact, they have said so. We all admit that there are some points of resemblance between them, but that does not justify the inference that in this matter of National Defence Contribution they ought necessarily to be treated alike. My right hon. Friend the Chancellor of the Exchequer mentioned the main reason for different treatment, namely, that co-operative societies compete with private traders who will be paying National Defence Contribution. Over the whole range of trade and industry you have co-operative societies competing with private traders who will pay this tax. In the case of building societies the boot is on the other leg. They get severe competition in the mortgage business from friendly societies who are exempt from the National Defence Contribution. That fact would be a reason for asking that building societies should be entirely exempt from the National Defence Contribution.
  Mr. Alexander: If that is a good argument for building societies, and I am quite prepared to admit that it is, why does not the hon. Member apply the same argument to co-operative societies because of the exemptions given to many of their competitors?
  Mr. Keeling: I was merely explaining why building societies might claim to be exempt altogether: they are subject to severe competition from friendly societies who will not pay the National Defence Contribution. The Chancellor of the Exchequer has said that he is not going to exempt building societies altogether. In the speech I made on the Financial Resolution I did not ask for their total exemption, nor do the Amendments on the Order Paper ask for that. All we ask, and all we are going to get, is some modification of the application of the National Defence Contribution to building

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  societies. Consider what would follow if building societies were subject to the full rate of the National Defence Contribution. It has been estimated that they would pay a total sum of not less than £1,000,000. How are they going to find that sum? It may be suggested that they should reduce the rate which they pay on deposits or on shares, but that would not be possible, because the rate is already very low, and to reduce it still further would undoubtedly dam the flow of money from the public upon which building societies depend for their ability to finance the purchase of houses.
  It follows that the only way in which they could provide the necessary £1,000,000 would be to raise the rates on mortgages, but many building societies are debarred by their rules from raising the rate on existing mortgages, and if they could not spread that £1,000,000 over all existing mortgages they would have to raise it by increasing the rate on new mortgages. One of the largest building societies in England has estimated that in order to provide this National Defence Contribution it would have to raise its mortgage rate from 41 to 6 per cent. Not only would such an increase subject it to very unfair competition on the part of friendly societies who would be able to continue to charge 4½ per cent., but it would strike a very severe blow indeed at the whole of the building societies movement. I am glad that the Chancellor of the Exchequer has appreciated the tremendous importance of not doing anything to discourage the building society movement and has announced that he is prepared to make a concession.
  10.1 p.m.
  Sir J. Simon: May I read to the Committee exactly what the proposal is about building societies? I fear that I did not make it quite clear, and I should be sorry to leave it vague. This is the proposal. Under the proposed concession to building societies, the charge to National Defence Contribution will be on the total income less expenses, but without any deduction for loan interest paid to depositors. Thus, if the total income of a building society less expenses is divided into (a) undistributed income, (b) interest paid on share capital, and (c) interest paid on loans and deposits, the concession will take the form of charging a percentage on the totals of (a), (b) and (c), whereas the
  478
  Committee knows that the general scheme of National Defence Contribution under the Bill as drawn will only be a charge on (a) and (b). My suggestion is that, having regard to the fact that we are adding interest paid on loans and deposits, the charge should be at the rate of 1½ per cent.
  Mr. Barnes: The hon. Member for Twickenham (Mr. Keeling) has said that there would be a charge of £1,000,000 on building societies. Can the right hon. Gentleman say how much the liability will be under the new arrangements?
  Sir J. Simon: I shall be glad to ascertain the amount, or the Attorney-General will give it when he speaks.
  10.3 p.m.
  Mr. Broad: I want to reply to some of the remarks of the hon. and learned Member for Ashford (Mr. Spens), who expressed the opinion that a small shareholder in a co-operative society would pay the amount indirectly and, therefore, would not notice it. That is on the same high level of moral principle as a person who would take a penny out of a blind man's tin because he would not notice it.
  Mr. Spens: I am sure the hon. Member does not want to de me an injustice. The hon. Member for East Ham, South (Mr. Barnes) said the small shareholder would feel it directly, and I was replying to that statement.
  Mr. Barnes: I am afraid the hon. and learned Member is wrong again. I was pointing out that in the case of the building society borrower he would notice it when the interest charged was passed on, and that in the case of the co-operative member he would not notice it.
  Mr. Spens: If the hon. Member will read the OFFICIAL REPORT to-morrow he will find that he used a different expression. He said that shareholders in cooperative societies would feel the tax directly. That is what I understood him to say, and that is what I was answering.
  Mr. Broad: Even if it was put that way there is a precedent for it, because a leading statesman of the last generation said that if you tax a poor man's table he would not know who had robbed him. In this proposal there are exemptions for businesses which make a profit of less than £2,000, and when that is applied

  479
  to co-operative societies it affects nearly 8,000,000 members, none of whom have more than £200 capital in the society. They get a small limited amount of return on their capital, mainly, about 3½ per cent., at the most it is 5 per cent., and that means that the maximum that any individual can get from his holding in a co-operative society is £10, that is if he gets 5 per cent. Therefore, in the case of one co-operative society, £120,000 is to be taken from the small investments of very small people.
  The principle on which the Chancellor proposes to make his concession to building societies is not nearly as strong in their case as it is in the case of the cooperative societies. The building societies compete with the ordinary moneylenders, the finance trusts, and so on, in advancing money. If it is right that the best terms should be given to the workman who wants to buy a house, why should not the same principle apply to those who make the best arrangements they can for buying their bread? Moreover, I would point out that a very big proportion of the members of co-operative societies keep their small savings in the co-operative societies, to accumulate until they are able to get sufficient to put down the deposit for buying a house, and then they borrow the balance from their society. I know of one case where, when the deposit was paid and the remainder borrowed from the co-operative society, the wife wanted the house called "Divi Villa."
  It is in that way that the foundations of thrift are being laid in a large proportion of the working class. The co-operative societies are doing an inestimable service to the community and relieving all kinds of public service from burdens which they might otherwise have to bear. Apart from any economic or monetary value which they have, the co-operative societies have done a great deal to develop thrift, self-confidence and mutual confidence in the great mass of the people. There is no real reason why the building societies should get this relief and the co-operative societies should not get it. It is due to a prejudice against co-operative societies on the part of hon. Members opposite. It was pandering to that pettiness and vindictiveness against co-operative societies which caused the present
  480
  Prime Minister to yield to the entreaties of hon. Members opposite and the present Chancellor of the Exchequer, in spite of all that he has said in the past, to give way now, and follow that policy. Now is the time to take a step in the right direction.
  There are other exemptions for public utility societies. In many cases the amount of interest or dividend on shares is limited in the case of public utility societies, but the limit is a varying one, and some of them pay 10 per cent. or more on the basis of a monopoly. It cannot be contended that those public utility societies are not competitive. They offer all manner of goods in competition with the co-operative societies and private traders. There are agents who go round from door to door pestering the women, and telling them all sorts of tales, in order to get them to buy vacuum cleaners, Hoovers and so on from the private concerns, and then the public utility society —in my area, it is the North Metropolitan —takes over the contract from the Hoover people, makes the debt its own, and acts as a debt-collecting agency. It has the power, to the shame of public utility concerns, to add the hire-purchase instalments to the price of the current, and to take those who default, and who want to surrender the appliance, into the police court in order to secure the full price. That is competition.
  Those are the people who, because they have friends on the opposite side of the Committee, are to be exempted, but these small people with £200 or £20 in the co-operative societies have to contribute to this tax. That is directly opposed to the principle on which the present Prime Minister introduced the first National Defence Contribution. It was said in the country that there would be great profit making out of the rearmament programme by the huge. armament firms, and there was a demand that the industry should be controlled. The present Prime Minister would not agree to that, but said he would tax the profits. The tax was to take back a proportion of the profits made by those who are exploiting the national necessity. Now, contrary to all principles of justice and equity, the Chancellor puts the tax on the people whose maximum income from the co-operative societies is £10 a year.
  That is unfair.

  481
  If the Chancellor will read some of the arguments that his friends have used, he will know that the application of this tax to the co-operative societies, and the relief which is given to building societies and not to co-operative societies, is not due to any sense of fairness, of equity or of fair competition, but is a pandering to the petty and vindictive spite of some trading elements against the co-operative movement, because of its success and because it has proved that we can find from the working classes of the country men and women quite as capable and far more trustworthy than any other class to manage great businesses in this country.
  10.13 p.m.
  Mr. Holdsworth: With regard to the concession made to building societies, I will reserve any criticism that I have to make until I have had an opportunity of studying the concession. I do not know exactly how that concession will work out, but my view was that building societies should not have been subjected to this particular tax at all. In one of his speeches on this subject, the Chancellor of the Exchequer referred to borrowed money, and said some very striking things on that matter. I contend that the whole of the business of the building societies is conducted on borrowed money, because the difference between deposit accounts and share accounts is merely a nominal difference. It is borrowing in the strict sense of the word.
  Another point I wanted to make is that I cannot understand why there is a distinction between the treatment of friendly societies and building societies. It is true that building societies work under the Building Societies Act, but it is also true that they are registered as friendly societies. I should have thought that if an exemption were being given to friendly societies, exactly the same kind of exemption should be given to building societies. I admired the clear way in which the Chancellor of the Exchequer stated the legal position in regard to the assessment of Income Tax on co-operative societies, and I do not think any Member of the Committee will challenge what was said on that point, either by the right hon. Gentleman or by the hon. and learned Gentleman the Member for Ashford (Mr. Spens). But both, I submit, completely missed the point.
  It
  482
  is true that the basis of liability to Income Tax is the same in all cases but it is not true that it works out the same in every case. A special computation is made in the case of the co-operative societies and the building societies. For instance, the building societies pay a special rate which is agreed upon with the Treasury, and my contention is that they should be able to claim in respect of the interest paid on deposits and on share account alike, because of the special rate which they are allowed by the Treasury to pay.
  If it was true, in 1933, in the case of the co-operative societies that a special arrangement was made and that their Income Tax would have been at a higher rate but for that arrangement, then I believe there is no reason why some special arrangement should not have been made in the case of the building societies. A gross injustice would have been created if building societies had only been allowed to charge as expenses the amount paid on deposits. From that point of view, I am glad to recognise that the Chancellor has at least given us something, but I still contend that the building societies are nothing more or less than mutual societies, and that they are not concerned with trading or profit in any sense of those terms. I should like to see the whole of this tax taken off their shoulders, but I reserve any further remarks which I have to make on the subject until I see the actual proposals.
  10.18 p.m.
  Mr. Levy: I support the contention put forward by the Chancellor of the Exchequer with regard to the co-operative societies. I have co-operative societies in my constituency as well as private traders, and I have always held that if private traders are called upon to pay a certain tax, there is no logical reason why cooperative societies, who are in competition with them, on exactly the same terms, should not be called upon to pay the same tax. I agree with the hon. and learned Member for Ashford (Mr. Spens) on this matter. It has been contended that the shareholders in these societies would be called upon to pay the tax. Let me give an illustration. Assume that a co-operative society makes £1,000 profit and that the intention of the society is to distribute £800 among its shareholders and put £200 to reserve. Under this tax they would be called upon to pay £50. The £800 would

  483
  still be distributed among the shareholders but only £150 would be put to reserve. We have been told by members of the co-operative movement that the reserve does not belong to any particular shareholder but to the community as a whole. Thus, I contend that the individual shareholder cannot possibly, by the widest stretch of imagination, be said to be subject to the tax.
  I only rise to support the Chancellor of the Exchequer. I did intend to support my hon. Friend the Member for Twickenham (Mr. Keeling) in his Amendment with regard to the building societies, but I am quite prepared to accept the statement that the Chancellor has made with regard to concessions to those societies. I am not suggesting that there is any real analogy between building societies and co-operative societies.
  Mr. Alexander: You do not understand.
  Mr. Levy: It may be. Perhaps I am stupid, but I am not so stupid as not to realise that the shareholders of the cooperative societies will not suffer at all, and I am not so stupid as to think that the people who are called upon to pay this National Defence Contribution will not be very willing to pay it, because it is a British characteristic, in accordance with the British nation, that if they are called upon to make any sacrifice in the interests of the nation as a whole, they have never been found lacking yet. That was demonstrated very clearly in 1931, after the Socialists had made such a mess of their two years of government, when the people were called upon to make a sacrifice and did it without any hesitation at all. I feel quite convinced that the Chancellor of the Exchequer in this matter is quite right, and I am sure that the Opposition will not be able to make any political propaganda out of the point that their shareholders are to be called upon to pay, whereas, as a matter of fact, it will simply mean a small reduction in the amount that would ordinarily be put to reserve.
  10.23 p.m.
  Mr. Lees-Smith: The difference which has arisen in this discussion can be reduced to a fairly simple point, on which I think I can make a good case to show that my hon. Friends here are right and that the co-operative societies, when com-
  484
  pared with other companies or businesses doing the same kind of work, are being subjected to a genuine injustice. The hon. and learned Member for Ashford (Mr. Spens) made a speech upon this subject, and I will address myself to what he said. Speaking with a good deal of professional knowledge of the subject, he said that the point was simple, that the principles of the Income Tax were being applied in this case, that the cooperative societies were not being taken out, but were being treated on the same principles as anybody else, and that, therefore, no injustice could possibly arise. What the hon. and learned Gentleman did not see was that as a matter of fact, the full principles of the Income Tax are not being applied in this National Defence Contribution.
  The fact is that in this National Defence Contribution all those careful provisions for abatements and exemptions which have been built up as a result of a century of experience of the Income Tax have been omitted, and that the building societies and the co-operative societies have always been recognised as having a larger proportion of their members who have small incomes which will come under the exemptions rule than, say, an ordinary company with the same number of members. That has always been recognised. As a consequence the State has not lost anything, but it has created a special machinery for dealing with the Income Tax of building societies and co-operative societies which, taking their special type of membership into account, has enabled the State to collect the tax with greater convenience than if had imposed it on every individual. The result has been that a building society, say, has hitherto paid a certain amount in Income Tax.
  At the present moment the general result of the National Defence Contribution is that an ordinary company will pay its Income Tax and not more than 20 per cent. in addition for the National Defence Contribution. That is the general result which has been worked out. The whole root of the difficulty is that in the case of building societies and co-operative societies we get the result that, instead of paying Income Tax plus 20 per cent., the building society that I know best was going to pay Income Tax plus 50 per cent., and the co-operative societies are going to pay Income Tax plus 40 per

  485
  cent. Therefore, I say it is clear that, whereas hon. Members opposite have said, "Why should you give a privilege to co-operative societies; why should they not be treated in the same way as a private business?" as a matter of tact, building societies and co-operative societies have had a penalty imposed upon them in the National Defence Contribution which no other company or business has had to bear. That is the point which the hon. and learned Member, apparently, did not appreciate.
  What is the complaint of my hon. Friends on this side of the Committee? As the result of the National Defence Contribution there are two great organisations which are being badly treated in the sense that they will both pay more than double what any other organisation will pay. One of them has been dealt with. The building societies have been picked out, and by a formula of a most peculiar character which absolutely destroys the basis of the National Defence Contribution, they are to pay just about the same proportion as the ordinary company. They have been put on the same basis as all the other institutions in the country. We are, therefore, left with the fact that the one great institution which is now selected for differential treatment is the co-operative society. For that reason it is perfectly clear to me that if in this House there were the same feelings of impartiality towards co-operative societies as there are towards building societies, they could be dealt with on their merits as industrial organisations. It is perfectly clear that in that case both these two institutions would have been dealt with. But the attitude of the Government towards the co-operative societies is not due to any principle of Income Tax; it is based on a prejudice which has been reflected in the attacks which have been made from the other side of the Committee.
  10.30 p.m.
  The Attorney-General: I will begin by giving the figure which my right hon. Friend promised that I would give, of the estimate of the amount which, under the formula, will be received from the building societies. The figure is in the neighbourhood of £400,000. Having given that I will come to the general point of this Debate, and will endeavour to be as brief as I can in doing what I hope
  486
  will be justice to the speeches made from the other side of the Committee. I myself have always felt that mutual trading was a good idea, and I think that view is shared by hon. Members opposite. I have always thought it possible, also, that it might extend, as, indeed it has, in the case of the co-operative movement, extended during the last 40 or 50 years over large areas of our industrial and economic life, and that it might even extend very much further than it has done already. If that view is right it is obvious that that is inconsistent with the contention that the surpluses which result from the activity should no be treated as profits.
  Mr. Alexander: On a point of Order. I do not want to interrupt the line which the Attorney-General is taking, but if we had understood that we could discuss the whole basis of mutual trading on this Amendment many of us would have addressed ourselves to that point. We thought we had disposed of that in the Amendment dealt with last week.
  The Chairman: As far as I understood the hon. and learned Gentleman he was merely leading up to a particular argument which he was putting.
  The Attorney-General: I quite appreciate that the right hon. Gentleman may have thought that I was raising a bigger issue. The only point I want to make is that if mutual trading is a good idea in industrial and economic life, then the profits which result must be treated as profits in the ordinary sense of the term, and in my submission that is what Parliament intended, as is made clear by the words used in Section 31 of the Act of 1933. It says there clearly that the profits of co-operative societies are, for Income Tax purposes, in exactly the same position as the profits of an ordinary trading company. Then it is sought to differentiate the position of co-operative societies by reason of the Sub-section (4) referred to, but there is no reason in principle or logic why, in the case of an ordinary company, similar machinery might not have been adopted. A company might have been allowed to deduct what it distributed as dividends before paying its quota to the revenue, leaving the dividends to bear tax in the hands of the shareholders.
  Therefore, I submit that my right hon. Friend and my hon. and learned Friend

  487
  the Member for Ashford (Mr. Spens) were quite right in saying that the Act of 1933 applies the same general principle to the profits of a co-operative society as is applied to the profits of companies, and that the differences which are introduced by Sub-section (4) are differences of machinery of collection. I can assure the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) that I am not actuated by the slightest animus against the co-operative movement. All I am seeking to put before the Committee is what is the fair principle to apply to a co-operative or any other organisation based on mutual trading, having regard to the principle on which the National Defence Contribution is based. So far as that is concerned, I have very little to add; only that the principle on which the tax is based is that of a tax on the profits of a concern, whether it is a cooperative society or a company.
  I appreciate the ground put forward in support of the Amendment, that the limit of the National Defence Contribution may affect the amount available for distribution to people of small means, but that applies not only to co-operative societies, but to other companies as well. The principle of the tax is not to have regard to the taxable capacity or the income of those who, whether as members or shareholders, may share in any profits that are distributed, but the principle descends on the profits of the concern. In descending on the profits of the co-operative societies, that logical principle is carried out, and there is no sort of hardship being placed upon co-operative societies as such in their relationships with their members.
  Question put, "That those words be there inserted in the proposed Schedule."
  The Committee divided: Ayes, 137; Noes, 250.

  Division No. 266.]

  AYES.

  [10.37 p.m

  Acland, Rt. Hon. Sir F. Dyke

  Griffiths, G. A. (Hemsworth)

  Noel-Baker, P. J.

  Adams, D. (Consett)

  Griffiths, J. (Llanelly)

  Owen, Major G.

  Adams, D. M. (Poplar, S.)

  Groves, T. E.

  Paling, W.

  Adamson, W. M.

  Hall, G. H. (Aberdare)

  Parker, J.

  Alexander, Rt. Hon. A. V. (H'Isbr.)

  Hall, J. H. (Whitechapel)

  Parkinson, J. A.

  Ammon, C. G.

  Harvey, T. E. (Eng. Univ's.)

  Price, M. P.

  Aske, Sir R. W.

  Hayday, A.

  Pritt, D. N.

  Attlee, Rt. Hon. C. R.

  Henderson, A. (Kingswinford)

  Rathbone, Eleanor (English Univ's.)

  Banfield, J. W.

  Henderson, J. (Ardwick)

  Richards, R. (Wrexham)

  Barnes, A. J.

  Henderson, T. (Tradeston)

  Ridley, G.

  Barr, J.

  Hills, A. (Pontefract)

  Riley, B.

  Batey, J.

  Holdsworth, H.

  Ritson, J.

  Bellenger, F. J.

  Hopkin, D.

  Roberts, Rt. Hon. F. O. (W. Brom.)

  Benn, Rt. Hon. W. W.

  Jagger, J.

  Roberts, W. (Cumberland, N.)

  Broad, F. A.

  Jenkins, A. (Pontypool)

  Rothschild, J. A. de

  Bromfield, W.

  Jenkins, Sir W. (Neath)

  Rowson, G.

  Brown, C. (Mansfield)

  Johnston, Rt. Hon. T.

  Salter, Dr. A. (Bermondsey)

  Buchanan, G.

  Jones, A. C. (Shipley)

  Sanders, W. S.

  Burke, W. A.

  Jones, Morgan (Caerphilly)

  Seely, Sir H. M.

  Cape, T.

  Kelly, W. T.

  Sexton, T. M.

  Chater, D.

  Kennedy, Rt. Hon. T.

  Shinwell, E.

  Cluse, W. S.

  Kirkwood, D.

  Silkin, L.

  Cocks, F. S.

  Lathan, G.

  Silverman, S. S.

  Cove, W. G.

  Lawson, J. J.

  Simpson, F. B.

  Cripps, Hon. Sir Stafford

  Leach, W.

  Smith, Ben (Rotherhithe)

  Daggar, G.

  Lee, F.

  Smith, E. (Stoke)

  Dalton, H.

  Leonard, W.

  Smith, Rt. Hon. H. B. Lees- (K'ly)

  Davidson, J. J. (Maryhill)

  Leslie, J. R.

  Smith, T. (Normanton)

  Davies, R. J. (Westhoughton)

  Logan, D. G.

  Sorensen, R. W.

  Davies, S. O. (Merthyr)

  Lunn, W.

  Stephen, C.

  Day, H.

  Macdonald, G. (Ince)

  Stewart, W. J. (H'ght'n-le-Sp'ng)

  Dobbie, W.

  McEntee, V. La T.

  Taylor, R. J. (Morpeth)

  Dunn, E. (Rother Valley)

  McGhee, H. G.

  Thurtle, E.

  Ede, J. C.

  MacLaren, A.

  Tinker, J. J.

  Edwards, Sir C. (Bedwellty)

  Maclean, N.

  Viant, S. P.

  Evans, D. O. (Cardigan)

  MacMillan, M. (Western Isles)

  Walker, J.

  Evans, E. (Univ. of Wales)

  Mainwaring, W. H.

  Watkins, F. C.

  Fletcher, Lt.-Comdr. R. T. H.

  Mander, G. le M.

  Wedgwood, Rt. Hon. J. C.

  Frankel, D.

  Maxton, J.

  Westwood, J.

  Gallacher, W.

  Messer, F.

  Whiteley, W. (Blaydon)

  George, Major G. Lloyd (Pembroke)

  Milner, Major J.

  Williams, T. (Don Valley)

  George, Megan Lloyd (Anglesey)

  Montague, F.

  Windsor, W. (Hull, C.)

  Graham, D. M. (Hamilton)

  Morrison, Rt. Hon. H. (Hackney, S.)

  Woods, G. S. (Finsbury)

  Green, W. H. (Deptford)

  Morrison, R. C. (Tottenham, N.)

  Greenwood, Rt. Hon. A.

  Muff, G.

  TELLERS FOR THE AYES.—

  Grenfell, D. R.

  Nathan, Colonel H. L.

  Mr. Charleton and Mr. John.

  Griffith, F. Kingsley (M'ddl'sbro, W.)

  Naylor. T. E.

  NOES.

  Acland-Troyte, Lt.-Col. G. J.

  Emmott, C. E. G. C.

  Mitchell, H. (Brentford and Chiswick)

  Adams, S. V. T. (Leeds, W.)

  Emrys-Evans, P. V.

  Morgan, R. H.

  Agnew, Lieut.-Comdr. P. G.

  Entwistle, Sir C. F.

  Morrison, G. A. (Scottish Univ's.)

  Albery, Sir Irving

  Errington, E.

  Morrison, Rt. Hon. W. S. (Cirencester)

  Anderson, Sir A. Garrett (C. of Ldn.)

  Evans, Capt. A. (Cardiff, S.)

  Nall, Sir J.

  Anstruther-Gray, W. J.

  Everard, W. L.

  Neven-Spence, Major B. H. H

  Apsley, Lord

  Fildes, Sir H.

  Nicholson, G. (Farnham)

  Assheton, R.

  Fleming, E. L.

  O'Connor, Sir Terence J.

  Astor, Viscountess (Plymouth, Sutter)

  Fox, Sir G. W. G.

  O'Neill, Rt. Hon. Sir Hugh

  Baillie, Sir A. W. M.

  Fremantle, Sir F. E.

  Orr-Ewing, I. L.

  Baldwin-Webb, Col. J.

  Furness, S. N.

  Patrick, C. M.

  Balfour, G. (Hampstead)

  Fyfe, D. P. M.

  Peake, O.

  Balfour, Capt. H. H. (Isle of Thanet)

  Ganzoni, Sir J.

  Peat, C. U.

  Balniel, Lord

  Gibson, Sir C. G. (Pudsey and Otley)

  Plugge, Capt. L. F.

  Beamish, Rear-Admiral T. P. H.

  Gledhill, G.

  Ponsonby, Col. C. E.

  Beauchamp, Sir B. C.

  Gluckstein, L. H.

  Porritt, R. W.

  Beaumont, Hon. R. E. B. (Portsm'h)

  Gower, Sir R. V.

  Pownall, Lt.-Col. Sir Assheton

  Beechman, N. A.

  Graham, Captain A. C. (Wirral)

  Procter, Major H. A.

  Beit, Sir A. L.

  Grant-Ferris, R.

  Radford, E. A.

  Bennett, Sir E. N.

  Gretton, Col. Rt. Hon. J.

  Rankin, Sir R.

  Bernays, R. H.

  Gridley, Sir A. B.

  Rathbone, J. R. (Bodmin)

  Blaker, Sir R.

  Grigg, Sir E. W. M.

  Reed, A. C. (Exeter)

  Boothby, R. J. G.

  Grimston, R. V.

  Reid, W. Allan (Derby)

  Boulton, W. W.

  Gritten, W. G. Howard

  Rickards, G. W. (Skipton)

  Bower, Comdr. R. T.

  Guest, Hon. I. (Brecon and Radnor)

  Robinson, J. R. (Blackpool)

  Boyce, H. Leslie

  Guinness, T. L. E. B.

  Ropner, Colonel L.

  Bracken, B.

  Gunston, Capt. D. W.

  Ross Taylor, W. (Woodbridge)

  Brass, Sir W.

  Hannah, I. C.

  Royds, Admiral P. M. R.

  Briscoe, Capt. R. G.

  Hannon, Sir P. J. H;

  Russell, Sir Alexander

  Brocklebank, Sir Edmund

  Harbord, A.

  Russell, R. J. (Eddisbury)

  Brown, Col. D. C. (Hexham)

  Harvey, Sir G.

  Russell, S. H. M. (Darwen)

  Brown, Brig.-Gen. H. C. (Newbury)

  Haslam, Henry (Horncastle)

  Salt, E. W.

  Bullock, Capt. M.

  Haslam, Sir J. (Bolton)

  Samuel, M. R. A.

  Burghley, Lord

  Heilgers, Captain F. F. A.

  Savery, Sir Servington

  Campbell, Sir E. T.

  Heneage, Lieut.-Colones A. P.

  Selley, H. R.

  Cartland, J. R. H.

  Hepworth, J.

  Shaw, Major P. S. (Wavertree)

  Carver, Major W. H.

  Herbert, A. P. (Oxford U.)

  Simmonds, O. E.

  Cary, R. A.

  Higgs, W. F.

  Simon, Rt. Hon. Sir J. A.

  Castlereagh, Viscount

  Hills, Major Rt. Hon. J. W. (Ripon)

  Smiles, Lieut.-Colonel Sir W. D.

  Cayzer, Sir H. R. (Portsmouth, S.)

  Hoare, Rt. Hon. Sir S.

  Smith, Bracewell (Dulwich)

  Cazalet, Thelma (Islington, E.)

  Holmes, J. S.

  Smith, L. W. (Hallam)

  Cazalet, Capt. V. A. (Chippenham)

  Hope, Captain Hon. A. O. J.

  Sir D. B. (Crewe)

  Channon, H.

  Hore-Belisha, Rt. Hon. L.

  Southby, Commander Sir A. R. J.

  Christie, J. A.

  Hudson, R. S. (Southport)

  Spens, W. P.

  Clarke, F. E. (Dartford)

  Hulbert, N. J.

  Stanley, Rt. Hon. Oliver (W'm'I'd)

  Clarry, Sir Reginald

  Hume, Sir G. H.

  Storey, S.

  Cobb, Captain E. C. (Preston)

  Hurd, Sir P. A.

  Stourton, Major, Hon. J. J.

  Colfox, Major W. P.

  Hutchinson, G. C.

  Strauss, E. A. (Southwark, N.)

  Colman, N. C. D.

  Inskip, Rt. Hon. Sir T. W. H.

  Strauss, H. G. (Norwich)

  Colville, Lt.-Col. Rt. Hon. D. J.

  Joel, D. J. B.

  Strickland, Captain W. F.

  Conant, Captain R. J. E.

  Jones, Sir H. Haydn (Merioneth)

  Sueter, Rear-Admiral Sir M. F.

  Cooke, J. D. (Hammersmith, S.)

  Jones, L. (Swansea W.)

  Sutcliffe, H

  Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)

  Keeling, E. H.

  Tasker, Sir R. I.

  Courthope, Col. Rt. Hon. Sir G. L.

  Keyes, Admiral of the Fleet Sir R.

  Tate, Mavis C.

  Craven-Ellis, W.

  Kimball, L.

  Taylor, C. S. (Eastbourne)

  Croft, Brig.-Gen. Sir H. Page

  Latham, Sir P.

  Taylor, Vice-Adm. E. A. (Padd., S.)

  Crooke, J. S.

  Law, Sir A. J. (High Peak)

  Thomas, J. P. L.

  Crookshank, Capt. H. F. C.

  Leckie, J. A,

  Titchfield, Marquess of

  Croom-Johnson, R. P.

  Lees-Jones, J.

  Touche, G. C.

  Cross, R. H.

  Leighton, Major B. E. P.

  Tree, A. R. L. F.

  Crossley, A. C.

  Lennox-Boyd, A. T. L.

  Tryon, Major Rt. Hon. G. C.

  Crowder, J. F. E.

  Levy, T.

  Tufnell, Lieut.-Commander R. L.

  Cruddas, Col. B.

  Lewis, O.

  Turton, R. H.

  Culverwell, C. T.

  Liddall, W. S.

  Wakefield, W. W.

  Davison, Sir W. H.

  Lipson, D. L.

  Walker-Smith, Sir J.

  Dawson, Sir P.

  Little, Sir E. Graham-

  Wallace, Capt. Rt. Hon. Euan

  Denman, Hon. R. D.

  Lovat-Fraser, J. A.

  Ward, Lieut.-Col. Sir A. L. (Hull)

  Denville, Alfred

  Lyons, A. M.

  Ward, Irene M. B. (Wallsend)

  Doland, G. F.

  Mabane, W. (Huddersfield)

  Warrender Sir V.

  Donner, P. W.

  MacAndrew, Colonel Sir C. G.

  Waterhouse, Captain C.

  Dower, Major A. V. G.

  McCorquodale, M. S.

  Watt, G. S. H.

  Drewe, C.

  MacDonald, Rt. Hon. M. (Ross)

  Wells, S. R.

  Duckworth, Arthur (Shrewsbury)

  Macdonald, Capt. P. (Isle of Wight)

  Whiteley, Major J. P. (Buckingham)

  Dugdale, Captain T. L.

  McKie, J. H.

  Williams, H. G. (Croydon, S.)

  Duggan, H. J.

  Macnamara, Capt. J. R. J

  Wilson, Lt.-Col. Sir A. T. (Hitchin)

  Duncan, J. A. L.

  Magnay, T.

  Windsor-Clive, Lieut.-Colonel G.

  Dunglass, Lord

  Makins, Brig.-Gen. E.

  Winterton, Rt. Hon. Earl

  Eastwood, J. F.

  Margesson, Capt. Rt. Hon. H. D. R.

  Womersley, Sir W. J.

  Eckersley, P. T.

  Marsden, Commander A.

  Wood, Hon. C. I. C.

  Edmondson, Major Sir J.

  Mason, Lt.-Col. Hon. G. K. M.

  Wright, Squadron-Leader J. A. C.

  Ellis, Sir G.

  Maxwell, Hon. S. A.

  Elliston, Capt. G. S.

  Mayhew, Lt.-Col. J.

  TELLERS FOR THE NOES.—

  Elmley, Viscount

  Mellor, Sir J. S. P. (Tamworth)

  Major Sir George Davies and Mr.

  Emery, J. F.

  Mills, Major J. D. (New Forest)

  Munro.

  10.46 p.m.
  Captain Cazalet: I beg to move, as an Amendment to the proposed Schedule, in line 87, at the end, to insert:
  "5. The provisions of subsection (4) of section twenty-seven of the Finance Act, 1920 (which disallows deductions on account of the payment of dominion Income Tax), shall not apply."
  This is a very complicated subject and, if my sentences are not as clear as they should be, I trust that the Chancellor of the Exchequer will be sympathetic and will try to understand the point that I am endeavouring to make. The Act of 1920 established the principle of Dominion tax relief, which has been the practice of our Income Tax ever since. The methods that the Dominions apply are different in almost every respect. Canada gives no reciprocal arrangements. Australia gives reciprocal arrangements in regard to Federal but not State taxes. India gives reciprocal treatment, but there again the matter is complicated by the new Surtax introduced a few years ago. The general principle, as I understand it, is that companies registered in this country and trading in the Dominions are allowed relief from taxation in this country up to half the standard rate, in other words relief not exceeding 2s. 6d. The new National Defence Contribution presents certain anomalies and injustices. For instance, companies registered and operating in this country are allowed to deduct National Defence Contribution before paying Income Tax under Schedule D. Companies registered in this country and trading in foreign countries are also allowed to deduct any taxes paid in the foreign country before paying their Income Tax, and National Defence Contribution. Companies registered in this country but trading in the Dominions get no relief in Dominion Income Tax, and a company may be paying full Dominion Income Tax on the amount paid in this country as National Defence Contribution and get no Income Tax relief in respect of it.
  The Committee is not fully aware of the extent of the taxation paid by companies trading in the Dominions. May I give one example? A company receiving a certain amount of its profit from Canada may easily pay in Dominion and State tax 4s. in the £ in Canada, and 2S. 6d. in the £ in this country. Now, in addition, there is 1s. in the £ National Defence Contribution. It is nearer 8s. than 7s. 6d., be-
  492
  cause the assessment on which they pay Income Tax in this country is nearly always higher than the assessment on which they pay in the Dominions. It has been suggested in the Press and elsewhere that the method of dealing with this question should be to treat the National Defence Contribution as an increase in Income Tax and thereby, applying the same principle of Income Tax relief, a 50 per cent. reduction, give a 3s. relief to companies trading in the Dominions. I appreciate that if this were adopted it would offend against certain principles of the National Defence Contribution. The Chancellor himself a few minutes ago described this tax as a special levy, and I appreciate that if you once admitted the National Defence Contribution could be treated as Income Tax, you would have to apply to it all the Income Tax exemptions.
  My proposal is to allow companies registered in this country and trading in the Dominions —getting part of their profits from the Dominions—to deduct the whole of the Dominion tax before paying National Defence Contribution. For instance, a company makes £100,000 profit in Canada, where it pays 4s. in the £ tax. It will thus pay £20,000 taxation in Canada. My suggestion is that it should be allowed to deduct the whole of this £20,000 from its assessable profits in this country before paying the National Defence Contribution. It is already able to deduct 1s. 6d. in the £, which is the difference between the Dominion tax and half the standard rate of 2S. 6d. I hope I have put it as clearly as possible. I know that no question of taxation is as simple as it sounds, but I think that the facts as I have put them explain the object I have in view in moving this Amendment. The hon. Member for East Aberdeen (Mr. Boothby) put down a new Clause which would have much the same effect. I think that if he would allow me to show him the result on paper, he would see that my Amendment would never give less relief and might in certain complicated cases give more. I hope that he will take my word for it for the moment and see his way to support my Amendment. It does not interfere with the special operations of the National Defence Contribution, it is simple to calculate and, I hope, simple to understand, and I trust that the Chancellor will see his way to accept it.
  10.54 p.m.
  Sir J. Simon: In arriving at the proper figure of profits for purposes of Income Tax it is permissible to make deductions for expenses incurred in earning that income and it is a well established principle of Income Tax law that one of the expenses you may deduct is foreign taxation upon the income. That was the principle both as regards foreign taxes and taxes imposed in other parts of the King's Dominions until the Finance Act of 1920, which in one part of it made some provisions to relieve the taxpayer from double taxation and in another part, as a consequence, rescinded the rule that you might deduct foreign taxes in the case of Dominion taxes.
  What is here proposed in the most convenient form is simply that we should permit the deduction of Dominion Income Tax as expenses before arriving at the balance of profit which would be charged to National Defence Contribution. That is rather a more convenient way to deal with what I think must be an admitted grievance than the way suggested by my hon Friend the Member for Eastern Aberdeen, who had on the Paper a new Clause which really had the effect of saying that National Defence Contribution for a particular purposes should be disregarded and that one should treat the Income Tax as being paid on £100 and not on £100 less National Defence Contribution. But the methods are very nearly the same. In fact, the one suggested here is more consistent with the usual Income Tax practice and is a little better for the taxpayer. I am, therefore, very glad to agree that this Amendment should be made, and I think it is quite plain that, now we have a system which avoids as far as possible double taxation, it would be right to make this alteration.
  10.57 p.m.
  Mr. Alexander: I am very interested to notice as we go along in these discussions on this tax where the concessions are going. The provisions of Section 27 of the Act of 1920 have been carefully explained by the hon. Member who moved the Amendment and are quite clearly recognised by the Chancellor of the Exchequer. I cannot see any special reason at all for the Chancellor of the Exchequer making this particular concession. There is not half a case for it compared with that which was submitted to him just now
  494
  on behalf of nearly 8,000,000 of the poorer sections of the community. But it is for his friends, his political friends. Before we come to a further consideration of the matter we are entitled to ask the Chancellor of the Exchequer what this is going to cost. What is the difference going to be in the year? You are going to make these special allowances to the companies who have investments or the persons who have investments in the Dominions, and what is to be the cost? [An HON. MEMBER: "He does not know."] If he does not know, the matter ought to be adjourned until he finds out. [An HON. MEMBER: "He is finding out now."] At any rate, I hope that my hon. Friends here—I have not had any chance of consulting them—will see that this concession does not go through any more than the one for which we were pleading on behalf of the poorer sections of the population. I hope that none of my hon. Friends will support the concession now being made, but will go with me into the Lobby against it.
  10.59 p.m.
  Sir J. Simon: I do not, I am afraid, recognise the relevance of the remarks of the right hon. Gentleman. If it is a question of the form of political badinage in proceeding to talk about friends and other people who are not friends, I make no reproach of the right hon. Gentleman because he has been so active on behalf of his friends of the co-operative societies. I do not complain at all, but I presume that even hon. Gentlemen opposite are of this opinion that, if possible, the same thing should not be taxed twice. That is a very simple proposition here. If you do not make this change, which will cost about £25,000, a number of cases will arise in which the same income is taxed twice. Whether the income belongs to the co-operative society or anybody else does not matter; this is nothing more than a single principle that, as far as we can, we should so arrange the tax that we do not tax people twice. As far as I am concerned, I do not make any distinction between one interest and another. If the right hon. Gentleman resists that proposition and wishes to register the opinion that he and his party think that there are people who ought to be taxed twice, let him do so.
  11.0 p.m.
  Mr. Boothby: I want to say only a few words in answer to the right hon.

  495
  Member for Hillsborough (Mr. Alexander). I have no doubt that he is smarting under a sense of grievance, but he ought not to allow his natural feelings of indignation that his own particular associates have not got the concession that he asked for, to darken counsel generally in regard to this Measure. I am sure that if the right hon. Gentleman gives a moment's thought to this proposition he will see that not only does it avoid double taxation, but that it would be unfair if we did not remedy what would otherwise be a gross injustice as between a company operating wholly in this country and a company which, while having its headquarters in London, operates very largely in the Dominions. I do not think that the right hon. Gentleman or any hon. Member opposite, whatever they may feel about co-operative societies, wants to drive away from this country the head offices of companies operating in the Dominions, or seek to discourage them from having their headquarters here.
  It may be interesting to the right hon. Gentleman to know that if you take a company which has £100,000 profit and which operates wholly in this country, and a company which operates to some extent in the Dominions, the difference in taxation—I have had the figures worked out and it is a long, involved calculation —amounts to something like £625 a year, that a company operating in the Dominions would pay in tax more than a company operating only in this country. There can be no practical defence of that. There is no argument in favour of differentiating unfairly between a company operating only in this country and one operating in the Dominions, with its head offices here, and I think the right hon. Gentleman would be well advised to reconsider the somewhat hasty decision he took in opposing this Amendment. I heartily agree with my right hon. Friend the Chancellor of the Exchequer that this Amendment achieves in a simpler and more effective way what I sought to do by an earlier Amendment. I welcome the decision of the Chancellor of the Exchequer to give this concession, and I thank him for it.
  11.3 p.m.
  Mr. Harold Mitchell: I should like to associate myself with what has been said by the hon. Member for East Aberdeen
  496
  (Mr. Boothby). I think that the criticism of the right hon. Member for Hillsborough is a little short-sighted. It is to the advantage of this country that we should encourage companies to establish their headquarters here. I have no hesitation in saying that there are thousands of people who are employed in this country because foreign and Dominion companies have their head offices here. There are many services, including insurance, banking, etc., which benefit and many orders are placed in Great Britain as a direct result of a Dominion company being domiciled here. The Committee would be acting most unwisely if it passed any legislation to make the registration of such companies in this country less attractive. I am not suggesting that these companies would necessarily remove their head offices abroad because of the taxation to which they might be subjected but it is very desirable that no encouragement should be given in that direction, and that particularly in regard to new companies being formed in the Dominions, they should, as far as possible, be encouraged to establish their head offices in this country. Where you have shareholders in a company some who reside in this country and some who reside overseas, the Dominions shareholders always want to have their head office in the particular Dominion. From the point of view of this country it is most desirable that the head offices should be here. I have a case in mind of a large company producing wool in Australia. All that wool is sold in London, and as a result considerable benefits result to Great Britain. In almost every case, Australian-domiciled companies sell their wool in Sydney. This is only one case of many, and it is obvious that where companies have their head office in London considerable advantages accrue to this country. It is a fair proposal and one to which the Committee should agree. Taking a long view it will not cost the Treasury much, and over a period of years may result in more money coming in.
  Question put, "That those words be there inserted in the proposed Schedule."
  The Committee divided: Ayes, 236; Noes, 92.

  Division No. 267.]

  AYES.

  [11.6 p.m.

  Acland-Troyte, Lt.-Col. G. J.

  Evans, Capt. A. (Cardiff, S.)

  Muirhead, Lt.-Col. A. J.

  Adams, S. V. T. (Leeds, W.)

  Evans, D. O. (Cardigan)

  Munro, P.

  Agnew, Lieut.-Comdr. P. G.

  Evans, E. (Univ. of Wales)

  Nall, Sir J.

  Albery, Sir Irving

  Fleming, E. L.

  Neven-Spence, Major B. H. H.

  Anderson, Sir A. Garrett (C. of Ldn.)

  Fox, Sir G. W. G.

  Nicholson, G. (Farnham)

  Anstruther-Gray, W. J.

  Fremantle, Sir F. E.

  O'Connor, Sir Terence J.

  Apsley, Lord

  Furness, S. N.

  O'Neill, Rt. Hon. Sir Hugh

  Aske, Sir R. W.

  Fyfe, D. P. M.

  Orr-Ewing, I. L.

  Assheton, R.

  George, Major G. Lloyd (Pembroke)

  Owen, Major G.

  Astor, Viscountess (Plymouth, Sutton)

  George, Megan Lloyd (Anglesey)

  Patrick, C. M.

  Baillie, Sir A. W. M.

  Gibson, Sir C. G. (Pudsey and Otley)

  Peaks, O.

  Baldwin-Webb, Col. J.

  Gledhill, G.

  Plugge, Capt. L. F.

  Balfour, G. (Hampstead)

  Gluckstein, L. H.

  Ponsonby, Col. C. E.

  Balfour, Capt. H. H. (Isle of Thanet)

  Gower, Sir R. V

  Porritt, R. W.

  Balniel, Lard

  Graham, Captain A. C. (Wirral)

  Pownall, Lt,-Col. Sir Assheton

  Beamish, Rear-Admiral T. P. H.

  Grant-Ferris, R.

  Procter, Major H. A.

  Beauchamp, Sir B. C.

  Gretton, Col. Rt. Hon. J.

  Radford, E. A.

  Beaumont, Hon. R. E. B. (Portsm'h)

  Gridley, Sir A. B.

  Rankin, Sir R.

  Beit, Sir A. L.

  Griffith, F. Kingsley (M'ddl'sbro, W.)

  Reed, A. C. (Exeter)

  Bennett, Sir E. N.

  Grigg, Sir E. W. M.

  Reid, W. Allan (Derby)

  Bernays, R. H.

  Grimston, R. V.

  Rickards, G. W. (Skipton)

  Blaker, Sir R.

  Gritten, W. G. Howard

  Roberts, W. (Cumberland, N.)

  Boothby, R. J. C.

  Guest, Lieut.-Colonel H. (Drake)

  Robinson, J. R. (Blackpool)

  Boulton, W. W.

  Guest, Hon. I. (Brecon and Radnor)

  Ropner, Colonel L.

  Bower, Comdr. R. T.

  Guinness, T. L. E. B.

  Ross Taylor, W. (Woodbridge)

  Boyce, H. Leslie

  Gunston, Capt. D. W.

  Rothschild, J. A. de

  Bracken, B.

  Hannah, I. C.

  Royds, Admiral P. M. R.

  Brass, Sir W.

  Hannon, Sir P. J. H.

  Russell, Sir Alexander

  Briscoe, Capt. R. G.

  Harbord, A.

  Russell, R. J. (Eddisbury)

  Brown, Col. D. C. (Hexham)

  Harris, Sir P. A.

  Russell, S. H. M. (Darwen)

  Burghley, Lord

  Harvey, T. E. (Eng. Univ's.)

  Salmon, Sir I.

  Campbell, Sir E. T.

  Haslam, Sir (Horncastle)

  Salt, E. W.

  Cartland, J. R. H.

  Haslam, Sir J. (Bolton)

  Samuel, M. R. A.

  Carver, Major W. H.

  Hellgers, Captain F. F. A.

  Savery, Sir Servington

  Castlereagh, Viscount

  Heneage, Lieut.-Colonel A. P.

  Seely, Sir H. M.

  Cayzer, Sir H. R. (Portsmouth, S.)

  Hepburn, P. G. T. Buchan-

  Salley, H. R.

  Cazalet, Thelma (Islington, E.)

  Herbert, Capt. Sir S. (Abbey)

  Shaw, Major P. S. (Wavertree)

  Cazalet, Capt. V. A. (Chippenham)

  Higgs, W. F.

  Simmonds, O. E.

  Channon, H.

  Hills, Major Rt. Hon. J. W. (Ripon)

  Simon, Rt. Hon. Sir J. A.

  Christie, J. A.

  Holdsworth, H.

  Smiles, Lieut.-Colonel Sir W. D.

  Clarke, F. E. (Dartford)

  Holmes, J. S.

  Smith, Bracewell (Dulwich)

  Clarry, Sir Reginald

  Hope, Captain Hon. A. O. J.

  Smith, L. W. (Hallam)

  Cobb, Captain E. C. (Preston)

  Hopkinson, A.

  Somervell. Sir D. B. (Crewe)

  Colfox, Major W. P.

  Hore-Belisha, Rt. Hon. L.

  Southby, Commander Sir A. R. J.

  Colman, N. C. D.

  Hudson, R. S. (Southport)

  Spens, W. P.

  Colville, Lt.-Col. Rt. Hon. D. J.

  Hulbert, N. J.

  Stanley, Rt. Hon. Oliver (W'm'I'd)

  Conant, Captain R. J. E.

  Hutchinson, G. C.

  Storey, S.

  Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)

  Inskip, Rt. Hon. Sir T. W. H.

  Stourton, Major Hon. J. J.

  Courthope, Col. Rt. Hon. Sir G. L.

  Joel, D. J. B.

  Strauss, H. G. (Norwich)

  Cranborne, Viscount

  Jones, Sir H. Haydn (Merioneth)

  Strickland, Captain W. F.

  Craven-Ellis, W.

  Jones, L. (Swansea W.)

  Sueter, Rear-Admiral Sir M. F.

  Croft, Brig.-Gen. Sir H. Page

  Keeling, E. H.

  Sutcliffe, H.

  Crooke, J. S.

  Keyes, Admiral of the Fleet Sir R.

  Tasker, Sir R. I.

  Crookshank, Capt. H. F. C.

  Law, Sir A. J. (High Peak)

  Tate, Mavis C.

  Croom-Johnson, R. P.

  Leckie, J. A.

  Taylor, Vice-Adm. E. A. (Padd., S.)

  Crossley, A. C.

  Lennox-Boyd, A. T. L.

  Titchfield, Marquess of

  Crowder, J. F. E.

  Levy, T.

  Touche, G. C.

  Cruddas, Col. B.

  Liddall, W. S.

  Tree, A. R. L. F.

  Culverwell, C. T.

  Lipson, D. L.

  Tryon, Major Rt. Hon. G. C.

  Davison, Sir W. H.

  Llewellin, Lieut.-Col. J. J.

  Tufnell, Lieut.-Commander R. L.

  Dawson, Sir P.

  Lovat-Fraser, J. A.

  Turton, R. H.

  Denman, Hon. R. D.

  Lyons, A. M.

  Wakefield, W. W.

  Denville, Alfred

  Mabane, W. (Huddersfield)

  Walker-Smith, Sir J.

  Doland, G. F.

  MacAndrew, Colonel Sir C. G.

  Wallace, Capt. Rt. Hon. Euan

  Danner, P. W.

  McCorquodale, M. S.

  Ward, Irene M. B. (Wallsend)

  Duckworth, Arthur (Shrewsbury)

  Macdonald, Capt. P. (Isle of Wight)

  Warrender, Sir V.

  Dugdale, Captain T. L.

  McKie, J. H.

  Waterhouse, Captain C.

  Duggan, H. J.

  Macnamara, Capt. J. R. J.

  Watt, G. S. H.

  Duncan, J. A. L.

  Magnay, T.

  Wells, S. R.

  Dunglass, Lord

  Makins, Brig.-Gen. E.

  Whiteley, Major J. P. (Buckingham)

  Eastwood, J. F.

  Mander, G. le M.

  Williams, H. G. (Croydon, S.)

  Eckersley, P. T.

  Margesson, Capt. Rt. Hon. H. D. R.

  Winterton, Rt. Hon. Earl

  Ellis, Sir G.

  Marsden, Commander A.

  Womersley, Sir W. J.

  Elliston, Capt. G. S.

  Mason, Lt.-Col. Hon. H. D. R.

  Wood, Hon. C. I. C.

  Elmley, Viscount

  Maxwell, Hon. S. A.

  Wright, Squadron-Leader J. A. C.

  Emery, J. F.

  Mayhew, Lt.-Col. J.

  Emmott, C. E. G. C.

  Mellor, Sir J. S. P. (Tamworth)

  Emrys-Evans, P. V.

  Mills, Major J. D. (New Forest)

  TELLERS FOR THE AYES.—

  Entwistle, Sir C. F.

  Mitchell, H. (Brentford and Chiswick)

  Lieut -Colonel Sir A. Lambert Ward

  Errington, E.

  Morgan, R. H.

  and Major Sir George Davies.

  Morrison, G. A. (Scottish Univ's.)

  498

  499

  NOES.

  Adams, D. (Consett)

  Grenfell, D. R.

  Richards, R. (Wrexham)

  Adamson, W. M.

  Griffiths, J. (Llanelly)

  Ridley, G.

  Alexander, Rt. Hon. A. V. (H'Isbr.)

  Hall, G. H. (Aberdare)

  Riley, B.

  Ammon, C. G.

  Henderson, T. (Tradeston)

  Ritson, J.

  Attlee, Rt. Hon. C. R.

  Hopkin, D.

  Rawson, G.

  Banfield, J. W.

  Jagger, J.

  Salter, Dr. A. (Bermondsey)

  Barnes, A. J.

  Jenkins, A. (Pontypool)

  Sexton, T. M.

  Barr, J.

  Jenkins, Sir W. (Neath)

  Silkin, L.

  Ballenger, F. J.

  Jones, A. C. (Shipley)

  Silverman. S. S.

  Benn, Rt. Hon. W. W.

  Kelly, W. T.

  Simpson, F. B.

  Bromfield, W.

  Kennedy, Rt. Hon. T.

  Smith, Ben (Rotherhithe)

  Brown, C. (Mansfield)

  Lathan, G.

  Smith, E. (Stoke)

  Buchanan, G.

  Lawson, J. J.

  Smith, Rt. Hon. H. B. Lees- (K'ly)

  Burke, W. A.

  Leach, W.

  Smith, T. (Normanton)

  Cape, T.

  Lee, F.

  Sorensen, R. W.

  Cluse, W. S.

  Leonard, W.

  Stephen, C.

  Cocks, F. S.

  Leslie, J. R.

  Stewart, W. J. (H'ght'n-le-Sp'ng)

  Cove, W. G.

  Logan, D. G.

  Strauss, G. R. (Lambeth, N.)

  Cripps, Hon. Sir Stafford

  McGhee, H. G.

  Taylor, R. J. (Morpeth)

  Daggar, G.

  Maclean, N.

  Thurtle, E.

  Dalton, H.

  MacMillan, M. (Western Isles)

  Tinker, J. J.

  Davidson, J. J. (Maryhill)

  Maxton, J.

  Walker, J.

  Davies, R. J. (Westhoughton)

  Messer, F.

  Watkins, F. C.

  Davies, S. 0. (Merthyr)

  Milner, Major J.

  Westwood, J.

  Day, H.

  Morrison, Rt. Hon. H. (Hackney, S.)

  Whiteley, W. (Blaydon)

  Dunn, E. (Rother Valley)

  Morrison, R. C. (Tottenham, N.)

  Williams, T. (Don Valley)

  Ede, J. C.

  Noel-Baker, P. J.

  Windsor, W. (Hull, C.)

  Edwards, Sir C. (Bedwellty)

  Paling, W.

  Woods, G. S. (Finsbury)

  Fletcher, Lt.-Comdr. R. T. H.

  Parker, J.

  Gallacher, W.

  Parkinson, J. A.

  TELLERS FOR THE NOES.—

  Graham, D. M. (Hamilton)

  Price, M. P.

  Mr. John and Mr. Charleton.

  Greenwood, Rt. Hon. A.

  Pritt, D. N.

  11.15 p.m.
  Major Hills: I beg to move, as an Amendment to the proposed Schedule, in line 91, after the second "business," to insert "life."
  The effect of my Amendment would be to exempt from the tax the income on investments held by fire, accident and marine companies. The principle in regard to investments subject to the tax was defined by the Chancellor of the Exchequer on 21st June when he said:
  "Generally speaking, income from investments will not be included for the purpose of this tax."
  Then the right hon. Gentleman went on to say:
  "If a trader holds some investment and draws his dividends from it, the proceeds of that investment will not be included in the profits gained by his trade or business."
  The right hon. Gentleman then stated the cases in which that income would be included. He said:
  "In the case of a company whose functions consist either wholly or mainly in the holding of investments or other properties, so that that really becomes its business, then, of course, those holdings must be treated as the business carried on by the company, and the profits made from them will become taxable."—[OFFICIAL REPORT, 21st June, 1937; col. 865, Vol. 325.]
  It is on that that I base my case. I shall endeavour to show that income from the investments of fire, accident and
  500
  marine companies should be free from the tax on the ground that those companies are not such as "wholly or mainly" hold investments for profit. When the original National Defence Contribution was introduced, the investments of these companies were not included, and if hon. Members turn to Part III of the original Fifth Schedule to the Bill they will find in paragraph 10, the following:
  "Account shall be taken of income received from investments in the case of banking businesses, businesses of building societies, life assurance businesses, and businesses consisting wholly or mainly in the making or holding of investments, but not in other cases."
  Therefore, as the Bill was then framed the only insurance investments included were those of life assurance companies. I take it that this tax remains a tax on the profits of business. That has been said over and over again, and I venture, with some confidence, to urge on the right hon. Gentleman that the business of those companies to which I have referred cannot be held to consist wholly or mainly of dealing in investments or the holding of investments. Their business is something quite different, underwriting. There are certain insurance companies which I shall call miscellaneous companies. They insure the public against fire or accident, and they insure the shipowner against loss. They hold investments of very large

  501
  values, but so do many commercial companies, and if the income from the investments held by these commercial companies is exempt, I cannot see why the income of this special class of insurance companies is taxed. For instance, to give some examples of large investments of commercial companies, Shell Transport hold £11,000,000 in Stock Exchange securities, Courtaulds hold £15,200,000 in British Government securities, Burmah Oil Company hold in British and Indian Government securities over £3,000,000 and miscellaneous investments of £11,500,000, Imperial Tobacco hold British Government securities of nearly £10,000,000, and the Distillers Company hold British Government and other securities of £5,500,000. These are immense figures, and the dividends on all these large investments will escape taxation, and I submit that the companies for whom I plead should stand in the same position as these trading companies. The reserves of these insurance companies are not made with the object of making profits. The Bill taxes the profits of commercial companies, and I quite agree that the profits of insurance companies ought to be included, but I see no reason for taxing the income from investments of these companies when the large commercial companies whose names I have read out are exempt. If you tax both the profits and the investment income of a company, surely you transform the National Defence Contribution into a tax on income and not a tax on profits. Insurance companies do not dispute their liability to National Defence Contribution, on their underwriting profits their profits are substantial and will yield a substantial amount to the Chancellor of the Exchequer.
  So far I have dealt with these miscellaneous insurance companies in comparison with commercial companies, and I have given to the Committee good reasons why they should not be placed in a different category from commercial companies as far as the taxation of income from investments is concerned, but I know that I have to go rather farther than that. I have to show the distinction between these companies and the life companies, if it is admitted that the investments of life companies are subject to this tax. I have to show some special character in the investments of these companies which places them in a different category from
  502
  the investments of the companies that insure your life. A contract of life insurance is different from a contract of insurance against fire. Under a life policy a certain sum is payable either at death or at a fixed date. If I insure my life for £1,000 payable after a term of years I pay a certain premium to the insurance company. Out of that premium the company have to pay commission to the insurance broker and the expenses of their office. Of the rest a small amount will go to the shareholders and the larger part—in the case of a mutual office, the whole—will go to the policy-holder either in bonus or in the payment of the £1,000 when it falls due.
  This sort of insurance is real investment business. It has the same effect as if a man paid a certain sum into his bank every year and let the amount grow up until the desired capital amount was reached. Or he might pay a certain sum to the Bank of England and let the dividends on it be invested every quarter. He goes to the insurance office for investment purposes for two reasons. The insurance office can earn more interest on his money, and in the case of an endowment policy it is paid if he dies before the policy matures. The whole transaction is investment either for himself or for those whom he wants to benefit after his death. A further use of a life policy is to enable a man to provide for Death Duties. Or he may use it as a sinking fund. He buys a leasehold house and pays a premium on the lease. At the end of the 30 or 40 years of the lease he wants to get his premium back, so he takes out a policy that will repay him at the termination of the lease. The business of a life insurance office is an investment business. Therefore it is rightly taxed. The point is that it knows its liability, and against that liability it has premiums which come in every year, and it piles up a fund which is always there to meet that liability. That fund must bear interest, because the person who has insured his life always gets more than the amount of the premiums he has paid. So much for life insurance.
  Take the case of fire insurance. There is here no certain date when the insured person gets his money back. He cannot burn down his house and claim the insurance, or he will get seven years. The contingency of fire may never occur. Many people have insured their houses

  503
  for 30, 40 or 50 years and no fire has occurred. On the other hand, when the claim does fall on the insurance company it is sudden and uncertain. Thirty-one years ago there was an earthquake in San Francisco which cost British insurance offices over £14,000,000. Fire insurance offices do not have regular payments out, as life insurance offices do, but are met with sudden and immense claims. Very heavy claims will have to be paid by British insurance offices in respect of Spain. What I want to impress on the Chancellor is that these fire companies must, for the purposes of their business, hold the very large funds which they do hold, and that it would not be either right or politic to subject those funds to the National Defence Contribution. Fire, accident and marine insurance companies do not look for a very big interest return. Interest does not concern them very much. What they have to do is to keep the capital value of their funds as stable as they can, to invest in securities which do not fluctuate very much in value, and also to keep funds liquid so that they can realise them. In order to pay the £14,000,000 after the San Francisco earthquake they had to realise their funds, and I am glad to say that that immense payment did not shake the solvency of our insurance offices.
  I may be told that it is not necessary to hold these great funds, and that the companies do it for the purpose of attracting business, that they are a sort of shop window to induce insurers to do business with them; but I assure the Committee that that is not so. They are necessary funds in this section of insurance business, where the liabilities are incalculable. In the last 30 years the liabilities of British insurance companies have greatly increased. They are now very large and very heavy. These funds are necessary for the purpose of meeting those liabilities, and there have to be such investments as will not fall in value. I assure hon. Members that large numbers of companies must have at their disposal very big investments. Besides the insurance companies, Lloyd's are also concerned, because they incur very heavy insurance liability. [Laughter.] I wish hon. Members would let me into the joke. I know it is late, but I cannot be short over a matter like this. Unless my
  504
  Amendment is carried, an injustice will be created, and great injury inflicted upon the insurance interests. I will give just one set of figures of one company which, under the old National Defence Contribution would have paid £10,000, a reasonable sum; under the new National Defence Contribution, if my Amendment is carried, it will pay £75,000 on its underwriting profits. That is all right; that is its contribution under the National Defence Contribution, but if the Amendment is not carried it will pay £100,000 a year extra or, in all, £175,000 a year more than it would pay under the original scheme. You can reckon that the total paid by the insurance, companies would be over £1,000,000 per year. The payment that would fall on the life insurance companies is a comparatively small sum; the whole put together would be one-twentieth part of the new National Defence Contribution. That is a very heavy charge to place upon one industry. It is specially heavy, and might have a serious effect on the work of the insurance companies, whose present efficiency and the speed with which they settle claims is well known.
  Here is a great national business which has been built up by the efforts of centuries. These companies are not absurdly extravagant in what they have to hold in order to cover their liabilities, and, from their past experience, they never know when a liability is to fall upon them or how heavy it will be. Events in connection with the Spanish problem, or something of that sort, may throw on them a loss far greater than any that falls on a life office. A life office may have to meet heavy claims owing to an influenza epidemic or something of that kind, but far bigger losses may fall on these offices. I would plead with the Chancellor to make some concession at any rate to the fire, accident and marine insurance companies.
  11.41 p.m.
  Sir J. Simon: My right hon. and gallant Friend has stated the case with his usual care, and it is very difficult for me to resist his appeal, but I feel that some of the things that he has said really provide the justification for keeping the provisions of the Bill in this respect as they are. The question is whether we should, in including income received from investments, limit the definition of assurance

  505
  business to life assurance business, or whether we should include other forms of assurance business. I agree with my right hon. and gallant Friend that I did not refer to this precise case when I introduced the Resolution, but I did refer to businesses consisting wholly or mainly in dealing in or holding investments. I did not refer to the business of banking, but it was always the intention to include as part of the scheme a business which earned an essential part of its income by dealing in or holding investments, whether it was a banking business or an assurance business or a business consisting wholly or mainly in dealing in or holding investments. The issue to be decided by the Committee is whether the holding of these investments is an essential part of the business of an insurance company if it is not a life insurance company but an insurance company of another kind. My right hon. and gallant Friend agrees that a life insurance company has to receive premiums from the people whom it insures, and that it invests those premiums in order that, when one of those people dies or reaches a certain age, it may pay the amount contracted for; but is it really the case that nothing corresponding to that happens in fire insurance business?
  I heard my right hon. and gallant Friend describe very eloquently how a fire insurance company may be faced with some overwhelming claim. He said that they never could tell when these claims were coming upon them, or how heavy they would be, and he explained what happened in the San Francisco disaster. But in that case it was only the fact that they held investments that enabled them to meet the claims. My right hon. and gallant Friend told us, indeed, that the solvency of these companies depends on their investments. I should think that that is all quite true, but it seems to me to prove that the holding of these investments is essentially the business of such an insurance company, and, after all, that is the test which has to be applied. If it is not merely a convenient process of putting aside money which they do not want, but is really essential to their business, I should have thought it would be very difficult to make a distinction between the fire insurance company and the life insurance company. I do not know whether it has ever happened to anyone in this Committee to be visited by an ingenious and persuasive gentle-
  506
  man who wants you to insure with his particular company, whether against fire, burglary, or whatever it is. The first thing that he does is to spread out a paper before you and point out what considerable investments his company has.
  While I agree as to the importance of the point, I am afraid I cannot see my way to make a distinction between these different kinds of insurance. I will give the Committee one instance which I am sure is quite conclusive. There may be a very important class of business carried on by insurance companies, the business of a capital redemption company. You have a wasting asset, and you arrange with an insurance company to pay so much a year and, when your lease is finished, or a ship worn out, you will get back sufficient money to build a new one. Surely no one will deny that an insurance company which carries on that business must make investments. Though I quite agree with the right hon. Gentleman that all cases are not as simple as this one, I am afraid I am not persuaded that it would be right to alter the Schedule and limit it to insurance companies. There are some very big commercial companies, not insurance companies at all, which, in fact, have very large investments, but you could not say that the holding of such investments is essential to the business. My own view is that insurance companies are, after all, enterprises which depend as much as any others on our country being safe and our defences being sure, and I do not think it is unreasonable to ask that insurance companies of every sort should make a contribution.
  11.47 p.m.
  Lord Burghley: It is only fair to say that I am interested in an insurance company. Insurance companies do not deny the importance of making their fair contribution as far as Defence is concerned. The point at issue is whether they are doing more than their fair share as compared with other companies. The right hon. Gentleman has drawn a difference between insurance companies and ordinary businesses, and says that ordinary businesses which make no contribution on their investments are not in the same position as insurance companies as far as investments are concerned. What about a company which puts plant into a factory

  507
  and guarantees to keep it up for 10 years? Surely if a company has not a strong financial position you will not trust it with that job. They are just as much dependent on their reserve investments as insurance companies. The right hon. Gentleman says that an insurance company's reserves are, as it were, stock in trade. When you start an insurance company, you must raise a certain amount of money, which becomes your stock in trade, but when you have once produced that nest-egg your ins and outs are being paid for by your premium income every year. Provided you have that nest egg, your policy holders are quite satisfied that they will be paid in an emergency. When the reserves of insurance companies are far bigger than their nest-egg need be to satisfy policy holders, they have very large sums which are in the same position as the reserves of ordinary companies.
  The principle appears to be that whereas an ordinary company puts money by for prudence, an insurance company is allowed to put no money by for prudence but simply to improve their stock in trade. That is a position which will not hold water. They could halve their investments to-day without their policy holders having any fear, and therefore a large percentage of that money must be considered to be reserves as in an ordinary company, and if it is to be considered as reserves it must be treated as such. Therefore, I urge the right hon. Gentleman to consider all these points before the Report stage to see if some modification cannot be made.
  11.51 p.m.
  Mr. Denman: I find with some surprise that there is considerable misunderstanding of paragraph 5. I would like to ask what is meant by income derived from investments? Is that the net income received after deduction of tax, or is the trust company or the insurance company to gross that net income—to use the language of Income Tax inspectors—and to add the Income Tax that has been deducted in order to find the amount to be charged for National Defence Contribution? My second question is as to the effect of this paragraph on mutual life offices. It was stated in an earlier stage of this Debate that they would not have to pay in respect of their investments, and I believe that that is taken to be erroneous. It
  508
  is believed outside by certain important offices, and it is desirable that the Chancellor of the Exchequer should make a clear declaration on the point. It seems to me that for the language of this paragraph it is quite clear that all the income they receive from investments, other than income which has already been charged to National Defence Contribution, will have to pay its due quota of this new tax.
  11.53 p.m.
  Mr. Crowder: The Chancellor of the Exchequer has not said a word about Lloyd's underwriters, who do a large business in insurance. He said that insurance companies tried to attract business by telling the public what large investments they hold. The public cannot find out what Lloyd's investments are, and it is not essential for Lloyd's underwriters to have investments at all. Therefore, I do not see that the argument which the Chancellor has used with regard to companies applies to Lloyd's underwriters, and it seems to me that if the Chancellor does not make some concession to Lloyd's underwriters, it will only encourage underwriters to pay out to the individual name of Lloyd's more than the balance sheet warrants, so that there will be no money left in the till for investments. The whole of the profit in one year is paid out to the individual name. We hold premiums in trust for a time for the insurers, and during the time we have that money before the account is closed, which is three years, this money is invested. I do not feel that it is right that these investments should be taxed.
  As the Chancellor knows, it has been rather difficult to do insurance abroad, and foreign countries have insisted that large sums of money should be deposited abroad to enable us to do business there, and up to a short time ago underwriters, to enable them to do this business, borrowed money—anal paid 2½ per cent. for it—from foreign banks. During the last few weeks arrangements have been made whereby a large sum of money has been raised by underwriters and invested abroad to enable them to do business there. Naturally the money will be invested in securities abroad. It is only there for the purpose of enabling us to do business. It is rather unfair that underwriters, who have unlimited liability, should be treated in the same way as the shareholders of a company.

  509
  I ask the Chancellor of the Exchequer whether he will not favourably consider doing something on the Report stage to make the position a little clearer and easier as regards Lloyd's underwriters?
  11.56 p.m.
  Sir J. Simon: I will reply first as to the question asked by my hon. Friend below the Gangway. I have looked at the words, and I think that the answer to his question is that the income to be charged is the gross income. Where investment income that is liable to National Defence Contribution first pays Income Tax by deduction it is the gross amount before deduction of Income Tax that will bear National Defence Contribution. However, I will look at it and if necessary give a more accurate answer perhaps on the Report stage. My hon. Friend the Member for Finchley (Mr. Crowder) has called attention to the position of Lloyd's underwriters, and I agree that there may be some respects in which their position may need to be specially considered. One reason is that, generally speaking, Lloyd's underwriters are not in quite the same position as companies, but I would want to go into the matter a little closer before I could give any assurance on it.
  Mr. Ellis Smith: Especially remembering that the municipalities would be interested?
  Sir J. Simon: The real problem is that the treatment of investment income is one of the most difficult things to decide in the whole scheme. It would be possible to devise a tax which either took in interest on investments or excluded it altogether. If it could be done all round, the insurance companies could be included as part of the whole. We have drawn a distinction—I think rightly —and said that where an individual company has got an investment which is not really an essential element in its business, that it shall not be taxed. That, I think, is right. The outside investments of manufacturing industry, for example, would not be taxed. But when you come to the case in which it is essential to the company's business that it should make investments and draw interest from them, you plainly have a case where you must regard it as carrying on trade, in part at least, by drawing interest from its investments, and it is a question on which side of the line insurance companies should
  510
  come. I appreciate very fully what was said by my hon. Friend opposite in a very persuasive speech, but, as I have said, I am not at present able to make a decision, and I will gladly consider the point.
  11.58 p.m.
  Mr. J. J. Davidson: I can see that the Chancellor of the Exchequer is rapidly becoming the favourite of one particular side of the Committee. His concessions to certain interests, on the one hand, and his definite stand against the interests represented on this side of the Committee have created some consternation among my colleagues. I say quite frankly to the hon. Members who have been pleading with such eloquence for the poor company which has only a nest egg, that it was admitted by the hon. Member below the Gangway to be a growing nest egg upon which to fall back, and that it is an assurance to those within such a company. Their pleading has been almost as eloquent as the pleading of Members on this side of the Committee when we were stating the case for a nest egg on behalf of the working class with regard to the means test administration, but I did not on that occasion see the Front Bench of the Government receiving our eloquent pleas with the same spirit in which they have received this plea to-night.
  This is a business proposition. We are told on good authority that there is money in it. The right hon. and gallant Member who moved the Amendment said that these companies would be liable under the Bill for an extra £100,000 in taxation. I take the view that the more the Chancellor of the Exchequer can get from companies who can afford to pay an extra £100,000 and the less he takes in taxes from small business men and co-operative societies the more fair and equitable the taxation will be. I trust that before the Report stage the Chancellor of the Exchequer will realise the grave danger there is of the people of the country recognising him and hon. Members behind him as trying to pass this National Defence Contribution on to the poorest sections of the business life of the country, and allowing the big industrialists and employers of labour to escape. The big industrialists have threatened the Government and now they are running

  511
  away from their proposals to tax the big men. I am glad to have this opportunity of showing the Chancellor of the Exchequer the grave danger which exists of the people realising that he is acting as a class Chancellor of the Exchequer and against the interests of the majority of the people.
  12.3 a.m.
  Sir W. Davison: I do not propose to follow the hon. Member in his observations except to say that when he refers to the ample resources of insurance companies, a business which commends itself to Members in all parts of the Committee, he must remember that they are provided in order to pay their liabilities to those whom they insure. I should like to comment on one point in the Chancellor's speech. He compared this kind of insurance company with a banking company. There could not be a greater difference. A banking company makes its profits by buying and selling investments, and, further, it is allowed a reduction in Income Tax when it makes a loss on the sale of investments. In the case of an insurance company this is simply a reserve fund, and is no part of the business. These investments are no part of the business. Their reserves are to give the country confidence that they are in a position to meet any demands which come upon them. They do not look for highly remunerative investments but for something liquid, which can be realised in a short time in order to pay claims which may be made upon them. They are in a different position from the investments of a bank, which are part of a bank's business. I hope that the Chancellor will bear this point in mind.
  12.5 a.m.
  Captain Sir William Brass: I want to appeal to the Chancellor of the Exchequer on the same grounds as my right hon. and gallant Friend. He pointed out that the investments of certain insurance companies—not life assurance companies—were their reserves. The Chancellor of the Exchequer just now said that investment was an essential part of an insurance company; I agree, and I want to ask him one question. Is not investment as essential to the Prudential Assurance Company, which has £11,000,000 as reserve, as it is to the Imperial Tobacco Company, or any other
  512
  company? These companies are to be exempt, but the insurance companies are not. Would the right hon. Gentleman answer that question in a single sentence now?
  12.6 a.m.
  Sir J. Simon: I will answer my hon. and gallant Friend with pleasure, although it is a question that does not need an answer. Perhaps he was not here at the beginning of the Debate, or he would know that those very examples were cited by the right hon. and gallant Member for Ripon (Major Hills) for the purpose of the argument which he addressed to the Committee, about half or three-quarters of an hour ago.
  Amendment negatived.
  12.7 a.m.
  Mr. Spens: I beg to move, as an Amendment to the proposed Schedule, in line 95, to leave out "by way of dividend or distribution of profits."
  The object of this Amendment is to avoid double taxation in the case of companies which have already borne taxation. Any income from industrial companies which has already borne taxation by investment in debentures or loans is to be brought into the charge of tax. One appreciates that there will be loss to the Treasury if the Amendment is accepted, owing to the fact that the industrial company itself will have been allowed a deduction for its debenture interest or loan interest, and so forth, and that that particular sum will not have brought tax into the hands of anybody. The anomaly that arises from that system is that hitherto there has been no reason why an investment company, an insurance company or a bank could have any preference as to whether it makes its investment in debentures, preference shares or ordinary shares, because it has not been liable to lose. Now, every time it selects debentures for investment, the company or bank will increase the amount it will pay under this National Defence Contribution.
  It seems undesirable that this factor should be introduced into the finance of industry, if it can be avoided. I cannot believe that so much is to be gained by including the income that comes from debentures in industrial companies, and if the position can be avoided without loss, to do so would be to the general advantage. A very great number of

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  questions are raised by it, to my own personal knowledge, and I hope it will not be necessary for me to persist in this matter. These industrial companies have paid the taxation according to the method of assessment in the Schedule, and, whatever the result of that method, if the taxation is paid once and for all, I suggest that it is undesirable to have the wording of the Clause as it stands, which incidentally is not where the exception has been made for avoiding double taxation. While I do not want to press the Amendment now, I hope that before the Report stage my right hon. Friend will be able to consider the matter with a view to seeing whether he cannot leave out the words that I suggest should be left out.
  12.11 a.m.
  The Attorney-General: In reply to my hon. and learned Friend, I think the real point is that the scheme which this Amendment would alter follows logically and inevitably on the principle that, in fixing the amount on which the National Defence Contribution is to be levied, loan interest and debenture interest is to be deducted, and no doubt that does throw the incidence of the National Defence Contribution levy on the ordinary shareholder. To that extent, the result inevitably follows that the balance is weighted against the ordinary shares in favour of debenture interest. While appreciating what my hon. and learned Friend says, if his Amendment were accepted it would load that balance still further in favour of debentures and against the ordinary shares, and by adopting, as we have, this scheme, which is based on a logical principle, and seeing that the loan interest if paid to an investment company shall in its hands bear the National Defence Contribution, we are to some extent. though not completely, of course, redressing the balance and seeing that, as far as may be, from the investment company's point of view, the disadvantage which might attach to ordinary shares as an investment as compared with debentures is counterbalanced by the fact that debenture interest in their hands will suffer the National Defence Contribution. For those reasons, we cannot accept the Amendment.
  Amendment negatived.
  12.13 a.m.
  Mr. Alexander: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
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  I move this Motion in order that we may get a statement from the Government as to how far they propose to go tonight.
  Sir J. Simon: I have been looking through the Amendments, and I think the Committee will be satisfied that there remains no matter which is likely to cause acute controversy or prolonged discussion. There are at most only three or four very minor points, and I am hopeful that if we go on we shall finish in quite a short time.
  Mr. Alexander: My hon. Friends have great difficulty in staying late because of having to catch trains. We do not mind continuing the business of the House if there is really something to debate, but it is very annoying to stay here and find that there is nothing but a sham fight.
  12.14 a.m.
  Mr. Tinker: I have listened to all the arguments on the Amendments from the other side, but when the Amendments have been discussed, they have been withdrawn and not pressed to a Division. Surely if hon. Members opposite do not intend to press their Amendments to a Division, they will curtail their remarks. The right hon. and gallant Gentleman the Member for Ripon (Major Hills) spoke for half an hour and did not receive satisfaction from the Government, but he did not press his Amendment to a Division. I hope the Government will realise that we want to get the business through.
  12.15 a.m.
  Mr. Davidson: May I ask the Chancellor of the Exchequer whether he cannot make a statement now to his followers behind him, with regard to their Amendments, that they should consult him about them and get him to take them into account and give them some assurance of that kind? That is all that is taking place on every Amendment that we have had from them for a considerable time. On every Amendment he has said that he cannot give them any definite assurance, but that he has noted what they have said. I ask him to take them all at once and to say, "Let us get through them." It is nonsensical keeping hon. Members here when hon. Members opposite have not the guts to carry their Amendments into the Lobby,

  515
  if they really believe in what they are moving.
  Motion, by leave, withdrawn.
  12.16 a.m.
  Colonel Ponsonby: I beg to move, as an Amendment to the proposed Schedule, in line 107, to leave out:
  "and directs or is entitled to direct the management of."
  It is a very short Amendment and almost a drafting Amendment. The proviso in which the words occur exempts from National Defence Contribution incomes from subsidiary statutory undertakings by a controlling or holding company, but in order to obtain that exemption the controlling company has to prove two things—first, that it has a controlling interest and, second, that it directs or is entitled to direct the management of the undertaking. The first point is quite easily ascertained. The shares are held either en bloc or partly en bloc and partly in the names of nominees. As regards the second matter, "directs or entitled to direct," I would point out that it is very difficult for a company to direct another company. In the eyes of the law the only parties who can direct a company are the directors, and possibly the Chancellor of the Exchequer may be aware that these words are taken from the Finance Act, 1921, Section 58, which deals with the Corporation Profits Tax. I do not know whether the fact that they have been removed en bloc from that Act makes them sacrosanct, but I ask whether he can see his way to agree to my Amendment and omit these words.
  Lieut.-Colonel Colville: This is really a drafting Amendment, and we agree to the deletion of these words.
  Amendment agreed to.
  12.19 a.m.
  Mr. H. G. Williams: I beg to move, as an Amendment to the proposed Schedule, in line 108, to leave out:
  "by way of dividend or distribution of profits."
  Public utilities whose profits are controlled are exempted from the tax, whether municipal or company owned, and it is clearly the intention that exemption of holding companies shall be carried through in the same way as is the case under Section 58 of the Finance
  516
  Act, 1921, which imposed the old Corporation Profits Tax. This is really not very much more than a drafting Amendment, but merely gives effect now to what was done in 1921, and in the same way.
  12.20 a.m.
  Lieut.-Colonel Colville: The hon. Member has, in a very few words, correctly covered the ground. We agree with this Amendment and accept it.
  Mr. Alexander: I think it wants a little more explanation than that, all the same. I do not want to spend time over a sham fight, but we must know what we are doing.
  Lieut.-Colonel Colville: I will give the right hon. Gentleman an explanation with pleasure. The omission which my hon. Friend proposes would have the effect that a body corporate which has a controlling interest in another body corporate which is a statutory undertaking, and therefore not chargeable to the tax, would not be required to pay National Defence Contribution on any income received from that statutory undertaking, whether in the form of dividend, distribution of profits, or management fees.
  12.21 a.m.
  Mr. Davidson: I trust that Members of the Committee will not accept this Amendment in the way that the Government have accepted it. It seems to me and to many of my colleagues that the Chancellor is now being faced by very many tricky experts who are showing him certain methods and avenues whereby certain interests can evade this tax. I and many of my colleagues are disgusted at the attitude of the Government towards those experts, and accordingly we shall divide against this Amendment.
  12.22 a.m.
  Mr. Alexander: I too am exceedingly doubtful about this Amendment. It seems to me to be just a way of getting out of what ought to be a legitimate charge upon holding companies, and having regard to the kind of criticisms that we have made from time to time from these benches in regard to the manipulation of these companies and its effect very often upon employment in the industries concerned, I do not feel that, because you have exempted under the Act the original statutory undertakings

  517
  whose profits are paid afterwards to the holding companies, you should thereby exempt the holding companies themselves.
  12.23 a.m.
  Mr. H. G. Williams: There is no point, I would point out to the right hon. Gentleman opposite, in exempting the statutory company if you do not also effectively exempt the company to which the profits go. It is purely a matter of administrative convenience in certain cases where a holding company controls and manages a group of public utilities. If you destroyed the holding company and distributed the shares which it held in these public utilities to the persons who were shareholders in the holding company, none of those persons would in any way be affected by this tax. Why, because for administrative convenience you interpose something which on administrative grounds is a sensible thing to do in many cases, you should say the tax should then be payable, I really do not know. Having exempted the public utilities themselves, I can see no reason why you should not also exempt the holding companies which receive the profits from those public utilities; and remember this, that this concession is given solely to people or public utilities which are controlled in respect of their rates of charge or rates of profit. They are people who are debarred by legislative and other regulations from exploiting any situation. To say that a controlled body should be taxed, though the body which controls it is not, seems to reduce the whole argument to complete absurdity.
  12.25 a.m.
  Mr. Bellenger: Before the Committee proceeds to a Division, it is only right that we should hear from the Financial Secretary what the cost of this would be. After all, in the case of all the other concessions he has given to his hon. Friends he has told the Committee what the cost will be. We have been told that this National Defence Contribution is to raise a certain amount of money. We have a great deal of consideration for the Chancellor of the Exchequer. We do not want his Budget to be unbalanced and we should like to know whether this would result in any substantial sum of money being lost to the revenue.
  12.26 a.m.
  Sir J. Simon: If there were any question of a loss of revenue, the Committee
  518
  ought certainly to know, but for the moment the hon. Gentleman who has just spoken has not quite got the point of this Amendment. The point is really an extremely limited one. What we have to consider is this. Suppose you have statutory undertakings; you are not going to get any National Defence Contribution tax out of them; that has already been decided. But it may be that the shares of these particular undertakings are owned by a company which manages them. Can it be contended that when the statutory undertaking pays these profits to the company which owns it, the company is to be taxed? That would be absurd, because you have started off on the proposition that it is a statutory undertaking. As we have drawn it up in the Schedule, we have not said that the owning company shall not be taxed, but only that the company shall not pay tax if it receives the amount from a statutory undertaking by way of dividend or by way of distribution of profits. But there is the possibility that you might have it paid by way of interest on debentures. It is solely for the purpose of covering an omitted case which is obviously exactly the same in principle as every other case that it is proposed to leave out the words
  "by way of dividend or distribution of profits."
  There is the more reason for leaving them out because in the case of the Corporations Profits Tax, which was exactly the same type of scheme, those words did not occur, with the result that whatever the method by which the statutory undertaking hands over its remitted profit to the owner, in the hands of the owner it does not hear tax. There is really, therefore, no question of losing money, but merely that we had omitted a particular case and so we are simply cutting out these words.
  12.30 a.m.
  Mr. Silverman: It is quite easy to see that the Chancellor of the Exchequer has given a good deal of attention to these matters. I do not know whether my own intelligence is more limited than that of other hon. Members, but it is not clear to me. I understand from his last few sentences that the intention is that where the tax is not leviable at the source, as it were, it shall not be leviable when the profits are distributed into the hands of those who ultimately receive those profits.

  519
  May I remind the right hon. Gentleman that earlier this evening we were discussing a case which is not without its analogies with this one? We discussed the case of the small investor whose total income was below the level at which Income Tax is assessed at all, and we suggested to him that as the whole purpose of this new tax was only to place a tax on large incomes and if you were not going to tax at all until the profits reached the sum of £2,000, it was anomalous, inequitable and wrong, where the profits were distributed into the hands of persons who were not assessable to Income Tax on the general principle, that you should then tax, in the hands of the ultimate receiver of the property, amounts which it was not intended should ever be taxed
  at all. I know there are differences and that the two cases are by no means the same, but as far as the principle on which the Chancellor of the Exchequer has sought to defend this proposal, it is precisely analogous with the case that we put to him earlier in the evening, and which he and the Committee rejected. It is only another example of concessions being made to large people which are refused to small ones, arid for my part I hope the Committee will divide against this proposal, and defeat it.
  Question put, "That the words proposed to be left out stand part of the proposed Schedule."
  The Committee divided: Ayes, 27; Noes 153.

  Division No. 268.]

  AYES.

  [12.31 a.m.

  Alexander, Rt. Hon. A. V. (H'lsbr.)

  Fletcher, Lt.-Comdr. R. T. H.

  Pritt, D. N.

  Barr, J.

  Grenfell, D. R.

  Silverman, S. S.

  Bellenger, F. J.

  Hall, G. H. (Aberdare)

  Smith, Ben (Rotherhithe)

  Benn, Rt. Hon. W. W.

  Kelly, W. T.

  Smith, E. (Stoke)

  Burke, W. A.

  Lawson, J. J.

  Stewart, W. J. (H'ght'n-le-Sp'ng)

  Cape, T.

  MacMillan, M. (Western Isles)

  Windsor, W. (Hull, C.)

  Cocks, F. S.

  Milner, Major J.

  Woods, G. S. (Finsbury)

  Dalton, H.

  Nathan, Colonel H. L.

  Davidson, J. J. (Maryhill)

  Noel-Baker, P. J.

  TELLERS FOR THE AYES.

  Edwards, Sir C. (Bedwellty)

  Price, M. P.

  Mr. Paling and Mr. Tinker.

  NOES.

  Acland-Troyte, Lt.-Col. G. J.

  Cruddas, Col. B.

  Inskip, Rt. Hon. Sir T. W. H.

  Agnew, Lieut.-Comdr. P. G.

  Culverwell, C. T.

  Joel, D. J. B.

  Albery, Sir Irving

  Dawson, Sir P.

  Jones, Sir H. Haydn (Merioneth)

  Anderson, Sir A. Garrett (C. of Ldn.)

  Duckworth, Arthur (Shrewsbury)

  Jones, L. (Swansea W.)

  Anstruther-Cray, W. J.

  Duggan, H. J.

  Keeling, E. H.

  Apsley, Lord

  Duncan, J. A. L.

  Kerr, H. W. (Oldham)

  Aske, Sir R. W.

  Eastwood, J. F.

  Keyes, Admiral of the Fleet Sir R.

  Assheton, R.

  Eckersley, P. T.

  Leckie, J. A.

  Astor, Hon. W. W. (Fulham, E.)

  Elmley, Viscount

  Levy, T.

  Baldwin-Webb, Col. J.

  Emrys-Evans, P. V.

  Liddell, W. S.

  Balfour, Capt. H. H. (Isle of Thanet)

  Errington, E.

  Llewellin, Lieut.-Col. J. J.

  Beamish, Rear-Admiral T. P. H.

  Evans, D. O. (Cardigan)

  Lloyd, G. W.

  Beauchamp, Sir B. C.

  Fleming, E. L.

  Mebane, W. (Huddersfield)

  Beaumont, Hon. R. E. B. (Portsm'h)

  Fox, Sir G. W. G.

  McCorquodale, M. S.

  Beit, Sir A. L.

  Fremantle, Sir F. E.

  Macdonald, Capt. P. (Isle of Wight)

  Bernays, R. H.

  Furness, S. N.

  McKie, J. H.

  Boulton, W. W.

  Fyfe, D. P. M.

  Margesson, Capt. Rt. Hon. H. D. R.

  Bower, Comdr. R. T.

  Gibson, Sir C. G. (Pudsey and Otley)

  Marsden, Commander A.

  Boyce, H. Leslie

  Gluckstein, L. H.

  Maxwell, Hon. S. A.

  Brass, Sir W.

  Graham, Captain A. C. (Wirral)

  Mayhew, Lt.-Col. J.

  Briscoe, Capt. R. G.

  Grant-Ferris, R.

  Mellor, Sir J. S. P. (Tamworth)

  Brown, Col. D. C. (Hexham)

  Gridley, Sir A. B.

  Mitchell, H. (Brentford and Chiswick)

  Burghley, Lord

  Grimston, R. V.

  Morgan, R. H.

  Cartland, J. R. H.

  Guinness, T. L. E. B.

  Muirhead, Lt.-Col. A. J.

  Cazalet, Thelma (Islington, E.)

  Gunston, Capt. D. W.

  Munro, P.

  Cazalet, Capt. V. A. (Chippenham)

  Hannah, I. C.

  Neven-Spence, Major B. H. H.

  Channon, H.

  Hannon, Sir P. J. H.

  Nicholson, G. (Farnham)

  Christie, J. A.

  Harbord, A.

  Ormsby-Gore, Rt. Hon. W. G. A.

  Clarry, Sir Reginald

  Harvey, T. E. (Eng. Univ's.)

  Orr-Ewing, I. L.

  Cobb, Captain E. C. (Preston)

  Heilgers, Captain F. F. A.

  Palmer, G. E. H.

  Colfox, Major W. P.

  Hepburn, P. G. T. Buchan-

  Perkins, W. R. D.

  Colman, N. C. D.

  Herbert, A. P. (Oxford U.)

  Plugge, Capt. L. F.

  Colville, Lt.-Col. Rt. Hon. D. J.

  Herbert, Capt. Sir S. (Abbey)

  Ponsonby, Col. C. E.

  Conant, Captain R. J. E.

  Higgs, W. F.

  Porritt, R. W.

  Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)

  Hills, Major Rt. Hon. J. W. (Ripon)

  Procter, Major H. A.

  Courthope, Col. Rt. Hon. Sir G. L.

  Holdsworth, H.

  Radford, E. A.

  Craven-Ellis, W.

  Holmes, J. S.

  Rankin, Sir R.

  Crookshank, Capt. H. F. C.

  Hope, Captain Hon. A. 0. J.

  Rathbone, Eleanor (English Univ's.)

  Crossley, A. C.

  Hudson, R. S. (Southport)

  Reed, A. C. (Exeter)

  Crowder, J. F. E.

  Hutchinson, G. C.

  Reid, W. Allan (Derby)

  Roberts, W. (Cumberland, N.)

  Spens, W. P.

  Wakefield, W. W.

  Ropner, Colonel L.

  Storey, S.

  Ward, Lieut.-Col. Sir A. L. (Hull)

  Ross Taylor, W. (Woodbridge)

  Stourton, Major Hon. J. J.

  Ward, Irene M. B. (Wallsend)

  Royds, Admiral P. M. R.

  Strauss, H. G. (Norwich)

  Wells, S. R.

  Russell, S. H. M. (Darwen)

  Strickland, Captain W. F.

  Whiteley, Major J. P. (Buckingham)

  Salt, E. W.

  Sutcliffe, H.

  Williams, H. G. (Croydon, S.)

  Seely, Sir H. M.

  Taylor, Vice-Adm. E. A. (Padd., S.)

  Winterton, Rt. Hon. Earl

  Shaw, Major P. S. (Wavertree)

  Thomas, J. P. L.

  Wright, Squadron-Leader J. A. C.

  Simon, Rt. Hon. Sir J. A.

  Titchfield, Marquess of

  Smiles, Lieut.-Colonel Sir W. D.

  Tryon, Major Rt. Hon. G. C.

  TELLERS FOR THE NOES.—

  Somervell. Sir D. B. (Crewe)

  Tufnell, Lieut.-Commander R. L.

  Captain Dugdale and Captain

  Southby, Commander A. R. J.

  Turton, R. H.

  Waterhouse.

  12.39 a.m.
  Mr. H. G. Williams: I beg to move, in Line 127, after the word "pounds" to insert:
  "or the average remuneration of such directors for the three years ended on the thirty-first day of March, nineteen hundred and thirty-seven."
  The point is quite a simple one. There are provisions inserted in this Schedule for making sure that the tax is not evaded by people absorbing an undue proportion by way of salaries. The point at issue was raised with me by one of my constituents and concerned a case of one or two of his relatives. A person had made, for reasons which are good and proper, his departmental managers into directors. As a result their salaries are aggregated with his for the purpose of this limitation. Actually the company is not a large one, and as far as I can make out only half their salaries would be treated as a trading expense. If to-morrow he dismissed them as directors and reappointed them as managers then, under the definition of managers we have in this Schedule, what they received would be a trading expense and no difficulty would arise. It seems to me very undesirable when people have, as these people have, risen from the ranks and got to the status of directors, and merely because they are called directors, that any part of their salaries in excess of the aggregate of their salary and that of the chairman who is the controller of the company that goes beyond the £11,500 or the 15 per cent., whichever is the greater you have the perfectly absurd position that this company will be taxed on what is, in effect, a substantial part of its working expenses.
  The position is manifestly absurd. I gather that, so far as the Government have considered it, they are not too much impressed by this argument, but I wonder whether they have studied it in the light of the facts I have given, It is a lates
  522
  hour to argue the question now, but surely if we accept the position that existed a few weeks before anybody dreamed of this tax, and assume that at that date people were arranging their things in such a way as to avoid a tax they never dreamed of, we are not taking up a fair position. If, on the other hand, there may be cases where, for reasons quite honest and proper, a very large proportion of the profits of a company have in fact been distributed by way of salaries in an undue proportion, my Amendment would have the effect of releasing a certain number of people who ought to pay, and I see the difficulty of that. If that be a difficulty I would ask the Chancellor of the Exchequer whether he could not insert some of those words of the kind we have inserted previously to say that the Commissioners of Income Tax or the Special Commissioners, or whatever is the right body of Commissioners, shall have a certain measure of discretion in this case. I am not now suggesting a proper form of words, but I do think a number of substantial cases of hardship will arise. I hope the Chancellor will give them most careful consideration, and I hope the Committee will sympathise with me.
  12.44 a.m.
  The Attorney-General: Nobody knows better than the hon. Member for South Croydon (Mr. H. G. Williams) that it is impossible to devise any general principle to fit a particular tax which does not, in certain exceptional circumstances, perhaps produce a result which is less equitable than in the general application of the principle on which it is based. But he admitted that if his Amendment were accepted there might well be cases where there was not any motive of dodging this tax. I am not suggesting there is any improper motive at all, but where in cases of this kind a very large proportion of the profits have been distributed as directors' salaries they are an amount in excess of what they would have received if they had

  523
  been getting salaries as managers. That is the object in certain cases. My hon. Friend suggested that there must be, at any rate, methods by which this situation, so far as it exists, could be met by amending the point of managers instead of directors. That is a possible way out. My right hon. Friend's view is that he cannot accept this Amendment, but we must stick to the principle in the Bill.
  With regard to the last point, namely, that there might be something in connection with the Special Commissioners, that is not a suggestion raised by this Amendment. We will, of course, consider it, but at the moment I very much doubt whether the point raised by this Amendment would justify the procedure. We do not believe—there may be no doubt exceptional cases—that any substantial hardship will be affected by the principles laid down.
  12.47 a.m.
  Mr. Bellenger: I was not quite clear from the last words of the hon. and learned Gentleman whether he was going to consider the suggestion made by the hon. Member for South Croydon (Mr. H. G. Williams) as to leaving some discretion in this matter to some body of commissioners. I hope he will not consider that, because it seems to me that judges make many complaints about the intentions of Parliament, and I think our intentions, when we are legislating, should be as clear as is possible and not left for some interpretation by a body of commissioners or other gentlemen, whatever their qualifications may be. Therefore, if the hon. and learned Gentleman in his concluding remarks meant to say that he will consider the suggestion made by the hon. Member for South Croydon, I hope he will not consider it at all.
  12.48 a.m.
  Mr. H. G. Williams: I am going to withdraw the Amendment, but before I do so I wish to point out that the learned Attorney-General is saying to me that I have got to tell six of my constituents that any salary they receive in excess of £5 a week is to be charged with the National Defence Contribution. I am going to tell them that it is the solemn and serious consideration of the Government and the House of Commons that any person in receipt of a salary in excess of £250 a year is liable to the National
  524
  Defence Contribution. Do not let us argue about it. That is the proposal. Do not let us talk about trifling cases of hardship, because alternatively five of my constituents have to be sacked from the Board on which they are sitting. That is the proposition. The plain truth of the matter is that neither the Chancellor nor the learned Attorney-General has thought the matter out. We all know about these things and how they are done. Amendments are tabled, and Civil servants get busy and do their best. Their best as a rule is very good, but very often they do not visualise all the possibilities. They have not visualised the possibilities in this case, and I cannot rest satisfied to tell my constituents, who are sufficiently competent to hold offices of some importance, that Parliament does not think they are entitled to more than £5 a week by way of salary. The only way they can dodge that is for one of them to sack the other five. That is the proposition which I will convey to my constituents by sending them a copy of the OFFICIAL REPORT containing my speech. But I hope the Chancellor will really consider this, because the matter has not had adequate consideration. I beg to ask leave to withdraw the Amendment.
  12.50 a.m.
  Mr. W. Benn: I do not want to intervene in this domestic debating society, but all this talk about something being done on the Report stage is sheer nonsense, because we cannot do anything which increases the charge. So far as withdrawing the Amendment is concerned, I would remind the hon. Member for South Croydon (Mr. H. G. Williams) that that is a matter for the Committee to decide.
  Mr. Williams: My Amendment does not increase the charge, it reduces it.
  12.51 a.m.
  Mr. Higgs: This is no matter of small importance. I know of a considerable number of people in my division who will be affected in a similar manner. It is a general procedure for people to become directors in order to conduct their business in the manner described. I am surprised to hear that the matter is being treated in this manner. It will be a difficult matter for people to run their businesses if they have to discharge people in order not to have to pay the tax.
  12.52 a.m.
  Mr. Davidson: I want to say how amazed Members on this side of the Committee are at the indignation of the hon. Member for South Croydon (Mr. H. G. Williams). He is so indignant on behalf of his constituents that he asks leave to withdraw his Amendment. I am very glad of the lead given by our front bench on this matter. If the hon. Member for South Croydon desires to convey to those poor constituents of his who are suffering from the burdens placed on them by the Chancellor of the Exchequer and the Attorney-General, the real way the Government have acted to-day as far as the small business men are concerned, I would ask him to send on one or two OFFICIAL REPORTS containing the speeches of some hon. Members on this side of the Committee. He should give them a personal explanation because none of his constituents reading the speech of the Attorney-General would understand what he was talking about. I think that this could have been one of the opportunities on which the Attorney-General could have extended some clemency to his hon. Friends. It is a plea for the small man, and as such we will support it.
  Amendment negatived.
  Schedule, as amended, added to the Bill.

NEW SCHEDULE.—(Assessment and Collection of National Defence Contribution, Appeals and Supplementary Provisions.)

  PART I.
  Assessment and Collection.
  1. The National Defence Contribution payable in respect of any chargeable accounting period shall be assessed on the person carrying on the trade or business in that period.
  2. Where two or more persons were carrying on the trade or business jointly m the relevant chargeable accounting period, the assessment shall be made upon them jointly and, in the case of a partnership, may be made in the partnership name, if any.
  3. Where by virtue of the foregoing provisions of this Schedule an assessment could, but for his death, be made on any person either solely or jointly with any other person, the assessment may be made on his personal representative either solely or jointly with that other person, as the case may be.
  4. Where any person liable to assessment under the foregoing provisions of this Schedule in respect of the profits arising from a trade or business in any chargeable accounting period is not resident in the United Kingdom, an assessment may be made upon any agent,
  526
  manager, or factor resident in the United Kingdom through whom the trade or business was carried on in that period.
  5. An assessment (including an additional assessment) may be made at any time within six years from the end of the chargeable accounting period in respect of which the assessment is made, and in the absence of a satisfactory return or other information on Which to make an assessment the Commissioners of Inland Revenue may make an assessment according to the best of their judgment.
  6. The Commissioners of Inland Revenue may make regulations with respect to the assessment and collection of the National Defence Contribution and may by those regulations apply and adapt any enactments relating to the assessment and collection of Income Tax.

  PART II.
  Appeals.
  1. Any person who is dissatisfied with an assessment to the National Defence Contribution may appeal either to the General Commissioners for the division in which he is assessed for the purposes of Income Tax or to the Special Commissioners.
  2. On any appeal under this Part of this Schedule, the General or Special Commissioners shall have power, if they think fit, to summon witnesses and examine them on oath.
  3. The provisions of Section one hundred and ninety-six of the Income Tax Act, 1918 (which relate to appeals in Northern Ireland from the Special Commissioners to the recorder or the county court judge) shall apply to an appeal to the Special Commissioners in Northern Ireland under this Part of this Schedule.
  4. The provisions of Section one hundred and forty-nine of the Income Tax Act, 1918 (which relate to the statement of a case on a point of law) shall, with the necessary modifications, apply in the case of any appeal to the General or Special Commissioners under this Part of this Schedule and in the case of any re-hearing of any such appeal in Northern Ireland, as they apply in the case of appeals to the General or Special Commissioners under the said Act.
  5. Notwithstanding that an appeal is pending against an assessment to the National Defence Contribution, such part of the contribution assessed as appears to the Commissioners of Inland Revenue not to be in dispute shall be collected and paid in all respects as if it were a contribution charged by an assessment in respect of which no appeal was pending, and on the determination of the appeal any balance chargeable in accordance with the determination shall he paid, or any amount over-paid shall be repaid, as the case may require.
  6. The Commissioners of Inland Revenue may make regulations with respect to the hearing of appeals under this Part of this Schedule, and may by those regulations apply and adapt any enactments relating to the hearing of appeals as to Income Tax by the Special or General Commissioners which do not otherwise apply.
  7. In this Part of this Schedule the expressions "the General Commissioners" and "the Special Commissioners" have respectively the same meanings as in the Income Tax Act, 1918.

  PART III.
  Supplementary Provisions.
  1. Any surveyor appointed for the purposes of the Income Tax Acts may by notice in writing require any person who carries on or has carried on any trade or business to which the Section of this Act charging the National Defence Contribution applies to deliver to him a return of the profits arising from the trade or business in any period during which it was carried on by that person and to furnish him with any other particulars relating to the trade or business:
  Provided that—

  (a) where any such person as aforesaid is dead, or is a body corporate which is being wound up, the notice may be given to the personal representative of the dead person or liquidator of the body corporate, as the case may be;

  (b) where the trade or business is or was being carried on by persons in partnership, the notice may be given in the partnership name, if any;

  (c) where the person who carries on or has carried on the trade or business is not resident in the United Kingdom, the notice may be given to any agent, manager or factor resident in the United Kingdom through whom he is or was carrying on the trade or business.

  2. Every person to whom a notice is given under the last foregoing paragraph shall comply with the requirements thereof within one month from the date of the notice:
  Provided that where a notice is given in the partnership name to the persons who are or were carrying on a trade or business in partnership it shall be the duty of the precedent partner or, where no partner is resident in the United Kingdom, of the agent, manager or factor of the firm resident in the United Kingdom, to comply with the requirements of the notice.
  For the purpose of this paragraph the expression "the precedent partner" has the same meaning as in paragraph (2) of Rule 10 of the rules applicable to Cases I and II of Schedule D in the Income Tax Act, 1918.
  3. Where a body corporate is being wound up, the liquidator of the body corporate shall not distribute any of the assets of the body corporate to the members thereof unless he has made provision for the payment in full of any National Defence Contribution which may be found payable by the body corporate.
  4. If any person without reasonable excuse contravenes or fails to comply with any of the foregoing provisions of this Part of this
  528
  Schedule, he shall be liable on summary conviction to a fine not exceeding five hundred pounds, and in a case where he fails to comply with the requirements of paragraph 2 of this Part of this Schedule, to a further fine not exceding fifty pounds for every day on which the failure continues.
  5. In a bankruptcy, in the winding-up of a company, and in the event of a receiver being appointed on behalf of the holders of any debentures of a company secured by a floating charge or of possession of any property comprised in or subject to a floating charge being taken by or on behalf of the holders of any debentures of a company secured by that charge, the same priority shall be given to the National Defence Contribution as is, by the enactments relating to bankruptcy and companies, required to be given to Income Tax.
  6. All Commissioners and other persons employed for any purpose in connection with the assessment or collection of the National Defence Contribution shall be subject to the same obligations as to secrecy with respect to the contribution as they are subject to with respect to Income Tax, and any oath taken by any such person as to secrecy with respect to Income Tax shall be deemed to extend also to secrecy with respect to the National Defence Contribution.—[Sir J. Simon.]
  Brought up, and read the First and Second time, and added to the Bill.
  Bill reported, with Amendments; as amended, to be considered To-morrow, and to be printed. [Bill 188.]

  RATING AND VALUATION BILL.
  Considered in Committee; reported, without Amendment; read the Third time, and passed.
  The remaining Orders were read, and postponed.
  It being after Half-past Eleven of the Clock upon Wednesday evening, Mr. SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.
  Adjourned at One o'Clock, a.m.

  OLD AGE PENSIONS.
  OLD AGE PENSIONS.
  SOCIAL SERVICES EXPENDITURE.
  SOCIAL SERVICES EXPENDITURE.
  AVIATION (AIRPORTS, WIRELESS).
  AVIATION (AIRPORTS, WIRELESS).
  UNEMPLOYMENT (SPECIAL AREAS).
  UNEMPLOYMENT (SPECIAL AREAS).
  POST OFFICE (EX-SERVICE MEN).
  POST OFFICE (EX-SERVICE MEN).
  TRINIDAD (INDUSTRIAL DISPUTES).
  TRINIDAD (INDUSTRIAL DISPUTES).
  TRADE AND COMMERCE.
    OTTAWA AGREEMENTS.
    OTTAWA AGREEMENTS.
  ROYAL DOCKYARDS (ESTABLISHED EMPLOYES).
  ROYAL DOCKYARDS (ESTABLISHED EMPLOYES).
  GREAT BRITAIN AND DOMINIONS.
  GREAT BRITAIN AND DOMINIONS.
  AIR RAID PRECAUTIONS.
  AIR RAID PRECAUTIONS.
  TRANSPORT.
    TRAFFIC CONGESTION (ONE-WAY STREETS).
    TRAFFIC CONGESTION (ONE-WAY STREETS).
  CRINAN CANAL.
  CRINAN CANAL.
  TRAFFIC STATISTICS (CENSUS).
  TRAFFIC STATISTICS (CENSUS).
Preamble
The House met at three of the clock, The LORD CHANCELLOR on the Woolsack.
LORD CHATFIELD.
Admiral of the Fleet Sir Alfred Ernie Montacute Chatfield, G.C.B., K.C.M.G., C.V.O., having been created Baron Chatfield of Ditchling in the County of Sussex—Was (in the usual manner) introduced.

LORD CADMAN.
Sir John Cadman, G.C.M.G., having been created Baron Cadman of Silverdale in the County of Stafford—Was (in the usual manner) introduced.
The Lord de Saumarey—Sat first in Parliament after the death of his father.

UCKFIELD ELECTRICITY ORDER, 1937.
THE EARL OF ERNE: My Lords, I beg to move that the Special Order, as reported from the Special Orders Committee yesterday, be approved.
Moved, That the Special Order, as reported from the Special Orders Committee yesterday, be approved.—(The Earl of Erne.)
On Question, Motion agreed to.

AMENDMENT OF THE SCOTTISH MILK MARKETING SCHEME, 1933.
THE LORD PRIVY SEAL (EARL DE LA WARR): My Lords, on behalf of my noble friend Lord Strathcona and Mount Royal, who is absent on official business, I beg to move, That the Special Order, as reported from the Special Orders Committee yesterday, be approved. The draft Amendments are explained in the Blue Paper which is available to your Lordships, and I think their purpose is quite clear. The only reason why I should say just one word is that the necessity for them arises out of a judgment in your Lordships' House delivered in the Ferrier case. That judgment was not a vindication of the contention that producer-retailers should not have to contribute to the pool, but decided simply that
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the actual language of the original provisions of the Scheme did not authorise such a contribution. In other words, it was established that there had been a defect in the drafting of these provisions of the Scheme, and the purpose of this Amendment is simply to put that matter right. I beg to move.
Moved, That the Special Order, as reported from the Special Orders Committee yesterday, be approved.—(Earl De La Warr.)
On Question, Motion agreed to.

MINISTRY OF HEALTH PROVI- SIONAL ORDER (HALIFAX) BILL.
Read 2a (according to Order), and committed.
MINISTRY OF HEALTH PROVI- SIONAL ORDER (HORNSEA) BILL.
Read 2a (according to Order), and committed.
MINISTRY OF HEALTH PROVI- SIONAL ORDER (MAIDENHEAD WATER) BILL.
House in Committee (according to Order) on re-commitment of the Bill: Bill reported without amendment.
MINISTRY OF HEALTH PROVI- SIONAL ORDER (SEVENOAKS WATER) BILL.
House in Committee (according to Order) on re-commitment of the Bill: Bill reported without amendment.
MINISTRY OF HEALTH PROVI- SIONAL ORDER (TONBRIDGE WATER) BILL.
House in Committee (according to Order) on re-commitment of the Bill: An Amendment proposed by the Committee made.
MINISTRY OF HEALTH PROVI- SIONAL ORDER CONFIRMATION (MORECAMBE AND HEYSHAM) BILL. [H.L.]
House in Committee (according to Order) on re-commitment of the Bill: Amendments proposed by the Committee made.

MARRIAGE BILL.
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(Lord Eltisley.)
On Question, Motion agreed to.
House in Committee accordingly:
[The EARL OF ONSLOW in the Chair].
Clause 1:
No divorce within five years of marriage.
1. No petition for divorce shall be presented to the High Court unless at the date of the presentation of the petition five years have passed since the date of the marriage:
Provided that nothing in this section shall be deemed to prohibit the presentation of a petition based upon matters which have occurred before the expiration of that period.
LORD SALTOUN LORD SALTOUN moved, at the beginning of the clause, to insert "Except as otherwise expressly provided in this Act." The noble Lord said: This Amendment is necessary to make room for the Amendment standing in my name to Clause 2, page 2, line 16, to which I beg to draw your Lordships' attention. The Second Reading of this Bill indicated that your Lordships were prepared to discuss the extension of the grounds for divorce, and it remains for us to-day to consider what those grounds should be, in the interests of the nation as a whole and in the interests of private persons. The interests of private persons seem to me to be more carefully considered in the Bill than those of the State or of the nation. On this side the sanctity of marriage and of the home are of immense importance in providing for the continuity of the race and in giving the best means of providing the necessary protection for the development of the young. I think that if I can show a case where a divorce is in the public interest, I am on much stronger ground than in merely asking relief for a private injury.
My Amendment to Clause 2 seeks to enact that if one spouse, against the will of the other, refuses to permit the conception or birth of a child without good reason, this shall be a ground for divorce without delay. The divorce must not be unduly delayed, since the prolonged use of contraceptives induces sterility. Now the State and the race have a distinct interest in the passage of this Amendment. The Divorce Commission's Report preceded the enormous advance and
70
popularity of contraceptives; a popularity which plays some part in the diminution of population with which we are threatened. We are told that even a slight fall in population threatens us with serious economic and industrial evils, so that from this point of view alone the State and the nation have a clear interest in the passage of the Amendment. Even should the Amendment prove a little difficult to work in practice, which I do not anticipate, its presence in the Bill will go a long way to prevent the commission of the crime it is intended to remedy. For it is a crime indeed, and no small one. It is a crime against the race, as well as against the person. Moreover, the crime is a new one for which rip provision is made in our present religious and social marital code.
A man is in a terrible position who has married a wife, and who after the marriage is told by her that she does not intend to have children. If he manages to evade her prohibition, she takes means, which are open to all women, to prevent the child going its time. What resources has such a man, the very purpose of the institution of marriage being thus defeated? He may have recourse to a cruelty from which his soul revolts, and I must say in such a case there would seem to be justification for cruelty. It might be effective, and I think a man in that position would be justified in taking very strong measures. But perhaps the most important side of the Amendment is as a protection to women. A woman has not even the meagre resources that a man has. Our divorce proceedings show an increasing number of cases where a man marries a girl, and then tells her that he intends to prevent the birth of children by contraceptives, and this in spite of her protest. To my mind it is a crime and far worse than adultery. It is a hideous wrong to the woman. In many laws; I believe in Mahomedan law—certainly in the old Roman law—provision was made that wives should have regular opportunities for the conception of children. It will, I feel, be a blot upon our nation, our religion, and a disaster to the race, if this remain one of the few countries where a woman can be married and then, against her will, be kept as a mistress and not as a wife. I beg to move.
Amendment moved—
Page line 12, at the beginning insert ("Except as otherwise expressly provided in this Act").—(Lord Saltoun.)
LORD ELTISLEY: I must respectfully ask the supporters of the Bill to reject this Amendment. In the first place there is no recommendation in the Report of the Royal Commission which supports an Amendment of this character, and I submit that it is obviously inadvisable, if not dangerous, to endeavour to introduce a new ground of divorce without support being given by a Report of this importance. Moreover, if I may venture to criticise the Amendment itself, owing to its actual terms there is no definition of what is to be called "reasonable cause" for the use of contraceptives. I will ask the House, therefore, to reject the Amendment.
On Question, Amendment negatived.
VISCOUNT BERTIE OF THAME VISCOUNT BERTIE OF THAME moved to leave out "petition for divorce shall be presented to" and insert "decree nisi of divorce shall be pronounced absolute by." The noble Viscount said: At first sight it might be thought that I am in favour of Clause 1. I am not, and I intend, should my noble friend Lord Redesdale go to a Division on his Amendment to leave out the clause, to vote with him. But we must visualise this clause with some form of limitation—some time limit. In a letter in The Times this morning Sir Reginald Poole, a well-known solicitor, says that adultery frequently happens soon after marriage, and therefore it is most important to have witnesses. If there is any time limit the witnesses may be dead by the time the petition is presented; they may have gone abroad, or they may not be traceable. I may be told: "Oh, yes, but you have your remedy; you can get a judicial separation." That may be true, but you then have three sets of costs, because you first have your judicial separation, then you go to the Court for the divorce on which a decree nisi is allowed, and then you have to get that decree made absolute. That makes three sets of costs against two.
Amendment moved—
Page 1, line 12, leave out from ("No") to ("the") and insert ("decree nisi of divorce shall be pronounced absolute by").—(Viscount Bertie of Thame.)
LORD ELTISLEY: I must ask your Lordships to resist this Amendment. The purpose of Clause 1 is to forbid divorce in the first five years after marriage. It provides in the difficult early years of marriage a period of waiting during which the spouses have time to reconsider their differences and an opportunity of coming together again. The object is therefore to discourage as far as may be the lighthearted assumption of the obligations of marriage in the knowledge, which is at present possessed by the respective spouses, that they may, with or without collusion, discard these obligations at any time. If this Amendment were carried the purpose of the clause would be defeated; the spouses would be able at any time to sue for divorce. A decree nisi having been granted, the spouses might then be left in a position in which the chances of reconciliation were indeed very remote, and at the same time remarriage would be impossible.
THE MARQUESS OF SALISBURY: I do not desire to contest the view which my noble friend has just uttered as to the proper fate of this Amendment, but I think I might take this opportunity of asking him a question. My noble friend Lord Bertie speaks of a decree nisi. I had assumed from reading the Bill that if the Bill passes in anything like its present form decrees nisi are going to disappear. I should be very glad if the noble Lord who sits beside my noble friend (the Earl of Drogheda) would put us right.
THE EARL OF DROGHEDA: I can assure the noble Marquess that there is no intention to do away with the decree nisi. That was originally in the Bill, but in another place the suggestion that the decree nisi should be done away with was defeated and the position remains as under the present law.
On Question, Whether the words proposed to be left out shall stand part of the clause?
Their Lordships divided:—Contents, 87; Not-Contents, 12.

CONTENTS.

Halifax, V. (L. President.)

Plumer, V.

Gorell, L. [Teller.]

Ridley, V.

Greville, L.

De La Warr, E. (L. Privy Seal.)

Samuel, V.

Hardinge of Penshurst, L.

Hay, L. (E. Kinnoull.)

Birmingham, L. Bp.

Hindlip, L.

Ailesbury, M.

Illingworth, L.

Reading, M.

Addington, L.

Jessel, L.

Salisbury, M.

Addison, L.

Joicey, L.

Ailwyn, L.

Kilmaine, L.

Ancaster, E.

Allen of Hurtwood, L.

Kilmarnock, L. (E. Erroll.)

Cavan, E.

Arnold, L.

Latymer, L.

Drogheda, E.

Askwith, L.

Mamhead, L.

Halsbury, E.

Atkin, L.

Middleton, L.

Lucan, E.

Bingley, L.

Monkswell, L.

Macclesfield, E.

Blythswood, L.

Palmer, L.

Midleton, E.

Boston, L.

Ponsonby of Shulbrede, L.

Mount Edgcumbe, E.

Brocket, L.

Rea, L.

Onslow, E.

Carrington, L.

Rennell, L.

Poulett, E.

Cautley, L.

Rhayader, L.

Sandwich, E.

Chalmers, L.

Roche, L.

Selborne, E.

Charnwood, L

Russell of Liverpool, L.

Strafford, E.

Cromwell, L.

Ruthven of Gowrie, L.

Darcy (de Knayth), L.

St. Just, L.

Astor, V.

de Clifford, L.

St. Levan, L.

Buckmaster, V.

Doverdale, L.

Sandhurst, L.

Cecil of Chelwood, V.

Dunleath, L.

Shute, L. (V. Barrington.)

Esher, V.

Eltisley, L. [Teller.]

Snell, L.

Greenwood, V.

Elton, L.

Stanmore, L.

Hambleden, V.

Fairhaven, L.

Templemore, L.

Long, V.

Fermanagh, L. (E. Erne.)

Vernon, L.

Mersey, V.

Gage, L. (V. Gage.)

Vivian, L.

Wolverton, L.

NOT-CONTENTS.

Cranbrook, E.

Aberconway, L.

Lawrence, L.

Wicklow, E.

Chatfield, L.

Milne, L.

Clanwilliam, L. (E. Clanwilliam.) [Teller.]

Oriel, L. (V. Massereene.)

Bertie of Thame, V. [Teller.]

Phillimore, L.

Heneage, L.

Teynham, L.

Resolved in the affirmative and Amendment disagreed to accordingly.
VISCOUNT BERTIE OF THAME: On a point of order. I understand that several noble Lords, owing to the way the Question has to be put, made a mistake and instead of—
SEVERAL NOBLE LORDS: No, no.
VISCOUNT BERTIE OF THAME: I understand that if any noble Lord will go to the Bar of the House and say he has voted wrongly his vote will count.
THE LORD CHAIRMAN: The Question was pot in the usual way, I think.
SEVERAL NOBLE LORDS: Hear, hear.
THE LORD CHAIRMAN: No noble Lord has yet said he voted in the wrong Lobby. I will read the Standing Order:
"When, on the Question being put, a Division is called for, the Lord on the Woolsack, or in the Chair, shall order strangers to withdraw, and thereupon the House and Inc side Lobbies shall be cleared of strangers, but not the galleries and the space within the rails of the Throne, unless the House shall so order.
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"As soon as the order has been given for strangers to withdraw, the Clerk at the Table shall turn a two-minute sand glass…"
and so on, and later it goes on to say,—which is the point in question—
"If any Lord shall have by mistake gone out with the Contents or Not-Contents (as the case may be), having intended to vote on the other side, he shall wait until the other Lords in the same Lobby shall have passed out, and on presenting himself to the Tellers desire that he may not be counted by them, he having entered that Lobby by mistake; and the Tellers shall thereupon come with such Lord to the Table, and inform the House of the circumstance, and shall ask the said Lord whether he was in the House when the Question was put, and if he shall reply in the affirmative, whether he desires to vote Content or Not-Content on such question, and the vote of the said Lord as then declared by him shall be taken by the Tellers in the House, and recorded by them accordingly."
THE EARL OF CLANWILLIAM: It is perfectly obvious that a large number of noble Lords voted the wrong way. If any noble Lord knows he voted the wrong way I think it is only right that he should stand up and say so.
THE LORD CHAIRMAN: I think we should continue with the debate.
LORD PONSONBY OF SHULBREDE: Before the next Amendment is moved, may I ask the noble Lord in charge of the Bill whether he does not think it would be to the general convenience of your Lordships if instead of taking these Amendments, which are very important, separately, we had a general discussion on the period suggested, so that the noble Lord at the end of that discussion might intimate to us which of the Amendments he is prepared to accept?
LORD ELTISLEY: It appears to me that this is a matter for the Chairman of Committees.
SEVERAL NOBLE LORDS: No, no.
LORD ELTISLEY: I beg your Lordships' pardon. It would certainly be for the general convenience of my noble friends who are supporting the Bill if we had a wide discussion because that would enable us to dispose of all the Amendments with the minimum number of Divisions.
THE MARQUESS OF SALISBURY: May I say that, although I share with the noble Lord opposite a wish that there might be a general discussion on the next Amendment, the Amendments must be put separately and decided separately?
SEVERAL NOBLE LORDS: Hear, hear.
LORD JESSEL: In the absence of my noble and learned friend Lord Maugham, whom I had very much hoped would have been here to move this Amendment, I would ask leave to move it at a moment's notice. It is to substitute "three years" for "five years." I am in sympathy with the Amendment, which strikes at the root of Clause 1. It does seem to me that this is only following other precedents in the Bill. For example, in the case of desertion, a period of three years is mentioned. Many of us who are interested in this Bill think five years is too long. Many other noble Lords think the clause ought to be abolished altogether and that you should have no time limit at all. That may be so, but we must recognise that there is a very strong feeling, not only in this House but in the other House, in favour of a time limit, a certain period
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of probation for marriage. It seems to me, therefore, that it Would be a wise compromise if your Lordships accepted the period of three years. I do not think I need say any more, except to point out that I understand there is no chance of this Bill passing in another place if the time limit is altogether removed. Therefore, though personally I do not so much care about it, I think it is very reasonable that the period of five years should be amended to three years. I am afraid I have not put the matter as well as the noble and learned Lord, Lord Maugham, would have put it—he would have given your Lordships very much better reasons than I can—but I have put before your Lordships those considerations that have occurred to me and I hope that you will accept this Amendment.
Amendment moved—
Page 1, line 14, leave out ("five") and insert ("three").—(Lord Jessel.)
LORD ELTISLEY: This is the first time in the history of our legislation that it has been proposed to impose a waiting period before divorce proceedings can be instituted. Admittedly this introduces a highly important change in our Laws. It says that for four years no one will be able even to entertain the idea of divorce because no question of a divorce can arise for four years. This keeps the idea out of people's minds. Possibly it is a very advantageous thing to know that in no circumstances during those first few critical years of marriage can they possibly obtain a divorce. Those who support the clause generally feel that it will produce a tendency, which some see, of trial or companionate marriage, of which we hear a good deal in other countries. It is a clause which deals with and regulates marriage and it will tend to make young people stop and think.
Clause 1, in the form of legislation, symbolises and emphasises that the State desires that marriage should be, above all, a permanent institution. It tends to discourage rash and frivolous marriages and those cases, which we see sometimes reported, that generally speaking, bring the great institution of marriage into dispute. We think that a provision of this kind will save a great many marriages. After all, a vast majority of people who do marry have every intention of settling down. I think there can be no doubt that they have no other thought in their minds than

77
that of a happy and united life together for the whole of their lives. For these reasons those who support the Bill think that there should be a waiting period. On the other hand, we have very carefully considered this obviously difficult question, and recognise that it is not easy to make up one's mind and lay down a precise period of months or years as a waiting period. It is difficult to decide precisely, in terms of time, what that waiting period ought to be. There will be differences of view on that subject, and some will differ very considerably in regard to it. It is a way out to reduce that period of five years to three years, as is suggested, and at the same time give a discretionary power to the Court in urgent and exceptional cases to grant permission to institute proceedings for divorce. That is the suggestion I venture to lay before the Committee.
VISCOUNT CECIL OF CHELWOOD: I do not know if I might ask my noble friend whether that means that, so far as he is concerned, he would be prepared to accept the two Amendments standing in the name of Lord Maugham.
LORD ELTISLEY: Yes, that is so.
VISCOUNT BUCKMASTER: I am not sure if I am correct in my procedure, but my original intention was to move an Amendment to the Amendment standing in the name of the noble and learned Lord, Lord Maugham, proposing that the word "two" be substituted for the word "three." I am indeed reluctant to oppose any Amendment put forward by the noble and learned Lord, Lord Maugham, but I feel that in placing the period at three years he has chosen too long a time. This matter in my view can only properly be assessed if one bears in mind the fact that after this period has expired there must be a further period during which divorce is sought. This amounts to something like twelve months, so that in fact your five years became six years and your three years become four.
It is true that there is a subsequent Amendment proposing that discretion be given to the Court, but your Lordships will appreciate that such an Amendment provides for the discretion to be exercised by the Court in cases of extreme hardship. I see little reason why cases of hardship which are not extreme should have the legal right to divorce, which they now enjoy, arbitrarily suspended for so
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long a time as three years. I myself am absolutely opposed to any such period. I would prefer to see the deletion of Clause 1. On the other hand, I am most anxious in no way to impair or impede the progress of this Bill. I think all matters should be approached as far as possible in a spirit of compromise, and for reasons which, very briefly, I will put before your Lordships, I suggest that two years is the very maximum period that should be established.
I can give my further reasons with great brevity. One point which I do not think has received adequate attention is the question of evidence. Let us assume that a couple seek divorce: how are they to preserve their evidence during this probationary period during which divorce is suspended? The normal procedure—noble and learned Lords who are better versed in this matter will correct me if I am wrong—is that on the institution of proceedings a subpoena is served on witnesses instructing them to notify any change of address. Well, when proceedings cannot be instituted how can you subpoena your witnesses? How are you to keep them? Where are they to be supposing the evidence has to come from abroad? I suggest that you will inflict the greatest hardship on people by having this long period of waiting. I do not want to overstate my case or to weaken it by overemphasis. I feel that some period is probably wise in the best interests of the Bill, but I do say that it should be as short a one as possible.
One last reason that I would put forward is this. The period during which divorce may not be instituted is an antisocial period. When people have reached the point that they have definitely decided to institute divorce proceedings the likelihood of their having children ceases to exist. It will be a barren, sterile period for those who are to seek divorce, and as such it will be contrary to the best interests of the State. I therefore ask your Lordships to fix the period as low as possible, and I suggest a term of two years.
THE EARL OF DROGHEDA: I support the Amendment which stands in the name of the noble and learned Lord, Lord Maugham. I think that Clause is a really vital part of the Bill, and that to reduce the period from five years to two years would be taking away too

79
much from the principle of the clause which was passed in another place. In my opinion three years is reasonable. I hope that that period is the one that your Lordships will accept.
LORD DARCY (DE KNAYTH): I think I have some connection with those who have dealt with this matter in another place, and I rather gather that they, at least, regarded this five years period as the raft on which this Bill has been floated through the Parliamentary rapids. When the clause came up to this House it was attacked by my noble and learned friend Lord Atkin in a speech which was very short but utterly conclusive. He pointed out the impossibility that it should work in the absence of some Amendment giving discretion. I do not think he actually spoke in favour of giving discretion, but it was quite clear from what he said that it could not work unless there was this discretion. I venture to think that if we put in a proviso about discretion we shall not sabotage the Bill, but we shall save a provision which is regarded as very important by people elsewhere.
It seems to me that we must look at the Amendment in conjunction with other Amendments standing in the name of the noble and learned Lord, Lord Maugham. On the Second Reading of this Bill he made a speech of extreme lucidity explaining the position, and he said that only a limited number of petitions would come under the five-year limitation. Then he used these words:
"If it is limited to three years, only 4 per cent. or thereabouts of the petitions which are now presented will be hit by the clause. If, in addition to that, you give the Court discretion, which I think your Lordships are very likely to do, the number of people who will be affected by Clause 1 is very small."
That comes very near saying that you will make the clause inoperative. I think that when we are considering whether this protection, to which many people attach so much importance, is to be included or not, it is very desirable that a decision should be come to on the broad issue.
LORD MOYNE: It is rather unfortunate that this question is raised first as a part and then as a whole. Many of us are entirely opposed to the clause in any form, and I take it that we shall reserve our arguments against the clause as a
80
whole until this Amendment has been disposed of. Personally, I propose to vote for the Amendment as a limitation of what I regard as a most dangerous clause, but if this Amendment is carried I hope that noble Lords who agree with the noble Lord, Lord Redesdale, will not take this Amendment as a satisfactory settlement but will go further and try to get the whole clause omitted when the time comes.
LORD GORELL: From the last two speeches to which we have listened it is fairly obvious that there is a great difference of opinion conscientiously held on this vital clause. We have the clause ardently recommended by those who are in reality opposed to the granting of any divorce at all, and we have those who wish full extension of the grounds of divorce desirous of taking out this clause. In all the circumstances it seems reasonable that those who desire this Bill to pass into law should not be swayed to either extreme. I would venture very earnestly to hope that your Lordships will accept the Amendments which stand in the name of the noble and learned Lord, Lord Maugham. I cannot help feeling, after listening, I think, to every word of the debate on Second Reading, that many of your Lordships must have been very greatly impressed by the speeches—notably that of the noble and learned Lord, Lord Atkin—dwelling upon instances of hardships that there might be if no form of discretion whatever is granted. We have now heard from the noble Lord in charge of the Bill a statement that he and those who work with him are hopeful that your Lordships will accept this middle period of three years coupled with a discretion to meet the very hard cases. I hope your Lordships will bear in mind that there are many who regard this clause in some form or other as absolutely vital to their support. If it is omitted altogether those who desire many of the great reforms in the Bill must be conscious that they will be grievously imperilled. Therefore I venture to hope that your Lordships may see your way to accept the two Amendments which stand in the name of the noble and learned Lord.
LORD MAUGHAM: I must apologise for not being here to move the Amendment standing in my name, but there was a slight mistake on my part as to the hour

81
at which the House would meet. I quite agree with the noble Lord who observed that everybody's right to vote for the more drastic Amendment to leave out Clause 1 ought not to be prejudiced by the view they take of the Amendment which stands in my name. But I would venture to think that when we come to consider the omission of the clause we shall have to take into serious consideration the views held on the matte7 in another place. There are many of us who may think that it is better to pass Clause 1 in an amended form rather than wholly disregard the views of many people in another place who are in favour of this period during which there would not be a positive right to present a petition for divorce. In considering the shortening of the period it: is desirable to bear in mind the fact that, even if the period is reduced to three years instead of five, we shall be imposing a considerable period of delay before the final step is taken in the normal case. In substance, the period of three years will mean that the innocent party will not get a divorce for four years, inasmuch as you must add to the three years a period of six months before m the normal way the ease will come on for hearing and a further period of six months before the decree can become absolute in the normal case. Really the Amendment would not result in a very short period during which the spouse who has been innocent has time for consideration.
Another point I would ask your Lordships to bear in mind is one which has been mentioned already. There are not a great number of petitions presented very early after marriage. The good sense of people in this country leads them to suppose that in the early years there may be matrimonial difficulties which can be got over in time. The figures, for which I am indebted to the noble Earl, Lord Drogheda, show that the first five years only account for some 14½ per cent. of the total number of petitions for divorce at the present time. If you reduce the period to three years you will reduce the number of petitions to about 4 per cent. One noble Lord has asked whether it is worth while to preserve the period of time at all in those circumstances. For my part I think it is. There would then be the position that people who enter the married state will know that during three years they will not in the normal case
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have a right to present a petition at all, and that may be of use.
But whether that view is quite correct or not, I think your Lordships have to take into consideration the fact that a great many members in another place—the majority—were in favour of there being some such period during which divorce petitions should not be presented. I think that view, founded as it is on the opinion that a great many people enter lightly into the bonds of matrimony, must be mistaken, but we have to take into consideration that widely-held view. Another reason for limiting the period is that, assuming that such a view exists, we ought not unduly to take away existing rights which have now for a very long time enabled married people to present a petition for divorce on the ground of adultery. In depriving people of existing rights it is worth considering that they ought to be deprived as little as possible in the interest of some theory about the circumstances in which people enter into the married state.
That relates to the period. If I may say a word on the question of discretion I would point out that it was suggested in a great number of speeches in the lower House that discretion ought to be inserted in the Bill. A number of persons thought that such a clause would be put into the Bill in this House. Although the Amendment that stands in my name has been the subject of much consideration and has had the assistance of many able people who are concerned with the actual practice of divorce and with the discharge of judicial duties in relation to matrimonial cases, yet I am not in any way wedded to its precise words, and it may be that on the Report stage somebody will be able to suggest a better Amendment carrying out the substance of what is desired. The substance is that there are very serious cases in which it would be a grave mistake, as well as a great injustice, to prevent the innocent party from applying for a divorce.
Will your Lordships give me leave to read, as an example—others might be given—two instances from cases which have been heard during the present legal term? I propose to cite one case where a husband, and another where a wife, has been injured. They were both poor people. The first one is this. A year after the marriage the wife went off with

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another man and told her husband that she would not in any circumstances return to him. The husband, who is left with a baby to look after, is a working man and has to go out all day. The other case is this. Within a year of marriage the husband told the wife brutally that he had no use whatever for her and went off with another woman. The wife, now aged 25, gets no money from the husband and has to go out to work. She has a baby a few months old. In cases such as these—not to mention even more terrible cases where one of the parties has been guilty of the grossest possible forms of depravity—it would be a cruel hardship to say that the wife or the husband, as the case might be, must remain for a period of three or five years, whichever it be, without the right to ask the Court to exercise the discretion and give leave to present a petition for divorce.
The circumstances of the poorer classes are such that a husband or a wife who is left in that condition has to have somebody to look after the home, and it happens only too often that illicit connections are then formed by the wholly innocent spouse. I venture to think that, by permitting discretion in such cases, you will diminish the formation of those unfortunate connections. Other grounds might be given for the exercise of the discretion and terrible cases which have in fact occurred might be mentioned as requiring the exercise of the discretion. I do not propose to delay your Lordships by mentioning things which must be within the imagination of everybody. Brevity is essential in this debate if we are to get through it within a reasonable time. For the reasons I have mentioned I venture to press these two Amendments upon your Lordships without prejudice the consideration of the more drastic Amendment.
LORD FARINGDON: I am unalterably opposed to this clause in any form whatever. I find myself in the completest agreement with the noble Lord, Lord Moyne. In point of fact, at the Second Reading the noble and learned Lord, Lord Atkin, described this clause as "a kind of 12½ per cent. discount" offered to those who did not like the Bill. I should call it something very much stronger than that; I should call it blackmail, and I dislike paying blackmail in any quantity.
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I do not think that it is any better in principle to reduce this period to three years than to leave it at five years. It is utterly and completely had from the word "go," and the only defence that I have as yet heard for it is that it may persuade certain people to let the Bill pass, as apparently it did persuade them in another place. I have a considerable acquaintance, as I suppose most of your Lordships have, with the other place, and from conversation with members of it I have been unable to find the large volume of support which this clause is claimed to have. It seems to have slipped through another place without having been noticed, considerably to the dismay of a great number of members there.
In point of fact, so bad do I think this clause that I do not care whether the Bill is thrown out in another place should we suppress it. I believe that the fact that this Bill is at the moment before your Lordships is evidence that there is such a strong feeling in the country for its necessity that it must come up again. On the other hand, should it pass in what I consider a mutilated form, then I am afraid that, as its sponsor said on the Third Reading in another place, it may be regarded as the last word on the subject for a considerable length of time. Should that occur, then our divorce law, which has, I am afraid, caused surprise and ribald amusement among foreigners for a great number of years, will add to their amazement and merriment yet another cause. That such a clause should be put into a Marriage Bill at this time in our history is to me utterly and completely amazing. I cannot believe that this clause has the support in another place that certain noble Lords seem to suspect. I think that the number of the people who were persuaded by this clause to vote for the Bill must be very small. In fact, I have a strong suspicion that, as the noble Marquess, Lord Reading, said—though he did not put it in these words—it is what one might call a "class-conscious" clause: it arises very largely from the fact that our impressions of the Divorce Court are based on the reports in the newspapers. Nothing, of course, as the noble Marquess pointed out, could be further from the truth.
Of course, it has occurred to your Lordships, and I entirely agree with the noble and learned Lord, Lord Maugham, that the clause would be considerably less

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vicious with his Amendment allowing discretion to the judges. There again, however, what cases are to be hard cases? He has given two flagrant cases to-day, and other flagrant cases were given on the Second Reading. Surely, practically all cases would be hard cases. I cannot visualise a case that is not hard. What is the situation in which you are going to tell a wife who is suing her husband, who has committed adultery, that she has got to put up with his adultery for another five years; in fact, as Lord Maugham has pointed out, for another six years? In what cases has she got to put up with cruelty for another five years? How much is he to beat her before it is a hard case? It seems, in fact, as I think the noble Marquess, Lord Reading, said on the Second Reading, that you are making a lottery of this divorce. It will depend upon the personal feelings of the Judge trying the case. Of course I am sure he will be as impartial as possible, but it seems to me a difficult matter to define hard cases.
I do not believe that this proviso is going to act as a deterrent in any way. The fact that the numbers affected are comparatively small seems rather an argument against the proviso than in favour of it. Why put in a clause so fraught with dangers and undesirable possibilities, in order to cover such a very small number of cases, of which the chances are, as has been said, that very few are in the least, shall we say, punishable by such treatment, or worthy of such treatment? I am at a loss to find any cogent reason for the clause at all, except some muddled thinking on the part of people who are fundamentally opposed to the Bill, and who have been bribed by this clause. I cannot understand why they should be bribed, because if one is fundamentally opposed to the Bill, on grounds such as Lord FitzAlan of Dement expressed, I cannot see why this clause should in any way allay one's conscience.
I might, incidentally, remind your Lordships that one of the greatest lawgivers, and perhaps the greatest of modern times, had a very different idea on this subject. When Napoleon drew up the Code Napoleon he considered seriously the insertion of a clause in exactly the opposite sense, making it impossible for people who had been married for nine years to get divorce at all. That shows that considerable thinkers are able
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to view the position from an altogether different angle. I am not certain, if either of these projects makes sense, that I do not prefer Napoleon's. I sincerely hope that your Lordships will throw out this clause entirely, and have nothing to do with it. I do not believe it is possible that, if you throw out this clause, the Commons may not accept the Bill, but if they do reject the Bill another Bill is bound to be produced in a short time. The feeling in the country demands it, and I fear that if you pass the Bill as it is it will be the last word for some time.
VISCOUNT CECIL OF CHELWOOD: The noble Viscount, Lord Buckmaster, in an earlier part of the debate, made an appeal that we should treat this subject as a matter of compromise. The noble Lord who has just spoken has clearly a different opinion, and I cannot help feeling that if that is the spirit in which the debate is to be conducted it will be very difficult to arrive at anything like an agreed Bill. The last speaker asked us to imitate foreign countries, and said that our divorce law was the subject of amusement and surprise on the part of foreigners.
LORD FARINGDON: I did not suggest that we should imitate foreign countries.
VISCOUNT CECIL OF CHELWOOD: For my part I do not care a button what foreigners say. We know quite well that our legal system, including divorce, is very much superior to that which prevails in any country in the world, and I am content to find that there are certain foreigners, though a small number, who do not agree in that opinion. As to the merits of this proposal, I thought we were going to discuss Clause 1 as it is. I thought that was the object of Lord Moyne, and perhaps your Lordships will allow me to say in a very few words what seems to me to be the case for something of this kind. It is not because of what will happen to the Bill when it returns to the House of Commons, though it is not unreasonable to consider that view of the matter.
We all start with this proposition, that the more indissoluble you can make marriage, consistently with justice, the better—that it is a good thing that marriage should be a permanent and not a temporary institution. That is the general view I

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believe. I see that the noble Lord who has just spoken assents to that. The point of this proposal—I am not talking about three or five years, about which I am content to take the opinion of those who have studied the matter more than I have—is to provide a pause, during which people who have married shall be told that it is important you should consider carefully before you enter upon marriage. Therefore we say "You must abide by what you have done for two or three years," or whatever number of years the House fixes. I think that is a reasonable proposition. I agree that there may be hard cases, and they are to be dealt with by Lord Maugham's second Amendment. There must be a safety valve for hard cases; but, broadly speaking, it seems a reasonable thing that people who have entered upon marriage, upon the theory, which will still be the theory of the law if this Bill is passed, that it is to be a lifelong contract, should be content, apart from conditions of great hardship, to abide by the contract for three or four years. If the result is to make people more careful before entering upon marriage, then it would be all to the good. For myself, I am quite prepared to vote for the clause as it stands, but if in a spirit of compromise the Committee accept an Amendment I shall be quite content with that.
LORD ATKIN: I troubled your Lordships for some time on the Second Reading, and I do not want to repeat what I said then more than is necessary, but I do suggest to your Lordships, as I said then, that this is an oppressive and reactionary clause and will deprive a great many people, especially of the working classes, of relief which they at present enjoy and which they are entitled to enjoy. There is a great deal of talk about compromise. There are some subjects upon which you have no right to compromise, and one of these is, I think, the woes and sufferings of married people and questions relating to married life. It is said that there are people in another place who would not be prepared to accept the rejection of this clause. I believe that that has been very much exaggerated. There were 190 people who voted for the Third Reading, and 37 who voted against it, and amongst the 190 who voted for it there were at least two of the supporters who, after saying they were going to vote
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for the Third Reading, said they were entirely opposed to this clause. Indeed one who opposed the Bill altogether said that, although he was opposed to the Bill, he could not see any sense in this five years provision. I believe that if you sent the Bill back without this illogical clause you would have not 190 but at least 490 voting for the Bill in its new form. And I will tell your Lordships why.
The Bill purports to prevent people from obtaining divorce in precisely the circumstances in which relief ought to be given. I mentioned to your Lordships on the last occasion some very hard cases—cases that I think would be met by my noble and learned friend's Amendment providing for cases of exceptional hardship. But those were only instances of had cases. My noble and learned friend mentioned two other cases to-day which he thinks would come within this class of case which would be subject to the discretion of the Judge—cases of exceptional hardship. I think when your Lordships listened to him you recognised that those were normal cases of divorce—everyday cases of divorce among the working classes, cases in which divorce and relief ought to be given. There are some very, very bad cases. I heard of one only the other day, where a girl was married to a man who within two years took to drinking, brought women to their small house of two rooms, turned the wife and the baby out of the marital bed, turned her into the sitting room while he had relations with the woman in their bed. I suppose that was a bad case, and I suppose that any Judge would exercise his discretion there. But that is not the ordinary case. Take the working-class husband who commits adultery with a woman or with women. Is he to return to a wife from the arms of his mistress and sleep with her in the wedding bed? Your Lordships will remember that among the working classes there is no question of separate rooms or even of separate beds. That is an insult from which a working-class woman is entitled to be relieved, and that is a normal, ordinary divorce case.
I do not know what the supporters of this clause have in their minds when they talk of matrimonial difficulties in respect to which people ought to stop and think. What ought they to think about when that happens? What room is there for stopping or thinking? That woman is

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entitled to relief from the terrible position in which she has been placed; and she would have no remedy. She has a remedy now by divorce. She would have a remedy under a later clause of this Bill by getting a separation; but I thought that the one thing that the promoters of this Bill really wished to do was to diminish separations, because they all know of the terrible difficulty and the sad immorality which are the result of making young people who have been married, and in whom the flames of passion have been rightly kindled, live apart in separation. Take the case on the other side, the normal case, when a man discovers that his wife has committed adultery with another man. What is he to do? Why has he to stop and think? Think about what? Is he to have a spurious child brought into his family? I thought that for generations it had been an accepted view that the manly thing to do in those circumstances, the right thing to do, is to turn the wife out of doors. That is what a husband has done from time immemorial, and that, it seems to me, is what he has a right to do. But in these circumstances he has either to stop and think or they have to adjust their personalities together while she is perhaps hearing the child of her paramour, and he is keeping her in his house and, I suppose, sleeping with her in his bed. It seems to me to be perfectly distressing.
I think the clause would be most cruel and oppressive, and I trust your Lordships will reject it. If you have three years, or two years, the clause will not entirely meet my view, but as far as I am concerned I am prepared to vote first for three, and then for two, and then for no clause at all. We have no right to balance the sufferings of one side, of the people who suffer now and to whom we are going to give relief by reason of giving divorce for cruelty and desertion—we have no right to balance against that the sufferings of people who during the first five years are subject to the wrongs that are done in normal divorce cases. My own suggestion is this. There are some of us whose views I respect—I know very well what it means to them—who are opposed to divorce altogether. That is not the position, I believe, of the majority of your Lordships. I believe your Lordships are in favour of the rule of law which has obtained now for eighty years
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—namely, that there should be divorce. I think your Lordships are prepared to accept a progressive Bill and to improve the law as to divorce. I suggest that your Lordships should adhere to that which I propose to make the golden rule, that is to say, adhere to the carefully considered recommendations of Lord Gore11's Commission.
There is not a word about the proposal of this clause in the Report of Lord Gorell's Commission. There was another Bill that was proposed by the father of my noble friend Lord Buckmaster, of whom no lawyer, and I think no one else in this House, would speak without respect and admiration. The late Lord Buckmaster carried a Bill through in this House for the improvement of divorce. This idea never occurred to anybody then. It was not in that Bill, it was not suggested by any of your Lordships.
LORD JESSEL: Was not the Bill thrown out?
LORD ATKIN: No, I understand it passed here and was thrown out in another place. I was not here at the time, but I believe that is absolutely correct. In those circumstances I propose that your Lordships should really go forward, that you should not take into account possible dangers which, I suggest to you, do not exist. If we have to go forward, why should we take one step forward in Clause 2 and another step backward in Clause 1? I submit that it is perfectly illogical. The abolition of this clause is really awaited and expected by the vast majority of people in this country, and I believe also in the House of Commons. I hope very much that your Lordships will act accordingly.
LORD ARNOLD: I had no intention of taking part in this discussion, but I would like to say a few words, being impelled to do so mainly by the speech of my noble friend Lord Faringdon and to some extent by certain observations of the noble and learned Lord who has just sat down. I wish to speak simply on the question of what I may call Parliamentary procedure—of what is likely to happen, because this, it seems to me, is of fundamental importance. After all, politics is the art of what is possible. As I see it, if this clause remained unamended, if it were put to your Lordships' House as it is, with the full five years, it would in all probability. I think, be defeated here. On

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the other hand, if the five years are entirely taken out and the clause goes back in that form to another place, I suggest to your Lordships that the probabilities are that that would mean that the Bill would be defeated, particularly having regard to the element of time. That is the point which is so important.
With great respect, my noble friend Lord Faringdon has not been in another place as some of us have. I would remind your Lordships that, to begin with, this is not a Government Bill. I myself was very greatly interested in a Bill two years ago, which was introduced at this stage of the Session into your Lordships' House, and which was a Government Bill, and a Bill which was to a very large extent non-controversial. As a fact in the end that Bill did just get through in time. This is what I want to put to my noble friend Lord Faringdon. He does not think there is a great number in another place in favour of the five years. It may not be a question of whether there is a large number. It might be a question of whether there are two or three or four. In the particular case of the Bill of which I have been speaking, it was largely a question of getting withdrawal of the opposition of a single member. That is all I wish to submit. Au fond, I agree with the noble and learned Lord, Lord Atkin, entirely, but it is a question of what we can do and what we are likely to get. You might get 490 members to vote in favour, but the question is how many you will get against.
Having regard to the history of this Bill, if it were sent back with the five years taken out altogether, the opponents of the Bill would almost certainly see that the Bill did not pass. There would be quite enough to see to that. Two persons would be sufficient, if persistent enough, to kill the Bill. If that he the case, we have to consider whether, on balance, it is not better to accept the Amendments of the noble and learned Lord, Lord Maugham. What is the price that will have to be paid? He tells us that the number of divorces within three years of marriage is only about four per cent., and that four per cent. will be further reduced because of the discretion which we are hoping will be inserted in the Bill, giving the judges power to deal with the hard cases which the noble and
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learned Lord admitted. I submit that, on balance, on a question of debit and credit, the best hope of getting the Bill through in a form which, after all, does mark a great step forward, is to accept the Amendments of the noble and learned Lord. The noble Lord, Lord Faringdon, said: "Throw the Bill out and with all the popular feeling we will get another Bill soon." That might be so, but it is twenty-five years since the Gorell Commission, which is a long time, and, with the exception of the Bill passed in 1920, there has been no divorce reform in the interval. I say, pass the Bill with the noble and learned Lord's Amendments, and get an amending Bill later on, if public opinion wants it, in the direction of those who really want to take out Clause 1 altogether.
On Question, Amendment agreed to.
VISCOUNT BUCKMASTER: I have nothing to add to what I have already said, and I beg to move that Lord Maugham's Amendment be amended in the form I suggest.
THE MARQUESS OF SALISBURY: On a point of order, I submit that your Lordships have just decided that the word "three" be inserted in the Bill, and that it is impossible to put "two" in now. With great respect to your Lordships, I submit that the proper time for the noble Viscount to intervene was when the Chairman put from the Table the question whether the word "three" be there inserted. Then he should have moved his Amendment. Your Lordships have decided that the word "three" he inserted. I do not want to give myself airs about this matter, but I suggest that it would be out of order to go back now. The noble Viscount will, after all, have his opportunity on the next stage.
VISCOUNT BUCKMASTER: I apologise if I am in error in moving this Amendment. I took advice on the subject, and it was on that advice that I moved. I was not perfectly clear. I do not think your Lordships now are perfectly clear as to whether we are doing the whole clause or taking the Amendments individually. But if I have fallen into error I apologise.
LORD MAUGHAM LORD MAUGHAM moved to omit the proviso and insert:
"Provided that a Judge of the Probate, Divorce and Admiralty Division may, subject to and in accordance with rules of Court,

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allow a petition to be presented before three years have passed on the ground that the case is one of exceptional hardship suffered by the petitioner or of exceptional depravity on the part of the respondent, but if it appears to the Court at the hearing of the petition, that the petitioner obtained leave to present the petition by any misrepresentation or concealment of the nature of the case, it may either dismiss the petition or, if the petitioner would otherwise have been entitled to a decree nisi, may pronounce such a decree, subject to the condition that no application to make the decree absolute shall be made for such period, expiring not earlier than three years after the date of the marriage, as the Court may direct.
(2) Nothing in this section shall be deemed to prohibit the presentation of a petition based upon matters which have occurred before the expiration of three years from the date of the, marriage."
The noble and learned Lord said: I beg to move this Amendment. I would only add, if I may, that those who have carefully studied the proceedings in another place, of whom I am one, will find it is quite a mistake to suppose that Clause I was inserted without very full consideration.
Amendment moved—
Page 1, leave out lines 16 to 19, and insert the said new proviso.—(Lord Maugham.)
LORD ATKIN: This is a mere question of detail, but your Lordships will observe what this Amendment says. First of all, we have a three-year limit. The discretion is only to be exercised, first of all, where a Judge of the Probate, Divorce and Admiralty Division allows a petition to be presented—that is to say, poor people from the country must come up to London and present their petition to a Probate, Divorce and Admiralty Division Judge in London. How he is to satisfy himself I do not know; it does not say. If he is to hear evidence, then the poor person from the country must produce his evidence. If he is to act solely upon the allegations in the petition, it will not be very difficult, I imagine, to make allegations in the petition which would entitle the person to get leave, though I believe the petitioner has got to swear to the truth of the allegations in the petition. It is after that that the discretion has to be exercised by the judge who happens to be trying the case. The standard is one of "exceptional hardship" or "exceptional depravity." I pointed out the objections there are to such a phrase. I have not the least idea whether the cases I quoted, to which my
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noble friend referred, are cases of exceptional hardship; but if they are cases of exceptional hardship, that appears to cover every case likely to come before the Divorce Court. It only indicates how vague the protection really is.
On Question, Amendment agreed to.
LORD REDESDALE LORD REDESDALE moved to leave out Clause 1. The noble Lord said: It is quite clear from what was said by the noble Lord who introduced the Bill that Clause r was designed to discourage persons, and particularly young persons, from frivolously, rashly, or irresponsibly assuming the obligations of marriage. Firstly, in my view, legislation should be framed in the interests of ordinary, normal people, and not with a view to patching up the misunderstandings of a few frivolous children. If frivolous children are to be dealt with here at all they should be dealt with, it seems to me, quite separately and on separate lines. Secondly, I cannot believe in any case that this clause will have, or can be expected to have, the effects intended. It seems to me impossible to suppose that in actual practice it will in any way discourage the reckless undertaking of marriage. The vast majority of people seeking relief under this Bill will not necessarily have married with any undue recklessness, and will nevertheless be genuinely suffering from the horrors it is designed to terminate.
Ordinary, normal people, in my experience, do not approach marriage in a spirit of reliance upon some clause in an Act of Parliament, nor, in my opinion, will any clause in any Act of Parliament ever induce people to look before they leap, which is the admitted object of Clause 1. People who approach marriage looking upon it as a mere frivolous experiment must be very few and far between. It is surely far more normal—for men at all events—to regard marriage as an extremely unlikely contingency until suddenly they meet someone, and when two people are sufficiently in love to contemplate marriage they are sure to regard each other as very perfect; and it is presumably at this stage that the magic of Clause 1 is intended to operate, to pull them up, at it were, and induce them to start thinking. But is it really possible to imagine either party at this stage saying to themselves: "Now you must be careful; do not forget that if he or she

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does so-and-so shortly after marriage I shall have all that time to wait before I can be free again"? Why, of course not. The mere possibility of any such behaviour on the part of someone on whom you look in a holy light of perfection would never enter your head. Thus I for one am absolutely convinced that Clause 1 will never even fill the part for which it was designed.
On the other hand, and whether I am right in that or not, there can be no doubt that it will inevitably inflict untold hardship and suffering on numbers of people who could obtain speedy relief from their troubles even under the law as it exists to-day. It has also to be remembered that the five years' delay might create very great hardship to the parties if during the interval material witnesses should die, disappear or forget. Several noble Lords, including the noble Lord who introduced the Bill, pointed out in their speeches on the Second Reading that one of the great merits of this Bill is that it will particularly benefit the poorer classes of the community. This is, of course, true, and it is a very good thing that it is so. But this clause will surely operate strongly in the opposite direction, for the period of delay will quite obviously inflict far greater hardships on poor people, living often in very close and restricted quarters, than on those whose circumstances enable them to make more suitable arrangements for its endurance. On the grounds, therefore, that this clause is quite unnecessary for any of the main purposes of the Bill, that it will certainly in practice defeat its own object and that it will inflict great and unnecessary hardships on many persons and especially on the poor, I beg to move to omit the clause.
Amendment moved—
Leave out Clause 1.—(Lord Redesdale.)
LORD MOYNE: The injustice which is to be feared under the clause which we are considering has been so very movingly put by noble and learned Lords and others whose experience in this matter is infinitely greater than my own, that I feel some diffidence in raising one or two points which seem not to have been dealt with. Is it not certain that the maintenance of this clause is bound to lead to an enormous growth of separation orders? We all know the
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disadvantages of that form of procedure, but I would like to draw attention to the very cruel position in which it is often found that these separation orders place the children who are the innocent victims of these divorces, which will in future, be so often based on a separation order.
Unfortunately very many marriages are wrecked in the first few months and this Bill will, I fear, not succeed in changing this sad fact. If a wife deliberately, during the subsistence of the marriage, lives with another man it will be almost necessary for the husband to apply for a separation order. Otherwise, is it not almost certain, if he goes on living with her, that when the time comes for a divorce to be possible he will be ruled out on grounds of condonation? I shall be very much obliged to noble and learned Lords if they will tell me that I am wrong, but I am informed that Judges are very particular, and properly particular, to be satisfied that in cases of divorce the husband has not forgiven the wife by going on living with her. Therefore when the husband gets evidence a few months after marriage that his wife is living in adultery with another man, if he wants to keep open the possibility of a divorce he will have to separate, and I think he will almost certainly apply for a separation order so as to put the evidence in cold storage.
The position of children who are alive at the time of a separation order is very unsatisfactory, but I would like the House to consider what is going to happen in the case of unborn children. It seems to me that it is bound to be a further inducement to an increase in separation orders so as to strengthen the defence of a husband against paternity being foisted on him for another man's child. Let me remind the House of what is apparently the law of legitimacy in these cases. Every child born during the subsistence of marriage is prima facie legitimate. The prima facie presumption of legitimacy may be rebutted by evidence that the husband and wife did not have access to each other as is necessary in order for the husband to be, in fact, the father of the child. The presumption of legitimacy continues, notwithstanding that the wife can be proved to have committed adultery with any number of men. In

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order that the presumption can be rebutted, it is essential for proof to be shown that the husband cannot have been the father of the child.
Evidence of non-access may not be given by the spouses, but, of course, it can be found in other directions. Is it not evident that legal separation will offer much firmer ground for evidence of non-access during the waiting period? And, if that be so, is it not to be feared that separation orders will take the place of early divorces, and that the possibility of the parties coming together will be effectively ruled out? When there is absolutely certain evidence of non-access the child can be declared by the Courts to be a bastard. Under the present law of quick divorce on account of adultery the question of legitimacy of the children is very seldom raised, and it seems to me that this clause threatens to create a class of children born during subsistence of the marriage and bastardised years afterwards by divorce proceedings.
The noble Lord, Lord Arnold, made an appeal to us on the ground of expediency. He said that he hoped that eventually, if this Bill passed with the clause in it, it would be amended and the clause would go out. I do not think we can be swayed by such an argument in a case of this kind where it is proposed to remove a relief which has been enjoyed for years by innocent people on the mere possibility of its being re-established at some future time. And if there is all this difficulty about the Government giving time when there is undoubtedly a great demand in the country that this matter should be settled, what is the prospect of its being re-opened afterwards? I am afraid I am entirely unmoved by an appeal for a compromise in this matter. It seems to me that the clause threatens such deep and incalculable reactions of divorce practice that I would rather have no Bill at all than a Bill containing this provision. If this clause stands I shall feel obliged, instead of supporting the Bill, to oppose the Third Reading, and, if we succeed in defeating it, I shill not lament its total loss in another place as an alternative to its reinstatement.
LORD ALLEN OF HURTWOOD: May I add a word or two in support of the speech just made? I most earnestly hope that this clause will be deleted. I do not know how it came to be drafted, but it
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was clearly not drafted by any one who has had any experience whatever of working-class homes or of work in social settlements or in the east end of some of our great cities. This Bill, if it contains this clause, is going to do one of the most cruel things that can be done. It is going to encourage immorality in the home itself. I understood that the object of bringing this Bill before Parliament was that we might diminish immorality. The right reverend Prelates who sit upon the Ecclesiastical Bench have had this clause in their minds throughout, and it has been their object to diminish immorality in this country. If this clause stands, far from diminishing immorality it would encourage immorality of the worst possible kind, the immorality which takes place in the home. You will have the position of a working-class man or woman who has been injured by the partner, being told by that partner when that injury has been done, "You cannot touch me for three or, may he, four years." And all that the working-class partner who has been injured can then do is to apply by an elaborate procedure for the discretion of a Judge who, I understand from the noble and learned Lord, Lord Atkin, will be in London.
Noble Lords far too often think of the subject of divorce in terms of the cases which are reported in the newspapers, and those are very often cases that are concerned either with curiously living human beings or special classes. They are not the cases which are the ordinary everyday cases of working-class life. If a woman is injured under the present procedure of this clause and she is told she has the right to go to the discretion of a learned judge in London, and she is an ordinary working-class woman, she will neither have the means, nor the knowledge, nor the courage to do so. Consequently, she will have to suffer for years on end, not outside her home but inside her home, the immorality and cruelty that noble Lords are desiring to remove. Therefore, I personally would say that if this clause remains part of this Bill I would infinitely prefer that the Bill should drop, and that the whole subject raised by this clause be once more discussed by those with experience of working-class life and marriage conditions, rather than that we should take a backward step of so serious a kind when the Bill was intended that we should take a progressive step forward.
THE LORD ARCHBISHOP OF CANTERBURY: There might have been some value in this clause in its original form, but I cannot see what value for the purpose for which the clause was originally intended will be secured from the clause as your Lordships have seen fit to amend it. The object was to fix by Statute a certain time during which the parties would have realised that no divorce was possible. Five years might have been of some use, but three years seems to me of comparatively little use for that purpose. On the other hand, for the sake of this, as I think, small value of three years, and for the sake of, admittedly, some fear of oppressing those who, unhappily, apply for divorce, you would run the risk of all those very real evils which have been so forcibly and eloquently described by noble and learned Lords and by the noble Lord who has just spoken. I do not think it is worth while and therefore, while I might have been prepared to vote for this clause in its original form, I do not see that any good advantage would be gained by voting for it now. At the same time, if a vote is challenged, I should not like to vote against it without the reason being known.
If it be said that to omit the clause as it now stands would prejudice this Bill elsewhere, that is not a matter of tactics with which I am much concerned. I read the debates in the other House very carefully, and I do not think it would be wrong to say that that House was not in the least seized of the importance of all the issues that have been so fully and specially put before your Lordships in this House.
LORD HEWART: May I in a sentence or two express my hope that this clause will be deleted? Without going into unnecessary detail I should like to ask a simple question. The object of this Bill, as I understand it, is to extend the grounds upon which divorce may in a proper case be obtained. Why should the adulterous or cruel husband have a close period of three years? Why should the existing rights of one potential class of persons be sacrificed in order to secure for others that which is admitted to be their right? It seems to me with great respect to be a most unreasonable concession to unreasonable opposition. It appears to be a price to be paid for
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getting the Bill through. I entirely agree that a period of three years is not worth while. A period of five years, in my respectful opinion, is less worth while. It is more unfair. I cannot for the life of me understand why the rights of one set of persons should be given away behind their backs in order to secure the admitted rights of others.
VISCOUNT SAMUEL: During the debate, this clause appears to me to have been riddled with arguments and the only justification put forward for it is that to omit the clause might imperil the fortunes of the Bill in another place. I would point out that time will have to be found in another place for consideration of the Lords Amendments, since your Lordships have already made Amendments, and important Amendments, in this clause. If, when that time is found, another place should insist upon the maintenance of a clause of this kind, then the matter can always be reconsidered by your Lordships' House.
LORD ROCHE: I do not intend to trouble your Lordships with lengthy observations, but I desire to make some, as an unrepentant supporter of this clause in the form in which it has been amended. I intend to do so in spite of incurring a charge of muddled thinking from the noble Lord, Lord Faringdon, or one of want of logic or of hardness of heart from the noble Lord, Lord Atkin. I support the clause, not as giving a discount for accepting something else, but because in my judgment the clause, as amended, is a good clause in itself. I would like to take your Lordships for a few moments to a busy Assize such as that of Manchester or Leeds, where perhaps there are one hundred or one hundred and twenty divorce cases in the list. I am free to confess that I have found time to relieve the monotony of that dreadful situation by keeping some sort of informal statistical score of the different classes of suitor. I came to the conclusion that in addition to the miscellaneous cases that came before the Court, there were two classes which stood out very clearly.
One, a very sad one, was the class of case where the marriage breaks up when the parties are about fifty years old, and the wife—it is generally the wife—is deserted. Such cases will be met, if your Lordships pass Clause 2. I may say, in

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passing, that I think it shows how little the noble Lord, Lord Faringdon's hero Napoleon knew or cared about human nature, because he apparently would have prohibited any divorce for such persons. Those are, in my judgment, the hardest cases of all. There is another class, I do not say a large one, of young persons, not all in the same class of society, who do lightly enter into the marriage tie, and in some classes of society consciously do it—in most cases it is unconscious—thinking and knowing that they can get rid of the tie. In the very thoughtful speech, if I may say so, of the noble Lord, Lord Moyne, he dropped the observation that there were some marriages—a number I understood him to say—which broke up within a few months. Why? The cases where they break up through another attraction are few and far between, and where they do, it is because one party has been grossly deceived. Those cases will be met by the Amendment as to discretion which has already received the assent of the Committee. But the cases where the marriage breaks up, not from passion but from pique, will be met by this provision of the Bill. That is why I support it.
I was very much struck, if I may say so, by the notable contribution which the noble Viscount, Lord Dawson of Penn, made to the debate on the Second Reading, and particularly by one observation which he made in the course of it. He narrated a case where, through the good services of a medical man, a reconciliation between parties had been secured, and he expressed himself as desirous of introducing some provision into this Bill furthering and forwarding reconciliation. It is to be found in this clause with the Amendment proposed by my noble and learned friend Lord Maugham, and adopted by the Committee. I cannot conceive any place and time which will be more fruitful of opportunities for reconciliation than when the parties come before the Court for leave to present a divorce petition. If it is a bona-fide case of hardship, I am perfectly certain discretion will be exercised, but if it is a case such as that put by the noble Lord, Lord Moyne, where the marriage has broken up within three month by reason of pique, the first thing the parties will be asked will be: "What are you doing about it? Have you tried
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to get on?" They will be sent away with the application adjourned to see whether they can be reconciled.
It may seem strange to many people who do not believe in the possibility of reconciliation that in these very sittings of the Divorce Court in London there have been four cases of reconciliation after the decree nisi and before the decree absolute. If that happens at the last stage of the proceedings, how much more may be expected to happen if the influence of the Court towards reconciliation is exercised when troubles begin. There is only one other thing I want to say with regard to reconciliation. Without betraying any confidences by giving details, I have within my own knowledge a case where both parties to a marriage had been unfaithful to one another, but in both cases it was the unfaithfulness, not of passion but of what I have ventured to describe as pique. Through the instrumentality of another medical man those parties were reconciled. Children were born to that marriage, and the parties are living as a happy married couple. It is for such reasons that I advocate the retention of this clause, as amended.
THE EARL OF MORAY: Before I attempt to address your Lordships on the thorny problem now before us, I must say a few words of personal explanation. I was born in Edinburgh thirty-seven years ago and married in Paris twelve years ago to an American girl. The civil marriage took place on the first day before the Maire of the 16th Arrondissement and a religious ceremony, was gone through on the day after. Through the careful forethought of my mother-in-law I can therefore get a divorce in Scotland or in America, but there seems to be some legal doubt if I can do so in France. So I take a rather academic and, I hope, unbiased view of this debate. This clause in particular applies now only in Scotland, where some people think we do things better.
In that connection I would like to draw your Lordships' attention to a paragraph which I saw in the newspapers the other day, stating that one of Scotland Yard's "Big Five" welcomed at Waterloo station a party of distinguished officers of the United States Police, who would remain in London for some weeks as the guests of the Metropolitan Police,

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during which time they would be given every facility to study the latest methods of crime detection. It is understood that a party of British officers will shortly pay a return visit to the United States as the guests of the New York City Police with a similar purpose. To get down to what I call brass tacks, by which I mean the noble Lord's Amendment, on which I am speaking, there are only two parts to which I wish to refer. One is the time-limit of five years. It may be true that a thousand ages in the sight of God are as a moment gone, but if it is true, then that God must be asleep all the time.
THE EARL OF DROGHEDA: May I say one word on this Amendment as one of the firmest supporters of the general principles of this Bill? I most fervently hope that the Amendment will be defeated, for the sake of those who I hope will receive much-needed and long overdue relief under Clause 2. So far as one can judge from the debates in another place, there is a strong feeling in this country that this clause should be retained and that it plays an important part in making many people support the Bill who would otherwise not have supported it. Without this clause I think the Bill will meet with uncompromising hostility. The clause was, moreover, strongly supported in another place by many who were most in favour of extending the grounds for divorce. I do not regard this clause as the payment of blackmail in any shape. I think that those who inserted this clause believe in the principle of preventing early divorce. Whether they are right or not I cannot say, but I was impressed by what was said by a member who was representing a working-class constituency. Speaking of the difficult early years of marriage, he said that many young people of the working classes marry and cannot get a home of their own, but have to live with the parents of either the wife or the husband, and never get a real chance to understand one another in married life at all. I think that point impressed many people in another place.
I gravely fear that to delete this clause will be to defeat the Bill, and I cannot imagine anything more dreadful than that this Bill should be defeated, not by its opponents but by its supporters. I
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hope that the Bill will pass, but I fear that it will not pass at all if this clause goes, just as it would never have come to your Lordships' House at all without the clause. I ask your Lordships, when giving your vote on this Amendment, to consider how many years of effort may be wasted, how many people who are entitled to relief may not receive it, and how many hopes may be frustrated, if you vote against this clause. I hope that the majority of your Lordships will not do so, but will leave this clause as amended by the noble Lord, Lord Maugham. The noble and learned Lord, Lord Atkin, said that one was not entitled to weigh one set of people against another set—that is, the people who will perhaps suffer some hardship under Clause 1 against the people who under Clause 2 will get relief. I most respectfully disagree with him; I feel that one is entitled to weigh them. One is weighing a hundred people a year against many thousands who will get relief under Clause 2. I earnestly hope that this clause, as amended, will stand part of the Bill.
LORD WRIGHT: On the Second Reading last week I explained very shortly the objections I felt to Clause 1. I hoped that those objections might be entirely cleared away by Amendments, but I am bound to say that, notwithstanding what has been passed to-day, I still object on principle to the clause even in its attenuated form. It must produce injustice and, so far as I can see, will do no good to anybody. The only argument I hear is that if the clause is rejected the Bill may be thrown out in another place. I do not know how that may be. Opinions seem to differ; I know nothing about it, but even so there might be a locus pœnitentiœ here. On principle, however, I feel bound, much as I regret it, to oppose this clause.
LORD AILWYN: I should like to support in as few words as possible the Amendment moved by my noble friend Lord Redesdale. I find myself in very complete accord with Lord Atkin when during the debate on the Second Reading he described this clause as "a terrible clause." Here is a Bill destined, we hope, to bring great benefits to our people. It is designed to help those multitudes of sane, respectable, sober, clean-living people, of mature age in the

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majority of cases, whose marriages, largely through no fault of their own, have ended disastrously. It is not designed, I submit, for those flighty persons who enter upon marriage in a light-hearted, frivolous, irresponsible way, although to those alone this clause would apply a wholesome and well-merited check. But do any of your Lordships seriously consider that these "butterflies," if I may so describe them, are worthy of legislation, when that very legislation must bring in its train untold hardship and misery to those countless others whom this Bill is fundamentally designed to benefit? Do not let us spoil what in my very humble opinion is an excellent Bill in all other ways by taking away from those unhappy people whose marriage has been desecrated the right which they now possess of being able to petition for divorce when life for them has become insupportable.
It is not difficult to see—and it has been stated in many quarters of the House—the motive underlying the inclusion of this clause. It is obviously in the nature of a compromise, designed rather as a sop for those who hold up their hands in horror and dismay at the very idea of divorce being made more easy. You cannot compromise with human lives. Life is far too serious and too profound for any such action. May I earnestly and respectfully beg your Lordships to be wholeheartedly courageous in the measures of relief which this Bill can bring
and strike out with a firm hand this offending clause?
LORD DARYNGTON: I wish in a few words to support what has been said by Lord Roche in connection with this Bill. Everyone who has been in communication with the other House will know that it is a balanced Bill, and that it would be unwise in the present instance to strike out this clause.
LORD ELTISLEY: Your Lordships have been very kind in allowing me to speak once before in regard to this Amendment. I trust that the clause will not be cut out. Those who have been sponsors and supporters of the Bill have been in close touch with those who they believe are most capable of giving a reasoned opinion as to the chances of the in another. House, and as a result we have come to the considered conclusion that in the interests of the Bill, which we believe is earnestly wanted by the country as a whole, the clause with the Amendments already accepted by this House should stand part of the Bill. I believe that the proposal of three years, coupled with the discretionary power, will catch the butterflies, and that the discretionary power will ensure that all the genuinely hard cases receive the relief which they merit and are entitled to obtain.
On Question, Whether Clause 1, as amended, shall stand part of the Bill?
Their Lordships divided: —Contents, 88, Not-Contents, 74.

CONTENTS.

Halifax, V. (L. President.)

Dawson of Penn, V.

Cautley, L.

Devonport, V.

Chalmers, L.

Norfolk, D. (E. Marshal.)

FitzAlan of Derwent, V.

Charnwood, L.

Greenwood, V.

Cromwell, L.

Ailesbury, M.

Hambleden, V.

Daryngton, L.

Reading, M.

Plumer, V.

De Saumarez, L.

Zetland, M.

Ullswater, V.

Dormer, L.

Dunleath, L.

Albemarle, E.

Birmingham, L. Bp.

Eltisley, L. [Teller.]

Bathurst, E.

Gloucester, L. Bp.

Elton, L.

Beatty, E.

Liverpool, L. Bp.

Fairhaven, L.

Birkenhead, E

Gifford, L.

Cavan, E.

Aberdare, L.

Gorell, L. [Teller.]

Drogheda, E.

Acton, L.

Greville, L.

Iddesleigh, E.

Addington, L.

Holden, L.

Macclesfield, E.

Addison, L.

Howard of Penrith, L.

Malmesbury, E.

Annaly, L.

Hutchison of Montrose, L.

Midleton, E.

Arnold, L.

Illingworth, L.

Munster, E.

Arundell of Wardour, L.

Jessel, L.

Selborne, E.

Biddulph, L.

Kilmarnock, L. (E. Erroll.)

Stanhope, E.

Bingley, L.

Latymer, L.

Blythswood, L.

Lawrence, L.

Astor, V.

Boston, L.

Mamhead, L.

Brentford. V.

Brancepeth, L. (V. Boyne.)

Maugham, L.

Cecil of Chelwood, V.

Brocket, L.

Monkswell, L.

Mount Temple, L.

Rennell, L.

Shute, L. (V. Barrington.)

O'Hagan, L.

Ritchie of Dundee, L.

Strathcona and Mount Royal, L.

Oriel, L. (V. Massereene.)

Roche, L.

Palmer, L.

Russell of Killowen, L.

Templemore, L.

Rankeillour, L.

St. Levan, L.

Teynham, L.

Rayleigh, L.

Sandhurst, L.

Vivian, L.

Remnant, L.

Sherborne, L.

NOT-CONTENTS.

Canterbury, L. Abp.

Falmouth, V.

Foxford, L. (E. Limerick.)

Goschen, V.

Gage, L. (V. Gage.)

De La Warr, E. (L. Privy Seal.)

Long, V.

Hardinge of Penshurst, L.

Mersey, V.

Hare, L. (E. Listowel.)

Ridley, V.

Heneage, L.

Ancaster, E.

Samuel, V.

Hindlip, L.

Balfour, E.

Swinton, V.

Mancroft, L.

Clarendon, E.

Middleton, L.

Cranbrook, E.

Winchester, L. Bp.

Milne, L.

Dudley, E.

Morris, L.

Halsbury, E.

Aberconway, L.

Moyne, L. [Teller.]

Iveagh, E.

Ailwyn, L.

Phillimore, L.

Lucan, E.

Allen of Hurtwood, L.

Ponsonby of Shulbrede, L.

Lytton, E.

Amulree, L.

Rea, L.

Onslow, E.

Askwith, L.

Redesdale, L. [Teller.]

Peel, E.

Atkin, L.

Rhayader, L.

Poulett, E.

Berwick, L.

Ruthven of Gowrie, L.

Sandwich, E.

Bethell, L.

St. Just, L.

Strafford, E.

Carnock, L.

Saltoun, L.

Wicklow, E.

Carrington, L.

Seaton, L.

Clanwilliam, L. (E. Clanwilliam.)

Selsdon, L.

Bertie of Thame, V.

Strabolgi, L.

Buckmaster, V.

Darcy (de Knayth), L.

Stuart of Castlestuart, L. (E. Moray.)

Chelmsford, V.

de Clifford, L.

Cobham, V.

Doverdale, L.

Trent, L.

Davidson, V.

Faringdon, L.

Waleran, L.

Esher, V.

Fermanagh, L. (E. Erne.)

Wolverton, L.

Wright, L.

On Question, Amendment agreed to.

Resolved in the affirmative, and Amendment disagreed to accordingly.
Clause 1, as amended, agreed to.
Clause 2:
Grounds of petition for divorce.
2. The following section shall be substituted for Section one hundred and seventy-six of the Supreme Court of Judicature (Consolidation) Act, 1925 (hereinafter called "the principal Act"):—
"176. A petition for divorce may be presented to the High Court (in this part of the Act referred to as 'the Court') either by the husband or the wife on the ground that the respondent—

(a) has since the celebration of the marriage committed adultery; or

(b) has deserted the petitioner for a period of at least three years immediately preceding the presentation of the petition; or

(c) has since the celebration of the marriage treated the petitioner with cruelty; or

(d) is incurably of unsound mind and has been continuously under care and treatment for a period of at least five years immediately preceding the presentation of the petition;

and by the wife on the ground that her husband has since the celebration of the marriage been guilty of rape, sodomy or bestiality."
VISCOUNT BERTIE OF THAME: I beg to move a drafting Amendment.
Amendment moved—
Page 1, line 25, leave out the second ("the") and insert ("this").—(Viscount Bertie of Thame.)
LORD ELTISLEY: As one of the most ardent admirers of the assiduity with which the noble Viscount scrutinises even the most prosaic of Bills which come before the House, may I thank him for his discovery, and for remedying a small grammatical error?
THE EARL OF DROGHEDA THE EARL OF DROGHEDA moved, in paragraph (b), after "petitioner," to insert "without cause." The noble Earl said: This is purely a drafting Amendment. The words "without cause" are really implicit in any application for relief on the ground of desertion. It seems, however, to be advisable to insert them in Clause 2 in order to bring the wording of the clause into line with the wording of the principal Act.
Amendment moved—
Page 2, line 5, after ("petitioner") insert ("without cause").—(The Earl of Drogheda).
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, after paragraph (b), to insert the following new paragraph:
"(c) the two parties have wilfully separated from each other for a period of at least three years and have after this period before presenting the petition made a declaration before the Registrar, that they have no desire for and no intention of ever coming together again."
The noble Earl said: In drafting this Amendment I took some care to see exactly what I thought was the general idea of this Bill. I think that the general feeling of the country was that the divorce laws as they at present stand were not satisfactory, and that throughout the country there was a certain amount of hypocrisy going on. It was felt that where you had only one ground for divorce, and that adultery, evidence of adultery was being given constantly when everyone knew perfectly well that the evidence was not true, and yet it had to be acted upon. That was one of the things that undoubtedly made the country feel that something ought to be done in order to get the laws of divorce on to a better basis.
Then, when people were discussing the Bill, they came to the conclusion that life had changed to some extent since the Act of 1857 was passed, and that it was better to grant an extension of the grounds for which divorce could be obtained. As a result there have been added two other grounds. I am not dealing with the further ground—namely, the question of unsound mind—but I am taking desertion and cruelty either of which would be a ground for granting a divorce. My Amendment really is an extension of paragraph (b)—the question of desertion. When you come to the question of desertion you are brought up against something quite different from the question of adultery or the question of cruelty. I am not sure that anybody has a right to say, as has been commonly said for many years, that in a marriage which has not succeeded and which has finally resulted in a divorce, one of the spouses is a criminal and the other a saint. As a rule in this life you will find that when people are unable to agree and to get on together, both are to some extent to blame. It is not always a question of one being a criminal and the other a saint. In the matter of desertion that becomes very obvious. If one thinks it over, it is often the person who is deserted who is
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the more to blame, because he of The is the person who has made the home so impossible that the other person cannot stop there, and leaves in order to get a decent and proper life. I mention that only to show that there certainly are cases where the person who is deserted is not necessarily the person who is the saint and the other the criminal.
Let us come down to the case where both are to blame, or possibly where neither is to blame. Two people have married, and I assume they married with the very best idea that they were going to live a happy married life for the rest of their lives. Afterwards they have unfortunately found that they are entirely unsuited for one another and that if they try to continue together they will both be condemned equally to a thoroughly unhappy and unsatisfactory life. That is a case that one feels should be dealt with. I have put this Amendment down in a way which would bring the law much more into line with the present law of Scotland. What I am suggesting is that if the two parties have wilfully separated for a period of at least three years—I am not letting it be done in a hurry—and have, after that period, before presenting the petition, made a declaration before the Registrar that they have no desire for, and no intention of ever coming together again, then they are entitled to a divorce. What is the difference between that and a case of desertion?
There has been a great deal spoken in another place and also in the debate in this House about the difficulty of collusion. Why in the name of creation collusion should be put up as something appalling I do not know. But assuming it is, the one thing we can get collusion in at once more easily than in anything else is desertion. All that has to be done in regard to desertion is for one party to say to the other: "My dear, we are not getting on very well, let us have a divorce. I will desert you, and you will get your divorce straight away." There can never be any evidence given of that. It is the simplest way of getting divorce by collusion you possibly could have. If you are going to allow that, which you do by the Bill in its present form, why not get out of the hypocrisy and say that if we allow that, let us have it out straight and honest. What we are saying in this Amendment is this: If two people cannot get on, desert each other for three years,

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and then after that say they could never get back together again, why not let them be separated rather than try to tie them for all their lives to a state in which they would not be really living in happiness at all, but living in a state half fight and feud and half bickering, with no tastes in common and no possible happiness?
I have only one other word to say about it, and then I shall leave it to your Lordships in the hope that you will allow this as nothing very new, nothing very much out of the way, but really as a paragraph which ought to continue after paragraph (b) in its present form in order to make a proper clause. When you are discussing divorce—and everybody agrees it is the most difficult subject you could possibly discuss—one of the first things everybody has to consider is the question of what is to be the position of the children. May one not say with perfect fairness that the position of the child under the custody of one parent is likely to be much happier than if the child were living with a mother and father who are doing nothing but constantly fighting with each other, and giving an idea of married life which that child must carry up to its mature years, and which must be the very worst atmosphere in which it could possibly be brought up? For these reasons I ask your Lordships to accept this Amendment not as anything new, not as anything violently radical, but as the logical counterpart of paragraph (b) of Clause 2 of the Bill now before the Committee.
Amendment moved—
Page 2, line 7, at end insert the said new paragraph.—(The Earl of Halsbury.)
LORD ALNESS: I should not have intervened on this Amendment were it not that the noble Earl a few moments ago invoked in support of it the law of Scotland and claimed a certain resemblance between his Amendment anti the law of Scotland to-day. I want to assure the Committee, if I may, that this Amendment does not bear the slightest resemblance—the noble Earl will forgive me for saying so—to the law of Scotland as it is to-day and as it has been for three hundred years. The law of Scotland requires that in a case brought on the ground of desertion the Court shall be satisfied that there is
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no collusion between the parties. That presents no difficulty on our side of the Border; we do it without any King's Proctor. In the second place, the Court must be convinced that one of the parties is, if I may use a technical word, a malicious deserter and the other party is deserted for some reason which must be wilful and malicious. But, so far as the other party is concerned, the law of Scotland has all along required, and does require, that the deserted party should be willing to continue, as we call it in Scotland, to adhere to the other, to remain in consortium, and not to desert. So far from there being a deserting mind on the part of both, there must be a deserting mind on the part of one and there must not be a deserting mind on the part of the other. Therefore, I am unable to see how the noble Earl can buttress this Amendment by invoking the law of Scotland.
But, the law of Scotland apart, this Amendment does seem to me to introduce a complete novelty. The noble Earl said it was not new. It appears to me to be entirely new. It has been, so far as I know, in no Divorce Bill before—and there have been a number in this House and in another place—and, what is more, it is not only novel, but it seems to me for the first time to propose to introduce into the law of England and the law of Scotland divorce by consent. That is contrary to the first principles upon which our Courts in Scotland have proceeded, and I think I am right in saying that it is contrary to the principles upon which the Courts in England have proceeded. So, whatever may be the merits of the Amendment, it cannot be claimed to receive any support from the law on the other side of the Border.
LORD ELTISLEY: I do not think there is anything further for me to add. I hope the Committee will reject this Amendment on the ground that it does amount to granting divorce by consent.
On Question, Amendment negatived.
THE LORD CHAIRMAN: Before calling the next Amendment I ought to explain to your Lordships that I have had handed in a manuscript Amendment by the noble Viscount, Lord Dawson of Penn. As your Lordships have not got it on the Paper, you should perhaps know what it is before discussing the

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Amendment which is down in the name of the noble Lord, Lord Elton. The manuscript Amendment is as follows: "In paragraph (d), line 10,to omit the word 'incurably' after 'is,'" and then, in the same line, after "mind" to insert the words "believed to be incurable." Your Lordships will see that that alters the sense of the wording, and therefore I shall put the question whether the word "is" shall stand part of the clause, thus leaving the noble Viscount's Amendment free.
LORD ELTON LORD ELTON moved to omit paragraph (d). The noble Lord said: The Amendment which my noble friend Lord Darcy (de Knayth) and I have put down is designed to remove the fourth of the four paragraphs in respect of which divorce is to be permitted—namely, the paragraph which permits divorce if the respondent is "incurably of unsound mind." Your Lordships will at once recognise that that paragraph stands on a quite different footing to any of the three paragraphs which go before it. Paragraphs (a), (b) and (c) all may be said, rightly or wrongly, to permit divorce because the erring party has deliberately, of his own misdemeanour, desecrated the marriage and made the marriage bond meaningless. This fourth paragraph alone permits divorce for misfortune, the misfortune of being "incurably of unsound mind." May I begin by drawing your Lordships' attention to the word "incurably" as a question-begging epithet? I do not know what the motive of the manuscript Amendment may be, but I take it that the motive may be that the noble Viscount recognises that it is not possible, or at any rate very difficult, to maintain the word "incurably."
I should like in that connection to quote to your Lordships a sentence or two from the evidence given before Lord Gorell's original Commission by one of the two chief medical experts who testified on behalf of divorce for insanity. These were the words of Dr. Robert Jones:
"To define such would be an impossible task. It Las become an axiom in the study of prognosis as to mental disease that anything may happen in lunacy. Excepting what we call dementia…the most unlikely and unexpected recoveries take place."
That is the evidence of Dr. Robert Jones before Lord Gorell's Commission. But I do not think we need rest our scepticism
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as to the word "incurably" solely on the testimony of experts. It is right to be respectful to experts, but there is no reason to be afraid of them. Is it not within the general knowledge of us laymen that the whole tendency of modern psychology is towards recognising that scarcely any mental insanity should be regarded as incurable? Most of us, I suppose, could think of cases, very likely during the War, when many learned doctors shook their heads over some instance of shell shock as being incurable, and yet the case was finally and permanently cured. With every possible respect, and no one has more respect for the medical profession and more reason to be grateful to it than myself, is it not the experience of most of us when we have consulted a number of medical experts on some obscure physical condition, which is usually far less baffling than an obscure mental condition, that although all these experts will alike have lavished the utmost devotion and great learning on our problem they do, in fact, almost invariably disagree? Yet this Bill is to pronounce the final sentence, and it is a terrible sentence to ask anyone to pronounce, that the sufferer is to have no hopes that he may be cured; and he is to have stripped from him all that stands between him and the troubles and anguish of life.
There is a reason which moves me, I confess, much more than the liability even of medical experts to error or change of opinion on which I believe other noble Lords will have more to say, and that is that it seems to me that what is fundamental and quintessential not only in the Christian but the civilised conception of marriage, is the conception of two persons coming together to comfort, support and cherish each other, in all the manifold changes and chances of this mortal life. In the words of the Marriage Service:
"To have and to hold from this day forward, for better, for worse, for richer, for poorer, in sickness and in health."
I hope none of your Lordships will say that is only the formula and the ritual of one Church; that by no means all the nation would subscribe to the tenets of that Church, that by no means all the nation or indeed not all of your Lordships' House accepts even the Christian faith. I would contend that that conception of marriage, represented by those

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words, represents something much wider, something much more fundamental than the creed of one Church. I maintain that that conception of marriage as the coming together of two persons who link their fates together against the darkest stroke that fate can deal them, runs not only through all the Christian conception of marriage but through all civilised conceptions of marriage, and over wide areas of the animal world itself. Pity, compassion—that seems to me to be the essential in love, less violent but more durable and in the long run more obvious than the sexual instinct itself.
The noble Marquess, Lord Salisbury, spoke during the Second Reading of cases of melancholia. I suggest to your Lordships that it is wrong that there should hang over these dark approaches and borderlands of insanity the threat that, if that worst of all misfortunes should fall, then the sufferer is to be stripped of all he values most, all that stands between him and the shocks of the outer world; that we are in fact to re-write the words of the Marriage Service "in sickness and in health" unless it is the worst of all sickness, and "for better for worse" unless it is the worst of all that befalls us. Once you accept the principle that divorce has to be possible for misfortune because misfortune misfits the sufferer from fully discharging his marital functions, then there are many other misfortunes which can be classed sooner or later in that category. We can all think of physical disabilities which prevent the sufferer from fully discharging his marital functions. We can think of lingering physical diseases which make one who was only the other day a helpful and hopeful partner, a mere tragic encumbrance of the earth.
The senior member for my own University of Oxford said during the Third Reading in another place that the Bill would settle this matter for at any rate twenty years. I suggest that within this twenty years if you accept this principle of divorce for misfortune, you will be extremely likely to find you are admitting other misfortunes beside mental instability. It may be said that this provision is, after all, only permissive and that those persons whose comfort would be worth having when the dark hour comes will not in fact avail them-
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selves of it, but the principle I want to hold on to is that we should not admit for the first time the principle of divorce for misfortune. We should not admit a principle of which we cannot see the end and which in itself is an inroad on all that is finest and most Christian in marriage.
Amendment moved—
Page 2, line 9, leave out from ("cruelty") to the end of line 13.—(Lord Elton.)
LORD GORELL: We have listened to a very moving speech from the noble Lord who moved this Amendment, but I hope nevertheless that your Lordships will not accept his Amendment. The noble Lord quoted from some of the evidence given before the Royal Commission, but, after all, the Royal Commission listened to the whole of the evidence, including that part which the noble Lord quoted, and the majority came to the conclusion that insanity with a definite safeguard should be recommended as a ground for divorce. The noble Lord spoke very eloquently against making misfortune in any degree a ground for divorce, but the Royal Commission pointed out how very markedly different insanity was from any other class of misfortune. The noble Lord spoke of misfortunes which prevented one partner from fully discharging the obligations of marriage. If I may say so, the introduction of that word "fully" was—I am sure he did not mean it—a trifle disingenuous, because, under the provisions of the Bill, it is not a case of one partner by misfortune being prevented from fully discharging the obligations of married life, but from being able to discharge them at all. I think one has to consider in relation to this very difficult class of case the actual practical effects of incurable insanity as defined in Clause 3 of the Bill upon the ordinary small home.
LORD DARCY (DE KNAYTH): Will the noble Lord tell us the difference between those having incurable insanity and those having ordinary insanity?
LORD GORELL: I do not understand the point of that interruption. The insanity of which we are speaking is the insanity which has been defined in the clause to which we will come next, Clause 3. It covers all the real cases of insanity. I have no doubt many medical questions

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will arise on that, and we shall get guidance, I hope, from the noble Viscount, Lord Davison of Penn. I would ask your Lordships in this matter, which was so fully considered and has been before the public for so many years, to rest upon the findings of Royal Commission, emphasising that it is not a case of starting upon a slippery slope of misfortune, that the degrees of insanity to which this clause applies have been explained by the Commissioners as—setting the case quite apart from any other form of misfortune—rendering all the obligations of marriage quite inoperative. I would earnestly hope that your Lordships will resist the Amendment and retain this as one of the causes for divorce in the Bill.
THE LORD ARCHBISHOP OF CANTERBURY: I do not wish to say much after the extremely able and eloquent speech of the noble Lord who moved this Amendment, but, having regard to my desire to mitigate the evils as well as encourage the good which this Bill may contain, I feel bound to say a word in support of his Amendment. I emphasise what he said—and I hope your Lordships will bear it in mind—about the unique character of this particular alleged ground of divorce, that it necessitates that the marriage may be terminated for a cause for which the person is in no sort of way to blame, and where determination of the marriage is due to no sort of fault, but to misfortune. I would go a step further than I think the noble Lord himself went, and say that sometimes in these cases there is a fault, but it is not the fault of the person who becomes insane. It may be the fault of the other partner, a fault which is extremely difficult to prove, by which continual ill-treatment or continual neglect has brought about those tendencies to mental disease which have led to the confinement, it may be, of the party who is to be against his or her will, divorced.
I would also emphasise what the noble Lord said, that if there is any single instance in which it is legitimate to appeal to the fact that marriage should be a sincere endeavour for each party to hold to the other in sickness as well as in health, it is this form of sickness, which is peculiarly distressing. We cannot ignore the fact—I imagine my noble friend Lord Dawson has accepted it—that you cannot really speak of mental disease as being incurable. I remember what
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was said by Lord Horder in this House not long ago, that the incurability of the disease is never more than an estimate based upon experience. And I would like to remind your Lordships that I was a member of the Royal Commission to which my noble friend Lord Gorell has alluded, and I had the opportunity of listening to all the evidence. I am bound to say that on this matter, perhaps it may be presumptuous to say so, the minority of whom I was one had a truer grasp of the weight of the expert evidence that was given than the majority, who were influenced by a great many other relevant considerations. I was particularly impressed by the evidence of one who, certainly at that time it will be admitted, was a very great authority on all matters of mental disease, Sir George Savage. Speaking of his experience what he said was that he approached this matter with every desire on grounds of emotion and the like to agree with the suggested change in the law, but, after reviewing carefully his forty years experience, he had come to the conclusion that, on the basis of that experience, he could not support the inclusion of insanity as a ground for divorce.
I think some of us have our own measure of experience in this matter. I would only allude to one single case of which I have knowledge, where a woman who had been regarded as insane and under treatment for nine years—four years in excess of what is provided here—completely recovered and returned home. What would her position have been if she had come home to find that another woman was in possession of her home, which, through no fault of her own, she had been obliged to leave, and that her children were under the care of one whom they had been led to regard as their mother? I might mention other cases, but I do not want to take up your Lordships' time. If it comes to actual experience, I would venture to call attention to experiences of which we had abundant proof in the Royal Commission, and to one's own experience of those with whom one has been brought in contact in a long life which has had much to do with all classes of society.
Then, lastly, I would remind your Lordships of the effect which the inclusion of this ground of divorce might have upon those who are partially insane or persons who may be liable to insanity.

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I do not know whether my noble friend Lord Dawson, who will no doubt punish me for my rash remarks about the medical aspects of the case when I am done, had that in mind when he spoke about including in this clause persons who would be liable to recurrent fits of insanity. On persons of that kind what is likely to be the effect of the inclusion of this ground? I have the very clearest recollection of the evidence that was given before the Royal Commission, and I think it is true to say that the majority of the expert witnesses themselves were against the inclusion of this cause, even though they were in favour of the inclusion of other causes for divorces. For instance, four Commissioners in Lunacy, the Lord Chancellor's Visitor in Lunacy, Sir George Savage, whom I have just quoted, and others who were familiarly dealing with people of this class every day of their lives, brought home to us that the apprehension that some approach of insanity might develop into a cause by which the man or the woman might lose a home and husband or wife, as the case might be, would have the gravest effect. Therefore, without labouring the point, I venture to think that the adoption of this Amendment would result in retarding the recovery of those who are curable and sometimes would upset the balance of those who are liable to become insane.
Of course there are in this matter hard cases. I have known mama myself, and I could easily impress your Lordships with a moving account of the way this hardship works. At the same time one has known cases of great hardship where a working man had a wife afflicted with epilepsy, paralysis or some incurable disease which made it quite impossible for her to look after the children. It would not be suggested in such a case that that incurable disease was a ground on which the man could get rid of his wife and send her to an institution and marry someone else. This is one of the cases in which, in attempting to relieve certain quite obvious hard cases which appeal to all our hearts, we should be creating even greater hardships. For these reasons, whatever may be thought about the extension of other grounds for divorce, I hope your Lordships will see fit to refuse to allow this to be included among them.
LORD CROMWELL: If the noble Lord who moved this Amendment will allow me I will try to point out that the arguments he used in favour of the Amendment were based on two fallacies. In the first place he appeared to assume that divorce did not exist at all. He used as an argument for not extending divorce to this misfortune rather than fault, the words of the Marriage Service. I think that all your Lordships would agree that marriage should be permanent, but the law of the land admits divorce and therefore I do not think it is fair to quote the Marriage Service as an argument against admitting insanity as a ground. The second fallacy, if he will forgive my saying so, is that he assumed apparently that divorce is a punishment. This argument has been used before, but I do not think any one would agree that divorce was instituted, in the first instance at any rate, as a punishment. Therefore, whether it is a case of misfortune or mistake, I do not think the question arises at all. Divorce, I think everyone will agree, was instituted in order to make the home which is left better.
LORD DARCY (DE KNAYTH): I would like before making those observations which I had intended to address to your Lordships to draw attention to the Report of the Royal Commission and to point out that in a very material and important matter its recommendations are not given effect to in this Bill. In paragraph 292 the Commission say:
"We further recommend that the insanity should be found to be incurable to the satisfaction of the Court, and that this ground should only operate when the age of the insane person is, if a woman, not over fifty years, and if a man, not over sixty years. The last recommendation would exclude the case of senile dementia, and cases where there is no reasonable ground for dissolving the marriage, having regard to the age of the parties."
There is nothing to that effect in this Bill. The evidence given by Dr. Robert Jones shows that in London alone at that time there were 7,339 cases between the ages of fifty and over eighty to which this would apply. Taking men alone between the ages of sixty and sixty-four there were 1,442 cases. Those figures will be found on page 13 of Volume III of the Report.
There is another thing I should like to mention before proceeding further. It is not fair to my noble friend Lord Elton

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to say he picked out a certain passage of the evidence which was in no way representative. It is not fair for two reasons. First, he did not pick it out, and I did. Secondly it is thoroughly representative, and I defy a contrary opinion to be found expressed in any of the evidence. The noble Lord, Lord Gorell, rightly pointed out one thing with which I will deal later, but I would like to say I owe the noble Lord an apology for having intervened when he was dealing with the question of results of insanity, because I mistook him and thought he was going to refer to the usual things that result after that terrible period that is instituted in this Bill of five years.
There are two other matters which I think it is only right to bear in mind in connection with the Report of the Royal Commission. The Royal Commission sat at a time when the only ground for divorce was adultery, and when relief could not be obtained, as would be possible under this by a decree of nullity in certain circumstances. Dr. Jones, one of the great twin brethren on whose shoulders the whole weight of medical evidence was carried, proceeded to give evidence in which he said he had known cases in which within a few months, a few weeks, a few days of marriage a person had become insane. The cases we are seeking to alleviate can be dealt with by getting a decree of nullity by which immediate relief can be obtained without having to wait five years to start the necessary proceedings. There is the further point of cruelty. There are many cases which start because of cruelty. Women who have suffered from being knocked about by their husbands who subsequently become insane are unable to secure a remedy. I do not mind their getting relief in those circumstances.
I referred a moment ago to the period of five years as being necessary for the purpose of getting a decree on the grounds of incurable insanity. We have thousands of cases like those of which the noble Lord, Lord Maugham, has told us: how the husband or wife, as the case may be, has young children to look after; and the result is that, in the absence of adequate financial standing, they are unable to do so without the intervention of Why this unnecessary cruelty? It is perfectly true that it is cruel. If you can say that a case of
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insanity is curable, why do you not cure it? Are you really so brutal that you are not going to do that? Of course, it is simply that from first to last there is only one way in which it is suggested in this Bill or in the evidence that a case of insanity may be incurable, and that is by showing that very few people are cured after a certain lapse of time. It is interesting to see that if you say that, if you say that so-and-so is incurable after that time, the suggestion is that you will not be wrong in saying so.
An idea which I think is rather interesting is that, as far as I have been able to find, and I have read and re-read the evidence given before the Royal Commission, where we had the advantage of seeing doctors and, what is more, doctors under cross-examination, not one of them, as far as I can tell—I shall of course be corrected if I am wrong—once made a single statement that he was able to pick out those cases that would recover. Are you not, rather, merely saying that the odds are—I think the figure was given—possibly 2 per cent., and therefore fifty to one against you? This tribunal is not going to sit down and say whether a particular case will recur, but what are the odds against its recurring. I suggest that this is to reduce the Bench to the position of the punter, and the experts who give the evidence to the position of a bookmaker who is shouting the odds. If it is only fifty to one, I know that many of your Lordships are prepared to venture such a risk to the considerable benefit of yourselves, and I should feel very surprised if your Lordships would not, in the interests of humanity, be prepared to take a risk which you are prepared to take in the interest of pecuniary gain.
I apologise for wearying your Lordships so much, but there is a great deal with which one really ought to deal. The noble Lord said that he thought that not one case in a thousand would slip through the procedure suggested. In evidence before the Royal Commission, that great expert Dr. Robert Jones proceeded to suggest that there ought to be colonies to protect people against the shocks that they might have on coming out and finding their spouses married to somebody else. In fact, he suggested that the local authorities all over the country should set up colonies in order to accommodate

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those totally sane persons who have been divorced on the ground of incurable insanity. There are a great many people who think that this is only a matter concerning a few poor, demented people. I wish I thought it was, but there was a great deal of evidence which suggests that the class extends very much further. We have heard evidence that a great many of these people would suffer very much indeed from the mere knowledge that insanity was a ground against them, even though they were not actually to be divorced.
Dr. Chambers in his evidence was asked, I think by the noble Lord, Lord Gorell:
"What is your view as to the effect of the knowledge that insanity was a ground for divorce?'
The answer was:
"It would have a deleterious effect on some members of the sane community. I know how unconvincing it is to press illustrations, but there is one that occurs to me. Take the case of a couple getting married—I am speaking rather of educated people with nervous organisations—and pregnancy occurs. If the young wife, at what is a physiological crisis for her, feels that she has all the attention and care she should have she will pass through it quite safely; but if the husband, perhaps thoughtlessly, is inattentive, she not being judicial in her attitude towards things may wake up one morning and think, 'He wants to get rid of me; if I break down in my confinement I may be divorced.' This is a grave matter. Then if you come to the other end of life, when a wife is not so attractive and may not be getting the same attention she had when she was younger, at the climacteric—I am not speaking of people with insane heredity, but people who are neurotic—again, if the husband is not careful—he may have too many interests outside his home, some may be wrong and some may not be wrong—she may think that he does not care for her, and it would be a great strain if she knew that insanity was a ground for divorce."
I am sorry; these extracts are much too long, but again and again a statement is made that members of the sane community, particularly females, are liable to be upset owing to the proposals of this Bill. Under this Bill, if in one of those most distressing cases of puerperal insanity, 20 per cent. of which, I understand, are not cured, the man is to be allowed to say: "No, I loved this woman when I married her, and owing to her efforts to produce a son and heir for me she has risked not only death but a fate which is possibly worse than death—"then, my Lords, how would you describe
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such a man if he were to take advantage of this provision? The noble and learned Lord, Lord Atkin, referred to some people who might be seeking relief under this Bill and said that he would not mention in your Lordships' House what he would think of them. This is a very serious matter, and I would not hesitate to say anything of the kind except for the fact that such expressions would be wholly or partially inadequate.
THE EARL OF MORAY: This is a serious matter which concerns your Lordships' House more than another place, both from an inheritance point of view and from a religious one. Another reason given us is that it is too costly—
SEVERAL NOBLE LORDS: Order, order.
VISCOUNT MERSEY: I beg to move, That the noble Earl, Lord Moray, be no longer heard.
SEVERAL NOBLE LORDS: Lord Darcy.
THE EARL OF MORAY: This is a serious matter which concerns your Lordships' House from the inheritance point of view—
THE MARQUESS OF SALISBURY: On a point of order, I venture to hope that that Motion will not be made. I am quite sure that your Lordships are very anxious to get on with business. Every noble Lord would feel that it would be a pity if we put into force that very rare Standing Order. It is really not called for. I believe that your Lordships are really anxious to hear what Lord Darcy has to say.
VISCOUNT MERSEY: In reply to the noble Marquess, I only made that Motion because the noble Lord, Lord Darcy (de Knayth) has not finished his speech. It was only for that reason. It is not a mere interruption by the noble Earl, Lord Moray; it is a new speech.
LORD DARCY (DE KNAYTH): I feel at any rate that one member of your Lordships' House thinks that I have spoken for a wholly adequate time. I will draw my remarks to a close by making one short observation. Your Lordships will remember the late Viscount Bridport. I once had a discussion with him when we were standing there at the Bar of this House. It was after a discussion on the subject of animal welfare, and the noble Lord asked me how I was going to vote.

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I replied to the noble Lord by asking him his views, and, with that broad sympathy for which he was so noted, he said to me: "Where there is an issue between men and animals and there is no good reason to the contrary, I always vote for the animals, because they are not here to speak for themselves." We are here dealing not with dogs, cats, rabbits or animals at all, but with fellow human beings who are not here to speak for themselves. In those circumstances, in the spirit of the broad humanity of that noble Lord, I feel myself impelled to make one last appeal to your Lordships on behalf of those who are entitled, with everyone else, to your Lordships' justice, and who have, owing to their misfortunes and misery, a peculiar claim to the charity, humanity and sympathy of every member of your Lordships' House.
VISCOUNT DAWSON OF PENN: The noble Lord who has just sat down will perhaps forgive me if I do not attempt to spread myself over the wide ground he has sought to cover. I think it was the speaker before the last who referred to the differences of opinion among experts. If there were not differences of opinion among experts there would be no progress in the world at all. There is no branch of knowledge, statesmanship included, where there are not differences of opinion, and it is a mistake to suppose that medical experts always differ. If you were to go calmly into it, you would find that on essential subjects there is more general agreement in the medical profession than almost in any other. It is common ground, I take it, that we all ought to be as human as we can be, and most of us think we are pursuing the Christian ideal. It is also common ground that this particular group of cases is one which demands our very careful consideration and our merciful consideration; and the reason is that in most instances it is not a matter of fault, it is one of misfortune. That statement is hot strictly true. I need only mention one instance, that of chronic alcoholism—the effect of alcoholism producing a steady progress of dementia. Another example is that of syphilis. Still, broadly speaking, it may be asserted that the element of misfortune does come into the question of insanity more than into the question of adultery and cruelty. Therefore, to my mind, what we have to do
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is to be very careful to hold the scales of consideration and justice as between the patient on the one hand, and the equally suffering partner, and equally suffering children, on the other band.
What has been so noteworthy in the speeches which have gone before is that one would think there had been no suffering partner; but any one who has had an opportunity of studying insanity in the homes would often come to the conclusion that far more sympathy is to be extended to the suffering spouse, who feels things acutely, than to the patient, who feels things less acutely. I take it that we cannot consider this clause without considering Clause 3. There you will find that the insane patient must have had continuous treatment in some form of institution for a period of five years. That, in itself, is a great protection. The question that next arises there is this—how many patients will be covered? We cannot expect to get one hundred per cent. in any clause of this Bill. We can only endeavour to get the best results for the largest number. It is a fact agreed by a fair consensus of opinion that the chances of recovery after five years of continuous treatment are small, or, put in another way, that the large majority of patients who have been under continuous treatment for five years do not recover. That does not go so far as to say "incurable," and I propose to move an Amendment on that. To assert that anything in the world is "incurable," which means one hundred per cent., is not a very wise statement by a scientific man, and I am proposing to put in, instead of "incurable," "one who is believed to be incurable." That, I think, is a fairer and more accurate statement.
I said just now that the large majority of patients who have had continuous treatment for five years will not recover so as to take their place in the world again. The prospects in the first year of treatment are very good. The prospects after two years of treatment are definitely smaller. There is a big drop between one year and two years, and between three and four years a greater drop, and after five years the number who recover is very small. Therefore, I put this to your Lordships, that after five years, when the prospects of recovery for the patient are so small, is it not our duty, in justice to the suffering spouse, to give that suffering spouse a chance of relief?

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We do not make it compulsory. What we say is that there is an option on the part of the suffering spouse—it may be on the part of the children, or it may be on the part of herself, or on the part of the home. What we are very apt to forget is that the large majority of people with whom we are concerned in this Bill are people who live in houses of only a few rooms, and therefore, in case of cruelty or insanity, whether caused by drunkenness or drug addiction, on the majority of the population it presses much more hardly than it would on members of your Lordships' House.
I would say that in many cases it will be true that the wife, or healthy spouse, will elect to tread that hard and thorny path, and go along with things in spite of the suffering which it involves, but I do not think it is justifiable for the community to make that compulsory. This country prides itself on voluntary effort. It depends upon voluntary effort and individual judgment. It will not let us even compel physical education to be taken by law. Was there ever a case where you were not justified in forcing on a spouse, after five years of treatment, with the chances of recovery so very small—was there ever a case in which you would not be justified in enforcing the judgment of the community and saying coûte que coûte that is to go on? Imagine a small household of perhaps two or three rooms, and a patient coming back after a term in an asylum. These patients let out of an asylum are indeed not normal, and have to be treated with great care. They are easily fretted and made irritable, and why each time that a patient comes out should that home be destroyed, and the health of the other spouse endangered? I think that that puts the main facts. The people who put in the explanatory clause, and made it five years, did it after great consideration. They did it after getting advice from experts, and the advice they had was right.
On the question of incurableness the only reason why I propose directly to amend this paragraph is really for scientific accuracy. For scientific accuracy it is much better to say "believed to be incurable." And if I ask your Lordships to pass that Amendment it does not mean that the medical profession has the power to say that no case is incurable. Cases like shell shock in the
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War are on a totally different footing from those cases of insanity which result from organic and structural disease. If, for example, the arteries of a man are getting harder and harder there never has been a case in Christendom where they have ever gone back. Those cases are completely incurable by the very nature of things, and there are certain definite structural causes of insanity which in their very nature must be incurable. Therefore it is very important to distinguish between such cases and that large group of functional cases which, if they were put under treatment for five years, would be cured, and most of them a long time before that. But the large majority of patients who have been treated continuously for five years do not get well, and therefore when that period has passed I claim that we should in mercy and justice turn aside from the odd chance of the patient getting well and turn our attention with gentleness and consideration to the small home which is converted into a hell very often by the deranged mind of a partner. A misfortune if you will, but the greater good is to look after the spouse and the children.
One more thing. It has been said, and it was said in to-day's Times by a very distinguished solicitor, Sir Reginald Poole: "Think of what it would mean for an insane person to think of the prospects of divorce, of his feeling that he has been displaced in his home, that his children belong to someone else." The answer to that is perfectly clear. It does not take place. We are very apt to judge those who are mentally deranged in terms of ourselves. In the large majority of cases when persons have been under continuous treatment for five years the acuity of mind has gone, the range of mental vision has contracted, the powers of appreciation have steadily declined, the point of view is narrower, and they feel not as we might think they would feel. They become accustomed to their surroundings, they look only a short way ahead, their life and their thought, with the deterioration of their minds, are entirely different. I have no fear on that point. There would be no substantial injustice done. The whole question turns on the question of five years. I should only be in favour of this paragraph if it were five years, and I beg your Lordships in the interests of the nation and of the

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spouses, and without doing any substantial injustice to the poor patient, to pass this Amendment.
THE MARQUESS OF SALISBURY: Perhaps your Lordships will allow me to intervene, not to repeat what I have already said on Second Reading, but just to say one or two words largely in consequence of the very important speech to which we have just listened. I need not say that I feel the greatest diffidence in entering into a controversy with my noble friend who has just sat down, from whom I have experienced every kind of kindness all through my life. My noble friend has made a very great contribution to the debate, but I think your Lordships will recognise that it was very significant that he has already abandoned in its integrity the word "incurable" altogether. He uses it, but he uses it with great limitation. I do not know whether it was the effect of the Second Reading debate upon his mind, but he is evidently convinced that to speak of incurable insanity world be what he called unscientific, and what in fact is inaccurate. That is very important. And your Lordships will observe that in discussing the question of insanity he spoke of insanity which was incurable in the great majority of cases. That is very significant too, because that is an admission in effect that there is a substantial minority of cases which would turn out not to be incurable. Of course we cannot contest with the noble Lord any matter of medical opinion. I should not dream of doing so, but I take it as he himself has put it before us. Here are cases of insane persons the great majority of whom will not recover, and he proposes therefore that, notwithstanding the fact of the substantial minority, yet this substantial minority should undergo the risk of divorce.
May I say one further word about the degree of insanity? It does not follow that because a man is insane, or even incurably insane, he has not got the most acute feeling. That is a matter which I want very much to impress upon your Lordships. He may be insane upon a particular issue or in a particular part of his mind. I gave the instance of melancholia on the Second Reading, but of course there are many other forms of insanity in which a wan is only insane on a particular matter. That may be incur-
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able—I do not know—and he may be confined in an asylum in consequence, but he may all the time be quite conscious of his domestic relations and of the love of his wife and the passion for his children. All these things may be present to his mind. It does not follow in the least that because he is incurable he is insensitive. On the contrary I expect he is very sensitive indeed, and therefore you have to deal with these cases of people, some of whom, by the noble Lord's own admission, may be recoverable, but even if they are not recoverable you have to deal with them when they are very sensitive indeed. Surely that is a very important consideration.
Sometimes I think we forget when we legislate of how suggestive legislation is. A woman who was attached to her husband and who was confined to an asylum, let us assume incurably insane, might be quite determined to stand by him as the law stands at present, yet if your Lordships alter the law and say to her, "You are entitled to a divorce" then it is suggested to her. And that penetrates all through our legislation. That is why we have to have all that legislation about drink, because unless we have that legislation we should be guilty of not saying that Parliament wished people not to drink too much, and that has immense effect. And so with this question of insanity. If you once suggest to a woman that has a great effect on her. Then all her relations come round her and say: "You married your husband. You are devoted to him still. He is mad. You are surely not going to stick to him. Parliament has suggested it to you. The noble Viscount, Lord Dawson, speaking in the House of Lords, has suggested to you that you are entitled to a divorce. Surely you are not going to stand out? Give way. Agree with us. We want you to free yourself." And the woman might say, "Very well, I suppose I must give way, but I am very fond of him still." I consider that these temptations that you put into people's minds are some of the most important dangers of legislation.
It is most dangerous for us to wander into this domain of misfortune. How many misfortunes there are which prevent marital relations. One occurs to me, it may occur to your Lordships. Supposing after an accident, after marriage, a man becomes impotent. That is a complete denial of marital relations. Is a divorce to follow? There is really no

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limit to where you will advance on these lines. Take the Amendments that are going to be moved immediately after this, dealing with imprisonment for a long term. I do not know what your Lordships will decide on that point, but on the arguments used on this insanity clause there is a great deal to be said for giving a woman divorce if her husband is imprisoned for a long term. Marital intercourse is completely arrested. Once you leave the domain of whether one of the spouses is at fault, and go into the domain of misfortune, there is no limit to the degree you will have to advance. I very much hope your Lordships will ponder well the speech made by the most reverend Primate. He showed that it was by no means proved that authority was all on the side of change. Speaking, as he did, as a Commissioner himself he was able to cite very effectively, if I may say so with great respect, the evidence on the other side. It is by no means true that all the authority is on one side. Your Lordships are asked to make a great decision. It involves a very great principle, and I hope your Lordships will agree to the Amendment which has been moved.
THE LORD BISHOP OF BIRMINGHAM: I trust the Committee will pardon me, if after the speech made by noble Viscount, Lord Dawson of Penn, I venture to speak very briefly. I would like to stress the aspect of heredity in connection with the particular question now before us. In these matters of divorce we normally think of the well-being of one or other of the spouses, but behind their well-being lies the question of the children, their well-being and the future of the race. As the most reverend Primate has truly said, insanity, though it ranks as a misfortune and not as wrongdoing, is a misfortune of practically a unique kind. A man normally does not become insane because of something that he himself has done. I exclude cases like chronic alcoholism or syphilis. He becomes insane because of something in his make-up. He inherits a highly organised nervous structure. The man who is insane is closely akin to the genius. This highly organised structure is part of his inheritance. He hands it on to his children, and if the organisation is such as to be liable to a breakdown leading to that type of incarceration in a mental
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home of which the noble Viscount, Lord Dawson, has spoken, then there is the more likelihood that he will hand on to his children a grievous type of instability which they may show as they grow to manhood.
We have been constantly told of the medical evidence before Lord Gorell's Commission—evidence given before 1912—but I would remind your Lordships that much progress with the study of inheritance has been made since that time. Menders great paper was rediscovered in 1900. The rediscovery was not really taken up by large groups of research students until about the time of the War. Since then, as everyone knows who has made even a cursory study of the literature, the volume of research has been enormous and the results are sometimes disquieting. For instance, take the allied though quite different subject of mental defect. That is adequately provided for, as I think, in the clauses relating to nullity which your Lordships will shortly be asked to pass, but the extent to which mental defect is inherited—not directly, of course, but according to Mendelian laws, so that it may appear in an earlier generation in brothers and sisters, not in direct ancestors—was estimated by one witness before the Brock Committee, the Departmental Committee which inquired into mental defects some few years ago, as some seventy-five per cent. His figures were challenged, and in a subsequent paper he said that probably inheritance existed in at least ninety per cent. of the known cases of mental defect. These inquiries are very difficult, and inquiry into the inheritance of insanity is more difficult than inquiry into inheritance of mental defect; but there is no doubt whatever that a very considerable proportion of the cases of insanity which are known result from a morbid inheritance.
Are you to allow the possibility that a man, carrying such a taint in his makeup that he has been for five years in a mental home, may come back and produce more children? I can conceive nothing more awful than that a woman should be expected to bear children to a man whom she knows to have this taint. You may say she ought to have discovered it before marriage; but nothing is more carefully concealed in all classes of the community than the existence in

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the family of a taint of insanity. That surely is well known to all social workers. It is particularly well known to all doctors in mental homes, for their endeavours to find insanity in the family in the past often fail because frank evidence is not forthcoming. As I look at this question, from the point of view of heredity it seems to me you have drawn rather too stringent precautions and I would make it easier for the sane partner to obtain relief.
LORD ADDINGTON: I have had experience with a mental hospital both in visiting and in the discharging of patients. The progress of medical science for twenty-five years since the Royal Commission has gone on and we look forward to much progress in the years to come. We hope to be able to discharge as cured an increasing number of patients even, many of them, after five years. I am quite aware that a discharge after five years is not common. They do exist and no one is able to say what particular case may not be cured after five, six or even nine or ten years. It is extremely difficult to say whether any case is incurable or whether they are believed to be incurable. In my own opinion, for what it is worth, as you go round the institutions, even by the old patients you are asked most frequently when they can get out and return to the family. It is quite impossible to tell. Taking the five years and this case, the number of cases which will be benefited is comparatively small. In view of these cases a very dangerous principle is shown in this Bill to use this class of misfortune in this way.
LORD ELTISLEY: We have listened to many eloquent speeches this afternoon
and we have taken decisions of very great importance and moment, and I would venture respectfully to make a plea for brevity of speeches because we have a tremendous programme ahead of us this evening. In support of that I will be very brief myself. I will remind the Committee that this matter was very carefully considered by the Royal Commission and also that this matter was debated at great length in another place. It is evidently the view of the other place at any rate that this paragraph should be included in the Bill. I only want to say one other thing because one can speak at great length on this subject, and that is that I do not think competence is in anything approaching the same field as the question of companionship. Those of us who support the inclusion of insanity in this Bill as a cause for divorce do so because we are of the opinion that sanity is on quite a different plane from any other illness. The distinction between insanity and other forms of illness is that, while in the case of physical illnesses, there can be and still is a very real companionship between the parties, in the case of insanity that companionship can no longer exist because the very basis of happy relationship has been destroyed. Much as we appreciate the position of the lunatic we look also at the other side of it and the children whose best interests ought to be served by the legislation which we pass. I hope the Amendment therefore may be resisted.
On Question, Whether the words proposed to be felt out shall stand part of the clause?
Their Lordships divided:—Contents, 95; Not-Contents, 31.

CONTENTS

De La Warr, E. (L. Privy Seal.)

Sandwich, E,

Birmingham, L. Bp.

Strafford, E.

Liverpool, L. Bp.

Wicklow, E.

Ailesbury, M.

Aberconway, L.

Reading, M

Addison, L.

Bertie of Thame, V.

Ailwyn, L.

Ancaster, E.

Chelmsford, V.

Allen of Hurtwood, L.

Bathurst, E.

Cobham, V.

Alness, L.

Beatty, E.

Dawson of Penn, V.

Amulree, L.

Birkenhead, E.

Exmouth, V.

Arnold, L.

Cranbrook, E.

Goschen, V.

Atkin, L.

Drogheda, E.

Greenwood, V.

Biddulph, L.

Effingham, E.

Hambleden, V.

Boston, L.

Howe, E.

Knollys, V.

Brocket, L.

Lucan, E.

Long, V.

Camrose, L.

Macclesfield, E.

Mersey, V.

Carnock, L.

Midleton, E

Plumer, V.

Carrington, L.

Peel, E.

Samuel, V.

Chalmers, L.

Plymouth, E.

Swinton, V.

Cromwell, L.

de Clifford, L.

Lawrence, L.

Rennell, L.

Doverdale, L.

Luke, L.

Rhayader, L.

Dunleath, L.

Mancroft, L.

Ritchie of Dundee, L.

Eltisley, L. [Teller.]

Maugham, L.

Roche, L.

Fairhaven, L.

Mendip, L. (V. Clifden.)

Selsdon, L.

Faringdon, L.

Middleton, L.

Sherborne, L.

Foxford, L. (E. Limerick.)

Milne, L.

Shute, L. (V. Barrington.)

Gage, L. (V. Gage.)

Monkswell, L.

Snell, L.

Gifford, L.

Mount Temple, L.

Strabolgi, L.

Gorell, L. [Teller.]

Moyne, L.

Templemore, L.

Greville, L.

O'Hagan, L.

Teynham, L.

Heneage, L.

Palmer, L.

Trent, L.

Hindlip, L.

Rea, L.

Waleran, L.

Illingworth, L.

Redesdale, L.

Wright, L.

Kilmarnock, L. (E. Erroll.)

Remnant, L.

NOT-CONTENTS

Canterbury, L. Abp.

FitzAlan of Derwent, V.

Clanwilliam, L. (E. Clanwilliam.)

Ullswater, V.

Salisbury, M.

Darcy (de Knayth), L. [Teller.]

St. Albans, L. Bp.

Grey, E.

Winchester, L. Bp.

Daryngton, L.

Iddesleigh, E.

Dickinson, L.

Malmesbury, E.

Elton, L. [Teller]

Onslow, E.

Addington, L.

Holden, L.

Poulett, E.

Arundell of Wardour, L.

Mamhead, L.

Radnor, E.

Berwick, L.

Rankeillour, L.

Selborne, E.

Bingley, L.

Russell of Killowen, L.

Cautley, L.

Saltoun, L.

Brentford, V.

Charnwood, L.

Seaton, L.

On Question, Amendment agreed to.

Resolved in the affirmative and Amendment disagreed to accordingly.
THE LORD CHAIRMAN: A manuscript Amendment has been handed in by the noble Viscount, Lord Dawson of Penn, in line 10, to leave out the word "incurably."
VISCOUNT DAWSON OF PENN: My intention was to move to leave out the word "incurably" and then after "mind" to insert "believed to be incurable," but during the Division some of my legal friends told me that that phraseology probably would not meet my purpose. Therefore, with your Lordships' permission, I will not move that Amendment, but retain a discretion to revive it on Report.
THE LORD CHAIRMAN: There was another manuscript Amendment, and that is not now moved.
VISCOUNT DAWSON OF PENN VISCOUNT DAWSON OF PENN had an Amendment on the Paper to add to paragraph (d) "or has during that period been subject to recurrent fits of insanity." The noble Viscount said: I propose to add, at the end of subsection (d) "or has during that period been subject to recurrent attacks of insanity." I agree that one of the principles that we ought to maintain is a careful balance between our sense of justice and our sense of mercy to both
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the patient and the spouse. At the same time, although knowing how tragic these cases of insanity are, I have, with the best intention in the world, failed I think to satisfy my own criteria and my own standard that we must hold the balance justly between the patient and the spouse. In cases of cyclical insanity, dangerous as these people are to the happiness of their homes, I am afraid it would be true that when the patient came back from a period of insanity and re-entered the home he would know, and would suffer as a result of knowing, that he might be divorced, whereas in the case which I have been discussing on the clause itself, at the end of five years he would in the majority of cases not know. Therefore, applying my own criteria, I am bound to confess I have failed and with your Lordships' permission I would not move the Amendment.
[The sitting was suspended at twenty minutes before eight o'clock and resumed at nine o'clock.]
VISCOUNT BERTIE OF THAME VISCOUNT BERTIE OF THAME moved, after paragraph (d) to insert:
"has since the date of the marriage and within the five years immediately preceding the presentation of the petition for divorce, been convicted at least three times of a crime, and sentenced on any such conviction to imprisonment for a period of not less than six months."

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The noble Viscount said: I had hoped to see my noble and learned friend Lord Alness with a view to his moving these Amendments, because they appear in the Scottish Bill, and I hope that, as I have not seen him, he will not think I have been poaching on his preserves. His Bill is more courageously entitled the "Scottish Divorce Bill," whereas this Bill is called the "Marriage Bill," although it has little to do with marriage except its dissolution. The Scottish Bill having passed through this House without even one Amendment being moved, I have put down a similar clause which is self-explanatory. It is a dreadful thing to think that a spouse should be tied to an habitual criminal. It is only serious crime, as you will see from the definition Amendment I have down at the end of the clause:
"the expression 'crime' means an offence involving dishonesty or personal violence."
I hope I have been short enough to satisfy my noble friend Lord Eltisley, and with some confidence I throw it to him as a sop. I beg to move.
Amendment moved—
Page 2, line 13, at end insert the said words.—(Viscount Berlie of Thame.)
LORD ALNESS: With diffidence, and, I hope, with brevity, I desire in a few sentences to support the Amendment moved by the noble Viscount. My sole justification for intervening in this matter is, as he has indicated, that I had the honour of sponsoring a Bill in your Lordships' House about three months ago—a Divorce Bill applying only to Scotland—which contained this very provision. I am aware that I was severely castigated by the noble Marquess, Lord Salisbury, on the Second Reading of this Bill. I was unable, unfortunately, to be present, but I read the report of the debate very carefully.
THE MARQUESS OF SALISBURY: I must apologise to the noble and learned Lord for having spoken of him in his absence, but it was not my fault!
LORD ALNESS: It was entirely my misfortune or, it may be, my fault, but I react what the noble Marquess said with very great respect and very great interest, and I am afraid I am still unrepentant in my profound conviction that serious crime ought to be a ground of divorce. Of course the crime must be serious—serious in the
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sense in which it is defined in the Amendment: that is to say, that a man shall have been convicted on three separate occasions of an offence which involves either personal violence or dishonesty, and have been sentenced on each of these occasions to a term of imprisonment of not less than six months. I venture to think that a man who has been convicted three times of such crimes as these may be guilty of a more outrageous violation of the marriage bond than a man who has committed adultery. On that question, no doubt, opinions may vary. But I am bound to say that I cannot imagine anything more tragic, anything more revolting, than that a woman should have to receive back, not perhaps into a house with three rooms, which has been mentioned this afternoon, but into a one-room house, a convicted felon—a jailbird. Nor can I imagine anything more distressing or degrading to the children of the marriage than that they should be compelled to associate with a convicted felon.
This is not a new proposal. It has been the law in fifteen civilised countries of the world for quite a considerable period, including three or four Catholic countries. It therefore comes before your Lordships, not only with a very recent precedent in your Lordships' House, but also documented by the experience of these foreign countries. I take courage in supporting this Amendment from an expression which fell from the noble Marquess this afternoon when he said, if I understood him aright, that, if we passed the insanity clause, that would give considerable support to those who proposed that crime also should be a ground for divorce. Well, we have passed the insanity clause, and I venture to invoke any help forthcoming from that fact in support of this Amendment. I desire to be brief, as we have been enjoined to be, and, though I feel very strongly on this subject, I will not trouble your Lordships with any further observations. I venture, however, to hope that the precedent of the Scottish Bill and of these various civilised countries to which I have referred may be followed on this occasion.
LORD ATKIN: I hope very much this Amendment will not be adopted. If it is the law in Scotland, I think we may offer our condolence to Scotland. It seems to be most unfortunate as it is worded.

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It means that within the five years there has been a conviction at least three times of a crime and a sentence of not less than six months, and the limitation, is very remarkable. It is confined to offences of violence and dishonesty. May I suggest what it leaves our? Poisoning, malicious damage, intercourse with a girl under sixteen, and indecent assault on children, which are not crimes of violence but are crimes because you cannot get consent. It does not exclude the case where the woman herself was a party to the crime, which oftens happens in the case of an habitual criminal. There are no safeguards, and I think the House would be far safer at this stage of the Bill in leaving the grounds of divorce where they are.
LORD GORELL: I do not know whether it is necessary after what has fallen from the noble and learned Lord for supporters of the Bill to say very much. I hope in this instance we shall not follow the example of Scotland. If we did I think we should deserve the criticism of Lord Salisbury, that we were putting our foot on a slippery slope. I trust we shall stand firm on the causes in the Bill as presented to your Lordships, and not increase them by the addition of a clause which is clearly one which might at any time be variable, and hardly seems to be deserving of reasonable consideration.
VISCOUNT BERTIE OF THAME: The points raised by Lord Atkin, especially if he gave me his help, could be dealt with on Report. I should like this provision to be in the Bill, because it is often said that it is a bad thing to have different laws on each side of the Border.
On Question, Amendment negatived.
LORD LAWRENCE LORD LAWRENCE moved to insert after paragraph (d):
"(e) is undergoing penal servitude in pursuance either of a sentence thereto or of commutation of sentence of death;
(f) has, since the date of the marriage and within the five years immediately preceding the raising of the action for divorce, been convicted at least three times of a crime, and sentenced on any such conviction to imprisonment for a period of not less than six months; or "
The noble Lord said: This provision is in the Scottish Bill, and I think it is very hard on a man or woman if the husband or wife is sentenced to death or
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to penal servitude for life. It would be just as if everything were dead, and I should very much like this Amendment to be inserted in the Bill.
Amendment moved—
Page 2, line 13, at end, insert the said new paragraphs.—(Lord Lawrence.)
VISCOUNT BERTIE OF THAME: I should like to support this Amendment, and I feel sure that in doing so your Lordships would like me to congratulate my noble friend on his maiden speech, although he has been in this House for twenty-five years. I hope now that he has broken the ice we shall often hear him again. Owing perhaps to some fortuitous circumstance, such as sentimentality, a man or a woman may be reprieved when he or she ought really to have been hanged, and I cannot see why that reprieve should make any difference.
VISCOUNT CECIL OF CHELWOOD: Surely this Amendment goes a long way further than that. It says anybody who is undergoing a sentence of penal servitude.
LORD LAWRENCE: That was moved by my noble friend Lord Bertie.
VISCOUNT CECIL OF CHELWOOD: I am sorry if I have misread it. But the Amendment seems quite clear—"is undergoing penal servitude."
LORD LAWRENCE: It is the second paragraph.
A NOBLE LORD: It is over the page.
VISCOUNT CECIL OF CHELWOOD: We have already defeated the Amendment dealing with the same subject as paragraph (f).
LORD GORELL: I am not quite clear what Amendment we are discussing. We seem to be dealing with penal servitude, as to which there is no period mentioned at all, and we have already dealt with the subject of paragraph (f). I earnestly trust that your Lordships, in pursuance of the same argument that applied to the Amendment moved by Lord Bertie, will not accept this Amendment.
On Question, Amendment negatived.
VISCOUNT DAWSON OF PENN VISCOUNT DAWSON OF PENN moved, after paragraph (d), to insert:
"(e) has since the celebration of the marriage been guilty of the practice of homo-sexuality."

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The noble Viscount said: I think some explanation is due from me for moving this addition. The word "sodomy" has in the course of time become inadequate and unsuitable. The word "sodomy" involves the question of a rather vulgar crime which is only open to the male, but the progress of knowledge has altered our conception, and we therefore have adopted the word "homo-sexuality." Homosexuality refers to both sexes, not to one sex. That is one justification, as I hold, for the addition I suggest. There is another reason, and that is that we now look upon homo-sexuality as a pathological condition. I am not at all sure that in the future it may not Le regarded as an insufficiency disease, and although it is true that the law must take cognisance of homosexuality and punish it in order to act as a preventive to potential offenders, the more reasonable view is gradually being adopted that it at any rate has one foot in the realm of disease and it is not wholly in the realm of crime.
I am not disputing the fact that the law must take serious cognisance of this offence, but I do urge that this is an occasion for recognising with advancing knowledge the increasing tendency to regard it as a pathological process which concerns those who have to deal with disease, and I almost enter the region of prophecy when I say it may be regarded as an insufficiency disease in the future. But for the purposes of this Bill I think it would be entirely wrong to use any word which confines homo-sexuality to one sex. It is really time that there should be equality of treatment between men and women. For that reason alone the insertion of this special paragraph is justified. We all know that this particular offence is quite compatible with excellent qualities of mind and character, and it is most important for us to realise that it is scientifically impossible for one who is attracted to the same sex to be capable of any sort of attraction to the opposite sex. That is not always so. Perhaps I ought to put it in this way, that in the case of individuals who have a leaning towards or attraction and affection for the same sex, whether they have a parallel affection for the other sex or not, we cannot possibly maintain that they are suitable people for marriage. In other words, such people would frustrate the purpose for which marriage exists,
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and it would be a grave injustice to recognise any marriage in which homosexuality turned out to be existent in either one of the parties, whether it be the male or the female.
A further reason for this addition is this. It is notorious to those who know anything about this class that homosexuality in all decent people hides its head. It is almost impossible for the spouse to have the tragic misfortune of finding out. They cannot find out very often before marriage that the natural attraction of sex is absent and that unfortunately the spouse is homo-sexual. When that is discovered, it ought to be, in my judgment and I trust in the judgment of your Lordships, a ground for divorce. I should have moved at a later stage, to delete the word "sodomy," but some noble and learned friends thought it would not do to delete a word which has been the sole means of expression of this unfortunate offence for centuries. Therefore I have not moved, at a later stage, to delete the word "sodomy" owing to that advice. But, at the same time, there is every reason in favour of putting in this paragraph by itself, if it is only for one purpose, and that is to recognise that it is an offence, or a misfortune or a disease, whichever way you like to look at it, equally in a woman as it is in a man. It is a curious thing that whereas a man at the present time can be open to criminal prosecution, a woman can not, but homo-sexual women can break up a home, as I have had sad experience of, just as easily as homo-sexual men.
Amendment moved—
Page 2, line 13, at end, insert the said new paragraph.—(Viscount Dawson of Penn.)
THE LORD ARCHBISHOP OF CANTERBURY: I would like to ask my noble friend a question. The word he uses is "practice." That seems to me extremely vague. Does he mean some particular act, proved, of this particular tendency, or does he mean a continuing habit? It seems to me the word "practice" is most dangerously vague. Also, I should like to ask him whether it is not the case in his experience, as it certainly is in mine, that even these unfortunate tendencies can be cured, and whether this is not a case of a disease, if it can be called a disease, which is incapable of cure?
VISCOUNT DAWSON OF PENN: I am grateful to the most reverend Primate for raising this question. I put in the word "practice" for this reason. It may occur to individuals that they will be inveigled into a single act of homosexuality, partly by curiosity, partly because they may be potential homosexuals and therefore open to the influence of an actual homo-sexual whom they happen to meet. There are instances where they will be inveigled partly by curiosity and partly by a physiological or pathological leaning, and then, having had that experience, they pull themselves together. Very often they come into contact with a doctor or friend. They are people who are perfectly capable, as I have knowledge, of being good spouses, and I put in the word "practice" for that reason. I meant the word "practice" to imply habit, a repetition and not a single instance. I had another reason at the back of my mind. Where there has been a single act of homosexuality on the part of only a potential homo-sexual, where, I may say, the female and male composites of the nature are a little too nearly balanced—because this is a scientific question—they are peculiarly open to blackmail. I am sorry I have not had the opportunity of fully consulting my legal friends in this House on account of pressure of other work, but I want to make clear to the Committee why I put in the words "practice of homo-sexuality." What I mean is a continuing tendency and not an isolated lapse.
Now there is the question of cure. I hope I am not going too far with the House, but as knowledge up to date sees this matter, it would be almost true to say that there are very few people who are 100 per cent. male or 100 per cent. female. The people who are males are predominantly males and those who are females are predominantly females, but there is often an admixture. I am talking anatomically. You get people who are near the borderland, and whether they go right or wrong depends on circumstances in life which none of us can control. For practical purposes speaking for myself alone, and this is a difficult question, I divide the homo-sexuals into those who are potential and those who are actual. Some of the offenders I wish particularly to guard against are those who are potential, because it is a fact that if
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you can only get a right influence to bear morally and physiologically, you can guide them into the natural physiological route. I have in my mind while I am speaking, people who are happily married at this moment who have had the necessary influence to tilt them, both physiologically and morally, if you like, into the right physiological path. That is my explanation to my most reverend friend the Primate as to why I use the word "practice." It involves the question not of an isolated wandering or lapse from what I might call virtue, but a repeated practice, and if any of my noble and legal friends can help me with a proper term I shall only be too pleased to adopt it.
As to the question of a cure we are only on the brink of this question. There is no more fascinating scientific study at the present moment than the development of these imponderable juices. For those who have a scientific interest it is a study of extraordinary fascination and there is no doubt that a realm is being opened up which will enable more help to be brought to these people provided they can be caught in the early stages. Whether they could be in later life I very much doubt. I apologise to the House for having continued for so long in a matter which is almost foreign to this House but I must seek protection behind me from my noble friend for having addressed those remarks.
LORD ELTISLEY: I know the noble Viscount who has put down this Amendment will forgive me if I say that I do not fully understand what this Amendment means or what its ramifications are, or how it is to be carried out in practice by the Courts of Law if it is passed. Frankly, to me, it is not at all clear. What is, however, clear is that the purpose of this Amendment is to put both sexes on the same footing with regard to homosexuality as a ground for divorce. I would venture to resist it on behalf of my noble friends who support me because this recommendation is not one made by the Royal Commission, and I think it is dangerous to endeavour to introduce a new ground of divorce of this character into the Bill.
VISCOUNT DAWSON OF PENN: I believe in Committee I am allowed to speak a second time. I do beg of your Lordships not to decide by the knowledge of years ago. If you are going to make

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a change on a matter like this surely you must take cognisance of the progress in knowledge that has taken place in the last twenty-five years. If there is one thing that has been established in our legislation of recent years it is equality of the sexes. If you are going to have equality of the sexes it ought to cut both ways, and it is as much a misfortune with the woman as it is with the man. You ought to protect the man against the Lesbian just as you protect a woman against a male homo-sexualist.
LORD ATKIN: This is a physical and a delicate subject, and there are not many people who would profess to know much about it. No one really would have at the present moment, as far as I know, a profound knowledge of the subject except a medical man who has had to study it with the knowledge and skill of my noble friend Lord Dawson; but, as a judge, one has come across this subject, and I had the privilege for seven years of being President of the Medico-Legal Society in which this kind of subject was discussed. I should not like it to be thought that this House rejected the more modern application of science as put forward by the noble Viscount, Lord Dawson, whom everybody trusts in the matter, without some reasoned objection to it. To begin with, I should think that it is not correct to say that these cases, though Lord Dawson did not say so, are the result of something in the nature of disease. It is quite certain in one's experience, I think, that they are not. They are the result of wicked impulses which, like other wicked impulses, are capable of being controlled. Like other impulses of the kind, they can be checked by advice and by resolution, and they do not appear to me to be of the nature of a permanent infirmity that is always likely to affect the married life.
But I think the real answer probably, at the present moment, is that this is a subject which requires very careful scientific examination. If some time or other a Select Committee or a Departmental Committee considered this subject in all its branches, the result might be a very valuable Report upon which the criminal law and the civil law might very well be amended. At the present moment, surely it would be a mistake for your Lordships to send this to another place with the discussion that would be likely to arise about it. Later on perhaps it
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may have to be discussed, but I venture to suggest that at present the right thing is not to accept this new ground for divorce, put into the Bill for the first time at this stage.
On Question, Amendment negatived.
VISCOUNT DAWSON OF PENN VISCOUNT DAWSON OF PENN moved, after paragraph (d), to insert:
"(e) is an habitual drunkard; or
(f) is an inveterate drug addict:
For the purposes of paragraphs (e) and (f) a signed certificate will -be required to be given in each case by two medical men at least one of whom belongs to a panel of names approved by the Home Secretary on the nomination of the Royal College of Physicians of London."
The noble Viscount said: I have been asked by my noble friend Viscount Eli-bank to move this Amendment in a slightly different form from that in which it is printed on the Amendment Paper. I do so on this ground. For those who claim that there should be no divorce at all it is perfectly logical that habitual drunkards or inveterate drug addicts should be excluded, but those who hold that marriage should be dissolved whenever such circumstances arise as frustrate the fundamental purposes of marriage cannot, to my mind, logically exclude habitual drunkards or inveterate drug addicts. There is nothing, whether from the point of view of companionship, or from the point of view of sex, or of the welfare of the children, that breaks up a home more than habitual drunkenness, whether on the part of a woman or on the part of a man.
It is easy for your Lordships to visualise, as it is very easy for me to do with the work of my life, the dreadful conditions in small homes which can result from the permanent drunkard who, night after night, rolls drunk into the house, and who causes to reign in that house a state of fear and unrest and distress. It means the break up of the home in every sense, economic, moral and everything else. Such an habitual drunkard—I stress the word "habitual"—gives legitimate cause for divorce in the view of those who believe, not that marriage is under all circumstances solemn—that I understand, that I respect, that is logical—but that marriage should be dissolved when the fundamental purposes for which it exists are frustrated so that in a spiritual sense that marriage exists no more. If we are going to do it for other things it seems to me that we are logically

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compelled, if we can, to deal with habitual drunkards. That is equally true of that dreadful thing the inveterate drug addict. Homes are broken up by these people. They are perfectly helpless and owing to the present state of the law we have no power to cure them. It is one of the curious anomalies of our law that unless we can certify them insane we cannot cure them and we cannot treat them. If they go insane and are certified, then within a few weeks their addiction is sufficiently relieved for them to demand their release from certificates. Out they go, back to their addiction they go. To chain a man or a woman for all time to a person who is a drunkard, habitual and incurable, and equally to a drug addict, especially to one who is addicted to cocaine, seems to me something which the community has not the right to ask of any citizen. It has no right to compel a citizen to go on living with such a person. In some instances a person will, out of sheer goodness of heart, but it should be a voluntary undertaking and not enforced by law.
Those briefly are my contentions for this Amendment. To continue, if I may: you must surround this provision with proper precautions, and the essence of proper precaution is that in order to decide whether a person is an habitual drunkard or an inveterate drug addict you must have the certificates of two doctors, one of whom must be chosen from an approved list of men with special knowledge and experience. My profession is in these matters extremely conservative. It takes a very strong case for any of us to say that a person is an habitual drunkard or an inveterate drug addict. Considering the whole attitude of mind of British medicine there need be no fear that they will not err on the side of caution. With that precaution, except for those people who wish that marriage should always be indissoluble, a view which I understand, it seems to me logical and right that these people should be relieved of this chain about their necks. I beg to move.
Amendment moved—
Page 2, line 13, at the end insert the said words.—(Viscount Dawson of Penn.)
VISCOUNT BERTIE OF THAME VISCOUNT BERTIE OF THAME moved, as an Amendment to Viscount Dawson's Amendment, to add:
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"The expressions 'habitual drunkard' and 'inveterate drug addict' mean a person who by reason of habitual drinking to excess of alcoholic liquor or of addiction to drugs, as the case may be, is (a) at times dangerous to himself or to others, or a cause of reasonable apprehension of such danger, or (b) incapable of managing his own affairs.
The expression 'drugs' means drugs to which Part III of the Dangerous Drugs Act, 1920, applies."
The noble Viscount said: This is merely a definition Amendment which I have poached from the Bill of my noble friend Lord Alness. I beg to move.
Amendment to the proposed Amendment moved—
At the end insert the said words.—(Viscount Bertie of Thame.)
VISCOUNT MERSEY: I should hesitate very much to disagree with anything my noble friend Lord Dawson said, and I am not at all certain that I am not in sympathy with the point that he put forward. But I believe I am right in saying that this question was very fully discussed in another place, and that the other place came to the decision that it was not desirable. I only wonder whether, from the point of view of those who desire that this Bill should pass into law, it is advisable to send back to the House of Commons an Amendment which they have themselves already rejected in principle.
VISCOUNT BERTIE of THAME: I must protest at what the noble Viscount, Lord Mersey, said. We are not ruled by the other place.
SEVERAL NOBLE LORDS: Hear, hear.
VISCOUNT MERSEY: I should not suggest it for the world. I asked whether it was wise that those who wish that this Bill should pass into law should ask the other place to stultify themselves at once.
VISCOUNT CECIL OF CHELWOOD: I hope the Committee will not adopt this Amendment. If you compare it with the Amendment dealing with insanity, you will see how very much more careful the promoters of the Bill have been in dealing with that matter than is proposed in dealing with this. There you say that the insanity must be believed to be incurable, and you require that the person shall have been under treatment for five years. No such provisions are suggested here. There is no definition except that suggested by the noble Viscount, Lord Bertie, of what is an habitual drunkard, and still

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less what is an inveterate drug addict. I should myself have the greatest difficulty in defining "inveterate." I do not know whether my legal friends would be able to do so. Lord Bertie of Thame defines them as "at times dangerous to themselves"—no doubt if a man is rolling drunk he is dangerous to himself—"a cause of reasonable apprehension of such danger"—to that the same observation applies—and also "incapable of managing his own affairs." There are many people who have been in a sense habitual drunkards. I believe a very learned Lord Chancellor was drunk every day—at any rate I have been told so—but he was quite capable of managing his affairs when he was not drunk, and he would not be an habitual drunkard. I think the whole thing is much too vague, and I do not think you can define it.
THE EARL OF KINNOULL: I am thinking more of the working class wife who listens to the faltering steps of her husband coining in, for she may get a crack with an iron bar or a slosh on the jaw when he comes in. That may happen every night, and it often happens that the police are called in. One frequently reads of such cases in fie papers, and I think it should form a cause for divorce. I hope your Lordships will accept the Amendment.
LORD ELTISLEY: I hope the Amendment will not be pressed. This proposal was rejected, as has already been mentioned by Lord Mersey, in another place, and I do not think it would be to the advantage of the Bill that we should put these words in. I would also like to point out that drunkenness is very often accompanied by cruelty and any one who can prove that he or she is subject to habitual cruelty will be entitled to a decree. If the drunkenness is continual, even if the man is not actually cruel he will be guilty in law of constructive desertion, and in such case therefore the injured spouse will be able to obtain a measure of relief, provided the cruelty is continuous for three years. I hope your Lordships will not accept these Amendments.
On Question, Amendment to the proposed Amendment negatived.
On Question, original Amendment negatived.
Clause 2, as amended, agreed to.
Clause 3 agreed to.
Clause 4:
Duty of court on presentation of petition for divorce.
4. The following section shall be substituted for Section one hundred and seventy-eight of the principal Act:—
"178.—(1) On a petition for divorce it shall be the duty of the Court to inquire, so far as it reasonably can, into the facts alleged and whether there has been any connivance or condonation on the part of the petitioner and whether any collusion exists between the parties and also to inquire into any countercharge which is made against the petitioner.
(2) If the Court is satisfied on the evidence that—

(i) the case for the petition has been proved; and

(ii) where the ground of the petition is adultery, the petitioner has not in any manner been accessory to, or connived at, or condoned the adultery, or where the ground of the petition is cruelty the petitioner has not in any manner condoned the cruelty; and

(iii)the petition is not presented or prosecuted in collusion with the respondents or either of the respondents;

the Court shall pronounce a decree of divorce, but if the Court is not satisfied with respect to any of the aforesaid matters it shall dismiss the petition:
Provided that the Court shall not be bound to pronounce a decree of divorce and may dismiss the petition if it finds that the petitioner has during the marriage been guilty of adultery or if, in the opinion of the Court, the petitioner has been guilty—

(a) of unreasonable delay in presenting or prosecuting the petition; or

(b) of cruelty towards the other party to the marriage; or

(c) of having without reasonable excuse deserted, or having without reasonable excuse wilfully separated himself or herself from the other party; or

(d) where the ground of the petition is adultery or unsoundness of mind, of such wilful neglect or misconduct as has conduced to the adultery or unsoundness of mind."

THE MARQUESS OF SALISBURY THE MARQUESS OF SALISBURY moved to add to the substituted subsection (1):
"and for those purposes the Court shall cause to be summoned in addition to the witnesses called by the parties to the proceedings, any witnesses, including the husband or wife as the case may be, whose evidence the Court may think desirable."
The noble Marquess said: I hope I shall be fortunate enough to carry with me the consent of the promoters of the Bill in this Amendment, which I think important, because its object is really to strengthen the policy of which the clause is an example. Under the Bill as it stands an obligation is thrown upon the Court to inquire, so far as it reasonably

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can, into the facts alleged. The question is how far will the Court be equipped to make this inquiry? Perhaps it would not have been so important to urge this matter upon your Lordships' consideration if it was not that so distinguished a lawyer as the noble and learned Lord, Lord Atkin, and I think to some extent the noble and learned Lord, Lord Wright, were very apprehensive of the operation of this clause. They seemed to shrink from its provisions, and indeed they seemed almost to suggest that it was not very workable as the clause stands.
LORD ATKIN: Not the first subsection of Clause 4.
THE MARQUESS OF SALISBURY: No, it was not quite workable. That alarmed me very much, because one of the main reasons why so large a majority supported this Bill, both here and in another place, was because of this provision against collusion, because it was felt by your Lordships and by every other observer of the working of the marriage law that this question of collusion has become a formidable scandal. I need not labour that point, because it is common ground. Everybody agrees that it is so. And in the Bill as it reaches your Lordships—I am not quite sure how far it was in the original Bill—this provision is made in order to prevent collusion.
I have tried to watch the working of the divorce law in practice lately, and I am going to say a thing which I want to express in the most respectful language. I think the Judges, or many of the Judges, have misunderstood the intention of Parliament. That may be the fault of Parliament. I am quite sure that many of the judges would say it was, although I would not dare to say so myself. But at any rate they misunderstood the intentions of Parliament, and they have allowed to grow up, especially in the provinces, this practice of what are called the hotel bill cases. I wonder now, having regard to the hesitation of the noble and learned Lord about the effectiveness of this clause, whether, if we pass it as it stands, we shall be able to convey to the Judges that Parliament desires that these provisions against collusion should be effective, because, as the clause goes on, the Court has to be satisfied on the evidence.
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Well now, what evidence? That is the point. It all turns on that. Unless the evidence is adequate for the purpose, then the clause may be inoperative. I have tried—I hope your Lordships will forgive my presumption in doing so—to indicate the direction in which I think—and others of your Lordships have conveyed to me their support of the view—that evidence may be made effective. I suggest that the obvious way is that the respondent should be made an available witness. Your Lordships will recall the kind of case we are dealing with. A married man engages a room in an hotel and, apparently out of the blue, a woman is found in that room whom he has never heard of before, never seen, knows nothing about, on a particular night. There is no evidence as to whether an actual act of adultery takes place. That evidence appears to be sufficient. If that is sworn to by some observer in the hotel—a waiter or a chambermaid—that is sufficient.
Many divorce cases appear to have been decided upon that issue alone. Here is a case in which a man has passed a night in a room with a woman—very suspicious conduct on the face of it, but that is a spontaneous thing; it suddenly occurred that he would like to pass the night in a room with a perfectly unknown woman. I suggest that the obvious way, to a layman, of finding out the truth is to ask him how he came into this curious position, where it is obvious that there is something a little bit queer. Why should you not ask him how it comes about that he found himself in this room with this woman of whom he had no knowledge at all—I need not go into further particulars—and thereupon a divorce is claimed? It might be a perfectly genuine thing; that that is what he likes to do; it is the sort of thing that happens to one of those lunatics, perhaps, whom your Lordships were discussing in the earlier part of the Bill. Surely it is very curious and surely the obvious way is to ask the respondent? I am told that it would be contrary to the practice of British law to ask him whether he committed adultery, though I cannot understand why. It seems to be a very obvious question to put to him. But supposing that direct question is ruled out, he might be asked whether he can explain to the Court how the woman came to be there, whether there was a certain

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agency he communicated with who had provided the woman, and he might even be asked whether he had any understanding with his wife on the subject. These things surely might be asked.
Once the evidence was given, the wonderful skill of the profession of which noble and learned Lords are great ornaments would at once put the witness through the business of cross-examination and probably find out the truth in a very short time. At any rate they would find out that the thing was very suspicious indeed, and if they found that out the clause would operate. The moment suspicion was established, then, unless the suspicion could be met, the Court would withhold the decree of divorce. Your Lordships will see that my whole intention has been merely to make the clause effective in the face of the sort of doubts which noble and learned Lords have thrown upon its operation and in face of the way in which, up and down the country, these divorce suits have apparently been rushed through in the provinces, and it toes seem that the time has come when Parliament should make the intention of Parliament perfectly clear.
Amendment moved—
Page 3, line 5, at end insert the said words.—(The Marquess of Salisbury.)
LORD ROCHE: I hope I may be able to reassure the noble Marquess on behalf of my noble friend who is in charge of the Bill. He has exactly the same objects as the noble Marquess—namely, to prevent and stop the few but gross cases of collusion which now take place, but those responsible for the Bill think that they have already secured that object if Clause 4 stands part of the Bill. If it stands part of the Bill substantially unaltered they think they will have secured the means of attaining that end, and I will tell the noble Marquess why. This Amendment proposes a course which is unusual and impossible in the British Courts. Judges at the Courts have neither the machinery nor the power to call witnesses, but they can require the parties to call witnesses, and if the parties do not call the witnesses necessary to satisfy the Court they can dismiss the case or petition as the case may be. Those responsible for this Bill think that is just what they are able to secure by Clause 4 as it stands. May I say this, in addition: If unfortunately, contrary to the desires
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and hopes of my noble friends responsible for the Bill in this House, that was not the case in regard to Clause 4, and it was substantially altered, they would be pleased to consider after consultation with the noble Marquess whether it was necessary for anything to be done in this sense, if in a different form, to secure the object he desires and they desire.
THE MARQUESS OF SALISBURY: I am very much obliged for the sympathetic way in which the noble and learned Lord has met this Amendment. I hesitate a little, notwithstanding his great position, to accept his assurance that the clause will work satisfactorily as it stands. Your Lordships must have been aware that when I put it to the noble and learned Lord opposite, another great luminary in this House, he was not entirely satisfied.
LORD ROCHE: My noble and learned friend Lord Atkin wants to alter the clause substantially and he was not saying the clause as it stood would not do that.
THE MARQUESS OF SALISBURY: The noble and learned Lord has put it himself. I understood him to say that on the first part of the clause as it stood, he did not think he was satisfied as to its working.
LORD ATKIN: I said I was satisfied with subsection (1) but not with the whole clause.
THE MARQUESS OF SALISBURY: That means that the noble and learned Lord thinks that without alteration further on it would not work later on. Is that so?
LORD ATKIN: Yes.
THE MARQUESS OF SALISBURY: What I understand the noble Lord, Lord Roche, to say is that he thinks the clause as it stands will work properly. Upon that I can only say that I am surprised that he is not willing to make assurance doubly sure. I do not see why there is this objection to calling these witnesses. It may be that the Judge can tell the parties to do so, but does he assure me—because I must accept what he says—that he thinks, as the clause stands, it will work?
LORD ROCHE: If the whole clause stands and the Amendments which will be moved, amongst others, by Lord

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Atkin, are not agreed to, I believe the clause will work reasonably, and it will be perfectly satisfactory, but if it was substantially altered, then some Amendment in substance, though not in form, such as is suggested by the noble Marquess might be necessary.
THE MARQUESS OF SALISBURY: I need not say that I do not care a straw about form. It is highly probable that my form is not the perfect form. I gather that other noble and learned Lords share the opinion of the noble Lord behind me (Lord Roche), and in the face of that I shall not press the Amendment at this stage, but I shall reserve to myself the right to submit it to your Lordships on a future stage if it should appear, especially after conference with my noble and learned friend, that the clause as it stands is not sufficiently strong.
Amendment, by leave, withdrawn.
LORD ATKIN LORD ATKIN moved to leave out that part of subsection (2) which precedes the proviso and insert:
"If on the evidence the Court is not satisfied that the case for the petition has been proved or where the ground of the petition is adultery finds that the petitioner has during the marriage been accessory to or has connived at or condoned the adultery complained of or where the ground of the petition is cruelty the petitioner has during the marriage condoned the cruelty complained of, or finds that the petition is presented or prosecuted in collusion with any respondent, the Court shall dismiss the petition.
(3) If the Court is satisfied that the case for the petition has been proved and does not find any of the findings mentioned in the last subsection the Court shall pronounce a decree of divorce."
The noble and learned Lord said: I notice what my noble and learned friend Lord Roche said, and the noble Marquess thought he was sympathetic towards me. He really did not mean to be sympathetic towards me; he meant to be unsympathetic towards me, and he was having a shot in advance at the Amendment which I am now proposing. I do object to the second part of the clause very strongly. I am quite prepared to accept the Amendment which has been made in subsection (1). Your Lordships know that that is a repetition, in part, of the previous existing section, Section 178, which, as the law stands at the present moment, says:
"It shall be the duty of the Court to satisfy itself so far as it reasonably can—"
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and the promoters of the Bill have put in "to inquire." That is the kind of duty that I think the noble Marquess meant to impose upon them, and I think that is right. The question is how they are to carry it out.
The proposal of this Amendment now is that, with or without evidence, and whether they have inquired, or whether they have not inquired, they have only to be suspicious about it, and it is the petitioner who has to prove that he or she has not been guilty of collusion, and the petitioner who has to prove he or she has not been guilty of connivance. I venture to say that is a complete reversal of the stream of judicial principle. It is not for a person to prove himself innocent of what is a very serious social and legal offence, and the law at the present moment, I venture to think, is entirely satisfactory. My Amendment is merely an Amendment to replace the existing law. It has to be altered slightly because there are now new grounds for divorce—namely, cruelty and desertion—but I have, in my Amendment, followed the words of the present section, which provides that if on the evidence the Court is not satisfied that the case for the petition has been proved, or comes to the conclusion that on the evidence the petitioner has connived at or condoned the adultery, or, later on, finds that the petition is presented in collusion with any respondent, the Court shall dismiss the petition.
With great respect, that is right. The Courts have not no business to act on suspicion. The duty of a Judge is to decide on evidence, and the present law is, I venture to think, a very proper law. It is not the Judge who has to call the evidence, but he has an official specially provided under the Act, whose duties under the Act are most carefully defined. That is the King's Proctor, who is, as we all know, a Solicitor to the Treasury. In the case of any petition for divorce, I would like to point out that this section is unaltered, so that all these powers are existing at the same time as this new section is in force:
"(1) The Court may if it thinks fit direct all necessary papers in the matter to be sent to His Majesty's Proctor, who shall…instruct counsel to argue before the Court in question…
"(2) Any person may…give information to His Majesty's Proctor of any matter material…and His Majesty's Proctor may thereupon take such steps as the Attorney-General considers necessary or expedient."

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That is to say, he has the great advantage of acting and consulting with the principal Law Officer of the Crown.
"(3) If in consequence of any such information or otherwise His Majesty's Proctor suspects that any parties to the petition are or have been acting in collusion…he may, under the direction of the Attorney-General,… intervene and retain counsel and subpoena witnesses to prove the alleged collusion."
That is the practice at the present moment, and that practice is in accordance with form and in accordance with principle.
I venture to think that there are a great many people, possibly in this House and certainly outside this House, who have a very vague idea of what collusion means, and I am quite certain the noble Marquess, though I have no doubt he knows what collusion means, is very unfamiliar—and properly unfamiliar—with the practice of the Divorce Courts in respect of evidence of this kind. I have never heard of a case where the lady who appears in bed with the respondent in the morning, and is seen by the chambermaid in bed with him, has been stated by the respondent to be a woman who is unknown to him. That is not the fact at all. The fact is no doubt that from time to time a man will commit adultery, I am sorry to say, with a woman with whom very likely he has had no relations before, but that does not mean that he does not know who she is when he takes her to the hotel. What does happen is that he will not give her name, and one of the difficulties of the Court has been to compel the respondent to give, or the petitioner to obtain from the respondent if she can, the name of the woman in the case, the hotel name.
Hotel evidence has been treated as being suspicious—so suspicious that the noble Viscount, Lord Bertie, was prepared to propose at one time that you had only to procure or send hotel evidence to prove collusion. But collusion means a bargain between the parties that divorce shall be obtained or that adultery shall take place. The matter was decided some time ago, and I submit to your Lordships that it was quite properly decided, within I think the last two years, by the Court of Appeal in a case of this kind. There were two people who had quarrelled within two years of the marriage. I commend that to those who think people do not quarrel within two years
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of marriage. The husband had left his wife. He left her in January and in July he wrote her a letter saying in effect, "I think it is only fair that you should have a divorce, and I enclose a hotel bill and the evidence which will enable you to get your divorce." Now is that wrong? Is it collusion? It certainly is not, and the Court of Appeal decided that it was not. This seems to me a rather remarkable case, because the President of the Divorce Court had said that he was not satisfied in that case that adultery had been committed.
The evidence in the case was that the chambermaid had walked into the hotel room and seen the two parties in bed together, and the Court of Appeal thought that the proper conclusion to draw in those cases was that they had committed adultery; and I suppose most people would think that was right. The wife thereupon obtained a decree. But this is a clause to reverse that decision. And why should the woman not obtain her divorce in those circumstances? Suspicion is wrong as a ground for a Judge to act upon. It is perfectly good ground for a Judge to make as many inquiries as you please, and to call upon the parties, if you please, to call evidence. But at long last, when the evidence has been called, the Judge must be satisfied that the offence has been committed before he can act upon it to the detriment of the woman. There are grave difficulties, I venture to think, in this clause. These cases are now tried in nearly all the Assize towns in the country, when they are undefended divorce cases, and what inquiries the Court is going to make in these undefended divorce cases, and at whose expense, it is very difficult to say. I do not know who is going to pay the expenses of calling the husband and the husband's witnesses. Is it the unfortunate wife, who has appeared under the Poor Persons' Procedure and who finds it difficult enough to produce the evidence of her own witnesses?
As a matter of fact this is a reactionary clause, again, which is going to create difficulties in the way of people obtaining divorces and especially in the way of poor people obtaining their divorces, because they will be unable to find the expense that is necessary for satisfying a suspicious Judge. You have all sorts of Judges. Some judges would be suspicious, some Judges would grant a

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divorce easily, and other Judges—like, I dare say, my noble and learned friend opposite—would find it very difficult to be satisfied and would be suspicious. You would have a very uncertain state of the law in this matter. The substance of my Amendment is that I leave the law as it is. Collusion is a bad thing, but if collusion exists, it ought to be proved. It is not for the petitioner, who may have suffered—and, if the case is right on the other ground, has suffered—a wrong, to satisfy a Judge who may require a standard of proof with which it is quite impossible to comply. There is no appeal, as far as I can see, because it is for the Judge to say whether or not he is satisfied on the evidence, and you cannot say that an unsatisfied judge is a person who has gone wrong; all you can say is that he has not chosen to accept the evidence, and there is an end of it.
I venture to say that this is a great grievance to petitioners. It reverses the law. I think the noble Marquess referred to the question of whether it was in the original Bill. It was not in the original Bill; it was a clause put in at the end of the tenth day of the Committee; and by whom do you suppose it was put in? By one of the keenest opponents of the Bill: by Mr. Spens, the member for Ashford; and I can very well understand why it was put in. We are taking a reactionary step in supporting this clause, and I venture to ask you to support my Amendment, not because I am putting in anything new, but because I am leaving the law as it has previously existed.
Amendment moved—
Page 3, leave out lines 6 to 21, and insert the said new words.—(Lord Atkin.)
VISCOUNT CECIL OF CHELWOOD: I earnestly hope that the Committee will not adopt the noble and learned Lord's Amendment. I think it very greatly underrates the opinion there is on this subject. Collusion in the Divorce Court has become a public scandal. Really, it is not an exaggeration to say that. All of us are perfectly aware of what happens. A wife desires to be divorced. She goes to her husband—I have known cases of my own personal knowledge—and says: "Either you will provide the necessary evidence, or I will go off with a man." Then he, in order to avoid a scandal, does provide evidence which is perfectly untrue in itself. Of course, he
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is not bound to swear anything under the existing law, but he merely creates a situation from which the Court draws the conclusion that adultery has been committed.
LORD ATKIN: Can it be proved?
VISCOUNT CECIL OF CHELWOOD: Of course it can be proved. But it is to nobody's interest to prove it. In point of fact, it happens constantly. My noble friend must be aware that that is a state of things which is continually occurring in the Divorce Court. I dare say such cases are very small in number, comparable with the whole number of divorces, but it is a very serious matter, not only on the ground of divorce but of respect for the law. It is a shocking thing that you should have the machinery of the law misused in this way. What is the real issue? My noble and learned friend talks about suspicion, and so on. There is no question of suspicion. The whole question is, is it to be the law that in order to establish collusion you have to prove positively that collusion has taken place, or is it to be the law that, as one of the conditions of obtaining a divorce you must satisfy the Court that no collusion has taken place? It is no question of suspicion at all, but only a question of the burden of proof, and there is no reason in the world why you should not cast the burden upon one party rather than another. It is only a question of what will best serve the ends of justice.
I trust that none of your Lordships will be misled by the noble and learned Lord's suggestion that any one who disagrees with the Amendment must be a reactionary. It is not a question of reaction or the contrary. My attitude is not what he would describe as a reactionary view. The people who are in favour of this change in the law are in favour of it perfectly genuinely, in order to put an end to what is a great scandal in the law. I hope that nothing will induce the House to refrain from adhering to the Bill as it stands, and I hope that the promoters of the Bill are prepared to accept the strengthening which is proposed by the noble Marquess, Lord Salisbury.
LORD ROCHE: I am sorry to find myself again in disagreement with my noble and learned friend Lord Atkin: not because it will make any difference to

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a friendship which has endured almost for a lifetime; but some of your Lordships may think that Law Lords in general, and my noble friend and myself in particular, are always in disagreement. But I would venture to point out that there are thirteen clauses in the Bill, and we agree about eleven of them and only disagree about two. With regard to this clause, I think it right to state very shortly the position of those who support this Bill in relation to the attitude of the Government. It is sometimes thought that this Bill, and the Amendments to it, have come into being haphazard, and that ignorant laymen have sought to rush in where only angels and lawyers ought to tread. His Majesty's Government have expressly disclaimed any part or lot in the policy of this but inasmuch as they are vitally concerned, not in the administration of justice—because that is a matter for the judges—but in the regulating of the machinery of the administration of justice, they have felt themselves impelled at every stage to take profound interest in the machinery clauses.
In another place not only was the Bill drafted by a Parliamentary draftsman, and all Amendments were submitted to him and considered by him, including this Amendment, but the Solicitor-General or the Attorney-General was present throughout the debates in Committee. They were instructed by the Treasury Solicitor, who has the advantage of being the King's Proctor, and in that capacity has recourse to every person of knowledge in the Divorce Court, including the President and the Judges. Of course those persons like His Majesty's Government would take no part or lot in the policy of the Bill, but they hold themselves rightly available for consultation as to the machinery. That being the equipment of those who dealt with the clause, what happened in another place in Committee was that, after this clause was submitted, the Solicitor-General said this with regard to this very clause:
"So far as the Government are concerned, we are satisfied that, subject to the question of policy, this new clause provides a workable convenience for the Court, and that it is necessary if the Court is to envisage much wider grounds for divorce than have hitherto been the law. I think that I can even go so far as to say that it would necessarily very much determine the attitude which His Majesty's Government might have to take towards this Bill if they found themselves with a measure which created new grounds for divorce but
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conferred on the Court no power of inquiry to see whether the law was being given effect to or whether abuses were not taking place. I think that it would be necessary to have some such power as the new clause confers and, so far as the form of the clause is concerned, the Government are satisfied with it."
In addition to that, I understood from my noble and learned friend Lord Wright on the Second Reading that he as a lawyer saw no objection to this clause.
For what it is worth, I see no objection to the clause as it stands. I think it is not correct to say that it is altering the onus of proof at all. The onus of proof in divorce cases is not as it is under the criminal law; in divorce cases it always was on the petitioner in this matter and there it rests to-day. My noble and learned friend's excuse is that he wants to go back to the former Statute. That is the law as it has been found to be insufficient. With regard to any other objection, I do not believe that the Judges are going to act on suspicion. The Judges of this country know how to act. The Judges of the Divorce Court are sensible and humane men and what is perhaps more important, they are busy men. They do not want to go hunting hares or indulging in any other form of not but they do want the power of suppressing and catching the few cunning hen-raiding foxes who at present seem to escape the meshes of the law.
THE LORD ARCHBISHOP OF CANTERBURY: I feel bound to say that to some of us Clause 4 is really vital to the claim of this Bill that it has such merits that it ought to pass. I do not think that what the noble Viscount, Lord Cecil, said about the existence of the present abuse was one whit too strong and on the Second Reading I said, with the approval of many of your Lordships, that the position of the law was scandalous, inasmuch as it brought the reality of the sin of adultery, the cause of truth, and the law itself into contempt. Now, it is patent that this is an abuse that calls for remedy, and it is patent equally that the existing law does not provide the remedy that is needed, otherwise the scandal as it is would not exist. I understand, and am supported in that understanding by what my noble and learned friend has just said, that those who are responsible for the administration of the divorce law desire that their powers should be strengthened and believe that this clause will effectively strengthen them.

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My noble friend Lord Atkin is obviously not well-informed when he said that this particular clause was due to the member for Ashford whom he described as one of the bitterest opponents of the Bill. I have read the proceedings in another place and observe that Mr. Spens was particularly thanked for the constructive help he had given. I speak in this matter as a layman, and there is a conflict between the representatives of the great profession of the law in this House. What I would, in a sentence, call your Lordships' attention to is the plain fact that the existing law has proved to be defective and that the noble Lord admits he is doing nothing to change it. In the view of those who believe that the existing state of things calls for a remedy, it receives no remedy at the hands of the noble Lord.
LORD ATKIN: May I say one word? In the first place this question of collusion has been grossly exaggerated. It is due very largely to the mistake people make, in such a case as I have put before which was decided in the Court of Appeal, that because the husband provided evidence of his adultery that is acting in collusion with the other side. It is that suspicion and feeling which seem to prevail, even now in spite of that decision, that I desire to get rid of. I cannot imagine anything more unfortunate than its being suggested that it is wrong for the husband who has done his wife irreparable wrong, who has deserted her and gone with another woman, to provide the wife with the means of setting her free. Far from that being an unsocial act, that seems to me to be worthy of commendation. He is acting fairly and properly, and the exaggeration that is produced is produced by those people who look upon an act of that kind as though it was something wrong. That is not collusion. Collusion means anything of a bargain between the spouses. Evidence of that kind can be given without there being any bargain at all. If there is no bargain, it seems to me that, far from its being blameworthy, it is praiseworthy, if in fact it represents the true facts of the case.
Apart from that, I do not think there is very much to be said about the matter. The Courts have powers to inquire which they did not have, and that is the part of the clause which seems to me satisfactory. If that is acted upon, well and
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good. The noble Lord opposite seems to be in touch with the Judges of the Probate and Divorce Division, and on the understanding, which I dare say is well founded, that they do not propose to act from prejudice and to adopt the airy view about collusion which has been adopted by a good many people who speak about it, I for my part, now that the matter has been ventilated, am satisfied, and I do not propose to ask your Lordships to divide.
Amendment, by leave, withdrawn.
LORD SALTOUN LORD SALTOUN moved, in the proviso in the substituted subsection (2), after the first "if," to insert "after taking all the circumstances of the case into consideration the Court is of opinion that the granting of a decree of divorce would be more injurious to the interests of any children of the marriage than its refusal or if." The noble Lord said: The Amendment that I have the honour to move will make the clause read, after line 21:
"Provided that the Court shall not be bound to pronounce a decree of divorce and may dismiss the petition if, after taking all the circumstances of the case into consideration the Court is of opinion that the granting of a decree of divorce would be more injurious to the interests of any children of the marriage than its refusal or if…"
I trust that I may win the support of the noble Viscount, Lord Mersey, because I am satisfied that this Amendment was not moved in another place.
It has astonished and, I confess, moved me very deeply that in all the discussion which this Bill has received so little has been said about the children. They should, in my mind, properly dominate every discussion of the Bill, and yet if your Lordships will examine what has taken place, one might think the children had very little to do with marriage. Mainly speaking, the real reason for the sanctity of marriage is that it provides the only easy means of giving the young of our species the requisite protection and provision up to maturity. The extension of divorce must always be a cruel burden to them. I am told that schoolmasters can always pick out, by sight, the children of divorced parents. I do not suppose your Lordships will be very much swayed by what happens in Russia, but, at any rate, according to the newspapers, in Russia at one time they started with absolute freedom of intercourse and crèches everywhere, and if reports are to

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be trusted, they are now restricting divorce very much, and trying, I think, to re-create the home. I think we might take a lesson from that.
This Bill, I submit, and this Amendment give an opportunity which may not occur for some time which shows that we do look to the future and consider the future of the race. I am told that the young people of the present day have very definite views on the matter. These young people who are born of marriages which were among the early divorces after the War, are now approaching marriage with a determination to avoid anything which would inflict on their children the intolerable hardship brought about by the divorce of their parents. It may be said that the Court is unable to bear the weight of the discretion which this would impose on it. I hope that is not so. It seems to me that to refuse the burden would be to reject the only effective means for settling the dispute. According to Clause 2 of the Bill, we are granting divorces for adultery, desertion, cruelty and insanity. In the case of the last three of these—in the case of insanity, in the case of cruelty, and in the case of desertion—it appears to me that the question before the Court is perfectly simple, and I should imagine that in every case the Court would come to the decision that the granting of a divorce would be in the interest of the children.
The only ground therefore that remains is that of adultery, and I am sorry I differ from a great many noble Lords, but in my opinion adultery is the weakest of all causes for divorce that appear in this Bill. By that I mean an isolated act of adultery. In fact, your Lordships will realise that isolated acts of adultery were only made punishable by divorce in 1923. The real reason for allowing a husband to divorce a woman is not her adultery, but the danger that by her adultery she may bring a stranger into the house with an indefeasible title to his estate and property. It appears to me that the mere fact that this discretion is vested in the Court should compel parents to approach those Courts with more humanity and more consideration for their children, and I think it is time that people who are obsessed by a sense of their own wrongs should be forced to think of the interests of those for whom they are responsible. Whatever we may do under this Bill to cut down a mutual
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contract that parties have entered into, I think at least that it should be the law of the land that the interests of neither parent should be allowed to supersede those of the innocent beings whom their contract has brought into existence.
Amendment moved—
Page 3, line 24, after ("if") insert the said worcls.—(Lord Saltoun.)
LORD MAUGHAM: I hope your Lordships will not be disposed, however much you sympathise with the excellent motives that have caused this Amendment to be put on the Paper, to agree with it. If the noble Lord had the experience of actual practice in the Divorce Court or, I may say, an active practice in other matters relating to children, he would really not have come to the conclusion that his suggestion was practicable. He is quite right, if I may say so with respect, in saying this will only occur in the case of adultery, because, of the other three causes, there can be no question as to who ought to have the custody of the children. But in the case of adultery the normal case will be that the home has been broken up, that one of the spouses has either gone off and left the home with some other person, or, at any rate, that there has been under the Bill, if it passes into law, real adultery and not the sort of fictitious thing of which your Lordships so strongly disapprove. A woman or a man who has been so treated by his or her spouse cannot be compelled any longer, according to the feeling of civilised people, to live with the person he or she has married. The home has come to an end; it has been broken up; and in many cases the guilty party would be living with somebody else.
But suppose the exceptional case where the guilty party has not gone off with another person; still, how can you then have to answer the question whether the grounds of the decree would be more injurious to the interests of any children of the marriage than its refusal? What materials will the Court have for judging that question except these: that one party is guilty and the other party is innocent? The noble Lord must not suppose that on an application for a decree of divorce the Court can go into the interests of the children from the point of view of the sort of home that the children are going

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to have, as the Courts do on an application for the maintenance of the custody of the children in the Chancery Division when there has been no decree of divorce. I may say, perhaps, that for years I was concerned with those cases in the Chancery Division. Difficult the cases are, and the Court deals with the matter solely on the test of whether the proposed order is in the best interests of the infants or not; but the Court there knows what sort of a home each of the spouses has got, whom they are living with, what their means are, how far they can support, maintain and educate children, and also the question whether the character of the person who is seeking to obtain the custody is quite satisfactory, or at any rate is better than that of the other person to the application.
Things of this sort were constantly dealt with, and are now constantly dealt with, in the Chancery Division. They cannot be dealt with on an application for divorce because the materials are not there. One party has left the house and gone away and committed adultery. How can you tell at that stage of the proceedings whether there are any circumstances under which at some future date he may be able to provide a suitable home for the children, although the perfectly innocent party, the petitioner in the divorce proceedings, is willing and desirous to take them? I venture to think with great respect that this particular Amendment, although as I said the motive behind it is most excellent, is one your Lordships should not accept.
LORD SALTOUN: I should like to tell the noble and learned Lord that that is precisely one of the reasons why people who look to the future of our race and of society do object to the regulations under which the grounds for divorce are being extended. So far as I can see the Courts have not got the material before them to judge how the most important persons are going to fare under the divorce. I would like to see the whole procedure very much strengthened and much greater powers given to the Courts and used by them.
On Question, Amendment negatived.
LORD ATKIN LORD ATKIN moved, in proviso (c) in subsection (2), after "party," to insert "before the adultery or cruelty complained of". The noble and learned
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Lord said: The two Amendments standing on the Paper in my name are another attempt on my part to improve this Bill. They are really drafting Amendments to which I think there is not likely to be any objection. The first Amendment, which deals with a person having wilfully separated himself or herself, is taken from the old Act.
Amendment moved—
Page 3, line 35, after ("party") insert ("before the adultery or cruelty complained of").—(Lord Atkin.)
LORD ELTISLEY: Although those in charge of the Bill do not consider these Amendments are strictly necessary they are clarifying Amendments which we accept.
LORD ATKIN LORD ATKIN: I beg to move the next Amendment.
Amendment moved—
Page 3, line 37, after ("mind") insert ("or desertion").—(Lord Atkin.)
Clause 4, as amended, agreed to.
Clause 5:
Decree of judicial separation.
5. The following subsections shall be substituted for subsections (1) and (2) of Section one hundred and eighty-five of the principal Act:—
"185.—(1) A petition for judicial separation may be presented to the Court either by the husband or the wife on any grounds on which a petition for divorce might have been presented, and the foregoing provisions of this Part of this Act relating to the duty of the Court on the presentation of a petition for divorce, and the circumstances in which such a petition shall or may be granted or dismissed, shall apply in like manner to a petition for judicial separation.
(2A) Subject to the provisions of this Part of this Act prohibiting divorce within five years of marriage, any person to whom there has been granted a decree for judicial separation, or an order under the Summary Jurisdiction (Separation and Maintenance) Acts, 1895 to 1925, having the effect of such a decree, may, if the grounds on which the decree or order was granted constitute grounds for divorce under this Act, present a petition for divorce on those grounds; and in a case where the ground is desertion, any period of desertion immediately preceding the institution of the proceedings for the decree or order shall, if the parties have not resumed cohabitation and the decree or order has been continuously in force since the granting thereof, be deemed immediately to precede the presentation of the petition for divorce.

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On any such petition for divorce the Court may treat the decree of judicial separation or the order having the effect thereof as sufficient evidence of the grounds on which it was granted, or may require further evidence of those grounds, and all powers of the Court in relation to petitions for divorce shall be exercisable in relation to any such petition as aforesaid.
LORD ATKIN LORD ATKIN moved, in substituted subsection (1), after "presented," to insert "or on the ground of failure to comply with a decree for restitution of conjugal rights or on any ground on which a decree for divorce a mensa et thoro might have been pronounced immediately before the commencement of the Matrimonial Causes Act, 1857." The noble and learned Lord said: The grounds for judicial separation in the Bill are not as wide as they were before, and I suggest that the words of Section 185 of the principal Act should be followed—namely, that a ground for judicial separation should be failure to comply with a decree for restitution of conjugal rights, a ground which has existed now for a long time, and also—this is important with reference to what fell recently from my noble friend Lord Dawson—any ground on which a decree for divorce a mensa et thoro might have been pronounced. That covers any attempt to commit rape and so forth, and it also includes cases of what we know as gross indecency, and probably covers also general cases of homosexuality. These are matters which would be taken into account by the Court if necessary and I think should now be taken into account.
Amendment moved—
Page 4, line 7, at end insert the said words.—(Lord Atkin.)
THE EARL OF DROGHEDA: On behalf of my noble friend in charge of the Bill I would like to say that we accept this Amendment subject to seeing how it will fit into the Bill. That can be dealt with on the Report stage. If I may say so, the same remark applies to the other two Amendments which Lord Atkin has on this page of the Order Paper.
LORD ATKIN: I understand that the Amendments will be accepted but that they will possibly be subject to some alteration on Report. I am quite content with that.
THE EARL OF DROGHEDA THE EARL OF DROGHEDA moved, to leave out the first paragraph of the substituted subsection (2A). The noble Earl said: Perhaps it would be convenient if I dealt at this stage with my later Amendments.
THE LORD CHAIRMAN: The noble Earl will excuse me. I see that the next Amendment is in the name of Lord Atkin:
Page 4, line 18, leave out from the beginning of the line to ("any") in line 20.
I will put the Amendment down to the word "any," in order to save the noble Lord's Amendment.
THE EARL OF DROGHEDA: That would be covered by my Amendment on the next page. I do not know whether it would be convenient if I dealt with my Amendment on the next page at this stage. I think perhaps it might save time. Would your Lordships look at my Amendment on page 8 of the Marshalled List. It is mainly a drafting Amendment. In the first place it seems to be preferable to make a new clause of subsection (2A) of Clause 5, because the subject matter of that subsection has no real connection with the subject matter of Clause 5 (1) and (2). Subsections (1) and (3) of the suggested new clause merely state in what, it is hoped, is a somewhat clearer form those provisions of the present Clause 5, subsection (2A), in regard to which there has really been no criticism. The real point of substance in the Amendment occurs in subsection (2) of the proposed new clause on page 8, and that should be read in connection with the last paragraph on page 4 of the Bill.
Your Lordships will remember that it is laid down in Clause 1 of the Bill that a petition for divorce may be presented upon facts that have occurred before the expiration of—it is now—three years from the date of the marriage. This last paragraph lays down that if a petitioner has already, on those facts, obtained a decree of judicial separation or an order under the Summary Jurisdiction Acts, he may when petitioning for divorce use the evidence already given on his behalf, subject to the reasonable discretion of the Court. Objection was made to this proviso in another place on the ground that it should not be extended to the evidence given before magistrates. It was urged that, when the Bill provided that evidence

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taken in courts of summary jurisdiction was to be used in divorce proceedings in a higher Court, the greatest care was to be taken to prevent any abuse of the privilege thus granted. I do not know, but it is possible that these are the considerations that have led the noble Marquess to put down an Amendment proposing the entire deletion of the last paragraph of Clause 5.
THE MARQUESS OF SALISBURY: That was so.
THE EARL OF DROGHEDA: I respectfully suggest to the noble Marquess that the total deletion of that paragraph might be very hard on those in humble circumstances. The paragraph does not, as the Bill did when it was first drafted, provide for the automatic conversion of the decree or order of the lower court into a divorce. The provisions of the clause of the Bill and of my Amendment provide that the whole matter shall be under the control of the High Court. The real point of the paragraph is that it gives a poor petitioner who has had an order granted by a magistrate some assistance in getting his divorce petition through on evidence that was given when the order was made. I need not point out to the noble Marquess that the expense that would be entailed if the poor person had to produce to the Higher Court all the witnesses who had already given evidence on his behalf would be a matter of the very greatest concern. Indeed, it is not always easy to find the witnesses who have given evidence before. The High Court may, if I may respectfully say so, be trusted to deal with the matter in a very reasonable way. That is, I think the High Court will not always call for fresh evidence, but it will see that the clause is not used so as to have a more or less automatic effect.
If it is shown by investigations made and evidence given that the evidence given before the magistrates would not support a decree of divorce, the Court has power to deal with the situation which would then arise, and would either dismiss the cause or call for fresh evidence itself. The change in the Bill which my Amendment makes is that in these cases the Court shall not grant a decree without receiving evidence from the petitioner himself or herself. I think it is a useful safeguard, and it
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would not be too great a hardship on petitioners in humble circumstances, as I think it would be if they had to call all the evidence that was given in the lower court. I think that would be a hardship, and I do feel that the Court will have ample power, after it hears the petitioner, to ask for further evidence or to make further inquiry of the magistrates if it is not satisfied as to the grounds on which the order was granted. I have reason to believe that my Amendment commends itself to those who have to administer the law.
Amendment moved—
Page 4, leave out lines 18 to 35.—(The Earl of Drogheda.)
THE LORD CHAIRMAN: Lord Atkin has an Amendment to follow and therefore in putting the Question on the noble Earl's Amendment I shall put it in the same way as the Amendment put down by Lord Atkin. Your Lordships will therefore see that the whole of the Amendment proposed by Lord Drogheda will not be agreed, and that the remainder will have to be put again.
VISCOUNT CECIL OF CHELWOOD: May I ask the noble Earl a question? Does he propose to leave in the Bill the paragraph at the bottom of page 5 of the Bill? That appears to be dealt with by paragraph (2) of his subsequent Amendment, and yet he does not propose to strike it out in the Amendment he is now moving.
THE EARL OF DROGHEDA: I think the noble Viscount will find that my Amendment on page 4 is to leave out lines 18 to 35.
VISCOUNT CECIL OF CHELWOOD: But line 35 stops short of that last paragraph. It should be lines i8 to 43.
THE EARL OF DROGHEDA: I am obliged to the noble Viscount. My Amendment should have gone on to that, but it is dealt with in the new clause.
THE MARQUESS OF SALISBURY: The noble Earl is perfectly correct. The reason why I put down my Amendment on the Paper to strike out the paragraph was for the reason he stated. I doubt whether you can trust the local magistrates upon so very important a matter to obtain direct evidence as to adultery which must be sufficient to warrant so vital a thing as a divorce. The noble

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Earl has shown that he is fully aware of all the difficulties, and I should certainly not try to interfere with him in any way. I only suggest that he has taken great care in drafting his Amendment to secure that the Divorce Court should be minded to call for evidence if they are not satisfied. He suggests that the words which he proposes, that the evidence of the petitioner should always be essential, is a sufficient safeguard. It may be so. I hope, therefore, he, will not think it impertinent on my part if I say that while I accept, as I fully do, his Amendment, and shall not attempt to press mine, I reserve the right to look into the matter a little more closely between now and the future stages of the Bill.
THE EARL OF DROGHEDA: I am much obliged to the noble Marquess, and I would like to say that I have given the matter the fullest consideration. I have tried to ensure that the Court shall have the most ample powers to satisfy itself, while at the same time not bearing too hardly upon poor petitioners.
THE LORD CHAIRMAN: I propose to put the Amendment to leave out from line 18 to ("any") in line 20, in order to preserve Lord Atkin's Amendment.
LORD ATKIN: That does not arise if we accept Lord Drogheda's Amendment. That is left out, and therefore the Amendment is unnecessary. My second Amendment would apply to Lord Drogheda's Amendment, but I think Lord Drogheda would be prepared to accept it.
THE LORD CHAIRMAN: I must now put Lord Atkin's Amendment.
THE EARL OF DROGHEDA: What I hoped to convey was that I promised the noble and learned Lord that his Amendment would be accepted in principle and be dealt with on the Report stage. So I gather that he does not wish to move his Amendment.
LORD ATKIN: I am quite content.
THE LORD CHAIRMAN: I will now put the Question to leave out "any" in line 20 and all following words down to end of line 35.
Amendment moved—
Page 4, line 20, leave out from ("marriage") to end of line 35.—(The Earl of Drogheda.)
THE MARQUESS OF SALISBURY THE MARQUESS OF SALISBURY moved to leave out the last paragraph of substituted subsection (2A). The noble Marquess said: I am now trying to cooperate with the noble Lord. I understand he now wants to leave out the last paragraph. That is my actual Amendment; therefore I move.
Amendment moved—
Page 4, line 36, leave out lines 36 to 43.— (The Marquess of Salisbury.)
Clause 5, as amended, agreed to.
THE EARL OF DROGHEDA THE EARL OF DROGHEDA moved, after Clause 5, to insert the following new clause:
Divorce proceedings after grant of judicial separation or other relief.
".—(1) A person shall not be prevented from presenting a petition of divorce, or the Court from pronouncing a decree of divorce, by reason only that the petitioner has at any time been granted a judicial separation or an order under the Summary Jurisdiction (Separation and Maintenance) Act, 1895 to 1925, upon the same or substantially the same facts as those proved in support of the petition for divorce.
(2) On any such petition for divorce, the Court may treat the decree of judicial separation or the said order as sufficient proof of the adultery, desertion or other ground on which it was granted, but the Court shall not pronounce a decree of divorce without receiving evidence from the petitioner.
(3) For the purposes of any such petition for divorce, a period of desertion immediately preceding the institution of proceedings for a decree of judicial separation or an order under the said Acts having the effect of such a decree shall, if the parties have not resumed cohabitation and the decree or order has been continuously in force since the granting thereof, be deemed immediately to precede the presentation of the petition for divorce."
The noble Earl said: I beg to move.
Amendment moved—
After Clause 5 insert the said new clause.—(The Earl of Drogheda.)
Clause 6:
New grounds for nullity.
6.—(1) In addition to any other grounds on which a marriage is by law void or voidable, a marriage shall be voidable on the ground—

(a) that the marriage has not been consummated owing to the wilful refusal of the respondent to consummate the marriage; or

(b) that either party to the marriage was at the time of the marriage of unsound mind or was at the time of the marriage, or has been within twelve months of that time, placed in an institution or under guardianship under Section three, Section six, Section eight, or Section nine of the Mental

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Deficiency Act, 1913, or was at the time of the marriage subject to recurrent fits of insanity or epilepsy; or

(c) that the respondent was at the time of the marriage suffering from venereal disease; or

(d) that the respondent was at the time of the marriage pregnant by some person other than the petitioner:

Provided that, in the cases specified in paragraphs (b)(c) and (d)of this subsection, the Court shall not grant a decree unless it is satisfied—

(i) that the petitioner was at the time of the marriage ignorant of the facts alleged;

(ii) that proceedings were instituted within a year from the date of the marriage; and

(iii) that marital intercourse has not taken place since the discovery by the petitioner of the existence of the grounds for a decree.

VISCOUNT CECIL OF CHELWOOD VISCOUNT CECIL OF CHELWOOD moved, in paragraph (b)of subsection (1), after "marriage," to insert "within twelve months after that time." The noble Viscount said: This clause deals with nullity, not divorce, and the proposal of paragraph (b) as far as I am concerned is that marriage should be voidable on the ground that either party to the marriage was at the time of the marriage of unsound mind. It goes on to say "or was at the time of the marriage, or has been within twelve months of that time, placed in an institution" for mental deficiency. I read that to mean that you would have to prove unsound mind at the time of the marriage, but in the case of mental deficiency it would be enough to prove that that had occurred, either at the time of the marriage or within twelve months after. I do not know whether I read it rightly or not. I do not wish to deal with the question of mental deficiency, which is a different point, but I hope very much that the House will extend this provision so that it will cover proof of unsound mind, not only at the time of the marriage but within twelve months after marriage. The reason I suggest that is that if you do not do that you leave the law exactly as it is. If you prove unsound mind at the time of the marriage, then the marriage is voidable.
This is an opportunity of putting right what has proved to be a very unfortunate provision in the working of this law. I must freely admit that, like other noble Lords who have addressed the House on
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different Amendments, my interest in this Amendment has been excited by a particular case with which I happen to be very well acquainted. That case was this. A man became engaged to a woman. During the course of his courtship he had reason to find that she was, at any rate, rather strange in her behaviour. He was assured that that was only due to her love for him. This is all reported in the Law Reports, or I should not go into these details. He thereupon agreed to go on with the marriage, and they were married in October. She rapidly became worse, and within less than six months she was admitted to be quite mad, and remained mad for the rest of her life. They were young people. She lived and he lived for another fifty years. He never was married in any reasonable sense of the word, but, in point of fact he was precluded from marriage during the whole of his life. I need not dwell on the absolute disaster to his life which was caused by that condition. He was unmarried, and yet prevented from being married in the circumstances. The case was tried, and it was argued that the evidence was that the woman was in fact not capable of giving true assent at the time of the marriage, but the Judge, a very able Judge, felt compelled to say that the evidence was not, in his view, sufficient to prove that. The evidence only proved there were circumstances of oddness about the woman, and that she certainly went mad within a very short time after the marriage.
I suggest that if a woman goes mad within six months of her marriage, that ought to be evidence—and in my judgment conclusive evidence—if the matter is brought before the Courts, that she was not really in a condition to give true assent at the time of her marriage. I quite admit that my interest in the matter has been excited by my personal knowledge of this particular case, but I have no doubt there have been many other cases of the same kind. I do think, if we are to reconsider the grounds of nullity, it would be a very reasonable extension of these grounds to say that, where the unsoundness became clear and evident within a year after the marriage, we might presume that she, or he for that matter, was at the time of the marriage not in a mental condition to give true assent. Otherwise you run the risk of these very shocking miscarriages

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of justice in the larger sense of the term. I do not think this is a very unreasonable proposition, because as I read the Bill in its present form, unless it is amended as far as mental deficiency is concerned, that is actually the proposal of the promoters. They did propose that where one of the parties to the marriage is placed under restraint under the Mental Deficiency Act, as I read it, within a year of the marriage, that shall be a sufficient ground for a declaration of nullity. I understand there is an Amendment down by my noble friend Lord Gorell which alters that, but at any rate, in the original idea of the promoters, they considered that a perfectly reasonable proposition, and I agree with them. If it is reasonable in the case of mental deficiency, it seems to me a fortiori reasonable in the case of unsoundness of mind. I do not think I can improve the case I am submitting to your Lordships by repeating my arguments, and therefore I beg to move.
Amendment moved—
Page 5, line 8, after ("marriage") insert ("or within twelve months after that time").—(Viscount Cecil of Chelwood.)
LORD ATKIN: I venture to say that the suggestion is entirely contrary to principle. Nobody ever heard of nullity except on a ground which was not existent at the date of marriage. That is the whole ground for granting nullity of marriage because in one form or another assent must be taken not to have been properly given because the parties had already contracted a previous marriage or because of these grounds, some of which, I venture to think, are a little doubtful, at any rate for nullity, not for divorce. There must be some ground which existed at the time of the marriage. Otherwise you would have divorce. Otherwise you would have a valid marriage up to the time when the particular occurrence occurred for which it is now said you must annul the marriage. I venture to think that this would be quite inconsistent with the clause we have already passed. We have dealt with unsoundness of mind as a ground of divorce, and we have had that five-year clause to which Lord Dawson attached so much importance and on which we have all agreed. But this only provides for unsoundness of mind and that, with great respect, does not mean madness unless you define "madness" as "being of unsound
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mind." It might arise twelve months after the marriage through a cause which had nothing in the world to do with the condition of the marriage. It might be the result of childbirth and is a not uncommon consequence of childbirth. I understand that Lord Gorell is moving an Amendment on this subject and I am bound to say that when I read that originally I understood it to mean twelve months before. I do not know if it is meant to be twelve months after. If that is so I think that is wrong also.
LORD GORELL: I am sorry not to find myself in agreement with Lord Cecil hut, because I agree with the argument of the noble and learned. Lord, Lord Atkin, as put forward, I put down my Amendment.
VISCOUNT CECIL OF CHELWOOD: The only thing I wish to say in answer to Lord Atkin is that nullity can only be granted on the ground that one of the parties is incapable of giving a true assent, but it does seem to me that if one of the parties goes definitely mad within twelve months of the marriage that may be fairly treated as a ground of saying that he or she was not in a position to give that assent. It has in fact been shown by one case and I believe a great many cases that where the woman does go mad within twelve months anyone not fettered by the rules of strict law would say she was not in a position to give a true assent.
VISCOUNT DAWSON OF PENN: It is a rather narrow issue raised by the noble Viscount. It is well known that mental disease may be so latent that it may be an unknown ground of suspicion. If it remains a suspicion then nullity would not obtain, but if in the consequence of things in that marriage the symptoms are manifest and fully developed six or eight or nine months afterwards, you are often quite able to say that these rather vague symptoms of the earlier time of the marriage are really nothing but the beginning of a disease which was in its initial stage then. I think on that ground the bulk of scientific opinion would be with the noble Viscount on that issue, but obviously, in order to establish that case, the Court would have before it experienced scientists who would be able to give evidence as to whether that was true in the particular case or not.
VISCOUNT CECIL OF CHELWOOD: Before you put the Question, I would like to ask a question. I do not want to put the House to the trouble of a Division on this matter if I can avoid it. I want to get the substance of what I am asking for; I do not care about the wording. I ask my noble friends to consider between this and the Report stage whether they could not meet me in some such way as this: to say the fact that one of the parties went mad within a year should be prima facie evidence, which could be rebutted, of unsoundness of mind at the time of the marriage. I do not ask them to give an absolute reply at this moment, but if they would consider some such provision as that I would be content not to propose this Amendment in its present form, but I beg them to try and meet me somehow.
LORD ELTISLEY: We are quite prepared to accept the suggestion to consider it.
VISCOUNT CECIL OF CHELWOOD: I am very much obliged, I will not press the Amendment.
Amendment, by leave, withdrawn.
LORD GORELL LORD GORELL moved an Amendment to make paragraph (b)read as follows:
"(b)that either party to the marriage was at the time of the marriage of unsound mind, a mental defective within the meaning of the Mental Deficiency Acts, 1913 to 1927, or subject to recurrent fits of insanity or epilepsy."
The noble Lord said: I am reluctant to ask your Lordships to accept an Amendment in view of the arguments I have ventured once or twice to address to you as to the difficulty from the point of view of time of changing the Bill at all. In the Amendment which I have placed upon the Paper I have had the advantage of advice from those who are best qualified to speak upon this matter, and I think I may say that the wording that I propose will help to clarify the subsection, and also will get rid of that difficulty of which the noble and learned Lord, Lord Atkin, spoke.
It would seem that under the present wording it is not at all clear whether it is before or after, and I would propose that the paragraph should run:
"that either party to the marriage was at the time of the marriage of unsound mind, or a mental defective within the meaning of the Mental Deficiency Acts, 1913 to 1927, or subject to recurrent fits of insanity or epilepsy."
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My point very briefly is that mental deficiency, if it is a ground for nullity, should exist at the time of the marriage. I think the clause was originally designed to meet the case of a person who was mentally deficient at the time, and then was placed under restraint twelve months afterwards. I understand that that would lead to the very undesirable result that some unscrupulous person might marry someone who is mentally deficient, obtain her money, then get her placed under restraint within the twelve months and have the marriage annulled. I understand that there is no objection in principle to the acceptance of my Amendment.
Amendment moved—
Page 5, line 8, leave out from ("or") to ("subject") in line 14 and insert the said new words.—(Lord Gorell.)
VISCOUNT CECIL OF CHELWOOD: Provided also the same understanding prevails with regard to the other Amendment.
VISCOUNT DAWSON OF PENN VISCOUNT DAWSON OF PENN moved, in subsection (1), after paragraph (d), to insert the following new paragraph:
"(e) that either party to the marriage has been within twelve months prior to the time of the marriage guilty of the practice of homo-sexuality."
The noble Viscount said: I do not propose to repeat the arguments which I put forward earlier in the evening, but I move this Amendment because I think it is of even greater importance where a question of nullity is concerned. I think the arguments I have brought forward are even more true in the case of nullity, because homo-sexuality may very easily not be manifest, and could not be manifest, in the social circumstances prior to the marriage.
Amendment moved—
Page 5, line 20, at end insert the said new paragraph.—(Viscount Dawson of Penn.)
LORD ELTISLEY: I would ask your Lordships not to accept this Amendment.
On Question, Amendment negatived.
THE LORD CHAIRMAN: I have a manuscript Amendment handed in by the noble Viscount, Lord Dawson, to insert on page 5, line 17, after the word "from" the word "communicable."
VISCOUNT DAWSON OF PENN: This Amendment raises a matter of considerable difficulty. If we leave out "suffering from venereal disease" we may land ourselves in the position that someone may have had venereal disease which some authorities regarded as not being cured, notwithstanding the fact that its manifestations had passed. That would be met by inserting the word "communicable." On the other hand, suppose at the time of the marriage one of the spouses had a very early stage of loco-motor ataxy which might easily remain undetected unless there was a special examination. It would be rather serious if the marriage could not be voided, if, for example, during the months subsequent to the marriage the disease developed. I do not myself see the solution of that at the moment, but if your Lordships will allow me I will consult with my professional friends and also with my noble and learned friends to see if anything can be done to meet the difficulty. If I may make that reservation I will not move the Amendment at this moment.
THE MARQUESS OF READING THE MARQUESS OF READING moved, in subsection (1), proviso (iii), after "intercourse," to insert "with the consent of the petitioner." The noble Marquess said: This Amendment is, I hope, self-explanatory. As the Bill stands at the moment it would be possible for a husband by forcibly having marital intercourse with his wife to destroy her right to apply to the Court to have the marriage annulled. Such a situation ought not to be allowed to arise, and I trust that those in charge of the Bill will find it possible to accept this Amendment.
Amendment moved—
Page 5, line 28, after ("intercourse") insert ("with the consent of the petitioner").—(The Marquess of Reading.)
LORD ELTISLEY: I will accept this Amendment, and in doing so I would like to appeal to noble Lords to remain in sufficient numbers to make certain of concluding the Bill to-night.
LORD ATKIN LORD ATKIN moved to insert at the end of subsection (1):
"Provided also that any child born of a marriage avoided pursuant to paragraphs (b)or (c)of this section shall be a legitimate child of the parties thereto notwithstanding that the marriage is so avoided."
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The noble and learned Lord said: This Amendment calls attention to what appears to me a very difficult position arising out of new and unprecedented grounds of nullity. I should say that the reference in the Amendment as printed to paragraph (a)is a mistake. For the first time, as far as I know, it is proposed to annul a marriage on any ground except on the ground that there never was a valid marriage at all. It is provided that persons may be lawfully married, and that within twelve months after the marriage they may discover either that the person was of unsound mind or that he or she was at the time of the marriage suffering from venereal disease. It is obvious that those are circumstances which permit of a child being conceived of the marriage, and it is to meet the very unfortunate situation which will arise in that circumstance that I have proposed an Amendment which I venture to think will commend itself to the humanity of the whole of this Committee.
Suppose there is a child and suppose that the father was in fact suffering from venereal disease, is it really to be suggested that when the marriage is annulled that child is to be a bastard? That appears to me terrible to contemplate, and if we really are giving relief of this kind for the first time, then let us also for the first time provide that if the marriage is annulled, any unfortunate issue of it shall not suffer from that sad fact but shall be legitimate. I cannot speak of the old ecclesiastical rules of the Roman Church. My own idea is, from what I have heard, that there are occasions, at any rate, on which a marriage is annulled but the Church allows the issue to be legitimate. That seems to me to be humane and Christian, and anything else seems to me to be inhumane and unchristian. I cannot believe that this Committee would allow a provision for nullity of this kind to be made and allow the unfortunate issue of the marriage to be branded through life as illegitimate. I have therefore made a proposal which appears to me, at any rate, to relieve that unfortunate position and which I venture to think will commend itself to the Committee.
Amendment moved—
Page 5, line 30, at end, insert the said proviso.—(Lord Atkin.)
LORD ELTISLEY: I beg to accept the Amendment subject to the deletion of the reference to paragraph (a), as has already been explained.
Clause 6, as amended, agreed to.
Clause 7:
Proceedings for a decree of presumption of death.
7.—(1) Any married person who alleges that reasonable grounds exist for supposing that the other party to the marriage is dead may present a petition to the Court, and the Court, if satisfied that such reasonable grounds exist, may make a decree of presumption of death.
LORD MAUGHAM LORD MAUGHAM moved, in subsection (1), after the first "Court," to insert "to have it presumed that the other party is dead and to have the marriage dissolved." The noble and learned Lord said: The Amendments that stand in my name here are almost entirely verbal. The only thing that has been added has been to this effect. Under the clause as drawn, the Court had only to be satisfied that the petitioner did not know that the other party was dead and that he
"has not been known by the petitioner to be living within that time."
That, is within the period of seven years. Some experience of applications to presume death led me to suppose that it was much safer to have some rather different words. Without knowing that the other party is alive, the petitioner might well have reason to believe that he was alive from some hearsay evidence which might not come to the notice of the Court. Therefore the words are now that the petitioner has no reason to believe that the other party has been living within that time. In other respects the clause is practically as drawn, except that the form of the order made by the Court is more in accordance with correct judicial procedure. The last part of the Amendment standing in my name, which incorporates Sections 181 to 184 inclusive of the principal Act, enable the King's Proctor to apply and make any proper inquiries which he may think necessary and they cover therefore subsection (4) of Clause 7 as it stands in the Bill. I beg to move.
Amendment moved—
Page 5, line 36, after ("Court") insert ("to have it presumed that the other party is dead and to have the marriage dissolved"). —(Lord Maugham.)
LORD ELTISLEY: I accept this, and the following Amendments. They are consequential.
Amendments moved—
Page 5, line 38, at end, insert ("and of dissolution of the marriage")
Page 5, line 39, at beginning insert ("In any such proceedings")
Page 5, line 41, leave out from ("and") to the end of line 1 on page 6, and insert ("the petitioner has no reason to believe that the other party has been living within that time")
Page 6, line 4, leave out subsections (3) and (4) and insert—
("(3) Sections one hundred and eighty-one to one hundred and eighty-four inclusive of the principal Act shall apply to a petition and a decree under this section as they apply to a petition for divorce and a decree of divorce respectively").—(Lord Maugham.)
Clause 7, as amended, agreed to.
Clause 8:
Prevention of delay in application for decree absolute.
8. Section one hundred and eighty-three of the principal Act shall be amended by adding thereto a subsection as follows:
"(3) If any party who obtains such a decree nisi shall fail to apply to make the same absolute within three months from the date when he could first do so, then the other party to the suit against whom the decree nisi has been granted shall be at liberty to apply to the Court and the Court shall, on such application, have power to make the decree absolute, dismiss the petition, or make such other order as the Court thinks proper."
LORD ROCHE: The noble Viscount, Lord Bertie of Thame, asked me to deal with the Amendment standing in his name at page 6, line 20, and I told him that in my view, particularly if Lord Maugham's Amendments were carried, this would be redundant. Acting on that view I do not move the Amendment, but I think it right to reserve the right of the noble Viscount on the Report stage to move this Amendment, if his view is different from mine.
THE MARQUESS OF READING THE MARQUESS OF READING moved, after "If any party who," to insert "has obtained or." The noble Marquess said: In the clause as it now stands the new power for a respondent to apply for a decree absolute would only apply to such decrees absolute as might be made after this Act comes into operation. If, as I believe, this power be a most salutary

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one, it should apply not only to such decrees nisi as have been obtained after the coming into operation of the Act, but to such as may have been obtained before but are still current at the time when the Act comes into force. I hope this will not be called retrospective legislation. It does not seek to reopen anything which has been closed. It merely extends the benefit of a new clause to such decrees nisi as are operative at the time when the new Act comes into force, and I hope the noble Lord will see his way to accept the Amendment.
Amendment moved—
Page 6, line 22, after ("who") insert ("has obtained or").—(The Marquess of Reading.)
LORD ELTISLEY: I accept the Amendment but I suggest that the better words would be "has obtained."
THE MARQUESS OF READING: I agree with that.
Amendment, by leave, withdrawn.
Amendment moved—
Page 6, line 22, leave out ("obtains") and insert ("has obtained").—(The Marquess of Reading.)
Clause 8, as amended, agreed to.
Clause 9:
Amendments as to maintenance, settlement of property, etc.
9.—(1) When a petition for divorce or nullity of marriage Las been presented, proceedings under Section one hundred and ninety, Section one hundred and ninety-one, or Section one hundred and ninety-two of the principal Act (which, respectively, confer power on the Court to order the provision of alimony, the settlement of the wife's property, and the application of property which is the subject of marriage settlements) may, subject to and in accordance with rules of Courts, be commenced at any time after the presentation of the petition:
Provided that no order under any of the said sections (other than an interim order for the payment of alimony under Section one hundred and ninety) shall be made unless and until a decree nisi has been pronounced, and no such order, save in so far as it relates to the preparation, execution, or approval of a deed or instrument and no settlement made in pursuance of any such order, shall take effect unless and until the decree is made absolute.
(2) The said Section one hundred and ninety shall apply in any case where a petition for divorce or judicial separation is presented by a wife on the ground of her husband's insanity as if for the references to the husband (except where the reference is to the "joint lives of the husband and wife") there were
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substituted references to the wife, and as if for the words "to the wife," wherever they occur, there were substituted the words "for the benefit of the husband."
THE EARL OF DROGHEDA THE EARL OF DROGHEDA moved, in subsection (1), to leave out "or" after "Section one hundred and ninety-one" in order to insert "or subsection (3) of Section one hundred and ninety-three" after "Section one hundred and ninety-two." The noble Earl said: The Amendment which stands at the beginning of page 11 of the Order paper really hangs together with the Amendment at the bottom of that page r, to introduce a new subsection (4), and perhaps it would be convenient to the House if I might deal with the two Amendments together. Under the law as it at present stands the Court may, on a decree for divorce or nullity of marriage, order the respondent's husband to secure for the benefit of the wife such sums, or part of such sums, as it may order him to pay for her maintenance. But there is no power to order security to be given for the benefit of the children whose maintenance or education the respondent's husband may be ordered to pay for, except by the variation of marriage settlements, if such exist. This sometimes causes hardship in cases where, for instance, the respondent husband dies and has left his money to third parties, or where he goes out of the country, and so the order cannot be enforced. This Amendment seeks to remedy the defect by giving the Court the same power to order security of maintenance for the children, as it has now for the benefit of the wife.
Amendment moved—
Page 6, line 31, leave out ("or").—(The Earl of Drogheda.)
Amendments moved—
Page 6, after ("ninety-two") insert ("or subsection (3) of Section one hundred and ninety-three").
Page 6, line 37, leave out ("and").
Page 6, line 38, after ("settlements") insert ("and the securing of money for the benefit of the children").—(The Earl of Drogheda).
THE EARL OF DROGHEDA THE EARL OF DROGHEDA moved to leave out subsection (2) and insert the following new subsection:

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".—(2) The said Section one hundred and ninety shall apply in any case where a petition for divorce or judicial separation is presented by the wife on the ground of her husband's insanity as if for the references to the husband there were substituted references to the wife, and for the references to the wife there were substituted references to the husband, and in any such case and in any case where a petition for divorce, nullity or judicial separation is presented by the husband on the ground of his wife's insanity or mental deficiency, the Court may order the payments of alimony under the said section to be made to such persons having charge of the respondent as the Court may direct."
The noble Earl said: The reason for this Amendment is that the effect of subsection (2) of Clause 9, as it at present stands, is that where a husband or wife petitions for divorce or a judicial separation on the ground of insanity, and is ordered to provide for the support of the insane spouse, payments must be made to that spouse. The result, I am advised, would be that in some cases the payments made to the person nominally in charge of the respondent would have to be passed on to those actually in charge, for instance a medical institution, and it is felt that this would involve unnecessary duplication and expense. The Amendment avoids this difficulty by providing that in each case the Court may direct to whom the payments are made.
Amendment moved—
Page 7, line 1, at end insert the said new subsection.—(The Earl of Drogheda.)
THE EARL OF DROGHEDA: I have already explained, in opening on this clause, the reason for the next Amendment.
Amendment moved—
Page 7, line 20, at end insert—
"(4) The following subsection shall be added to Section one hundred and ninety-three of the principal Act:—
(3) The Court may, if it thinks fit, on any decree for divorce or nullity of marriage, order the husband, or (in the case of a petition for divorce by a wife on the ground of her husband's insanity) order the wife, to secure for the benefit of the children such gross sum of money or annual sum of money as the Court may deem reasonable, and the Court may for that purpose order that it shall be referred to one of the conveyancing counsel of the Court to settle and approve a proper deed or instrument to be executed by all necessary parties:
Provided that the term for which any sum of money is secured for the benefit of a child
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shall not extend beyond the date when the child will attain twenty-one years of age.'" —(The Earl of Drogheda.)
Clause 9, as amended, agreed to.
Clause 10:
Extension of jurisdiction of courts of summary jurisdiction.
(2) Where the wife of a married man has been guilty of adultery the married man shall be entitled to apply to the court of summary jurisdiction for an order and on such application the Court may make one or more of the orders set out in Section five of the Licensing Act, 1902, as amended by this Act.
THE EARL OF DROGHEDA THE EARL OF DROGHEDA moved, in subsection (2), to leave out "as amended by this Act." The noble Earl said: This is purely a drafting Amendment. The words as amended by the Act were needed as the Act was originally drawn. They are now quite redundant and I move that they be deleted.
Amendment moved—
Page 7, line 34, leave out ("as amended by this Act").—(The Earl of Drogheda.)
Clause 10, as amended, agreed to.
Clause 11:
Relief for clergy of Church of England.
11. The following subsection shall be substituted for subsections (2) and (3) of Section one hundred and eighty-four of the principal Act:—
"(2) No clergyman of the Church of England shall be compelled to solemnize the marriage of any person whose former marriage has been dissolved on any ground and whose former husband or wife is still living or to permit any other minister of the Church of England to perform such a marriage service in his church or chapel."
LORD ATKIN LORD ATKIN moved, after "England," to insert "or of the Church in Wales." The noble and learned Lord said: The most reverend Primate has requested me to move this Amendment in his absence. It is to avoid a possible question of doubt in the law. Under the Welsh Disestablishment Act the enactments relating to the Church of England in this matter would appear to apply, and are expressly applied, to the Church in Wales after disestablishment. If that stood alone there would be no difficulty at all. But there is a provision of rather doubtful interpretation excepting enactments relating to marriage, and as

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this is an enactment relating to marriage the provision in the Disestablishment Act applies.
LORD ELTISLEY: We are in entire agreement with this Amendment.
LORD ATKIN: I was only going to add that we want to apply this protection to clergymen of the Church in Wales as well as in England.
Amendment moved—
Page 8, line 4, after ("England") insert ("or of the Church in Wales").—(Lord Atkin.)
LORD ATKIN: The next Amendment is in similar terms, and I beg to move.
Amendment moved—
Page 8, line 9, after ("England") insert ("or of the Church in Wales").—(Lord Atkin.)
Clause 11, as amended, agreed to.
Clause 12 agreed to.
THE LORD BISHOP OF ST. ALBANS THE LORD BISHOP OF ST. ALBANS had on the Paper a proposed new clause, after Clause 12, to make provisions for the purpose of introducing conciliation methods into matrimonial causes concerning divorce and nullity, and for reducing the cost of such proceedings for those who are unable to afford adequate professional advice. The right reverend Prelate said: In speaking on the Second Reading of this Bill I called attention to the fact that the Bill contained no provisions for conciliation in matrimonial divorce cases. As the Bill is one to establish and strengthen the institution of marriage, that seemed to me, as it still does, a great weakness. I do not intend to keep your Lordships at this late hour longer than a very few minutes, but I felt that the attention of the House should be drawn in Committee to this lack. The original Bill contained a clause to this effect. As a matter of
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fact, I thought somebody else was going to move this particular Amendment, and I have put it down in my name as it appeared in the original Bill. I, and I am quite sure a great number of your Lordships, have been immensely impressed, perhaps by personal experience, but more particularly by what has taken place in the courts of summary jurisdiction with regard to the effect of conciliation.
I am not going to weary your Lordships with figures at so late an hour, but though I believe it is a matter which cannot be considered now in this Bill, it is one which ought to have the serious attention of the Government of this country in order to try and devise a scheme for bringing conciliation into the Courts. I am told on very high authority that if the Amendment standing in my name, which was part of the original Bill, was introduced it would cause a great deal of difficulty with regard to these matters of divorce being tried in the courts of summary jurisdiction and so on. I dare say that is quite true, and I only wish that the promoters of the Bill would find a better way of bringing in this question of conciliation. I am quite sure there is not a single member of the House, however much he may approve the provisions of this Bill, who would not infinitely rather see questions of this kind settled and parties reconciled than go through the Divorce Court. I hope your Lordships will forgive me for having occupied even a few minutes at this hour, but I did want, before asking leave to withdraw this Amendment, to bring before the notice of the House once more the need of this most important aspect of the matter.
Remaining clause agreed to.
House adjourned at twenty minutes before twelve o'clock.