Sitting of 4 May 1938

Preamble
The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.
NEW WRIT.
For the County of Bucks (Aylesbury Division), in the room of Michael Wentworth Beaumont, esquire (Manor of Northstead).—[Captain Margesson.]

PRIVATE BUSINESS.
IRVINE AND DISTRICT WATER BOARD ORDER CONFIRMATION BILL,
" to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to Irvine and District Water Board," presented by Mr. Elliot; and ordered (under Section 7 of the Act) to be considered To-morrow, and to be printed. [Bill 137.]
Ministry of Health Provisional Order (Keighley) Bill,
Read a Second time, and committed.

ORAL ANSWERS TO QUESTIONS.

  GERMAN AND AUSTRIAN REFUGEES.
  Mr. Hall-Caineasked the Prime Minister for what reason it has now been decided that British visas are to be insisted upon in the case of German and Austrian citizens desiring to visit Great Britain; and whether there is any proposal that British subjects should in future obtain German visas before visiting Germany?
  Mr. Creech Jonesasked the Prime Minister for what reasons the British Government are introducing visa restrictions against Austrians travelling to Britain; what instructions in the matter have been isued to British consuls; and whether any difficulties will be put in the way of
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  political and religious refugees escaping from Austria?
  The Under-Secretary of State for Foreign Affairs (Mr. Butler): I would refer the hon. Members to the reply given yesterday by my right hon. Friend the Home Secretary to the hon. and gallant Member for the Central Division of Wandsworth (Colonel Nathan). The necessary instructions have been sent to consuls and passport control officers. I am not aware as yet of any proposal that British subjects should in future obtain German visas before visiting Germany.
  Mr. Riley: Does the hon. Member not consider that the insistence on such visas may well prevent innocent persons from escaping from Nazi persecution?
  Mr. Butler: If the hon. Member will refer to the statement made by my right hon. Friend the Home Secretary he will see that it is necessary, in order to assist refugees coming to this country; and certain organisations in this country dealing with refugees have recognised the necessity for this provision.
  Mr. Mander: Will it not make it difficult for genuine refugees coming to this country to go back to Germany or Austria?
  Mr. Butler: I would refer the hon. Member to the full statement made by my right hon. Friend the Home Secretary.

  GERMANY.

    FOREIGN POLICY.
    Mr. Manderasked the Prime Minister whether, in view of the unrest and insecurity felt in Denmark, Belgium, Czechoslovakia, Hungary, and other countries bordering on Germany as a result of the policy of the German Government, he will consider bringing the question of the preservation of peace in this part of Europe before the League of Nations or making direct representations to Germany with this object?
    Mr. Butler: His Majesty's Government do not consider that any useful purpose would be served by adopting this course at the present moment.
    Mr. Mander: In view of the fact that the British colonies are also threatened, would it not be better for us all to hang together than to hang separately?

    NON-ARYANS (EXPROPRIATION).
    Commander Locker-Lampsonasked the Prime Minister whether he can give time for an early Debate on the Motion standing in the name of the hon. Member for Handsworth?
    [That this House protests against the expropriation in Germany of non-Aryan nationals, and urges joint action with the United States to preserve the primitive rights of helpless minorities.]
    The Prime Minister (Mr. Chamberlain): No, Sir. In view of the state of public business I am afraid I cannot afford a special opportunity for the discussion of this Motion.

    CHINA AND JAPAN.
    Sir John Wardlaw-Milneasked the Prime Minister whether his attention has been drawn to the complaint made by British residents in the International Settlement in Shanghai of 12th April that incidents involving violence by Japanese military authorities to the persons and property of foreigners are a frequent occurrence, ranging in gravity from a pistol threat, under the eyes of Japanese sentries, to the commandant of the Durham Light Infantry to physical assaults on civilians; and what steps have been taken to protect the lives and property of British subjects in the area of the settlement occupied by Japanese troops?
    Mr. Butler: My attention has been drawn to this complaint. His Majesty's Ambassador at Tokyo has made energetic representations to the Japanese Government with whom he has instructions to take up all these matters urgently.
    Sir J. Wardlaw-Milne: Is my hon. Friend not aware that conditions in the International Settlement are entirely different from conditions in the rest of China; and is it not possible for the British Government, in consultation with the American Government, to insist on action being taken to protect the integrity of the International Settlement?
    Mr. R. Acland: Is the hon. Member aware that that could not be done without a war?
    Mr. Butler: Representations on the subject have been made by our Ambus-sador at Tokyo.
    Sir J. Wardlaw-Milne: Is the hon. Member aware that no question of war arises in the case of the International Settlement, which is not on foreign territory?
    Mr. Moreingasked the Prime Minister whether his attention has been drawn to the obstacles placed by the Japanese authorities in the way of Chinese workers desiring to return to work in British factories in the Shanghai International Settlement, particularly with regard to the refusal to allow the necessary service of tramways; and what steps is he taking to remedy this state of affairs?
    Mr. Butler: Yes, Sir. His Majesty's representatives both in Shanghai and Tokyo have done their utmost to bring about an improvement in the situation.
    Mr. Moreingasked the Prime Minister whether he will instruct His Majesty's Ambassador in Tokyo to request the Japanese Government to refrain from preventing the British-owned Shanghai tramways from sending their tramcars for necessary repairs to the company's repair shops in Yangtsepoo, in the International Settlement?
    Mr. Butler: The Shanghai Electric Construction Company, Limited, obtained permission through the efforts of His Majesty's Consul-General at Shanghai on 28th March to send trams for overhaul in Yangtsepoo and they have been sending them regularly to repair shops there since 31st March.
    Mr. Moreingasked the Prime Minister whether his attention has been drawn to the attempts of the Japanese Government to impose Japanese currency upon the Shanghai International Settlement, particularly with regard to the refusal to allow the tramcars to work in certain districts unless the fares are collected in Japanese yen; and whether he will instruct His Majesty's Ambassador to protest against this interference with the established currency in the International Settlement?
    Mr. Butler: I have received no information from Shanghai in this sense. Perhaps my hon. Friend will be good enough to communicate with me in the matter.
    Mr. Hannahasked the Prime Minister what steps have been taken to put a stop to the extensive smuggling of Japanese goods into the Hongkew and

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    Yangtsepoo districts of the International Settlement of Shanghai, to the prejudice of the trade of other nations?
    Mr. Butler: The Japanese Government have repeatedly been urged to put a stop to this abuse, and it is hoped that more effective action will be taken as a result of the arrangements recently reached regarding Customs matters in the areas occupied by the Japanese forces.
    Mr. George Griffiths: Cannot we bring this matter to the notice of the Non-Intervention Committee?
    Sir John Haslam: May I ask the hon. Gentleman to recognise that some of us are very keen on this Chino-Japanese question, although Members in certain parts of this House do not seem to be troubled at all?
    Mr. Butler: I appreciate that fact.
    Commander Marsdenasked the Prime Minister whether he will call a conference of the Powers enjoying treaty rights in the International Settlement of Shanghai with a view to issuing a joint demand to the Japanese Government to withdraw from the area of the International Settlement all Japanese naval and military forces, save such as may be reasonably required in accordance with treaty rights for the protection of the lives and property of Japanese nationals in the area of the Settlement?
    Mr. Butler: I fear that my hon. and gallant Friend's suggestion presents many difficulties and would not be likely to lead to any practical results.
    Commander Marsdenasked the Prime Minister why the Chinese Customs service is allowed to operate normally in the French Concession at Shanghai and not in the International Settlement?
    Mr. Butler: The reason is that the French Concession is solely under French control and the armed forces of other nations are not permitted to exercise authority therein.
    Commander Marsden: Is my hon. Friend fully aware that, owing to the Japanese control of Customs, a lot of Japanese goods are going into the Settlement free of duty to the detriment of our trade; and will he not adopt a more determined attitude?
    Mr. Butler: I will consider the point which my hon. and gallant Friend has put to me.
    Major-General Sir Alfred Knoxasked the Prime Minister whether he has any information as to the quantity of munitions imported into China since the outbreak of war and from what countries these munitions chiefly came?
    Mr. Butler: As regards munitions imported into China from other countries, I have nothing to add to the reply given to my hon. and gallant Friend on 7th February. So far, however, as imports from the United Kingdom are concerned, the total value of the arms, ammunition and military and naval stores exported from this country to China was £204,908 during the period 1st June, 1937, to 31st March, 1938, the latest date up to which figures are available.
    Sir A. Knox: Is it not true that 80 per cent. of these munitions are supplied by Germany and Italy and that the bill is backed by Soviet Russia?
    Mr. James Griffiths: Can the hon. Gentleman say how it comes about that the Foreign Office have such specific information about arms going to China and such vague information about arms going to Spain?
    Mr. Noel-Bakerasked the Prime Minister whether he can make a statement concerning the negotiations of His Majesty's Government with the Government of Japan regarding the Chinese Customs service?
    The Prime Minister: His Majesty's Ambassador in Tokyo has, since February last, been carrying on unofficial conversations with the Japanese Vice-Minister for Foreign Affairs, regarding the servicing of the foreign obligations secured on the revenues of the Chinese Maritime Customs and other matters connected therewith. His Majesty's Government in the United Kingdom have now received from the Japanese Government a communication stating what temporary measures they propose to take during the period of hostilities to regulate these matters. His Majesty's Government will offer no objection to the application of these measures for the period mentioned. They appear to His Majesty's Government to offer the

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    best guarantee obtainable for safeguarding the interests of the holders of China's foreign obligations secured on the Customs revenues and thereby to assist in maintaining China's credit. I am circulating further details in the OFFICIAL RERORT.
    Mr. Noel-Baker: May we take it that this agreement does not in any way recognise the legitimacy of the action Japan has taken in respect of the Chinese Customs service?
    The Prime Minister: Yes, Sir.
    Mr. Thorne: Does that mean that you are depriving the Chinese Government of a good deal of the revenue by the attitude you are adopting?
    The Prime Minister: No, Sir.
    Following are the details:
    According to the arrangements notified to His Majesty's Government by the Japanese Government which will be subject to reconsideration in the event of a radical change occurring in the economic conditions, all revenues collected by the Customs at each port within the areas under Japanese occupation are to be deposited with the Yokohama Specie Bank. From revenues thus deposited foreign loan quotas will be remitted to the Inspector-General of Customs in order to meet in full the servicing of the foreign loans and indemnities secured on the Customs revenue. The servicing of such foreign loans and indemnities will be treated as a first charge on the revenue after deducting the maintenance expenses of the Customs Administration and certain Customs payments and grants. Foreign loan quotas for each port will be determined monthly in proportion to the share of that port in the total gross collections for all ports during the preceding month.
    Arrangements will also be made for payment to the Japanese Government of arrears on the Japanese portion of the Boxer indemnity held at the Hongkong and Shanghai Bank since last September, for meeting future payments in respect of the Japanese portion of the Boxer indemnity and the Japanese share of the re-organisation loan of 1913, for the repayment of the overdraft incurred by the Inspector-General of Customs since January in relation to the Shanghai share of the foreign loan service, which has been accumulating in Hongkong and
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    Shanghai Bank at Shanghai, and for transfer to the Yokohama Specie Bank of the balance of Customs accounts with the Hongkong and Shanghai Bank in each port under Japanese occupation and its utilisation for the future servicing of foreign obligations.

    GRECO-TURKEY TREATY.
    Mr. Thorneasked the Prime Minister whether he can state the text of the Greco-Turkey agreement, signed at Athens on Wednesday last; whether that agreement has been reported to the League of Nations; and whether the agreement links up with the Government agreement with Turkey?
    Mr. Butler: I have received a French translation of the treaty to which the hon. Member refers, published when the treaty was initialled on 28th February, and I am arranging for an English translation to be placed in the Library of the House. As this treaty was only signed on 27th April and has not yet come into force, I do not imagine that it has yet been registered with the Secretariat of the League of Nations. As regards the last part of the question, the new treaty, so far as I am aware, is not inconsistent with any instrument in force between His Majesty's Government and the Turkish Government.

    LONDON NAVAL TREATY.
    Mr. Thorneasked the Prime Minister whether the Government have given notice to the League of Nations of their intention to apply the escalator clause of the London Naval Treaty of 1933; and what effect it will have upon other nations?
    Mr. Butler: The answer to the first part of the question is in the affirmative. As regards the second part of the question, I am unable to express an opinion as to the effect upon other nations.

    LEAGUE OF NATIONS (STATES' CONTRIBUTIONS).
    Mr. Dayasked the Prime Minister the total budget of the League of Nations for the 12 months ended to the last convenient date, and the contributions of His Majesty's Government in the United King-

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    dom to the same date, including the International Labour Office and the permanent Court of International Justice; and which members of the League have not paid their quota?
    Mr. Butler: As the reply involves a number of figures, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Day: Are the States that are owing large sums of money taking any steps to reduce their obligations?
    Mr. Butler: I have enough responsibilities without that.
    Mr. Mander: Are we ourselves carrying out our obligations?
    Following is the reply:
    The total Budget voted for the financial period ending 31st December, 1937, was 23,347,302 gold francs. The Budget of the International Labour Office and the Permanent Court of International Justice are included in this sum. Of this amount 2,062,479.70 gold francs were provided out of the surplus from 1935 and the remainder in contributions from Member States. The United Kingdom contribution amounted to 2,490,531.75 gold francs. At the date of the most recent statement issued, the following States had not paid their contributions for 1937 in full: Albania, Cuba, Ecuador, Spain, Ethiopia, Greece, Guatemala, Haiti, Panama, Paraguay, Salvador and Yugoslavia.

    SPAIN.
    Mr. W. Robertsasked the Prime Minister whether, as protests have failed to safeguard British ships and British seamen from attacks by Italian aeroplanes, he will now consult with the French Government to devise means by which the navies of the two countries may protect such ships in the conduct of their lawful commerce?
    Mr. Aclandasked the Prime Minister whether he has received any information tending to show whether the insurgent aircraft whose raids damaged British shipping recently in Barcelona and Valencia were indiscriminately bombing the harbours or were deliberately attacking the British shipping?
    Mr. Noel-Bakerasked the Prime Minister whether he has received any reports concerning the nationality of the aircraft which bombed British ships in Barcelona harbour last week; whether those reports indicate whether the attack was deliberately directed against the British ships; and what is the extent of the damage inflicted upon the ships?
    Mr. Butler: As regards the air raid on Valencia on 25th April, I would refer the hon. Member to the reply which I gave to similar questions on 2nd May by the hon. Members for Barnstaple (Mr. Acland) and Birkenhead, East (Mr. White). During this raid one British ship, the "Stanland," was narrowly missed by a bomb and suffered considerable damage, and four other British ships are reported to have been slightly damaged. As regards the air raids on Barcelona on 30th April and 1st May, no British ships were damaged. On all three occasions the aircraft were flying at a great height, and it was not possible to identify their nationality. All the air raids in question appear to have been directed against the ports, and His Majesty's Government do not consider that there is any evidence to show that attacks were deliberately aimed against British vessels. In these circumstances, they do not consider that any special action is called for.
    Mr. Roberts: Is it not a fact that the captains of the ships concerned have definitely identified the aeroplanes as Italian?
    Mr. Butler: As I said in my answer it was not possible, owing to the great height, for us to identify their nationality.
    Mr. A. V. Alexander: If these planes were flying at such a great height, can it be argued that they were aiming at military objectives? Were they not just dropping bombs from a great height indiscriminately on civilians?
    Mr. Butler: The effect of the raid seems to have been concentrated on a district in which there were military objectives.
    Mr. Noel-Baker: Is it the view of the Government that it is legitimate to drop bombs on ports where there is neutral shipping, although the ports may be remote from the firing line?
    Mr. Butler: I do not think we like air raids in any circumstances at all, but it

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    is less easy to make a protest when there are military objectives in view from the air.
    Vice-Admiral Taylor: Was the British ship not alongside the jetty and within the area of a perfectly legitimate objective?
    Mr. W. Robertsasked the Prime Minister whether the British Government will now claim damages from the insurgent authorities in Spain for damage done to the steamship "Stanwell," which was the object of deliberate bombardment by aircraft?
    Mr. Butler: As I informed the hon. Member for Birkenhead, East (Mr. White) on 30th March, the British Agent has been instructed to inform the Burgos authorities that His Majesty's Government reserve the right to claim in due course compensation for the damage to persons and property resulting from the attack on the steamship "Stanwell."
    Mr. Roberts: Why should a different procedure be followed in this case from that which was followed when the British Ambassador was deliberately attacked by Japanese planes? Is there a different valuation on the lives of seamen and of Ambassadors?
    Mr. Butler: I have already outlined in a previous answer what the procedure is with regard to compensation. Of course, there is a difference between an Ambassador and a ship.
    Mr. George Griffiths: The men on the ship do not count then, do they?
    Mr. Mander: Will any compensation be asked for before or after the settlement?
    Mr. Butler: Does the hon. Member mean the settlement of hostilities?
    Mr. Mander: Yes, Sir.
    Mr. Butler: It is probable that a claim will be put in after the cessation of hostilities. That is the general policy. But it is now necessary to assess the damage to property resulting from the attack.
    Mr. Creech Jonesasked the Prime Minister whether the British Consulate at Barcelona has been closed; and, if so, what arrangements have been made to give help and protection to non-combatant British nationals who remain in the city?
    Mr. Butler: No, Sir. There is a branch of the office in Barcelona, through which touch is maintained with British subjects in the town.
    Mr. Creech Jones: Do I gather that the consuls of other nations are already in Barcelona and that the British Consul has been withdrawn?
    Mr. Butler: No, Sir, there is an office in Barcelona, though it is true that the British Consul lives outside.
    Captain Ramsayasked the Prime Minister (1) whether his attention has been drawn to the fact that 466 trucks with a loading capacity of 850 tons and carrying that weight of heavy and light artillery guns, anti-tank guns, machine guns and munitions, armoured cars, automatic rifles and tanks passed over the Franco-Catalan frontier in the week ending 22nd March; and will he bring these facts to the attention of the Non-Intervention Committee;
    (2) whether he is aware that 300 aeroplanes crossed Rumania from Soviet Russia on 25th April en route for Spain; and whether he will bring this fact to the notice of the Non-Intervention Committee?
    Mr. Butler: I would refer my hon. and gallant Friend to the reply which I returned on 2nd May to a similar question put by my hon. and gallant Friend the Member for Bournemouth (Sir H. Croft).
    Captain Ramsay: May I ask my hon. Friend whether, in view of the importance of Question No. 21, if I put the question down later on, he will let me have a separate reply on the matter?
    Mr. Butler: That question has already been covered by the answer I have given.
    Mr. Gallacher: Is the Minister aware that the hon. and gallant Gentleman who asked this question saw the Russians pass through Scotland during the War?
    Mr. Rileyasked the Prime Minister whether the German Government is still a member of the Non-Intervention Committee; and if they have accepted the British formula for the withdrawal of foreign volunteers from Spain?
    Mr. Butler: The answer to both parts of the question is in the affirmative.
    Mr. Rileyasked the Prime Minister whether the application of the British formula for the withdrawal of foreign volunteers will also cover the withdrawal of foreign military aeroplanes, guns and munitions?
    Mr. Butler: No, Sir. In this connection I would refer the hon. Gentleman to the reply given on 30th March to a question by the hon. Member for Kings-win-ford (Mr. A. Henderson).

    ANGLO-POLISH NAVAL AGREEMENT.
    Mr. Thorneasked the Prime Minister the text of the Anglo-Polish Naval Agreement; whether the agreement has been reported to the League of Nations; and whether it is on lines parallel with those entered into with Germany and Russia?
    Mr. Butler: Arrangements are being made to publish the documents comprising the Anglo-Polish Naval Agreement in a White Paper as soon as possible. The answer to the second part of the question is in the affirmative. This agreement follows the lines of the London Naval Treaty, 1936.
    Mr. Thorne: How is it that the Government can get these agreements with Poland and other European countries on many questions, and cannot get a political agreement with some of these people and avoid war altogether?
    Mr. Butler: The hon. Gentleman has no doubt seen the instance of a political agreement recently made, and I only wish that he would support the Government in these agreements.
    Mr. Thorne: I will do that when it is a genuine one.

    AUSTRIA (BRITISH AND AMERICAN NATIONALS).
    Sir Percy Harrisasked the Prime Minister whether his attention has been called to the report of the American Consul-General in Vienna to the State Department in Washington that on 50 occasions he had protested to the authorities in Vienna against the ill-treatment of American-born Jews or Jews possessing American citizenship, and that two British
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    subjects had also been subjected to similar treatment; and whether the British Government are making similar representations on behalf of their nationals?
    Mr. Butler: I have no official knowledge of the report to which the hon. Baronet refers. His Majesty's Government have taken action in all cases in which they considered it practicable to do so.

    ABYSSINIA.
    Miss Rathboneasked the Prime Minister how many British consular or other representatives remain in Ethiopia, and in what towns they are stationed?
    Mr. Butler: There are five British consular officers at Addis Ababa and two at Harar.
    Miss Rathbone: As there are only consular officers in two towns in Ethiopia, upon what is the information based that Italian control of Ethiopia is practically complete?
    Mr. Butler: I have said that there are seven consular officers and that they are in those two places, and they send us reliable information.
    Miss Rathbone: Can that reliable information refer to anything but to the towns in the neighbourhood?
    Mr. Butler: The hon. Lady underrates the abilities of our consular officers.
    Miss Rathboneasked the Prime Minister how many British firms or banks still have representatives in Ethiopia, and in what cities?
    Mr. Butler: My latest information is that in October last there were some 35 British companies registered with His Majesty's Consular Officers in Ethiopia. In most of these the predominating interest was Indian and they were situated in Addis Ababa, though a few operated in outlying places. There are no British banks in Ethiopia.
    Miss Rathbone: Do I understand that the Indian or British representatives of those firms are still in Addis Ababa?
    Mr. Butler: So I understand.
    Mr. Noel-Bakerasked the Prime Minister whether he can now say if His Majesty's Government will lay a motion

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    before the Council of the League of Nations concerning the recognition of Italian sovereignty in Abyssinia; if so, what are the terms of that motion; and, if not, what procedure it is intended to adopt with regard to this item of the Council's agenda?
    The Prime Minister: The position of His Majesty's Government with regard to the recognition of Italian sovereignty over Ethiopia was explained in the course of the Debate on 2nd May. It is for the Council to decide upon the procedure to be followed in considering the question which His Majesty's Government have placed upon the agenda, and I cannot make any forecast on the subject.
    Mr. Noel-Baker: Can the Prime Minister tell the House whether His Majesty's Government intend to propose any definite course of action with regard to the recognition of Italian authority in Ethiopia?
    The Prime Minister: No, Sir, I cannot say that at present.
    Mr. Noel-Baker: If that is so, why has the right hon. Gentleman said in a note to Signor Mussolini that we were desirous that the obstacles to recognition should be removed by members of the League?
    The Prime Minister: Because that represented the fact.
    Several Hon. Members rose—
    Mr. Speaker rose—
    Mr. A. V. Alexander: Are we not entitled to question the right hon. Gentleman?

    CZECHOSLOVAKIA.
    Mr. Vyvyan Adamsasked the Prime Minister whether he will make representations to the Council of the League of Nations, in accordance with Article 11 of the Covenant, to the effect that the recent German interference with the domestic affairs of the Republic of Czechoslovakia constitute a threat to the peace of Europe, to which His Majesty's Government cannot undertake to remain indifferent?
    The Prime Minister: I do not think that the course which my hon. Friend suggests would lead to any useful result.
    Mr. Adams: Is the Prime Minister aware that, if the Henlein demands were
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    granted, the independence of Czechoslovakia would be effectively destroyed?
    The Prime Minister: That may or may not be the case, but it does not affect my answer.
    Mr. Adams: Is my right hon. Friend satisfied that Berlin really desires a peaceful and reasonable settlement of the Sudeten Deutsch question?

    ANGLO-FRENCH CONVERSATIONS.
    Mr. Simmondsasked the Prime Minister whether he can make any statement on the proposed closer co-operation between the French Air Force and the Royal Air Force?
    The Prime Minister: I would refer my hon. Friend to the statement in the communiqué issued on 29th April at the close of the Anglo-French conversations to the effect that
    " the two Governments decided to continue as might be necessary the contacts between their General Staffs established tinder the arrangement reached in London on 19th March, 1936."
    To this statement I have nothing to add.
    Mr. Simmonds: Can the Prime Minister say whether it is proposed to begin technical discussions in regard to the air programme with the French Government?
    The Prime Minister: I imagine that the discussions which take place between the air attaches are of a different character.
    Mr. Mander: Is it intended to bring other friendly Governments into the discussions?
    The Prime Minister: No, Sir.
    Mr. Alexander: May we take it that the only position we have reached is a military alliance with France, and that we are preparing for war against other countries?
    The Prime Minister: No, Sir. That is not a fair interpretation of the position.

  ROYAL NAVY.

    MARRIAGE AND LODGING ALLOWANCES.
    Vice-Admiral Taylorasked the First Lord of the Admiralty how much more a married officer with wife and one

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    child, taking up a shore appointment where no official quarters are provided, will receive per annum than a married officer with a wife and no children?
    The First Lord of the Admiralty (Mr. Duff Cooper): As a result of the arrangement which I communicated to my hon. and gallant Friend in reply to his question of 6th April, a married but childless commissioned officer will receive the same total emoluments as he would if he had one child. A married warrant officer with one child will receive 1s. per day more than he would if he were childless.
    Vice-Admiral Taylor: Am I to understand that a married officer with one child receives no more than a married officer who has no children? If that is so, will the First Lord go into the matter and see that the officer gets the 2s, which under the scheme is allotted for the first child?
    Mr. Cooper: My hon. and gallant Friend is aware that under the scheme as originally propounded it was found that a married officer with no child will be slightly worse off than he was before, owing to the forfeit of his lodging allowance. Therefore, a change was made in order to ensure that nobody should suffer under the new scheme, and it works out that he will receive as much as an officer with one child.
    Vice-Admiral Taylor rose—
    Mr. Speaker: There are 102 questions on the Order Paper.
    Vice-Admiral Taylor: On a point of Order. This is a very important subject to the naval officers, and supplementary questions are being asked on other matters.
    Mr. Speaker: The First Lord has answered the question.
    Vice-Admiral Taylorasked the First Lord of the Admiralty what payments will be made to a lieutenant-commander or commander with a wife and one child removing his family from England to Hong Kong on account of the tickets for his wife and child; and what will he receive after arrival on account of lodging allowance and marriage allowance, respectively?
    Mr. Cooper: The original scheme has been modified and orders have recently
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    been issued by which the families of officers employed on shore abroad will be given free passages to and from the officer's place of appointment. On arrival abroad the officer will be entitled to the same allowances as if he were appointed on shore at home. Alternatively, an officer appointed on shore abroad who certifies that he is maintaining a home in this country for his family, will receive marriage and chilldren's allowances in addition to any allowances, for example, lodging allowance, to which he is himself entitled.
    Vice-Admiral Taylor: I have not followed exactly what the allowance is. I do not mean that in any derogatory sense. Can the right hon. Gentleman say whether, under the amended regulations, when a naval officer with his family goes abroad, he will receive his travelling allowance and that in addition, when he arrives to take up his appointment abroad he will receive his marriage allowance?
    Mr. Cooper: Yes. He will receive marriage allowance when he is abroad and he will also receive travelling allowance.
    Vice-Admiral Taylor: Thank you.
    Vice-Admiral Taylorasked the First Lord of the Admiralty whether under the marriage allowance scheme a married officer with no children, on taking up a shore appointment where no official quarters are provided, will be better off financially than he was before the scheme was introduced?
    Mr. Cooper: After allowing for the cut in pay, the officer in question will be in approximately the same position financially as hitherto.
    Vice-Admiral Taylor: Am I to understand that the married officer receives no more than the unmarried officer, although he has greater expense, owing to the fact that he is married? May I have an answer? Will the First Lord say when a White Paper will be issued giving the particulars?
    Mr. Parkerasked the First Lord of the Admiralty whether the marriage allowance for commissioned officers from warrant rank is 4s. 6d. per day or 3s.; and whether he will state the separate emoluments and the total of commissioned officers from warrant rank above

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    nine years' seniority in the mechanical and non-mechanical branches, respectively, under the old system, if receiving lodging and provision and any other shore allowance, and, if married with no children, under the new system with marriage allowance, but with his pay cut and allowances abolished?
    Mr. Cooper: The normal marriage allowance for a commissioned officer from warrant rank is 3s. a day, but married and childless commissioned officers from warrant rank employed on shore and not provided with married quarters receive 4s. 6d. a day. As regards the remainder of the question, I would refer the hon. Member to the reply I gave to him on 13th April.

    EQUIPMENT (MERCANTILE MARINE).
    Sir Robert Rankinasked the First Lord of the Admiralty what steps have been taken during the current year to accumulate stocks of anti-aircraft and anti-submarine equipment for the merchant navy; and what proportion of the mercantile marine could now be fitted out with such equipment at short notice?
    Mr. Cooper: As regards the first part of the question, sufficient stocks of antisubmarine guns for arming ships of the merchant navy had already been accumulated before the current year. Provision is also being made for the necessary stocks of anti-aircraft equipment. As regards the second part of the question, it would not be in the public interest to divulge the precise figures of our preparations in these respects.

  TRADE AND COMMERCE.

    WEST INDIES AND MALAY STATES (JAPANESE COTTON GOODS).
    Mr. Roland Robinsonasked the Secretary of State for the Colonies whether he is aware that Japanese firms are importing into the West Indies large quantities of four-yard lengths of printed spun-viscose rayon fabric made up as bedspreads, to which the quota does not apply, and that after importation these bedspreads are unpicked and the resulting cloth-lengths are made up into dress goods; and what steps does he propose to take to prevent the evasion of the general quota restrictions upon Japanese cloth imports into the West Indies, which
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    is having an adverse effect on the Lancashire cotton industry?
    Major Procterasked the Secretary of State for the Colonies whether his attention has been called to imports into the West Indies of large quantities of printed four-yard lengths of spun-viscose rayon fabric made up as bedspreads, which are then unpicked and the resulting cloth lengths made up into dress goods, and that this type of importation is nullifying the quota restrictions upon Japanese cloth imports into the West Indies and so competing with British cotton prints to the detriment of the cotton industry; and what action he proposes to take?
    The Secretary of State for the Colonies (Mr. Ormsby-Gore): I have recently received representations from the Cotton Spinners' and Manufacturers' Association on this subject and I am making inquiries.
    Mr. Robinson: Will the right hon. Gentleman promise to take firm action to prevent any evasions of the quota restrictions which may be brought to his notice?
    Mr. Ormsby-Gore: I must have the facts first.
    Major Procterasked the Secretary of State for the Colonies whether he is aware that, in order to circumvent the quota restriction on cotton piece goods imported into the Malay States, Japanese exporters are sending in cotton shirts with tails several yards long so that, although the shirts are defined as one garment, the tails can be cut off and used as piece goods; and whether steps have now been taken to deal with this evasion of the quota restrictions?
    Mr. Ormsby-Gore: I have seen some reports to this effect, and I understand that the local authorities have taken steps to deal with the matter.
    Major Procter: Will the right hon. Gentleman make representations to the appropriate department of the Japanese Government in order to prevent a recurrence of this sharp practice?

    MALAYA (POWER SPIRIT PRODUCTION).
    Mr. Morganasked the Secretary of State for the Colonies whether his attention has been called to the closing down of the Nipah estate in Malaya, which was the only concern producing power spirit in the country; and whether, in the in-

    863
    terests of the community as well as of the Empire, some assistance will be given by the Government to this industry, especially in view of the creation of the Singapore dock?
    Mr. Ormsby-Gore: I have received no information on the subject, but I am asking the High Commissioner for the Malay States for a report.

    RUBBER INDUSTRY.
    Mr. Dayasked the Secretary of State for the Colonies particulars of the present arrangements between the British and Dutch Governments for the production of and/or shipment of rubber from the possessions of either Government?
    Mr. Ormsby-Gore: The production of rubber in both the Netherlands East Indies and the main British producing territories is governed by the International Rubber Regulation Agreement, signed in 1934.
    Mr. Day: Can the right hon. Gentleman say whether the reports still show that there is considerable distress in the rubber industry in British Possessions?
    Mr. Ormsby-Gore: I think that on the whole the International Agreement is working well.

    GOLD COAST (COCOA INDUSTRY).
    Mr. Alexanderasked the Secretary of State for the Colonies (1) whether an agreement has been entered into with the approval of the Government of the Gold Coast controlling the export of cocoa for a period up to Octber, 1938; who are the parties to the agreement; and who was consulted before the agreement was approved;
    (2) whether he is aware that many Gold Coast traders consider that the quotas fixed for cocoa exports from West Africa up to October, 1938, are calculated to protect the firms who have been parties to the buying pool and are detrimental to both native producers and independent buyers; and what steps he is taking to prevent this?
    Mr. Creech Jonesasked the Secretary of State for the Colonies whether he can make a statement as to the position of the dispute in the cocoa trade in South Africa?
    Mr. Ormsby-Gore: I apologise for the length of the reply. As the hon. Members will be aware, the greater part of the present season's Gold Coast cocoa crop has not so far come upon the market. At the beginning of the season the majority of firms buying cocoa on the Coast entered into an agreement regarding the terms of their operations. As the growers in the Gold Coast considered that the existence of such an agreement was detrimental to their interests, they for several months refused to sell their cocoa and this hold-up applied not only to the agreement firms but also to other firms who were not parties to the agreement. In order to facilitate the solution of this deadlock and to prevent the large accumulated stocks of cocoa from being placed suddenly upon the market at a rate beyond its capacity to absorb them, the Government of the Gold Coast have recently passed legislation to control the export of this year's crop. The legislation is purely temporary and will remain in force only until October.
    I am happy to say that, partly as a result of this legislation, the parties to the agreement have now suspended it and the hold-up of cocoa by the growers has been brought to an end. During the negotiations which have led to this result the terms of the legislation which has been passed were naturally discussed with both parties, that is to say, with the agreement firms on the one hand and with the representatives of the growers on the other hand. Under this legislation the greater part of the licences to export cocoa up till 1st October will be allotted to each firm engaged in the trade in proportion to its share of the trade in each of the last two crop years. Each firm will thus be able to enjoy the same share of the trade that it has had in the past. The remaining licences representing 6 per cent. of the total exports or a minimum of 2,000 tons a month will be retained by the Governor for allocation at his discretion, and it is the intention that this discretion should be exercised particularly in favour of African shippers. This amount is much larger than that ever exported by African shippers in the past.
    I cannot accept the suggestion that the quota legislation is detrimental to the African producer. I am sorry that it should be considered unfair to any other

    865
    interest, but the great difficulty will be appreciated of discovering any basis for the allocation of licences in the existing difficult situation which is not open to some criticism, and I am satisfied that on no other basis consonant with due regard to the interests of all parties would it have been possible to secure both the termination of the hold-up by the producers and the suspension of the Agreement by the firms concerned. This was the primary objective, and it is clear that its attainment will benefit all firms trading in the Gold Coast whether they have been parties to the Agreement or not. Before next season's crop I hope to have received the report and recommendations of the Special Commission now in West Africa on any future arrangements regarding the sale of cocoa.
    Mr. Alexander: Is the Secretary of State aware that all the independent firms who had refused to join the buying pool agreement which depressed the native growers' prices have been left out of consultation in making this quota agreement with the pool, and that in consequence many of them will not get their requirements for the current season without going to the pool and paying enhanced prices to the pool?
    Mr. Ormsby-Gore: I could not answer that. That is a strictly business matter; hut the great thing is that all the firms trading in the Gold Coast will get quotas in proportion to their trade in the past two years. That is the only fair way of dealing with the emergency.
    Mr. Burke: Can the right hon. Gentleman tell us whether the prices offered to the growers will be increased, and, if so, to what extent?
    Mr. Ormsby-Gore: I cannot possibly tell that, because it depends upon world prices. We cannot control world prices.
    Mr. Burke: Is the right hon. Gentler-an aware of the fact that as a result of the depression of prices, due to the activities of the pool, trade temporarily stopped, and that if prices do not increase, the same detrimental effect will occur again?
    Mr. Ormsby-Gore: The hon. Gentleman uses the word "pool." Of course, the firms participating in the agreement deny
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    that there is a pool. [HON. MEMBERS: "Oh! "] I do not say whether it is right or wrong. Surely, it does not depend on any firms in the Gold Coast as to what the price of cocoa is, because that is fixed by the price on the New York market.

    BRITISH GUIANA BUILDING SOCIETY.
    Mr. Lunnasked the Secretary of State for the Colonies whether, in view of the present unsatisfactory position of the British Guiana Building Society, he will recommend the appointment of a committee representative of the Colonial government, the Georgetown Town Council, and the subscribing members of the building society to investigate the question of reconstruction with a view to obviating loss on the part of those least able to bear it?
    Mr. Ormsby-Gore: I understand that proposals have been prepared by the solicitors representing a large body of shareholders and contributors to the British Guiana Building Society, most of whom are members of the poorer and lower middle classes, for the incorporation of a new society and transfer of the assets of the present society to it. I further understand that these proposals will shortly he considered by the liquidator and the members of the society. In the circumstances, I do not consider that the appointment of a committee would serve any useful purpose.
    Mr. Lunn: If I put a question later, will the right hon. Gentleman give me the information regarding the position?
    Mr. Ormsby-Gore: Certainly, if the hon. Member will give me time. I understand that the official receiver is acting for the liquidator and that negotiations are going on.

    BRITISH BROADCAST NEWS (EMPIRE).
    Mr. Morganasked the Secretary of State for the Colonies whether there are any parts of the British Empire, and, if so, which, where no official British broadcast news is now received and distributed to the public; and what is the position in this respect in the different West Indian Colonies?
    Mr. Ormsby-Gore: I must confine my reply to those parts of the British Empire which fall within the sphere of the Colonial Office. I have recently addressed inquiries to the Governments of all these territories with regard to the reception and distribution of the British Offical Wireless News Service. So far as concerns Barbados, the Leeward Islands, the Windward Islands, Malta, Seychelles and the Western Pacific High Commission territories, my information is not yet complete. I understand that in all the other dependencies, with the exception of Northern Rhodesia, Somaliland and St. Helena, the service is duly received and made available to the public. I might add, with reference to the latter part of the question, that Cable and Wireless, Limited, are under an obligation to supply a news service of British news to the West Indies (excluding Jamaica) and to British Guiana.

    SPREAD-OVER HOLIDAYS (PARLIA MENTARY BUSINESS).
    Captain Peter Macdonaldasked the Prime Minister whether, in view of the agreement in the House as to the desirability of spreading holidays over a wider period of the summer and the desirability of Parliament setting an example in this matter, he will set up an inquiry into the possibility of advancing the financial business of Parliament either by ending the financial year earlier than 31st March, or by other means, so as to make possible the commencement of the Summer Recess earlier than the beginning of August?
    The Prime Minister: As explained by my right hon. Friend the Chancellor of the Exchequer on 28th April, in reply to a question by my hon. Friend the Member for Newcastle-upon-Tyne, North (Sir N. Grattan-Doyle), any alteration in the present dates of the financial year would cause serious disturbance both to this House and to the business community. In the circumstances, I do not think that any change is practicable in the arrangements of the House relating to financial business which would enable an appreciable advancement to be made in the date of the Summer Recess. It does not appear, therefore, that any useful purpose would be served by instituting a special inquiry into the matter.
    Mr. Paling: Is there no time from the beginning of April, when the Budget is taken, to the end of June, to deal with the financial business, which takes only three weeks of Parliamentary time and there are three months in which to do it? Cannot the Prime Minister look at the matter from that angle and fall in with the general thoughts in the country on the holiday business?
    The Prime Minister: I am sure that the House, without dislocating its business and without causing great inconvenience to the business community, would desire to do anything to assist in the spacing out of holidays, but if the hon. Member will look at the answer given by my right hon. Friend he will see the difficulties in the way.
    Mr. Paling: I have done my best, and I do not deny that there are difficulties in the way.

    FEEDING STUFFS (HOME PRODUCTION).
    Mr. De la Béreasked the Prime Minister whether he can now find time to consider the Motion standing in the name of the hon. Member for Evesham relating to the home production of feeding stuffs?
    [That, in view of the vulnerable position occupied during war by agriculture in respect of the importation of feeding stuffs, this House urges on the Government the need for developing at home supplies of suitable commodities by permitting the cultivation of additional acreage of potatoes which are not suitable for human consumption but which can be fed to pigs, by using surplus fish for the production of fish-meal for poultry feeding, and by establishing national factories for the supply of these two feeding stuffs to the rearers of pigs and poultry.]
    The Prime Minister: I regret that I can hold out no hope of time being found for the discussion of this Motion.
    Mr. De la Bére: May I ask my right hon. Friend the Prime Minister whether he is aware that it is not only a lack of time, but that there is in some quarters a lack of courage and imagination? Is he not further aware that half measures are insufficient?
    The Prime Minister: I do not think it is true to say that there is a lack of appreciation of the importance of the matter.

    CABLE AND WIRELESS AGREEMENT.
    Mr. David Adamsasked the Prime Minister when the cable and wireless agreement will be submitted to Parliament for approval?
    The Prime Minister: I expect that the Bill required to implement the cable and wireless agreement will be presented within the next two or three weeks.

  DEFENCE.

    ENGINEERING AND SHIPBUILDING INDUSTRIES.
    Mr. David Adamsasked the Minister for the Co-ordination of Defence whether he will make a statement arising out of his recent conferences with representatives of the engineering and shipbuilding industries?
    Sir A. Knoxasked the Minister for the Co-ordination of Defence whether, in accordance with his suggestion, the Engineering and Allied Employers National Federation have invited the Amalgamated Engineering Union and the Confederation of Shipbuilding and Engineering Unions to meet to discuss the speeding-up of the armament programme; whether these bodies have yet met and, if not, why?
    The Minister for the Co-ordination of Defence (Sir Thomas Inskip): I understand that the Engineering Employers' Federation wrote to the Amalgamated Engineering Union and the Confederation of Shipbuilding and Engineering Unions on 5th April inviting them to a meeting. The Confederation have accepted the invitation. No reply has yet been received from the Amalgamated Engineering Union, but I am informed the Executive Council are meeting to-day to consider the invitation.
    Sir A. Knox: Can the right hon. Gentleman say what is the reason for this enormous delay? Was not the invitation issued by the Employers' Federation on 5th April? Why has a whole month's delay occurred before this important matter is inquired into?
    Mr. Kirkwood: Is the Minister for the Co-ordination of Defence not aware that the officials of the Amalgamated Society of Engineers view the Minister with suspicion, the reason being that they know he is asking for sacrifices from the engineers, these sacrifices being their trade rights, for which they have fought for 50 years? They have no right to surrender these rights, but to defend these rights. When he is approached by them will he treat them with justice?
    Sir T. Inskip: The hon. Member is under a misapprehension. I have not asked the Amalgamated Society of Engineers or the Federation of Shipbuilding Workers to make sacrifices. I have asked them to meet the representatives of the Engineering and Allied Employers National Federation in order to discuss how they can provide the necessary skilled labour in this emergency.
    Mr. Kirkwood: Is it not the case that the right hon. Gentleman has stated by his public pronouncements that the engineers will be called upon to make sacrifices? They are not going to do it.
    Mr. David Adams: In view of the fact that such meetings are to take place and we understand that one is to take place this afternoon, will information relating to them be placed at the disposal of the House?
    Mr. Thurtle: Is the right hon. Gentleman aware that it is stated on the "tape" that the Executive Committee of the Amalgamated Society of Engineers have decided to attend the conference?
    Sir T. Inskip: I have not received that information previously. With regard to the other question I shall always be happy to give such information to the House with regard to these proceedings as it is in my power to give.
    Sir A. Knox: Will the right hon. Gentleman answer my question and say what is the reason for the delay?
    Sir T. Inskip: I am not able to answer the question of the hon. and gallant Member. I desire, as he does, as much expedition as is possible.
    Sir A. Knox: Should it not be made public who really is to blame for the delay?

    REARMAMENT SCHEME (CONTRACTS).
    Mr. W. Joseph Stewartasked the Minister for the Co-ordination of Defence the value of contracts for rearmament materials being executed by manufacturers in the administrative county of Durham and the county boroughs of South Shields and Sunderland?
    Sir T. Inskip: I regret that it is not possible, without an undue amount of labour, to ascertain the value of orders placed under the rearmament scheme in any county or any Special Area.
    Mr. Stewart: Is it the policy of the Government in placing contracts to give special attention to the Special Areas and other areas where the percentage of employment is exceptionally high?
    Sir T. Inskip: I have repeatedly stated in the House and elsewhere that the policy of the Government is to give consideration to the Special Areas, other things being equal.

    FOOD STORAGE.
    Mr. J. Griffithsasked the Minister for the Co-ordination of Defence whether, in the steps that are being taken to store food for a national emergency, full consideration has been given to the advantages of canned foods for storage purposes; whether the possibilities of a rapid expansion of the food-canning industry have been explored; and whether he can indicate what steps are being taken in the matter?
    Sir T. Inskip: The answer to the first two parts of the hon. Member's question is in the affirmative. I lately received a deputation from the Food Manufacturers' Federation when the question of food canning in relation to the Government's storage programme was fully discussed. As to the last part of the question, I am not in a position to make any statement.

    CALCIUM CARBIDE.
    Mr. Louis Smithasked the Minister for the Co-ordination of Defence whether it has now been definitely decided to establish a calcium carbide factory in Norway instead of in Scotland or in Wales; and whether he has had any communication on the subject with the company which sponsored the Scottish scheme?
    Sir T. Inskip: If my hon. Friend has in mind a factory to be set up, or on
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    behalf of, the Government in Norway, I am not aware of any such proposal.
    Mr. Smith: Is my right hon. Friend aware that a strong feeling exists in England as well as in Scotland that calcium carbide should be manufactured at home, and will he use his best endeavours with that end in view?
    Sir T. Inskip: I used my best endeavours on a recent occasion.

    MILITARY AIRCRAFT (EXPORT).
    Mr. Hall-Caineasked the Minister for the Co-ordination of Defence whether, in view of the decision to import military aircraft from abroad in order to make good the deficiencies of aircraft supply in this country, it is proposed to take any steps to limit in future the export of British military aircraft; and what is the total number of military aircraft exported since 1st January this year?
    Sir T. Inskip: I would refer my hon. Friend to the answer which I gave to my Noble Friend the Member for Peterborough (Lord Burghley) on 14th April which stated the procedure followed in dealing with applications for sale abroad and explained the various considerations of which account is taken in dealing with these applications. For the reasons indicated in that reply, the Government do not consider it desirable to impose a complete ban on the export of military aircraft from this country, but all applications are rigidly scrutinised in the light of Royal Air Force requirements by the committee which has been set up for this purpose. The total number of aircraft of military types exported by aircraft firms with Air Ministry permission during the period from 1st January to 30th April, 1938, was 106, of which only 13 were of the later types.

    JAMAICA.
    Mr. Sorensenasked the Secretary of State for the Colonies whether he is aware of serious unrest in Jamaica and that many children are suffering from lack of food; whether the threat of a hunger march has been averted by the police; and whether he intends to take action to meet the situation?
    Mr. Ormsby-Gore: I assume that the hon. Member's question is based on a recent Press report containing information

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    which, I am informed by the Governor, is out of date and grossly exaggerated. I have no information that children in Jamaica are suffering from lack of food. The reference to a hunger march appears to relate to a demonstration by ex-British West Indies Regiment Association members which took place on the Kingston racecourse on 14th August, 1937. The association subsequently apologised to the Governor for the disturbances, and its grievances were later discussed in full and steps were taken where possible to meet them. As regards the last part of the question, I would refer to the reply given to the hon. Member for Consett (Mr. David Adams) on 27th April.
    Mr. Sorensen: Is the right hon. Gentleman aware that, in fact, serious disturbances have broken out? Has he been acquainted of these disturbances, and if not, will he take steps to get all the information necessary and publish a report at an early date?
    Mr. Ormsby-Gore: The next question that I shall answer deals with disturbances, but I wish to make it clear that I have no information of any disturbances at Kingston. The disturbances have been a long way from Kingston.
    Mr. Riley: Is the right hon. Gentleman aware that as recently as August, 1937, a petition was presented to the Governor of Jamaica asking him to have an inquiry into labour conditions in the island, and what action did the Government take?
    Mr. Ormsby-Gore: The petition was received, it was accepted, and the commission is now at work.
    Mr. Sorensen: Is the right hon. Gentleman aware that I did not mention Kingston in my question?
    Mr. R. Robinsonasked the Secretary of State for the Colonies whether his attention has been called to disturbances on the West Indies sugar estates near Savana-la-Mar, Jamaica, on Sunday, 1st May; what action was taken to quell the disturbances; and whether these disturbances have now ceased?
    Mr. Ormsby-Gore: I have received a telegraphic report on these disturbances from the Governor. It appears that a slight disturbance occurred on Friday, 29th April, on the West Indies Sugar Company's Frome Estate in the Parish
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    of Westmorland, where a new factory is now being erected, during the payment of weekly wages. Some windows were broken, but there were no casualties, and one hour later the police inspector found that all was quiet. On the following day, between 400 and 500 labourers employed on the new factory struck for higher wages, but the situation remained quiet and no disturbance occurred through the week-end. Ninety extra police were drafted to the area. It appears, however, that on Monday, 2nd May, a crowd of about 3,000 strikers demolished the company's office at Old Frome, attacking the staff and police with stones, sticks and iron bars, necessitating immediate firing by the police. Motor traffic was attacked on the road nearby, and some 80 acres of cane near the factory were fired. Four persons were killed and nine wounded, and 93 arrests were made. The disturbances appear to have been entirely local in character and due to trouble on the particular estate. The latest report indicates that the situation is now quiet.
    Mr. Robinson: Will my right hon. Friend take strong action to maintain law and order in the West Indies, and at the same time make it clear throughout the British Empire that just grievances can always be remedied by constitutional action?
    Mr. Lunn: May I ask the right hon. Gentleman again whether he will send out a commission to inquire into the horrible conditions that exist not only in Jamaica but in the West Indies, so as to settle what is the cause of these disturbances?
    Mr. Ormsby-Gore: We have just had a Commission on Trinidad and, as I informed the House, the new labour adviser to the Colonial Office is going out to the West Indies; a special inquiry is now sitting in Jamaica, and we have had one in Barbados. When an incident takes place such as this one, of course, there must be a special inquiry, but as to the character of that special inquiry, naturally I must consult the Governor before taking any steps.
    Mr. Kirkwood: Is the right hon. Gentleman aware of the fact that they are not allowed to form a trade union in Jamaica, and that therefore they cannot follow the usual constitutional method?
    Mr. Ormsby-Gore: I assure the hon. Gentleman that that is not so. We now have trade union machinery fully working in the West Indies.

  ROYAL AIR FORCE.

    AIRCRAFT SUPPLY (UNITED STATES AND CANADA).
    Mr. Manderasked the Chancellor of the Duchy of Lancaster whether the Air Ministry mission to America has made any arrangements for the purchase of Boeing machines; and whether the result of its inquiries will be placed at the disposal of the French or other friendly governments?
    The Chancellor of the Duchy of Lancaster (Earl Winterton): I am not at present in a position to add anything to the full reply which I gave last week to the hon. Member for West Islington (Mr. Montague) with regard to the scope and objects of the investigations now in hand by the party of experts which is visiting the United States and Canada.
    Mr. Mander: Is it impossible to give any information in reply to the second part of the question as to the handing over of information to the French Government and other governments?
    Earl Winterton: The information could not be imparted to a third party without the permission of the firms concerned. Presumably the French Government have their own methods of obtaining it.

    AIRCRAFT PRODUCTION.
    Sir Walter Smilesasked the Chancellor of the Duchy of Lancaster whether he can give an approximate date when the first aeroplanes will be available from factories in this country which use mass-production methods?
    Earl Winterton: Considerable deliveries have already been made of aeroplanes in the construction of which methods appropriate to large scale production have been applied so far as is practicable and consistent with the high standards imposed by considerations of efficiency and of the safety of flying personnel.
    Sir W. Smiles: Are the mass-production methods in this country as efficient as those in Germany and the United States of America?
    Earl Winterton: There is no mass production of aeroplanes in either country. I will deal more fully with this matter on the course of the speech which I shall make next week, as it would take too long to do so in answer to a question.
    Mr. Kirkwood: Is the Noble Lord aware of the fact that mass production along those lines has been going on in this country for the last 20 years in a most efficient manner?
    Earl Winterton: Yes, but the resemblance between that and the aircraft industry is not very close.

    METALCLAD, LIMITED, WORKS, NEATH.
    Sir William Jenkinsasked the Chancellor of the Duchy of Lancaster whether he is aware that the Metalclad, Limited, works at Neath have been closed since 13th December last, involving 187 men; that this company were producing machinery and assembling bodies manufactured for the Air Ministry; and will he consider the re-opening of these works, as the people employed are in a distressed area?
    Earl Winterton: The firm referred to carried out machining work on bombs some months ago on a sub-contract for a main Air Ministry contractor. If and when further supplies of the same article are required, the main contractor will again be invited to tender, and both firms are being borne in mind for any work for which they may be suitable.
    Sir W. Jenkins: Is the Noble Lord aware that since the closing down of this industry, nearly 4,000 men have been thrown out of employment in the steel trade?
    Earl Winterton: Yes, Sir, I was aware of that, and I was very sorry to hear it. I must point out, however, that these men were not employed on aircraft, but on certain portions of bomb making, and they were employed by a sub-contractor. The chances of their getting work in future will depend upon the work which they get to do in connection with subcontracts.

    AERODROMES.
    Mr. Dayasked the Chancellor of the Duchy of Lancaster the number of licensed civil aerodromes of all kinds and

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    the number of Royal Air Force aerodromes that were completed and ready for use as at the last convenient date?
    Earl Winterton: The numbers at the present time are 100 and 89 respectively.
    Mr. Day: In view of the development of civil aviation, will the Noble Lord impress upon local authorities the advisability of having more landing grounds?

    SHADOW FACTORIES (CONTRACT ARRANGEMENTS).
    Mr. Garro Jonesasked the Chancellor of the Duchy of Lancaster whether the agents for the shadow factories are to receive as management fees the sum of £220 to £225 per air frame and £75 per engine, irrespective of the type of air frame of engine and with no penalty clause for delays?
    Earl Winterton: The management fees for each air frame produced is fixed at £200 or, alternatively, £225 according to the type of air frame. For aero engines it is fixed at £75 irrespective of the type of engine. There is no specific penalty clause for delay, but agreements are terminable on due notice on failure of the agents to carry out their obligations.
    Mr. Garro Jones: Is the same price fixed for an engine which costs £1,000 as for one which costs £3,000?
    Earl Winterton: This matter is very fully explained in the report of the Comptroller and Auditor-General on the Air Appropriation Account.
    Mr. Garro Jones: Is the Noble Lord aware that the report does not state explicitly whether the same price is being paid for an engine which costs £1,000 as for one which costs £3,000?
    Earl Winterton: I shall be very glad to deal with this question in extensor in the course of my speech next week.
    Mr. Garro Jonesasked the Chancellor of the Duchy of Lancaster, what is the fixed management fee paid or to be paid in addition and prior to the £220 to £225 per annum for each airframe and £75 per engine to each of the agents for the shadow factories during the period before production begins; and whether this is an annual or total payment?
    Earl Winterton: I would refer the hon. Member to the figures which were supplied in an answer given to him by my right hon. Friend the Minister for Coordination of Defence on 17th February, 1937. For the first year management fees of the amounts therein stated are payable to the firms concerned for their services in respect of erection and equipment of the shadow factories and of the planning of them for production. In subsequent years the managing firms are re-munerated by the fees earned for the production of airframes and engines.
    Mr. Garro Jones: Are these fixed payments made only when production commences, or are they paid annually, irrespective of how long it takes to come into production?
    Earl Winterton: The whole of the first year is necessarily absorbed in the work of the erection, installation and equipment of the shadow factories.
    Mr. Garro Jones: Can I have an answer to the point which I put to the Noble Lord? Is the sum fixed irrespective of when they come into production? If they take 10 years to come into production, do they receive an annual payment of this amount?
    Earl Winterton: I am sorry that I have not made it clear. The answer is, "No, Sir."
    Mr. Attlee: Is there any check as to the amount of actual attention given to the management of these shadow factories by the firms themselves?
    Earl Winterton: Yes, Sir, there is a most complete check.

    DIRECTION-FINDING APPARATUS.
    Mr. V. Adamsasked the Chancellor of the Duchy of Lancaster, how many first-line machines in the Royal Air Force are equipped with an efficient direction-finding or homing device; and whether our development in this respect is comparable with the standards achieved in the air forces of other great Powers?
    Earl Winterton: All first-line aircraft in the Royal Air Force are equipped with facilities for obtaining efficient direction-finding and homing services. The answer to the second part of the question is in the affirmative.
    Mr. Adams: Does that mean the retractable loop design?
    Earl Winterton: There is about to come into production an even more efficient instrument than the present one, but I prefer, for reasons of public interest, not to go into details about it.
    Mr. Kirkwood: May I be permitted to put this point? It has been put to us this morning that the shadow factories and other factories are going on with work that is two years out of date?
    Earl Winterton: I think the hon. Gentleman is referring to the previous question. This question deals with direction-finding and homing.
    Mr. V. Adams: Is it not a matter of very serious public interest that gallant and precious lives should be exposed to great danger owing to lack of efficient instruments?
    Earl Winterton: I cannot accept that suggestion. This is a serious matter and I said in reply to the question that all first-line aircraft were equipped with facilities for obtaining direction-finding and homing services.

    BRITISH AIRCRAFT INDUSTRY.
    Mr. Sandysasked the Chancellor of the Duchy of Lancaster how it is that in spite of the Government's aircraft expansion programme British aircraft manufacturing companies are short of orders, and that many aeronautical engineering works are discharging employés?
    Mr. Simmondsasked the Chancellor of the Duchy of Lancaster in what directions it is hoped that the Air Ministry Committee of Supply will improve the preceding organisation?
    Earl Winterton: I hope to be in a position to make a comprehensive statement in the near future which will deal among other matters with the points raised by my hon. Friends, but I cannot accept the assumption in the question of my hon. Friend the Member for Norwood (Mr. Sandys). The numbers employed in the aircraft industry have largely and progressively increased.
    Mr. Sandys: Is the Noble Lord aware that since I put down this question I have received letters and telegrams from
    880
    aircraft firms all over the country confirming these facts?
    Earl Winterton: I am very surprised to hear that as I am myself in touch with the principal aircraft production firms, and I understand that they have full programmes of work. If the hon. Member will be good enough to let me have the letters and telegrams to which he refers, I will look into them.
    Mr. Gallacher: Will the Minister, pending his speech, make the necessary inquiries and do something in order to get back into the trade the skilled workers who have been driven out because of low wages?
    Earl Winterton: That is more a matter for the firms themselves. But in any event I cannot accept the assumption in the question.

    AIR MINISTRY COMMITTEE OF SUPPLY.
    Mr. Simmondsasked the Chancellor of the Duchy of Lancaster whether any member of the recently formed Air Ministry Committee of Supply has wide practical experience in large-scale engineering production and supply?
    Earl Winterton: The committee, whose functions are administrative, has the valued assistance of Sir Charles Bruce-Gardner, the Chairman of the Society of British Aircraft Constructors, who is a full time member. The committee, as a result, not only have the benefit of Sir Charles Bruce-Gardner's own wide experience but can also draw through him on the individual and collective experience of the aircraft industry.
    Mr. Simmonds: Is my right hon. Friend not aware that Sir Charles Bruce-Gardner is an administrator and not an engineer; and is he not aware that the failure on the supply side of the Air Ministry is due to the fact that they have not competent engineers and production managers in their employ?
    Earl Winterton: I could not possibly agree with my hon. Friend. I could supply him privately—there would not be time to do so in reply to a question—with the directorships which have been held by, and the administrative work of, Sir Charles Bruce-Gardner, who is thoroughly competent in all branches of engineering.
    Mr. Simmonds: Even if that be the case, surely one in this Committee is not

    881
    adequate to decide questions of supply concerning the Royal Air Force?
    Earl Winterton: I never said so, but the Committee over which I have the honour to preside happens to be a very competent one.
    Mr. De la Bére: Is not the whole matter thoroughly unsatisfactory?

BUSINESS OF THE HOUSE.
Motion made, and Question put,
" That the Proceedings in Committee on Bacon Industry [Money] be exempted, at this day's Sitting, from the provisions of the Standing Order (Sittings of the House)."— [The Prime Minister.]
The House divided: Ayes, 231; Noes, 107.

Division No. 195.]

AYES.

[3.47 p.m.

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

Emrys-Evans, P. V.

Marsden, Commander A.

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

Entwistle, Sir C. F.

Mayhew, Lt.-Col. J.

Albery, Sir Irving

Erskine-Hill, A. G.

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

Anderson, Rt. Hn. Sir J. (Sc'h Univ's)

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

Mills, Sir F. (Leyton, E.)

Anstruther-Gray, W. J.

Fildes, Sir H.

Mitchell, Sir W. Lane (Streatham)

Aske, Sir R. W.

Findlay, Sir E.

Moreing, A. C.

Assheton, R.

Flaming, E. L.

Morgan, R. H.

Astor, Viscountess (Plymouth, Sutton)

Furness, S. N.

Morris-Jones, Sir Henry

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

Goldie, N. B.

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

Barclay-Harvey, Sir C. M.

Graham, Captain A. C. (Wirral)

Muirhaad, Lt.-Col. A. J.

Beamish, Roar-Admiral T. P. H.

Grant-Ferris, R.

Munro, P.

Beauchamp, Sir B. C.

Grattan-Doyle, Sir N.

Naven-Spence, Major B. H. H.

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

Greene, W. P. C. (Worcester)

Nicolson, Hon. H. G.

Bennett, Sir E. N.

Gratton, Col Rt. Hon. J.

O'Connor, Sir Terence J.

Birchall, Sir J. D.

Gridley, Sir A. B.

O'Neill, Rt. Hon. Sir Hugh

Bird, Sir R. B.

Guest, Lieut.-Colonel H. (Drake)

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

Blair, Sir R.

Guest, Hon. I. (Bracon and Radnor)

Patrick, C. M.

Bossom, A. C.

Guinness, T. L. E. B.

Peake, O.

Boulton, W. W.

Hambro, A. V.

Perkins, W. R. D.

Bower, Comdr. R. T.

Hannah, I. C.

Peters, Dr. S. J.

Braithwaite, Major A. N.

Hannon, Sir P. J. H.

Pickthorn, K. W. M.

Brocklebank, Sir Edmund

Harbord, A.

Pilkington, R.

Brown, Col. D. C. (Hexham)

Harvey, Sir G.

Plugge, Capt. L. F.

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

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

Porritt, R. W.

Browne, A. C. (Belfast, W.)

Haslam, H. C. (Horncastle)

Procter, Major H. A.

Bull, B. B.

Heilgers, Captain F. F. A.

Radford. E. A.

Bullock, Capt. M.

Hely-Hutchinson, M. R.

Raikes, H. V. A. M.

Burgin, Rt. Hon. E. L.

Herbert, Major J. A. (Monmouth)

Ramsay, Captain A. H. M.

Caine, G. R. Hall-

Higgs, W. F.

Rathbone, Eleanor (English Univ's.)

Campbell, Sir E. T.

Hoare, Rt. Hon. Sir S.

Rathbone, J. R. (Bodmin)

Carver, Major W. H.

Holmes, J. S.

Rayner, Major R. H.

Cary, R. A.

Hope, Captain Hon. A. O. J.

Reed, A. C. (Exeter)

Cayzer, Sir C. W. (City of Chester)

Hore-Belisha, Rt. Hon. L.

Reid, W. Allan (Derby)

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

Howitt, Dr. A. B.

Rickards, G. W. (Skipton)

Cazalet, Thelma (Islington, E.)

Hudson, Rt. Hon. R. S. (Southport)

Robinson, J. R. (Blackpool)

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

Hulbert, N. J.

Ropner, Colonel L.

Channon, H.

James, Wing-Commander A. W. H.

Ross Taylor, W. (Woodbridge)

Chapman, Sir S. (Edinburgh, S.)

Jarvis, Sir J. J.

Royds, Admiral Sir P. M. R.

Chorlton, A. E. L.

Joel, D. J. B.

Ruggles-Brise, Colonel Sir E. A.

Clarry, Sir Reginald

Jones, L. (Swansea W.)

Russell, Sir Alexander

Cobb, Captain E. C. (Preston)

Kerr, Colonel C. I. (Montrose)

Russell, S. H. M. (Darwen)

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

Kerr, H. W. (Oldham)

Salter, Sir J. Arthur (Oxford U.)

Conant, Captain R. J. E.

Keyes, Admiral of the Fleet Sir R.

Samuel, M. R. A.

Cook, Sir T. R. A. M. (Norfolk, N.)

Knox, Major-General Sir A. W. F.

Sanderson, Sir F. B.

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

Law, Sir A. J. (High Peak)

Sandys, E. D.

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

Leech, Sir J. W.

Scott, Lord William

Cooper, Rt. Hn. T. M. (E'nburgh, W.)

Leigh, Sir J.

Sellay, H. R.

Courtauld, Major J. S.

Leighton, Major B. E. P.

Shakespeare, G. H.

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

Lennox-Boyd, A. T. L.

Shaw, Major P. S. (Wavertree)

Cox, H. B. Trevor

Lewis, O.

Shepperson, Sir E. W.

Crooke, Sir J. S.

Liddall, W. S.

Shute, Colonel Sir J. J.

Crookshank, Capt. H. F. C.

Lipson, D. L.

Simmonds, O. E.

Cross, R. H.

Llewellin, Colonel J. J.

Simon, Rt. Hon. Sir J. A.

Crossley, A. C.

Lloyd, G. W.

Sinclair, Col. T. (Queen's U. B'lf'st)

Crowder, J. F. E.

Locker-Lampson, Comdr. O. S

Smiles, Lieut.-Colonel Sir W. D.

Cruddas, Col. B.

Lyont, A. M.

Smith, L. W. (Hallam)

Culverwell, C. T.

Mabane, W. (Huddersfield)

Smith, Sir R. W. (Aberdeen)

Davidson, Vitcountess

M'Connell, Sir J.

Smithers, Sir W.

De la Bére, R.

MacDonald, Rt. Hon. M. (Ross)

Somerset, T.

Denman, Hon. R. D.

Macdonald, Capt. P. (Isle of Wight)

Somervell, Sir D. B. (Crawe)

Danville, Alfred

McEwen, Capt. J. H. F.

Spears, Brigadier-General E. L.

Dower, Major A. V. G.

McKie, J. H.

Stewart, William J. (Belfast, S.)

Duggan, H. J.

Macnamara, Major J. R. J.

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

Dunglass, Lord

Macquisten, F, A.

Strauss, H. G. (Norwich)

Elliston, Capt. G. S.

Maitland, A.

Stuart, Hon. J. (Moray and Nairn)

Elmley, Viscount

Makins, Brig.-Gen. E.

Sueter, Rear-Admiral Sir M. F.

Emery, J. F.

Manningham-Buller, Sir M.

Tasker. Sir R. I.

Emmott, C. E. G. C.

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

Tate, Mavis C.

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

Wallace, Capt. Rt. Hon. Euan

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

Thomas, J. P. L.

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

Willoughby de Eresby, Lord

Thomson, Sir J. D. W.

Ward, Irene M. B. (Wallsend)

Windsor-Clive, Lieut-Colonel G.

Titchfield, Marquess of

Wardlaw-Mllne, Sir J. S.

Wintertan, Rt. Hon. Earl

Touche, C. C.

Warrender, Sir V.

Withers, Sir J. J.

Tree, A. R. L. F.

Waterhouse, Captain C.

Wood, Hon. C. I. C.

Tryon, Major Rt. Hon. G. C.

Watt, Major G. S. Harvie

Wragg, H.

Tufnell, Lieut.-Commander R. L.

Wedderburn, H. J. S.

Turton, R. H.

Whiteley, Major J. P. (Buckingham)

TELLERS FOR THE AYES.—

Wakefield, W. W.

Wickham, Lt.-Col. E. T. R.

Captain Dugdale and Mr.

Grimston.

NOES.

Acland, R. T. D. (Barnstaple)

Hardie, Agnes

Pearson, A.

Adams, D (Consott)

Harris, Sir P. A,

Pathick-Lawrence, Rt. Han. F. W.

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

Hayday, A.

Quibell, D. J. K.

Anderson, F. (Whitehaven)

Henderson, A. (Kingswinford)

Richards, R. (Wrexham)

Attlee, Rt. Hon. C. R.

Henderson, J. (Ardwick)

Riley, B.

Banfield, J. W.

Henderson, T. (Tradeston)

Ritson, J.

Barnes, A. J.

Hills, A. (Pontefract)

Roberts, W. (Cumberland, N.)

Batey, J.

Hopkin, D.

Robinson, W. A. (St. Helens)

Bellenger, F. J.

Jenkins, Sir W. (Neath)

Rothschild, J. A. de

Benn, Rt. Hon. W, W.

Jones, A. C. (Shipley)

Salter, Dr. A. (Bermondsey)

Benson G.

Jones, Sir H. Haydn (Merioneth)

Seely, Sir H. M.

Buchanan, G.

Jonas, Morgan (Caerphilly)

Sexton. T. M.

Burke, W. A.

Kelly, W. T.

Shinwell, E.

Chatar, D.

Kennedy, Rt. Hon. T.

Silverman, S. S.

Cluse, W. S.

Kirby, B. V.

Simpson, F. B.

Clynes, Rt. Hon. J. R.

Kirkwood, D.

Smith, Ben (Rotherhithe)

Cove, W. G.

Lathan, G.

Smith, E. (Stoke)

Daggar, G.

Leach, W.

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

Davidson, J. J. (Maryhill)

Lea, F.

Smith, T. (Normanton)

Davies, R. J. (Westhoughton)

Leonard, W.

Sorensen, R. W.

Davias, S. O. (Marthyr)

Leslie, J. R.

Stephen, C.

Day, H.

Lunn, W.

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

Dunn, E. (Rother Valley)

Macdonald, C. (Ince)

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

Ede, J. C.

McEntee, V. La T.

Taylor, R. J. (Morpeth)

Edwards, A. (Middlesbrough E.)

McGhee, H. G.

Thorne, W.

Edwards, Sir C. (Bedwellty)

MeGovern, J.

Thurtle, E.

Evans, D. O. (Cardigan)

MacLaren, A.

Tinker, J. J.

Gallacher, W.

Mander, G. le M.

Viant, S. P.

Gardner, B. W.

Maxton, J.

Walkden, A. G.

Garro Jones, G. M.

Montague, F.

White, H. Graham

Green, W. H. (Deptford)

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

Whiteley, W. (Blaydon)

Greenwood, Rt. Hon. A.

Muff, G.

Wilson, C. H. (Attercliffe)

Griffiths, G. A. (Hemsworth)

Noel-Baker, P. J.

Woods, G. S. (Finsbury)

Griffiths, J. (Llanelly)

Owen, Major G.

Guest, Dr. L. H. (Islington, N.)

Paling, W.

TELLERS FOR THE NOES.—

Hall, G. H. (Aberdare)

Parker, J.

Mr. Groves and Mr. Charleton.

Hall, J. H. (Whltashapel)

Parkinson, J. A.

Resolution agreed to.

LONDON PASSENGER TRANSPORT BOARD BILL.
Reported, with Amendments, from the Committee on Group F of Private Bills (with Report on the Bill).
Bill, as amended, and Report to lie upon the Table; Report to be printed.

ORDERS OF THE DAY.
  WAYS AND MEANS.

    REPORT [26th APRIL].
    Fifth and subsequent Resolutions considered.
    INCOME TAX.
    CHARGE OK TAX.
    5. "That—
    (1) Income Tax for the year 1938–39 shall be charged at the standard rate of five shillings and sixpence in the pound, and, in the case of an individual whose total income exceeds two thousand pounds, at such higher rates in respect of the excess over two thousand pounds as Parliament may hereafter determine;
    (2) all such enactments as had effect with respect to the Income Tax charged for the year 1937–38 shall have effect with respect to the Income Tax charged for the year 1938–39.
    And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
    HIGHER RATES OF INCOME TAX FOR 1937–38.
    6. "That Income Tax for the year 1937–38 in respect of the excess of the total income of an individual over two thousand pounds shall be charged at rates in the pound which respectively exceed the standard rate by amounts equal to the amounts by which the rates at which Income Tax was charged in respect of the said excess for the year 1936–37 respectively exceeded the standard rate for that year.
    And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
    AMENDMENT AS TO RELIEF IN RESPECT OF LIFE INSURANCE PERMIUMS.
    7. "That, in cases where the allowance to be given in respect of life insurance premiums and other payments under Section thirty-two of the Income Tax Act, 1918, is restricted by paragraph (f) of Subsection (3) of that Section as amended by Section twenty-three of the Finance Act, 1935, the rate of tax by reference to which the allowance is so restricted shall be ten thirty-thirds of the standard rate instead of one-third of the standard rate.
    And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
    AMENDMENT OF SCHEDULE C AND CONSEQUN-TIAL AMENDMENT OF SCHEDULE D.
    8. "That—
    (1) for all the purposes of Income Tax under Schedule C and Rule 1 of the rules
    906
    applicable to Case 111 of Schedule D, the expression ' public revenue ' shall, except where the context otherwise requires, include the public revenue of any Government whatsoever and the revenue of any public authority or institution in any country outside the United Kingdom;
    (2) where a banker or any other person in the United Kingdom, by means of coupons received from any other person or otherwise on his behalf, obtains payment of any foreign dividends elsewhere than in the United Kingdom, the tax under Schedule C shall extend to the dividends and the person obtaining payment shall be treated for the purpose of the paying agents rules as if he were intrusted with the payment thereof;
    (3) where a banker in the United Kingdom sells or otherwise realises coupons for any dividends, being foreign dividends, and pays over the proceeds to any person or carries them to his account, or where a dealer in coupons in the United Kingdom purchases any such coupons as aforesaid otherwise than from a banker or another dealer in coupons, the tax under Schedule C shall extend to the proceeds of the sale or other realisation, and the paying agents rules shall apply to those proceeds as if they were dividends, and shall apply to the banker or dealer as if he had been intrusted with the payment thereof;
    (4) the provisions of the last two foregoing paragraphs shall apply for the purpose of Rule 7 of the miscellaneous rules applicable to Schedule D (which relates to interest, etc., from colonial and foreign companies) subject to any necessary modifications;
    (5) for the purpose of this Resolution—

    (a) the expression ' banker ' includes a person acting as a banker and, notwithstanding anything in the paying agents rules, includes the Bank of England and the Bank of Ireland;

    (b) the expressions ' dividends,' coupons' and 'coupons for any dividends' have the same meanings as in the paying agents rules and the expression ' foreign dividends ' means dividends payable elsewhere than in the United Kingdom, whether they are also payable in the United Kingdom or not;

    (c) the expression ' paying agents rules ' means the rules applicable to Schedule C as to interest, etc., with the payment of which persons other than the Bank of England, the Bank of Ireland and the National Debt Commissioners are intrusted;

    (6) the provisions of Schedule C and Schedule D shall be deemed always to have had effect subject to the foregoing provisions of this Resolution:
    Provided that, where at any time after the twenty-ninth day of July, nineteen hundred and thirty-seven, and before the twenty-seventh day of April, nineteen hundred and thirty-eight, tax could have been charged on or deducted from any profits under Schedule C of the said Rule 7 if the provisions of this Resolution had been

    907
    enacted at that time, but has not been so charged or deducted, those profits shall be chargeable under Case VI of Schedule D for the year of assessment in which the profits arose.
    And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
    TRANSFERS OF INCOME ARISING FROM SECURITIES.
    9. "That—
    (1) where, in any year of assessment, the owner of any securities (in this Resolution referred to as ' the owner ') has sold or transferred or hereafter sells or transfers the right to receive any interest payable, whether before or after the sale or transfer, in respect of the securities without selling or transferring the securities, the following provisions shall have effect and shall be deemed always to have had effect:

    (a) that interest, whether it would or would not be chargeable to tax apart from the provisions of this Resolution, shall, for all the purposes of the Income Tax Acts, be deemed to he the income of the owner or, where a beneficiary is entitled to the income arising from the securities, the income of the beneficiary, and not the income of any other person, and be deemed to be income for that year;

    (b) in the case of a sale or other realisation the proceeds whereof are chargeable to tax under Schedule C or Rule 7 of the miscellaneous rules applicable to Schedule D, the amount of the interest deemed to be the income of the owner or beneficiary shall be an amount equal to those proceeds;

    (c) in any other case, tax at the standard rate in respect of the interest shall be chargeable on the owner or beneficiary under Schedule D;

    (2) nothing in the foregoing provisions shall affect any provision of the Income Tax Acts authorising or requiring the deduction of tax from the interest, or from the proceeds of any subsequent sale or realisation of the right to receive the interest;
    (3) for the purpose of this Resolution, the expression interest ' includes dividends, annuities and shares of annuities, and the expression ' securities ' includes stocks and shares."
    FUNDING BONDS ISSUED IN RESPECT OF INTEREST ON CERTAIN DEBTS.
    10." That—
    (1) where any funding bonds are issued to a creditor in respect of any liability to pay interest on any debt to which this Resolution applies, the issue of the bonds shall be treated for all the purposes of the Income Tax Acts as if it were the payment of an amount of that interest equal to the value of the bonds at the time of the issue thereof;
    (2) where any person by or through whom any such bonds are issued in any year of assessment would be required under the said Acts to deduct tax from the said amount of interest if it had been actually paid by or through him, he shall retain bonds the value whereof at the time of issue is equal to tax at the standard rate for that year on the said amount of interest, and shall be acquitted in respect of the retention in like manner as if he had deducted such tax from the interest, and shall be chargeable with such tax accordingly:
    Provided that the Commissioners of Inland Revenue, if satisfied that it is impracticable to retain bonds as aforesaid, may relieve any such person from the foregoing provisions of this paragraph on such conditions as they think fit, and thereupon tax in respect of the amount of interest treated as having been paid by the issue of the bonds shall be chargeable for that year under Case VI of Schedule D on the persons receiving or entitled to the bonds;
    (3) the debts to which this Resolution applies are any debts incurred, whether in respect of moneys borrowed or otherwise, by any Government, public authority or public institution whatsoever, or by any body corporate whatsoever, and for the purpose of this Resolution the expression ' funding bonds ' includes any bonds, stocks, shares, securities or certificates of indebtedness;
    (4) the foregoing provisions of this Resolution shall be deemed always to have had effect:
    Provided that, where at any time after the twenty-ninth day of July, nineteen hundred and thirty-seven, and before the twenty-seventh day of April, nineteen hundred and thirty-eight, any bonds could have been retained under this Resolution if its provisions had been enacted at that time but have not been so retained, an amount equal to the value of the bonds at the time of the issue thereof shall be chargeable under Case VI of Schedule D for the year of assessment in which the bonds were issued.
    And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
    PROVISIONS AS RESPECTS SETTLEMENTS.
    11. "That—
    (1) there may be included in any Act of the present Session relating to finance such provisions as to Income Tax as Parliament may determine in relation to—

    (a) settlements which are wholly or partly revocable or otherwise determinable in any circumstances whatsoever (including settlements whereunder the settlor's liability might cease on payment of a penalty);

    (b) settlements whereunder any income or property of any description is, or will or may become, payable to or applicable for the benefit of the settlor in any circumstances whatsoever;

    909

    (c) the disallowance, in computing total income for purposes of Surtax, of the deduction of sums paid by a settlor to the trustees of the settlement or persons connected with the settlement;

    (d) sums paid directly or indirectly, whether by way of loan or repayment of loan or otherwise, by the trustees of a settlement or persons connected with a settlement to the settlor;

    (2) subject to such qualifications and exceptions as Parliament may determine, the said provisions shall apply to any settlement wherever or whenever made or entered into, and shall apply for the purposes of assessment to Income Tax for the year 1937–38 and subsequent years;
    (3) for the purpose of this Resolution the expression ' settlement ' includes any disposition, trust, covenant, agreement or arrangement, and the expression ' settlor ' includes any person by whom a settlement was made or entered into directly or indirectly and, in particular, includes any person who has provided or undertaken to provide funds directly or indirectly for the purpose of a settlement, or has made with any other person a reciprocal arrangement for that other person to make or enter into a settlement; and references to a settlor include references to the wife or husband of a settlor."
    AMENDMENTS AS TO AVOIDANCE OF INCOME TAX BY TRANSFER OF INCOME ABROAD.
    12. "That there may be included in any Act of the present Session relating to finance such amendments of Section eighteen of the Finance Act, 1936 (which contains provisions for preventing avoidance of Income Tax by transactions resulting in the transfer of income to persons abroad), as Parliament may determine, and any such Act may provide that the said amendments shall have effect for the purpose of assessment to Income Tax for the year 1937–38 and subsequent years, and shall apply in relation to transfers of assets and associated operations whether carried out before or after the date of this Resolution."
    ADMINISTRATION OF ESTATES.
    13. "That—
    (1) there may be included in any Act of the present Session relating to finance such provisions as to Income Tax as Parliament may determine in relation to the estate of a deceased person and the income arising therefrom before the completion of the administration of the estate, in relation to persons having an interest in the residue of an estate before, on and after the ascertainment thereof and persons to whom legacies are bequeathed by a will, and otherwise in relation to the administration of estates;
    (2) any such Act may provide that the said provisions shall have effect for the purpose of assessment to Income Tax for the year 1937–38 and subsequent years and shall apply in relation to the estate of a deceased person whether he died before or after the commencement of that year."
    VALUATION OF TRADING STOCK ON DISCONTINUANCE OF TRADES.
    14. "That—
    (1) when any trade is discontinued or treated for the purposes of Income Tax as if it had been discontinued, any trading stock then belonging to the trade shall be valued, in computing for the purposes of Income Tax the profits or gains of the trade, as follows:

    (a) in the case of any such trading stock which is sold or transferred for valuable consideration to a person who carries on or intends to carry on a trade in the United Kingdom and may deduct the cost of the trading stock as an expense in computing the profits or gains of that trade, the value thereof shall be taken to be the amount realised on the sale or the value of the consideration given for the transfer;

    (b) in the case of any other such trading stock, the value thereof shall be taken to be the price which it would have realised if sold in the open market at the discontinuance;

    (2) provision shall be made for determining any questions arising under sub-paragraph (a) of the last foregoing paragraph for the purpose of computing the profits or gains of both the trades concerned;
    (3) for the purpose of this Resolution, the expression ' trading stock ' includes property of any description, whether real or personal."
    LOSSES OF CAPITAL REDEMPTION BUSINESS.
    15. "That—
    (1) where any person carries on capital redemption business—

    (a) the capital redemption business, if carried on in conjunction with business of any other class, shall be treated for the purposes of Income Tax as a separate business; and

    (b) in ascertaining whether and to what extent he has sustained a loss in the carrying on of the capital redemption business for the purpose of setting off or giving relief in respect of the loss, any of his income derived from investments held in connection with the capital re-demptan business shall be treated as part of the profits arising from that business:

    (2) in this Resolution the expression ' capital redemption business ' means the business (not being life assurance business or industrial assurance business) of effecting and carrying out contracts of insurance, whether effected by the issue of policies, bonds or endowment certificates or otherwise, whereby in return for one or more premiums paid to the insurer a sum or series of sums will become payable to the insured in the future."
    ESTATE DUTY.
    ESTATE DUTY IN RESPECT OF RESIDUARY ESTATES.
    16. "That—
    (1) there may be included in any Act of the present Session relating to finance such provisions as to Estate Duty as Parliament may determine in relation to the residue of the estate of a deceased person and to the inclusion of property representing such residue in the property that passes or is deemed to pass on the death of a person dying before the completion of the administration of the estate;
    (2) any such Act may provide that the said provisions shall have effect and be deemed always to have had effect in relation to a person so dying whether before or after the commencement of the said Act."
    ESTATE DUTY IN RESPECT OF PROPERTY TRANSFERRED TO, AND SHARES IN, CERTAIN COMPANIES.
    17. "That—
    (1) for the purpose of determining the rate of Estate Duty, property which is deemed to pass on the death of any person by virtue of Section thirty-four or Section thirty-five of the Finance Act, 1930, shall not be an estate by itself but shall he aggregated with other property passing on the death;
    (2) for the purpose of the definition of ' the value of the total assets of the company ' contained in Section thirty-eight of the said Act, the deduction to be made under paragraph (i) in respect of any debentures, debenture stock or preference shares of the company shall, instead of being the par or redemption value thereof, whichever is the greater, be the principal value thereof."
    ESTATE DUTY IN RESPECT OF SETTLED PROPERTY.
    18. "That the exemption conferred by Subsection (3) of Section five of the Finance Act, 1894, in the case of settled property where the interest of any person under the settlement fails or determines by reason of his death before it becomes an interest in possession and subsequent limitations under the settlement continue to subsist, shall cease in cases where the property would, if that Sub-section had not been enacted, have been deemed to pass on the death otherwise than by reason of the failure or determination of the interest."
    MISCELLANEOUS.
    NATIONAL DEFENCE CONTRIBUTION.
    19. "That Part III of the Finance Act, 1937 (which relates to the National Defence Contribution), shall be amended—

    (a) so as to re-define the circumstances in which a body corporate is to be deemed to be a subsidiary of another body corporate for the purpose of Section twenty-two of the said Act (which provides for the amalgamation of the profits and losses of subsidiary and principal companies) and of any provision made in pursuance of this Resolution;

    912

    (b) so as to alter the provisions of the said Section twenty-two relating to the giving of notice thereunder by a principal company as respects a subsidiary;

    (c) so as to disallow, in computing profits, any deduction in respect of any interest, annuity or other annual payment, or any royalty or rent, paid by one body corporate to another, where one of them is a subsidiary of the other or both are subsidiaries of a third;

    (d) so as to disallow the carrying forward of any loss under sub-paragraph (2) of paragraph (2) of the Fourth Schedule to the said Act, if and to the extent that the loss has been deducted from or set off against the profits arising from a trade or business, whether under the said Section twenty-two or otherwise;

    and that the said amendments shall be deemed to have had effect as from the date on which the said Part III came into operation."
    RESTRICTION OF RELIEF FROM TRANSFER STAMP DUTY ON CERTAIN INSTRUMENTS.
    20. "That any Act of the present Session relating to finance may restrict, in such manner as Parliament may determine, the relief from Stamp Duty given by Section forty-two of the Finance Act, 1930 (which relates to instruments the effect whereof is to convey or transfer a beneficial interest in property from one associated company to another)."
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    Mr. Pethick-Lawrence: Will the Government explain this Resolution?
    3.56 p.m.
    The Chancellor of the Exchequer (Sir John Simon): This Resolution is merely consequential upon the Resolution which has just preceded it. If we did not adopt this Resolution for the reduction of the modified life insurance allowance, cases would arise where the rate of life insurance deduction would be a higher rate than the rate of Income Tax which would be applicable to the individual. As long as we had the strict rule that within the reduced zone the rate of tax was one-third of the standard rate, that is to say, 1s. 8d. out of the 5s., 1s. 8d. might be the legitimate deduction, but the Statute as it is framed changes it into 1s. 10d., although, as the House will know, we are providing that only 1s. 8d. shall continue to be the reduced rate of Income Tax.

    913
    Therefore this is a purely consequential adjustment and goes with the Resolution preceding it.
    Motion made, and Question proposed, "That this House doth agreed with the Committee in the said Resolution."
    3.59 P.m.
    Mr. Hely-Hutchinson: I should like to ask a question in regard to Sub-section (Ell, which deals with the retroactive provisions that will become necessary in connection with this Amendment. As my right hon. Friend is aware, a proposal to make any taxation retroactive gives rise to considerable uncertainty in business, and I am only asking for some sort of assurance that it is not proposed to upset the results of litigation which has already been decided and cases which may fall in the same category.
    4.0 p.m.
    The Attorney-General (Sir Donald Somervell): I can give the assurance for which my hon. Friend has asked; it is not intended to interfere with the results of cases already decided. I think that is the only question my hon. Friend asked.
    Mr. Pethick-Lawrence: Would the Attorney-General explain the whole matter?
    The Attorney-General: This and the following Resolution deal with interest on coupons, those little tickets attached to bonds which are detached year by year and presented at some place or other, and in return for them the interest is paid. It has been assumed by everyone concerned, those who cash coupons through bankers or coupon dealers, that until a recent case in the Court of Appeal this House by certain provisions in the Income Tax Acts had carried out what the intention of Parliament was, in particular in the case of coupons of bonds which cannot be presented to anyone in this country for direct cashing but are payable outside this country, being bonds of foreign Governments or concerns. Originally coupons of that kind were outside the provisions of the Income Tax Acts which provided for the deduction of tax at the source. In the case of an ordinary coupon payable in this country, a coupon which is presented to the issuing Government or country, of course tax is deducted at the
    914
    source. Coupons of that kind have been for many years dealt with by holders or by bankers acting on their behalf by being sold to persons called coupon dealers, who in normal cases get a small profit for themselves for undertaking to deal with the coupons by presenting them at whatever place, usually some place abroad, where they have to be presented. Naturally if a coupon can be cashed in this country the individual or banker presents it directly and it is not necessary to deal with a coupon dealer.
    Parliament provided a number of years ago a provision in the Income Tax which, in ordinary popular language, meant that the provisions as to deduction of tax at the source were to apply to coupon dealers who dealt with coupons in this way, and since that provision was inserted in the Act coupon dealers have been accounting to the revenue for the tax in exactly the same way as other people who deduct tax. The recent case in the Court of Appeal decided that that provision inserted in the Act did not apply to cases where the coupons were payable solely out of the United Kingdom. I cannot but think that Parliament must have intended it to apply to such cases. The Court also decided that where a man sells one of these coupons to the coupon dealer he is not getting the interest as such but is getting the purchase price of a right to interest.
    Mr. Pethick-Lawrence: Is that the decision of the Court?
    The Attorney-General: Yes, the Court decided that where someone takes one of these bits of paper to a coupon dealer and realises substantially, in normal cases the full amount he was receiving something which was not income. I think it is quite clear that Parliament must have intended the proceeds of these coupons to be income, because it did insert words stating that the coupon dealer was to deduct tax from what he paid. There was a further minor point, and that was that Schedule C of the Income Tax Schedules, which applies primarily to Government securities, has been as a matter of practice treated as applying to foreign municipalities. That is being dealt with in these two Resolutions. The Ninth Resolution deals with a case that is not very likely to arise, in which the coupon instead of being sold

    915
    to a dealer is sold to a private person. The House will not want me to go into the details at this stage.
    The Resolution does not raise any further point of principle, but it is necessary, I think, because the failure of Parliament to carry out what was clearly its intention was due to the fact that in this very complicated statutory structure we inserted special words in one part without realising that in another and earlier part of the structure more general words would require amendment. This is a case in which the decision of the Court of Appeal has shown that what everyone concerned had thought was the law and had been acting upon, was not in fact the law. It is not merely the revenue which is concerned here, but banks and coupon dealers have been making deductions of tax which on this decision ought not to have been made. Therefore, I suggest that this is one of the cases in which it is right, in everyone's interest, that the position which had been understood to be the position in law should be validated retrospectively.
    4.10 p.m.
    Mr. Pethick-Lawrence: I am sure the House is very much obliged to the Attorney-General for his lucid exposition of this particular Resolution. We did have from the Chancellor a very full account of most of these Resolutions when he was making his Budget speech, and those who followed him carefully can, I think, digest a good deal of what is in these very complicated Resolutions now. At the same time I think it is for the convenience of the House at this stage that we should know a little more than what the Chancellor gave us in his Budget statement, for these things are exceedingly complicated and we cannot carry in our minds precisely what the Chancellor said last week. Perhaps we may have on each of these Resolutions a little preliminary explanation before we discuss them. I understand that the matter with which we are dealing here is something which the Legislature quite definitely intended but which was not, in the opinion of the court, fully embodied in the Statute; and therefore the court, rightly or wrongly—I am not speaking with any disrespect—has come to the conclusion that under the law strictly the taxpayer has been entitled to relief from a tax which, from an equitable point of
    916
    view, it was the intention that he should bear. That being so, the Chancellor has very properly asked the House to re-impose the burden in words which are unmistakable. It would be quite ridiculous if it were suggested that people could escape their burden of Income Tax on what is really their income because something was not fully and implicitly stated in the legislation imposing the tax.
    With regard to the paragraph (6) of the Resolution, I am not quite clear that I understood the Attorney-General. I understand that by paragraph (6) it is intended to say that it shall not be open to all and sundry who have paid taxation appropriate to their coupons to come before the court and demand relief on the ground that this legislation was passed only this year. I understood the Attorney-General to say that in so far as the particular persons who have already been before the court and have secured relief are concerned, that relief is not to be taken away from them. I suppose we can hardly ask that it should be otherwise, but it does seem a little unfair that one person who has taken a case into the court should get relief and that another person who has not taken a case cannot get relief. Probably in a matter of comparative fairness it is better to leave it in the way the Attorney-General proposes to leave it rather than take it away even from those people who have secured relief. The Attorney-General's attempt to prove that a coupon is in fact nothing but a bit of paper which has a certain value reminds me of a conundrum which was put to me by a lawyer: "Supposing a man were not to convey a property but were merely to sell the actual pieces of paper which formed the title deeds? "The Attorney-General began to explain the Ninth Resolution. I am afraid that he did not convey to me the details, and perhaps he will give a further explanation when we reach it.
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    4.17 p.m.
    The Attorney-General: This Resolution deals with the case in which the coupon

    917
    is sold to someone other than a coupon dealer in this country and with that part of the decision to which I referred which laid down that the proceeds of the sale of the coupon were not income. We must deal with the case where coupons are sold otherwise than to a coupon dealer for there would, of course, be a ready means of conversion of coupons outside the provisions for deduction of tax. Also, if you are able to sell it to someone not a coupon dealer and say, "This is not my income because I have sold it instead of cashing my coupon," there would be a ready means of reducing one's Income Tax liability. Therefore, it is necessary that one should deal with sales to persons other than coupon dealers and the general effect of the Resolution is that in that case the person selling to the person other than a coupon dealer shall be assessed on interest represented by the coupon. If, in fact, he got a very much smaller sum than the coupon was really worth, it might be said it was unjust, but as far as we can see no one would sell to anyone other than a coupon dealer unless he was enabled by so doing in some way to evade tax liability. The normal way of realising coupon values is by selling to a coupon dealer or presenting the coupon through a bank for encashment. If it were provided that where you sold to someone other than a coupon dealer, you would be assessed on simply what you get from him, it could be arranged easily to sell the coupon at much less than full market price and so reduce the amount of income. That is why the Resolution deals with the matter in this way. The position will, of course, be clearer when we get the actual Clause, but that is the general effect of the Resolution.
    Sir Waldron Smithers: May I take it that a coupon dealer is registered as a banker for the purpose of making returns to the Excise for purposes of Income Tax on coupons he receives?
    The Attorney-General: I am not sure whether registering as a banker is the right term. All I can tell my hon. Friend is that a coupon dealer in this country who buys coupons takes the place, as has been done in the past, of the person who is entrusted with payment of dividends and accounts for the tax deducted, in exactly the same way as the
    918
    banker does who arranges for the encashment of coupons.
    4.21 p.m.
    Mr. Pethick-Lawrence: As I understand the Attorney-General, the position is that the Eighth Resolution stops up a gap which had become open owing to the decision of the court with regard to the intention of the Legislature, but that if the Resolution stood by itself it would be possible for a new gap to be opened up—the first person selling to a second person and the second person selling to a coupon broker. Therefore, in order to stop up the first gap it was necessary to anticipate that a second gap might arise, and therefore that gap is stopped by the Ninth Resolution. That, I presume, answers a question which would otherwise arise to our minds. If it were necessary at the end of the Eighth Resolution to put in paragraph (6) which makes the legislation retrospective, why has it not been done in this case? I take it the answer is that it is not necessary to do it in this case.
    The Attorney-General: I would refer the right hon. Gentleman to paragraph (1) of the Resolution.
    Mr. Pethick-Lawrence: I had expected to find it in the same place in this Resolution as it is in the Eighth Resolution. I take it there had been no cases along these lines and that Resolution will apply retrospectively in all cases?
    The Attorney-General: I will look into that.
    Mr. Benson: I am afraid that I cannot square paragraph (1, b) with the explanation of the Attorney-General. I understand the hon. and learned Gentleman to say that but for this Resolution there would have been a possibility of tax evasion by the sale of coupons at a lower value than their face value. Here, apparently, if the sale takes place at a lower value than the face value, the lower value shall be taken to be the interest of the owner.
    The Attorney-General: This paragraph refers to Schedule C or Rule 7 of the miscellaneous rules. It covers only cases where the payment is subject to deduction, that is to say, cases in which payment is made either by a bank or a paying agent or a coupon dealer. It is necessary for technical drafting reasons

    919
    to insert in this Resolution that it deals with cases not covered by paragraph (b), that is, cases where the tax is not deducted, where there is a sale to some one other than a person charged under Schedule D.
    Mr. Ede: Can the hon. and learned Gentleman give any indication of the amount of money it is expected to collect under this and the preceding Resolution?
    The Attorney-General: I am afraid that I cannot at the moment, but the sums involved, I think, are substantial. The effect of this Resolution is however only protective and is simply to continue this range of deductions which concern, broadly speaking, coupons and foreign bonds and securities.
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    4.27 p.m.
    The Attorney-General: This Resolution also arises out of a recent decision of the court of appeal. It has long been recognised, and was not in any way disputed in that decision, that Income Tax is payable on income whether that income is received in money or in money's worth. Thus, if a company makes an arrangement with its managing director under which his remuneration or part of it is made by way of receiving shares in the company or something of that sort, he is assessable to Income Tax on the value of the money's worth which he gets in exactly the same way as if he received money. The House will appreciate that otherwise, of course, there would be the readiest means of evading Income Tax by making payments in kind of a value which when sold would realise a sum of money which it was intended to transfer. That principle was established a very long time ago and there has been no dispute about it. The application of the principle arose in connection with the case of a foreign government. There have been other cases where foreign governments, having issued bonds bearing interest, find that in a given year they have not got, or have found it more con
    920
    venient not to produce, the cash which the original bond provided for the payment of interest.
    Mr. Ede: Like our debt to America.
    The Attorney-General: I do not want to specify individual countries. Everybody knows that there have been many foreign countries which in recent years have found difficulty in meeting the interest on some of their foreign bonds. In many of these cases what they have done is to give to the bondholders what is called a funding bond. Suppose that a man has a bond for £100 and the Government in question say that is due in interest but that it is difficult to pay that £6 in cash. He is given a bond funding the interest, which may be worth £6 or, if the Government is not able to give a bond for £6, it may give a bond for £4 or £3.
    Mr. Pethick-Lawrence: Does the hon. and learned Gentleman mean that the bond has a different face value or a different market value?
    The Attorney-General: It may have a different face value or a different market value. It might have the face value of £6 but be worth, in fact, only £4 in the market; or there might be a case in which a Government said, "We cannot give you bonds to the full face value but will give you bonds for 50 per cent. of the face value." In cases in which bonds so given have a readily ascertainable market value, that is to say are marketable securities which can be realised in the ordinary way, it has been assumed that they came within what I may describe as the ordinary money's worth principle and were subject to tax, and in cases where they were paid through paying agents they were subject to deduction of tax by the paying agents. There have been large transactions through paying agents in this country in which, assuming the Income Tax was at the rate of 5s. in the £ and large quantities of these bonds were entrusted to the paying agents for paying out to a bondholder, they have handed out three-quarters of the bonds to the bondholder and handed over the other quarter to the Inland Revenue in satisfaction of the tax which, under the law, they have to deduct. Where owing to the size of the holdings or the denominations of the bonds it is impossible to split the bonds up into heaps of three-quarters

    921
    and one-quarter, other arrangements are made for realising the necessary amount to satisfy the obligation to the revenue, and the matter is settled in that way.
    In the present case the bonds were, as I fancy these bonds usually are—like the Treasury Notes which we have in our pockets—in the form of a promise to pay by the foreign Government. That I think is the usual form of a funding bond"— The (so-and-so) Government promise to pay." The Court of Appeal decided in this case that where what is,prima facie money's worth takes the form of a promise to pay by the person from whom the interest is due, it is not right under the law to treat it as money's worth because, in fact, it is merely the substitution of one promise for another. That, very briefly, is the sort of line which was taken when the decision was given. It seemed to my right hon. Friend the Chancellor that if that was so it was contrary to what had been assumed to be the case by everybody concerned with these matters in the past; that while it might be perfectly correct in law it did not accord with the intentions of this House with regard to the matter, because when you are dealing with a foreign Government bond you are undoubtedly dealing with money's worth in the ordinary sense.
    There was no intention in the past, nor is there any intention under this Resolution—in fact, it expressly provides the opposite—ever to assess anybody in respect of these bonds save upon their market value. From our point of view it is an ordinary case in which someone who is entitled to get interest has received instead of £10 in cash a Government bond worth £10 and by ordinary principles it seems that it should be subject to tax, and it has borne tax in the past and has been treated as money's worth. Therefore, it seems to my right hon. Friend to be a case in which what has been understood to be the law in the past should be validated retrospectively, and that money's worth of this kind obtained in respect of interest should be treated in exactly the same way as money's worth received in any other form.
    4.35 P.m.
    Mr. Pethick-Lawrence: I have followed as well as I could the interesting explanation given by the Attorney-General, but
    922
    I cannot claim to understand it entirely, and I confess that I see a certain difficulty. As I understand the position, a foreign Government which should pay interest in a certain year may declare that it is unable or unwilling to do so and hand out to those who are entitled to the interest pieces of paper which are, in fact, promises to pay a certain sum at some future time. The recipients of those pieces of paper can do one of two things. First, they can sell them immediately for what is their market value and then they will be to all intents and purposes receiving an income which, though it may be different from the amount of the face value of the coupon or bond, has a definite value in money. I can understand that in those cases the Inland Revenue have taken their share of the amount which the owners of the bonds received. To take the illustration given by the Attorney-General, if the owner was entitled to receive £6 the Inland Revenue took £1 10s. and the owner was left with £4 10s.
    The Attorney-General: The right hon. Gentleman was, I think, taking a case where a man gets a bond which may be worth less than the face value of £6. I did not intend to say—and if I did say so it was inaccurate—that the Inland Revenue have ever taken anything but its due proportion of the money's worth which the man received. If that bond was worth less than £6, was worth, say, only £4, then the Inland Revenue have taken only £1.
    Mr. Pethick-Lawrence: It is my fault if I did not succeed in making my meaning plain, because I did understand what the Attorney-General said. I was taking the case where the coupon or bond was actually worth its face value. In such a case, when not only its face value but its market value was £6;, the man would take £4 10s. for himself and £1 10s. would go to the Inland Revenue. But there is an alternative course of action. The man could "sit on" the bond or coupon until the foreign Government does actually redeem it. This is the point upon which I am not clear. Do I understand that in cases where a man proposes to do that it has been the practice of the Inland Revenue to come down upon him and say, "You cannot keep the whole of these bonds or coupons, you must hand over one-quarter of them to us "? Is that correct?
    The Attorney-General: As to what has been happening in the past let me take a case as an illustration. Suppose a man were entitled to receive instead of his interest £400 of bonds, and that they were issued in denominations of £100 each. There would be four bonds lying at the bank representing the gross sum of interest to which he was entitled. The bank has a statutory duty to deduct the appropriate amount of Income Tax in respect of payments made by way of interest. What has happened in the past in a case of that kind is that the holder of the original bond has gone to the bank and said, "I know that you cannot get the interest on the bonds in money but you have some bonds representing the interest." The bank would say, "Yes, you are entitled to £400 of bonds. We have to deduct tax and we give you three of these bonds of £100 each, which you can do what you like with, and we are handing over the fourth bond to the Inland Revenue in satisfaction of the tax."
    Mr. Pethick-Lawrence: That is broadly what I had understood from the very lucid explanation which the hon. and learned Gentleman has given us of what is really a difficult matter. The point I am getting at is this: The Inland Revenue would actually get the bonds, and it would then be for them to sell them in the market if they wanted the money. What is proposed, as I understand, is that the rule which has been acted upon hitherto is to be retained, but that this Resolution is necessary because some doubt has been raised—perhaps more than a doubt in view of the decision of the court—that the Legislature had not fully covered that particular case. If that be the position this seems to be a sound method of dealing with it.
    4.41 p.m.
    Lieut.-Colonel Sir A. Lambert Ward: Perhaps the hon. and learned Member will excuse me for putting a question, I hope that I shall make it intelligible, but I am not at all sure that I shall, because this is extraordinarily complicated. I should like to ask what is the position of a coupon dealer who, on receiving these funding bonds from a defaulting Government, has omitted to take a quarter of them and hand them over to the Treasury, but has handed over the whole of the bonds to the man who
    924
    handed in the coupons. I understand that this legislation has retrospective effect. What, then, would be the position of the coupon dealer? Apparently, as the courts have interpreted the law, he was correct in doing what he has done. What would his position be in the future?
    The Attorney-General: I will make inquiries as to whether there were any cases of that kind prior to this decision. We have had communications since the decision asking what should be done, but I very much doubt whether there had been any such cases in the past. Of course if this Resolution becomes the law the position would be exactly the same as if the law was what it was thought to be at the time, namely, that he would not have made a payment which he ought to have made. He would be in exactly the same position as any other people who, having an obligation to pay interest and an obligation under the Income Tax Acts to deduct the appropriate amount of tax and pay it over to the Inland Revenue, have failed to do so. My hon. and gallant Friend's hypothetical coupon dealer would be in exactly the same position as anyone else who has failed to make a payment which the law said should be made.
    Sir A. Lambert Ward: But the hon. and learned Gentleman said that the decision of the Court of Appeal was that he was not compelled to make that deduction.
    4.45 p.m.
    Mr. Ede: I wish to ask the same question that I put upon a previous Resolution. We are dealing here with the question of raising revenue. The hon. and learned Member and the Chancellor of the Exchequer must be aware that there are wide divergencies of opinion as to the amount of money that would be obtained if all the alleged leaks in the Income Tax law were stopped up. I have seen a statement in a reputable newspaper that the amount would be equivalent to a yield of 6d. in the £ on the tax. I understand that the right hon. Gentleman himself does not feel that that estimate would be reached, even though every leak were stopped up. We are dealing with some of the leaks which have been most recently created by decisions of the court in regard to those that are most obvious.

    925
    The House is entitled to know what the yield would be if all the leaks were stopped up. I understand that the present situation has been caused because the Court of Appeal has said that when a foreign Government, who have not kept a promise which they have made, make a renewed promise, this promise is worth nothing. I am glad to find that that view, which I held on Monday, has some legal weight behind it. It may be that something may be realised after a time, even in financial matters. The House is entitled to some indication from the Government of the amount which they expect to get by stopping up these leaks.
    4.46 p.m.
    Sir J. Simon: Although one may have a have a dog, a very good barking dog, I am occasionally willing to do a little barking myself.
    Mr. Ede: Your dog has exhausted his right to bark now.
    Sir J. Simon: As this is a question of revenue it is right that I should answer the hon. Gentleman's question. We shall come to the other proposals a little later on, where the question has a different application. As regards this proposal and the one which was dealt with before, the hon. Gentleman will appreciate that this is a protective provision. Quite recently there has been an unexpected interpretation put upon the existing law and unless Parliament thought fit to correct the position as it is now declared to be, the leakage would ensue. What we are actually doing is not finding a new source of revenue but merely saying that we do not think that the House would desire that the law as it is now expounded should continue to be as it is. We are inviting the House, by its own legislative act, to put the law in a position in which it has hitherto been understood to be. There is no question under this heading therefore of how much this proposal will produce or of trying to estimate, for example, to what extent foreign Governments issue funding bonds. Estimates of the value of saving devices are peculiarly difficult to make.
    I could illustrate that by an analogy of a boat. It is comparatively easy to
    926
    say how much more liquid you will get in a vessel which has not a hole if you increase the rate of flow or, in other words, enlarge the rate of charge. It is very much more difficult to answer the conundrum: Suppose this leaky condition continues, how many people would take advantage of it, or how far will the hole which now exists be enlarged and further used? We shall certainly do our best in this connection. This is really a protective provision and the hole ought to be stopped up promptly, because if we do not do so there may be a loss, and possibly an increasing loss.
    4.50 p.m.
    Sir Waldron Smithers: I wish to make only one point—to which I do not expect an answer to-day—which may make this provision more workable. The Attorney-General stated that the Income Tax payer would be assessed only on the gross value of the bond. I suggest that the Government should provide some method of assessing that value. The Attorney-General talked about £400 worth of funding bonds, but suppose that they are in Mexican dollars, pesos or lire; ought there not to be some method between the taxpayer and the revenue authorities for assessing the value? It is easy to do so if the funding bond has been sold, when you know what the taxpayer has got for it, but suppose the revenue authorities or the taxpayer are sitting on the bond; it is not easy in those circumstances. I would ask the Government to consider what provision they can make in the Finance Act, either by referee or in some other way, for deciding between the Income Tax authorities and the taxpayer what is a fair value to put upon the bond for the purposes of Income Tax.
    4.52 p.m.
    Mr. Gallacher: It appears to me that while the Government are patching up one hole and one leak they are creating a series if new leaks. Would it not be better and ensure complete security, as well as putting an end to all possible leaks, if the Chancellor of the Exchequer took all the money away from these people, over and above a certain amount?
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    4.55 p.m.
    The Solicitor-General (Sir Terence O'Connor): Hitherto the House has been dealing with Resolutions about which it was possible to speak with a great measure of precision. I am afraid that this Resolution must necessarily lack some of that precision which gave my hon. and learned Friend an opportunity to give the House so lucid a statement. This Resolution is the bare bones, the skeleton, which will have to be clothed in flesh in the Finance Bill, for the purpose of enabling an end to be put to some of the tax-avoidance schemes which were outlined by my right hon. Friend when he opened his Budget. The House will see that the Resolution provides that legislation may be introduced into Parliament affecting four different types if settlement in respect of each of which an abuse has been discovered. The first example is of settlements which are wholly or partly revocable. The second is concerned with settlements which, although irrevocable, provide that the income may in certain circumstances revert to the benefit of the settlor. The third example relates to settlements where sums may be deducted by the settlor when paying to the trustees, and where use is made of the settlement in order to accumulate sums of money. The fourth example relates to the type of case where sums are paid by loan or repayment of loan, by the trustees of a settlement or persons connected with a settlement, to the settlor.
    My right hon. Friend, when he made his Third Reading speech on the Finance Bill in 1937, referred to the subject of avoidance of tax and gave a warning that he would not hesitate to propose legislation to deal with the subject, and particularly with that type of avoidance of tax through the form of accumulating trusts, under which Surtax payers were able tto reduce their liability by transfer of income under trusts outside the provisions of Section 20 of the Finance Act, 1922. Under that Act, if the settlor has power, of his own volition, to revoke a settlement, the income is treated as his income, so that he is liable to Surtax upon it,
    928
    but if the power of revocation is subject to the consent of somebody else, he goes outside the provisions of the Act of 1922. The provision that we propose to embody in the Finance Bill when it comes forward will stop up a gap that is obviously available by virtue of that Act.
    We have seen, for example, and I have here a copy of one, a deed which can be completed by means of a 10s. stamp. It begins by reciting certain names of beneficiaries who are to receive annual payments made by the settlor to trustees for them, in such shares as the settlor may direct. It goes on to provide that he may remove the trustees and appoint new ones and that, with the consent of specified people—some accommodating friend, no doubt—he can revoke the deed in whole or in part, may appoint and make a new trust and, in particular, may require the trustees to hand over the trust fund to himself. The fact that revocation can be made only with the consent of an accommodating friend makes the Act of 1922 inapplicable to that kind of case. Of course, the annual payment which the settlor makes under the deed is a deduction when he comes to compute his total income for Surtax purposes, and he avoids Surtax by this obvious device. It is manifest that by selecting accommodating friends he can get back for himself the sums of money he has paid for the security, without the attendant and inconvenient payment of Surtax.
    This device has to be dealt with, and what we propose is that in the case of settlements which can be revoked by the settlor with the consent of some other person the income in any year will be treated for Income Tax purposes as his income, irrespective of whether it is or is not accumulated by the trustees. As to example B, our proposal when clothed with form in the Statute, will deal with those cases where there is not a power of revocation in the settlement and in which the income under the settlement will, in certain contingencies, revert to the settlor or his wife. In these cases the settlor makes a settlement under which the income is to be accumulated over a term of years, and then provides that the whole of the accumulated income shall be paid over to his wife; and, the accumulated funds being a capital payment, when they are paid over under the terms of the settlement all the

    929
    accumulated income escapes Surtax. Settlements of this kind, which are commonly known as "Surtax accumulators," have been largely used in order to avoid Surtax.
    It is now proposed that in the case of these settlements the income, to the extent to which it is accumulated, shall be treated as the settlor's income for tax purposes. If it is distributed to beneficiaries, it is, of course, treated as their income for tax purposes, as it cannot get back to the settlor. Certain exceptions to and modifications of this general scheme will have to be made in the Finance Bill—for example, to meet the case where funds are permitted to revert to the settlor on the bankruptcy of the beneficiary or in the event of an assignment or charge. This is the ordinary kind of provision, not a tax-evading provision at all, which is commonly inserted in respect of minors and in other cases that occur to one—in the case, for example, of a marriage settlement where the funds revert to the settlor on the death of the parties to the marriage. Provision will have to be made for the exclusion of bona fide cases of that kind, but the general scheme will he to prevent this easy method of saving Surtax when, notwithstanding that payments have to be made over a period of time, the benefit of those payments really reverts in a lump sum to the settlor.
    Paragraph (c) deals with settlements which are irrevocable so far as the settlor is concerned, and do not provide for the reversion to him of the funds of the settlement. In that respect they are not covered by paragraphs (a) and (b). The settlor undertakes to make an annual payment to the trustees of the settlement, and, provided that they are made for a term exceeding six years, these payments constitute, under the existing law, deductions from his total income when calculating his Surtax liability. Supposing that those payments are made to a beneficiary, no question arises. If they are paid direct to the beneficiary under a deed creating the charge for a term of six years, he can obtain a deduction for Surtax purposes, and there is no reason why he should not similarly obtain a deduction when a payment is made through trustees, so that that case does not matter. But the case where the payments are accumulated in the hands of
    930
    trustees—in other words, where the settlor is using the trustees as a kind of savings box—is a case in which we think Surtax ought to be leviable, and proposals will be put forward to effect that purpose.
    Paragraph (d) deals with what is perhaps one of the more obnoxious and reprehensible forms of tax evasion of this character. Articles have appeared lately in the Press calling attention to a device under which a settlor can, in effect, enjoy the income of the settlement by means of getting loans from the trustees under the settlement. He makes an irrevocable settlement, the trustees are directed to accumulate funds provided by the settlor for the benefit of somebody, a child or whoever it may be, and the trustees are empowered to make loans to the settlor out of the funds in their hands. In the exercise of that power they make an annual loan to the settlor. That was the kind of case which my right hon. Friend described in opening his Budget as a case in which not only the settlor got his income free of Surtax in the form of loans, but, in fact, does not have to face the inconveniences usually attendant on loans. His indebtedness is not of any importance either to him or to the beneficiary, because usually the beneficiary is a member of his family or some accommodating friend, so that in practice the situation is not a very menacing one from his point of view. I have given an example of the simplest kind of case that is dealt with in paragraph (d), but it will be necessary in the Act to amplify and extend the provisions to deal with very much more complicated matters.
    I will give the House an example. A transfers securities to a company for £100,000. He then makes a settlement, quite a nominal one, on some beneficiary, say for £100, with the provision that the income is to be accumulated during the lifetime of A, the settlor. He then makes a loan of £99,900 to the trustees of the settlement, and with that £99,900 the trustees buy shares in the company to the value of £100,000. The company returns the £100,000 to A in payment for the securities. The House will see that the whole transaction is merely a paper transaction, a mere exchange of cheques. A can fix any figure he likes for the loan, and it need not correspond with the real value of the securities. The

    931
    company pays to the trustees the corresponding income from the securities, and the trustees use this income every year to repay the loan to A. That is a nice convenient arrangement whereby A avoids Surtax for the period of the transaction.
    I will give another example of the kind of case that we shall have to cover in the fuller exposition of our treatment of these problems in the Finance Bill. Suppose that the settlor, instead of making a loan to the trustees, sells to them some asset at a figure much in excess of its real value, and that the arrangement is that the purchase price shall be paid by instalments over a period of years. The income of the settlement is used to pay the instalments, or to cover the fictitious element in the purchase price. This results in an accumulation of the income, and the accumulated income is used to make payments to the settlor in a nontaxable form. To defeat these schemes we propose to provide that any sum paid by trustees to a settlor shall be treated as the settlor's income to the extent to which there is accumulated income from the settlement. This will apply to all existing settlements, but it will only affect sums payable to settlors in the year 1938–39 and subsequent years. In the Finance Bill we shall have to fortify this provision by a provision, similar to some others which have been made, to cover the case in which a company or chain of companies is inserted between the settlor and the ultimate receiver.
    The second paragraph of the Resolution enables retrospective effect to be given to the provisions. It provides that the proposals shall apply to all settlements existing or future, whether made in this country or abroad, and that the new provisions shall take effect as from the year 1937–38. But we only intend that the provisions of paragraphs (a) and (b), which deal with revocable settlements and settlements where the income reverts to the settlor, shall operate in respect of the year 1937–38 and for the purposes of Surtax only. They will not affect the standard rate tax until the year 1938–39, and that will be made clear in the Finance Bill.
    Paragraph (3) of the Resolution defines the expression "settlement" so as to include any disposition, trust, covenant, agreement or arrangement; and the ex
    932
    pression "settlor" includes not only the person who has actually made the settlement, but also any person who has provided funds for the purpose or has made a reciprocal arrangement with some other person to make such a settlement. The paragraph also provides that husband and wife shall be treated as one for the purpose of the Resolution, so that, for example, if a settlor's wife undertakes to make an annual payment under a settlement, or if the trustees make loans to the settlor's wife, the respective provisions will operate as if the annual payment had been made by the settlor or the loans had been made to the settlor.
    The question has been asked, with regard to previous resolutions, whether any estimate could be made of the value to the revenue of the Resolution. I think, however, it will be clear to the House that it would be impossible in this case to say what the effect on the revenue is likely to be. This is another instance in which one has to stop up holes lest the leakage becomes greater than it is at the present time. I remember in my youth reading the story of the boy who put his finger into a hole in a dyke in Holland in order to prevent the country from being swamped by the incoming sea. It may very well be that he would never have been able to estimate the damage that would have occurred if he had pulled his finger out. In the same way, it may very well be that, if we leave open the holes that we are here seeking to stop, very considerable damage might be done to the revenue, but I think the House will agree that it is impossible to make an estimate of what the potential figure is.
    5.13 p.m.
    Mr. Pethick-Lawrence: I am sure the House is very much indebted to the Solicitor-General for his full account of these provisions. Obviously, it will be unnecessary for me to go over the ground which he has already covered so carefully, but there are one or two questions that I should like to ask. As I understood the Chancellor of the Exchequer last week, when he was dealing in his Budget speech with the question of settlements, all that the House was going to be asked to do was to amend certain provisions of the Act of 1936; but, as I understand the Solicitor-General to-day, it is only paragraph (a) that is really concerned with

    933
    the Act of 1936. If I understood him aright paragraph (b), and certainly paragraphs (c) and (d), carry us into realms that were not contemplated in the Act of 1936. Perhaps whoever replies—
    Sir J. Simon: The right hon. Gentleman is quite right, but I did refer to these other points. I dealt with the first point at the bottom of column 52 of the OFFICIAI. REPORT for Tuesday, 26th April, and with the second point in column 53; and then I went on to say:
    " There are two more proposals on this topic to which I attach importance. One deals with the device under which the settlor is enabled to enjoy the income of a settlement, without paying tax upon it, by way of loans made to him by the trustees. A loan is not income. It is first a debt."—[OFFICIAL REPORT, 26th April, 1938; col. 53, Vol. 335.]
    They were all mentioned in a summarised form, but it was not a very easy occasion on which the details could be given.
    Mr. Pethick-Lawrence: I was not making a charge or a complaint against the Chancellor of the Exchequer. He is not bound to cover all the details in his Budget speech, although he does generally make some reference to the points that are to be dealt with in the Resolutions. The Committee on Budget day know that they have to pass the Resolutions at the end of the day, and they are somewhat in the dark because they cannot expect to have a full explanation from the Chancellor of the Exchequer. I gather that it is only (a) that is concerned with the Amendment of the 1936 Act. Again, without making any charge against the Chancellor of the Exchequer or his predecessor, if I remember correctly, such grounds as are covered in this Amendment formed the subject of debate on a former occasion.
    A second point on which I am not certain is how far these provisions concern Surtax. I gather that in the main it is only Surtax that will be affected. I think that in the case of (c) it is specifically confined to Surtax, but I gathered from the speech of the Solicitor-General that there are parts which will also affect Income Tax. I think that comes particularly under (d). If a man makes a settlement, say, in favour of trustees for charitable objects, it is not merely Surtax but Income Tax that is avoided in that case.
    My last point relates to leakage. My hon. Friend the Member for Chesterfield
    934
    (Mr. Benson) has raised this question before, and has asked how much is going to be saved. I understood from the Chancellor of the Exchequer that this is not a leakage that has occurred in the past but a leakage that is going to occur if we do not stop it, and, therefore, it is not a case where a specific sum can be mentioned. I agreed with the Solicitor-General when he said that he could not say how much new leakage was going to be stopped by carrying out the provisions envisaged in the Resolution, but I think we are entitled to know what is the estimated leakage that is taking place at the present time, which it is proposed to stop. I know that the estimate could only be uncertain. We are, however, entitled to some estimate, how ever conjectural, of what is the leakage at the present time. I should be obliged if that information could be given. There must be some figure which can be given as to the amount of leakage which it is estimated may be stopped.
    5.18 p.m
    Mr. Assheton: I should like to congratulate the Chancellor of the Exchequer on having stopped up a good many more holes in our Income Tax legislation, and I should like to say how grateful we are on these benches that this policy is being rigorously followed. I should also like to congratulate the Solicitor-General on the explanation that he has given, and, if I may, to ask him a question. Take the case of a man who has a considerabe surplus income and who is able to put aside into a trust, say, £100,000 of capital, the income of which can either be applied for the benefit of his children or can be accumulated; am I right in assuming that in the event of that income being accumulated the income will be assessed as part of the income of the settlor? If that be so, may I go a step further and ask, what is to happen in the case of the settlor being dead and being no longer assessable to Surtax? There are cases when a settlement is made and the income has accumulated for a long time after the death of the settlor when it is, in a sense, nobody's income, and in that way a certain amount of tax is lost to the revenue. Possibly these points may be dealt with in Committee but perhaps the Solicitor-General would prefer to give me an answer now.
    5.20 p.m.
    Mr. Benson: I am afraid that I cannot follow the hon. Member for Rushcliffe (Mr. Assheton) in congratulating the Government on pursuing this matter of tax evasion with rigour. They are limping tardily along. Take the matter dealt with under (a). That is a question which I raised in 1936, when I pointed out that this evasion was going on, but nothing was done. It is not until two years afterwards that we are to get any legislation. I am not certain the Solicitor-General is correct when he says that (d) does not arise out of the Finance Act of 1936. In regard to the liability of trustees, I raised the point that if the trustees were adequately safeguarded by the terms of the trust deed they would be able to hand over the income in such a way that it might come back to the settlor. I was told that that could not be done, but here to-day we have to legislate against it.
    I am very much disappointed with the explanation given by the Solicitor-General. When I read the Resolution I was hoping that the Government were going to cast their net a great deal more widely than they propose to do. For instance, under (b) where part of the settlement can be used for the benefit of the settlor, I hoped that they were going to deal with foreign trusts, like the Archer Shee Trust. Our courts, apparently, have decided that our tax law in the case of foreign settlements must be subject to foreign tax law. A man makes a settlement in America and income is received out of the securities. Normally, the income received from securities by a person resident in this country is taxed whether it comes into this country or not, but because under the American law income received from securities which goes into the hands of trustees for beneficiaries loses its identity and is no longer held to be income from the specific securities, our courts have held on that change of identity, that only such income as is transmitted to this country shall be taxed. As a result of that decision it is possible for a wealthy man to make a settlement trust in America, to take advantage of American law and accumulate income there and to make investments there, and only have to pay tax if he transmits the income from the accumulated investment. Why is that not dealt with? It was thought worth while to fight an expensive legal case to decide the legality of these transactions
    936
    and try to upset the decision; why, then, cannot we take the simpler and cheaper method of quashing that decision in the Finance Bill?
    Let us consider what is known as the discretionary trust. The discretionary trust in its inception was primarily for the purpose of safeguarding an estate from the depredations of an erratic heir, but since then it has been found that it can be used most effectively as a means of avoiding Death Duties. At the same time it can and does avoid Income Tax and Surtax. Under a discretionary trust the trustees have complete power to pay as they like any sums to A, B, C or D, A being the settlor. Although they have complete discretion to pay as they like, they are chosen with care and they will pay as the settlor desires. They may pay to his children and what goes to the children is not the income of the settlor but is income of the trustees, who can dispose of it according to their discretion. Here is a trust under which a certain amount of benefit goes to the settlor, and it ought to be dealt with. Are the Government prepared to deal with it?
    My right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) raised the question of Income Tax. Under these tax-dodging settlements a very large amount of Income Tax is being avoided. Take the case of a man who settles, under a revocable trust, an income of £300 on his son. Although that revocable trust may have the effect of adding the income paid to the son to the settlor's income for Surtax purposes, it does not avoid the dodging of Income Tax. The settlor, when he pays his £300, pays it less tax amounting to £82 10s., but the beneficiary, having received his income less tax, is entitled to apply to the Inland Revenue for repayment. He can claim back, if the total is £300, £55 of Income Tax out of the £82 10s., so that the result is that Income Tax of £55 is avoided. In all these trusts, where they are taxed because they are revocable, the whole of the income for all purposes of tax ought to be treated as the income of the settlor and of nobody else.
    Why have not the seven-year trusts been dealt with? It is one of the most common and extensive methods of avoiding tax. The Solicitor-General quoted

    937
    from a duplicated document when he said how easy it was for some of these trusts to be established. In the Debate on the 1936 Finance Bill the Chancellor of the Exchequer, with horror in his voice, described how certain of the educational trust documents were being widely distributed. There is scarcely an institution which depends upon public subscription that does not print these seven-year trust documents and distribute them broadcast. If a man wants to subscribe to any particular charity, why should he be able to compel the Government to subscribe anything up to two-thirds of what it costs him? If a Surtax payer paying the full rate makes an annual donation of £100 to some institution in which he is interested under one of these seven-year trusts it costs the Government something like £70 a year and the generous donor something like £30. Why should such a man be able to deflect from the Revenue 13s. 9d. of every £ that he gives? Why should the Chancellor of the Exchequer be compelled to subscribe to any particular institution, charity or trust which the subscriber likes to choose?
    The Chancellor will not settle the matter of Income Tax avoidance by simply stopping up one hole after another. If he stops up one hole, it will merely means that another hole, which is not being very greatly used at the moment, will be expanded. Until the Government are prepared to take powers of a general character which will enable the courts or the Commissioners, subject to the courts, to look at the reality and not the mere form, we shall have an unending spate of tax evasion legislation. Let us settle the matter once and for all by giving powers to the Inland Revenue to enable them to deal with income as income and not continually to have to adopt these various piecemeal methods.
    5.35 p.m.
    Mr. Ede: I would like to thank my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) for supporting the plea that we should have more information. I was interested in the illustration which the learned Solicitor-General gave in his attempt to avoid giving the information. He seems to occupy the converse positon to that which Talleyrand thought Napoleon occupied, when he remarked:
    938
    " How unfortunate so great a man should have been so badly brought up."
    I would say, "How unfortunate that one who was so well brought up should now be Solicitor-General in the meanest Government of modern times." The hon. and learned Gentleman is the engineer whose job it is to estimate how much water will go through any given leak and to estimate how long it will take before the country is inundated. I am aware that it is now the custom of Members of the Government ostentatiously, as my right hon. Friend the Leader of the Opposition said the other night, to carry on conversations when hon. Members are directly addressing questions to them. The Chancellor of the Exchequer is not Prime Minister yet and he might at least conform to the ordinary courtesies of the House.
    Sir J. Simon: I am very sorry if I appear to have been discourteous to the hon. Gentleman. I hope that he will understand that, if a complicated question is put, it is sometimes necessary for the Minister in charge to confer with the Law Officer on the particular Section which directly bears on the matter.
    Mr. Ede: I cannot think that the point which I am putting to the hon. and learned Gentleman is as complicated as all that. The hon. and learned Gentleman himself said that the second of these evasions was so enormous that they could be called "Surtax accumulators," and he used the phrase, "They are widely used." This must mean that there must be some idea of quantity in the minds of the Income Tax officials and of the Treasury. It is not one of the small matters which have cropped up owing to a recent decision of the courts. It is one of those things which form the main topic at lunch at the offices of the Law Society where one member explains to another the most recent thing he has discovered and the best way to work it. It is not something which the Court of Appeal has decided during the last fiscal year, but it has been operated for some years and has secured a nickname from the people who are engaged in this particular form of in-industry. He described is as objectionable and reprehensible, and it must be assumed that it has occupied a good deal of attention at the Treasury.
    It is desirable that the Treasury should convince the House upon these Resolu-

    939
    tions that this is not mere window-dressing. There is a very strong fear, as has been exemplified by the speech of my hon. Friend the Member for Chesterfield (Mr. Benson), that this matter is not being tackled in any way that really means the bringing in of a great amount of grist to the Treasury mill. Does the present legislation mean the bringing in of £2,000, £200,000, or £2,000,000? What idea is in the mind of the Treasury as to the extent to which they will be able to justify occupying the time of this House in dealing with this matter and putting a very complicated Clause in the Finance Bill? I would suggest to the Government that, in their own interests, it would be as well if they were to put before the House either some statement as to the kind of estimate they have formed, or say quite frankly, "We do not know."
    I gather that the answer of the Chancellor of the Exchequer on the previous Resolution, although it took him three or four minutes to say, was really one of four words, "I do not know." That may have been a justifiable answer on that matter, but in view of the fact that we are now dealing with old and well-established malpractices, the Government cannot take refuge behind the statement of the Attorney-General. They must be prepared to give some estimate of what they hope to get in an ordinary year from being able to stop these practices.
    5.41 p.m.
    Mr. Gallacher: I would like, first of all, to make a reference to the feeble joke which was attempted by an hon. Member opposite when he said that he and the occupants of the benches across the House were glad that the Government were chasing the tax evaders. It reminded me of the paraphrase of the old popular song, "I am laughing with tears in my eyes." That is how the tax evasion Resolutions have been received by hon. Members opposite, and, surely, after all the talk that we have had about the matter, it ought to be possible for an estimate of some kind to be given. This matter did not arise as a result of the speech of the Chancellor of the Exchequer on Budget night, for the present Prime Minister raised this question when he was Chancellor of the Exchequer and gave the impression to the House that the leakage that was going on repre-
    940
    sented a very considerable amount of money. There was no sense in the Prime Minister, when he was Chancellor of the Exchequer, making a speech of that kind and giving the House such a warning if there was not a considerable amount of money involved. Any independent estimates that have been given have created the impression that there is a very large amount of money being diverted from the Treasury through these various measures of tax evasion which these particular Clauses are supposed to try and stop. It is quite natural that hon. Members on this side of the House and people throughout the country should get that impression.
    After all this talk and the threats of the present Prime Minister when Chancellor of the Exchequer as to what would happen if there was any more of it, the Chancellor of the Exchequer has estimated a sum round about £1,000,000. Is that what all the fuss is about? It is right that we should ask for an estimate of what will be saved by the stopping of these various practices which are so well known. The Prime Minister let us know a year ago that they had their eyes on this sort of thing, and surely they can now give us some explanation. I am sorry that the Chancellor of the Exchequer has left the Chamber. He is very touchy. Last night I had to draw attention to the same sort of thing. He is touchy; he has a guilty conscience. He knows the evil he is doing, and, at the least word from anybody he is in a huff. I should like this very relevant and important question conveyed to the Chancellor. When he makes up his mind actually to operate the Resolution to stop the leakage and to make the vessel watertight, if he finds that instead of getting about £1,000,000 he is getting £4,000,000, £5,000,000 or £6,000,000, will he then agree to withdraw the tax on tea? If those responsible work this as we would work it, they will get considerably more than the amount that has been suggested, and the tax on tea ought to be withdrawn.
    5.47 p.m.
    Mr. David Adams: The hon. Member who has just spoken is rather overlooking the fact that the Chancellor is new to his office and is, therefore, likely to be more sensitive than a case-hardened person. I do not say that in any depreciatory way

    941
    of the Chancellor. I am glad that he is of that sensitive temperament which will enable him, no doubt, to perform the prodigies in the financial world which we expect of him, and which are required at the present day in those realms. It must be remembered that tax avoidance is not illegal, but that tax evasion is. If tax avoidance has been committed for a generation past it must have been known to the Treasury and the Board of Inland Revenue. But we are grateful that, under the particular headings which have been so clearly outlined by the Solicitor-General, it is clear now that, by settlements of this character, it will not be possible in future to avoid payment of Income Tax and Surtax.
    I should like the Solicitor-General to apprise us as to why it is necessary to have this particular legislation. Could not there be a general instruction of this House, through this Measure, to the Board of Inland Revenue, that all such avoidances, under whatever head they may occur—and there are quite a diversity beyond what has been indicated here— which in the past have been perfectly legal, shall no longer be legal but shall be treated as though they were tax evasions, and that the inspectors of the board shall keep a watchful eye open for such avoidances? In that connection, there might be injustices perpetrated, but all who know anything about the operation of Income Tax law know that those who have grievances have an appeal to the Commissioners. The only fault with that—and I have always felt it to be a grave injustice—is that, whereas appeals may be made—
    Mr. Deputy-Speaker (Captain Bourne): That is a question of the administration of the Income Tax law.
    Mr. Adams: Am I entitled to suggest that a more general method, instead of this particular legislation, should be under consideration at this moment?
    Mr. Deputy-Speaker: The hon. Member is quite entitled to suggest alternatives, but he is not entitled to go into details.
    Mr. Adams: The Board of Inland Revenue, for some years past, has been quite aware of avoidances that have been going on. These avoidances have been perfectly legal. The board, which has general powers in issuing directions, could
    942
    now be charged with general powers to say that in their judgment certain forms of tax avoidance constituted evasion, and after such a determination it would therefore become illegal. I have indicated— and I could hoi go into the matter now— that persons who have grievances would have a right of appeal, under which their alleged wrongs could be rectified by the Commissioners of Inland Revenue, while evasion could be stopped.
    5.53 p.m.
    Mr. James Griffiths: I do not want to say much on this question, as I am not an expert on Income Tax dodging. I am a man whom all my life Income Tax has dodged. This is a matter, I understand, in which the Treasury are trying to find the best way to close up these holes by which tax dodgers have been escaping in the past. They have certainly closed up all the holes by which working-class people might escape. I would suggest that the Treasury might have a word with the Ministry of Labour and the Unemployment Assistance Board, and all those whose job it is to find out every penny that the working man has, so that he cannot get anything out of the Treasury that he is not entitled to.
    5.54 p.m.
    The Solicitor-General: The right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) asked me whether, in addition to Surtax, these provisions are expected to affect Income Tax. Broadly speaking, the answer is no. I do not say that there is no instance in which Income Tax might be affected. For instance, there is the case in which trustees might hold securities which do not pay tax. Those securities might be affected. But the general principle applies. Except in the case of those who enjoy a certificate of exemption, the income arising from trustees is liable to standard rate of tax: it is the Surtax which is avoided; and it is, therefore, to safeguard the position in regard to Surtax that the legislation is introduced.
    My hon. Friend the Member for Rushcliffe (Mr. Assheton) put to me a case relating to £100,000 of capital which was settled and in respect of which the income was to be accumulated. The instance he was quoting, I presume, relates to an ordinary irrevocable settlement. That will not be touched at all. The

    943
    hon. Member for Chesterfield (Mr. Benson) referred to what I know he will recognise when I describe it as the second Archer-Shee case. He seemed to think that nothing had been or was being done to meet that case. I think he must have overlooked the next Resolution, which it would not be in order for me to discuss at the moment, but on which my hon. and learned Friend will have something to say when the time comes, and if you take the Act of 1936 combined with the proposed provision that we expect to make by virtue of the next Resolution, a good deal of the attractiveness of the second Archer-Shee position will have disappeared.
    Mr. Benson: I was assuming that the Twelfth Resolution was to be more or less on the question of motive, which was what the Chancellor dealt with in his Budget speech. The Archer-Shee case depends primarily, as I understand, on the fact that Income Tax from securities loses its identity when it passes into the hands of trustees under American Income Tax law.
    The Solicitor-General: I think that if the hon. Gentleman will await the exposition of the Twelfth Resolution he may find that a good deal of his apprehensions about the second Archer-Shee case will have been modified. The hon. Gentleman also referred to the case of the discretionary trust. We certainly have power to deal with that under the Resolution. If I followed him rightly he was suggesting that, under an irrevocable trust, the child could recover Income Tax. I think that impression arises from a misreading of the Act of last year. The instance he gave was not a sound one. Of course, the child would not be able to treat it as his income for purposes of reclaiming tax. He would be faced with the provision which says that he has no power to reclaim. The Act of Parliament says that it is not his income for all purposes. I will not follow the hon. Member into his inquiry as to whether all charitable payments should not come within the full rigours of the Income Tax law. All I would say in regard to such a suggestion is that it would spread a good deal of alarm and despondency among charitable institutions in the country. The root of the present law is that charities are treated as an exception and are exempted from the ordinary provisions of
    944
    the Income Tax Acts. They are entitled to ask that taxes which have been paid upon such incomes shall be paid back. Anything which would vary the position in that respect would not be very acceptable.
    Mr. Benson: It does not apply only to charities, because the Duke of Westminster paid his servants that way and then claimed exemption.
    The Solicitor-General: I was dealing with the case the hon. Member gave. He was complaining that he could not understand why a gentleman should be entitled to make a settlement under which he undertook to pay to a particular hospital a sum of money over a series of years and why the hospital should be entitled to claim back from the revenue the Income Tax that had been deducted. I have given him the reason. By the operation of the law we put charities in a favoured position, and if they can show that the tax has been paid they can come to the revenue and get it back. It would be disastrous to charities if we now altered the favoured position which they enjoy. The hon. Member for South Shields (Mr. Ede) seemed to think that these proposals were only window-dressing.
    Mr. Ede: I said that unless the Government were prepared to give us an estimate they must not be surprised if people thought so.
    The Solicitor-General: I apologise. I thought it was not a thing which the hon. Member would wish to say. But I repeat, we cannot exactly estimate with anything like precision what wastage to the revenue is likely to be prevented by these proposals. That is something which is completely nebulous. It depends on the patriotism of the people, on the extent to which they co-operate in making the system of taxation work, and on a whole host of other things. What the prevention of wastage will be is a thing which none of us can say. It would be only a guess. But what we can say is that we have given in the White Paper an aggregate figure of the advantage to the revenue in a full year in respect of the provisions relating to trusts and settlements, the transfer of assets abroad and the liabilities by residuary legatees, and we have put the figure at £3,000,000. That is a very substantial figure. Indeed, it will

    945
    be observed that the positive advantage to the revenue is about £500,000 more than the total of the Tea Duty to which the hon. Member referred.
    That is not the end of the picture. If one were in a position to evaluate the imponderabilities and see the picture if these proposals were not carried into law, I have no doubt the figure would be very much more. The hon. Member for Con-sett (Mr. David Adams) was anxious to know why we should not have some general overriding legislation to enable the Inland Revenue Commissioners in the case of tax evasion to deal with the matter. While the hon. Member was speaking I looked at the hon. Member for Dundee (Mr. Foot) and I could see that he was somewhat disturbed. To vest in the administration, in the Executive, power to say, "We do not like the look of this sort of thing," or, "There is something in the flavour of this transaction," would be a complete abrogation of the functions of Parliament. It is for Parliament to put down in terms what is the law, and as long as the subject carries out the law he ought not to be subjected to inquisition by commissioners or anybody else, however benevolent they may be. The responsibility is on us here, and it will be for hon. Members when we table the full effects of these Resolutions in the form of a Bill to say whether they reasonably meet the problem.
    Mr. David Adams: Under my proposition it would be the law.
    Sir Arthur Salter: Would the learned Solicitor-General distinguish the proposal, which I think he has rightly criticised, from a proposal that the law should be so framed as to give to the Courts the right to quash particular arrangements on the ground that they were clearly designed to evade taxation?
    The Solicitor-General: If the hon. Member will give to Parliamentary Counsel and myself the benefit of his assistance in drafting a Clause which would get through this House, I should be glad to have a talk with him.
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    6.9 p.m.
    The Attorney-General: This Resolution, which I agree is framed in general terms, is put down in order to give the House the necessary power at a later stage to strengthen Section 18 of the Finance Act, 1936, which deals with the transfer of assets to foreign persons or companies. In 1936, when this matter was dealt with, it was a common method of avoiding taxation to transfer assets abroad to a person or to a company, who might enjoy the income from those assets, but the arrangement was that the person in this country whose assets had been transferred could enjoy or had the power to enjoy when he wanted the income arising from the assets so transferred. Parliament in drafting the Section in wide terms, intended to except from its provisions the transfer of assets made in the ordinary way of trade and business, and which were made without any tax avoidance motives, though of course in some cases it has resulted in less tax being paid than would otherwise have been paid. In one respect this Section has been found to require strengthening, and that is with regard to the words which Parliament then used to cover the cases where such transfers were effected—
    " mainly for some purpose other than the purpose of avoiding liability to taxation."
    Unless a person was able to bring himself within that exception he had to pay Income Tax and Surtax upon it. The word "mainly" has been so construed as to widen the exceptions beyond what Parliament intended, and my right hon. Friend gave an example in his Budget speech. In that case the transfer was mainly for the purpose of tax avoidance, and, of course, for some other purpose. Therefore, if the Section is left as it is the construction of the word "mainly" would defeat the intention of Parliament, which was to exclude normal and bona fide transfers of assets by way of business.
    Mr. Benson: We told you that in 1936.
    The Attorney-General: No doubt there are many other cases where one proves to be wrong, but they do not occur to one's mind with the same vividness as

    947
    when the event proves us to have been right. We have all had the same pleasant experiences, which I have no doubt the hon. Member is now enjoying. At a later stage we propose to strengthen this Section of the Act of 1936 and to deal with a point which has arisen owing to the construction put on the word "mainly." There are two other points with which it is proposed to deal. One is the case where the assets or income arising from the income are under the control of discretionary trustees, whether there should not be words inserted to make it clear that that fact does not prevent it being said that the transferor has the power to enjoy. The definition of the power to enjoy is wide, but doubts have arisen as to whether it would cover a case of that kind. In our view it should cover such a case, and therefore the Resolution is wide enough to enable an Amendment to be made in that regard.
    The third point with which it is proposed to deal is this. The Section refers to "persons abroad "—I am not quoting textually, but that is the effect of it— and doubts have arisen as to whether a company registered abroad but controlled by persons here would come within the words used in that regard in the Section. I think it is right to say that a company, for taxation purposes, is regarded as being resident where those who control it are, as distinct from where it is registered. The point is a technical one, but it has come to our knowledge that possibly there might be a loophole in the Section which could well be stopped up. Those arc the three points with which we are concerned. I agree that the Resolution is in wide terms. It is not an easy matter, and I do not think that the Clause, when it is drafted, will be a simple one. The Section is one which I think had the full approval of the House in 1936, and I feel sure that hon. and right hon. Gentlemen in all parts of the House will desire this year to see that the full intentions of the Section are carried out.
    6.16 p.m.
    Mr. Pethick-Lawrence: It is difficult to know what exactly the Government intend to do in this matter when we have not before us the Clauses of the Finance Bill, because the Resolution is a permissive one only, which we have to take entirely on trust from the hon. and
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    learned Gentleman. Although the hon. and learned Gentleman was inclined to make fun of my hon. Friend the Member for Chesterfield (Mr. Benson), I think he must admit that when the Government last tried their hand at this, they failed to some extent, and they failed in the direction in which my hon. Friends had suggested they would. Therefore, I think we are entitled, not so much to congratulate ourselves on the suggestions we made, but to give a warning to the hon. and learned Gentleman. We hope that the Government, having been defeated in their efforts in this direction two or three years ago, will be very careful not to make the same errors in the terms which they embody in the Finance Bill this year.
    There is one point on which I would like to have an assurance from the Government. The Resolution which we have just passed contains provisions concerning settlements, and the Resolution which we are now discussing deals with the transfer of income abroad. What I want to be quite clear about is that where it is a matter both of a settlement and of a transfer abroad, between Resolution II and Resolution 12, it is not caught in a tertium quid, and that where there is a settlement and that settlement deals with a transaction resulting in a transfer abroad, if it is not caught under Resolution 11, it will be caught under Resolution 12. I would like to have an assurance that, in the opinion of the Law Officers, that will be the case, and that under Resolution 12 we shall not merely catch a transfer of income, but a settlement which is a transfer of income.
    Finally, I would like to raise a wider point. The whole essence of the avoidance of Surtax is the successful attempt, within the terms of the law, to turn income into capital, and for the person concerned to get it back in the form of capital instead of in the form of income. That is done in a very large number of ways, by using settlements, transfers abroad and so on; but in essence the simple method is by putting it into the form of a company and letting the company redeem itself after a certain number of years and return to the person concerned his income in the form of an appreciation of capital. Can the Attorney-General give an assurance that, in his opinion, between Resolutions 11 and 12

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    and the law as it stands at present, such means of enabling a company to accumulate income and then return the proceeds in the form of capital to the person concerned, is effectively prevented? I do not feel satisfied that it is, and I should be glad if, at some stage, the hon. and learned Gentleman would express an opinion on this matter.
    6.21 p.m.
    Mr. Benson: I am not quite sure that the Attorney-General has succeeded in easing my mind on what, if I understand the matter correctly, is the basic fact of the Archer Shee case, namely, that in the case of income arising from a foreign country, our tax laws are in some way subject to the laws of that foreign country in that the laws, and the difficulties arising under the laws in that country, decide what that income or benefit is, and that that is accepted by our judges as binding. It is obvious that in the Archer Shee case the income arose from securities, and had the trust been in England, there would have been no question but that the income would have been subject to tax; but because the American scheme was that the income had lost its identity once it got into the hands of a trustee, it could not, therefore, be held in our courts to be income arising from securities and was not taxable except in so far as it was brought home. From a very interesting article in the "Times" newspaper, I understand that some small countries, such as Liechtenstein, in order to attract this sort of companies, from which they can get taxes, alter their law whenever there is an alteration in our law so that they may help and assist tax evaders to put their companies into those particular countries. If decisions of the English courts are to be dependent upon decisions of foreign courts, obviously there is a weakness that ought to be stopped. I think it should be made clear in the Clause, when it is drafted, that an English decision shall carry, irrespective of what any foreign legal decision may be.
    Are we to understand that the question of motive in the transference of income is being entirely discarded? Surely, the reason a man transfers income abroad is, for tax purposes, entirely irrelevant. The question should be as to what the effect is, and not what the motive is. If a man, for legitimate commercial reasons,
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    suddenly finds that, owing to some particular legal complexity, he is thereby relieved of normal taxation, it is an anomaly which ought not to exist. The mere fact that a man, for purpose A, establishes a foreign company or transfers income abroad, and then discovers, quite irrespective of anything which he had intended, that he is receiving benefit B, no harm is done to him by taking away benefit B. What we are asking is that an entirely unforeseen benefit in the form of a lower tax should not be allowed to operate. Once the question of motive was introduced, it would cause trouble such as already exists, namely, that the courts have to decide not merely questions of fact but questions of motive, which are always extremely difficult to decide.
    A further point I wish to make is that, as the law stands at present, the prevention of tax avoidance applies only to the transferor or to his wife, and in the case of a man who makes some elaborate foreign scheme, the Attorney-General said nothing about what seems to me to he an important point, namely, that that elaborate scheme, although we may prevent it from operating during the period of the settlor's lifetime, immediately he dies his heirs may inherit the scheme and then, because the heirs are not the transferors, the whole question of tax avoidance will arise. That point was very clearly debated on the Finance Bill in 1936, and the then Financial Secretary, who is now the Minister of Agriculture, laid down definitely that the intention of the Government was that the prevention of tax avoidance should apply only to the transferor abroad and should not apply to his heirs when they inherited that particular scheme. If that be the case, and if the present attitude of the Government is the same, it opens the door for very considerable tax avoidance, because a good deal of tax avoidance is not directed primarily to saving the Income Tax or Surtax of the individual concerned, but to preserving the financial status of his children. The schemes for the avoidance of Death Duties are not for the benefit of the individuals who make the schemes or whose estates are to be inherited, but for the benefit of their children. Here we have a scheme which, although it will bring the settlor no advantage, will enable him to leave to his children tax-free income. I think it ought to be made

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    clear in the present Finance Bill that the provisions shall apply not merely to the settlor but also to his relatives, as defined in Section 19 (2) of the Finance Bill, 1936. I see no reason why, in the case of these foreign schemes, they should not apply with equal rigour to the relatives of the settlor. I hope that the Chancellor will see that this further extensive tax avoidance is included in the scope of the scheme.
    6.30 p.m.
    Mr. R. Acland: I was extremely interested just now in the answer of the Attorney-General to the question put by the hon. Member above the Gangway as to the discovery of motive.
    The Attorney-General: I wish to make that clear. The hon. Gentleman asked me whether it was the Government's intention to discard altogether the tests already on the Statute book. I shook my head and I intended to convey that it was not the Government's intention wholly to discard those tests.
    Mr. Acland: It was not exactly in that point I was so much interested, as in the fact that on this question the Government are doing on a small scale what the hon. Member for Oxford University (Sir A. Salter) suggested should be done on a wide scale. As I understood it, the hon. Member for Oxford University suggested that we would not be able to deal with this whole question satisfactorily unless we gave, not to the Commissioners of Inland Revenue, but to the courts the power to look into all these transactions and to ask the question, "Is this being done with the intention of avoiding Income Tax, Surtax or Death Duties?" and also the power to upset any transaction carried out with those motives. I believe that is a proposal which ought to be applied not only to transfers abroad but to all these machinations. Therefore, I await with great interest the Clause in the Finance Bill which will deal with this matter in order to see how the Government draftsman approaches what is admittedly a difficult problem. I believe that knowlingly or unknowingly the Government are breaking new ground in this respect. At any rate, they are going a little bit further into the ground which was first broken in 1936, and they are introducing a proposal which, in the opinion
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    of many, will shortly extend itself to cover all these matters of tax avoidance.
    6.34 p.m.
    Mr. Lathan: I, too, hope that the Government will examine this question from every point of view. It would be unfair at this stage to express too definite an opinion, but some apprehension has developed in the minds of hon. Members because of the limited assessment now made of the revenue likely to be derived from steps to prevent tax avoidance. We must await, as my hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) indicated, more definite proposals from the Government showing the lines on which they intend to proceed. The Government must be aware that feeling is growing in the country in regard to this scandal of widespread tax evasion. Hundreds of thousands of taxpayers with small incomes, who have to pay every penny which is due from them to the State, are becoming intensely annoyed when they read in the newspapers of the devices which are adopted by others, with the assistance of various legal gentlemen, for the purpose of avoiding taxation responsibilities. I hope the Government will extend the range of their survey as widely as possible.
    I hesitate to speak too definitely about this matter in the presence of so many hon. Members who are learned in the law and wise in financial transactions. But is it not possible so to arrange matters as to provide that any money derived from trade or other transactions in this country, shall be taxable whether it is transferred abroad or not? Is it not possible to devise proposals to deal with cases such as one which was described to me a few weeks ago. That was the case of a business which, having been conducted very profitably, in relation to recent developments in the armament industry, was transferred, lock, stock and barrel, with the profit in it, to a new company. I was informed that the profit of the company for the period covered was in the region of £30,000. Not only did they pay no Super Tax, but they paid no taxation at all, because under an arrangement which I am told is legally possible, this was regarded as a capital improvement and not as taxable profit. I hope the Government will inquire fully into all these matters.
    6.38 p.m.
    The Attorney-General: I wish to say, in the first place, that not only has this matter been examined, but it will be kept under constant examination. It is a matter to which my right hon. Friend attaches the greatest importance, and on which he is prepared to receive with sympathy any suggestions and if they are helpful and practicable, to consider putting them into operation. It is obvious that every Chancellor of the Exchequer must approach this question in exactly the same way. He must, of course, desire that Income Tax or Surtax should not be avoided by particular groups, but that everybody should pay his proper share. Therefore, it was with no lack of sympathy towards any of the suggestions which have been put forward that my hon. and learned Friend just now made some observations as to the impracticability of the course proposed by the hon. Member for Oxford University (Sir A. Salter). No doubt the hon. Member's suggestion is extremely attractive, but I assure hon. Members that when we come down to detail there is a great deal of difficulty about it.
    I am not sure whether the hon. Member for Barnstaple (Mr. Acland) realises that the motive test has been on the Statute book since 1936. We are not making any new departure in that respect. We are only making an amendment of the law owing to the fact that the motive test has not worked very satisfactorily. It is quite true that the proposal is more or less on the lines of the general principle suggested by the hon. Member for Oxford University, but the transfer of assets abroad is not in itself the sort of transaction which is carried out hundreds or thousands of times in the course of ordinary business and it is when you get into the area in which the tax evader uses a transaction of that kind that one of the chief difficulties arises in the practical application of any such proposal. However, I must not be led away by general considerations from dealing with the points which have been put to me in the course of the Debate.
    The hon. Member for East Edinburgh (Mr. Pethick-Lawrence) asked what was our main object. The subject is a complicated one. Some of the accumulations by companies were dealt with in the Finance Act, 1922, and any transaction
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    which comes within the specific wording of either the 11th or 12th Resolutions will, of course, be hit by them. As far as transfer and settlement abroad are concerned, those transactions will, for the most part, fall under the Resolution which we are now discussing. Section 18 as amended certainly applies to transfers of capital abroad which is producing incomes and is not restricted in the way suggested. The hon. Member for Chesterfield (Mr. Benson) raised the question of the effect of foreign law. The relevance of foreign law arises in this way. If someone in this country has certain rights in a foreign trust or in any other foreign contract or settlement governed by foreign law in order to see what those rights are, it is necessary to consider the foreign law governing that trust settlement or contract. It would, of course, be wrong to tax a person on rights which he did not possess under the law applicable to the trust concerned and that is a principle on which we could not impinge as I think the hon. Member will agree.
    Reference was made to a case in which the American law had been upheld in relation to persons here who had transferred assets to trusts of that kind. Of course, we have to take steps, and will be prepared to take steps in the future if we find that, as a result of the application of some foreign law, persons who are capable of enjoying the income are not liable to tax. That is exactly the kind of device which has been dealt with in the past and will be dealt with in the future. The hon. Member also raised the question of heirs. They were not covered, as he knows, in 1936 by the intentions expressed, and with regard to this Resolution, I am not sure whether they are technically covered. But it is not our intention to deal with that matter and it appears to me that there is great objection to dealing with it on the basis of the motive test as some hon. Members have suggested. It seems extremely difficult to apply the motive test in such cases. If you ask a son what were his father's motives when he carried out a certain transaction it would seem to be asking a question which the son would have extreme difficulty in answering unless he had communications with the other world—and those are not generally recognised in a court of law. No case of the kind has as far as we know, arisen and it certainly is not proposed to deal with

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    the matter in the Clause which will be based on this Resolution. It is possible that the point might arise in the future and might have to be dealt with then.
    Mr. Speaker: I am informed that it is the general desire of the House that this Resolution and the Sixteenth Resolution which deal with the same point, should be considered together.
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    6.45 p.m.
    The Solicitor-General: As you have just said, Mr. Speaker, these two Resolutions really deal with different facets of the same matter, and both of them, I think, arise as a result of a casualty which occurred in the Court of Appeal in a recent case. The question arising is, What is the position of income payments received by executors during the period after the death of the testator and before the estate is fully administered? This sum reaches the executors' hands, and in the normal course of events the executors will pass on some part of the money either to the life tenant or to the residuary legatee in anticipation of the estate ultimately being administered. The difficulty has arisen that in a recent case it has been decided that before the administration of the estate is complete, there is no residue, so that there is no source from which a person receiving the money can be said to be receiving income, and, therefore, those sums of money, although they reach the executors' hands minus tax, because the tax is deducted before coming to them, when they are passed on by the executors to the life tenants or the residuary legatee are held not to be the income of the residuary legatee or the life tenant, as the case may be, and reach that person's hands, therefore, in a condition in which he does not pay Surtax.
    We propose to restore the law to what most people thought it was before the recent case. Such a situation in law has not presented itself either to us or to the Revenue authorities, and no doubt the
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    country at large has cheerfully gone forward on the assumption that when a gentleman left his estate for the benefit of somebody, and it took some time to wind up that estate, the payment made to the ultimate residuary of money which reaches the executors' hands as income is money passing to the beneficiary. Unfortunately, that is now shown to be not the correct view of the law, so that we propose to restore the law to what most people thought it was before the Corbett case was decided. We propose that, in the case of the life tenant, payments made to him during the administration or on completion of the administration will be taxed as part of his total income for Surtax purposes. We propose also that, in the case of the residuary legatee, the income arising during the administration will be treated as his income for Surtax purposes to the extent that he enjoys it, but that his liability to pay Surtax on the income will, of course, only arise, as it should, when he comes to enjoy it and not until it reaches his hands.
    The main effect of these proposals will be to fortify the Revenue, but a counter loss to the Revenue of a kind which I am sure the House will approve will necessarily result. There will be an advantage now to charities which they do not at present enjoy, in consequence of some rather difficult legal decisions to which I need not refer. After the Barnardo case some years ago, there was a provision put in an Act of Parliament by which charities can recover tax which, under the Barnardo decision, they were not entitled to do, levied upon the income of the estate in which they were interested from a date one year after the death of the testator. In consequence of the legislation which we shall introduce in implementing this Resolution, charities will in future be able to claim repayment of tax as from the date of the death of the testator. That will be a necessary corollary of this legislation.
    In this case I am in a position to satisfy the hon. Member for South Shields (Mr. Ede) with something in the nature of figures. We are able to make some estimates as to what advantage will accrue to the Revenue from these proposals. We estimate that the Surtax loss to the Revenue in the case of beneficiaries entitled to an absolute interest as residuary legatees is not less than £750,000 a year, and that in addition the casualty to which

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    I have referred, which occurred in the Court of Appeal, would involve a loss of nearly £750,000 a year in the case of the life tenants, so that the sum of those two figures is something like £1,500,000 of possible loss to the Revenue, which will be prevented by the effect of Resolution 13 as implemented by the Act of Parliament when it is passed.
    I do not desire it to be thought that the whole of these provisions relate to the avoidance of tax. That was not suggested for one moment to be the fact in the Corbett case. Of course, it must normally happen that in the case of large estates it takes some time to wind them up, and as the law now stands you cannot charge Surtax on the income during that interval, but the House will readily see that it does offer a considerable inducement to people to be a little sluggish, shall we say, in winding up estates if they know that until they are wound up, they are not in an income-producing condition. I can give some examples. There is a case where the date of death was 1919, the annual income is £1,100, and the annual Surtax £220, which is lost at the present time. There is another instance of an estate with an annual income of £150,000. The death was in 1929, the residue was only ascertained in 1935, and the Revenue lost annual Surtax of £55,000. Resolution 13 and the legislation which will follow will, we hope, put that situation at rest.
    With regard to Resolution 16, this is in case there be any doubt as a result of the Corbett decision as to what is the position in regard to the Estate Duty. It simply gives effect to the practice according to which Estate Duty is levied at present. In the case where, for example, a life tenant dies before an estate has been completely administered, where is the burden of Estate Duty to rest? The practice has for years been based upon a decided case, and everybody has thought that in those circumstances the estate passed upon the happening of the event during the period of administration, that is to say, upon the death of the life tenant. Everybody has assumed that to be the law. It appears to us that in view of the decision in the Corbett case, it may be doubtful, and it may be said that the beneficiaries in those cases have no direct interest in the specific assets of the estate, because it has
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    not yet been administered, and that, therefore, those assets cannot truly be said to pass. So, on the death of the life tenant, before administration is complete, and after the death of the testator, it may be said that there is no estate passing and, therefore, that Estate Duty is not payable.
    Mr. Pethick-Lawrence: I understand that the learned Solicitor-General is not talking of the whole estate, but of that part which has arisen as income?
    The Solicitor-General: Where, during the period of administration, the life tenant dies, and, therefore, the portion of the estate which is the source of the income that goes to him now becomes available for whomsoever ultimately becomes entitled on the administration, it has always been assumed that that amount of the estate passed on the happening of the event. Corbett throws some doubt on that as a proposition. The law has been administered for years and years on the footing that the other view is right, and we propose to make it perfectly clear, by Resolution 16, that in those circumstances the Estate Duty shall continue to attach to the estate as passing on the happening of the event.
    Sir Robert Tasker: In the event of a man dying and leaving his estate to four daughters, and on their death it reverting to the son, who becomes the residuary legatee, do I understand the learned Solicitor-General to say that although Death Duties have been paid, the son will again have to pay them on the death of the sisters?
    The Solicitor-General: Let me take a simple case. "A" by his will leaves his residuary estate to "B," the daughter, for life, with remainder to the son, "C." Supposing "B," the daughter, dies before the estate is administered, then a claim for Estate Duty under the existing practice is made on "B's" death in respect to the estate which passes to "C "; that is to say, it was made on the death of the daughter in respect of that part of the estate which represents that income and which passes to the son. On that basis we have always treated the property as passing, and Estate Duty must be paid. The Corbett case throws doubt on the question of whether that is right or not, because it: can be so con-

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    strued as suggesting that in those circumstances, the estate not being administered, nothing has yet passed to the daughter. In those circumstances, since doubt might be cast upon a practice which has been very general and very long continued, we propose by legislation to make the position clear.
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    6.59 p.m.
    The Attorney-General: This Resolution affects only certain kinds of enterprise, namely, those which deal for their stock-in-trade in things which increase in value: for example, a company which buys land with a view to future development, land which it believes will increase in value, because it will be demanded for building purposes, or companies which deal in securities, which buy and sell securities and shares. One might perhaps, in order to explain the effect of the Section, take the simple case of a company which bought a large consignment of immature wine or whisky with a view to retaining it for five or six years and then disposing of it at a profit at the enhanced value which it would then rightly have. As things are at present, if you take a company which goes on trading continuously, it is assessed on its trading profits made by buying and selling its stock-in-trade as and when those profits are realised by sale. Until the trader sells, you do not tax him on the ground that what he bought at 5s. is now worth 7s., but if he sells it at 8s. there will be a profit of 3s. to come into his trading account. A company which has a stock-in-trade of this kind may, in certain circumstances, avoid paying Income Tax by discontinuing business and transferring the stock-in-trade, which has appreciated in value, to a newcomer, the sum that he gets from that newcomer, which represents the increased value of the stock-in-trade, being the sum received as the purchase price of the business, and therefore a capital sum, and not a sum received by way of sale of stock-in-trade in the ordinary way.
    960
    It is a matter which my right hon. Friend thinks should clearly be dealt with. It was dealt with by Parliament on the same lines as this Resolution in connection with Excess Profit Duty, enabling appreciated value of this kind to be brought in, but it has not previously been dealt with under Income Tax law. I do not say that it is a very big thing, but some cases have come to the attention of the Revenue where this device of discontinuing business and transferring it to a new concern has been used and thereby tax avoided on what clearly is a proper trading profit.
    Sir Robert Tasker: In the case of land, if it lay derelict for a number of years could not some interest be calculated on the initial outlay in purchasing it?
    The Attorney-General: Under the present system allowances are made in respect of the time the money has been out of use and all the rest of it, and allowances are made for expenses. The point is this. If the company continues business and sells the land at a greatly enhanced value, subject to all proper deductions, that is a trading profit which will bear tax. If they transfer their whole business to another company, getting the enhanced value of the land as a capital sum in the purchase price of the business, it is kept out of the charge for tax as a trading profit. The purpose of the Resolution is to see that it comes in as a trading profit subject to exactly the same deductions and adjustments as would have been made if the company had realised the value in the ordinary way by selling it.
    Sir R. Tasker: Who determines what is a fair rate of interest?
    The Attorney-General: That does not arise upon this Resolution. It arises in exactly the same form in the case of a company which does not discontinue business. The answer is probably that the company borrows money from the bank to purchase its stock in trade and brings the interest in as an expense.
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    7.10 p.m.
    The Attorney-General: This is a Resolution, which I understand insurance companies agree is fair, to put what is called capital redemption business on the same basis as life assurance business. Life insurance, of course, is a scheme under which one pays so much a year and either on an endowment policy gets a lump sum at 60 or, in the case of a full life policy, other people get it when one dies. In addition to that business there is a considerable business carried on under which capital or lump sums become payable not from the point of view of life insurance but at a certain date, say for paying off a loan when it becomes due or for some purpose of that kind, but normally, as the name that is used to describe the business implies, for the redemption of capital. A sum of money may have been borrowed to be repaid in 15 years and, in order that the money may be available, arrangements are made with an insurance company for capital redemption assurance. At present business of that kind is not assessed on the same basis as life insurance business. Life insurance business has its own special rules. An ordinary life insurance company's main source of income is from the investments that it makes with the premiums that it receives, just as the ordinary trading company's main source of profit is the realisation of the goods that it buys and sells. It is, therefore, desirable that this capital redemption business should be dealt with by the same methods as are applicable to life insurance business.
    May I give a short example of how it works out at present? In computing profit or loss for the purpose of assessment under Case i of Schedule D, there is deducted from the profit actually made the amount of taxed income that is included in that profit. Tax has already been paid on that. If you want to find whether there has been a trading loss, you have to take into account that the trader has paid tax on that part of his income that he has received from investments. If a capital redemption business produces an investment income of £100,000 and the profit actually made is £10,000, the £100,000 has to be deducted
    962
    from the £10,000 in order to arrive at the Income Tax profit or loss, with the result that the business is found to have an Income Tax loss of £90,000.
    Mr. Tinker: Have you not put it the wrong way round?
    The Attorney-General: It is a minus quantity, and therefore there is a loss. If the company has other insurance business —not life insurance—on which the profit for assessment under Case 1 of Schedule D amounts, say, to £500,000, the loss that I have described on the capital redemption business is set off against the £ 500,000 profit, with the result that the assessment on that business is reduced to £410,000. In that case the revenue has lost tax on £90,000, because this artificial loss has been deducted from the other business carried on by the company.
    Mr. Tinker: The Attorney-General has attempted to explain what this Resolution means. If this is what is called high finance, I am entirety lost. In order to understand it I shall have to go to school again.
    Mr. Higgs: What will be the position of an individual running two businesses— not capital redemption businesses but genuine trading businesses—where at present he can set the loss of one against the gain of the other? Is he still in a position to do that?
    The Attorney-General: Yes, quite.
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    7.15 p.m.
    The Solicitor-General: This Resolution is to prevent the avoidance of Estate Duty through the one man or family company and to amend Section 34 and Section 38 of the Finance Act of 1930. Those sections were specifically designed to deal with the case of the person who in anticipation of death conveyed his property to a company from which he continued to derive a good deal of benefit. It was provided in Sections 34 and 35 that the benefits which he so derived should not

    963
    be aggregated with other elements of his estate. The effect of that has been to enable considerable evasions to be made of what Parliament desired to effect. The first proposal that we make in this Resolution is that for the purpose of determining the rate of duty payable the property shall be aggregated with other property passing on death. Let me explain what Sections 34 and 35 of the Act of 1930 do. They impose the charge of Estate Duty where property has been transferred to a one man company in such a way that under the previously existing law no charge of duty had been existing although the owner had been enjoying the benefit of it. Section 34 deals with the case where the deceased was the absolute owner of the property transferred and Section 35 dealt with the case of the man who was a life tenant. Under Section 34 a notional sum of money is deemed to pass on his death. A sum not exceeding the value of the assets transferred to the company by the deceased which bears the same proportion to the value of the total assets of the company as the benefits drawn from it by him bears to his own total income. Under Section 35 the actual property transferred is deemed to pass on the death of the life tenant.
    The important point to note is that under both sections the property which is deemed to pass on death is by express statutory authority not aggregable with the rest of the property passing at death. To some extent these non-aggregating provisions were due to an oversight left out of both sections. There is no good reason really why you should not aggregate, and the result of the existing law, which was devised to prevent tax avoidance, has been to provide a new loophole for tax avoidance because tax dodgers can reduce their Estate Duty liability by the simple expedient of splitting the property which it is proposed to transfer, and then transferring it to several companies thereby securing lower rates of duty on various parts which are not aggregated. I can give an instance. The worst case that has been come across is in reference to a property of the value of £800,000. It was split up between five companies to which Section 34 applied, and instead of there being one non-aggregable estate, there were five and this aggravation of the principle of aggregation saved the estate from £164,000 Estate Duty. It is obvious
    964
    that this is a leakage which ought to be stopped, and the effect of the two limbs of this Resolution will be to cure the defects that have been discovered.
    Mr. Pethick-Lawrence: I am very glad that the Government are remedying these defects. I remember the facts of the case described by the hon. and learned Gentleman. It was due to an oversight, and it was felt that the two parts should be of the same kind and that the legislation should be amended at a later date.
    Motion made, and Question proposed, "That this House cloth agree with the Committee in the said Resolution."
    7.21 p.m.
    The Attorney-General: This Resolution deals with another rather technical point, and I am not sure whether the hon. Gentleman the Member for Leigh (Mr. Tinker) will regard it as any more intelligible than the previous one. It arises out of an article in the "Law Times" which suggested that the particular provision of the Finance Act, 1894, which was put in as a relieving section to prevent Death Duties being levied where they ought not to be levied, could be used to get round the provision that if property is transferred within three years of the death of the transferor it is aggregated with his estate for the purposes of estate duty. The relieving section dealt with a case of this kind. Suppose a man settles property on himself for life, and, on his death, on B for life, and, after B's death, to B's children. The Section to which I have referred dealt with the position on the basis that B dies during the life of A. There was a passing of property in this sense, that the children, as it were, came up a step, but obviously it was not a passing that should be made the subject of Estate Duty. This Section made it clear that in a case of that kind Estate Duty should not be payable.
    What the writer in the "Law Times" said was this. Suppose somebody desires to make a gift by settling property on B for life, and on B's death on his children. That is done by A. But if A puts in a life interest for himself after B saying,

    965
    " I transfer this property now to B for life and on B's death, if I am still alive, it is to come back to me and then it is to go to the children." Then A dies within three years of making that transfer. The writer in the "Law Times" suggested that the provisions of this Section were such that in his view it would prevent the provisions which bring in gifts within three years as part of the estate from being applicable. This is a technical matter and I think probably the Committee will not want me to go into details. The point is that a Section which was intended to prevent Death Duty being exigible on a death which really did not bring about a passing of property could by an artificial method be used to prevent a transfer within three years of death from being made liable to the duty.
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    7.26 p.m.
    The Financial Secretary to the Treasury (Lieut.-Colonel Colville): This Resolution is for the purpose of remedying two defects in the law which has been passed relating to national defence contribution and it paves the way for the legislation which we shall lay before the House for that purpose. Its first object is to prevent the deduction, in computing the profits of a company which belongs to a group of parent and subsidiary companies, of interest on loans and other annual payments to other companies within the group, which really affect the internal and not the external finance of the group. Such payments are not true expenses of earning the profits of the group but are merely transfers of profits dictated by the structure of the internal finance of the group. In the existing law there is a provision which disallows a deduction of interest paid within the business to proprietors of the business or to directors having a controlling interest in the business, but the provision does not extend to the case of parent and subsidiary companies. It is our view that
    966
    these payments which are in essence internal arrangements should not be allowed as deductions.
    The second object of the Resolution is to prevent a double allowance of losses. Owing to a technical flaw in the existing law, in certain circumstances a loss in one trade or business may be set off against the profit arising in another trade or business, and may also be carried forward by the concern making the loss so as to secure a second allowance of the loss by deduction from its own future profits. It was clearly not the intention of Parliament that that should be so and it arises owing to a flaw in one of the Schedules. I could give the House several examples of what I mean in actual practice, but if the House will allow us to have this Resolution now we shall be able to discuss the matter in more detail when we are considering the precise proposals.
    Mr. Pethick-Lawrence: May we have one example?
    Lieut.-Colonel Colville: Yes, Sir. Supposing a principal company makes a profit of £100,000 in the first accounting period and in that same period a subsidiary company makes a loss of £40,000. Under the existing law the principal company can ask that the profits or losses of the subsidiary company shall be treated as the profits or losses of the principal company, and the principal company is accordingly assessed to National Defence Contribution upon £60,000 only. In the second period the principal company makes a profit of £150,000 and the subsidiary company this time makes a profit of £90,000. The assessment upon the combined profits ought to be £240,000, but under the paragraph in the Fourth Schedule which we say needs correction the subsidiary company is entitled to claim that the loss of £40,000 sustained by it in the first accounting period shall be carried forward and deducted from the profits made by it in the second period. The profits of the subsidiary company for the second period are, therefore, computed, not at £90,000, but, after deducting the £40,000, at only £50,000. The loss of £40,000 has thus been allowed for twice over. That is due to a flaw in the existing law, and it is a flaw which we wish to put right and we shall bring forward proposals based upon this Resolution to remedy it.
    7.33 P.m.
    Mr. Croom-Johnson: I wish to call attention to the last line of the Resolution. I have not had any experience of the particular point to which my right hon. and gallant Friend the Financial Secretary has called attention, and the explanation he has given sounds all right, if he will allow me to say so, but I do observe that it is intended that this change in the law shall be deemed to have effect as from the date on which Part 111 came into operation. There may be, and there probably is, a very good reason indeed for suggesting that this amendment of the law should be made retrospective in effect, but when the House is dealing particularly with taxing legislation I do not think we ought to allow such a point to pass without someone calling attention to it, so that we may all have our minds upon it in order to see what the reason, which I have no doubt is a good reason, is when we come to consider this proposal when it is translated into the Finance Bill.
    7.34 P.m.
    Lieut.-Colonel Colville: If I may have the permission of the House to speak again, I will answer the point put by my hon. and learned Friend. He quite properly called attention to the fact, which I had intended to mention, that this provision is retrospective. I think the reason for making it retrospective will appeal to the House, although of course he was quite right in drawing attention to it. In the case of a tax such as the National Defence Contribution, which was imposed for a specific period of five years, it is important that it should be levied upon the same lines as far as possible over the whole period. It would be inequitable as between different classes of taxpayers if an obvious defect of the law should not be remedied as from the inception of the tax. We have not yet had a full year of the tax and in order that all trading concerns should pay in a common measure throughout the whole period of charge it is a fair thing that we should in this case make the alteration retrospective.
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    7.36 p.m.
    Lieut.-Colonel Colville: This Resolution authorises the introduction of a Clause which is designed to prevent the avoidance of Stamp Duty which is taking place in connection with the sales of property by one limited company to another. Instruments of conveyance or transfer on sale are, in the ordinary way, liable to duty at the rate of £ per cent. ad valorem. Where, however, two limited liability companies constitute, as parent and subsidiary company, one financial whole, or where they are both subsidiaries of a third company, the law has, since the Finance Act of 1930, recognised that such a transfer does not represent a real change in ownership, and so exemption from the ad valorem duty was given. The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) will remember that when his Government was in office that point was discussed fully, and it was agreed that there should be this exemption, which was granted partly to encourage wise grouping in the interests of rationalisation, but I am sure the Government did not intend the exemption to be misused as we find that it is being misused in some cases at the present time.
    A quite unjustifiable advantage has been taken of this relief by certain companies having no financial or other connection except that they happen to have contracted, as ordinary vendor and purchaser, to sell property to each other In such cases there is a real change of ownership. But by interposing a small limited liability company created for the purpose they can avoid the payment of Stamp Duty. I think the right hon. Member for Hillsborough (Mr. Alexander) was interested in this matter and mentioned it in the House of Commons last year—this avoidance of Stamp Duty by the interposition of a small bridge company. It is clear that such a proceeding is an abuse of the present law and we propose to bring in provisions to put a stop to it. We have been frequently asked during this Debate whether we can give any estimate of the amount of money saved to the revenue by the provisions we have been proposing, and in this instance I am able to say that we think that the amount of Stamp Duty which is being avoided at present is about £100,000 annually.

  FINANCE [POWER TO BORROW FOR CERTAIN FINANCIAL PURPOSES].
  Resolution reported,
  " That the whole or any part of the sums required in the current financial year for the purposes mentioned in paragraph (a) or paragraph (b) of Sub-section (4) of Section twenty-three of the Finance Act, 1928, as amended by auy subsequent enactment, may be provided out of money borrowed for the purpose under Section one of the War Loan Act, 1919, instead of out of the permanent annual charge for the National Debt."
  Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
  7.38 p.m.
  Sir J. Simon: The House will probably wish me to make a short statement upon this Resolution. It is to enable a Clause to be introduced into the Finance Bill which in case of need could be used to enable us to borrow to meet Sinking Fund charges on the contractual Sinking Funds. The House may remember that for some years past the Budget arrangements have provided £224,000,000 as the fixed debt charge. That £ 224,000,000 is intended primarily to pay the interest on debt, together with the cost of the management of the National Debt, and includes the interest upon savings certificates actually cashed during the year. The figure has been £224,000,000 year by year for the last four or five years, and down to last year it was sufficient, not only to meet completely the primary purpose of paying for the interest and management of the National Debt but to leave a margin which was enough to provide in full for the statutory Sinking Funds. The figure needed for that purpose varies from year to year according to changing conditions, and at present is in the region of £10,000,000 or a little more. Last year, as I told the Committee of Ways and Means when I opened my Budget, the provision of £224,000,000 was not enough to meet the whole of the cost of providing for the statutory Sinking Funds, but was sufficient to provide most of what was needed. There was a balance of some
  970
  £2,770,000, which was met out of revenue and which, in effect, reduced the surplus last year.
  I have announced that it is my intention this year, and a Clause will be included in the Finance Bill, to provide £ 230,000,000 for the fixed debt charge, and not £ 224,000,000, and I gave my reasons in the Budget speech. The reference will be found to it in column 49 of the OFFICIAL REPORT of Tuesday, 26th April. I hope and believe that that £ 230,000,000 will be sufficient to cover the interest and management of the National Debt, and the interest on the savings certificates cashed and to leave a margin sufficient to serve the statutory Sinking Funds, but according to our ordinary practice, which has been followed year after year, as a precaution one also takes power in case of need to borrow for that last purpose. This proposal is exactly in line with the provision which has been adopted by the House for a number of years past, and I ask the House to give me this Resolution in order that I may include the ordinary Clause in the Finance Bill.
  7.42 p.m.
  Mr. Pethick-Lawrence: If I understand the Chancellor aright, he has properly recognised the conditions with regard to savings certificates. They always have an interest for me, because they were one of the questions which I constantly raised as a junior Member of the House. I pursued the right hon. Member for Epping (Mr. Churchill) on this point in every one of the years of his Budget, and I think that in the end he had to make some concession to my protest. I am glad that the Chancellor has recognised that if he were not to make an allowance for the accruing interest on those certificates he would be borrowing even more than he is borrowing at the present time, and therefore, in so far as he has put up the charge which he expects to cover this point, and others, I feel that he has acted correctly. He has arranged to borrow so large a sum of money altogether that it does not, of course, seem to be a very great matter whether he borrows a little more or a little less. When we are borrowing £100,000,000 or more a few odd millions almost pass out of our ken as a matter of small importance, but we have argued that out on previous occasions and I do

  971
  not think it is necessary to go through it again to-night. We do not find it necessary to oppose this Resolution.
  7.44 P.m.
  Mr. Benson: With regard to the payment of these contractual obligations I am not quite clear why it is necessary to take power to pay these Sinking Funds out of borrowed money if necessary. I should have thought that the State would have had to pay the statutory Sinking Funds whether they had taken powers or not, and that if there were a deficit the payments would take their place in the normal payments for the year irrespective of any power to borrow. Assuming that the Chancellor were unduly optimistic and felt there was no danger of having to borrow to pay those Sinking Funds and omitted to take the power, if by some mischance there were a heavy deficit what would constitute the position then?
  7.45 P.m.
  Mr. A. V. Alexander: It is difficult for the ordinary Member of the House always to understand exactly what the position is in some cases. I wonder whether the right hon. Gentleman can give us an idea of how the Sinking Fund arrangement is working in relation to reduction of the National Debt. We understood the position very well before 1930£ 31, when we had a fixed sum always put before us representing the Sinking Fund of the year, but we are not clear now whether a fixed sum is actually placed aside for debt reduction. If the right hon. Gentleman has figures available to put before us easily, perhaps he would give them to us, as they might reassure us.
  7.46 p.m.
  Sir J. Simon: I quite understand the nature of the question put to me, and I will say a word briefly upon the point but hon. Members, and the right hon. Gentleman, will probably agree that it might be better to authorise the Clause, after which we shall be able to consider it. As regards the question put by the right hon. Gentleman, I understand that it is undoubtedly the case that we have to provide money for the contractual Sinking Funds. If there were no specific authority to borrow and there was still a charge to be met, the right hon. Gentleman will apprehend, that would either reduce the surplus or increase
  972
  the deficit, as the case may be. Assuming that it is a case of a deficit, it would be necessary to find the money by borrowing. It is a matter of precaution, and it is desirable to have two ways of dealing with the matter. This is now our regular system, followed year by year. In practice this amount is found out of revenue.
  As regards the question put to me by the right hon. Gentleman from the Front Bench opposite, I would remind him that I did endeavour in my Budget statement to make the position clear regarding the position of the National Debt. Perhaps he will be good enough, at his leisure, to look at the passage, which in the OFFICIAL REPORT begins in column 48. He will see whether I have provided the information which he has in mind, and, after he has refreshed his memory, if he does not feel that it gives him all he wants and will let me know, I will gladly see whether there is something more that I can say. I do not want there to be any misunderstanding. The reason why we make this provision for paying off, even in these difficult times, a portion of the Debt against us, is, among other things, that if we did not do so, we might imagine that we were standing quite still, whereas we should really be increasing our liability. As I explained in the Budget speech, the savings certificates which are outstanding and are not presented for payment in cash in the course of the year, are earning interest all the time. Good bookkeeping requires that we should take that fact into account. I am not open to reproach in this respect. That £ 230,000,000 should properly be regarded as an effort, at a time when there is a debt operation going on, to secure that our capital liabilities are not, as it were, secretly increased. With that explanation I hope that I shall earn the commendation of the stern and unswerving rectitude of the right hon. Gentleman opposite.

  FINANCE [CURRENCY OF CERTAIN SAVINGS CERTIFICATES].
  Resolution reported,
  " That the power of the Treasury, under Sub-section (1) of Section forty-three of the

  973
  Finance Act, 1931, to prolong the currency of savings certificates shall cease to be limited as provided in proviso (b) to that Subsection (which limits such prolongation to the thirty-first day of March, nineteen hundred and forty, in the case of certificates issued on or before the thirty-first day of March, nineteen hundred and twenty-two)."
  Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
  7.51 p.m.
  Sir J. Simon: For hon. Members who desire an explanation of this Resolution I am not certain that reading it will make it reasonably intelligible, but I think I can explain it in a way which I hope will make it clear to everyone. The object of the Resolution is to authorise the Treasury to extend the first issue of savings certificates, the original issue, beyond their present final date which, as things stand, is 31st March, 1940 They must be brought in and encashed by that date. The first issue of these certificates was on sale from February, 1916, to March, 1922, at the price of 15s. 6d. They were to be worth £1 after five years and 26s. after 10 years, and their value thereafter was to increase at the rate of 1s. per year. Certificates of the first issue still in existence are now worth between 32s. or just over 38s., according as they were taken out in 1916 or 1922. As the matter now stands they have their final date in March, 1940.
  Some years ago, in a previous Finance Act, that of 1931, the Treasury were given leave to extend the final dates of saving certificates, but it was applied only to later issues. The final date of this original issue was retained for the reason that at that time it was supposed that by 1940 the amount of the first issue would be a very small matter indeed; they would have worked themselves out and the issue could be finally wound up and disposed of. In fact, the popularity of this issue is such that the certificates have not been brought in and encashed as might have been expected, and the amount outstanding, including the accrued interest, is still the equivalent of over £45,000,000. It will probably be £40,000,000 in 1940. It appears to us that, having given the facility of extension to the other issues, it would not be advisable to force redemption of this issue for so large an amount. A good many of the holders want to keep them, and would not by any means be averse to a further extension, which is
  974
  clearly desirable. What I now ask is for authority by this Resolution to introduce a Clause into the Finance Bill. When hon. Members see the Clause they can consider it at their leisure.
  7.55 P.m.
  Mr. Benson: May I ask why these Resolutions were not printed with the other Resolutions? These proposals were foreshadowed in the Budget speech of the right hon. Gentleman.
  Sir J. Simon: I think they stand in a different position from the Resolutions which were reported to the House from the Committee of Ways and Means, which are the Resolutions upon which the Finance Bill is founded. Is that not so, Sir?
  Mr. Speaker: The two Resolutions we have been considering are upon the Paper for their Report stage.
  Mr. David Adams: What is the prospective duration of the extended time?
  Sir J. Simon: I am not asking that the Resolution should limit it. That is a matter for consideration in the Bill. What I was proposing to do was to remove the present limit which says that, Willy-nilly, they must all come to an end in 1940.
  Mr. Alexander: Is not the whole point whether it is best to force that compulsory conversion in 1940 or to leave things as they are? If the interest now remains at 1s. it is believed that people would like it to continue.
  Sir J. Simon indicated assent.

  WAYS AND MEANS [28th April].
  Resolution reported:
  AMENDMENT OF LAW.
  " That it is expedient to amend the law relating to the National Debt, Customs and Inland Revenue (including Excise) and to make further provision in connection with finance."
  Bill ordered to be brought in upon the said Resolutions and upon the Resolutions reported from the Committee of Ways and Means on 3rd May and agreed to by the House on that day, by the Chairman

  975
  of Ways and Means, the Chancellor of the Exchequer, and Lieut.-Colonel Colville.
  FINANCE BILL,
  " to grant certain duties of Customs and Inland Revenue (including Excise), to alter other duties, and to amend the law relating to Customs and Inland Revenue (including Excise) and the National Debt, and to make further provision in connection with Finance," presented accordingly, and read the First time; to be read a Second time upon Monday next, and to be printed. [Bill 138.]

  BACON INDUSTRY [MONEY].
  Considered in Committee, under Standing Order 69.
  [Captain BOURNE in the Chair.]
  Motion made, and Question proposed,
  " That, for the purposes of any Act of the present Session to provide for the better organisation of the bacon industry and the pig producing industry, it is expedient to authorise—
  A. The payment out of moneys provided by Parliament of any administrative expenses incurred for the purposes of the said Act by the Minister of Agriculture and Fisheries and the Secretary of State for Scotland;
  B. In respect of certain pigs related to years comprised within a period of three years commencing with an appointed day—

  (1) the payment out of moneys provided by Parliament to bacon curers of sums related to rises in the cost of a standard ration for pigs over eight shillings and six pence per hundredweight;

  (2) the payment into the Exchequer of sums recovered from bacon curers, being sums related to falls in the cost of the said standard ration below the said sum;

  (3) the payment out of moneys provided by Parliament to bacon curers of sums related to falls in the price of bacon below, in the case of sums payable in respect of the first year, ninety-four shillings and nine pence per hundredweight, in the case of sums payable in respect of the second year, ninety-three shillings and nine pence per hundredweight, and in the case of sums payable in respect of the third year, ninety-one shillings and nine pence per hundredweight;

  (4) the payment into the Exchequer of sums recovered from bacon curers, being sums related to rises in the price of bacon over the said amounts respectively;

  so however that the sums to be paid in respect of any pig shall in all cases be calculated by reference to, amongst other things, the weight of bacon produced or presumed to be produced from that pig on specified
  976
  classes of premises, with an addition in certain cases for weight lost by the removal of bones and skin, and that sums are not paid, in the case of the first year, for more than two million one hundred thousand pigs, in the case of the second year, for more than two million four hundred thousand pigs, and in the case of the third year, for more than two million five hundred thousand pigs."—(King's recommendation signified.)—[Mr. W. S. Morrison.]
  7.59 P.m.
  The Minister of Agriculture (Mr. W. S. Morrison): I am moving this Resolution on behalf of my right hon. and gallant Friend the Financial Secretary to the Treasury. The Committee will be aware that it authorises the financial backing for our proposals for the reorganisation of the bacon industry in this country that were embodied in the Bill recently read a Second time. The full proposals have so recently been under the consideration of hon. Members that it will not be necessary to expatiate upon them at this stage, but hon. Members will remember that the two main objects of the proposals are the setting up again of the contract system for the supply of bacon pigs in this country, and a scheme for the reorganisation of the bacon factories of the country so as to provide the industry with the asset of low cost and efficient curing establishments. To enable this process of reorganisation to be carried on, it is proposed that assistance should be given to the industry for a period of three years, with the object of insulating it against wide fluctuations in prices of feeding stuffs as far as the farmer is concerned, and in the price of bacon as far as the curer is concerned.
  The Resolution is, I think, almost self-explanatory. The assistance is based on the assumption that an efficient pig producer can work at a profit if he gets 12s. 6d. per score for his bacon pigs, and has not to pay more than 8s. 6d. per cwt. for the standard ration of feeding stuffs, and the Resolution, in its first two numbered paragraphs, provides for that part of the assistance. The proposal is founded upon the report of the Lane-Fox Reorganisation Commission, in paragraph 23 of which hon. Members will find the matter more fully discussed. Provision is made in these two paragraphs for payment from the Exchequer to bacon curers of the necessary subsidy, and the curers are bound to pay 12s. 6d. a score to the pig producer, plus the food cost subsidy which is appropriate having regard to

  977
  the ruling level of prices for the relative commodities.
  The contract between the pig producer and the curer may, and certainly will, provide for variations in price according to the grading of pigs, in order to secure that the proper animals are produced, and also according to the month of the year in which they are coming forward, in order to secure level delivery, which is so essential for the efficiency of the bacon curing industry. The other side of the picture is the assistance that is here given to the curing side of the industry. It is thought that, if the price of bacon sold in this country does not fall below 94s. 9d. per cwt., the curer can afford to pay the 12s. 6d. per score, and the second pair of the numbered paragraphs deal with the conditions on which the subsidy will be paid from the Exchequer to the bacon curer should the price of bacon fall below the figure of 94s. 9d.
  The only other feature to which I ought to draw attention in connection with these proposals is that throughout the three-year period the assistance is diminished, or tapered. The reason for that is that it is supposed that, during the three-year period of reorganisation, economies will become available on both sides of the industry, as a result, not only of rationalisation, but of research and education in the matter of the production of pigs, and that, therefore, slightly less assistance may be necessary as the time from the inception of the proposals goes on. It will be understood that these proposals are not only for payments out of the Exchequer to the persons affected, but for repayment to the Exchequer should conditions become more favourable for either curer or producer. What the scheme really does is to provide, for this period of three years, a measure of stability and security which is eminently desirable if these proposals for the reorganisation and betterment of the industry are to succeed.
  The last words of the Resolution refer to the numbers of pigs in respect of which this assistance is to become available. In the first place, the assistance is available only in respect of pigs sold on long contract. That is the basis upon which the contract system is established. The numbers given in the last part of the Resolution are 2,100,000, 2,400,000 and 2,500,000 in the three respective years. This provides for a certain expansion of
  978
  the industry. It was estimated, although no exact information is available, that in 1937 the number of British pigs converted into bacon was round about 1,900,000, so that, even in the first year of the operation of these proposals, it is anticipated that there will be some expansion. This expansion will not only be a good thing for the agricultural industry and for the nation in general, but will make it possible, by securing a greater supply of proper animals for the curing side of the industry, to obtain that steady throughput which is such an essential economic factor in its prosperity.
  8.8 p.m.
  Mr. Alexander: If it had not been for a little trouble at the Ministry at the time when the Bill was before the House, I have not much doubt that the Money Resolution would have been on the Paper at that time, and probably, in view of the long Debate that we had on the Second Reading of the Bill, it would have been passed with very little discussion. The principle of the Bill has been approved by the House of Commons, and the Bill is now before a Standing Committee, which is discussing the details of the legislative provisions proposed. While I shall have a few things to say to-night about the purely financial provisions and their relation to the industry, I would say at once that we do not wish at this stage to indulge in what would be a sham fight, because we have already said on the Second Reading a great deal of what we have to say, and we shall have a good deal more to say both from above and from below the Gangway, in the Standing Committee, on the Amendments that we desire to see adopted.
  In dealing with the financial provision which the House is now asked to make, I thing it is important to make one or two general observations. We are asked to provide a sum which cannot be exactly measured, but which, the Minister's Department thinks, may average about £ 1,000,000 a year for three years; but there is, of course, a great deal of doubt in the minds of many hon. Members as to whether there is really going to be a strict limitation of the period. We have seen so much of the expansion of the subsidy system under the National Government in its two terms of office since 1931, that some of us have very little hope that, as long as that Government stays in,

  979
  there is going to be any real limit to the extent to which it spends public money upon particular industries.
  When I consider the general situation in relation to this subsidy, I find it rather disturbing. We now have a large number of separate subsidies operating outside agriculture, with which I will not deal, because it would not be in order to do so, but in relation to agriculture today we are subsidising wheat, in respect of which the Treasury acts only as a collector, because the consumer pays in the price of bread and flour; we have the Cattle Subsidy, which we were assured was in large part going to be paid for by the beneficent producers in the Argentine, who would be able to exercise such economies that they would reduce the price so that the British consumer would not pay; and in the case of the Cattle Subsidy the Treasury also provide an actual sum of £ 5,000,000 towards the cost of the subsidy.
  When one looks at other subsidies, like that on milk, the continuance of the sugar subsidy, and the sugar rebate, and when one remembers the dead-weight burden of agricultural rate relief and the fact that we are now being asked to provide £ 1,000,000 a year for the next three years for the purposes of agriculture, we find that we shall now be actually voting to agriculture direct subsidies at least equal in amount to the yield of 6d. in the£ on the Income Tax, or about £30,000,000 a year. What worries a great many people when we are asked to consider financial provisions of this kind is what is going to happen to British agriculture if at some time or other we find ourselves in such a situation that the subsidies have to be removed. That would lead to an exceedingly unhealthy and difficult position.
  I said a word or two on the Second Reading of the Bill about the general view of producers in relation to these matters. It was very significant to me that one of the leading speakers on behalf of the board, at the recent annual meeting of the Pigs Marketing Board, said that, although of course the Government assistance was limited to three years, they were quite convinced that they would not be let down at the end of that period. I think, therefore, that the point I am raising in regard to this financial provision
  980
  has some substance, and that really a very dangerous situation is created by this constant outpouring of public money. I am not attempting to deny that agricultural production in this country for some years has had a very difficult position to face, but I am not at all satisfied that the method of constant subsidies is the way in which to provide a really lasting and effective policy for the reconstruction of agriculture on a paying basis.
  I should certainly like to know from the Minister whether he can say that the Government now issues a fiat that the three-years period outlined in the Money Resolution and in the Bill is final, and that if at the end of that time contract pigs are not forthcoming at the proper rate and of the proper grade to maintain the proper expansion of the bacon curing industry in substitution for foreign imports, the expenditure of public money which we are now asked to vote will definitely come to an end. I think we ought to have from the Minister, in the interests of the general body of taxpayers, some statement on that actual situation.
  There is another point, to which reference was made by my hon. Friend the Member for Don Valley (Mr. T. Williams), when he was dealing with the financial Clauses of the Bill on the Second Reading. I come back to it because I noticed that the Minister, in his remarks to-night, said that of course it was hoped that a rationalisation of the industry and a reduction of costs might make possible some reduction, or tapering, as he called it, of the subsidy, and he went on to speak of what he called the recoupment of the Treasury for the expenditure. I am all in favour of that in principle, and am not quarrelling with him for saying it, but I am concerned as to how that is to be done. One of our principal complaints about the general provisions of the Bill is that it does not deal with this industry in regard to organisation in such a way that you can organise it for plenty, and make an end to this situation, in which you have a constantly restricted supply of an important item of food, of the working classes especially, at prices which they are unable in many departments of working-class life to meet.
  When the Minister speaks about the recoupment of the Treasury, I should like to know from whom the recoupment is

  981
  to come. I should like, when I come to speak on the detailed proposals in this Bill, to say something about the supply in relation to the total population to-day, as compared with that in 1933. It is so simple for the Minister to say at any given time, "The time has now come for recoupment of the Treasury. We can do that by so arranging a further restriction of imports from two main supplying countries, like, say, Denmark and Holland, that the price will rise so far above the 94s. 9d. that not only will no subsidy be required but there will be a presumed profit which will accrue to the Treasury." We ought to have some assurance about that, because the view of this party, as far as I can gather by discussing the matter with my colleagues, is that we want to see the problem of bacon production in this country tackled; we want to see the organisation of pig production of a kind that will be helpful in a well-balanced system of farming; but we also want to see that our people get enough of this important food at a price which they can pay.
  So far, we have been limited to a total supply of bacon, including those parts known as pickling pork, to, at first, 10,600,000 cwts., and afterwards 10,800,000 cwts., although we were able to consume in the years of depression, when bacon was cheap, about 1932, much nearer 13,000,000 cwts.—and I have no knowledge of any substantial waste. People will eat bacon when they can afford to buy it. It may be said, with some truth, that the price of bacon then was so low as to be unremunerative, to bacon curers as well as pig producers. That we have to recognise, but for the Government to pursue a policy of either limiting the bacon supply of this country to 10,800,000 cwts., or actually reducing that amount, will go far to defeat their main objective, because they will kill the bacon-eating habit among a large section of the people.
  You cannot have a satisfactory industry from the point of view of either the primary or secondary producers unless you are going to have a regular, stable, consuming market. I beg the Minister, therefore, to be quite certain as to what his policy is to be in that connection. I am tempted to ask, in view of the announcement made in the House only a few days ago that Denmark has been induced to take a larger supply of British
  982
  exports to that country, whether there was any talk at the time that the agreement was made with regard to contra trade from Denmark to this country. I know that that is not the whole problem—Denmark is not the only country—but we ought to know what was said about that, and what the policy is going to be now that we are actually asked to vote the money.
  The only other point I think I need raise—because we put the position very clearly on Second Reading, and we shall say a great deal more upstairs—is that in the Minister's statement in the House of Commons on 10th March he stated that in the second year the basic pig price will be reduced by 1d. a score and the notional bacon price by 1s. a cwt. He went on to say that there will be further reductions in the third year. The Financial Resolution, which is necessarily drawn in general terms, gives us no indication as to how this decrease in the second and third years will operate. I would like to have some assurance on that. While I recognise that the pig producer, in common with other sections of the agricultural industry, has had difficult problems to face, all the trouble has not been on the side of the pig producer.
  As to whether this can come about with ease will depend to some extent on how you treat the bacon curer. In considering what economies can be brought about by rationalisation, many factors have to be taken into account. Following your control of imports policy, you cut off from a factory—I mention this particular factory because it is one in which I am much interested—nearly 50 per cent. We endeavour to work according to methods which we have already demonstrated can be successfully adopted, and we find ourselves actually prevented by Government control from achieving the economic working of the factory. It is in the light of that that I am asking what is the intention of this decrease. I doubt whether a man who processes about 100 or 120 pigs a week for bacon, unless he is paying abnormally low wages in a rural area, could process them at less than 12s. or 13s. per pig, but if he is a large producer of bacon, handling not fewer than 1,200 to 1,500 pigs a week, the actual processing cost per pig will be 4s. That is an extraordinary difference.

  983
  If this scheme is to function, to the benefit of both sides of the industry, it is absolutely essential that the curer should get a fair opportunity. We provide capital, put the factory up, get the most modern machinery and the latest technical devices, and then we are not allowed to produce, Further, we have to sell at a price on which we lose. If one were to look at the average record of the large curers in this country during the last eight or nine months, one would find that, without exception, they have lost money. It is in the light of that side of the industry that I am asking what is really meant by this scheme of decrease and how it is to be worked. I hope that I have put the various small problems that I had in mind clearly before the Minister and the Committee. There may be other people who take a different point of view. I shall not ask my hon. and right hon. Friends to divide against the Resolution to-night, but we should like these points to be clarified, because it will assist us in our further discussions, which we are undoubtedly going to have on the more important details of the Bill in Standing Committee.
  8.26 p.m.
  Mr. Acland: The Bill and the attendant Money Resolution are based upon the operation of the Development Board. I do not want to go into the discussion which we had upstairs, but the Committee has by a majority declined our suggestion to establish a board with a majority of independent members working in the interests of the public, and has established, unless we can reverse the decision on the Report stage, a board with a majority interested in the industry. Those who were of the majority in that decision seem to take the view—and I think that the hon. Gentleman the Member for Stone (Sir J. Lamb) expressed it—that nothing could be more in the public interest than to have the industry run by the industry in the interests of the industry. It is enormously in the public interest to have this industry run efficiently and well, and in that the interests of the public and of the industry coincide.
  There is one rather important question, that of price, upon which the interests of the industry and of the public as a whole conflict. There are two problems in the industry. There is, first, the price at which the semi-finished product is passed
  984
  on from the primary producer to the secondary producer, and that price has to be a fair price, and for the settlement of that price the present board is most admirably suited. But more important from the public point of view is the final price, and it is in the private interests of the industry that the price should be high and in the interests of the public that the price should be low. I appreciate that it is possible for an individual, when he finds himself appointed to a board, to address himself to his task entirely divorcing himself from any consideration of his own private financial interests. It is a little harder for him to do that when he has been appointed to such a board for the very purpose of representing the whole class of interests. Therefore, we must be forgiven if we fear lest these boards may look primarily to the interests of those who are in the industry rather than to the interests of the public as a whole.
  In the Money Resolution the price for bacon is fixed for three years, and the State is to pay to the industry any margin by which the realised price falls below the fixed price. Under Clause 27 of the Bill the State also has power to raise or lower the price of bacon by its regulation of the volume of imports. Therefore, the State, having power to raise prices, is made financially interested, together with the board, in maintaining prices. That is rather an ominous provision to put in an Act of Parliament. As at present estimated, the cost of this provision is to be round about £ 1,000,000. Is it going to be temporary or permanent? It is for three years, as provided in the Bill, but we have had in this industry Measures introduced with every possible promise and undertaking that they would be of a purely temporary nature and yet they have become permanent.
  Therefore, I think that I can safely say to the Minister, though this is subject to any decision to which the electorate may come at the next General Election, that the provisions of the Bill will, in fact, become permanent. We are settling the price of this product for three years, but if this scheme goes on, no doubt the House of Commons will again settle the price in the fourth, fifth and sixth year. It will be settled, as will the volume of importation, almost solely on the advice of this board. Hon. Members opposite regard all this sort of thing apparently as

  985
  perfectly normal. The Minister described this process as if it were absolutely usual and unexceptional. I saw the hon. and learned Gentleman the Member for Ashford (Mr. Spens) most vigorously shaking his head at me in Committee when I stated that there should be nothing suspicious or dubious about the way in which the board carry on. It really is one of the privileges of belonging to my party that one is able to watch the way in which both the other parties swallow with complete complacency suggestions made by themselves, which they would mock to scorn if they were proposed by members of the party opposite to them.
  Mr. Alexander: I hope that the hon. Gentleman is not going to attack my party in that way. I remember the present Viscount Samuel and the present Leader of the Liberal party swallowing Protection holus-bolus when they joined the National Government.
  Mr. Acland: They expressed their opinions on that matter pretty strongly.
  Mr. Alexander: After they had accepted it.
  Mr. Acland: I suggest to the right hon. Member for Hillsborough (Mr. Alexander) that there might be protests from above the Gangway if a Bill were to he introduced, not to nationalise the coal industry, but to conduct the coal industry efficiently and well in the interests of that industry by means of a board containing a majority of those engaged in the industry, namely, the miners. That Bill might fix the price of coal for three years and then stop, but no hon. Member would assume that in the fourth year the price would be free. It would be taken for granted that in the fourth, fifth and sixth years the miners' representatives on the board would suggest, and the Labour Government would accept, further price-fixing. One can imagine the leading article in the "Times" newspaper if it were a provision of that Bill that the State should make up to the board any sum by which the price of coal fell short of the price fixed by the Labour Government at the suggestion of the trade union representatives forming the majority of the board in control of the industry. do not expect that the hon. and learned Gentleman the Member for Ashford and his friends will agree with many of the detailed criticisms which we intend to
  986
  bring against the Bill, but I hope that he will understand why so many of these things, which seem to him to be perfectly normal and right, are bound to seem to us a little open to suspicion.
  It is almost a mistake to talk about big bacon factories in this country. Our average is 250 pigs per week, while the Danish average is 800 per cent. higher. Our average bacon factory is not to be compared with the Danish bacon factory. The Minister told us that we have factories capable of handling over L000 pigs a week. Are there any capable of handling 2,000 pigs a week, which is the Danish average? Have we any factory which comes up to the Danish average? We speak of bacon factories in Denmark, but in this country we speak of middle-sized and small bacon factories. I am afraid that under this Bill the middle-sized factory will squeeze out the small factory and frustrate the big factory.
  I visualise the time, three or four years hence, when the factory rationalisation scheme has gone through and when the small factories are being bought up and the middle-sized factories are running to a capacity varying between 250 and 500 pigs per week, and then I think of some courageous, far-sighted, patriotic and astute group of business men coming to this country and saying: "Let us establish a couple of factories on the Danish scale capable of dealing with 4,000 pigs a week." Those two factories would put up our capacity by 10 per cent. I imagine that there would then be a howl from the Development Board. They would say: "This is going to upset the whole of our arrangements. We shall no longer be able to maintain our high percentage of output and we shall be prevented by these big bacon factories—which is what the public want—from making profits in our middle-sized bacon factories. Therefore, we will under the Act prevent those factories from being established in this country." That is what I fear.
  May I repeat a question which I asked in the Second Reading Debate, to which I did not get an answer? Under the Bill the price which the curer will pay to the producer will be reduced from 12s. 6d. to 12s. 3d. That is a reduction of 3d. a score, which represents is. 9d. for a seven-score pig, which I understand produces 1 cwt. of bacon. Therefore, the curers would get 1 cwt. worth of pig for

  987
  1s. 9d. less. They are going to sell 1 cwt. of bacon at 3s. less. Does that mean that the total savings which are anticipated from rationalisation is worth no more than 1s. 3d. per cwt.? If it is worth more, why does it not show, and if it is not worth more, what are we bothering about? These figures of 12s. 6d., 12s. 5d. and 12s. 3d. and the corresponding figures of 94s. 9d., 93s. 9d. and 91s. 9d. per cwt. must be based upon some calculation. Can the Minister publish the calculation, or can he supply to interested Members a copy of the calculations? It seems to me that that calculation ought not to be a confidential document. It would assist us in the consideration of these prices.
  Could the Minister help us in dealing with the financial provisions of the Bill by giving us another set of figures? With respect to certain typical factories of the top size, our biggest factories dealing with 1,500 or 2,000 pigs a week, a factory dealing with 500, and a factory dealing with 75 pigs a week, can he give us figures showing approximately the cost of the pigs, raw materials, the costs of labour and other running expenses and overhead expenses, expressed perhaps not in figures but as a rough statement of total? It makes a difference if raw materials represent 40 per cent., labour 50 per cent. and overheard charges 10 per cent., compared with overhead charges 30 per cent. and other charges correspondingly lower. Those figures must be in the Minister's possession. He could not talk as he has done about rationalisation unless they were in his possession. I hope he will be able to assure us that he can give us answers to these questions of detail so that we may consider this Bill, of which we are suspicious for the reasons I have tried to give.
  8.38 p.m.
  Sir Ernest Shepperson: I find myself in 100 per cent. agreement with the right hon. Member for Hillsborough (Mr. Alexander) in regretting the fact that a subsidy of £1,000,000 is to be paid by the Exchequer to this industry. I should possibly have preferred that the £ 1,000,000 went towards rearmament rather than to the pig industry. I regret it not because the industry does not require the £ 1,000,000—it does—but I would rather have seen the £,1,000,000
  988
  put into the industry not by the Exchequer but by a levy on imported bacon coming into this country. The right hon. Member for Hillsborough said that it might be possible for the Minister by restriction or control of imports to raise the price of bacon beyond the figure of 94s. per cwt. That might be possible, but I would suggest to the right hon. Gentleman and to the Government that if the £ 1,000,000 required had been paid by a levy on imported bacon it would have the result that the price of bacon would not have risen to anything like the figure to which it will rise on restriction of imports, and the producer of bacon under the levy subsidy principle would have obtained what he wants and what he must have in order that the industry may continue, while the consumers would have got their bacon far cheaper than they will get it under and restricting methods. I prefer that the Danish importer should pay the subsidy rather than the British taxpayer should pay the subsidy to the industry.
  Mr. Alexander: After our experience of food taxation in the last seven years does the hon. Member suggest that the foreigner pays the tax? The Minister told us when he was introducing the meat tax 12 months ago that the Argentine producer would pay it. The fact is that although the tax was three farthings per lb., we have been paying from 1½d. to 2d. per lb. more since the tax was put on. The foreigner never pays the tax, but the consumer does.
  Sir E. Shepperson: In putting forward the principle of a levy on imported goods coming into this country the reply that has come to me from different parts of the House has been that the effect of the tariff or levy placed upon the articles will not be what is desired, that is, to raise the wholesale price, because the foreigner will pay the levy. Does the right hon. Gentleman not know what happened when we put a duty of £ 1 a ton on Dutch potatoes coming into this country? The Dutch Government subsidised the export of those potatoes to England. When we took the duty of £ 1 off, the potatoes did not alter in price because the Dutch Government ceased subsidising the export of the potatoes. That is definite proof that the duty on those potatoes was paid by the exporters who were subsidised by

  989
  their Government. That is my only criticism of this proposal. I should have preferred that this subsidy to the industry should have been obtained by a levy on the exporters rather than out of the pocket of the British taxpayer. I should like to ask the Minister or you, Mr. Deputy-Chairman, a question. The Financial Resolution provides:
  " For the payment out of moneys provided by Parliament to bacon curers of sums related to rises in the cost of a standard ration for pigs over eight shillings and sixpence per hundredweight."
  I am hoping in the Committee stage of the Bill to move Amendments which will increase the figure which the producer shall receive. I should prefer that the figure should be 12s. per score, when the standard rate of foodstuffs is 7s. 6d., the figure which applied when the Bacon Marketing Board first introduced their Measure three years ago. The question I want to ask you, Mr. Temporary-Chairman, is whether this Financial Resolution will bar me from moving those Amendments in the Committee stage? I hope to do so, although I cannot say that I have very much hope that they will be accepted.
  The Temporary Chairman (Sir Hugh O'Neill): I could not give a Ruling now as to what Amendments will or will not be in order on the Committee stage of the Bill, but any Amendment to increase the money paid by the Government would not be in order under this Resolution.
  Sir E. Shepperson: Then I am afraid my Amendments will not be in order. Although the Financial Resolution provides this money by a method which I do not prefer, I say to the Minister that the pig producers of England thank him for having brought forward the Bill. While this, is not the method I should have preferred for providing this money, we do accept the Financial Resolution and the Bill as a very definite attempt to solve the difficult problem of pig production in this country.
  8.49 p.m.
  Mr. Price: The provisions in the Financial Resolution will undoubtedly do a great deal to help the pig and bacon industries through a difficult time. At the same time, many of us are a little uneasy at the continued use of public money in support of one or other branch of the
  990
  agricultural industry. I am not one of those who take the view that this should not be the case. On the contrary, having regard to the fact that agriculture as a whole has to meet the products of agriculture in other countries in world markets subsidised by the Government of these countries, it is difficult indeed for the Government of this country to remain altogether uninterested in the matter. But I do not think that is the main reason why this financial provision is necessary at the moment for this industry. I think the main reason is that the industry has in the course of the next couple of years to pass through a process of rationalisation. I refer to the pig-curing side of the industry, and until that is carried through there is a very strong case for the expenditure of a certain amount of public money. But it must be temporary, and it must be contingent upon the rapid rationalisation of the industry.
  There is no doubt that there are in different parts of the country great waste and far too high overhead charges in consequence of small and inefficient methods which are responsible for the present state of the industry. While safeguarding the legitimate interests of the small curers, nevertheless, this process has to be carried through, and I think there is a strong prima facie case for the expenditure of a certain amount of public funds for the purpose of helping the industry through this difficult time. But it must not become permanent. The whole matter must be subject to review, and this House should withdraw its sanction for further expenditure if for one reason or another rationalisation is not carried through in the way it should be carried through. Of course, there are other reasons. The State cannot wash its hands of the industry if owing to the collapse in prices on the world market, or, as I have said, owing to subsidies given by foreign Governments prices are forced down to an uneconomic level, as was the case in 1930 and 1932. I am not one of those who say that the State must wash its hands of the industry in those conditions. But as far as the industry at the moment is concerned, the main reason for the Financial Resolution is the necessity for rationalisation.
  There is one point upon which I should like the Minister to tell us something, and that is on what basis he has calculated the standard ration for pig feeding. There

  991
  has been a certain amount of research carried out in the agricultural research stations in recent years to find the best and most economical pig-feeding ration. Has the Minister consulted the figures in the research stations, and are these the figures on which the subsidy is to be based? I may point out that pig rations vary considerably. There are, of course, three main articles, bran, middlings and hydrogenous food like fish meal, but it has also been found possible to include such articles as maize. A few years ago the Harper Adams College made investigations into this question and found that, up to 30 per cent., one could feed maize meal to pigs without unduly affecting the pig meat. Up to last year, the price of maize was £7 a ton, and the introduction of maize into the pig ration would very substantially reduce the figure. To-day, of course, the situation is different. The price of maize is up to nearly £9 a ton, and any advantage of introducing maize into the pig ration has gone, owing to the rise in the price of maize on the world market.
  What I wish to point out is that all these things should be liable to revision. The movement of prices on the world market may make it possible for the pig feeding stuffs of to-day to be uneconomical to-morrow, but it might be possible to introduce some other ingredient which had fallen in price and thus bring about a reduction in the figure, thereby saving money to the Treasury. The price of the standard ration is likely to be at a varying figure, and therefore, the Minister ought to keep a careful watch in order to save public money. Personally, I think that the figures mentioned in the Financial Resolution for dealing with the standard ration of pigs and the price of bacon are reasonable, and I think that all efficient pig producers should be capable of carrying on reasonably in present conditions. I think that the Committee, in considering this Resoluton, must do everything it can to see that, where possible, public money is saved, and therefore I hope that the Minister will be able to give some assurance that he has gone closely into the matter of the standard feeding-stuff ration for pigs.
  8.58 p.m.
  Mr. W. S. Morrison: In replying to some of the questions which have been
  992
  asked in the course of the Debate, I would like to begin by saying something about the paragraph in the Financial and Explanatory Memorandum which mentions the sum of £1,000,000 a year. In the course of the discussion, hon. Members have once or twice referred to this figure as though it were the average cost of the scheme. What the Financial and Explanatory Memorandum says is that it is difficult to estimate exactly what the cost will be, but that on certain assumptions it will be £ 1,000,000 a year. I will elaborate that a little bit, because hon. Members will be interested to see how the financial provisions work out. Hon. Members will see that a subsidy becomes payable to one or other branch of the industry in the case of two eventualities —when the price of feeding stuffs rises, or when the price of bacon goes down.
  The sort of assumption on which we have been working, for the sake of making a careful estimate, is that, supposing that feeding stuff prices remained at about what they are to-day—10s. a cwt.—and bacon prices fell, the cost might approximate, as nearly as one can estimate, to £1,000,000 a year. But all experience shows that these two things very seldom go together; that is to say, when feeding stuff prices rise, there is always a reduction in the pig population, accompanied by a scarcity and a rise in bacon prices. That is true not only of this country, but of every country in the world. Last year when the cost of feeding stuffs began to rise, not only did our pig population suffer, but the pig population of Denmark and Holland was reduced by no less than 15 per cent. and 16 per cent. respectively. The conclusion which I ask hon. Members to draw from that fact is that the real influence on the price of bacon is, in the long run, the price of feeding stuffs, and the question whether or not conditions exist which make it profitable for pig production to go on.
  The right hon. Gentleman the Member for Hillsborough (Mr. Alexander) referred to this aspect of the matter and to the great importations into this country in 1932, and he said that people will eat bacon when they can afford it. I would ask him to accept the corollary to that, which is that people will produce bacon only when they can afford to produce it. The low prices of 1932 did not last, and they would not have lasted even

  993
  if there had been no scheme. What happened was that pig production on the Continent became so unremunerative to the Danes and the Dutchmen, who could make no profit out of the low prices, that wholesale destruction of the breeding herds took place, with the result that we had an immediate scarcity and a very violent example of what has come to be known as the pig cycle.
  As prices have been mentioned, let me say what the Bacon Marketing Scheme has done. It has steadied prices, and it has prevented the wild swings and fluctuations of the pig cycle. By doubling the output of British bacon, it has left us to that extent less dependent upon foreign supplies. If hon. Members will look at the published figures for bacon, they will see that since the bacon scheme came into operation, the price of bacon has risen less than the prices of other foodstuffs, and that the prices of food stuffs have risen less than the prices of other commodities purchased by the wage-earning population of this country. It would be a great gain if we could somehow secure the people of this country against such fluctuations in prices. I think I speak for the whole agricultural population when I say that what the farmers want is not high prices and not excessive profits, but that they long for some stability in the price structure which would make their occupation less hazardous.
  The right hon. Gentleman the Member for Hillsborough asked certain questions to which I will endeavour to reply, although I am sure he will excuse me if I make the general observation that many of the points that he made can be dealt with in greater detail when we face each other across the floor in the Standing Committee.
  Mr. Leach: I beg to call your attention, Sir Hugh, to the fact that there are not 40 Members present.
  The Temporary Chairman: I think the hon. Member has forgotten that it is not possible under the Standing Orders to call a "count" between 8.15 and 9.15.
  Mr. W. S. Morrison: The right hon. Gentleman raised the important matter of the duration of the scheme. This is a three years scheme, but the permanent benefit which we hope it will give to the industry will be to enable the industry
  994
  during that period to equip itself, so that the factories in this country will approach a standard of efficiency and low-cost production which will facilitate the supply of cheap British bacon capable of competing with bacon from any other part of the world on equal terms and with profit to the industry. The right hon. Gentleman asked how recoupment would be carried out by the Treasury. In this matter of financial arrangements, the curers will be agents for that purpose. The curer will pay his price to the pig producer, adding if necessary the appropriate feeding stuffs subsidy, and in his turn he will receive from the Treasury what he has paid to the producer for the feeding stuffs subsidy. But if the bacon curer has to make recoupment in respect of feeding stuffs, then that will be deducted from the sum which he will pay to the producer. So the recoupment will go on; there will be a balancing of accounts and there should be no difficulty whatever in these financial arrangements.
  The hon. Member for Barnstaple (Mr. Acland) invested this discussion with a miasma of suspicion and seemed to suggest that at some point a man with a cloak and dagger was lurking ready to jump out; but I ask him to believe that we on this side are as conscious as he is of the necessity of building up the industry in a way which will be fair to all concerned. He said that it might be in the interests of the bacon industry in this country to have what he would consider unduly high prices, but I think he got his answer in what was said by the right hon. Gentleman the Member for Hillsborough. If anyone were stupid enough to try to kill the bacon demand in this country, it would be one of the most short-sighted commercial propositions imaginable. The truth about this question of price and about the interests of the various boards in price, is that under this proposal, for three years, neither the Bacon Board nor the Pig Board will have any interest at all in the price of bacon. They will be able to observe its fluctuations without any interest in them whatever. They will be insulated; they will be able to put their own house in order and to supply what is such a desirable thing for the people of this country, namely, cheap British bacon.
  The hon. Member also asked certain questions about the size and output of the factories in this country and particu

  995
  larly whether there were any factories with a production of over 2,000 a week which, as he correctly said, is about the average of the factories in Denmark. There are at least three factories which exceed that output. One of them at Brierley Hill near Birmingham has an output of 6,000 a week and is as far as I am aware, the biggest and most up-to-date bacon factory in the world, so that there is nothing lacking in the genius of our people, if they are given a chance to produce bacon factories equal to anything to be found abroad. It is a wonderful thing that, in spite of the selective competition to which our agriculture has been exposed from all over the world, you should find remaining such confidence, skill and enterprise, and we hope that under the provisions of the Bill those qualities will provide us with the sort of factories which we want in this country.
  Certain questions were also put by the hon. Member about the "taper" and he seemed to wish us to calculate, with a nicety which is really impossible, the relative values of the decrease in the price per score of pigs and the price of bacon that was guaranteed. In the first place I should make it clear to him that the three figures which we take for the purposes of our financial calculations, namely, 8s. 6d. per cwt. for foodstuffs, 12s. 6d. per score dead weight for pigs and 9d. for bacon, are important only in their relation to one another. We are not really fixing the price of bacon at 94s. 9d. or the price of pigs at 12s. 6d. per score. There will be added or deducted the appropriate amounts for the cost of feeding stuffs. It is in the way in which these figures are related to one another that the validity of the scheme lies. While it is obvious that we can expect economies in production during the progress of this scheme, I would not be rash enough to predict with any likelihood of accuracy what the money value of those economies will be in every case, but I think there is a strong case for supposing that there will be economies, a case which justifies the financial proposals now before the Committee.
  Mr. Acland: Is it not the case that the total expected economy is 1s. 10d. per cwt. in two years?
  Mr. Morrison: That is not really the whole of the story. I anticipate that the
  996
  full economies of rationalised bacon production will take a great deal longer than that to mature. There will have to be a good deal of reorganisation and it would not be quite justifiable to suppose that in a certain period of six months or 12 months you will achieve a certain amount of economy. The thing will be a continuous process and all we can say is that as there will be some economies, it is right to make this "taper" provision.
  Mr. Price: The figure of two years is in the Bill.
  Mr. Morrison: Rationalisation will take place in that time, but when the economies of rationalisation will be realised is another matter. It takes a little time for the economies to accrue. There is expenditure of one kind and another to be taken into account.
  Mr. Acland: The economies of rationalisation surely take place the moment rationalisation is completed and the economies of which the Minister and hon. Members opposite have been talking, are the economies which will be effected when you get your factories working at something like 100 per cent. instead of 60 per cent. of their capacity. Surely that begins to happen as soon as rationalisation has been completed and therefore, if rationalisation is to be completed in two years, we ought to expect these economies to be realised in two years. I appreciate the fact that after that there is a further period of getting in the more up-to-date machinery, which your 100 per cent. capacity makes possible, but the 100 per cent. ought to be achieved simultaneously with the rationalisation.
  Mr. Morrison: I do not think there is anything between us in this matter. It is clear that rationalisation is a process which brings economies. It is not clear that you can absorb all the capital costs that may be necessary for purchasing businesses, amalgamations and so on and realise economies straight away. It will take some time and all we can say with certainty—and I would not like to prognosticate anything of which I was uncertain—is that there is a reasonable chance of sufficient economies during the period of the currency of this scheme to justify the "taper" which we propose. The hon. Member also asked for a number of figures. He asked on what grounds

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  we justified these various price relationships. They are the result of a great deal of information of a very varied character which has been supplied to us in confidence. The Department is able to rely upon business people to give them information which they know will not be divulged against their wishes. I will look into the matter and see whether any figures are obtainable which I can give to the hon. Member, but I am sure he will not ask me to give any figures which I ought not to give. It is on the information with which we have been provided that we have arrived at these various figures and I may be able to tell the hon. Member a little more later. He will appreciate that it is impossible to group these factories altogether by size. There are costs inside the factories which vary very greatly.
  The hon. Member for Leominster (Sir E. Shepperson) also gave us his views, and I am grateful to him for his speech of general commendation. It was suggested that the limitation of imports since the date when the scheme came into operation had had the effect of raising prices. I am confident that it has done nothing of the kind. It is true that it has rescued the industry from the slump crisis of 1932–33. I have endeavoured to argue earlier that if that had not been clone, if the bacon-pig producing industry had been suffered to perish, the position would have been very much different from what it is at the present time.
  The hon. Member for the Forest of Dean {Mr. Price) also gave a general commendation of the Bill, but he mentioned a dilemma about assistance to agriculture which is sometimes expressed. I think everyone in this House would like to feel that he was associated with our general desire to assist this vital and important industry, but sometimes I hear it said that the particular method which we have chosen is not the right one. I believe that, as agriculture is a vital industry and one which, if they allowed it to decline, the people of this country would regret, not only in time of peace, but in time of war, we ought to apply
  998
  such measures of assistance as appear to us to suit the exigencies of each particular problem as it arises. It is no good saying that we are anxious to assist agriculture if we object to import duties, to regulation by quantities, or to subsidies. It is no good saying that we like agriculture very much, but that we hate all of the only methods by which it can be brought into some degree of prosperity. Therefore, I hope the hon. Member will continue to give us his assistance upstairs in Committee, on the basis that we have made a real attempt, by these proposals, to provide the industry with the assistance necessary to enable it to be reorganised.
  I can assure the hon. Member that, on the question of a standard ration in particular, we set great store by the provisions for education and research contained in the scheme, that the question of what is the proper method of feeding pigs will be kept constantly under review, and that every effort will be made to ensure that a standard ration is so determined as to give a just reward to the producer and not to encourage waste in any department. At present, for the purpose of contracts, the standard ration consists of certain proportions of barley meal, wheat offal, and fish meal; but all these matters are being kept under review. I think I can commend this scheme with sincerity to the Committee, and I hope it will now let me have the Financial Resolution.
  Question put, and agreed to. Resolution to be reported To-morrow.
  The remaining Orders were read, and postponed.
  ADJOURNMENT.
  Resolved, "That this House do now adjourn."—[Mr. Furness.]
  Adjourned accordingly at Twenty Minutes after Nine o'Clock.

TRANSPORT.
  PEDESTRIAN CROSSINGS.
  PEDESTRIAN CROSSINGS.
  BY-PASSES.
  BY-PASSES.
  ABOLITION OF KERBS.
  ABOLITION OF KERBS.
  ROAD CONSTRUCTION (SURFACING).
  ROAD CONSTRUCTION (SURFACING).
  ROAD ACCIDENTS (SKIDDING).
  ROAD ACCIDENTS (SKIDDING).
  TOLL ROADS AND BRIDGES.
  TOLL ROADS AND BRIDGES.
  MICKLEHAM BY-PASS.
  MICKLEHAM BY-PASS.
  GLASGOW-EDINBURGH ROAD (SPEED LIMIT).
  GLASGOW-EDINBURGH ROAD (SPEED LIMIT).
  CANALS AND WATERWAYS.
  CANALS AND WATERWAYS.
  RAILWAY ARCHES (FIRE DANGER).
  RAILWAY ARCHES (FIRE DANGER).
  MARKET STREET, ST. COLUMB.
  MARKET STREET, ST. COLUMB.
  TRUNK ROADS (LIGHTING).
  TRUNK ROADS (LIGHTING).
  CHEAP RAILWAY TICKETS (COMPANIES' LIABILITY).
  CHEAP RAILWAY TICKETS (COMPANIES' LIABILITY).
  MOTOR DRIVERS' LICENCES (CHESHIRE).
  MOTOR DRIVERS' LICENCES (CHESHIRE).
  ROAD HAULIERS (APPEAL TRIBUNAL'S DECISION).
  ROAD HAULIERS (APPEAL TRIBUNAL'S DECISION).
  GLASGOW-HELENSBURGH OMNIBUS SERVICE.
  GLASGOW-HELENSBURGH OMNIBUS SERVICE.
  THORPE ST. ANDREW BY-PASS.
  THORPE ST. ANDREW BY-PASS.
  LONDON HIGHWAYS (SIR CHARLES BRESSEY'S REPORT).
  LONDON HIGHWAYS (SIR CHARLES BRESSEY'S REPORT).
  LONDON UNDERGROUND RAILWAYS (BREAKDOWNS).
  LONDON UNDERGROUND RAILWAYS (BREAKDOWNS).
  ROAD TRANSPORT COSTS (TAXATION).
  ROAD TRANSPORT COSTS (TAXATION).
  PEDESTRIAN TRAFFIC IN ROADWAYS.
  PEDESTRIAN TRAFFIC IN ROADWAYS.
CIVIL AVIATION.
  SUBSIDISED AIR LINES (FOREIGN AIRCRAFT PURCHASES).
  SUBSIDISED AIR LINES (FOREIGN AIRCRAFT PURCHASES).
  RENFREW AERODROME.
  RENFREW AERODROME.
  IMPERIAL AIRWAYS, LIMITED (SCHEDULES).
  IMPERIAL AIRWAYS, LIMITED (SCHEDULES).
  OLLEY AIR SERVICE, LIMITED.
  OLLEY AIR SERVICE, LIMITED.
  BRITISH AIRWAYS, LIMITED (FOREIGN AIRCRAFT PURCHASES).
  BRITISH AIRWAYS, LIMITED (FOREIGN AIRCRAFT PURCHASES).
  AIR TRANSPORT COMPANIES (REGULAR SERVICES).
  AIR TRANSPORT COMPANIES (REGULAR SERVICES).
ROYAL AIR FORCE.
  AEROPLANE MANUFACTURE (TYNESIDE).
  AEROPLANE MANUFACTURE (TYNESIDE).
  AIR-COMMODORE WEIR.
  AIR-COMMODORE WEIR.
  H.R.H. THE DUKE OF WINDSOR.
  H.R.H. THE DUKE OF WINDSOR.
  HAMPTON COURT PALACE.
  HAMPTON COURT PALACE.
  REGISTERED COMPANIES (GOVERNMENT SHARES).
  REGISTERED COMPANIES (GOVERNMENT SHARES).
  ITALIAN MISSIONARIES.
  ITALIAN MISSIONARIES.
  INTERNATIONAL SUGAR AGREEMENT.
  INTERNATIONAL SUGAR AGREEMENT.
  GERMANY AND ITALY (BANNED NEWSPAPERS).
  GERMANY AND ITALY (BANNED NEWSPAPERS).
EIRE.
  ADOPTION OF NAME.
  ADOPTION OF NAME.
  SILICOSIS.
  SILICOSIS.
  BRITISH COAL IMPORTS (STATISTICS).
  BRITISH COAL IMPORTS (STATISTICS).
  UNEMPLOYMENT (TRANSITIONAL BENEFIT PAYMENTS).
  UNEMPLOYMENT (TRANSITIONAL BENEFIT PAYMENTS).
  SOLICITORS (PROSECUTIONS FOR FRAUD).
  SOLICITORS (PROSECUTIONS FOR FRAUD).
  CEYLON (CIVIL SERVICE).
  CEYLON (CIVIL SERVICE).
  AFRICA (FAUNA AND FLORA).
  AFRICA (FAUNA AND FLORA).
  DEFENCE (PETROLEUM STORAGE).
  DEFENCE (PETROLEUM STORAGE).
Preamble
The House met at three of the clock, The LORD CHANCELLOR on the Woolsack.
BOURNEMOUTH CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.
Read 2a (according to Order), and committed.

THE EXERCISE OF THE FRANCHISE.
LORD DERWENT LORD DERWENT rose to move to resolve, That this House deplores the increasing apathy of the electorate as displayed in the voting at Parliamentary, and more particularly at municipal elections, and considers that this is a grave menace to the survival of democratic institutions; and that His Majesty's Government should take measures to stimulate the interest of the public in the exercise of its traditional democratic rights.
The noble Lord said: My Lords, the fact that this Motion of mine has figured on the Paper by now for some considerable time might seem to call for an apology on my part; and if I do not offer one, it is not because I claim any resemblance to the officer in Mr. Bernard Shaw's Arms and the Man who proudly stated "I never apologise," but because the sequence of grave events that has occupied the interval makes the implication contained in the Motion itself much less academic and much more burningly actual than I like or than I originally intended it to be. As a result, I am obliged to make certain allusions to this (in my opinion) extremely dreary and fruitless Holy War that two systems of government have declared on each other—an obligation that I have so far studiously avoided; and this being the case, I consider that I merit more of your Lordships' pity than of your disapproval.
Before all, however, your Lordships will expect roe to justify my submission that the electorate of this country has become apathetic in the matter of exercising a privilege which took several
810
centuries to conquer. My attention was first drawn to this matter by observing that both at the last General Election and at frequent by-elections since that time, according to figures given in the Press, such-and-such a percentage of the electorate voted; and even if allowance is made for change of voters' domicile, and what, after all, must be a gradually diminishing difficulty experienced by inhabitants of remote country districts in getting to the polling-place, these percentages often seemed disturbingly low, and even where they were higher, one could not help asking oneself, perhaps rather naively, why should it be a question of a percentage at all? Your Lordships would probably not contest what I say, but it is only honest to jog your memories with a few statistics. I have therefore taken ten different cases, and I will give the difference in the percentages of voters between the General Elections of 1929 and 1935, including those of 1931: A rural constituency fell from 90·9 to 82.8; an industrial constituency fell from 79·3 to 69·9; a residential and fishing constituency fell from 84.6 to 68.9; a pleasure resort constituency fell from 81.1 to 73·9; a constituency where low unemployment prevailed fell from 82.1 to 81; a constituency where high unemployment prevailed rose from 79·3 to 80·7—this is the only rise and the case is an interesting one; a spa town constituency fell from 75.2 to 65.7; a University City fell from 84.8 to 68; a constituency which provided an elder statesman's seat fell from 81.7 to 77·4; and a London division fell from 72.2 to 65·3.
Now, your Lordships may consider that these percentages are fairly high; but I am anxious to insist, even while allowing for the heightened interest of the Elections of 1929, that they are only percentages, that they have considerably diminished, and that there is no guarantee that they will not diminish further. I may add that I have chosen them as high as possible, and that I have even instanced a rise, but even in that case, the rise was only of 1 per cent. and the total percentage was only 80. I should add that I have also taken into account the fact that owing to the formation of the National Government and to the consequent enfeeblement of opposition, the usual issues confronting the

811
electorate were less clear-cut than usual. In spite of all this, I persist in thinking that when the number of potential voters is considered, that their average percentage in the typical cases I have mentioned should work out at under 75 per cent. even in favourable cases is a state of affairs serious enough to warrant your Lordships' attention; and I repeat that I could have found worse cases than these.
But there is also another field where the individual has been allowed the possibility of expressing his opinion of the way in which much of his official life is ordered, and that is the field of local government. One would have thought that the parish pump, being nearer and dearer, would exercise a greater attraction than the august purlieus of Westminster. On reading, however, a remarkable letter sent by a Sir James Marchant to The Times on the eve of the last municipal elections, what do I find? Sir James Marchant went to the trouble of discovering a variety of facts, of which the following are the essential ones:—Out of 338 existing county and borough councils, he took, as he says, "a large representative sample" of 92, having together 3,105 councillors; and he contrived to ascertain their various occupations. For the sake of general interest, I will give your Lordships a summary of this search's result. Of these 3,105 councillors, some 1,800 are tradesmen, 1,148 may be called professional, and 157 are women.
Of individual trades builders (almost all regarded as small) top the list with 199; to these must be added 19 architects and 93 sanitary and similar engineers. Next come 173 house, estate and insurance agents. Then come 750 grocers, butchers, fishmongers, bakers, caterers of various kinds, ironmongers, printers, with 215 described as company directors, mostly of trading concerns of a similar character. There follows a block of 215 artisans of various manual trades, including gas, transport, and electrical employees. In addition, we find, somewhat surprisingly, 171 railway employees, chiefly clerks and guards. One hundred and fifty are described as "gentlemen," Manchester and Liverpool providing the larger number. There are 110 "retired" elderly men from Army and Civil Service. Agriculture shows 49, doctors, dentists, and chemists 87, trade union and similar
812
officials 91, policemen 11, magistrates (local J.P.'s) 19, clergy 13, accountants, solicitors, clerks and retired barristers 244, retired schoolmasters 31, the remainder being various kinds of agents—colliery, shipping, stock, etc., with a few journalists, hairdressers, motor-men, and one undertaker, one musician, one pawnbroker, one artist, and three sculptors.
Now, my Lords, I have no intention of commenting on the composition of these important bodies, although I will say, in passing, that the heading of this list by builders and estate agents seems to me to open an attractive field of speculation as to their potential influence on the appearance of our towns and our countryside. I am unwilling to do so, because the question of which occupations produce the most competent councillors is obviously a controversial one, but also and principally because the crux of the matter is, in my opinion, to be found in Sir James Marchant's next statement. He adds:
"It appears that these borough councillors are elected by about 30 per cent. of the electorate. Of those on county councils about 50 per cent. are almost always unopposed."
It is on this fact that I wish to lay stress—although I will, again because I think it may interest your Lordships, conclude with Sir James Marchant's own final observation:
"And there seems to be a general impression among councillors themselves and borough officials that with, of course, honourable exceptions, the general type of councillor elected tends to deteriorate. There is also a marked dearth of younger men, while older men increase."
I trust your Lordships will find that in these facts I have supplied you with sufficient justification for the Motion I have put forward.
I want to narrow my line of argument as much as possible. I want to insist on this cardinal situation: if we accept that the system of government under which Englishmen live is not only the one that we have evolved over a long period and for which, in the eyes of the world, we are primarily responsible, but also the one we want—I assume this for the moment—we find that one of its mainstays, the chance for what is by now the bulk of the population to decide by whom and in what way it shall be governed, is being neglected by them. For myself, I have no hesitation in declaring that I consider such a situation fraught with

813
the gravest dangers; and to put it bluntly, the first and worst of these dangers seems to me to be that if the electorate continues, in great part, to ignore such privileges as it has so far been allowed to enjoy, it may wake up one fine morning and find that those privileges have vanished in the night.
In making such a statement, my Lords, I can assure you I am not acting thoughtlessly. I am under no illusions as to the defects inherent in what I am obliged to continue to call democratic government—I say obliged, because I do not doubt that someone is quite capable of trying to convince me that we do not live in a democracy, but that Demos is "run" by a plutocracy, by Press Barons, by a caste system, by old school ties, by trusts and combines of all sorts, and that it has about as much power as the late Lord Curzon declared he possessed, when he complained that it was limited to sending an office-boy across Whitehall. But I repeat that, rightly or wrongly, it is known as democratic government and that to define it exactly would take us much too far afield. Not only I, but a great many other people are aware that our system of government needs a good spring-cleaning. As to the best means of doing so, opinions are naturally divided; but in these days, when personal liberty is not only decried in more than one country, but denied, flouted, and peremptorily refused, is it not fantastic that in one of the countries where there is still left enough personal liberty to ensure to nearly everyone the possibility of being able to say "Yes" or "No" concerning matters that intimately concern his or her everyday life, both the he's and she's seem frequently quite indifferent as to whether they may express an opinion or not?
Are we to conclude that the huge extension of the franchise whose origin dates to only about a hundred years back and to which men of ability and tenacity devoted whole lives of unselfish work and for which many suffered persecution, represents only a new toy given to a child, of which the child has almost at once tired? Judging from the criticisms directed in England against the régimes of other countries where no such liberties have been granted or, if granted, have been removed, I have no right to draw such a conclusion; and yet, the facts are
814
there. And, at this point, I am obliged, however unwillingly, to face up to the dilemma with which everyone is confronted in these days. If we are, in spite of everything, to suppose that to be able to help in sending a representative to Parliament or to a local governing body is a right that people as a whole no longer appreciate or desire, then it is clear that one of two things must be postulated: either that the electorate wants a reform of the whole system, while maintaining its basis, or that it would prefer to live under a totally different one. Now, I suggest that if the first supposition is right, then the sooner the reform is proceeded with, the better, for in these hectic days, there is no time to muddle through any longer; and there are certain signs manifest that such a desire is fairly widespread. I will only mention an article of Mr. Amery's in a recent Sunday Times written round the question of a special extension of the executive; and were there time, I would much like, since France professes to be living under a régime that resembles ours, to have read your Lordships some of a newspaper article by M. Jules Moch, a Socialist Minister in one of the recent French Governments, in which he sings the praises of the method of granting pleins pouvoirs to an executive in certain cases, subject to discussion and control by the Legislature as far as the details are concerned.
If, on the other hand, the public's apathy over voting is due to a desire for a complete change of system, then I find it, as I have said, difficult to see why there is this spate of criticisms directed against the régimes adopted by other countries. It is clear that in certain circles there is, for instance, the same sort of admiration for what I will call authoritarian government as certain Athenians of the classical period of ancient Greek history openly professed for Spartan methods. Are we to deduce that this feeling is becoming more generalised than we have been led to think? Or are we to deduce that when the Socialist Party, for example, make a great show of vomiting the Communists from their midst, they are quite mistaken in imagining that they are dealing with an unimportant minority, and that there are far more Englishmen in favour of a Communist régime than they ever dreamed of? In a word, what do non-voters want? To see their institutions changed, or to see

815
them abolished? Or is it necessary to launch out on a third theory? These two that I have mentioned seem to me the only conceivable ones if we assume that the voter is interested in what happens to him and to his country. But what if this apathy I speak of is due to quite different causes? What if the granting of almost universal franchise has fallen on stony ground? And if that is now the case, since we must suppose that, in view of the passion once expressed for the privilege in question, such was not originally the case, why has the ground become stony?
For as brief a time as possible, I should like your Lordships to consider with me the results of this quasi-universal franchise that exists since 1927 in England to-day. Whatever may have been the tactical reasons for conferring it on the millions that inhabit this island, the basic one was clearly that the levelling of fortunes and privileges and the spread of education made it both possible and desirable for everyone from the lowest to the highest to have their say in government of the people, for the people, by the people. But whereas even as late as a hundred years ago, the relative simplicity of a life untroubled by the problems of to-day would have made such a thing both simple and desirable, now by an unkind twist of fate, the immense complexity of these problems, thanks to the vast changes in the face of the world due to unforeseen scientific discoveries, makes this virtually impossible for all but a sprinkling of human beings. (I am presuming, of course, that our present mode of government still exists and ought to exist.) The rich man, as far as voting is concerned, has by now only one advantage over the poor man, and that is that he has more leisure in which to discover what he is voting about. As far as education goes, it is probable that, save in exceptional cases, that which a rich man receives does not any better fit him to express a useful opinion about the way he should be governed than that which is open to the poor man.
The materialist civilisation represented principally by what are crudely known as the Anglo-Saxon countries has, ever since the days when Calvin first enunciated the principle, set itself two ideals: the first that each individual should strive to
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achieve material success for himself, and the second, which is a later corollary of the first, that even those who do not succeed should have their standard of life raised for them. The ordinary man, therefore, after receiving enough education to push him into a profession, goes into it, succeeds in it, in which case he has been taught to think it natural that part of his earnings shall be taken from him to be spent on making life more agreeable for the less successful, or else does not succeed, in which case he becomes a recipient instead of a provider. In any case, the lives of both are taken up with the struggle for existence; and meanwhile, during the last fifty years or so, these lives have both been completely transformed by an entirely unforeseen element, a positive torrent of practical scientific inventions which make a modern State about as much like one of a hundred years ago as a hay-wain was like the newest Ford car. Add to this the frightful pace of modern existence, the fatigue engendered by the noise and rush of city life, the mass of cheap amusements thrown by ingenious purveyors at the crowd, the encouragement to hurry even through such largely increased leisure as has been made possible by machines and shorter hours of work, and the efforts made by the popular Press to convince John Citizen that it is much more important to be entertained than instructed, and you find yourself confronted with a population which is no more capable of understanding what is really happening round it than a child of two is capable of driving an aeroplane.
The result is that more and more of these automata of to-day begin to resign themselves to confining their interest to the struggles and satisfactions of their everyday lives. Poor creatures, they are much too tired and stupefied by this brave new world to do otherwise! What wonder, then, that, in view particularly of the groaning and creaking of the whole machine itself, thanks to the terrible competition between countries and the growth of exacerbated nationalism, the average man becomes little by little a puppet in the hands of whatever power is able to make use of him? And as far as he is concerned, what particular difference in the end, is there for him between being "run" by a Parliament or a dictator, except that in the first case he can talk, and in the second, he cannot?

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I suggest that the root of the matter is there. Over half the electorate is, for no fault of its own, simply not in a fit condition to understand the real issues of modern life, the way in which it has changed and is constantly changing. It knows little or nothing about the past, and has no idea how the future ought to be organised, for it and by it; and at the same time, it is still empowered to give its opinion, an opinion formed only by a demi-education and by whatever necessities or passions influence it.
It is here that I consider that any Government which professes to attach importance to individual judgments and to the real well-being of individuals ought to step in—and I do not need to remind anyone that there are Governments existing to-day that do not profess this. For man cannot live by bread alone, and as far as every word that proceedeth out of the mouth of God is concerned, the State has, for better or for worse, been obliged to replace the Deity in many respects, since humanity has decided to renounce the primitive simplicity of Christian life and to order its own affairs in a more complicated manner. Indeed, of the two ways, apart from the material side, in which the level of a civilisation may be raised—the moral and the intellectual—the first, though it is of vast importance, can no longer he sufficient; for even if a change of heart can work certain miracles, no change of heart can control the colossal complications of the machine modern existence represents—on which machine there is clearly no question of going back in any sense of the word. The civilisation we have evolved is with us for good and all, unless of course, it collapses; and if it collapses, it will be because Governments will not have taken the necessary trouble to prevent it. They have the power now, the power formerly exercised by monarchies or castes or even that last-deposed monarch, private finance, and the responsibility is theirs. In any case, however much we may dislike modern civilisation, its fall would lead to such a reign of gangsterism and barbarity as would hardly be considered preferable.
I suggest, therefore, that His Majesty's Government should begin to take two principles to heart. One is, that men cannot progress morally as a whole very
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far, except for isolated individuals, but intellectually, they can be propelled very far indeed. The second is that the best civilisations have been built up round cadres or frameworks of select individuals. Biology has shown that moral qualities are not inherited and that each human being starts his moral life from zero. It has also shown that as far as the brain is concerned, not only are intellectual qualities frequently inherited, but that the brain itself long outlasts the decay of the body and that old age has nothing like the effect on it that it has, say, on bones and arteries. It should be the State's business, therefore, gradually to form an electorate worthy of the name; and I repeat that I take it as being desirable that grown-up people should be treated as having a mind worth paying attention to, instead of being treated like children and ordered about.
Logic seems to indicate that there is only one means of doing this, and that is to make a vote something worth having, and if people either do not want it or do not deserve it, not to give it to them. To force people to vote, in their present condition, would be virtually useless. It would merely be to encourage what is happening now—that is to say, the state of affairs whereby wholly ignorant and unsuitable people are allowed to choose other hardly less ignorant, often just as unsuitable, but usually more ambitious and energetic people to govern them from the town next door or from Westminster; and the end of that is either demagogy, which has been historically shown to herald the decline of all civilisations, or else the apathy we have seen exists, which usually leads in the end to an authoritarian régime. What is needed is a framework of people who know what they are voting about; and I would definitely propose that so as to begin to form it, everyone should be required to show that they do know before they are allowed to vote. We have already in existence one such parallel framework which does not attract much attention, but has imperceptibly and silently become indispensable to the modern machine. You may consider the Civil Service to be a costly and cumbersome institution; but the fact remains that in England at least through all the vagaries of changing Governments and the discussions of principle, this corps of functionaries continues its invisible but

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essential work without which half our lives would be impossible, to say nothing of the life of the Government itself. Now, no one objects to a civil servant having to pass a pretty stiff examination before he is allowed to draw the taxpayer's money; in other words, being obliged to show that he understands something of what he is going to be expected to do. Why, then, should there be any objection to the voters of the electorate, who at present are also cogwheels, ipso facto, in the machinery of government, being made to pass some sort of examination before becoming entitled to influence their own lives and everyone else's lives?
But, as I have said, this is not possible at present; and that is where I consider the other part of the Government's duty in this matter commences. At present, only one person in a hundred, I should think, really takes the trouble to educate himself at all after the educational period of his youth and adolescence is over (if he receives an education); and of those, a smaller proportion still take the trouble to familiarize themselves with the complexity and diversity of modern life's real practical problems. I suggest that the Government should without delay give a greatly increased publicity to the existence of such organisations as have been already set up which aim at providing adult education, like, for instance, the British Institute of Adult Education, the Association for Education in Citizenship, the Workers Educational Association to which I know the Board of Education give regular grants, and the various educational facilities provided by the London County Council and certain other county councils, and all the numerous courses of lectures on political science and sociology and kindred subjects that are already at the public's disposition. What is really needed, of course, and what would enormously redound to any Government's credit, is the founding of an institution which I would call the Synthesis College. I lift the idea from Mr. H. G. Wells, who is, in my opinion, a great deal less Utopian in his ideas than people imagine. Such an institution would act as a coordinating instrument for all the vast store of knowledge accumulated in particular over the last fifty years, and it would make it its business to supply information on all the myriad subjects that the voter may find himself faced with in
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the formation of his opinion, and which concern him directly or indirectly, such as economics, sociology, scientific inventions, the history of civilisations, biology, geography (of which most of us are even now absurdly ignorant), statistics about health, about population, about wages, about diet, and so on.
May I give your Lordships an example of the sort of utility this institution could be made to have, an example for which I am indebted to an article by Commander Stephen King-Hall, the success of whose reasonably impartial weekly News-Letter I, for one, have welcomed as a comforting phenomenon in a dislocated world. The article states that:
"About a year ago the United States National Resources Committee issued a report on 'Technological Trends and their Social Implications' which was described as the first major attempt to show the kinds of new inventions which may affect living and working conditions in America in the next ten to twenty-five years. Its conclusions were of world wide importance. The committee compared the sudden adoption of inventions as the equivalent of an 'immigration of iron men' and they pointed out that although technical progress may create more jobs than the number which it destroys in the superseded industries and occupations, this is a poor consolation to the trained worker who may find himself either pushed down into a lower grade of employment or entirely displaced unless he can carry through, often well on in life, a series of exacting re-adjustments.
The report observes that twenty-five years ago, the telephone, motor-car, aircraft, rayon, radio and film industries which are now dominant features in American life were still in the stage of relatively undeveloped inventions and the question is whether we may expect another half dozen inventions to spread with equally disturbing results during the next twenty years.
It is practically impossible to predict the effect of specific inventions, but it is possible to foresee the general consequences of groups of inventions. For example, the group in which one can classify motor-cars, railway electrification, telephones, radio, cinema and chain stores have all tended to bring about (amongst other things) suburban types of development.
As regards the social effects of inventions, stress is laid in the report upon 'four characteristic trends of modern manufacturing: (1) Toward continuous processes; (2) automatic operation; (3) use of registering devices; and (4) of controlling devices.' The last two of these may embody the new electric eye or ear—the photo-electric cell, combined with the vacuum tube and various automatic registering and controlling devices, and the televox, which sifts sounds, so that a door has been fitted to open only to the words "Open sesame" and machinery to stop on "hearing" the cry "Help!"' Sub-division of

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labour, which creates so many repetition jobs, paves the way to eliminating them by a suitable mechanism; 'the more monotonous a job has become the closer it is brought to abolition.'
In the past, labour displacement by machinery has occurred principally in jobs where mere muscle was required, or where senses other than sight were concerned. Now, however, 'the photo-electric cell is doing an increasing number of tasks better than the most keen-eyed, skilful, faithful and tireless workman,' and all simple repetition jobs based upon seeing are in danger. …
In the light of this information the American Committee recommended amongst other things the carrying out of a series of special studies of a few inventions which may soon be widely used with important social consequences, including the cotton picker, air-conditioning equipment, plastics, the photoelectric cell, synthetic rubber, prefabricated houses, television, facsimile transmission, steep-flight aircraft, and tray agriculture. So far as I know no action of this nature is being taken in Great Britain, but I suggest that it is one which might well occupy the attention of the British Association for the Advancement of Science."
Such, my Lords, is the type of immediately practical use to which such an institution as I have described could be put—an institution which, as Sir Josiah Stamp put it recently, "ought to be able to mobilise facts readily for common use." By a coincidence which for me, at any rate, was miraculous, I had only just arrived at this point in preparing my speech when I picked up the Times of April 23 and I read that forty distinguished men of science including the President of the Royal Society, the Director of the Rothamsted Experimental Agricultural Station, Sir F. Gowland Hopkins, Mr. H. G. Wells, Dr. Julian Huxley, Professor J. B. S. Haldane, and other leading representatives of sociology, economics and psychology, have all expressed their opinions in the pages of the scientific periodical Nature in favour of forming an organisation to study the social relations of science, and to go deeper into the repercussion which science has had upon social development. The same article also revealed to me that there already exists a recently formed National Institute of Economic and Social Research. It is such bodies as these to which I suggest that any Government ought to think it its duty to call the public's attention.
The only progress humanity has ever made as far as civilisation is concerned has been reached through the efforts of
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an élite. An élite of voters would, I have no doubt, return to power a Government worthy of the name. With the aid of the institutions already existing and in process of formation, such an élite—which would, of course, be open to everyone to aim at joining and which would therefore be as completely classless as any society beaten into a new shape by a totalitarian régime—could be arrived at in at any rate two generations and possibly earlier. To set on foot such an enterprise would be a triumph for any Government. In any case, I consider that to leave things as they are at present, that is to say, to leave demi-formed masses equipped with the power to select their representatives as they now do is to encourage all the worst elements of Parliamentary government, instead of the best. It is also not only to incur the contemptuous disregard and impertinences of other régimes that despise democracy, but to run the risk of falling eventually into the same errors as those régimes, with all that that entails.
If my suggestion for limiting the franchise is considered either too retrograde or too revolutionary, then the next best solution is clearly to let things run on as they are, but at least to provide these educational facilities that I have described; and if the worst comes to the worst, then as a final and desperate suggestion, I would propose that if at future Elections people are going to indulge in the luxury of not voting, they ought at least to be made to put on record their reasons for not voting, which would be highly instructive for everyone. I am also, of course, aware that there is a distinction to be made between voting in municipal and in Parliamentary elections, and that the same sort of training need not be necessary for both; but, in general, I consider the same principle to be applicable to both. I consider that the possession of both is worth having; I consider that it is the Government's business to make it more worth having than it is at present, and that it is even more serious for the Government to disregard this state of affairs than for voters themselves to accept it. "A democratic State." Mr. Eden said the other day, "depends for its successful working upon the corporate efforts of all its citizens." A Government which will insist on this will, I am sure, stand high in the estimation not only of present-day men and women, but of posterity as well. I beg to move.
Moved to resolve, That this House deplores the increasing apathy of the electorate as displayed in the voting at Parliamentary, and more particularly at municipal, elections, and considers that this is a grave menace to the survival of democratic institutions; and that His Majesty's Government should take measures to stimulate the interest of the public in the exercise of its traditional democratic rights.—(Lord Derwent.)
LORD REA: My Lords, I have to ask, not only for the indulgence which your Lordships' House always generously extends to a new member, but also for special sympathy in that my occupation in another place for twenty years and more has been such as to impose upon me an almost Trappist habit of silence which I find very great difficulty in breaking. But that experience has impressed me with the danger that has been brought to your Lordships' notice by the Motion which is now before the House. I am not presuming to suggest any such elaborate or long-distance solution as my noble friend has just put forward, but I am impressed by the danger of the situation, a danger that is constantly growing. I remember when I was first returned to the House of Commons over thirty years ago I was elected on a vote of over 90 per cent. of the electors. Now, as my noble friend has just reminded your Lordships, it is unusual to get anything over come 75 per cent. There have been cases where the total going to the poll has been something like 50 per cent., and the tendency is ever to decrease. In municipal affairs, of course, the figures are far worse.
I regard this as a matter of sufficient importance to demand the attention of Parliament at no distant date. I am aware that the superficial view is that it is of no importance, that majorities change, that Governments come in and go out in spite of the small polls, and that, after all, those who care to vote have the chance to elect their representatives. But there is a deeper significance behind this, and, as I see it, a very grave menace to our liberties. Let us suppose that the tendency goes on a very little further and it will be quite possible for a Government to be elected with a working majority on the votes of scarcely more than 20 per cent. of the electorate. If that happens I should regard it as a very dangerous
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situation. If we had either a Socialist or a Fascist Government and it proceeded to carry into legislation the pledges it had given and on which it had been returned, we should reach so dangerous a situation that it might very easily, and indeed might actually, lead to revolution. For consider what will be the attitude of those whose grievances are backed, as they will believe, by some 80 per cent. of the electorate. Are they going to submit to have their wishes overruled by what they will regard as a totally unrepresentative House of Commons? It will be no use relying on your Lordships' House to withstand an onslaught such as that. The danger is that, instead of relying on a Second Chamber to prevent such an occurrence, some dictator will arise who will claim to represent 80 per cent. or a very large majority of the electors of the country, who will sweep aside Parliamentary Government and in doing so will claim that he is acting in the interests of democracy.
I regard that as a very special danger at the present time, because once that happens we find that the electors are so terrified that they will not stand up against it. The experience in Austria the other day, as I was assured by a friend of mine who had been in that country, is that unless you are a very strong partisan indeed, when a dictator is in the offing you will vote on a plebiscite in his favour merely on the chance that he may be able to dominate your life hereafter. That is the danger, and to my mind it is a very real one. We have to consider whether there is a way out. I believe the real way out is somehow or another to induce the voter to exercise his franchise and to give his vote. You have to make him interested in politics, and I believe that can be done if you will give him the power to make his vote effective and not a mere futile walking to the polling station to put a cross against the name of a person who he knows has no possible chance of being returned to represent him. I believe—and here I differ from my noble friend—that this lack of interest is much less due to apathy than to the feeling that it is no use going to vote, that the trouble is merely wasted. What is the good of asking a Conservative to go and vote in South Wales, when no Conservative has a chance of being elected, or a member of the Labour Party in the South of England, where, except

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in a very few industrial areas, the voter might just as well save himself the trouble?
When you turn to municipal affairs I will take as an illustration the local government area in which we are situated at the present time, where 40,000 Municipal Reformers went to the poll and secured all the sixty seats and the 21,000 Labour voters have no representation at all. How can you expect voters to keep up an interest in circumstances like that? I am convinced that it is merely lack of opportunity that keeps voters from taking an interest. I have had recent experience of that in something which happened within my own Party in the last few months. I do not wish on this occasion to enter on controversial politics, but it happens that the Party with which I am associated launched a petition to protest against the rising cost of living, an important but not a Party issue. The response to that petition was not only instant but almost overwhelming. It became impossible to deal with the rush of people who were anxious to take their part in making that protest. From that I think I am right in deducing that the voter is ready to take an interest if you arouse that interest and can make him feel that it is worth while to take the amount of trouble that is involved in going to the poll.
Then comes the problem how to make it worth while. I suggest that the only way in which we can do it, apart from the somewhat long-distance solution put forward by my noble friend, the only immediate way, is to give him a real opportunity of making his weight felt when he does vote, to give him an opportunity of voting for somebody who will at any rate have a chance of being returned. I submit that, if not the only, at any rate the obvious and simplest method of doing this is by the institution of some form of proportional representation, or something of that sort. I am aware, of course, that there are many drawbacks and that a great many arguments can be put forward against proportional representation: that it leads to constituencies of unwieldy size, or to difficulty in dealing with by-elections. These are mere details of machinery which can be got over. Nor do I regard as of any great importance the argument, which is very popular on the platform, that proportional representation would lead to a
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Parliament filled with cranks. I remember that the first Parliament in which I had the honour to sit, in 1906—many noble Lords here may have had the same experience—was described at the time as a Parliament of cranks; but it was the most interesting Parliament in which I have sat, and it was far from being the least effective. Therefore I am not to be terrified by the thought that it may be possible under proportional representation to secure representation in Parliament or on a local authority of views which are not necessarily those of the unthinking mass.
These difficulties are, of course, to be faced, but they do not apply in anything like the same degree to local elections as they do to Parliamentary elections. I would suggest that we could, without any risk, make a most useful experiment in applying proportional representation to the municipal elections and so inducing voters to take an interest which is all too lacking at the present time. I am fortified in this view by the knowledge that in other countries proportional representation has, in spite of assertions to the contrary, worked with success. In Belgium, in thedemocratic countries of Scandinavia, and even in New York, proportional representation is successfully at work. I might perhaps be permitted to remind your Lordships that we have taken it upon ourselves to incur much graver risks by imposing it in part on a much less suitable constituency by the Government of India Act, which has recently become law. If we can take this risk so far afield and on so much less favourable a ground, surely it is right that we should take steps to meet this evil, to face this danger, before it becomes too great; that we should follow the examples which I have ventured to put before your Lordships and take what to me seems to be the only opportunity of escaping from a situation which is not only, as this Motion says, of the utmost gravity at the present time, but which as time goes on becomes ever more dangerous.
THE EARL OF TANKERVILLE: My Lords, although conscious of your Lordships' very much wider knowledge and experience upon a question such as this, I would ask your indulgence for a few moments on this the first occasion upon which I have had the honour of addressing you in this House. Certain aspects

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of the Motion—aspects which in essence are not complicated but extremely simple—appear to me, as the noble Lord who has just preceded me has pointed out, urgently to require emphasis in the interests of the voter and of democratic principles. As has already been implied, it would seem necessary that before measures can be taken, as the Motion puts it, "to stimulate the interest of the public in the exercise of its traditional democratic rights," the cause of the increasing apathy of the electorate, which I think none of your Lordships will doubt and to which this Motion refers, should first be considered and, if possible, remedied.
There is little wonder that the voter has become apathetic when one considers the results he has obtained by the present way in which the democratic vote is being used, results which in the main are contrary to his own interest and contrary to those results which he really desires. Instead of increased freedom there is imposed upon him increasing taxation and debt, and constantly increasing bureaucratic control over his life and his property. Instead of prosperity he has an increasing cost of living and the fear of another possibly approaching trade depression. Instead of peace he is compelled to sacrifice his standards of living in the interest of feverish preparations for war. Instead of distribution of the enormous plenty which modern scientific methods of production have made available, he sees the production of food, clothes and other goods, of which in millions of cases he is in urgent need, being restricted or even destroyed in order to maintain nothing more real than an out-of-date system of debt finance. If the voter is to take a lively interest either in local or national government, he must be taught not by words but by that same practical experience as, used in an opposite direction, has brought about this present apathy. He must learn not only by what constitutional action he can get the results he really desires, but also what are the limitations of practical democracy. At present he has not learnt—though I have good reason to believe that now at last bitter experience is rapidly teaching him—that voting for persons, parties or technical methods will not produce for him the results that he desires. He still
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votes, and naturally is encouraged in it by certain vested interests, not for results but for alternative methods by which he is to be taken to a destination which is not truthfully disclosed to him and about which he is never consulted.
The principal limitation of democracy appears to be that it can only be usefully applied to a demand by a majority of voters for certain practical results, which results must of course be clearly defined and easily understood. But when it comes to the technical methods by which such results are to be achieved, it is clearly no longer within the scope of a useful democratic vote. While 99 per cent., probably, of any average group of voters will be able to give a correct answer as to their desire for a given result, 99 per cent. can equally be relied upon to give an incorrect answer as to the best technical method of achieving that result. Methods, surely, can only be correctly decided by technical experts, but it is nevertheless possible for voters, having demanded any physically possible result—and, my Lords, I would call your attention to the distinction between a physically possible result and a financially possible one, on the ground that whatever is physically possible can, if ordered by the voters, be made financially possible by financial experts—it is possible for the electorate to hold the technical experts responsible for the adequacy or otherwise of the methods they employ for its alleged achievement.
I am convinced that the secret of making democracy a successful actuality, instead of merely a nominal and idealistic pretence, as, unfortunately, it appears to be at present, lies in the realisation by the voter that no matter how expert he may be in any particular technical matter, when it comes to voting, to democratic voting, he can get what he wants only by demanding results and not by allowing his purpose to be diverted or disintegrated by arguments about methods.
It may be said that the voter does not know, and certainly cannot formulate, the results he wants. Although I believe that such a statement, while partly true, is too often a conscious or unconscious mental evasion—because it should surely be one of the duties of a representative to find out and to help formulate clearly the desires of those he

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represents—there are at any rate certain results which an overwhelming majority of voters, if given any opportunity of being unitedly articulate, would undoubtedly say that they do not want. For instance, higher rates, higher taxation, increased financial difficulties of maintaining a decent standard of living occurring together with artificial restriction of production. Yet in a nominally democratic country these results are imposed upon the voter against his will, and, ironically enough, through the very medium of his democratic vote, not because these unwanted results are necessary for him, not because they are inexorable laws of nature, but solely because they are necessary for the maintenance of the power of certain vested interests, particularly the financial one, behind the institutions, in which, although he has a democratic vote as regards administration, he has no actual control whatsoever in regard to ultimate policy.
I would suggest, therefore, that the apathy of the voter cannot usefully be overcome by any artificial means, such as—with all due deference to my noble friend Lord Gifford—that of compulsory voting or the like, but only by finding out and giving the voter the results which a majority really desire; that is, increased prosperity and economic freedom in security to lead the sort of life which he himself wishes to live, whatever that may be, together with decreased taxation and debt, and decreased bureaucratic control over his life, his property and his business.
I feel convinced that if His Majesty's Government base upon these principles such measures as they may some day take for the actualisation of democracy—that is, upon the principle that it is the function of the voter to dictate policy and demand what results he desires, and that he defeats his own purpose by getting lost in arguments about technical methods of administration; also, that it is the function of the Government to see that he gets the results which he demands—then little difficulty will be found, as this Motion puts it, in stimulating "the interest of the public in the exercise of its traditional democratic rights"; for then, and only then, the individual voter (and it is, I submit, the individual voter who matters) will learn by experience that, in association with others, his power to demand
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whatever physically possible results he wants is a living reality, which is greater than that of any anti-social forces which may now be seeking to enslave him to their own ends. Then, moreover, civilisation will be saved from what I believe is one of its greatest present dangers, the domination of the individual by institutions, instead of the reverse, and hence the domination by the vested interests which at present control the policy of institutions.
LORD GIFFORD: My Lords, I desire to support the Motion of the noble Lord, Lord Derwent, and I hope your Lordships will forgive any shortcomings on my part as this is my maiden speech. Indeed I crave special indulgence from your Lordships this afternoon, because what chance has a poor bachelor like myself among the bevy of "maidens" who have invaded the House to-day? I think your Lordships will agree that the strength of this House lies in the special knowledge which various members of the House possess. Among its members there are those who have had an opportunity of studying, at first hand, almost every aspect of life in the British Empire. I myself have resided for six years in Australia, and I have had an opportunity of studying the conditions in that Dominion, and particularly in the State of New South Wales. There are many members of your Lordships' House who have served in various parts of the Empire as Governors representing His Majesty, but perhaps there are not so many who have served in a humbler capacity. I was for four years on the staff of the Governor of New South Wales and had a unique opportunity of seeing official life and life throughout the State. I then retired from official circles and took a private position, so that I was able to look on affairs not only through the official glass but also as an ordinary private citizen of New South Wales. I found that one thing which pleased me enormously was the fact that the people there did not alter their demeanour towards me in any way when I ceased to be a rather exalted being from Government House and became an ordinary humble citizen. In fact, the first time I went in my ordinary capacity to an official function and, instead of going in state with escort and outriders, I went in the usual way, the police sergeant on

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duty had a look into my car and said, "Oh, well, Sir, we must continue to look after you now you have come down in the world."
I think in this matter we can learn something from the Dominions. Our Dominions are very keen and anxious to learn from the Mother Country, but I do think to-day there are many occasions when the reverse is the case. For some years voting has been compulsory in various parts of Australia, particularly in New South Wales. The enrolment of voters was made compulsory in 1921, and compulsory voting began in 1930. In Queensland compulsory voting began as far back as 1915, in Victoria in 1926, and in Tasmania in 1928. It is common knowledge that Australia is a very democratic country, and I do not think that anybody would ever say that totalitarian methods are practised there. Yet Australia has led the way in compulsory voting, and also—I may mention in passing—in a matter which is of great importance at the present time, compulsory military training. That does not exist now but it was in existence for many years in Australia. The effect of this compulsory voting has been very marked indeed. During the voluntary period the figures for various elections ranged from 82 per cent. to as low as 56 per cent. of the electorate. But since compulsory voting has been in force there has been an average of over 95 per cent. of the electors going to the poll. The detailed figures in the three Elections since the Act was passed are:—1930, 94·9 per cent.; 1932, 96·4 per cent.; 1935, 95·8 per cent. I think that the noble Lord, Lord Derwent, in the figures which he gave was only able to mention one occasion when the figures reached 90 per cent. and the average was only 75 per cent.
In addition to compulsory voting, the system in New South Wales makes it as easy as possible for the voter to record his vote. Absent voters may poll at any polling place; people w ho are infirm or who are distant over ten miles from a polling station or are on a journey may record their votes by post. The noble Lord, Lord Rea, mentioned the subject of proportional representation. New South Wales has not gone as far as that, but it has preferential voting, so that every voter can feel that even if the candidate
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whom he wishes to place first on the list is unsuccessful, he can help to a certain extent by getting his second or even the third choice elected. By these two means—by making it easy to vote and by the compulsory system which has been a deterrent to laziness—the results which I have mentioned have been brought about. The penalties are not at all heavy. I have here the Act on the subject, and it is not in any way harshly administered.
I should like to mention just two clauses in the Act. The first clause says:
"Within three months after the close of the poll at every election the Electoral Commissioner—
(a) shall send by post to each elector whose name indicated as aforesaid appears on such marked roll … a notice in the prescribed form notifying that he has failed to record his vote at the election and requiring him to state the true reason why he has failed so to vote."
The elector has then every opportunity of replying and any reasonable excuse is accepted, that is to say illness or absence from the State, and it is only in very gross cases that a fine is enforced. It is provided in another clause that the words "valid and sufficient excuse" include an honest belief on the part of the voter that abstention from voting is part of his religious duty. The penalties are quite small. The maximum is £2, but except in very aggravated cases a fine of not more than 10s. is the usual penalty. I will not take up your Lordships' time any further, but I do feel that in view of the laziness and lack of interest on the part of the electors here, Great Britain can profit by the example of one of our Dominions.
LORD JESSEL: My Lords, I think we must all be very gratified at the three maiden speeches that we have heard this afternoon, and I hope that the noble Lords who have so greatly contributed to the debate will try their mettle on future occasions. The noble Lord, Lord Derwent, who introduced the discussion to-day, suggested in his very interesting speech that the voter should pass an examination before he registers his vote. I do not think that he is very practical. I wonder whether it would also be suggested that members of both Houses, before they take their seats, should also pass an examination. I am afraid some

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of us would have forgotten all we knew in attempting to pass! I may remind your Lordships that there are certain, not Government, but other educational facilities for the voters by means of propaganda. On our side there is Ashridge, founded in honour of that great Conservative Prime Minister, Mr. Bonar Law; and also in London there is a good deal of propaganda on the part of the Socialist Party. There is the London News which I read regularly every week, with which Lord Snell is well conversant, and which is in the hands of many electors in this great Metropolis. After all, our education, by common consent, is improving year by year, and we are following out what was truly said by Mr. Lowe when compulsory education was introduced as long ago as 1870: "We must educate our masters." That is a process which is still going on.
I well remember when I first went into the House of Commons a great many years ago that I was studying hard at a Blue-book when Dr. Tanner, a well-known Irish Member of Parliament, said, "What are you doing studying Blue-books? Are you going to make a speech? For God's sake, if you are going to make a speech, never study a Blue-book or give any statistics." I am afraid this afternoon I cannot quite follow that advice. Time is getting on, and I know your Lordships are more interested at the moment in coal than in this other important question, but I should like to draw your Lordships' attention very briefly to the fact that the figures at Parliamentary Elections are not so bad as is generally supposed. In the last few years the lowest poll for a General Election was in 1923 when 74 per cent. of the electors recorded their vote. In 1924 80 per cent. voted. I do not think that is bad. In 1935 nearly 75 per cent. voted. Of course, where we do find low voting at Parliamentary Elections is at by-elections, and since this Parliament began there have been a great many by-elections. On the other hand, there is some cause for satisfaction, because at Greenock 83 per cent. of the electors went to the poll. The South is always behind in this matter. At Farnham only 50 per cent. voted, and the worst poll at a by-election was recently at North Islington where only 40 per cent. went to the poll. That caused a great deal of comment at the time, but
834
it was owing to the state of the register that so many electors could not vote. Twenty-three per cent. of the electors had gone away during the period since the register had been compiled. I will give the figures if your Lordships will bear with me for one moment. There were over 200,000 electors, and no fewer than 47,000 had gone out of the district.
That is a thing the Government might remedy, and I will make a suggestion on that point before I sit down. Though at Parliamentary Elections the voting might be better, it is nothing to despair of, but in municipal elections it really is very bad. In the boroughs—I am only taking the boroughs—the Northern part of England always seems to vote well, but the South is very much behind. Accrington, 75 per cent.; Burnley, 72 per cent.; Morpeth, 71 per cent.; and then we get Plymouth, 41 per cent.; Cambridge and Rochester, 40 per cent.; and Luton 31 per cent. There is, therefore, an enormous divergence at borough elections in the provinces. When we come to London the position is far worse. In the London boroughs in 1928 only 32 per cent. voted, and in 1937 35 per cent. For the London County Council in 1928, 35 per cent. voted, and in 1937, a comparatively high poll, 43 per cent. I know Lord Snell will agree that that is not a very good record for the electorate. But there are special reasons for that in London because of the way the population shifts. People go from one part of London to another, and, as everyone knows, it is a big place. If they are not living in the district where they are going to vote they naturally do not take the same interest as people do who live in the same borough all their lives.
This is the suggestion I should like to make to the Government. I believe a good deal of the difficulty could be got over if they would change some of the dates of registration. There is a two months' lag between the last date for objections and the publication of the register. Some time about the middle of August is the last date for objections, and that applies not only to London but to the whole country. In the middle of August the last claim for objections comes before the registration officer, and the register is not published until October 15. If you have an election, as we do, in London on November 1, and as all the country

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does for municipal elections, that does not give sufficient time to election agents and others concerned with elections to find out where the electors are living and notify them. I should like to suggest to the Government, especially for the sake of London, that the register should be compiled and brought up to date on October 1. There has never seemed to me any reason why that cannot be done. Then you would be able to notify all those concerned, and in the case of those who have gone away send them proper notice instead of the rush and hurry which now prevails in the short time of a fortnight which is available. That period is too short when you are dealing with such huge electorates as exist at the present day.
Another alternative has been suggested. I cannot say I am particularly in love with compulsory voting. I think it would be difficult. It may be a solution one day, but there is another suggestion that comes from America. In America people have to go down to the town hall and register themselves. If they do not want to vote, they are off the register. Your Lordships are well aware that in any society, if you get something for nothing, you do not take the same interest as you would if you had to pay for it. Take, for example, a political organisation, if any of the members do not contribute, they are on the whole apathetic. I am glad the noble Lord, Lord Rea, who has great experience in this matter, spoke upon it. He knows as well as I do that a spoon-fed constituency is no good at all. On the other hand, if the electors are interested in politics and contribute to one side or the other a small proportion of the expenses incurred so as to show their interest, you will get much more life in the elections. In the same way I am not at all sure that if you did ask the electors or their representatives to go to the town hall, as they do in America and register their names, instead of continuing the present practice of sending a list out in June for them to fill up as they please, you would not get them much more keen to vote. There has been another suggestion that you should have the registrations twice a year. That, as your Lordships know, would cost another £500,000, and I do not think it would produce any really good results. Besides, half a million
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pounds in these days is not to be despised. I am not going to follow the noble Lords who have spoken about proportional representation. That is an arguable-subject, and would take up a lot of time, and there would have to be a great deal of discussion in both Houses. I want to make this practical suggestion to the Government. It is one that has been urged over and over again, and it is that the register should be put into force a fortnight earlier and published. That would give a great deal of help, especially at municipal elections, to secure the desired result.
THE EARL OF MUNSTER: My Lords, it is my happy task before replying to the Motion made by the noble Lord opposite to offer on behalf of His Majesty's Government our sincere congratulations to the three noble Lords who delivered their maiden speeches this afternoon. I feel sure that we on this Bench at any rate will look forward to the time when they will have the opportunity of presenting their views to us on other matters. The Motion which the noble Lord has made is one that calls attention to a matter which is undoubtedly of very great importance to a democratic country. The success of our method of government in Great Britain is perhaps largely due to the close touch which is kept between Members of Parliament and their constituencies, and I think that this helps towards good government by keeping the electorate well informed upon matters which come before Parliament during the week. Any falling off of this interest on the part of the electors in public affairs would, therefore, be of very grave concern.
With regard to Parliamentary Elections there does appear to be very little reason to charge the electors with apathy, and as far as I can see there are no grounds for believing that this apathy is increasing. I have many figures in front of me, but perhaps if I say this it will be sufficient. In the last six General Elections—those from 1922 onwards—the proportion of those who cast their votes to the total number of names on the register of electors has been between 74 per cent. and 80 per cent. Now allowing for the fact that a register is compiled on June I each year and comes into force on October 15, so that it is practi-

837
cally four and a half months old, there must always be a number of electors who are unavoidably prevented from one cause or another from recording their votes. I think the failure of many of these people to exercise their power can be accounted for by reasons other than indifference. I am informed that it was only quite recently that in Kingston-on-Thames about ten thousand people out of a total electorate of between 75,000 and 80,000 had ceased to be qualified during the preceding year. At the last General Election—I take this as an example—in the Rhondda division of South Wales the electors had to choose between voting for a Labour candidate and a Communist candidate, and I think it must be assumed that a number preferred not to vote at all.
I come now to the municipal elections. The percentage of electors who record their votes at these elections is, I know, unfortunately much smaller than the number voting at Parliamentary elections. I have had experience myself in London, and I agree that it is a matter which calls for great concern. There are no statistics available for the country as a whole, but in London since 1922—that is to say, at the last four elections of county councillors and the last six elections of borough councilors—the percentage has generally been between 30 and 40. I think it is to be very much regretted that a keener interest is not shown by the people not only in London but in the provinces in municipal elections, but the remedy would not appear to lie so much in action on the part of His Majesty's Government but, it appears to me, in greater activity among the Parties contesting these elections. I know the difficulties full well, but I think it would be very rash for the Government to enter into consultation with the local authorities to improve the electorate at these municipal elections. It is a matter entirely for the local authorities and I hope that this debate to-day may at any rate have served a useful purpose to that extent. The noble Lord, Lord Gifford, in an interesting maiden speech, gave us certain particulars concerning Australia which I feel certain appealed to many of your Lordships. I have no more to say upon this matter to-night, but I do think that the debate may have served a very useful purpose towards encouraging the electors to vote at municipal elections. I hope the
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noble Lord will withdraw the Motion that stands on the Paper.
LORD DERWENT: My Lords, I should like to say that I am very thankful for the support which I have received. We have had many and varied suggestions put forward as efficacious remedies for the state of affairs which the noble Earl who answered for the Government at any rate admitted exists. In addition to what have been described as my long-range proposals, we have had proportional representation advocated, and the noble Earl, Lord Tankerville, has suggested that voting for methods should be replaced by voting for results; while the noble Lord, Lord Gifford, expressed himself in favour of compulsory voting. In addition, we have had from the noble Lord, Lord jessel, a great deal of interesting information about the question of deficiencies in the register. I confess that, although I welcome the admission of the noble Earl who replied for the Government that the state of affairs which I have described exists, it seems to me that I am entitled to be discontented so far as the local government question is concerned, and also to be discontented that the only suggestion the Government will make is not to bother the local authorities about it but to let them settle the matter for themselves. I think, frankly, that that is an extremely inadequate reply from the Government. I only hope that in the picture I painted in my speech I was not playing the role of Cassandra, and that all the various ills which I prophesied, and which I find other people in the country as a whole have prophesied if the Government do not take their proper part in this matter, will not eventuate. I can only hope that the outlook is not indeed so bad as that. But in the circumstances I think the only thing that I can do is to withdraw my Motion.
Motion, by leave, withdrawn.

COAL BILL.
Debate resumed (according to Order) on the Motion for the Second Reading, made yesterday by the Earl of Munster.
THE LORD CHANCELLOR (LORD MAUGHAM): My Lords, this is a controversial and difficult matter and I confess that I had originally intended to address

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your Lordships at some length. After what took place yesterday, however, and having regard also to the time at your Lordships' disposal and the number of noble Lords who wish to speak, I am going to take the course merely of replying to the criticisms which have been raised against the Bill and of dealing with them to the best of my ability. If some criticisms are not dealt with I hope that noble Lords who are concerned in regard to them will feel that it is only because I think that they can be dealt with more adequately on the Committee stage than at the present time. The first thing I want to deal with is a tendentious word used by the most reverend Primate. He told us that this measure was a measure of expropriation. That is a word which carries to the minds of many people a somewhat sinister meaning. It is, however, like all the words which fall from the most reverend Primate, perfectly accurate. It is in a sense a measure of expropriation, since property belonging to a number of very worthy people is taken away from them on the terms which are contained in the Bill. But the same word is also applicable to every case where property is taken away from private owners for public purposes.
There would not have been a railway of any size constructed in this country if it had not been for the expropriation of a large number of the interested landlords on whose property the railway line was built. The same thing is true not only of railways but of practically every public undertaking throughout the whole country. If your Lordships care to go back a hundred years to reports of debates which took place in the years between 1835 and 1845, you will find perfectly honest members of this House protesting in the most violent language against private property being interfered with for the purposes of constructing a railway or a dock or other undertaking of that kind. And the matter does not stop there, because whenever our incorruptible Chancellor of the Exchequer gets up in another place and proposes a measure which takes 5s. 6d. in the pound from the pockets of all your Lordships there is no doubt that that is a measure of expropriation. At the same time, I do not suppose there is anyone here or that there is any sensible person who, if
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he chooses to use the word "expropriation" in connection with such an operation as that, feels that he is really stating that an act of injustice is being perpetrated. It has got to be done in the public interest. It is on the same ground that the "expropriation" which is involved in the present Bill has to be defended.
The most reverend Primate went on to paint a pathetic picture of the very serious effect which in his view would be caused by this measure to the funds of the Ecclesiastical Commissioners. I do not myself doubt that they and other people who at present are owners of coal royalties are going to suffer a very serious diminution in income if this Bill becomes an Act. But is that really a ground on which the Bill can be attacked? Coal royalties have never been treated in this country as if they were in the same position as what are called gilt-edged securities, and the noble Marquess, Lord Crewe, stated yesterday that he never thought the royalties with which he was concerned could be regarded as an investment of that character. That question as to the inadequacy of the consideration which these owners will receive under the Bill has to be considered in the light of facts. A tribunal was instituted to determine the value of all the coal royalties in this country. The tribunal consisted of three gentlemen, and I do not think I am going beyond my rights as a speaker in this House in saying that I am intimately acquainted with two of them and very well acquainted with the third. I do not quite see how you could have got three gentlemen more disinterested, who had better judicial spirit and who were more likely to arrive at the fair number of years' purchase to be given for the coal royalties belonging to those 4,000 persons who are interested.
Though I have not thought it right, because it is never right, to discuss with any of these gentlemen the reasons why they arived at the figure fifteen as the correct multiplier, I have had the opportunity of knowing from counsel who appeared before them something of the reasons which must have influenced them in coming to the conclusion they did come to. It is true that in this country coal royalties have never been regarded as worth a large number of years' purchase. It is true that the royalty owners in this

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country ever since the year 1894 have been able to persuade the Inland Revenue officials that for Estate Duty purposes a multiplier less than the number fifteen was a justifiable figure to apply in ascertaining the market value of coal royalties.
Those noble Lords who were yesterday indignant on this matter must really, I think, take a somewhat wider view of the matter than they were disposed then to take. I would remind your Lordships of this, that the yield of the royalties to a particular owner depends on the output of coal from the land which he has leased to some colliery company. What is there which can possibly be said to persuade a valuer, whoever he may be, that the output of coal from that particular colliery is going to continue in perpetuity, or say, if you like, for fifty years? Surely it all depends upon output, and output will depend very largely on whether the export of coal continues at the present price. There are all sorts of possibilities with regard to the mine. There is the chance of coming upon faults, or finding other difficulties in the working of the mine. There are strikes, and all sorts of other possible difficulties. If you take those facts into consideration and add to them the circumstance that the mine is a wasting asset, I cannot see how you can escape the conclusion that you have to apply a smaller number of years' purchase than you would to a rent derived from a lease of the surface.
It is not to the purpose of anything before your Lordships to-day that the legal view has long been in accordance with that which I suggest. As many of your Lordships well know, the tenant for life of mines has never in the ordinary way been allowed to take the whole of the rent and royalties which he can get from those mines. Ever since the law devoted its attention to this matter, and certainly since the year 1882, which is at least going back a good long way, the law has treated the tenant for life as entitled to something less than the royalties which he gets from the minerals which are included in the settlement. Under the present Act, the Settled Land Act, 1925, Section 47, the tenant for life, if he is impeachable for waste, can only get one-quarter of the royalties which come from a lease included in the settlement, and the whole of the other three-quarters have got to go to capital. If he is not imp-
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peachable for waste, he gets three-quarters and a quarter goes to capital. That is only an illustration of the fact that coal and other minerals are really not in the same position as the surface. They are open to all sorts of considerations, and in particular the consideration that a mine is not inexhaustible.
So it was not from any political predilection that any one of those three persons who were members of the tribunal came to the conclusion that fifteen years' purchase was an adequate figure to take. It was because, from the materials before those gentlemen, it was not reasonably possible to fix a larger number of years' purchase than fifteen. When you add to that fact the circumstance that the Government have taken the course of agreeing that for an extra three-and-a-half years the royalty owners are going to receive the royalties which belong to them, and an addition to the sum of £66,000,000 odd which amounts to £7,000,000 altogether, I think any really disinterested man will come to the conclusion that although he may suffer and his brethren may suffer a substantial reduction in their income, that is because he is getting, instead of coal royalties, a sum of cash which he may invest in a permanent security not liable to the chances and risks of coal.
However that may be, as his Grace, with his usual fairness, pointed out, the tribunal agreed, the tribunal made a report, and they fixed upon the number of years' purchase which I have mentioned. I should like to ask any member of this House what the Government—the National Government—could have done but accept that figure or throw up the whole project included in this Bill. Is it conceivable that a National Government, after appointing an agreed tribunal of three eminent persons, could have said, "We know better, and the owners of coal royalties ought to be given a larger sum"? My Lords, it was not possible, of course. The three-and-a-half years is a sort of windfall which comes to the royalty owners by reason of the circumstance that it will take three-and-a-half years before the matter is ripe for payment, before they are able to arrive at the date of vesting. During those years of a postponement that was not due to anything but the actual facts of the case, it was only fair that the

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royalty owners should continue to take what, after all, is still their property. When the time comes they will have a sum of cash ascertained, as I said, in a fair manner.
Now I come to the second point, which was raised, with his usual great dialectical skill, by the noble Lord, Lord Hastings. He asked your Lordships to believe that there was really no interest of the State sufficient to justify such a Bill as is now before you. It is no doubt perfectly honest opposition, both from the noble Lord and from the other noble Lords who object to this measure. But I urge them to be very sure, before they vote against the Second Reading of this measure—it there should be a Division on the Second Reading—that their own personal interests do not, to some extent at any rate, cause them to come to that conclusion. Let me point this out to your Lordships. There never has been a greater unanimity among the independent bodies who have considered this question than there has been in relation to the unification—as I prefer to call it—of coal royalties. The Coal Industry Commission, 1919, the Royal Commission of 1925, which still goes by the name of the Samuel Commission, the Report in 1933 of the Coal Mines Reorganisation Commission—all those bodies, and other bodies and persons whom I have not mentioned, have been unanimous in the opinion that it would be to the interest of the coal industry that the royalties should be acquired by a single body or by the State.
Anybody who thinks that they are all wrong is perfectly justified in holding to his view. Perhaps they are all wrong! But he cannot ask the independent persons, the disinterested persons, to come to the same conclusion. Governments dealing with a very highly complex and, to some extent, a very technical matter such as the coal industry cannot act in any other way but by following the conclusions come to by independent bodies of inquiry, who report unanimously on this point in a particular direction. If I may take up your Lordships' time on the question of interest I would like to tell you a story for the truth of which I can vouch. Some forty years ago there used to preside or sit in this House, in a judicial capacity, a learned Lord who was by universal
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acknowledgment the greatest authority in this country on questions of equity, and on questions of the construction of documents. Under a certain will be was an interested person. He formed a view as to the true construction of that will which, as it happened, was in his own interest and involved several thousand pounds. He expressed his opinion in correspondence, and he found that his views were not agreed to. He then sent a case for opinion to a young and, at that time, unknown member of the Chancery Bar, and the latter thought it right to write an opinion contrary to the views of this great expert. The noble Lord of whom I am speaking accepted this adverse view without a single word of remonstrance. And when he was asked why he did so he said that a long life had taught him that no man was a judge where his interests were affected. I think, although it is a different case, that the principle is one that those of your Lordships who are inclined to think that this measure is ill-designed and unfair may well take to heart.
I would like to say just a word on the subject of amalgamations. There there has been difference of opinion among your Lordships. One noble Lord yesterday said that a blank cheque had been given by the Government to compel amalgamations. Another noble Lord said that while those members who were concerned about amalgamations were afraid of them, in his view they might well sleep happily at night notwithstanding the provisions at present to be found in this Bill. A blank cheque is very easy to fill up but I should never have thought that the case which that transaction involves was very similar to the efforts of the Coal Commission in getting over all the obstacles placed in their way before a compulsory amalgamation may be made. If one may use another metaphor I should say that you have first a difficult fence, then a water jump, then a stone wall and then a double-oxer and all these four obstacles have got to be overcome before you reach the winning post. I do not think there is going to be much actual resort or much successful resort to these measures; but then on the other hand I do not think there are a great many cases where amalgamation is necessary. There are some cases and I think it is idle to suggest that this Part of the Bill is either going to cause unfair amalgamations to

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be forced upon constituent bodies or that there will be very much resort to the provisions of the Bill in that respect at all. That the provisions exist will be important because if there are cases, as Lord Crewe said there were, where amalgamation is overdue, then the existence of these provisions will enable steps to be taken and it will very likely lead to voluntary amalgamation if it be really necessary. That at any rate is my view with regard to amalgamations, and I think the view taken in the early days of this Bill in another place, that it did not offer enough scope for effective criticism, is an objection which no one will raise who has read the provisions which really apply to Part II of the Bill as it stands.
I now want to say a word about marketing. I do not think any of your Lordships will doubt that the provision as to marketing of such a commodity as coal is absolutely necessary. I remember when I was young reading books on political economy and being much impressed by the law of supply and demand. I thought then that everything I read was gospel truth, but it has become perfectly apparent that where there is unrestricted and cut-throat competition it is impossible for the producers to get fair prices for their produce. In the commercial world at the present time in regard to butter, pigs, milk, and I do not know how many other things, it has been found necessary to have some provision for limiting cut-throat competition by a marketing scheme. For my part, and I believe my view is shared by the vast majority of the people concerned in the sale of coal, the provisions for the marketing of coal are absolutely essential, more especially when the demand tends to fall. They have been amended in another place very largely at the suggestion of the people concerned most directly in the matter—namely, the colliery owners—and I would suggest to your Lordships that that part also of this proposed scheme will be of great advantage, at any rate of substantial advantage, to those who are most concerned.
There are just one or two things which I would like to mention which do not fall exactly within the scope of my speech, but I shall be very short. The most reverend Primate asks for some assurance on the question of the coal to be found in the wastes of manors and copy-holds. I think that has been fully pro-
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vided for. At any rate I am prepared to give an assurance that the matter shall be looked into with the greatest care to see if anything else is needed for the purpose of ensuring that those who have rights in coal as lords of the manor shall be properly protected. There is one other matter. Lord Addison objected to the prohibition of the Commission engaging in the business of coal mining. From the point of view of the Government it is absolutely vital to the proposals included in this Bill. We do not want the Commission, and it would be quite wrong to put the Commission in a position, to engage in the business of mining coal. This is a measure primarily for the unification of the royalties only—to institute one body which will be the landlord of the whole of the industry, but not to put upon that body the duty of engaging in a business so difficult and so highly technical as that of the actual extracting of coal.
The noble Earl, Lord Crawford, sought to terrify—and he may have succeeded in terrifying—some of your Lordships by reminding you that the Government lost a sum of £1,000,000 a week by carrying on the business of coal-mining during the War. That may very well be. I do not know how much the Government would lose if they took the view of the noble Lord, Lord Addison, and empowered the Commission to engage in the process of coal-mining at the present time. But the noble Earl, Lord Crawford, knows perfectly well that that loss had no connection with the ownership of coal royalties, but was a loss caused by the Government engaging in the difficult and complex business of mining and marketing the coal. This Government at any rate, I can assure your Lordships, have no intention whatever of repeating the mistake—unless they are forced by another war or other circumstances of that sort—of endeavouring to carry on the business of coal-mining itself.
One other point mentioned by the noble Earl, Lord Crawford, was the question of the safety of the miners referred to in Clause 2. That is a matter which perhaps might be discussed at some length on the Committee stage. As it appears in Clause 2 at the present time, generally speaking the powers of the Commission will be chiefly employed in granting leases on such terms that the utmost possible care will be taken to avoid accidents by impos-

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ing obligations on colliery proprietors to take special precautions in the matter. Whether there is any other way in which the Commission can usefully operate in this respect I am not at all sure, but at any rate that can be a matter for discussion in Committee.
Now I suggest to your Lordships that each of the three limbs of this legislation has an enormous weight of expert and disinterested approval behind it. All these Commissions are in favour of the steps that we are taking. Part II and Part III of the Bill have got just as much authority of practical men behind them as Part I has the authority of all the Commissions and Committees to which I have referred. The Third Reading of the Bill in another place was not contested. The Bill is undoubtedly not a panacea for all ills, and it would be a most unfair thing to suggest that it is. It will not have any very great immediate effect on this industry. But it is, as I contend, a perfectly honest measure intended to secure benefits to the industry by providing all the colliery proprietors in this country with a single landlord, and not only a single landlord but a landlord who has no interest whatever in making money out of the industry. An honest and disinterested landlord of all the colliery undertakings in this country does seem to me to be a thing which must finally be to the benefit of the industry as a whole.
A great point has been made with regard to reduction of rents being the only thing at present mentioned in, I think, Clause 21. It is possible in Committee that something else might be mentioned in that respect, but any reduction of rents must enure to the extent of an average of 85 per cent. for the benefit of the miners. If it is asked why it should be the miners rather than the public, the answer is that in the view of the Government and in the view taken in another place it is high time that something was done to improve the position of this industry and to improve the position of that very fine body of men, the working miners of this country. I confidently ask your Lordships to give this measure a Second Reading on the grounds which I have given.
LORD GAINFORD: My Lords, we have had, I think, three maiden speeches this afternoon, and I am quite sure we
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have all listened with great pleasure to the speech which the noble and learned Lord has just delivered from the Woolsack. I think we may say that we realise that he has done his very best to commend this Bill to your Lordships' approval. If my words are somewhat less well chosen, I hope that I may be able to contribute some suggestions of value which, if adopted by His Majesty's Government, may at any rate diminish the harm which may be done to the industry and remove many of the injustices which are apprehended by many of those interested in the measure.
Last year on the Coal (Registration of Ownership) Bill I ventured to point out that I thought it would be very difficult to make a good case for the introduction and passage of a Coal Bill this Session. The result of that Bill which was passed last year, so we are told by the Minister of Mines, has been that 17,105 royalty owners have already applied to have their coal registered, and up to the present time only 404 have passed the preliminary examination for registration. At that rate of progress it seems to me as if it will take not three and a half but about forty years, spending £30,000 a year (which is the figure given by the Minister of Mines) before these properties will be properly examined and registered. But let that pass. If the registration procedure is going to be expedited it must mean the expenditure of a still further considerable sum in connection with this process. I wonder how many of those 17,105 royalty owners are regarded by the Government as morally liable for the acceptance of the Greene Report. I am told that not more than 1 per cent. of those 17,105 had any knowledge of the proceedings before the Greene tribunal, that only about twenty royalty owners took any part in connection with the negotiations, and I feel that the whole matter was very badly mishandled by those who represented the royalty owners.
The Coal Reorganisation Committee has lasted for eight years and has done no real valuable work. I am told it costs something like £50,000 a year. That is, £400,000 have been thrown away on that organisation; and I suppose some of the members of it will now be employed in connection with the new Coal Commission. Personally, I am tired of all these Committees and Commissions in connec-

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tion with the coal trade. There are two new bodies going to be created, and they will have to be financed of course out of public funds in one way or another—the Coal Commission and the Investigation Committee in this Bill. I have yet to be convinced that anything is going to be gained by anything in this Bill for the benefit of the industry—far from it. Colliery owners as a whole are very apprehensive that the Bill will do damage to the industry and not benefit it. It was, of course, necessary that Part III should be passed, but it might have been passed, and might still be passed, by an amendment of the Expiring Laws Continuance Bill just as well as through being introduced into a coal measure. Who is suggested as going to benefit by this Bill? The miners are not convinced. The miners, in spite of what Lord Samuel said yesterday, quoting Mr. Tawney, a don of Oxford, in connection with some evidence he gave before the Commission—
VISCOUNT SAMUEL: Mr. Tawney appeared officially before the Royal Commission of which I was Chairman to present the evidence-in-chief of the Miners' Federation.
LORD GAINFORD: What the noble Viscount has said is quite true, but still I am quite sure on this point: Having represented miners and been elected over and over again by miners for the other House and for the county council in my own county, I know that the miners did not agree with Mr. Tawney for one moment in connection with the examination which was conducted by the noble Viscount when Mr. Tawney was present. I was there throughout the whole of the sittings. I know he represented and spoke for the Miners' Federation, but at the same time he did not represent their views in connection with the object of their nationalisation desires. Their desire for nationalisation has always been on the ground that they were going to get rid of what they thought was an unfair charge on the industry in connection with the mining royalties, and the only benefit which they see now in connection with this Bill is that at some deferred date it is possible there may be some reduction of the higher royalty rents which have been imposed by royalty owners upon the industry recently.
The miners are opposed to other portions of this Bill. They are very appre-
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hensive of amalgamation, and they could find no better spokesman than the gentleman who was for a very long time secretary of their federation and who is now working collieries himself. In the very able letter which he wrote to The Times he pointed out, on behalf of the miners as well as of those who conduct the industry, that amalgamations, and compulsory ones, do not tend to the safety of mining. The miners are also opposed to the limitation of pithead prices because 85 per cent. of the proceeds go towards the miners' wages, and so long as there is a limitation of pithead prices by an authority such as is now going to be set up the miners are apprehensive that it may reduce the 85 per cent. of the additional price which might go to the benefit of themselves in connection with wages. The consumers, as far as I know—and I have seen a good number of them—do not resent the miners being well paid, but they do object to the high charges which they think are often made for coal in connection with the cost of distribution and the delivery price.
I come to the mineowners. As I have already said they do not feel there is anything to be gained by this Bill, and I will deal with one or two points later. Before that I wish to deal with the question of the royalty owners. If I had spoken yesterday I should not have referred to this matter, but I was impressed more than I can say by the very moderate language of the most reverend Primate in connection with the confiscation of property belonging to the Ecclesiastical Commissioners of which I have some knowledge. I have been also impressed with the attitude of Peers in their hesitation in coming forward to denounce this Bill as royalty owners when their own pockets are to be affected. We were told, however, yesterday by two speakers who knew what they were talking about that in addition to the £120,000 which is going to be lost by the poor clergy who are already not sufficiently well paid in this country, the royalty owners are going to lose £2,000,000 a year under the proposals of this Bill. There is no objection whatsoever in any quarter to the personnel of the Greene Committee. I do not think a better tribunal could have been appointed, and I have no doubt the period they named—fifteen years—was a very fair number of years in connection

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with such a property as coal. But what those of us who know something about the industry feel very strongly is that the £4,430,000 upon which that period of fifteen years was based in order to obtain the global sum of £66,450,000, was not a fair figure for an ascertainment of that kind.
First of all, during the period 1928–34 we went through a depressed period of several years in which the quantity of coal was very much reduced in this country, and coalowners went to the royalty owners and asked for concessions—my firm went to the Ecclesiastical Commissioners and asked for concessions. Therefore when these particular years are taken into account the calculation ignores the fair amount which the Ecclesiastical Commissioners and other royalty owners should have obtained in a normal period for the value of their coal. The amount of £6,000,000, to which Lord Samuel alluded as the figure at the time of his Commission in 1925–26, was a much fairer figure if the latter had been dealt, with equitably. Therefore, I am not surprised when members of this House and royalty owners all over the country take exception to the amount of money of which they are going to be deprived in these circumstances. The whole case was not before the tribunal as it ought to have been presented. The Treasury figure of £4,430,000 was accepted by the Commission, whereas in my judgment it was a wholly unfair figure. If you look at the aggregate output of coal between 1928 and 1934—that is, the years which were taken—the average quantity was six per cent., less even, with one or two good years included, than in the year 1937 which we have just passed, and if the assessment had been made on the amount of rent in 1937 a very much larger award would have been given by the Greene Committee. Therefore I come to this conclusion, speaking not as a royalty owner, that there has been under the proposals of this Bill confiscation and spoliation as against what ought to be equitable and fair compensation for property. To me it is a question of right or wrongdoing, and I protest against this sum as being wholly inadequate for the interests which I think are being attacked by this Bill, and, so far as I can, I appeal to the Government to look into this matter
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again and see whether some revision of the figures is not due.
I come now to a matter in which I am personally interested but only as a shareholder and director, and that is the freehold coal, which amounts to one-eighth of the whole of the coal that is included in this £66,000,000. Now we do claim that it is unfair upon those who have bought freehold coal for themselves, after great pecuniary sacrifice, in order to consolidate their underground operations and to produce economical working, that when they have acquired this coal at one price they should be compelled by law to sell it at another and lose thousands of pounds, as many firms will do year by year in consequence. The noble Lord, Lord Teynham, last night alluded to one case of a company which would lose between £60,000 and £70,000 by compensation such as is proposed in this Bill. That is one firm alone. Such treatment deprives the firm of an enormous amount of capital which would enable it to spend money on improvements. But I have case after case which I shall be able to give on the Committee stage making, I think, an unanswerable case for the exemption of all freehold coal which has been bought by coalowners with a view to working it themselves. We are quite prepared to have it leased by the Government on a peppercorn rent, but we decline to accept any decision of the Greene Committee upon this matter. We were never consulted, and one member of the Greene Committee told me himself that the matter was never brought before that Committee, and that if it had been he thought the proposal which I am now making would have been a very fair one—namely, that freehold coal should be exempted from the provisions of such a measure as this.
Now I come to the question of unification. The noble Earl, Lord Munster, thought that he was making rather a clever point against me by quoting some words that I spoke in connection with my approval of the principle of unification. If he had looked at many of my other references he would have found many of them condemning nationalisation root and branch. But circumstances vary, and after the passage of the Coal Mines Bill of 1930 district boards were set up, as the noble and learned Lord on the Woolsack said, with a view to bringing under-

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cutting between competing firms to an end. District boards having been established they had to arrange for standard tonnages for all the firms, and the amount of coal which they can produce, as well the control of prices. We came to the conclusion in the industry that under the powers we then possessed we had no alternative but to refuse to carry out certain provisions of our leases, and we also came to the conclusion that the principle of unification might then be justified. However, I must admit that in the last five years we have had such concessions from royalty owners in connection with the terms of our leases that we have no complaint at present in regard to our treatment by them.
THE EARL or MUNSTER: The noble Lord will remember that he made the statement in 1934, which is not five years ago.
Loan GAINFORD: I thought it was 1933. I added fifteen years to 1918 and I thought it came to 1933. However it does not matter whether it was four or five years. Since then, as I have said, we have gone through very serious times. Adversity is a hard task-master, and we have done a good deal in connection with the rearrangement of our leases, with the consent of royalty owners, and, as I say, at the present moment we have no complaint to make in regard to our treatment. What we ask for is that there should be fair compensation in connection with the application of this principle, and we all agree with the royalty owners that they are not receiving fair compensation under the provisions of this Bill. One of the things which we as mineowners feel very acutely about this Bill is that we are going to lose so many great advantages which we have had through the ownership of the coal and of the surface being in one hand. Facilities have been granted to us for the building of houses for our workpeople and for the erection of our plant and coke ovens and other things. The facilities that we have received in this respect have been of enormous value, and we fear that if this Bill becomes law the owner of the surface, riot being interested in the coal, will be in a position to exploit the mineowner and to extort the highest terms he can in respect of any claims for damage to the surface and so on.
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Now I come to the question of amalgamation. Probably, I suppose, no one has had more experience of amalgamations of iron and steel and coal enterprises than myself. There are a great many views as to how amalgamation should be best carried out. I for one believe in leaving business men to settle their own amalgamations for their mutual benefit, and not to rely upon the State to interfere by forcing compulsory amalgamation upon people who do not desire it. I must divert for a moment to refer to the attitude which my right honourable friend Mr. Stanley, if I may so call him, has adopted towards the Mining Association. He is very sore that in connection with amalgamations we entered into a public agitation in order to secure the safeguards which were put in the 1930 Act by your Lordships in order to prevent amalgamations being enforced on any parties. This Bill not having any of those safeguards in it, we asked the Minister responsible for the Bill to receive a deputation. Time after time he refused to hear us, to see us, or to have anything to do with us, and if anybody has a grievance it is the Mining Association who were refused a hearing for their views by the Minister of the Crown responsible for the Bill before he produced it.
We had no alternative but to raise that agitation which induced the public through their representatives in the House of Commons to secure for us an appeal court as now introduced into the Bill, although I regard that appeal court as a very cumbersome and expensive method of settling troubles in connection with the industry. It is a political body and I would much sooner have a matter of this kind left to a judicial tribunal rather than to political Committees of either House of Parliament with all the expense entailed. However, what we do insist upon as a mining association—and I hope the Government will accept our Amendments—is that we should know the reasons for an amalgamation before these Committees sit so that we shall have an opportunity of knowing the case for an amalgamation and be able to oppose an amalgamation if we think that any of our interests are prejudiced. That I think is only fair. Under the provisions of the Bill, however, the reasons need not be produced, although they are essential to those who are interested in the question whether their concerns should be amalgamated.

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To the inconsistency of Ministers perhaps I need hardly refer, but I feel justified at any rate in re-reading an extract from a speech by the noble Earl, Lord Baldwin, in connection with amalgamations, because it represents so truly what was I believe the view of the whole Conservative Party in the year 1930. I cannot understand why any of them should differ from those views to-day. Speaking on April 3, 1930, on the Coal Bill, Mr. Baldwin, as he then was said:
"… coal pits differ very much from each other … and there is a real fear that the end of your compulsory amalgamation … may be simply this—that you take a progressive, productive concern, and you kill it by hanging half a dozen duds round its neck."
He went on to say:
"Compulsory amalgamation I do dread very much, and I also dread it from the financial point of view."
Mr. Baldwin added:
"All the books of orthodox political economy will be thrown into the funeral pyre. The indecency of that proceeding takes from me the further power of speech."
Now, if I may, I turn to what is the main case put forward for this Bill and that is that the industry does require reorganisation. Those were the words used by the noble Earl who introduced the Bill in his great speech yesterday, and the same charge was made against the industry by the noble Viscount, Lord Samuel, in his speech. We as coalowners entirely repudiate the charge that the industry is not well organised. As the noble Earl, Lord Crawford, said yesterday, it is the only industry which has an arrangement with its workmen by which they receive 85 per cent. of the proceeds. We have had troublous times. I do not deny that. We lost trade in the War. Our output was reduced from 280,000,000 tons to about 200,000,000 tons, and our exports so went down from 70,000,000 tons that last year there were only 37,000.000 tons. But that has not been due to any mismanagement on the part of the coalowners. Coalowners, although they have had very little capital to spend on improvements, and although they have had no dividends for their shareholders in very many cases, have managed in recent times to spend a lot of money in development work, in putting down electrical plant for hauling, ventilation, pumping and mechanisation. In
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1928 we had 2,200 conveyors and to-day we have over 5,000 mechanical conveyors. Mechanical contrivances for drilling instead of hand-work which were installed in 11.8 per cent. of our collieries in 1928 are now installed in over 5o per cent. of the collieries. In connection with sorting, cleaning and marketing and in the provision of safety appliances I believe we are the best organised coal industry in the world, and I repudiate the idea that a Coal Bill is necessary in connection with reorganisation.
I am only going to make two other remarks. One is in connection with prices. We have given assurances, to which we shall adhere, in connection with the price of our coal that I believe will be satisfactory to our consumers. I would point out that in conducting our business it is always to our interest to do our very utmost not to exploit our customers but to retain their good will and their custom. It is not to our interest to exploit them and to end that friendship which has always existed between buyer and seller in the industry. I do not believe there will be much work for this new Commission and on the whole I have very little exception to take to Part III of the Bill.
If I may I will sum up what I regard as the greatest defects of the Bill. There is, first, the inadequate compensation for royalties, with which this House I know cannot deal. Then there is the question of the exemption of freehold coal which this House can deal with by Amendment to Clause 12. There is the matter of arbitration where differences occur in connection with leases which are made by the Commission or arising in connection with their interpretation. There is the point that cash payment should be made and not payment in scrip. Where compulsory amalgamation is forced upon us there should be full particulars made public to justify amalgamation before a Committee of either House sits. There is another small point which I think must be left to the House of Lords to settle. It is a question on which mineowners differ. That is whether there should be a uniform reduction in royalty rents when there is any money for that purpose, or whether, as proposed in the Bill, high royalty rents should be brought down to the level of the lower rents. Many of us feel that the high rents are due to the

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increased value of particular coal such as exists in Wales, and that it would be much better to have a uniform reduction of rents all round rather than have the higher rents where the coal is of most value reduced to the figure of rents where coal is of less value. I fear I have occupied rather more time than I intended to, and I only want in conclusion to refer to what Mr. Oliver Stanley said in the House of Commons. He said it was up to Parliament to see that the rights of mine-owners were not to be injuriously affected by this Bill, and he added "I say that deliberately." I am relying on the noble Lord in charge of the Bill to make certain that that assurance will be observed.
LORD SNELL: My Lords, I am wholly incompetent to enter into the complex details of this Bill. I have never been a miner, and I am sorry to say I have never been a royalty owner! I intervene for the sole purpose of reminding your Lordships of a side of this Bill that is in danger of being forgotten, a side that the miners themselves, the Labour Party as a whole and a vast number of workers in the country regard as most essential: that is, the welfare of the mine workers themselves. Granted that this Bill becomes an Act, we cannot, with the most generous view of it, see that the lot of the mine worker is going to be very much improved, if improved at all. The miners themselves and the Labour Party are not unwilling that complete justice should be rendered to the royalty owner, but they also want justice to be rendered to the coal hewer, who is a very important factor in the mining industry of this country. The case for the Bill was presented to us by the noble Earl, Lord Munster, whose growing competence in your Lordships' House is a matter of great satisfaction to us all. As a very old offender in public speaking, I congratulate the Government on the speech that he made. At the same time I give the noble Earl, the Leader of the House, fair warning that if I see the slightest chance of annexing him to my own purposes on this side of the House, I shall do it without hesitation!
The case against the Bill was presented with a note of personal injury, which might have been anticipated in a debate of this kind, by those who consider that the provisions of the Bill touch the sacred ark of the covenant of unrestrained private enterprise. Their grief was, however, too
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angry to be at all impressive—at least to myself. The Bill, so far as we could judge from its reception yesterday, had no enthusiastic support in any part of your Lordships' House. It does not settle the problem attached to the coal industry. At the most it will diminish some acute grievances; it leaves untouched the fundamental problem. Its aim would appear to be to safeguard whatever may be left of private enterprise in an industry which is destined at no distant date to come wholly under public control.
The noble Lord who has just spoken, Lord Gainford, whose authority in this matter all of us would wish to recognise, said that the miners themselves were only interested in the question of royalties. They are interested in that, but they are interested in something else even more acutely: they are interested in the question of personal security in their work in the mines. They remember that in Holland, for example, where the coal industry is nationalised, the accidents are only half of what they are in this country. The conditions may be different. I make no accusation about it; I merely wish to point out in passing that security for the miner's life while he earns his daily bread is the supreme consideration. The noble Lord also said that the miners did riot want amalgamation. At least the miners' representatives in the House of Commons, who ought to know one side of the industry at any rate, supported this Bill and let it go through its Third Reading without a Division.
The Labour Party as a whole regards this Bid as better than nothing and is willing to accept the Bill as the beginning of a dealing with the problem, but in no sense regards it as an end. Unification, in its view, is a step forward, but the compulsory amalgamation clauses appear to render quite uncertain and possibly quite futile the proposals for amalgamation. The Act may be proved to be unworkable except when all the interests are agreed. The big interests may, and probably will, buy out the smaller interests, the result of which may be to strengthen monopoly practices without giving the public any kind of effective control. In any case, the Bill will not provide effective organisation. It has been said that the owners have risked their capital in this industry. That is true, but it is also true that the miners have invested their lives in it. As

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it is an exceptional industry, where the dangers to human life are so great, the coalowners must accept the inclusion of unusual regulations for the protection of human life.
My desire is to end very quickly. I will merely, therefore, say that the miners appear to pay a very heavy price for our present system. If I am correctly informed, during the last sixty-four years up to September last there have been no fewer than 72,000 fatal accidents in British mines, and during the last sixteen years the non-fatal accidents have grown to 2,000,000 or more. In regard to compensation, we think that the proposals are at least adequate, if not generous. When the miner is disturbed, either through the closing of a pit or in any other way, the kind of compensation that is given to him is a mere pittance.
In conclusion, I would just say that we are unable to welcome this Bill. The principle of the mere amalgamation of profits, without regard to social finance and the welfare of the people, does not attract us. We dislike the Bill in so far as it perpetuates a system in which social considerations are subordinated to commercial success. This Bill will not be the end of the controversy; that will probably be postponed until another type of Government is in power. The nation as a whole is completely tired of this industry, and wishes some action to be taken. Since 186o there have been nine Royal Commissions, thirty Commissions of Inquiry, and over thirty separate Acts of Parliament, all of which suggests that nationalisation, so terrifying to my noble friend Lord Gainford and to your Lordships, is the end which will have to be faced. I understand that at a later stage of this Bill the noble Lord, Lord Hastings, and his friends, are going to move that it be an instruction to the Committee to leave out Part I of the Bill. My Lords, we, as I have said, dislike this Bill—dislike it for what it leaves undone—but there are things in it which will help, and on that account we shall have the humiliation of having to go into the Division Lobby to save the Government from the zeal of its own friends. On that principle His Majesty's Opposition will vote as one man, and I hope we may thereby acquire temporary merit from His Majesty's Government. We, in any case, shall deserve it, for an Opposition can show no greater
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self-denial than that it will save the life of its enemies.
LORD CROMWELL: My Lords, when I entered this House, a comparatively short time ago, after signing my name at the Table I walked towards the then Lord Chancellor, who was good enough to shake me by the hand. I was told that I was on that occasion breaking the only rule of the House—that was, in passing in front of the Woolsack. Obviously there was a very good reason for that rule, because in so passing I trod upon the then Lord Chancellor's toe, and he had to restrain himself from telling me exactly what he thought of my actions. Being told that that was the only rule of the House, I was rather surprised to hear, if I may say so, fall from the lips of the present Lord Chancellor—who as is the custom left the Woolsack to deliver his address—a lecture to your Lordships, which, although I have had no experience of the other place, would I am sure not be in order for the right honourable gentleman who occupies a similar position there to have delivered. I am sure the Lord Chancellor will not shelter himself behind his great office or the Woolsack, if I just make this comment, in regard to the implication that certain members of your Lordships' House would vote a certain way because it was in their own personal interest to do so, that I myself without any offence take a certain amount of objection to being lectured in that way.
In venturing to address your Lordships I make no apology for the fact that I am vitally interested, financially, in this measure, and therefore, as was indicated by the noble Marquess, Lord Crewe, I do not claim to be impartial; but, like the noble Marquess, I claim to be trying to view the whole question from an impartial point of view. I think that your Lordships will agree with me that there are not a great number of your Lordships in this House who have a personal knowledge of the intricacies and technicalities of this Bill who are not themselves interested in the financial or other side of the measure, in some way or other. In fact one of your Lordships, who is not now in the House, indicated not so long ago that he was not sure that he could take part in this debate at all, and was satisfied that he would not vote in any case if there was a Division, because of

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the fact that he was interested in the outcome of this measure. It was very quickly pointed out by another member of your Lordships' House, who is in his place now, that if that was carried to its logical conclusion there would hardly be any measure at all on which any member of the House could either deliberate or vote, because if not directly and intimately interested he would be indirectly interested as concerned in the welfare of the nation, and therefore he would not be able to vote upon any measure at all.
Therefore your Lordships will see that I am taking part in the discussion, and if any vote is taken I shall certainly vote in the way that my conscience directs me, and I hope my conscience will direct me to vote ill the interests of the community as a whole. There can be no doubt, to my mind, that this measure has been introduced by the Government, if not entirely at any rate mainly, for the reason that it is a political Bill. I do not mean a Party Bill, but it is introduced, I contend, mostly for political reasons, although of course there are some features in the Bill which continue existing legislation and attempt to improve it. Therefore, as was pointed out by Lord Hastings, it is not possible at this stage to oppose the Bill as a whole, because there are some parts of it which obviously should go anyhow as far as the Committee stage. But I do submit to your Lordships that the measure requires a good deal of close examination before a departure from an accepted principle—that is, in regard to the wholesale purchase of a raw material such as this—can be undertaken or justified.
No one, I think, would suggest that vested interests should take precedence over the general interests of the community, and one readily admits that under existing legislation compulsory purchases already take place. Both the State and county councils do, almost day by day, as alluded to by the Lord Chancellor, have to make compulsory purchases of land for public purposes. Otherwise, any individual owner who liked to be unreasonable could prevent any scheme of this sort taking place at all. The Lord Chancellor did, however, think fit to make a comment on an observation which fell from the lips of the most reverend Primate. He defined for us, as of course he is entitled to do, what the word "expropriation" means, and he gave as an
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example that it could be applied in its logical conclusion to the Income Tax of 5s. 6d. in the pound proposed in another place. If I may carry that argument a little further, supposing the Chancellor of the Exchequer of the day were to introduce into the Budget an Income Tax of 21s. in the pound, that might perhaps be put in a different category from a 5s. 6d. Income Tax. So apparently there are degrees of expropriation, and I suggest that the proposal contained in this measure is a degree of expropriation and is something half way between the 5s. 6d. in the pound and the 21S.
All of us object when any scheme of improvement is suggested, however much we have advocated it in principle, if it involves the pulling down of one of the walls round our garden so that the public are able to gaze straight into our front window. Therefore I suppose it may fairly be said that because the coal is being forcibly taken from us we have reason to object, and especially if we do not think we are getting reasonable compensation for it. I suppose it is true to say that, apart from the land, coal is about our only stable national asset. I do not think anyone would dare on this account alone to justify the purchase of the coal. So to justify this Bill one must look for some other reason. It has already been stated in several quarters, and in particular by the noble Earl who introduced the Bill, that actually there is no question whatever that the present owners have a right to their coal. Up to about three hundred years ago anyone owning land who thought fit to do so could obtain quarried coal or stone or gravel from his property, and he is entitled to do so now. It will not be asserted, I think, that there is any reason why coal should be treated differently from gravel or sand.
As was pointed out by the noble Marquess, Lord Crewe, if one were to dig a hole in the ground and get something, and then went on to dig a little further and get something else, and if one were to dig further still and get something else, how on earth could it be suggested that those commodities should be treated in a different way? He then went on to say that, for some reason which he was himself unable to explain, because coal is brought up in a lift it appeared that there was some difference between coal and the other commodities. As your Lordships are well aware, about three hundred years

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ago a case, which has already been referred to, came before the Courts and it was decided that the owner of the surface owned all the minerals underneath, apart from precious metals, and the only exception to that is oil, the right to which by recent legislation has been removed from the owners of the land.
I think it is impossible to suggest that you can compare oil and coal. For example, coal is a static body, of which the boundaries can be defined, and oil is a fluid which may be found anywhere; and anyone drilling a hole in the ground may take oil which comes perhaps from an oilshed (if that is the technical expresion) under someone else's property. Therefore it cannot be said in any way to resemble coal. It could more readily be compared to water. If a spring rises in a certain person's property he is entitled to that water wherever it comes from, though the watershed may be underneath the land of a great number of his neighbours. It has been suggested that in the case where the owner of the surface and the owner of the coal are different people there should be some difference in the way they are treated in this Bill. I do not wish to labour this point now, but one noble Lord suggested that the coal owned by the colliery proprietors should be excluded from this Bill. I myself would certainly subscribe to that, provided it was also excluded from the 66,450,000 at which the coal is valued. If that were done I think it certainly would be a way of giving fairer treatment to the present owners of coal.
I have especially avoided using the word "royalties" because that expression has given rise to a great deal of misunderstanding. Most members of the public would assume that coal royalties are the same as the royalties which an author receives from a book, but they are no such thing. They represent the actual purchase price of the coal. A royalty is not a permission given for a colliery to work the coal, and for which they pay so much, it is the actual price per ton which the colliery company pays to the owner of the coal for the coal actually drawn from its seam. If that were more clearly understood, by your Lordships in particular, I think those noble Lords who have taken a certain line in argument might perhaps alter their
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tune to some extent. The only difference is that in most cases when the coal is sold it is sold for a period of years and, instead of selling the coal and receiving a cash payment the same day, there is an agreement between the colliery owner and the owner of the coal to pay so much a ton for the coal, and only to pay for the coal when it is actually taken out of the seam.
Having now explained my view of the nature of royalties, may I say that I think it has already been admitted by the noble Earl, Lord Munster, that the average coal royalty would be something under sixpence a ton. When one deals with an average figure one is very apt to get into trouble, and of course there are coal royalties which are higher than that, but there are also some which are lower. It cannot be seriously argued that the price of sixpence a ton on coal materially affects the actual price which the small buyer in the house has to pay when the coal is delivered into his cellar. In point of fact, there is a very big difference, as your Lordships know, between the cost of the coal at the pithead and the price charged when it is delivered into the cellar. Whereas there is only a question of a few pence involved in the royalty, there is a question of many shillings between the price charged at the pithead and that received when it is put into the cellar. I suggest that there are economies which could be made in distribution which would completely swamp any effect which the sixpence or so—be it a smaller or greater amount—has on the actual cost of the coal.
I think it was admitted by the noble Earl, Lord Munster, that the price of royalties would not in itself have been sufficient ground for introducing this measure because—he did not use these words—it would not make any practical contribution towards assisting the industry. Your Lordships will be aware that the royalties are to continue under this measure. It simply means that instead of being paid to individuals, they will be paid to the Commission. I can quite see the point of the noble Lord who speaks for the Opposition when he says that if anything is to be taken off the price of coal it should go to the taxpayer. I can quite see the force of that argument if one is going to introduce a measure of this sort at all. In point of fact, as has been pointed out

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by several of your Lordships, there will be no immediate economies at all, and it will be some time before anything is derived from this measure which will help the industry or help the price of coal.
On what argument, therefore, do the Government justify this measure? It would appear that, administratively, it could be claimed that vesting the coal in one ownership would be an advantage, but that ownership need not necessarily be the State. As the noble Viscount, Lord Samuel, pointed out, the Commission over which he presided recommended that it should be in the hands of one owner, but they did not recommend that it should be in the hands of the State. They said that the State might be considered as one possible owner. I do not think that Commission went further than that in their recommendation. But if it actually passes into the hands of the State, there can be no question it is a Bill for nationalisation. This I intend to deal with a little later, if I may. Meanwhile the whole question bristles with difficulty and, most important, the separation of the ownership of the coal and the ownership of the land will involve the greatest difficulties for all concerned. As will be known to most of your Lordships, subsidence does not occur at once when the coal is withdrawn, and also it does not happen uniformly. It may be some time after the coal face has passed beyond individual property before any effect is shown at all. When that effect occurs it does not happen uniformly. It is not a sudden drop. It drops according to the soil which is underneath. And it is not regular, and therefore very great damage may be done to any building, however constructed. I do not intend to refer to that part of the Bill which sets out that the Commission will have to be satisfied that the construction of the building is such that it will withstand such an occurrence, because that is not possible. It would not be possible to construct any building which in every case would withstand that form of subsidence.
I would suggest, as has been done by other speakers, that the very fact that the owner of the surface is not now to be the owner of the coal will at once create difficulties. Up to now the owner of the surface, being the owner of the coal, has worked as a helpful partner with the colliery concerned. Now he will be working
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directly against the colliery company because, although in the past he has derived income both from coal and from land, he has weighed it up with the colliery company, both of them thinking of the interests of the community first, whether it would pay either of the parties to work that coal or leave it, depending on the actual compensation which the colliery company would have to pay for putting the estate in the same position as it was before the coal was removed. The Government may well answer that if any individual is going to be so selfish as to prevent the proper working of the coal underneath his land they will very quickly pass a measure which will bring that impasse to an end. It would not be a bad prophecy to say that that will be inevitable. It will be inevitable in some form or other that the land should be purchased by the State or such restrictions should be placed on the land as to take away completely any enjoyment of that land from its owner. One has to bear in mind that it may not necessarily be some grasping individual with whom one has to deal. In many cases, in by far the larger number of cases, it will be trustees and these trustees will be bound to see that the value of the property is kept intact.
If I may be so bold as to question the ruling of law as given by the Lord Chancellor—I know it is a big step to take—if his ruling is right that three-quarters or one quarter as the case may be (I cannot remember the legal language he used) of all moneys derived from the sale of coal—in other words, coal royalties—must be set aside and treated as capital, I suggest that the Ecclesiastical Commissioners are the only people drawing money from coal who are carrying out the law. I would say that in a great number of cases nothing is put aside for capital, and I would suggest that 10 per cent. is a high figure. I know a case of 10 per cent., I know a case of nothing, and therefore I quote these particular figures. I suggest that it depends entirely on what appears in the settlement. If it is settled land, it will depend entirely on what appears in the settlement whether anything derived from coal royalties is set aside for capital.
I feel convinced myself that the owner of the surface must of necessity be the next victim, but until I actually see that come to pass I shall not believe it. I

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believe that the present Government, a National Government as it is, will almost entirely support the words which fell from the noble Earl, Lord Munster, when, in moving the Second Reading, he said that private enterprise was to be maintained and could only be interfered with when it was in the national interest to do so. If that is so, then I should like to know whether the noble Earl thinks it will be in the national interest to buy the land above the coal in a short time. That may not be his view, but it is my own view. As I stated earlier, this, in my opinion, is a measure which has been brought in not entirely but chiefly for political motives. The unification of coal was mentioned in His Majesty's gracious Speech certainly once, if not twice, and so far as that is concerned I think the Government are entitled to bring in a measure for the unification of coal, but I submit most strongly that they are not obliged, because of those words in the gracious Speech, to bring in this particular measure, and that they have no authority for doing so. They are quite entitled to do so, but they must not, I think, quote what appeared in the gracious Speech from the Throne in justification of bringing in such a measure as this.
The noble Earl, Lord Munster, admitted that the owners of coal had a perfect right to it in every way. If I do not misquote him he meant by that actually and morally, though he did not use those words. I would suggest that it is quite common to hear it stated that it is almost a crime to be the owner of coal, but the majority of the people who say that do not, I think, subscribe in any way to the doctrine of private ownership of anything. I do not believe that is the Government's view, and in fact I have been assured that it is not their view. I do not see that coal can be treated in any different way from the inheritance and ownership of, say, stocks and shares, either Government shares or any other. It would be true to say, I think, that the Government have the majority in the country in numbers behind them in introducing this measure, because, owing to the gross misrepresentation which has taken place, for some reason or other royalty owners are well nigh placed in the class of people living on immoral earnings. I am a member of
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the Church Assembly, and I actually took part in a debate in which there was a proposal put forward quite formally on the Paper by a member that the Church should refuse to receive any more rents from coal because it was immoral to do so. That is the sort of thing we have to contend with. It is not just. Either you believe in the sanctity of private property or you do not. I suppose if one went back far enough every single possession in the hands of your Lordships at present was got by piracy. There were various forms of pleasing the King or Parliament, and at some time in the history of a family something was given for something which one gave them.
As I say, one must subscribe to the doctrine of private property, which includes coal, or leave it alone altogether. Under the democratic system which we enjoy at the moment there are, of course, many disadvantages, but I do not for a moment suggest that those disadvantages are not much worse in any dictator State whether the dictator be from the Right or whether he be from the Left; they are dictators just the same. We at least have a certain amount of privilege. We can walk reasonably outside the pedestrian crossings without being run into gaol, and we have the liberty of walking on those crossings if we want to be safe. As I say, there are disadvantages in the democratic principle, and one of these, I think, is apparent now. The Government think that a pledge has been given to introduce such a measure as this, and they are trying to justify it on that account. I have endeavoured to show that from the financial point of view the acquisition of the coal is not justified, and that politically it is only justified if our rulers are governed by their hearts and not their heads. One must therefore see if there is any justification for it. In my view the only possible justification might be if, as has in fact been stated, the economic development of the coal was being retarded by the unreasonableness of certain owners and, most important, there was no existing way of bringing them into line. As is well known, the Railway and Canal Commission have full power, where the national interest demands it, to insist on any coal being worked, and the owner is bound to accept a fair price for it. This, therefore, to my mind explodes the last possible argument which can be used in favour of this

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measure other than the political one. In this I am referring to Part I.
There are two angles, I submit, from which one should examine the measure. Firstly, is it necessary, taking all the circumstances into account, or expedient that the coal should be nationalised? Secondly, if you come to the conclusion that it is, are the owners of the coal receiving a fair price? In what I am going to say now I am only using certain words which fell from one of your Lordships not now in the House. He put this into my head, and, if I am cribbing from him, I thank him and apologise for doing so. If one took the narrow point of view at this stage, one would try to prove that in fact this is a Bill for the nationalisation of the coal industry, and that it can be used as a precedent by this Government or, which is perhaps more important, by some alternative Government, to nationalise or socialise all forms of property, starting with the land, continuing with the railways, and eventually embracing all forms of industry. When the noble Lord, Lord Addison, spoke he emphasized—your Lordships can read what he said on this matter in the OFFICIAL REPORT if you care to look at it—the point that his Party took note of this measure, and that fifteen years' purchase is the most that it is considered any property is worth, and that they will see to it that that is not neglected in future. I am going to try, if I can, to disprove that this measure can be used either by this Government or by any future Government as a precedent for the nationalisation of any industry. It is difficult, but I am going to try.
In another place a certain member who was not at all friendly to the Government, when the matter of the appropriation of oil by the Mexican Government was being discussed, asked how a British Government could in fairness object to the Mexican Government doing for oil exactly what the British Government was doing for coal. I think there was a certain amount of truth in what he said. He did not, as far as I know, use the word "confiscate" but he implied that that was what was being done in both cases. I think that although one may do harm to oneself at the present time, yet looking back one may at some future time be consoled by the fact that one did try at this stage to point out, however diffi-
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cult it was to do so, that in fact this measure did not propose to nationalise the coal industry but to deal with it in the same way as electricity and other concerns of that sort have been dealt with by way of boards and commissions, and that therefore nationalisation could not be introduced using the Coal Bill as a precedent. I suppose the argument one would use in support of the theory would be that pure nationalisation involves the running of the industry by the State and the using by the State of any profits, as noble Lords opposite desire. Not that any profits for the State would be likely. There would be profits to the Commission of £2,000,000, as we know, each year. One would go on to say that in fact it was not the intention that the State should take part in the day-to-day administration of the coal industry, but that the Commission should have full control, subject to the supervision of the Board of Trade in certain aspects, and that the profits, which would as I have stated be about £2,000,000 per year, would be used eventually in one form or other for the benefit of the coal industry, commencing with extinction of the royalties. It has been stated that that is the only way in which the balance could be used, and I will accept that.
If I may I should like to be allowed at this stage to suggest a correction in what the most reverend Primate said. In connection with the Marriage Bill, I think it was—I forget its exact title—I told him that his mathematics were not as good as his other attainments. I suggest that he showed that yesterday. By a process of deduction, which he explained, he said that by this measure the Ecclesiastical Commissioners and through them the Church would lose £50,000 a year. That is wrong. They would lose £120,000. The fact that they have been prudent in putting aside certain sums—and apparently they are under a legal obligation to do so—amounting to £70,000 a year does not mean that they are only losing £50,000. They are losing £120,000. It is true that the recipients will not lose as much as if the Ecclesiastical Commissioners had been distributing the whole of that sum before, but the Ecclesiastical Commissioners are losing £120,000. I was very sorry to see glaring headlines in the newspaper. They were correct, of course, because it is the most reverend

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Primate's figure that was wrong. £120,000 is the figure. Every famous man—I need hardly say I do not describe myself as one—is likely in the future to have to face up to something which he said in the past. There were instances of that yesterday in reference to words used by two noble Lords opposite. They could not deny them, but they were able to say that of course circumstances were so different that the words were not applicable in this particular case. I must remember that for future reference.
I claim rightly or wrongly to have a certain intimate knowledge of this industry, and if I may be allowed to develop my argument to its conclusion I will be as brief as possible. As a humble member of your Lordships' House what I am saying will be recorded, and I should like to go down as having suggested that no Government in the future can use this Bill as a precedent for wholesale nationalisation. It is quite possible that when a doctor recommends a dose of salts to a patient it may do him good, but if another doctor recommends him to take the whole bottle it may kill rather than cure the patient. If I may refer at this stage to the fact which was pointed out by the noble Lord, Lord Teynham, that there was an alternative scheme suggested to the Government for the unification of royalties, I would admit that it was presented at rather a late stage in the proceedings. But it was presented in good faith on the assurance given by the noble Viscount, Lord Halifax, who was then Leader of your Lordships' House, that any suggestion submitted by the mineral owners' association would receive consideration. This proposal, which among other things suggested sharing some of the £2,000,000 surplus of the Commission between the State and some of the colliery undertakings, was turned down, to my way of thinking, out of hand, because we were told so soon that it was no good, that the Government could not have had time properly to consider the proposal.
In this connection the noble Viscount, Lord Samuel, quite rightly said that Part I was of the essence of the Bill. He did not go on to say, although I think he cannot deny it, that Part II and Part III can be proceeded with even if Part I is not. They are not interlinked. Part II and Part III in large measure renew pre-
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vious legislation. As appears in the Bill the Government propose to pay £66,000,000. This is a point I really want to get home. That sum is for all the coal in the country, whatever it may be, leased or unleased, proved or unproved. The Bill is taking away more than that: it is taking away, at the price set out by the tribunal, something which was never put before the tribunal. They were only asked to value the coal; they are taking all the underground workings as well. In that sense the royalty owners certainly have a grievance. The only thing which was asked of the tribunal was that they should fix some figure by which the £4,300,000 should be multiplied; for some reason or other that was to be the actual value of all the coal in the country. The line of thought which must have gone through the minds of those members of the Commission was that, as Death Duties—to use no stronger term—were calculated on less than fifteen years—I suppose something like thirteen would be nearer the correct figure—it would not be right to give any more for all the coal in the country.
That is the fallacy on which the whole Report is based. When Death Duties are settled on an individual property, they are settled with regard to the risks special to that particular property. The risks special to practically all properties are strikes, faults and—which God forbid!—accidents. For that reason it is suggested that the income of the undertaking might fall, and so not more than fifteen years is suggested as its value. Now you cannot apply that reasoning to all the coal in the country, for this very good reason. Suppose one pit gets up less coal, that is immediately transferred to some other pit, and if there are not enough pits to get it up, then you immediately go and tap all the five hundred years' worth of coal which is known to be at present underneath the ground and which, if worked at the present rate, would still leave some there. It is therefore not possible to compare any valuation you put on an individual pit with the valuation of all the coal as a whole. I will not labour that point, but I hope I have made it clear. Perhaps I have already insulted too many people, but I suggest that, if you were to see the report of the tribunal, it would merely consist of the figure 15 written on an envelope. That may not be true, but I am suggest-

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ing that that is all the tribunal did: they wrote "15" on an envelope, and the whole of this measure is based on that figure.
It has been suggested that the advisers of the mineral owners prepared a bad case. I am afraid that I could not subscribe to that suggestion, but I could subscribe to this: that the terms of reference submitted to the tribunal were most unfortunate. When the noble Viscount, Lord Samuel, was asked this question he said he could not help that, or words to that effect; that it was no concern of his. But imagine, my Lords, finding yourselves in the position of having to fight the Government. You cannot compare it with two ordinary interests competing. The Government said, in point of fact: "If you cannot suggest a figure which the coal is worth to which we will agree, you will see it in the Bill next week." What alternative had the royalty owners' advisers but to say: "Well, we will clutch at the last straw, an independent tribunal." They agreed to terms of reference to which I, as a royalty owner, also agreed, but a very important part of the terms of reference was that the income should be considered in perpetuity. Any income which is considered in perpetuity must, I contend, be worth more than fifteen years' purchase.
I have nearly finished, as your Lordships will be glad to hear, but I do not think it is fair to suggest that a bad case was presented. I was perhaps the only members of your Lordships' House who sat through practically the entire proceedings of the Commission. I listened with great interest and was astounded at the decision given. I would suggest that if the evidence given to that tribunal were published, no one could but be surprised that fifteen years was the award actually made. I have here a book labelled Mining Royalties in Relation to the Coal Bill and written by Mr. J. B. Dickie. I suppose that Mr. Dickie is an authority, because in the foreword appears this remarkable statement by the present Chancellor of the Exchequer, that he has read the book with interest from cover to cover and would recommend anyone else to do the same. I do not want to make any reference to the book which I cannot prove. In it appears the following, which is most interesting: that the Samuel Commission gave an award of
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£100,000,000. That has been corrected by the noble Viscount: he said it was £92,000,000 plus £8,000,000. We must therefore regard the £92,00,000 as a comparable figure to £66,000,000. Mr. Dickie, who is apparently an authority upon whom the Chancellor of the Exchequer relies, goes on to say that no doubt the royalty owners would want a higher figure than this now because the rates of interest are different now from what they were then. When the Samuel Commission gave their opinion the rate was something around 5 per cent.; now it is 3¼ per cent., and if you were to reinvest £92,000,000 at 5 per cent. you would get a very different income from that which you would get by investing £66,000,000 at 3¼ per cent., which is all we have to do. I would go so far as to suggest that if £100,000,000 had been the award, I should have accepted it without comment, still thinking it to be low.
I think I have now dealt with practically everything. I know I have bored a good many of your Lordships, but I wanted to get this off my chest! I do not know much about anything, but I do know a little about this, as I have been too much in the mill myself. In conclusion, I would make one other reference to Mr. Dickie, with particular reference to what the noble Marquess, Lord Crewe, said about gilt-edged securities. He said it is perfectly true that it is not a gilt-edged security, because it is not an income, it is a capital. That is what the noble Lord said. But it is gilt-edged, I suggest, from every other point of view, in so far as Mr. Dickie actually says this. He quotes the figure of £5,000,000, which was then the figure before the Samuel Commission, I believe, and he said that it was largely maintained by minimum rents. Now either you think minimum rents are bad or good, but the fact remains that they are there. He goes on to say that the income of the royalty owners did not actually suffer to any marked degree over all the bad period of the coal industry because of that very fact that it was secured by a minimum income. Therefore, although it is not a gilt-edged security as interest it is a gilt-edged security of capital in every other way, and I suggest that it could not be treated really in any other respect than that. The tribunal treated it as a 7 per cent. security, which is really equivalent to a property which is either in a bad state

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of repair or which is difficult to let. I hope I have made out my case, and I shall try to bring up a few points which I have omitted at the next opportunity.
THE EARL OF LINDSAY: My Lords, may I put your minds at ease at once, and say that I do not intend to detain you for more than a few moments. The Bill before us has been criticised in almost every part of the House, and so it necessarily follows that there is very little to add to those criticisms. I for one would not venture to address your Lordships on this matter after hearing the speeches of certain noble Lords, like Lord Gainford, who knows the industry from A to Z, but for the fact that I have had nearly thirty years' association with the industry. This Bill is divided into four Parts, but to all intents and purposes Part I and Part II are the contentious parts. Part I, I hope the Government will not mind my saying, is camouflaged under the tile of "Unification of coal mining royalties." Part II deals with amalgamations. The group of collieries with which I am associated have as many leases to deal with almost as could be found in any coal undertaking, owing to the fact that there is such an immense number of small proprietors, and I cannot remember, in all the years I have been chairman of the company, that we have ever had any very great difficulty, in dealing with those leases, in coming to satisfactory arrangements.
Furthermore, I must add that in addition to this large number of small royalty owners, with which we have to deal, we have also two royalty owners who own considerable royalties in the area we work. I should like to say that in our dealings with them our experience has been exactly the same as that of which Lord Gainford told us a short time ago—namely, that during the bad years of 1926 and later on we received from them every assistance, every consideration, and all the help it was possible to expect. I am bound to say that I should not care to bet that we should get that same amount of consideration from the proposed Coal Commission. I do not think so, and I base my view on this fact. In another place, during the Committee stage, the honourable member for North Leeds, Captain Osbert Peake, moved what I consider to have been a very
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reasonable Amendment. It was the one dealing with the case where a colliery owned its own royalties, and he suggested, as I think very reasonably, that where the colliery company owned the royalty and paid for it nothing should happen, that it should be in plain language a "washout," the colliery company, of course, acknowledging the superiority of the Commission by paying a peppercorn rent. What could be more reasonable than that? But it was turned down.
In addition to that I should like to call the attention of the Government to the case where a colliery company has on its books a very unpleasant item called "Paid for, but not yet worked" That is a very serious item appearing in the balance sheets of many colliery companies. As I understand it (and it is a little difficult for a person of a non-legal mind to follow all the clauses of this Bill) the intention of this Bill is that the company should not go on paying these minimum rents, but that when they are cleared off then they should commence to pay a royalty to the Coal Commission. I do not consider that fair. I think that if the Coal Commission, or anybody, take over the whole of the property, as they are doing in this case, then they should take over all the liabilities. It is all very well to say, "We won't take anything from you until you commence to have overpayments," but all this time we may not begin to work the coal, which will give us the overpayments, for ten, fifteen or any number of years you like, and that, I think, is a hardship which should be remedied. I will not deal with the treatment of the royalty owners, because that has been dealt with over and over again. There is only one thing left out, which appeals to me as a Scotsman, and it is this. It has never yet been mentioned that royalties in Scotland, in addition to paying Income Tax, Surtax, 10 per cent. duty, and miners' welfare, also contribute to the rates in Scotland. In these days, when we are very nearly rated out of existence, we can hardly afford to lose a penny, and I hope later on attention will be called to this matter.
One more word about amalgamation. Everything in this Bill goes on assumption. Why should it be assumed for a single moment that because you amalgamate a lot of companies they will be more efficiently worked, that there will

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be economies, and fewer accidents? On what do you base that expectation? We are never told these things. My feeling and my fear is that these large amalgamations will lead to and cause a great deal of trouble and I will tell your Lordships why. There is not the slightest doubt that one of the reasons why amalgamations are favoured by the Labour Party and the Socialist Party is that it is so very much easier to stir up trouble when you have a lot of men under one control. I would like, if I may, to give your Lordships a very clear example of this. Last year in South Yorkshire a large voluntary amalgamation took place. It all went like a wedding day, no one objecting, all friendly, everybody agreed. And, what is more to the point, several of the concerns amalgamated were first-rate. There was the Bullcroft, and there was the Brodsworth, the Hickleton and three other collieries. Now follow what happened. The ink is scarcely dry on the deed completing this combine when out breaks a strike—what they are pleased to call a "lightning strike"—at one of these collieries. I went into it. It was, I understand started by the boys, and I will say that the miners' leaders and the other men working in the collieries did their best to dissuade them, but it was of no avail. What happened? Instantly there broke out what is called a sympathetic strike, and I think I am right in saying that there was a five weeks' stoppage. It resulted in great loss of time and very serious financial loss. These people who organise these stoppages and strikes think that when you begin again you can start where you left off. Of course you cannot do such a thing. The strikes are very serious in these days when one wants all the capital one can lay one's hand on.
If I may revert to what I was saying, in what way will this Bill lead to greater efficiency? In the very admirable speech of the noble Earl who introduced the Bill there was one thing to which I objected. He wound up his remarks by saying, "You must reorganise, you must put your house in order." How can you reorganise when there is nothing to re organise? Why should you be told to put your house in order when it is not out of order? They will not tell us what is wrong. It seems to me to be a most extraordinary thing that here we are in
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this country advocating large combines, big amalgamations, and over the water you have President Roosevelt attributing all the evils that country has undergone in the last few years to large combines and amalgamations, which he says are destructive of individual enterprise and free competition. I have been long enough in your Lordships' House to prognosticate that this Bill will receive assent, but I do hope that when it comes to the Committee stage the Government will not be averse from having Amendments made which in my opinion will make it a fairer and more workable measure.
LORD BALFOUR OF BURLEIGH: My Lords, you have had a long debate to-clay, and at this late hour I will do my very utmost to condense my remarks into the smallest possible compass. We have had a good deal of discussion as to whether this is confiscation or unification. Let it be simply called by the name of State purchase, which in fact is what it is; it is a vast scheme of State purchase of royalties. Now that can only be justified on two assumptions: first, that it is really necessary in the national interest; and, secondly, that the compensation, the price which is proposed to be paid, is fair. Neither of these assumptions is justified in the present instance. We have had dissertations from a number of noble Lords—from the noble and learned Lord on the Woolsack, from the noble Viscount, Lord Samuel, from the noble Lord, Lord Addison, and others—telling us of all the Committees and Commissions which recommend unification. By some odd coincidence they all forgot to tell us that in practical effect no difficulty is being experienced to-day. It is the fact that the Railway and Canal Commission, under the legislation which has been passed since all these Committees sat, have every single power that is required to bring coal into operation in the teeth of any recalcitrant owner. I believe the only power that Commission has not got is to interfere with existing leases. Existing leases are safeguarded under this Bill.
I would like to support what the noble Earl, Lord Lindsay, said. Another Scottish colliery owner said to me that he had not the faintest expectation of getting as favourable treatment from the Coal Commission in the future as he has had from the Scottish royalty owners in the past. He told me of the consideration which

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had been extended to him in the depression, when fixed rents were voluntarily forgone, and he said that they had not the slightest difficulty about getting any concession in reason they wanted from their royalty owners. There is another very strong consideration which would weigh with me in favour of this measure, that is, if it would contribute in the remotest degree to the safety of the men who are actually getting the coal. There is no member of your Lordships' House who does not recognise that they are the front rank soldiers in this fight to win the coal from the bowels of the earth. Care and consideration for these men is not limited to noble Lords who sit on the Front Bench opposite; and indeed when the noble Earl, Lord Munster, was telling us why it was necessary to introduce this Bill he was driven back on asserting that it would have a beneficial psychological effect on the miners. What is the psychological effect? I will tell your Lordships. For years now mud has been thrown at the royalty owners, and an entirely fictitious case has been produced that the royalty owners are the scum of the earth and deserve no better fate than hanging, drawing and quartering. The Government seem to think that there may be some benefit to be got in meeting that feeling—which is entirely imaginary and fictitious. That is your psychological effect, if there is one. There is nothing else, for it is admitted that the actual amount in money of the royalty is not sufficient to make any difference to the miner, at all events for years and years to come, and nobody has yet suggested that it is going to make his admittedly dangerous work more safe or more comfortable.
The point I should like to examine so far as Part I is concerned is the compensation payable. We must all have been interested to hear the remarks of the noble Lord, Lord Addison. It was only too clear that he was delighted to have this highly respectable precedent brought in by this highly respectable Government; it would be very useful in the future. He noted it with interest, and he talked about the startling reductions which were being made. That is only an indication, a straw showing which way the wind is going to blow. In passing I should like to refer to Lord Addison's remarks about tacking. My noble friend Lord Hastings said that this was a blatant
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example of tacking. That was disputed by Lord Addison and Lord Samuel. They said this cannot be tacking, because it is such an important part of this Bill. That only makes it worse. The more important the part and the more irrelevant the worse is the example of tacking. Parts II and III could perfectly well be brought in by themselves. The noble Earl, Lord Munster, said that the trouble of the coal trade was due to the production being in excess of demand, which is perfectly true. That will not be affected by the purchase of the royalties. Parts II and III are what are necessary to deal with that, and therefore if there ever was an example of tacking this is tacking, and the noble Lord, Lord Hastings, is more than justified.
I am going to pass very quickly over Parts II and III. All I want to say about Part III is that I doubt, myself, whether the interests of the consumer have been fully protected. Here is a monopoly. The coal trade have been given a monopoly, and I think it would be right that there should be an independent tribunal to decide whether a demanded increase in price or the maintenance of price at a time of falling prices is justified. The iron and steel trade have much less of a monopoly than the coal trade. There, there is an independent tribunal, but I am perhaps talking of things of which I do not know enough to justify the comparison. With regard to Part II, amalgamations, I will only say this. It does seem to me as a layman that the theoretical advantages of amalgamations are very apt to outweigh the practical. It may easily be that great trouble can be taken to bring about compulsory amalgamations which in theory might be beneficial, but from which in point of fact these practical advantages might not accrue. Probably the Bill is all right as it stands on that point, but there again I prefer not to say more.
It is on Part I that I wish really to draw your Lordships' attention to one or two points which I do not think have had the attention they deserve. I am going to work on the assumption that it is the intention of the Government to be fair. They have said it is, and I believe that is so. If that is so, I shall hope to get answers to the questions that I put, and I shall hope to find that they are willing to make some reasonable con-

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cession. The noble Earl, Lord Munster, made use of a very remarkable phrase on the subject of fairness. He said this:
"The transfer of private property to a statutory Commission set up by the State should be accompanied by payment of compensation upon a basis which Parliament is satisfied is both fair and equitable."
That is all right, but I would like to know whether the noble Earl himself is satisfied that the basis is fair and equitable and whether other members of the Government are satisfied as reasonable men that it is fair and equitable. We have had arguments about the Greene tribunal and so on, but these I shall deal with later on. There may be no significance in that phrase used by the noble Earl at all, but it did strike me as being a remarkable phrase. I am not satisfied with the basis on which this measure is presented to your Lordships under pressure by a Government with a huge majority—apparently a docile majority—in another place, and I would have preferred a recommendation from a reasonable man and reasonable men that they themselves are satisfied that this is fully fair, fully reasonable, and what the royalty owners might expect.
I do think that insufficient attention has been directed to the global figure. All the noble Earl told us was that the global figure represented fifteen years' purchase, but the global figure I am interested in, in the first instance, is the £4,430,000. I would like to know how that global figure came to be admitted as a basis of discussion. The noble Earl said that the Government and the Mineral Owners' Joint Committee agreed from the beginning of their conversations that the proper method of compensation was the fixing of a global sum equivalent to the value of all the coal property to be acquired. I have no reason to doubt the veracity of the noble Earl, but that is a most astonishing statement. Never before has property been acquired in that way, and I would like to be told more about that. If it is the fact that these representatives of the mineral owners themselves agreed that it was fair to take a global revenue, and multiply it by a number of years' purchase, I would like to know who these representatives were. I am a small royalty owner myself, and therefore I am personally interested, but I never heard of it. I know very few owners who did. I would like to hear
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what the most reverend Primate has to say about that. He told us he was seized of the proposal to pay a number of years' purchase before the tribunal, but he did not say anything about the global revenue. Was he or were his representatives a party to this proposal to agree the global revenue? I should be surprised if they were. It suggests to me something very strange.
Under what pressure did these representatives of the mineral owners agree that it was fair to take that global figure? It suggests to me nothing so much as the evidence we saw given in those Russian trials, when eminent men came forward and admitted themselves guilty of the most extraordinary crimes. One wondered what pressure had been put on them in the background, whether it was rubber truncheons or what it was. I do not know whether rubber truncheons were applied to the mineral owners, but I cannot conceive any set of business men agreeing to have their property valued on that basis unless it was under duress of some kind or other. I shall be grateful if the Government will give us more information about that. Just suppose the Government applied that principle in their housing legislation. I have said some hard things in this House about slum property owners, but when the Government wanted to buy a slum area in which there were many different interests—freehold, leasehold, sub-leases, and other interests—I have never suggested that the whole of these interests in one area should be put into one pot, a global total taken, a number of years' purchase fixed, and then that the owners should be left to scramble for the proceeds. That is what is being done with coal. It seems to me a perfect analogy. Why? I would like an answer. I cannot see why that global figure should have been taken in the first instance.
Then I would like the Government to tell us how the global figure was arrived at. We understand that the gross royalties were taken, and that a deduction was made for mineral rights duty. I would like to know how much. Another deduction was made for the welfare levy. I would like to know how much. Another deduction was made for management. I would like to know how much deduction was made for management. What other deductions were made? There may

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have been quite a lot. Without that information I do not see how members of your Lordships' House can be expected to judge whether this proposed compensation is really fair. The noble Viscount, Lord Samuel, seemed to indicate that the royalty owners had been very ill-advised not to take this compensation, when it would have been more, a few years ago. Of course, the diminution is due to the bad years which have followed, and I do not suppose there is a single royalty owner who would not be prepared to take the risk of a worse bargain in the future. We do not believe that our property is such a diminishing asset as we are told. We know cases of colliery after colliery with two or three hundred years' coal in sight. We are not afraid of getting less than fifteen years' purchase for that, and therefore that is another point on which I think the compensation is inadequate—fifteen years' purchase.
Great play has been made with the argument that Death Duties have been calculated on an average on a lower basis. Frankly I do not think the Death Duties argument is quite a fair one. Everyone knows that it has been a common convention that property is not valued for Death Duties at the highest possible figure which can be put on it. If it were, Death Duties would have been uncollectable. I think it is not quite fair to take the Death Duty analogy. Everybody knows there is a difference in price between a buyer and a seller. You have only to try and sell a motor car which you bought new two days before, or some furniture, to find out that there is a very big difference between a buying and selling price, and I think there is an element of that in this valuation of royalties. It is remarkable that we are told in this valuation that so much emphasis has got to be laid on the fact that coal is a wasting asset. It is quite a different story when we have to account for our incomes and have to pay Income Tax and Surtax. No question of that sort then arises. We have to pay the full rate as though it was an annual revenue. How can that be justifiable? One end or the other must be wrong.
I would like to refer to just one point about this freehold coal in the ownership of the collieries, because I would like to know how much was included for that in
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the global figure of £4,430,000. I understand that certain collieries do account in their Income Tax for the royalties which are due on the freehold coal which they own themselves. The Inland Revenue see to that because a matter of taxation is involved. I understand that there is a tonnage output formula which has been agreed with the Inland Revenue. That is all right as far as the coal is concerned which is being worked, but it has never been suggested that anything is included for a fixed rent on the reserves of coal. Now if this freehold coal owned by the collieries is to be the subject of leases granted by the Commission as provided by the Bill, these leases are to be subject to the ordinary conditions under which such leases are given and presumably one of them will be a fixed rental. The noble Lord opposite will correct me if I am wrong. If, therefore, a fixed rent has to be paid, two consequences follow. One is that the Commission will be given a rent for something they have not paid for and the other is that if compensation is given for them that compensation has to come out of the £66,000,000. That was never before the Greene Committee. I would like to know what the answer to that is. I do not think it is escapable that the Government have something else to pay for which is not included in the £66,000,000.
Again I would like to emphasize the inadequacy of the compensation from the point of view of undeveloped coal. The noble Earl told us that fifteen years' purchase was an average for coal in full working. He said, I think, that some people might get more and some people might get less, according to the degree to which the coal was worked out. Then it would not be surprising if they averaged out. That, therefore, will be likely to mop up the whole of the fifteen years' purchase which is provided. That leaves the undeveloped coal wholly out of reckoning. Let me give your Lordships an example from my own case. I do not put it forward because I am anxious to secure the sympathy of your Lordships for my own case, but because I think the facts are interesting in this connection and they are facts which are familiar to me. The coal in question is very deep coal. It is only to-day that that deep coal is coming within the range of practical working. The seams are below what is called the millstone grit, a long way down and the whole trend of the

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strata is downwards from east to west. I am talking of the valley of the River Forth; the coal rises again on the other side. For many years this coal has been worked in Fife on the east and in Stirling-shire on the west and south. It is a saucer shaped bed of coal. As science teaches the colliery owners how to do it they are able to work that coal at ever deepening levels. The fact that this coal has not been developed is no fault of the royalty owner.
My Socialist friends will no doubt say "You ought to have developed it before." But it was not possible to develop it before because for one thing the coal was not proved nor could it be worked at the depth. Now, as time goes on, ever deeper shafts are being sunk in progression from east to west. Had it not been for the uncertainty engendered by the Government's legislation I think I am entitled to say that a shaft would have been sunk to work my coal to-day. It has not been sunk because of the action of the Government in proposing this legislation and in injecting this uncertainty into the industry. I cannot see that there is anything left of the £66,000,000 with which to acquire that asset. The Government seem to think that no coal is of any value except the coal which is subject to a lease. That is a most extraordinary delusion. That coal has an enormous potential value; in fact it is the coal of the future; and that illustrates the absurdity of thinking that you can put a fair value on the coal which remains in the ground by having regard to the value of coal which has been taken out of the ground. The two things have nothing in the world to do with one another, and it is patent to your Lordships that if this compensation were to bear a relation to value it would be by the most extraordinary fluke in the history of the world. What the Government are buying is the coal which is in the ground and, therefore, it is all the more extraordinary that the people who are going to get most compensation are the people who have had the coal extracted and, therefore, have had the royalties. In many cases the people who own undeveloped coal, who own the coal of the future, have not had the royalties and, therefore, they are not going to get the compensation How can you say that that is a fair arrangement?
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Finally, one other example of unfairness. There is to be a Central Valuation Board set up, and that Board is going to allocate this purchase price among the different coal regions of the country. We are not told how. Is it to be on a basis of tonnage output? It would be ridiculous if it were, because it is putting a dying area on a level with a coming area. That would be patently absurd. I would like to know on what basis the Central Valuation Board is going to allocate the global amounts of this compensation for the different regions. The amount having been allocated, there are to be Regional Valuation Boards which are going to ascertain the value of each individual owner's holding; then, as your Lordships know, there is to be a scaling down. It will be a scaling down all right. There is no question of a scaling up, and thus the owner is to get the proportion which the value of his section bears to the proportion of the purchase price. It follows, therefore, that precisely similar holdings, if you will postulate such a thing, in two different regions are quite obviously going to be paid a different compensation unless again by some extraordinary fluke all the circumstances correspond in the two areas. That is mighty unlikely.
These are a few of the patent unfairnesses of this compensation and in spite, if I may respectfully say so, of the soothing syrup which was poured over your Lordships' House by the noble Lord on the Woolsack at the beginning of this afternoon's sitting, I remain unrepentantly of the opinion that this measure will involve a large degree of confiscation. I have made quite clear to your Lordships that I am personally interested in this matter, and, arising out of what has been said on the question of interest both by the noble Lord on the Woolsack and the noble Lord, Lord Cromwell, I am bound to tell your Lordships that, although I personally feel at liberty to criticise the Bill and to do what I can by argument to secure its amendment, I should not feel justified myself in voting on the part which directly affects my financial interests. I need hardly say that in expressing that opinion I am speaking for myself alone. I have not the faintest desire to offer criticism of anybody else who takes a different view. It is a question which every one has to decide for himself. I think indirect concern in other

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matters is too remote to matter, but this is a matter of direct concern and as such I think it is a little difficult to vote as judge of one's own interests. I mention that only because of references that have been already made.
In conclusion I only want to say that the Government have introduced this Bill as being likely to get rid of difficulties with which this industry is faced. They have not referred to the difficulties which are going to be caused by severance. The noble Lord, Lord Gainford, and other noble Lords, have said something about that, and at this late hour I will not detain your Lordships long, but the difficulties due to severance are going to be in my opinion—and I have lived in a coal mining area all my life—very much greater than any difficulties that will be solved by this Bill. Let me give one example. Suppose the Commission grant a new lease of some coal in a territory which has been already the subject of previous leases. The lessee may say "I will only take that coal on condition that I am not responsible for any damage caused by subsidence except that due to my own working." The Commission will be quite glad to grant a lease subject to that condition, and indeed the new lessee may very well be tempted to offer a larger royalty if he is freed from any liability except that caused by his own workings than if he had to accept liability for any damage that occurred. But think of the position of the unfortunate landlord of the surface, on one side, with the Commission and the mineral tenant both together on the opposite side against him, both out to prove that any subsidence was due to the workings of a previous lessee. That is only one example. It could be multiplied by hundreds. It is no use saying that other countries have this arrangement. It is one thing to start from the word "Go" with a system of law and to carry it through with all safeguards to its logical conclusion. It is quite another matter to swop horses in the middle of the stream by which obviously one gets the worst of both worlds. I venture to hope that even at this late stage the Government will realise that Part I is a misbegotten infant and that they will quietly drop it into the river.
LORD PHILLIMORE: My Lords, I am sure you will all agree with me that it
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is a great pity that there is not a larger House to listen to the admirable and, I may add, devastating speech which we have just heard. I have none of that deplorable knowledge that comes from lifetime association with the industry. I can therefore take a completely detached view. But I have in common with all your Lordships a great interest in the welfare of the State, and it is on that side of the matter that I am going to speak to-night. I am not going to speak of royalties. I am not going to speak of amalgamations. I am going to speak about the Coal Commission and its powers and the effect of setting up this sort of body to control this sort of interest. I regret that the State should take upon itself the invidious and very difficult tasks which often accompany the fact of being a landlord and which in this particular case are enormously multiplied by that severance of property to which the noble Lord who has just sat down alluded. I venture to suggest to the noble and learned Lord, the Lord Chancellor, that the difficulties of a landlord's job are by no means so small in comparison to the difficulties of the colliery proprietor as he seemed to depict.
I think that if we examine the full implications of this Bill we shall see more and more that this Coal Commission will be faced with matters of an extremely ticklish nature. I am told—here I go back to my position as a citizen of the State—that the beauty of this Bill largely consists in the fact that the royalties are to be unified and not nationalised. In other words the State and the Government of the State will have this particular responsibility lifted from their shoulders. Does that bear examination? Who do we find under the Bill gives instructions to the Commission? The Board of Trade. What is the Board of Trade? It is a Department of State. It is answerable to Parliament. Who do we find appoints the members of the Commission? The Board of Trade, a Department of State. To whom do the Commission report? They report annually to the Board of Trade, and the Board of Trade lays their report before Parliament. How is it possible with provisions such as these, to pretend that the odium of being the landlord of this property is lifted from the shoulders of the State? I do not think that we need labour that point very particularly. But I would draw attention to one matter which

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I think is likely to cause no end of trouble in the future. That is the special reservation to the Board of Trade of questions which affect the national interest. I venture to say that in years to come the application, and the attempt to extend the application, of this phrase will provide Parliament and the Government of the day with a great deal of trouble.
Be that as it may, and whether or not there is any real distinction between unification and nationalisation, there is no doubt that at the present time an increasing number of problems involving the economic conditions of large bodies of men and of large aggregations of wealth do present themselves to all Governments in all countries, especially the Governments who are Governments of industrialised countries. These problems do demand a solution and that no doubt is the justification for attempting the solution which is put forward in this Bill. The number of persons interested and the wealth invested and the wealth derived from this industry do lift these matters up to the level of real national concern. They may be partly due to the fiend of rationalisation, and partly due, I think, to the possession by the workers in those countries of the vote. Very naturally their first interest is in their own economic conditions. I think we must admit that there are these problems to be faced. We have passed through, until quite recently, a long period, a period I think of seventy years, during which a laissez faire philosophy has governed the relation of the State with its subjects. The result is both interesting and very natural. There is no body of experience built up within modern times, no body of legislation of the character of that with which we are now dealing. There is a want of precedents, and there has been very little long-distance consideration of the real problems which are now confronting us. In fact, I doubt whether there is a national policy in respect of this class of problem.
There is, of course, the Socialist remedy, riot very well represented in this House; but, as we all know, that policy is probably not believed in up to the limit even by its own advocates, and would inevitably lead to a general bankruptcy. We can therefore leave that aside and agree that there is at present no national policy on this class of ques
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tion at all. But there is growing up slowly a national practice, and, in the ordinary English way, we shall find that the national practice gets deified into the national policy. That is just where the risk comes in. This Bill is an instance. It is desired by this Bill, as it has recently been desired in respect of other commodities, to erect some central authority which will unify and control to some extent, which will centralise and rationalise, the interests involved. There have recently been several interesting forerunners of this Bill. If your Lordships will turn to the Central Electricity Act and the Board which was set up under it in 1936, you will find that, just as in this Bill, a Commission is set up consisting of so many members and a Chairman, that it reports to the Board of Trade, that it is appointed by the Board of Trade, that it makes the usual annual report to Parliament, arid that it is not constituted—though I am not sure that this is said in the present Bill—of persons who have prior interests in the industry. Turn again to the Sugar Commission set up in 1936, and you will find almost precisely the same organisation set up. The same principle applies to the Cotton Spinning Industry Act, 1936, and is followed to a lesser extent by the Royal Charter granted to the British Broadcasting Corporation, and in the London Passenger Transport Act.
In effect, what is the nature of these bodies that are set up? I think we may agree, in the light of what we know of the short history of those other bodies which have already been set up and which have already reported to Parliament, that the very minimum of Parliamentary supervision is ensured; that in effect these bodies become practically autonomous bodies carrying out their own task without any real supervision from either the Minister or Parliament. They are, in fact, bodies satellite to the Departments of State, manned—let us put it quite plainly—by bureaucrats, "eminent persons," in the words of the Lord Chancellor, no doubt; and a very lucky people we are that we can still command such a number of disinterested and honourable men to fulfil those tasks. But their position is the position of a bureaucrat, and we are gradually extending, by the creation of these satellite bodies, a gigantic and, to a large extent, an irresponsible bureaucracy. We are giving—and this is a point

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which I have never seen discussed before—these bodies power over sources of wealth on which the nation has to rely for its income, not only for the income of individuals, but also for the income of the State.
To illustrate my point, you will notice in Clause 1 (2) of this Bill that the Coal Commission
"shall be a body corporate … with perpetual succession … and with power to hold land without licence in mortmain."
It would have been better expressed if it had said "to hold land in mortmain without licence." That is what it comes to. The same identical words occur in the Electricity Act. Has any one given consideration to the importance of that power? Shades of Bracton, Littleton and Coke, and of the old Common Law doctrine against anything which militates against the freedom of alienation! Has the noble and learned Lord, the Lord Chancellor, given his attention to this, and has he considered why the Statute of Mortmain was first passed? As I understand it, it was first passed in order that the feudal fees which passed at death should accrue to the feudal barons and also to the King. In other words, it was a question of raising taxation. In so far as you leave land—and I may add, in cases like this, other wealth-producing assets—in mortmain, in the dead hand, so far you are depriving the State as well as the individual of the possibility of revenue. At any rate, the Coal Commission as contemplated will never die. It will therefore never pay Death Duty, and, as at the present moment the royalty owners must pay Death Duty on at least £5,000,000 or £6,000,000 every year, that source of revenue to the Chancellor of the Exchequer will disappear for ever. In fact, to quote the noble and learned Lord Chancellor again, one expropriation defeats the other expropriation. I may add that, in so far as the royalty owners suffer a diminution of their income—and I think no one denies that they will—both the Income Tax and the Surtax on their income will be diminished, and nobody else will pay it.
It would be useless to say all this were the practice which has grown up, of setting up these bureaucratic and satellite bodies, the only possible practice. It is not. Other countries, and especially more modern States, from whom, I hope, the
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barrier of national prejudice will never prevent us from learning, have met this difficulty in quite different ways. They have seen that even a poor landlord, the object of so much abuse, has his uses. They have seen that an industry understands, that the component people in an industry understand, the wants and needs of that industry better in the long run than an outside, imported official is ever likely to understand it. They have recognised that at any rate the common interest in the flourishing of that industry will act as a powerful lever to pull the whole three interests together. In this particular case I can speak for the three interests: the landlord, the worker and the colliery company; and so far from sweeping away one limb of the structure they have deliberately encouraged the incorporation of all those three different items of industry in one corporate and active body. Now, my Lords, have we even considered whether that class of treatment is not more appropriate to the problem which I admit is raised by modern conditions? I do not think we have. We have simply slipped into what is the most facile and easy method, and one which I think in the long run is somewhat shortsighted.
VISCOUNT RIDLEY: My Lords, I do not wish to take up much of the time of the House at this hour, particularly having regard to the members of the House who I know wish to take part, and to those who have already taken part, who have greater knowledge than I have myself of this subject; but I do feel that those members of the House who, like myself, have personal connection with and interest in the question with which this Bill deals should attempt to define their attitude. As a royalty owner I was very interested to hear what the noble Lord on the Woolsack said, as to the hope that this industry would come under one honest and good owner, instead of being under many, when this Bill comes into operation. I very much hope he will admit that a few of the royalty owners are to some extent honest at the present time. Much has been said to-day on the question first of all of the necessity and desirability of Part I of this Bill. A great deal also has been said about the negotiations for the price that was to be paid, and the method by which the purchase price was arrived at. I can only say that I am not yet convinced

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of the desirability or necessity of this purchase being accomplished, but I do feel that if it can be proved to the satisfaction of Parliament that it is a necessity, and can be done with consideration for the interests of all concerned, and with sufficient safeguards to protect as far as possible all the interests involved, it would be wrong for anyone personally interested in opposing the Bill to attempt to oppose it on that ground.
As to the award which was made, and the number of years' purchase to be paid, I think it is rather difficult to state that the royalty owners as a body are bound by an understanding which was made by the negotiating committee who were to represent them. I do not feel that there is in fact any useful or sensible purpose to be served in suggesting that the figures should be altered, but I do feel that the way in which the negotiations were conducted does leave, and should leave, every individual member of this House free to express his own opinion on what has taken place. I would hesitate to use the word "confiscation" or "expropriation." One must remember it was the result of a tribunal which was independently appointed, and I would rather say that in my opinion the royalty owners were unlucky to the extent that they have made a very bad bargain indeed. I do not think any one would be better off by attempting to deny that in fact the owners of this property are going to lose a considerable proportion of what they once had. I would rather admit that as a fact, and, having done so, I should expect that the owners of this property which is to be nationalised would take a reasonable attitude, and say that they were willing to accept this personal loss and this sacrifice, provided they were satisfied an improvement was going to be effected in the mining industry and other parts of the coal industry. That, I think, is the right attitude for the royalty owner to adopt.
I do not think that opposition to Part I, as presented to your Lordships, by anybody who is an owner of royalties, is a right course to take, but I think it is right and proper to ask your Lordships to consider closely and adopt certain Amendments, which will make the Bill both fairer and more equitable and much more easy to work. I think there is no doubt that if the affairs of the Commission are properly conducted they
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will have a surplus every year, and it is quite natural that the late owners of the property should take a sentimental interest in the disposal of this surplus. Therefore I take the liberty of disagreeing with the noble Viscount, Lord Samuel, who said yesterday that he felt that the general taxpayer should have the benefit of any surplus. I entertain the diametrically opposite view, and I would say that the only justification for this particular bargain is that the money which is derived from it, when a surplus is available, should be devoted to the interests of the industry. The noble and learned Lord on the Woolsack said that the Government's intention was to help the industry, and that it was high time something was done for the coal industry. In this Bill something is being done, not at the expense of the Government but from a source derived from private ownership at present.
I should like to see Amendments inserted in that part of the Bill which deals with the finances of the Commission. I should like to see somewhere a definition of the loan which the Commission are to raise to finance their operations. It makes a very considerable difference whether they borrow for thirty years and pay it back, or whether they borrow for ninety years. It may make all the difference between a surplus being available and not available, and I take it that the direction as to the form of loan will be in the hands of the Treasury operating, of course, through the Board of Trade. I should like to see in the Bill some provision as to what the terms of the loan should be, and as to the application of the surplus which will result. It will, I think, be necessary to have some instruction or arrangement by which the terms of the loan would be long enough to result in a surplus, and I do not think that a loan of ninety years on the total coal of the country would be too long a period to justify. As to the provisions for a statutory reserve, and the minimum sum to be set aside for reserve every year, I think they could have been framed in a more direct way, so as to give much better help to the industry, which is the one underlying purpose of the Bill. I notice that none of the help which the Government propose to give is to come from Government sources. The Coal Commission are to pay taxes in the same way

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as the coalowners are paying them. There will be no diminution of income accruing to the State from that source. There will be no diminution of Mineral Rights Duty, which was a duty put on some years ago as a kind of special duty on one particular kind of property. It would be rather odd for the Government to keep on a duty of 5 per cent. which was put on as a kind of discrimination against one kind of property when that particular form of property is in the ownership of a body controlled by the State.
One more aspect of the Bill which has been mentioned already is the future relationship between the surface and the coal underground. It has been said in the past that the coal trade has suffered because the workings underground have to be worked to fit in with the planning above ground. Is it not the case that in a very large number of cases they have been planned so as to work out together? Is it not a fact that an owner of the surface and of the coal will take every precaution he can, in his lease or arrangements with the colliery company, to see that the coal is developed in such a way as not to interfere with the surface and at the same time not to sterilise too large a quantity of valuable coal. I do not put that forward as a sufficient reason by any means against the severance of the surface and the mineral, but I do put it forward as a point which needs a great deal more consideration and more detailed provisions to deal with it than are embodied in this Bill.
There is no reference, for example, to any kind of concerted planning of development as between the surface and the mineral. There might be all sorts of provisions to ensure that land was not unnecessarily let down or spoilt which should have been for various purposes kept solid. Then another very difficult situation comes in when the Bill goes on to deal in the Second Schedule with coal which is not at present in lease. To my mind it produces a new kind of surface servitude, as it is called in the Bill, and I cannot help feeling that it will lead to a considerable amount of litigation and difficulty if it is not amended. Again in Clause 29 or 30, referring to statutory authorities or undertakings, special provisions are quite rightly made whereby local authorities, public utility companies
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and so on, have a special process whereby they can get support and have coal sterilized on their property. Is there any reason why other people—large business enterprises, even individuals—who have property which, for one reason or another, either because of its value or even because of its national interest, should not be damaged, should not have the same protection? The reason why that is necessary with reference to coal which is at present unlet is of course the wording in part of the Second Schedule, where it says that the obligation on the Commission shall be to make good or to pay compensation. There are some things which it is impossible to make good, and there are other things which if made good in a temporary and makeshift sort of way would be spoilt and ruined.
I think this Bill in its present state is a bad Bill, but I think it is not impossible for it to be improved by Amendment. I do not offer these criticisms in an obstructive or over-critical spirit, but I think your Lordships will agree, after what has been said in this debate, that there are many members of this House who will be glad to see modifications and Amendments introduced which will make this into a workable Bill instead of, as it is at present, a piece of legislation which will lead to many pitfalls and much confusion.
VISCOUNT ELIBANK: My Lords, I desire to put forward a point of view which has not been dealt with, at any rate adequately, in this debate. I am very sorry to have to inflict a speech on your Lordships at this time of night but we ought not to have been placed in this position. I hope that the noble Lord, Lord Cromwell, the next time he addresses your Lordships on a subject on which he has so much knowledge, will have greater consideration for those fellow-Peers who also wish to put their point of view. First of all I should like to congratulate the noble Earl, Lord Munster, on the speech with which he opened this debate. I have not heard a speech in opening the Second Reading of a Bill in this House which, for clarity, lucidity and the information it contained, was more admirable. I stand before your Lordships not as one connected with a colliery nor as a royalty owner. I do not know whether the noble and learned Lord on the Woolsack will agree that I have

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no bias when I say that I stand here as a consumer of coal—as a consumer of coal through manufacture, and a consumer of coal domestically. From that point of view I have attempted to examine this Bill and the principles contained in it.
Looking at Part I, I feel that the Government had no option but to proceed with the main object aimed at in that Part. Many Commissions have sat and there is no doubt that the country has become accustomed to the principle of the unification of royalties; and if the Government had not carried out that principle in this Bill they might have been very seriously assailed. But at the same time I would like to join with those noble Lords who have spoken in regard to the actual amount of compensation payable. I do not feel at all happy about that. It is true that the basis has been arbitrated, but any basis of compensation, whether arbitraged or not, which deprives owners of 50 per cent. of their income, however that may be calculated, seems to me inequitable, especially when that action is taken by Government and it is a case of force majeure.
I am chiefly concerned with the principle raised by that, and how it may affect transactions of a similar nature. As the noble Lord, Lord Phillimore, has said, we live in a rapidly changing age, and we see more and more Government control and interference in industry. Gradually all the big industries in one way or another are being brought under Government ægis, and when the Socialists some day come into power, as I suppose they will, we shall no doubt see a quicker advance in that direction. Land nationalisation, railway nationalisation, bank nationalisation, insurance nationalisation—we have beers threatened with all these, and if they get a chance they will take it. For that reason also I deplore any action of this Government which invades the principle of fair compensation in the case of private property which is expropriated by force of law. I sincerely hope that this principle is not going to be adopted in any other measures that this Government may feel constrained to bring forward of a similar nature before it dies a natural death.
I should like to have said more about that, but I shall pass on to the question
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of compulsory amalgamation. Anyone who has had any business experience at all must know that to amalgamate compulsorily any businesses or concerns must lead in most cases, at any rate, to greater expense and greater difficulties. A mere increase in the size of a unit does not in itself necessarily mean economy. Amalgamations can only be in the national interest—I am talking about the amalgamation of coal pits—if they mean the lowering of the costs of production and a reduction in the price of coal. If none of these advantages are there, then amalgamation is not justified. If justified, then they should be on a voluntary basis, which is a more effective and more economical arrangement as a rule. I want to quote only one sentence from the speech made by the President of the Board of Trade on the Third Reading in another place, which I take from the OFFICIAL REPORT. Although he was responsible for this Bill and guided it through another place on the Third Reading, he went so far as to use these words:
"I would like to see these amalgamations voluntary amalgamations because, if they are voluntary, they start in a better atmosphere and with better prospects for the direction in future years."
I hope that is the spirit that will guide the Government in the carrying out of that particular part of the measure when it become law.
Now I come to Part III, the selling schemes. I was a little surprised to hear my noble friend Lord Phillimore, in the course of his remarks, say that there were only three interests in this Bill—royalty owners, colliery owners, and colliery workers. I did not interrupt him because I knew I was going to speak very shortly after him, but I would like to remind my noble friend that the consumers' interests are in point of numbers equally as great as, if not greater than, the whole of these three interests put together. When I looked at this Part of the Bill, and when I listened to the noble Earl, I felt that while perhaps there were more safeguards inserted in the Bill during its passage through another place, these safeguards were possibly not everything that they seemed. They are certainly not everything they seem as far as the small consumers are concerned because the machinery is cumbersome. First of all we have the Coal Commission which will fix, as I understand, certain minimum

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prices. I should like to have seen some machinery whereby maximum prices might be fixed at the same time. Then we have got the Investigation Committee and, thirdly, the Central Appeal Tribunal. How will it be possible, from the point of view of expense alone, for the small consumer or the small manufacturer to fight his case through all these tribunals? I can see many of the small consumers being left in the lurch unless something is done to give them a greater opportunity to put their case before these tribunals. It is perfectly true that consumers can combine for that purpose but there are many cases of small factories, small concerns and individuals who do not form part of a bigger unit and who would be forced to try and put their case individually.
The cost of coal affects our manufacturing costs very much indeed. Coal is very much the life-blood of our export trade. If coal is too dear we cannot produce at a cost to enable us to compete in foreign markets, and this applies not only to the cost of coal but to wages. The increased price of coal during the past fifteen years has made engineers study the efficient use of coal with vastly improved results—even as much as 100 per cent. greater efficiency per ton of coal. I am doubtful if this efficiency can be improved. To such a degree is this now the position that coal is at a disadvantage with oil, and any increase in price will naturally make this disadvantage greater. When we consider the industries dependent on coal for their life-blood, if I may use the phrase again, we know that the whole country in every direction is permeated by that necessity. Take railways alone. In the case of one railway which I know, something like 40,000 to 50,000 tons of coal per week are consumed. An increase of a shilling a ton means 40,000 to 50,000 shillings which, being translated into pounds, means £2,500 a week or £125,000 a year. That is the cost to that railway. You can go on and think of the gas industry, the cotton industry, and many other industries which use coal for motive and operating power, including the electrical industry which is using many thousands of tons of coal per annum.
I should like to give your Lordships figures as to how the electrical industry has been affected since 1934 when the coal
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selling schemes came into operation. In 1934 the Central Electricity Board, under their coal clause agreement for the bulk supply to retail distributors, charged 16s. per ton. In 1938 that had risen to 21s., or an increase of 5s. a ton, equivalent to 33 per cent. on the cost of the coal, and, actually, the cost of the electric current bulk supply to the distributors had been increased by 23 per cent. All over the country there is a very insistent demand by retail consumers for a reduction in the price of electricity, and they are probably quite unaware that, whilst they are demanding these reductions, the price of bulk supply electrical current is rising all the time. This is making it impossible for the retail suppliers to meet the wishes of the consumers who desire a reduction.
I desire to warn the Government that it is absolutely necessary—if the noble Lord who is in charge of the Bill will listen to me—for the Government to look into the question of the increased cost of coal which may arise as a result of this Bill. The consumers in the country numerically are far more interested perhaps in this Bill than the other concerns, and unless there is some control by the Government behind these rather cumbrous arrangements and assurances which are contained in the Bill on this particular matter the consumers' interests are bound to suffer, and to suffer even more than they have done already. I am sorry to have kept your Lordships so long at this late hour but it is not my fault. Again, I would say that the matter with which I have dealt is very important, and I do wish to impress upon the Government that unless they have the full cooperation of all the interests which I have named, the object of the Bill which, as stated by the noble Earl, Lord Munster, at the end of his speech, is for the welfare of the country and everybody in it, will certainly not be carried out.
THE EARL OF LUCAN: My Lords, on behalf of my noble friend Lord Lothian I beg to move that this debate be now adjourned.
Moved, That the debate be now adjourned.—(The Earl of Lucan.)
On Question, Motion agreed to, and debate adjourned accordingly.
House adjourned at twenty-five minutes before nine o'clock.

STANDING ORDERS COMMITTEE.
Report from, That the Standing Orders not complied with in respect of the petition for the following Bill: Harwich Harbour, ought to be dispensed with, and leave given to introduce the Bill: Read, and agreed to.
ALDRIDGE URBAN DISTRICT COUNCIL BILL.
The CHAIRMAN OF COMMITTEES informed the House that the opposition to the Bill was withdrawn. The Orders made on the 7th and 12th of April last discharged, and Bill committed.
HARWICH HARBOUR BILL. [H.L.]
Presented (pursuant to leave given this day); and read 1a.
WEAR NAVIGATION AND SUNDERLAND DOCK BILL. [H.L.]
The King's consent signified; and Bill reported, with Amendments.
WEST THURROCK ESTATE BILL [H.L.]
  BLACKPOOL IMPROVEMENT BILL.
  Reported, with Amendments.

SUNDAY ENTERTAINMENTS ACT, 1932 (AYLESBURY BOROUGH ORDER).
Order made by the Secretary of State for the Home Department extending Sec-
902
tion 1 of the Act to the Borough of Aylesbury:
Laid before the House (pursuant to Act) for affirmative Resolution and ordered to lie on the Table.

SUNDAY ENTERTAINMENTS ACT, 1932 (BRENTFORD AND CHISWICK BOROUGH ORDER).
Order made by the Secretary of State for the Home Department extending Section 1 of the Act, to the Borough of Brentford and Chiswick:
Laid before the House (pursuant to Act) for affirmative Resolution and ordered to lie on the Table.

SUNDAY ENTERTAINMENTS ACT, 1932 (WATFORD BOROUGH ORDER).
Order made by the Secretary of State for the Home Department extending Section 1 of the Act to the Borough of Watford:
Laid before the House (pursuant to Act) for affirmative Resolution and ordered to lie on the Table.

MINISTRY OF HEALTH PROVISIONAL ORDER (BRIDGWATER EXTENSION) BILL.
Reported, with Amendments, and recommitted to a Committee of the Whole House on Tuesday next.
MINISTRY OF HEALTH PROVISIONAL ORDER (SCARBOROUGH) BILL.
Reported, without amendment, and recommitted to a Committee of the Whole House on Tuesday next.