Sitting of 29 June 1939

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

    UNEMPLOYED MEN.
    Sir Frank Sandersonasked the Minister of Labour whether he is aware that there are a number of unemployed men between the ages of 20 and 21 years who are anxious to join the Militia immediately; and whether he will instruct the Employment Exchanges to accept all unemployed men between the ages of 20 and 21 years for service immediately irrespective of their alphabetical rotation?
    The Minister of Labour (Mr. Ernest Brown): Yes, Sir; arrangements have already been made for this to be done in the case of unemployed men who ask to be called up early.

    MEDICAL EXAMINATION.
    Dr. Edith Summerskillasked the Minister of Labour what instructions have been issued to the medical boards charged with examining militiamen as to the standard of health required for service?
    Sir Richard Aclandasked the Minister of Labour whether, in order to dispel any suggestion that the standard of militiamen's medical examination was lower than that of entrants of the Regular and Territorial Army, he will publish the instructions, whether verbal or in writing, which were given to the doctors who conducted the examinations?
    Mr. Silkinasked the Minister of Labour whether any instructions have been issued to the medical boards appointed under the Military Training Act and, if so, will he issue a statement setting out such instructions?
    Mr. E. Brown: I am having a copy of the instructions placed in the Library.
    Dr. Summerskill: Is the right hon. Gentleman aware that men are being passed as fit for service who are regarded as chronic invalids?
    Mr. Brown: I am not aware of that. Perhaps the hon. Lady will read the copy of the instructions which have been issued, and if she then desires to pursue the matter either in the House or with the Department, or with me personally, I shall be very glad to deal with it.
    Dr. Summerskill: Has it been brought to the right hon. Gentleman's notice that men with glass eyes are being passed as fit for service?
    Mr. Brown: I answered a question dealing with that point only last week, I believe.
    Mr. Mathers: Will it not be possible for the right hon. Gentleman to give more publicity to these instructions than will be given by placing them in the Library?
    Mr. Brown: I cannot add anything to what I have said at the moment. The instructions are long and elaborate, and have been drawn up with great care in consultation with a number of experts. Perhaps when hon. Members have seen them they will consider whether they desire to raise the matter further.
    Mr. Rhys Daviesasked the Minister of Labour whether the medical personnel examining militiamen is the same as in the case of those joining the Regular Forces; if not, how this personnel has been chosen and what are their qualifications for their posts; and will he state the percentages of medical rejects in the case of militiamen and the Regular Army, respectively?
    Mr. Brown: The medical boards set up under the Military Training Act are composed of civilian doctors selected by the Ministry of Health from lists supplied by the British Medical Association. The percentage of men found unfit for any form of military service up to 20th June was 2.6 in the case of the examinations under the Military Training Act. As regards the results of the examinations for the Regular Army the hon. Member should address his question to my right hon. Friend the Secretary of State for War.
    Mr. Davies: Does the right hon. Gentleman mean to tell the House that he does

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    not realise the difference between the two, and will he tell me whether the qualifications of the doctors who are examining under the Military Training Act are the same as those of the doctors who examine for the Regular Army?
    Mr. Brown: Their qualifications are of the highest kind.
    Mr. Davies: That is not what I asked. They may have qualifications of the highest kind, but have they the qualifications which would set the same standard of examination in the two cases?
    Mr. Brown: That is another point, and that is why I have referred the hon. Member to my right hon. Friend.
    Mr. R. J. Taylor: Can the Minister assure the House that there is adequate provision for testing the eyes of the militiamen, because great doubt is being expressed on that point in view of the fact that men are being passed who have never been able to see without glasses?
    Mr. Brown: That does not tally with the information which I had received from hon. Members.
    Mr. Taylor: I am making not a general statement, but a specific statement.
    Dr. Summerskillasked the Minister of Labour whether a militiaman who has an unsatisfactory medical history and who is dissatisfied with the decision of the examining doctor is given the right to appeal for a second opinion from a specialist?
    Mr. Brown: The decisions of the medical boards are final, but arrangements are made for men to be referred to consultants for report when the boards are in doubt.
    Dr. Summerskill: Would the right hon. Gentleman agree that if a man has certificates over a long period of years certifying him as suffering from some complaint, which may be obscure to a new doctor who is examining him, that he should have the right to appeal to a specialist in his complaint?
    Mr. Brown: I should not like to give a definite answer upon a particular case without consulting the specialist concerned, but I shall be glad to discuss the matter with the hon. Lady.
    Dr. Summerskill: Is the right hon. Gentleman aware that many Members on this side of the House have cases sent to them day after day of men who have been certified as suffering from a certain complaint but are now passed fit for service?
    Mr. Brown: I hope hon. Members will send them on to me. The thing that has struck me for the last fortnight is the very small number of letters I have had on this matter.

    LOCAL TRIBUNALS.
    Mr. Loganasked the Minister of Labour whether he will set up in Liverpool a local tribunal in connection with the Military Training Act, 1939?
    Mr. Kirbyasked the Minister of Labour whether, having in mind the very large population in Liverpool and on Merseyside generally, he will consider setting up in Liverpool a local tribunal, before which Merseyside conscientious objectors could appear, thus saving expense to the public as against such objectors appearing before the tribunal in Manchester?
    Mr. E. Brown: I am setting up a local tribunal to cover Lancashire, Cheshire and the Glossop and New Mills district of Derbyshire. The number of applications from conscientious objectors in Liverpool and on the Merseyside is not sufficient to justify an additional local tribunal for that area.
    Mr. Logan: Is the Minister not aware that in the late War we had such a tribunal and that the expense of travelling to Manchester was then met?
    Mr. Brown: This, of course, is a different situation. We are dealing here with one section and not with the whole range. As the hon. Member knows, of the 88 who originally registered, only 75 have applied for final exemption, so he will understand that this is not a problem of great magnitude. The tribunal is normally sitting in Manchester, but it would be possible to sit in Liverpool.
    Mr. Logan: Will the expenses be paid to them?
    Mr. Brown: Certainly.

    SPECIAL ALLOWANCES.
    Mr. Gallacherasked the Minister of Labour whether, in the case of a one-man

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    business where the owner is called up for service, a grant will be made to provide wages for a competent substitute to carry on the business and thereby enable the house hold to get the income from the business and at the same time save the business for the conscript?
    The Financial Secretary to the War Office (Sir Victor Warrender): I have been asked to reply. The Military Service (Special Allowances) Advisory Committee is being set up to consider applications for monetary assistance to meet serious hardship in the case of those who are unable, by reason of undergoing a course of training, or being called out for service, to meet their financial obligations.
    Mr. Gallacher: Is the Minister prepared to say that this committee has the power and the finance to meet such a case as I have supposed in the question; and is the Minister aware that otherwise a very large number of young lads will be stranded after serving six months and will suffer very grave injustice?
    Sir V. Warrender: If the hon. Gentleman will look at the White Paper he will see it stated there:
    "Assistance may be granted to those who are unable by reason of their service to meet their financial obligations, whereby serious hardship is caused."
    It will be for them to establish the hardship.
    Mr. Mathers: Does that mean that a strict means test is to apply in all these cases, and, if so, does the Minister not appreciate that there will be very keen resentment on this matter in many parts of the country?
    Sir V. Warrender: No, Sir. I do not think that is the case. It is a question of establishing hardship.

    POLICE RECRUITS.
    Mr. Thorneycroftasked the Secretary of State for the Home Department the nature of the instructions issued by him to the appropriate authorities upon the acceptance of recruits for the police force before such recruits have completed their Militia training?
    The Under-Secretary of State for the Home Department (Mr. Peake): The appointment of recruits to the police forces is a matter for the individual police authorities or chief officers of police, as the case
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    may be. As regards future applicants it is anticipated that as a rule they will perform their military training before joining the police, but as regards applicants who have already been accepted the attention of chief constables has been drawn to the provisions of Section 7 of the Military Training Act, 1939, and it has been pointed out that they should not alter any arrangements made with intending recruits by reason of their military obligations.
    Mr. Thorneycroft: Do I understand that the police authorities have been, or have not been given instructions by my right hon. Friend as to the acceptance or refusal of recruits before they have completed their military training?
    Mr. Peake: We certainly have not given any instructions upon this point. It is a matter for the local police authorities, but we do anticipate that in the future the general practice will be for applicants for the police force to do their training before joining that force.
    Mr. Thorneycroft: Does my hon. Friend realise that if private employers adopted this attitude very few young men between the ages of 19 and 20 would be able to get a job at all, and will he therefore instruct the police authorities that the passing of the Military Training Act should make no difference to the acceptance of recruits?
    Mr. Peake: No, Sir; I think that my hon. Friend is under a misunderstanding. There is no fixed age for joining the police force. Men are accepted at very many varying ages. As far as the younger applicants are concerned, they can apply under Section 1 of the Military Training Act for permission to undergo their training at an earlier age than 20.

  UNEMPLOYMENT

    RHONDDA
    Mr. Mainwaringasked the Minister of Labour whether the Commissioner for Special Areas has made any decision with respect to the clearance and preparation of sites suitable for the establishment of new industries in Rhondda?
    Mr. E. Brown: The Commissioner for the Special Areas has decided to acquire a small site at Forth to be cleared in

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    order to improve amenities. As regards the acquisition of sites for industrial development, I have nothing to add to the answer I gave the hon. Member on 25th May.
    Mr. Mainwaring: Is the Minister aware that up to now not one site in that area has been cleared or prepared by the Special Commissioner?
    Mr. Brown: I do not think the answer which I have given bears out that statement.
    Mr. Mainwaring: Will the Minister accept it from me that not one site in that area has yet been cleared by the Commissioner?
    Mr. Brown: Factories have been provided and new industrial undertakings are now in operation.
    Mr. Mainwaring: But sites were not cleared by the Commissioner.
    Mr. Brown: Provided by him.
    Mr. Mainwaring: No, Sir.

    UNEMPLOYMENT FUND.
    Mr. Dayasked the Minister of Labour the present average rate of interest charged on the loans or overdraft of the Unemployment Insurance Fund?
    Mr. E. Brown: Interest at the rate of 3⅛ per cent. is payable on the debt of the Unemployment Fund.
    Mr. Day: Is the right hon. Gentleman thinking of bringing in legislation to reduce it?
    Mr. Brown: No, it is fixed by Section 60 (2) of the Act of 1935.

    ASSISTANCE.
    Mr. Parkerasked the Minister of Labour whether it is the generally accepted policy of the Unemployment Assistance Board that wages obtained by applicants in their last week of work should meet all normal family needs for two weeks before the Board provide assistance?
    Mr. E. Brown: No, Sir. If the hon. Member has any individual case in mind and will let me have particulars I shall be glad to have inquiries made.

    GOVERNMENT CONTRACT, HARROGATE.
    Mr. Lunnasked the Minister of Labour whether he is aware of the fact that numbers of unemployed local men applied at the Harrogate Employment Exchange for work at the military camp there and were told there was no work for them because the contractors, had shipped over from Ireland a large number of men to do the work, who are difficult to organise into a trade union and are not paid trade union rate of wages; whether this is in accordance with the Fair Wages Clause of the Government; and what action does he propose to take?
    Mr. E. Brown: I am having inquiries made and will communicate with the hon. Member as soon as possible.
    Mr. Lunn: Would the right hon. Gentleman answer the latter part of my question and say whether the contractors who are doing Government work are paying trade union wages? I think that his Department ought to insist upon that.
    Mr. Brown: The rates that I have had from rural districts and districts of that kind are rather the other way, and show that labourers are being brought from ordinary labour at excessive rates of wages.
    Mr. T. Smith: In view of the dissatisfaction that exists in regard to the work on this camp, will the right hon. Gentleman have a thorough inquiry made, in order to see whether there is not more suitable local labour?
    Mr. Brown: I have the matter under review. The fact is that the total number affected comprises 234 carpenters and joiners and 646 labourers, of whom 156 carpenters and joiners and 575 labourers were accepted from that exchange.
    Mr. Smith: How does it come about that 20 men were engaged on this work for one day only?
    Mr. Brown: The hon. Member did put a question to me about that matter and I explained it at the time.

    MONTROSE EXCHANGE.S
    Mr. Gallacherasked the Minister of Labour whether he is aware of the action of the officials of the Montrose Employment Exchange in asking for a police report on an applicant, Mr. James McIntosh; under what regulation was this

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    action taken and what steps he proposes to take to protect applicants from such treatment?
    Mr. E. Brown: I am having inquiries made and will communicate with the hon. Member as soon as possible.
    Mr. Gallacher: If such a report has been sought or obtained will the right hon. Gentleman take action against the manager, as I have received, as the result of this question, a report from another district about one of these managers and this practice of asking for reports?
    Mr. Brown: I cannot accept ex parte statements, although I shall pay all respect to any facts given to me by any hon. Member of this House.
    Mr. Gallacher: If the Minister finds that this is right, will he take action to remove that manager?
    Mr. Brown: That is a hypothetical question.

    ASSISTANCE BOARD OFFICE, ROMFORD.
    Mr. Parkerasked the Minister of Labour what steps have been taken to obtain premises or a suitable site for premises for the projected Unemployment Assistance Board offices to serve the Romford Parliamentary Division and surrounding districts?
    Mr. E. Brown: I am informed by the Unemployment Assistance Board that His Majesty's Office of Works are at the present time in negotiation for a tenancy of suitable premises for the purpose of an office at Romford.

    DURHAM COUNTY.
    Mr. W. Joseph Stewartasked the Minister of Labour whether he is aware that in Durham County there are 26,000 persons who have been unemployed for more than a year; and what schemes the Government have apart from the trading estates to provide these people with employment?
    Mr. E. Brown: I would refer the hon. Member to the answer I gave him on 27th June.
    Mr. Stewart: As there are 6,000 people in Durham who have been unemployed for a year, and in that number between 6,000 and 7,000 have had no work for three, five or 10 years, does it not suggest that the method adopted by the Govern-
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    ment for meeting the problem of long-term unemployment has failed?
    Mr. Brown: That is another question.

  ICE CREAM VENDORS.
  Mr. R. J. Taylorasked the Minister of Labour whether he has considered the evidence of long hours submitted during the hearing of a case affecting the Eldorado Ice Cream Company; and will he inquire into the conditions operating in this firm?
  Mr. E. Brown: I have no information about this case other than the reports that have appeared in the Press. Last year, however, I made certain inquiries in connection with this class of employment, and, as stated in reply to a question asked by the hon. Member for Westhoughton (Mr. Rhys Davies) on 17th November last, I came to the decision not to deal with this particular class of retail trade separately from the consideration I am giving to the regulation of wages and conditions in retail distributive trades generally.
  Mr. Taylor: Is the Minister aware that correspondence which I have had since this question was put down reveals an intolerable state of affairs in relation to hours and the difficulty of managers retaining their honesty as far as this firm is concerned, and will he be prepared to reconsider the matter if the correspondence is submitted to him?
  Mr. Brown: I shall be glad to look at the correspondence. I have had many facts revealed to me in connection with this matter, but the House will know that we are now in the last stages of the consideration, of a unanimous report from the two sides of the industry, and I think the House will agree that it will be better to deal with all the points which have been considered rather than to take sporadic action on individuals points.
  Mr. Taylor: Is it the intention of the right hon. Gentleman to bring this class of work under trade boards legislation?
  Mr. Brown: There is another question on that point.
  Mr. Lawson: The right hon. Gentleman says that he has inquired into this class of work, but has he inquired into this particular company?
  Mr. Brown: I said that I have had no information except from reports in the Press. If I get the facts to which the hon. Member refers I shall be glad to make inquiries about them and to approach the firm in the matter.
  Mr. Taylor: Does not the Minister consider 13 hours a day worth an inquiry?

  BEET SUGAR INDUSTRY (ALIEN WORKERS).
  Mr. Dayasked the Minister of Labour the number of aliens who were originally admitted into this country under permit to take up positions in the sugar-beet factories who have since been given permission to remain in this country without conditions; and the length of the period for which these permits have been extended?
  Mr. E. Brown: No alien whose stay is limited by a time condition is at present employed in the beet sugar industry in this country. Of the aliens originally admitted for employment in the industry, 23 were eventually allowed to remain without conditions. These aliens occupied posts of an administrative or supervisory nature. Without special inquiry it is not possible to say how many of them are still so employed.
  Mr. Day: Can the Minister say what was the nationality of the persons who were allowed to remain without conditions?
  Mr. Brown: Not without notice.
  Mr. Leach: How many aliens are in control of this industry?
  Mr. Brown: I do not know that I could give that information. The question appears to be one for another Department.
  Mr. Day: Do we understand that all the permits were allowed to continue without conditions?
  Mr. Brown: They were allowed to remain without conditions.

  CATERING TRADE (WAGES AND HOURS OF WORK.)
  Mr. Leslieasked the Minister of Labour whether he has considered the
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  advisability of setting up a trade board for the catering trade, in view of the low wages and long hours imposed upon women employed in the trade to the detriment of their health?
  Mr. E. Brown: The hon. Member may rest assured that among other possibilities the question of action under the Trade Boards Acts will not be overlooked in my consideration of the most effective methods of regulating conditions in this field. If the hon. Member can furnish particulars of the low wages and long hours to which he refers I shall be glad to consider them.
  Mr. Leslie: Is the Minister not aware that there is any amount of evidence in his office as to the bad conditions in the catering trade?
  Mr. Brown: I am aware that I initiated the general conference which has produced a unanimous report and has led to a long step forward in many businesses in the last 2½ years.
  Mr. Graham White: Will perambulating ice-cream salesmen be covered by the trade boards?
  Mr. Brown: I should not like to say off-hand. I believe that I did give an answer on that point some weeks ago.

  HOUSING.

    RENTS (DECONTROL).
    Mr. James Hallasked the Minister of Labour the average increase in the rent of houses which were decontrolled in consequence of the Increase of Rent and Mortgage Interest (Restriction) Act?
    Mr. E. Brown: On the basis of such information as is available to my Department, it is estimated that the rents (inclusive of rates and water charges) of working-class dwellings which have become decontrolled under the provisions of the Rent and Mortgage Interest Restrictions Acts are about 20 per cent. higher on average, than the rents of similar dwellings which are still subject to rent control under those Acts.
    Mr. Hall: Is the right hon. Gentleman aware that this increase of rents is responsible for the dissatisfaction which has expressed itself in different parts of the

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    country; and could not something be done to prevent that dissatisfaction being created?
    Mr. Brown: I am not responsible for that. I am responsible for providing the figure of the cost-of-living index.
    Mr. Hall: Is the right hon. Gentleman prepared to make a representation to the Minister of Health?
    Mr. Brown: I am not sure about that. I might find a number of other houses rented too low.
    Mr. Hallasked the Minister of Health whether, in view of the hardships endured by many people, he will introduce legislation to prevent the letting of decontrolled houses at exorbitant rents by companies specialising in such type of business?
    The Minister of Health (Mr. Elliot): I would refer the hon. Member to the reply which I gave to him on 15th June.
    Mr. Hall: Is the Minister aware that the Unemployment Assistance Board, in their report, have called attention to the exorbitant rents of working-class houses in London? Cannot something be done to bring this intolerable state of affairs to an end?
    Mr. Elliot: Parliament came to a decision on this matter last year.

    BACK-TO-BACK HOUSES (DECONTROL).
    Mr. Leachasked the Minister of Health whether his attention has been drawn to the decision in the case of Lord versus Welch heard at the Bradford county court on 14th June, 1939, relating to back-to-back houses and decontrol; whether he is aware that a considerable number of other houses may be affected by the decision; and what action he proposes to take to safeguard the interests of the tenants concerned?
    Mr. Elliot: I have seen a Press report of the county court decision referred to. This related only to the particular property before it, and does not affect any other premises. I do not consider that any action on my part is called for.
    Mr. Leach: Is there not a need for protection of a tenant who is in occupation of part of a back-to-back house when that house is transformed into a through house by the landlord?
    Mr. Elliot: In this case the tenant agreed to these alterations.
    Mr. Leach: No.

    SUBSIDENCE (INCE-IN-MAKERFIELD)
    Mr. Gordon Macdonaldasked the Minister of Health whether his attention has been directed to the serious concern of the urban distrtict council of Ince-in-Makerfield at the extensive damage, caused by mining operations, to a number of comparatively new houses situate in Holt Street, near Rose Bridge Colliery, Ince, and acquired by the occupiers by means of loans; and whether he is prepared to facilitate legislation to remedy this state of affairs.
    Mr. Elliot: The answer to the first part of the question is in the affirmative. As regards the second part, the question of legislation is one primarily for the Mines Department.

  CIVIL DEFENCE.

    AIR-RAID SHELTERS.
    Mr. Leonardasked the Lord Privy Seal whether, in view of the advice he has received that tenement houses in Glasgow offer protection to citzens during air-raids if suitably strengthened, he can state what proposals have been made to strengthen them?
    The Lord Privy Seal (Sir John Anderson): I am advised that, where the conditions are not suitable for the provision out-of-doors of shelters of the standard brick or concrete types, the strutting of closes offers the most satisfactory solution. My technical advisers are always ready to help with practical suggestions, and one of my principal technical officers is in Glasgow this week for the express purpose of conferring on this subject with the authorities.
    Mr. Leonard: Will the right hon. Gentleman bear in mind that the shelters are entirely inadequate to accommodate the population of the tenements which they are intended to serve; and will he take into consideration that those tenements are closely congested and require special attention directed to them?
    Sir J. Anderson: I shall be in a better position to judge when I have the report of my technical office.
    Mr. W. H. Greenasked the Lord Privy Seal whether he has considered the position of many sub-tenants desiring air raid shelters residing in houses where the householder refuses to have such shelters; and what he proposes to do to meet such circumstances?
    Sir J. Anderson: I hope that, with the growing realisation of the importance of providing air-raid shelter in the vulnerable areas, there will not be many cases of the kind contemplated in the question, in which people living in the same building are unable to reach a reasonable accommodation with one another in this matter. But, as I indicated in the course of the Debate on the Report stage of the Civil Defence Bill, cases where agreement cannot be reached will, in the last resort, have to be met by the provision of public shelter, in regard to which the local authorities already have adequate powers.
    Mr. Green: Do I understand the Minister to say that if an owner refused a shelter to a sub-tenant the sub-tenant cannot have one, and that the local authority have no power?
    Sir J. Anderson: I have said that the local authorities have adequate power to deal with the matter by way of the provision of public shelters.
    Colonel Grettonasked the Lord Privy Seal whether occupiers of factories and owners of commercial buildings in non-vulnerable areas are required by the provisions of the Civil Defence Bill to provide air-raid shelter for the persons employed in their premises and, if so, will he state what are the legal obligations resting on such occupiers and owners; and whether the provisions of the Bill in regard to training workpeople in any premises where more than 30 persons are employed and the provisions dealing with the obscuration of light in factories apply to employers in non-vulnerable areas?
    Sir J. Anderson: In areas to which Part III of the Civil Defence Bill is not applied, the occupiers of factory premises and mines, and the owners of commercial buildings, will be under no statutory obligation to provide air-raid shelter, unless the provisions of Part III are specifically applied to their premises by a special order made under the proviso to Clause 12 of the Bill. But all persons employing more than 30 persons in any factory
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    premises, mine or commercial building will be required, wherever the premises are situated, to provide training in air raid precautions routine and to train and equip a suitable proportion of the employés for first-aid, anti-gas and fire-fighting. The provisions of Clause 42 of the Bill, which deal with the obscuration of light, will also apply to all factory premises, as defined in the Bill, throughout the country.
    Colonel Gretton: May I take it that my right hon. Friend's answer refers entirely to statutory obligations, and that employers and others are not relieved of any moral obligation that there may be to provide suitable shelter for their people?
    Sir J. Anderson: Yes, that is the case.
    Mr. C. S. Taylor: If a factory is closed down, or if an assurance is given that it will be closed down, in war-time, will it be necessary to provide for the obscuration of light in such a factory?
    Sir J. Anderson: That matter was dealt with in the course of the discussion on the Bill, when I made it clear that, in enforcing the obligations imposed by the Bill, it is necessary to proceed on a basis of fact, and not on the basis of what someone thinks might happen in the event of war.
    Mr. Sutcliffeasked the Parliamentary Secretary to the Board of Education what is the policy of his Department in regard to air-raid shelters for grant-aided schools; in what way this policy differs in respect of schools in evacuation areas, neutral areas, and reception areas, respectively; and what financial assistance has been given where air-raid shelters are being provided for such schools?
    The Parliamentary Secretary to the Ministry of Health (Mr. Bernays): I have been asked to reply. The policy of the Government in regard to air-raid shelters in schools is fully set out in the Board's Circular 1467, of which I am sending my hon. Friend a copy. In areas which are to be evacuated, all schools will be closed for the whole period during which the children remain evacuated, and no air-raid protection at those schools will be required. In neutral areas, and generally speaking in the more populous urban parts of reception areas, protection, which will normally take the form of trenches, is expected to be provided by

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    the local education authority for the children in the schools. Schools in the rural parts of reception areas will not, as a rule, need any special shelter protection. Approved expenditure by local education authorities on protective measures for school children ranks for grant from the Board at the rate of 50 per cent.

    LICHFIELD.
    Mr. Pooleasked the Lord Privy Seal whether his attention has been called to the report of the Lichfield Rural Head Wardens Association which alleges lack of information, organisation, and equipment to a serious degree; and what action is he proposing to take in the matter?
    Sir J. Anderson: I have received this report, and I have asked my regional officer to make inquiries on the spot into the various matters to which it refers.
    Mr. Poole: If the allegations contained in the report are substantiated on inquiry, will the Minister agree that it reveals a very serious state of affairs which is very discouraging to the voluntary workers concerned and calls for immediate attention by his Department? Is he also aware that this is not the only district in Staffordshire in which that state of affairs exists?
    Sir J. Anderson: I know that there have been representations in several rural parts of Staffordshire in regard to these matters, and that is why I am sending my regional officer to inquire on the spot.

    COMPENSATION FOR INJURIES.
    Mr. Thorneycroftasked the Lord Privy Seal whether he will include in any scheme for the compensation for death or injury sustained by members of Civil Defence Organisations or their dependants a provision whereby disputes arising under such scheme between the Crown and the subject should be submitted to the judgment of a third party?
    Sir J. Anderson: No, Sir. The course suggested by my hon. Friend has never been contemplated. But there will be nothing in the scheme to prevent any person aggrieved by a decision of the Treasury from seeking a remedy in the courts.

    SANDBAGS.
    Sir Cyril Entwistleasked the Lord Privy Seal whether he is aware that it has been established by scientific re-
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    search that sandbags, if treated with a preservative, are strengthened, have a much longer life, and are protected against bacterial mildew or insect attack and the liability to be gnawed by rodents; and whether he will consider the withdrawal of the circular he issued on the 18th May to local authorities, prohibiting them submitting the sandbags in their possession to a process of rot-proofing?
    Sir J. Anderson: I am aware that sandbags which have been rot-proofed would remain serviceable in use for longer periods, but I am advised that the substantial cost of rot-proofing would be justified only if it were intended that the bags should be stored ready-filled. It is not intended that any of the bags issued to local authorities should be stored ready-filled; and local authorities were therefore advised, in the circular to which my hon. and learned Friend refers, that sand-bags issued to them by my Department should not be rot-proofed, and that the cost of rot-proofing any other sandbags in their possession would not be allowed to rank for grant under the Air-Raid Precautions Act. I see no reason to withdraw that circular.
    Sir C. Entwistle: Is my right hon. Friend aware that even when the bags are not filled, but are stored unfilled, they are liable to very rapid deterioration, particularly if they are stored in a damp place; and that, if this proofing is allowed, it will save a great deal of waste of money?
    Sir J. Anderson: The question of expense was taken fully into account in coming to the decision referred to. As regards the first part of the supplementary question, the specification for these sandbags provides especially that the material shall be dehydrated, and, if the bags are stored by local authorities according to the instructions given, I am advised that they will keep without deterioration for a very long period. As regards the second part of the supplementary question, the decision given was arrived at after very careful consideration on the basis of expert advice from the Department of Scientific and Industrial Research.
    Sir C. Entwistle: Is my right hon. Friend aware that the elimination of moisture in the manufacture of the bags confers no rot-proof qualities whatever;

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    and, if I send him data on the subject, will he kindly give the matter reconsideration?
    Sir J. Anderson: I shall certainly be glad to look into any information that my hon. and learned Friend can supply, but the advice I have had is not in accordance with what he says.
    Mr. Leonard: Can the right hon. Gentleman say what is the cost of rot-proofing?
    Sir C. Entwistle: It is ¾d., as against 3d. for each bag.
    Sir J. Anderson: That is not the figure submitted to me.

    EVACUATION.
    Lieut.-Colonel Acland-Troyteasked the Minister of Health what arrangements he has made to compensate owners of houses in reception areas for damage done to their property by refugees?
    Mr. Elliot: Consideration is being given to this matter in connection with the wider question of compensation for war damage, as to which my hon. and gallant Friend will be aware that a statement was made by my right hon. Friend the Chancellor of the Exchequer on 20th June.
    Lieut.-Colonel Acland-Troyte: When is my right hon. Friend likely to come to a decision in regard to this matter?
    Mr. Lambertasked the Minister of Health the estimated number of persons to be sent to Devonshire in time of emergency; and what preparations have been made for their reception?
    Mr. Elliot: The present timetables provide for the transport to Devon in the initial evacuation of 17,600 persons only, but there is a considerable balance of accommodation which will be kept available for the purposes of the Government's scheme, which, as my right hon. Friend is aware, is being extended to cover a number of additional towns. Arrangements for reception of evacuated persons are being made by the county district authorities, with the assistance of the county council. I am sending my right hon. Friend copies of the documents that have been issued by my right hon. Friend the President of the Board of Education and myself for the guidance of these authorities in this work.
    Mr. Lambert: Would my right hon. Friend consider diverting some of the amounts now devoted to A.R.P. to the accommodation of these people, considering that Devonshire is so remote?
    Mr. Elliot: That remoteness is a reason why we have greatly reduced the numbers.
    Mr. Charles Williams: May I also have a copy of the documents?
    Mr. Elliot: Yes, certainly, if my hon. Friend wants it.
    Mr. Whiteleyasked the Minister of Health whether he will take into consideration scheduling the North-East portion of Blaydon as an evacuation area owing to the density of the population?
    Mr. Elliot: I would refer the hon. Member to the answer given on 18th May to the hon. Member for Everton (Mr. Kirby). I have considered the position of Blaydon, but I regret that I cannot undertake to extend further the list of evacuable areas.

  BLACK-LISTED SCHOOLS, WALES.
  Sir William Jenkinsasked the Parliamentary Secretary to the Board of Education what number of black-listed schools there is in Wales; what number of schools where application has been made and refused; what is the rate levied in these areas in the current year; and will he consider giving a higher grant for building purposes where the rates are over 15s. in the £ taking each county separately?
  Mr. Bernays: There are 112 schools in Wales on the Black List. In the case of nine of these schools, the board have informed the responsible bodies that, unless satisfactory proposals for improving the premises are submitted at an early date, the school will be removed from the list of recognised public elementary schools. In the case of a large number of the remaining schools on the Black List, partial improvements have already been carried out, and proposals for further improvements are awaited. The answer to the third part of the question contains a large number of figures which need interpretation. I will, therefore, with the hon. Member's permission, have the information sent to him. The answer to the fourth part of the question is in the negative.
  Mr. A. Jenkins: Can the hon. Gentleman state where these nine schools are situated?
  Mr. Bernays: No, Sir, but I shall be very glad to have the hon. Member supplied with the information.

  ROAD ACCIDENT, STAMFORD HILL.
  Mr. Messerasked the Parliamentary Secretary to the Board of Education whether he has considered the report of the accident in which Dorothy Hertz, Rita Hertz and another child were knocked down and pinned under a trolleybus at Amherst Park, Stamford Hill, on Friday, 16th June; whether he is aware that the road is a very dangerous one for school-children to cross, and whether special provision can be made to ensure the safety of the children?
  Mr. Bernays: My hon. Friend's attention had not previously been called to this regrettable accident, but he is making inquiries, and will communicate with the hon. Member.

  LOCATION OF INDUSTRY (ROYAL COMMISSION'S REPORT).
  Mr. Silkinasked the Prime Minister when he anticipates that the report of the Royal Commission on the Geographical Location of Industry will be published?
  Mr. Lawsonasked the Prime Minister whether he is now in a position to state when the report of the Royal Commission on the Distribution of the Population will be published?
  The Prime Minister (Mr. Chamberlain):I have consulted the Chairman of the Commission. He informs me that, as a result of illness and other unexpected difficulties that have arisen, completion of the report has been unavoidably delayed, but he hopes that the report will be issued not later than September next.

  DEFENCE DISCUSSIONS, SINGAPORE.
  Mr. Arthur Hendersonasked the Prime Minister whether he can make any statement on the recent defence discussions at Singapore?
  The Prime Minister: As has been reported by the Press, the recent defence discussions at Singapore have been satisfactorily concluded. As in the case of other staff conversations, however, it would not be in the public interest to disclose any details of the discussions.
  Mr. Henderson: May the House take it that arrangements have been made for the fullest possible co-operation between the British and French forces in the Far East in event of an emergency?
  The Prime Minister: That is one of objects of the discussions.

  PUBLIC HEALTH.

    TUBERCULOSIS, WALES.
    Sir W. Jenkinsasked the Minister of Health what steps he is taking to prepare schemes in rural and industrial areas in Wales, in view of the report on tuberculosis in Wales, to improve housing, water supplies, sewerage, and clinics; and whether he is considering special assistance to distressed areas to carry out the necessary schemes for public health purposes?
    Mr. Mainwaringasked the Minister of Health whether, having regard to the nature of the report upon the extent of tuberculosis in Wales, and the bearing housing conditions have upon this disease, he is prepared to include in his plans for dealing with unemployment problems that greater expenditure be embarked upon in demolition of old and construction of new houses, and that without incurring additional rate charges upon depressed areas?
    Mr. Elliot: I gave details of the action I am taking on the report, in reply to the hon. Member for Llanelly (Mr. J. Griffiths) on 8th June, and to my hon. and gallant Friend the Member for Cardiff, South (Colonel A. Evans) on nth May. So far as housing is concerned, a special survey is being made by my housing inspectors. They have, up to now, visited 22 districts, and I have received 10 reports. Subject to the conditions laid down by the Commissioner for the Special Areas, schemes, which are urgently necessary, submitted by local authorities in those areas for the improvement of public health services, are still eligible for consideration for assistance from the Special Areas Fund.

    ICE CREAM
    Brigadier-General Clifton Brownasked the Minister of Health whether he is aware that a considerable amount of ice cream is made without cream or milk; and whether he will bring in legislation to compel ice cream makers to state the quantity and quality of milk used in ice creams they sell to the public?
    Mr. Elliot: I am aware that some frozen mixtures sold as ices or ice cream may contain little or no cream or milk. The Food and Drugs Act, 1938, which comes into operation on the 1st October next, will give me increased powers for making regulations governing the composition of food and kindred matters, and I am considering the question of making regulations as to ice cream.
    Brigadier-General Brown: Does not my right hon. Friend think that the time has come when a statutory standard should apply to all ice cream that is sold; and will he make regulations to that effect?
    Mr. Elliot: I will take these points into consideration.
    Sir Percy Harris: Have not the local authorities power to make by-laws to regulate the sale of ice cream?
    Mr. Elliot: I am not sure how far their powers go, but the new Act will certainly give greater powers to the central Department

    VACCINATION.
    Miss Rathboneasked the Minister of Health whether he is aware that a statutory declaration of conscientious objection to vaccination made by the wife of a labourer in the Royal Arsenal, Woolwich, on behalf of her child, was recently refused by the vaccination officer of the Metropolitan borough of Woolwich on the ground that only the declaration of the father of the child could be accepted, he having its legal custody; that in this case the father was prevented from making a declaration owing to his hours of work being from 8.20 a.m. to 6 p.m., and that in many other cases the father may be prevented by illness, mental disability, or temporary absence from home; and whether he will consider making such a change in the regulations as will enable the mother to make the declaration?
    Mr. Elliot: My attention has not previously been drawn to this case. The
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    statutory declaration may be made before either a commissioner for oaths or a justice of the peace at any time. I cannot, therefore, accept the contention that the father concerned was prevented from making such a declaration because of his hours of work. I do not consider it necessary to propose the amendment of the law which the hon. Member suggests.
    Miss Rathbone: Is the right hon. Gentleman aware that this refusal to acknowledge the statutory declaration of the mother is not only practically inconvenient in many cases but is an insult to the mother, and is quite inconsistent with the spirit of the declaration and of the Custody of Children Act; and will not the Government consider taking action, if necessary in the way of legislation, to give equal rights to the father and mother in this matter?
    Mr. Elliot: That was not the point that the hon. Lady put to me in the question.
    Mr. Lipson: What is the value of the statutory declaration? Should it not be sufficient if the form is filled in?
    Mr. Elliot: I have to have regard to the Act of Parliament, the same as anybody else.

    X-RAY APPARATUS.
    Mr. Hopkinasked the Minister of Health, (1) whether he will set up a committee of investigation to inquire into the present state of efficiency of X-ray plant in hospitals and to report on the relative efficiency of British and foreign X-ray plant, and on the provision of spare parts of foreign X-ray plant in case of war;
    (2) whether he is aware of the high standard of efficiency of British-made X-ray plant and that the London County Council insist on using British X-ray plant only; and whether he will now advise the appointment of a highly-qualified engineer to assist the Cancer Commission to bring British-made X-ray plant to the favourable notice of all hospitals?
    Mr. Elliot: I am aware that British-made X-ray apparatus has been found to be efficient, and that the apparatus used in London County Council hospitals is almost entirely of British make. The

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    Council, in accordance with a recommendation made by my Department, generally adopt a policy of making use to the utmost extent practicable of goods and materials of home production. I do not think it desirable to adopt the suggestions made in the last part of the second question.
    Mr. Hopkin: Would the Minister answer the first part of Question 63?
    Mr. Elliot: I think that is not necessary.
    Dr. Summerskill: Is the Minister aware that in many provincial towns in this country there is no X-ray apparatus at all, and that, as a result, many patients have to come to London' for diagnosis? Would he consider remedying that state of affairs? That is what is expressed in Question 63?
    Mr. Elliot: I am afraid my reading of Question 63 is not the same as the hon. Lady's.
    Dr. Summerskill: It asks the Minister to investigate.
    Mr. Elliot: I understood that I was asked to investigate the efficiency.
    Dr. Summerskill: Or the inefficiency.

  NATIONAL HEALTH INSURANCE ACTS.
  Mr. Loganasked the Minister of Health when he intends to issue an up-to-date consolidation of the National Health Insurance Acts; and whether it is intended also to issue an approved societies' handbook?
  Mr. Elliot: I understand the reference in the first part of the question to be to the projected volume containing the consolidated National Health Insurance Acts and the Regulations made there under. While some progress is being made in the preparation of this volume, and also of a revised edition of the Approved Societies' Handbook, pressure of other urgent work in my Department has delayed their completion. I hope that it may be found possible to issue the former volume within the next few months, but I am afraid that I cannot promise an early issue of the latter.
  Mr. Logan: If there is a possibility of delay in issuing the volume relating to the National Health Insurance Acts, would it be possible to issue the Approved Societies' Handbook, having regard to the complexity of the matters with which they have to deal?
  Mr. Elliot: I am not sure about that, but I will look into the point.

  OLD AGE PENSIONERS (PUBLIC ASSISTANCE).
  Mr. Messerasked the Minister of Health how many non-contributory old age pensioners were; drawing public assistance from the Middlesex County Council at the last available date.
  Mr. Elliot: I regret that the information desired by the hon. Member is not available.
  Mr. Gallacher: Is it not the case that a lot of old age pensioners have to seek public assistance?
  Mr. Jenkins: Cannot information be obtained, because only recently such information was supplied by this body to the County Councils Association?
  Mr. Elliot: It is not a matter for me.

  TOWN AND COUNTRY PLANNING, BYFLEET.
  Mr. Edeasked the Minister of Health when an application to vary the zoning of land on and near the Manor House Estate, By fleet, Woking, was received; by whom it was made; what is the nature and purpose of the inquiry made by the Ministry; and whether, in view of the local antagonism to the proposed variation, a public inquiry will be held?
  Mr. Elliot: With regard to the first and second parts of the question, an appeal under the Town and Country Planning Act by Messrs. Duncan B. Gray and Partners, Limited, on behalf of Wing-Commander Shaw, D.F.C., against the refusal of the local authority to permit the development of this site at densities proposed by the appellant was received by me on 21st April last. With regard to the third and fourth parts of the question, a local inquiry, for the purpose of hearing representations regarding the matter under appeal and inspecting the

  619
  site, was held on 17th May last, and my decision has now been issued.
  Mr. Ede: Was the local inquiry a public one?
  Mr. Elliot: I understand that, owing to a misunderstanding, the Press were excluded, but the objectors were present, and most of them were represented by counsel.
  Mr. Ede: Has the Minister issued his findings in the matter yet?
  Mr. Elliot: Yes, Sir.

  FIRES, LONDON
  Mr. Thorneasked the Home Secretary whether he can give any information in connection with the fire at the offices of Messrs. Schenkers, shipping agents, Queen Victoria Street, on Monday, when a young girl lost her life; and whether there were proper iron escape staircases at the back of the building?
  Mr. Peake: I understand that the coroner is investigating this case, and I am not in a position to make any statement at present.
  Mr. Henderson Stewart(by Private Notice) asked the Home Secretary whether he can account for the series of fires in London during the past few days; whether there is any reason to believe that they are the work of foreign agents; and what steps he is taking to prevent further outbreaks in the immediate future?
  Mr. Peake: Exhaustive investigations are being made with a view to ascertaining the causes of these fires; but I am informed that a series of fires such as has recently occurred in the City of London is not unprecedented in the London Fire Brigade area. It would not be proper for me to make any further statement as to the causes of these fires to-day, as they may be the subject of fire inquests by the City Coroner in pursuance of his powers under the City of London Fire Inquests Act, 1888.
  Mr. Stewart: Can the Under-Secretary say whether the City Police have called in the services of the Special Branch, and since all these fires have occurred within the danger zone of the City, will he not consider, in addition to the Coroner's inquiry, setting up a special commission to inquire into this special problem with a view to the better safety of London?
  Mr. Peake: We already have in the City a special form of procedure into these matters, and I can assure the hon. Member that the Commissioner of Police is giving this question his personal attention.
  Mr. Lawson: Is there any precedent for so many fires in so short a time?
  Mr. Peake: Other outbreaks of fires have occurred in the past in the City in somewhat similar circumstances.
  Mr. Thorne: Is the Under-Secretary aware that I paid a visit to Guildhall this morning and made a personal inquiry, and I was assured that the City authorities are going to make a thorough investigation into the cause of these fires?
  Mr. Peake: That is so. There is to be an inquiry by the Coroner of the City of London, but, owing to the exceptional circumstances in this case, Scotland Yard are giving their assistance.
  Mr. Godfrey Nicholson: Is it not a fact that warehouses are not under the supervision of the London Fire Brigade with respect to things like sprinklers and fire alarms? Would it not be a good thing if warehouses were put under the same regulations as other buildings?

  HOURS OF WORK (YOUNG PERSONS).
  Mr. Gallacherasked the Home Secretary the number of applications received under the Factories Act since 25th April last to exempt employers from the provisions limiting the hours of labour of young persons, and the names and addresses of the applicants?
  Mr. Peake: My right hon. Friend has received a considerable number of applications from individual firms, groups of employers and associations of varying size and scope, for regulations under Section 71 of the Factories Act to allow more than 44 working hours a week for persons under 16 after the end of this month. The great majority have been refused or withdrawn, and I do not think that any good purpose would be served by giving a list of all those applicants; but I am circulating a table showing the classes of factory as respects which inquiries have been directed under the Section, with information as to the cases in which the reports of the Commissioners have been received and their findings, and as to the dates fixed for the remaining inquiries.
  Mr. Gallacher: Is it not the case that a considerable number of employers of young people are using this Clause to avoid their responsibilities and to keep lads and girls working for over 44 hours a week?

  FACTORIES ACT— SECTION 71.

  PUBLIC INQUIRIES DIRECTED TO BE HELD

  (Up to Wednesday, 28th June, 1939.)

  Class of factory.

  Factories in which is carried on the spinning of woollen or worsted yarn or the weaving of woollen or worsted cloth.

  Report of Inquiry received. Regulations recommended.

  Factories in which is carried on the spinning of cotton yarn or the weaving of cotton cloth.

  Report of Inquiry received. Regulations recommended.

  Factories in which is carried on the spinning or weaving of jute.

  Report of Inquiry received. Regulations not recommended.
  Application refused.

  Factories in which is carried on the spinning, of ramie yarn.

  Report of Inquiry received. Regulations not recommended. Application refused.

  Factories in which is carried on the spinning of yarn for carpets or the weaving of carpets.

  Report of Inquiry received Regulations recommended.

  Factories in which is carried on the bleaching, dyeing, or printing of cotton, rayon, or woollen yarn, or the bleaching, dyeing, printing, or finishing of cotton, rayon, or woollen piece goods.

  Inquiry held. Report not received.

  Factories in which the sole or principal work carried on is the manufacture of biscuits.

  Application withdrawn.

  Factories in which is carried on the manufacture of chocolate or sugar confectionery.

  Application withdrawn,

  Factories in which is carried on the manufacture of paper or paper board, or the process of paper coating.

  Report of Inquiry received. Regulations not recommended. Application refused.

  Factories in which the sole or principal work carried on is printing or bookbinding.

  Inquiry held. Report not received.

  Factories in which is carried on the spinning or weaving of flax or the bleaching, dyeing, or printing of flax, or the bleaching, dyeing, printing or finishing of linen cloth.

  Inquiry opened on 28th June.

  Factories in which is carried on the spinning of hemp for cordage, or the manufacture of rope or twine or nets.

  Inquiry to be opened on 4th July.

  Factories in which is carried on the spinning or throwing of silk or rayon yarn, or the weaving or printing of silk or rayon fabrics.

  Inquiry to be opened on 10th July.

  Factories in which is carried on the making of felt hats or the making of felt hoods.

  Inquiry to be opened on 11th July.

  Factories in which is carried on the manufacture of bricks, roofing tiles, flooring tiles (quarries), salt glazed sewer pipes, sanitary fireclay goods, architectural terra cotta, or refractory goods of fireclay or silica.

  Inquiry to be opened on 18th July.

  Factories in which is carried on the manufacture of china, earthenware (including sanitary earthenware), earthenware tiles, electrical earthenware, fireclay sanitary ware, jet, rockingham or samian wares, or floor tiles.

  Inquiry to be opened on 25th July.

  Factories in which is carried on the manufacture of insulated electrical cables.

  Date of Inquiry not fixed.

  Mr. Peake: I have said that a considerable number of applications has been received; and the table which I am going to circulate will, I think, give the hon. Member all the information he desires.
  Following is the table:

  WORKMEN'S COMPENSATION.
  Mr. Oliverasked the Home Secretary whether his Department intends to offer evidence to the Royal Commission on Workmen's Compensation on the special position of workmen who, by reason of having suffered from nystagmus or other industrial diseases are refused employment on those grounds, and although cured of the disease are rendered permanently unemployed unless they can obtain work in some other industry?
  Mr. Peake: This point has already been mentioned in the Home Office evidence, and is more fully dealt with, so far as nystagmus is concerned, in the report of the Stewart Committee, to which the attention of the Commission has been drawn,
  Mr. Ellis Smithasked the Home Secretary (1) whether he will invite the Royal Commission on Workmen's Compensation to devote their early attention to a limited number of urgent questions and produce an interim report in order that action can be taken to deal with them pending the report on the big problem;
  (2) whether he will introduce legislation on a limited number of urgent questions, such as an increase in the maximum amount of workmen's compensation, silicosis, etc., pending the report of the Royal Commission that is investigating the problem of workmen's compensation?
  Mr. Peake: I cannot add anything to the answers already given on these points.
  Mr. Smith: Would the hon. Gentleman ask his right hon. Friend to consult the Prime Minister with a view to considering what steps can be taken to carry out the promise made by the Prime Minister with respect to this matter?
  Mr. Peake: As the hon. Gentleman is aware, a private Member's Bill carrying out one of the main recommendations of the Stewart Committee was introduced last autumn by the hon. Member for Wallsend (Miss Ward), but it met with a good deal of opposition from hon. Members opposite.
  Mr. Smith: That answer is just side-tracking the subject raised in this question. The Prime Minister gave an undertaking that he would be prepared to con-
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  sider introducing legislation to deal with a limited number of the points raised in the question, and I am asking the hon. Gentleman to consult his right hon. Friend with a view to seeing what steps can be taken to implement the promise made by the Prime Minister?
  Mr. Peake: My right hon. Friend the Home Secretary has frequently stated that it really is impossible to ask the Royal Commission to deal prematurely with the larger question. As far as smaller points are concerned, we retain the right to introduce legislation.
  Mr. Arthur Greenwood: Does not the hon. Gentleman realise that there are certain quite definite and specific problems which can be dealt with, apart from the larger question, and that these problems are creating much hardship and a good deal of feeling in the country; and would it not be possible, as has been done before in the case of Royal Commissions, to segregate these particular problems and ask the Royal Commission to give early attention to them with a view to legislation on the matter?
  Mr. Peake: I do not think that I can usefully add anything to the answers that I have already given.

  ALIENS (BRITISH WIVES).
  Mr. Hannahasked the Home Secretary whether the Government can hold out any hope of early legislation enabling British women marrying aliens to retain their citizenship?
  Mr. Sorensenasked the Home Secretary whether he is aware of the demand for an alteration of the law respecting the nationality of British women marrying aliens; and whether His Majesty's Government will take action to enable such women to retain their British nationality if they wish to do so?
  Mr. Peake: My right honourable Friend is aware of the interest which is taken in this subject to which much attention has been given by successive Imperial Conferences. It has not so far been found possible to reach agreement on an alteration of the law, and under the existing law there is no action which can be taken.
  Mr. Hannah: Is not the law of 1870 hopelessly out of date, and can the Minister give any idea when agreement is likely to be reached?
  Mr. Peake: The difficulties are that there is no general agreement as to what alterations in the law are desirable, and furthermore, this is a subject which obviously must be discussed at the next Imperial Conference.
  Colonel Sandeman Allen: Can we not bring this country into line with Australia and New Zealand? Is there any reason why there should be any difference within the Empire on such a matter?
  Mr. Peake: There are practical difficulties, and I would refer my hon. and gallant Friend to the statement which was made by the Lord Chancellor when a Bill was recently introduced in another place.

  PROPAGANDA (DEFACING OF PAVEMENTS AND WALLS).
  Sir Percy Hurdasked the Home Secretary what powers he has devolved on local authorities to ban, under penalty, the advertising or disseminating of news and propaganda on footpaths, roadways and street walls; how many local authorities have made such by-laws; and with what general result?
  Mr. Peake: The position is not that the Home Secretary has any powers which he can devolve on local authorities, but that local authorities under their power to make by-laws for good rule and government can make by-laws relating to the defacing of pavements or roadways or walls. Such by-laws have been made by many local authorities, and I will send my hon. Friend particulars. In districts where such by-laws are in force the police, so far as I am aware, take all practicable steps to enforce their provisions.
  Mr. Herbert Morrison: Is the hon. Gentleman aware that the defacing of walls and footpaths, sometimes with real paint, is a common practice adopted by an organisation interested in foreign propaganda, and will he inquire from the Commissioner of Police whether the police are taking energetic steps to stop this objectionable practice?
  Mr. Peake: I will certainly make that inquiry.
  Mr. Lipson: Do local authorities require any special powers to enable them to introduce by-laws?
  Mr. Peake: No, Sir; it is open to any local authority to apply to the Home Office for approval of the appropriate by-laws.
  Lieut.-Colonel Acland-Troyte: Is it not the fact that the regulations are not efficient and that they want strengthening, and will my hon. Friend consider that point?

  EVICTIONS, STEPNEY.
  Mr. J. Hallasked the Home Secretary how many tenants of Langdale Mansions, Stepney, received hospital treatment following the eviction of several tenants on 17th June; what was the extent of their injuries; and is he prepared to take any action to expedite a settlement of the issues involved between landlords and tenants?
  Mr. Peake: I presume the hon. Member is referring to incidents which took place on 27th June. On that occasion, county court bailiffs charged with the execution of ejectment warrants against certain tenants at Langdale Mansions notified the police that they anticipated meeting with opposition in carrying out their duty under the orders of the court. It became, therefore, the duty of the police to attend to preserve the peace. A force of 49 police officers was detailed for the purpose and these had later to be reinforced by a further 34. A cordon was not formed until serious disturbances had occurred and a large crowd had assembled, and when it was formed all persons with lawful business were allowed to pass. I am informed that three persons in all, one of whom was not a tenant, complained of injury, and of these one only was taken to hospital. The settlement of disputes between landlords and tenants is not a matter in which my right hon. Friend has any power to take any action. It is clearly laid down in the instructions to constables that they are not to intervene in such disputes and that their sole function is to preserve the peace.
  Mr. Silverman: Are we to understand from the reply that on a mere notification

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  by the bailiffs that they anticipated opposition in the carrying out of their duty the police sent 49 members of the force to assist the bailiffs in the evictions? If that is so, will the hon. Member tell us under what authority the police took that action?
  Mr. Peake: I can only say that it seems to me a very good thing that such a large police force was, in fact, sent, otherwise the disturbance might have had much more serious results.
  Mr. Silverman: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise the matter on the Adjournment.

  CINEMAS (SUNDAY OPENING).
  Mr. Rhys Daviesasked the Home Secretary whether he is aware that cinema proprietors, in seeking to secure the necessary statutory steps to obtain a draft order for the opening of cinemas on Sundays, are promising the local authority to defray the costs of the necessary proceedings, and that some authorities have accepted the money; and whether he will make it clear to those authorities that it is illegal and against public policy for them to do so?
  Mr. Peake: My right hon. Friend's attention has been drawn to one case in which any arrangement of the kind referred to by the hon. Member has been made. My right hon. Friend fully appreciates the objections to it. In his opinion the decision of the local authority to exercise its powers under the Sunday Entertainments Act, 1932, should be taken on public grounds, and should not be influenced by any offer on the part of interested persons to defray the cost. The question whether the arrangement is legal is not one which my right hon. Friend has any authority to determine, and he is not in a position to issue instructions to local authorities on the subject.
  Mr. Davies: Is the hon. Member aware that the instructions which have been sent by the Home Office to one or two of these authorities have been taken as implying that they are within their legal rights in accepting these payments? Is it not obvious, therefore, that the acceptance of these payments must be regarded as an inducement to local authorities to do a thing which they otherwise would not do?
  Mr. Peake: If that is so, then local authorities are under a misapprehension. I will look into the matter.
  Mr. Petherick: Is it possible to give some guidance to these local authorities, in view of the fact that if the action is illegal they may be surcharged?
  Mr. Peake: I will note that point.

  MEDICINE STAMP DUTIES.
  Mr. de Rothschildasked the Chancellor of the Exchequer what representations were made to him, previous to the introduction of the Budget, in favour of the repeal of the Medicine Stamp Duties; and by whom, or on behalf of what organisations and interests, such representations were made?
  The Chancellor of the Exchequer (Sir John Simon): The Department of Customs and Excise, which is responsible for the administration of this duty, represented to me the extreme difficulties of administering the existing duty and the many anomalies involved. It was with these considerations in mind that I felt that the repeal of the duties was desirable. As regards representations by trade interests, which have been received from time to time, I may mention that the Parliamentary Committee of the Co-operative Congress and the Proprietary Association of Great Britain conveyed to me their views in favour of the repeal of the duty; moreover, the Pharmaceutical Society of Great Britain, after criticising the Select Committee's re-commendations, represented to me that no reasons were advanced in the report, nor were any substantial reasons given in evidence before the Committee, why medicines should be preferred for taxation before many other more obviously suitable commodities and that they could not find in the report any justification for the imposition of a heavy duty upon the products of one particular industry and that an industry concerned with the public health.
  Sir P. Harris: How is the right hon. Gentleman going to carry on during the next 12 months? Does he anticipate a lot of trouble?
  Sir J. Simon: We shall carry on as well as we can, but it still remains true that there is extreme difficulty in the administration of these duties.
  Mr. Lambert: Is the right hon. Gentleman quite sure that patent medicines are always advantageous to the public health?
  Sir J. Simon: I am not at all sure of that, but I have no means at my disposal to distinguish between one and the other.

  CIVIL SERVANTS (REMOVAL OF FURNITURE).
  Colonel Sandeman Allenasked the Chancellor of the Exchequer whether he is aware that in the instructions to civil servants concerning removals there has appeared a recommendation that the rail way should be chosen for the removal; and will he issue instructions to all Government Departments that there should be no restriction of choice of removal contractors?
  Sir J. Simon: My hon. and gallant Friend would appear to have been misinformed. Civil servants compulsorily transferred from one part of the country to another are required to submit three competitive tenders in writing for the removal of their furniture, one of the tenders being from a railway company if the distance of transfer is 60 miles or more. Officers may accept whichever tender they choose, but payment from public funds is restricted to the amount of the lowest tender save for good reasons to the contrary.
  Colonel Sandeman Allen: Is the right hon. Gentleman aware that one civil servant was offered a free railway ticket for his daughter provided that he took the railway tender?
  Sir J. Simon: I am not aware of that.

  CZECHO-SLOVAKIA (ASSETS).
  Mr. G. Straussasked the Chancellor of the Exchequer on what day he communicated to the Bank of England representatives on the Board of the Bank for International Settlements the view of the French Government and His Majesty's Government on the transfer of the Czech gold to Germany?
  Sir J. Simon: I informed the hon. Member on 15th June of the nature of the communication received from the French Government and of the reply of His Majesty's Government. The Bank of England were promptly informed accordingly on 24th March.

  OLD AGE PENSIONS.
  Mr. E. Smithasked the Financial Secretary to the Treasury the approximate cost of paying the old age pension to all women whose husbands have reached 65 years of age; and what is the estimated number of women who would be affected and the number who have been forced to apply for public assistance?
  The Financial Secretary to the Treasury (Captain Crookshank): As regards the first two parts of this question, which I assume refers to the cost of paying the old age pensions to all women whose husbands have reached 65 years of age and are in receipt of an old age pension, I would refer the hon. Member to the answer given on 2nd March to a question by the hon. Member for Cheltenham (Mr. Lipson). As regards the latter part of the question, I regret that information is not available.
  Mr. Gallacher: Is the Minister prepared to consider the setting up of a social service fund in order to deal with this grave problem?

  QUESTIONS TO MINISTERS.
  Mr. Logan: May I draw your attention, Mr. Speaker, to Questions 77 and 79 on the Order Paper to-day—
  Colonel WedgwoodTo ask the Secretary of State for the Home Department whether, in view of the persistence of the Irish Republican Army outrages, he will now consider deporting Irish Republican Army-suspects who are also Irish citizens, and treating would-be immigrants from Eire as in the Dominions?
  Colonel Wedgwood: To ask the Secretary of State for the Home Department how many of the Metropolitan Police were born in Eire, and whether he can obtain similar figures for the police forces in Manchester and Liverpool?
  The questions have not been answered, but I want to ask for your Ruling in regard to the impropriety of putting such questions on the Order Paper of this House. There is the word "suspects" in Question 77, which I think should never have appeared, and in Question 79 there is a suggestion which, I think, should never have been made. I cannot say anything in regard to whether Irishmen should be in the Manchester, Liverpool or Metropolitan forces, but I want to ask you whether such questions should be put in regard to such a contented and well-deserving body?
  Mr. Speaker: I do not think there is anything out of order in the questions.
  Mr. Logan: My point is that, owing to the delicacy of things at the present time, there are Irish people in this country who deserve the protection of the House, and I consider that no imputation whatever should be made in a question by any hon. Member which he is not able to substantiate by facts.
  Mr. Speaker: That is not a point of Order.

BUSINESS OF THE HOUSE.
Mr. Greenwood: May I ask the Prime Minister what will be the Business for next week?
The Prime Minister: The Business for next week will be:
Monday— Conclusion of the Committee stage of the Finance Bill.
Tuesday—Supply; Committee [10th Allotted Day], Department of Health for Scotland.
Wednesday—Supply; Committee [11th Allotted Day], Ministry of Transport.
Thursday— Report and Third Reading of the Cotton Industry (Reorganisation) Bill.
Friday—Second Reading of the Milk Industry (No. 2) Bill, and Committee stage of the necessary Money Resolution.
On any day, if there is time, other Orders may be taken.
Mr. Greenwood: Can the Prime Minister say when the Milk Industry (No. 2) Bill will be available?
The Prime Minister: To-night.

RIDING ESTABLISHMENTS (REGISTRATION AND INSPECTION) BILL (changed to "RIDING ESTABLISHMENTS BILL").
Reported, with Amendments [Title amended], from Standing Committee B.
Bill, as amended (in the Standing Committee), to be considered upon Monday next, and to be printed. [Bill 179.]
Minutes of Proceedings to be printed.

BILL PRESENTED.
  MILK INDUSTRY (No. 2) BILL,
  "to authorise certain payments out of the Exchequer to milk marketing boards in respect of certain milk; to extend the powers and vary the duties of such boards as to the making of payments or allowances to producers of milk and in connection with approved arrangements for the sale of milk at reduced prices, and as to the manner in which moneys paid to the boards from the Exchequer are to be dealt with; and to extend the functions of consumers' committees in relation to milk marketing schemes and milk product marketing schemes and milk product development schemes," presented by Colonel Sir Reginald Dorman-Smith; supported by Mr. Colville, Captain Crookshank, Sir Walter Womersley, and Mr. Wedderburn; to be read a Second time upon Monday next, and to be printed. [Bill 175.]

AIR MINISTRY (HESTON AND KENLEY AERODROMES EXTENSION) BILL.
Minutes of Evidence taken this day reported from the Select Committee.
Minutes of Evidence to lie upon the. Table, and to be printed.[No. 141.]

SELECTION (STANDING COMMITTEES).
  STANDING COMMITTEE A.
  Colonel Gretton reported from the Committee of Selection; That they had discharged the following Member from Standing Committee A (added in respect of the Prevention of Damage by Rabbits Bill [Lords]): Sir Ernest Shepperson; and had appointed in substitution: Sir Joseph Lamb.
  STANDING COMMITTEE B.
  Colonel Gretton further reported from the Committee; That they had added the following Ten Members to Standing Committee B (in respect of the Disused Burial Grounds Act (1884) Amendment Bill): Mr. Bernays, Mr. Butcher, Sir Samuel Chapman, Mr. Hannah, Sir Patrick Hannon, Mr. Arthur Henderson, Miss Horsbrugh, Sir Graham Kerr, Mr. Leonard and Mr. Thome.

  STANDING COMMITTEE C.
  Colonel Gretton further reported from the Committee; That they had added the

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  following Fifteen Members to Standing Committee C (in respect of the Mining Industry (Amendment) Bill): Mr. Collindridge, Colonel Cruddas, Mr. Culverwell, Sir Granville Gibson, Captain Graham, Mr. George Hall, Mr. Lee, Mr. Lloyd, Mr. Magnay, Sir Joseph Nall, Mr. Palmer, Mr. Radford, Sir Hugh Seely, Mr. Sloan, and Colonel Windsor-Clive.
  Reports to lie upon the Table.

STANDING ORDERS.
Resolution reported from the Select Committee;
That they had come to a Resolution, as followed: "That, in the case of the British Overseas Airways Bill, the Standing Orders ought to be dispensed with: That the Bill be permitted to proceed."
Resolution agreed to.

MESSAGE FROM THE LORDS.
That they have agreed to,—

Ministry of Health Provisional Order (Hailsham Water) Bill,

Ministry of Health Provisional Order (Luton Water) Bill,

Ministry of Health Provisional Order (South Kent Water) Bill, without Amendment.

South Staffordshire Water Bill,

Jarrow Corporation Bill

Stalybridge Hyde Mossley and Dukinfield Transport and Electricity Board Bill, with Amendments.

ORDERS OF THE DAY.

  FINANCE BILL.
  Considered in Committee [Progress, 28th June.]
  [SIR DENNIS HERBERT in the Chair.]

  FINANCE BILL.

    NEW CLAUSE.—(Meaning of "armament business" and "armament contract.")
    (1) If the Minister declares to the Commissioners that in any accounting period the total receipts of a business under armament contracts were not less than two hundred thousand pounds or, if the accounting period is less than twelve months, not less than such sum as bears to two hundred thousand pounds the like proportion that the length of the period bears to twelve months, the business shall, in relation to any chargeable accounting period which consists or forms part of that accounting period, be deemed to be an armament business.
    Provided that, before making any such declaration with respect to a business, the Minister shall give to the person carrying on that business at least twenty-eight days notice that he proposes to do so and shall consider any representations made by that person before the expiration of that period and, if he makes the declaration, shall notify that person accordingly.
    (2)For the purposes of the provisions of this Act relating to armament profits duty the expression "armament contract" means, in relation to any business—

    (a)a contract between the person carrying on the business and His Majesty's Government in the United Kingdom, being—

    (i)a contract for the supply of anything required for the purposes of the armed forces of the Crown or of any foreign armed forces, or for the supply of any machines, tools, or materials required for making or repairing anything required for those purposes;

    (ii)a contract for the execution of any works required for those purposes; or

    (iii)a contract for the supply of any such equipment, appliances or other materials as are mentioned in Section nine of the Air-Raid Precautions Act, 1937;

    (b)a contract under which the person carrying on the business supplies anything to, or executes any works' for, any other person, being a contract entered into by that other person for the purpose of enabling him to perform an armament contract; or

    (c) a contract between the person carry-on the business (being a company) and His Majesty's Government in the United Kingdom for the construction, alteration or management by the company as agent for
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    that Government of any factory in the United Kingdom which belongs, or is to belong, to the Crown:

    Provided that nothing in this Sub-section shall apply to any contract for the supply of any such articles or materials as may from time to time be specified in an order of the Minister, being articles or materials which in his opinion are commonly required for purposes other than those mentioned in this Sub-section and for that reason cannot equitably be brought within the scope of the provisions thereof.—[Mr. Burgin]
    Brought up, and read the First and Second time.
    3.53 p.m.
    Mr. Ross Taylor: I beg to move, as an Amendment to the proposed new Clause, in line 12, at the end, to insert:
    "(2)This Section shall not apply to any business carried on by statutory undertakers and consisting wholly or mainly in the rendering in the United Kingdom or a Dominion as defined in Section twenty-seven of the Finance Act, 1920, of any of the following services, namely, the supply of water, gas, electricity or hydraulic power.
    For the purposes of this Sub-section the expression statutory undertakers means any local or public authority authorised by or by virtue of any enactment to render any of the services aforesaid in the United Kingdom or a Dominion as defined in Section twenty-seven of the Finance Act, 1920, and any other person so authorised who is precluded by or by virtue of anyenactment from charging any higher price for those services than that authorised by or by virtue of the enactment or, in the case of a body corporate, is either so precluded or precluded by or by virtue of any enactment from paying a dividend at any higher rate, or distributing by way of dividend any greater amount, than that authorised by or by virtue of the enactment."
    The purpose of this Amendment will be clear to the Committee. It is expressly to exempt from the operation of the Armament Profits Duty those statutory undertakings mentioned in the Amendment. I realise that I may be met by the objection that the Amendment is unnecessary, that the duty will not apply to statutory undertakings, and that they cannot be said to be engaged in armament business; but I submit that, for the reasons which I shall try to give, an express exemption ought to be included in the Clause. The phrase "armament contract," as defined in the Clause, is very wide indeed. It includes contracts with His Majesty's Government for the supply of anything required for the purposes of the Armed Forces of the Crown or of any foreign armed forces, or for the supply of any machines, tools or materials required

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    for making or repairing anything required for those purposes. It also covers contracts with third parties for supplies enabling them to perform armament contracts. Therefore, it might very well be argued that supplies to His Majesty's Government, directly or through contractors or sub-contractors, of water, gas, electricity, or, in the case of gas, by-products of manufacture, might be regarded as supplies of things required for the purposes of the Armed Forces of the Crown.
    There is, therefore, a not unreasonable fear on the part of the larger public utility undertakings, both municipal and company, whose receipts are above the £200,000 limit, that attempts may be made to bring them within the operation of the duty, and therefore, they desire to have an express exemption. They ask for this exemption not because they desire to evade a financial burden imposed in the national interest, but because they are not in a position to make those excess profits which it is the purpose of the Clause to tax. Their profits are already controlled by Parliament. Every statutory undertaking is operating under an Act of Parliament, or an Order having the force of an Act of Parliament, which either limits the charges which may be imposed or precludes the payment of anything higher than the authorised dividend, or does both; so that the standard has already been imposed. The Amendment follows almost word for word the precedent set in the Finance Act, 1937. By Section 19 of that Act, statutory gas, water, electricity and some other public utility undertakings are expressly exempted from the National Defence Contribution. I should like to quote the words uttered by my right hon. Friend the Chancellor of the Exchequer when he was justifying that exemption in 1937, for they are very pertinent to my case. He said:
    "The view we took was that a public utility company, or in some cases a company established by law which was rendering that kind of service and was by law restricted as regards the profits it distributed or the charges it made, was a class of case which ought to be exempted, because they are not free as others may be to make what profits they please or charge what they like."— [Official Report, 30th June, 1937; col. 2062–3, Vol. 325.]
    That is really the case of the statutory undertakings to which I have referred in regard to this new duty. If I am told
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    by my right hon. Friend who replies that it is not intended that the duty shall apply to these undertakings, I would suggest that, in order to dispel all doubt, the exemption should be inserted, and, therefore, I hope that my right hon. Friend and the Committee will be prepared to accept the Amendment.
    4.0 p.m.
    The Minister Without Portfolio (Mr. Burgin): I have sympathy with the object of this Amendment, and I may tell the Committee at once that it was never intended that water, gas, electric power and other statutory undertakings, as referred to in the Amendment, should come within the Clause. There may be some difficulty, perhaps, in determining whether or not these substances are articles or materials within the wording of the proviso of the proposed new Clause, and what I suggest to my hon. Friend is that he should accept my assurance that it is desired that these substances should not come within the scope of the Duty. Between now and another stage, I will consider whether the appropriate method is to enlarge the definition of what is to be excluded, or whether it would be more appropriate to insert specific words. With the object of the Amendment I am in sympathy. I cannot accept it in form, but perhaps with that assurance my hon. Friend will feel disposed to withdraw the Amendment.
    Mr. Ross Taylor: In view of the assurance of the right hon. Gentleman, for which I thank him, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    4.2 p.m.
    Mr. Pethick-Lawrence: I beg to move, as an Amendment to the proposed new-Clause, in line 16, after "Government," to insert "or any local or public authority."
    If hon. Members will turn to the proposed new Clause which I seek to amend, they will find that it is concerned in Subsection (2) with the character of an armament contract, and in paragraph (c) of that Sub-section, such a contract is defined as:
    "A contract between the person carrying on the business …and His Majesty's Government in the United Kingdom."
    I am seeking by my Amendment to extend that definition so as to cover con-

    661
    tracts not made between the contractor and the Government but made between the contractor and "any local or public authority." To many of us this seems to be a matter of very considerable importance. It was discussed at some length in Committee of Ways and Means when the Resolution was before it last Monday, and if I judged aright the feeling in all parts of the Committee on that occasion there was a widespread opinion that the Bill as drafted was inadequate; and I would go so far as to say that this is one of the matters which is of first importance in considering whether the intentions of the Government really are to make an effective tax and to prevent profiteering by the armament manufacturers, or whether this is a piece of window-dressing in order to make the public think that something effective is being done when in fact very little is being accomplished, and how little that is will not be found out until some years afterwards when the net result of the tax comes to be seen.
    I should be out of order in referring to other Amendments in my name on the Paper, but in order to make the matter clear I think I am entitled to mention them in passing. The first question is the question of the apportionment, which occurs in a previous Clause. The second is the matter of the £200,000 in this proposed new Clause; there is the question of the datum year, which occurs in the next Clause on the Paper in the Chancellor's name; and there is the matter of the very large amount of depreciation which is referred to in the Schedule. Those five matters, of which this is one, are all matters which in my opinion are test questions for the Government. If in all these matters they adhere to the form of the proposals as drafted, I think there will be very little doubt that the proposals are not seriously meant, and that they are simply intended to give the public an impression which will not be realised when the amounts produced prove to be as small as they will be.
    What are the facts as to the Amendment I have moved? The Government recognise perfectly well that armaments do not consist solely of munitions of war. They consist of all sorts of articles and preparations which are the subject of contracts not only for the purpose of waging a war, but for the purpose of maintaining the country, and therefore
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    within limit they propose to put in not merely the work required for fighting but for such things as air-raid precautions. Those things are referred to in Subsection (2) of the proposed new Clause. While the Government do that they propose to exclude from their purview all those contracts made with a local authority. It was pointed out in Committee of Ways and Means that a great many local authorities are compelled to provide air-raid precautions, and in fact public money, in some cases to the extent of 90 per cent., is going into those precautions. Yet the proposal of the Government is to exclude all those contracts. It does seem to some of us to be grotesque that the Government should take that view. I can imagine several answers that the Government may make to the Amendment. They may say, though I cannot see how they can do it, that these proposals are already included; or they may say that they could not be included without some different machinery from that which is provided. That may be true, but in that case it is perfectly open to the Government to find means by which they can certify the contract of the local authorities as coming within the purview of this tax. Therefore I do not think that that will serve to defend the exclusion of these contracts.
    I think I have covered the whole ground. First there is the complete illogicality of excluding these contracts; secondly, there is the large hole in the net that the exclusion will create. It is no use the Minister of Supply designate shaking his head. It is a considerable hole, because first of all it will very likely exclude some of the contractors owing to the limit of £200,000; in the second place it will exclude part of their excess profits, and, thirdly, it will alter the proportion liable to tax as defined in the first of the new Clauses. When we take those three facts together they are bound to have a substantial result. I cannot see any ground on which the Government can resist the Amendment. I believe that that opinion would be supported by all Members who wish to see this tax an effective tax and not merely window-dressing to enable the Government to get away with a fiction.
    4.10 p.m.
    Mr. Burgin:I cannot advise the Committee to accept the Amendment to the proposed new Clause. I say that not on

    663
    grounds of logic but on grounds of practical administration. So far from this being a large hole left open under the scheme of this tax, in reality it amounts to comparatively little, for reasons which I shall explain. The armament profits tax is intended to be something which can be quite easily capable of determination and collection. Where a Government Department places an order it is a relatively simple matter, by a process of ordinary arithmetic and addition, to know at once whether one of these supply contractors has had receipts amounting to £200,000 in a given accounting period. For some time past the three contract-making departments of the Service Departments of the Crown, the Army, Navy and Air Force, have been working in partnership with regard to supply contracts. That process is being continued, and it will be perfectly simple for the Minister of Supply, when the Bill has received the Royal Assent, to say at once that "such and such a supplier is a supplier of armament work amounting in the financial year to £ 200,000 or more." Where the contract is placed by a Government Department that information is in the possession of the Government and is a simple matter of ascertainment. Collection follows on ordinary Income Tax principles and the Inland Revenue Commissioners operate the tax.
    Think what the position would be if, instead of the contracts being contracts placed by Government Departments, the matter was wide enough to include contracts placed by "local authorities or public authorities," whatever that last expression may be intended to mean. In England and Wales alone there are 1,557 local authorities and there are numbers of local authorities in Scotland. There are 1,082 local authorities in England, Wales and Scotland which are entitled to grant under the A.R.P. scheme. There is no method open to the Government for knowing when these local authorities place orders, with whom they place orders or how payments under those orders are effected, and in reality local government is very largely a matter of a great number of relatively small authorities up and down the country keeping alive the spirit of local patriotism. In England there are 28 metropolitan boroughs, 61 county authorities, 83 county boroughs and perhaps 300 muni-
    664
    cipal county boroughs. That is a total of something between 400 and 450. Those will be the main bodies. Does anyone think that contracts placed by the average urban district council or rural district council will amount to £ 200,000 with any one contractor? Of course they will not.
    Mr. Pethick-Lawrence: No one suggests that one local authority will give a contract for £ 200,000, but it may easily happen that a contract given by a local authority will turn the scale, when added to other contracts already given by Government Departments.
    Mr. Burgin: I will proceed a little further with the argument which I was addressing to the Committee. I want the Committee to understand that this is not a question of whether orders by a number of small authorities will or will not amount to £200,000 in a particular case. I ask them to look at the scope of what we are discussing. The greater part of the expenditure on air-raid precautions work is by the central Government. The greater part of the orders for steel shelters, sandbags, gas-masks and the like, are placed by Government Departments. All those supplies come within the ambit of the tax. For the year 1939, the expenditure of local authorities on air-raid precautions was something like £7,000,000, whereas the expenditure of the central government for like purposes was £34,000,000. The Committee will see that we are dealing with a relatively small section of the defence preparations expenditure. This Clause is a definition of "armament contract" and we are discussing the question of whether it is to go outside the scope of contracts placed by Government Departments. The right hon. Gentleman's suggestion is, from the point of view of administration, impracticable. It would need a very large machine to operate it. It would mean keeping a tremendous volume of data only to be employed in a relatively small number of cases, and, frankly, it would be the type of data, the collection of which would not be worth while.
    Mr. Marshall: Do we understand that the £ 7,000,000 is expenditure out of their own resources by local authorities, or is it aided by the Government?
    Mr. Burgin: The £ 7,000,000 is that proportion of local government expenditure in respect of which there is a national

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    grant. The total expenditure is something like £9,000,000.
    Mr. Marshall: Then £2,000,000 is out of their own resources?
    Mr. Burgin: Yes. I wanted to give the Committee at an early stage the attitude of the Government with regard to the point about local authorities.
    Let me now refer to the other words of the Amendment "or public authority." I take it that would include public utility undertakings, railways, docks, harbours and some of the larger employers, in connection with screening of lights and matters of that kind. I cannot believe that the Committee intends armaments to include such matters. Expenditure by the Mersey Docks and Harbour Board, to take an example at random, on providing additional dock facilities, or laying down an additional siding for the clearance of the docks, or the storage of extra materials, could not, in the ordinary sense of words, be regarded as expenditure on arms. The notion of the Government in imposing the tax is something different. It is that the Government, meaning not merely the three Defence Services but also the Civil Defence authority, places contracts with suppliers of recognised materials for the conduct of the preparations for Defence; that those contracts are easily ascertainable; that they are placed in relatively large amounts with relatively few people. There will be very little conflict as to whether a firm is or is not within the £ 200,000 limit in a particular year; there will usually be a clear dividing line. But I suggest that a firm screening its windows by putting in extra blinds, or a dock company putting in an extra siding, or an electricity undertaking putting in a spare generator, cannot be said to be contributing to the armaments programme, without going completely outside the ordinary conception of armament contracts. I, therefore, ask the Committee to reject the Amendment.
    4.20 p.m.
    Mr. Sandys: My right hon. Friend tells us that the Government have not at their disposal the means of collecting this tax. I find it hard to understand why that should be so, but if he tells us that, we are powerless to press him to impose a tax which he says it is beyond his power to collect. I am in entire sympathy with the proposal of the right hon. Gentleman
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    the Member for East Edinburgh (Mr. Pethick-Lawrence). Had he not put down his Amendment, I would have put down such an Amendment myself, in a more complete form. The Amendment which I have put upon the Paper is an extension of the right hon. Gentleman's proposal. I cannot understand the attitude of the Minister. It seems to me that the purpose of this tax is not to hit a particular category of industrialists just because they are armament-makers. We do not recognise that there is anything wrong in being an armaments firm, though certain hon. Members opposite would like to do away with them. That is not the issue here. The fact that a particular firm produces a particular kind of equipment or appliances or munitions required for certain aspects of defence, does not put them into a different category, as far as the present discussion is concerned, from another firm which is producing other forms of equipment and materials required for other aspects of defence. I understood from the Chancellor of the Exchequer when he announced this tax that it was the intention of the Government to make its scope as wide as possible, and that it was only in exceptional cases, such as that of food and one or two other matters to which the Chancellor referred specifically, that contractors would be specially exempted by the Minister of Supply.
    As I say, the purpose of the tax is not to penalise specific armament firms carrying on a specific kind of production. Its purpose is to meet the demand which is common to all parties and all sections in the country, that measures should be taken to see that neither individuals nor big firms shall derive profit and benefit from the nation's needs, that they shall not obtain advantages which they would not normally obtain, merely as a result of the country's danger. In so far as the Government accept that principle, surely they must accept the consequence of it, which is that any firm which is obtaining large profits as a result of the disturbed international situation and as a result of the demand for special defence precautions, whether in the field of the fighting forces or in the field of Civil Defence, shall be included. The matter of Civil Defence has been specifically introduced by the Government themselves. I cannot understand why, when they have accepted the principle that Civil

    667
    Defence should be included, they should seek to exclude the very large expenditure of local authorities. I am not dealing here with the actual figures, but I think that that expenditure is larger than my right hon. Friend has suggested. Anybody who has followed the provisions of the Air-Raid Precautions Act and of the Civil Defence Bill must realise the wide scope of the expenditure involved, and how much of it will be incurred by the local authorities and not directly by the Government. When I first looked at this proposal I was reassured by the reference to Section 9 of the Air-Raid Precautions Act, 1937. Incidentally, my right hon. Friend the Chancellor of the Exchequer assured me that he intended to bring the requirements of the Civil Defence Bill within the scope of the tax. Section 9 of the Air-Raid Precautions Act, 1937, covers any expenses incurred with the consent of the Treasury by the Secretary of State in the general superintendence and direction of measures taken under the Act, but it goes on to refer to:
    "paying to local authorities the grants payable under this Act."
    I imagined that the tax would therefore cover expenditure incurred by local authorities. I had, however, overlooked the fact that paragraph (a) (iii) of Subsection (2) of this Clause, which refers to Section 9 of the Air-Raid Precautions Act, 1937, was governed by the earlier words—
    " a contract between the persons carrying on the business and His Majesty's Government."
    which limits the whole thing to such contracts. Therefore, this other expenditure does not, apparently, come within the scope of this tax at all. I do not propose to press my right hon. Friend on the matter at this stage. He has declined to accept the Amendment on the ground that, for technical reasons, the tax could not be collected in these cases. I am not in a position to examine the validity of that argument, but I ask him, between now and the Report stage, to consult those who are in the position to know how such taxes can be collected, and to see whether some means cannot be found of bringing the large expenditure of local authorities within the scope of the tax.
    4.26 p.m.
    Mr. Tinker: I hope the right hon. Gentleman opposite will take this Amendment in the spirit in which it has been
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    moved. We are anxious to help the Government in this matter. I take it that the Government's intention is that something shall be paid back to the State out of excessive profits made on armaments. It is on those lines that we are prepared to help. Incidentally, I take exception to the proposed limit of £200,000. I think it might have been much less but if that figure is to be fixed, then all contracts coming to any firm should be brought under one head, whether they come from local authorities or public authorities, or Government Departments. If they combine to make up £ 200,000 then the firm should be liable. Suppose a firm gets a £100,000 contract from the Government, and then gets a £50,000 contract from another source and a further £50,000 contract from a third source. According to this Clause as it stands, they could not be called upon to pay any tax because they would be within the £ 200,000 limit as far as the Government contract was concerned. There should be no difficulty in bringing together all the orders given from these various sources to one firm, and if an enlarged profit has been made on those orders, some of it ought to go back to the State. It is in that spirit that the Amendment is meant, and I do not think the Government should lightly turn down any attempt to help them in this matter. I do not think the attitude ought to be that of the difficulty of collecting the tax and the length of time that it would take to get it together. We believe that it can be levied. This is a national emergency call, and it is very unfair that any firm should be able to get away with excessive profits. Therefore, I think that after the appeal that has been made for further examination of the question, the right hon. Gentleman will give a little time before the Report stage to see whether or not it is workable. If he is satisfied that it cannot be worked, we must accept that, but I hope he will look again into the matter.
    4.31 p.m.
    Mr. Marshall:It appears to me that the right hon. Gentleman put before the Committee a number of unreal difficulties. In the first place, he spoke about the difficulty of getting accurate information from the large number of local authorities in the country, but the Government, with their vast machinery, have all kinds of means of extracting information from the local authorities, and from that point of

    669
    view I do not think there is any difficulty at all. The right hon. Gentleman admitted that local authorities to-day were spending £2,000,000 out of their own resources, and I assume that that money is spent on productions which would likely come within the ambit of this tax. I want to say that that expenditure during the next few years, whether or not we have a war, is likely to increase very substantially. As a consequence, the right hon. Gentleman is denying himself of the opportunity of getting quite a considerable return from contracts that local authorities are placing to-day. It is possible, as the Clause is drawn, for a particular firm to supply 100 local authorities, and I have no doubt that many of them do supply special articles in that way, but let us assume that a contract with numerous local authorities comes to £300,000. Under the Clause as it is you will not get a halfpenny in respect of this tax from such huge contracts as that.
    Let us take another case. It may be that a firm has contracts with the Government reaching the stipulated figure of £ 200,000. On top of that, it may have contracts for another £ 100,000 with various local authorities, but that £ 100,000 is absolutely cut out for the purposes of this tax by the right hon. Gentleman's Clause. I suggest that there must be some way of connecting these two. I admit that there are not many local authorities whose contracts would reach the figure of £ 200,000 in any charge-able year. It may be that the London County Council and certain other county councils would reach that figure, but I think we can admit straight away that the majority of local authorities would not. But they spend £ 20,000 here and £ 30,000 there, and I think there should be some way of bringing those local authority contracts within the scope of this tax. I do not know whether cement is included in the provisions of this Clause, but most of us who have been on local authorities know how, by a ring, the price of cement can go up in one week, thereby mulcting local authorities in an expenditure of thousands of pounds. I can quite imagine that the supply of this very necessary material would have to go up if hostilities should come about, but whether or not that were so, the local authorities are using an ever increasing amount of this material, and I cannot imagine the right hon.
    670
    Gentleman excluding contracts of that nature, with any reasonableness, at any rate. I think he ought to apply his mind to bringing forward some scheme which will connect the contracts with the Government and the local authorities together, in order that the tax may be extracted from the numerous contracts which local authorities have to make to-day.
    4.35 p.m.
    Mr. Benson: I think the argument of the right hon. Gentleman was that the multiplicity of local authorities is so great that to deal with this matter efficiently was quite beyond the power of the Board of Inland Revenue. I think he gave the number of authorities that would be involved as something over 1,000.
    Mr. Burgin: The number is 1,082.
    Mr. Benson: That is undoubtedly a big figure, but the Board of Inland Revenue are dealing with three or four million Income Tax payers, they deal with 97,000 Surtax payers, and they deal with anything up to 200,000 estates that come under review for death duties. In view of these facts and of the fact that the Board of Inland Revenue has machinery for dealing, not with thousands, but with many millions, of incomes, I really cannot accept the argument that to ask the Board to deal with another 1,000 persons would break their backs, unless, of course, they suddenly develop creeping paralysis. These municipal authorities have their accounts properly audited. The Government have details in regard to £ 7,000,000 out of the £ 9,000,000 that the local authorities spend. They are statutory accounts, and what we are asking is that the Board of Inland Revenue shall take account of a maximum of 1,082 accounts, which are properly and efficiently audited, in addition to the several million accounts with which they are accustomed to deal.
    That is quite a possible proposition, and it is ridiculous to tell the Committee that it cannot be done. Anyhow, even if it is beyond the powers of the Board of Inland Revenue, we are not concerned in this matter to scrape up every penny that ought to be scraped up. There are so many loopholes that even if we do not make the collection of this tax on the expenditure of local authorities 100 per cent. efficient, it does not matter. If the Minister will grant the principle and will say that the expenditure of local authorities shall, as far as is possible, within

    671
    the weak and puny powers of the Board of Inland Revenue, be subjected to this tax, we will accept it, but merely to turn down the entire principle that local authority expenditure should not rank for tax is illogical, and certainly the defence that the Minister put up is entirely invalid.
    4.39 p.m.
    Mr. Ede: We have now had an opportunity of seeing the wicketkeeper at work, and I understand why we have a long stop. The right hon. Gentleman said that the amount with which we are dealing is only £7,000,000 out of a total of £34,000,000, but does that include all the works that are to be placed on the local authorities by the Civil Defence Bill which is not yet law? If it does, I cannot make out how the Treasury have arrived at any estimate, because, quite frankly, the big local authorities are appalled at the expense that they are going to have to encounter even after they have received the Government grant. I cannot understand the figure of £7000,000. I am a member of one quite substantial local authority, the Surrey County Council, and our bill for providing trenches for the elementary and secondary schools in our county, a bill which has already been approved by the Board of Education for a 50 per cent. grant, is £291,000. When we go to the people who are supplying us with the materials that will be necessary to enable us to construct these trenches and keep them in a reasonably permanent form, we are told, "You can only have a very limited delivery each week, because we have already entered into contracts with other education authorities which want the same kind of material." That is one thing alone, with one county council, and when I sit on the emergency committee of the county council which is dealing generally with the provisions under the Air-Raid Precautions Act and under the Civil Defence Bill which we have been asked to take into consideration, I am astounded at the width and the variety of the expenses that we have to incur.
    The right hon. Gentleman has just left the Ministry of Transport, but I think that before he left, the Ministry asked us to make preparations to have bridge materials for all the important bridges in the county, including all the bridges over the Thames from Chiswick to Staines, and that expenditure on materials which are clearly within the range of armaments,
    672
    namely, iron, steel, and concrete, is tremendous. I cannot help thinking that this figure of £ 7,000,000 is a substantial under-estimate. Frankly, as one who is engaged for one county and as one who, as chairman of the air-raid precautions committee of the County Councils Association, has some idea of the difficulties confronting the other counties, without including the big county boroughs such as that which my hon. Friend the Member for the Brightside Division (Mr. Marshall) serves, I cannot understand how this figure is limited to £ 7,000,000 in one year. I think that must be the amount under the Air-Raid Precautions Act, based on the estimates for last year.
    Mr. Burgin: On my information— I will make further inquiries—it is the estimated total expenditure of local authorities on A.R.P. work in the year 1939.
    Mr. Ede: That clearly cannot include the work under the Civil Defence Bill on such things as underground shelters, for which we have not yet got the power to take proceedings, and for which a very substantial amount of material will be required. However, I will leave that point. Clearly, it is a question of fact and can be ascertained, and the statement that I made I made on good faith, on the limited information at my disposal. Now I come to the question of the difficulty of entering into the accounts. The right hon. Gentleman has been Minister of Transport, and he knows the meticulous audit that is made of the accounts of local authorities before they can get a striver out of his Department; and no one imagines that the Lord Privy Seal, with his experience at the Home Office, will be less meticulous in his examination of the accounts. No one has ever suggested that police accounts are less carefully audited by the Home Office than the county engineer's accounts are audited by the Ministry of Transport. These accounts will all be audited and every receipt will be produced to a departmental auditor when the annual examination of the accounts takes place. Therefore, it will be information within the knowledge of one Department of the Government— every penny that has been spent for this particular purpose—and I hope the right hon. Gentleman will think again before he finally turns down the proposal that local authorities should be included.

    673
    I am sure his decision will be received with the greatest possible disappointment by the local authorities themselves, because our experience last September, when we had suddenly to order considerable quantities of materials such as sand-bags, timber, and concrete, was brought before the House. A statement was made by the clerk of the West Riding County Council, for instance, with regard to the way in which prices were put up. It makes us feel that unless we are protected by being brought within the ambit of this tax, we may very well find that some of the cases that I mentioned in my speech last night on a previous Clause may work out in this way, that while very small profits will be made on the work done for the local authorities, where the firm is doing work partly for Government Departments and partly for local authorities, a very different price will be asked from the local authorities compared with that which is asked from the Government.
    These Clauses are brought in pursuance of the Prime Minister's pledge, when he said that he was going to introduce compulsory military training and that something would be done towards what was commonly known as the conscription of wealth. I have not heard it said that men will not be called up from small villages and hamlets because it is not worth while getting only one or two from a particular village or hamlet. Everyone who is of the prescribed age is being brought under the Military Training Act, and it seems to me that every contract concerned with National Defence, whether the contract is placed by a Government Department or by a local authority, should be brought within the ambit of this tax. On the analogy on which the whole tax is founded there is no ground for saying that to do what we suggest in regard to the contracts let by local authorities, with a substantial Government grant behind them— the placing of the contract merely happens because it is more convenient for the local authority to do it than the Government— the Government might be overwhelmed by the details. If they are going to audit the accounts, surely, there is no reason why they should not use the information they so obtain in order to ensure that this tax falls on everyone upon whom the people outside this House think it ought to fall.
    4.48 p.m.
    Mr. Burgin: I much appreciate the spirit in which the Committee have dealt with this problem. They will understand that nobody speaking on behalf of the Government would wish to give up revenue or any chance of obtaining revenue, but, on the information placed at my disposal by my advisers and experts, I feel obliged to say that it would be impracticable to make the extension for which hon. Members opposite have asked. After 12 months of working it may be found possible to widen the class of contract, including contracts placed direct with contractors by local authorities, but for the moment, on the information before me, realising many of the points which have been raised and that there is the possibility of contractors putting prices up against local authorities in a time of emergency, the only promise and assurance I can give to the Committee is that as far as possible all common services shall be the subject matter of central Government purchases.
    In addition to the items which I mentioned in my first speech in resisting the Amendment, namely, steel shelters, gas masks and a number of other things, I have been supplied with a further list of typical items of common user which are the subject of central Government purchase— fire engines, steel struts, fire-fighting hose and bleaching powder. In other words, wherever there is a recognition by the central Government that some particular substance will be wanted in very large quantities by local authorities up and down the country, then it may well be that the practice and normal rule should be that the acquisition of large stocks should be the subject matter of central Government purchase and should come within this Clause, rather than that the goods should be allowed to be purchased locally.
    I think that hon. Members are underestimating the difficulties, just as they suggest, some of them, that some of the difficulties I am putting forward may be unreal. For instance, the hon. Member for Chesterfield (Mr. Benson) talks of the Inland Revenue auditing 1,082 accounts. First of all it is the Ministry of Supply which has to designate the taxpayer who comes within the ambit of this Clause. The matter never gets to the Inland Revenue authorities at all until the declara-

    675
    tion has been made by the Minister of Supply that such-and-such a firm comes within the ambit of the Clause. The question is not the audit by the Inland Revenue of 1,082 accounts, but the examination of 1,082 accounts of 1,082 buyers from a limitless number of suppliers. The matter has been surveyed, and, broadly, it is found that these are purchases of a very large number of substances locally in small quantities from a. very large number of different suppliers.
    Mention has been made of cement. That comes within armaments contracts. It is dealt with in the Clause which refers to the definition of armaments contracts, but it is only included if the contract is made between a Government Department and a contractor who is building or supplying materials for works.
    Mr. Sandys: I am sure the Committee appreciate the importance of the assurance which my right hon. Friend has given, that it is his object to bring as many firms as possible within the scope of the tax, and that the Government will buy centrally materials and appliances which will be required by local authorities in large quantities. Previously, my right hon. Friend referred to the question of steel shelters. Can he give a similar assurance in regard to the steel shelters which have to be bought by individuals whose incomes are over £250 a year? They would not come under the category of goods purchased by the Government, but it is obviously desirable that the supply of those steel shelters should be taxable, although in fact the individual is going to be the eventual purchaser.
    Mr. Burgin: I am much obliged to my hon. Friend. I cannot give an assurance immediately, but I will look into the point and see whether it is the intention of my right hon. Friend the Lord Privy Seal to make purchases in that way. I wanted to give an assurance to the Committee as generally and as roundly as possible that where it is possible to make a central purchase— clearly the arguments that have been addressed to the Committee are strongly in favour of that—it should be done. The hon. Member opposite asked me about my figure of £7,000,000. I want to be perfectly frank. On the information I have before me, I am thinking of the estimates as known to the Department at the present time. I agree that there may be other obligations under the Civil Defence Act, but it is probable that these will not come as expenditure during the current year. The total figure of the Estimates so far for local government expenditure on air-raid precautions for the year 1939 is £9,000,000, of which £ 7,000,000 is the portion covered by the grants from Exchequer funds. That is the information we have. I and my advisers will consider most carefully the remarks made by hon. Members, but I should not like the Committee to receive any encouragement that the definition of armament contracts will be enlarged this year to include local government contracts. The point, however, is a substantial one and is worthy of consideration.
    Question put, "That those words be there inserted."
    The Committee divided: Ayes, 107; Noes, 179.

    Division No.203.]

    AYES.

    [4.55 p.m.

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

    Ede, J.C.

    Jenkins, A. (Pontypool)

    Adamson, Jennie L. (Dartford)

    Edwards, Sir C. (Bedwellty)

    Jenkins, Sir W. (Neath)

    Adamson, W, M.

    Frankel, D.

    Jones, A. C. (Shipley)

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

    Gallacher, W.

    Kennedy, Rt. Hon. T.

    Ammon, C. G.

    Gardner, B. W.

    Kirby, B. V.

    Anderson, F. (Whitehaven)

    George, Major G. Lloyd (Pembroke)

    Kirkwood, D.

    Banfield, J. W.

    George, Megan Lloyd (Anglesey)

    Lathan, G.

    Batey, J,

    Graham, D. M. (Hamilton)

    Lawson, J. J.

    Bellenger, F. J.

    Green, W. H. (Deptford)

    Leach, W.

    Benson, G.

    Greenwood, Rt. Hon. A.

    Leonard, W.

    Bevan, A.

    Grenfell, D, R.

    Leslie, J. R.

    Broad, F. A.

    Griffiths, J. (Llanelly)

    Logan, D. G.

    Brown, C. (Mansfield)

    Groves, T. E.

    Lunn, W.

    Burke, W. A.

    Hall, J. H, (Whitechapel)

    Macdonald, G. (Ince)

    Cluse, W. S.

    Harris, Sir P. A.

    McEntee, V. La T.

    Cocks, F. S.

    Hayday, A.

    McGhee, H. G.

    Collindridge, F.

    Henderson, A. (Kingswinford)

    MacLaren, A.

    Cove, W. G.

    Henderson, J. (Ardwick)

    Mainwaring, W. H.

    Daggar, Q

    Henderson, T. (Tradeston)

    Mander, G. le M.

    Davidson, J. J. (Maryhill)

    Hills, A. (Pontefract)

    Marshall, F.

    Davies, R. J. (Westhoughton)

    Hopkin, D.

    Mathers, G.

    Dobbie, W.

    Isaacs, G. A.

    Maxton, J.

    Montague, F.

    Salter, Sir J. Arthur (Oxford U.)

    Thorne, W.

    Morrison, Rt. Hon. H. (Haskney, f.)

    Sanders, W. S.

    Tinker, J. J.

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

    Seely, Sir H. M.

    Viant, S. P.

    Naylor, T. E.

    Sexton, T. M.

    Walker, J.

    Noel-Baker, P. J.

    Silver man, S. S.

    Watson, W. McL.

    Paling, W.

    Simpson, F. B.

    Westwood, J.

    Parkinson, J. A.

    Smith, Ben (Rotherhlthe)

    White, H. Graham

    Pearson, A.

    Smith, E. (Stoke)

    Williams, E. J. (Ogmore)

    Pethick-Lawrence, Rt. Hon. F. W.

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

    Williams, T. (Don Valley)

    Poole, C. C.

    Smith, T. (Normanton)

    Wilmot, John

    Price, M. P.

    Stephen, C.

    Woods, G. S. (Finsbury)

    Quibell, D. J. K.

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

    Riley, B.

    Stokes, R. R.

    TELLERS FOR THE AYES.—

    Ritson, J.

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

    Mr. Charleton and Mr. Whiteley.

    Robinson, W. A. (St. Helens)

    Taylor, R. J. (Morpeth)

    NOES

    Acland, Sir R. T. D.

    Fox, Sir G. W. G.

    Peters, Dr. S. J.

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

    Fremantle, Sir F. E.

    Petherick, M.

    Albery, Sir Irving

    Furness, S. N.

    Pickthorn, K. W. M.

    Allen, Col. J. Sandeman (B'knhead)

    Gluckstein, L. H.

    Pilkington, R.

    Anstruther-Gray, W. J.

    Glyn, Major Sir R. G. C.

    Plugge, Capt. L. F.

    Aske, Sir R. W.

    Goldie, N. B.

    Ponsonby, Col. C. E

    Astor, Viscountess (Plymouth, Sutton)

    Graham, Captain A. C. (Wirral)

    Procter, Major H. A.

    Baillie, Sir A. W. M.

    Granville, E. L.

    Radford, E. A.

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

    Greene, W. P. C. (Worcester)

    Ramsay, Captain A. H. M.

    Baxter, A. Beverley

    Gretton, Cot. Rt. Hon. J.

    Ramsden, Sir E.

    Beauchamp, Sir B. C.

    Gridley, Sir A. B.

    Rickards, G. W. (Skipton)

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

    Grigg, Sir E. W. M.

    Ropner, Colonel L.

    Beechman, N. A.

    Hacking, Rt. Hon. Sir D. H.

    Rosbotham,Sir. T.

    Bennett, Sir E. N.

    Hannon, Sir P. J. H.

    Ross Taylor, W. (Woodbridge)

    Bernays, R. H.

    Haslam, Henry (Horncastle)

    Rothschild, J. A. de

    Blair, Sir R.

    Haslam, Sir J. (Bolton)

    Rowlands, G.

    Bossom, A. C.

    Heilgers, Captain F. F. A.

    Royds, Admiral Sir P. M. R.

    Braithwaite, J. Gurney (Holderness)

    Hely-Hutchinson, M. R.

    Russell, Sir Alexander

    Briscoe, Capt. R. G.

    Heneage, Lieut.-Colonel A. P.

    Russell, S. H. M. (Darwen)

    Brocklebank, Sir Edmund

    Hepworth, J.

    Samuel, M. R. A.

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

    Herbert, Lt.-Col. J. A. (Monmouth)

    Sandeman, Sir N. S.

    Bull, B. B.

    Higgs, W. F.

    Scott, Lord William

    Bullock, Capt. M.

    Holdsworth. H.

    Shakespeare, G. H.

    Burgin, Rt. Hon. E. L.

    Horsbrugh, Florence

    Shaw, Captain W. T. (Forfar)

    Butler, Rt. Hon. R. A.

    Howitt. Dr. A. B.

    Shepperson,Sir, E.W

    Campbell, Sir E. T.

    Hudson, Capt. A. U. M. (Hack,

    Simon, Rt. Hon. Sir J. A.

    Carver, Major W. H.

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

    Smiles, Lieut.Colonel Sir

    Castlereagh, Viscount

    Hunloke, H. P.

    Smith, Sir R. W. (Aberdeen)

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

    Hurd, Sir P. A.

    Snadden, W. McN.

    Cazalet, Thelma (lslington, E.)

    Joel, D. J. B.

    Somerset, T.

    Cazalet, Capt. V. A. (Chippenham)

    Hutchinson, G. C.

    Spears, Brigadier-General E. L.

    Channon, H.

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

    Spens, W. P.

    Chapman, Sir S. (Edinburgh, S.)

    Lambert, Rt. Hon. G.

    Stewart, J, Henderson (File, E.)

    Colfox, Major Sir W. P.

    Lancaster, Lieut.-Colonel C. G.

    Stewart, William J. (Belfast, S.)

    Colville, Rt. Hon. John

    Levy, T.

    Strauss, H. G. (Norwich)

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

    Liddall, W. S.

    Strickland, Captain W. F.

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

    Lipson, D. L.

    Stuart, Lord C. Crichton- (N'thw'h)

    Croft, Brig.-Gen. Sir H. Page

    Little, J.

    Stuart, Rt. Hon. J. (Moray and Nairn)

    Crooke, Sir J. Smedley

    Loftus, P. C.

    Sueter, Rear-Admiral Sir M. F.

    Crookshank, Capt. Rt. Hon. H. F. C

    MacAndrew, Colonel Sir C. G.

    Sutcliffe, H,

    Crowder, J. F. E.

    Macdonald, Capt. P. (Isle of Wight)

    Tasker, Sir R. I.

    Cruddas, Col. B.

    McEwen, Capt.J. H. F.

    Taylor, C. S. (Eastbourne)

    Davidson, Viscountess

    McKie, J. H.

    Thorneycroft, G, E. P.

    Davison, Sir W. H.

    Macnamara, Lt.-Col. J. R. J.

    Touche, G. C.

    De la Bèer, R.

    Makins, Brigadier-General Sir Ernest

    Wallace, Capt. Rt. Hon. Euan

    Denman, Hon. R. D.

    Manningham-Buller, Sir M.

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

    Dodd, J. S.

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

    Wardlaw-Milne, Sir J. S.

    Doland, G. F.

    Markham, S. F.

    Warrander, Sir V.

    Donner, P. W.

    Maxwell, Hon. S. A.

    Waterhouse, Captain C.

    Dugdale, Captain T. L.

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

    Watt, Lt.-Col. G. S. Harvie

    Duncan, J. A. L.

    Mills, Sir F. (Leyton, E.)

    Wayland, Sir W. A.

    Edge, Sir W.

    Mitshell, Sir W. Lane (Streatham)

    Wells, Sir Sydney

    Edmondson, Major Sir J.

    Moore, Lieut.-Col. Sir T. C. R.

    Willoughby de Eresby, Lord

    Elliot, Rt. Hon. W. E.

    Morgan, R. H. (Worcester, Stourbridge)

    Windsor-Clive, Lieut.-Colonel G.

    Ellis, Sir G.

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

    Winterton, Rt. Hon. Earl

    Elliston, Capt. G. S.

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

    Wright, Wing-Commander J. A. C.

    Emmott, C. E. G. C.

    Munro, P.

    York, C

    Entwistle, Sir C. F.

    Neven-Spence, Major B. H. H.

    Evans, Colonel A. (Cardiff, S.)

    Nicholson, G. (Farnham)

    TELLERS FOR THE NOES—

    Evans, E. (Univ. of Wales)

    Orr-Ewing, I. L.

    Lieut-Colonel Kerr and Mr.

    Fleming, E. L.

    Palmer, G. E. H.

    Grimston

    5.6 p.m.
    Mr. Sandys: I beg to move, as an Amendment to the proposed new Clause, in line 16, after "Government," to insert "or any firm or person."
    Certain assurances were given by the Government that they would look into this whole question of the expenditure by bodies other than the Government on matters of Civil Defence, and that, in particular, they would, as far as possible, bring the contractors concerned within the scope of the tax by means of large-scale central purchases. I should like to get a similar assurance with regard to the further category of persons proposed in this Amendment.
    Mr. Burgin: I am willing to give the same assurance with regard to these words.
    Amendment, by leave, withdrawn.
    Mr. Sandys: I beg to move, as an Amendment to the proposed new Clause, in line 18, after the second "forces" to insert:
    "or for the purposes of any enactment (whether passed before or after the passing of this Act) relating to civil defence."
    The purpose of the Amendment is to include within the scope of the tax certain matters which do not appear at present to be included and which I cannot help feeling that the Government intended in the first place to include. As it stands the tax only covers the expenditure referred to in Section 9 of the Air-Raid Precautions Act, 1937. That specifies:
    "expenses incurred with the consent of the Treasury by the Secretary of State in the general superintendence and direction of measures taken under this Act or in providing such services and training such persons and acquiring, on behalf of His Majesty, such equipment, appliances and other material as the Secretary of State considers it necessary to furnish."
    The words "equipment, appliances and other material" are rather confined, and do not cover by any means all the expenditure that is likely to be incurred even by the Government itself in the course of its Civil Defence activities. The purpose of the Amendment is to cover expenditure which is likely to be incurred by the Government to meet the requirements of the Civil Defence Bill such as is not already covered by Section 9 of the Act of 1937. In particular, it is intended to cover expenditure upon the execution of works which are not covered
    680
    at all by that Section of the Act. Merely "equipment, appliances and material" are referred to. As the Clause stands, the Government could not include within its scope contracts even, say, for the construction of air-raid shelters in Government offices in Whitehall. Even if the Government are not prepared to accept the right hon. Gentleman's Amendment regarding local authorities, it seems clear that it must be their intention to cover ail direct contracts regarding any form of work, whether the manufacture of appliances, or the digging of trenches, or the erection of shelters for which they are directly responsible.
    5.11 p.m.
    Mr. Pethick-Lawrence: As I understand it, the intention at any rate of the Amendment is the same as mine, to insert:
    "or in any Act of the present session to make further provision for civil defence."
    The real point is this. As I see it, we are in doubt as to whether the Clause as originally drafted is sufficiently all- embracing to cover all the matters which we think, and I believe the Government also think, ought to be included in the purview of the tax, at any rate as far as orders by the Government are concerned. I cannot help feeling that the Government must wish that all those things should be included. If they can tell us that it is in the Clause as drafted, we shall be satisfied but, if it is not so drafted, I hope they will be able to accept this Amendment in substance.
    5.13 p.m.
    The Chancellor of the Exchequer (Sir John Simon): What the right hon. Gentleman says is right. As the Clause is drafted, the Government contracts that were included were under three heads, (i), (ii) and (iii), and the third head was:
    "a contract for the supply of any such equipment, appliances or other materials as are mentioned in Section nine of the Air-Raid Precautions Act, 1937."
    When I moved the Resolution on Monday I was asked by certain Members whether or not we were so planning our tax as to cover contracts made by the Government for the purposes of Civil Defence. I said:
    "I think that all contracts entered into by the Government for these supplies for passive defence are within the scheme."— [Official Report, 26th June, 1939; col. 63, Vol. 349]
    That was certainly the intention. I looked more carefully at the reference to

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    Section 9 of the Air-Raid Precautions Act. I am very far from saying that the draftsman was not quite right in his insertion, though I think it is a little cryptic to the reader. It did not look as if it was all embracing, but I think it was as far as equipment is concerned. Apart from equipment there is also the case of contracts for work which would not necessarily be equipment. Digging holes is not equipment. We may, before we have done this business, go further still. Therefore, I am glad to accept an Amendment which refers not only to the Air-Raid Precautions Act, 1937, but refers to any Act passed now or hereafter dealing with Civil Defence, and I am much obliged to the hon. Gentleman who made the point. It was always our intention to apply this provision to Civil Defence contracts made by the Government, and I have had the words looked at very carefully and feel convinced that they will have the effect of making the Clause all-embracing.
    Amendment agreed to.
    Further Amendments made to the proposed new Clause:
    In line 20, after "for," insert "any of."
    After "purposes," insert "or."
    In line 21, after the second "for," insert "any of."
    In line 22, leave out from "purposes" to the end of line 25.—[Mr. Sandys.]
    5.17 p.m.
    Mr. Pethick-Lawrence: I beg to move, as an Amendment to the proposed new Clause, in line 27, after "works," to insert directly or indirectly."
    At an earlier stage the Chancellor of the Exchequer said that it was the intention that the proposals should cover contractors, sub-contractors to those contractors and, if necessary, sub-contractors ad infinitum. I have had difficulty in finding that that intention is expressed in the Clause. Reading paragraph (b) of Sub-section (2) without expert legal advice it would appear to cover only direct sub-contractors, and the Amendment is designed to give effect to what is, I understand, the intention of the Government.
    5.19 p.m.
    Sir J. Simon: I can well understand the reason for putting down this Amend-
    682
    ment, and for asking this question, for I agree that this point has to be looked at closely, but it sometimes happens that the skilled draftsman, by a neat use of words, does cover all the cases that we want to cover. There is no difference between us as to intentions. We are not limiting this Clause to imposing the duty upon A, who has a contract with the Government, but we want to include B, who is a sub-contractor, and who has a contract with A for the purpose of a Government contract, and also to include C, who has a sub-sub-contract with B; and so on ad infinitum as the right hon. Gentleman said. But that is not a very easy intention to express, and I doubt whether the words of his Amendment "directly or indirectly," would do it, but the Clause in fact does do it. The first provision, which is labelled "(a)"refers to:
    "A contract between the person carrying on the business and His Majesty's Government in the United Kingdom."
    There the person carrying on the business is the person I have called A, and his is the main contract. We want to be sure, having fixed the main contract, that B, who has a sub-contract with A, is also caught. He is caught, because the Clause next refers to:
    "A contract under which the person carrying on the business "—
    that is (&)—
    " supplies anything to or executes any work for any other person "—
    namely A—
    "being a contract entered into by that other person for the purpose of enabling him to perform an armament contract."
    By the earlier Sub-section we have already established that in the case supposed A is within the Clause, and now, by reference or application, or walking down the scale, we have got B in. Exactly the same reasoning will show that C, the sub-sub-contractor, will be similarly caught, because he has a contract with B, who has now been identified as what I may call an armament subcontractor. The draftsman was good enough to show me this and I have tried to explain it. At first I suffered from the same disability as the right hon. Gentleman opposite, but when one looks at it carefully one can see that the purpose is effected. It is very neatly put, and there is the advantage that one does not have to say "and so on ad infinitum," be-

    683
    cause every step follows on the one before. I think I can assure the Committee that it is really all right. I am satisfied that we have really caught the sub-contractor and the sub-sub-contractor, and so forth for ever and ever.
    Mr. Pethick-Lawrence: On that explanation I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    5.23 p.m.
    Captain Strickland: I beg to move, as an Amendment to the proposed new Clause, in line 34, at the end, to insert:
    "but only to the extent of any remuneration payable by His Majesty's Government in respect of such agency."
    The purpose of this duty is to tax excess profits that are made by contractors. The basis of the tax will be the total receipts of a business from the Government under armament contract, and an armament contract is defined in Sub-section (2) as being inter alia
    "a contract for the construction of any factory in the United Kingdom which belongs or is to belong to the Crown,"
    This matter introduces the shadow factory. Certain firms and companies have been authorised by the Government to erect, maintain and organise certain factories for the production of Government supplies. The factories themselves do not belong to the Government agent. He is authorised to erect and construct the shadow factory, but merely acts as an agent, and in due course receives from the Government the cheque to pay for the factory. Under the provisions of this Clause that would be one of the receipts which might bring the firm within liability to pay the tax; but there has been no profit whatever made upon the transaction. The Government pays to its agent, which happens to be this company, a cheque for, say, £200,000, and the company pay over the £200,000 to the persons who have built the factory, and in that respect act only as an agent, and I submit that that is not the type of transaction which the Government had in mind in seeking to tax excess profits.
    There is nothing in this Amendment which would exclude any of the profits which are made out of actual trading or management, only any remuneration payable by His Majesty's Government in
    684
    respect of such agency; so that any profits made by this contractor would come under the consideration of the Government for the purposes of this tax; but as regards any grant paid to the company which acts as agent for the Government on which no profit is made that should be definitely excluded, and I do not think that would happen unless this Amendment were accepted.
    5.26 p.m.
    Sir J. Simon: This is a curious point, and I have had it specially looked into, and with great respect to my hon. and gallant Friend I do not think his account of the way in which these matters are usually operated is quite correct. What actually happens is that the Government pay direct, and not through any agent, for the work of construction and the carrying on of the factory. It is not the case that we put somebody else in funds merely that he may hand the money on. The Government pay direct, and all that the agent receives is the agent's remuneration; though, of course, he may, in another connection, be a big armaments contractor, and come under one of the other sub-sections, in which case his profits will all come under review. Therefore, as a practical matter, what the hon. and gallant Gentleman is proposing would not make any difference. It is not the case that the Government hand over £200,000 to Mr. X because he is managing a shadow factory, and X pays that money over to other people. The Government pay the people whose bills are vouched for, and what they pay to the agent is the agent's remuneration.
    I have had inquiries made at the Air Ministry and they tell me that, as far as they know, what I have said represents the invariable practice, but if there were an exception it obviously would be very wrong to treat those who are acting as agents in one way and to treat quite exceptionally somebody else in another way, and I think that as a matter of precaution it would be right to insert this Amendment and I am willing to accept it. But my information is that, as far as we know, it does not make any difference, for the reasons which I have stated. The point simply is that the agency business is remunerated by payment of the agreed remuneration. It is not the case that large sums of money are handed over to be handed on.

    685
    Therefore, in accepting the Amendment I am not altering the collection of the tax or the scope of it.
    5.29 p.m.
    Captain Strickland: It is difficult, of course, for a Member of Parliament to know the exact procedure which is followed in these cases. One has to take the actual wording of the Clause itself. It is not a case only of the construction but of the management, and it is quite possible for those who act as agents to do something for the remuneration given by His Majesty's Government. I believe that in many cases they do actually pay accounts and then submit the accounts to the Government. I may be mistaken, but I should like these words to be inserted in order to make quite sure that the actual payment of any sums on which they are not making a profit will not bring them into the scheme but only so far as they are making profit out of the Government.
    5.31 p.m.
    Mr. Bellenger: Is the right hon. Gentleman quite certain that the insertion of these words will exclude from liability an agent managing a shadow factory for the Government who is engaged at the same time in some other business which would ordinarily incur this A.P.D.?
    Sir J. Simon: That is quite clear and that is what I had to provide. That is certainly so. I believe that in most cases the agency work is entrusted to firms which have very substantial armament contracts, and they would of course be within the earlier part of the Section. What is added to their profits under that head ought not to be more than the agency fee.
    Amendment agreed to.
    5.32 p.m.
    Mr. Noel-Baker: I beg to move, as an Amendment to the proposed new Clause, to leave out lines 35 to 39.
    I move the Amendment in order that the Minister may give an explanation of what the Clause means and how the Government intend to work it. On Monday—I hope the Chancellor of the Exchequer will not think it offensive if I say this—the impression left on the mind of the Committee by the information which he
    686
    gave was a little confused. I have reread what he said, and it does not seem to me that his own conception of the matter was crystal clear. I cannot make head or tail of what the Clause is to do. At one moment a thing appears to be excluded and at another to be included. Cement is to be in and coal is doubtful. Uniforms are voted in and out according to who is to wear them. Broadly speaking, there was no clear line at all. The Chancellor said—I think he was quite right—that he was prepared to make the definition right and to provide that exclusion could be made if required by the Minister.
    In the Debate on Monday, attention was drawn by the hon. Member for Mossley (Mr. Hopkinson) to the proviso. He said it was most cryptic and that he would be glad to have an explanation; whereupon the Chancellor said—I have his words—that the proviso really arose on the draft Clause which, for the convenience of the Committee was printed on the Order Paper although it could not really have any existence until we had decided upon this general resolution. That is true, but it means that he gave no explanation on Monday and that the Committee are entitled to have an explanation now. On Monday, attention was chiefly devoted to supplies for local authorities. We want to know, as far as the Government can tell us, what is to be included in the way of materials in this proviso and how it is to work. It would be of great advantage to know what is to be in and what is to be out. That is fundamental for the purpose of checking excessive profiteering on preparations for war. What is in our mind is that already in the scheme of this A.P.D. there are gaps through which profiteers can escape, for example in the apportionment of which my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) spoke of £200,000, a limit about which we have our doubts. There is the question of the standard year, to which I shall draw attention in a moment. I want to know whether this is another loophole by means of which another great class of profiteers will escape the tax altogether. If the right hon. Gentleman gives us a satisfactory explanation we shall withdraw the Amendment, but if not we shall press it to a Division.
    5.36 p.m.
    Mr. Burgin: One of the disadvantages of speaking after 12 o' Clock at night is that you are too late for the Official Report for that day, and that what you are saying will not be available in print on the following day. Last night, at a time when we were all a little tired, I gave an explanation of this Clause. One of the difficulties is that my remarks are not now available to hon. Members, so I will try to explain again without having my previous data before me. Let me say again that it is proposed that the Ministry of Supply should issue, at a very early date after the Royal Assent is given to the Bill, an explanatory memorandum so that everybody shall clearly understand exactly how the process of a contractor notifying a sub-contractor and that sub-contractor notifying sub-contractors further down the line, is to be carried out.
    The hon. Member for Derby (Mr. Noel-Baker) asks what the proviso means, whether it is intended to be a loophole to allow a whole class of profiteers to escape. No, it is not intended for anything of the kind. It is thought that in the wider conception of armaments there must be a number of substances not very easy to enumerate seriatim, which ought not, on any reasonable interpretation of words, to be included in the calculation. Food was an example that was given, largely because the substance is not one of which there has been a vastly increased manufacture by reason of the Defence programme. It is much more a user of the particular stocks in a special way rather than an increase of the total. Because there are more people in khaki consuming food and less people not in khaki doing so that does not mean that more food is produced but merely that there is a difference in the use. Food was intended to be a class of article properly to be excluded. Another substance which it seems to me could clearly be excluded would be coal. I do not think it would be possible for a coal merchant when selling coal to know the user to which the coal was to be put. The mere accident that some coal is used for something that goes into armaments does not warrant the inclusion of all coal. It does not seem equitable to say that coal is produced as an armaments supply.
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    If you proceed a little further I think you will find that tobacco should be excluded. I am not giving these articles as a complete list but am endeavouring to tell the Committee how I understand the dispensing power given by the Clause is intended to operate.
    Mr. Bellenger: Does the right hon. Gentleman include railways which are Used for carrying armament supplies?
    Mr. Burgin: We are not talking about the people but about the articles.
    Mr. Bellenger: It is a service.
    Mr. Burgin: I am not talking about services, but about substances—all food, all tobacco and all coal. There may well be other substances of a like character. I have already intimated to the hon. Member who moved an earlier Amendment that the supply of gas, water, electric power and hydraulic power ought probably to be excluded also. I have attempted to give the Committee a sort of idea of the extent to which this Clause is intended to operate. I conclude by saying, as I did last night, that there must be a number of substances not fabricated at all which ought to be excluded, and that a memorandum dealing with the Government's intentions in the matter will be issued for general public information as we progress.
    5.40 p.m.
    Sir Percy Harris: I was surprised to hear that the right hon. Gentleman would exclude public utility services such as water, electricity and gas, all of which are regulated by Acts of Parliament, and cannot be the subject of excessive charges. I am surprised about food. The history of the last War showed that there was more profiteering in bully beef, plum-and-apple jam and various foodstuffs than there was in guns and armaments. It is easier in the right hon. Gentleman's Department to control the price of munitions. It is very easy, through skilful costing, to know what ought to be the cost of guns and rifles or even of uniforms and equipment. It may be difficult when it comes to large contracts for foodstuffs of various quantities and qualities to prevent profiteering. I should not be surprised to hear that in previous wars, particulaly the South African War, excessive profits were made out of the necessity for feeding the armies. Food supply is as essential as is

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    the supply of equipment and ammunition, but there is no reason why a food contractor should be put in a privileged position equal with that of a manufacturer of guns or clothing. I suggest that the right hon. Gentleman should think again. I understand that the right hon. Gentleman is not binding himself.
    Mr. Burgin: In the earlier White Paper, food was put in as being one of the excepted articles. I am therefore binding myself completely.
    Sir P. Harris: I take great exception to that. From the point of view of the public it would be a tragedy. We know that there always are complaints and suspicions about the food supply. While there are complaints from the front that the quality of the food is not good, there are people at home waxing fat on Army contracts for food. It would be a blunder from every point of view to put the food contractor into a privileged position. I see no reason why excessive profits should be made out of the necessities of the State in provisioning the Army. The food contractor should be subject to the same necessities in this Clause as any other contractor. Food is just as essential as ammunition. Many an Army has been defeated because of a shortage of food supply or because of bad quality. Excessive prices may be charged not so much by actual high prices but by the provision of poor quality and the reduction of standards. Incompletely excluding food the right hon. Gentleman will be going entirely against public opinion, when you remember the popular clamour and the general demand in time of war that nobody should profiteer out of the needs and necessities of the nation. I do not see why any profiteer in foodstuffs should be considered more than a profiteer in things like munitions.
    5.44 p.m.
    Mr. Silverman: I am at a loss to understand what is the danger or the injustice which it is intended to guard against by having the proviso in the Clause at all. The Clause will not hit anybody until certain conditions are satisfied. Before anybody comes under the Clause, either his turnover or his receipts from Government contracts or sub-contracts in the accounting period reach £200,000, or his proportion of new Government work to ordinary work is appropriate to bring him within the category of a Government con-
    690
    tractor or sub-contractor of that size; and then no one will come under the Clause until the Minister of Supply himself specifies that the kind of work he is doing is such as to make him reasonably amenable to this kind of taxation. Supposing that a contractor had receipts or turnover within the accounting period sufficient to bring him within the Clause, but that his contracts were for food, on what possible ground is it conceivable that his liability to taxation should be different from what it would be if he were supplying to the Government, for exactly the same class of purposes, some other article?
    What is it that the Minister wants to guard against? Does he want to guard against somebody being made liable to this taxation who is not supplying the Government with articles for general armament purposes? He need not be. There is nothing which compels the Minister to designate a firm. If a contractor is of such a kind that he ought not equitably to be subject to this taxation, the Minister need not designate him. But suppose that the Minister felt a difficulty about not designating him. Suppose that the Minister said: "I must designate him because these contracts that he is getting are really for armament purposes, although they are not for armament goods." If the Minister felt that the kind of contract he was getting, or the kind of business he was doing, was such that he ought, in justice to others and in the proper discharge of his duties under the Clause, to designate him, because he was doing what in effect was an armament business, why should he not be subject to the tax if his contract is of sufficient size? I cannot see why the proviso was thought necessary, or who would be brought under the Clause who ought not to be under the Clause if the proviso were not there. It may be that there is some answer on that point; I feel sure that there must be; but I feel equally sure that it has not been given yet.
    If the matter is left in ambiguity, it is not altogether our fault. It ought not to be left in ambiguity, because it looks as if several people will escape, if the proviso is there, who ought not to escape. The right hon. Gentleman in introducing it, said it was not the intention of its framers or sponsors that a whole class of people should escape who otherwise would be caught. That may be so, and, if he says it, I see no reason why I should not

    691
    accept his word for it. But this Committee is not concerned with the intentions of framers of Clauses and their sponsors here: it is the facts that matter. The right hon. Gentleman said that, after all, there might be some articles that were not fairly suitable for this kind of taxation. He instanced food, and coal, and some other things. But, surely, it all depends upon what the food or coal is wanted for. The right hon. Gentleman shakes his head. I suppose that means that he does not agree.
    Mr. Burgin: If it depended on the use to which the article is put, I would ask the hon. Gentleman to put himself in the position of a taxing authority and consider how he would deal with a substance which is of general use, but which is to be taxed if it goes into certain hands and is not to be taxed if it goes into other hands.
    Mr. Silverman: There is no difficulty about that at all. First of all, the Minister himself has the right to designate or not to designate. The right hon. Gentleman shakes his head again. What is wrong with that? I thought that, under the Clause, nobody would be liable until he was designated by the Minister as a person amenable to this taxation. Is that a mistake?
    Mr. Burgin: The hon. Member is suggesting that, if the Minister knew that someone coming within the Clause was above the limit of £200,000, he had the option whether to make a designation or not. That is not the case.
    Mr. Silverman: The position then would be that, if a firm were supplying the Government with food for storage purposes—I am putting a purely imaginary case—to the extent of £200,000 or more, the Minister would have to designate?
    Mr. Burgin: Not if food were an excluded article.
    Mr. Silverman: I mean without the proviso.
    Mr. Burgin: Certainly, without the proviso.
    Mr. Silverman: Then what harm would be done? If a firm is supplying to the Government, for storage purposes, food of that value, and if the profit it makes out of that Government contract is within the
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    scale of this Clause, why should they escape paying the tax? There is no difficulty about identifying the user. The Government have placed the contract; the Government have ordered the goods; the Government know what they are going to do with the goods. The goods are not going into the shops; they are not going to be sold; they are going to be stored for war purposes. What is the difference between a profit made out of a contract of that kind and a profit made out of an order for shells, which equally are going to be stored? I do not see what the difference is between profit made out of food bought for storage against a time of emergency, and profit made out of shells bought and stored against the same time of emergency. Why should those who make a profit out of the one be taxed and those who make a profit out of the other not be taxed? That is what the right hon. Gentleman has not even attempted to explain, and I cannot see what the explanation is.
    Here is a case where there is no difficulty in distinguishing according to the use to which the goods are to be put. Obviously, if a distinction of this kind is to be made at all, there is a difference between the profit made by a grocer selling goods over the counter for immediate consumption and the profit made by selling a large quantity of such goods for storage purposes. Suppose that the contractor is storing the food himself, under contract with the Government. Suppose that he has a contract with the Government, not to supply the goods for the Government to store, but to store them himself, and suppose that, when the Government come to require the food to be taken out of store, its price has risen, as it well might, and the contractor makes an enormous profit, as he well might do. He would be storing the goods under contract with the Government, and he would be ultimately supplying them to the Government, perhaps under a new contract. By what possible reasoning ought he to escape, as he would under this proviso, from taxation under the Clause? It really seems to me as though the matter has not been examined with the care it deserves, and that the Committee will find it impossible to understand, from what has been said so far, why this proviso was ever put in, if we are to accept the statement that it is not the intention to allow a class of people to escape this taxation who ought not to escape it.
    5.56 p.m.
    Mr. Sandys: I agree with my right hon. Friend that this proviso is an essential part of the machinery of the Clause, and I do not see how the Committee could delete it without fatally impairing the working of the Clause as it is now drafted. But I would ask my right hon. Friend, if he is going to say any more on the matter, to assure us, as I think we wish to be assured, that he will use the powers given to him in the proviso very sparingly indeed. I am a little sorry that he has committed himself to excluding food from the application of this tax. I said earlier, and I wish to emphasise it once again, that the excess profits which we wish to tax under this Clause are not any particular profits derived by any particular businesses, but abnormal profits which have accrued as a result of the defence preparations which the nation has been obliged to undertake as a result of the international situation. We wish to stop people making excessive profits in these special and exceptional circumstances.
    Mr. Bracken: May I remind my hon. Friend that in the last War very large profits were made by the multiple grocers?
    Mr. Sandys: I have said that I am sorry food has been excluded from the operation of this tax, because any profits which have arisen as a result of the nation's need are profits that we wish to tax. I think that the hon. Member for Nelson and Colne (Mr. Silverman) made a valid distinction between food which is used for current consumption and food which is stored as an essentially military precaution— as a defence precaution to meet the possibility of war. Purchases of petrol for storage by the Government will come within the ambit of this tax, whereas in the case of purchases of whale oil, which we understand the Government are purchasing in considerable quantities, the profits of the contractors will not come within the operation of the tax. I would ask my right hon. Friend whether, in granting this exemption with regard to food, he means it to cover, not merely food for current consumption, but also those foodstuffs which the Government are purchasing, and which we hope they will purchase in increasing quantities, for storage purposes?
    6.0.p.m
    Mr. Bellenger: While listening to the hon. Member for West Norwood (Mr. Sandys), I thought he was arguing in support of the case we had advanced. I agree with him that foodstuffs offer possibilities for enormous profits. If the principle behind these Clauses is that the Government want as far as possible to stop profiteering, but in so far as they cannot stop it, to tax it, why should they tax profits derived from making commodities to be used in killing people, and not tax profits derived from other commodities which will be used in attempting to keep people alive until they are killed? In the last War there were certain foodstuffs which the troops in France used to say contributed almost as much to their early decease as did the shells, and large profits were made from them.
    I think we are giving powers to the Minister that are too wide, because, although the hon. Member for West Norwood asks him to use these powers sparingly, it will be entirely within the right hon. Gentleman's discretion, after the Bill becomes an Act, as to what he designates non-taxable commodities. Will these orders which the Minister is going to promulgate come before Parliament for confirmation or rejection, or are we giving him complete power to designate as he thinks fit? If the answer is that the whole power will reside in the Minister alone, without consultation with Parliament, those powers are far too wide. I interrupted the right hon. Gentleman to ask him whether it would be possible to tax increased profits for transport services— it might be railways or it might be road services— which are going to carry these armaments. The right hon. Gentleman evaded that question at the time. Under Sub-section (2, c), we are going to tax the services of those who manage our shadow factories. Why, therefore, should we not tax any excess profits derived, for example, from transport services? I do not know how the explanation that has been given appeals to my hon. Friend the Member for Derby (Mr. Noel-Baker). He told us that if the explanation was not satisfactory we should have to divide. I hope that we shall divide on this, because it is a most important issue.
    6.4 p.m.
    Mr. David Adams: I, like my colleagues, must express my astonishment at the proposals to exclude food. It is generally agreed in the country that, for purposes of offence and defence, food is quite as essential as munitions, and the only explanation that could be given for excluding food would be that the Government are taking such steps as to prevent excessive profits on food. But we are all aware that no such protection is, or could be, given to the public. Therefore, food ought to be included. The hon. Member for West Norwood (Mr. Sandys) is of the same opinion. He began by saying that he was supporting the Minister, and then he went on to lament the fact that the Minister was taking this apparently reactionary step. His arguments were directly in opposition to the exclusion of food and, possibly, other commodities which would be required for armament purposes.
    The Minister has not put up an argument which I thought he might have put up, namely, that there might be some difficulty in designating what food would be required for armament purposes as against other foods required for civilian purposes. Of course, there can be no such difficulty, because the Minister knows the purpose for which such food would be used, because he would be handling it. For him to assert that there is not likely to be any large profit on food would be putting forward an argument which would not bear examination. We are entitled to know specifically the reasons that are animating the Minister to say that one form of armaments, foodstuffs, shall not be charged with armament profits tax, when other forms of armaments, such as shells and guns, will have to bear the tax which the House are unanimous in declaring should be charged on excess profits. We have certainly had no explanation which would justify us in agreeing to the Minister's contentions.
    6.7 p.m.
    Viscountess Astor: I wonder why the Government have left out food, shipping and drink, because in the last War some of the largest fortunes came from profiteering in food and drink. The right hon. and gallant Member for Burton (Colonel Gretton) will bear me witness that before the last War brewers were
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    almost on their last legs, but when the War came along up went the shares. Some of the largest fortunes were made from drink.
    Colonel Gretton: The Noble Lady has forgotten the circumstances. She forgets that brewers' materials were strictly limited by the exigencies and conditions of the War, and that the prices they were allowed to charge for their beer were controlled by the Food Controller.
    Viscountess Astor: That is quite right, but, in spite of that, the brewers were richer after the War than they were before.
    Colonel Gretton: The Noble Lady is making statements that are without foundation.
    Viscountess Astor: I had relations in the trade, and I know all about it. As soon as the War began, the drink trade had to be controlled, but, in spite of that, enormous profits were made. Then take shipping. I cannot remember all the men who came here after the War who had made colossal profits out of shipping. They did not all keep them. The profits disappeared, and so did the men. Some became blue-blooded, and some evaporated; but they made their fortunes from shipping. There is nothing more difficult than to control profiteering in a war. It is not only the rich who do it but all sections. Is it not profiteering for one section to strike for higher wages while others are bleeding at the front?
    The Deputy-Chairman (Colonel Clifton Brown): I would ask the Noble Lady to apply herself more closely to the Amendment.
    Viscountess Astor: I thought it just as well to bring that in. In all seriousness there is nothing I think more repellant than profiteering in food and in drink during a war. If you want money look at the drink trade. Their profits in the last 10 years have been enormous.
    The Deputy-Chairman: It is not a question under this Amendment of whether we want money.
    Viscountess Astor: That question must be in the mind of hon. Members. I ask what explanation can the Government give for leaving out drink, food and shipping, all fruitful sources of revenue? If a war comes they will have to be

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    tackled and I think it would be better for the Government to do something about it now.
    6.11 p.m.
    Mr. Bracken: I never thought I should live to see the day when I should support the Noble Lady. I am much attracted by the excellent and moderate suggestion which was put forward by the hon. Member for South-West Bethnal Green (Sir P. Harris). I cannot see why the Government should exclude very prosperous trades such as the grocery trade from this taxation. I do not know whether the Chancellor wants to go down in history as die grocers' Chancellor, but he certainly will. But why should he bother about the grocery trade? He will remember the poem:
    " The evil-hearted grocer
    He called his mother 'Ma'am,'
    And bowed at her,
    And bobbed at her,
    Her aged soul to damn."
    Look at the profits that grocers made in the last War. As the Noble Lady said, they were ennobled and shunted into another place in serried rows. They made vast profits, and they will do so again. If the Chancellor's recommendations are carried out to their full extent every mother will be taught to say, "Mother, don't put your son into the armaments trade. The maker of armaments is an evil fellow." On the other hand, the grocery profiteer is regarded as a most estimable person.
    The Deputy-Chairman: That is going beyond the Amendment.
    Mr. Bracken: I beg pardon, Colonel Clifton Brown, but, of course, one gets enthusiastic on the subject of grocers. Surely it is very wrong to set apart one small section of the community for this taxation. I know that the Chancellor is more anxious than anybody to get new revenue. I think he has been driven into his present attitude by the Socialist party. They have been for years attacking one section of industry, the armament producers; and now, in a most illogical way, they adopt their present attitude, Just because it suits their book to attack the Government.
    Mr. Silverman: Does the hon. Member mean that there has ever been a time when this party has defended the making of unreasonable profits in any industry?
    Mr. Bracken: The attitude of the Socialist party passes all understanding. If the hon. Member expects me to follow them from one slippery inconsistency to another, I can only say that I should be quite out of order in doing so.
    Mr. Noel-Bakers: The hon. Member knows that our party has always opposed a system which makes production for public needs dependent on private profits. In matters of life and death, it is especially important that production should not be in the hands of people who are making private, profit out of it.
    Mr. Bracken: I heard the hon. Gentleman's most generous tribute to the high principles upon which his party exist, but many Members of his party have lived very comfortably on this private profits system in spite of them—
    The Deputy-Chairman: I must ask the hon. Gentleman to confine himself to the Amendment before the Committee.
    6.15 p.m.
    Mr. Noel-Baker: I hope that the Minister will be better at his third attempt than he was to-day at his second. I admit that some of the arguments used in this Debate have been merely in favour of a general excess profits duty rather than of the extension of his powers in this proviso, but it is certain that we shall have to divide the Committee unless he can tell us a little more. It is evident in all quarters of the Committee that there is a desire that profiteering in food supplied to the Forces in consequence of our present armament expansion should be taxed. Why not? It is only a question of taxing excess profit. You are going to leave normal profit in any case, and in fact a good deal more than normal profit, in view of the very high standard which is taken as a basis. We say that on Army contracts of food we ought now, in a time which the Prime Minister him self has said is not normal peace time, to prevent gross profiteering just as we tried to prevent it during the last War.
    I want again to put another point in connection with food which was mentioned by my hon. Friend the Member for Bassetlaw (Mr. Bellenger). Why should it be the Minister who decides? Parliament ought to have a voice in this matter, and before the final decision on this question is taken Parliament should be able to express its view. There are

    699
    many things on which the Minister has given no information. We are left in great doubt on Monday about what is to be done on uniforms, and I am still in doubt. The Minister did not mention clothing, but the argument about clothing is the same as that about food. Why should there be gross profiteering? I am Sure that if he mentions them he will tell us that they will be included, but he might have used them as an illustration. There is steel.
    Mr. Burgin: Steel was expressly raised last night, and I gave the assurance that it was included.
    Mr. Noel-Baker: I beg the Minister's pardon. I was not able to be here last night, and I have not seen it in the Official Report as it is not yet available. Half the value of the finished armament is, in fact, the value of the steel. Perhaps the right hon. Gentleman answered these questions also. Are copper, nickel, manganese to be put in? They all have a civil use, and they are all essential and are required for war. Immense profits are now being made out of them by people who are supplying them to aggressors who are destroying and attacking British interests all over the world. They certainly ought to be taxed.
    There is another matter to which I hope the Minister will give particular attention and upon which he will be able to give us a specific answer. I refer to oil. Oil contracts for the armed Forces must have increased enormously even since the standard year. Compared with 1934, the oil contracts for the armed Forces have greatly increased, and I take it for granted that oil will be included. I could not at all understand the argument which the Minister used on the general principle that you could not help these things which were of double use. In many cases it is the Government themselves who are paying the price. There is the proportion of turnover which is sold to the Government, in the form of food, oil, clothes, etc. If a man is selling steel or copper, not to the Government, but to the manufacturer of arms, the matter is a little more difficult perhaps, but it is not insuperable. I am certain that in looking at the books of the company you could very easily find the necessary information. I hope that the right hon. Gentleman will give us better information. We say that Parlia-
    700
    ment ought to have a voice in deciding these schedules. I hope that that is going to happen, or we shall have to divide against this proviso, because it is unsatisfactory to leave the matter obscure as it is now.
    6.21 p.m.
    Sir Patrick Harmon: I am bound to say to the Minister, and to the Chancellor of the Exchequer, that they are placing the supporters of the Government in a very difficult situation. I have followed every detail of the Debate since the speech of the hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris), and I fail to see why food should be excluded. [Interruption.] And drink. I can recall the South African war, and anybody who had any experience in connection with contracts in relation to that war will remember the fortunes that were made out of it. Goods sold in preparation for war should certainly pay their quota of taxation. There were certain hon. Gentlemen who came into this House after the Great War who had accumulated immense fortunes owing to contracts connected with the supply of food. Anyone who was familiar with the circumstances of the men in the trenches during the War and realised what food was consumed must know of the immense fortunes that were made by food contractors during that period. I trust that the Minister will discharge his obligations with discretion and care, but, as an ardent supporter of the Government, I cannot feel happy that food is not included when it really becomes an instrument of war.
    6.23 p.m.
    Mr. Collindridge: Since the right hon. Gentleman put his reasons for this proposal before the Committee I have heard three or four supporters of the Government who have indicated that they are not in line with the attitude of the Government on this matter. On many occasions when Government supporters have disagreed with their own Front Bench opinion they have walked into the Division Lobby at the back of the very policy which they have condemned.
    Mr. Bracken: Will the hon. Member remember the anguish caused to us by having to do so?
    Mr. Collindridge: There may have been anguish, but the stern fact is that, when that policy is contrary to the line of

    701
    argument, what they generally adopt in words they do not carry out in deeds. In no case have we heard at all since the right hon. Gentleman replied an argument in favour of his attitude. I sat in this House on Monday and tried to understand his attitude, and I have not understood it yet. There are certain articles which are used normally, but if we were to have a crisis and that crisis developed into a war, there would be more of those commodities consumed than formerly. There was an official attached to His Majesty's Government during the last War stationed at Copenhagen, and he saw commodities from this country which were very much needed by us. These commodities were re-exported from Britain to enemy countries and used against this country in its hour of need. In a future war we might have a shortage of goods, and yet the money received by the people who sold the goods might be greater and the profits very much in excess of normal times. Therefore, we are justified in asking either that the Minister should change his attitude from what it was an hour ago, or that hon. Gentlemen who belong to the Government should walk into the Division Lobby in support of the Amendment.
    6.26 p.m.
    Sir Edward Grigg: I had the misfortune not to hear the Minister, and there fore I am not in possession of his argument, but I have listened to the whole of the rest of the discussion about the Clause and the proviso, and I agree with other hon. Friends of mine who are supporters of the Government in saying that I fail to understand why food and drink are to be omitted from taxation of this character. Certainly some of the greatest profits during the last War were made from food and drink. I do not know anybody who took part in that War who did not consider Machonachie, bully beef, and plum and apple jam as munitions of war. They were certainly so regarded at that time. I presume that this legislation will not only apply in an emergency, but will apply in time of war.
    Mr. Burgin: We are not at war. This is not a Measure dealing with profiteering, requisitioning or prices. We are dealing here with the definition of armament contracts for a special purpose.
    Sir E. Grigg: The fact remains that the Government are acquiring stocks and
    702
    stores for armament purposes, and, therefore, these stocks ought to be subject to the same taxation as all other articles of war. I beg of my right hon. Friend to realise that he it putting a very large number of supporters of the Government in a most embarrassing position. I shall feel quite unable to support the Government on this point, and I hope that he will reconsider the matter.
    6.29 p.m.
    Mr. Levy: I am. an ardent supporter of the Government. During the last War I was an assistant executive officer of food control, and had some opportunity of seeing the enormous profits that were made. Therefore, I want to add my argument to the arguments used by other hon. Members with regard to profiteering. My right hon. Friend said very properly that we were not at war and that this was not going to apply probably when an emergency took place. But the Government are acquiring stocks. These stocks will have to be dealt with sooner or later. They have been acquired and will have to be sold and replaced, and, therefore, I feel that they should be included so as to prevent discrimination between one trade and another.
    6.31 p.m.
    Mr. Burgin: I am conscious that the explanation which I gave to the Committee on the Clause last night was at too late an hour for it to appear in the Official Report to-day, but I have endeavoured by explaining the Clause again to-day to define the Government's intentions in asking the Committee to agree to this proviso. There is agreement in the Committee that some proviso is necessary. The Debate has roamed over what is to come within the terms of the proviso. Let me try to help the Committee. The Clause proceeds on the basis of universality, that articles included in it shall become liable to taxation if the contract itself is an armament contract. Then there is the proviso. Let me say at once that the Government would use the proviso not for the purpose of letting people out, but in order to produce equity should inequity arise. That is the basis on which the proviso is intended to operate. I have not the slightest wish to leave anything out which properly should be included. The conception upon which I have been giving an explanation as to the articles which in my judgment will have to be excluded, has been this

    703
    sort of consideration. We proceed by article, not by person; in other words, it does not matter what it is as long as we are dealing with the article and the material.
    Take the case of coal. I think there would be many difficulties, particularly in the case where coal is sold through middlemen, in tracing the substance through— not usually a very easy matter. In the original conception, food, and certainly food for civilian purposes, for ordinary normal consumption, would appear to come within that same category. I am convinced from the arguments I have heard this afternoon that there must be a class of contract for Army stores which could be identified, and I think hon. Members have rendered a real service by showing that food is not something capable of a globular definition, and that it would necessarily include every article of consumption of food or drink. The Committee has shown that it will be possible to include a category of Army foodstuffs which are easily and clearly identifiable, and which would not produce any inequity. I think the Committee have rendered a real service by making that clear, and I want to say at once that it is not our object to exclude anything which should properly be included. I do not know that it is very easy to define on the spot what type of Army food contracts can properly be included, but certainly from the cases which hon. Members have given, food contracts for the Army, contracts for the normal supply of large quantities for storage, for civilian consumption in time of war, seem to be clearly capable of identification, and I say that the Government are convinced from the Debate that they ought not to be excluded. I think I shall carry the Committee in saying that there are a large number of articles of ordinary consumption, of civilian food, which may properly be excluded.
    Mr. Silverman: If there are such articles which might properly be excluded because they are not of an armament character, why does the right hon. Gentleman retain the proviso? Under the Clause he has to certify that in an accounting period total receipts under Army contracts are more than £ 200,000.
    Mr. Burgin: I am not concerned at the moment with the £ 200,000 limit; there
    704
    may be some substances which, whatever the total, ought nevertheless to be excluded. I think the general sense of the Committee is that we must have the proviso. Obviously, there are some articles which you must exclude. The hon. Member for Derby (Mr. Noel-Baker) put a series of substances to me. He was handicapped by not having heard my earlier statement, and as I did not put them down it may be that I shall forget one or two. Steel, I distinctly said would clearly be included. To talk about armaments and leave steel out would be like "Hamlet" without the Prince of Denmark. He asked whether uniforms were in or out. I think the Chancellor of the Exchequer has said that police uniforms would not be in because they are not for the armed Forces of the Crown, but uniforms for soldiers would certainly come in.
    Mr. Noel-Baker: And clothing?
    Mr. Burgin: That would certainly come within armament contracts. The hon. Member asked me with regard to a number of other substances, but I recollect only one— copper. I should have thought copper would certainly have been included.
    Mr. Noel-Baker: Nickel?
    Mr. Burgin: Certainly.
    Mr. Noel-Baker: And oil?
    Mr. Burgin: The hon. Member is quite right. I beg his pardon for not having put these substances down. Oil certainly is included.
    Viscountess Astor: And drink?
    Mr. Burgin: That comes under another consideration.
    Mr. Noel-Baker: Cement?
    Mr. Burgin: That is quite clearly included.
    Mr. Bracken: The storage of drugs bought in great quantities for the Army?
    Mr. Burgin: I know of no reason why drugs should be excluded. I do not want in this genial cross-examination to be too definite, because I want to give the broad assurance that the idea is the universality of articles and materials, that there are some things which should be

    705
    out, such as the public utility services, and then to add to that list some other things. We want to use the proviso quite sparingly.
    Viscountess Astor: Drink?
    Mr. Burgin: I have said nothing yet which excludes drink.
    Colonel Arthur Evans: Is it not true that the only alcoholic liquor which the Government purchase on behalf of the Forces is rum for the Navy?
    Viscountess Astor: And they do not take it.
    Mr. Burgin: Several hon. Members have referred to what happened in the South African War and in the last War, as if war conditions are comparable with the period in which we are now. The Defence of the Realm Regulations and a number of similar emergency powers will be enacted should an emergency arise, and under those powers there will be food control, price control, requisitioning and control of profiteering, control quite out side anything which is my concern this evening. I am dealing with the definition of "armament contract," and I say that you must have a dispensing power and that the dispensing power should be most sparingly used.
    6.42 p.m.
    Mr. Pethick-Lawrence: The right hon. Gentleman has announced a very considerable concession to the feelings of the Committee, namely, that he does propose to include food in bulk for storage. Members in all quarters of the Committee are grateful to him, but I want to point out that it does not really meet our case. I would suggest that he withdraws the proviso in its present form and that when he has his Schedule right, put it into the Bill at a later stage. It is for the Committee to decide what things should be or should not be included. It is just an accident that some of us thought of the question of food, and in cross-examination the right hon. Gentleman has found out the opinion of the Committee. I think we should have before us a Schedule in which there are items which can be specified in actual detail, and there should be a definition which the Committee would be prepared to accept. I
    706
    cannot advise my hon. Friend to give to the Minister these wide powers which are in the Clause at the present time.
    6.43 p.m.
    Mr. Gallacher: These Clauses are as full of holes as a Dutch cheese, and if the proviso goes in it will be all hole and no cheese. The right hon. Gentleman said that food in bulk under contract for the Army and storage for the civilian population in a time of crisis will come in, but that it would obviously be unfair to bring in food that is going in the ordinary way to the civilian population. The Minister must know that food going to the ordinary civilian population is not the subject of a Government contract. It has nothing whatever to do with the Clause or with the proviso and, therefore, the proviso is not directed to food that is going towards the civilian population but is directed to the supplies of one kind or another which are the subject of Government contract. Will the Minister kindly tell us what commodities subject to Government contract will be ruled out under the proviso?
    6.45 P.m.
    Mr. Bellenger: I should be glad if the right hon. Gentleman would give a reply to the point which I put to him in my speech, and which my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) put in a different way. I said that the powers for which the Minister was asking were too wide, and I asked whether he would not give Parliament an option of saying whether it disagreed or agreed with the orders that he would ultimately make. My right hon. Friend suggested that the Minister should withdraw the proviso until he was able to insert in the Bill a schedule of the articles he was going to exclude. If the right hon. Gentleman will not accept that suggestion— and I take it that he will not— then, will he give Parliament the right to consider those orders which eventually he will make?
    Question put, "That the words proposed to be left out stand part of the proposed Clause."
    The Committee divided: Ayes, 179; Noes, 116.

    Division No. 204.]

    AYES.

    [6.47 p.m.

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

    Furness, S. N.

    Radford, E. A.

    Albery, Sir Irving

    Gluckstein, L. H.

    Ramsden, Sir E.

    Allen, Col. J. Sandeman (B'knhead)

    Gower, Sir R. V.

    Rayner, Major R. H.

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

    Grant-Ferris, Flight-Lieutenant R.

    Reed, A. C. (Exetar)

    Anstruther-Gray, W. J.

    Greene, W. P. C. (Worcester)

    Reid, W. Allan (Derby)

    Apsley, Lord

    Gretton, Col. Rt. Hon. J.

    Rickards, C. W. (Skipton)

    Aske, Sir R. W.

    Gridley, Sir A. B.

    Ropner, Colonel L.

    Baillie, Sir A. W. M.

    Grigg, Sir. E. W. M.

    Rosbotham, Sir T,

    Balfour, G. (Hampstead)

    Grimston, R. V.

    Ross, Major Sir R. D. (Londonderry)

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

    Gritten, W. G. Howard

    Ross Taylor, W. (Woodbridge)

    Beechman, N. A.

    Guinness, T. L. E. B.

    Rowlands, G.

    Blair, Sir R.

    Hannon, Sir P. J. H.

    Royds, Admiral Sir P. M. R.

    Bossom, A. C.

    Haslam, Sir J. (Bolton)

    Russell, Sir Alexander

    Bower, Comdr. R. T.

    Hely-Hutchinson, M. R.

    Russell, S. H. M. (Darwen)

    Bracken, B.

    Hepburn, P. G. T. Buchan-

    Salmon, Sir I.

    Braithwaite, J. Gurney (Holderness)

    Herbert, Lt.-Col. J. A. (Monmouth)

    Salt, E. W.

    Briscoe, Capt. R. G.

    Higgs, W. F.

    Samuel, M. R. A.

    Broadbridge, Sir G. T.

    Hoare, Rt. Hon. Sir S.

    Sandeman, Sir N. S.

    Brocklebank, Sir Edmund

    Horsbrugh, Florence

    Sanderson, Sir F. B.

    Brooke, H. (Lewisham, W.)

    Hudson, Capt. A. U. M. (Hack., N.)

    Sandys, E. D.

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

    Hume, Sir G. H.

    Shepperson, Sir E. W.

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

    Hurd, Sir P. A.

    Simmonds, O. E.

    Bull, B. B.

    Hutchinson, G. C.

    Simon, Rt. Hon. Sir J. A.

    Burgin, Rt. Hon. E. L.

    Joel, D. J. B.

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

    Carver, Major W. H.

    Lamb, Sir J. Q.

    Smiles, Lieut.-Colonel Sir W. D.

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

    Lambert, Rt. Hon. G.

    Smithers, Sir W.

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

    Leech, Sir J. W.

    Snadden, W. McN.

    Channon, H.

    Leighton, Major B. E. P.

    Southby, Commander Sir A. R. J.

    Chapman, Sir S. (Edinburgh, S.)

    Levy, T.

    Spens, W. P.

    Chorlton, A. E. L.

    Liddall, W. S.

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

    Clarke, Colonel R. S. (E. Grinstead)

    Lipson, D. L.

    Stewart, J. Henderson (Fife, E.)

    Colville, Rt. Hon. John

    Little, J.

    Storey, S.

    Conant, Captain R. J. E.

    Llewellin, Colonel J. J.

    Stourton, Major Hon. J. d.

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

    Loftus, P. C.

    Strauss, H. G. (Norwich)

    Courtauld, Major J. S.

    McCorquodale, M. S.

    Strickland, Captain W. F.

    Craven-Ellis, W.

    Macdonald, Capt. P. (Isle of Wight)

    Stuart, Lord C. Crichton- (N'thw'h)

    Croft, Brig.-Gen. Sir H. Page

    McEwen, Capt. J. H. F.

    Stuart, Rt. Hon. J. (Mcray and Nairn)

    Crooke, Sir J. Smedley

    McKie, J. H.

    Sutcliffe, H.

    Crookshank, Capt. Rt. Hon. H, F. C

    Macmillan, H. (Stcokton-on-Tees)

    Tasker, Sir R. I.

    Cross, R. H.

    Macquisten, F. A.

    Taylor, C. S. (Eastbourne)

    Culverwell, C. T.

    Manningham-Buller, Sir M.

    Thomson, Sir J. D. W.

    De Chair, S. S.

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

    Thorneycroft, G. E. P.

    De la Bère, R.

    Markham, S. F.

    Touche, G. C.

    Denman, Hon. R. D.

    Maxwell, Hon. S. A.

    Turton, R. H.

    Donner, P. W.

    Mills, Sir F. (Leyton, E.)

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

    Drewe, C.

    Mills, Major J. D. (New Forest)

    Warrender, Sir V.

    Dugdale, Captain T. L.

    Morgan, R. H. (Worcester, Stourbridge)

    Waterhouse, Captain C.

    Duggan, H. J.

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

    Wayland, Sir W. A

    Dunglass, Lord

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

    Wells, Sir Sydney

    Eastwood, J. F.

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

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

    Edmondson, Major Sir J.

    Munro, P.

    Windsor-Clive, Lieut.-Colonel G.

    Elliot, Rt. Hon. W. E.

    Nall, Sir J.

    Winterton, Rt. Hon. Earl

    Ellis, Sir G.

    Nicolson, Hon. H. G.

    Wolmer, Rt. Hon. Viscount

    Elliston, Capt. G. S.

    O'Connor, Sir Terence J.

    Womersley, Sir W. J.

    Emery, J. F.

    O'Neill, Rt. Hon. Sir Hugh

    Wragg, H.

    Emrys-Evans, P. V.

    Orr-Ewing, I. L.

    Wright, Wing-Commander J. A. C.

    Entwistle, Sir C. F.

    Petherick, M.

    York, C.

    Evans, Colonel A. (Cardiff, S.)

    Pickthorn, K. W. M.

    Everard, Sir William Lindsay

    Pilkington, R.

    TELLERS FOR THE AYES.—

    Fleming, E. L.

    Ponsonby, Col. C. E.

    Lieut.-Colonel Kerr and Lieut.

    Fox, Sir G. W. G.

    Procter, Major H. A.

    Colonel Harvie Watt.

    NOES.

    Acland, Sir R. T. D.

    Chater, D.

    Gardner, B. W.

    Adams, D. (Consett)

    Cluse, W. S.

    Garro Jones, G. M.

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

    Clynes, Rt. Hon. J. R.

    George, Megan Lloyd (Anglesey)

    Adamson, Jennie L. (Dartford)

    Cooks, F. S.

    Graham, D. M. (Hamilton)

    Adamson, W. M.

    Collindridge, F.

    Greenwood, Rt. Hon. A.

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

    Cove, W. G.

    Grenfell, D. R.

    Ammon, C. G.

    Cripps, Hon. Sir Stafford

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

    Banfield, J. W.

    Daggar, G.

    Griffiths, J. (Llanelly)

    Barnes, A. J.

    Davidson, J. J. (Maryhill)

    Hall, J. H. (Whitechapel)

    Bellenger, F. J.

    Davies, R. J. (Westhoughton)

    Hardle, Agnes

    Benson, G.

    Day, H.

    Harris, Sir P. A.

    Bevan, A.

    Dobbie, W.

    Hayday, A.

    Broad, F. A.

    Ede, J. C.

    Henderson, A. (Kingswinford)

    Brown, C. (Mansfield)

    Edwards, Sir C. (Bedwellty)

    Henderson, J. (Ardwick)

    Buchanan, G.

    Evans, E. (Univ. of Wales)

    Henderson, T. (Tradeston)

    Burke, W. A.

    Foot, D. M.

    Hills, A. (Pontefract)

    Cape, T.

    Frankel, D.

    Hopkin, D.

    Charleton. H. C.

    Gallacher, W.

    Isaacs, G. A.

    708

    709

    Jenkins, A. (Pontypool)

    Oliver, G. H.

    Stephen, C.

    Jenkins, Sir W. (Neath)

    Paling, W.

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

    Jones, A. C. (Shipley)

    Parkinson, J. A.

    Stokes, R. R.

    Kennedy, Rt. Hon. T.

    Pearson, A.

    Summerskill, Dr. Edith

    Kirkwood, D.

    Pethick-Lawrence, Rt. Hon. F. W.

    Taylor, R. J. (Morpeth)

    Lathan, G.

    Prise, M. P.

    Thorne, W.

    Lawson, J. J,

    Quibell, D, J. K.

    Tinker, J. J.

    Leach, W.

    Richards, R. (Wrexham)

    Viant, S. P.

    Leonard, W.

    Riley, B.

    Watson, W. McL.

    Leslie, J. R.

    Ritson, J.

    Welsh, J. C.

    Lunn, W.

    Robinson, W. A. (St. Helens)

    Westwood, J.

    Macdonald, G. (Ince)

    Sanden, W. S.

    White, H. Graham

    McEntee, V. La T.

    Seely, Sir H. M.

    Whiteley, W. (Blaydon)

    McGhee, H. G.

    Sexton, T. M.

    Williams, E. J. (Ogmore)

    MacLaren, A.

    Silkin, L.

    Williams, T. (Don Valley)

    Marshall, F.

    Silverman, S. S.

    Wilson, C. H. (Attercliffe)

    Maxton, J.

    Simpson, F. B.

    Woods, B. S. (Finsbury)

    Messer, F.

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

    Young, Sir R. (Newton)

    Montague, F.

    Smith, Ben (Rotherhlthe)

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

    Smith, E. (Stoke)

    TELLERS FOR THE NOES—

    Naylor, T. E.

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

    Mr. Mathers and Mr. Anderson.

    Noel-Baker, P. J.

    Smith, T. (Normanton)

    Clause, as amended, ordered to stand part of the Bill.

    NEW CLAUSE.— (Computation of standard profits.)
    (1) For the purposes of armament profits duty, the standard profits of a business shall be computed in accordance with the following provisions of this Section:
    Provided that in relation to a chargeable accounting period which is less than twelve months, the standard profits computed as aforesaid shall be proportionately reduced so as to correspond with, the length of the period.
    (2)If the business was commenced on or before the first day of July nineteen hundred and thirty-six, the standard profits shall be ascertained by reference to the profits of the standard period as hereinafter denned and, subject as hereinafter provided, shall be, where the standard period is one year, the amount of those profits and, where the standard period is two years, half the amount of those profits.
    (3)If the business was commenced on or before the first day of January, nineteen hundred and thirty-five, the standard period shall be, at the option of the person carrying on the business, either the year nineteen hundred and thirty-five, the; year nineteen hundred and thirty-six, the years nineteen hundred and thirty-five and nineteen hundred and thirty-seven or the years nineteen hundred and thirty-six and nineteen hundred and thirty-seven.
    (4)If the business was commenced after the first day of January, nineteen hundred and thirty-five, and on or before the first day of January, nineteen hundred and thirty-six, the standard period shall, at the option of the person carrying on the business, be the year nineteen hundred and thirty-six or that and the following year.
    (5)If the business was commenced after the first day of January, nineteen hundred and thirty-six, and on or before the first day of July in that year, the standard period shall be such consecutive period of twelve months ending not later than the end of June, nineteen hundred and thirty-seven as the person carrying on the business may select.
    (6) If, on the application of the person carrying on the business, the Board of Referees are satisfied that, in the standard period, the rate of profit or the volume of business was less than might then have been reasonably expected, they may direct that the standard profits shall be ascertained as if the profits for that period were such greater amount as they think just:
    Provided that where the person carrying on the business is a company, the said amount shall not exceed the amount necessary to provide dividends for the standard period—
    (a) as respects the paid-up ordinary share capital of the company, of six per cent, per annum;
    (b) as respects any other paid-up share capital of the company, at the fixed rate per annum payable in respect thereof;
    unless the Board are satisfied that owing to some specific cause peculiar to the business it is just that a greater amount should be allowed.
    (7)If, in the case of any business to which Sub-section (a) of this Section applies, the average amount of the capital employed in the business in any chargeable accounting period is greater or less than the average amount of the capital employed therein in the standard period, there shall, in relation to that chargeable accounting period, be added to or, as the case may be, subtracted from, the standard profits the statutory percentage of the increase or decrease.
    (8)In the case of a business commenced after the first day of July, nineteen hundred and thirty-six, the standard profits shall, in relation to any chargeable accounting period, be the statutory percentage of the average amount of the capital employed in the business in that period.
    (9)In this Section the expression "statutory percentage" means—
    (a)in relation to a business carried on by a company (other than a company the directors whereof have a controlling interest therein) eight per cent.;
    (b)in relation to a business not so carried on, ten per cent.;
    Provided that, in relation to any decrease of capital the statutory percentage shall be in all cases six per cent.— [Sir J. Simon.]
    Brought up, and read the First time.
    6.54 p.m.
    Sir J. Simon: I beg to move, "That the Clause be read a Second time."
    I think the Committee is well acquainted with the provisions of this Clause, which are clear. I should, of course, be prepared to offer any explanations which hon. Members might desire; but I think that the Committee would wish me at this stage simply to move the Clause. There are on the Paper one or two Amendments to the Clause, and I shall, of course, endeavour to deal with them as well as I can.
    Mr. Pethick-Lawrence: The right hon. Gentleman the Chancellor of the Exchequer was quite correct, as the points of difference between us and the Government on this Clause will be brought out in the course of the discussions on the Amendments. We do not wish' to delay the proceedings by having a discussion on the Motion for the Second Reading of the Clause, but we propose to discuss the Amendment in the name of my hon. Friend the Member for Derby (Mr. Noel-Baker), which is of considerable substance.
    Question, "That the Clause be read a Second time," put, and agreed to.
    6.55 p.m.
    Mr. Noel-Baker: I beg to move, as an Amendment to the proposed new Clause, in line 12, at the end, to insert:
    "(3) If the business was commenced on or before the first day of January, nineteen hundred and thirty-four, the standard period shall be the year nineteen hundred and thirty-four."
    I move this Amendment for the purpose of inviting the Chancellor to make a change in the standard years by which the standard profits under this proposal are to be calculated. In the Clause, the Chancellor proposes to offer the manufacturer of arms a fourfold option—1935, 1936, an average of 1935–36, and an average of 1936–37. On Monday last, I ventured to say that at least 95 out of every 100 manufacturers will choose the last, and, indeed, the Chancellor's name will go down in history as blessed among manufacturers of arms for having given them the chance of choosing. It is little short of amazing that, in putting forward a proposal of this kind, the Chancellor should have thought it possible to choose the years 1936–37 as a basis for the scheme he propounds. I cannot conceive how
    712
    he did it, except that he must have been too busy to have time to look at any of the relevant facts and figures. We know that he has had troubles about various matters, but whatever may be the cause, certainly he cannot have examined the annual armaments expenditure the country has made year by year, the purchases of the Government from private firms, the profits which those private firms have made from their sales of arms, or the dividends which they have been able to pay as a result of their profits; for if he had examined the figures, I venture to think he would not have made the speech that he made on Monday.
    After all, this is the very crux of the scheme. Everything depends upon the kind of profit that was being made in those years. If it was already excessive, if it was already much above the normal, it is fantastic to take a certain, not a very large, proportion of the sum above that standard. It is on this that the country will decide, and we shall decide, whether the Armament Profits Duty is intended as a serious effort to deal with excess profiteering in the preparations for war, or whether it is what the hon. Member for Mossley (Mr. Hopkinson) called "eye-wash." I think that on Monday the Chancellor was conscious that he had something to defend. He said in the course of his speech that hon. Members might refer to 1937 because it was the case that before the end of that year the rearmament scheme was in progress. He went on to defend his choice of years. What defence did he make? He said that the beginning of the rearmament scheme was very much more in the region of planning and preparation than in the region of very active production—in other words, that the private firms were not getting abnormally increased orders in 1936 –37—and he went on to add that it was only with those increased orders that the costing machinery had proved to be ineffective for limiting the profits that were made.
    Of course, the first answer to the second part of that argument is that made by my hon. Friend the Member for Kennington (Mr. Wilmot), that before 1937 the costing machinery for controlling profits was a good deal slacker, and a good deal less satisfactory, than it is now. The Government, including the Prime Minister in April, have admitted that this is true. But the principal answer, and the answer which I hope to show is really

    713
    quite conclusive, is that the Chancellor is entirely wrong on the facts on which he bases his defence.
    The Chairman: May I interrupt the hon. Member? I should like the Committee to be quite clear. Do I understand that he is moving this Amendment and proposing to discuss later Amendments in the names of other hon. Members?
    Mr. Noel-Baker: No, I made a mistake. I should have said in my own name only.
    The Chairman: Then the hon. Member must confine himself, of course, to the Amendment.
    Mr. Noel-Baker: I am endeavouring to argue that the years 1936–37 are extremely unsatisfactory as the basis for a calculation of excess profits.
    Sir J. Simon: And 1935, too?
    Mr. Noel-Baker: I am going to propose that 1934 is a much better year, though 1935 would be better than 1936 or 1937. I am trying to show that, by 1937 there had in fact been a great expansion in armament expenditure. As I said on Monday in 1932 the expenditure was £ 103,000,000; and in 1934 £ 113,000,000; which was about the average over the 12 years from 1922 onwards. In 1936 it was £ 186,000,000 and in 1937 £ 269,000,000. In other words the average for the two standard years is about £ 230,000,000, more than double that of 1934. I reminded the Committee on Monday that the great part of that additional expenditure went, not on man-power, but on armaments and ammunition. We had not reached the stage of increasing man-power and therefore more went to those who manufactured armaments, I further pointed out that the share of one of the private manufacturers was abnormally great, far more than was normally given to them before, and the share of the Royal dockyards and arsenals was less. It followed that the orders which the private firms had received by 1937 were not only double what they had received in 1934 or earlier years; they were much more than double. I suggested on Monday that they might be as much as four times.
    This is of such importance that perhaps I might try to substantiate these statements with a few figures, all taken from Estimates and other Government White Papers on the armed Forces. They show
    714
    that I under-estimated the increase. In regard to the Army, for example, the increase on expenditure on war material only, rose from 1934. when it was £ 3,000,000, to £ 7,000,000 in 1936 and to £ 28,000,000 in 1937. That is an average increase of nearly 10 times. In the Navy it increased from £ 24,500,000 in 1934 to £ 64,500,000 in 1937, an increase of nearly three times. In the Air Force it increased from £ 7,250,000 to £ 43,500,000 in 1937, an increase of six times. That proves, I submit, conclusively that the expenditure of the Government was on war material much more than on man-power. I have further figures and percentages if they are desired. One typical figure is that of the Army whose expenditure on war material rose from 6 per cent, of the whole of the expenditure in 1934 to 35 per cent, in 1937. That proves that the increase of the expenditure on arms was about four times. But that does not mean that the arms firms got only four times as many orders as they were getting in 1934, because their proportion of the whole was also increasing.
    The Government did not extend the Royal arsenals, factories and dockyards as fast as they were giving orders to the private manufacturers. As I have said, I have looked up the matter with some particularity since then, and I have come to the conclusion that it must be at least six times. Again I have all the details here if they are of interest to the Committee with regard to the Army, Navy and Air Force. I only mention that with regard to the Navy, and in respect of new construction, which is the important item for the manufacturers— repairs bring small, profits— private firms were receiving in 1937 93 per cent. of the whole. If you look at the details, they were making 132 vessels while the Government yards were making 16 of which the largest were six cruisers and the rest only submarines and mine-sweepers. The private firms were making five battleships at £ 8,000,000 or £ 10,000,006 a time, five aircraft carriers, and 15 cruisers, against six which the dockyards were making, and 48 destroyers. They were having 93 per cent, of the whole. You cannot show with regard to the Air Force that the proportion between Government and private manufacturers had increased, because the Air Force never had any Government manufacture at all. It has always been 100 per cent. mono-

    715
    poly for the private firms. But the "in crease of expenditure"— I am quoting from a statement accompanying the Air Estimates for 1937— "falling on the Vote for war materials is indicated by the fact that the net provision for 1937 is more than six times the corresponding figure for 1934."
    I submit that if the Chancellor's justification for this standard which he takes is, as he said on Monday, the fact that armament expansion had not seriously begun by 1937 his case falls completely to the ground. He has not a leg to stand on. He ought either to find a new standard or a new defence for the standard he has taken. I submit respectfully to him that he cannot find a new defence because there is not one. The essence of the matter is the profits which are made. The orders have increased. Yes. I have tried to show that the Chancellor's argument was wrong. But what did it lead to in the profits which we all want to prevent from being excessive? I showed on Monday that by 1937 many of those firms who specialised in armaments and which supplied the vast bulk of the finished arms which the Government bought were already then making profits so high as to make his scheme absurd. I showed that for a total of 30 firms the joint profits of those firms, which were the principal firms supplying armaments, had risen from £ 3,800,000 in 1934 to £ 11,700,000 in 1937. That is an increase of £ 8,000,000 in three years and a trebling of the profits they were making. They were doing quite well in 1934. I do not think the Chancellor can defend such a standard year as that.
    I do not want to repeat all the details I gave with regard to particular firms but let me put it for one moment in terms of dividends. What kind of dividend does an investor expect to get? What does he hope for from something which is as safe as armament shares have shown themselves to be? Five per cent.? Six or seven per cent.? No one could deny that that was very reasonable. I think it is the kind of thing which the Chancellor himself has had in mind when considering what ought to be counted as a normal profit. In this very Clause he has a provision about allowance for increase or decrease of capital since 1937, the standard year. In that, he allows
    716
    that a profit of 8 per cent. or 10 per cent. shall be exempt from this Excess Profits Duty. There is a passage in his speech in which he says:
    "In a case where an exceptional standard is allowed to a company we propose that it is not to exceed the amount necessary to pay its fixed preference dividend and 6 per cent. on its other share capital."— [Official Report, 26th June, 1939;, col. 70, Vol. 349.]
    Accepting 6 per cent— I think it is pretty high— as being the kind of thing, what dividend were these firms actually earning in 1937? Let me start with Vickers. In 1934 they were paying 6 per cent. In the following year they paid out a capital bonus of 50 per cent., and on their increased capital they paid in 1936 10 per cent. and in 1937 10 per cent. Everybody knows that the finances of the Vickers group are extremely mysterious and there may well have been other earnings in other forms. It is extremely difficult to trace all that is well earned. Handley Page in 1936 paid 50 per cent. and the following year they paid out a capital bonus of 50 per cent. and on that increased capital paid 30 per cent. tax free.
    Mr. Higgs: Will the hon. Member tell us what these firms were paying in 1929 and 1931?
    Mr. Noel-Baker: They were paying quite good dividends. Handley Page in 1937 put to reserve £ 125,000. If you take a small firm like the Projectile and Engineering Company you will find that it was making a good normal profit in 1934. In fact in that year it made 10 per cent., which was very high; in 1936 20 per cent. and in 1937 20 per cent. The English Steel Corporation in 1936 and 1937 were paying 20 per cent, each year tax free. Thomas Firth and John Brown Limited paid in 1934 5 per cent. tax free. In 1936 they paid 15 per cent. and in 1937 17 ½ per cent. Tube Investments paid in 1934 10 per cent. and in 1937., 23 ¾ per cent. White head Iron and Steel paid in 1934 15 per cent., and in 1937 35 per cent. plus 25 per cent. capital bonus. I suggest that it is grotesque to take dividends of 20 per cent. tax free or 30 per cent. tax free on capital inflated by a bonus distribution of shares, or 35 per cent. plus 25 per cent. distribution of bonus shares as the standard for estimating excess profits under this scheme. I hope the Government will take the course we propose. I know the Chancellor is

    717
    going to say it is difficult because of the civil firms who have only recently begun to make armaments. Perhaps there is a difficulty. But if he does argue that I will make a second proposal to get over that difficulty later. I do not do it now because I hope that in the light of the figures I have given he will say that he will reconsider this matter and come back at a later stage with new proposals for the Committee.
    7.15 p.m.
    Sir J. Simon: The hon. Member has made, as he always does, a speech illustrated by a great many facts and figures. I have followed his argument as well as I can and I propose to deal with it at once. The actual Amendment proposes that the standard to be taken for this purpose should be the standard of the profits for the year 1934. As the hon. Member has commended this suggestion to the Committee on the score of fairness and reasonableness, it may be interesting to observe that his view is that to get a fair standard for this purpose, the method is to take the year 1934 and that year alone. I certainly would have imagined that to take that year alone would be exceedingly unfair to those with whom we are now seeking to deal in this tax proposal, as compared with the suggestions which have been made in the other direction. I suggest that it cannot have been seriously suggested. It can only be an illustration of the methods of the bazaar by which you start with a price very different from that which you seriously intend to adopt. Of course it would be outrageous to take as the only standard the year 1934 but that is the method proposed in the Amendment.
    The hon. Member, as I have said, used a wealth of detail of figures and percentages, but, as it seemed to me, the early part of his argument, at any rate, was quite fallacious and was, if I may respectfully say so, making an illegitimate use of the figures for the purpose of what he sought to prove. He was pointing out that between 1934 and 1937 there was, unhappily, a greatly increased expenditure on armaments. That is, indeed, true, but I think it must be obvious to any Member of the Committee that that has nothing to do with the point which we are discussing.
    Mr. Noel-Baker: I introduced those figures because the right hon. Gentleman said on Monday that there had been no
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    substantial expansion of armaments in those years. That was the only reason which he gave in defence of his choice of a year.
    Sir J. Simon: The point which I wish to make is plain. The fact that very large sums have been spent in those years has absolutely nothing to do with the question of whether we have chosen the proper year or not. Neither has that anything to do with the fact that the expenditure which has grown, has been largely expenditure on war materials. The only question is what would be, in the circumstances, fair alternative years or fair average years to take for the purpose of establishing a standard. The hon. Member has explained quite fairly that he was addressing that part of his argument mainly to my observation, that 1937 hardly brought us into the full blast of production. I still think that my observation is justified. It is true that the year 1937 was the first year of the five-year period. It was the first year of the expansion, the first year of the period in which a series of special efforts was organised. It is certainly true that in that first year, it was not the case that armament production had gone up to that intensity of rapid delivery which has occurred since. Everybody can remember how in this House, again and again, we had Debates in which the Government were greatly reproached for their failure to produce aeroplanes and guns and so on. Allowing for whatever exaggeration there may have been in those criticisms, they were based on the plain fact that when you start a five-year period of intensive rearmament, you do not get into the full swing of production at the beginning. That was what I was referring to in that statement and I had perfect justification for it.
    I beg the Committee to remember that this duty is not the main instrument by which we seek to limit armament profits. The main instrument by which we seek to do so is the method of fixing proper contracts on the basis of proper calculations and we shall reinforce that by the activities of the future Ministry of Supply. This is a secondary method and it is addressed principally to this situation that although your contract system may be a very good and effective one, still, if production becomes immensely increased, the method and the calculations which

    719
    gave you reasonable results as long as production was not excessive, will give the most enormous return from the point of view of the ordinary shareholder by the mere fact of those calculations being multiplied again and again. An hon. Member opposite has, more than once, put that point to the House and has recognised its difficulty. One of the results of enormous production is that the application of a contract method, I do not care what that method is, can become completely falsified by the mere fact of that enormous production.
    That was not the case at the beginning of the quinquennium, but the situation is very different now. I am very glad to think, and I imagine that the whole Committee in the circumstances are entitled to take some comfort from the fact, that as a matter of fact our production to-day is extremely intense and the production of aeroplanes is at the most remarkable level. That is the situation as we would wish it to be, but the result is as I have described. That was the meaning which I intended to convey in my previous statement and if I did not express it as precisely as I ought to have done, I accept the hon. Gentleman's criticism and correction in all good part. But that was what I was trying to say. It is true, therefore, that the year 1937 is different from the later year of the quinquennium and the incidence which we now are trying to correct arose from that vast mass of production which has taken place later.
    There is a second point. My most earnest desire was as far as I could— I cannot hope to have succeeded entirely— to produce a scheme which would be simpler and therefore better than the former Excess Profits Duty. One of the things that was done under the Excess Profits Duty scheme was this. There were alternative standards left to the choice of the taxpayer. He could either take his profit or if he preferred it, he could take a standard which was a percentage on his capital— capital, in this connection, meaning not his share capital but the capital which was employed in his business, the physical thing which he had acquired for that purpose. That was a possible way of proceeding in this case. I thought however that it would be of great advantage if we could devise a scheme which did not introduce, as a main method of settling the standard, this
    720
    most difficult calculation on capital. It is very difficult indeed to go back for many years and to put the right value say upon a machine which has been in use for many years and is still being employed when it is possible that it has been written down in the books. It would have been a most elaborate and a most unsatisfactory method to have relied upon calculations of the capital employed in the business. I think I was right to avoid that feature. But if I do that I am depriving the taxpayer of one of the two alternatives which he previously enjoyed.
    Mr. Bellenger: The right hon. Gentle man is doing it in one case.
    Sir J. Simon: I think I know the case to which the hon. Member is referring. I have to do it where there is alteration in the amount of capital.
    Mr. Bellenger: Or where the business started after 1936.
    Sir J. Simon: That is so, but I think it is mainly right to avoid that method. That being so, it seems to me we have to determine how the line is to be drawn for the purpose of giving a standard that is fair and at the same time provides a reasonable basis against which to compare the excessive profits which in some cases may have been made, and which, I am certain, the whole Committee is anxious to put under contribution. It would be wrong to choose a year like 1934 or a figure of the kind suggested by the hon. Member opposite. It is easy enough for the hon. Gentleman to take certain instances such as he gave. I have no doubt his figures were accurate because I know how careful he is about this matter. It is all very well for him to do that, but I have to find a standard which is to be applied to everybody. I cannot pick the biggest strawberry out of the basket and say that it is the only one that I will consider. I have to provide a standard for everybody, for people who may have been badly hit in one or other of those years, for people who, for aught I know, in the year 1934 may have been struggling. While it is right that we should not fix a standard which is monstrously high at the same time my business is not to pick out instances which show bloated profits and to forget the rest. My business is to strike a balance between all the people concerned.

    721
    That being so, and having considered this question with great care, I have arrived at this decision. This is a very important matter, and it is my responsibility. I have to take, and I do take, the responsibility for it, but I say that the standard which we have here is the only possible standard to apply to deal fairly with the great variety of firms with which I have to deal. With their different experiences I had to give them a choice, and I did give them a choice. I gave them the choice of the year 1935. The hon. Member's Amendment would not allow them that. I gave them the choice of the year 1936. The hon. Member would not allow them that. It is not true to say that I gave them the choice of 1937. What I did say was that I thought, on the whole, it would be right, in order to provide for the various classes of cases, that there should be a fair choice which would be an average of two years, the later of which might be 1937. That year must be combined with cither 1936 or 1935. It is for the Committee to judge of these proposals. If I can get, as I hope I shall get, substantial sums from this duty, so much the better, but I think I have shown the Committee that that has not been the sole consideration. This is the result of careful and deliberate consideration of the whole of the facts and figures involved. I hope the Committee will feel disposed to support the Government in this matter. The hon. Gentleman opposite wants us to take the year 1934, but there is an hon. Gentleman behind me who says we ought to take the year 1937. Some people want to push me more rapidly and other people want to hold me back, so, on the whole, I rather think it is very likely that in what I am proposing I am right, and so I intend to stick to that.
    7.31 p.m.
    Mr. Silverman: The concluding observations of the right hon. Gentleman prompt me to say a word or two. With his extremely long experience in this House and in another profession outside it, I suppose it is not only my perhaps over subtle mind that suspects that there might have been a reason for his hon. Friends behind him putting down the Amendment which they have put down, because it cannot be merely an accident that he was enabled to say, "After all, my proposal does happen to be something like half way between, and, therefore, it must be fair." I think
    722
    he does an injustice to the ingenuity of his friends behind him when he assumes that. The right hon. Gentleman will remember that when the Prime Minister was Chancellor of the Exchequer he introduced a form of tax from which he ultimately withdrew— the National Defence Contribution, 1937.
    Sir J. Simon: Number 1.
    Mr. Silverman: Yes, and he withdrew that. I am glad to see the hon. Member for North Paddington (Mr. Bracken) back. I wish he had heard the previous part of the Debate. I missed him very much. He has taken so leading a part in the discussions which we have had in Committee which have been designed to induce the right hon. Gentleman to make his proposals more effective that I was relying confidently on his support on this occasion.
    Mr. Bracken: The hon. Member could not have it on this occasion, because I think the Chancellor has struck an even balance. The years 1935 and 1936 were recovery years, and the year 1937 was a slump year, so that my right hon. Friend, I think, has shown marvellous; ingenuity in striking a right balance.
    Mr. Silverman: The hon. Gentleman can be forgiven for that interruption, be cause, as I have already said, he did not hear the speech of my hon. Friend in moving the Amendment, and I think he heard only part of the right hon. Gentleman's reply. If he looks at the Official Report to-morrow, I think he will see that his interjection does not meet the argument at all, and if that be the case, I hope I may still rely on his help in trying to induce the right hon. Gentleman to do better than he has done. We do not in the least mind the hon. Member poking fun at us. We have observed that he always pokes fun at us when he supports us. It has happened on every occasion when he has found himself suffering from the mental anguish, as he described it, of having to vote against the Government that he has relieved it by poking fun at his reluctant allies. That is all right, and we are quite prepared to pay that price. We will pay it again if he will come with us on this occasion. The National Defence Contribution, 1937, No. 1, was withdrawn because of what was eloquently described by one hon. Member the other day as the howl which arose

    723
    from the Stock Exchange, and when I asked the right hon. Gentleman why we had not got a howl on this occasion, he replied that perhaps it was because the tax was regarded as perfectly fair. It is rather remarkable that there has been very little protest against and very little interest in the Clause which we are now discussing. The right hon. Gentleman does not seem to agree.
    The Chairman: I would remind the hon. Member that we are not discussing the Clause now. The Clause has had its Second Reading.
    Mr. Silverman: I dare say I trespass a good deal on the patience of the Chair, but I think I may be able to convince you, Sir Dennis, that I am not so far out of order as perhaps you are tempted to think. I am arguing that the reason why the Clause which we are now discussing arouses so little protest and opposition as compared with the National Defence Contribution is precisely because of the years which the right hon. Gentleman has chosen and because of the options which he has given. The people concerned know very well that if you choose those years, this tax will hit them very little, if at all, whereas if you had chosen an earlier year, as we suggested, the difference would have been very great, and I think the right hon. Gentleman's real reason for not accepting the Amendment now before the Committee is that if he did accept it he knows very well that he would get the same kind of howl of indignation and protest which forced his predecessor to abandon the earlier tax.
    7.37 p.m.
    Mr. Noel-Baker: The Chancellor argued, firstly, that it did not greatly matter what standard you took, because the real way of stopping excess profits was—
    Sir J. Simon: I did not say that it did not matter what standard you took. I agree that it is important. What I said was that that is not the primary way in which you should seek to limit the profits.
    Mr. Noel-Baker: That is the way I should have stated it. I agree that it is the primary way, which the Government have adopted, but in our view it
    724
    is not the right way, and I think the Prime Minister's admission in April really supports that view. I do not believe that new powers of the Minister of Supply will help, unless and until he creates national factories on a very large scale to check the prices which private manufacturers charge. I am sure he will not do that, and until he does I shall not believe in the efficiency of costing only. Therefore, I shall continue to think that this is a matter of great importance and that the standard year taken is really fundamental. I recognise, with the Chancellor, that if you took 1934 you would do an injustice to some firms. For a great many firms that year was a year of slump, and it might be unjust. But not for armament firms— those firms which are still selling a great proportion of the finished arms which the Government buy. The great majority of finished arms are still being sold by firms which are principally engaged in the manufacture of arms and were so principally engaged in 1934. But I agree that it may be difficult to have a standard which is fair both to the armament firms and also to the civil engineering firms which have been brought into armament manufacture as a result of what we used to call industrial mobilisation. Perhaps you cannot take one standard that will apply equitably to both. Can you make a distinction between them? I think you can. The year 1934 was a year of normal profits to the armament firms. They were paying reasonable dividends and making a profit on capital which could easily be assessed. It was assessed by the Royal Commission on the Private Manufacture of Arms at £ 53,000,000, and they were earning a profit of £ 3,800,000, or 8 per cent., which is not a bad profit on the capital as it was declared to be to the Royal Commission.
    If you have that as a fair standard to start with for the armament firms, I put it to the Chancellor of the Exchequer that to take the years 1936–37 for such firms is grotesque, because there are the basic facts, on which the right hon. Gentleman has not answered me, that by 1937 these firms were having money paid out to them by the Government for finished armaments six times as much as they had received in 1934, and they were paying those very high dividends and earning those very high profits of which I have spoken. Can you make a dis-

    725
    tinction between the two and keep 1934 for armament firms and another standard for civil firms? I think you can. If the Chancellor would bring in a Clause that laid it down that for firms on the contractors' list of the Admiralty, the War Office, and the Air Force in 1934, firms which in that year received £ 200,000 in orders for armaments as now denned by the Minister of Supply, you would be setting them a standard that would be fair, and you could know quite easily which they were; and for other firms which were not on the contractors' list and did not fall into that category you could take some other formula, which I should propose would be the average of 1935 and 1936, because, as the hon. Member for North Paddington (Mr. Bracken) said, that would be generous to them, but perhaps not too generous in the present circumstances. I make these proposals and hope the Chancellor will promise to consider them before the Report stage; otherwise we shall be obliged to vote against this Clause.
    Sir P. Hannon: Does the hon. Member realise that in Coventry, which he once represented, that during series of years firms now engaged in armament production were passing through very bad times, and that those firms carried an enormous amount of invested capital with no return at all?
    Mr. Noel-Baker: I am well aware that at no time, even in the year when unemployment in Coventry reached as high as 30,000, has unemployment there been anything like what it has been in many other parts of the country. Some firms which had watered their stock very considerably in the course of the last War were not able to pay much dividend on that stock, but most of the owners of those firms had taken out their money and put it into other investments, and it was the public who lost the money; and those people remain to this day immensely rich. You have only to mention their names to know that they are immensely rich.
    Mr. Bracken: Will the hon. Member tell us their names?
    Mr. Noel-Baker: I do not want to do that, but they need not be ashamed of it. It is the fact, as I have stated it. I ask the Chancellor to reconsider the matter and to bring in new proposals on the
    726
    Report stage. If not, we shall have to divide the Committee.
    Mr. Gallacher: If this Amendment is not accepted, then we are faced with a situation where, if a firm during the years 1936-37 has made what in ordinary circumstances would be considered excess profit, that excess profit would become the standard profit. There is a provision whereby any firm in the year that is chosen as the standard year has a very low profit. It can make an appeal to the Board of Referees, and the Board of Referees, after considering the circumstances, can declare a higher rate of profit than the firm has actually made as the recognised standard profit for that firm. I want to ask the Chancellor whether he is going to make any provision to ensure that, just as a low rate of profit can be increased, so an excessive rate of profit can be reduced. Is that not possible?
    7.44 p.m.
    Sir Hugh Seely: I did not agree with either the first speech of the hon. Member for Derby (Mr. Noel-Baker) or the reply from the Chancellor of the Exchequer. I think the 1936 standard too low, and I do not think the Chancellor's explanation that other people were asking for an even higher one was the way in which one would want to deal with the matter. I think the second speech of the hon. Member for Derby was much nearer the mark. It certainly will be a very high figure which the Chancellor has accepted. In regard to firms which are now making armaments, the years chosen are very favourable ones and will come out favourably for the companies. What happened in the slump years does not affect this Clause one way or the other. Some may have made a great deal in those years on other work. We are dealing with the arms that are being made to-day. If the Chancellor of the Exchequer could give an assurance that he would think of some formula other than leaving it purely to this one of years, it would be more satisfactory, because as it is proposed there will be a feeling that you are choosing years in which the standard profits were the highest. During the War in the coal trade we had a standard profit; certain years were taken for the purpose of standard profits, but they were not chosen from those years when the War was on, because the profits then

    727
    could have been too high. In the present case we are choosing years in which very high profits undoubtedly were made. It is these high profits which are making the people of this country suspicious, and they have a very strong feeling that very high profits are being made now. I hope the Chancellor of the Exchequer will be able to give attention to the proposal made by the hon Member for Derby (Mr. Noel-Baker).
    7.47 p.m.
    Sir J. Simon: I must, in the first place, explain to the Committee that we reached the formula in the Bill after a great deal of consideration. Naturally, hon. Members have not had the same opportunity of considering this matter with the same prolonged detailed examination which we have been able to give to it. After that examination, we came to the conclusion which is incorporated in the Bill. On the whole, my opinion is that the course we have adopted is the right one. I will consider what has been said, but I do not think that I should be justified in saying anything or giving a promise which might persuade the hon. Member for Derby (Mr. Noel-Baker) and his friends from dividing, if they wish to do so. If they desire to express their views in the Division Lobby, it is better that they should do that. I will, however, examine the question further. Since the matter was raised to-day I have only been able to make a perfunctory inquiry. I would have hon. Members bear in mind that this is a complicated standard. It is not one standard but two, and it is not a very easy thing for anyone to say how you are to draw the line between one and the other. I will look at the matter in all honesty, but I do
    not wish to use words of soothing encouragement. There is one question which I have been asked, which I will answer at once. I was asked whether or not there is any provision in the scheme by which if the year 1936 or 1937 gave a high figure something could be taken off on the ground that it was excessive. The answer is, no. What is and what is not excessive is a question of judgment until you can define it. We do define in this Clause what we mean.
    Mr. Gallacher: Let me put this question. Two firms are working and they both choose this particular year. One firm has a profit of 3 per cent. and the other a profit of 10 per cent. The firm making 3 per cent. profit makes an appeal to the referee and the referee may decide to raise their standard to 6 per cent. as the standard profit which they should be allowed. Is there any power to bring the 10 per cent. down to the standard of 6 per cent.?
    Sir Irving Albery: I hope my right hon. Friend will not for one moment consider adopting a standard based on a single year.
    Mr. Noel-Baker: I thank the right hon. Gentleman for his promise to consider this matter. I think he must have in his mind the difficulty of the old conundrum: Can you define an armament firm? I hope he will give careful consideration to the matter, but I am afraid that we must divide the Committee.
    Question put, "That those words be there inserted in the proposed new Clause."
    The Committee divided: Ayes, 115; Noes, 161.

    Division No. 205.]

    AYES.

    [7.52 p.m.

    Adams, D. (Consett)

    Cooks, F. S.

    Griffiths, J. (Llanally)

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

    Collindridge, F.

    Hall, J. H. (Whitechapel)

    Adamson, Jennie L. (Dartford)

    Cove, W. G.

    Hardle, Agnes

    Ammon, C. G.

    Cripps, Hon. Sir Stafford

    Harris, Sir P. A.

    Anderson, F. (Whitehaven)

    Daggar, G.

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

    Banfield, J. W.

    Dobbie, W.

    Hayday, A.

    Barnes, A. J.

    Dunn, E. (Bother Valley)

    Henderson, A. (Kingswinford)

    Batey, J.

    Ede, J. C.

    Henderson, J. (Ardwick)

    Ballenger, F. J.

    Edwards, A. (Middlesbrough E.)

    Henderson, T. (Tradeston)

    Benson, G.

    Edwards, Sir C. (Bedwellty)

    Hills, A. (Pontefract)

    Bevan, A.

    Foot, D. M.

    Hopkin, D.

    Broad, F. A.

    Frankel, D.

    Isaacs, G. A.

    Brown, C. (Mansfield)

    Gallacher, W.

    Jenkins, A. (Pentypool)

    Buchanan, G.

    Gardner, B. W.

    Jenkins, Sir W. (Neath)

    Burke, W. A.

    Garre Jones, G. M.

    Jones, A. C. (Shipley)

    Cape, T.

    George, Megan Lloyd (Anglesey)

    Kennedy, Rt. Hon. T.

    Charteton, H. C.

    Graham, D. M. (Hamilton)

    Kirkwood, D.

    Chater, D.

    Greenwood, Rt. Hon. A.

    Lathan, G.

    Cluse, W. S.

    Grenfell, D. R.

    Lawson, J. J.

    Clynes, Rt. Hen. J. R.

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

    Leach, W.

    Leonard, W.

    Parkinson, J. A.

    Summnerskill, Dr. Edith

    Leslie, J. R.

    Pearson, A.

    Taylor, R. J. (Morpeth)

    Lunn, W.

    Pethick-Lawrence, Rt. Hon. F. W.

    Thorne, W.

    Macdonald, G. (Ince)

    Price, M. P.

    Tinker, J. J.

    McEntee., V. La T.

    Pritt, D. N.

    Viant, S. P.

    McGhee, H. G.

    Quibell, D. J. K.

    Watson, W. McL.

    MacLaren, A.

    Richards, R. (Wrexham)

    Welsh, J. C.

    Marshall, F.

    Riley, B.

    Westwood, J.

    Maxtor, J,

    Ritson, J.

    White, H. Graham

    Messer, F.

    Robinson, W. A. (St. Helens)

    Whiteley, W. (Blaydon)

    Milner, Major J.

    Seely, Sir H. M.

    Wilkinson, Ellen

    Montague, F.

    Sexton, T. M.

    Williams, E. J. (Ogmore)

    Morgan, J. (York, W.R., Doncaster)

    Silkin, L.

    Williams, T. (Don Valley)

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

    Silverman, S. S.

    Wilmot, John

    Naylor, T. E.

    Simpson, F. B.

    Wilson, C. H. (Attercliffe)

    Noel-Baker, P. J.

    Smith, E. (Stoke)

    Woods, G. S. (Finsbury)

    Oliver, G. H.

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

    Young, Sir R. (Newton)

    Paling, W.

    Stephen, C.

    Parker, J.

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

    TELLERS FOR THE AYES.—

    Mr. Mathers and Mr. Adamson.

    NOES.

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

    Gritten, W. G. Howard

    Rickards, G. W. (Skipton)

    Albery, Sir Irving

    Guinness, T. L. E. B.

    Rosbotham, Sir T.

    Allen, Col. J. Sandeman (B'knhead)

    Hannon, Sir P. J. H.

    Ross, Major Sir R. D. (Londonderry)

    Aske, Sir R. W.

    Haslam, Sir J. (Bolton)

    Rowlands, G.

    Assheton, R.

    Heilgers, Captain F. F. A.

    Royds, Admiral Sir P. M. R.

    Balfour, G. (Hampstead)

    Hely-Hutchinson, HI. R.

    Russell, Sir Alexander

    Beechman, N. A.

    Hepburn, P. G. T. Buchan-

    Russell, S. H. M. (Darwen)

    Blair, Sir R.

    Herbert, Lt.-Col. J. A. (Monmouth)

    Salmon, Sir I.

    Bower, Comdr. R. T.

    Higgs, W. F.

    Salt, E. W.

    Bracken, B.

    Horsbrugh, Florence

    Samuel, M. R. A.

    Braithwaite, J. Gurney (Holderness)

    Hudson, Capt. A. U. M. (Hack., N.)

    Sandeman, Sir N. S.

    Briscoe, Capt. R. G.

    Hume, Sir G. H.

    Selley, H. R.

    Broadbridge, Sir G. T.

    Hunloke, H. P.

    Simmonds, O. E.

    Brown, Rt. Hon. E. (Leith)

    Hurd, Sir P. A.

    Simon, Rt. Hon. Sir J. A.

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

    Hutchinson, G. C.

    Sinclair, Col. T. (Quean's U. B'lfst)

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

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

    Smiles, Lieut.-Colonel Sir W. D.

    Bull, B B.

    Levy, T.

    Smith, Bracewell (Dulwich)

    Burgin, Rt. Hon, E. L.

    Liddall, W. S.

    Smithers, Sir W.

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

    Little, J.

    Snadden, W. McN.

    Channon, H.

    Locker-Lampson, Comdr. O. S.

    Somerville, Sir A. A. (Windsor)

    Clarke, Colonel R. S. (E. Grinstead)

    Loftus, P. C.

    Southby, Commander Sir A. R.

    Conant, Captain R. J. E.

    Mabane, W. (Huddersfield)

    Spears, Brigadier-General E. L.

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

    MacAndrew, Colonel Sir C. G.

    Spens, W. P.

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

    Macdonald, Capt. P. (Isle of Wight)

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

    Courtauld, Major J. S.

    McEwen, Capt. J. H. F.

    Stewart, J. Henderson (Fife, E.)

    Craven-Ellis, W.

    McKie, J. H.

    Stourton, Major Hon. J. J.

    Crooke, Sir J. Smedley

    Macmillan, H. (Stockton-on-Tees)

    Strauss, H. G. (Norwich)

    Crookshank, Capt. Rt. Hon. H. F. C.

    Macquisten, F. A.

    Strickland, Captain W. F.

    Cross, R. H.

    Manningham-Buller, Sir M.

    Stuart, Lord C. Crichton- (N'thw'h)

    Crowder, J. F. E.

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

    Stuart, Rt. Hon. J. (Moray and Nairn)

    Culverwell, C. T.

    Markham, S. F.

    Tasker, Sir R. I.

    De Chair, S. S.

    Maxwell, Hon. S. A.

    Taylor, C. S. (Eastbourne)

    Denman, Hon. R. D.

    Medlicott, F.

    Thomson, Sir J. D W.

    Drewe, C.

    Mills, Sir F. (Leyton, E.)

    Thorneycroft, G. E. P.

    Dugdale, Captain T. L.

    Mills, Major J. D. (New Forest)

    Touche, G. C.

    Eastwood, J. F.

    Morgan, R. H. (Worcester, Stourbridge)

    Turton, R. H.

    Edmondson, Major Sir J.

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

    Walker-Smith, Sir J.

    Elliot, Rt. Hon. W. E.

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

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

    Ellis, Sir G.

    Nall, Sir J.

    Warrender, Sir V.

    Elliston, Capt. G. S.

    Neven-Spence, Major B. H. H.

    Waterhouse, Captain C.

    Emery, J. F.

    O'Connor, Sir Terence J.

    Watt, Lt.-Col. G S. Harvie

    Emrys-Evans, P. V.

    Orr-Ewing, I. L.

    Wayland, Sir W. A.

    Everard, Sir William Lindsay

    Peters, Dr. S. J.

    Wells, Sir Sydney

    Fleming, E. L.

    Petherick, M.

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

    Fox, Sir G. W. G.

    Pickthorn, K. W. M.

    Winterton, Rt. Hon. Earl

    Furness, S. N.

    Pilkington, R.

    Wolmer, Rt. Hon. Viscount

    Fyfe, D. P. M.

    Ponsonby, Col. C. E.

    Womersley, Sir W. J.

    Gledhill, G.

    Procter, Major H. A.

    Wood, Hon. C. 1. C.

    Gluckstein, L. H.

    Radford, E. A.

    Wragg, H.

    Gower, Sir R. V.

    Raikes, H. V. A. M.

    Wright, Wins-Commander J. A. C.

    Graham, Captain A. C. (Wirral)

    Ramsbotham, Rt. Hon. H.

    York, C.

    Greene, W. P. C. (Worcester)

    Rayner, Major R. H.

    Gridley, Sir A. B.

    Read, A. C. (Exeter)

    TELLERS FOR THE NOES.—

    Grigg, Sir E. W. M.

    Reid, W. Allan (Derby)

    Lieut.-Colonel Kerr and Mr.

    Grimston, R. V.

    Remer, J. R.

    Munro.

    Question put, and agreed to.

    8.0 p.m.
    Mr. Simmonds: I beg to move, as an Amendment to the proposed new Clause, in line 16, to leave out from "thirty-six"
    730
    to the end of the Sub-section and to insert "or the year nineteen hundred and thirty-seven."

    731
    The effect of this would be that contractors would have the option of three individual years, 1935, 1936 and 1937, and not 1935 just individually and the mean of one of those two years with 1937. The Chancellor of the Exchequer has explained that rearmament was not well under way in 1936. The Secretary of State for Air, who came in because aircraft production was so low, did not in fact take office until the late spring of 1938, and we are therefore perfectly correct, and so was my right hon. Friend, in saying that during 1937, particularly as far as aircraft production was concerned, the momentum of rearmament was not under way. But I want to address the Committee on an entirely different basis. It seems to me that hon. Members opposite have missed the fundamental point with regard to this duty. Most of the yield will come from contractors who are not what is normally known as armament firms. It will come from those contractors who have recently come in to the supply of all that we understand within the term armaments. It will include many firms which are not at the moment supplying the Forces but whom the Minister of Supply may either persuade or force into accepting armament contracts.
    I want to ask the Chancellor— we do not intend to press the matter to a Division— if he would review the position of firms which were not doing armaments at all during these three standard years but who are now going to be subject to this duty because they will have contracts in excess of £ 200,000. I will give one example out of many that I could give of a great Birmingham firm known throughout the country and indeed throughout the Empire, and I am indebted to the directors for permission to give the information. It refers to Stewart and Lloyds, the great tube making firm. They were part of the International tube cartel, which at the beginning of 1935 the Germans smashed up, when they started competing at absurd prices throughout the world. As a result, and I should not like to say without some support by way of suggestion or approval from the Government, Stewart and Lloyds decided quickly to cut all profits, and they raced the Germans round the world playing their own game. Is not that what right
    732
    hon. Gentleman on the Front Bench have often advised British firms to do, to stand up to the Germans and let them see that we can beat them at their own game? Stewart and Lloyds estimate that, as a result, they lost profits to the extent of £ 600,000 in each of the two years 1935 and 1936. At the end of 1936 the cartel was patched up again and 1937 became a respectable year. In 1935 their profits amounted to only £ 800,000, in 1936 to £ 1,200,000 and in 1937, when the cartel started to operate again and there was rationalisation of the home market, they went up to £ 2,300,000.
    That has nothing to do with armaments at all, but now that that firm has come in and assisted the country with the supply of certain products for the Forces it would be wholly unjust that the Government should be forced to take those two years into consideration for standard profits. I hope the Chancellor will feel that here is a very substantial point for these firms which are now coming into armaments and which may, for reasons wholly beyond their control, have had very bad years in 1935 and 1936, though the situation may have mended in 1937. I hope, although he obviously cannot give us any undertaking now, that my right hon. Friend will consider this aspect together with the proposals which have been made by hon. Members opposite. We believe very strongly in the equity of our case and we are speaking for a very large number of important firms who are now going to turn their hands to armaments and who, I am certain, the Government would desire should have a square deal.
    8.8 p.m.
    Sir J. Simon: We discussed this subject of the choice of standard years, going over a wide range, just now. My hon. Friend has put his point with admirable brevity and clearness, and, of course, I will carefully study the considerations that he has urged and the suggestions that he has made. I think we ought, however, to try to arrive at the right level not by taking hard cases and then deducing a rule from them, but rather by taking a fair range of cases, remembering that there may be cases which need special treatment. Sub-section (6) of the Clause provides that, after the standard has been worked out according to the ordinary rules,

    733
    "If, on the application of the person carrying on the business, the Board of Referees are satisfied that, in the standard period, the rate of profit or the volume of business was less than might then have been reasonably expected, they may direct that the standard profits shall be ascertained as if the profits for that period were such greater amount as they think just."
    I know that is very general, but you must trust someone, and I cannot imagine a better judge for the purpose than the Board of Referees, who have experience and are completely independent and have shown the greatest good sense in the things that they have had to handle. It is better to take fairly into account all considerations which might operate, than to take a very exceptional case, even a hard case, and make it the thing that determines the rule. That is my feeling about it. I have listened to my hon. Friend with a real understanding of he great importance of the point and I will certainly consider what should be done when we come to Report.
    3.12 p.m.
    Sir P. Hannon: My hon. Friends and myself thank the Chancellor for the statement that he has made and his promise to keep in mind the difficulties that many industries have had to contend with over a long period of years. I know he will always remember that many firms now turning to armament production have had a very lean and hard time in the years that have passed. Some of them have had to maintain a large amount of machinery, keep intact a staff of skilled workmen and endeavour to keep continuity of production under very difficult circumstances up to 1933 and 1934. I know that no one is more alive to that than the Minister of Supply designate, who has made it his special study to examine, I am sure sympathetically, circumstances in which firms have gone into armament production who have had to carry their burden of commercial and industrial responsibility and have been in difficulties for many years. If this were to go to a division I should not vote, because I am interested directly in armament work, but at the same time I feel it my duty to emphasise the point that there are considerations which should be kept in view in relation to the period for which profits are to be considered for the purposes of Armament Profits Duty.
    8.14 p.m.
    Mr. Higgs: The year 1937 is already included as a combined year, and what we are asking the Chancellor of the Exchequer to do is to include it as a separate year. The armament expenditure which has already taken place is said to have a considerable effect upon various firms, but it is not realised that that expenditure up to 1937 was made in preparation and was considerably spread over a large number of firms and did not affect those individual firms whom this tax is expected to cover. The "Economist" index of British business activities gives the maximum period of activity as 1937. Then it falls until the end of 1938, and the most rapid portion of the fall is at the beginning of 1938. That is pretty conclusive that all this armament expenditure has not had a considerable effect upon the whole of industry. In 1928 it certainly did have an effect on certain firms, and I cannot see any reason why 1937 cannot be included as a standard year. I would remind the Chancellor that the old Excess Profits Duty included a provision for merging different accounting periods but, as far as I can see, there is no provision of that description in this new Clause, and there fore manufacturers will work under a disadvantage as compared with the old Excess Profits Duty. This tax is supposed to continue for three years, and surely during that period there will be a natural expansion, and if that natural expansion is to have any consideration then it should be a basic tax on profits on turnover. Manufacturers have accepted this tax, there has been little or no opposition to it, and if the Chancellor can see his way to give a concession on this point I am sure that it will be greatly appreciated.
    Mr. Simmonds: In view of the Chancellor's statement that he will be good enough to look into this point, and in the belief that he will probably see the virtue of our argument, we beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Motion made, and Question proposed, "That the Clause be added to the Bill."
    The Chairman: The Question is—
    Mr. Gallacher: May I not speak?
    The Chairman: The Clause has been read a Second time and we are at a different stage now.
    Mr. Pethick-Lawence: Do I understand you to rule that no speech can be made upon the Motion that the Clause be added to the Bill? Is that your Ruling, Sir Dennis?
    The Chairman: No, I do not think that is so; but it would be difficult to imagine a speech which would be in order. There was a Debate on the Question that the Clause be read a Second time, and it has not been altered since the Committee decided for the Second Reading.
    Mr. Pethick-Lawrence: But supposing the Clause had been considerably altered in the course of the proceedings since then. The Clause has never before appeared in the Bill, it is read a Second time and Amendments are discussed, and surely when we come to the Question that the Clause be added to the Bill, we are in the same position as with the Question that the Clause stand part of the Bill in an ordinary Committee discussion. I should have thought it would be possible to have some discussion on the Motion. I do not know of any Motion on which it is not possible to have some Debate. An hon. Member might feel that because the Clause had not been amended it ought not to be put into the Bill in its un-amended form. He might have been quite prepared to allow it to be read a Second time, hoping to see it amended, and if it is not amended he may wish to give grounds why it should not be added to the Bill.
    The Chairman: The right hon. Gentleman is, of course, correct. I do not think I can quarrel with anything he said except, incidentally, that there are Motions which certainly cannot be debated, but that is by the way. What I meant to rule was that I did not think the Clause could be discussed in the same way as it was discussed on the Question that it be read a Second time. The right hon. Gentleman is quite right in thinking that there are certain limits within which it could be debated now as a result of its not having been amended. In the same way it might have been possible, if it had been amended, to discuss it in the light of the alterations which had been made. I understood the hon. Member for West Fife (Mr. Gallacher) to say that he wanted to speak generally on the Clause, and it was to that that I was objecting. It would not be in order for him to make
    736
    such a speech as I anticipate he might have made on the Question that the Clause be read a Second time, and I can only warn him, therefore, that he will have to keep strictly within the limits of order.
    Mr. C. S. Taylor: Did I understand that you had put the Question?
    The Chairman: I had not collected the voices.
    8.20 p.m.
    Mr. Gallacher: I did not want to intervene in the Debate on the previous Amendment, but it brought out very clearly a point which I want the Chancellor to consider. I shall not discuss the Clause generally at all, but I should like this particular point considered. The fact that the three hon. Members opposite were prepared to press their Amendment shows the need for the Chancellor to give the closest attention to this point. They are not satisfied with the Sub-section of the Clause which makes everything quite safe for them.
    Sir P. Hannon: We are entirely satisfied with the statement made by the Chancellor.
    Mr. Gallacher: But not with the statement in the Clause which has been presented by the Chancellor, and it is with that that I am dealing. I want to change the Chancellor's mind if he has any intention of giving concessions to the hon. Members. Sub-section (6), to which the Chancellor referred, makes everything quite safe so far as the hon. Members are concerned. If the industry which they are talking for had a low rate of profit in the particular years referred to all they have to do is to appeal to the referees.
    Mr. Higgs: Was the hon. Member present when the hon. Member for Duddeston (Mr. Simmonds) spoke?
    Mr. Gallacher: Certainly I was present. I heard the three hon. Members present the case for the Amendment, and I heard the Chancellor point out that Sub-section (b) allowed an appeal to the referees so that if the profits are low as a result of this, that or the other circumstance the referees can decide, on the basis of equity, to raise the standard. Surely hon. Members cannot ask for more than that, and the fact that they do ask for something more means that they are conscious that

    737
    what I have suggested will probably be the case, that years will be chosen in which some of these firms are already making what could be called excess profits, that as a consequence it will be an excess profit that will be classed as a standard profit, and so the tax will be not a tax upon an excess profit but a tax on an excess over an excess profit. That is the point which I am anxious should be considered, and I am of opinion that the very fact that the three hon. Members, representing powerful industries, are not satisfied—
    Sir P. Harmon: Representing what?
    Mr. Gallacher: Widespread industries, powerful and widespread industries.
    Mr. Simmonds: I do not think the hon. Member can claim that we represent industries; we are representing our constituencies, like hon. Members opposite.
    Mr. Gallacher: I will put it that the three hon. Members are speaking for powerful and widespread industries.
    Mr. Simmonds: We are speaking for the industry of Birmingham. We have that honour.
    Mr. Gallacher: I am not saying anything against that. I am saying that the three hon. Members, speaking for very widespread industries, are not satisfied with Sub-section (6), and if they are not satisfied with what is considered a fair standard of profit it is obvious they want to have excess profits as a standard. The hon. Member shakes his head, but if he reads Sub-section (6) he will realise the position.
    Sir P. Hannon: I have already said that my hon. Friends and I accept the statement of the Chancellor as entirely satisfactory.
    Mr. Gallacher: I am asking whether they accept the Clause of the Chancellor as entirely satisfactory, because the hon. Member said he withdrew the Amendment in the very great hope that the Chancellor would make a concession.
    Mr. Simmonds: The Chancellor promised to make an investigation in the same way as he did in the case of the hon. Member for Derby (Mr. Noel-Baker), and I fail to see why he should not investigate our Amendment as well as that of the hon. Member for Derby.
    Mr. Gallacher: I have no objection to hon. Members taking up that attitude, but it makes it clear that they are not satisfied with the Clause as it stands. If they are not satisfied with the Clause as it stands they are not satisfied with being allowed a moderate and fair rate of profit as the standard for the standard year. They want an excess profit for the standard year and it is about that that I want to warn the Chancellor of the Exchequer and the Financial Secretary. Some profits may be raised. If the hon. Members have a profit of 3 per cent. in the years that are chosen and it is considered that the normal profit should be 6 per cent., they can get 6 per cent. from the referee, but if their profit is 20 per cent. there is no arrangement of any kind to alter that as the standard that will apply to that firm. There is no provision in the Clause for bringing a profit down from an excess character to a normal character, although there is provision for bringing a profit up from what is considered low to what is considered a normal standard. I am very concerned that the Chancellor of the Exchequer should take this point into account. The three hon. Members are not prepared to accept a fair and equitable profit. They want to get an excess profit as a standard profit.
    Sir P. Hannon: The hon. Gentleman has no right to say that. He is misrepresenting our point of view completely. We are quite prepared to accept the statement made by the Chancellor of the Exchequer and it is a violation of his position in this House for the hon. Gentleman to make charges of that kind.
    Mr. Gallacher: Let me ask the hon. Member whether he is satisfied with Subsection (6), which reads:
    "If, on the application of the person carrying on the business, the Board of Referees are satisfied that, in the standard period, the rate of profit or the volume of business was less than might then have been reasonably expected, they may direct that the standard profits shall be ascertained as if the profits for that period were such greater amount as they think just."
    Is the hon. Member satisfied with that?
    Mr. Simmonds: From what the hon. Member is saying it is obvious that he has not followed the matter very closely. We think it would be much preferable that these points should be fixed in the Bill without this continual reference to arbitration. I am certainly not liking to see Sub-

    739
    section (6), and I do not think it should be utilised in almost every case. We should try to fix something and not leave the whole thing to arbitration.
    Mr. Gallacher: Will the hon. Member agree to support the proposition that I make to the Chancellor, that if profits are excessive in the particular year chosen there should be a provision to bring those profits down?

    NEW CLAUSE.— (Provisions as to computation of profits and capital.)
    (1)For the purposes of the armament profits duty the profits arising from a business in any year constituting or comprised in the standard period, or arising in any chargeable accounting period shall be separately computed and shall be so computed on the principles on which the profits arising there from are computed for the purposes of Income Tax under Case I of Schedule D, as adapted in accordance with the provisions of Part I of the Schedule (Computation of profit and capital for purposes of armament profits duty)to this Act, and the average amount of the capital employed in a business in any such year or period shall be computed in accordance with Part II of that Schedule.
    (2) Where a standard period or chargeable accounting period is not a period for which the accounts of a business have been made up, such division and apportionment to specific periods of the profits and losses for any period for which the accounts relating to the business have been made up and such aggregation of any such profits or losses, or any apportioned part thereof, shall be made, as appears necessary, to arrive at the profits arising in the chargeable accounting period.
    (3) Any apportionment under the preceding Sub-section shall be made in proportion to the number of months or portions of months in the respective periods, unless the Commissioners having regard to any special circumstances otherwise direct.— [Captain Crookshank.]
    Brought up, and read the First time.
    8.29 p.m.
    The Financial Secretary to the Treasury (Captain Crookshank): I beg to move, "That the Clause be read a Second time."
    I do not think this Clause requires very much explanation. Sub-section (1) provides that profits are to be computed, with certain adaptations, on the same general lines as profits are computed for purposes of Income Tax under Case I of Schedule D. The Committee will notice that the words in the line are:
    740
    "shall be so computed on the principles on which the profits… are computed for the purposes of Income Tax."
    In case hon. Members want to know what that means, I will explain that it means that it is not necessarily the automatic computation of the Income Tax because there may be some error, and this would allow of modification if that were so. Sub-sections (2) and (3) deal with the apportionment which is obviously necessary, as the standard period or the chargeable accounting period may not be the same as that for which accounts are made up.
    8.30 p.m.
    Mr. Pethick-Lawrence: On a point of Order. I should like to ask your Ruling, Sir Dennis, on this question: The proposed new Clause contains a reference to the first of the proposed new Schedules which are to be put forward by the Chancellor of the Exchequer, and in that Schedule paragraph 2 of Part I contains a reference to the depreciation allowance and to the special depreciation of 10 per cent. which is provided under this scheme. At a suitable time I propose to move an Amendment to reduce that 10 per cent. to some other figure. I also want to discuss in general what the effect of that depreciation will be upon the whole scheme of the Government. Subject to your approval, I should propose, on the proposed new Clause, to discuss what will be the effect of the scheme as outlined by the Government and then, when we come to the Schedule, I should propose to move a definite Amendment substituting a different figure for 10 per cent. The argument then will be on a specific point. I should like to ask whether you approve of that method of proceeding with the matter?
    The Chairman: The course which the right hon. Gentleman proposes is I think, if I rightly understood him, the correct one. He may discuss questions which could be raised on the Schedule, when speaking on the proposed new Clause, but in such a case when we come to the Schedule the discussion must not be repeated. I gather that the right hon. Gentleman wishes to discuss certain points, and to move an Amendment in regard to something which is definitely provided for by the Schedule and not by the Clause. If he were to put down an Amendment to the Schedule to an effect contrary to the Clause then the Clause having been passed the Amend-

    741
    ment would not be in order. He proposes in that case to move an Amendment to the Schedule. I do not think it is necessary for him to discuss, or that it would be in order for him to do so, the points which he proposes to deal with by moving an Amendment to that Schedule. There may be other questions of general principle, on which I gather from him that his intended remarks would be in order on the Clause and not on the Schedule and in that event perhaps he would like to deal with such questions of principle in discussing the Clause. I may have to rule him out of order if he refers to the Schedule, but I am sure that the right hon. Gentleman will not discuss anything which he thought would be in order on the Schedule and not in order on the Clause.
    Captain Crookshank: I quite understand what it is suggested that we are to do. The Sub-section merely says that the computation is to be on the principles of the Income Tax as adapted in accordance with the Schedule. I should have thought it would be almost impossible to discuss the Schedule because that is the only point which arises on this Subsection. I do not want to make it awkward for the Committee or for the right hon. Gentleman but I should have thought that the Schedule was the place to deal with the modification since the Schedule deals only with the modification and adaptations under Schedule D.
    Mr. Pethick-Lawrence: I do not intend in any case to make any very lengthy remarks, so perhaps it will save time if I proceed to say what I intend to say. If you think that I am going in the wrong direction, Sir Dennis, you will no doubt stop me and I will then reserve my remarks until we come to the Schedule.
    The Chairman: In these matters I can safely allow the right hon. Gentleman to say what he wants to say if he will bear in mind what I have said. I do not think that he can find very much to say which would be in order.
    Mr. Pethick-Lawrence: I will bear your remarks in mind while I set out my case. The proposed new Clause, as I understand it, says that profits are to be computed according to Income Tax law except in so far as they are modified under Schedule D. One distinction in the Schedule is that, in addition to the normal
    742
    Income Tax depreciation there is to be allowed an additional 10 per cent. In a later portion of the Schedule there is a provision for a review of this amount if the emergency comes to an end and when it comes to an end. I want to put this point to the right hon. and gallant Gentleman and to the Minister without Portfolio who is sitting by his side. I want to understand exactly what is going to happen under the provisions of the Schedule as they stand.
    Let us take a company which, perhaps largely in order to carry out Government work, goes in for considerable capital expansion. For the sake of argument, I will take the large round figure of £ 1,000,000. I understand that what happens immediately, in the: first year under review, is that they are allowed this provisional figure of 10 per cent. for additional depreciation, so that, on £ 1,000,000, they are allowed £ 100,000 by way of provisional depreciation. Whether it has actually taken place or not, that is the figure that they are allowed. Further, they are allowed the Income Tax depreciation. I do not profess to have that intimate knowledge of these matters which those who are directly concerned in the kind of businesses that make armaments have, but I imagine that that figure will differ very much from factory to factory, according to the precise kind of armaments made, owing to the wide scope covered by the Bill.
    I will take the very low figure for Income Tax depreciation of 7 per cent. I believe it is far more than that under the present arrangements. That makes 17 per cent. On the top of that, this firm is to be allowed 8 per cent. interest in computing the profits in the chargeable year as compared with the standard year. That makes altogether 25 per cent., or £ 250,000. As I read the Clause and the Schedule, a firm which has recently, since the standard year, spent £ 1,000,000 in expansion of its capital, would be earning no less than £250,000 more in the year under charge: than in the standard year before it would begin to be considered to have earned excess profits. When I speak of earning that amount, I mean that the actual return for depreciation and so on allowed on the capital could be £ 250,000 more.
    Of course it may be said that in fact the capital has been depreciating all this

    743
    time, and that that has to be taken into account. There is certainly something in that, but, at the same time, this 10 per cent. has been added, not because there will be any physical depreciation in the capital, or not mainly for that reason, but because there is a notional depreciation arising from the fact that, after the emergency is over, the capital may be no longer required, and may only represent scrap iron. It seems to me, however, that, although in the ordinary course of a business that is carrying on from year to year the same kind of work the depreciation has a more or less physical counterpart, in this case the 10 per cent. which is being allowed may or may not have a physical counterpart; it may be purely notional.
    The two questions of broad principle that I want to put are these: In the first place, as I see it, this addition 10 per cent, is only provisional, and the actual amount that is going to be allowed, if I am right, either up or down, against the 10 per cent.— I am not quite sure; I shall be corrected if I am wrong— is not finally to be settled until the period arrives when the emergency is practically over. I cannot find the exact place where that is stated, but I think it is the case. In the case I am considering, it might be as much as £ 100,000 a year, and, supposing that the firm is doing scarcely anything but armament work, 60 per cent. on that is 60,000, which the firm will be paying on one basis. If the 10 per cent. should be proved to be utterly inadequate, the firm may find that it has overpaid by a very large sum, whereas if the 10 per cent. should prove far too much in the sequel, it will be the other way. Do I understand that all these matters will remain open for an indefinite time until the emergency can be said to be over? If so, it seems to me that it will be a highly complicated business, and will interfere with the distribution of dividends. It seems to me to be a very complicated notional scheme. The second question is: May it not prove to be the case that this principle which we are now adopting will in a great number of cases reduce the actual profits of the firm, as computed for Income Tax purposes, to an almost negligible quantity?
    Another point about which I want to ask is this:
    744
    What is the position where the money has been put up, not by the firm, but by the Government? I imagine that there is some place in the Bill where it is provided that it is only where the money for the capital expansion has been put up by the firm itself that any of these provisions will apply. I imagine that, if it has been put up by the Government, it is outside the provisions of this particular part of the schedule. I cannot imagine that that is not so, but I should like to be assured that that is laid down somewhere in this rather complicated scheme. We cannot read it like a single page; it is very difficult to follow, and we have not had any very long time in which to master it. I should like to be assured that this point is settled, and that any capital put up by the Government is entirely excluded from any provision of this kind. How far the firm is ever going to get finality on this matter until what is called the end of the emergency comes seems to be a very difficult question. In some cases, at any rate, the effect of this provision may be to wipe out a very large part of what is normally regarded as the additional profits of the firm.
    8.46 p.m.
    Captain Crookshank: My right hon. Friend intended, when this matter came up on the Schedule, to give one of his very lucid explanations. I am not quite as clear about this as I should like to be, because I did not foresee that this matter would be raised at this stage, but I think I can perhaps explain it in this way. Depreciation will be computed under this Schedule as for Income Tax, but it is proposed to give this further exceptional depreciation in particular cases where the buildings have been provided or plant or machinery installed since 1st January, 1937, for the purposes of the rearmament programme. The Committee will realise that such a factory, with its machinery, by the nature of the fact that it has been put up for the purposes of the rearmament programme, is one where there may well be exceptional depreciation, because it must be very likely, if not more than likely, that when the rearmament period comes to an end it will be obsolescent, or possibly completely redundant. I am sure that, on reflection, everybody will see that some thing of this sort is right. We provide

    745
    for the final determination of this allowance at some time. That "some time" must be when Parliament— I am precluded from discussing it in the terms of the Schedule— determines that the emergency is over. The duty is limited to three years, but the end of the emergency must be determined by Parliament.
    In regard to the Excess Profits Duty a great number of questions remained open in this way, and somewhat similar provision as was made in the case of the Excess Profits Duty is found here. The difficulty which the right hon. Gentleman found himself up against was as to whether there would be any special depreciation allowance in the case of factories and machinery put up with Government assistance, or at Government expense. The answer to that is that I understand there is no special allowance; this deals only with what is to be put up by the firm itself. I do not know whether I have dealt entirely with what the right hon. Gentleman wished to know, but the exceptional depreciation— I take it that this is really what he wants to know— attributable to the period during which the Armament Profits Duty is in force— that is three years— will be from the 1st April, 1939, with the Armament Profits Duty comes into force. I am sorry that my right hon. Friend was not aware that this was going to be raised, because he intended to deal with it himself, but I will see that the right hon. Gentleman gets a fuller answer on the Schedule.
    Mr. Pethick-Lawrence: I thank the right hon. and gallant Gentleman, and, for myself, I will not delay the Committee any longer on the matter.
    8.50 p.m.
    Mr. Benson: I am not quite clear on this. In the Schedule depreciation is mentioned twice— in Sub-section 3 (1) and in Sub-section 3 (2). Am I to under stand that the 10 per cent. mentioned in Sub-section 3 (2) is additional to the normal standard of depreciation, and that firms will be allowed normal depreciation and then a further 10 per cent. of the capital value in addition, so that, as my right hon. Friend has said, they may get depreciation of 17 per cent. or 20 per cent.?
    8.52 p.m.
    Mr. Gallacher: Take the case where a firm is building an extension for the pur-
    746
    poses of this work. Will the mere fact that the firm has built the extension since that date entitle it to depreciation on that construction regardless of other circumstances? Is it not the case that there were certain firms which during the last crisis extended their plant for Government purposes, and that, at the end of the crisis, the plant was, as the Minister says, redundant? There were firms— of which I know many myself— which very considerably extended their factories for Government contracts during the War, and, as a consequence, they were able, when the War was over, to wipe out a lot of smaller competing industries, and they have now established themselves as great and flourishing concerns. This is known to the Minister. We have here a situation in which firms, on the promise of Government contracts, will build new factories, and out of the profits they will pay for those buildings, and the new factory, after the crisis is over, will become part of a great new establishment, bringing in very great profits at the expense of smaller firms round about.
    Yet, without any consideration as to the circumstances attending the building of these factories, or additions to factories, or without considering the possibilities of maintaining the buildings after the crisis, all of these new buildings are to be treated as being inevitably redundant. I suggest that this should be considered, and steps taken to see that so many loopholes are not left. It has become quite obvious that there will be justification given for the most excessive profit to be made, and I ask the Minister to reconsider the question of depreciation.
    Mr. Benson: May I have a reply to the specific question whether these two depreciations are to be added together or whether they are alternatives?
    8.56 p.m.
    Captain Crookshank: Perhaps the hon. Gentleman was not present when the discussion started.
    Mr. Benson: Yes, I was.
    Captain Crookshank: The scope of the discussion was made very narrow by the Chairman, and I said that I was in some difficulty because of that fact. It was not anticipated that points on the Schedule itself would be raised. Perhaps I can answer the points made by both hon. Gentlemen. The hon. Gentleman the Member for West Fife (Mr. Gallacher)

    747
    was referring back to the "last crisis," by which he meant 1914–1918. There have been a few crises since then, but he meant that one. Here we are dealing with quite a different matter, and I do not think that his argument is particularly relevant. What is being dealt with here, from the point of view of exceptional depreciation, are, as I said, firms whose factories were built or whose machinery was installed since 1st January, 1937, for the purpose of the rearmament programme. As regards the hon. Gentleman the Member for Chesterfield (Mr. Benson), I think I can say that the answer is that the ordinary wear and tear allowances now have to show an increase of 10 per cent. and 20 per cent. The original allowance is additional to that and is not more than 10 per cent. of the capital cost. All this question of wear and tear allowances was reviewed at the time of the Finance Acts of 1932 and of 1938, when certain additional allowances were given to industry as a set-off against the increase in the standard rate of Income Tax.
    Mr. Benson: This allowance was a 10 per cent. increase in the depreciation, and not a depreciation of 10 per cent. of the capital, which is a fundamental difference.
    Clause read a Second time, and added to the Bill.

    NEW CLAUSE.— (Succession and amalgamation.)
    (1) As from the data of any change in the persons carrying on a business, the business shall, for the purposes of armament profits duty, be deemed to have been discontinued and a new business shall be deemed to have commenced:
    Provided that a business which at the date of any such change is an armament business shall not be deemed to be discontinued by reason of the change, and the standard profits of the business for any chargeable accounting period shall be computed accordingly, and, in particular, in computing the capital employed in the business after the change, no regard shall be had to any consideration given in respect of the transfer of the business or any of the assets thereof on the occasion of the change.
    (2) Where two or more businesses are amalgamated and immediately before the amalgamation any of those businesses were armament businesses, the resulting business shall be treated for the purposes of the provisions of this Act relating to the computation of standard profits as if—
    (a) it had been in existence throughout the period during which there were in existence any of the former businesses which were armament businesses immediately before the amalgamation;
    (b) any profits made or losses incurred or capital employed in any of those former businesses had been made, incurred or employed in the resulting business; and
    (c) any assets of any of those former businesses had become assets of the resulting business when they became assets of the former business
    and, in particular, in computing the capital employed in the resulting business, no regard shall be had to any consideration given in respect of the transfer of any of those former businesses or any of the assets thereof, on the occasion of the amalgamation:
    Provided that nothing in this Section shall affect any liability to armament profits duty in respect of any period before the amalgamation.
    (3) Where part of an armament business is transferred (as a going concern) by the person theretofore carrying it on to another person, the part transferred and the part not transferred shall each be deemed for the purposes of the provisions of this Act relating to the computation of standard profits to be a continuation of the original business, and the said provisions, including the provisions of this Section relating to amalgamations, shall apply accordingly, subject to any necessary modifications:
    Provided that, for the purpose aforesaid, such apportionments shall be made of the profits made, and losses incurred, and the capital employed, in the original business, and of any assets of the original business, as may appear to the Commissioners, or, on appeal to the Board of Referees, to that Board, to be just.—[Mr. Burgin.]
    Brought up, and read the First time.
    8.59 p.m.
    Mr. Burgin: I beg to move, "That the Clause be read a Second time."
    I hope that what looks to be a formidable Clause can be reduced to very simple proportions by a little explanation. Hon. Members in all parts of the Committee will be with me on this occasion, because it is quite clear that what I am endeavouring to do is to prevent the possibility of evasion. I am endeavouring here to foresee that there might be certain possible methods of endeavouring to escape from this tax. As the Committee know, in general Income Tax practice, if a business changes hands, as a broad general rule the old business ceases on that day and the new business commences. It is the recognised rule that where company A sells its business to company B, the businesses cease and begin respectively. The

    749
    first part of this Clause says that where you are dealing with an armament business that general Income Tax rule on the stoppage of a business and the commencement of a new one shall not apply. In other words, if there is a continuity of armament business for profit purposes you cannot get out of the fact that you are on a higher profit-earning year by the simple expedient of dissolving your company or selling your business to an other. That is the out-and-out transfer of the whole of the business from an old owner to a new owner.
    The second part of the new Clause deals with a more complicated business. It deals with two businesses amalgamating. The Clause says that if either of them is an armament business, the combined business shall be considered as continuing the armament business. You would not alter the profits standard of the armament business by marrying the two businesses. If one was an armament business it would carry to the amalgamated business its standard as an armament business.
    The third part of the Clause deals with the man not selling the whole of his business or amalgamating with another, but selling part of his business. It says that if that part of his business is armament business, then after splitting up, both the old business and the new business will be treated as continuing the original armament business. That is using rather a sort of boxing language in an endeavour to explain the Clause, but I assure Members of the Committee that it is a very sensible hand-made Clause to deal with the possibility of evasion. Where you have a business which could change its owner ship with normal Income Tax consequences you provide, by the first proviso to Sub-section (1), that that should not apply to armament businesses, and if you think that by amalgamation you are going to alter the character of the business, you are defeated by paragraph (2), and if you think you can alter the character of the business by sub-dividing and setting it apart, you are again unable to do that by the express wording of the third part of the new Clause.
    9.3 p.m.
    Mr. C. S. Taylor: The point that I have in mind is a very simple one and I do not think that my right hon. Friend will have any qualms about making this
    750
    concession to me. Under the first half of this Clause there may be a private company, say, for example, Smith & Company, that had been formed 10, 15 or 20 years ago. That company after 1936 might have decided to change from a private company into a public company, and under the terms of law that public company, having the same name as the private company whose business it had taken over, is a new company, although the directors and the management are the same and the business precisely the same, except that it has changed from a private company into a public company. I ask my right hon. Friend to give me an assurance that where a business remains the same except in that one small particular the company in question would be permitted to come under the provisions of Clause 4 of the White Paper instead of Clause 6, and would be considered an old company having commenced before and not after 1936.
    9.5 p.m.
    Mr. Pethick-Lawrence: There are two points on this new Clause which I want to raise. Let me say at once that I appreciate the intention of the Clause, and so far as it goes it will achieve something to prevent an evasion of the tax. The first point is the apportionment. This is dealt with in the proviso. But for the proviso the position would be as follows: Suppose there is one company which has never done anything but armament work. It makes a certain profit in the standard year and a considerably increased profit in the year under charge. The whole of that increase would be subject to assessment. Another company who are not doing armament work are making a constant profit. If these two companies are brought together it will be of no advantage to the second company because the profits of the second company are constant, its excess profits will remain precisely as if the armament company had existed alone. But according to the provisions in the first Clause of those which relate to A.P.D. the importation of this non-armament company under normal circumstances would have reduced the charge by quite a considerable amount by the apportionment arrangement under the proviso. It is clear that the framers of the Armaments Profit Duty realise that position and it is provided in the proviso that a Board of Referees shall adjudicate

    751
    on the matter. I want to be clear that they will adjudicate on a common-sense view of this particular case, and that the whole of that excess profit shall be allocated to armaments and pay the whole 60 per cent. If that is so, then precisely similar arrangements should prevail in the case of a company which from the beginning has been in precisely the position of this amalgamated company. Therefore, I say that almost every individual case will have to come before the Board of Referees for a proper apportionment. If that is not the case a most unfair position will arise.
    The other point is in connection with a matter which I had hoped to put forward in an Amendment. I am told, however, that it is out of order and therefore I will put the point now. There is a danger which I foresee exists in a real form if the proposals of the right hon. Gentleman come into law in their present form. Let me explain the position. Suppose an entirely new firm comes into the world in order to make armaments for the Government. The promoters having started business consider that they will be called upon before long to pay excess profits if they take anything like £ 200,000 worth. They consider what they should do, and they form themselves into a company with two or three subsidiary companies. The parent company will take contracts from the Government and then let out subcontracts to these subsidiaries, and will so arrange the amount and prices as to avoid the duty under both heads. The subsidiary company will not come into the picture, because it will be so arranged that it will never get sub-contracts to an amount of £ 200,000. Only the parent company comes into the picture, and so arranges the price between itself and its subsidiaries that they never make a profit which the Chancellor of the Exchequer can get at at all. That is the case put in its simplest form.
    I am aware that if a company subdivides itself for the purpose of doing this the Clause contains a provision against it, but I think that a clever lawyer could devise a scheme of the kind I have envisaged which would cut through the mesh of this Clause. Let me put a possible case which occurs to me. The provision in the Clause is against a company sub-dividing itself. Suppose there is
    752
    company A, which has been in the habit of putting out its contracts to company B, a perfectly bona fide contract and a perfectly bona fide price between the two. Company A might create a subsidiary company of its own, and that subsidiary company might purchase company B. There is no proceeding there which would justify the provision of the Clause against sub-division coming into play, but subsidiary company A now being in possession of company B through its sub-contracting company, would be able to manipulate prices between itself and company B and so evade the duty. That is an illustration which has occurred to me while I have been standing on my feet, and I am sure that a clever lawyer who is in the habit of dealing with Surtax and Death Duties could think of a far better expedient and device for evading this tax. Since my Amendment will not be called I should be glad if the right hon. Gentle man can really assure the Committee that with all these devices he will be able to prevent any evasion of this duty.
    9.15 p.m.
    Mr. Benson: In Sub-section (1) of this. Clause, it is stated that if there is any change in the persons carrying on a business the business shall be deemed to be a new business. It would appear that if an ordinary private business which had been in existence for a number of years took on an armament contract after July, 1936, and after that date there had been some change in the directorship, although there was a complete continuity in the business and no serious change in the interests represented in it, under this Sub-section the firm could claim, if it so suited it, that a new business had arisen. In a previous Clause, it was laid down that where there had been low profits in previous years, the referees are entitled to substitute for a standard year in the case of a public company 6 per cent., and in the case of a private company, I assume they would be more or less guided by the 6 per cent. that is laid down. But if there was a minor change in the partnership and the firm desired to establish itself as a new firm, it would immediately come under Sub-section 9 (b) of a previous Clause at a basic percentage of 10 per cent. Is it the intention that merely by some minor change in the partnership, a firm, if it wishes, can establish a basic rate of 10 per cent?
    9.18 p.m.
    Mr. Gallacher: I was more than pleased to see the volatile Minister get up at that Box as Jack the Giant-Killer, but I warn him that the bunch of robbers he is after will be very difficult to catch, and that once they are caught, they will be very difficult to hold. I want to ask the right hon. Gentleman a question. If he will turn his attention to the Official Report of Monday, 26th June, he will find that in the middle of a speech that was being made by the Chancellor of the Exchequer, I made an interjection, as follows:
    " In the event of a contractor letting out a series of sub-contracts, each of them of £200,000, are all those sub-contracts excluded from the scheme, although it may be that these sub-contracts are let out merely to subsidiary companies?"
    The Chancellor replied:
    "Oh, no, the scheme covers the cases which the hon. Member has in mind."— [Official Report, 26th June, 1939; col. 59, Vol. 349.]
    Will the Minister be good enough to tell me where the scheme covers these cases?
    9.19 p.m.
    Mr. Burgin: In reply to the question put by the hon. Member for West Fife (Mr. Gallacher), the main contractor is, of course, caught by the tax, because he has got the contract for the whole. Each subsidiary company which does £ 200,000 is caught under the definition.
    Mr. Gallacher: What happens if they are under £200,000?
    Mr. Burgin: If less than £ 200,000, only the main contractor is caught. My hon. Friend the Member for Eastbourne (Mr. C. S. Taylor) asked a question about a private company turning itself into a public company. In order to answer his question, I must know whether he means at a date subsequent to 1st April, 1939, or at a date prior to 1st April, 1939.
    Mr. C. S. Taylor: This is an actual case of a company that was a private company and has now been changed into a public company. Certainly, the change took place between 1936 and 1939.
    Mr. Burgin: The Committee will understand my purpose in asking that question. It is only to 1st April, 1939, that this tax can date back. We are dealing with the financial year 1939. Any change of ownership that occurred prior to 1st April, 1939, will have the ordinary consequences
    754
    of the ordinary law, and will in that case have started a new business. There is nothing in this proposal that acts retrospectively to alter the law as from a date prior to the time to which the tax could date back. No such idea is contemplated. Therefore, it must be clear that changes in ownership, even of armament businesses, prior to 1st April, 1939, will operate under the old law of altering and changing ownership.
    Mr. Taylor: Then the company I have mentioned is regarded as an old company and not a new company?
    Mr. Burgin: No, I think not. I may have misunderstood my hon. Friend. I am not dealing with the question whether it is an old company or a new company for the purpose of the standard year. That is a matter of interpretation. I am answering the question whether there is a change in ownership. Where in the case of an armament business there is a change from a private company to a public company at a date subsequent to 1st April, 1939, it will be treated as if there had not been a change of ownership, but if the change took place before 1stApril, 1939, the old law prevails. My hon. Friend's anxiety is to know which standard year that company would have. That is something that was dealt with in another Clause.
    Mr. Taylor: Surely it comes under this Clause which deals with succession, and could not have come under any other Clause that has been dealt with? May I refer to the original National Defence Contribution? In that case, such a company as I have in mind would have been regarded as an old company and not a new company. It makes a very vital difference. There is no idea of evasion in the case of the company I have in mind. It makes a vital difference to the company whether it is considered a company that has continued with its unbroken record or whether it is to be considered a new company. Just because it changes from a private company into a public company and does not change its business in any way and has the same directors and is the same in every other respect except that there are different shareholders, which may be the case in regard to any company— I cannot see why such a company should be penalised in this manner.
    Mr. Burgin: I am not arguing whether it is penalised or not. Something the hon. Gentleman has said makes me wonder whether there was any change at all. Do I understand there was a new company formed or was the private company sold to a new company?
    Mr. Taylor: A new company had to be formed to take over the assets of the old company.
    Mr. Burgin: Then the matter is as I understood it from the start. There was an actual change of entity, the transfer from the old company to the new. The ordinary Income Tax law would render that an effective change of ownership, with all the consequences that would flow from that unless there is some Income Tax rule that the hon. Member can pray in aid. But it only becomes relevant to the point we are discussing if it was after the 1st April, 1939. If the transfer was before that date, the operation is outside the purview of the Clause, and the change of ownership carries the usual consequence.
    The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) raised a number of points of importance, most of which dealt with the subsidiary company. The main contractor is or is not within the tax according to whether or not the receipts amount to £200,000. But all the examples he was putting were cases where the main contractor did come within the limit. His anxiety was lest the main con tractor paid too much for services or articles necessary to complete his work. It is a question of price or cost in which the contract powers under the Ministry of Supply Bill must come into operation. The Minister has the same powers over sub-contracts as over the main contracts and a contract with a subsidiary is a sub contract. I should have thought that the ordinary rule of wisdom would be that if there was any identity of ownership between contractors and sub-contractors the scrutiny of price should be the closer, and I should have thought that was where the control would lie. The right hon. Gentle man asked whether the receipts of the subsidiary companies might not be so apportioned as never to amount to £200,000. I admit the possibility but I say that the method of controlling is by a rigorous costing system and examination under the powers of the Ministry of Supply Bill.
    Mr. Pethick-Lawrence: Would the right hon. Gentleman give the matter further consideration in consultation with his expert advisers and if he finds that the Clause would not prevent evasion will he consider the steps necessary to make it adequate?
    Mr. Burgin: Most certainly. I give that assurance at once. The Chancellor of the Exchequer has said that should it be found necessary to buttress the powers by further legislation the new legislation would be retrospective to the same extent as the new Clause. The right hon. Gentleman gave one final example in dealing with subsidiaries. He mentioned a company which had been in the habit of sub-contracting to Company B and the main contractor bought up the sub contractor. The sub-contractor was itself an armament firm and consequently in buying up the subsidiary would make the whole of that sub-contractor come within the category of an enlarged subsidiary. I can give a covering assurance that with my expert advisers I will look at the points which have been made because the desire of the framers of this Clause is to prevent evasion on all possible lines of transfer, amalgamation or sub-division. With regard to apportionment the proviso secures the apportionment of standard profits and capital between new entities so that each new entity will take over every portion of the standard which corresponds to its own business. Such an apportionment will be possible without undue difficulty, but there is provision for appeal to the Board of Referees. The right hon. Gentleman must decide, whether he treats that as a reinforcement of his earlier argument, but it is an academic matter.
    Mr. Gallacher: Does the right hon. Gentleman admit that the Chancellor of the Exchequer had no right to say that the scheme covers the cases which the hon. Member had in mind— the cases to which the right hon. Gentleman has referred now in connection with the argument of the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence).
    Mr. Burgin: The hon. Member for West Fife (Mr. Gallacher) in his question expressly said that each of the sub-contracts was of £200,000. When he put the question to me just now he said that it was below £200,000. If we are not dealing with the question he put and which is in

    757
    the OFFICIAL REPORT, that is another matter. The Chancellor of the Exchequer's answer as appearing in the OFFICIAL REPORT is faultless.
    Mr. Gallacher: The Chancellor of the Exchequer replied to the case that the hon. Member had in mind, and it was obvious that the case was that of a contractor letting out orders to subsidiary companies in order to get under the £200,000. When the Minister tells me that the main contractor will be responsible, of course he will have to pay on any profit he makes, but if £500,000 should be let out to three sub contractors is it the case that that £500,000 is not taxable as far as these three subsidiaries are concerned?
    Mr. Burgin: No, it is not taxable with the three subsidiaries any more than it would be with three strangers. The tax applies if the receipts are £ 200,000. If the receipts are less, the tax will not apply whether the recipient is a complete stranger— a Chinaman— or a subsidiary company.
    Clause read a Second time, and added to the Bill.

    NEW CLAUSE.—(Duty to give information.)
    (1) Where the total receipts of a business under armament contracts in any accounting period falling wholly or partly within the three years beginning with the first day of April, nineteen hundred and thirty-nine, amount—

    (a)in the case where the period is twelvemonths, to two hundred thousand pounds; or

    (b)in a case where the period is less than twelve months, to such sum as bears to two hundred thousand pounds the like proportion as the length of the period bears to twelve months,
    it shall be the duty of the person carrying on the business, as soon as may be after the said receipts amount to the said sum, and in any case not later than twenty-one days after the end of the accounting period, to notify the Minister to that effect.

    (2) It shall be the duty of any person who, for the purpose of enabling himself to perform an armament contract, had, whether before or after the passing of this Act, entered into another contract with any persons carrying on a business (being a contract for the supply of anything by them to him, or the execution of any works by them for him, under which payments fall to be made to them during the three years beginning with
    758
    the first day of April, nineteen hundred and thirty-nine), to send to those persons, as soon as may be after the passing of this Act, or, as the case may be, after entering into the contract, a notice in writing stating that the contract has been entered into for that purpose.

    (3) It shall be the duty of the person carrying on a business—

    (a) if required by the Minister by notice in writing so to do, to furnish within such time not exceeding twenty-eight days, as may be specified in the notice, such particulars as may be; so specified, being particulars reasonably required for the purpose of enabling the Minister to perform his functions under this Act;

    (b) in such classes of cases as the Minister may by order specify, to furnish to the Minister, without being served with any such notice as aforesaid, such particulars as may be specified in the order of any contracts entered into by him for the purpose of enabling him to fulfil any armaments contracts.

    (4) Any person who fails to comply with the provisions of this Section shall be liable on summary conviction to a fine not exceeding two hundred pounds and, if the default in respect of which he was so convicted continues after the conviction, he shall be liable on summary conviction to a fine not exceeding fifty pounds for each day on which the default so continues:
    Provided that it shall be a defence for any person charged with failing to make a report under Sub-section (1) of this Section to prove that, by reason of the failure of any other persons to send him a notice under Sub section (2) of this Section, he had no means of knowing that his receipts under armament contracts had amounted to the sum mentioned in Sub-section (1) of this Section.

    (5) Any person who, in giving a notice or furnishing particulars under this Section, knowingly makes any false statement, shall be liable on summary conviction to a fine not exceeding two hundred pounds or to imprisonment for a term not exceeding three months or to both such fine and such imprisonment.— [Mr. Burgin.]

    Brought up and read the First time.
    9.36 p.m.
    Mr. Burgin: I beg to move, "That the Clause be read a Second time."
    The Clause requires a contractor to give notice to the Minister when his receipts from armament contract business in an accounting period reach the amount which brings them within the charge. Hon. Members asked earlier whether there were to be returns, or whether forms were to be issued to everybody. This Clause puts the obligation on the contractor to notify the Minister when the £200,000 period has arrived and it puts on the contractor a duty to notify sub-contractors

    759
    whenever he places armament contracts With them. He has the further duty, on receipt of notice from the Minister, to give particulars of what armament contracts have been carried out by him. The requirements to give information set out in the Clause are considered sufficient to enable the Minister to carry out this function. He has in addition, under Clause 9 of the Ministry of Supply Bill, power to examine all books and to procure information on the cost of those contracts which fall within the range of the wider definition of "articles required for the public service." The provisions in Sub-section (3) of this new Clause are devised to make the administration of this scheme easier both for the Minister and the contractors.
    Mr. Pethick-Lawrence: I make only one comment upon this Clause. The right hon. Gentleman has rightly imposed this duty on the contractors, but he finds it utterly impossible to impose upon contractors, at the same time, the duty, of stating what money they receive for armament contracts given by local authorities.
    Mr. Garro Jones: Last night I ventured to make a suggestion to the effect that armament contracts should be marked at their origin in the Service Departments. I was not favoured with any reply to that suggestion, but I still think it was a good one, and my belief is confirmed by this Clause. I ask the Minister how the recipient of a contract is to know whether it is an armament contract or not. Last night I read an extract from a journal which is supposed to be well informed about these matters to the effect that an armament contractor, or any other contractor, would find it difficult to know whether any given contract came within this definition or not. Therefore, I repeat my suggestion and ask the Minister to examine its practicability.
    Mr. Burgin: I am sorry the hon. Member did not receive an acknowledgment of his suggestion, but I did endeavour, by a nod of the head, to convey to him that his suggestion ran on parallel lines with the scheme which we have been working out. I think it is desirable, when con tracts are placed by any of the contract departments of the three fighting Services, or by any other Government Department coming within this operation that the con tract itself should clearly denote that it is an armament contract from the moment it leaves the Government office.
    Mr. Garro Jones: Will the Minister go a step further in the interest of efficiency and say that a main armament contractor who receives such a contract shall be obliged to re-mark it if he is giving it to a sub-contractor?
    Mr. Burgin: That is all included in the scheme put forward last night and tallies exactly with the arrangements which are being made in the Departments for the purpose of operating this tax.
    Sir P. Harris: I recognise the sweet reasonableness of the right hon. Gentleman and congratulate him on his desire to meet suggestions in order to secure co-operation in making this Clause a success. It occurs to me, however, that it is a little dangerous to have promises of this kind made in the Committee, which might suggest that if a contract is not marked as an armament contract, it would be immune from any liability under this Clause. That would be a very serious thing in the light of our discussion this afternoon about border-line cases.
    Mr. Burgin: The only way in which I can make it clear is this. I have said that in connection with the administration of this Armament Profits Duty it is proposed that the Ministry of Supply, as soon as the Royal Assent has been given to the Bill, shall issue to contractors and those likely to be concerned an explanatory memorandum on the way in which it is proposed to administer the duty. The hon. Member seemed to suggest the possibility that by a clerical error, say by a stamp not having hit the corner of a contract, somebody might be rendered immune. For the purpose of rendering it more noticeable to the contractor that the contract is an armament contract, it is intended that that fact shall be noted on the contract, and no doubt by accompanying letters and in other ways the notification can be brought home to all concerned. Certainly, it will not be a defence that the contract was not so marked. These provisions are for the purpose of assisting and not hindering the administration of the tax.
    Sir Geoffrey Ellis: Surely whether the contract is marked or not, it is, in the long run, a question of interpreting the Act whatever the Department may do and it would be always open to a contractor, if there was a dispute, to appeal.
    9.43 P.m.
    Mr. Ede: I wish to reinforce the point made by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) in view of the right hon. Gentleman's explanation to my hon. Friend the Member for North Aberdeen (Mr. Garro Jones). I cannot follow why a local authority could not be instructed, when placing a contract, to intimate by a notice on the contract itself that it was a contract on which grants would be payable under the Air-Raid Precaution or Civil Defence Measures and that therefore any profits on it must be included in the return to the Minister. I suggest that the right hon. Gentleman is steadily building up our case so completely that at last he will convince himself.
    Clause read a Second time, and added to the Bill.

    NEW CLAUSE.—(Application to Armament Profits Duty of Fifth Schedule to Finance Act, 1937, etc.)
    (1) The provisions of the Fifth Schedule to the Finance Act, 1937 (which relate to the assessment and the collection of the national defence contribution, appeals and supplementary provisions) including the provisions thereof enabling the Commissioners to make regulations, shall have effect with respect to Armament Profits Duty as they have effect with respect to the national defence contribution:

    Provided that—

    (a) no appeal shall lie to the General Commissioners from any assessment;

    (b)no appeal shall lie to the Special Commissioners in respect of any matter with respect to which an appeal lies to the Board of Referees, or which is by this Act to be decided by that Board or by the Minister, or is left to the discretion of the Commissioners; and

    (c)the powers conferred by Part III of the said Schedule on a surveyor shall be exercisable also by the Commissioners.

    (2) The obligation as to secrecy imposed by the Income Tax Acts and by the said Schedule (both as originally enacted and as applied by the preceding provisions of this Section) shall not prevent disclosure to the Minister or any authorised officer of the Minister of such facts as may be necessary for the purpose of carrying the provisions of this Act relating to Armament Profits Duty into effect.—[Captain Crookshank.]

    Brought up, and read the First time.
    9.45 p.m.
    Captain Crookshank: I beg to move, "That the Clause be read a Second time."
    762
    We propose under this Clause to apply in connection with Armament Profits Duty, methods and arrangements which were adopted in connection with the National Defence Contribution. It is only right to explain to the Committee what is meant by the proviso in the Clause. It makes certain modifications in the method which was applied to National Defence Contributions. The first is that no appeal shall be made to the General Commissioners. We are leaving it to the Special Commissioners. It is thought desirable in cases like these, that appeals should be heard by an experienced whole-time appeal tribunal. The second proviso is directed to obviating the possibility of any dispute with regard to jurisdiction, and the third empowers the Commissioners to exercise a power which the inspectors of taxes have in connection with National Defence Contribution to require taxpayers to render returns and furnish the necessary particulars. Sub section (2) makes one modification with regard to secrecy, because it may be on occasion necessary for the Revenue, in order to carry out the provisions of the Act, to disclose some information to the Minister of Supply. The Sub-section accordingly provides that such information can be transmitted.
    Clause read a Second time, and added to the Bill.

    NEW CLAUSE.—(Deduction of armament profits duty in computing liability to Income Tax and National Defence Contribution.)
    The amount of the armament profits duty payable in respect of a. business for any chargeable accounting period shall, in computing for the purposes of Income Tax or the National Defence Contribution the profits and gains, or the profits, arising from that business, be allowed to be deducted as an expense incurred in that period.— [Captain Crook shank.]
    Brought up, and read the First time.
    Captain Crookshank: I beg to move," That the Clause be read a Second time."
    As the Committee is already aware, because it has been stated from this Box, it is intended that the amount of Armament Profits Duty payable for any charge able accounting period shall be treated as an expense of the business in computing profits for Income Tax and National Defence Contribution purposes.
    Clause read a Second time, and added to the Bill.

    NEW CLAUSE.—(Interpretation, etc.)
    (1) In the provisions of this Act relating to armaments profits duty—

    (a)the expression "the Commissioners" means the Commissioners of Inland Revenue;

    (b)the expression "the Board of Referees" means the Board of Referees for the purposes of Rule 6 of the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918;

    (c)the expression "turnover" means the net amounts charged, in the chargeable accounting period in question, by the person carrying on the business to the persons with whom he deals, or, in relation to a contract part of the profits or losses under which are taken into account for the purposes of armament profits duty in that period, so much of the total net amount which has been or will be so charged under that contract as is properly attributable to that period;

    (d)the expressions "company," "director," and "ordinary share capital" have the same meanings as they have for the purposes of the Fourth Schedule to the Finance Act, 1937;

    (e)the expression "the fixed rate" in relation to share capital other than ordinary share capital, includes a rate fluctuating in accordance with the standard rate of Income Tax;

    (f) the expression "the Minister" means such Minister of the Crown as His Majesty may designate by Order in Council;

    (g) the expression "accounting period" has the same meaning in relation to a business as it has for the purpose of the National Defence Contribution;

    (h) the expression "chargeable accounting period" means—

    (i) any accounting period which falls wholly within the three years beginning with the first day of April, nineteen hundred and thirty-nine; and

    (ii) in a case where any accounting period falls partly within and partly without the said three years, such part of that period as falls within those three years.

    (2) Any Order in Council or order under the provisions of this Act relating to armament profits duty may be revoked or varied by a subsequent Order in Council or order, as the case may be.— [Captain Crookshank.]

    Brought up, and read the First time.
    Captain Crookshank: I beg to move, "That the Clause be read a Second time."
    It is not necessary for me to say more than that this is the interpretation Clause.
    Clause read a Second time, and added to the Bill.

    NEW CLAUSE—(Reduced Customs duties on tea.)
    (1) The duties of Customs chargeable on tea under Section one of the Finance Act, 1936, shall be at the following reduced rates, that is to say:

    Tea not being an Empire product

    the lb. 8d.

    Tea being an Empire product

    the lb. 2d.

    (2) This Section shall be deemed to have had effect as from the twenty-seventh day of April, nineteen hundred and thirty-nine.— [Mr.Barnes.]
    Brought up, and read the First time.
    9.48 p.m.
    Mr. Barnes: I beg to move, "That the Clause be read a Second time."
    The purpose of the Clause is to reduce the tax on Empire tea from 6d. per lb. to 2d. per lb. I desire to ask the Committee now to switch over from considering the rather nefarious practices of the counting house designed to evade taxes to consider a tax that falls on the conditions of the people in a form that they cannot possibly evade. Although the present Bill does not impose any new burden upon the consumers of tea, I think it is still appropriate that we should use this occasion to call attention to the burden on the average working-class household that this duty represents. In last year's Budget the Chancellor, justifying the imposition of another 26. per lb. on tea, said:
    "I believe that there is a willingness and even a pride in the humblest homes to take a share in this rearmament outlay."—[Official Report, 26th April, 1938; col. 66, Vol. 335.]
    I must confess that that appeared to me to be rather offensive to one's sense of pro portion in considering the problem of equity in the field of taxation. Which are the humblest homes in the community to which the Chancellor referred? Obviously in the financial sense he was referring to the poorer homes, the homes of the old age pensioners, of the unemployed, of the widow struggling to keep her home going after a breadwinner has been taken from her, the homes of young sons and daughters trying to maintain a family, or invalids, or younger children. I think we might have been spared excuses of that description, at least from the Treasury Bench, when they were bringing up the high taxation on tea. Contrast that attitude with what we have experienced

    765
    during the stages of the present Finance Bill. We have witnessed highly organised and powerful sections of industry using to the full their capacity to influence Members of the House to evade or to defeat or to avoid any fresh impost on their particular industry. I do not take the view that there has not been some case for their demands, but I compare the influence which a highly organised industry like the film industry— with its capacity through publicity to reach the community and to influence public opinion, and the rapid effect that it can produce in this House— with the inability of the great mass of the consumers in this country ever to express an effective voice to the Treasury Bench when matters of this description are under consideration.
    The second experience that we have had with regard to this Finance Bill has been the influence which the chemists, aided by the medical profession, have been able to exercise on a Budget decision, rightly or wrongly, as the case may be. Whatever the merits or the demerits of those particular tax issues may have been, I certainly claim that the demand for a reduction in the Tea Duty is based on grounds equally as strong as the demand for the abolition of the proposed film duty and for the re-imposition of the Medicine Stamp Duties. I recognise that the incidence of taxation at the present time is heavy in all directions, but it appears to me that when one looks at commodities like tea, sugar, tobacco, beer, and petrol, here we have a range of consumable commodities that unfortunately represent an easy method of collection for the Treasury, and they become too easy game when the problem of additional taxation confronts this House. I think there is too ready a disposition and too great an acquiescence on the part of Members of Parliament to permit the Chancellor to turn to this type of articles and to place heavy burdens upon them, whereas I think public opinion, and certainly opinion in this House, ought to compel the Treasury to devote its attention to devising a system of taxation based on the ability to pay of the whole community. While we continue to acquiesce in certain commodities being taxed because of their convenience of collection yielding an undue contribution to the national revenue, I do not consider the Treasury will direct its attention to a change in the taxation law that will raise
    766
    the necessary revenue on a basis of equity over the whole community.
    I am not approaching this problem from the angle that the Chancellor of the Exchequer must not have the money. I accept the position that the money is necessary, but I am challenging the distribution of the burden. In regard to the 3,000,000 persons who pay Income Tax, I readily admit that their burden is a heavy one, but one cannot argue that those people are distressed to the extent that it represents personal physical hard ship in their budgetary position in the domestic sense. The imposition of the Tea Duty does represent actual distress if not to the majority of the citizens of this country, at any rate to a fairly considerable proportion. Not only that, but when you impose a duty of this description, by weight, on an article that varies in price, determined by quality, the incidence of the tax becomes increasingly aggravated.
    As I am dealing only with a reduction of duty on Empire teas, I will not take the percentage of the incidence of the tax on foreign-blended tea. Let me take the percentage of incidence on the differently priced teas of Empire blend. On tea sold at 2s. a lb. the present tax represents 25 per cent. of the price. On tea at 2s. 6d. a lb. the tax burden is 20 per cent., on tea at 3s. per lb. it is 16.6 per cent., and on tea at 5s. a lb. the tax is 10 per cent. Hon. Members will observe that the poor type of person who is purchasing tea at 2s. a lb.— and many of them purchase even a cheaper quality of tea than 2s.— is paying two-and-a-half times the amount of tax on a pound of tea that the more wealthy person pays on the higher priced tea. Therefore, my complaint against this type of taxation is not only that it is wrong to turn to these ready methods of taxation, but that in the incidence of the tax itself, based upon weight and not upon value, its unfairness is aggravated.
    The Colwyn Committee— it is true that the Colwyn Committee is now rather an ancient body, but I think the particular figure which I shall quote is still fairly accurate— estimated that the average home with a weekly wage of £2 consumed in the course of a year roughly 40 lbs. of tea. If that is the case, then a tax of 6d. a lb. means that type of home, where the wage does not exceed from all quarters £2 per week, is paying, roughly, £1 a year

    767
    in taxation on tea alone. I think that is a disgraceful state of affairs when we consider a tax of this description. When we were discussing the Sugar Duty the other evening. I emphasised the point that one could not consider these taxes on the breakfast table or the tea table without taking into consideration the definite trends of taxation which have developed in the last six or seven years. As a result of certain political and economic agreements with the Dominions, known as the Ottawa Agreements, other important items of food that were not previously taxed are now added to the taxable food list— butter, cheese, eggs, condensed milk and similar commodities. A whole range of additional taxes has been imposed upon staple foodstuffs. I am repeating myself a little here, but repetition is not entirely new in this House, and I think the Financial Secretary should have this point dinned into his ears as much as possible.
    In regard to import duties, other staple foodstuffs like potatoes, tomatoes, fruit and vegetables are also now subject to tax, with the result that, roughly, £50,000,000 a year is raised in indirect taxation revenue on staple foodstuffs. If we also take into consideration the revenue that is raised in a general way by fiscal changes since this Government assumed power, we find that whereas in 1930–31, the last year of the then Labour Government, the receipts from all kinds of Customs and Excise was £121,000,000, last year, under the fiscal changes brought about by the present Government, the amount was £226,000,000. This is a burden imposed upon the masses of the people equivalent to a yield of is. 8d. in the £ on the Income Tax. Whilst the Income Tax has increased by only is. in the £since 1931, we have had this additional burden imposed upon the indirect taxpayer.
    My final point is this, that in 1929, when the right hon. Member for Epping (Mr. Churchill) was Chancellor of the Exchequer and he abolished the Tea Duty, he reminded the Committee that the Tea Duty had remained in being since the time of Queen Elizabeth, and he was glad to be the instrument to abolish the tax in the reign of the late King George V. He expressed the view that as this was a burden that fell on the humblest, the old, the weak and the poor, he was wit-
    768
    nessing the final abolition of this particular tax. Apparently, the present Chancellor of the Exchequer is determined, in the reign of another King George, George the VI, to inaugurate increasing taxation on the comforts of the old, the weak and the poor.
    10.4 p.m.
    Mr. Collindridge: I beg to second the Motion.
    This is the first time that I have taken part in any discussion on a Finance Bill in this Chamber. I have sat through the Debates that have taken place during the last few days, and I say with respect that I have been a little worried in hearing so constantly the views of big business. By hon. Members on the benches opposite an amazing amount of time has been spent in looking after the interests of people who can very well look after themselves. On this occasion we are voicing the cry of the poorer section of the community, which constitutes the mass of the nation. We have in this proposal the voice of the breadwinner who is unemployed, of the injured worker in receipt of compensation, the old age pensioner and the widow endeavouring to bring up her family on a meagre pension. There is also in the appeal that we make to the Government the cry of the recipient of public assistance. In my constituency last week-end I conversed with a widow who in her early days lost her father and a brother in a mine explosion. She is now in receipt of the old age pension and at the age of 72 has to go out charing. The tax that was inflicted last year weighed heavily on people of that kind. In mining districts there is a large consumption of the beverage which we are told cheers but does not inebriate. A miner often consumes two quarts of cold tea in a shift. The infliction is much greater on working-class folks than on the well-to-do, who can take some other stimulant and are able to pay a greater tax than these poor people. I do not want to introduce a too sentimental note but I think I ought to put this over. Accidents occur in mines and factories, and generally, after a few words of sympathy extended by kindly neighbours when the worker is brought home fatally injured, the stimulating effect of a cup of tea helps to alleviate the sorrow occasioned by the accident.
    I have heard hon. Members opposite suggest that, when heavy rates are im-

    769
    posed, the ratepayers should be told the amount of the rate for certain services. If they are sincere in that argument, they themselves ought to have placed on the packets of tea the amount of the tax that it bears. The burden does not fall only on the consumers. In the Barnsley district in the last 12 months the number of old age pensioners who have to apply for public assistance because of the meagre pension that the Government gives has increased by 13 per cent. The taxation on tea reduces the purchasing power of these people and so inflicts a loss on the trading community. In my youth I used to read the speeches of prominent statesmen, including the present Chancellor of the Exchequer. I am proud to say that I never shared his political beliefs but I did subscribe to a phase of his political activity when he suggested a free table as far as taxation was concerned. I am wondering where that forgotten past has gone. It makes me wonder whether the right hon. Gentleman, who supported the free breakfast table, has not now transferred his affections to the free medicine chest.
    The argument has been used that the poorest of the community may well be proud to bear their share of the expense of rearmament for their protection. I wonder how that strikes our potential enemies. If it is broadly quoted that the poorest of the community have to help in making big guns to protect them, that will not strengthen our moral. I hope that in these days, when tension is becoming more acute and the need for national unity is stressed from all sides, and not least from the Government side, we shall consider this tax from two points of view. The first point is that the main burden of the tax falls on the masses of the poor, and the second point is that the people who are paying the tax are in need of support rather than of the oppression which comes on them by way of this tax. I hope that for the sake of national unity the Government will throw out a gesture to the people by saying, "We recognise that you are unable to bear this tax." It may be said that the money must come from somewhere, and we on this side support that view, but we say the issue is between people who are bearing nearly intolerable burdens and the rich, who, though they also have to bear the tax, will only have to economise to the extent of having, perhaps, a less
    770
    high-powered car or taking a little less champagne or living a little less extravagantly. The burden can be borne better by those people than by the poor people on whom it is being imposed.
    10.17 P.m.
    Mr. R. J. Taylor: I wish to support the reduction of this duty, and I would take the opportunity of telling the Chancellor that he was not the first to say that he felt sure that the people in the humble homes of this land want to play their part in rearmament. I remember the present Prime Minister making the same statement in 1937. I have told a large number of the people in my constituency what was said, and it left them absolutely cold. They showed no signs of emotion. They felt that it was unnecessary to make an appeal to them on those grounds. An added burden in their already straitened circumstances was something which they were not asking for. They take the view that for a long time they have been playing their part in helping to build up and strengthen this nation but that the statesmen of this and other countries have misused and wasted their opportunities. Those elderly people down in the shadows at the latter end of their lives feel that this increased tax is a burden that is un warranted and should not have been placed upon their shoulders, and I assure the Chancellor that if he could see his way to remit the burden it would be greatly appreciated.
    For the last week or two we have been discussing our remembrances of the last War, discussing how to find ways and means of stopping the holes through which the profiteers may get away. I admit that it is a big job, and I shall be satisfied that the holes have been stopped only when I see results from the efforts made by the Chancellor. But I must return to, the more humble topic of tea, though I would add that if the Chancellor has effectually stopped the holes he ought to get a considerable amount of money. In getting that money, and in view of the added burdens which the Government have placed on the backs of these people, including the old age pensioners, the compensation men, the widow, the man who happens to be 65 years of age and his wife aged 60, unable to get a pension and forced to have recourse to the Poor Law system. [Interruption.] The Financial Secretary to the Treasury may get a con-

    771
    siderable amount of joy out of that picture, but I hope that his wife will not be in that position when the time comes. In looking into the future, as the Chancellor has been trying to do in order to stop profiteering in armaments—
    The Deputy-Chairman: The hon. Member is dealing with a subject which is not part of the proposed new Clause.
    Mr. Taylor: I feel that we are entering a new period when the rise in the cost 01 living will probably be fairly steep. The Government are not preparing to give old age pensioners some increase in their pensions.
    The Deputy-Chairman: The hon. Member must confine his remarks to the subject of tea.
    Mr. Stephen: Surely the hon. Member is in order in showing how heavily the Tea Duty bears upon the old age pensioners who have only 10s. a week.
    The Deputy-Chairman: The hon. Member was proposing an increase in old age pensions.
    Mr. A. Jenkins: Surely he is entitled to point out that old age pensioners are unable to buy the same quantity of tea as they would if the duty were lower.
    The Deputy-Chairman: That was not the argument which the hon. Member was putting forward.
    Mr. R. J. Taylor: I want to show that 10s. does not go as far as it did seven years ago and that the cost of living is rising. If the Chancellor of the Exchequer would make the remission that we suggest it would be a counter-balancing factor and would enable our aged people and old age pensioners to keep pace in some measure with the increasing cost of living.
    10.23 P.m.
    Captain Crookshank: It is always interesting in a Debate upon the Tea Duty to see what new points are raised in support of the reduction or the abolition of that duty. The case this year is a very simple one. Listening to the speeches of hon. Members one would have thought that this duty would be removed by the enactment of the proposed new Clause which we are discussing— but this is not so. The Clause leaves the Tea Duty, and it can surely be argued that it thereby
    772
    admits by inference, at least, that at any rate it is a right thing that some part of the money which is required for the National Exchequer this year should be derived from that source. I could have understood it better if the hon. Gentleman had proposed abolishing the duty altogether—
    Mr. Collindridge: Would you support it?
    Captain Crookshank: As I say, I could have understood the logic of that. Let me first say that as no one has yet explained what the Clause would do, I would ask the Committee to consider its effect. The Clause proposes to leave the existing duty on foreign tea as it is, and to reduce the duty on Empire tea from 6d. to 2d. I do not make any point of the unwork ability of the second paragraph of the Clause, which as regards the past would have the effect, if it were carried, of making this concession operate not for the benefit of the consumer but for the benefit of the trader. I do not suppose that that was the object which the hon. Gentleman had in mind, but the Clause proposed would have that result. The effect would be to reduce the duty on Empire tea from 6d. to 2d., and that would have very serious consequences on the Exchequer. At present something like 94 per cent. of the tea retained for consumption in this country is Empire tea, and no doubt, if the existing preference, which is considerable, was increased to that extent, there would be practically no foreign tea used at all, and therefore the price would be greater than it is on the present basis. The estimated cost of this concession would be £5,750,000 this year, and £6,500,000 in a full year, and the hon. Gentleman will realise perfectly well that a concession of that magnitude is one which cannot, in present circumstances, be considered. [Hon. Members: "Why not?"] Because of the needs that have been explained over and over again during the passage of the Finance Bill, and the general plan for financing the expenses of the year as outlined by my right hon. Friend in opening his Budget. Hon. Gentlemen opposite had, I am sure, no expectation that I should be able to recommend this Clause to the Committee in view of the present financial situation, as they admit themselves by not having moved to abolish the Tea Duty, but only to reduce it in this way.

    773
    I do not think it is necessary to go through all the arguments that have been so often used on this subject. The hon. Member who moved the Clause made a most interesting series of statistical calculations, about which I would only say this, that, while it is no doubt of interest to contrast the revenue from Customs and Excise in the year 1930–31 with that of this year, we have, of course, changed our whole fiscal system, to the great advantage of the country, during the intervening years, and therefore it is no use arguing on that basis. But when the hon. Gentleman says that the Tea Duty—which, incidentally, is not being increased this year, though some of the phrases used in the speeches would make a casual hearer think that it was—when the hon. Gentle man goes so far as to say that the existing Tea Duty causes actual distress up and down the country, I venture to suggest that he is really rather exaggerating the case. Personally I have never heard, and I should very much doubt whether anyone else has heard, of a case of what might be called actual distress as a result of the duty. While no doubt, as the Chancellor has pointed out on previous occasions, all taxation is an imposition and a burden, as we are all perfectly well aware, to carry it to the extent of saying that it causes distress is, I think, to use the language of exaggeration.
    Mr. J. J. Davidson: Is the Minister totally unaware of the fact that a very great proportion of the people of this country, because of poverty, buy the cheapest possible tea on the market; and is he aware that that cheap tea causes, in a few years' time, very grave distress to the physical health of those people?
    Captain Crookshank: I have not heard of any medical evidence to that effect. But there are a number of other new Clauses in which hon. Gentlemen opposite are interested, and, having made their case—such as it is—on this, and having heard that it is quite impossible for us to make a concession of this kind, they may be prepared to go to a Division.
    10.31 p.m.
    Mr. Stephen: I am sorry that the Financial Secretary has given such an un sympathetic answer on this important Clause. He said that this was a hardy annual and suggested that there was nothing serious in this proposal, because
    774
    the Opposition had not proposed the complete abolition of the tax. It is very difficult to deal with the Minister. If we had proposed the abolition of the tax, he would have started to tell of the tragic state of the country, and how the rich people were being threatened with such poverty that they would soon be going about in rags. All that the Opposition did was to propose a reduction of the tax—and a reduction that might have met with the favour of hon. Members opposite, who profess such a love for the Empire, since it would tend to develop friendly relations with different parts of the Empire. But there is no pleasing the Minister. He has simply said that the concession would cost in a full year over £6,000,000, and that the Government, therefore, in present circumstances, could not dream of accepting the Clause.
    I wonder whether the Government would not reconsider their attitude, and whether, if they are not prepared to accept this Clause, they might not be induced to apply the same principle to this tax as they have to the Armament Profits Duty. If we could get that principle applied to this tax, so that the tax on tea would be simply an eye washing tax, as the Armament Profits Tax is, it would be to the advantage of everybody. For example, the Chancellor of the Exchequer might arrange that the tax would apply only after a certain amount of tea had been bought by any person. Why should we not apply to the poor people who are hit by this tax the same principle as we do to the profiteers and the armaments industry? The Financial Secretary does not know of any people who are distressed by the operation of the tax. I could refer him to some pas sages in some of the former speeches of the Chancellor of the Exchequer in which he showed eloquently how this tax bore heavily on the poorest members of the community, and how important it was to free the breakfast table from this tax. The Financial Secretary evidently thinks that there was no substance in all that long series of speeches which helped to make the reputation of his distinguished colleague, the Chancellor of the Exchequer. Another point which he made is that it is impossible to give up the tax, because of the circumstances of the country and the heavy expenditure in which it is engaged at present. Evidently it is necessary to get this money, although

    775
    it means, as the Chancellor of the Exchequer recognises, a good deal of hardship.
    In the circumstances of the country and of the large expenditure in connection with armaments and of the tremendous responsibilities of the Government at the present time, they are completely misinterpreting the mind of the people of the country with regard to the willingness of the ordinary people to bear the extra amount of taxation involved in the tax on tea. I do not believe that the slogan with which the Government are evidently going to the country at the general election, namely, "Vote for a tax on tea and security for the Poles" will make an appeal to the great mass of the people of this country. I do not think that the ordinary people of this country are so full of sympathy for Poles, Greeks or Turks as to ask that a tax should be put on their tea in order that things may be right in Danzig. I am very disappointed that the Government did not go any distance at all to meet the Opposition, who were very modest in asking not for the abolition of the tax altogether, although it would be thoroughly justified in justice and in logic, but only for a certain amount of remission, and yet the Government have turned a deaf ear to their appeal. I hope that the country will realise that the Government, in all their schemes of taxation, are providing loophole after loophole in order to allow the profiteers to get away with their profits, while they refuse any lightening of the burden of the ordinary poor people in the community.
    10.38 p.m.
    Mr. Naylor: I was surprised at the comments made by the Financial Secretary to the Treasury. He is usually so precise in his arguments, but on this occasion I think he will recognise that he failed to make a distinction between the incidence of taxation upon the poor and the incidence of taxation upon the rich. The incidence of the Estate Duty is negligible, but if you add anything to the cost of the working class budget it does not merely mean that the man or woman pays more, for that is only half the statement. The real incidence of the tax upon the poorer classes is that they buy less. You restrict their income in the same way as is the case when wages
    776
    are reduced. They have less to spend upon the necessities of life, and to that extent the incidence of taxation is very different as between one class and another. If you raise the Income Tax you do not necessarily alter the standard of living of those who pay the higher rates of Income Tax, but if you put a tax of any sort, either direct or indirect, upon the workers you immediately reduce their standard of living. Therefore I hope the Financial Secretary to the Treasury will realise that when he reminds us that all classes must share the burden of taxation, he should also re member that the burden falls more severely upon those who have their standard of life affected by the maintenance or the increase of the tax, than on those who have to pay without having any alteration whatever made in their standard of living.
    Mr. Gallacher Mr. Gallacher rose—
    Hon. Members: Divide.
    Mr. Gallacher: You can divide if you like.
    The Chairman: The hon. Member must recollect that he must address the Chair.
    10.40 p.m.
    Mr. Gallacher: I will certainly try to avoid the behaviour of hon. Members opposite. I want to ask a few questions. I want to know where are the mighty battalions who were fighting so valiantly for a reduction of the tax on films? Where are the heavy weights who battered the Chancellor for the removal of the Stamp Duty? Where are they now, when we are discussing a tax on the food of the people? Where are all those mighty orators who in 12 horse-power speeches tried to get a reduction of the motor car tax? Where are the three Birmingham Members who, when speaking of the steel industry, had the audacity to say they were speaking for their constituents? Where are they now? They have all gone— and they are not drinking tea. Why is it that when a question so vital to the poor is being discussed they are absent? It is no exaggeration to say that a tax on tea causes distress. If wages are low and the price of commodities too high, if you increase the price of tea, they are all contributory factors to the distress which exists in the

    777
    country. No hon. Member will dare to deny that, and when it is a question of a tax which bears so heavily on the masses of the people how is it that there is not one hon. Member opposite who is prepared to say a word on behalf of the poorest of the people. It is obvious that they arc not concerned about the poor.
    Surely some hon. Member opposite will have one word to say? I ask the Financial Secretary whether he will agree to this proposition, that while one section of the people have a surplus there is no justification for taxing those people who are living under the recognised standard of decent life. Is he prepared to deny that proposition? Are hon. Members opposite prepared to deny that proposition? You cannot talk about spreading the taxation over the whole of the community. These poor workers— who are being taxed are already living under the recognised standard as laid down by the British Medical Association as the standard of subsistence. It is said that they have to contribute
    their share. I have already had occasion to point out that they are the only people who are contributing anything. I see an hon. Member opposite lying back and smiling; I would like to see him stuck into a factory to produce guns. The men who are living under a normal standard of life are the men who are producing the guns, the tanks, and all the armaments that will defend the country. It is presumption for any hon. Member to suggest that a tax should be put on them in order that they should contribute some thing to defence, when they are producing everything for defence. Without them, there could be no defence. It is shameful. Therefore, I ask whether it is possible, out of all that Sodom and Gomorrah that presents itself on the other side of the Committee, to get one just man who will get up and say one solitary word on behalf of his poor constituents.
    Question put, "That the Clause be read a Second time."
    The Committee divided: Ayes, 119; Noes, 174.

    NEW CLAUSE.—(Deduction in respect of dependent relatives.)
    Section twenty-two of the Finance Act, 1920 (which provides for a deduction of tax in respect of dependent relatives), shall have effect as if the words "fifty pounds" were substituted for the words "twenty-five pounds."—[Mr. Viant.]
    Brought up, and read the First time.
    10.55 p.m.
    Mr. Viant: I beg to move, "That the Clause be read a Second time."
    In the Finance Act of 1920 it was provided that where it could be shown that an adult was wholly dependent on the
    780
    taxpayer, an allowance of £25 should be made by way of remission of taxation. Since those days, the cost of living has changed materially and the House of Commons in its wisdom has recognised the reason and the need for making concessions to married men in respect of children. There are many cases in which the taxpayer finds himself confronted with a position of this kind. He has a son or daughter who is approaching or who has arrived at adult age but who is wholly unable to earn his or her own livelihood. In those circumstances the £25 remission is hardly sufficient to meet the changed conditions of to-day. In other

    781
    instances, there are single men and women who are called upon to support a father, mother or other relative. Comparing their situation and their responsibilities with those of the married man who has one or two children, there is no equity in the present arrangement and we feel justified in asking the Financial Secretary to the Treasury to meet us in this proposal.
    I anticipate that the right hon. and gallant Gentleman will say that the principle has been discussed already. The last time it was discussed was in 1928 and since then considerable changes have taken place. The cost of living has in creased, rent has increased and there are many other factors which must be taken into consideration. We feel that in existing conditions we are justified in asking that the amount of this remission should be raised from £25 to £50. I have given serious consideration to the cost involved to the Exchequer and I estimate that it would amount, roughly, to £500,000. On the last occasion when a similar proposal was discussed it was suggested that it would cost £600,000. I hope the Financial Secretary will give reasonable consideration to our proposal and will not try to alarm the Committee by suggesting that the cost of the concession would be unduly high. Instances have been given which show conclusively that, by the method of indirect taxation, the purchasing power of the average family has been considerably reduced. I hope that fact will be borne in mind and that if the Financial Secretary is not prepared to accept this new Clause, he will indicate his readiness to give consideration to the position in the near future.
    11.0 p.m.
    Mr. Tinker: I support the new Clause because I think the time has come when the Committee ought to examine this question once again. The point is that these people are unable to maintain themselves either through old age or infirmity. If an individual is unfortunate enough for any reason to be unable to earn his living, he may have to depend entirely on his relatives, and we say that some help ought to be given to the unfortunate family that is placed in that situation. Some recognition has been given to this case by a £25 remission of taxation, but we ask whether the time has not come for a reconsideration of this question.
    782
    There may not be very many of these people. The cost of this concession has been mentioned as possibly about £500,000, but it may not be so much as that. Wherever the burden falls, however, it is very heavy on that individual family, and we think that it is time that a little more than has been done up to the present in this matter should be done.
    Since this remission was first agreed to, there have been certain remissions of taxation in other directions, and we think that consideration of this matter might now be favourable. Whether it is or not, it is as well that we should realise what is happening in these cases, and it is because of what is happening that we ask the Committee to examine the question in the full light of what it means. If hon. Members will let their minds dwell on the position of the household that has to maintain dependants in this way, I think they will agree that this is a desirable Clause. I have had many letters, not this time, but in previous years, asking for something to be done to relieve this burden. We have not hitherto been fortunate enough to get this Clause called, but this time the Chair has given us the opportunity of bringing the matter forward, and I trust that the Chancellor will give us some hope that the question can be examined and that, if not this time, possibly next time some such help as this, may be given.
    11.4 p.m.
    Captain Crookshank: Of course, my right hon. Friend and I have given the most careful consideration to this new Clause. Anything which affects the allowances in the sphere of Income Tax is a matter for serious consideration, and I can assure the hon. Members who have moved and supported the Clause that that has been done. The hon. Member for West Willesden (Mr. Viant), who is always fair in what he says, made a remark which I think might lead to a false inference. He pointed out that it was in the Finance Act of 1920 that this remission was first given; and as his next remark was that the cost of living had changed, the implication in the context is that it was a change for the worse. But everybody knows that the cost of living in 1920 was a great deal higher than it is now. Therefore, if £25 was a sufficient allowance then, it represents more to-day than it did then.

    783
    This is an allowance which is given in respect of
    "any person"
    maintained by the taxpayer,
    "being a relative of his or his wife, who is incapacitated by old age or infirmity from maintaining himself, or his or his wife's widowed mother, whether incapacitated or not, and being a person whose sole income from all sources does not exceed fifty pounds a year."
    The allowance was first given in the Finance Act of 1920, and it has stood the same ever since. I would stress that point, because, in 1931, there were a great many alterations made as a result of the financial crisis of that year to a whole series of different allowances, but this particular allowance has never been changed. The suggestion is now made that the time has come when it ought to be changed, and to appreciate this suggestion one has to look at the whole structure of Income Tax allowances. It is true that since 1920, indeed since the lifetime of this Parliament, there have been considerable changes in the structure in one direction or another. But all alterations which are of advantage to the taxpayer cost money. Therefore, the problem which the Chancellor of the Exchequer and I are up against is the cost of this proposed concession. I am sorry to say that the estimate which the hon. Member opposite made was very much out, because the cost of this proposal in a full year would be £1,500,000. The Committee will see at once that that is a sum which in the circumstances we cannot afford.
    Mr. Tinker: One anticipated that as the nation has improved in health there would would not be so many infirm people. Relatively, the population has not increased, and therefore in view of the improved health of the nation one would have thought that we should have had less infirmity.
    Captain Crookshank: Actually, the population has increased. Moreover, people are living longer. There is certainly an improvement in health, as we have seen recently in the examination of those who have come up under the Military Training Act. Whatever may be the reason for that, I can only give the Committee the best estimate that we are able 0 make as to the cost of the concession,
    784
    and I must tell the Committee that it is not a proposal which in the present circumstances we can accept. The hon. Member for Leigh (Mr. Tinker) realising that in this year it is not possible to expect this concession to be granted, asked whether we could give consideration to it another year. I am afraid that in the present state of affairs we really find it impossible to make a promise one way or another. What we are dealing with is the finances of this year, and £1,500,000 is more than we can possibly afford. I must, therefore, ask the Committee not to give the Clause a Second Reading.
    Mr. Viant: In 1928 it was estimated that this concession would cost £600,000. Can the right hon. Gentleman explain the huge disparity between £600,000 and £1,500,000?
    Captain Crookshank: Taxation has not remained the same in the interval. Possibly another explanation is that I am speaking of what it would cost in a full year, and it may have been that the £600,000 would be what it would cost for the rest of that financial year. I suspect that may be the explanation. The fact is that in a full year now we estimate that the cost would be £1,500,000.
    11.10 p.m.
    Mr. Davidson: Everyone on this side of the Committee will be disappointed at the Financial Secretary's complete refusal to re-examine this proposition. I expected that he would immediately place before us the cost of this item. I do not think my hon. Friend need worry very much about the discrepancy between a Tory speech in 1920 or 1924 and to-day. Those discrepancies continually arise. I read the passage myself and was fully under the impression that it was definitely stated that the cost would be £600,000 for the financial year. I want to make a further appeal which I trust will reach the ears, if not of the Financial Secretary, of those who sit behind him and who may realise the implications of refusing any concession at all to certain sections of the community while consideration is always given to other sections. I wish the Chancellor himself had taken on the task of replying to this and the previous proposition, because during the discussions on this Bill I have often noticed at regular intervals the Chancellor rising and with a benign smile, which is very seldom

    785
    seen on this side because his head is usually turned to that side when the smile is there, stating that he would give the proposition full considerating, promising that it would be of a most sympathetic character.
    But when we come to impositions upon the poorest sections of the community, the person who is not only working for a wage and producing necessities for the community, and producing all the taxes of the community—when that man asks for some reconsideration of a burden placed on him by the State to maintain dependants who really should be the State's responsibility, who generally speaking had given service to the State and, by reason of that service, are often dependent on the wage-earner, the Financial Secretary says, "No, there can be no concession. This will cost £1,500,000." If it even cost the State £5,000,000 the Government could afford to make it. If the £5,000,000 was necessary for some poor unfortunate shipowner who was only making 3 per cent. instead of a previous 10 per cent. profit, the State would soon find not £5,000,000 but a £12,000,000 subsidy.
    The industrialists who have pleaded for rebates of the taxation of employers, those who in a national emergency are building shelters for the people producing the things which will defend the nation and keep it alive and who build these dug-outs or trenches or passages, have made repeated appeals and have been met with continual assurances that their claims will be sympathetically considered. Whose case is it we are putting forward in asking the Chancellor to give this matter further examination and to hold out at least some hope of sympathetic consideration? They are a section of the community who have done and are doing more for the defence of the nation than any employers, a section of the community who are bearing a burden of taxation which ought not to be theirs. The whole system of our society is organised so that the wage-earner receives bare maintenance for an average family, and dependants are an added liability for which he ought not to be taxed but whom the State ought to maintain.
    The Financial Secretary said that the concession would cost £1,500,000. He is not so simple as he would have us believe.
    786
    He has been long enough in his position to know that if to-morrow the Government desired to raise £60,000,000 or £100,000,000 for any Government purpose they would get it. We have been passing legislation in this Bill to tax persons who are making comfortable incomes and excess profits and also those whose wealth is such that they can live in the greatest luxury and with the greatest extravagance. While that state of affairs exists there is no case for the Financial Secretary of a Government which has the backing of the Press and of the banks, and has the power to raise more credit than any other Government in the world, to say that it cannot afford £1,500,000. We are giving £52,000,000 to agriculture in subsidies, we are giving £12,000,000 to shipowners, we are subsidising sugar and beet, spending £45,000 in derating brewers, who make big profits, and handing £40,000 to a ship-owning company which shows £240,000 profits. And yet the Financial Secretary says that it is beyond the power of the Government to find £1,500,000 for this section of the community. It stumps the Government. All their financial experts cannot see their way to meet the burden. It is only an attempt to hoodwink the Committee; it is not putting forward any real argument against this claim.
    If the Chancellor of the Exchequer is asking how he can raise the cash I put forward this suggestion as a humble backbencher: Let him have two extra Honours Lists in the year, and he will raise the £1,500,000. Let him, if he desires to be fair, go over the list of those things to which he has agreed to give sympathetic consideration; let him decide upon the representations that have been made to him by employers of labour and the representatives of big industries showing high profits; then let him take this question into consideration at the same time and place it in its proper place. It should be at the top of the list. The Government should give assistance and increased spending power to the section of the community that produces the wealth of the nation and produces also the taxes that are paid by all the members of the community.
    Question put, "That the Clause be read a Second time."
    The Committee divided: Ayes, 109; Noes, 156.

    Division No. 206.]

    AYES.

    [10.47 p.m.

    Acland, Sir R. T. D.

    Greenwood, Rt. Hon. A,

    Parker, J.

    Adams, D. (Consett)

    Grenfell, D. R.

    Parkinson, J. A.

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

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

    Pearson, A.

    Adamson, Jennie L. (Dartford)

    Griffiths, J. (Llanelly)

    Pethick-Lawrence, Rt. Hon. F. W.

    Adamson, W. M.

    Hall, J. H. (Whitechapel)

    Price, M. P.

    Ammon, C. G.

    Hardle, Agnes

    Richards, R. (Wrexham)

    Banfield, J. W.

    Harris, Sir P. A.

    Riley, B.

    Barnes, A. J.

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

    Ritson, J.

    Batey, J.

    Hayday, A.

    Robinson, W. A. (St. Helens)

    Bellenger, F. J.

    Henderson, A. (Kingswinford)

    Seely, Sir H. M.

    Benson, G.

    Henderson, J. (Ardwick)

    Sexton, T. M.

    Broad, F. A.

    Henderson, T. (Tradeston)

    Silverman, S. S.

    Brown, C. (Mansfield)

    Hills, A. (Pontefract)

    Simpson, F. B.

    Buchanan, G.

    Hopkin, D.

    Smith, E. (Stoke)

    Burke, W. A.

    Isaacs, G. A.

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

    Cape, T.

    Jenkins, A. (Pontypool)

    Stephen, C.

    Charleton, H. C.

    Jenkins, Sir W. (Neath)

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

    Chater, D.

    Jones, A. C. (Shipley)

    Stokes, R. R.

    Cluse, W. S.

    Kennedy, Rt. Hon. T.

    Summerskill, Or. Edith

    Cooks, F. S.

    Kirkwood, D.

    Taylor, R. J. (Morpeth)

    Collindridge, F.

    Lathan, G.

    Thurtle, E.

    Cove, W. G.

    Lawson, J. J.

    Tinker, J. J.

    Cripps, Hon. Sir Stafford

    Leach, W.

    Viant, S. P.

    Daggar, G.

    Lee, F.

    Walkden, A. G.

    Dalton, H.

    Leonard, W.

    Watkins, F. C.

    Davidson, J. J. (Maryhill)

    Leslie, J. R.

    Watson, W. McL.

    Day, H.

    Lunn, W.

    Welsh, J. C.

    Dobbie, W.

    Macdonald, G. (Ince)

    Westwood, J,

    Dunn, E. (Rother Valley)

    McEntee, V. La T.

    White, H. Graham

    Ede, J. C.

    McGhee, H. G.

    Whiteley, W. (Blaydon)

    Edwards, A. (Middlesbrough E.)

    MacLaren, A.

    Williams, E. J. (Ogmore)

    Edwards, Sir C. (Bedwellty)

    Mander, G. le M.

    Williams, T. (Don Valley)

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

    Marshall, F.

    Wilmot, John

    Foot, D. M.

    Maxton, J.

    Wilson, C. H. (Attercliffe)

    Frankel, D.

    Messer, F.

    Windsor, W. (Hull, C.)

    Gallacher, W.

    Milner, Major J.

    Woods, G. S. (Finsbury)

    Gardner. B. W.

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

    Young, Sir R. (Newton)

    Garro Jones, G. M.

    Naylor, T. E.

    George, Megan Lloyd (Anglesey)

    Noel-Baker, P. J.

    TELLERS FOR THE AYES.—

    Graham, D. M. (Hamilton)

    Oliver, G. H.

    Mr. Mathers and Mr. Anderson.

    Green, W. H. (Deptford)

    Paling, W.

    NOES.

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

    Grant-Ferris, Flight-Lieutenant R.

    Procter, Major H. A.

    Albery, Sir Irving

    Gridley, Sir A. B.

    Radford, E. A.

    Allen, Col. J. Sandeman (B'knhead)

    Grigg, Sir E. W. M.

    Raikes, H. V. A. M.

    Anstruther-Gray, W. J.

    Grimston, R. V.

    Ramsay, Captain A. H. M.

    Apsley, Lord

    Gritten, W. G. Howard

    Ramsbotham, Rt. Hon. H.

    Baldwin-Webb, Col. J.

    Guest, Lieut.-Colonel H. (Drake)

    Rankin, Sir R.

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

    Gunston, Capt. Sir D. W.

    Reed, A. C. (Exeter)

    Beamish, Rear-Admiral T. P. H.

    Hambro, A. V.

    Reid, W. Allan (Derby)

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

    Hammersley, S. S.

    Remer, J. R.

    Beechman, N. A.

    Hannon, Sir P. J. H.

    Rickards, G. W. (Skipton)

    Bernays, R. H.

    Haslam, Sir J. (Bolton)

    Ropner, Colonel L.

    Bossom, A. C.

    Heilgers, Captain F. F. A.

    Rosbotham, Sir T.

    Braithwaite, J. Gurney (Holderness)

    Hely-Hutchinson, M. R.

    Rosa, Major Sir R. D. (Londonderry)

    Briscoe, Capt. R. G.

    Heneage, Lieut.-Colonel A. P,

    Ross Taylor, W. (Woodbridge)

    Broadbridge, Sir G. T.

    Hepburn, P. G. T. Buchan-

    Rowlands, G.

    Brocklebank, Sir Edmund

    Herbert, Lt.-Col. J. A. (Monmouth)

    Royds, Admiral Sir P. M. R.

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

    Higgs, W. F.

    Russell, Sir Alexander

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

    Hogg, Hon. Q. McG.

    Salmon, Sir I.

    Bull,' B. B.

    Howitt, Dr. A. B.

    Samuel, M. R. A.

    Burgin, Rt. Hon. E. L.

    Hudson, Capt. A. U. M. (Hack., N.)

    Sandeman, Sir N. S.

    Butcher, H. W.

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

    Sandys, E. D.

    Carver, Major W. H.

    Hume, Sir G. H.

    Simon, Rt. Hon. Sir J. A.

    Castlereagh, Viscount

    Hunloke, H. P.

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

    Channon, H.

    Hurd, Sir P. A.

    Smith, Bracewell (Dulwich)

    Clarke, Colonel R. S. (E. Grinstead)

    Hutchinson, G. C.

    Smithers, Sir W.

    Colman, N. C. D.

    Jennings, R.

    Somervell, Rt. Hon. Sir Donald

    Conant, Captain R. J. E.

    Joel, D. J. B.

    Southby, Commander Sir A. R. J.

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

    Lamb, Sir J. Q.

    Spears, Brigadier-General E. L.

    Cox, H. B. Trevor

    Lancaster, Lieut.-Colonel C. G.

    Spens, W. P.

    Craven-Ellis, W.

    Leach, Sir J. W.

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

    Crooke, Sir J. Smedley

    Leighton, Major B. E. P.

    Stourton, Major Hon. J. J.

    Crookshank, Capt. Rt. Hon. H. F. C.

    Levy, T.

    Strauss, H. G. (Norwich)

    Cross, R. H.

    Liddall, W. S.

    Strickland, Captain W. F.

    Cruddas, Col. B.

    Lipson, D. L.

    Stuart, Lord C. Crichton- (N'thw'h)

    Culverwell, C. T.

    Little, J.

    Stuart, Rt. Hon. J. (Moray and Nairn)

    Davidson, Viscountess

    Llewellin, Colonel J. J.

    Tasker, Sir R. I.

    De Chair, S. S.

    Locker-Lampion, Comdr. O. S.

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

    Denman, Hon. R. D.

    Loftus, P. C.

    Thomson, Sir J. D. W.

    Drewe, C.

    Mabane, W. (Huddersfield)

    Thorneycroft, G. E. P.

    Dugdale, Captain T. L.

    MacDonald, Sir Murdoch (Inverness)

    Thornton-Kemsley, C. N.

    Duggan, H. J.

    McEwen, Capt. J. H. F.

    Tryon, Major Rt. Hon. G. C.

    Duncan, J. A. L.

    McKie, J. H.

    Tufnell, Lieut.-Commander R. L.

    Eastwood, J. F.

    Macmillan, H. (Stockton-on-Tees)

    Turton, R. H.

    Edmondson, Major Sir J.

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

    Walker-Smith, Sir J.

    Ellis, Sir G.

    Markham, S. F.

    Wallace, Capt. Rt. Hon. Euan

    Elliston, Capt. G. S.

    Medlicott, F.

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

    Emery, J. F.

    Mitcheson, Sir G. G.

    Warrender. Sir V.

    Emrys-Evans, P. V.

    Morgan, R. H. (Worcester, Stourbridge)

    Watt, Lt.-Col. G. S. Harvie

    Entwistle, Sir C. F.

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

    Wayland, Sir W. A

    Evans, Colonel A. (Cardiff, S.)

    Munro, P.

    Wells, Sir Sydney

    Everard, Sir William Lindsay

    Nail, Sir J.

    Winterton, Rt. Hon. Earl

    Fleming, E. L.

    Neven-Spence, Major B. H. H.

    Womersley, Sir W. J.

    Furness, S. N.

    Orr-Ewing, I. L.

    Wood, Hon. C. I. C.

    Fyfe, D. P. M.

    Peake, O.

    Wragg, H.

    Gledhill, G.

    Peters, Dr. S. J.

    Wright, Wing-Commander J. A. C.

    Gluckstein, L. H.

    Pickthorn, K. W. HI.

    York, C.

    Glyn, Major Sir R. G. C.

    Pilkington, R.

    Goldie, N. B.

    Ponsonby, Col. C. E.

    TELLERS FOR THE NOES.—

    Gower, Sir R. V.

    Pownall, Lt.-Col. Sir Assheton

    Captain Waterhouse and Lieut.

    Colonel Kerr.

    Division No. 207.]

    AYES.

    [11.22 p.m.

    Acland, Sir R. T. D.

    Griffiths', J. (Llanelly)

    Pearson, A.

    Adams, D. (Consett)

    Groves, T. E.

    Price, M. P.

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

    Hall, J. H. (Whitechapel)

    Pritt, D. N.

    Adamson, Jennie L. (Dartford)

    Harris, Sir P. A.

    Quibell, D. J. K.

    Adamson, W. M.

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

    Richards, R. (Wrexham)

    Ammon, C. G.

    Hayday, A.

    Riley, B.

    Anderson, F. (Whitehaven)

    Henderson, J. (Ardwick)

    Ritson, J.

    Barnes, A. J.

    Henderson, T. (Tradoston)

    Robinson, W. A. (St. Helens)

    Batey, J.

    Hills, A. (Pontefract)

    Seely, Sir H. M.

    Bellenger F. J.

    Hopkin, D.

    Sexton, T. M.

    Benson, G.

    Isaacs, G. A.

    Silverman, S. S.

    Brown, C. (Mansfield)

    Jenkins, A, (Pontypool)

    Simpson, F. B.

    Buchanan, G.

    Jenkins, Sir W. (Neath)

    Smith, Ben (Rotherhithe)

    Burke, W. A.

    Jones, A. C. (Shipley)

    Smith, E. (Stoke)

    Charleton, H. C.

    Kennedy, Rt. Hon. T.

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

    Cluse, W. S.

    Kirkwood, D.

    Stephen, C.

    Cocks, F. S.

    Lathan, G.

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

    Collindridge, F.

    Lawson, J. J.

    Stokes, R. R.

    Cove, W. G.

    Leach, W.

    Summerskill, Dr. Edith

    Cripps, Hon. Sir Stafford

    Leslie, J. R.

    Taylor, R. J. (Morpeth)

    Daggar, G.

    Lunn, W.

    Thurtle, E.

    Dalton, H.

    Macdonald, G. (Ince)

    Tinker, J. J.

    Davidson, J. J. (Maryhill)

    McEntee, V. La T.

    Viant, S. P.

    Dobbie, W.

    McGhee, H. G.

    Walkden, A. G.

    Dunn, E. (Rother Valley)

    MacLaren, A.

    Watkins, F. C.

    Ede, J. C.

    Mander, G. le M.

    Watson, W. McL.

    Edwards, Sir C. (Bedwellty)

    Marshall, F.

    Welsh, J. C.

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

    Maxton, J.

    Westwood, J.

    Foot, D. M.

    Messer, F.

    White, H. Graham

    Frankel, D.

    Milner, Major J.

    Williams, E. J. (Ogmore)

    Gallacher, W.

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

    Williams, T. (Don Valley)

    Gardner, B. W.

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

    Wilmot, John

    Garro Jones, G. M.

    Naylor, T. E.

    Windsor, W. (Hull, C.)

    Green, W. H. (Deptford)

    Oliver, G. H.

    Woods, G. S. (Finsbury)

    Greenwood, Rt. Hon. A.

    Paling, W.

    Young, Sir R. (Newton)

    Grenfell, D. R.

    Parker, J.

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

    Parkinson, J. A.

    TELLERS FOR THE AYES—

    Mr. Whiteley and Mr. Mathers.

    NOES.

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

    Duncan, J. A. L.

    Little, J.

    Albery, Sir Irving

    Eastwood, J. F.

    Llewellin, Colonel J. J.

    Allen, Col. J. Sandeman (B'knhead)

    Elliot, Rt. Hon. W. E.

    Locker-Lampson, Comdr. O. S.

    Anstruther-Gray, W. J.

    Elliston, Capt. G. S.

    Loftus, P. C.

    Apsley, Lord

    Emery, J. F.

    Mabane, W. (Huddersfield)

    Aske, Sir R. W.

    Emrys-Evans, P. V.

    MacDonald, Sir Murdoch (Inverness)

    Baldwin-Webb, Col. J.

    Fleming, E. L

    Macdonald, Capt. P. (Isle of Wight)

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

    Furness, S. N.

    McEwen, Capt. J. H. F.

    Barrie, Sir G. C.

    Fyfe, D. P. M.

    McKie, J. H.

    Beamish, Rear-Admiral T. P. H.

    Gledhill, G.

    Macmillan, H. (Stockton-on-Tees)

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

    Gluckstein, L. H.

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

    Beechman, N. A.

    Glyn, Major Sir Ft. G. C.

    Markham, S. F.

    Bernays, R. H.

    Goldie, N. B.

    Medlicott, F.

    Bird, Sir R. B.

    Gower, Sir R. V.

    Mills, Major J. D. (New Forest)

    Bossom, A. C.

    Grant-Ferris, Flight-Lieutenant R.

    Morgan, R. H. (Worcester, Stourbridge)

    Braithwaite, J. Gurney (Holderness)

    Greene, W. P. C. (Worcester)

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

    Briscoe, Capt. R. G.

    Gridley, Sir A. B.

    Munro, P.

    Broadbridge, Sir G. T.

    Grimston, R. V.

    Nall, Sir J.

    Brocklebank, Sir Edmund

    Gritten, W. G. Howard

    Neven-Spence, Major B. H. H.

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

    Guest, Lieut.-Colonel H. (Drake)

    Orr-Ewing, I. L.

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

    Gunston, Capt. Sir D. W.

    Peake, O.

    Bull, B. B.

    Hambro, A. V.

    Peters, Dr. S. J.

    Butcher, H. W.

    Hammersley, S. S.

    Pilkington, R.

    Carver, Major W. H.

    Hannon, Sir P. J. H.

    Pownall, Lt.-Col. Sir Assheton

    Castlereagh, Viscount

    Heilgers, Captain F. F. A.

    Procter, Major H. A.

    Channon. H.

    Hely-Hutchinson, M. R.

    Radford, E. A.

    Clarke, Colonel R. S. (E. Grinstead)

    Heneage, Lieut.-Colonel A. P,

    Raikes, H. V. A. M.

    Colman, N. C. D.

    Hepburn, P. G. T. Buchan-

    Ramsay, Captain A. H. M.

    Conant, Captain R. J. E.

    Herbert, Lt.-Col. J. A. (Monmouth)

    Ramsbotham, Rt. Hon. H.

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

    Higgs, W. F.

    Rankin, Sir R.

    Cox, H. B. Trevor

    Hogg, Hon. Q. McG.

    Reed, A. C. (Exeter)

    Craven-Ellis, W.

    Howitt, Dr. A. B.

    Reid, W. Allan (Derby)

    Crooke, Sir J. Smedley

    Hudson, Capt. A. U. M. (Hack., N.)

    Rickards, G. W. (Skipton)

    Crookshank, Capt. Rt. Hon. H. F. C.

    Hunloke, H. P.

    Ropner, Colonel L.

    Cross, R. H.

    Hutchinson, G. C.

    Ross, Major Sir R. D. (Londonderry)

    Cruddas, Col. B.

    Jennings, R.

    Ross Taylor, W. (Woodbridge)

    Culverwell, C. T.

    Joel, D. J. B.

    Rowlands, G.

    Davidson, Viscountess

    Lamb, Sir J. Q.

    Royds, Admiral Sir P. M. R.

    De Chair, S. S.

    Lancaster, Lieut.-Colonel C. G.

    Russell, Sir Alexander

    Drewe, C.

    Leech, Sir J. W.

    Salmon, Sir I.

    Dugdale, Captain T. L.

    Liddall, W. S.

    Samuel, M. R, A.

    Duggan, H. J.

    Lipson, D. L.

    Sandys, E. D.

    788

    789

    Simon, Rt. Hon. Sir J A

    Stuart, Lord C. Crichton- (N'thw h)

    Watt, Lt.-Col. G. S. Harvie

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

    Stuart, Rt. Hon. J. (Moray and Nairn)

    Wayland, Sir W. A.

    Smith, Bracewell (Dulwich)

    Thorneycroft, G. E. P.

    Wells, Sir Sydney

    Smithers, Sir W.

    Thornton-Kemsley, C. N.

    Winterton, Rt. Hon. Earl

    Somervell, Rt. Hon. Sir Donald

    Tree, A. R. L. F.

    Womersley, Sir W. J.

    Southby, Commander Sir A. R. J.

    Tufnell, Lieut.-Commander R. L.

    Wood, Hon. C. I. C.

    Spears, brigadier-General E. L.

    Turton, R. H.

    Wragg, H.

    Spens. W. P.

    Walker-Smith, Sir J.

    York, C.

    Stourton, Major Hon. J. J.

    Wallace, Capt. Rt. Hon. Euan

    Strauss, H. G. (Norwich)

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

    TELLERS FOR THE NOES.—

    Strickland, Captain W. F.

    Waterhouse, Captain C.

    Lieut.-Colonel Kerr and Major

    Sir James Edmondson.

    NEW CLAUSE.—(Personal allowance of married persons.)
    Sub-section (1) of section eighteen of the Finance Act, 1920 (which, as amended by section forty of the Finance Act, 1927, section eight of the Finance (No. 2) Act, 1931, section twenty of the Finance Act, 1935, and section sixteen of the Finance Act, 1936, provides for a deduction of tax on one hundred and eighty pounds in the case of married persons), shall have effect as if the words "two hundred pounds" were substituted for the words "one hundred and eighty pounds."— [Mr. Simpson.]
    Brought up, and read the First time.
    11.30 p.m.
    Mr. Simpson: I beg to move, "That the Clause be read a Second time."
    I regret that a Clause of this social importance should come before the Committee for consideration at so late an hour. Varied claims and special pleadings have been made during the discussions on the Finance Bill but this Clause comes into an entirely different category. We must recognise that there is an economic datum line below which no decent family may be maintained. If things proceed as they are going, we may reach a position where there may be some difficulty about the family being brought into being. There are people who, being thoughtful about the future, hesitate to take the risk of having a family. This proposal affects a range of persons who might give us families and add to our population, just the type of people who, in the matter of health and education, would be of value. Taxation enters in some degree, into payments for food, clothing and shelter, and therefore, without the payment of any direct taxation, the people most affected by this Clause would be making a substantial contribution to the State—a contribution, indeed, which is out of all proportion to their incomes. The totalitarian States, by one method or another, are paying special attention to the question of population, and encouraging the family. Whatever degree of urgency, or
    790
    otherwise, we attach to the question, this proposal refers to the very fundamentals of the life of the community itself. These are desperate days in regard to national needs and financial claims, but, for that very reason, we should be especially concerned about marriage and the home. It is true that this proposal would be of advantage to homes without children, but it would be no less advantageous in cases where there are children. I am not suggesting that in all instances there are careful budgetary calculations before people enter into matrimony—perhaps it is as well that that is not the case—but where that is so, this concession would be an inducement to people to marry, and where such calculations are not made, this would be a justifiable assistance in meeting imprudence. There are wide and increasing fields for taxation without anti-social effects.
    In some directions taxation imposes a desirable restrain on expenditure which is unwise or of doubtful social value. Therefore, to increase taxation to compensate for the concession for which we ask in this case would possibly prove of cumulative social advantage, and the proposal is justifiable on every sound social canon and principle, and, in the long run, would be advantageous on economic grounds. It would be a contribution and stimulus to those influences that are possibly much neglected in these days. It would be a correction and emphasises on the deepest individual and collective values which make for real contentment and the fulfilment of personality. Finally, I believe that it deals with a problem that is vital to the life, and indeed the existence of this country at the present time. It would strengthen the roots of those influences that make decent life and civilisation possible, and although the range of this proposition is limited in the Clause, as I recognise, yet, as a gesture, and as an emphasis on principle to the extent indicated, I beg to submit it to the Committee on the grounds I have briefly enumerated.
    11.37 p.m.
    Mr. Ritson: I beg to support the Motion. My hon. Friend the Member for Ashton-under-Lyne (Mr. Simpson) has struck a very vital chord. He suggests that the Chancellor of the Exchequer ought to consider that there is a feeling going through the country to-day that it is not worth while having children at all because the burden is too great. That has not only been suggested, but it is being practised to an extent which makes me, as the father of a fairly large family, very alarmed. I never paid Income Tax until I came to this House. I was never fortunate enough to get to that stage, but when I first came here, I found that I had a protective value of five children under 14. That was helpful in that sense, but, whenever you say to a man, "How many are you in family?," he will say, "I cannot afford to have more than one or two." That is the sort of thing that the Chancellor of the Exchequer and the nation ought to consider. We are always being told to increase the family. I remember that the hon. Gentleman the Member for Oxford University (Mr. A. Herbert), whom I call a loose-box comedian, was once very sore concerning the suggestion of the need for increasing the families of this country, but I would suggest a better way than that which he suggested, and that is, to give relief to such people as widows who have no margin to work on in a time like this. Generally speaking, I find that skilled men and hard-working people have only an amount of money which just allows them to scrape along, and rather than allow themselves to be handicapped by getting hopelessly in debt, they refuse to reproduce them selves or to function in any way beneficial to the nation.
    I remember that when we were dealing with this matter two years ago we on this side were criticised by the hon. Gentleman the Member for South Croydon (Sir H. Williams), who reminded us that, if we would only do our arithmetic first and speak afterwards, it would be a good thing for us mentally, morally and politically. I should not worry if I were in the same position as the hon. Member for South Croydon as I should have a margin upon which to work. When the late Lord Snowden was in this House and the hon. Member for South Croydon was continually interrupting him, shouting and howling inarticulate things, he told him
    792
    to sit still and keep his mouth shut. When we are told that we do not understand the subject because we do not know our mathematics, all I can say is that the fathers and mothers of families on £ 200 a year are the best mathematicians I know. This is no sentimental appeal. We are all anxious that there should be a more equitable distribution of the burden and that there should be no attempt to curtail their liberties and functioning in life.
    11.42 p.m.
    Captain Crookshank: We all appreciate the arguments which have been put forward as to the value to the nation and to the individual of family life, but we must look at the other side of the picture. We are entitled to point out that during recent years a great deal has in fact been done for just this section of the community in the way of allowances if or married men and children. I would re mind the Committee that a great deal has been done in recent Budgets in one way and another to assist the small taxpayers, and it is only right that this should be remembered, particularly when appeals are made to go a little further. Look at what has happened in the last few years. In 1935 the marriage allowance was raised from £150 to £170 and in the same year another valuable concession was made. There was a reduction in the charge on the first amount of the taxable income from one-half to one-third of the standard rate. In 1936, when it was possible to remit taxation because of the improvement in our general position, the marriage allowance was raised from £ to £ 180, and in the same year the children's allowance was raised from £ 50 to £ 60, the highest figure it has ever been. Then, last year, my right hon. Friend found it possible to reduce again the charge on the first portion of taxable income and bring the amount due to what it was before in spite of the rise in the standard rate of tax. Hon. Members must not overlook the fact that a great deal has been done for the people for whom hon. Members are appealing, and we are justified in making that point. It is not as if nothing has been done for this section of taxpayers, whether you look at it from the marriage allowance point of view or the children's allowance point of view.
    It is, of course, very disappointing to have to give the same answer "No" on

    793
    three successive new Clauses, but that is often the case when we come to the new Clauses on the Finance Bill, because new Clauses are apt to raise questions of considerable difficulty and always of great expense. This particular concession would really be an expensive one. It is estimated that in a full year it would cost £4,500,000, and having had to refuse the last new Clause, deserving though it was, because it would have cost £1,500,000, no-one will be surprised if this concession,
    which would cost £4,500,000, certainly cannot be considered at present. I am sorry that it should be so, and I ask the Committee to reflect upon what has recently been done for the section of small taxpayers in the way of relief.
    Question put, "That the Clause be read a Second time."
    The Committee divided: Ayes 94; Noes 136.

    Division No. 208.]

    AYES.

    [11.46 p.m.

    Acland, Sir R. T. D.

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

    Parkinson, J. A.

    Adams, D. (Consett)

    Griffiths, J. (Llanelly)

    Pearson, A.

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

    Groves, T. E.

    Price, M. P.

    Adamson, Jennie L. (Dartford)

    Hall, J. H. (Whitechapel)

    Pritt, D. N.

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

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

    Richards, R. (Wrexharm)

    Ammon, C. G.

    Hayday, A.

    Ritson, J.

    Anderson, F. (Whitehaven)

    Henderson, J. (Ardwick)

    Robinson, W. A. (St. Helens)

    Batty, J.

    Henderson, T. (Tradeston)

    Selley, H. R.

    Bellenger, F. J

    Hills, A. (Pontefract)

    Sexton, T. M.

    Benson, G.

    Hopkin, D.

    Silverman, S. S.

    Buchanan, G.

    Isaacs, G. A.

    Simpson, F. B.

    Burks, W. A.

    Jenkins, A. (Pontypool)

    Smith, Ben (Rotherhithe)

    Charleton, H. C.

    Jenkins, Sir W. (Neath)

    Smith, E. (Stoke)

    Cluse, W. S.

    Jones, A. C. (Shipley)

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

    Cocks. F. S.

    Kennedy, Rt. Hon. T.

    Stephen, C.

    Collindridge, F.

    Lathan, G.

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

    Cove, W. G.

    Lawson, J. J.

    Stokes, R. R.

    Daggar, G.

    Leach, W.

    Thurtle, E.

    Dalton, H.

    Lunn, W.

    Tinker, J. J.

    Davidson, J. J. (Maryhill)

    Macdonald, G. (Ince)

    Viant, S. P.

    Dobbie, W.

    McEntee, V. La T.

    Watkins, F. C.

    Dunn, E. (Rother Valley)

    McGhee, H. G.

    Watson, W. McL.

    Ede, J. C.

    MacLaren, A.

    Welsh, J. C.

    Edwards, Sir C. (Bedwellty)

    Marshall, F.

    Westwood, J.

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

    Mathers, G.

    White, H. Graham

    Fool, D. M.

    Maxton, J.

    Williams, E. J. (Ogmore)

    Frankel, D.

    Milner, Major J.

    Williams, T. (Don Valley)

    Gallacher, W.

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

    Wilmot, John

    Garro Jones, G. M.

    Naylor, T. E.

    Windsor, W. (Hull, C.)

    Green, W. H. (Deptford)

    Oliver, G. H.

    Young, Sir R. (Newton)

    Greenwood, Rt. Hon. A.

    Paling, W.

    Grenfell, D. R.

    Parker, J.

    TELLERS FOR THE AYES.—

    Mr. Whiteley and Mr. Adamso

    NOES.

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

    Crookshank, Capt. Rt. Hon. H. F. C.

    Hannon, Sir P. J. H.

    Albery, Sir Irving

    Cross, R. H.

    Heilgers, Captain F. F. A.

    Allen, Col. J. Sandeman (B'knhead)

    Cruddas, Col. B.

    Hely-Hutchinson, M. R.

    Apsley, Lord

    Culver well, C. T.

    Heneage, Lieut.-Colonel A. P.

    Aske, Sir R. W.

    Davidson, Viscountess

    Hepburn, P. G. T. Buchan-

    Baldwin-Webb, Col. J.

    De Chair, S. S.

    Herbert, Lt.-Col. J. A, (Monmouth)

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

    Dugdale, Captain T. L.

    Higgs, W. F.

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

    Duggan, H. J.

    Hogg, Hon. Q. McG.

    Beechman, N. A.

    Duncan, J. A. L.

    Howitt, Dr. A. B.

    Bird, Sir R. B.

    Eastwood, J. F.

    Hudson, Capt. A. U. M. (Hack., N.)

    Bossom, A. C.

    Edmondson, Major Sir J.

    Hunloke, H. P.

    Braithwaite, J. Gurney (Holderness)

    Elliot, Rt. Hon. W. E.

    Hutchinson, G. C.

    Briscoe, Capt. R. G.

    Elliston, Capt. G. S.

    Jennings, R.

    Broadbridge, Sir G. T.

    Emery, J. F.

    Joel, D. J. B.

    Brocklebank, Sir Edmund

    Emrys-Evans, P. V.

    Keyes, Admiral of the Fleet Sir R.

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

    Fleming, E. L.

    Lamb, Sir J. Q.

    Browne, A. C. Belfast, W.)

    Furness, S. N.

    Liddall, W. S.

    Bull, B. B.

    Gluckstein, L. H.

    Lipson, D. L.

    Butcher, H. W.

    Goldie, N. B.

    Llewellin, Colonel J. J.

    Castlereagh, Viscount

    Grant-Ferris, Flight-Lieutenant R.

    Loftus, P. C.

    Channon, H.

    Greene, W. P. C. (Worcester)

    Mabane, W. (Huddersfield)

    Clarke, Colonel R. S. (E. Grinstead)

    Gridley, Sir A. B.

    MacDonald, Sir Murdoch (Inverness)

    Calman, N. C. D.

    Grimston, R. V.

    Macdonald, Capt. P. (Isle d Wight)

    Conant, Captain R. J. E.

    Gritten, W. G. Howard

    McEwen, Capt. J. H. F.

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

    Guest, Lieut.-Colonel H. (Drake)

    McKie, J. H.

    Cox, H. B. Trevor

    Gunston, Capt. Sir D. W.

    Macmillan, H. (Stockton-on-Tees)

    Craven-Ellis, W.

    Hambro, A. V.

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

    Crooks, Sir J. Smedley

    Hammersley, S. S.

    Markham, S. F.

    Medlicott, F.

    Ross, Major Sir R. D. (Londonderry)

    Tufnell, Lieut.-Commander R. L.

    Mills, Major J. D. (New Forest)

    Rowlands, G.

    Walker-Smith, Sir J.

    Morgan, R. H. (Worcester, S tour bridge)

    Royds, Admiral Sir P. M. R.

    Wallace, Capt. Rt. Hon. Euan

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

    Russell, Sir Alexander

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

    Nall, Sir J.

    Sandys, E. D.

    Waterhouse, Captain C.

    Neven-Spence, Major B. H. H.

    Simon, Rt. Hon. Sir J. A

    Watt, Lt.-Col. G. S. Harvia

    Peaky, O.

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

    Wayland, Sir W. A

    Peters, Dr. S. J.

    Smith, Bracewell (Dulwich)

    Wells, Sir Sydney

    Pownall, Lt.-Col. Sir Assheton

    Smithers, Sir W.

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

    Prector, Major H. A.

    Somervell, Rt. Hon. Sir Donald

    Winterton, Rt. Hon. Earl

    Radford, E. A,

    Southby, Commander Sir A. R. J.

    Womersley, Sir W. J.

    Raikes, H. V. A. M.

    Spears, Brigadier-Central E. L.

    Wood, Hon. C. I. C.

    Ramsay, Captain A. H. M

    Spens, W. P.

    Wragg, H.

    Ramsbotham, Rt. Hon. H

    Strauss, H. G. (Norwich)

    York, C.

    Rankin, Sir R

    Strickland, Captain W. F.

    Reed, A. C. (Exeter)

    Stuart, Hon. J. (Moray and Nairn)

    TELLERS FOR THE NOES.—

    Reid, W. Allan (Darby)

    Thorneycroft, G. E. P.

    Lieut.-Colonel Kerr and Mr.

    Richards, G. W. (Skipton)

    Thornton-Kemsley, C. N.

    Munro.

    Ropner, Colonel L.

    Tree, A. R. L. F.

    Resolution agreed to.

    Ordered, That the Chairman do report Progress, and ask leave to sit again.— [Captain Margesson.]
    Committee report Progress; to sit again To-morrow.

  COTTON INDUSTRY (REORGANISA TION) [Money] (No. 2).
  Resolution reported,
  " That, for the purposes of any Act of the present Session to make provision for the better organisation of the cotton industry and certain industries related thereto, and for purposes connected with the matter aforesaid, it is expedient to authorise—

  (a)the payment out of the Consolidated Fund or moneys provided by Parliament of the sums required for the making of any payment under the Cotton Spinning Industry Act, 1936, by the Board of Trade to the board constituted under that Act (here in after referred to as "the Spindles Board"), being a payment the liability for which is attributable to any provision made by the said Act of the present Session for extending the period during which the powers conferred on the Spindles Board by subsection (1) of section two, and subsection (1) of section four, of the said Act of 1936 are exercisable, for reducing the rate at which the levy under the last-mentioned Act is payable for any year, and for deferring payment of any instalment of that levy; and

  the payment into the Exchequer of any sums received under the said Act of 1936 by the Board of Trade from the Spindles Board, being sums the receipt of which is attributable to any provision made by the said Act of the present Session for extending the said period."

  GAS UNDERTAKINGS ACTS, 1920 TO 1934.
  Resolved,
  " That the draft of a Special Order proposed to be made by the Board of Trade under the
  796
  Gas Undertakings Acts, 1920 to 1934, on the application of the Newton Abbot and District Gas and Coke Company, Limited, which was presented on the 5th day of June and published, be approved."
  Resolved,
  " That the draft of a Special Order proposed to be made by the Board of Trade under the Gas Undertakings Acts, 1926 to 1934, on the application of the Maldon Gas Light Company, Limited, which was presented on the 6th day of June and published, be approved."
  Resolved,
  " That the draft of a Special Order proposed to be made by the Board of Trade under the Gas Undertakings Acts, 1920 to 1934, on the application of the Sutton-in-Ashfield Urban District Council, which was presented on the 25th day of May and published, be approved with the following modifications:—
  Clause 6, page 3, line 6, leave out "Second."
  Clause 6, page 3, lines 6 and 7, leave out "and in the First Schedule to this Order ";
  Clause 6, page 3, line 11, leave out "Schedules," and insert "Schedule";
  Clause 6, page 3, line 14, leave out "Schedules," and insert "Schedule";
  Page 3, leave out Clause 7;
  Clause 60, page 23, line 15, leave out "Second";
  Page 23, leave out the First Schedule."—[Mr. Cross.]
  The remaining Orders were read, and postponed.
  It being after Half-past Eleven of the Clock, Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.
  Adjourned at Four Minutes before Twelve o' Clock.

TRADE AND COMMERCE.
  NEW FACTORIES, GREATER LONDON.
  NEW FACTORIES, GREATER LONDON.
  JAPANESE HOSIERY (IMPORTS)
  JAPANESE HOSIERY (IMPORTS)
  CANNED FISH IMPORTS.
  CANNED FISH IMPORTS.
SCOTLAND.
  LANDING FACILITIES, UYEASOUND.
  LANDING FACILITIES, UYEASOUND.
  DEER
  DEER
  SMALLHOLDINGS, HIGHLANDS AND ISLANDS.
  SMALLHOLDINGS, HIGHLANDS AND ISLANDS.
  ANTI-TUBERCULOSIS SERVICES, WALES.
  ANTI-TUBERCULOSIS SERVICES, WALES.
  MATERNAL MORTALITY, WALES.
  MATERNAL MORTALITY, WALES.
HOUSING
  COSTS
  COSTS
  WEST RIDING OF YORKSHIRE.
  WEST RIDING OF YORKSHIRE.
  WALLSEND.
  WALLSEND.
  INFANT MORTALITY AND BIRTH RATE.
  INFANT MORTALITY AND BIRTH RATE.
  NATIONAL HEALTH INSURANCE (RHEUMATISM).
  NATIONAL HEALTH INSURANCE (RHEUMATISM).
  NON-INDUSTRIAL STATE EMPLOYES.
  NON-INDUSTRIAL STATE EMPLOYES.
  COST-OF-LIVING INQUIRY.
  COST-OF-LIVING INQUIRY.
  WARREN CEMENT WORKS, HARTLEPOOL.
  WARREN CEMENT WORKS, HARTLEPOOL.
EDUCATION
  MEALS AND MILK IN SCHOOLS.
  MEALS AND MILK IN SCHOOLS.
  MEDICAL AND NURSING STAFF (STATISTICS).
  MEDICAL AND NURSING STAFF (STATISTICS).
  NURSERY SCHOOLS.
  NURSERY SCHOOLS.
  INDIA (MILITARY FORCES, SMALLPOX).
  INDIA (MILITARY FORCES, SMALLPOX).
  FIRE BRIGADE SERVICES (PETROL).
  FIRE BRIGADE SERVICES (PETROL).
COAL INDUSTRY.
  MINERS AGED 20 AND 21 YEARS.
  MINERS AGED 20 AND 21 YEARS.
  ACCIDENTS, WARWICKSHIRE COALFIELD.
  ACCIDENTS, WARWICKSHIRE COALFIELD.
UNEMPLOYMENT
  UNEMPLOYMENT FUND (STATISTICS).
  UNEMPLOYMENT FUND (STATISTICS).
  ASSISTANCE DISALLOWED (E. CROSS).
  ASSISTANCE DISALLOWED (E. CROSS).
  DISALLOWED BENEFIT, GLASGOW.
  DISALLOWED BENEFIT, GLASGOW.
  ASSISTANCE (MEDICAL SERVICES).
  ASSISTANCE (MEDICAL SERVICES).
  BALLOON BARRAGE CONSTRUCTION, GLASGOW.
  BALLOON BARRAGE CONSTRUCTION, GLASGOW.
  DOMESTIC WORKERS.
  DOMESTIC WORKERS.
  BROADCASTS (UNEMPLOYED WORKERS' MOVEMENT).
  BROADCASTS (UNEMPLOYED WORKERS' MOVEMENT).
BRITISH ARMY.
  MILITIA
  MILITIA
  OFFICERS' MARRIAGE ALLOWANCE.
  OFFICERS' MARRIAGE ALLOWANCE.
  HUT ENCAMPMENT CONTRACT.
  HUT ENCAMPMENT CONTRACT.
  RETAIL DISTRIBUTIVE TRADES CONFERENCE.
  RETAIL DISTRIBUTIVE TRADES CONFERENCE.
MILITARY TRAINING ACT
  STOCKPORT.
  STOCKPORT.
  AGRICULTURAL TRACTOR DRIVERS.
  AGRICULTURAL TRACTOR DRIVERS.
  MINERS.
  MINERS.
  RACECOURSE BETTING (TOTALISATOR FUND).
  RACECOURSE BETTING (TOTALISATOR FUND).
  IRISH REPUBLICAN ARMY IMMIGRANTS
  IRISH REPUBLICAN ARMY IMMIGRANTS
  MAGISTRATES' COURTS (HATLESS WOMEN WITNESSES).
  MAGISTRATES' COURTS (HATLESS WOMEN WITNESSES).
  POLICE FORCES (IRISHMEN).
  POLICE FORCES (IRISHMEN).
  FACTORIES ACT (JUVENILES).
  FACTORIES ACT (JUVENILES).
  REFUGEES.
  REFUGEES.
  EXPERIMENTS ON LIVING ANIMALS (BRADFORD).
  EXPERIMENTS ON LIVING ANIMALS (BRADFORD).
  POLICE SERVICES (EXCHEQUER GRANTS).
  POLICE SERVICES (EXCHEQUER GRANTS).
  CIVIL DEFENCE (AIR-RAID WARDENS).
  CIVIL DEFENCE (AIR-RAID WARDENS).
  INTERNATIONAL CONVENTIONS.
  INTERNATIONAL CONVENTIONS.
  CYPRUS.
  CYPRUS.
  MILK PRODUCTS MARKETING SCHEME.
  MILK PRODUCTS MARKETING SCHEME.

Preamble
The House met at a quarter past four of the clock, The LORD CHANCELLOR on the Woolsack.
The Marquess of Lansdowne—Sat first in Parliament after the death of his father.

MERTHYR TYDFIL CORPORATION BILL. [H.L.]
Returned from the Commons, agreed to, with Amendments: the said Amendments considered and agreed to.
COVENTRY CORPORATION BILL.
Brought from the Commons; read 1a; and referred to the Examiners.
SOUTH STAFFORDSHIRE WATER BILL.
Read 3a, with the Amendments, and passed, and returned to the Commons.
JARROW CORPORATION BILL.
Read 3a, with the Amendments, and passed, and returned to the Commons.
STALYBRIDGE HYDE MOSSLEY AND DUKINFIELD TRANSPORT AND ELECTRICITY BOARD BILL.
Read 3a, with the Amendments; a further Amendment made; Bill passed, and returned to the Commons.

NEWTON ABBOT AND DISTRICT GAS ORDER, 1939.
LORD TEMPLEMORE: My Lords, I beg to move that this Special Order be agreed to.
Moved, That the Special Order, as reported from the Special Orders Committee on Thursday last, be approved.—(Lord Templemore.)
On Question, Motion agreed to.

MALDON GAS ORDER, 1939.
LORD TEMPLEMORE: My Lords, I beg to move that this Special Order be agreed to.
Moved, That the Special Order, as reported from the Special Orders Committee on Thursday last, be approved.— (Lord Templemore.)
On Question, Motion agreed to.

SUTTON-IN-ASHFIELD GAS ORDER, 1939.
LORD TEMPLEMORE: My Lords, I beg to move that this Special Order be agreed to, with modifications.
Moved, That the Special Order, as reported from the Special Orders Committee on Thursday last, be approved with modifications.—(Lord Templemore.)
THE CHAIRMAN OF COMMITTEES (THE EARL OF ONSLOW): My Lords, I should like to say a word on a point which came before the Committee in reference to this Special Order. As your Lordships are aware, one of the duties of the Committee is to report to your Lordships' House if they have any doubt about the vires. I need not tell the whole story, which is rather lengthy and complicated, but it is quite clear there was a doubt about the vires. I understand that the decision of the Special Orders Committee to make a report to your Lordships on the matter was concurred in by the learned Attorney-General. It is hardly necessary for me to say how important it is that the Special Orders Committee should go very carefully into the question of vires. This, I think, is the first time a recommendation of the sort has been made to your Lordships by the Committee. I should like to emphasize that this really is one of the most important duties of the Committee. Obviously, if that examination were not strictly undertaken many matters might go forward in a Special Order which were really not justified under the Act on which the Special Order was based. Appeal to the Courts would be possible, but it would be very undesirable that your Lordships should concur with an Order which was ultra vires.
On Question, Motion agreed to.

MINISTRY OF HEALTH PROVISIONAL ORDER (HAILSHAM WATER) BILL.
Read 3a (according to Order), and passed.
MINISTRY OF HEALTH PROVISIONAL ORDER (LUTON WATER) BILL.
Read 3a (according to Order), and passed.
MINISTRY OF HEALTH PROVISIONAL ORDER (SOUTH KENT WATER) BILL.
Read 3a (according to Order), and passed.
DUNDEE CORPORATION ORDER CONFIRMATION BILL.
Considered on Report (according to Order).
DUNDEE HARBOUR AND TAY FERRIES (SUPERANNUATION) ORDER CONFIRMATION BILL.
Considered on Report (according to Order).

HALL-MARKING OF FOREIGN PLATE BILL.
Order of the Day for the Second Reading read.
4.22 p.m.
THE MARQUESS OF READING: My Lords, this is a short and somewhat specialised Bill, but none the less necessary in order to remove a long-standing inconvenience and anomaly in the existing legislation. The position can, I think, be shortly explained. By the Customs Act, 1842, Sections 59 and 60, it was provided that any plate manufactured abroad which was brought into this country for purposes of sale should be treated in exactly the same way as if it had been manufactured in this country and should be assayed and hall-marked in the same manner. Shortly after that Act was passed, in the same year, it was found that the provisions were too rigid and that some exemption from them must be supplied. By an amending Act of the same year, 1842, it was provided that if the importer could show that the plate

847
had been manufactured abroad before the year 1800, then it was not necessary that it should be either assayed or hall-marked in this country.
That position has obtained ever since, but with rather curious results, because your Lordships may observe that instead of inserting in the exemptions a period of years, a definite year was put in, with the result that, the Bill having been passed in 1842, exemption was at that time provided for any plate which could be shown to be more than forty-two years old—that is, the difference between 1800 and 1842. The position now is that in order to obtain exemption the importer has still to show that the plate was manufactured before the year 1800, with the result that the exemption can now not be claimed for plate brought in at any point of time less than 139 years ago. The short Bill which is before your Lordships' House is designed to rectify that anomalous provision by fixing a period of 100 years. The first clause repeals, in effect, Clause 6 of the amending Act of 1842, and the second clause repeals a clause of an Act of 1883 which, as matters at present stand, imposes upon the Revenue authorities the duty to hold such foreign plate in bonded warehouse until the necessary steps have been taken for its hallmarking and assaying.
So much for the explanation of the Bill. May I add a brief word as to its history? Some three or four years ago the British Association of Antique Dealers, who, as your Lordships know, are a responsible, reputable and representative body, approached the Goldsmiths Company with a request that the necessary alteration in the law should be made. The Goldsmiths Company, in their turn, took the matter up with all the other assaying offices in England and Scotland and obtained their assent, as also the assent of the Hall-Marking Committee, which is a Committee on which are represented all those associations which deal with gold and silver plate in this country. Thereupon approaches were made to the Board of Trade, where they were sympathetically received; and indeed matters progressed so far that a clause embodying the provisions that are now in this Bill was originally included in the Finance Bill of last year, but was crowded out during its passage through
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another place. In those circumstances it was decided to embody these provisions in a Private Member's Bill. This Bill has already passed through another place without opposition or amendment, and in the circumstances, since the Bill appears to have many powerful and respectable friends and, so far as I am aware, no enemies, I trust your Lordships will give it your support. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2a.—(The Marquess of Reading.)
LORD TEMPLEMORE: My Lords, I have to say that His Majesty's Government give full support to this Bill; they think it is a good Bill and they hope it will pass speedily into law.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

POULTRY INDUSTRY BILL. [H.L.]
Order of the Day for the Second Reading read.
4.28 p.m.
THE PARLIAMENTARY SECRETARY OF THE MINISTRY OF AGRICULTURE AND FISHERIES (THE EARL OF FEVERSHAM): My Lords, in moving the Second Reading of this Bill I should like to refer briefly to the importance of the industry with which it deals. It is not so widely recognised as it should be that the value of the annual production of the poultry industry amounts to some £26,000,000, or over 10 per cent. of the total for the agricultural industry in Great Britain. As for the number of producers, it is so great as to defy exact calculation, because, as your Lordships know, nearly every farmer and smallholder keeps poultry, and in addition there are thousands of "specialists," as well as cottagers and retired professional men who keep poultry as a part-time occupation. Marketing and distribution must necessarily account for a further large number of persons who will certainly be affected by the provisions of this Bill.
In view of the fact that this Bill, which concerns such a large industry as I have indicated, has come to your Lordships' House before going to another place, perhaps I may be permitted to give a somewhat fuller account than I would otherwise have done of the way in which the

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provisions of this Bill affect the various sections of the industry. I do not propose to go far into past history, but I think the House will agree that the most appropriate starting-point is the Commission presided over for a large part of its deliberations by the noble Lord, Lord Addison, in 1934. This was a Reorganisation Commission for England and Wales, appointed under the Agricultural Marketing Acts, of which Acts the noble Lord was the parent. Its task was to prepare a marketing scheme for eggs and poultry which producers could adopt or not as they chose; and under the guidance of Lord Addison—though circumstances compelled him to relinquish the Chairmanship before the Report was signed—it used its opportunities to present the industry and the country with a picture of the poultry industry, of its accomplishments as well as of its weaknesses, which, if I may say so, provides an excellent foundation for a study of the industry's problems. A corresponding Commission dealt with the industry in Scotland, and it was the Reports of these two bodies that threw a spotlight on the two outstanding problems of the poultry industry—the serious losses due to debility and disease, and the need for improvements in marketing.
On the marketing side the Commissions drew our attention to the very rapid expansion of the home poultry industry between the years 1924 and 1934. They pointed out that marketing methods had failed to keep pace with this expansion and with the demand from the towns for regular supplies of standardised goods, and suggestions were made for remedying this situation. But the Commissions came to the conclusion that marketing improvements, important as they were, would not of themselves solve the whole problem. I believe the noble Lord opposite will inform the House that the Commission for England and Wales were deeply impressed by the evidence as to the losses from disease suffered by the poultry industry, and following a recommendation of that Commission a Committee was appointed, known as the Poultry Technical Committee, under the Chairmanship of Sir Duncan Watson, to whom we owe a heavy debt of gratitude. The proposals contained in the Report of the Technical Committee, which was published last year, were welcomed by the industry as a whole and have been closely
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followed in that part of the Bill which deals with stock improvement. As no doubt a number of your Lordships will know, since 1934 the economic position of the industry has become weaker, and the number of poultry kept on holdings of one acre or more in Great Britain has fallen from 69,000,000 to 59,000,000. At the same time the position in regard to mortality has certainly not improved. The losses due to disease have been estimated at more than £4,000,000 per annum. The Government have, therefore, brought forward legislation to deal with these problems under the two main heads—the heads of stock improvement and marketing—and it is proposed that the task of giving effect to the proposals on both sides of the industry should be entrusted to a single independent Commission.
Clause 1 accordingly provides for the establishment of a Poultry Commission on lines similar to those laid down in the Livestock Industry Act. Its membership will consist of a Chairman, and not more than eight members. The Commission will be assisted by two Advisory Committees, which will advise on stock improvement and marketing matters respectively. In each case the Advisory Committee will consist of members representing the interests of all classes of persons affected, together with a few independent members. The provision for these Advisory Committees will be found in Clauses 6 and 11 of the Bill, and also in the Second Schedule. The Livestock Act has in this case also set a precedent for the establishment of the Advisory Committee system, for it has been proved since that Act was passed that such a system works smoothly and well.
Clauses 2 to 5 contain the stock improvement provisions. The conclusion reached by Sir Duncan Watson's Committee was that disease and low vitality had become so serious that the situation was one of emergency, and that nothing short of control of stock distribution could bring about that substantial improvement which was necessary within a reasonable period. The first step in the control proposals is registration. Every distributor of poultry stock, whether in the form of adult birds, day-old chicks, or hatching eggs, will be required to register with the Commission. But the Commission will have powers to grant exemption from this obligation to register, so that it will be possible, if thought desirable, to leave free

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from control those small poultry keepers who may from time to time dispose of a few birds. The Commission will, no doubt, proceed at an early stage to lay down certain simple regulations which would be within the competence of any distributor to comply with. These preliminary regulations would enable the Commission to deal with the more blatant malpractices. Later the Commission may be expected to formulate more detailed regulations, designed to bring about a steady improvement in the standard of poultry-keeping generally throughout the country. The Commission will not, of course, be able, as it were by a stroke of the pen to eliminate disease and remove debility from our poultry flocks. The process is bound to be a slow one, but one effect of the Bill will be of course to encourage all who are concerned to pay greater care than perhaps they have done in past years to the question of stock production.
Clauses 4 and 5 of the Bill deal with voluntary accreditation schemes for breeders and hatcheries aiming at the production of healthy and high quality foundation stock. The Government have accepted the view that under existing conditions breeders are not in a position to maintain such high quality in their stock as is thought to be desirable, and it is therefore proposed to compensate them in a measure for the extra time and labour that will be required for record keeping, elimination of unsuitable birds, and so on, by the offer of Exchequer premiums. A total limit of £,250,000, spread over not more than seven years, is laid down, and the premiums are to be on a diminishing scale.
The marketing provisions are contained in Clauses 7 to 10. The main objective is the proper grading of home - produced eggs and poultry according to quality and according to size or weight. This grading will put the home producer in a better position in relation to his foreign competitors, and should help him to get a real footing in the larger urban markets, which to-day cannot depend upon odd lots of produce of mixed description. The requirement of testing and grading is also bound to lead to an increase in the practice of packing and grading at central points, and will therefore improve the machinery of assembly and distribution, so helping
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to solve the problem of local gluts, which cause great hardship among egg producers. Every retailer will be required in due course, subject to such exemptions as the Commission may decide upon, to sell eggs and poultry according to prescribed grades laid down by the Commission. But it would not be economical or reasonable to require every retailer himself to grade the eggs and poultry he sells.
In order to ensure that the produce reaches the retailer properly graded, it is proposed to register wholesalers and to require them to observe regulations which would be fitted to the circumstances of their own particular branch of the industry. The task of making regulations fitted to each of the branches of the wholesale trade will of course fall upon the Commission, which will be assisted by the Marketing Advisory Committee. Clause 7 contains the general prohibition of sales of ungraded produce produced in the United Kingdom but, apart from the Commission's general power to grant exemptions, certain forms of sale are specially excluded in the Bill itself. Wholesale sales by the producer which are in effect his final act in the process of production are excluded, as also are sales by the hotel and restaurant trades. The local authorities responsible for the administration of the Food and Drugs Act will co-operate by enforcing the grading provisions among retailers in their areas, but on the other hand the supervision of the wholesale trade will rest with the Commission.
Five clauses, Clauses 12 to 16, deal with the marking of preserved eggs. The present position is that home-produced eggs which are cold stored or chemically stored have to be marked as such, but for reasons of difficulty of enforcement there has been no corresponding requirement for imported eggs. There is a strong case for removing this discrimination and the case will, I believe, become even stronger if in future steps are taken by the industry to store eggs on a large scale in order to reduce the seasonal variation of supplies and prices. The principal new provision in this Bill is that by Clause 15 all eggs imported into the United Kingdom will have to be marked before arrival as having been preserved, unless they are exempted from that requirement by order or licence issued by Ministers. In practice these

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orders will be issued only if Ministers are satisfied that in the country in which the goods were produced there are satisfactory arrangements in force for marking preserved eggs as such before exportation. The Government will of course seek the co-operation of exporting countries in giving full effect to this new provision, and time will be required for the necessary negotiations to take place. For that reason these clauses will not come into effect immediately but, like a number of other clauses in the Bill, on a day which is to be appointed.
I now come to that part of the Bill—Clauses 17 to 19—dealing with quantitative regulation of imports which is designed to give effect to the proposals outlined in the statement made by my right honourable friend the then Minister of Agriculture on July 11 last. The provision follows the lines of that already adopted in the Livestock industry Act, and it is proposed to confer on the Board of Trade powers to regulate by order imports of eggs and egg products, and live and dead poultry, so far as may be necessary in order to secure the stability of the market. This is a necessary corollary to the measures of reorganisation provided for elsewhere in the Bill. The Government feel that if the task of establishing the poultry industry on a firm foundation is to be undertaken with energy and confidence, it is imperative that the industry should be adequately safeguarded against possible dislocation or deterioration of the market resulting from arrivals of eggs and poultry from overseas. At the same time there is no intention that quantitative regulation should be used as an instrument to raise prices above normal levels and so encourage an unhealthy expansion of the home industry.
Your Lordships will be aware that under Section 3 of the Agricultural Marketing Act, 1933, an independent body—the Market Supply Committee—has been appointed whose duty it is to review generally the circumstances affecting the supply of agricultural products in the United Kingdom, and in particular to advise Ministers on questions of import regulation either generally or in connection with marketing schemes. The Government propose to invite the Committee to keep under close review the market for eggs and poultry, so that there may
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be no delay in determining whether or not conditions are arising likely to endanger the stability of the market. It is also proposed to suggest to the Market Supply Committee that there would be advantages in setting up a fully representative Trade Committee to provide them with expert advice in carrying out this duty. Provision is further made, in accordance with the policy statement, for the regulation of imports in conjunction with and in support of any organised arrangements that have been or are being undertaken by the industry, for the storage of eggs during the spring flush with a view to modifying the extreme seasonal variations of supplies and prices, should such regulation appear to be necessary to secure the effective operation of such arrangements.
Storage schemes may be promoted under the provisions of the Bill dealing with service schemes or may perhaps be promoted independently of the provisions of this Bill. In any case it is clearly undesirable that any substantial efforts the industry may make by storage, in order to secure a more even distribution of supplies, should be jeopardised by excessive supplies of imported eggs. It is accordingly proposed that if the Board of Trade are satisfied that these storage schemes are sufficiently comprehensive and are effective in taking supplies off the market during the flush season, and that such a measure is necessary to secure their successful operation, the Board will be enabled, with the affirmative approval of Parliament, to take steps to regulate imports by order. The Market Supply Committee and the proposed Trade Committee will also be available for advising upon the operation of this aspect of supply regulation. Clause 18 of the Bill provides ample powers whereby the Board of Trade can ascertain the quantities of eggs put into storage, and can thus gauge the effectiveness of any storage operations undertaken by the home industry. The exercise of the powers to regulate imports for both these purposes is subject to the usual condition—namely, that due regard is to be paid to the interests of producers and consumers alike and to our commercial relations with other countries. Provision is made in Clauses 20 to 23 for service schemes on much the same lines as in the Livestock Industry Act. The underlying principle is to put the industry in a position to help itself.

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I do not think I need detain your Lordships at length with the remaining provisions of the Bill, which are for the most part concerned with general and supplementary matters, such as the power of the Commission to obtain information and conduct inquiries. I should perhaps mention that in Clauses 28 and 29 the opportunity is taken to amend certain provisions of the Merchandise Marks Act of 1926. Under that Act the penalties for removing the indications of origin from imported eggs are a fine of £5 for the first offence and £20 for the second or subsequent offence. It has been felt that these penalties are not sufficient to meet a case of deliberate fraud, and the new penalties, which follow those laid down in the recent Food and Drugs Act, are £20 for the first offence and £100 or three months imprisonment, or both, for a second or subsequent offence. The officers of food and drug authorities are also given greater powers of entry, and these powers are extended to the officers of the Commission.
In conclusion, I should like to say that my right honourable friend the Minister of Agriculture and his predecessors have had lengthy consultations with representatives of all sections of the poultry industry in framing these proposals, and my right honourable friend is most grateful to these organisations and to the individuals who have given their advice and assistance. While there are still points of difference, as is natural in so extensive a measure, the Government believe that the Bill presented to your Lordships' House will have the substantial agreement in all its major principles of the interests concerned. There is no need for producers or wholesalers to fear any sudden imposition of arbitrary regulation. Before any regulations are issued, ample opportunity must be given for discussion and the consideration of objections both by the Commission and by Ministers before confirming them. In any case, the main provisions of the measure will come into operation only after appointed days, which may be different for each class of product and for each particular purpose. I commend this measure to your Lordships' House as one calculated to raise the standard of efficiency of the industry, and to bring about valuable and lasting improvements in our marketing methods and in the health and quality of our poultry stock. I beg to move.
Moved, That the Bill be now read 2a.—(The Earl of Feversham.)
4.56 p.m.
LORD ADDISON: My Lords, I am sure we are indebted to the noble Earl for bringing before us, so simply, this highly complicated Bill. I thank him, in the first place, for the very friendly and appreciative reference he made to my colleagues and myself who studied this problem at the invitation of the Government in 1934. I am only sorry that successive Ministers have found themselves, as I know, between then and now, confronted with a good many difficulties and many rival interests in fashioning their proposals. That certainly must be taken into account when we look at the exceedingly complicated proposals now before us. But I wonder if your Lordships have apprehended from the description given by the noble Earl what the proposals are.
It is fair to assume that, seeing we have got 150,000 or more—probably more—egg and poultry producers in the country, they will not in the mass be very good hands at filling up forms. We cannot expect them to take a keen interest in regulations. Anything which is going to serve their interests must be simple. They must be able, I suggest, to understand it reasonably well. In this Bill, I see, there are at the start five or six different registers of various classes of people. There is a register of stock suppliers, there is a register of wholesale traders, and there is a register of licensed importers. There may be three different schemes, each of which will have its own register, so that there will be six registers of one sort or another open to the industry.
Then when you come to consider how many schemes the Bill provides for, there is one called the breeders' accreditation scheme—that is for accredited and expert breeders and suppliers of hatching eggs and so on. There is another and separate scheme for those who run specialised hatcheries—that is a hatcheries' accreditation scheme. There is another scheme for the sale and marketing of breeding fowls and hatching eggs. There is also another scheme, which is the only one with which the rank and file of the producers will be concerned: that is the scheme for the marketing of poultry products, which include chickens and eggs and ducks and so on. Finally, there

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is another scheme for market research and intelligence. So that there are no fewer than five separate schemes.
There are a great many producers up and down the country who have to carry on different sections of this business. The most successful and the most efficient, so far as we found them, are those who sell a lot of day-old chicks and hatching eggs, and, over and above that, have a large number of eggs to be sold in the ordinary way. Sometimes, instead of selling all their day-old chicks, they let a lot of them grow up; they become young cockerels, and have to be sold for the market. That is one section. Just see what this man is going to be landed with by this Bill. He will be registered on three separate registers. He will be on the register for the service scheme for poultry products; he will be registered for selling breeding fowls and hatching eggs; and then, I suppose, if he is an enlightened person, he will be on the register for market research and intelligence; in addition to which, if he is an accredited breeder, he will be a member of the breeders' accreditation scheme. If he has a hatchery, he will be in another scheme, the hatchery scheme. So this unfortunate man will have to make returns for no fewer that five separate schemes, and he will be on the appropriate register for each. I hope he will have a big enough business to be able to afford to employ a clerk. If he has not he will be in a very bad way. It is a bewildering business, and I am quite sure the rank and file of the producers have not the faintest idea of what is in front of them if they give a welcome to this part of the Bill. Happily, as one might say, the vast majority of producers will be concerned oily in the scheme for the sale of poultry products. I know something that lies behind these complexities. I am not altogether wishing to blame the Ministry, but this, unfortunately, betrays a surrender to all kinds of conflicting vested interests. It is market specialisation run to seed.
When I come to make one or two further criticisms, that comment is one of them; but first let me say a word about the noble Earl's remarks about the losses from disease. I entirely agree with everything he said. It could not be exaggerated, and I am sorry that one of the schemes, as it seems to me at all events, fails to deal with one of the most
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important contributory causes of the spread of disease. The first of the schemes under Clause 20 will be for people who are engaged in the production and marketing of day-old chicks and hatching eggs and so forth. The board can do various things. It can arrange for insurance; it can arrange for advertisements and measures calculated to improve conditions of sale by auction, and so forth. We found, and I am sure the noble Earl knows it is so, that one of the most important contributory causes of the spread of disease was really the publication of what can only fairly be described as dishonest advertisements. Advertisements are published widely saying that the advertiser undertakes to supply this, that and the other kind of stock, and a lot of producers, who have no special facilities for investigating the bona fides of the advertiser, buy stock and find themselves landed with a lot of weakly stock, often with disease breaking out quite soon after that stock has been bought. The stoppage of that is one of the most important things that ought to be done.
I hope that the necessity of making every breeder an accredited breeder, bringing him on to the register, making conditions and all that, will gradually weed out these very undesirable persons, but there is no doubt at all that one of the most important functions of a board dealing with the sale of this type of product should be to secure improvements in the conditions of sale in all forms, including the sale by advertisement, which is often the most poisonous and misleading of all. I cannot imagine why the Government have restricted the power of this board to an improvement of sale by auction. I hope it does not mean that they have surrendered to the interests which are pretty powerful in the industry and which flourish on the continuance of this kind of practice. I am using fairly strong language, but it is nothing like as strong as my colleagues on the Commission used, and nothing like as strong as has been used by other persons who have investigated this aspect of the question. That is the serious weakness of the Bill. The mischief can be stopped by not allowing these people to sell at all unless their premises are of a proper kind.
I remember one case we investigated where a man had most effective advertisements and, as far as we could find,

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he had no hens at all. All he had was an office, and he used to send round when he got an order and collect chickens and eggs from farmyards, where cockerels were running with hens, and send them. There might have been some that were good ones, but what he sold was not what he had purported to supply. I urge that this sort of undesirable method of supply should be most firmly prevented if we are going to eradicate disease from the industry. I agree with the noble Earl that it will be a considerable time before much progress can be made, and I wish the Minister and those responsible for these schemes every success in eradicating disease, but it appears to me that they have made it needlessly complicated.
May I come to another point? I see that there are provisions relating to importation in Clause 17. It is quite evident that you must be able to manage your importation. Apparently the method to be employed is contingent upon there being organised some comprehensive arrangements for the storage of eggs. And here is a serious deficiency in the Bill. The producer wants something that is simple. He wants something that will prevent the spring slump in prices. It often happens that prices drop to nearly one-third, or at all events to less than half what they were in the previous November. Prices suddenly drop when the hens begin to lay more eggs in the spring. There may be only a trifling excess on the market, nevertheless you get a precipitous fall in price. The sensible thing to do would be to have an arrangement whereby a percentage of these glut supplies could be taken off the market and properly stored. But who is going to be responsible? The noble Earl said that there might be various storage schemes. At least I understood him to say so. I say quite confidently that that happy-go-lucky way of dealing with storage is doomed to failure. If you are going to have an intelligent system for taking off a percentage of the surplus in any given week, so as to steady the precipitous fall in prices, it must be done by one body of persons who have the whole thing under review. It must be done by one board who have all the intelligence at their disposal and who have control over the distribution of eggs somewhere or other.
So far as I can understand the Bill, there may be piecemeal operations for
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the storage of eggs. There may be an organisation in Worcestershire and nowhere else, or there may be one in Norfolk and not one in Suffolk, and so on. It is completely impracticable. It will not in any way whatever steady the precipitous fall in prices, and I am surprised that a proposal of this piecemeal character has been introduced. Of course we have a Government that rather likes to proceed by piecemeal methods—they are rather in keeping with their character—but still it is hopelessly illogical. Apparently the organised control of importation is to be dependent upon the Board of Trade being satisfied that organised and comprehensive arrangements for storage have been set up. Who is going to set them up? Now I have a very grave criticism, and I hope that when the Bill gets into Committee your Lordships will be willing to look at this purely from the producers' point of view and will not support the Government blindly every time in the Lobby.
The rank and file of producers, who are not specialists, will be concerned with how they can get a decent market for their eggs and chickens. Everything depends upon the machinery whereby a sale is effected. Under Clause 20 (2) it will be seen that a marketing scheme may be prepared by persons engaged in the production of any poultry products or in the marketing of any poultry products. What does that mean? The whole purpose is that we should get a marketing scheme that will be helpful to the producers. That is what it is meant to do, I suppose. I suggest that it is completely alien to the purpose of the Bill that wholesale distributors, for example, should be entitled to set up a scheme which will become an approved scheme and which will cut out the producers from having a scheme of their own at all. That is entirely wrong.
As the Bill stands, a scheme may be prepared by either of these two parties. It will be much easier for the highly-organised marketing firm to prepare a scheme. They could do it easily, and they certainly will, and we shall have a repetition of what has happened under the Bacon Board. There what happened was that the factory interests produced a scheme—they called it a bacon scheme—and the sale of pigs by the producer was not regulated in the interests of the producer but in the interests of the factory part of the business. The result was

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that very soon the farmers found that the price had slumped. They did not see why they should supply pigs to the bacon factories when they could make a better price for pork, and the whole thing, I believe, is still in the melting pot. The purpose should be to have a scheme operated by and on behalf of the producers. It should be limited to that purpose. If it is not, I am quite confident that the interests of the producers will be sacrificed as they have been in the case of pigs. When the Bill goes into Committee I shall move the omission of the words in line 27 on page 24, and I hope your Lordships will support me in that in the interests of the producers, regardless of the exhortations of the Government Whip, because this is a serious defect in the Bill.
Your Lordships will observe that the Government propose to make grants in aid of what are called packing stations. That comes as a sort of afterthought in Clause 36. That clause provides that if the Ministers are satisfied that satisfactory arrangements have been made there shall be a packing station. But that is an essential ingredient in the whole thing. You cannot work organised marketing at all—unless you deliver yourselves bound into the hands of the wholesalers—except through the medium of some kind of packing station where eggs pass through a channel over which control can be exerted. Packing stations should not be a sort of sideshow. They are an essential ingredient in the logical working of a scheme. In my opinion it should be provided that all the packing stations should be under the direction of the board which operates the scheme for the sale of poultry products—the whole lot—and that they should be operated by and on behalf of the producers only. I am quite at a loss to understand why this sort of afterthought is inserted as placing some premium upon the establishment, here and there, I suppose, of packing stations, for the packing station system is essential to the successful working of the scheme.
There is one other criticism I have to make, and that is with regard to the third class of scheme. I hope I am not confusing any of your Lordships, but the Bill itself is confusing. There is a third class of scheme dealt with in Clause 20, on page 25, for the encouragement of market intelligence and research. Why should there be a separate scheme for
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market intelligence and research? It means, I suppose, a separate register of all the producers contributing in whatever way may be chosen to this scheme, and a separate board—a separate everything. Why? The other boards, whether they like it or not, will have to have a system of market intelligence. They cannot work without it. The Poultry Products Board, the Hatcheries Board, all of them, must of necessity, if they are going to do their business, have a market intelligence service. I cannot imagine why one should be divorced from the other. Therefore I hope your Lordships will be willing to insert power to provide market intelligence in both the other schemes, and delete the provision for it in Clause 20, because it is an essential part of every scheme. I am glad that some contribution to research is forecast, but the very efficient Committee to which the noble Lord refers have the matter in hand, and I am inclined to think that they will manage it better than this piecemeal business.
After all, this Bill contemplates that there may be a separate scheme for market intelligence and research. Well, there may not; but as a matter of fact research into the prevention of disease and the improvement of stock is one of the most important services we can possibly render to the industry, and it should not be dependent in this way upon a board or a scheme being set up or not. I think it is the duty of the State, just as we do in other directions, through this appropriate and excellent Committee to foster research schemes, to secure their proper direction, and so on. It is not the business, as such, of one of these separate little boards; it is a highly specialised business requiring the best scientific service that we can command, and I suggest that it is the wrong approach altogether to research to put it into the hands of a separate board which may or may not be created. It is the duty of the Government to see to it, and to make good grants for it.
I should like to pay tribute to what the Ministry has been doing in this respect. I remember that we were confronted with the shameful fact that, while the industry was suffering a loss of from three to four million pounds a year from disease, the total that we were contributing as a nation to research on those dis-

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eases was, as far as I could ascertain, £10,000 a year; that was all. I do not know how much it is now; perhaps it is very much more, perhaps it is a little more. But it is a disgraceful position, and I think it is the business of a State Department to deal with this matter. It may be that when the producers' schemes are running well a very small levy may quite properly be made in aid of research; still, the direction of research, the conduct of it and all the rest of it should be under the charge of a national body, and it should be a State body, as it is already in medicine and in other branches of agriculture.
Then there is one thing omitted, a power which these boards should have and which I should like to see inserted: that is in regard to the supply of feeding stuffs. One of the biggest drawbacks of the small producer is the high price he has had to pay for his feeding stuffs. I do not know what percentage they now form of the price of a dozen eggs, but it is very considerable, and it is quite evident that the service of assisting the producers to get their feeding stuffs and their rations well mixed at cheaper rates is one of the most important services a central board could render. I should like to see this power of a central board incorporated in the Bill. It is really unfortunate that the Minister has not gone for the establishment of one central board to deal with all these various matters, but has allowed himself to be persuaded into introducing this exceedingly complicated and, I am afraid, rather bewildering set of proposals. I hope they will succeed, but I am very much afraid that once they begin to be understood by the rank and file of producers, the producers will get horrified at the prospect of the forms, returns, reports and all the rest of it that they may be called upon to provide and which may greatly prejudice the success of the measure.
LORD HARMSWORTH: My Lords, I should be very glad if my noble friend below me would explain one point in connection with this Bill. Under the terms of this Bill it is obviously going to be an exceedingly hazardous risk and laborious form of employment to keep a fowl. May I ask him whether bantams are included in the Bill?
LORD STRABOLGI: Or fighting cocks!
5.26 p.m.
LORD REA: My Lords, I have no desire to raise any objection to the main principle of this Bill, which seems wholly admirable as an effort to improve the quality of poultry and of eggs. I am, it is true, a little concerned lest inadvertently it should add still further to the cost of living by putting up the price of a very cheap and wholesome imported food. But to-day my principal reason for troubling your Lordships is that I am afraid that, unless attention is drawn to the point in good time, there is a serious chance that quite unintentional injury may be done to a trade which at first sight appears to have nothing to do with the poultry or egg industry. I am referring to that Cinderella of British trade, the shipping industry. Your Lordships may perhaps be surprised to find that this industry is in any way concerned with this Bill, but when I inform you that the imports of eggs from overseas amounted last year to no less than £12,500,000 sterling, and that much of this, particularly of the eggs from the more distant ports, is carried in British ships, you will see that it is of really vital interest to a much distressed industry that it should not be inadvertently interfered with. I might point out that from China alone the import of eggs to this country amounts to nearly £3,000,000—that is, about one-third of the total imports from China. And, what is important in these days, when we are considering how we can help Chinese trade, that import alone is sufficient to pay for half the whole of the exports we send to China. Therefore I submit that it is worth while for your Lordships' House to spend a few minutes considering how you can avoid a hardship on a trade which in other debates has been admitted to be of the most vital interest to this nation in the most dangerous times through which we are passing.
This trade happens to be a very highly organised one, for which almost special ships and certainly special refrigerating machinery have to be built. They take years to build, and the trade, carried on as it is under somewhat complicated conditions, has to be organised a long way ahead. What I am really afraid of is that we may once more experience difficulties that have occurred under previous legislation of this kind. It is perfectly true that the Bill does not in specific terms

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prohibit the importation of eggs, but it empowers the Board of Trade by order to regulate importation into the United Kingdom of poultry and poultry products. I am very much afraid, especially after the very candid statement made by the noble and learned Lord on the Woolsack last week, that when regulations come to be considered by this House we may be told that even if they are not drafted with the care that some of us desire, they must be accepted in the form in which they stand—
THE LORD CHANCELLOR (LORD MAUGHAM): I never said that.
LORD REA: Very well; I am far from being able to enter into controversy with the noble and learned Lord on the Woolsack, but some of us were a little concerned at the way in which regulations, no doubt of vital importance, go through this House at rather shorter notice and with less examination than some of us would desire.
LORD STRABOLGI: The noble Earl, Lord Stanhope, said that on the last occasion.
LORD REA: I beg the noble and learned Lord's pardon; the remark to which I referred was made by the noble Earl the Leader of the House. That, however, was a mere illustration of the point that I am desiring to make. Both here and in another place these regulations, though they have to be confirmed by both Houses of Parliament, come up at inconvenient times and cannot be amended, and therefore the only way in which we can safeguard interests which might unwittingly be interfered with is to see that proper safeguards are put into the Bill when it passes through Parliament. That is my excuse for, at this early stage, drawing attention to a danger, which may occur, of serious interference with trade by regulations put into force at very short notice without proper consultation with those concerned, with the possibility of producing the almost scandalous state of affairs that we have found under previous regulations, where shipments have been legal at the time they were loaded, but illegal and not allowed to be landed when the ship arrived at its destination. I am sure it is nobody's intention that that should take place. This Bill provides specifically for
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consultation with all classes of persons concerned, whether producers or consumers, and I venture to submit to your Lordships that there are others concerned—namely, the carriers. Those engaged in the trade have very vital interests, and I would like an assurance from the noble Earl in charge of the Bill that this comparatively small, but very important, point may be considered, so as to safeguard those interests when we come to a later stage of the Bill.
5.32 p.m.
LORD PHILLIMORE: My Lords, the noble Earl in charge of the Bill paid a very proper tribute to Lord Addison, than whom no one has been more deeply immersed in the complexities of agricultural legislation, but I must say that I received some of Lord Addison's remarks with a certain amount of sardonic satisfaction. I was delighted to find that even he, who was the originator of the first Marketing Act, was somewhat troubled at the complexities introduced in the life of the producer by such interference with industry. That was an admission which I took to be a very valuable one as coming from Lord Addison's side of the House. Also I was not displeased to find that the noble Lord's opinion as to tariffs had so radically altered since 1931, when I, amongst others, in vain recommended that no marketing scheme was worth anything unless a certain amount of protection against foreign producers was coupled with it. Now I find the noble Lord saying that it is quite necessary to have State management of importation.
LORD ADDISON: I am sorry to interrupt, but management of importation is not necessarily the imposition of a tariff.
LORD PHILLIMORE: I quite admit that. It is, however, a form of protection. It is also true, I think, that all these Bills of this nature do introduce great complications into the work of producers, but I submit that it would be a mistake to fall upon this Bill because it covers, under various headings, various specialised sides of agriculture. Agriculture is in its nature so diverse an occupation that it is impossible to treat it in such a wholesale way as the noble Lord suggested. I think that from his admissions made at other times he would himself have drawn attention to the complexity of the industry with which we are now dealing.

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This Bill, to which I and those for whom I am speaking accord a very hearty welcome, does deal with many sides of poultry production and marketing, and deals with them, as I see, in a practical, close and well-considered way. It was not possible, I submit, if a satisfactory result was to be obtained, to throw all these various complicated sides of the industry together, and make one sweeping recommendation with regard to the whole. It was absolutely necessary to go into detail, and to divide up the various functions of the producer and marketing, and so on. I personally, and those for whom I speak, are very grateful for the Bill, and particularly for the recognition that disease has been the worst injury to the poultry industry during the last few years. The noble Lord, Lord Addison, and I are both working on a scheme which involves the purchase of hundreds of thousands of young stock or eggs, and the greatest difficulty of that association has been to obtain healthy stock. I venture to say that no-one will, in the end, be more grateful for the Bill than the Durham miner, whose keen interest in poultry has been so greatly and recently developed. In particular, he will have cause to be grateful for the provisions as to disease.
The noble Lord, Lord Addison, if I may return to him once more, for he is a formidable and well-informed critic, wished to complicate the Bill still further by adding foodstuffs for poultry to the many other functions which the Bill sets going. I submit that that is far too difficult and different a side of the question to include in a Bill of this character. There is only one suspicion that I have as to the Bill at present, and that is that the grading of eggs provision may let slip through certain categories of persons, and certain categories of trades, which it will be desirable to rope in. I notice that already the direct seller is very properly exempted from the grading provisions. I think it will probably be necessary, as the Bill goes through the House, to look further into that point, and see whether such bodies as the Wholesale Co-operatives, and so on, are clearly within the Bill, as they should be. With these few remarks I beg to give the Bill a hearty welcome.
5.38 p.m.
THE EARL OF RADNOR: My Lords, I also, like Lord Phillimore, welcome this Bill, because it deals at last with a problem which has been exceedingly complex, and it deals with a section of the agricultural industry which has been crying out for something of this nature for a very long time. I also welcome the Bill for the reason given by Lord Strabolgi on the First Reading in this House—namely, that at long last the Government have seen fit to introduce a major measure in the first instance in your Lordships' House. I hope that the precedent will be followed more frequently in future. May I also say that I hope it will not in future be done in quite the same way? I think it was generally understood, originally, that the Bill was going to be introduced in another place, and consequently those organisations that are interested in the details of the Bill took steps to get their points of view represented in the other House. At the last moment things were switched over and the Bill was introduced in this House, and so far as one organisation is concerned, which is actively interested in the Bill, it has been unable to find anyone who has the time to represent its point of view. It is most desirable that the view of those interested should have an opportunity of being put forward for discussion when a Bill is before Parliament, and I put that point to the noble Earl in the hope that on future occasions there will be a better opportunity for those people to put their views forward.
This is a very complex Bill. In the main it is on the same lines as the marketing schemes with which we are familiar, but it does depart in one major respect from marketing schemes that have hitherto been put into operation, in that the Commission which does all the work is not democratically elected. The noble Lord, Lord Addison, knows a great deal better than I that it was very difficult—I believe he found it impossible—to devise a satisfactory scheme of election for a Commission to deal with the poultry industry; there are so many concerned in it, and so many of them are small people. But I do not know that it is not a good thing that it should be so. I speak from perhaps rather bitter experience of the activities of the democratic principle in connection with

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the Pigs Marketing Scheme, in that I was defeated in a democratically run election, and perhaps my views have been coloured somewhat by that event. But I then came to the conclusion that the farmer is by nature an autocrat, and is not an entirely suitable medium for the democratic principle.
Well that is the only major point of difference between this and any other marketing scheme. Apart from that, it has the usual complications of many different possibilities of schemes, a multiplicity of committees, both advisory and other, all to be set up to harry the unfortunate producer. But it has worked in other schemes, and presumably it will work under this scheme; though I must confess that I have some sympathy with Lord Addison is his complaint of the number of possibilities of different schemes which may affect any individual producer. In that connection I would draw your Lordships' attention to the two schemes contained in Clauses 4 and 5, the breeders' accreditation scheme and the hatcheries accreditation scheme. It is true that they have one major difference, which is that in the case of the breeders' accreditation scheme there is a certain amount of money made available to assist them; but I really do not know what hatching is but breeding poultry in some form or another, and equally I do not think you can breed poultry without hatching eggs. I cannot see, after a study of both those clauses, why those two schemes should not be run into one. It seems to me that these two classes of people are exactly the same.
On that point, and particularly on Clause 4, dealing with the breeders' accreditation scheme, I would like to echo what has already been said regarding the importance of improving the health of our poultry. It is well known that generally speaking it has deteriorated very seriously for several years past, largely, I think, owing to the desire on the part of producers to get a hen which will produce more and more eggs. The result has been that the stamina of the poultry generally has gone down, and they are therefore less resistant to disease. But that, I believe, will be dealt with under the scheme which is to be set up by the Commission under this Bill. I hope that in course of time it will succeed in improving the quality of our poultry, and that the industry will therefore be
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better off economically. Your Lordships will note in subsection (6) of Clause 4 that this scheme has to be confirmed by a Resolution of the Commons House of Parliament. That is, of course, because there is finance in it. There is a great deal besides finance in it (or will be) but it has to go to the Commons, otherwise presumably it would not be confirmed by anybody. It seems to me that this might well go through the same process as other marketing schemes, and come before both Houses for confirmation and criticism; because, so far as I can see, in the whole of this Bill there is no means by which the aggrieved producer, or the producer who has any objection to the scheme, has a chance of voicing his views publicly, and if the scheme came before both Houses of Parliament there would be an opportunity for careful consideration.
There is only one other matter to which I want to refer, and that is that in Clause 6 you have a Stock Improvement Advisory Committee, and in Clause 11 a Marketing Advisory Committee. I would ask your Lordships to look at the composition of those two Committees side by side. The Stock Improvement Advisory Committee is to consist of "the producers in Great Britain of such fowls or eggs as aforesaid," while the Marketing Advisory Committee consists of "producers in Great Britain of poultry products." Those are, as far as I can see, the same. Then, in Clause 6, "persons who carry on in Great Britain the business of supplying such fowls or eggs," and, in Clause 11, "persons who carry on in Great Britain the business of selling poultry products, whether by wholesale or by retail." Those people are very much the same. Then, in both clauses you have "(c) local authorities in Great Britain," and "(d) such other persons.…", and they are both the same on these Committees. Would it not be possible for the two Committees, which are identical as far as I can see, to be run into one? It is a multiplicity of committees which sometimes frightens people off these schemes, and it would, I believe, help generally if the procedure could be simplified in some such way. These criticisms that I have made are really only very minor criticisms, and virtually on Committee points. I hope that your Lordships will give this Bill a Second Reading and that it will pass into law

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substantially in the form in which it is now and will give that assistance to the poultry industry which is so much required.
5.48 p.m.
THE EARL OF FEVERSHAM: My Lords, I think it has been agreed by all those who have taken part in the debate that this Bill is of a complicated character, but it is not nearly as complicated as the noble Lord, Lord Addison, would have the House to believe. The noble Lord suggested that under the Bill there will be so many schemes of one kind or another that it would be possible for one producer to have to submit himself to a register six times. With regard to Clauses 4 and 5, to which my noble friend Lord Radnor drew attention, they deal with voluntary schemes, and therefore there is no compulsion on those who have breeding establishments or hatchery undertakings to join such a scheme. The noble Lord, Lord Addison, very properly devoted many of his remarks to Clause 20, which is the first clause dealing with service schemes. I would remind the House again in respect of those service schemes that they are not compulsory. They follow the precedent which was set in the Livestock Industry Act, whereby a scheme cannot come into operation unless a preponderating number of those connected with that section of the industry vote in favour of it.
LORD ADDISON: With great respect to the noble Earl, there is no provision for voting in the Bill.
THE EARL OF FEVERSHAM: If the noble Lord will turn to Clause 22, and also to the Third Schedule, he will see that exactly similar provisions rule in regard to the confirmation and publication of service schemes as appear in the Livestock Industry Act, which means that the Minister cannot sanction a service scheme unless the majority of those connected with that branch of the industry are in favour of such a scheme being instituted. I hope, by bringing those two instances to your Lordships' notice, it will be appreciated that although the complexity of the provisions for the various schemes is necessarily great, it is not by any manner of means implied that every producer or distributor has to submit himself to the regimentation of marketing restrictions and regulations.
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The noble Lord, Lord Addison, has referred to the fact that the Reorganisation Commission envisaged a Marketing Board for both eggs and poultry. Under that scheme the country would be divided into areas, with a single packing station for each area, and the board would have power to fix minimum prices and prescribe selling grades. It is important that the House should appreciate that whether the proposals of the Commission should be adopted or not was a matter for the producers themselves. In actual fact, the producers of eggs and poultry have not adopted these proposals. The reasons are well known. They derive from the character of the poultry industry, to which Lord Addison made some reference. It is, as is generally recognised, a large and important industry, but it is one composed of an enormous number of units of varying sizes, many very small, and therefore is difficult to organise. The register of stock suppliers and wholesalers proposed under this Bill will not affect the ordinary producers of eggs and poultry for consumption, nor will the accredited schemes, which concern only those breeders or hatcheries, as the case may be, who care to join them. Service schemes are not compulsory under the Bill. The industry can utilise that clause of the Bill if it so desires. On the other hand, if the proposals contained in the Report of the Reorganisation Commission, of which Lord Addison was an eminent member, were brought into effect, every producer would have to register and send in returns. As it is, ordinary producers—that means those who are not producing stock birds—will not have to register at all unless they choose of their own accord to set up a service scheme. It is unnecessary to point out that ordinary producers far outnumber the breeders.
My noble friend Lord Radnor asked a question as to why the Bill had to be made, in his view, unnecessarily complicated by a similar provision being included for both breeders and hatcheries. My noble friend failed to draw a distinction between these two sections of the industry. Clause 5, which deals with the hatcheries accreditation scheme, applies primarily to undertakings where a large quantity of eggs—say 30,000 or 40,000—are hatched by scientific processes and where the eggs for that purpose are bought from breeders. That is quite a different section of the industry from the

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breeders' side, which may concern a much smaller unit that does not buy any eggs from exterior sources but relies upon its own stock for breeding and hatching purposes. Therefore it was felt that it would be more effective if there were two separate schemes whereby, on a voluntary basis, the persons engaged in, say, hatcheries would be able to formulate their own scheme and most probably buy their eggs in large quantities from the breeders' accreditation scheme which had been set up.
THE EARL OF RADNOR: Surely there is bound to be a lot of overlapping in that case. It is not every hatchery that keeps a chicken, nor is it every breeder who sells all the eggs he produces for hatching purposes.
THE EARL OF FEVERSHAM: There are a few instances of undertakings which could be described, for the purposes of this Bill, as both breeders and hatcheries; but, by and large, it is correct to say that hatchery undertakings are that side of the industry which concentrate upon the purchase of eggs in very large numbers for hatching, whereas the breeders' undertaking is often not on such a large scare and is more self-contained. I am assured that it is necessary, as the Technical Committee recommended, that this distinction should be drawn.
My noble friend Lord Harmsworth asked whether the bantam was included in the provisions of this Bill. I can assure the noble Lord that the bantam, for the purpose of this Bill, is defined as a fowl. The noble Lord, Lord Rea, together with the noble Lord, Lord Addison, raised an important issue with regard to import control. Import control by order of the Board of Trade is not dependent upon a storage scheme being in force. Without any such scheme the Board of Trade can control imports if desirable in order to secure the stability of the market. The noble Lord, Lord Addison, made some reference to the question of storage. As regards storage schemes, the Board of Trade has to be satisfied that a scheme is sufficiently comprehensive before it will be accepted as the basis for import regulation. It will be appreciated that every section of the industry must have its interests properly safeguarded, and although the ultimate objective is to get, in effect, something of the nature of that which has been out-
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lined by the noble Lord, it is, as I have indicated, necessary that considerable time should be taken in the process of building up such a scheme.
I should like to assure my noble friend Lord Rea that, as regards import regulation, the Bill provides for consultation with all parties that are concerned. It is suggested that regulation of imports should take place after consultation with the Market Supply Committee, and that Committee should set up a Trade Committee which would be an expert consultative committee, and that all sections of the industry, including the distributive interests, should be able to give their advice and to make their views known. Regulation under the Bill will not, of course, necessarily be continuous as is the case with a number of other commodities to which he referred. As I have indicated it will be applied in order to safeguard the stability of the market, which is obviously in the interests of all parties—producer, consumer, wholesaler and importer. It will be necessary, as I indicated in my earlier remarks, for the Board of Trade to give some indication to the country of origin when such regulation is to take effect.
My noble friend Lord Addison referred to the important question of research. I wish to say now that, apart from the provision for a service scheme under this head under the Bill, which is voluntary, the Government already make a substantial provision, as he will well know, for poultry research. The announcement which was made in July last on the poultry policy of the Government included a statement that the Government would facilitate the establishment of a special research station for the investigation of poultry disease, and also that the Commission to be set up under this Bill would be asked to formulate a scheme for the establishment of a progeny testing station. I would like to inform the noble Lord that actually, at the present time, proposals for the research station are under consideration. I am afraid I have not dealt with all the points that have been made, but, as my noble friends Lord Radnor and Lord Addison have intimated to your Lordships, some of the questions raised in the course of this debate are essentially Committee points, and I shall have the opportunity of further looking into them after reading the Report of this debate.
LORD ADDISON: May I intervene for a moment, with your Lordships' permission, to ask the noble Earl, in making the inquiries that he has just promised, to inquire into the accuracy or otherwise of two statements he has just made. I do this now so that he can give the answer when we come to the Committee stage. I understood him to say that as far as the average producer is concerned the producer will be a voluntary participator. As I read it, the Commission have to be satisfied by persons substantially representing all interests. There is nothing to say how that is to be ascertained, but I take it that the scheme may then be imposed on all producers, whether they like it or not, and that it is not a question of whether they can voluntarily participate. I am only asking the noble Earl to look into it. It is not provided for in the Schedule or anywhere else.
THE EARL OF FEVERSHAM: I should like to assure the noble Lord that in respect of the approval of such schemes, the majority concerned in that section of the industry must be preponderatingly in favour of the scheme.
On Question, Bill read 2a, and committed to a Committee of the whole House.

MINISTRY OF SUPPLY BILL. [H.L.]
Order of the Day for the Second Reading read.
6.8 p.m.
THE MINISTER FOR THE COORDINATION OF DEFENCE (LORD CHATFIELD): My Lords, in moving the Second Reading of this Bill perhaps it would not be inopportune for me to point out that I am undergoing a somewhat new experience. No doubt my feelings are somewhat like those which your Lordships might have if you were suddenly placed on the bridge of a battleship and told to take her smoothly and safely to port. I hope I shall have the indulgence of your Lordships in my novel experience this evening. This Bill follows on a statement made by the Prime Minister in another place on April 20 last, when he said that it was the intention of His Majesty's Government to introduce a Ministry of Supply Bill, and to institute a Ministry of Supply which would have over it a Minister of Cabinet rank, and that the Bill would be so
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framed as to enable it to be developed in the fullest way as a Supply Ministry, although for the time being, at any rate, the intention was that it should be administratively circumscribed within certain limits.
It was said that it would deal with three things initially, and, firstly, with the problems of Army supply, considerably expanded as they have been by the recent decisions to increase the strength of the Army and the Territorial Force. Secondly, it would deal with the responsibility for certain general stores—what is called common user stores—which the War Office already supplies to various Departments, including the Civil Defence Department, and that this particular function would be progressively extended as was found desirable. Thirdly, it would take over responsibility for the acquisition and maintenance of the reserves of certain materials, including raw materials—that is to say, those materials required for the defence programme. He also said the branches which would be transferred from the War Office to the new Ministry would include those dealing with research, with experiment, with production, design and inspection. In addition, the ordnance factories would be taken over, and the Bill would include powers to take priority over industry for Government orders for defence. He said also that a Ministerial Priority Committee would be set up. This Bill which is before your Lordships follows precisely the lines indicated in that statement by the Prime Minister.
In moving the Second Reading of this Bill I think I ought to make a few remarks to your Lordships, first, as to why it is being introduced at this particular moment, and not at any other moment, and secondly, as to why the action of the new Ministry is to be limited beyond what some would consider necessary—that is to say, that it will not cover at first the whole field of supply. The reason why the Bill is being introduced at the present time is that it is in the proper sequitur to a number of other measures that have been recently introduced by His Majesty's Government. I refer to the Military Training Act and to the large increase in the Territorial Army. These measures, which were necessitated in themselves by the international situation, have completely

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changed the hypothesis on which Army supply has up to the present been based, but they have not necessitated any change in the hypothesis for the Navy or the Royal Air Force. That is an important factor to be borne in mind. So we have been Faced with a sudden problem of great emergency and magnitude which requires exceptional and rapid action. On the principle of putting first things first, it has been necessary to put aside lesser considerations and principles which have guided us in the past. But if you are going to judge the wisdom of the Government's action, I think it is necessary that all of you should be perfectly clear as to what are the conditions under which we have been working in the last ten or twelve years.
I should like to remind your Lordships that after the War, when the Ministry of Munitions was abolished and the vast accumulation of stores that it made was scattered to the winds, it was thought necessary to consider once again in 1923 whether it was right to go on working in watertight compartments, the Army and the Navy Supplies and Contracts Departments being completely shut off from each other, with a new service introduced which equally was not in touch with the others, or whether it would not be wise to set up a Ministry of Supply in peace for all time. A Committee was set up to go exhaustively into that question. I was on that Committee. We sat for three and a half years and we heard witnesses of every type on the matter. We definitely came to the conclusion that it would not be a wise step to set up a Ministry of Supply in peace. We considered that, better than that, the proper step was to make the Service Supply Departments co-operate and that each Department should create its own connection with industry and work out its own requirement; of industry in war. The three Supply Departments, we thought, should be completely coordinated and made to work together harmoniously.
The Government in 1927 accepted that Report and it had the most beneficial effect on the relationship between the three Service Departments. I refer to the Principal Supply Officers' Committee and the Supply Board. The great effect that was made by that decision, and the effect it had on the Services themselves, I do not believe is fully realised by those
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who are not in those Services. Anyhow, during the last two or three years, without any special powers to our Defence Ministers, without any undue disturbance of industry—and what disturbance there was having been voluntarily accepted—it has enabled the Navy to start its vast rebuilding programme; it has enabled the Royal Air Force to set up a vast new organisation in industry on a scale never before envisaged; and it has enabled the Army, with its limited hypothesis up to this year, to provide the necessary weapons until this new problem arose—and that without any friction or serious clash between the Departments of State. Any difficulties that there have been have been readily resolved either by the Principal Supply Officers' Committee, now under the Chancellor of the Duchy, or by the Supply Board, under Sir Arthur Robinson. I think myself—and I have had very considerable experience on both sides of this problem in the last fifteen years—that the success that has been achieved is not so much a matter for acrid criticism as a great tribute to the decision made in 1927. It is always easy to find faults in people or in organisations, but the good points are sometimes apt to be swept away by a stroke of the pen.
Now, however great may be the advantages of setting up a Ministry of Supply in certain circumstances, we must not forget that there are also disadvantages. There must be disadvantages if you tear away from the Services their supply sides and thereby compulsorily separate the fighting men who have to use the weapons produced from those who design and produce them. That is an undoubted fact which is fully recognised by those who deal with these matters. But, at the same time, it has always been recognised that the time might well come, when some new and special problem was before the country, when it would be wise to set up a Minister of Supply and to give him special powers at a time when you would have to raid industry much further than you have ever contemplated doing in the past, to disturb and to take so much of the country's industrial resources into the defence programme that it could only be accomplished by some very special and arbitrary measure. But that does not to my mind make it wise to disturb those parts of the supply machine which

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are working efficiently and harmoniously, so long as they continue to do so. I believe that the new Ministry will have a vast and difficult enough task in what has been allotted to it.
Now, if I may come to the Bill itself, of which I believe it is proper for me to make some small explanation of the principles, your Lordships know that the Bill is divided into three Parts. The first Part provides for the powers which are to be permanently entrusted to the Minister. It also provides him with a Parliamentary Secretary. Part II provides special powers to be given temporarily for the purpose of securing the supply required during the continuation of our expanded defence programme. Part III of the Bill contains the more or less formal provisions which are needed. As regards Part I, Clause 1 merely enables a Minister of Supply to be appointed. Clause 2, which is one of the major clauses, and Clause 3 give general powers for the supply of any article required for the public service, but the Minister is only to exercise those powers in regard to supply to any other Government Department if that Department's supply powers in regard to the articles required have been transferred to the Minister. The transfer is effected, as stated, under the authority of Clause 3 by Orders in Council. It is provided in Clause 6 that these Orders in Council shall be submitted for the prior approval of both Houses.
The scope of the powers to be transferred to the Ministry are shown in a White Paper, Command 6034, laid before Parliament on May 31. In that statement the phrase "articles required for the public service" should be carefully noted, because it occurs frequently in the Bill, and a very wide range is given to it by Clause i8 of the Bill, which provides that articles required for the public service cover, not only the normal supplies for the public service, but also the materials needed for the maintenance of essential civil industries in the event of war, reserve stocks and materials, as well as plant and machine tools needed for the production of any supplies that are required. Clause 4 gives power to the Minister to finance an accumulation of reserves if that is considered to be the most effective way to secure the carrying out of the defence programme, or, in
880
emergency, stocks of materials for the maintenance of essential civil industries. Clause 5 gives power to the Minister to call for a return of stocks of articles which might be required for the public service.
In Part II of the Bill, which deals with the temporary powers of the Minister, there is a very important clause—Clause 7. The first subsection of Clause 7 is to secure priority for Government orders over anything else. The second and third subsections are to requisition output if the exercise of the power under subsection (1) does not achieve the desired result. Subsection (5) enables a controller to be appointed to carry on the whole or part of any business in which the person fails to comply with the Minister's direction. Subsection (6) fixes the price in the case of difficulty occurring between the producers and the traders on the one hand and Government Departments on the other. Clause 9, which is also part of the same group of powers, enables business records to be examined relating to articles required for the public service. Clause 8 gives power to require available storage accommodation to be placed at the disposal of the Minister, and Clause 12 gives power to require the protection of essential plant required for defence manufacture.
Although all these powers are expressed to be exercised by the Minister, it is of course intended that they shall be exercised in consultation with other Departments, in so far as the supply functions of these Departments are not transferred to the Minister of Supply. Further, the exercise of powers as to priority would be subject to the general control of the Ministerial Priority Committee which has been set up. As I have already stated, there has not been up to the present any substantial need to use priority powers, but with the extending programmes for the Army it has seemed desirable that they should at any rate be available. I should like to say one word about the appointment of controllers. That is a very drastic sanction which we hope will never have to be put into force. Similar powers were in the possession of the Minister of Munitions in the last War, but they were only used on two or three occasions during the whole period of the War.
In addition to providing the Minister with great powers over industry, Clause 7 gives a measure of protection as regards private contracts which may be set aside

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by reason of Government priority, and also provides in subsection (6) a resort to arbitration in the event of it being impossible to settle the price by negotiation between the Minister and the contractor. I shall propose at a later stage a change in the method of selection of arbitrators as shown in the Bill, by reason of the discussion which took place at the Report stage in another place. The Amendment which I shall propose will provide that the panel of arbitrators shall be appointed by the Minister, and it is the intention that he shall appoint these from as wide a field of selection as possible, and that he shall appoint a Chairman and Deputy Chairman, who shall be persons with wide legal experience and capable of bringing an unbiased judgment to the task which will fall on them, of selecting from the panel the arbitrator or arbitrators to be appointed to deal with specific cases.
Clause 10 prescribes the powers of persons appointed as controllers. Clause 11 provides protection for directors of businesses who, in producing articles required for the public services, contravene the memorandum and articles of association, or, in case of statutory companies, the governing statutes. Clause 12 provides power to the Minister to require any contractor or sub-contractor to carry out whatever protective measures may be considered necessary to protect essential plant in his works from air-raid damage. Clause 13 is for the authorisation of the temporary powers in Part II, which has been proposed as being for three years, that being the same period as that during which the Military Service Act will run. If this part of the Act is still needed at the end of the three years, then it may be extended from year to year on an Address to His Majesty by both Houses of Parliament. Part III of the Bill contains general provisions regarding the administration of the Ministry, and as regards expenditure, which I need not refer to any more at this stage.
This Bill asks, as your Lordships will see, for new and extensive powers, to be energetically but reasonably applied. It adds a new powerful driving cog to the general supply machine, that can be clutched into those wheels where it can be best applied, but will not throw out of gear the delicate parts of machinery that are already working smoothly and effi-
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ciently. At the same time the Government can at any moment, by Order in Council, extend or re-direct the new power to be created into other unlimited Government spheres as and when they think it wise so to recommend. May I assure you, my Lords, that this question of a Ministry of Supply Bill has been considered in the past, as now, not from a narrow Service outlook, nor as a political issue, but rather in the very spirit that I know animates everybody in this House, of doing what is wisest and best in a difficult emergency and acting on the best balance of advice at the disposal of His Majesty's Government. I beg to move that the Bill be read a second time.
Moved, That the Bill be now read 2a.—(Lord Chatfield.)
6.33 p.m.
LORD ADDISON: My Lords, I must apologise for having to address your Lordships for a second time on the same day on the Second Reading of a Bill. It so happens that by the accident of Parliamentary business, it relates to two measures which concern Departments to which I have been attached. Thus I am fortunate enough to be able to say with what pleasure we have all listened to the noble and gallant Lord who has just spoken. I did not know whether to admire more his charm and lucidity or his brevity as compared with the Minister of Supply in another place. I have here before me a copy of the speech of the Minister of Supply on the same topic in another place, and I see that after he had occupied no fewer than nine and a half columns of the OFFICIAL REPORT, he craved permission to pass to the actual Bill itself. How long those nine and a half columns occupied I do not know. I confess I find them somewhat boresome reading because I think that any competent foreman of the works department would have been familiar with all his arguments and would have regarded them as commonplaces.
Another thing which I admired about the noble and gallant Lord was the agility with which he skated over the Government's change of view. We have discussed this matter I think three times in this house, and twice on formal Motions. One was by Lord Mottistone. I am not sure that Viscount Swinton did not also take a hand on one occasion and I had a hand at another time. We received most

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convincing arguments from the Government why it was undesirable, in these critical times, to set up a Ministry of Supply. So satisfied were the Government supporters that when we had the temerity to carry the matter to a Division, only seventeen of your Lordships voted for the Motion. I remember that the Lord Chancellor had been most unfortunately coached because he relied upon the Report to which the noble Lord has referred, and whoever had coached him had unfortunately omitted to point out that the governing consideration before the Committee was an instruction that the Report was to be drawn up on the supposition that there would not be a major European war for, I think, ten years. Of course, that was a very important governing consideration which made all the difference.
THE LORD CHANCELLOR: The noble Lord referred to it himself. We were all perfectly aware of that.
LORD ADDISON: I drew the attention of the Lord Chancellor to it. He had prepared an argument with great care and lucidity to convince us that a Ministry of Supply was not necessary, but he had overlooked that instruction.
THE LORD CHANCELLOR: May I suggest that the noble Lord might now refer to the Bill before us?
LORD ADDISON: I am coming to the Bill, but I think I am entitled to make these observations and I must say I am doing so because I admire the way in which the noble and gallant Lord passed over what had taken place on previous occasions.
LORD CHATFIELD: I think, perhaps, I might justify what I said rather more than Lord Addison accepts. What I said was that it was quite true that at the time when we were considering this question we were not considering a vast programme of armaments, but rather a period of disarmament, and the situation was not the same as now. But, nevertheless, we studied the problem not from the point of view of the situation at the time, but as a matter of principle, and our decision and recommendations were given not on a matter of expediency at the moment, but on a matter of principle.
LORD ADDISON: Yes, that is true, but I am drawing attention to the fact that the critical situation of the last few months, in which these Motions were discussed in your Lordships' House, is quite different from the circumstances which accompanied the setting up and the deliberations of that Committee. It reminds me of a man who, when confronted with a difficult situation, said: "What is the use of having a mind, if you cannot change it?" That is the attitude of the Government on this important matter.
Well, having spoken in support of a Ministry of Supply on two or three separate occasions, I certainly shall not oppose it now. We welcome this conversion, and I have only just this to say, that I am doubtful whether the noble and gallant Lord will find that he can continue the limitations upon the functions of the Minister which his present proposals indicate. I think particularly, with regard to the common user of supplies, that the functions of the Minister of Supply should immediately be extended to cover a very large volume of ferrous and non-ferrous metals and other supplies, which are required by all producing Departments and by all the major industries. Otherwise, we shall have a very needless inflation of price and, I am afraid, serious delay. It is true, I think, from what I learn, that the work before the Minister in expediting the supply programme, of the War Office particularly, is exceedingly urgent, but there are one or two quite obvious things, for example scientific instruments, which are required by all the Services. I suggest that the Services' common user should be extended to them, and it is very urgent that it should. However, these are minor matters. I rise on behalf of my noble friends to say that I am glad at last that His Majesty's Government, in this matter as in others, have come to our point of view, and that we live in hope.
6.42 p.m.
VISCOUNT SAMUEL: My Lords, I am sure your Lordships appreciated very greatly the manner in which the noble and gallant Lord has presented this Bill. His opening observation reminded me of something that was said about Lord John Russell who, it was alleged, was a man who was quite capable of undertaking any task suggested to him, even that of commanding the Channel Fleet. However

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incompetent Lord John Russell or any other statesman would have been to discharge that office, certainly the noble and gallant Admiral has shown as great efficiency at the Ministerial box as on the Admiral's bridge. His lucid, comprehensive, and compact exposition shows that he has Parliamentary qualities which will be a strength to the Government, and also a service to the whole House.
My mind necessarily goes back to previous discussions, to which my noble friend Lord Addison has referred. More than a year ago, on May 23, 1938, my noble friend Lord Mottistone moved a Motion for the establishment of a Ministry of Supply. I gave him such support as I could, the noble Lords, Lord Addison, Lord Trenchard and others supported him, but the noble Viscount, Lord Stone-haven, opposed, and on behalf of the Government the noble Marquess, Lord Zetland, who is now on the Government Bench, gave to the Motion an emphatic negative. That was the famous occasion on which he used the phrase that ought to become perhaps classic, that the mind of the Government was to introduce such a measure "sooner or later, perhaps." Then six months later, on November 1, we had a two days' debate on national defence, initiated by the noble Lord, Lord Strabolgi, when again this matter was given prominence and the establishment of a Ministry of Supply was supported once more by the noble Viscount, Lord Trenchard, and also out of the fullness of their experience by the noble Viscount, Lord Swinton, and the noble Lord, Lord Milne. Once more the Government rejected the suggestion, and the Leader of the House, the noble Earl, Lord Stanhope, gave an accumulation of reasons why the establishment of a Ministry of Supply was open to grave and irrefutable objections: it would involve delay rather than accelerating supply, it would introduce confusion rather than greater simplicity, it would be useless unless it included compulsory powers, whereas compulsory powers could only properly be exercised in time of war. However now, under the pressure of public opinion, the Government are taking a different view, and the least convincing part of the noble and gallant Lord's speech was, I think, that in which he gave reasons for this change of attitude.
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As long ago as the time of the grave crisis last September the noble Earl, Lord Baldwin, speaking in this House said that he would "mobilise our national industry tomorrow." Some of us wondered why our national industry had not been mobilised in the "yesterday," rather than waiting for the "to-morrow." But the task now is one of mobilising our national industry for purposes of defence, and that is far too vast an undertaking to be left to the Supply Departments of the Service Ministries. They cannot cope, and are not designed to cope, with that task. It needs close and constant contact with the industrial leaders throughout the country, with the trade union leaders and the Labour movement in general, and it undoubtedly requires a special Department and a special Minister devoted to the one object. As soon as it became apparent that we had to have an immense programme of national defence it should at the same time have been obvious that the creation of a Ministry such as this was essential. The conditions already, in 1936, were wholly different from what they were in 1923 when the Committee sat to which the noble and gallant Lord referred.
The scope of this Bill is very narrow. It has the title of a Ministry of Supply Bill, and it may be it takes powers to extend the functions of the Minister more widely than at first, but in fact it is at the outset little more than a Ministry of Army Supply Bill. No doubt the Army requirements are the most urgent, on account of the great expansion of those forces during the last few months, but the Air Force also is now on an immense scale, and for my own part I cannot doubt but that great advantage would be gained if some parts, at any rate, of the requirements of that Ministry were to be included within the functions of the Minister, if not immediately, at all events after a not very long interval. The Bill, however, it must be said, does give elasticity. It allows for growth, and no doubt the task devolving upon the Minister is a very delicate one at the outset in order to fit in the new system with that which already prevails. There are competitive claims from the various Departments—and they are necessarily competitive—and a great deal of tact and discretion as well as drive will be required from the head of the Department. The success of the Ministry must necessarily

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depend very largely indeed upon the personality of the Minister.
This is little more than a legislative framework—and I do not complain of that; it is a mistake for the Legislature to try to deal with these matters in too great detail itself—a framework which will be filled in by administrative action. And for my own part I feel, as I have said, very little doubt but that the powers of transfer should be exercised in the near future, and the functions of the Minister enlarged. One of the reasons why it is desirable to concentrate in a single hand a very great deal of this business is the financial reason. The competition between Departments must have, directly or indirectly, some effect upon the prices that have to be paid. The Departments may not exercise control in an equal degree upon the prices that they are charged, and contractors are naturally tempted to give priority, unless there is some instruction from above as to priority, to Departments where the financial conditions may be easier. This financial aspect has, I venture to say, been too little considered, and the noble Lord who has spoken has said nothing with regard to the control over expenditure that the Minister of Supply ought to exercise. We have never adopted a policy of "Peace at any price," but we have adopted a policy of "Arms at any price." Whenever there is war or danger of war, Treasury control is necessarily relaxed, the tap is turned on, the golden stream pours out, and frequently a great deal of it runs to waste.
In the latter years of the Great War the House of Commons appointed a Select Committee on National Expenditure, of which I had the honour to be Chairman. We sat during two sessions of Parliament. We were a numerous body, and we divided ourselves into a number of sub-committees which examined the expenditure at home, and at the Front to some extent, of all the various Departments concerned in the War. We found that the waste in many directions was immense, and such of our recommendations as were put into immediate operation did, I believe, save the taxpayer many millions of pounds. Nevertheless every member of that Committee was convinced of the fact that there had been, and still was, a vast deal of avoidable waste through lack of
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financial control. I had to preside not only over the whole Committee but also over the sub-committee dealing with the War Office, which then included the Air Force. The Air Force at that time seemed to have even less adequate control than the other Departments. It was a new organisation with no financial traditions, and the waste there in many directions was undoubtedly colossal. Whether the Air Ministry at the present time is still inclined to extravagance I do not know. I have heard rumours, but have no personal knowledge and so cannot speak. When men's lives and safety are directly concerned, the Department of course must have the best and must not be stinted. Nevertheless there can be adequate regard for life and safety and at the same time a proper control over expenditure.
I would draw attention to the statement that was made when, with the consent of all Parties, the nation embarked on its great new policy of defence. In March, 1936, a Government White Paper was issued in which the following sentence appeared:
"His Majesty's Government are determined that the needs of the nation shall not serve to pile up extravagant profits for those who are called upon to meet them."
Ministerial declarations were made at the same time to a similar effect. That was three years ago. I have been provided with a statement showing some of the dividends which were, in fact, paid last year compared with the dividends paid immediately before that statement was made.
I shall trouble the House with a very few of these figures because they are of very great importance and have a direct bearing upon the Bill now under discusssion. Of steel and general armament makers, Thos. Firth and John Brown earned a dividend in 1935 of no less than 21 per cent. free of tax. In 1938 that was increased to 30 per cent. free of tax. They actually paid in 1935 12½ per cent. free of tax, and in 1938 17½ per cent. Hadfields earned in 1935 a dividend of 14 per cent., and last year 34 per cent. In 1935 they paid a dividend of 7½ per cent., which was increased last year to 22½ per cent. Vickers' dividend was increased from 8 per cent. to 10 per cent. in the same period, and meanwhile the capital had been increased by 50 per cent. Among shipbuilders, Cammell Laird earned a dividend in 1935

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of 3·2 per cent. and in 1938 of 19·7 per cent. In the one year they paid 3·3 per cent., and in the other 10 per cent., and the capital was also doubled.
LORD MANCROFT: Can the noble Viscount say whether these increased profits were made out of armaments or whether a large amount of these increased profits were made out of purely civil work, such as mercantile shipbuilding, as in the case of John Brown's?
VISCOUNT SAMUEL: I had not overlooked that point, and was going to state that of course it is impossible to say whether the whole of these profits were made out of armaments; but these are the leading armament makers.
LORD MANCROFT: The noble Viscount will mislead the public if these figures go forth without specific explanation that there is no implication that these great profits have been made at the expense of the country's misery.
VISCOUNT SAMUEL: I did not say anything about the country's misery, and I was going to say, if my noble friend had not interrupted me—I had it in my notes—that of course one does not know how far these profits were due to armaments and how far to other business; but there is no reason to think other business should have made these immense profits and should have led to the very large increase in the capital of many of these firms. There is also the case of Yarrow's. They show an increase in their dividend from 10 per cent. in 1935 to 20 per cent. last year. No one would doubt that Yarrow's are mainly an armament-making firm. Fairey Aviation earned a dividend in 1935 of 4 per cent., which increased in 1938 to 25·7 per cent. tax free, and the dividend paid increased from 5 per cent. to 15 per cent. tax tree on a capital which had been doubled. I could give other instances if necessary, but I have said enough to show—in fact it is quite notorious—that the armament firms of this country have mace very large profits during the last three years, and their shareholders have benefited accordingly. The fact is admitted. The Government are now introducing a new system of taxation, and my noble friend opposite would not suggest that the Government would go to the trouble of introducing a new Armaments Profit Duty if they did not think there had been excess profits made.
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Indeed they have frankly stated that the measures they had taken have not proved adequate, and that further measures of a fiscal character have had to be taken. The Armaments Profit Duty, however, leaves a very large part of these profits to the firms concerned, and only applies to contractors who do armament business to the value of £200,000 or more.
I mention these facts in order to urge that this new Ministry should make it one of its chief purposes to ensure an adequate control over the profits made from Government contracts. It is not enough to have an Armaments Profit Duty, for the reason I have stated that it does not apply over the whole field and only deals with a part of the profits. There should be a more adequate control in the terms of the declaration made three years ago that:
"His Majesty's Government are determined that the needs of the nation shall not serve to pile up extravagant profits for those who are called upon to meet them."
I trust, therefore, that this Department will have a strong accounting and control branch, that although of course speed should not be sacrificed to financial considerations, it will recognise that financial waste is always a sign of inefficiency, and that the motto of the new Ministry should be "Speed without wastefulness."
7 p.m.
VISCOUNT SWINTON: My Lords, I should like to join with noble Lords who have spoken in congratulating my noble friend on the charm and clarity of his speech, and equally upon the skill with which he piloted this Bill at this stage through the snags and shoals which, to the simple mind, would hardly appear to exist at all, so smooth was its passage. I also want to join, as one who has steadily in this House advocated the creation of a Ministry of Supply, my congratulations to those which have been given to the Government on their conversion, or partial conversion. Perhaps, rather than partial conversion, I should say that part of the Government appear to have been converted but part are still living in sin, because it is only part of the work of supply which is to be transferred to a Ministry of Supply, while a very large part, or, at all events, quite as much, remains outside the net as is to be transferred within it. I should hardly like to think that the "agreement to differ" which brought such comfort to the mind

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of my noble friend who has just sat down was finding its way back into the Cabinet. I hope and trust that is not so.
I make no apology for speaking now. This is the only opportunity, when this Bill comes up for Second Reading, of asking your Lordships to devote some little further time to the consideration of the principles involved. It is the most important Bill, industrially and strategically, that we have been called upon to consider, and it is important that we should consider it with the thoroughness and the gravity that it deserves. The issues involved are very familiar to your Lordships. We have debated them in this House. We have had the experience of men like Lord Addison, who was himself a Minister of Munitions in the War, and of impartial and very authoritative men like Lord Trenchard and Lord Milne. The argument of all those who, like them and myself, have advocated a Ministry of Supply, is essentially this, that such a Ministry would be absolutely necessary in war and, that being so, the Ministry ought to be created now. It ought to be created now because the Ministry as it should function in war must be ready to function and its very readiness would, I believe, be a very material deterrent to war itself. What should that organisation be? It is, as I see it, essential that it should be that organisation which is required in time of war. You need not exercise all the compulsory powers. All the arguments that the Leader of the House addressed to us on a previous occasion as to the undesirability of setting up complete compulsory control of the whole of industry is utterly irrelevant, if I may say so with respect, to the question of whether or not you should have a complete and effective Ministry of Supply in being. You need exercise none of the compulsory powers unless you find that they are necessary; but the organisation must be there; it must be established and equipped and ready to function as you would require it in war.
What, then, should that organisation be? What should be the responsibility of this Minister of Supply and over what should he operate? I submit that he should be in charge of the full field of supply for the three Services which he will have to cover in time of war, and
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that he should have that executive responsibility here and now. I do not want to discuss now how far that should go in Admiralty matters. A great deal may be said in support of pure shipbuilding being kept outside. I do not think it would be proper to digress into that at this moment, but I am quite sure of this—and I speak from experience almost as long as my noble friend, with whom I have had many happy years of working—that there is a mass of Admiralty work which calls for the same material, calls for the same labour, often skilled labour, and is placed actually in the very same factories as work for the Army and the Air Force. Over that wide field of what really is common service I have no doubt at all that the Minister of Supply should function.
I dwell on this because my noble friend in his speech spoke of these very questions of principle. What has been the Government's answer when pressed on this, and pressed, believe me, with no feeling of hostility, because there is only one thing we all, I believe, want to do, and that is to get the best organisation for this country in these difficult times? I think it was my noble friend Lord Zetland who rebuked me on a previous occasion, and said how wrong it would be to establish a Ministry of Supply because it would interfere with ordinary business. Well, I never have understood why one single Ministry should interfere with ordinary business more than three separate Ministries or sections of Ministries operating independently. But we all agree to-day that business has got to be interfered with, and that the first call on business is for the munitions required by this country. That argument, I take it, is no longer advanced.
Then came the argument, on which my noble friend based himself in large measure to-day, about the danger of dislocation. There may be two opinions about that. Personally I believe that argument to be greatly overrated because what is proposed by all of us who advocate a Ministry of Supply is not the creation of some entirely new Ministry, or rather of new personnel and sections of Departments. We are not advocating the finding of something entirely new, and transferring from one set of men to another set of new men the functions of supply. That is not the proposal at all.

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It is not the way it is being carried out here. What is happening even in this truncated Bill is that the whole Supply Department of the War Office is transferred to the Minister of Supply, precisely in the same way as part of the Air Ministry or part of the Admiralty would be transferred. It is a merger of the Supply Departments under one executive head. It has been said they are very competent people who are doing this work. No one knows that better than I do. I have had the privilege of working with them and seeing them in all their Services, and I know they are competent. I wish to pay my tribute to them; but they will not be any less competent when working in a merged Department, as they would have to do in war, than they are to-day in their separate spheres. The final argument, and the argument which was used most forcefully before and again was enforced very much by my noble friend the Minister for Defence to-day, was that it is wrong in principle to separate the Supply Departments of a Service Ministry from what he called the user. There is very much to be said in favour of that. I admit that on the Esher Committee, Lord Esher and Lord Haldane, I think, took a different view.
If I may go back for a moment there is a point which I wanted to make before about dislocation. I believe, as I say, that the danger of dislocation is overrated. To-day—certainly I can speak for the Air—you have Vast orders which have been placed, which will occupy firms for a long time, taking the whole output of factories, and behind them further orders which the manufacturers know of, so that they can jig and tool for them. The amount of dislocation is, as I say, greatly overrated. But whatever measure of dislocation there may be, is it not important that it should be faced now in time of peace rather than in time of war? I should have thought that was really unanswerable.
Now I come back, if I may, to the argument so much stressed by the Minister for the Co-ordination of Defence, the importance of not separating the user from the supplier. I always felt that that was an argument that had to be met, and in a recent debate I propounded the solution that the members for supply on the different Councils—the Admiralty, the Air and the Army Councils—who become
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the principal officers of a Ministry of Supply, should remain members of their respective Service Councils, and the noble Viscount, Lord Trenchard, and the noble Lord, Lord Milne, both said in this House that they thought that was a complete answer to that problem. Incidentally, I would like to ask my noble friend whether the chief officer of the new Ministry of Supply—who I suppose will be the very distinguished sailor and public servant who has been Director General of Munitions Production, I think that is his title, in the War Office—will continue to sit as a member of the Army Council. I most sincerely hope that the answer is in the affirmative. But what I think is in the minds of most of us in regard to that argument about not divorcing the user and the supplier, is that you will have to make this an effective Ministry in war, and, that being so, you should do it now.
Observe, my Lords, that this Bill departs entirely from the principle upon which the noble Lord has laid such stress. The Admiralty and the Air Ministry are still to adhere to the principle that the user and the supplier are to remain one and the same, but in the War Office that principle is no longer to apply. Yet surely to-day in the War Office, under the new expansion scheme, the problems of strategy and the problems of organisation must be—at least so I should have thought—as closely interlinked with the problems of supply as they are in the Admiralty and the Air Ministry, who are in the full vigour of the execution of their great programmes. It is only in the War Office that this principle is transgressed, but most effectively transgressed. What happens? What happens is this, that you transgress this principle of not divorcing the user and the supplier without making a really effective Ministry of Supply. I know that powers are taken under which it can be made a real and effective Ministry, but what I think we want to know is what is the Government's intention. How far do they intend to go, and when do they intend to carry out this extension?
I am bound to say I myself am not at all reassured by the statement made by the Minister-designate of Supply in another place. It really was a most extraordinary speech. He said: "I am taking over the War Office supply because the Secretary of State wishes me to do so.

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He wishes to use me as an agent, or wishes"—I will not say to pass the buck, that would be improper—"to transfer these responsibilities. But you really would not suggest," he went on, "that I should go and take over from the Air Ministry or the Admiralty, unless the Ministers there want to make me their agent or would like to discard their functions also." With great respect, you cannot approach this great principle as if the Minister was setting himself up as an agent to be employed or not to be employed by commercial firms, if they thought fit, in this market and not in that market. It is a tremendous question of principle. It is a question of what is the right principle, and it ought not to be left to the idiosyncrasy of Ministers to decide. It is a question on which the Government must make a decision on the merits of the case, and it must not depend on the wishes for the time being of this or that Minister. As the noble Lord, Lord Addison, pointed out, this Minister is not going to function as a Minister of Supply at all under the present arrangement. He simply is the Director-General of Army Supplies taken out of the War Office and put apart.
It is said that he is to take over the common services, but on that the noble Lord, Lord Chatfield, was, I think, very frank, and he has given the information that I wanted and that I think we all wanted. The common services which this Minister is to take over under the present plan are merely those services which up to this moment the War Office has been conducting as agent either to the Air Ministry or the Admiralty—nothing else. Compare that with the field which was covered by the Ministry of Munitions in the War. By common services in a Ministry of Supply I understand—and I think all who feel as I do understand—not just those things which the War Office does to-day as an agent, but the provision of articles which draw on a common stock of material, or which require similar industrial facilities. That is really what we mean by common services as they would be conducted by a Ministry of Supply in war.
I do not want to labour this, but it is a vital matter. Let me therefore put certain examples to my noble friend. All of these cases—I could multiply them indefinitely—are cases where the supply of the article draws on the
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same material, the same labour and often in actually the same factories. Take guns. As I understand it, and I have read the Minister's speech in another place, he will be responsible for guns of a type which the War Office use. If it so happens that the Admiralty or the Air Ministry are using a machine gun or a Bofors gun which is of the kind the War Office also use, then he will place the order for it; but if, as they do in fact to a great extent, they use different machine guns and different other kinds of guns, although it is the same labour, the same material and very often the same factories, he will only place an order, as I understand it, for those guns of the War Office type.
Take shells. He will order shells for the Army, but he will not order shells for the Navy. He will order shell cases, but he will not order bomb cases for the Air Ministry, and he will not order mines or depth charges, because they are not Army requirements. If fuses are to go into a shell used by the War Office, they will be the responsibility of the Minister of Supply; if the fuses are required for a weapon that is not a War Office type, then they will not come within the purview of the Minister of Supply. Take scientific instruments: my noble friend Lord Addison referred to them. It is always very difficult to get the highly-skilled men and also the special material which are necessary, and which can only be found in a few firms, so that the same firm has to take orders from the Admiralty, the War Office and the Air Ministry. If it is a War Office scientific instrument, the Minister is responsible; if it is a scientific instrument for the Admiralty or the Air Ministry—the Minister is not responsible. The same with wireless: if it is a wireless used by the Army, the Minister orders it: if it is a wireless used by the Air Ministry or the Navy, the Minister does not order it, although I suppose the orders in many cases are going into the same shops.
Take explosives: I think there the War Office has been the agent for the Air Ministry and not for the Navy, and therefore the Minister will place orders for explosives for the War Office and the Air Force, but will not place orders or have any responsibility for explosives for the Admiralty. I do not know what the responsibility is for uniforms and clothing. Presumably the Minister orders the Army

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trousers but does not order the Air Force trousers, and he would certainly not be allowed to order the trousers for the Navy—at least, I presume so, but perhaps I shall be corrected if I am wrong. Take also motor transport, which all the Services require in a greater or lesser degree. It may be that if the Navy and the Air Force bought exactly the same kind of motor car which is bought by the Army, then the Minister would place the order. I am not even sure in that case, but certainly if they required different kinds of transport from that which the Army required, then the Minister would supply the Army but he would not supply the Navy or the Air Force.
I could go on indefinitely with a list like this, but is it not only common sense that when vast demands are made on industry already, and demands far greater even than this will be made if we come into war, it will be absolutely necessary to vest in one purchasing authority all these common purchases? I would beg of the Government to consider whether it is not wise to vest that purchasing authority in the new Minister to-day.
Take research, to which my noble friend referred. The research for pure Army purposes will vest in this Ministry; but how closely interlocked all that research is to-day ! Those of us who have been concerned with these things know that so well. I agree with my noble friend that we do work closely, we have worked closely together, but I am sure it would be much better if, where so much of this is in common, the responsibility of supply and the responsibility of research were in this Minister.
Then I come to the question of priorities, and I really must deal with that. One of the great advantages of a Ministry of Supply is that the Minister of Supply is the authority—subject to the final Cabinet authority in case of dispute—who has the responsibility to determine priorities. He has no such power at all under this Bill. He has not. I will show your Lordships that he has not any real power to determine priorities. He cannot have. He has a power to say that a particular factory shall deliver a Government order before it delivers a private order, but that is not what I mean by priority. He has not the power under this Bill to say: "You shall deliver that order for the War
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Office in priority to the Air Ministry order or the Admiralty order." That is all going to be dealt with through a system of priority committees. I do not believe in committees for getting executive action. The Minister cannot have that power to-day, because he is merely a War Office agent, and of course you cannot give a mere War Office agent, sitting in a separate building, power to decide on priorities between the War Office and the Air Ministry, or between the War Office and the Admiralty. But if the Minister, as he would have in a Ministry of Supply, has the executive responsibility for delivering the goods, the common goods, to each of the three Services, then of course, because it is his executive responsibility, because he is the man you shoot at if there are not guns for the Navy or guns for the Air Force as well as guns for the Army, there devolves upon him the duty of assigning the priorities—subject always, of course, to the supreme authority of the Cabinet.
This Bill does not set up a war organisation; it is not pretended that it does. I would beg my noble friend to tell us what is the organisation which the Government believe will be necessary in time of war and which they intend to use in time of war, if war should come. They must have taken their decision on that; they must know how much in their opinion ought to be vested in this Minister in time of war. I cannot believe that it is only these functions which are assigned to the Minister under the White Paper, which has been quoted—of course it is not. If these were all the functions which the war Minister of Supply is to exercise, the whole of the rest of the powers in the Bill to extend would be meaningless. I would beg the Government to use those powers in the Bill, when they get it, now, to create and operate a Ministry of Supply covering the full field which they mean that Ministry to cover in war. I believe that is a necessary preparation for war, and I believe that in creating that effective Ministry of Supply with, the full powers and the full field it would have to exercise in war, we are not only making our preparations complete but we are perhaps establishing a very effective deterrent to war and an insurance of peace.
7.29 p.m.
LORD GAINFORD: My Lords, I rise only for one moment to deal with a point on behalf of industry. Industry is very

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much perturbed at certain permanent powers which are included in this Bill. In Clause 2 powers are given to the Minister to buy, manufacture or otherwise produce any articles required for the public service. When we turn to Clause 18 we find that the expression "articles required for the public service" means:
"(b) articles which, in the opinion of the Minister, would be essential for the needs of the community in the event of war; and
(c) anything which in the opinion of the Minister is or is likely to be necessary for or in connection with the production of any such article as aforesaid."
What industry is apprehensive about is not that the powers proposed to be given in this Bill shall operate for a limited period, but that those powers should be in the permanent part of the Bill.
I would point out that just as in Egyptian history there rose up a new King over Egypt, who knew not Joseph, so in the event of a permanent provision of this kind being placed on the Statute Book, it would be possible for a Socialist Government to nationalise nearly every industry in this country, and it would have unlimited powers if it were deemed advisable to exercise those powers. Industry is quite prepared to do its utmost for the Government in the present emergency; it is willing to help in every possible direction; but it does ask that the Government should put some limitation upon the power of manufacturing and production given to the Minister in perpetuity. While I am putting down an Amendment to deal with the subject, I do feel that it is a matter of sufficient importance for the Government themselves to put down an Amendment, which would at any rate limit that power of manufacturing and producing against private enterprise, and not support what might eventually become a Socialist policy.
I recognise to the full that the Minister and present Government, as the Minister of Supply said in another place, have no intention whatever of superseding the normal processes of trade. He said he was not going to start enormous State manufactories. And again to-day the noble and gallant Lord stated clearly that it was not the intention of the Government to put industry out of gear. While the White Paper shows that it is their intention to be quite reasonable in regard to industry, industry is apprehensive upon
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this particular point, and I press the noble and gallant Lord to introduce some Amendment on behalf of the. Government which will meet that apprehension, which in my opinion is a reasonable one, on the part of industry.
7.33 p.m.
LORD BARNBY: My Lords, my first need is to draw your attention to the clock, and ask you to bear in mind not what it says at this moment, but what it said at the hour at which consideration of this Bill was begun. I think you will understand then the difficulty in which I find myself in addressing the House at this moment. It seems to me regrettable that with full knowledge of the pressure of Parliamentary business, it should not have been possible to arrange the order of business somewhat differently. Surely the hour at which consideration of this important Bill was begun suggests that there might well have been some revision of the Order Paper. I know it is presumptuous for a Back Bencher to suggest such a thing, but in the interest of those who have to speak one must express regret that some such rearrangement was not made.
I cannot help reminding your Lordships of the vast importance of this measure. It is a Bill which proposes revolutionary changes in the practice of this country, perhaps not unnecessarily, and that the discussion of it should be limited, under the constitutional arrangements that we have in this country, to such a parsimonious and meagre amount of time as has been allotted to it by those in control of the House, is much to be regretted. Further, I would remind your Lordships of the wealth of talent and experience possessed by members of this House, and that they should be condemned to discuss a matter of this character in such a limited space of time will, I am sure, be a matter of surprise to the country. I feel sympathy with the noble and gallant Lord in charge of the Bill in the desire that he should not lose his dinner, but we have heard Lord Swinton, speaking from his great experience, and we have also heard a distinguished past President of the Board of Trade, and the noble and gallant Lord is going to be denied, except at the expense of his dinner, the opportunity of dealing with the most momentous arguments which have been put forward.

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Naturally I want to associate myself strongly with a great deal of what Lord Swinton said. As to general agreement with the Bill there can be little doubt. The fact that it should have been introduced by the noble and gallant Lord, coupled with the conviction of his vast experience from a technical as well as administrative point of view, gives encouragement to anyone that the manner in which it has been presented and prepared is necessary. I listened with attention to the three debates which took place in this House in the early part of this year, to which reference has already been made, and while refraining from speaking myself, I listened with surprise because in those three debates a great part of the attention was given to the question whether or not there should be a Ministry of Supply, and little time was given to the powers to be conferred. As Lord Swinton has said, the essential part is the priorities, not only the priorities of production, but the priorities of the different Services concerned.
My ground for asking your indulgence at this hour is that having been in charge of one of the major controls in the last War, and having preceded that by being loaned to the Army Contracts Department, and subsequently being transferred to the Ministry of Munitions, I have had considerable opportunity of observing the workings of a Ministry of Supply. At this hour, one would need courage to deal with points in detail, but this is the only occasion one has for expressing one's views and attempting to be helpful. I venture to think, too, that the noble Lord in charge of the Bill is being robbed of an advantage which he himself would have welcomed, of hearing more than twenty minutes of constructive criticism from Lord Swinton, with his great experience, to which contribution might also equally have been made by other members of the House.
The point really with regard to the Bill is, as has been expressed by Lord Gain-ford: Shall the powers be permanent or temporary? Shall those great powers that have been offered to the Ministry be included in Part I or in Part II? I wish to associate myself emphatically with the suggestion of the noble Lord, Lord Gain-ford. He, like myself, is able to be in close contact with what we recognise in this country as the mouthpiece of organised industry, the Federation of British
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Industries, and the need for having industry effectively organised is daily becoming clearer. The existence of the Federation of British Industries is of great assistance to all the Government Departments, and particularly in a case like this, in which I am sure that the noble and gallant Lord in charge of the Bill requires the fullest collaboration of industry.
He was good enough in the course of his remarks to reassure the House on the question of the panel of arbitrators and the manner in which equity and justice for industrialists is going to be assured, and we welcome that statement. On Clause 12 there is the question of the compensation which is to be allowed to industrialists for the expenditure which they are likely to be called upon to make, and while it is provided that 27½ per cent. may be recovered in the taxable year there is some doubt as to the manner in which the remaining 72½ per cent. is to be dealt with. It is suggested that a proportionate amount shall be regarded as permissible to be added to the price of the contracts. But there appears to have been in another place no assurance that the amount to be received under this head would actually escape taxation under the new Armaments Profits Duty. That is a very important matter for industry as a whole, and I hope it will be possible to clarify that point.
The question of priorities, to which the noble Viscount, Lord Swinton, referred, has another angle to which I have given more particular thought, and that is the priority in production of any industrial machinery. With orthodoxy disproved in so many matters, I feel that it may well be that these powers must be co-ordinated very closely with the question of priority for export. I raise this point because in these days it is becoming daily more clear that a "white war" or the economic argument—whichever term you like to employ—is an integral factor of the situation and, as the noble Viscount, Lord Samuel, explained, in these days the tap is turned on and the golden stream flows out. That is what we are proposing to do to-day, and it is inescapable; but if we are going to go on spending on this vast scale it is equally necessary that we should provide the means with which to pay, and that must be by means of our export trade. We are not going to live on merely making armaments, and the provision of ex-

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change change and the protection of sterling are matters essential to the welfare of the country. No reference has been made to them at all in the introduction of this Bill.
I know that it is heresy to suggest such a linking of powers. One shrinks from the idea that these great powers could be permanent, but if after all the Government have decided, and continue in their determination, that they shall be permanent, then I urge that the question of the priorities of the export trade be dealt with and given the proper consideration. It may well be that in order to protect sterling we must give some stimulus to export trade by some rebate on taxation. It may come from the control of imports and under those conditions one immediately thinks of things like legislation insisting on a larger amount of offal in wheat, machinery for insisting on the larger use of tobacco from South-Eastern Europe, and the conservation of oil for internal road transportation. All of these would involve the control of imports, which again must not be in conflict with the Ottawa Agreements. But under Clause 12 there is a call for the due functioning of industry, and that involves efficiency for domestic production and for export.
That brings us to the desirable action which has been urged by the President of the Board of Trade, and persistently and energetically by the Minister for Overseas Trade—namely, the assistance that is necessary to the countries in Europe which we have guaranteed. The first thing is to strengthen their economic life, so that they may help themselves. That involves priorities for the export of whatever may be necessary for that purpose, including not only armaments but matters for civilian development, so that they may help themselves in every way possible. Then we see that British productive capacity is limited without control, and that brings up the necessity, which is well urged, for the powers which are being provided by the Bill. In referring to the guaranteed countries and the powers which can be given under the Bill, and the relationship of civilian necessity and military necessity in production, I urge again that this should be outside the provisions of the Export Guarantees Act. It may well be said that there is no connection between the two, but I
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urge that there is, because it is clear that this economic armament is just as important as military armament.
At this late hour I shall, like other speakers, be denied the opportunity of saying much that I would have liked to say, but one assumes that if the intentions of the Government are as rigorously applied in the passage of this Bill through this House as they were yesterday in regard to the Civil Defence Bill, there is little likelihood of large concessions being obtained. All the same, I conclude by urging that the noble and gallant Lord in charge of the Bill may give consideration to the points which have been made.
7.49 p.m.
LORD CHATFIELD: My Lords, we have had a most interesting, but all too short, discussion, and I should like, in the first place, to express my thanks to many noble Lords for the very kind remarks they have made about the manner in which I introduced the Bill, which I appreciate very much. I also wish to thank your Lordships for the reception you have given in general to the Bill, and for the spirit of constructive criticism which has been so evident in all the speeches made this afternoon. I certainly sympathise with the noble Lord who has just sat down on account of the late hour at which we had to take this Bill. Unfortunately, the debate on the very popular—or was it unpopular?—measure that was being debated before was unduly prolonged. I had been waiting for some hours to come to this Box, but was not able to do so, but I am sure we shall be able on the other stages of the Bill to discuss a lot of the matters for which there has not been time to-night.
The criticisms which have been made of the Government's proposals have taken a course which probably is a natural one, because it is evident that this question of setting up a Ministry of Supply and of what powers should be given to it is a very controversial one. It is one on which we all may have different views and hold them perfectly honestly, and each of us with considerable common sense. There are undoubtedly, as I have explained, both advantages and disadvantages in the whole plan. There are pros and cons, and what His Majesty's Government had to do was to weigh up these pros and cons

905
and make a decision. The noble Viscount, Lord Swinton, who so kindly mentioned me in his speech, was a member of His Majesty's Government not so very long ago, and I have no doubt, though I do not remember, that he then pressed the views he has so eloquently addressed to the House this afternoon to the effect that the Government were wrong in those days in not setting up this Ministry. I know there is a great deal in every argument he has used. I know them so well. You can say "Yes" almost to all his questions, and yet you can also say "No." That is the difficulty of the problem.
The noble Viscount, Lord Samuel, raised the question of finance and expressed the anxiety he felt at there being no co-ordination of financial control, regretting also that we were going to have only what he regarded as a half-hearted measure dealing with excess profits and so on. Whether his figures with regard to the dividends of the companies he quoted are really substantiated I am not able to say, but we all know, as my noble friend Lord Mancroft pointed out, that these armament firms are also very great industrial manufacturers. The greater part of some of these businesses is not armament work at all, and for many years they have had to live, not on armament work, but on their wits in private trade. For instance, John Brown's, we remember, built a big ship called the "Queen Mary." I dare say that helped to swell dividends though I do not think we can call the "Queen Mary" munitions. Nevertheless, it is impossible to say that the noble Viscount's feelings about these matters are entirely unfounded.
They may be, but the point is that whether we look back on the past with regret or happiness, it is a fact that in this Bill the Government are taking powers which are very important and in my opinion they really should be sufficient. They are taking very great powers in Clause 7 to enable the Minister to examine thoroughly the records and the books, or cause them to be conducted in the way which is necessary in order that the Ministry may satisfy itself, first of all, before the contract is made, or in other cases during the process of the contract being carried out, that the prices which have been agreed are right and not unduly beneficial to the contractor. In addi-
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tion, as your Lordships know, there has been recently introduced in another place the Armaments Profit Duty which will, as the Chancellor of the Exchequer remarked, catch the balls which the wicketkeeper has been unable to stop. I do not think I can say more than that on the financial question except that I believe it will be less unsatisfactory than the noble Viscount, Lord Samuel, feared.
The noble Viscount also referred to the difficulty of Ministers coping with industry. He said: "How can a Minister cope with industry when Ministers have so many other things to do?" It will be remembered that when the Ministry for the Co-ordination of Defence was set up three years ago, my predecessor was given the task of helping Ministers to deal with that very problem. When I took his place four or five months ago the Chancellor of the Duchy of Lancaster had this duty specially devolved on him of dealing with supply questions and helping the supply authorities in all three Services, as well as the Ministers, in dealing with industry, with labour questions, and with problems affecting the production of munitions.
My noble friend Lord Swinton also made a very eloquent plea for the setting up now of the organisation we must have in war. He said: "If you are going to have, as you must have, a Ministry of Supply in war—presumably going to the utmost limits to which that term can be applied"—I do not know whether he would include the construction of battleships and so on—"but to whatever extent you are to have such a Ministry in war time, it should be set up now." You certainly can use arguments to that effect, but the Government, having considered the matter, have for the reasons I urged in my opening remarks come to the conclusion that to set up a full Ministry of Supply now would be a disadvantageous act. The fact that the Government have come to that conclusion will probably not satisfy the noble Viscount, but I can only say that while one views with sympathy his conviction that that would be the best thing to do, I do not think, personally, that I agree it would be the right step to take.
Is it to be taken as an absolute fact that when war starts a Ministry of Supply must immediately be set up with full powers? I do not think that follows at all. It may or may not be necessary. I

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spoke on this matter before in your Lordships' House, and pointed out that when a war starts no one can say what is going to happen. The Departments may be functioning satisfactorily, and the hypotheses on which they may expect the war to continue may be all right. The supply organisation may be going on normally. On the contrary, in the first week of the war, you may have a change of circumstances which might necessitate the whole naval programme giving way to the air programme, or the whole of the air programme giving way to the military programme—nobody can be sure. To say before a war starts that you are to set up a full Ministry of Supply, taking away from the Services a well-functioning Supply machine—I do not believe that would be a wise step at this moment when, so to speak, we are almost verging on lining up in the trenches. I think it would be too big a thing to do. It might have the most catastrophic results in delays.
I think that the step we have taken to deal with the problem is the best one that could be taken. As it happens, it is the problem of suddenly increasing the Army in a pre-war period, instead of having to do it possibly, as it was previously envisaged that it might have to be done, at a time when war was already taking place. I think it was really the safest and best step to take. The noble Viscount, Lord Swinton, also asked me whether the Director-General of Munitions Production, Vice-Admiral Sir Harold Brown, would remain a member of the Army Council. I think the answer to that is that he will not, but as a matter of fact the precise form of liaison between the Service Departments and the new Ministry are still being worked out. The Bill has not yet passed through your Lordships' House, but there is a great deal of work going on to decide exactly how these transfers are to be made. They are very complicated and difficult matters, but I do not think the Director-General will be a member of the Army Council. There will, however, be a very carefully arranged form of liaison between the Departments.
VISCOUNT SWINTON: I am sorry to intervene; I do not want to press the noble Lord to answer if he cannot do so: but, assuming that the Director-General
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will not be a member of the Army Council, will the officer who is the chief responsible officer for Supply in the Supply Ministry be a member of the Army Council, or will it merely be a paper liaison between the Department and the Army Council?
LORD CHATFIELD: No, he will not be, so far as I am aware, a member of the Army Council. If I am wrong I will inform the noble Viscount at a later stage. *But there will be an arrangement made to ensure that the object which the noble Viscount has in mind is achieved. The noble Viscount hoped that the question as to whether more powers were to be taken over by the Minister himself would not be left to the Minister's own idiosyncrasies or feelings at any one moment, and he suggested that it should be done upon a much bigger scale. I can assure the noble Viscount that is what is fully intended. Of course the decisions that will necessitate Orders in Council being brought to your Lordships' House will be decisions which are made by the Cabinet; they will be Government decisions. It will be the duty of special members of the Cabinet to watch over the progress that is being made, and to see that the great machine which is being created by this Bill is worked with full efficiency and with full effect, and is extended when that should be necessary, subject to the approval of the two Houses of Parliament.
As regards articles of common user, I think probably it is not realised that these articles will be far more extensively adopted by the Minister of Supply than is anticipated. The White Paper may perhaps give a rather misleading impression that there are going to be very few things, only such things as already exist, that the Army work for the other Services will be taken over and that then there will be a full stop and nothing more will be done. That is not at all the intention. The intention is, having set up this Ministry of Supply, to make the utmost use of it that we can, and to take every advantage that can be obtained by means of common purchases and common contracts.
I would like for a moment to refer to the question of priority which was raised
*The words "the Minister of Supply will be a member of the Army Council" have been deleted from the original report of this sentence. See Cols. 976 and 977 for Lord Chatfield's correction.
by the noble Viscount, Lord Swinton. He asked how priority was going to be settled by the Minister. He must understand that these questions of priority are not going to arise suddenly now any more than they have existed for the last three or four years. We have always had questions of priority, and one of the results of the organisation that was set up in 1927 was to create what was called a Supply Board, and that Supply Board consists of a large number of Supply Committees. I think there are about ten of them, and each of the Supply Committees consists of a number of representatives of each Service, and whenever any question of priority arises it is those Supply Committees who first recommend how the priority shall be judged and to whom the priority shall be given. Then their report goes to the Supply Board, and the Supply Board, under Sir Arthur Robinson, gives a decision. If he is unable to get agreement, it goes to the Principal Supply Officers' Committee under the Chancellor of the Duchy; so that there is already in existence a priority organisation which has been wholly effective in the past, and there is no reason that I can see why it should not be wholly effective in the future. I do not believe there will be any great difficulty between the Services when the Minister of Supply is dealing with Army supply as well as with his other duties. In the past I think the priority organisation has worked quite satisfactorily.
Then the noble Lord, Lord Gainford, was apprehensive about the fact that in the permanent part of the Bill, Part I, powers are given to interfere, as he feels,
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with industry. As he is going to move an Amendment on the matter, I do not think I need deal with it extensively at the moment. However, I think I may say that we felt it was imperative that the permanent part of a Minister's work—after all, the temporary powers may be suspended at any time, if necessary—must be such that he must have wide powers of supply; and the real safeguard is the fact that the operations of the Minister will come under review by Parliament regularly. That, I think, is the real safeguard, and a very necessary safeguard, which the noble Lord requires. As it is so late, and as I have dealt, I hope, with most of the questions that have been raised, perhaps it would be sufficient now if I left the remainder of our discussion till a later stage.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

COAST PROTECTION BILL.
Amendments reported (according to Order).

BUSINESS OF THE HOUSE.
THE SECRETARY OF STATE FOR INDIA (THE MARQUESS OF ZETLAYD): My Lords, I understand there is a considerable amount of business upon the Order Paper for Tuesday, and I propose therefore that the House should meet at three o'clock on that day.
House adjourned at eight minutes past eight o'clock.

TIVERTON CORPORATION BILL.
Reported, without amendment.
WALSALL CORPORATION BILL. COLNE VALLEY WATER BILL.
Reported, with Amendments.

MUSSELBURGH GAS ORDER, 1939.
Special Order proposed to be made on the application of the Musselburgh Gas Company:
Laid before the House (pursuant to Act) for affirmative Resolution and referred to the Special Orders Committee.

HUDDERSFIELD GAS ORDER, 1939.
Special Order proposed to be made on the application of the Mayor, aldermen and burgesses of the Borough of Huddersfield:
Laid before the House (pursuant to Act) for affirmative Resolution and referred to the Special Orders Committee.

GLASGOW GAS ORDER, 1939.
Special Order proposed to be made on the application of the Corporation of the City of Glasgow:
Laid before the House (pursuant to Act) for affirmative Resolution and referred to the Special Orders Committee.

BRIDGNORTH GAS ORDER, 1939.
Special Order proposed to be made on the application of the Mayor, aldermen and burgesses of the Borough of Bridgnorth:
Laid before the House (pursuant to Act) for affirmative Resolution and referred to the Special Orders Committee.

ASHFORD GAS ORDER, 1939.
Special Order proposed to be made on the application of the Ashford Urban District Council:
Laid before the House (pursuant to Act) for affirmative Resolution and referred to the Special Orders Committee.

MANSFIELD GAS ORDER, 1939.
Report from the Special Orders Committee, That no petition has been presented praying to be heard against the Special Order; that they have considered the modifications proposed by the Board of Trade and recommend their adoption in the House; that there is nothing further in this Order to which they think it necessary to call the attention of the House:
Read, and ordered to lie on the Table.

WHITEHAVEN GAS ORDER, 1939.
Report from the Special Orders Committee, That no petition has been presented praying to be heard against the Special Order; that they have considered a modification proposed by the Board of Trade, and recommend its adoption in the House; that there is nothing further in this Order to which they think it necessary to call the attention of the House:
Read, and ordered to lie on the Table.
MINISTRY OF HEALTH PROVISIONAL ORDER (YORK WATER) BILL.
MINISTRY OF HEALTH PROVISIONAL ORDER (NEWHAVEN AND SEAFORD WATER) BILL.
MINISTRY OF HEALTH PROVISIONAL ORDER (CORSHAM WATER) BILL.
Reported, without amendment, and re-committed to a Committee of the Whole House on Tuesday next.

ST. HELENS CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL. SOUTHEND-ON-SEA CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.
Reported, without amendment, and re-committed to a Committee of the Whole House on Thursday next.