Sitting of 1 May 1940

Preamble
The House met at a quarter before Three of the Clock, Mr. SPEAKER in the Chair.
NEW WRIT.
For the County of Lancaster (Middleton and Prestwich Division), in the room of Sir Nairne Stewart Sandeman, baronet, deceased.—[Captain Margesson.]
PRIVATE BUSINESS.

  STAFFORDSHIRE AND WORCESTERSHIRE CANAL BILL.
  Lords Amendments considered.
  The Deputy-Chairman of Ways and Means (Colonel Clifton Brown): One of these Amendments alters the qualification of members of the Committee of Management. The other Amendments are consequential.
  Lords Amendments agreed to.

  WESSEX ELECTRICITY BILL.
  Lords Amendments considered.
  The Deputy-Chairman of Ways and Means: These Amendments are of a drafting nature.
  Lords Amendments agreed to.

  COMMERCIAL GAS BILL [LORDS],
  As amended, to be considered To-morrow.
ORAL ANSWERS TO QUESTIONS.
  NORWAY.

    BRITISH CIVILIANS (NARVIK).
    Captain Alan Grahamasked the Prime Minister what information he has to give to the House in regard to the recent murder by German sailors of the British Consul at Narvik and of other British civilians there; and whether His Majesty's Government will consequently seek to impress on the German Government the stupidity of such crimes by means of the sternest possible reprisals?
    The Under-Secretary of State for Foreign Affairs (Mr. Butler): His Majesty's Government have instituted inquiries, but they have at present no reliable information enabling them either to confirm or deny the reports referred to.

    EXPEDITIONARY FORCE (PARCELS).
    Captain Stricklandasked the Prime Minister whether he will make arrangements for the duty-free importation of parcels consigned to members of His Majesty's Forces in Norway?
    Mr. Butler: This Question is under consideration.
    Mr. Markham: Can my right hon. Friend say when an announcement is likely to be made on this subject?
    Mr. Butler: As soon as possible.

    AIR ATTACKS ON CIVILIANS.
    Lieut.-Colonel Heneageasked the Prime Minister whether the official information he has received shows that the Germans have bombed and machine-gunned civilians in villages and towns in Norway where there are no military objectives?
    Mr. Butler:Official information on the German methods of warfare in Norway is as yet necessarily scanty, but I hope to be able to make a fuller statement when further reports have been received. There is no doubt, however, that the Germans are waging the war in Norway with the same ruthless disregard for the safety of civilian life as they have shown both at sea and during the campaign in Poland.
    Lieut.-Colonel Heneage:Can my right hon. Friend tell the House that the only action which the Germans understand will be taken against them?

    GERMAN PROPAGANDA.
    Mr. Levyasked the Minister of Information whether his attention has been called to the exaggeration of British naval losses off Norway by Germany; whether he is aware that these reports are widely circulated in neutral countries, especially in South-Eastern Europe; and what is being done to combat them by telling the truth of Allied and German losses?
    The Minister of Information (Sir John Reith): Yes, Sir. German claims are so exaggerated as to evoke sarcastic

    681
    comment in neutral countries. Special machinery exists in the Ministry for dealing with enemy misstatements. When these are not designed to elicit valuable information immediate corrections are issued through channels which assure wide publicity, especially in South-East Europe. A number of such statements have been issued in recent weeks.
    Mr. Levy: Is my right hon. Friend satisfied that the machinery suggested by him, which can be used and should be used to combat these reports, is being used widely enough, since a large number of people in this country do not know anything about it?

    BROADCASTING (UNCONFIRMED REPORTS).
    Mr. G. Straussasked the Minister of Information whether he has considered the effect on listeners both here and in neutral countries of the broadcast of unconfirmed reports of the Norwegian conflict by the British Broadcasting Corporation and, in particular, of inaccurate news emanating from unauthoritative Swedish sources; and what steps he is taking to counteract this effect?
    Sir J. Reith:Yes, Sir, though I should like to assure the hon. Member that it is the practice of the British Broadcasting Corporation to emphasise, where necessary, that particular reports are unconfirmed and should be treated with reserve. The effect of an inaccurate rumour can best be counteracted by the publication of an ample supply of truthful information, and this it is our constant endeavour to secure.
    Mr. Strauss:Is the Minister aware that anything which is given out by the B.B.C. has, in the minds of most listeners, both here and abroad, some official sanction; does he appreciate the very serious effect of broadcasting inaccurate, optimistic news which is afterwards proved to be false, and will he see to it that this is not done in future?
    Sir J. Reith:I think I indicated to the hon. Gentleman that the B.B.C. do, in fact, when broadcasting a report which is not confirmed, indicate quite clearly that that is so. I am sure that the B.B.C. are fully alive to the dangers to which the hon. Member refers.
    Mr. Strauss:Should not the B.B.C. go further and when any piece of particularly optimistic but unconfirmed news is about to be broadcast, first ask the Service
    682
    Departments whether the news is true or not, so that if it is untrue it shall not be broadcast at all?
    Sir J. Reith: I should like to assure hon. Members that the B.B.C. are at great pains to secure confirmation or otherwise of news before it is broadcast.
    Sir Herbert Williams: Why do the B.B.C. tell me at nine o'clock what I have read in the morning newspaper?

    OSLO HARBOUR (ENEMY SHIPPING).
    Commander King-Hallasked the First Lord of the Admiralty to what extent it has been found possible to deny the use of Oslo harbour to enemy shipping during the past fortnight?
    The Parliamentary Secretary to the Admiralty (Sir Victor Warrender): To answer my hon. and gallant Friend's Question would necessitate giving information concerning the measures we are taking to harass the enemy's communications with Oslo, and I regret that it would not be in the public interest to do this.

    PRIME MINISTER'S STATEMENT.
    Mr. Attlee(by Private Notice) asked the Prime Minister whether he can now say when it will be possible for him to make a statement on the position in Norway?
    The Prime Minister (Mr. Chamberlain): I hope to be in a position to make a statement to-morrow.

  DANISH MINISTER AND STAFF (STATUS).
  Mr. Arthur Hendersonasked the Prime Minister whether, in view of the fact that the Danish Government were compelled by force majeure to surrender to the German armed forces, His Majesty's Government will continue to recognise the diplomatic status of the Danish Minister and his staff?
  Mr. Butler: His Majesty's Government cannot maintain diplomatic relations with the Danish Government since that Government is under enemy control. Furthermore, His Majesty's own accredited representative has been expelled from Denmark. As a matter of courtesy, His Majesty's Government are continuing to accord diplomatic privileges to the Minister and his staff and are re-

  683
  taining their names on the diplomatic list. Thus, while the Danish Minister will continue to act in a semi-official capacity, it will be appreciated that in present circumstances it is not possible for His Majesty's Government to recognise him as having an official status.
  Mr. Henderson:Is it not only fair to the Danish Government to say that the British Minister has been expelled from Denmark by the Germans and not by the Danes?
  Mr. Butler: Yes, Sir; that is certainly so.

  CZECHS (STANDARD OF LIVING).
  Mr. A. Hendersonasked the Prime Minister whether he has any information of the effect on the standard of living of the Czech people following on the incorporation of their country in the German customs union?
  Mr. Butler: The answer to the hon. and gallant Member's Question is that this incorporation, which was to have been effected on 1st April, has not yet taken place. In general it may be presumed that the standard of living of the Czech people has by now been assimilated to that of the German people.
  Mr. Henderson: Does not that mean that the standard of living of the Czech people has been lowered as a result?
  Mr. Butler: That may be presumed.

  ROYAL AIR FORCE.

    LOW FLYING.
    Captain Pluggeasked the Secretary of State for Air what decision has been given in regard to the claim of occupiers of marshes at Cliffe and Cooling, Kent, submitted on 1st June, 1939, in respect of prejudice caused by low-flying aeroplanes to the breeding of lambs by flocks of sheep on the marshes in question; and what instructions have been given in general with regard to the effect of low-flying aeroplanes on stock?
    The Secretary of State for Air (Sir Samuel Hoare):I am advised that the circumstances are not such as to justify acceptance of liability by my Department for the damage alleged to have been
    684
    caused. In regard to the second part of the Question, unauthorised low flying is forbidden under standing instructions which are from time to time brought to the notice of all concerned. These instructions forbid a pilot to fly or manoeuvre his aircraft in any manner likely to cause damage to livestock.
    Captain Plugge: Have many claims of this kind been received?
    Sir S. Hoare: I do not think so, but I will look into the facts.
    Lieut.-Colonel Heneage:Is my right hon. Friend aware that aircraft frequently fly low over Lincolnshire, where there are many flocks, and that they do not mind in the least?
    Mr. Thorne: Can the Minister say whether the accident at Clacton-on-Sea this morning was due to low-flying?
    Sir S. Hoare: I am certainly not responsible for the flying of enemy machines.

    WOMEN'S AUXILIARY AIR FORCE.
    Mr. Ralph Ethertonasked the Secretary of State for Air why medical orderlies and cooks in the Women's Auxiliary Air Force, many of whom were specially recruited, are graded in the lowest grade, namely, A.C. 2; whether there is a proper establishment under which medical orderlies can obtain the rank which their training experience and responsibility warrants; and whether he will rectify the present anomalies?
    Sir S. Hoare: Members of the Women's Auxiliary Air Force are employed only as sick-quarters attendants on members of that Force who are sick in quarters and not sent to hospital. Any skilled nursing necessary in such cases would be carried out by members of Princess Mary's Royal Air Force Nursing Service and trained members of voluntary aid detachments. The majority of the personnel to which my hon. Friend refers are therefore appropriately graded as aircraftwomen 2nd class. I am aware that some members have been found since their enrolment to possess skilled qualifications and the question whether any higher mustering can be accorded them is now under consideration. In regard to cooks, there is an adequate establishment by ranks but this, as with all Women's Auxiliary Air

    685
    Force establishments, is kept under review.
    Mr. Etherton: Arising out of that reply, have medical officers in command of hospital and other units been instructed or authorised to submit lists of persons suitable for promotion to the rank equivalent to corporal or sergeant and might not this Cinderella branch of the Royal Air Force receive slightly more generous consideration?
    Sir S. Hoare:I think we are dealing very fairly with this service. If my hon. Friend has any specific case to bring to my attention, I shall be glad to have it.
    Sir Ernest Shepperson: Is it not a fact that only 5 per cent. of the A.C. 2's are permitted to become A.C. 1's in the Women's Auxiliary Air Force?
    Sir S. Hoare:I think that if my hon. Friend will look at the original answer, he will see the reason, namely, the nature of the work that is required.
    Mr. Ethertonasked the Secretary of State for Air whether he has considered the undue proportion of officers and non-commissioned officers in the Women's Auxiliary Air Force who have been given responsibilities and commands without receiving even an acting rank proportionate to their employment, and whether he will take steps to remedy this?
    Sir S. Hoare: Owing to changes in the distribution and organisation of the Women's Auxiliary Air Force since the outbreak of war, a number of officers and sub-officers have from time to time had to discharge duties appropriate to ranks higher than those they actually hold; in many cases this experience has been of value as a test of their capabilities. Revised establishments for the Force have now been drawn up which will enable higher rank to be granted where this is appropriate, and the position will be regularised as soon as possible. In some cases the most convenient way of doing this may be to grant acting rank.
    Mr. Etherton: Will my right hon. Friend bear in mind that there are officers in command of groups who still have only the lowest commissioned rank?
    Sir S. Hoare:I think there are bound to be, in the early months of the war, cases of that kind, but I will keep in mind the point that my hon. Friend has raised.

    BILLETING RATE.
    Mr. Roland Robinsonasked the Secretary of State for Air whether he is now in a position to announce his decision with regard to billeting rates for members of the Royal Air Force?
    Sir S. Hoare:Yes, Sir. It has been decided to increase the present billeting rate for meals from 2s. 3d. to 2s. 7d. a day with effect from Saturday, 4th May, and immediate steps are being taken to give effect to this decision.

    PILOTS (MEDICAL STANDARD).
    Mr. Simmondsasked the Secretary of State for Air whether he can make any statement as to the physical fitness of men who have presented themselves for service as pilots in the Royal Air Force during the last two months?
    Sir S. Hoare:The standard of physical fitness of the candidates for pilot duties remains satisfactory, and the high medical standard is not proving a limiting factor in securing the numbers of pilots required.
    Mr. Simmonds:Can my right hon. Friend assure the House that the standard which the Ministry require has not been reduced since the outbreak of war?
    Sir S. Hoare: Yes, Sir. We have been maintaining intact the present very high standard and we are still getting all the recruits we want.

  CIVIL AVIATION (HANNIBAL CLASS AIRCRAFT).
  Mr. Simmondsasked the Secretary of State for Air whether he is aware that there are substantial reasons why the Hannibal Class of air-liner should not be restored to passenger services by the British Overseas Airways Corporation; and whether he will give an assurance that such restoration will not take place?
  Sir S. Hoare: Apart from the fact that the Hannibal Class is obsolescent in type, I am not aware of any substantial reasons why aircraft of this class should not be utilised under present circumstances on passenger services. Certificates of air-worthiness are current for the three air-craft of this class which are still available for passenger services, and tests recently carried out by and on behalf of the British

  687
  Overseas Airways Corporation disclosed no sign of fatigue in the materials. It has, however, been decided to divert these three aircraft to other uses not involving the carriage of passengers, and arrangements have been made to serve the route on which they were formerly employed by flying boats until such time as land planes of more recent design can be made available.
  Mr. Simmonds: In view of the great importance of that decision, can my right hon. Friend give an assurance that the decision will not be modified without his personal sanction?
  Sir S. Hoare: Yes, Sir. I will give that undertaking.

  ELECTRICITY CHARGES (LONDON).
  14. Major Sir Jocelyn Lucasasked the Minister of Transport whether, in view of the fact that the electricity charges in London are now out of all proportion to the general rise in the cost of living, which it is the policy of the Government to control and as these increased charges are becoming prohibitive, he will take strong action in the matter and, if necessary, guarantee the companies against loss if the price charges are controlled and reasonable?
  The Minister of Transport (Captain Wallace): As I stated in reply to my hon. Friend the Member for North Kensington (Mr. Duncan) on 7th February, I should not hesitate to have recourse to my powers under the Defence Regulations to ensure that an unjustified burden is not placed upon consumers if it should be shown to my satisfaction in any individual case that prices have been raised to an undue extent, even within the limits of authorised maximum prices. My hon. and gallant Friend will appreciate that any proposal to guarantee the companies against loss would raise questions of policy affecting many other interests, and could not be the subject of separate action directed to electricity charges alone.
  Sir J. Lucas:Is my right hon. and gallant Friend aware that I have here a bunch of cases in which the costs have been raised by from 200 to 800 per cent.,
  688
  and that many people have had to give up their homes in consequence?
  Captain Wallace:I shall be very pleased, as I have said, to look into any individual cases which hon. Members in any quarter of the House bring to my notice, but I think that my hon. and gallant Friend will recognise that what is envisaged in his Question is a policy of subsidies to the consumers of electricity and that this at the present moment is not practicable.
  Sir J. Lucas: I beg to give notice that I will raise this matter on the Motion for the Adjournment.

  TRANSPORT (ROAD SCHEMES).
  Sir Cooper Rawsonasked the Minister of Transport whether he will give particulars, including estimated cost, of schemes for the construction of by passes which have not yet been started or have been abandoned because of the war; and whether he has consulted the military authorities as to the advisability of proceeding with some of these schemes?
  Captain Wallace: The answer to the first part of the Question is a long one, involving a considerable number of figures, and I will, with permission, circulate it in the Official Report. As regards the second part of the Question, I can assure my hon. Friend that the closest touch is maintained with the military authorities in order to ensure that schemes necessary to meet war requirements are put in hand without delay.
  Sir C. Rawson:Is my right hon. and gallant Friend aware that there is a great deal of unemployment in the hard-stone industry throughout the country; and can he not facilitate these schemes and see that they are proceeded with as early as possible?
  Captain Wallace: That, I think, is an entirely different question.
  Captain Strickland: Will the Minister bear in mind always the high strategic value of good roads?
  Following is the answer to the first part of the Question:
  The following schemes for the construction of by-passes or diversions costing £10,000 and upwards will not now be put in hand unless they are needed either for war requirements or to meet urgent public needs.

  Grant-aided Schemes

  Authority and Scheme.

  Estimated Cost.

  £

  Kent C.C.—

  Sevenoaks By-Pass

  550,000

  Riverhead By-Pass

  41,000

  Herts. C.C—

  East Barnet By-Pass

  235,000

  Bucks. C.C.—

  Chalfont St. Peters By-Pass

  118,000

  Hunts. C.C—

  Fletton By-Pass

  29,000

  Lincs. (Kesteven) C.C.—

  Leadenham By-Pass

  16,000

  Berks. C.C.—

  Newbury Relief Road

  32,000

  Somerset C.C.—

  Wincanton By-Pass

  18,000

  Bridgwater Relief Road

  103,000

  A.39 Diversion (Wilton-Mine-head Road)

  225,000

  A.361 Diversion (Watford Cross-Othery Road)

  207,000

  A.370 Diversion (West Town By-Pass)

  125,000

  Leicestershire C.C.—

  Thurmaston By-Pass

  59,000

  Oxfordshire C.C.—

  Adderbury By-Pass

  49,000

  Salop C.C—

  Egmond Diversion

  10,000

  Warwickshire C.C.—

  Warwick By-Pass

  150,000

  Durham C.C.—

  Durham City Relief Road

  97,000

  Yorks. W.R. C.C—

  Ripon Relief Road

  49,000

  Skipton Relief Road

  17,000

  Redhouse-Crofton By-Pass

  63,000

  Leeds Ring Road

  105,000

  Leeds—

  Westgate Relief Road

  194,000

  Yorks. E.R. C.C—

  Malton By-Pass (part)

  63,000

  West Hasterton By-Pass

  12,000

  Yorks. N.R. C.C—

  Malton By-Pass (part)

  150,000

  A. 165 Diversion (Scarborough-Filey)

  146,000

  Cheshire C.C.—

  Kingsway (Cheadle By-Pass)

  119,000

  Dones Green Diversion

  20,000

  Derbyshire C.C.—

  Worksworth By-Pass

  12,000

  Lancs. C.C.—

  Middleton Road By-Pass, Morecambe

  35,000

  Southport—

  Water Lane Diversion

  21,000

  Kilmarnock T.C.—

  Kilmarnock By-Pass (section 3 and 4) (Sections 1 and 2 to be completed)

  63,000

  £3,133,000

  Trunk Road Schemes.

  Estimated Cost.

  London-Edinburgh-Thurso Road—

  £

  Boathouse Bridge and Diversion

  58,600

  New Bridge over Rive Avon at Linlithgow

  47,578

  New Bridge over Rive Allan at Bridge of Allan

  62,666

  Diversion from Kindallachan Bridge to Haugh of Kilmorich

  16,292

  London-Great Yarmouth Road—

  Brentwood By-Pass

  260,656

  Ingatestone By-Pass

  81,875

  London-Folkestone-Dover Road—

  Maidstone By-Pass

  773,600

  London-Holyhead Road—

  Loughton By-Pass

  72,580

  London-Carlisle-Carlisle-Glasgow-Inverness Road—

  Barton By-Pass

  62,446

  Mountsorrel By-Pass

  192,264

  Quorn By-Pass

  60,048

  Stints Bridge Diversion

  39,228

  Winchester-Preston Road—

  Newcastle-under-Lyme

  107,538

  Swansea-Manchester Road—

  Diversion of Pontardulais Road, including reconstruction of Cadle Bridge

  14,618

  Northwich By-Pass—Eastern Section

  163,991

  Liverpool-Preston-Leeds Road—

  Loughton By-Pass

  137,636

  Sheffield-Grimsby Road—

  Hatfield By-Pass

  57,882

  Edinburgh-Carlisle Road—

  Groundiston Diversion

  10,368

  Perth-Aberdeen-Inverness Road—

  Diversion at River Pilgair

  27,415

  Total Estimated Cost

  £2,247,286

  In addition there are the following improvement schemes, which include the construction of diversions:

  Estimated cost.

  London-Edinburgh-Thurso Road—

  £

  Spital Gap Lane to junction with A.545, including Shilling Hill Diversion

  60,743

  London-Fishguard Road—

  Melin Llan to Pen-y-gors, including diversions at Bryntwood and Llangyfelach

  113,430

  London-Carlisle-Glasgow-Inverness Road—

  Widening, including diversions at Millbank, Poneil and south of Coalgill from Newfield Inn to 1·7 miles south of Millbank

  252,972

  Widening between Telford Bridge Diversion and Abington, including diversions at Crawford, Hurlburn Bridge and Abington

  219,640

  Widening between Dumfries County Boundary and Telford Bridge Diversion, including diversion at Paddy's Rickle Bridge

  278,629

  691

  Estimated Cost.

  London-Carlisle-Glasgow-Inverness Road (cont.)—

  £

  Widening from north of Miltons Road to Moffat Bridge, including diversion at Beattock

  83,193

  Birmingham-Gt. Yarmouth Road—

  Widening A. 447 and construction of By-Pass to Earl Shilton

  174,400

  Chester-Bangor Road—

  Widening between Bod Erw, St. Asaph and Kimnel, including two diversions

  166,958

  Edinburgh-Carlisle Road—

  Reconstruction north of Appletreehall Road junction, including diversion at Newton

  17,870

  Gretna-Stranraer-Glasgow Stirling Road—

  Widening from City of Glasgow Boundary to Baden heath Bridge, including diversions to Muirhead and Mollinsburn

  217,920

  Widening from east of Lanarkshire Boundary to east of Stirling Boundary, including diversion at Cumbernauld and Castlecary

  197,200

  Total Estimated Cost

  £1,782,965

  MINISTRY OF INFORMATION.

    GERMAN PROPAGANDA, CUBA.
    Mr. G. Straussasked the Minister of Information whether he is aware that a well-organised and successful Nazi propaganda campaign, through the Press and the radio, is being carried on in Cuba against Great Britain; and whether he will consult with the American Government with a view to taking counter-measures?
    Sir J. Reith:The Germans are, indeed, endeavouring to influence the Cubans in their favour, but my information about the effect of their propaganda does not quite accord with that of the hon. Member. If he has evidence which would help us I should be very glad to have it. As to the second part of the Question, we are making our own case known in Cuba, but this is not a matter in which we can properly invite the co-operation of a neutral Government.
    Mr. Strauss: Is the Minister aware that this propaganda is directed equally against Great Britain and against the United States and that it might be appropriate therefore to ask the co-operation of the United States Government in countering it?
    Sir J. Reith: No, Sir; in fact I did not know that, and I am glad of the information.

    ARMED FORCES (OFFICIAL PHOTOGRAPHERS).
    Mr. Vernon Bartlettasked the Minister of Information how many photographs of operations in Norway have been issued through his Department; how many of these are the work of professional photographers; and has he any arrangement with the Admiralty, the War Office and the Air Ministry to send official photographers on similar expeditions in the future, in order to facilitate his own task of disproving German propaganda about British decadence?
    Sir J. Reith:Seventy-two photographs of operations in Norway have so far been received and distributed by the Ministry, of which 21 were taken by professional photographers officially employed by the War Office, and the rest by Service personnel in the course of Service duties. Other negatives supplied were unsuitable for issue. The arrangements for obtaining these photographs were described by my hon. Friend the Financial Secretary to the War Office to the hon. Member for South Kensington (Sir W. Davison) on 24th April. The responsibility for the presence of official photographers at the scene of action must rest with the Services concerned. I hope that in future similar or improved arrangements may be agreed between the Service Ministries and the Ministry of Information.
    Mr. Bartlett:In view of that reply may I ask the right hon. Gentleman whether more cannot be done in this respect, because there is no doubt that the Germans are producing a very great effect in all neutral countries by their photographs; and, further, is it really a good thing from the Services point of view, that we should depend to the extent indicated upon Services personnel for our photographs?
    Sir J. Reith: I agree with the hon. Member and the matter is under discussion with the Service Ministers.

    SIR NEVILE HENDERSON.
    Sir Richard Aclandasked the Minister of Information whether it is as an official representative of the British Government that Sir Nevile Henderson is to lecture in America?
    Sir J. Reith: No, Sir.
    Sir R. Acland: Will the Minister consider rather carefully whether Sir Nevile

    693
    Henderson is not, in fact, the embodiment of the American case for isolation, and whether it would not be wise for the Government to discourage his departure to that country?
    Mr. A. Bevan:Will it not be difficult to prevent Americans thinking that Sir Nevile Henderson is speaking in an official capacity?
    Sir J. Reith: I understand the purport of the Question and I will consider it with my Noble Friend the Secretary of State for Foreign Affairs.
    Mr. Herbert Morrison:In view of the tragic failure of the mission of Sir Nevile Henderson to Berlin and the dangers which have accrued from the policy pursued by him—doubtless on instructions—is it not the case that, from the propaganda point of view, the less the world hears from him the better?
    Sir R. Acland: I may raise this matter on another occasion?
    Mr. McGovern: Would it not have been better if more attention had been paid to the "Daily Herald"?

    The date of engagement and the date of registration is given in each case. The approximate date of calling up is not known to the Department.

    —

    Date of engagement.

    Date of registration.

    R. F. Daviel

    …

    …

    …

    13th February, 1939

    …

    …

    27th April, 1940.

    S. C. Hahn

    …

    …

    …

    28th November, 1938

    …

    …

    21st October, 1939.

    B. E. H. Holloway

    …

    …

    13th February, 1939

    …

    …

    17th February, 1940.

    A. B. Kelly

    …

    …

    …

    24th May, 1939

    …

    …

    …

    27th April, 1940.

    H. M. Lawson

    …

    …

    30th January, 1939

    …

    …

    6th April, 1940.

    L. McIntosh

    …

    …

    …

    9th November, 1938

    …

    …

    6th April, 1940.

    B. Solomon

    …

    …

    …

    20th February, 1939

    …

    …

    9th March, 1940.

    These employés were engaged in a temporary capacity for work in connection with the provision of A.R.P. refuges in Government Offices. This work is rapidly approaching completion, and the staff has had to be reduced correspondingly.

    Similar information for the remainder of the stag is as follows:

    —

    Date of engagement.

    Date of Registration.

    J. C. Anderson

    …

    …

    30th January, 1939

    …

    …

    Not yet announced.

    E. A. Baker

    …

    …

    …

    13th February, 1939

    …

    …

    9th March, 1940.

    S. W. Blackmore

    …

    …

    13th July, 1936

    …

    …

    25th May, 1940.

    C. H. Bottell

    …

    …

    …

    24th July, 1939

    …

    …

    9th December, 1939. (Exempt on medical grounds).

    W. H. Gill

    …

    …

    …

    18th July, 1939

    …

    …

    Not yet announced.

    F. C. E. Jolley

    …

    …

    13th February, 1939

    …

    …

    3rd August, 1940. 20 years old).

    R. A. Kettlewell

    …

    …

    13th February, 1939

    …

    …

    Not yet announced.

    F. E. Wilkins

    …

    …

    …

    17th July, 1939

    …

    …

    25th May, 1940.

    H Worley

    …

    …

    …

    19th December, 1938

    …

    …

    60 years of age.

    MILITARY SERVICE (OFFICE OF WORKS STAFF).
    Sir R. Aclandasked the Parliamentary Secretary to the Ministry of Home Security, as representing the First Commissioner of Works, whether he will make a statement showing the date of entry into his service of R. F. Daviel, S. C. Hahn, B. E. H. Holloway, A. B. Kelly, H. M. Lawson, L. McIntosh, B. Soloman, together with the approximate dates on which these employés would have been called up for military service; and whether he will also state the names of the other employés working in the same Department, together with the dates on which they joined the Department and the approximate dates on which they would have been called up?
    Major Sir James Edmondson (Vice-Chamberlain of the Household):I have been asked to reply. The statement asked for by the hon. Member is somewhat long. I will, with his permission, circulate it in the Official Report.
    Following is the information:

    ROYAL NAVY.
    OFFICERS (HOTEL CHARGES).
    Commander Sir Archibald South byasked the First Lord of the Admiralty whether he is aware that officers who, by reason of their duties, are compelled to find accommodation in London Midland and Scottish Railway Company's hotels are being charged £5 5s. a week inclusive, but that, if their duties take them away for a day or two, they are not allowed any rebate for unconsumed meals; whether he is aware that in the London Midland and Scottish Railway Company's hotels a service charge has been arbitrarily added to all bills commencing on 1st April, 1940, and varying from 10 to 50 per cent.; if the imposition of such a service charge is in accordance with regulations; and whether he will take steps to prevent officers and men who have perforce to use London Midland and Scottish Railway Company's hotels being charged more than the 10 per cent. universally accepted as the proper sum in lieu of tips for services rendered?
    Sir V. Warrender: I am informed that the weekly rates quoted by my hon. and gallant Friend are less than those charged to members of the public living at these hotels en pension. When naval officers have for a period been compelled to stay, on account of their duties, at a hotel where the charge is £5 5s. a week, subsistence allowance has been paid to them. I am also informed that a service charge of 2s. on every 20s. is made on the en pension rates.
    Sir A. South by:Is the Parliamentary Secretary aware that since this Question was put on the Order Paper Naval officers living in the Exchange Hotel, Liverpool, have been given notice to give up their rooms, although the hotel is only halt full? Will he take steps to prevent the exploitation of these officers who are engaged on arduous duties? In view of what he said in the last part of his answer may I ask whether he is aware that the charge of 3d. on a 9d. cup of coffee is made at lunch, and the same charge for a shilling cup of coffee is made after dinner?
    Mr. Etherton: Will the Parliamentary Secretary bear in mind that where the charge is 21s. the service charge is 3s., being an increase of 100 per cent. on the extra shillings?
    Sir V. Warrender:As I said in my original answer, these officers are given special terms at hotels and are given a subsistence allowance to cover the cost of their living there. My hon. and gallant Friend will understand that I have no power to control charges of the sort he has mentioned.
    Sir A. South by:May I ask, in that case, whether my hon. Friend will discuss with the First Commissioner of Works the advisability of taking over this hotel and running it for these officers? [Interruption.] May I have an answer to that question? On a point of Order. In view of the unsatisfactory nature of the reply I shall raise this matter again on the Adjournment.

  PALESTINE.

    POSSESSION OF ARMS (ARRESTS).
    Captain A. Grahamasked the Secretary of State for the Colonies what were the reasons for which the head of the Agricultural College at Tel-Aviv was recently sentenced to imprisonment; and to what extent American Zionists were implicated in this case?
    The Secretary of State for the Colonies (Mr. Malcolm MacDonald):I think my hon. and gallant Friend must be referring to recent events at the settlement of Ben Shemen. Eleven Jews, including the Director of the Agricultural School, were arrested in connection with the seizure of arms in the settlement, and were tried on the charge of being jointly in possession of arms, ammunition and bombs contrary to the provisions of Emergency Regulation 8 C. The Director was acquitted of this charge, but the Manager of the School and seven of the remaining defendants were sentenced to varying terms of imprisonment. As regards the second part of the Question, I have no information to show that American Zionists were in any way connected with this case.
    Mr. T. Williams:Since the arms, found long after the suppression of the rebellion, have been accumulated as a means of defence and not as a means of offence, does the Colonial Secretary think that the sentences inflicted on these five or six persons are really justified?
    Mr. MacDonald:These particular secret arms were quite unnecessary for defence because there were other authorised arms provided for the defence of the settlements.
    Mr. Williams: Is there any case on record where any of these firearms have been used?
    Mr. MacDonald: Under the Regulation the secret possession of them was contrary to the law of Palestine.
    33. Mr. T. Williamsasked the Secretary of State for the Colonies how many Jews are serving terms of imprisonment in Palestine for being in possession of firearms during the period of the Arab rebellion; how many of the sentences exceed 12 months; and in how many cases has the sentence been reduced since the Jewish community offered unconditionally their wholehearted support to the Allies?
    Mr. MacDonald:105 Jews are serving terms of imprisonment in Palestine for offences in connection with the possession of arms, bombs and explosives during the period April, 1936, to the present date. In all these cases the sentence exceeds 12 months. No sentences have been reduced for the reason suggested.
    Mr. Williams:Does not the right hon. Gentleman think that the time has now arrived when these sentences ought to be revised, particularly in view of the fact that these firearms were held very largely not as a means of offence but of defence against those who had been attacking them for the last two or three years?
    Mr. MacDonald:Stores of arms were provided by the local administration for the proper protection of these settlements and the possession of these other firearms is quite unnecessary for this purpose. As regards the other question, I do not think the time has arrived as suggested, particularly as a number of the offences have been committed since the outbreak of war.
    Mr. Williams: Is the right hon. Gentleman aware that Jews as well as Arabs were being killed off almost daily during the course of the rebellion, and that whatever arms the Government may have held they were ineffective in many outlying settlements? Since the sentences were for three or five years will he not consider the question of revision?

    CUSTOMS DUTY CONCESSIONS (BRITISH FORCES).
    Captain Stricklandasked the Secretary of State for the Colonies whether he has received any communication yet from the High Commissioner of Palestine on the subject of the duty-free admission of parcels into Palestine when consigned to members of His Majesty's Forces?
    Major-General Sir Alfred Knoxasked the Secretary of State for the Colonies whether it has yet been possible to arrange that British soldiers serving in Palestine shall receive presents of cigarettes duty free, as soldiers do who belong to the British Expeditionary Force in France?
    Mr. M. MacDonald:Yes, Sir. It has been arranged that members of His Majesty's Forces serving in Palestine will be granted the same Customs duty concessions as members of the British Expeditionary Force in France.
    Mr. Markham: May I ask when this comes into operation and whether it is based on the French system?
    Mr. MacDonald: It is based on the system operating in France to-day. As regards the date I should like to have notice of that question, but I venture to think that, if it has not already come into operation, in a few days it will as soon as the necessary provision can be made.
    Mr. Duncan: Will it apply to Dominion soldiers in the same way as to British soldiers?
    Mr. MacDonald: I venture to say that that matter is covered by this decision.
    Mr. Denman: Is it at the cost of the Palestine revenue or the British revenue?

  KENYA (ELEMENTARY EDUCATION).
  Mr. Palingasked the Secretary of State for the Colonies whether the question of the expulsion of African children from elementary schools in Kenya owing to the inability of their parents to pay fees, and the question of the advisability of fee paying generally, has now been fully considered by the legislature; and, if so, with what result?
  Mr. M. MacDonald:This question has been the subject of recent investigations by the District Education Boards. It appears that inability to pay fees has not prevented any large number of Africans from obtaining elementary education. The missions are responsible for the great majority of the elementary schools for Africans, and in many of them arrangements already exist for dealing with applications for the remission of fees in necessitous cases. All missions have recently been urged to complete such arrangements and have been asked to report to the education authorities any cases of hardship which may occur. In those Government schools where fees are charged to Africans, the headmaster is empowered to remit them after consultation with the District Commissioner and native headmen.
  Mr. Paling:If the education of these children is to make headway, as the right hon. Gentleman wants, is it possible for it to be made while these people have to pay fees, particularly in view of the appallingly low wages they receive and their inability to pay any fees whatever?
  Mr. MacDonald: I think that under the extended arrangements which are now contemplated there will not be, or ought not to be, any cases where fees are not remitted in necessitous cases.

  JAMAICA AND TRINIDAD.
  Mr. Palingasked the Secretary of State for the Colonies how many people have been arrested and how many convicted for illegal assembly under the Emergency Powers Act in Jamaica and Trinidad since the beginning of the war?
  Mr. Leslieasked the Secretary of State for the Colonies whether he is aware of the arrest and conviction of the secretary of the Trinidad Union of Shop Assistants and Clerks for an alleged breach of the Emergency Defence Act; and will he state the reason for his arrest, the circumstances under which the arrest took place, and the nature of the sentence imposed?
  Mr. M. MacDonald: There have been no arrests or convictions for illegal assembly in Jamaica since the beginning of the war. In Trinidad three persons, including the secretary of the Trinidad Union of Shop Assistants and Clerks,
  700
  have been arrested and convicted under the Public Meetings Regulations made by the Governor under the authority of the Emergency Powers (Defence) Act, 1939, which enact that public processions shall require the permission of the Commissioner of Police or his nominee. The incident leading to the arrest of these persons occurred on 5th February during the annual carnival celebrations. Permission was granted for the holding of some processions, but the three persons concerned were leaders of one which was unauthorised. On being informed by the police that they were acting contrary to the law they adopted an uncompromising attitude. They were found guilty under the Public Meetings Regulations and were fined 15 dollars each and placed on bonds of 50 dollars each for six months. Appeals have been lodged in all cases and are pending.
  Mr. Paling: Were not these people conducting a meeting or procession in order to achieve a higher rate of wages, and are they guilty of doing anything which would not have been accepted in this country as a normal practice?
  Mr. MacDonald: There would have been no difficulty at all if they had asked permission to hold their procession and the permission had been granted. I have indicated that the authorities granted permission for other processions to be held on that day.
  Mr. Jagger: Were there not 40,000 people on the Racecourse, and is it not a fact that this was a procession of about 200 and that they arrested the leaders of the 200, and ignored the fact that there were 40,000 on the Racecourse?
  Mr. MacDonald: As regards the other processions and demonstrations, permission was asked and granted for these to take place.
  Mr. Leslie:Would it not be wiser to show more clemency in these cases instead of putting something into the mouth of Haw-Haw about the liberty enjoyed by the individual?

  ST. HELENA.
  Mr. Palingasked the Secretary of State for the Colonies what progress has been made in the building of houses, the provision of land for land settlement, and

  701
  the reduction of unemployment in the island of St. Helena within the last 12 months?
  Mr. M. MacDonald: The outbreak of war has caused difficulty in obtaining the necessary materials, but during the last 12 months some 10 houses have been completed; and a grant from the Colonial Development Fund to enable 64 cottages to be built has recently been approved. This scheme includes provision of about two acres of land for each cottage. As regards the last part of the Question, I would refer the hon. Member to the reply which I gave to the hon. Member for Moseley (Sir P. Hannon) on 6th March, of which I am sending him a copy.
  Mr. Paling:Is it not a fact that the outbreak of war operated in the opposite direction of increasing employment in some ways? It has in certain of the island industries.
  Mr. MacDonald: In some ways it has in certain island industries, but it has tended to slow up the process of house building, as I have said, because of the difficulty of obtaining building materials.

  COLONIAL ECONOMIC DEVELOPMENT.
  Mr. Levyasked the Secretary of State for the Colonies what special measures he is taking to develop the resources of and to stimulate the production of wealth in the Colonial Empire, in view of the heavy charge upon our resources for war and the need of being prepared for economic conditions after the war?
  Mr. M. MacDonald: The steady development of the economic resources of the Colonial Empire is a normal object of British Colonial policy, and in particular forms an integral part of the new policy on Colonial Development announced in the statement of policy on 20th February.
  Mr. Levy: Can my right hon. Friend be more explicit than in a general statement of that kind in answer to my Question?
  Mr. MacDonald:It will be difficult for me to be more explicit in regard to actual plans until we have the legislation
  702
  through Parliament, but in the meantime we have asked the local governments to prepare five-year plans of development and that work of preparation is being undertaken.
  Mr. Thorne: Could not the wealth of this country be increased when we have 1,000,000 men out of work?
  Mr. Paling: Would not the wealth production of these places be better if the prosecution of the workers was dropped?

  WEST INDIES (SUGAR INDUSTRY).
  Mr. R. Morganasked the Secretary of State for the Colonies whether the Government has yet been able to formulate its policy with regard to the sugar industry of the West Indian islands, especially with regard to the recommendations of the Royal Commission; and when he will be able to announce it?
  Mr. M. MacDonald: As the answer is rather long, I will, with my hon. Friend's permission, circulate it in the Official Report:
  Following is the answer:
  The Royal Commission recommended on the one hand a variation in the system by which a supplementary preference is granted on a limited quantity of certificated sugar, and on the other an increase in the basic export quotas in the West Indian Colonies by about 120,000 tons per annum. As the Commissioners themselves suggested, war-time conditions have modified the situation, especially in relation to the special certificated preference, which before the war they contemplated should be used as a device to adjust the market price for sugar to what they thought the producer should receive. One fundamental change since the outbreak of war has been the bulk purchase of all Colonial sugar by the Ministry of Food at a fixed price, and His Majesty's Government have reached the conclusion that the recommendations of the Commission on the system of certificated preference are not suitable for adoption during the war. On the other hand they recognise also that it is not appropriate in present conditions to adhere literally to the scheme announced in Parliament by my right hon. Friend the Chancellor of the Exchequer on 7th March, 1938, by which the value of the certificated preference

  703
  was to be reduced by 25 per cent. for every rise of 6d. in the bulk price of sugar above a pivotal figure of 6s. 6d. They accordingly propose that, even if the price fixed by the Ministry of Food for bulk purchases of Colonial sugar exceeds 6s. 6d. by 6d. or more, the extra preference of 3s. per cwt. shall continue to be given on a quota of 360,000 tons for the duration of the war.
  As regards an increase of the quantity of Colonial exports, the recommendations of the Royal Commission were received too late for any action to be taken as regards the West Indian crops to be reaped in 1941, which were planted in 1939; but it happens that His Majesty's Government had advised all the sugar producing Colonies, including those in the West Indies, as long ago as July, 1939, to work towards the production of 20 per cent. in excess of their basic quotas under the International Sugar Agreement for the 1941 crop. This works out at approximately the same increase for the West Indian Colonies as a whole as that recommended by the Royal Commission. The position of the 1942 crop, to be planted this year, is now under review, in the light of the estimated requirements of this country in 1942 and of shipping facilities likely to be available. Should it be decided that any further increase is desirable the recommendations of the Royal Commission as to the allocation of increased quotas within the West Indian group will be taken into account. I cannot, however, say more at present than that the Colonies will be advised what action to take well before the commencement of the planting season.
  At the end of the war, the whole question will have to be considered in the light of the conditions then prevailing.

  FRAUDULENT SOLICITORS.
  Mr. Liddallasked the Attorney-General whether he is aware that on 8th April another solicitor was struck off the Rolls for theft of money belonging to a deceased client; and that on 12th April another solicitor was sentenced at the Central Criminal Court to 12 months' imprisonment for forging a deed with intent to defraud; and will he therefore, even if fees will not cover expenses, open a Public Trustee branch office on the North-East coast and extend the area of
  704
  compulsory registration under the Land Registry so as to protect the public against further frauds by solicitors?
  The Solicitor-General (Sir Terence O'Connor):I cannot add anything further to what I indicated to the hon. Gentleman on 2nd April, 1940, except to say that it is not proposed to open any new Public Trustee offices in the provinces, and that it is not considered practically possible to extend the area of compulsory registration at the present time.
  Rear-Admiral Beamish:Will my hon. and learned Friend urge the Law Society to proceed with their Private Bill, which has for its object the protection of an honourable profession and trustful citizens alike?
  The Solicitor-General:My hon. and gallant Friend may have noticed with satisfaction that the First Reading of a Bill to deal with the matter was taken in another place yesterday.
  Sir H. Williams: Will facilities be given by the Government in this House to secure the passage of that Bill at the earliest possible date?
  The Solicitor-General:That depends on public business for which I am not responsible, but, so far as we are concerned, we shall put no obstacle in the way.
  Mr. Logan: Has the hon. Gentleman considered the advisability of sending these gentlemen to a Borstal school?

  NAVAL AND MILITARY PENSIONS AND GRANTS.
  Mr. Tomlinsonasked the Minister of Pensions whether he is aware of the application for a pension made by Mrs. E. Collins, of 83, Great Egerton Street, Stockport, widow of Mr. E. Collins, late driver Royal Army Service Corps; that Collins was passed A1 on 14th December, 1939, and died on 14th January, 1940, in Shorncliffe military hospital, from bronchial pneumonia; and whether, in view of the probability that death was attributable to severe weather under Army conditions, Mrs. Collins' claim for a pension will be reconsidered?
  The Minister of Pensions (Sir Walter Womersley): I am having further inquiries made regarding this case. As soon as these have been completed I will communicate with the hon. Member.
  Mr. Tomlinson:Is the hon. Gentleman aware of the strong feeling aroused when decisions of this kind are sent to the widows?
  Sir. W. Womersley:I am aware that statements of that kind are made from time to time, but I go carefully into every case which Members of Parliament bring to my notice.
  Mr. Buchanan: Has not the time arrived when any person making a claim for a pension should be heard by some impartial body before which her case can be stated by the person involved or her representative?
  Sir W. Womersley:It is the fact that the British Legion and other bodies do assist people in their applications.
  Mr. Buchanan: Is the hon. Gentleman aware that no claimant for a pension has any appeal against the Minister's decision, and is it not time that some body was set up?
  Sir W. Womersley: The finest court of appeal in the country is available in the House of Commons.
  Mr. Buchanan: Is the hon. Gentleman aware that owing to the growing number of cases it is impossible to raise all of them in the House?
  Mr. Tomlinsonasked the Minister of Pensions whether he will reconsider his decision to refuse a pension to Mrs. E. Reynolds, widow of Private Reynolds, who died whilst on sick leave, was posted in the roll of honour and whose own medical adviser, called in when the man returned home, stated definitely that his Army service was responsible for his death?
  Sir W. Womersley: In view of additional information which has reached me since I wrote to the hon. Member last month, further inquiries are being made into this case and I will write to the hon. Member as soon as possible.
  Mr. Tomlinson: How did the hon. Gentleman's medical advisers decide that this
  706
  man died in any other way than that suggested by his own medical advisers, seeing they had no opportunity of examining him?
  Sir W. Womersley:My medical advisers came to their conclusion on the evidence then available. Further evidence has now come in and we are having full inquiry made.
  Mr. R. J. Taylor:Why should there be such a conflict of medical evidence when a man is passed as A.1 and his medical advisers say he died as the result of some trouble he had when he joined the Army?
  Mr. Lyons: Are the recommendations made by the Minister's medical advisers brought to the notice of the medical advisers of the applicant in order that they may comment on the matter before a decision is made?
  Sir W. Womersley: The medical evidence of the man's advisers is brought to the notice of my advisers and on the evidence produced a decision is arrived at. Due consideration is given in every case to the evidence brought forward by the medical advisers of the claimant.
  Mr. Tomlinson: May I ask whether, unless the Member of Parliament for this constituency had been persistent, any question of the evidence would have been raised at all?
  Sir W. Womersley:Yes. A letter was sent to me, not by a Member of Parliament, but by the woman herself, and as soon as I got the letter I made inquiries into the matter.
  Mr. Tomlinson: In spite of the fact that three letters had previously been sent.

  PUBLIC ENTERTAINMENTS, LONDON.
  41. Lieut.-Colonel Sir Thomas Mooreasked the Secretary of State for the Home Department the decisions recently reached with the Lord Chamberlain's Department regarding evening entertainments in London; and whether he will avoid imposing further and unnecessary restrictions on the enjoyment and recreation of our people, unless such are urgently required in the interests of our war effort?
  The Under-Secretary of State for the Home Department (Mr. Peake):The conclusions of the conference recently held by

  707
  the Lord Chamberlain were published in the Press on the following day. I will send my hon. and gallant Friend a copy and I can assure him that the Government have no wish needlessly to restrict legitimate forms of entertainment and recreation.
  Sir T. Moore: While thanking my hon. Friend for his reply, may I ask whether the Home Secretary and my hon. Friend will bear in mind in handling this admittedly difficult problem that we are fighting to retain our liberties and not to surrender them?
  Mr. Lyons: Will my hon. Friend publish the recommendations of the conference in the Official Report?
  Mr. Peake: The recommendations have been published in the "Times" and all the other newspapers.
  Rear-Admiral Beamish: Will my hon. Friend let the House know where these entertainments are to be seen?

  "VOICE OF SPAIN."
  Captain A. Grahamasked the Home Secretary whether his attention has been drawn to a weekly publication entitled "Voice of Spain"; and whether, in view of its object and effect being to upset existing good relations between England and Spain, he will not merely withdraw its present export permit but cause it to cease publication?
  Mr. Peake:My right hon. Friend is in consultation with my right hon. Friend the Foreign Secretary on the subject.
  Miss Rathbone: Is the hon. Gentleman aware that the "Voice of Spain" is one of the few publications in which those who wish to follow the opinions expressed in the Spanish Press can do so, and that it would be a great loss if we did not have that sort of information?

  ENEMY ALIENS (MR. T. HEYER, BRIGHTON).
  Sir Cooper Rawsonasked the Home Secretary when the matter of Mr. T. Heyer, of Brighton, about which the hon. Member for Brighton has been in correspondence since November, 1939, is likely to be completed; and, in view of the fact
  708
  that Mr. Heyer has lived in England since he was 18 years old and his naturalisation papers were nearly through before the present war commenced, will this matter be expedited, as much distress is being caused to Mrs. Heyer?
  Mr. Peake: On the question of naturalisation my hon. Friend has been misinformed. No application for naturalisation has been made and there is no ground for any suggestion that but for the outbreak of war this German subject would have been naturalised. The information about him satisfied the local tribunal that despite his long residence in this country he ought to be interned. His case is to be reviewed by the Advisory Committee at an early date, and as soon as my right hon. Friend receives the committee's report he will reconsider the case; but on the information at present before him he is not prepared to authorise the release of this enemy alien.
  Sir C. Rawson: Will the hon. Gentleman tell me why it is that those words "at an early date" have occurred so often during the last six months; and does he know that I was led to understand by the Minister, who replied to me instead of the hon. Member, that he would have this appeal taken by the end of last month?
  Mr. Peake:This case has been referred by my right hon. Friend to the Advisory Committee. There has been some little delay in the proceedings before the Advisory Committee owing to the illness of the chairman, but my right hon. Friend has no intention of releasing any enemy alien without the fullest inquiry.

  PURCHASE TAX.
  Mr. Graham Whiteasked the Chancellor of the Exchequer whether, in connection with the preparation for and the working of the proposed Purchase Tax, it is intended to institute a census of production?
  The Financial Secretary to the Treasury (Captain Crookshank):No, Sir. Apart from other difficulties, the information derived from the census would not be available until long after the date on which it is hoped to bring the tax into force.

  DEPUTY MINISTERS.
  Rear-Admiral Sir Murray Sueterasked the Prime Minister whether, in view of the necessity during these times of having Ministers with minds constantly alert for making quick decisions, he will consider appointing three deputy Ministers to relieve the Ministers in charge of the Navy, Army and Air Force of much of the detail of Departmental matters in the same manner as has been done in providing the three Chiefs of Staffs with understudies?
  The Prime Minister:I appreciate the object which my hon. and gallant Friend has in mind in making this suggestion, and I have already considered carefully whether means of giving effect to it could be found. The duties of the Chiefs of Staff are not, however, analogous to those of Ministers in charge of Departments, and I am afraid that it would not be practicable for Ministers to delegate their responsibilities. They have, of course, the assistance of their Under-Secretaries who can and do relieve them of a good deal of Departmental work.

  FOOD SUPPLIES.

    BREAD PRICES.
    Mr. De le Bèreasked the Parliamentary Secretary to the Ministry of Food whether he will give an assurance that he will not sanction an increase in the price of bread to the consumer for the period up to the 30th June, 1940?
    The Parliamentary Secretary to the Ministry of Food (Mr. Lennox-Boyd): I would refer my hon. Friend to the answer which was given to him on 14th February in reply to a similar Question.
    Mr. De la Bère:Is my hon. Friend aware that in three months prior to the outbreak of the war the prices of wheat and flour were the lowest recorded for 300 years, and that the price of flour and bread did not fall correspondingly; and why, when the price of flour is fixed now, should the price of bread be put up? Is it not true that he is contemplating doing it? Why not be frank with us? Am I not entitled to an answer?
    Mr. Speaker: If the hon. Member will put his Supplementary Question in an ordinary common-sense way he will get an answer.

    ALDERSHOT SLAUGHTERHOUSE.
    Mr. G. Straussasked the Parliamentary Secretary to the Ministry of Food what steps he is taking to remedy the conditions existing in the Alders hot slaughterhouse?
    Mr. Lennox-Boyd:Work is in progress at the present time for the purpose of improving the drainage system and for effecting certain structural alterations (including the provision of additional hanging accommodation) which will put the slaughterhouse in a satisfactory condition. Pending the completion of the work no stock is being killed at this slaughterhouse.

    MILK.
    Mr. W. Robertsasked the Parliamentary Secretary to the Ministry of Food when the new order is to be made altering the price at which manufacturing milk is to be sold to manufacturers?
    Mr. Lennox-Boyd:No order is necessary for this purpose and, generally speaking, the new prices for manufacturing milk came into operation on 1st April.
    M. Roberts asked: the Parliamentary Secretary to the Ministry of Food whether he is aware that the Maximum Milk Retail Price Order now in force enables distributors to charge the same price as they did during the last seven days in December; that this is causing many consumers in rural areas and towns of under 10,000 population to pay 1d. per quart more for their milk in February, March and April than they did last year; and when he intends to rectify this?
    Mr. Lennox-Boyd:The Milk (Provisional Retail Prices) Order dated 8th February fixed maximum prices which did not over-ride customary practices or contractual obligations whereby reductions below those maxima should normally have taken place. A new Order is now being prepared and will be issued very shortly fixing as maximum prices for England and Wales the prices ruling on the corresponding date during the year 1939, and laying down specific prices for Scotland which, in fact, will be the prices which prevailed over the greater part of Scotland during the corresponding period of 1939.
    Mr. Roberts:Is the Minister aware that the Order of 2nd February does in fact allow for an increased price of a penny

    711
    per quart in all country districts, and that the Minister of Food promised me two months ago that a new Order would be issued on 1st April to rectify that situation?
    Mr. Lennox-Boyd:I am aware that the rather vague wording of the original Order has enabled some unscrupulous distributors to avoid the real intentions of the Order, but the new Order will, we hope, get over that difficulty.
    Mr. Roberts: When will this matter be rectified?
    Mr. Lennox-Boyd: In a matter of hours.

    SUGAR.
    Mr. De la Bèreasked the Parliamentary Secretary to the Ministry of Food whether he will take immediate steps to ensure that supplies of sugar are available to retailers for distribution to their customers in all parts of the country against the exchange for ration coupons, in view of the difficulties which have been experienced in many villages and rural areas of supplies being unobtainable?
    Mr. Lennox-Boyd:I shall be glad to have immediate inquiry made into any cases of difficulty of which my hon. Friend will supply particulars, but I have no information that supplies of sugar to retailers have been or are inadequate to supply the requirements of their registered customers.
    Mr. De la Bère:Is my hon. Friend aware that retailers blame the Ministry of Food and the Ministry of Food blames retailers, and will he try to get me some common sense answer to that question?
    Mr. Lennox-Boyd: I am not aware that we have received any complaints from retailers, whether common sense or otherwise, on this subject.

    MEAT (CONTROLLERS).
    Mr. T. Smithasked the Parliamentary Secretary to the Ministry of Food who has been appointed as the north-eastern area controller to the meat scheme; whether he has had any experience in the meat trade; and the terms and conditions of the appointment?
    Mr. T. Williamsasked the Parliamentary Secretary to the Ministry of Food whether he will state the duties of the
    712
    area meat officer for South Yorkshire, the name of the officer and the conditions of the appointment?
    Mr. Lennox-Boyd:Mr. C. W. H. Glossop has recently been appointed Area Meat and Livestock Officer for the North-Eastern Area. This is a post requiring general administrative experience and powers of large scale organisation. Knowledge of the meat trade is not essential. The appointment is on the usual terms for temporary officers of the Ministry.
    Mr. T. Smith: Am I not right in assuming that this Mr. Glossop is the ex-Member for Penistone, and, if that is so, is the Minister satisfied that he has sufficient particular experience for this post?
    Mr. Lennox-Boyd: From among a number of candidates we are satisfied that, on merit, he was the best available.
    Mr. T. Williams:Is it not true that this post has been obtained exclusively by political influence, and that the person to whom the job has been given has no knowledge of the meat trade, has never been associated with it and has never been associated with any other big business?
    Mr. Lennox-Boyd:In reply to the second part of the question, the hon. Member cannot have it both ways. If we appoint someone who is interested in the trade we are accused of putting in traders to run their own trade. In reply to the first part of the question, though he was a Member of Parliament he is in every way qualified to fill the post.
    Mr. Williams:May I ask where he obtained his qualifications and when and how? Will the Parliamentary Secretary also tell us, in reference to Question 56, what position is occupied by Mr. Bentley who is called upon to pay for livestock slaughtered at the central slaughter houses.
    Mr. Lennox-Boyd:I have answered the two Questions together and in the answer I have given I thought I had dealt with both points, but I will make further inquiries into the case of Mr. Bentley.
    Sir H. Williams:Is my hon. Friend not acquainted with the number of coal miners who become agricultural experts?
    Mr. Buchanan: May I ask what qualifications this gentleman had for the job other than that he was a Member of Parliament?
    Mr. Lennox-Boyd: He has had administrative experience.
    Mr. Attlee: Could the hon. Gentleman specify what administrative experience this gentleman has had?
    Mr. Lennox-Boyd: The gentleman in question is Deputy Chairman of the Thorpe and District Water Company, a Director of the Yorkshire Electric Power Company; he has been a member of Empire Farmers Tour to different parts of the Empire. He is a member of the Council of the Royal Agricultural Society of England and a practical farmer.
    Mr. Lyons: May I ask what was his salary and whether the post was advertised?

    STANDARD BREAD.
    52. Mr. Lyonsasked the Parliamentary Secretary to the Ministry of Food what decision has been reached with reference to standard bread?
    Mr. Lennox-Boyd:I presume that my hon. and learned Friend refers to whole meal bread, supplies of which can always be obtained by members of the public who prefer this type of bread.
    Mr. Lyons: Is it not a fact that my hon. Friend made a statement to a number of Press representatives the other day that standard bread was under consideration by the Ministry, and that he hoped to make a statement soon, and is there any foundation for the belief that standard bread will be officially introduced?
    Mr. Lennox-Boyd:I said, as I have often said, that every means of improving our food supplies is always under consideration.

    JAM-MAKING (SUGAR).
    Vice-Admiral Taylorasked the Parliamentary Secretary to the Ministry of Food whether he is now in a position to make a statement on the increased sugar allowance to be used for the preservation of fruit by those who do not grow their own fruit but purchase it to make into jam?
    Mr. Lennox-Boyd: The question of an increased allowance of sugar to persons who wish to purchase fruit for jam making is under consideration, and my Noble Friend hopes to make an announcement on the subject at an early date.
    Sir A. Southby:In going into this matter will my hon. Friend consider the case of people who pick wild fruit in order to make jam?
    Mr. Lennox-Boyd: Certainly.
    Vice-Admiral Taylor: Is the hon. Member aware of the great importance of seeing that fruit shall not be wasted?
    Mr. Lennox-Boyd: It is our duty to see that as far as possible no part of the fruit crop is wasted.

    BUTTER.
    Mr. C. Wilsonasked the Parliamentary Secretary to the Ministry of Food whether he can state the weight of butter required per week and its price when rationing was first introduced; and the similar figures for the last available date?
    Mr. Lennox-Boyd:I have not the precise figures asked for by the hon. Member; but I am endeavouring to obtain them and will communicate with him at an early date.

    LIVESTOCK (PAYMENT TO FARMERS).
    Mr. T. Williamsasked the Parliamentary Secretary to the Ministry of Food why farmers who send livestock to the central slaughter-house, Don caster, have to wait three weeks or more before payment is made; why all accounts have to be fixed and settled in Doncaster and then forwarded to the area meat officer, Pontefract; and will he consider having an appropriate staff at Doncaster so that payments can be expedited?
    Mr. Lennox-Boyd:With the exception of casualty and other animals which have to be slaughtered urgently, farmers do not send their stock to a slaughter-house, but to a collecting centre. It is not practicable to set up accounting staffs at slaughter-houses and payment for fat-stock is made in each county from a convenient centre. Yorkshire, for this purpose, is divided into two parts, and payments in the West Riding are made from Pontefract. The delays in payment to which the hon. Member refers have been due to initial difficulties in the recruitment and training of staff. They are now being rapidly overtaken, and I am assured will have disappeared within the next two or three weeks.
    Mr. Williams:Can the Minister state exactly why it is that, when the person responsible at the collecting centre has decided how much should be paid in respect of each animal, there should be days' and sometimes weeks' delay before farmers are actually paid?
    Mr. Lennox-Boyd:If we had accounting staffs for every single slaughter-house legitimate complaints might be made in this House on the ground of expense.
    Mr. Williams: Will the hon. Gentleman see to it that accounting staffs are large enough to cope with the number of cases with which they have to deal, so that there is not such a long delay before payment is made to very poor farmers?
    Mr. Lennox-Boyd: That is what my reply shows.

    RETAILERS (PROSECUTIONS).
    Captain Stricklandasked the Parliamentary Secretary to the Ministry of Food whether his attention has been drawn to the remarks, on 24th April, of the chairman of the Coventry bench of magistrates in dismissing summonses brought by the local food control committee against certain licensed retailers of food who had pleaded guilty of charging prices for food in excess of those permitted by the Government's regulations; and what consequential steps he proposes to take?
    Mr. Lennox-Boyd: Yes, Sir. My attention has been drawn to these cases. As the question of obtaining the opinion of the High Court upon certain of them is under consideration, it would not be proper for me to make any comment on the matter.

    PEAS.
    Mr. Lyonsasked the Parliamentary Secretary to the Ministry of Food what action has now been taken with regard to loose and processed peas; and whether these commodities are included in an ex tended list to be covered by the Prices of Goods Act?
    Mr. Lennox-Boyd:My Noble Friend has under active consideration the making of an Order fixing maximum retail prices for dried and processed peas and other pulses. If this is done, there will be no need to include these commodities in a list covered by the Prices of Goods Act.
    Mr. Lyons: Is it a fact that this type of exploitation was brought to his notice several weeks ago and that no action was taken, and does he realise that it is being carried on? Is there no correlation between his Department and the Board of Trade to put an end to this public ramp?
    Mr. Lennox-Boyd: There is very full correlation and we are satisfied that the question of a maximum price Order merits consideration.
    Mr. Lyons:Cannot the Order be introduced now, because a week ago the Parliamentary Secretary to the Board of Trade said that it was under active consideration? Here we are, going on week after week, and still no action is taken. Can a decision be made forthwith in this matter?

  MINISTRY OF SUPPLY.

    WASTE PAPER (COLLECTION).
    Mr. Culverwellasked the Minister of Supply how many local authorities have no organisation for the collection of waste paper?
    The Minister of Supply (Mr. Burgin): I cannot answer my hon. Friend's Question categorically, partly because my Department's system of returns does not extend to very small authorities, and partly because the latest periodical return from an area does not always reflect the position to-day. What I can say, however, on the basis of the latest returns received, is that 704 local authorities, with an aggregate population of 35,000,000 people, are definitely known to be organising the collection of waste paper. In reply to a Question by the hon. Member for Bilston (Mr. Hannah) on 17th April, it was mentioned that an urgent circular was issued by my Department on 11th April to every local authority in England, Scotland and Wales, stressing the need for the collection of waste paper. Replies to this circular are now being received daily, and I have every reason to believe that the figures mentioned above will be considerably increased.
    Mr. Culverwell: Is my right hon. Friend satisfied with what is being done in this matter and, if not, will he use compulsion to force all local authorities, into the scheme?
    Mr. Burgin: That matter would be within the Department of my right hon. Friend the Minister of Health. We are in collaboration with each other in case the voluntary returns should not prove adequate.
    Mr. Holdsworth: Is anything being done to salvage the waste paper of the Services?
    Mr. Burgin: Yes, Sir. The salvage arrangement includes the Services as well as the civilian population.

    STANDARD SUITS.
    Mr. Lyonsasked the Minister of Supply what decision has now been reached with reference to standard suits?
    Mr. Burgin:I have nothing to add to the reply given to my hon. and learned Friend on 17th April.
    Mr. Lyons: Will it be possible for him to make a more definite statement next week?
    Mr. Burgin: I will see whether that can be done.

    WOOL CONTROL (PAYMENTS TO FARMERS).
    Mr. T. Hendersonasked the Minister of Supply whether he is aware that the failure to pay for stocks of wool produced by farmers in the Western Highlands of Scotland, and requisitioned by the Government, is causing hardship to the farmers referred to; and is he prepared to have the agreed price paid to them at once?
    Mr. Burgin: This wool is being paid for after it is brought in, as quickly as it can be appraised. If any farmer is experiencing undue delay in obtaining payment, he should report the facts to the British Wool Section, Wool Control, Bradford.

    NEWSPRINT SUPPLIES.
    Mr. Dingle Footasked the Minister of Supply whether he will cause a regulation to be made extending to the "Radio Times," the "Listener" and other publications controlled by the British Broadcasting Corporation the arrangement voluntarily entered into by the rest of the Press for the avoidance of waste, whereby periodicals are no longer to be supplied by newsagents on a sale-or-return basis?
    Mr. Burgin:The British Broadcasting Corporation have informed me that this and other measures to effect economy in the use of paper are now under consideration by them.
    Mr. Foot: Will the Minister press the necessity of these journals falling in with the rest of the Press?
    Mr. Burgin: These journals have gone rather farther, and have materially reduced their size, effecting a greater saving in newsprint than the reform suggested by the hon. Gentleman.
    Mr. Foot: Is there any reason why they should not follow a perfectly easy and convenient arrangement?

MESSAGE FROM THE LORDS.
That they have passed a Bill, intituled, "An Act to confer further powers upon the South Suburban Gas Company; and for other purposes." [South Suburban Gas Bill [Lords.]
SOUTH SUBURBAN GAS BILL [LORDS].
Read the First time; and referred to the Examiners of Petitions for Private Bills.

NATIONAL EXPENDITURE.
Ordered, That a message be sent to the Lords to request that their Lordships will be pleased to give leave to the Lord Catto to attend to be examined, as a Witness, before the Sub-Committee on Army Services, appointed by the Select Committee on NationalExpenditure.—[Sir Ralph Glyn.]
ORDERS OF THE DAY.
  WAYS AND MEANS.

    REPORT [25TH APRIL].
    Resolution reported:
    "That it is expedient to amend the law relating to the National Debt, Customs and Inland Revenue (including Excise) and to make further provision in connection with Finance."
    Resolution read a Second time.
    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
    3.48 p.m.
    The Chancellor of the Exchequer (Sir John Simon):With your permission, Mr. Speaker, I should like to inform the House that this Resolution for the Amendment of law has been put down to be taken first, because my intention is to make the subject-matter of the 29th Resolution, which deals with the Purchase Tax, the subject of a separate Bill from the Finance Bill. I think that that course will be for the convenience of everybody. The Finance Bill will, therefore, be introduced after the House has approved the Report of this Resolution and of the following 28 Resolutions, which deal with Finance Bill matters, and then the Resolution that remains, on the Purchase Tax will be taken separately. The reason for introducing a special Bill on the subject of the Purchase Tax is that I have put in motion discussions between various trade organisations and my advisers for the purpose of getting the greatest help in framing its Clauses, and I should not like to circulate a Bill for the Purchase Tax until that work has been completed. The work may take rather longer than the other matters which will be in the Finance Bill. My intention, therefore, is to introduce the Finance Bill, excluding the Purchase Tax, and then to introduce the Purchase Tax Bill. I am not quite sure whether what I have been saying will be regarded as strictly within the terms of order on the discussion of the Amendment of Law Resolution, but I am making this statement because I think the House would like to know about it.
    Mr. Dingle Foot: I take it that we shall proceed with this matter after the Resolution for the Amendment of Law?
    Sir J. Simon:Yes, Sir. The Resolution will, I hope, be carried to-morrow, and I shall proceed to introduce the Purchase Tax Bill immediately.
    Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

    REPORT [23RD APRIL].
    Resolutions reported:
    REPORT [23RD APRIL].
      CUSTOMS AND EXCISE.

        BEER (EXCISE).
        1. "That, as from the twenty-fourth day of April, nineteen hundred and forty, the duty of excise charged in respect of beer under Section one of the Finance (No. 2) Act, 1939, shall be charged at the following increased rates:

        £

        s.

        d.

        For every 36 gallons of worts of a specific gravity of 1,027 degrees or less

        3

        5

        0

        For every 36 gallon of worts of a specific gravity exceeding 1,027 degrees—

        For the first 1,027 degrees

        3

        5

        0

        For every additional degree in excess of 1,027 degrees

        0

        2

        6

        and so in proportion for any less number of gallons;
        and, in the case of beer in respect of which it is shown to the satisfaction of the Commissioners of Customs and Excise that duty of the foregoing increased rates has been paid, the excise drawback allowed under that Section shall be allowed at the following increased rates:

        £

        s.

        d.

        For every 36 gallons of beer of an original gravity of 1,027 degrees or less

        3

        5

        2

        For every 36 gallons of beer of an original gravity exceeding 1,027 degrees—

        For the first 1,027 degrees

        3

        5

        2

        For every additional degree in excess of 1,027 degrees

        0

        2

        6

        and so in proportion for any less number of gallons:
        Provided that as respects beer of an original gravity of less than 1,027 degrees, the amount of drawback allowable shall not exceed by more than two pence for every 36 gallons the amount of duty which is shown as aforesaid to have been paid.
        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        BEER (CUSTOMS).
        2. "That, as from the twenty-fourth day of April, nineteen hundred and forty, the duty of customs charged in respect of beer under

        733
        Section one of the Finance (No. 2) Act, 1939, shall be charged at the following increased rates:—

        £

        s.

        d.

        For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity of 1,027 degrees or less—

        In the case of beer being an Empire product

        3

        5

        5

        In the case of beer not being an Empire product

        4

        5

        5

        For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity exceeding 1,027 degrees—

        In the case of beer being an Empire product—

        For the first 1,027 degrees

        3

        5

        5

        For every additional degree in excess of 1,027 degrees

        0

        2

        6

        In the case of beer not being an Empire product—

        For the first 1,027 degrees

        4

        5

        5

        For every additional degree in excess of 1,027 degrees

        0

        2

        6

        and so in proportion for any less number of gallons;
        and in the case of beer in respect of which it is shown to the satisfaction of the Commissioners of Customs and Excise that duty at the foregoing increased rates has been paid, the customs drawback allowed under that Section shall be allowed at the following increased rates—

        For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity of 1,027 degrees or less—

        £

        s.

        d.

        In the case of beer being an Empire product

        3

        5

        2

        In the case of beer not being an Empire product

        4

        5

        2

        For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity exceeding 1,027 degrees—

        In the case of beer being an Empire product—

        For the first 1,027 degrees

        3

        5

        2

        For every additional degree in excess of 1,027 degrees

        0

        2

        6

        In the case of beer not being an Empire product—

        For the first 1,027 degrees

        4

        5

        2

        For every additional degree in excess of 1,027 degrees

        0

        2

        6

        and so in proportion for any less number of gallons:
        Provided that as respects beer of an original gravity of less than 1,027 degrees the amount of drawback allowable shall not exceed the amount of duty which is shown as aforesaid to have been paid, less three pence for every 36 gallons.
        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        SPIRITS (EXCISE).
        3. "That, as from the twenty-fourth day of April, nineteen hundred and forty, the rate of the duty of excise charged on spirits by Section three of the Finance Act, 1929, in addition to the duties specified in Part III of the First Schedule to that Act, shall be increased to four pounds, seventeen shillings and sixpence per gallon computed at proof.
        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        SPIRITS (CUSTOMS).
        4. "That, as from the twenty-fourth day of April, nineteen hundred and forty, the duties of customs charged on spirits of the descriptions set out in the first column of the following table by Section three of the Finance Act, 1920, in addition to the duties specified in Part II of the First Schedule to that Act, shall—

        (a) in the case of spirits being Empire products, be charged at the increased rates shown in the second column of that Table; and

        (b) in the case of spirits not being Empire products, be charged at the increased rates shown in the third column of that Table.

        TABLE.

        1.

        2.

        3.

        Description of Spirits.

        Preferential Rates.

        Full Rates.

        In cask.

        In bottle.

        In cask.

        In bottle.

        £

        s.

        d.

        £

        s.

        d.

        £

        s.

        d.

        £

        s.

        d.

        For every gallon computed at proof of—

        Brandy or rum

        4

        17

        10

        4

        18

        10

        5

        0

        4

        5

        1

        4

        Imitation rum or geneva

        4

        17

        11

        4

        18

        11

        5

        0

        5

        5

        1

        5

        Unsweetened spirits other than those already enumerated

        4

        17

        11

        4

        17

        11

        5

        0

        5

        5

        0

        5

        For every gallon of perfumed spirits

        7

        16

        0

        7

        17

        0

        8

        0

        0

        8

        1

        0

        For every gallon of liqueurs, cordials, mixtures and other preparations in bottle entered in such manner as to indicate that the strength is not to be tested

        —

        6

        12

        10

        —

        6

        16

        2

        For every gallon computed at proof of spirits of any description not heretofore mentioned, including naphtha and methylic alcohol purified so as to be potable, and mixtures and preparations containing spirits

        4

        17

        11

        4

        18

        11

        5

        0

        5

        5

        1

        5

        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        TOBACCO (CUSTOMS).
        5. "That, as from the twenty-fourth day of April, nineteen hundred and forty, in lieu of the full duties of customs theretofore chargeable on tobacco imported into the United Kingdom, there shall be charged on tobacco so imported of the descriptions set out in the first column of the following Table duties of customs at the rates respectively specified in the second column of that Table:

        TABLE.

        Description of Tobacco.

        Rate of duty per pound.

        Tobacco unmanufactured—

        £

        s.

        d.

        containing 10 lbs. or more moisture in every 100 lbs. weight thereof—

        unstripped

        0

        17

        6

        stripped

        0

        17

        6½

        containing less than 10 lbs. of moisture in every 100 lbs. weight thereof—

        unstripped

        0

        18

        6

        stripped

        0

        18

        6½

        Tobacco manufactured, viz.:

        Cigars

        1

        6

        1

        Cigarettes

        1

        2

        7

        Cavendish or Negrohead

        1

        1

        9

        Cavendish or Negrohead manufactured in bond

        1

        0

        0

        Other manufactured tobacco

        1

        0

        0

        Snuff—

        containing more than 13 lbs. moisture in every 100 lbs. weight thereof

        0

        19

        4

        Containing not more than 13 lbs. of moisture in every 100 lbs. weight thereof

        1

        1

        9

        and so in proportion for any less quantity.
        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        TOBACCO (EXCISE).
        6. "That, as from the twenty-fourth day of April, nineteen hundred and forty, in lieu of the duties of excise theretofore chargeable on tobacco grown in the United Kingdom, there shall be charged on tobacco so grown of the descriptions set out in the first column of the following Table duties of excise at the rates respectively specified in the second column of that Table:—

        TABLE.

        Description of Tobacco.

        Rate of duty per pound.

        s.

        d.

        Tobacco unmanufactured:

        containing 10 lbs. or more of moisture in every 100 lbs. weight thereof

        15

        3½

        containing less than 10 lbs. moisture in every 100 lbs. weight thereof

        16

        0⅞

        Tobacco manufactured, viz.:

        Cavendish or Negrohead manufactured in bond

        17

        4⅞

        and so in proportion for any less quantity.
        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        TOBACCO (DRAWBACK).
        7. "That, as respects tobacco on which there have been paid duties of customs or excise at the increased rates for which provision is made by any Resolution passed by the Committee of Ways and Means on the same date as this Resolution, drawback shall be allowed at the rates set out in the following Table, instead of at the rates set out in Part III of the Fourth Schedule to the Finance (No. 2) Act, 1939.

        TABLE.

        Description of Tobacco.

        Rate per pound.

        In respect of tobacco on which full customs has been paid.

        In respect of tobacco on which customs duty at a preferential rate or excise duty has been paid.

        s.

        d.

        s.

        d.

        Cigars

        18

        9

        16

        7

        Cigarettes

        18

        6

        16

        4

        Cut, roll, cake or other manufactured tobacco

        18

        3

        16

        1½

        Snuff (not being offal snuff)

        18

        0

        15

        11

        Stalks, shorts, or other refuse of tobacco, include offal snuff

        17

        9

        15

        8

        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        Matches (Customs).
        8. "That, as from the twenty-ninth day of April, nineteen hundred and forty, there shall be charged on matches, in lieu of the duties of customs theretofore chargeable thereon, the following duties of customs, that is to say—

        £

        s.

        d.

        For every 1,000 containers in which there are not more than 10 matches

        0

        12

        9

        For every 1,000 containers in which there are more than 10 matches, but not more than 30 matches

        1

        18

        3

        For every 144 containers in which there are more than 30 matches, but not more than 50 matches

        0

        9

        0

        £

        s.

        d.

        For every 144 containers in which there are more than matches:—

        For the first 50 matches

        0

        9

        0

        For every additional 5 matches or part of 5 matches in excess of 50 matches

        0

        0

        11

        and so in proportion for any less number of containers.
        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        MATCHES (EXCISE).
        9. "That, as from the twenty-ninth day of April, nineteen hundred and forty, there shall be charged on matches, in lieu of the duties of excise theretofore chargeable thereon, the following duties of excise, that is to say:—

        £

        s.

        d.

        For every 1,000 containers in which there are not more than 10 matches

        0

        12

        0

        For every 1,000 containers in which there are more than 10 matches, but not more than 30 matches

        1

        16

        0

        For every 144 containers in which there are more than 30 matches, but not more than 50 matches

        0

        8

        4

        For every 144 containers in which there are more than 50 matches:

        For the first 50 matches

        0

        8

        4

        For every additional 5 matches or part of 5 matches in excess of 50 matches

        0

        0

        10

        and so in proportion for any less number of containers.
        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        MECHANICAL LIGHTERS (CUSTOMS).
        10. "That, as from the twenty-ninth day of April, nineteen hundred and forty, the rate of the duty of customs chargeable under Section six of the Finance Act, 1928, on any mechanical lighter and on any component part of a mechanical lighter, other than a flint, shall be increased to three shillings and sixpence.
        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        MECHANICAL LIGHTERS (EXCISE).
        11. "That, as from the twenty-ninth day of April, nineteen hundred and forty, the rate of the duty of excise chargeable under Section six of the Finance Act, 1928, on every mechanical lighter manufactured in the United Kingdom which is complete, or which could be made complete by the addition of a flint,
        738
        and on every mechanical lighter sent out in an incomplete state from the premises of a manufacturer of mechanical lighters, shall be increased to two shillings and sixpence.
        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        DRAWBACK OF DUTIES UNDER SAFEGUARDING OF INDUSTRIES ACT, 1921.
        12. "That, in lieu of the drawback allowed under Sub-section (1) of Section twelve of the Safeguarding of Industries Act, 1921, with respect to goods chargeable with duty under Part I of that Act as amended by any subsequent enactment, it is expedient to provide for the allowance of drawback as if such goods were chargeable with duty under Part I of the Import Duties Act, 1932, so, however, that no drawback shall be allowed on the bringing of any such goods into a shipbuilding yard."
        FEES AND PENALTIES IN CONNECTION WITH LEAVE PERMITS FOR MECHANICALLY PROPELLED VEHICLES.
        13. "That fees not exceeding ten shillings may be charged in respect of permits issued to persons on leave in lieu of excise licences for mechanically propelled vehicles, and that those fees, and all penalties in respect of offences in relation to such permits, shall be paid into the Exchequer."

        INCOME TAX.
        CHARGE OF TAX.
        14. "That—

        (a) Income Tax for the year 1940–41 shall be charged at the standard rate of seven shillings and six pence in the pound, and, in the case of an individual whose total income exceeds one thousand five hundred pounds, at such higher rates in respect of the excess over one thousand five hundred pounds as Parliament may hereafter determine;

        (b) all such enactments as had effect with respect to the Income Tax charged for the year 1939–40, other than such enactments contained in the Finance (No. 2) Act, 1939, as by their terms relate only to tax for the year 1939–40, shall, subject to the provisions of such of the enactments contained in the said Act as by their terms relate only to the year 1940–41 and subsequent years, have effect with respect to the Income Tax charged for the year 1940–41.

        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        HIGHER RATES OF INCOME TAX FOR 1939–40.
        15. "That Income Tax for the year 1939–40 in respect of the excess of the total income of an individual over two thousand pounds shall be charged at rates in the pound which respectively exceed the standard rate by amounts equal to the amounts by which the rates at which Income Tax was charged in

        739
        respect of the said excess for the year 1938–39 respectively exceeded the standard rate for that year.
        And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

        TAXATION OF INCOME FROM FOREIGN POSSESSIONS.
        16. "That all income from possessions out of the United Kingdom which falls within Case V of Schedule D, other than income which is immediately derived from the carrying on of any trade, profession or vocation, or arises from any office, employment or pension, shall be taxable under Rule 1 of the Rules applicable to the said Case V (which provides for the taxation of income irrespective of the receipt thereof in the United Kingdom)."

        RENTS AND ANNUAL PAYMENTS.
        17. "That—

        (a) where rent is payable in respect of a house which is unoccupied for the whole or any part of a year of assessment, the relief from Income Tax to be given by reason that the house is unoccupied shall be dimished or withheld, and the tax for the year, so far as not otherwise recovered, shall be recoverable from the landlord;

        (b) persons entitled to rents under leases for 50 years or less and certain other leases shall, in certain cases, be liable to tax under Case VI of Schedule D, that liability being additional to the tax under Schedule A;

        (c) no deductions of tax for the year 1940–41 or any subsequent year of assessment shall be made under the Rules applicable to Schedule A from rents under leases to which paragraph (b) of this Resolution does not apply, or from annual payments other than rent, and any such rents and any annual payments (other than rent) to which any land is subject, shall be chargeable to tax under Case VI of Schedule D and treated for the purposes of the Income Tax Acts in all respects in the same way as patent royalties;

        (d) special provisions shall be made as respects deductions of tax where payments of rent or other annual payments have been made after the fifth day of April, nineteen hundred and forty, and before the passing of the Act giving to this Resolution."

        INCOME TAX ON DIVIDENDS PAID WITHOUT FULL DEDUCTION OF TAX.
        18. "That—

        (a) where a dividend is paid without deduction of tax or without the full deduction of tax, the amount received shall be deemed for the purposes of the Income Tax Acts to be a net amount received in respect of a dividend from the gross amount of which there has been made such deduction as is authorised by Rule 20 of the General Rules;

        740

        (b) preference dividends paid without deduction of tax or without the full deduction of tax shall not be treated as preference dividends as defined by Sub-section (4) of Section twelve of the Finance Act, 1930;

        (c) Sub-section (2) of Section seven of the Finance Act, 1931, shall apply to all dividends other than preference dividends as so defined;

        (d) the foregoing provisions shall have effect with respect to the year 1939–40 and all subsequent years of assessment."

        TREATMENT OF SECURITIES THE INCOME WHERE-FROM IS EXEMPT FROM TAX IN CERTAIN CASES.
        19. "That—

        (a) in computing any profits or losses of any banking business, assurance business or business consisting wholly or partly in dealing in securities, stocks or shares which is carried on in the United Kingdom by a person not resident therein, interest, dividends and other payments to which paragraph (d) of Rule 2 of the General Rules applicable to Schedule C extends shall be included;

        (b) if, in computing any profits or losses of any such business carried on in the United Kingdom by a person not ordinarily resident therein, the interest on any securities issued by the Treasury has, by virtue of an exemption from Income Tax for the interest thereon, to be excluded, there shall also be excluded any interest or other expenses, and any profits or losses, attributable to the acquisition or holding of the securities, or to transactions therein;

        (c) in the case of an assurance company not having its head office in the United Kingdom, the interest, dividends or payments dealt with in paragraph (a) of this Resolution shall be included in computing the income from the investments of its life assurance fund, and if in computing that in come any interest on any securities issued by the Treasury with an exemption from Income Tax for the interest thereon is excluded, a reduction shall be made in the relief in respect of management expenses;

        (d) the foregoing paragraphs of this Resolution shall apply in relation to any computation for the purposes of the year 1940–41 or subsequent years of assessment irrespective of the year or period by reference to which the computation is to be made;

        (e) it is expedient to declare the effect on the exemption from Income Tax enjoyed in certain circumstances as respects the interest, dividends and payments mentioned in the foregoing paragraphs of this Resolution of certain provisions of the Income Tax Acts which provide that in certain circumstances income of one person is to be deemed to be income of another person."

        WEAR AND TEAR OF LEASED MACHINERY AND PLANT.
        20. "That the deductions for wear and tear of machinery and plant shall not be allowed to any person in respect of machinery or plant let to him unless the Commissioners having jursidiction in the matter are satisfied

        741
        that the burden of the wear and tear of the machinery or plant will in fact fall directly upon that person."

        DOUBLE CLAIMS FOR CHILDREN RELIEF.
        21. "That where two or more individuals are, or would be but for this Resolution, entitled to relief from Income Tax in respect of the same child, the deduction mentioned in Sub-section (1) of Section twenty-one of the Finance Act, 1920, shall be apportioned among those individuals and the relief, if any, to be given to each of them determined accordingly."
        AMENDMENT OF SECTION 11 OF FINANCE (NO. 2) ACT, 1939.
        22. "That the relief from Surtax given under Section eleven of the Finance (No. 2) Act, 1939, to an individual whose actual earned income is less than his earned income as assessed but is more than four-fifths thereof shall, where the difference between his actual earned income and four-fifths of his earned income as assessed exceeds the relief from standard rate tax to which he would have been entitled under that Section if his actual earned income had been four-fiths of his earned income as assessed, be reduced by the amount of the excess."
        AMENDMENTS CONSEQUENTIAL ON PROVISIONS AS TO EXCESS PROFITS TAX ON INTERCONNECTED COMPANIES.
        23. "That any Act of the present Session making amendments of the law relating to excess profits tax in the case of interconnected companies may contain provisions (applicable to any year of assessment Income Tax for which is affected by trading results for a period with respect to any part of which excess profits tax is chargeable) prescribing the way in which payments and allowances made under those amendments are to be dealt with for Income Tax purposes, and varying, in connection with such companies, the provisions of the Finance (No. 2) Act, 1939, as to the relation of excess profits tax to Income Tax."

        MISCELLANEOUS.
        EXCESS PROFITS TAX.
        24. "That the extent and incidence of excess profits tax (for all chargeable accounting periods) shall be varied so as to give effect to amendments as to standard profits and the computation of capital, the computation of profits and losses, the relief to be given for deficiencies of profits, interconnected companies, and the relation of excess profits tax to the national defence contribution."

        NATIONAL DEFENCE CONTRIBUTION.
        25. "That the extent and incidence of the national defence contribution (as respects all chargeable accounting periods beginning on or after the first day of April, nineteen hundred and thirty-nine, and so much of any chargeable accounting period beginning before that date as falls on or after that date) shall be varied so as to give effect to amendments as to the computation of profits and losses, interconnected companies, and the relation of the national defence contribution to excess profits tax."

        ESTATE DUTY (AMENDMENTS AS TO VARIOUS MATTERS).
        26. "That the enactments relating to Estate Duty shall be amended with regard to—

        (a) the charge of duty on a death where an interest limited to cease on the death has been disposed of or has determined in whole or in part;

        (b) the exclusion, from the matters which may be treated as consideration for a disposition made in favour of a relative of the disponer or in favour of certain companies, of the grant in favour of the disponer of an annuity or other interest limited to cease on a death or of any similar interest, and of any operation connected with the enjoyment directly or indirectly by the disponer of any such interest;

        (c) the extension of references in the said enactments to a disposition so as to include references to the creation, and to the extinguishment, of a debt or other right, the extension of references therein to property so as to include in relation to the creation of a debt or other right, that debt or right, and in relation to the extinguishment of a debt or other right, the benefit thereby conferred, and the treating of a debt or right which passes on a death, and of such a benefit as aforesaid which so passes, as property in which the deceased had an interest;

        (d) the interests that are to be treated for the purposes of the said enactments as interests limited to cease on a death."

        ESTATE DUTY (CERTAIN COMPANIES).
        27. "That it is expedient that further provision be made—

        (a) for the charge of estate duty in respect of any such assets of such companies as may be specified in any Act of the present Session relating to finance in cases in which property has been transferred directly or indirectly to such a company by a person dying after the commencement of the said Act, or at his request or with his consent or acquiescence; and for treating the property in respect of which duty is charged as property in which the deceased had an interest;

        (b) for the valuation of shares or other interests in such a company which pass on a death occurring after the commencement of the said Act;

        (c) as to the cases in which, and the extent and manner to and in which, Section three of the Finance Act, 1894, is to have effect in relation to transactions in which such a company or its assets, or persons interested in any manner in such a company or its assets, is or are directly or indirectly concerned."

        POWER TO BORROW FOR CERTAIN FINANCIAL PURPOSES.
        28. "That the whole or any part of the sums required for the current financial year for the purposes mentioned in paragraph (a) or paragraph (b) of Sub-section (4) of Section twenty-three of the Finance Act, 1928, as amended by any subsequent enactment, may

        743
        be provided out of money borrowed for the purpose under the National Loans Act, 1939, instead of out of the permanent annual charge for the National Debt."

        PURCHASE TAX.
        29. "That—

        (a) provision shall be made for charging a tax in respect of purchases of goods from wholesale sellers and in respect of such other transactions relating to goods as may be provided by any Act of the present Session, subject to such exceptions and limitations as may be thereby provided;

        (b) the Treasury shall have power to make orders for bringing the tax into operation and for prescribing the rate of the tax from time to time;

        (c) an order made by the Treasury for the purposes of the preceding paragraph shall not have effect unless it is approved by a Resolution of this House, but if approved may have effect as from such date as may be specified in the order."

        First, Second, Third and Fourth Resolutions agreed to.

      TOBACCO DUTIES.
      Fifth Resolution read a Second time.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      3.51 p.m.
      Mr. Pethick-Lawrence: We on these benches have not opposed the preceding four Resolutions and we do not propose to oppose the Fifth or Sixth Resolutions relating to tobacco. We have taken this course in spite of the fact that we appreciate that these taxes will press very heavily on a number of working people who will be in a very strained condition with regard to their expenditure. I rise, however, to put to the Chancellor of the Exchequer two points with regard to this tobacco tax. The first point is a general one. I desire to ask the Chancellor what steps he is taking to ensure that customers who purchase tobacco in the retail shops are not mulcted, on account of the tax, of a larger amount than the tax which is collected by the Revenue authorities. I have not weighed the packets of the different brands of cigarettes, but there are people who think that the additions made to the prices of cigarettes are more than is adequately represented by the tax which is imposed by weight, and I would like to know from the Chancellor of the Exchequer, before we part with these Resolutions, what steps are taken to secure that that is not the case.
      744
      The other matter which I wish to raise on these tobacco duties is one that was put forward by my hon. and gallant Friend the Member for Central Wands worth (Colonel Nathan) with regard to the supply of cigarettes to members of His Majesty's Forces inside this country. There is considerable feeling in this matter in all parts of the House. I fully realise that it would be quite wrong for the Chancellor to make any concession which would lead to any real leakage of revenue. If, for instance, he were to propose that inside this country the price of cigarettes where soldiers are in the habit of dealing were to be at a lower level than that which prevailed in the outside market, then of course it would be possible for all sorts of friends and temporary friends of soldiers to get their tobacco cheap in that way, and that would be quite an impossible state of affairs. I also realise that one of the objects of the Chancellor of the Exchequer in this legislation is probably to keep down the actual amount of smoking in this country with a view to preserving foreign exchange. But what I think hon. Members are anxious to know, bearing in mind those two main considerations, is, whether the Chancellor of the Exchequer has given any serious thought to this matter. Of course, it is not for me to suggest ways in which the administrative difficulties might be overcome, possibly by allowing quite small purchases to soldiers or by allowing them to purchase at special canteens, or whatever steps might be taken with regard to purchases of a limited amount. I quite appreciate that there are considerable difficulties, but whether they are insurmountable or not I do not feel confident to judge.
      I should like to ask the Chancellor of the Exchequer whether he has already given consideration to this point, and if he has not done so whether he will do so between now and the Second Reading of the Finance Bill. If he finds himself able to make some concession, even if it is quite a small one, I feel sure that it will be received with approval not only on these benches but in all parts of the House. After all, the soldier who is staying in this country and has not gone overseas has a great many disabilities compared with the man serving abroad, and although I recognise the considerable difficulties I think that his peculiar

      745
      position needs special consideration. The Chancellor has already put up the price of one of the few luxuries enjoyed by such a man, namely, receiving and writing letters, and if at the same time he has to pay more for his cigarettes, his very few diversions from the ordinary routine life will be still further reduced. I hope, therefore, that we shall have a sympathetic if at present not a final concession by the Chancellor of the Exchequer on this point.
      3.57 p.m.
      Mr. W. H. Green: I am sure that no one in this House desires to make any harder the lot of the average private soldier. I am not sure that some hon. Members at least are fully seized of the hardship and grievance which the private soldier feels over this tobacco tax, particularly those on active service at home and more particularly those engaged in the anti-aircraft service, who have an extraordinarily monotonous time. To them tobacco, not only cigarettes but pipe tobacco, is a real necessity. If I may mention a personal incident to enforce this view in order that the Chancellor may perhaps give it attention which he might not otherwise do, I have a son serving at home in an anti-aircraft unit. When the Budget was announced he said to me: "Dad, my colleagues here are very upset about this tobacco business. I am sure that if the Government only knew the circumstances which surround these private soldiers they would think twice before they imposed this duty. What is actually happening here is this: On Wednesday night the average soldier has to finish his smoking"—that was before the tax came into operation—"Heaven only knows what will happen when this tax comes on. Further, we see private soldiers lighting cigarettes and, knowing that the number is severely limited, putting them out half smoked in the hope of having the other half at some later time."
      I suggest that this is not the occasion to extend these grievances. I know the difficulties with which the Chancellor will be faced if he sets about endeavouring to remove from the serving soldier in this country this impost, but surely it is not beyond the realms of ingenuity to devise some means by which an average allowance of tobacco and cigarettes to a serving soldier at home might be served, if not
      746
      duty free at least free of this extra impost which the Budget envisages. I urge the Chancellor, for the sake of our soldiers—and it ought not to be an appeal which needed emphasis to have effect—to consider whether there is not some means by which thousands of these men with extremely limited incomes might be exempt from this extra impost.
      4.0 p.m.
      Mr. Graham White: I think this is probably the only point in connection with these duties which the House would wish to consider. There is no doubt, from the correspondence which we have all received, that this is a matter which has aroused a certain amount of disappointment among a very large number of the serving troops. I received a long letter only this morning suggesting a piece of machinery for giving effect to some concession. The suggestion was—I have no knowledge which would enable me to determine whether or not it would be effective machinery—that the tobacco might be sold to the N.A.A.F.I. canteens throughout the country at a price which would not include the additional impost. I put forward that suggestion to the Chancellor of the Exchequer for what it may be worth.
      4.2 p.m.
      Mr. Burke: I also have had a number of letters from people in distant parts of the country serving on home defence—old soldiers used to smoking and having a good deal of time on their hands, but whose duties are very monotonous and dreary. They complain that while they are as far from their homes as many of the men on the North Western Front or in France, they do not have anything like the facilities which those men have; for instance, they do not get concerts and all those little amenities that are being given to the men in France, and yet their duties are highly important, as this House knows very well. They are at danger spots in the country, and in particular I have in mind a place which has been raided over and over again, away up in the North. The men in France, while under no more danger and living a comparatively easier life, have the facility of sending home letters without any postage, but the men for whom I am speaking will now have to write home at an increased charge and will not have the chance of getting free

      747
      cigarettes. I would like the Chancellor of the Exchequer to consider whether it would not be possible, in Army canteens, to allow these men to get a rationed quantity of cigarettes per week at reduced prices, so as to make their conditions something comparable to those of the rest of His Majesty's Forces who are overseas, for these men are doing just as arduous and necessary a job on our own shores.
      4.4 p.m.
      Sir J. Simon:The right hon. Gentleman who first raised this point to-day asked me whether I had already maturely considered it. I certainly have considered it. I have a great deal of sympathy with the difficulty which I appreciate is felt; and I think nearly every Member of this House has had his attention called to it by correspondence. I am fully alive to it, but it is a very difficult thing indeed to arrange for. It is really, of course, of the nature of a Customs and Excise Duty that it should be represented in the price of the article here at home. After the duty has been paid and the article is exported, the fact that it passes out of the country gives the opportunity for giving any necessary rebate, and we do give it. Consequently, it follows that there is no difficulty really in securing for those who are serving in France that they do not bear the duty. Hon. Members will appreciate that, but that difference does not arise from the fact that we conceive of those who are serving in France as though they were necessarily rendering a different or superior service to those who are serving all over the country at home, as the hon. Gentleman opposite has said. It is not that at all; it is the difficulty of arrangement.
      We have tried to meet the point in the more limited cases which I will mention to the House, because I would not like anyone to suppose that we are indifferent to this matter. If you take, for instance, supplies of tobacco for those who are wounded in hospital—soldiers who have been wounded and are lying in hospital—I think it has really been done outside the strict terms of the Statute, but in fact I am, through the Vote of Credit, seeing that tobacco is provided for those people who are being looked after, wounded in hospital, without the duty being paid.
      748
      That, of course, is a very limited class. They cannot set up a trade in cigarettes, and there may be some limit to the amount of their smoking, for medical or other reasons, but that is a case where we could do it, and we did it very gladly, as I am sure everybody all over the House would wish. In the same way, there are cases where gifts of tobacco are sent from overseas into this country. There is a number of approved organisations, including the British Red Cross Society and, I think, the Navy League, which are allowed to receive free of duty imported gifts of tobacco for distribution to the wounded in accredited hospitals. There again, as the House will see, the machinery is possible, because, of course, as the package comes through the Customs it is possible to make certain that it is really addressed to the Red Cross or whoever it may be, and that it has not been opened or distributed or otherwise dealt with on the way.
      In a limited case like that we can do it, and where we can, we ought to do it; but this is a very different case. It is an extremely difficult case to conceive a solution for. The classes affected are really very wide. Probably many of us think of the particular class brought to our attention, like the hon. Gentleman who has spoken, but you would have to include a very great variety of services all more or less connected with the war—men and women in all sorts of services. I must say that I share the view which was expressed, I think, at this Box yesterday by the Secretary of State for War, to whom a question on this subject was addressed. He pointed out—and I do not see the answer to it—that if you really were to say that in the canteens cigarettes were to be sold across the counter at less than the normal price—less the tax or less the latest addition to the tax—really you would have no practical means of securing that the sale was just a limited sale for the individual smoker; and nothing would be easier than to start a traffic in such cigarettes, to the advantage of both the person buying them and the person to whom they are sold. I do not think it would be a very heinous crime, because generally a soldier is friendly with plenty of people in the neighbourhood, and it is asking a good deal of him to assume that he will take so strict a view of the needs of the Chancellor of the Exchequer that

      749
      he will never yield to that very obvious opportunity.
      I think the Secretary of State for War was right when he said that you cannot get over that difficulty. No doubt it could be got over—I admit it—if the canteens themselves were prepared to purchase the cigarettes in the ordinary way, wholesale, of course, and then to retail them over the counter at a lower price. That is certainly possible. That does not touch the revenue at all, and it satisfies all the necessary conditions about Customs and Excise. I can imagine that there might be difficulties in that solution, though I daresay hon. Members would like to have it further investigated. I do not oppose it at all, but it is a little hard, I would have thought, on those who do not happen to be smokers if the profits, if there are profits, of the canteen are thus to be used for the purpose of subsidising those who wish to buy cigarettes. You might say, "We will do the same thing about beer and spirits. "It seems to me, however, that we are really face to face with a practical difficulty. I have taken the House entirely into my confidence. I have no sort of wish to make things more difficult for the serving man, whether here or anywhere else, but looking at it, as I am bound to look at it, first from the revenue point of view and secondly from the practicable point of view, we have not struck a method of solution which will get over those difficulties.
      I am perfectly prepared to say that I will communicate further with the Secretary of State for War, and I need not say that any good suggestion which may be made in the Debate or which occurs to anybody shall be studied with every desire to be helpful, but I am bound to give the answer that so far as I see at present I really do not see how these difficulties can in fact be got over. While it is true, of course, that there are many restrictions which the serving soldier, or sailor, or airman is under, we have to remember that ordinary citizens too, some of them with very small incomes, who are not provided out of public funds with shelter and food, have, out of their own pockets, to bear this additional tobacco tax. I realise that it is indeed a very considerable hardship to a great many people, and I wish I could find some way of avoiding inflicting these burdens, but I cannot, and, that being
      750
      so, I am bound to give what I am afraid is this rather discouraging answer to the House.
      The right hon. Gentleman asked a second question—he put it first—and it is a question that is very familiar when a rate of duty is changed, namely, how far one can be sure that ordinary customers are protected against being mulcted of a greater addition to the price of the cigarettes which they are buying than the increase in the duty would warrant. For the most part I think these things are sold under a brand, and it is not a case of a particular shop pricing them. They are mostly sold under a brand, although there is a certain amount of competition between different brands. It is not true to say at the moment that the Prices of Goods Act has actually been applied to the subject of cigarettes and tobacco, but it could be, and I agree that it is very important that we should do what we can to secure that there is not an improper addition made to the price.
      Mr. Shinwell: Is the right hon. Gentleman not aware that that kind of profiteering is already going on in this House?
      Sir J. Simon:Not, I presume, in the House, but possibly in the precincts. That would be a question more properly addressed to the Kitchen Committee. Anyhow, I think that all that one can say is that we always keep our eyes open to this sort of thing, and in the case of the tobacco trade, which has always been a trade which has been responsive to the appeals made to it by the authorities, I should be very much surprised if there were illegitimate profiteering in this regard. If it turns out that there is any, I shall be quite prepared to communicate with the trade on the question.
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
      Sixth to Eleventh Resolutions agreed to.

      DRAWBACK OF DUTIES.
      Twelfth Resolution read a Second time.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      Mr. Lees-Smith: Perhaps we can have an explanation of the reason for this Resolution.
      4.15 p.m.
      The Financial Secretary to the Treasury (Captain Crookshank):It is a very small point designed for one purpose only—that of export. It is a question of the differences in administration in regard to drawback under the Safeguarding of Industries Act, 1921, and under the Import Duties Act, 1932. Section 12 (1) of the Safeguarding of Industries Act provides for payment of drawback on any re-exported key industry goods, provided that the goods have not been used in this country, and provided that they have not been processed in this country before manufacture. But the Act of 1932 gives power to the Treasury to provide for payment of drawback notwithstanding the fact that the goods may have been submitted to some process in this country, provided that the change is not sufficiently great to alter their form or character. As this particular arrangement applies in the large sphere of drawbacks covered by the Import Duties Act, it seems only reasonable that if the conditions which existed under the earlier Act are at any time a hindrance, the drawbacks should be assimilated to those under the other Act. That is the only effect of the proposal. The right hon. Gentleman will realise that that is a rather difficult matter to explain on the spur of the moment; and perhaps if he wants to raise any further points, a suitable time would be when the Finance Bill is before the House.
      Mr. Lees-Smith: I do not want to raise any further points. I see that according to the Second Schedule of the Import Duties Act the Import Duties Advisory Committee must be consulted before any action is taken. Is that intended under this machinery?
      Captain Crookshank: I am sorry. Perhaps I should have reminded the House that since the outbreak of the war the functions of the Import Duties Advisory Committee have been taken over by the Treasury.
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

      LEAVE PERMITS, MECHANICALLY-PROPELLED VEHICLES.
      Thirteenth Resolution read a Second time.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      4.18 p.m.
      Sir Irving Albery: I beg to move, in line 2, after "leave," to insert:
      "from any of the Armed Forces of the Crown."
      From questions which have been put in this House, I have always understood it to be the desire of the House that anyone home on leave from the Services should have this privilege. I put this Amendment down only because I was not quite sure that the Resolution, because of the way in which it is framed, does not extend that privilege far beyond what the House would wish. It is our wish that it should cover only those on leave from service in the Forces at the time.
      4.19 p.m.
      Mr. Charles Williams: I beg to second the Amendment.
      I hope that some words will be put in to provide that all members of the Forces, from the Dominions and the Colonies as well as from this country, will be able to enjoy this privilege.
      4.20 p.m.
      Sir J. Simon:I quite appreciate the reasons which have led my hon. Friends to raise this point. Frankly, the language of the Resolution is very wide and it usually seems to be counted a virtue when the Government put down a Resolution in wide terms, and a reproach to them when it is put down in unduly narrow terms. It is intended to give this relief which I think is a very welcome relief to those on short leave from the Armed Forces of the Crown, but I do not think it would be wise to put in the words of the Amendment. There may be a limited class, outside that, to whom we want to give this concession. If we were to limit it strictly to the case of individuals home on leave from any of the Armed Forces, it would not include such women's services as the nursing service, the Women's Auxiliary Territorial Service, the Women's Auxiliary Air Force, and so on.
      Mr. Edmund Harvey: The British Red Cross.
      Sir J. Simon: That might be another case. At any rate, there are cases which we should wish to include which would be excluded if we were to put in the limitation suggested. It is not, of course, intended to make the thing of universal application. If somebody came home on leave, perhaps for a fortnight, it would be very hard for him to have to take out a licence from the beginning of the calendar month, perhaps to the end of the quarter. This privilege is, I think, one of the features of the Budget that are universally approved.
      Mr. A. Bevan: What machinery is established in order to satisfy the House that the extent of the privilege is sufficiently limited? Who are to be consulted, the Service Departments?
      Sir J. Simon: The idea was that there would be a permit issued on behalf of the individual by, let us say, the Admiralty; but also, for the sake of the Revenue, the consent of the Chancellor of the Exchequer would have to be given.
      Mr. Bevan: While it is the desire of everybody that these privileges should be given, if too many privileges are given to officers, there might be dissatisfaction on the part of privates, who may not have cars.
      Sir J. Simon: A great many of the men might have cars laid up.
      Mr. Bevan: A very limited number.
      Sir J. Simon: A car or a motor cycle.
      Amendment, by leave, withdrawn.
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
      Fourteenth Resolution read a Second time.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      4.23 p.m.
      Mr. Pethick-Lawrence:I do not rise to oppose this Resolution, but to say a few words in regard to it, and in regard to the prospective taxation of this country. This Resolution, as I understand, relates to three points. In the first place, it relates to the standard rate of tax during the present year, and it proposes to fix that rate at 7s. 6d. In the second place, it relates to a pos-
      754
      sibility, at any rate, of lowering the starting point for Surtax, the amount to be determined next year. In the third place, I think I am right in saying, it relates to the alterations in the basis of Income Tax applying in the present year.
      Sir J. Simon: I do not quite follow the third point.
      Mr. Pethick-Lawrence: Alterations in the abatements.
      Sir J. Simon: No, they are all Statute law. They are in the last Finance Act.
      Mr. Pethick-Lawrence:They only come into operation this year? It is not necessary to pass this to bring them into operation?
      Sir J. Simon: No.
      Mr. Pethick-Lawrence: Then the Resolution applies only to the first two points: the standard rate of Income Tax and the Surtax, as it may be decided next year. There is no doubt that the Income Tax is a very severe burden. I certainly should not dispute that. At the same time, we must recognise that the Income Tax is a means of raising a very large part of the Revenue of this country, and that if we are to raise a very considerable Revenue to meet the cost of the war, it is largely to the Income Tax that we must look. The Chancellor of the Exchequer, by a number of devices, has increased taxation of all kinds; but I think he will agree that the total amount so raised cannot, by its nature, be very large. I know that the Purchase Tax, if it is passed through this House, may produce further sums, but the Income Tax must remain, if not the sole or even the main, at least a very considerable machine for raising Revenue.
      In the circumstances, I think it is unfortunate that in the September Budget the Chancellor of the Exchequer announced what was his intention, at any rate, for the current year. It is always, I think, a mistake for Chancellors of the Exchequer to declare months or years in advance what they are going to do. I remember that the late Lord Snowden, when he was Chancellor of the Exchequer, made that mistake in 1930. He announced that it was not his intention to make further increases in taxation in the following year. I thought at the time that that was a very grave error of

      755
      judgment. [Interruption.] Yes, I took steps to make that view known at the time. I think my view was proved to be correct afterwards. I believe that that announcement was largely the cause of the troubles that occurred in 1931. I think that the Chancellor, in making predictions about what he thought would take place this year, was unwise.
      As I said, the Income Tax is a very severe burden, but I noticed that the hon. Member for Hastings (Mr. Hely-Hutchinson) supported me in what I said last week, that we must not shut out from our minds the possibility of quite substantial increases in Income Tax as the war proceeds. At the week-end, I was talking to a friend of mine, who, I think, is a Conservative. He said that, from a personal point of view, he was very thankful that Income Tax was not higher than it was, but he was surprised, because he had thought that it might go up to 10s. He said, "I loathe the idea of a 10s. Income Tax, but still more do I loathe the thought of what would happen if, owing to our failure to take appropriate action, the Germans were to win this war. "The Chancellor of the Exchequer last Thursday saw fit to twit me about something I had said in a broadcast speech the previous evening. I have no objection, of course, to the Chancellor's little jokes, particularly about the Red Queen.
      Sir J. Simon: It was the White Queen.
      Mr. Pethick-Lawrence: I have the report here, and what the Chancellor said was "the Red Queen. "I understand him now to say that it was the White Queen. That is not a matter of supreme importance at the present moment. I rather gathered that the right hon. Gentleman wanted the House to think that I was taking advantage of a speech to the public to say what I would not say here in this House. That is quite foreign to my habit. So far from representing the nature of the proposal of the right hon. Gentleman more lightly in the speech that I broadcast than I did in this House, the contrary is the case. I spoke in that speech of an increase, whereas in this House I had said, and I defended my view, that the Income Tax at the standard rate for the year 1940–41 was actually going to be lower than it had been effectively for the six months that
      756
      had gone by, because for effective purposes the Income Tax for the six months since the outbreak of war has not been 7s.; it has for effective purposes been 8s. 6d. What the Chancellor has actually done is to allow the tax for the ensuing year to be actually lower than it has been for the past six months.
      I will be frank with the House and the right hon. Gentleman. I have said from the beginning that many of the people of considerable wealth could not, having regard to their responsibilities and liabilities, pay unlimited extensions of tax, but I think that the right hon. Gentleman will have to consider carefully, not merely next year but possibly before this year is out, whether there will not have to be a further increase of tax. The right hon. Gentleman has taken the view with regard to Surtax—and it is a nice question upon which I do not intend to criticise him—that he could not very well lower the figure at which Surtax begins for persons whose Surtax was due in the current year, but he is proposing to take power in this Resolution to do so for a year later. The fairest and best way of imposing taxes upon income would be to have a graduated tax stretched all the way from the point at which Income Tax begins up to the highest income. We do not do that in this country mainly for administrative reasons. It is much easier to administer a flat-rate tax, with abatements and exemptions, on the one hand, and to confine strictly graduated duties to the much fewer number of incomes that start at a certain figure. It ought to be the object of the Chancellor of the Exchequer so to work these two engines as to produce a fairly regular rhythm all the way from the lower level to the highest. I imagine that the Chancellor of the Exchequer is right in thinking that the time has come when a much larger contribution will have to be borne out of income. A lower limit for Surtax will have to be imposed. Whether in fixing it at £1,500 the Chancellor of the Exchequer is right or not, I do not presume to say; we shall have to examine all that when we discuss it later. It is clear that the reduction of the amount from £2,000 is probably fully justified, and the sooner the Chancellor of the Exchequer is able to operate on that basis the better.
      What I said just now about a higher tax on income even in this year will not be applicable to the question of a reduced

      757
      lower limit of Surtax. I think I am correct in saying that, assuming the view the Chancellor of the Exchequer takes is upheld, it could not be operated until April of next year, so that even if the Chancellor of the Exchequer finds it necessary to have a September Budget he will not be able to make use of that provision. I feel that it is very important to observe the right to impose burdens, however onerous, and however much in other ways they are regrettable, in places where the money can be found. Our difficulty is that among the people with large incomes there are some who have grave responsibilities and liabilities and who would be in the greatest difficulty in finding the taxes the Chancellor of the Exchequer imposed. At the same time, we know well from some of our picture papers, and from other sources, that there is a class of individuals who squander on personal luxury of all kinds money which the nation so greatly needs, and it was particularly to those people that I made the reference in the speech to which I have already referred.
      4.38 p.m.
      Mr. Benson: I am very disappointed both with the standard rate of Income Tax and the decision of the Chancellor of the Exchequer not to reduce Surtax below the level of £1,500. I agree with my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) that the present rates of tax are a heavy burden. I do not think that anybody disputes that at all ranges, except the very lowest, Income Tax and Surtax are a heavy burden, but the question of the weight of the burden is entirely irrelevant. The question we have to ask ourselves is not, Is this burden heavy or is it grievous, but, Is the amount of taxation imposed adequate to our problem? And nothing else matters. The only point that we can really consider is the adequacy of the amount to be raised by taxation, and, frankly, I do not think that, under the Budget proposals, the taxation which is proposed to be raised is in any degree adequate. We have to meet the cost of this year's war out of this year's income, apart from such securities that we can sell abroad. We cannot put the burden upon posterity. If we could, I should be only too delighted to do so. In this respect I am rather like the Irishman who asked,
      758
      "What has posterity ever done for me?" I would be willing, if it were a feasible possibility, to thrust the burden upon posterity, but it cannot be done. You cannot fight this year's war with next year's guns, and whatever we spend on the war has to come out of the national income this year. We are not raising by taxation, and we shall not raise by taxation, even in addition to the loans from real saving that we may get, the full cost of the war. That is generally agreed.
      There is no reason why the Chancellor of the Exchequer should not have brought his Surtax down to £1,000. I see that the highest rate of Income Tax on an income of £1,000, that is of a single person, is £306, less than 30 per cent. If you take the tax to be paid in respect of a married couple, with three children, it is £224, less than a quarter. The sum of £1,000 is an income which puts a person not in the wealthy class, but far above the range of those who can be described as the poorer classes. We are faced with an expenditure which will amount to something like half the total of the national income this year, and the taxation that is imposed upon people who are not even near the poverty line but are comparatively wealthy, as incomes go, is entirely inadequate. I am not disputing the weight of the burdens, but the fact that the burdens that are being imposed, heavy though they may be, are inadequate for the task. The money will have to be found. If it is not found by taxation and by genuine loans, it will be found by inflation. The burden will be placed upon the community in some way or other. The snag about bearing the burden by means of inflation is that it hits, not the person with £1,000, but the wretched individual with 30s., 40s. or 50s. a week. We cannot escape the burden. We cannot escape paying for this year's war during this year. It is far more equitable to face the burden boldly and see that it rests upon shoulders which can bear it. I do not dispute the crushing weight of it, but I do contend that the burden does not meet the situation.
      4.42 p.m.
      Sir Stanley Reed: AH sections of this House always listen to the right hon. Gentleman the Member for

      759
      East Edinburgh (Mr. Pethick-Lawrence) with profound respect, especially as in financial questions he represents a tradition which, alas, has been swept away under pressure of sterner events. But I would ask him to reconsider the argument advanced to-day—that the Chancellor of the Exchequer was unwise in warning us that we would have to pay Income Tax at the higher rate of 7s. 6d. in the £ in the coming year. I think he will admit that these higher taxes mean a very difficult process of readjustment. Indeed he dealt with this point elsewhere in his remarks. These readjustments are not only painful to the payee but even more painful to those affected by the economies the taxpayer has to make in order to bring his expenditure into proportion with the higher scale of taxation. This was inadequately cleared up by my right hon. and gallant Friend the Financial Secretary to the Treasury last week. I would therefore ask the right hon. Gentleman the Member for East Edinburgh to reconsider this part of his argument, and if he is not able to do so, to urge the Chancellor of the Exchequer not to take account of it in his Budgetary arrangements, but rather to give us the longest reasonable time to consider the effect of the burdens he is bound to put upon us, so that the inevitable adjustments may not be unduly severe, either on the payee, or on those most affected by them, even more harshly than the payee himself.
      4.44 p.m.
      Sir J. Simon:We have had an interesting short discussion on this very big question, naturally raised on the Resolution which deals with Income Tax, and I will just address a few remarks before we pass on. The right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) made reference—not intended in any censorious spirit I am sure—to what I had said about his broadcast. I did not in the least intend to suggest that he was whispering to his hearers some slander about the Budget; what I had in mind was that he did say, in the course of his address, that the Income Tax that I was proposing to-day was small. Those are his words. I cannot agree with that description. The circumstances we have to face to-day—expenditure measuring thousands of millions of pounds—is no reason at all
      760
      for calling the increase of Income Tax this year small. It is not small at all. It will produce in a full year £61,750,000 more money than before.
      Mr. Pethick-Lawrence:The right hon. Gentleman professes to quote things which I said outside this House and to controvert them, but he is not quoting from the text of what I said. I did not say that the total additional yield of Income Tax was small; what I said was that the burden he was imposing on the smart set was small, which was quite a different thing. The fact that they will have to pay 7s. 6d. against what they paid last year is, so far as that particular section of society is concerned, a small increase.
      Sir J. Simon: I have the text of the right hon. Gentleman's observations almost at my hand, and we can look at the actual words he used. I do not recollect any reference to the smart set in that connection. Now, Income Tax does not only touch the smart set and I think it quite foolish to regard one of the principal instruments of taxation in this country as though it operated only against a limited class of people. It is a severe burden on people of all kinds—business men, professional men and working people—and I will never subscribe to the view that, if in a single year we can get out of ordinary Income Tax over £60,000,000, that can be regarded as a small matter, although I do agree that it is a small fraction of the total we have to face this year.
      I think the hon. Member for Aylesbury (Sir S. Reed) made a very just answer to the criticism that it was a mistake for me to indicate, last September, what might be the arrangement I should have to make when the present Budget came round. At any rate, I did not repeat the mistake of the late Lord Snowden in giving an undertaking that there would not be any increase of taxation. What I said was this: It is already the end of September and people who have to face Income Tax burdens have to consider carefully what arrangements they will make. It seems to me to be a service to the country and not an injury to say that, acting as I am, only in the second half of the financial year, I must severely increase the Income Tax, that I am not merely thinking of the next six months but looking further ahead, and that we ought

      761
      to accept for a longer period the sort of levels we may have to attain.
      It is to be observed under this head, also, that while it is quite true that we may have to have recourse, before we have done with this war, to this instrument of taxation in the most formidable fashion—and I offer no assurance to the contrary—there can be no doubt as to how the taxation will have to operate. It will not operate simply by getting further contributions from what the right hon. Gentleman calls "the smart set". If you were to sweep away and put into the Exchequer every single farthing of income of everybody in the country who has over £2,000, not tax it, but shovel it into the Revenue, the total additional amount you would get would be not much more than £60,000,000. It will not be by adding all these burdens at that end of the scale of Income Tax that you will produce very large additional sums. I welcome the right hon. Gentleman's courage and candour when he insists that Income Tax shall be called upon, if this war continues, to make a great additional contribution, but do not let us come along and say that the smart set will have to pay. It must be remembered that just as two-thirds of the whole of the consumption in this country is consumption by individuals who are not getting more than £5 per week, so it is true that if you want to get greater additional amounts from Income Tax, it must not be merely at the top end of the scale. You must face the fact that there must be very substantial additional claims, many of them very hard to bear, at the end of the scale which is lower I do not mean the lowest of all; of course, we must let the lowest of all have such protection as we can give them, because they have so little. I am glad to have the support of the right hon. Gentleman opposite when I say that if in future years of this war we are to ask for a greater additional amount of money by the imposition of Income Tax, it has got to be on a curve which, make no mistake, is bound to cut deeply into the incomes which are at the lower end of the scale.
      The right hon. Gentleman also referred to Surtax. The House, I am sure, appreciates the reason why I took the step that I did. If you do not enlarge in advance the field of income within which Surtax can be imposed, then when you
      762
      come to consider how Surtax is to be revised, you will necessarily be committed to the field which already exists. It seems to me my duty to take now the step of enlarging the field, with the result that it will be possible next year, if it is so decided, to get a contribution in the form of Surtax or additional tax not beginning at £2,000, but at £1,500. There, again, let there be no doubt as to what the effect of that will be. Without giving figures to the House, you may take it that the result of such changes as are hereafter made, in so far additional revenue may be got by way of Surtax from incomes from £1,500 to £2,000, will be comparatively small. The place where such changes might produce a substantial rise would be higher in the scale, the reason being that Surtax is really built up by charging a different rate on different slices of income and adding, them together. The result would be to push up the charge right through the scale. I have made these observations in order to make my purpose clear. I do agree that we have to face the big possibility—and I cannot say how soon or how much—of yet further taxation. I cannot but be struck by the slight difference in tone of the Debates on this subject and those in September last. The truth is, as I think my hon. Friend the Member for Was all (Sir G. Schuster) observed the other day, that, when I stood at this Box in September, and said that Income Tax would be 7s. 6d., a shudder went through the House. I can remember an hon. Member on the Labour benches making a speech that evening in which he said he was astonished at the length to which I had gone. So were a great many others. But in this respect, as in many other respects, familiarity breeds contempt, although it is extraordinarily easy to fall into the error of saying that this is not so very serious, after all. None the less, it is nothing to the seriousness of our failing to take the steps necessary to win the war, and I am sure of this, that the House and country will never fail to accept any other burdens that are imposed so long as they will help us to win the war.
      Question, "That this House doth agree with the Commitee in the said Resolution," put, and agreed to.
      Fifteenth Resolution agreed to.

      763
      Sixteenth Resolution read a Second time.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      4.58 p.m.
      Mr. Benson:I hope either the Chancellor or the Solicitor-General will give us some explanation of this Resolution. It is obvious what it means, but I would like to know exactly how far its operations will take us and whether it is likely to catch the Archer-Shee type of trust. Has there been any calculation of how much taxation it is likely to bring in? There is one point I would like to mention, and that is that I notice it excludes entirely from taxation any income from trade or profession except what is brought into this country. When we are in such desperate need for revenue, the legislation which deals with the small company under the control of not more than five persons might have been applied to trading companies abroad. I see no reason why a company, trading abroad, should be allowed to build up large reserves which, if they were brought over in the form of income to this country, would be liable to Surtax. I do not see any good reason why the Commissioners should not be in a position to demand that companies trading abroad, controlled by not more than five persons, should be compelled to have their profits placed to reserve, treated as if they had been dividend declared.
      4.59 p.m.
      The Solicitor-General (Sir Terence O'Connor):This particular Resolution must gladden the heart of the right hon. Gentleman the Member for East Edinburg (Mr. Pethick-Lawrence), because I seem to recollect that a good many times in preceding years he has advocated this change in the law. It arises in this way, as the hon. Member for Chesterfield (Mr. Benson) pointed out. Incomes derived by persons resident here from foreign possessions are charged under Case V of Schedule D. Foreign possessions may be either stocks, shares or rents, in which case the whole of the income is taxed or of possessions other than stocks, shares, rents and securities. In the case of the second category, only the income brought to this country is taxed. The second category includes cases governed by the Archer-Shee case, which decided that in-
      764
      come from trusts or settlements comes into the second category and therefore only income brought into this country is taxed. The hon. Member is quite right in saying that the effect of legislation to be introduced will be to put an end to that anomaly.
      The other feature to which he called attention relates to the exceptions which it is proposed by the Resolution we should make. Dealing first with trades, professions, vocations and employment, in most cases these will involve considerable expenditure of the income abroad in the country where it is earned, and in those circumstances it has been thought right and fair that only the income brought into this country should be the subject of tax. In the case of businesses, I am afraid that I cannot agree with the hon. Member that it is not desirable at the present time to encourage people with genuine foreign businesses to devote a part of their profits to the extension and development of their business. At the present moment we are trying to make a great drive in favour of an increased export trade to build up assets abroad to strengthen the financial position of this country. One of the worst steps we could take would be to denude genuine foreign businesses of the power of extension by devoting some of their profits to the development and extension of their business. If they are not genuine cases then they are very liable to be caught under Section 18 of the Act of 1936. If they are tax avoidance cases, businesses designed only as a cloak for the transfer of assets abroad, they are caught, but in the case of genuine businesses it is thought that they should not be prevented from building up a reserve fund in order to extend and develop their businesses abroad.
      Mr. Benson: That point is met by the legislation.
      The Solicitor-General:I cannot agree that it is entirely met, but it will be met in future to a greater extent in the case of businesses abroad.
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
      Seventeenth Resolution read a Second time.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      Mr. John Wilmot: Can the Financial Secretary tell me whether paragraph (a) of this Resolution means that a man has to pay tax on money which he has not received?
      5.5 p.m.
      Captain Crookshank:This Resolution deals with the point raised in September by the hon. Member for Kennington (Mr. Wilmot) and the hon. Member for South Shields (Mr. Ede). The paragraph to which the hon. Member has referred is to ensure that, in future, relief will no longer be given in respect of unoccupied property where rent is payable. At present if a house is not occupied, though the rent is paid, it appears that taxation cannot be collected, and it is to get over that difficulty that the paragraph has been inserted.
      Mr. Pethick-Lawrence: I think I raised this matter a year or two ago.
      Captain Crookshank: I apologise to the right hon. Member, but I think the most recent instances are those of the two hon. Members to whom I have referred.
      Mr. Benson: I should also like some explanation of paragraph (b), which refers to rents under leases for 50 years or less.
      Captain Crookshank: This is a most complicated matter, but I will do my best to deal with it and explain why there is a difference made in the case of leases of over 50 years. It is thought that for the purposes of legislation it is wise to make this provision on the ground that whilst leases under 50 years represent expenditure of income, in the case of leases over 50 years the rent is more in the nature of a charge on income. In this paragraph we are concerned with three points. The first is that the Local Commissioners may have fixed the Schedule A assessment below the actual rent. That is one class of case. Secondly, the rent may have been raised after a year of revaluation, while under the law relating to Schedule A the old assessment based on the original rent must go on year after year until the next general revaluation takes place, although there has been a change in the rent. The third case is the most interesting; but it is an exceedingly complicated one, and I hardly dare venture to explain it. It is the case where there is a chain of sub-lettings. For instance, if tax is deducted at the lowest of the rentals in the chain, then a greater amount of tax
      766
      cannot be deducted on the higher rentals in the chain. Suppose there is a rental of £1,000 and there is a sub-letting of £600, then tax is deducted at the rate of 7s. 6d. on the £600 and more tax cannot be deducted on the £1,000 rental than has been deducted on the £600. There is a gap, and the purpose of this provision is to ensure that the right tax is paid for Income Tax purposes. Simultaneously provision is made in the other type of case. I am afraid that is not very clear. It is a very difficult point, but the provision is made to cover a gap in these rental problems. When the Finance Bill is seen I hope it will be more clear and I do not think there will be any controversy about the matter.
      Mr. Tomlinson: Does it always work the other way? If tax is paid on the £1,000, can the man on the £600 mark claim a rebate on the amount which has been paid on the higher rent?
      Mr. Craven-Ellis: The Financial Secretary has not said whether, if the rental is below the quinquennial valuation, there will be any reduction in the assessment.
      Captain Sir William Brass: I want to put the same point. I want to know whether, if the assessment is too high for the rent, there will be a rebate the other way.
      Sir I. Albery:I also should like to put the same question. In the case of property where the rental, say, is £1,000 per annum and there is a sub-let at £600, is there any adjustment in the other direction?
      Mr. Benson:I know from long experience that if property is valued at £1,000 in the quinquennial valuation and is let at £800 later on, I have never had any difficulty in arranging a reduction in the assessment with the local surveyor.
      Captain Crookshank: The hon. Member has really said what I had in mind. There is always the right of appeal.
      Mr. MacLaren: I take it that the amendments which are going to be made in regard to quinquennial valuations will get over the difficulty of quinquennial valuations being fixed for five years?
      Mr. Craven-Ellis: Is it possible for the Financial Secretary to reply to my question?
      Captain Crookshank: I think we had really better wait until we see the Clause in the Finance Bill before we embark upon a detailed discussion.
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
      Eighteenth Resolution read a Second time.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      5.14 p.m.
      Sir I. Albery:I want some explanation of this Resolution. I have read it carefully, and I must confess that I cannot see what the effect of it will be. I do not think the House should part with the Resolution without understanding it.
      5.15 p.m.
      The Attorney-General (Sir Donald Somervell):I think I can explain this matter fairly briefly in the following way. Any hon. or right hon. Member who is fortunate enough to have shares in a company will from time to time, unless he is very unlucky, receive dividends. Although he may not have noticed it, I am certain he will always have received those dividends in one or other of two forms. The form will either have been, say, 10 per cent. and then a deduction of Income Tax, leaving, say, £7 10s.; or, he will have received a sum which will have been expressed to be free of tax. Of course, in both cases the sum which he gets in his pocket, having borne tax as part of the profits of the company, does not bear Income Tax again. On the other hand, if he had got the same sum by reason of the exercise of a profession—that is to say, in circumstances in which it had not already been taxed—he would have had to pay tax under a direct assessment. Therefore, £5 from a company's dividend represents more by the amount of the tax deducted than the same sum would represent if it had to bear tax after coming into one's pocket.
      This is important to three classes of people. It is important to those who are in the lower ranges of income, and who, therefore, have a right to recover Income Tax which may have been deducted from dividends which they have received, because they have a right to a rebate. It is important, from the Chancellor's point
      768
      of view, when one comes to Surtax payers, because a Surtax payer's total income is the gross sum before the tax has been deducted. It is also important to charities which may have a right to recover, under certain Sections, the tax referable to the sums which they receive as dividends. This system went on perfectly well until it occurred to some ingenious gentleman who was anxious to reduce his tax liability that, instead of having 10 per cent. and then deducting the tax, instead of using the magic words "free of tax"—which had been construed by the courts as entitling what is called a grossing-up to the gross figure—by using the magic words "without deduction of tax, "he could say, "You cannot gross up this sum; it does not represent a sum from which either actually or notionally tax has been deducted. "Therefore, for Surtax purposes, instead of grossing it up, it had to go in as the actual amount of cash that had come into the shareholder's pocket.
      In a recent case, the House of Lords held that that was right. Of course, the tax law dealing with companies goes back to the old days before joint stock companies existed in their present form. I do not want to go into the legal technicalities of that decision of the House of Lords, but it was held that Parliament had inadvertently used words which enabled or necessitated this result taking place if the magic words "without deduction of tax "were used. All that this Resolution does—there have to be special provisions for preference dividends—is to say that a person is not in any better position as regards paying Surtax if the company accompanies the cheque with a little slip saying "without deduction of tax" than he is if the company accompanies it with a little slip saying "free of tax." The realities are clearly the same in both cases, and the Resolution enables this technical flaw to be put right.
      5.20 p.m.
      Mr. Benson: We are continually discussing the most complicated provisions of Income Tax law arising from some decision of the House of Lords. Would it not be simpler to pass a short, simple Clause amending the House of Lords?
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

      769
      Nineteenth Resolution read a Second time.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      5.21 p.m.
      Mr. Benson:I should like to raise one or two points with regard to this Resolution. I can quite understand paragraph (b) of this Resolution in so far as it deals with businesses which hold stocks and shares. In dealing in Government securities from which tax is not deducted by a person who is living abroad, apparently the profits from dealing in those securities, as well as the revenue arising from them, are excluded. That seems to me to be illogical. There may be some good reason for this, but I should be glad to know why profits arising from dealing in securities, as well as the interest on the securities, are to be excluded. With regard to paragraph (c), if interest is excluded in this case, there is to be a reduction made in respect of management expenses. That is legitimate, but how much deduction is there to be? Is the reduction to be equivalent to the amount of interest which is excluded from taxation, or is it to be some proportionate sum? I should be glad if these points could be explained. I should also be glad if the right hon. and learned Gentleman would explain paragraph (e).
      5.22 p.m.
      The Attorney-General:This Resolution is also slightly complicated, but it has arisen in the following way. I will deal first with foreign, Dominion and Colonial securities. Under the Income Tax Acts, foreign, Dominion and Colonial securities which arrange for their dividends to be paid through an agent here are prima facie subjected to tax, but there is a provision that if the shares are held by a non-resident they shall escape taxation, for the very good reason that the securities, not being here, since they are foreign, Dominion or Colonial securities, and the person owning them not being here, since he is a non-resident, the mere fact that there is an agent here who acts as the channel for payment would not justify us in bringing the securities within the general net.
      Mr. MacLaren: Why should the money come here at all?
      The Attorney-General:It comes here simply because there is an agent here through whom it goes. It comes in and it goes out. In dealing with private citizens and individuals who are non-residents that is fair, and no difficulty or question arose; but the matter arose in the case of a bank in one of the Dominions. Being a Dominion bank, it was a non-resident. It opened a branch here and carried on business here, and in those circumstances, it became liable to tax on such part of its business as was carried on by the branch here. That went on all right for a time, until one day this point was raised. In the banking business carried on here there were certain of these foreign and Colonial securities. They were part of the bank's stock-in-trade, and the interest or dividends on them would fall, under the principles on which banks are assessed, to be assessed as part of its income. Those particular securities in the hands of a non-resident were exempted from tax. The argument that was made against the bank was, "This would be true if they were held by a private person, but in your case they are part of your income as a trader, falling to be assessed on you as a bank carrying on trade." The court held, however, that the words conferring the exemption applied, because the bank was a non-resident, and that one could not read into the words an exception for the case of a non-resident who came within the net because he was carrying on a trading business here. The House will see that if this were allowed to stand it would put the Dominion or foreign bank which comes here and opens a branch in a favoured position in competing with our banks. Therefore, I think there will be no controversy about this being put right.
      There was also the case of War Loan. That is a little more difficult because the court held, when the point was raised as to the War Loan which was exempted from taxation, that the application of that exemption to banks, and I think probably insurance companies, which came to trade here was not only in accordance with something in the Income Tax Acts as passed from time to time, but also in accordance with the prospectus on which the money was raised. That being so, although it may have been that Parliament did not intend to give a trading advantage to non-residents who

      771
      came here, it was felt that it would be quite wrong, as a matter of principle, to take away an exemption which the court had said was to be found expressed in the prospectus on which the money was subscribed. Therefore, in this Resolution, we deal differently with those Treasury securities and the foreign and Colonial securities.
      The second point of the Resolution is this: Having dealt with those classes of securities and said that they were exempted from tax for the reasons I have given, the Crown said, in that case, if the securities were to escape taxation, the proportion of expenses attributable to them should not be allowed to be deducted. If the income was ruled out, the expenses attributable to it should be ruled out. However, the court, although it saw a good deal of commonsense behind that argument, said that there was no provision in the Act which enabled that division to be made. What we propose to do in the Resolution is this. We leave the Government securities exempted, but since they are exempted, we say that such proportion of expenses as can be properly attributed to that part of the income cannot be deducted. The hon. Member for Chesterfield (Mr. Benson) asked what would be the proportion of management expenses. The proportion depends on the amount of income affected, and as a matter of fact, very little difficulty ever arises in adjustments of that kind between the Inland Revenue and banks or insurance companies. As far as foreign and colonial securities are concerned, exemption will no longer apply in the case of either banks or insurance companies. I do not think there will be any objection to that. The provision places them on a par, as far as business here is concerned, with the British banks and insurance companies with which they are in competition. As to the reason for bringing in "profits," I have already explained that the object is to eliminate the approximate expenses. What you are doing is to carve out a certain slice of the business, including profits or losses. Paragraph (E) is quite different. There was passed, two or three years ago, a Section directed against tax avoidance by the transfer of assets to companies abroad. The possibility occurred to us, in view of this very general decision of
      772
      the courts about the War Loan exemption, that if the tax avoider among the assets which he transferred to the company abroad included War Loan, he would be able to say that that War Loan was now held by a non-resident and he might go on to say, "It cannot, therefore, be deemed to be my income within the Section." We are satisfied—and that is why this will have a declaratory form—that that is not the result which the words used by Parliament bring about, but as it was a point which might obviously occur to these rather ingenious people, we thought it would save litigation, prevent disputes and remove doubts if we declared in the Finance Bill this year that no point of that kind could be sought to be made.
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
      Twentieth and Twenty-first Resolutions agreed to.
      Twenty-second Resolution read a Second time.
      5.32 p.m.
      Mr. Benson: I should like an explanation of this Resolution. It seems so clear, that I have a suspicion that I have misunderstood it. Reading it in connection with Section 11 of the second Finance Act of last year, it looks as if this provision had been droped out of that Section by accident. In the form in which Section 11 was passed, under the concession given to the Surtax payer, it seems to me that he would pay on less than his actual and not merely on less than his assessed income for the year, but for this new Resolution. Had the terms of this Resolution been embodied in the last Finance Act, I should have felt certain that I understood it, but the fact that it was not then included and is being put in now makes me suspicious. It is, I submit, valuable to have explanations on points of this kind on these Resolutions, rather than on the Finance Bill itself, because they help us to understand the Clauses of the Bill. That is why I ask for a statement on this Resolution.
      5.34 p.m.
      The Solicitor-General: I am not surprised that the hon. Member has not entirely understood what this Resolution does. It deals with a mistake, a flaw

      773
      which exists on account of the wording of Section 11 of the Finance Act of last September. The House may not remember what Section 11 of that Act was designed to do, and I shall proceed to tell them, in order to make clear what is the mistake which we are trying to repair. Section 11 dealt with the very difficult case of people whose incomes had been substantially reduced owing to the war, and it provided that where a person's income was reduced by 20 per cent. or more on account of circumstances arising directly or indirectly out of the war, he could claim to be assessed for tax, not according to Income Tax law on his income of the previous year, but on the actual earned income of that year. Machinery was set up for dealing with that position. Similar machinery was set up to enable the Surtax payer to invoke the assistance of the Section in order that next year, when dealing with this year's income, he should be charged for Surtax only on the actual earned income and not on the income as assessed.
      As I pointed out when the matter was under discussion in September, there were marginal cases. Suppose that a man, although he had earned more than 80 per cent. of his previous year's income, had earned only 80 per cent. plus £10. To deal with that marginal case, there was a provision that he could, at his option, surrender the £10 and claim a rebate of the tax which he would otherwise be called upon to pay. That is a not uncommon provision in the Income Tax Acts. In framing the Section dealing with these marginal cases we had a faulty Sub-section (3), and I can best illustrate the fault we are now trying to cure by giving a few figures. Suppose a case of £1,000 a year of Surtax income. If the man had, in his actual earnings for the year, only £800 then Section 11 settled the matter. His income was reduced by 20 per cent. and he could claim to be assessed for both purposes on the actual income of£800. But suppose his actual earnings were £850. Then he would invoke the marginal provision. He would say, "My income, it is true, is reduced by less than 20 per cent. If it had been reduced by 20 per cent. I would be entitled to have returned to me all the tax appropriate to the £200—the difference between £800 and £1,000. But I must allow that reduction of tax to be abated to the extent by which what I
      774
      have actually received exceeds £800. That is to say I must deduct from the tax appropriate to £200, which happens to be £56, the surplus over £800 which is £50. Therefore, I am entitled to relief of £6."
      That is a clear case, and exactly the same transaction applies in estimating his Surtax liability. But suppose his income to have been £890. He does not get any standard rate tax back by invoking that because the amount he has to surrender overtops the tax which he will recover. He does not gain any benefit on the Income Tax provision. But as the Surtax provisions are drawn, he is able by means of a flaw in the drafting of the Income Tax Section to say this, "Although it is true I did not gain any rebate of standard rate tax, I came within the Section, and by virtue of that, I am entitled in making my return for Surtax to say that I have shown a reduced income, amounting only to £800."Therefore, he includes in his return of total income, not the actual income earned of £890, not the notional income—the income of the preceding year—but a figure of £800 which he has no right to do at all. Everybody knows the haste with which this legislation was drawn up last September and this was obviously an accident. It is to cure the effects of that drafting accident that we are taking the powers contained in this Resolution and that is why I have been involved in this, I fear, confusing and difficult explanation.
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
      Twenty-third Resolution agreed to.
      Twenty-fourth Resolution read a Second time.
      Mr. Lees-Smith:I think we should have some explanation of this Resolution. Is it intended to deal with the various negotiations between the Treasury and the representatives of commercial organisations?
      5.40 p.m.
      Captain Crookshank:My right hon. Friend the Chancellor of the Exchequer, in his Budget speech, indicated the type of amendment of the law to be proposed in the Finance Bill, as a result of the further study of this matter which was promised when we were discussing the

      775
      original Excess Profits Tax in September. The answer to the right hon. Gentleman is, "Yes."
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
      Twenty-fifth Resolution read a Second time.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      Captain Crookshank: May I say that as the National Defence Contribution and the Excess Profits Tax are alternative duties, in many cases some of the amendments which will be made with regard to Excess Profits Tax will have to be taken into account, in relation to the National Defence Contribution, in order to enable suitable Clauses to be introduced where necessary. That is why we are proposing this Resolution.
      Question put, and agreed to.

      ESTATE DUTY.
      Twenty-sixth Resolution read a Second time.
      5.42 p.m.
      The Solicitor-General: It may be convenient—especially as I notice certain anticipatory movements on the benches opposite—to say a few words at this stage about this formidable Resolution and what it is devised to do. It is devised to check certain forms of avoidance of Estate Duty. Paragraph (a) deals with cases where an interest in property is limited to cease on death. In such cases, where that interest has been surrendered or disposed of during the lifetime of the owner, there is a chance at present of methods being devised whereby it can avoid Estate Duty. An attempt was made to deal with the situation in the Finance Act, 1900. At that time it did not seem necessary to provide for the case in which the surrender of the life interest was made to a person other than the remainder man. In such a case, no merger resulted of the life interest and the residuary interest. But with the steepening of taxation and the increased ingenuity of those who advise people how to avoid taxation schemes grew up which had to be dealt with by legislation in 1940.
      776
      The kind of scheme then aimed at was that in which the life tenant and the remainderman surrendered their interests to a company for shares, the remainderman taking the shares and the life tenant taking for the remainder of his life, income from the company in the form of directors' fees. The result was that although the life tenant derived from the company an income which was for his life, equivalent to what he had got from the estate, the property did not pass on his death, because the two interests were merged in the company. Section 35 of the 1930 Act was aimed at dealing with that situation. But we have found that that Section is not as effective as we had hoped, and paragraph (a) of the Resolution is devised to enable us to introduce legislation to tighten up the provisions of that Section. The way we propose to do it is to take power that where there is a life tenancy, the property is to be deemed to pass on the life tenant's death, notwithstanding the fact that he has surrendered his interest, and without regard to whom the surrender may have been made. The only surrender we shall recognise is one made more than three years before death, and thereafter the life tenant had no interest whatsoever in the property transferred. By that method we hope to check these cases.
      Paragraph (b) dealswith a different kind of avoidance. It is a sort of case where a man during his life transfers the whole of his property, or a substantial part of it, to a near relative in return for an annuity. Supposing a man is fortunate enough to have £500,000and in his life transfers that amount to his son in return for an annuity of, say £25,000 or £30,000 a year. On his death on a transaction of that kind the property does not pass because it has passed in his lifetime. It is perfectly true that if he sold his estate to a company for an annuity—a proper insurance company—the property would have passed out of his control, but the whole essence of buying an annuity is that you have the confidence and the backing of a substantial company carrying out that kind of business and to whom you can look to for security. But transactions between a man and a relative must rightly be the object of the closest possible scrutiny to see whether they are not for the purpose of the avoidance of Death Duty. We do not look on transactions of that kind as being fair-sale purchases of

      777
      annuities, and the remedy we are proposing is that where property is transferred by an individual to certain specified persons in consideration of an annuity payable to him, the property so transferred shall be treated as liable to Estate Duty on the transferor's death. The specified persons will be near relations and private companies.
      Paragraph (c) deals with a different matter, which is again a scheme for tax evasion consisting of evading the full effect of Death Duties by creating artificial debts, and the object is to impose the charge of duty where a gift is made by the deceased during his life in the form of the creation of a debt. The simple sort of case is where a man makes a loan charged on his property as a consideration for whatever it is which he is buying from a company or relative instead of making an actual transfer of property to them. As again, having made a loan, he could extinguish it, even though it is extinguished within three years of his death, and the extinguishment was in substance a gift within that period. Under the existing law, there would be no liability of duty. I can give the House instances, and perhaps the simplest is that of "A" lending £100,000 to a relative and then releasing the debt in consideration of an annuity. The relief is not a "disposition of property," and the existing law does not catch that transaction, but when we have passed the legislation here contemplated, it will.
      Lastly, paragraph (d) is designed to give an extended meaning to the expression "an estate limited to cease on death." A good many references are creeping into settlements of provisions for an interest to terminate on death or on prior happenings of some other contingency, and we propose that references to an interest limited to cease on death shall include references to its being subject to cessation on death or on the prior occurrence of some other event.
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
      Twenty-seventh Resolution read a Second time.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      5.54 p.m.
      The Solicitor-General: This also deals with preventing the avoidance of duty by transfers, and I gather that a little explanation would be welcome. The evil aimed at is the avoidance of duty by a person about to die transferring to a company property of which he is competent to dispose; and the valuation of shares in a private company passing on the death of a deceased owner. These matters have been dealt with by the Finance Act, 1930, but the provisions of that Act are not very satisfactory. I could give the House instances. The best way of illustrating the case with which we are trying to deal is by giving an example of an individual who has during his lifetime made a transfer of property to a company, which is a company falling within Section 21 of the Finance Act, 1922, relating to one-man companies, and has power to enjoy or dispose of either income or capital at his death. We feel that a charge of duty should be made upon his death. Sometimes it is found that a deceased person made during his life a transfer of property to such a company and could enjoy or dispose of the income or capital or receive benefits out of the company that had been created.
      Suppose a man transfers property which is worth £100,000 to a company with a capital of £100,000 in £1 shares. Suppose 90,000 of the shares are ordinary shares and 10,000 are extraordinary shares, carrying all the voting rights, and the man gives the 90,000 shares to the children and retains the 10,000 shares, retaining all the voting rights, in his own possession during his lifetime. Each class of shareholders is now entitled to whatever dividend the person in possession of the voting rights cares to give them. So long as he lives he, in other words, can allot the whole of the income if he likes to the 10,000 shares in respect of which he has the voting right. What we say in this case is that you must examine over the last three years of the deceased person's life to see what real benefits he has had from the company and how these benefits are represented in proportion to the income of the company. Supposing the income he enjoyed was £6,200, £8,000 and £7,700, you would take the proportion that these figures bear to the total income of the company, in each of the last accounting three years, and relate

      779
      that proportion to the total assets of the company.
      Paragraph (b) is to deal with a Section of the Finance Act, 1930, which badly needs redrafting. That Section was drafted to prevent the avoidance of Estate Duty in connection with the valuation of shares of a private company. The basis in such cases was to be the market value of the shares. Suppose the owner of shares in a private company, instead of taking the income by way of dividend on his shares, takes the whole income of the company by way of a salary to himself. Then the valuation of the shares is a very artificial one and does not represent the real value of the property that passes on death. In order to deal with that situation, we propose that the Act should be so amended as to enable us to value the shares of the company by reference to the total assets of the company and not by mere reference to the market value. That is one of the provisions that will be enacted by virtue of paragraph (b), which will have certain correlative effects.
      Paragraph (c) is to deal with a different matter. It is necessary for the inclusion of a Clause to limit the operation of Section 3 of the Finance Act, 1894, which exempts from Estate Duty, wholly or partially, transactions for full or partial considerations in relation to transactions with certain private companies. Unless we can exclude the operation of Section 3, the transfer of property to a company in exchange for shares can itself be said to be a transaction for full consideration. The Clause in the Bill aims at the prevention of the avoidance of Estate Duty by these transfers, often to a large extent nullified by the existing provision of Section 3 which we now want to alter. If we excluded it entirely, we should do a good many injustices which we do not want to do, but it is necessary that it should be modified. The type of case we are trying to deal with is where property is transferred to a company where there are other shareholders beside the transferor. In such cases, supposing the transferor buys an annuity from the company, then to the extent of his own interest in the company he is really only buying for himself, but to the extent that there are other shareholders in its assets, as well as himself, of course these other
      780
      shareholders are contributing to the provision of the annuity. The solution proposed will be that in such cases the transaction with such a company will be one for consideration to the extent to which the Commissioners of Inland Revenue are satisfied that it would have been so treated if the company's assets had been held upon trust for giving effect to the rights of the various shareholders. This is not the ordinary, simple case of a man transferring his assets to a company and paying himself by way of dividends out of the company. We must, in order to be fair, apportion the incidence of the duty in cases where there has been a burden upon the other shareholders in the company who have themselves contributed. To that extent it can be said that the company has been giving real consideration for the transaction.
      6.1 p.m.
      Mr. Benson:I hope the hon. and learned Gentleman will not think I am reflecting on his lucidity when I say that I shall know more about the Resolution when I read his speech in the Official Report. If I gathered it correctly, there are two types of evasion of which he gave examples. One was the company in which 10,000 shares are retained, the voting rights concentrated in them and the major portion of the dividends given to them. He also instanced the case of the method of depressing the valuation of shares by paying a high salary to the managing director so that the valuation placed on the dividends is very low. There is also the case, which I am not sure is covered, of the company in which the shares are transferreden bloc, with the possible exception of one share, to the children, and then by arrangement the disponer is appointed managing director. He receives, not dividend, on his one share, but a salary which absorbs all or most of the revenue of the company. Is that point covered in the Resolution?
      6.3 p.m.
      The Solicitor-General:I will do the same as the hon. Gentleman is going to do with me; I will read his observations to-morrow morning. He will appreciate that we are dealing only with the Resolution and that when we see the Clauses will be the time to decide whether they fit the case he mentioned or not. The examples I have given have been only instances of

      781
      the kind of case which will be covered by the general principle which we are asking the Committee to accept. I cannot say more at the moment.
      Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.
      Twenty-eighth Resolution agreed to.
      Bill ordered to be brought in upon the said Resolutions by the Chairman of Ways and Means, the Chancellor of the Exchequer and Captain Crookshank.

      FINANCE BILL,
      "to grant certain duties of Customs and Inland Revenue (including Excise), to alter other Duties, and to amend the law relating to Customs and Inland Revenue (including Excise), and the National Debt, and to make further provision in connection with finance," presented accordingly, and read the First time; to be read a Second time To-morrow, and to be printed. [Bill 38.]
  WAYS AND MEANS.
    REPORT [23RD APRIL.]

      PURCHASE TAX.
      Twenty-ninth Resolution read a Second time.
      6.4 p.m.
      Mr. Foot: I beg to move, in line 9, after "House," to insert:
      "either without modification or with such modifications by way of reduction as may be specified in the Resolution."
      I raise this point at this stage because it seems to me to affect the control of this House over taxation. It is proposed, as I understand the Resolution, that in future taxes shall be imposed on commodities by way of an Order-in-Council. As hon. Members know, this House never initiates taxation; it rests with the Government to do that; but it has always been part of the powers of the House to refuse to grant a tax and also to reduce the amount that is asked for. Under this proposal an Order will be brought forward, the House will simply have to say, "Aye" or "No," and it will have no power to reduce the amount in question. If, for instance, the Chancellor comes forward with an Order proposing that there shall be a tax of 50 per cent. on boots, it will be open to the House under the procedure as now envisaged only to accept
      782
      or to reject the Order outright. It will not be open to any hon. Member to propose that the tax should be 25 instead of 50 per cent. We in this part of the House have frequently raised the question whether the House should have the power to amend Orders and Regulations. This is a slightly different question, because here we are dealing, not with ordinary Orders or Regulations, but with Orders which impose a charge.
      I am glad to be able to say that I have a precedent in the Safeguarding of Industries Act, 1921. By that Act power was taken to impose duties by Order on goods coming into the country, but the power was specifically reserved to the House of Commons to modify the Order if it thought fit. On this occasion we ought to follow that precedent and keep that power in our own hands. I am aware that there is a precedent on the Government side. They can point to the Import Duties Act, 1932, which did not give the House power to reduce the tax which is placed on imports. Here we are dealing with an even wider range of taxation than was dealt with in the 1932 Act. We are dealing with taxation which will affect not only imported commodities, but a whole range of commodities; in fact, as we understand it, practically everything except foodstuffs. In that case, when we are inventing an entirely new instrument of taxation, I suggest that the House ought to keep in its hand the utmost power over the use of that instrument.
      Mr. E. Harvey: I beg to second the Amendment.
      6.8 p.m.
      Sir J. Simon:As the hon. Gentleman has said, this class of question has been raised more than once before by himself and by others in that part of the House. The question now arises on the point that when the Purchase Tax Bill becomes an Act of Parliament an Order will be brought before the House for approval. I think it was by a slip of the tongue that the hon. Gentleman spoke of an Order-in-Council. In this case it will be a Treasury Order which will be brought before the House, much in the same way as certain other Treasury Orders are brought before the House. The House is asked to say after debate whether it approves or disapproves. That question is one which,

      783
      as I apprehend, will be in order on the discussion on the relevant Clause in the Purchase Tax Bill when it is before the House, and this Amendment can well be moved then.
      Mr. Foot:The reason I put the Amendment down on the Money Resolution is that it appeared to me, as there was a reference to the procedure in the Money Resolution, that an Amendment to the Bill might conceivably be held to be inconsistent with the Money Resolution.
      Sir J. Simon:I have taken advice from the draftsman, and I have, I believe, the approval of the Table, when I say that I think the hon. Gentleman may feel safe on that point. I would much sooner we dealt with it then because it is difficult to discuss a thing which is so much in vacuo. I imagine that the House is expecting from me some statement on the general scope and plan of the tax, and I am prepared to give that. I should not at this stage be prepared to accept this Amendment, and as I think the hon. Gentleman may take it that there will be an opportunity of raising it on the Bill later, perhaps he will be so good as to let me say that I have taken note of the suggestion, that I should not think it was a good suggestion, and that it is certainly not one which I can accept at this stage.
      6.11 p.m.
      Mr. Pethick-Lawrence: I do not want to keep the House from discussing the proposals involved in this Resolution, but the point raised by the hon. and learned Gentleman is certainly one of great substance, and if this were the only opportunity of debating it, I should support his point of view, because it is a serious matter. Probably, however, the most convenient method would be to discuss it on the substance of the Resolution.
      Mr. Foot:In view of the opinion which has been expressed and which, of course, I accept, that such an Amendment would not be out of order on the Bill, and in view of the fact that the right hon. Gentleman, while not giving me much encouragement, has at any rate taken note of the suggestion and will consider it between now and the Report stage of the Bill, I beg to ask leave to withdraw the Amendment.
      784
      Amendment, by leave, withdrawn.
      Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
      6.13 p.m.
      Sir J. Simon:I think that those hon. Members who have been able to attend to-day have done so largely because they expected to have some account on this Resolution of the proposals that we have in mind and which are described in the Resolution as the Purchase Tax. I will do my best to acquaint the House in more detail of what we propose. The idea in this country is novel, and I am not surprised that, as the reference I made to it in the Budget speech came rather late in a long performance, it has not perhaps received the clear understanding that I would have wished to create for it. There are really two propositions involved in this Resolution, and in asking the House to approve it I would ask them to consider these two propositions. Of course, they will not be finally decided to-day, for this Resolution is merely opening the way for a Bill which I will introduce if and when the House approves the Resolution.
      The first proposition is that it is right in present circumstances that we should formulate a sales tax. The second proposition is that the sales tax should be that form of sales tax which is imposed and collected at the stage when the wholesale merchant sells to a retailer. Those are the two broad issues which are involved in the Resolution. I address myself first to those two propositions, and then, before I end, I will indicate in outline what sort of machinery will be necessary if we are to put those two propositions into effect.
      The first question concerns sales taxes in general. They exist in many parts of the world. They have beer, applied, and applied with success, in the British Dominions; in fact, the Government of New Zealand, the Labour Government of New Zealand, probably provided me with my nearest precedent for a Purchase Tax in this form. Undoubtedly the tax has been found in many countries to be a useful instrument for collecting revenue, and an instrument which has this very important feature, that if it is used with boldness the amount of revenue produced is very considerable. Nothing is more distressing to a Chancellor of the Ex-

      785
      chequer in these days, when naturally he receives a great many suggestions about taxation—and I always do my best to read every letter about them which comes to me—than to see how almost invariably the proposals submitted, many of which are very ingenious, would produce very little money. The sales tax, in some other countries, has produced a good deal of money, and I have no doubt the Purchase Tax, as I call it, may be made to do so here.
      There are various forms in which the tax has been imposed, and I think I had better call attention to four different forms of the tax which, in one country or another, or according to different theories, have been proposed. There is, first of all, what is commonly referred to as the turnover tax. I have had endless letters asking, "Why don't you propose a turnover tax? "A turnover tax essentially means that you charge the tax at each transaction of sale and purchase in the history of an article. It follows that in a great many cases the same article will have to pay tax more than once as it passes from A to B and to C and D, and so on, all in the way of trade, until we finally get to the consumer; and the consumer, therefore, whether he knows it or not—and he does not always know it—is really bearing a very much bigger burden, and a burden which includes the element of a tax upon a tax.
      I am myself entirely satisfied that a turnover tax as I have just described it would not be accepted by the commercial opinion of the country as just. Among other things, it has this objection, a serious one, that it would operate very unequally according to the way in which a particular trade is geared, or even as between competitors in the same trade, because it may be that in one instance a commodity ultimately reaches the hands of the consumer after passing through a series of sales and purchases, whereas if there are companies with a vertical construction in an industry or a particular branch of an industry, it may pass straight from the manufacturer to the retail shop and the customer and bears tax only once. There is a very large number of other reasons against such a tax which could be given, and I think we may take it that whatever we may do we shall not prefer a turnover tax to any of the other forms which I am going to mention.
      786
      The second form of tax under this general head which has attracted much attention, partly because people travelling on the Continent have come across it and also because theorists have written a great deal about it, is a tax upon the retailer as he sells the article to the consumer in his shop. Examples of it could be quoted from some foreign countries. This form of tax, too, is open to very serious objections. I am disposed to think that one of the biggest objections is that it multiplies the number of recorded transactions, all of which have to be taken account of, in an overwhelming fashion. There are about 750,000 retailers in this country, and in addition about 50,000 other traders who cannot be called ordinary shopkeepers—street traders or people selling in markets. If you say, "I am going to impose a tax in respect of which each one of these people must account," you are bringing into your charge an enormous number of detailed transactions which in a great many cases are done by people who do not keep accountants or cashiers or have records which show what they have been doing. I may say that, even if we confine ourselves to retailers above the Income Tax limit, it is estimated that something like 300,000 of them do not keep accounts, and our efforts to get a proper assessment from them are necessarily of a rather general character. Still, after all, that happens only once a year; but if every day of the week and every hour of the business day we had the small retailer put under a duty to record every sale and to add a tax, we should produce a most fearful state of confusion, in which it is very difficult to think that justice would be done. There are foreign countries which, I believe, are prepared to do it by sending an official into a shop to look round and say, "I assess you at so much. "Then, after whatever discussions are allowed between the taxing authority and the shopkeeper, the money is paid, and the shopkeeper is left to get it out of his customers as best he can. I do not think the House of Commons would ever agree to treatment of that sort in this country, and therefore I feel obliged to reject that method.
      Then we are left with two other forms of tax either of which has a good deal to be said for it. One form is what is called a producers' tax. You impose the tax when the article is produced and at that

      787
      stage only and thenceforth the article carries the tax. It is like an Excise Duty. The other form is the one which I have thought the best and which I hope the House will encourage me to pursue by passing this Resolution, although I would point out that that in itself will not decide the matter, because we shall decide it later when we come to the Clauses of the Bill. There are certainly very strong reasons which can be advanced if we are to have a tax of this character, and to impose it only once in the evolution of the work, for imposing it at the stage when the wholesale merchant is selling to the retailing customer. Complications will occur to anybody the moment I make that statement, and I am well aware of some of them; but that is the main idea. It certainly means imposing the tax at a stage at which we can be pretty sure that records are ordinarily kept, so that we can be sure that it is imposed with equality as between the man who provides the material information which is required and the person who is less willing to let us know what business he is doing.
      It has also an advantage for this reason. If the tax is to do any good, it must be widely applied, but I think we shall all agree that, especially in the present circumstances of the country, it must not be applied to the export trade. If we were to apply it to the export trade, I am afraid that all the efforts of the Board of Trade and the Export Council to stimulate exports would be completely nullified. Though as a general rule I should certainly stand up for the proposition that my fellow countrymen ought to be treated at least as well in the matter of trading as anybody else, we must consider how essential it is to increase the export trade in order to provide ourselves with additional foreign currency for the purpose of carrying through the war. We see the necessity of doing our utmost for the export trade and we ought to exclude it from this tax. That can be done very well at the point where the wholesaler is selling to the retailer.
      If we go further back and deal with goods in the stages of their production, there will be many cases in which it will be quite impossible to ascertain whether when they are made the goods will go out of the country or be consumed here. In
      788
      the spinning of raw wool, for example, it is impossible to say whether the yarn will be going here or there, and therefore we must come to the point where something has been manufactured and is in more or less in the condition in which it will be finally dealt with—the cloth rather than the wool or yarn. We do get in our organisation of business the stage which may be described as the stage of the wholesale merchant where, as a matter of practice, we shall be able to apply the tax without bringing in the export trade. And we can put into the Bill an expressed relief for the export trade as well as securing it in other ways.
      I have come to the conclusion, therefore, and it is not a conclusion in which I can be charged with any particular prejudice, because I do not know of any problem which is more free from that sort of bias than this, that the right stage at which to apply such a tax is the stage when the wholesale merchant is selling the article to the retailer who buys it from him. I think the tax should be applied at that stage on what one would call the wholesaler's price. There will have to be an adjustment in cases where the wholesaler skips the retailer and sells direct to the individual purchaser. In such a case as that, he very likely charges a higher price, rolling the wholesale and retail profits into one, and as we only want to attach to the goods their value to the retailer as he buys them from the wholesaler the Bill will contain a provision by which that adjustment can be made. But, broadly speaking, the thing which will be taxed is the value of the wholesale article as it is passing from the wholesaler to the retailer. Details about that will naturally have to be discussed on the Bill.
      In order to carry through that scheme it is absolutely necessary to create a register. This matter has been the subject of the closest examination by highly-skilled people for some months. We want such a register for two purposes, which at first sight may not appear to have much to do with one another. It will only be the registered person who will have to account for any tax at all. If one retailer sells to another retailer, or one private individual sells to another, that will be quite outside the tax. It is only the registered person who will have to

      789
      account for the tax, which will be a percentage as determined hereafter by the House on the wholesale value of the article. We must have the register in order to know the people who are to be charged; and not only must we have a register but there must be compulsory power to cause the right people to be registered. I noticed, in a Sunday newspaper which dealt with this matter under several heads, two observations. One was:
      "One may well ask why the preparation of a register was not set on foot months ago."
      The answer is that you need an Act of Parliament before you can compel people to register. That is one purpose of which I spoke. The other purpose, which does not at first sight seem clearly associated with it, is that those who are on the register will always be able to buy, in the way of their trade, what they want. The transactions in which they will be engaged will never be those in respect of which tax will have to be paid, because the tax will be paid once, and once only. Once you have your proper register of people who have to account for the tax, those who are on the register can buy free of tax what they need—the utensils of their trade, their raw materials or whatever it may be—and you avoid all possible risk of duplication in the taxation or of taxation of raw materials as such.
      Perhaps hon. Members now see how this matter is expected to work out. As I say, for the moment all that I am asking the House to do is to approve the Resolution so that I may introduce a Bill which will contemplate the imposition of this Purchase Tax and which will recognise that the Purchase Tax should be imposed once, at the stage where the wholesaler sells to the retailer. There will have to be definitions, and I can easily imagine difficulties arising in trying to draw a line between one stage and another. These matters have been very carefully considered, and I think they will be done in a way that is satisfactory. For instance, manufacturers in many cases also operate as wholesalers. They will require to be registered, and they will gladly register themselves, because that will make it plain that they have not to pay tax in respect of anything they buy. The way we can prove that is that there will be a registered number and a record, and the manufacturer will say: "I place this order with you. I am registered
      790
      under the Purchase Tax, and therefore I am not accountable for any portion of the tax."
      Although I have described this scheme in general terms, it will have to be very carefully worked out. I look forward very much to the whole scheme being made more completely practical and useful, with the assistance of friendly but informed comment, not only in the House of Commons, which comment will be valuable and will, I suppose, mostly arise at a later stage, when hon. Members have seen the Bill, but from associations of trades which will be affected. I told the House last week that I was setting on foot communications with the different associations concerned, because I desired to get their full help as to the best way in which to fit this tax into their trading structure and practice, instead of presenting them with something which had come out of the head of the Treasury and then finding very acute criticisms from business people. Such objections may be overcome by consultation at an early stage.
      Therefore, my programme is this: I hope that the House will give me this Resolution to-night. I shall then introduce in the ordinary way the Purchase Tax Bill, which will be in dummy, just like a Finance Bill. I have already got the Commissioners of Customs and Excise, and more particularly one very senior officer, who has been secured for the purpose, to put themselves into communication with trade organisations. I have every reason to know that these organisations are willing to help in every way. We shall go through the suggestions and proposals, because they will greatly help us to see how far the suggested method and machinery of the thing conflict with trade practice and how far they will have to be adjusted in this or that respect. We think this is the right way of procedure.
      Of course, the Chancellor of the Exchequer is always exposed to alternative criticisms, and is liable to be caught by either one barrel or the other. One criticism is: "You don't know your own mind, and you come here and speak in general terms. You ought to have the scheme cut and dried. What is the good of coming here and talking like this?" If you try to respond to that criticism, you are told: "This is a trade matter

      791
      about which traders know very much more than you. If you will only bring these matters to those who know about them, you will be able to produce a much better scheme than you have." I have in mind the history of N.D.C. No. 1 and N.D.C. No. 2. I know that N.D.C. No. 2, which was my own production—it was accepted on its merits, of course, and not because it was my production—had the full help of those who were concerned and who could see how it might work. I hope, therefore, that I shall be able to come to a position this time in which I can settle my Clauses and circulate the Bill. Then we can have a Second Reading Debate in the ordinary way. The Committee stage will be the time to consider whether the Clauses need amendment. I hope by these means that we shall get this instrument approved, before the end of the Session, and that then we shall be able to see the nature of the arguments for imposing, a tax of this sort and the sort of yield which will be likely.
      I have two other observations to make. Hon. Members now have the picture before them, as well as I can give it at this stage, and my first observation is that there must claim to be important exemptions to the application of a Purchase Tax. I formulated some of them last week in my Budget speech. I propose that this tax should not apply at all to food or drink for man or to feeding-stuffs in the case of animals. They should be excluded altogether. I think this exclusion will be generally approved. In the same way I wish to exclude fuel altogether. I do not propose to include within the tax at all any form of service as such. There are countries where attempts have been made to apply this tax to travel, but I do not think we should attempt to apply it to services, properly speaking, at all. In the same way it should not be applied to gas, electricity or water supply. These will be the principal exceptions, as the matter has appeared to me after such study as I have made.
      Mr. A. V. Alexander: There is no question of its being applied to raw materials?
      Sir J. Simon:It would not apply to raw materials purchased by producers because the tax would be applied lower down.
      Sir I. Albery: Will it apply to petrol?
      Sir J. Simon: I shall have to go into such questions. I am not giving a precise list of exceptions at this moment.
      Mr. Lipson: Will it include clothes?
      Sir J. Simon:I am certain that if we are to make this tax work at all, it must be because we have made a number of bold exceptions, taking masses of things to which you cannot apply the tax, and not because you go through the whole category and pick out things here and there. If you do this, the tax will not produce the substantial revenue which is one justification for imposing it. For example, it is extremely easy to say: "This will be a very good tax as long as you apply it to luxuries, but I do not approve of it if it is put upon anything else." You might as well abandon the tax here and now, in that case. I do not want to see burdens put upon things other than luxuries if I can help it, but this scheme cannot be limited to luxuries. To do so would not raise the money. The essence of a tax of this sort is that it should be widely applied. My hon. Friend has just mentioned clothes. I think that it will become necessary to include them, but that is a matter which we can discuss when we come to the Clauses of the Bill. The difficulty is that if you attempt to exclude clothes of every sort and kind, you make a most terrific opening.
      Mrs. Hardie: Would the Chancellor consider excluding children's clothes?
      Sir J. Simon:I am sure that the hon. Lady will know that it is not uncommon for a good mother to have a piece of cloth, out of which she makes a dress for herself and has something over out of which she makes a dress for her child.
      Mrs. Hardie: A good mother thinks of the child first.
      Sir J. Simon:Very well, we will put it the other way round. It is very illuminating, and I am delighted that the House is taking such a deep interest in this subject. I think that we shall be occupying our time to-day unprofitably if we discuss the possibility of this exception or that, because this matter needs to be very closely examined. Here we

      793
      are taking only the Resolution, but I thought it was right to tell the House my own belief that this tax will be bound to apply to a wider range of things than to luxuries. If you attempt to make a series of exceptions, you simply cut out of the tax anything of real value for the purpose of revenue. A further observation which I should like to make is that I regard the tax at the present moment as specially valuable for a reason which has not directly to do with taxation. Indeed, I would go so far as to say that, if we were living in ordinary times, I might see such general objections to certain applications of the tax that I should not be prepared to go any further with it. We are engaged, however, in a tremendous struggle, and one essential thing is to limit civilian consumption. It is no good pretending that we all want to win the war unless we are prepared to face that problem fairly and squarely.
      It is greatly to the honour of many men in this country, whose natural instincts are all in favour of championing the cause of those who have not very much to spend or who work for wages with their hands, that they do recognise those facts. It is one of my main concerns and responsibilities that we cannot prevent and contribute to preventing the constant and unrestricted rise of prices unless, in a time like this, when there are enormous additional demands for supplies for war purposes, we succeed in controlling and keeping down expenditure on the demand which is put forward by civilians. The greater part of the civilian demand is for things which most of us regard as quite reasonable, and when one talks about shutting down that demand, it cannot be simply the shutting down of the demand for luxuries. That would not produce anything like the effect which is expected. Shut them down by all means, but we have to apply a very hard rule for the purpose of adapting our economic forces so as to advance victory in the war. Therefore, while, of course, we shall do everything we can to see that we do not unnecessarily impose any burdens, it is my duty to tell the House that I am certain that, when hon. Members examine this tax they will find that, in the nature of things, it has to be widely applied, and that, if we try to make exceptions at every point, we shall destroy the real quality of this tax.
      794
      I hope I have succeeded a little better than perhaps I did at the tail end of my Budget Speech in making plain the nature of this proposal. What I am suggesting is not that I should answer everything now, although I have a great deal in my head as the result of having studied this plan for some time, but that the House should give to me the authority, which it will give by passing this Resolution, to introduce this Bill. I hope to present it to the House in a form which has been examined and helped by these trade associations which are ready to serve. When that happens the House will have the freest opportunity on the Second Reading of saying whether or not this scheme is one which we ought to include in our armoury of taxes. As for the way in which the tax will be applied, it is plain that we must apply it in this way. We cannot by passing the Purchase Tax Act on a particular day provide that when the Royal Assent is given the tax shall start. If we did anything of that sort, there would be a forestalling of the most prodigious character all over the country. [Interruption.] The right course, I think, is that when the machine has been approved in the House of Commons the Treasury should make an Order and that Order should be brought to the House. I cannot make an Order and bring it here the following morning—I must have a gap of two days or so—and then we must face the question whether we are prepared to apply that tax then and there at the rate proposed. That would be the most satisfactory way in which to apply it.
      The right hon. Gentleman said that it is possible that even already the shadow of the tax is having an effect. I hope a great deal will be done to discourage that, because the only justification for imposing a burden of this sort—and it is a burden—is that it provides a big contribution for the purpose of helping to fight the war. There is no other justification at all. I think that the method which I have proposed, imperfect as it may be, is the best method which can be adopted.
      Mr. Barnes: Can the Chancellor indicate whether he has any figure in mind which he expects the tax to yield?
      Sir J. Simon: That depends on the rate which will be applied. If one has special

      795
      means of studying the trade figures it is possible to form a rough view as to what will be included, and then one can see the sort of rate which has to be applied to give a particular result. If the tax is applied only once at the right rate, it would have to be not a small, contemptible rate but something substantial. When I say something substantial, I have not got in my mind what it should be, because I would very much sooner wait and see the result of the deliberations which are going on.
      Mr. Denman: The Chancellor has talked of a rate of tax. Does he wholly rule out differential rates of tax, so that the more luxurious articles are at a higher rate than the other articles?
      Sir J. Simon:The passing of the Resolution will not affect that question, which will remain open. I myself think that there will be a great difficulty in having a differential rate. The first difficulty will be to devise a fair system, because many things are made of a number of materials mixed up together, and it will be an extraordinarily complicated business. There is a second difficulty which I am sure the hon. Gentleman will keep in mind. It is another form of the point which I mentioned just now. When you have a differential rate you really mean putting a heavy tax on the luxuries and a lower tax on the things which are not luxuries. It is a conceivable theory, but the result is that you are losing enormously in the actual result secured. I repeat, we have to face the fact that we have to limit consumption in the present condition of the war, and we shall not limit consumption if we merely say that no one is to buy grand pianos or velvet curtains. We have to limit the consumption of ordinary people. I am not shutting the door to differential rates. It is one of the questions, and a very interesting question, which we shall have to consider.
      Mr. Denman: A surcharge Purchase Tax on luxuries is not ruled out?
      Sir J. Simon:The hon. Gentleman has the Resolution before him, and no doubt there will be many opportunities of discussing this matter on another occasion. I think I may claim that I have interested the House of Commons on this
      796
      subject. I am aware that there is plenty of criticism which may be made. I would ask the House after the Debate to give me this Resolution in order that I may take the next step and so that I may present the House with the Bill.
      6.51 p.m.
      Mr. Pethick-Lawrence:In common with other hon. Members in the House, I settled down to listen to the Chancellor of the Exchequer expounding the details of his scheme with a very considerable measure of interest. I am bound to tell the Chancellor of the Exchequer that I am very seriously disappointed, because I have not been enlightened to any considerable extent beyond what I knew beforehand. On the question of the details of the scheme, I agree with the Chancellor that it is just as well, if the House is presented with a new proposal, that it should not have it all worked out down to the last comma, because in that case there would be very little room for the House of Commons to improve it, but I think we are entitled to a good deal more filling in of the background than the Chancellor has given us. We do not know in the very least what is the magnitude of the sum that the Chancellor of the Exchequer has in mind. It may be £10,000,000, £30,000,000, £50,000,000 or £200,000,000. It is a different matter if Purchase Tax is to bring in a small sum like £10,000,000 or a large sum such as £200,000,000, or whereabouts between those two extremes the Chancellor's mind stands. We do not know—although I think the Chancellor gave an hon. Member a considerable indication—whether the tax is to be at a flat rate or a graduated rate. The hon. Gentleman, no doubt, wants to vote for the Chancellor's Resolution and wants the matter left open.
      It is clear from what the Chancellor said the other day and from what he has said to-day that he has practically set his mind on a flat-rate tax. Those are two of the matters which are absolutely left in the air as a result of this further explanation which the Chancellor has given us to-day. But that is not the whole point. The House will, I think, have gathered from the Chancellor's speech that that was to remain in doubt to-day but that the Bill would fill in the details which we do not know, and that therefore we should have the usual stages of a Bill in which those details should be discussed and the House

      797
      should be able to move Amendments altering some of the details. But if I understand this scheme aright, as we have it in this Resolution, we shall be nearly as much in the dark when we have the Bill and even when the Bill leaves this House, if it does go through at all, as we are at the present time, for the reasons which were given by the hon. Member who spoke from the Liberal benches and who has since left the House. The fact is that this tax is not to be imposed after discussion in this House at all. This tax is to come fully dressed in all its details from the Treasury, and all that the House will have an opportunity of doing is to say aye or no to the proposal in that form. That makes the passing of this Resolution a very serious matter. It is true that in a sense we are not being asked to give a blank cheque to the Chancellor of the Exchequer, because we shall have some opportunities later of saying whether the cheque as it is finally drawn meets with our entire satisfaction, but this is a very considerable departure from the ordinary procedure of this House. I believe that the only case where this method has been adopted before was during our discussions on the Imports Duty. It is one thing to introduce such a method in that case and quite another thing to introduce it for a lame weapon of taxation.
      What we have to remember is this: By whatever name you call taxes, whether you call them Purchase Tax or a tax of some other nomenclature, you are really imposing indirect taxes upon individuals. It is no escape from imposing those taxes upon individuals by trying to camouflage them in the form of a Purchase Tax made at a certain stage in the transaction. I agree with the Chancellor of the Exchequer that we shall have to take some steps to prevent or discourage excessive spending if we are to allow the Government sufficient sinews with which to prosecute the war. The other day, after the Chancellor's speech, I said that I agreed with him in turning down what is known as the Keynes scheme, but I would also say that the Keynes analysis, as distinct from his scheme, has a great deal to recommend it, and I think the country owes a great deal to Mr. Keynes for the very penetrating analysis which he has brought to bear on this problem. But that is not saying that we can accept the proposals which are put forward here.
      798
      When the Chancellor of the Exchequer first brought them forward I was very loath to take up a decided view. I wanted to examine them carefully and I wanted to give the Chancellor the benefit of the doubt, but nothing that he has said has inclined me to be favourable to his proposals; on the contrary, the more I think about them the more I find myself in general disagreement with them. I can see no ground that would justify me in recommending to my hon. Friends who sit on these benches that we should give our support to these proposals. What are the main grounds on which I come to that opinion? The first ground is that by the Chancellor's own showing this will be a regressive tax. A flat rate will press upon different sections of the population in inverse proportion to their income. I object essentially to regressive taxation.
      The Chancellor says that you cannot confine the tax to luxuries. I am not prepared to dispute that. What I think the Chancellor fails to see is that there is more than one division in looking at the whole range of commodities. You cannot put luxuries on one side and vital necessities on the other. There are at least three sections, and perhaps four. You start with vital necessaries, which have to be paid for by the poorest as well as by other sections of the population. Then you come to unnecessaries, or things which people can do without, but which most people want to have. Then you come to articles which may be described as semi-luxuries, comforts and pleasures which people can certainly be asked to go short of in war-time. Finally, you come to articles at the top of the scale, which we call luxuries. It is quite clear that if you confine yourself to those at the very top of the scale you will not cover a very wide range, but if you take semi-luxuries, and, still more, if you take what I call unnecessaries, you have a very wide range. But if you come right down to the articles which are necessaries, you are taking a very grave step. The Chancellor has told us quite frankly that, as far as he can see, he will have to come very low. I presume that he will include household requisites and other essentials. That means that the tax will be borne by the poorest of the poor, those whose incomes are already below the poverty line.
      If there is one thing which we on these benches will not support, it is addi-

      799
      tional burdens on that section of the population. I do not want to weary the House by going over ground with which it is already familiar, but we have the well-known statement of Sir John Orr that a large proportion of the people of this country—he puts it, I think, at 30 per cent.—are under-nourished because their incomes are insufficient. If this tax is to put an additional burden on the necessities of life, it will drive down the health of those people. We shall not stand for that. As the tax is now disclosed, we cannot agree to it. It will send up the cost of living, not only in respect of those things which people can do without, but in respect of those things which they cannot do without. We have agreed, without a Division and in very short time, to all the other 28 Resolutions. There has not been a single voice raised against any of those Resolutions, although we know that there are people, who depend upon us to make their views heard, who will be seriously affected by some of them. But when it comes to taxing the necessities of life, we cannot take that attitude.
      The Chancellor says that this tax is to be raised at the point where the wholesaler sells to the retailer. If he chooses that method he must take care that the public are protected against exploitation. I presume that he has some plans for doing that, although he has not indicated any to us to-day. What guarantee have we that the retailer will not make his profit on the tax as well as on the article? In fact, the retailer is likely to have considerable argument for taking that course. One of his arguments will be that he will have to lock up additional money in finding the tax before he sells to the customer, because I gather some of these articles are not like tobacco, which is sold quickly by the retailer. Many of the articles may be kept in stock by the retailer for considerably more than a twelve-month. The retailer will demand recompense for that. He will say that one of the objects of the tax is to reduce total sales, and inasmuch as he has to meet his overhead charges for the total quantity of his sales, and inasmuch as his sales will be fewer, he will have to make up his profit on those sales that he makes, so that, whatever money is collected by this tax, we fear that the
      800
      purchaser will have to pay a good deal more than the Government receive. That, to us, is a very distressing idea, which makes this tax an undesirable one. There is a provision in this Resolution which may be capable of some simple explanation, but on which the Chancellor himself did not touch. It has rather puzzled some of my hon. Friends, and I hope that before the Debate ends some explanation will be given. The Resolution reads:
      "provision shall be made for changing a tax in respect of purchases of goods from wholesale sellers—"
      that is quite understandable, but then it goes on:
      "and in respect of such other transactions relating to goods as may be provided by an Act of the present Session.…"
      Short of an explanation, those words might cover almost anything that the Chancellor might like to do. I expect that there is some quite simple intention behind those words, but I think the House would be unwise to give even skeleton powers to the Chancellor until we have had some limiting explanation put on their meaning. I come to a point which has been already mentioned. Paragraphs (b) and (c) of this Resolution take away from this House the right to criticise in detail the proposals when they have reached their final form. They hand over all power to the Treasury. As far as I can see, this is what can happen.
      Suppose we pass this Resolution and the Bill—which I honestly do not think will give us much more information. That does not make anything operative. Then the Treasury decide that certain articles shall be taxed at so much per cent. The Government, on one of the days when Parliament meets, says, "Here is the whole thing, all written out and bound in vellum. The only thing left is to go into the Division Lobby on these proposals." Members of Parliament, as we have seen in the last few weeks, when they ought to be sitting on the Benches opposite are away in the smoking-room. We put up very convincing reasons why, in their proposed form, these Treasury plans are most undesirable. The Division bells ring. Members come in from the Smoking-Room and they vote, and that is the end. The tax is then imposed. There is no opportunity for reading next day what was said and of discussing or hearing opinions on the matter. One short

      801
      vote, one Division and the whole tax will fall upon the people.
      I am bound to say that on so important a matter as this, if we accept that procedure, which is inherent in this Resolution, we shall be giving up one of the essential functions of this House of Commons; we shall be abandoning our right to decide what individual tax shall or shall not be imposed. And mark you, it does not end there, because on Tuesday, 10th June, or whatever day the 10th June may be, the Government may bring in this proposal which the Treasury has formulated, and we may be called upon to vote. Members will come out of the Smoking Room and vote for the proposal. On 10th July the Treasury may propose to extend it to other articles, and to add 50 per cent. to the weight of the tax, and again a single vote will decide the issue. I realty do not think that that is right. If we in this House agree to that form of procedure, we are not serving the country. The Chancellor of the Exchequer seems to think that we can impose upon the populace of this country an omnibus tax with the least amount of detailed discussion by this House, and that in that way he is going to get away with it. He may do. I have seen the docility of Members opposite and the way they come in without having heard any objections. I am not speaking of hon. Members who are here now; they are only a mere handful of their party.
      Mr. Lipson: That is not limited to Members on one side of the House only.
      Mr. Marcus Samuel: The right hon. Gentleman should look behind him.
      Mr. Pethick-Lawrence: I am not complaining of the Members now in the House, but I am saying that proposals of the Government are carried frequently by a mass vote of people who have not heard the Debate. That is serious enough under the ordinary procedure of the House of Commons, when we have three or four stages. The seriousness is not so great then, because Members talk between the different stages and start understanding what is being done, but the thing is very much more serious when we are asked to dispense with the normal procedure of the House, as we are in this Resolution. My right hon. Friend the Member for
      802
      Hillsborough (Mr. Alexander) says that it might easily be after 11 o'clock at night. I and my hon. Friends recognise that contributions have to be made to pay for the war from all classes, except those who are right down below the poverty line. We have acknowledged that in what has not been voted against in the early stages of these Resolutions this afternoon. We also recognise that a properly constructed series of taxes on individual articles, discriminating between vital necessities and unnecessaries—merely luxuries and great luxuries—would be a perfectly just proposal to lay before this House, and in the circumstances we would support such a proposal. But I cannot find it in my heart to recommend to those who are sitting with me on these benches that they should support this Resolution, which will open the door to the taxation of the necessities of life, and will indubitably drive up the cost of living. It will be open to grave abuse and will have to be carried through by a procedure which, if not wholly novel, is at least novel and revolutionary in the manner of its application.
      7.17 p.m.
      Colonel Sir A. Lambert Ward: The right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) favoured us with the time-honoured gibe about Members who support the Government pouring out of the Smoking-Room and voting down the industrious and intelligent Members who have been sitting here throughout the Debate. If he would take the trouble to walk through the Smoking-Room towards the Library he would find just as many Members of his own party who also pour in when the Division bells ring and vote as ordered by their own Whips. If he would also look behind him and count the number of his supporters who have listened to his speech, he would find that their numbers are approximately 12 per cent. of the strength of his party in this House. In these circumstances I do not think that he was either just or fair in turning towards our benches and stigmatising our supporters as being neglectful of their duties.
      I understand that any new suggestion with regard to taxation is bound to meet with a great deal of opposition, but although this form of taxation is novel as far as this country is concerned, other countries have experimented with it with a

      803
      great deal of success for a very considerable time. In Canada a sales tax was instituted a considerable time ago. Although I stand open to correction, I think it was introduced to meet war expenditure, but it proved to be such a success that I understand that it has never been done away with since. There are many countries on the Continent, as anybody who has travelled on the Continent will know, where a sales tax is almost invariably imposed. But I must say, with due respect to my right hon. Friend the Chancellor of the Exchequer, that I cannot help feeling that the system they have in those countries of imposing this tax is better in many ways than the suggestion he has put forward to this House. There it is added directly to the bill which you pay to the retailed trader in the shop. It is either written on the bill—10 per cent., 5 per cent. or 7 per cent. as the case may be—or else a stamp is placed on every bill dealing with every purchase that you make. In my opinion that has the great advantage that it avoids any extra cost of financing the tax, which, the right hon. Gentleman said, might easily mean that the entire proceeds of the tax would not find their way to the Exchequer. The principal argument which he advanced against collecting the tax on these lines was the fact that it was said there were something like 750,000 retailers in this country. That may be true. There are also something like 5,000,000 Income Tax payers in this country yet that is in no way an argument against Income Tax being imposed.
      But to get down to what this tax actually means. Will it mean an appreciable addition to the cost of living? What is hitting the people of this country at the present time is not the increased cost of absolute necessities such as bread, meat, bacon, milk or sugar, or anything of that kind; it is the additional cost of local authority and public utility charges. Rates, during the last two or three months, have gone up in various districts from 3d. to 2s., the cost of electricity in London has practically doubled and the water rate is up by something like 10 per cent. The cost of gas is rising in proportion. You cannot attribute these increases to any form of taxation which has been imposed. Taxation of this kind has an advantage in that it will not give any
      804
      excuse, even to the most predatorily-minded local authority or public utility undertaking, for increasing their costs.
      A little time ago the Chancellor of the Exchequer, in answer to a Question from the opposite side, admitted that the cost-of-living essentials, or necessaries, such as bread, milk, meat, etc., were being subsidised by the Government, to keep down the cost of living, at a cost of something like £60,000,000 per annum. The effect of this tax will be that the cost of subsidising these essentials will be met by a tax on what are, to all intents and purposes, non-essentials. The cost of subsidising bread, milk, meat and sugar, etc., will be met by a tax which is now proposed to be imposed on things which, although they may be necessary, are not absolutely essential. I cannot think of a better way of keeping down the cost of living than by subsidising essentials by taxing non-essentials.
      7.25 p.m.
      Mr. Barnes: I think the Chancellor of the Exchequer will agree that there is very widespread interest in the country regarding this proposed Purchase Tax. I do not usually find that the public are interested in the procedure of this House, but I was rather struck by the number of persons who commented on the fact that he was precluded the other night, by a point of procedure, from making what they anticipated would be his more informative statement on this proposed tax. I am confident that now he has had the opportunity of restating the position to the House of Commons, both the public, as consumers, and traders generally, will be very disappointed with his additional statement. Obviously, what the public wish to know is the percentage that is in the Chancellor's mind and roughly the amount he will raise by this new form of taxation. It is very difficult, apart from the attitude one might adopt on the principle of method, procedure, or incidence of taxation of this description, for anyone to come to a definite decision until the Chancellor discloses his mind on the matter. It is most regrettable that we should be in a position this evening of being asked to approve the principle of this tax with practically no more information than we had in the vague statement of the Chancellor when he introduced the subject in his Budget statement.

      805
      What is rather disturbing is the language which the Chancellor has used, both on 23rd April and again this evening. He has used language which suggests that he looks to this tax to supply substantial additional revenue to the Exchequer. Referring to the tax this evening he asserted that it should be applied with boldness. That suggests at once that he has some definite sum or percentage in his mind, and I think it would have been of advantage to the community if we had had that indication on which to form our opinion. In the circumstances we have to investigate the potentialities of this tax by an analysis of the range of goods and values on which it could possibly be levied, and I would like the House to consider for a moment the field of this potential tax in relation to the trading figures of 1937.
      The Chancellor was very careful to-night to leave in our minds the impression that this tax is likely to fall over practically the whole field of commodities or articles that do not fall under the heading of exemptions. The total value of retail sales in 1937 was £2,830,000,000. The Chancellor has enabled us to obtain definite deductions from that sum by his exemptions. He proposes that all foodstuffs shall be deducted and—I am keeping to the 1937 figures as a definite year of values—the deduction of foodstuffs represents a figure of £1,360,000,000, drink £260,000,000,tobacco £160,000,000, petrol £25,000,000 and coal £65,000,000. In the retail value of sales there are excluded such services as transport, electricity, gas, water and so on. That means there is £1,870,000,000 from the total retail sales of £2,830,000,000. That leaves us with a potentially taxable area of £960,000,000 retail value. The Chancellor has indicated that it is his definite intention to leave this Purchase Tax on the wholesale price and if it is not levied on the wholesale price that figure of £960,000,000 must be reduced, on wholesale values, to a figure in the neighbourhood of £740,000,000 to £750,000,000.
      The point immediately arises: Has the Chancellor 1, 5 or 10 per cent. in his mind? A 5 per cent. tax on an amount of £750,000,000—and after all a 5 per cent. tax would be a substantial tax on a whole range of commodities—would only yield £35,000,000 or £50,000,000. No one can face the problem of war
      806
      finance which the Chancellor of the Exchequer is asking us to face without a grave sense of responsibility, but I submit that the House of Commons in considering a proposal of this kind, which can have repercussions in the community far outweighing the financial advantages, is not entitled to swallow the proposal without consideration. In fact, I think there is no more regrettable aspect of Finance Bills of recent years than these half-baked and ill-digested proposals which Chancellors of the Exchequer have put before the House, and which on examination have met with considerable resentment from the public and the traders.
      I feel that in regard to finance matters hon. Members should accept a larger measure of independent responsibility than we do ordinarily in the work of our general legislation. I would urge that on matters of finance Members of Parliament should exercise the fullest degree of independent thought, judgment and courage, and so create a position in which the Treasury would not bring proposals before the House before they have been thoroughly prepared and digested and have some measure of support behind them. Taking the figure of 5 per cent. for our purposes of calculation we are faced with the possibility of getting £40,000,000 of additional revenue but also the creation of additional machinery of registration. Indeed, the process of registration in regard to the traders of this country has become utterly absurd. This will mean the compiling and maintenance of a whole series of fresh accounts which have no relation to normal business processes and methods. It will mean the checking of all these accounts. Take the position of a manufacturer who is selling to a wholesaler and has a considerable business, say, with a local authority over a whole range of contracts for uniforms and in regard to institutions for all kinds of soaps and towelling, and imagine the additional amount of accountancy which will be required for checking and going through all the hundreds and thousands of individual accounts. If we were dealing with a proposed tax which might of itself solve the major problem of war finance we might consider the desirability of this additional machinery, but this additional machinery is created by the Treasury just at a time when all the other processes in relation to Government policy

      807
      are putting an increased strain on office organisations and accountancy staff.
      Apart from the general range of foodstuffs in grocery departments which would be exempt, there are a vast variety of small but necessary grocery goods which possibly might not fall into the food groups and would come into the taxation groups. It is estimated that £37,000,000 of goods sold through grocery shops might very well fall within this tax. The value of women's clothing amounts to £168,000,000; men's clothing to £143,000,000; boots and shoes to £70,000,000; piece goods, like laces and curtains, to £67,000,000; furniture to £118,000,000; the whole range of hardware goods £75,000,000; drugs, including cosmetics, £148,000,000; sporting and travelling equipment £34,000,000; cars and cycles £50,000,000 and finally newspapers £50,000,000. While petrol would be taxed and therefore excluded, it is not clear whether cars and cycles would be excluded, but if they are excluded because they are not taxable articles you reduce the total figure and also the yield of taxation. Therefore, we are faced with the problem that the whole range of these articles would be subjected to this tax with all this cumbersome machinery, and, quite apart from the equity of its incidence, I associate myself with the remarks of the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) and say that the House of Commons should think twice before it passes this Resolution.
      My view is that it should refuse to pass the Resolution and put the Chancellor of the Exchequer and the Treasury in the position that they must bring forward their Bill and submit much more definite information before we commit ourselves to the principle of supporting a tax of this kind. It is contrary to the general experience of taxation in this country. Hitherto we have proceeded on the well-tried principle that the Government of the day shall make out its case on each particular form of taxation, whether it is on the income of the individual or on some specific article; and the House of Commons has accepted the responsibility of saying whether the tax could be imposed without injury to the community as a whole. Now we have the worst possible aspect of the old Disraelian theory, that by indirect taxation you can
      808
      tax the shirt off the workman's back providing he does not know the point at which the tax is being imposed. Under the advent of war the Chancellor of the Exchequer proposes to raise a sum which is not defined, by a method and procedure which are withheld from the House of Commons, and by a breach with the traditions of this House we are asked to say, not that a specific commodity shall be taxed, but that a whole range of goods which are consumed and used by the people of this country shall be taxed.
      My second point is that this is contrary to the trend of public opinion in this House and outside. In recent years the trend of public opinion has compelled successive Governments to depart more and more from a system of indirect taxation on foodstuffs. It has been brought back again because of the exigencies of war. I am opposed to this tax, and I sincerely trust that hon. Members, before committing themselves to this principle, will compel the Chancellor to accept the responsibilities of his position, to put forward a case with regard to the sum he expects to collect, and to be more definite about the procedure that will be applied.
      7.41 p.m.
      Mr. Lipson: I hope the Chancellor will not get an easy passage for this Resolution. It is true, as was said by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence), that we are not asked to-night to give the Chancellor a blank cheque, but we are asked to approve a principle, and if we pass this Resolution it will mean that we approve of the principle of this tax. I am loath to give the Chancellor that support. He told us that in introducing this tax, he had two objects: one was to raise Revenue, and the other was to stop consumption. The Chancellor cannot have his cake and eat it. To the extent that he raises Revenue from this tax, he will be stopping consumption, and to the extent that he stops consumption, he will not get his Revenue. Therefore, I feel he ought to make up his mind exactly what it is that he wants—whether he wants to raise Revenue, or whether he wants to stop consumption. From the point of view of the war, I suggest that perhaps the more important object may be to stop consumption, but my complaint against a tax of this sort is that

      809
      it will stop consumption only by people of small means; it will not stop consumption by people who can afford to pay the price of the article when the tax has been added. I object to a discriminatory tax of this kind. If the Chancellor wants to stop the consumption of some articles, the fair and proper method is to do what he has done with certain articles of food—to ration those articles, and say that all shall be treated alike, whether they be rich or poor.
      I should like now to deal with the second object of this tax, which is to raise Revenue. Has the Chancellor asked himself how much such a tax is likely indirectly to add to the cost of the war? One cannot get away from the fact that this is a tax on the cost of living, because the Chancellor has made it clear that it is not to be a tax on luxury articles only, but a tax on necessities. It is to be a tax of wide application. That is bound to add to the cost of living. If there are any further additions to the cost of living, the Chancellor will be faced throughout the country with a demand for wage increases, and that will be bound to mean additions to the cost of the war. What is the sense, on the one hand, of spending £60,000,000 a year to keep down the cost of living, and, on the other hand, imposing a tax which clearly will add to the cost of living? My hon. and gallant Friend the Member for North-West Hull (Sir A. Lambert Ward) suggested that the Chancellor would be able to provide the £60,000,000 to keep down the cost of living by the proceeds of this tax. That is indeed a case of robbing Peter to pay Paul. I cannot see any very sound financial sense behind proposals of this kind. This tax will fall particularly heavily on the family man. It will not fall anything like so hard on the single man as on the married man and the man with children, and the more children he has, the heavier will be the tax.
      Mr. MacLaren: He will be given a family allowance.
      Mr. Lipson: If the Chancellor proposes to provide family allowances, he will show that he has some intention of minimising the evil of this tax, but that proposal is not in the Budget, and as far as I know, it is not the Chancellor's present intention to consider it. We are told that the justification for this tax is that it will
      810
      bring a big contribution towards the cost of the war, but I submit that it will add to the cost of the war probably more than it will contribute in Revenue, because through increases in the cost of living it will send up the wages bill and consequently the prices of materials required for the war, and ultimately that will add more to the cost of the war. It was suggested by my hon. and gallant Friend the Member for North-West Hull that the increases in the cost of living now are due to the actions of local authorities and to the increases in the cost of certain services. I submit that this tax will add to the costs of local authorities, because they have to maintain insitutions of one kind and another in which they have to buy articles that will be affected by this tax. This will add still more to the burdens which they have to bear. War or no war, this is a thoroughly bad tax, and though we are asked in the name of war to do a great many things, I hope the House will hesitate long before agreeing to the principle of a tax of this kind, which personally I cannot support.
      7.47 p.m.
      Sir Walter Smiles: I disagree with my hon. Friend the Member for Cheltenham (Mr. Lipson). We are at war, and we have to raise the money somehow. I agree with the hon. Member for East Ham South (Mr. Barnes) about the office staff that will be required, but in war time, all office staffs are increased, specially those of people who have anything to do with Government contracts or the sale of articles to the Ministry of Food. That is one of the small evils of war. In the past, Chancellors of the Exchequer have been criticised for having no imagination. It has been said that they come to the House on Budget day, put a couple of pence a pound on tea and another shilling on the Income Tax, and with that, the Budget is finished. On this occasion, my right hon. Friend has shown some imagination. He knows that the money has to be found, evidently he has taken some trouble in examining what is being done in foreign countries with taxes of this sort, and he has proposed this tax. In most parts of the world, it is an accepted tax. Those hon. Members who have travelled abroad, in Italy, France, Canada, for example, know that when one buys things in various shops in those countries, there is a ticket on those things giving the

      811
      amount of the tax. The Chancellor has made an effort to simplify this tax, which is being imposed for the purpose of the war.
      In my consideration of the tax, I have arrived at very much the same conclusion as the hon. Member for East Ham South, although he has arrived at that conclusion by correct methods and I have arrived at a nearly correct answer by a wrong method. The way in which I look at the matter is that the Chancellor will not impose this tax unless he is going to raise about £50,000,000, for unless he raises that sum it will not be worth his while to create the trouble of putting on a new tax. There are in this country 45,000,000 men, women and children who will have to pay the tax, and it will mean about £1 a head a year. I agree with the hon. Member for Cheltenham that the tax will fall heavily upon the family man. That cannot be denied. We all have sympathy with thefamily—man, wife and three children, perhaps—with an income of less than £3 a week, who will have to pay perhaps £2 or £3 a year towards the tax. What I should like the Chancellor to do is to make a sort of graduated tax. He might be able, without very much more complication, to increase the tax that will be paid on luxuries. That is the primary object.
      In the case of fur coats, for instance, there are people who pay £50 for one, and I have seen them advertised in the Press at prices going up to £1,000, although I cannot imagine who buys them and I cannot imagine more than two or three being sold in a year. At any rate I have never bought one, and I never intend to, even if I could afford it. But in the case of a fur coat costing £500, no one here would object to taxation of 500 per cent. Such an article ought to go to America where there are people who can afford to buy it. On the other hand, take the case of the little girl secretary who once a year goes to the sales and buys a coat costing less than £10. Is she not to have the enjoyment and the comfort of her new coat? One wishes her to be taxed as lightly as possible. Then there is the case of diamonds. We know that a lot of marriage rings and engagement rings are being sold now. One does not want to tax those comparatively cheap little rings which boys buy for their
      812
      best girls. If it were possible to skip over those articles and to tax articles of jewellery costing £500 and amounts of that kind, no one would object to the very expensive articles being doubled or trebled in price. Indeed it would probably be a very good thing.
      The hon. Member for Cheltenham mentioned motor cars, and the Chancellor of the Exchequer in the Budget speech said that since raising the horse-power tax, he had increased the amount of money which he received from motor cars, thus falsifying every prophecy that had been made when the tax was introduced. I assume that this tax will be placed on motor cars also, and the Chancellor will probably, as a result, get an even higher amount from the motor car industry than he is getting at present. A heavy tax on motor cars is one thing but I do not think any of us would be keen on taxing such things as bicycles, and certainly not bassinets at a time when we want all the babies we can get in the country. An hon. Lady opposite interrupted the Chancellor with a question about children's clothes. I do not want to place any charge on baby linen or children's clothes if it can be avoided, but it is desirable to tax luxury articles such as beach suits and if you had such a tax there is the possibility that someone might try to evade it by cutting a child's dress into a couple of beach suits. The suggestion which I make is that when the Chancellor brings the necessary legislation before the House he should try to graduate the tax, so that it will bear more heavily on luxuries and so much will not be required from the poorer people.
      7.54 p.m.
      Mrs. Hardie: I desire to point out the unfairness of this method of raising taxation. I do not dispute the fact that a large amount has to be raised by taxation at the present time, but under this proposal the poorer people, who have to spend a large part of their income on food and clothing, will bear an unfair share of the burden. Take the case of soldiers' dependants. I notice that in calculating the money required by working-class households there is a tendency to overlook clothes and household goods. An amount which will pay the rent and provide food is sup-

      813
      posed to be sufficient for working-class people, and the allowances given to soldiers' wives and children are barely enough to do that. I had the pleasure of meeting in the House of Commons recently a number of soldiers' wives from the London district who came to ask for better allowances. I was struck by the very pathetic plea which they made about the difficulty of having the children's shoes mended. I thought that their request was a very humble one and showed how little these women asked from life. The only thing they seemed to think about was the mending of little cheap shoes—often hardly worth mending—so that the children would be dry-shod. Are such people to be taxed in providing the necessities of life for their children?
      A number of people who have been unemployed for a long time have now got work. Is it fair that those people should be taxed when they go to buy the bare necessities of life? Take the case of a man who has been unemployed for a long time but has been able to scrape along on unemployment assistance, providing the food and perhaps paying the rent for the family without any surplus for clothes. When that man gets a job he needs new clothes and boots. The cost of those articles has already gone up. In addition to that burden, it is now proposed to impose this tax upon him. In the household of an unemployed person articles of domestic equipment will have worn out, and once the housekeeper gets a little money, she proceeds to replacenecessities—cleaning materials and so on—and to buy things like blankets and sheets for a family which has probably been shivering without any blankets for a considerable time. Is she to be taxed on the purchase of those articles? I am sure hon. Members must seethe unfairness of the position. It is no hardship to people who are moderately well off to restrict their purchases. We are told that this tax is intended to raise revenue as well as to restrict consumption but, as has been pointed out, it will not restrict consumption except among the poor people. I am sure the wife of any hon. Member here would not be prevented by the addition of a few shillings to the price, from buying a dress which she wanted. I am sure that the addition of 5s. or even 10s. to the price of a suit, would not prevent anybody of moderate income from buying a suit if he wanted
      814
      it. The only people who will be restricted are the poor people who have to consider every shilling they spend.
      There is another section for whom I desire to speak and with whose welfare I have always been closely associated. I refer to the young women workers. Many people think that the young woman worker does not need to be very well dressed, that she does not require stockings, shoes, gloves and all the rest of it, but any girl who is not properly and neatly clad will not hold down her job very long, apart altogether from her right as a woman to be as nice looking as she can be. Many of these girls have suffered wage reductions because certain industries, particularly in the distributive trades, are not doing as well as they did before the war. Already, the cost of those articles on which they must spend a considerable proportion of their income has increased. Stockings such as the average shop girl buys have gone up by about 1s. a pair, and in addition to that it is now proposed to place a tax on all these articles on which the average clerk, shop assistant and so on, has to spend a considerable proportion of her income. They have to do it. It is not only a question of choice. The wear and tear on the clothes of an individual who has to go to work every day is much greater than it is in the case of a woman who is in the home all day and who can wear a cheaper article and probably look quite nice in it. It is the people to whom I refer who will suffer most by this tax.
      Another point which I wish to make concerns the method of imposing the tax. The Chancellor said it would not be possible to put the tax on the retailer and that the easier and better plan would be to put the tax on the wholesaler. I listened carefully to his suggestion that it would be difficult, with open markets and so on, to levy the tax on the retailer. I have had some experience of shop life. I spent about 15 years behind a counter and reached the giddy height of being a buyer, and my experience is that if you put a tax on the wholesaler, it means that the retailer will have to pay it on the goods, whether he sells them or not. The retailer has to lay in a stock. He may not sell it. The sale, particularly of ladies' wear, is a bit of a gamble. What will happen is that he will have to pay the tax on these goods whether he

      815
      sells them or not, and to safeguard himself he will put a bit extra on the goods sold. Therefore, you will have a very wasteful tax by levying it in this particular way. Not only will you have the shop-keeper making profits on the tax, but the wholesaler, passing the goods on to the retailer will also make his profit. These points, I think, are worth considering by the Chancellor of the Exchequer before he brings in his Bill. I notice that once a man commits himself to a certain line of action it is very difficult to get him to change it, but perhaps if the Chancellor of the Exchequer considers these points before he brings in his Bill, it will help him to produce something which is more satisfactory. Indirect taxes are much more unfair than direct taxation. It would be better to levy Income Tax, even if you brought it down to a lower scale, so that people would know what they were paying.
      8.2 p.m.
      Mr. Orr-Ewing: I was extremely interested in hearing the final words of the hon. Lady who has just sat down. I think all of us would like to be able to know exactly what the incidence of the taxation is to be, and equally many of us would like to know what the ultimate cost of this war will be. Until we know the one, it is difficult to determine the other. The main line of her argument was that she, in common with many hon. Members on the other side of the House, objected to a form of taxation which might, in her opinion, affect the actual standard of living, especially of the poorer classes of the community. I do not suppose anybody in this country would wish to see or would like to see a reduction in the standard of life of any section of the community. We have perhaps built up an artificial standard for ourselves, but I think we have to draw the line somewhere as to the point above which we may be forced to accept a lowering of the standard of living as the result of the brutality of war. Above that point, sometimes called the poverty line, and sometimes called the subsistence level, every single one of us must be prepared to face a reduction in the standard of living. Below that point, obviously, every single one of us would struggle and do our utmost to see that the actual subsistence line is maintained. In
      816
      all fairness we must try to determine, in our own minds, where that dividing line is.
      I should like to feel that this form of taxation was coupled with some form of rationing of necessities—one could quote as an example apparel, clothing, including boots and shoes. It is surely possible to evolve a system by which, in conjunction with a tax of this sort, we could ascertain what the different members of the community will require by way of cheap supplies of necessities, and, having made an estimate and arrived at a reasonable amount which people should be able to buy at a cheap price, could we not also evolve some form of standardised production? But that standard production cannot be economical, and cannot be at the lowest possible price level to the consumer unless we have some conception of what the demand will be. Obviously, if the present price of a suit of clothes is above the price at which it need be, and if we can reduce that price by some form of rationing or standardisation, then the ultimate cost of that same suit, with the tax added, need not seriously be increased.
      I hope we shall have some hint from the Treasury Bench to show that this Purchase Tax is not an alternative method of reducing consumption, but that it is a method, coupled with a system of rationing, whether that rationing is carried out through the consumer—that is to say, limiting the amount the consumer may buy—or whether it is a form of rationing carried out by limiting the amount of raw material available to the manufacturer—telling the manufacturer that he may turn out so many boots and shoes of a standard type at the cheapest possible rate. I believe this tax, serving this dual purpose, would better serve if it were coupled with some form of standardisation of production of necessities, and some rationing, either from the consuming end or the producing end, by the supply of raw materials. After all, that was only one purpose the Chancellor of the Exchequer mentioned as being inherent in the Purchase Tax. One was the limitation of consumption which is essential unless prices are going to rise and to be forced up by an increasing demand on a limited supply, and the other was to raise the largest possible revenue in

      817
      order to enable us to prosecute the war with the greatest possible efficiency. If we can achieve the raising of this larger amount of revenue without oppression to that particular section of the community which lies below the line I have mentioned, and without oppressing any section of the community which cannot afford to be oppressed, while at the same time asking those who can afford it to make this contribution, we shall have achieved something which is not only a financial benefit—
      Mr. Ede: It is a miracle.
      Mr. Orr-Ewing: This is by no means a miracle or outside the realm of possibility. With careful thought and organisation I believe this dual purpose can be achieved, and that in achieving it we shall be getting something more than the actual provision of cash to enable this war to be carried on as hard as we want to see it carried on. There is no limit to the energy with which the whole House wishes to see the struggle carried on. We shall achieve also the purpose which inspired our entry into the struggle, which is the realisation of the necessity, if we are to live up to the high ideals which we have, of being prepared to sacrifice something if we can afford to do it. What I believe upsets hon. Members opposite more than the suggestion of the tax itself, the tangible or visible effect of the tax, is the suspicion that those who cannot afford, literally in flesh and blood, to give up any more are being asked to do so as a result of the tax. No purpose can be served by attempting to apply a tax which will drive out of existence one section of the community and it is going rather far for hon. Members opposite to make that intolerable insinuation with regard to this tax. After all, the Chancellor of the Exchequer, to whatever party he may belong, surely has the confidence of the House to the extent that he cannot be considered either a complete brute or a complete fool. Otherwise, he would never have arrived at the position which he holds.
      I feel, and I believe everybody on all sides feels, the utmost urgency of making sure that the revenue will be available in such a form as will enable us to do our duty and to enable other sections of
      818
      the community to do their duty too. We do not in this House attempt to teach people outside a lesson, but it is our duty to bring the facts of the situation home to them, not brutally, but as clearly as we can. This tax is necessary, and I believe it can be evolved and developed so as to avoid any form of brutality in its effect. It will, too, bring home, as possibly nothing else would, what the true position is to-day, a position which calls forth every ounce of energy from the country. I hope that the Chancellor will be able to make it clear that, so far as the tax might affect contracts directly concerned with armaments, it will not be applied, for it would be a waste of energy and would add to the cost to the community of the essential raw materials of war. We do not want waste of effort on the part of anybody. It will be a difficult matter to manipulate but if we can cut out redundancy of this sort we shall help the country to raise the necessary revenue.
      8.18 p.m.
      Mr. Silverman: I am not quite clear what purpose the hon. Member for Weston-super-Mare (Mr. Orr-Ewing) was attempting to serve in the speech which he has just made. I can only hope that, whatever that purpose may have been, he has achieved it to his satisfaction and to the satisfaction of those who wished him to do what he has done. This is a thoroughly bad tax, and it is a great pity that the Chancellor of the Exchequer, who said that he was anxious to hear what people had to say about it before he committed himself finally to any definite proposals, has not had the opportunity of listening to some of the speeches that have been delivered in the last two hours. In particular, I would commend his earnest attention to the speech of the hon. Member for Cheltenham (Mr. Lipson), who sits on the other side, and the speech of my hon. Friend the Member for Springburn (Mrs. Hardie). The tax is anomalous in itself for the reason that was clearly given by the hon. Member for Cheltenham. The Chancellor ought to make up his mind whether he wants the tax in order to limit the consumption of necessary goods as well as of luxuries, or whether he wants it primarily in order to raise revenue. That is a dilemma which no ingenuity can resolve, because so far as the tax succeeds in one

      819
      of these purposes it defeats the other. That anomaly by itself would make it a bad form of taxation.
      The dilemma is no new one. Whether the Financial Secretary to the Treasury is as conversant with it as the Chancellor of the Exchequer, I am not sure, but the Chancellor, at any rate, will be familiar with it, because it was one of the most effective weapons in the hands of the controversialists with whom he was once associated in the days when Protection as against Free Trade was a live issue. It arose then in the argument that you could not have a revenue duty and a protective duty at the same time. It is true that the dilemma in this instance is not a real dilemma, because the Chancellor has made up his mind which of the two mutually exclusive things he really wants. I think that he really wants the revenue and that he will introduce the tax in such a form as is best calculated to increase the yield of it. All the talk about the desirability of finding new ways of lowering consumption was merely a makeweight to the right hon. Gentleman's argument, and it was not very useful to it, because it produced the dilemma to which I have referred. Let us take it that what he really wants is money. We must take it so because that is the reason for not limiting the tax to luxuries and not grading it steeply as between necessaries and luxuries. The right hon. Gentleman's reason for not limiting it to luxuries is that if he did, he might as well abandon it at once because it would not produce enough money. The Chancellor quite frankly let us know that he wants this tax in order, first, to get money and not so much in order to limit consumption, and, secondly, wants to get the money out of that class of goods upon which the poorest sections of our community spend their wages.
      Mr. Orr-Ewing: The statement has been made very often from the opposite side of the House that it is only the poorest section who have any need for necessities. It is an easy sort of slogan, but I think we must be fairer in discussing this proposal. Surely the hon. Member recognises that other sections of the community too have necessities.
      Mr. Silverman: If the hon. Member had had the advantage of hearing as much of this Debate as I have, he would not find
      820
      it necessary to ask me to repeat arguments which have been used repeatedly. The short answer to the hon. Member's point, without debating it, is that while all have the same need for necessaries not everybody has the same means of obtaining them, and to tax the necessaries of a man who has to expend the whole of his small income upon purchasing them is not the same thing as to tax the same necessities when they are purchased by another man out of a very small fraction of his income.
      Mr. Orr-Ewing Mr. Orr-Ewing rose—
      Mr. Silverman: I am not going to give way again. The hon. Member made a very long speech, and I think we all understand has point of view. I think the hon. Member's leaders on the Treasury Bench will not deny that it is now made clear, first, that the tax is to get money and, secondly, that it must be a tax upon necessaries, because in that way we cover the widest section of the population. Therefore, though the tax will fall on those with most money, among others, it will fall especially upon those the whole of whose income has to be expended upon necessaries. If that be so, then what we have here is a disguised Income Tax upon levels of income not so far subject to Income Tax. That is an inescapable conclusion, and I think the Treasury has not been as candid as it might have been. My own conclusion is that this tax has been proposed, not for its own merits, but because it enables the Government to impose by indirect means what is, in fact, a disguised Income Tax upon those whom this House would not readily agree to make subject to Income Tax.
      If the Government have formed the view that this extra money must be raised and that it can only be raised by an Income Tax upon incomes below the present taxable level, it would have been better if the Chancellor had frankly said so and invited the House and the community to face the facts. It would have been better to raise the money honestly and directly in that way. Of course, the Chancellor would have had to convince us that the money could not be better raised from other sources. Why should he not have sought to do it if he had thought it to be right? If he thinks it to be wrong, it cannot be right to impose in this indirect way what he is not confident of being able to impose in a direct way. We must recognise this is an In-

      821
      come Tax upon the poorest section of the community, and I think my hon. Friends on this side will have no difficulty in coming to the conclusion that they cannot accept it even in principle.
      8.25 p.m.
      Sir Robert Tasker: The Chancellor is seeking to raise revenue, but in his proposed method of doing so I foresee that he will encounter many difficulties, raising inter alia the old issue of what is a manufactured article. The article which is manufactured by A may be the raw material of the article produced by B. One could cite hundreds of examples, but perhaps the House will permit me to give one. A firm of steel manufacturers possess mills which roll steel girders, plates, angle irons, bars and other sections. Those products are clearly manufactured articles. Now, if I understand the Chancellor aright, when they leave the rolling mills a duty will be levied upon each girder, plate, angle iron and so on. Those things go to another firm which converts the various sections into compound girders—that is, girders built up of various components: stanchions, pillars, and other things. When the receiving firm have built up stanchions, pillars, compound girders and the rest, they become the manufacturers. Will there also be a charge upon the products of their industry? But included in the thousands of tons of steel purchased there will be a large quantity of the rolled steel joists cut into lengths and sold. No more work will be executed upon these girders than reducing them to the lengths required. I will not pursue the argument, but that is a typical example of the difficulties which I foresee. The same argument could be applied in respect of nearly all materials used in the engineering, building, shipbuilding trades and so on.
      The Chancellor invited every Member of the House to communicate with him suggesting means of economising. That was only an invitation to assist him in securing the revenue for the conduct of the war. The response he met with is unknown to me, but let me confess that I did not reply to that invitation, because, to my mind, it would be only beating the air. If one does make suggestions for economy, they are usually ignored, and the effort leads nowhere. There is one source of revenue to which
      822
      no reference has been made this afternoon, and that is war profiteering. I hold the view that it is criminal and wicked for anyone to make profits out of war. It may be too late, but if it is not, I hope that when the Bill is brought in provision can be made in it for the disclosure and forfeiture of any profit that is being made out of the manufacture of warlike materials, nor would I confine this suggestion to the manufacture of munitions or guns.
      Mr. Orr-Ewing: Would my hon. Friend include architects?
      Sir R. Tasker: Most emphatically, yes. There are a few people so overwhelmed with professional work which they cannot honestly execute, but, in addition, there are contractors of all kinds. I would extend the tax even further than them. I would extend it to the unskilled labourer, who is pocketing £6, £8, £10 or £12 a week, while the skilled craftsman considers himself lucky to receive £4. If the net were only spread wide enough, it would include all the unskilled labour and compel them to contribute something every week till the end of the war. The last war showed us that these people are improvident; although they were taking anything from £6 to £12 a week, they had nothing at the end of the war. I should not be in order to pursue this point further, but I must add that there are many ways and means of raising revenue. I should not consider I had performed my duty as a Member of this House if I did not state this thing, however unpopular it might be, in order to express my honest conviction, whether it be right or wrong, that it is only right, proper and just to exercise the utmost limit to raise revenue in order that there may be what the Chancellor of the Exchequer and all of us so ardently desire.
      8.34 p.m.
      Mr. Woods: The Chancellor of the Exchequer often shows himself remarkably alert in this House to detect inconsistencies between individual Members on these benches, but it is not often that we find a Minister so utterly inconsistent with himself as the Chancellor has been this afternoon. On an earlier Resolution it was urged from these benches that, at least in regard to tobacco, serving soldiers should not be asked to pay an additional tax, because

      823
      they were giving their whole time in service. The right hon. Gentleman resisted that suggestion on the ground that it would be difficult. The difficulty could have been overcome by the issue of a voucher entitling the soldier to so much tobacco. After having made that excuse for not doing a perfectly reasonable thing, the right hon. Gentleman is apparently prepared to go to no end of trouble to do something which, when all is said and done, will be utterly inequitable and unfair to the population of this country. The last speaker pointed out one of the difficulties. The Chancellor maintains that he has no desire that this tax shall be a sort of snowball, to be assessed at each stage in the sale of a given commodity. That means that there must be a very careful analysis to trace the history of each commodity from the raw material until it arrives at the ultimate consumer, to find at which stage the tax should go on. If it is made clear in the Bill that the tax will be assessed only at one point, it is probable that there will be an enormous amount of further trouble and expenditure in dealing with claims for rebates, on the ground that a tax has been paid on this or that commodity at this or that point. I can even imagine legal difficulties being involved as to which of the various vendors of the said commodity should be liable to the tax.
      That is not the only difficulty. Another difficulty was made clear by the hon. Member for East Ham, South (Mr. Barnes). There is hardly a business house doing any volume of business in this country that would not have many sales subject to tax and, on the other hand, have Government transactions, and others that would be exempt from tax. Therefore, estimating the liability of any wholesaler would necessitate an exact, microscopic inspection of all transactions throughout the year and would, I imagine, involve an enormous increase in the staff of those responsible for the work, which would, finally, give no real satisfaction. I mention this point because it must be inevitable that the cost of collecting the tax will add enormously to the expenses of the Exchequer.
      The matter does not end there. My hon. Friend the Member for Springburn (Mrs. Hardie) pointed out another aspect of the matter which is that, of every £1
      824
      accruing to the Exchequer, the consumer of the commodity will have to pay something plus. It is not difficult to assess these payments, on the figures which were given by the hon. Member for East Ham, South. Roughly, the volume of sales which will definitely come within the orbit of the tax will be in the region of £750,000,000, on the 1937 figures. Let us allow an ample margin for the increase in prices since 1937 owing to the war, and let us make the sum into the round figure of £800,000,000. That would give about £8,000,000 to the Exchequer for each 1 per cent. of the taxation. On a 5 per cent. basis, which seems to be a very substantial levy to raise—1s. in the £ on every article sold—the revenue will be in the neighbourhood of £40,000,000. Let us see how that sum will affect the public, after deducting the additional expenses of collecting it and for setting up new machinery and making innumerable appointments. The general average figure of the difference between the wholesale price and the retail price is an addition of 25 per cent., which includes a range of commodities on which the margin is substantially smaller of the day-to-day products, such as goods that come in weekly or monthly from the wholesaler, and on which there is no risk of loss of stock by deterioration. In such cases the turnover is continuous. This covers practically all the items that are exempt, such as tobacco, foodstuffs, butter, cheese. All those things which have the smallest margin of addition to the wholesale price to cover the cost of retailing are taken out, so that the average figure of 25 per cent. includes all the higher-priced things.
      As my hon. Friend the Member for Springburn mentioned, you have to add not only the actual cost of retailing, but a margin to cover non-sales, fashions going out and deterioration of stocks. Many of those commodities are purchased, and may be in stock for three, four or five months or longer. They are the slow turnover goods. Taking 25 per cent. as a very conservative estimate of the actual addition, that means that it will cost the public an additional £10,000,000 to provide the Chancellor with £40,000,000, less the additional incurred expense of collecting. If that is sound economics, I think we should all go back to school and find out what economics really means. To impose such an enormous burden on the

      825
      public in order to raise £40,000,000 for the Treasury is fantastic waste and absolutely unpardonable in these circumstances of high cost of living.
      With regard to the necessity for this tax, the Chancellor said that we have to win the war. But wars are won not only on the battlefield. This war is very largely a war of ideas and ideals, and if the Government of this country have not awakened to the psychological values inherent in modern warfare, the dictatorship countries are quite alive to what is involved in the mentality of the people, and I can conceive of no other innovation in our taxation methods which creates so much resentment among the mass of the people, which gives to the public of this country a sense of the unfairness of this Government and makes the war unpopular so that there will be an enormous increase in the number of those people who will say, "If this is what it means, it is not worth it." On the ground of the necessity of winning the war, I would appeal to the Chancellor to reconsider this innovation in taxation. He went on to say that to win the war we must raise revenue. Surely, it is not outside the capacity of the Chancellor of the Exchequer to raise a mere £40,000,000 without such a drastic innovation as this and without causing so much disturbance. There is no disagreement in this House as to the importance of raising the money, and there is hardly a speaker who has not referred to the willingness of himself and the people whom he or she represents to have an increase on luxuries and unnecessary goods, but this is a tax on the necessaries of life and will cause all the hardship which has been claimed for it by the various speakers.
      The Chancellor's second point with regard to the necessity for winning the war was the reduction of consumption. It seems to me that when we have financiers speaking thus airily about reduction of consumption, as if that were the solution of all our ills and financial problems, we must take a second think. Assuming it does achieve any considerable reduction of consumption, what are the secondary results of that apparent superficial economy? Carried to its logical conclusion, we might all become nudists and emulate the example of that robust gentleman who spoke over the wireless
      826
      recently and told us of the virtues of eating grass. You will have reduced consumption to the nth degree.
      Mr. Silverman: You could tax grass.
      Mr. Woods: That would react on the cows rather than on the human consumer. By reducing consumption, you will further dislocate the existing unsatisfactory state of trade, add enormously to unemployment, reduce wages and put businesses into bankruptcy. That is the solution which the Chancellor has. The more the proposal is examined, the more fantastic it becomes. I will conclude with a point which has been covered by a number of speakers, and that is the inequity of the proposal. We have had in this House many Debates in which the decline in the birth-rate has been lamented. We are saying to every young wife, "Directly you have a baby we shall tax you," whereas another person who does not have a baby will not be taxed. There is no exemption even on bassinettes, such as was advocated by an hon. Member opposite, and there is no exemption on baby clothing. If the baby turns out to betwins or triplets, it would be a tragedy for the young mother. [An Hon. Member: "She would get the Queen's bounty."] That comes out of the country, at any rate. A burden is being put on parenthood, and it is without justification. Take an example of a young couple, the husband about to be called up. They get married. They will reduce as far as possible the purchase of furniture to the very minimum, but any young bride will want at least one room furnished so that when her husband comes home on leave they can be in a room of their own. Even the most reactionary minded person in this country would concede that that is something to which the young couple are entitled. They go out and start doing their purchasing to make a home of one room, for which the man is prepared to lay down his life. Because he is put to the expense of furnishing a room, the Chancellor says he has to pay so much additional taxation from which the miser or a person who does not trouble to get married is exempt. Such injustices and such disproportionate demands on the public, penalising the highest service given to the country, apart from all the other arguments, condemn this tax and make it imperative that the Chancellor should think again

      827
      and find another method which would be a practicable and equitable system of raising the necessary funds for the prosecution of the war.
      8.48 p.m.
      Mr. MacLaren: I have sat listening most of the afternoon and have suffered the usual consequence of patience, which is to hear one's own points anticipated and used by others. However, perhaps my points have been used better than I could use them myself. When the Chancellor of the Exchequer the other day led up to a sort of theatrical prelude to tell us of the great tax which he was going to divulge and when he mentioned this one, I shouted out that this was an insane tax. That seemed to be a disturbing thing to do so far as the Chancellor was concerned, but I think the Debate this afternoon has proved it.
      Before saying much about the tax itself I want to go back to what I consider to be something of urgent importance on which the House should keep their eye. The Chancellor has come here to-night and asked this House to allow him to get a Resolution. He has used all the artifice of which he is a master to get this little innocent Resolution passed, and we are promised that afterwards we shall have a Bill the contents of which we do not at the moment know; but the Chancellor wants this Resolution, and if we are so nice and accommodating as to give it him he promises us that everything will appear subsequently in the Bill. In spite of the fact that one's voice is echoing among so many empty seats in the House to-night, I hope that this House will not allow this procedure to go much further, because once this Resolution is passed the Chancellor will have this House hip and thigh for the rest of the proceedings. It may be anything that the Chancellor likes. Hon. Members may make long speeches, but he will not listen to them; he will have his Resolution. He will have us on the slippery slope, and we shall be finished. That is very bad procedure, and I hope that it will be challenged. I notice that already the Whips have been busy, and have put up one or two hon. Members on the other side, to keep the Debate going until other Members come back. Perhaps I am assisting the Whips to keep it going; if
      828
      I thought that I were doing so, I should sit down at once.
      Listening to one Chancellor after another—and I have listened to more than I care to remember—coming forward with new taxes and devices for raising money, I often wonder who is the evil genius who comes and whispers these devices in the Chancellor's ears. The Chancellor always says that he has thought this and thought that, and has come to such and such a conclusion. He never does anything of the kind. I am not over-impressed by the financial and monetary understanding of the present Chancellor, but I am quite sure that he is not responsible for the wonderful innovation we are discussing to-night. There must be some person in the Chancellor's office at the Treasury, some antiquated kind of muck gatherer, running around, who comes and whispers these fancy devices in his ear. If I could lay my hands on that fellow I would get out of his skin satisfaction for what I feel about this tax. Those of us who were here when the Silk Tax was brought in, remember all the trouble there was to discover where the silk could be found so that it might be taxed. Now we get this tax. The Chancellor told us that he had had all sorts of devices examined, and that this was the only one that he thought suitable. It was said that we should adopt this because it was used on the Continent. When did the British Parliament fall so low that it must copy the methods adopted in certain other countries?
      Sir A. Lambert Ward: We might copy a good deal from them, with advantage.
      Mr. MacLaren: I cannot hear what the hon. and gallant Member is saying. This form of taxation is practised by certain other Governments which are not altogether above suspicion in their monetary dealings. When I heard the Chancellor refer to this tax, it was not so much a case of my being impressed with the wrongfulness of the tax as of my suffering a psychological shock at the thought that we in this country should fall so low as to adopt a financial device of this kind. The Chancellor said that this tax had two strong characteristics—it checked consumption, and it would give him some extra Revenue. These self-destructive arguments have been already answered,

      829
      and I will not repeat the case against them, which is self-evident to everybody.
      I begin to wonder with whom we are at war. Are we out to kill the people in Great Britain or the Germans? The Chancellor seems to be intent upon making life as difficult for the people who remain in England as he would probably like to make it for the people on the other side of the Magi not Line. We have to restrict consumption, we have to make a Spartan life for everybody here at home; and here is his device—a sales tax. Not merely this tax, but all his taxes, have been inspired by this one idea, of making it as difficult as possible for people here at home to live in some measure of comfort. It must have startled even hon. Members on the other side to know that he is not thinking of making this a graduated tax. The hon. Member for Springburn (Mrs. Hardie) told of her own experience. Is there any woman in this country who has to rear a family, who does not know what the effect of this tax will be? It will be a standing disgrace to us if we pass this tax and allow it to be imposed on the clothing of the people of this country. The Chancellor this afternoon, speaking from his great experience of family matters, said that if the wife is making a skirt for herself she can quite easily cut it too short, and have something left over to make clothes for the boy. That was his philosophy of life this afternoon.
      This tax, like all the taxes in the Budget, will be passed on to the producers of wealth. I have said this before, but it seems to me that one has always to repeat these things. Throughout these Budget Debates, the phrase has been constantly recurring about taxes being paid by one section of the community as against another section of the community. As a matter of fact, there is only one section which pays all the taxes in this or any other Budget. That point must be driven home time after time, until it is understood. Taxes are paid only by the producers of wealth. Unless wealth is produced, no taxes can be paid. The producers of wealth are those people actively employed in wealth production. Therefore, this Budget, with all its taxes under different designations, is paid for by the working classes of this country.
      Sir William Wayland: What about the middle classes?
      Mr. MacLaren:Where do they get their living from except by taking a hand in the production of wealth? All those who are not actively engaged in the production of wealth are parasites.
      Sir R. Tasker: Do you include Members of Parliament?
      Mr. Henry Haslam: Are the middle classes parasites?
      Mr. MacLaren:I did not say so. Anybody who takes an active part in the production of wealth is a wealth producer, and, therefore, a tax producer.
      Sir W. Wayland: Would the hon. Gentleman consider a Member of Parliament a wealth producer?
      Mr. MacLaren: No, I do not include him. But let me get down to this basic truth, because, if it is accepted that there are certain stratifications in society, such as a middle class or a lower class, it is easy for Chancellors to play upon the feelings of the public and to say, "The upper classes are paying so much; the middle classes are paying so much; and, therefore, is it not the duty of the lower classes, for the rest of the war, to pay something?" It is these producer classes, who are mostly to be found among what is called the lower classes, who pay all the taxes in the Budget. These taxes, like all the rest, will be passed on, and paid for by the consumers of goods: that will be, the working classes of this country. I will not endeavour to follow the economic arguments that have been so efficaciously used this afternoon, because if there is one thing that I hate it is repetition of old arguments. They have been most effectively put across this afternoon. The Chancellor of the Exchequer was not present, and I am sorry, because in his absence the most effective speeches to which I have ever listened criticising his tax proposal have been in this House this afternoon, and in particular the speech delivered by the hon. Member for Cheltenham (Mr. Lipson) should be read by the Chancellor of the Exchequer to-morrow morning. Let me come back to the main point of my complaint. The action of the Chancellor of the Exchequer is on all fours with recent conduct in that quarter of endeavouring to muzzle this House in its criticism of innovations in taxation and handing over delegated authority to

      831
      people outside this House to decide increases in taxation, leaving this House without any power over the taxes levied on the country.
      Sir W. Wayland:Is the hon. Gentleman aware that this tax has been in operation for a considerable time both in France and in Belgium?
      Mr. MacLaren: I said that before the hon. Member came into the Chamber, and I cannot repeat what I have said now. The tax itself, from my point of view, is only a subject for sheer derision. There are ways and means of raising taxes without harassing the public, and without creating a battalion of bureaucrats, making life unbearable for the ordinary wealth-producer in the country, and exacting a vast volume of expenditure and bringing very little back to the Treasury.
      There is something I will not mention because all the House knows what I mean. [Laughter.] It may cause a little laughter that I should suggest it now, but make no mistake about it, to-night over in Norway and in France there are the conscripted bodies of men probably in the traps of death defending this land. This House has conscripted the young manhood of this country to defend this land. Who is it that should laugh if I suggest that there are other forms of taxation that would restore to the people their right to the land that they are now defending to-night? Is there any laughter in that? You pursue this policy when sons are on the battlefield, and you go on with these devices, making the lives of their dependants harsher than they ought to be, and making their cost of living rise. We have these oscillations going on on the other side of the House, and it is said, "We must not get in the spiral because it is vicious and we might lose the war." Yet at the same time you are accepting the policy of imposing not merely this tax that we are talking about to-night but other taxes in the Budget with placidity. It makes me afraid that the British House of Commons is losing its individuality and personality, and its right of thinking and criticism, when I see one Budget after another rolling out of this House without anybody getting up and trying to put an end to the cant that is based on economic and financial wisdom from the Treasury.
      832
      Every tax in this Budget, not merely the sales tax but Income Tax, which is supposed to be paid by particular rungs of society, is imposed and hits the workers of this country. It is they who have to bear the burden of the millions that are being raised. Therefore, I cannot treat this as a joke. I have for years in this House advocated justice in taxation and I have repeated on more than one occasion—and I do it again—that there is nothing more potent for the destruction of society than the pursuit of a form of taxation which makes the lives of the people unbearable. Taxation has caused revolutions, and it has brought kings from their throne and has made some of the best parts of your Empire divorce themselves from you. You are imposing such taxation now and making life unbearable for people at home at the very time when you ought to be trying to bring some measure of comfort to the dependants who are left behind.
      Perhaps I have said more than I ought to have said within the confines of this Debate, but it all comes back to these fundamentals. The experience of politicians may seem to carry them to success along the transient way. They are no sooner dead than they are forgotten, but the harm that they have done in devising expedients brings with it distress, anxiety and destruction. This tax has all these characteristics, and that is why I am speaking as I am speaking now, and I repeat again, that the time has surely come when the House of Commons ought to rouse itself from its lethargy. The House ought to be backed by action and see to it that if taxation is to be raised to finance enterprises of war it should be based upon a system approximating in some form or other to basic justice. It seems to me, as I look at the empty benches opposite, and when we are now gambling in some £7,000,000 or £8,000,000 a day, as if even the House of Commons itself has become almost blinded by the size of the enterprise we are undertaking, and that even this tax, which has occupied our attention for the last three hours, seems such a trivial matter. I hope that the House to-night will divide and that the Chancellor of the Exchequer will not get this Resolution. Let the House on all sides realise that to give him this Resolution is to

      833
      tie up the power of criticism in this House of the autocratic actions of the Treasury. We should not blindly accept a Resolution which will tie us in every sense when the Bill comes before us.
      9.8 p.m.
      Mr. A. V. Alexander: We have now had a Debate of some considerable length upon the last and one of the most important Budget Resolutions to be reported. As far as I have been able to listen to it, I feel that the Government cannot be very pleased with the amount of support that they have received from the House to night for the proposal in the Resolution. In the first place, this particular Resolution should be considered in its relation to the whole of the Budget problem that the Chancellor of the Exchequer has to face, and I really have not heard a very great deal about that side of it to-night. Certainly the Chancellor of the Exchequer did not enlighten us very much more upon that point than he attempted to do in the course of his main speech upon the Budget or in his winding-up at the end of the Budget Debate. The fact is that when one has made every allowance for the revenue to be raised during the course of the fiscal year, of £1,234,000,000, we have still to raise £1,443,000,000 from other sources, and the proposition which was originally put by the Chancellor of the Exchequer was that he had to look for some source from which there would be a really substantial revenue. My first criticism of this Resolution to-night is that it does not hold out any clear prospect of substantial revenue in relation to the main fact of this Budget—that the Chancellor has to raise £1,443,000,000 by borrowing. If the amount of the revenue is not to be really substantial, then it seems to be even more unjustifiable for the Chancellor to throw into the realm of public controversy, during the course of a war in which it is essential to maintain by all means in our power the unity and morale of the working classes, such a principle as is involved in this tax. That is where his first mistake lies. The Chancellor cannot expect us, in view of the social aspect of this tax, to go to the country and support it. This tax cuts across our principles, as well as inflicting great social injustice on the people concerned, and the Chancellor must consider that. This tax will mean opposition to
      834
      the Chancellor and his policy all over the country, and it is just as well that, in the midst of a war, he should understand that.
      Mr. Orr-Ewing: The right hon. Gentleman has made a very grave statement, and I am not quite clear how he is entitled to make that statement without knowing what the incidence of the tax may be. I put that to him, because he might like to amend what he has said.
      Mr. Alexander: If the hon. Member had listened carefully to what I said, he would have seen the strength of my argument. The Chancellor has to produce something substantial, and although one gets the most substantial estimate that one can, the amount is comparatively so small, in relation to the total borrowing problem, that it is not worth the dispute of the principle which is bound to be raised among the working classes, on whom most of the burden will fall. I listened very carefully to the Chancellor, who made one of his best types of Parliamentary speeches, well argued, and gave us much more information than on the Budget. He put up two main propositions which, he said, he had to prove to the House. The first was that it was right to formulate this sales tax, and I listened to what would be the strength of his argument in support of this proposition. But I must say I felt he was not giving us any real argument at all. What he said in effect was that sales taxes of this kind have been utilised elsewhere, that they have succeeded and, therefore, would be found to be most useful for revenue and that, if used with boldness, it would get considerable revenue. He went on to examine the various forms of the tax, and that was the extent of his argument, in favour of his first proposition. By that argument, I am not convinced.
      What is the position in relation to the Government's economic policy to-day which would make the Chancellor think it was right to formulate a sales tax? At one moment we were told that the Government found it essential to prevent a vicious spiral in wages and to keep the cost of living down as much as possible. For that purpose they devoted their energies, with a Treasury Committee under the chairmanship of Lord Stamp, whose influence is profound in nearly all the spending Departments, to keeping

      835
      down the prices of goods. They collaborate with the Board of Trade in the administration of the Prices of Goods Act. On the other hand, we get through the Budget of last year and the September war Budget this startling fact, that we are now levying on the working classes the tremendously increased sum of £46,000,000 a year from tea and sugar alone. Then the Government get another great anxiety, and they say, "This will be unpopular. We must keep down the cost of living. We will temper the wind to the shorn lamb and prevent the poor from being exploited by preventing the cost of bread going up above 8d. or 8½d. We will subsidise farmers for the increased cost of milk by preventing prices from rising." At the end of three months this milk policy could not be continued, the subsidy had to be withdrawn from 1st April, and the new production cost of milk had to be passed on, so this summer we are to have a rise in the price of milk and, also, condensed milk. On top of that, we now get the new proposal of adding a further burden to the cost of living by putting on a sales tax.
      The Chancellor in his first argument said with some pride that the tax, used with boldness, could produce large revenue. What sort of boldness does he mean? We are still in the dark. We have not the faintest idea, eight days after the unfolding of the Budget, what is the real sum which the Chancellor has as his objective, what is the rate of tax or what is the exact area of the incidence of the tax. This kind of economic policy seems to be a policy of Bedlam; the Government do not seem to know where they are going unless the Chancellor can tell us that the real object of the measures in the past was so that he could, in the long run, raise a far larger proportion of tax revenue from the working classes than has ever been previously contemplated.
      Let me put to the House a figure which I published elsewhere two or three days ago and which will, perhaps, bring to mind something of the increased effort required by the State from the direct tax-paying classes and the working-class consumer. I take what I have dared to describe as the last normal Budget that I remember, the Budget for 1931. In that Budget we had a revenue from direct tax-
      836
      ation of £447,000,000 and £245,000,000 from indirect taxation. What is the position in the present Budget? The right hon. Gentleman hopes to raise from direct taxation £700,000,000, an increase of £253,000,000. The indirect taxation in this Budget, so far as we can assess it, is £466,000,000, but that does not include any part of what is really indirect taxation which falls on the working classes and no part of the revenue which the Chancellor of the Exchequer hopes to raise from the Purchase Tax. If we put the yield from the Purchase Tax at the modest figure of £25,000,000, then the yield from indirect taxation will be £491,000,000, or an increase of about £248,000,000 over the year 1931. That is an enormously steep rise in relation to the capacity of the people to pay compared with what is being taken from the direct taxpayer. The increase in indirect taxation is almost equal over the years to the amount you are imposing on the direct taxpayer. That is a matter which ought to be carefully considered by the Chancellor of the Exchequer, because if the Government are to get the whole of the people behind them in a great drive, they must persuade them that the Budget is not only adequate but fair. I am not persuaded that this Purchase Tax makes the Budget fairer. I think it makes it more unfair than it otherwise would be.
      The second proposition of the Chancellor of the Exchequer was that the tax should be imposed and collected when the wholesaler sells to the retailer. I can well understand that in having to deal with retailers to the number of 750,000 or 800,000 any proposal to make a tax of this kind operate at the extreme end of the transaction would be so unpopular politically that the right hon. Gentleman would seek to avoid it. I have heard it said that the two people of whom the Tory headquarters have always been most afraid are the small retail trader and his power of propaganda over the counter, and the insurance agent calling at the back door [Interruption.] I am not saying that our own organisation has not other ways and means, which, of course, we must have in order to get our case over to the general public. Of course, I can also see the reason why the Civil Service advised him, on the machinery and cost of collection, a tax on the wholesaler, which would prevent the

      837
      accumulated collection of the tax at more than one stage of the process of any particular commodity. I think that is right and just. They will have a much smaller number of people to collect from, and, therefore, there will be less cost to the Revenue. But I have not yet heard any advice from the Chancellor of the Exchequer as to exactly at what stage of the wholesale transaction it will be. I threw out one or two lines to which I thought the Chancellor of the Exchequer might rise and give us some little information, but it is very difficult indeed, on the explanation of the right hon. Gentleman, to define the wholesaler.
      He says that he is going to have a register of wholesalers, and that one of the certain things about it will be that if you are on the register, you will not pay the tax upon the purchase, but you will pay a tax which you can pass on to anybody to whom you sell. I find it difficult to define how you will qualify a person for inclusion in the register of wholesalers. The Chancellor of the Exchequer said that it was not proposed to include in the tax certain services. We have not yet his complete definition of what he proposes to include in the services which are to be exempt, but I would suggest that it will include professional services, and, if so, what becomes of the manufactured article in connection with professional services? Let me illustrate my point. Let me take a great organisation dealing first with the supply of professional dental treatment and, secondly, with the completion of that treatment by the supply of complete dentures. Members of the aristocracy and business men can receive professional services in Wimpole Street from dentists. They can have professional treatment, and I take it that would not be a wholesale sale, and there would be no tax upon it. If they have a denture complete I take it that if it is done by a professional dentist, a workman in his workshop, it is a retail sale, but if you have a large organisation employing qualified dentists, in respect of which all your dentures are made to model in a factory, then the factory supplying dentures would be regarded as performing a wholesale service. How are you going to define things like that? I can produce dozens of other cases. How are you going to define a wholesaler?
      If you take another class of business, ordinary dried goods; a firm which is re-
      838
      garded in the public mind as a large multiple retailer will in fact claim that in their buying operations they are always wholesalers. How are you going to define them? I can see considerable difficulty to the Treasury in dealing with the definition of a wholesaler. The Chancellor said that any wholesaler within the ring selling to another wholesaler will be exempt. Why should he be exempt if it is a question of a finished article? I do not quite understand the logic of the case which has been presented to the House, or exactly how the proposal will operate.
      There is one point that has been made by a number of hon. Members to-night which I consider to be fundamental. It has been argued from many points of view, both in discussing the Government's statement and in discussing Mr. Keynes' proposals, that in order to carry through the war successfully there must be an economic policy that will tend to restrict consumption. The Chancellor claims, in respect of this field of commodity taxation, that one of the merits of his proposal is that it will definitely restrict consumption. Is that true? I do not believe it is true. I believe the effect of the proposal will be to restrict consumption by certain classes, but to say that it will restrict the consumption of a particular article in the mass may be quite untrue. Let me take as an example a food commodity which has been rationed—butter. We know now from experience that butter is very largely rationed to the poor by its price, but that does not mean there is a very large restriction in the consumption of butter at the present time. Butter is being bought by the people who can afford to buy it. This applies in exactly the same way to all the commodities which the Chancellor will bring within the purview of this tax. To use the method of a largely increased price, caused by the imposition of an additional tax upon the commodity, is no safe measure for restricting consumption. There may be a restriction in consumption by certain classes, but in the mass, it may be that just the reverse will happen; it may be found in the end that there has not been a restriction of the general consumption of the country, but that it has been left at about the same level as before, and all that has been done is a grave injustice to the poorer section of the community. For these reasons, although I am not unsym-

      839
      pathetic to the Chancellor's main problem in dealing with the very large Budgetary provision that has to be made, I ask the House to reject this proposal. As hon. Members have said, there are other means of raising Revenue if the Chancellor needs them—as, of course, we know he needs them.
      Sir J. Simon: What means?
      Mr. Alexander:I suggest that the Chancellor might show some of his enthusiasm of pre-1914 days for seeing that the income from and values of assets created in land are used for the benefit of the community. He was a great exponent of that. Since he has been at the Treasury, he has seen an enormous expenditure of public money on sites and buildings for Government purposes, very often expenditure on land that had no rateable value. This is one thing that he might certainly exploit. Moreover, I think he ought again to consider the general proposition that was made in the Budget Debates in April, 1939, by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence). That proposition was to mobilise in war-time the capital wealth of the country, to take it as reasonable, not merely to impose a levy upou war wealth at the end of the war, but to say to people who continue to enjoy their wealth that it is reasonable for them to recognise that the continued enjoyment of that wealth depends upon the maintenance of the integrity of the country, and the protection of its law, and for them in a time of national emergency to transfer a fraction of those fortunes to the State. While, as I have said in previous Budget Debates that I think the actual amounts which the right hon. Gentleman proposes to raise by increases in direct taxation are by no means to be despised, much more can be done in this direction if the Chancellor will have the courage to go to the right quarter and if he will bear in mind some of those earlier convictions of which he was such an able exponent from 1906 to 1916, and see that the poor are cared for properly and that they get justice.
      9.36 p.m.
      The Financial Secretary to the Treasury (Captain Crookshank): I trust that the final words in the speech of the
      840
      right hon. Gentleman the Member for Hillsborough (Mr. Alexander) will not cause any gulf between my right hon. Friend the Chancellor of the Exchequer and myself on subjects which in the past were matters of controversy between us. The right hon. Gentleman has given us, as he always does, a very vigorous speech; but taking this Debate as a whole—and I have sat right through it, because I wanted to note all the speeches and their atmosphere andenvironment—I should say that in my view the House is still reserving its judgment on this question. The right hon. Gentleman said just now that we could not expect the Opposition to go round the country supporting this tax, and he ventured on a prophecy as to how it would be received. I will not hold him to that particular prophecy, but I would say this: that while certain speeches have been made from the benches opposite, three of them from hon. Members with special experience of the Co-operative movement, the speeches to-day, on the whole, have not been anything like as critical as the right hon. Gentleman seemed to imply. I think it is true to say that the House, as a whole, is prepared to wait and see in further detail the Measure which will be placed before it.
      The hon. Member for East Ham, South (Mr. Barnes) asked the House not to pass this Resolution and suggested that, instead of submitting the Resolution the Chancellor should introduce the Bill in order that the House could examine it. He overlooked the simple proposition that we cannot introduce a Bill of this kind without a Resolution. This Resolution has been drawn, as some other hon. Members complained, in very wide terms in order to enable us to introduce the Bill. When the Bill is introduced there will be ample opportunity for criticism, which will no doubt be directed accurately to the proposals in the Bill and as a result of which, we hope, a good Measure may emerge. So, when the right hon. Gentleman who opened this Debate complained about the lack of detail and said that when we had finished with the Bill and when it had been passed we should be just as much in the dark as we are now, I think he overstated the case. We shall not be in the dark at all by the time the Bill is passed, except, possibly, with regard to the rate of the tax and the date at which it will be introduced; we shall

      841
      know all about the machinery and the framework of the tax which will have been evolved as the result of our united endeavours.
      The hon. Lady the Member for Springburn (Mrs. Hardie) made a very attractive and interesting speech and drew upon her personal experience in these matters when discussing the possibility of a retail sales tax. She begged my right hon. Friend to consider very carefully all that had been said in the Debate to-day before he introduced the Bill. I would like at once to give an assurance that we certainly shall consider all that has been said, and not the least important part of what we shall consider will be the speech of the hon. Lady. We had from the hon. Member for Burslem (Mr. MacLaren) an amplification of his earlier comment on the proposal when he used the word "insane" about it. In a rhetorical and finely phrased passage he regretted that this country's Parliament should have fallen so low as to resort to a device of this kind. It is a fact that France, Belgium, Germany, Hungary, Rumania, Russia, Italy, Norway, Holland, Switzerland, the former Poland, the former Austria, the former Czecho-Slovakia, Bolivia, Brazil, the Argentine, Canada, Australia and New Zealand—all these countries have adopted and worked in some way or another a form of sales tax. The last two have schemes very much on the lines of that outlined by my right hon. Friend the Chancellor of the Exchequer. While, of course, as Englishmen we are rightly proud of the high position of this country, it may be going a little too far to sweep all these countries, including the Dominions, into the category of those who have sunk so low that we should not in any circumstances follow their example. I hope, therefore, we shall not look at this problem from any prejudiced point of view. After all, I can always throw it back at hon. Gentlemen opposite that New Zealand, which they are usually only too pleased to quote to us, has adopted an almost identical form of tax to that which we propose; and one exists in practically the same form in Australia—so there is nothing undemocratic about it.
      It therefore falls to me to consider the Purchase Tax on its merits and in the light of the circumstances in which it is introduced. I think that my hon. Friend the Member for Blackburn (Sir W.
      842
      Smiles) was quite right in saying that a Chancellor of the Exchequer is so often criticised on Budget days for being unimaginative and for suggesting nothing more than a penny here and two pence there. But when my right hon. Friend the Chancellor of the Exchequer does come down with something completely startling which no one has suggested for years and years, then we find he is blamed for it. The position of a Chancellor of the Exchequer must be very difficult. There have been few comments on the speech to which my right hon. Friend asked the House to direct its attention. My right hon. Friend asked us to consider which of the four different kinds of taxes which exist in one or other of other countries would be the most suitable and useful for us to adopt, and very few speeches were addressed to trying to answer that particular question. The hon. and gallant Member for North-West Hull (Sir A. Lambert Ward) thought a retail sales tax would be better, and I think the right hon. Member for Hillsborough rather took that view, because he said the only reason it was not being suggested was some political imaginations which he got somehow out of his own head. Of course, without wishing to be disrespectful to any of the countries which have adopted that particular form of tax, I think they would be the first to admit that administratively it is by no means easy and that it lends itself to evasion on the vastest scale. I believe that many hon. Members who have visited these countries have found quite often that the bills presented to them were not exactly the same as the amount of money with which the purchases were made. It is because of these and many other reasons that we are not introducing anything of that sort.
      The one which my right hon. Friend has thought wise to put forward is to be imposed at a different stage—at the wholesaler-retailer stage. That is one of the points where, in spite of the right hon. Gentleman's fears—
      Mr. Jagger: Is is assumed that a retailer would be dishonest and that a wholesaler would not be?
      Captain Crookshank: I am not making any such accusation about anyone. I am merely saying that the experience in foreign countries is that it is an easy tax

      843
      to evade. Nor is it so easy to work where there is not a decimal system of coinage. We have decided to impose the tax at the wholesaler-retailer stage provided we can get a right definition, and I do not think it is beyond the wit of the draftsmen, and, failing them, the united wisdom of the House to make the dividing line quite clear. The hon. Gentleman who made the interruption will appreciate that it is fundamental to the machinery of the proposal that there should be a register of wholesalers. That is a very different proposition from the alternative which would have to be introduced if the tax were imposed at the retailer stage, for that would necessitate some control of retailers. As my right hon. Friend pointed out, there is not only an enormous number of very small shopkeepers with small turnovers, but there are something like 50,000 itinerant retailers, men and women who sell at markets and so on and the complicated form of machinery which would be necessary to deal with them would be out of the question, apart from the other difficulties I have mentioned.
      The right hon. Gentleman said that it would be difficult to get a proper definition in legislative form of a wholesaler. He may be right, but it will not be for want of trying if we do not get an adequate one. My right hon. Friend pointed out, in opening the discussion, that one of the reasons for the method in which this Bill was being introduced was to give us an opportunity of inviting various organisations—and I have an idea the right hon. Gentleman knew that—to help us to try and make certain that we get a right sort of definition. The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) asked me what was meant by the words in the Resolution:
      "and in respect of such other transactions relating to goods as may be provided by any Act of the present Session."
      These are covering words which will enable us to deal with such a question as that of direct sales by manufacturers to consumers. They will have to come in at the proper stage, even though they are direct sales. The second class of transaction which these words are intended to cover, and for which some machinery will have to be worked out, is the sale of goods on the hire-purchase system. This
      844
      may not constitute a sale; it is technically a hiring by purchase, and it is in order that we may deal with that category that some general form of words was necessary to the Resolution.
      Mr. Jagger: There is a larger class of man who is both wholesaler and retailer.
      Captain Crookshank:My right hon. Friend dealt with that in his speech today, and it would be out of Order for me to say exactly the same things again, although I have alluded to some of the points he so clearly made. My view of the Debate is that on the great issue of the Purchase Tax itself the views of hon. Members are not yet completely formed; it may be because they themselves are not completely informed, through the circumstances of the case; but, generally speaking, I think the House is prepared to reserve its opinion upon the tax while giving us this Resolution to-night, because, after all, the passage of the Resolution is necessary to do what the hon. Member for East Ham, South, wants to see done, and that is to enable us to produce the Bill. Because the House passes a Resolution of this kind, it is not mandatory that anything should flow from it; the Resolution merely consists of enabling words, when all is said and done, and the House retains full control over subsequent stages. The hon. Member for Burslem (Mr. MacLaren) implied that if we passed this Resolution, all was over and done with, that the House would never have another chance of expressing its opinion. Nothing could be further from the facts. It shows how far the hon. Member is carried away by his own oratory.
      Mr. MacLaren:I know the House can over-rule what we are doing now, but it has been my experience that whenever a Resolution like this is passed the House loses all capacity for criticising or doing anything. Once the Resolution has gone, the spirit of debate seems to leave the House.
      Captain Crookshank: If that be true, it is the fault of the House and not my fault, but I should not have thought that it was true. I have recollections of many Bills which were the subject of considerable controversy even after the Money Resolution had been passed—for example, the National Defence Contribution (No. 1)

      845
      Bill. I should like to deal with a point which has been raised in various speeches that this is a novel procedure because it does envisage the possibility of there being a Bill on the Statute Book and of the date of the introduction of the tax and its rate being settled by another procedure than that of a Finance Bill. The precedent, such as it is, or at any rate the analogy, is found in the procedure under the Import Duties Act whereby Customs Duties are imposed by an affirmative Order passed in this House. There, again, I think the fact that we pass this Resolution does not prevent the House from adopting another or more normal way of proceeding. It only makes it clear that if this is what is decided upon, the House has given its authority in a Resolution arising in Committee of Ways and Means; it does not follow that we have to do it in that way. Of course, in practice, it is clear that we are entering upon a novel scheme, and so far it has been difficult to see—though the united wisdom of the House still has an opportunity for finding another and better way—howone could introduce a Bill and go through all the stages of that Bill, which obviously will not be passed in five minutes and will require a good deal of detailed consideration, and is the sort of Bill on which a good many Amendments have to be made one way or another—it is difficult to see how we could introduce a Bill of that kind and put in it the exact date on which the tax is to come into effect, and the rate of it, and then have it hanging over the whole commercial community for weeks or even a couple of months, with all the difficulties which would inevitably flow in the way of forestalling and so on. Up to now we have not envisaged any other way than by adopting some form of novel procedure. There are probably disadvantages in almost everything one does, and some things are worse than others, and we shall see before the Debates go much further.
      Finally, the hon. Member for Nelson and Colne (Mr. Silverman) found great difficulty in something said by my right hon. Friend in regard to our objective. Let us not forget that all this is being done in time of war and with the tremendous background of war, and that we are being forced to introduce Measures of a kind which would probably never
      846
      see the light of day in ordinary times. You have, against that background, the objective that you want to get as much money as you can, and at the same time you do not mind reducing—in fact, you are quite pleased the more you can reduce—the consumption of civilian goods. "So," says the hon. Gentleman, "you are in a complete dilemma and anomaly." He says the same sort of thing as was argued about before my time—I suppose it was in his time, as he mentioned it—on the subject of Free Trade and Protection. [Laughter.]
      Mr. MacLaren: You are not as young as that.
      Captain Crookshank: The hon. Gentleman said we always found that those who discussed the matter were impaled on the dilemma that you could not get both the revenue and the protection as well. Whatever may have been said in those days, I think that since we have introduced our present fiscal system, we have been quite pleased with the fact that we have actually got them both. We are getting a very nice revenue. [An Hon. Member: "No."] The hon. Gentleman has only to look at the balance-sheet to see that we are getting a very nice revenue—and that we have received a measure of protection in recent years. I am not talking about that now, because trade is regulated in present conditions on a system of import licences and so on. Up to the time of the war it is clear, whatever the arguments may have been, that we were getting a very nice bit of both. That may very well be the case in regard to the proposed tax.
      It has been clearly shown that in either case, whether in order to get a lot of money or to get an effective reduction of consumption, you have to cover the widest possible field. That is why it is obviously difficult to exclude from this scheme this long list or that long list of commodities, apart from the basic things which my right hon. Friend mentioned in his Budget speech; that is to say, food, fuel, rent, light and services. It is the generality beyond that particular point which is so important, whether we are to have a tax at all, whether the House will approve of it, and whether we are to get money or a reduction in the demand for civilian goods. When hon. Members tell us that we shall depress the standard of living,

      847
      we must remember that these excluded categories of goods represent a very large proportion of the expenditure of the bulk of the people of this country, and they are included to a very large extent in the cost-of-living index. The right hon. Gentleman says that it does not look as though we are going to succeed; but this is a very early stage, and we have to try to make the proposal succeed by excluding big blocks of expenditure which fall heavily upon everyone, rich and poor alike. Perhaps the country up to this moment has not yet fully realised how far it will be necessary to restrict the consumption of civilian goods in war time. One is sometimes led to the conclusion that that point has not been sufficiently emphasised. Perhaps some of us on the Front Bench have not said enough on that aspect, and it will be clear when one reflects, as was announced in this House, that restrictions in articles like linen and cotton goods—
      Mr. Alexander:If I may interrupt, I would like the Government to keep in mind the point which some of us have argued ever since the war started, namely, that the method to adopt was not one of raising prices, but of rationing.
      Captain Crookshank: That is a little off the point with which I was dealing. What I was trying to indicate, no doubt very feebly, was that perhaps the problem itself had not been sufficiently stressed. In the nature of things, as munition production increases and as there are increasing difficulties in getting certain
      things from some parts of the world, there will inevitably be a restriction in consumption, and we must face up to that. In spite of the fact that the right hon. Gentleman and his friends do not care about this Measure at their first look at it, and in spite of their fear that it may lead to exploitation, I would point out that it can probably be dealt with along the lines of the Prices of Goods Act. The question which the right hon. Gentleman raised was that if there was this tax at the wholesale level, there might be a tendency for an excess price to be charged by the retailer, but, of course, the Prices of Goods Act is there for the very purpose of ensuring that prices are not unfairly increased. As the House knows, the Parliamentary Secretary to the Board of Trade said to-day and a week ago that consideration was being given to an extension of the scope and effect of that Act. We must not, therefore, overlook the fact that we have already on the Statute Book a safeguard tending in that direction.
      Taking everything into account, the House would be well advised to pass this Resolution now, in order that a Bill may be introduced, when it will be possible to discuss all these details of a tax which, in the end, the House will agree is a very wise one to introduce at this particular stage of the war.
      Question put, "That this House doth agree with the Committee in the said Resolution."
      The House divided: Ayes, 145; Noes, 86.

      Division No. 60.]

      AYES.

      [10.5 p.m.

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

      Conant, Captain R. J. E.

      Harbord, Sir A.

      Albery, Sir Irving

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

      Harland, H. P.

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

      Court hope, Col. Rt. Hon. Sir G. L.

      Haslam, H. C. (Horncastle)

      Anstruther-Gray, W. J.

      Craven-Ellis, W.

      Hely-Hutchinson, M. R.

      Beamish, Rear-Admiral T. P. H.

      Crooke, Sir J. Smedley

      Henderson, J. J. Craik (Leeds, N.E.)

      Beauchamp, Sir B. C.

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

      Heneage, Lieut.-Colonel A. P.

      Beechman, N. A.

      Crowder, J. F. E.

      Hepworth, J.

      Bennett, Sir E. N.

      Cruddas, Col. B.

      Horsbrugh, Florence

      Bernays, R. H.

      Culverwell, C. T.

      Howitt, Dr. A. B.

      Bird, Sir R. B.

      Davidson, Viscountess

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

      Blair, Sir R.

      Denman, Hon. R. D.

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

      Blaker, Sir R.

      Drewe, C.

      Hume, Sir G. H.

      Bossom, A. C.

      Ellis, Sir G.

      Jennings, R.

      Boulton, W. W.

      Elliston, Capt. G. S.

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

      Briscoe, Capt. R. G.

      Emery, J. F.

      Jones, L. (Swansea W.)

      Broadbridge, Sir G. T.

      Erskine-Hill, A. G.

      Kerr, Lt.-Col. Charles (Montrose)

      Brocklebank, Sir Edmund

      Etherton, Ralph

      Kerr, Sir John Graham (Sco'sh Univs.)

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

      Everard, Sir William Lindsay

      King-Hall, Commander W. S. R.

      Campbell, Sir E. T.

      Fremantle, Sir F. E.

      Lamb, Sir J. Q.

      Carver, Major W. H.

      Fyfe, D. P. M.

      Leech, Sir J. W.

      Cary, R. A.

      George, Major G. Lloyd (Pembroke)

      Leighton, Major B. E. P.

      Chapman, A. (Rutherglen)

      Glyn, Major Sir R. G. C.

      Levy, T.

      Christie, J. A.

      Gridley, Sir A. B.

      Little, Sir E. Graham-

      Cobb, Captain E. C. (Preston)

      Grimston, R. V.

      Lucas, Major Sir J. M.

      Colville, Rt. Hon. John

      Hannon, Sir P. J. H.

      Mabane, W. (Huddersfield)

      McCallum, Major D.

      Raikes, H. V. A. M.

      Strauss, H. G. (Norwich)

      McCorquodale, M. S.

      Ramsbotham, Rt. Hon. H.

      Strickland, Captain W. F.

      McEwen, Capt. J. H. F.

      Reed, A. C. (Exeter)

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

      Magnay, T.

      Reed, Sir H. S. (Aylesbury)

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

      Makins, Brigadier-General Sir Ernest

      Reid, W. Allan (Derby)

      Thomson, Sir J. D. W.

      Manningham-Buller, Sir M.

      Rickards, G. W. (Skipton)

      Titchfield, Marquess of

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

      Robertson, D.

      Wakefield, W. W.

      Mayhew, Lt.-Col. J.

      Robinson, J. R. (Blackpool)

      Wallace, Capt. Rt. Hon. Euan

      Medlicott, Captain F.

      Ross Taylor, W. (Woodbridge)

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

      Mills, Major J. D. (New Forest)

      Rowlands, G.

      Ward, Irene M. B. (Wallsend)

      Mitcheson, Sir G. G.

      Royds, Admiral Sir P. M. R.

      Warrender, Sir V.

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

      Salt, E. W.

      Wayland, Sir W. A.

      Morgan, R. H. (Worcester, Stourbridge)

      Samuel, M. R. A.

      Webbe, Sir W. Harold

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

      Schuster, Sir G. E.

      White, Sir Dymoke (Fareham)

      Munro, P.

      Shaw, Major P. S. (Wavertree)

      Williams, C. (Torquay)

      Nall, Sir J.

      Shepperson, Sir E. W.

      Windsor-Clive, Lieut. Colonel G.

      Neven-Spence, Major B. H. H.

      Simon, Rt. Hon. Sir J. A.

      Winterton, Rt. Hon. Earl

      O'Neill, Rt. Hon. Sir Hugh

      Smiles, Lieut-Colonel Sir W. D.

      Womersley, Sir W. J.

      Orr-Ewing, I. L.

      Smith, Sir R. W. (Aberdeen)

      Wright, Wing-Commander J. A. C.

      Peake, O.

      Snadden, W. McN.

      Young, A. S. L. (Partick)

      Pickthorn, K. W. M.

      Somervell, Rt. Hon. Sir Donald

      Ponsonby, Col. C. E.

      Somerville, Sir A. A. (Windsor)

      TELLERS FOR THE AYES.—

      Procter, Major H. A.

      Southby, Commander Sir A. R. J.

      Major Sir James Edmondson and Mr. Buchan-Hepburn.

      Pym, L. R.

      Spens, W. P.

      Radford, E. A.

      Storey, S.

      NOES.

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

      Green, W. H. (Deptford)

      Muff, G.

      Adamson, Jennie L. (Dartford)

      Greenwood, Rt. Hon. A.

      Noel-Baker, P. J.

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

      Griffiths, G. A. (Hemsworth)

      Paling, W.

      Anderson, F. (Whitehaven)

      Griffiths, J. (Llanelly)

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

      Attlee, Rt. Hon. C. R.

      Groves, T. E.

      Price, M. P.

      Barnes, A. J.

      Hall, G. H. (Aberdare)

      Riley, B.

      Barr, J.

      Hall, J. H. (Whitechapel)

      Ritson, J.

      Bartlett, C. V. O.

      Hardie, Agnes

      Roberts, W. (Cumberland, N.)

      Benson, G.

      Harris, Sir P. A.

      Robinson, W. A. (St. Helens)

      Bevan, A.

      Harvey, T. E.

      Sexton, T. M.

      Brown, C. (Mansfield)

      Henderson, T. (Tradeston)

      Shinwell, E.

      Buchanan, G.

      Hills, A. (Pontefract)

      Silverman, S. S.

      Burke, W. A.

      Horabin, T. L.

      Smith, Ben (Rotherhithe)

      Cocks, F. S.

      Jagger, J.

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

      Collindridge, F.

      Jenkins, A. (Pontypool)

      Smith, T. (Normanton)

      Cove, W. G.

      John, W.

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

      Daggar, G.

      Jowitt, Rt. Hon. Sir W. A.

      Stokes, R. R.

      Dalton, H.

      Kennedy, Rt. Hon. T.

      Taylor, R. J. (Morpeth)

      Davies, R. J. (Westhoughton)

      Lathan, G.

      Tomlinson, G.

      Dobbie, W.

      Lawson, J. J.

      Viant, S. P.

      Douglas, F. C. R.

      Leonard, W.

      Watson, W. McL.

      Ede, J. C.

      Lipson, D. L.

      Westwood, J.

      Edwards, Sir C. (Bedwellty)

      Lunn, W.

      Whiteley, W. (Blaydon)

      Edwards, N. (Caerphilly)

      MacLaren, A.

      Windsor, W. (Hull, C.)

      Evans, D. O. (Cardigan)

      Maclean, N.

      Woodburn, A.

      Foot, D. M.

      Marshall, F.

      Woods, G. S. (Finsbury)

      Frankel, D.

      Milner, Major J.

      Garro Jones, G. M.

      Montague, F.

      TELLERS FOR THE NOES.—

      Gibbins, J.

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

      Mr. Charleton and Mr. Adamson.

      Gibson, R. (Greenock)

      Mort, D. L.

      Question, "That this House do now Adjourn," put, and agreed to.

      Bill ordered to be brought in upon the said Resolution by the Chairman of Ways and Means, the Chancellor of the Exchequer, and Captain Crookshank.

      PURCHASE TAX BILL,
      "to provide for the imposition of a tax in respect of purchases of goods from wholesale sellers, and in respect of certain other transactions relating to goods, and for purposes connected therewith," presented accordingly, and read the First time; to be read a Second time To-morrow, and to be printed. [Bill 39.]

      GOVERNMENT OF INDIA ACT, 1935 (ADAPTATION OF ACTS OF PARLIAMENT (AMENDMENT) ORDER).
      Motion made, and Question proposed,
      "That an humble Address be presented to His Majesty, in pursuance of the provisions of Section 309 of the Government of India Act, 1935, praying that the Government of India (Adaptation of Acts of Parliament) (Amendment) Order, 1940, be made in the form of the draft laid before Parliament."—[Sir H. O'Neill.]
      10.9 p.m.
      The Under-Secretary of State for India and Burma (Sir Hugh O'Neill): This is purely a formal matter. The sole effect

      851
      of this Order is to extend for a further six months the period, expiring 31st May next, of the exemption of the application of the Import Duties Act pending the conclusion of a trade agreement between the United Kingdom and Burma.
      Ordered, "That the Debate be now adjourned."—[Sir H. O'Neill.]
      Debate to be resumed upon Tuesday next.
      The remaining Orders were read, and postponed.

    AIR-RAID PRECAUTIONS.
    Motion made, and Question proposed, "That this House do now adjourn,"—[Mr. Buchan-Hepburn.]
    10.13 p.m.
    Mr. Tomlinson: The question I wish to bring before the House arises out of a Question which I asked of the Secretary of State for the Home Department on Thursday, 18th April. It was in the following terms:
    "whether he will make provision for the local education authorities, as such, to be consulted when the revision of grants under the 1937 Act relating to air-raid precautions is taking place, in view of their peculiar position and the dispute which has arisen between these authorities and his Department?"—[OFFICIAL REPORT, 18th April, 1940; col. 1102, Vol. 359.]
    The answer was that he referred me to the reply which he gave on 4th April. As that answer was in the negative, I gave notice to raise this Question on the Adjournment. The dispute arises out of the decision to differentiate between the grants to local education authorities for air-raid precautions purposes, and the provisions of the Act of 1937. I would remind the House that from 1935 to 1937 representatives of local authorities were in negotiation with representatives of the Home Office with one object in view, to determine on an equitable basis the charges for air-raid precautions.
    Agreement, after a time, was reached, and the payments to be made are set out in the Schedule to the Act of 1937. There are two things that I would ask the House to note with regard to these agreements. They are, first, that Section 7 of the Act states that any local authority may incur expenditure for the purpose of making provision for the protection of
    852
    persons and property from injury or damage in the event of hostile attack from the air, whether or not such expenditure is incurred in pursuance of an air-raid precautions scheme. There, the authorities referred to are known as scheme-making authorities; they are boroughs and counties which are called upon to submit schemes, not local education authorities. That needs to be kept in mind. The second fact to be noted is that in these negotiations there was not suggested at any time any differentiation between the responsibility for taking air-raid precautions for school children and the duty of taking precautions for the community generally. Nowhere, I submit, in the text of the Act itself is there any differentiation made, neither in function nor in grant. In July of last year owing to the trouble that had arisen as a consequence of differentiation having been made, an influential deputation from the Association of Education Committees, of Municipal Corporations and the County Councils' Association, waited upon the right hon. Gentleman to make representations to him, in the light of this Act of Parliament, suggesting that a breach of undertaking had taken place inasmuch as the provisions of the Act were not being carried out.
    The right hon. Gentleman has suggested on two or three occasions, in answer to Questions, that local education authorities were under a misapprehension inasmuch as they were not parties to those negotiations, which had taken place between 1935 and 1935, and, therefore, could not be expected to know what exactly had taken place. May I remind him, however, that one of the individuals present when that deputation waited upon him was Sir Miles Mitchell, who took a leading part in those negotiations and, at the end of the case made by the Secretary of the Association of Education Committees, made the following comments:
    "I can only emphasise on behalf of the Association of Municipal Corporations, that we agree with everything Sir Percival Sharpe has said. Might I just mention one point he has made. I was in all the negotiations and all the discussions with the Government on air-raid precautions, beginning in this room in 1935, and at no time was it suggested or did it come within our knowledge that a distinction was to be made between the protection of children in schools and the protection of the general public, nor was any suggestion ever made that there should be

    853
    a difference in the financial arrangements. It was strange to us; we were surprised that this distinction should be made and we do not understand why it should be made."
    That was the statement of a man who had taken part in all the negotiations, and he, at at any rate, felt it was not an overstatement of the case to suggest that a breach had taken place or that a mistake had been made. What he said on that occasion was confirmed by a gentleman who had also been present on the previous negotiations, Dr. Gurney-Dixon, on behalf of the County Councils Association.
    Mr. Ede: I do not think Dr. Gurney-Dixon was in the previous negotiations.
    Mr. Tomlinson: At any rate he said:
    "We do not propose that everyone of us should put forward our own argument; had we done so we should have emphasised as strongly as possible the arguments and considerations that Sir Perceival Sharpe has put forward."
    In any case the County Councils Association, through their spokesman, said that a case had been made out for equal treatment as between local authorities. That is all we are asking for. I submit that a case has been and can be made out for equality of treatment. It was clearly understood by local authorities at the close of the negotiations that all expenditure on air-raid precautions designed for the safety of persons referred to expenditure on schemes which received the assent of the Government and there is not a word in the Act of 1937 or in the Schedule which gives rise to any other understanding. Yet within three months of the passing of the Air-Raid Precautions Act embodying this undertaking, powers were exercised under which instead of 75 per cent. being granted about 50 per cent. was granted for this purpose. We contend that whatever maybe the attitude of the Minister, whether or no this has been a breach of an undertaking, there is no possible justification for the differentiation which has taken place between these respective authorities and the work they are carrying out. I know that it can be said, and probably will be said, that between 1935 and 1937 the Board of Education, in consultation with education committees, were considering this question of air-raid precautions. Circular 1461 was sent out by the Board stating that money spent on air-raid pre-
    854
    cautions would rank for grant, but it cannot be assumed that the authorities imagined that the grant would be anything less than that suggested for other services. I beg the right hon. Gentleman to keep in mind that so far as education authorities are concerned there is quite a number of variations in the grants that are paid for different services, and it was assumed that the same rate of grant would be paid in this respect. It is impossible to justify this differentiation. I have a letter from a director of education in a Northern town pointing out the futility of trying to put public shelters in one category for expenditure purposes and school shelters in a different category. He quotes the case of his own town, where certain of the schools were in capable of being provided with adequate shelter accommodation of their own, but where they were situated near to, and in some cases practically adjacent to, public shelters. He says:
    "If the children had remained out of school, they would have been members of the public, and in the event of an air raid would have had a right to and would have made use of these public shelters as ordinary members of the public. To keep their school closed, therefore, because there was no shelter accommodation for them seemed to us merely stupid, so we opened the school, saying quite frankly that we intended to make use of the public shelters. The Air-Raid Precautions Emergency Committee got worried, but they could neither close the schools for us—and,by the way, they did not want to—nor could they forbid our use of the public shelters. They had no power to do so. Our proposed use of the public shelters had to be accepted. At the same time, we gladly put at the disposal of our Emergency Committee all our school shelters outside school hours, and even such part of them as we may not need for our own use during school hours. This kind of mutual overlapping and helpfulness does seem to show the futility of the exclusiveness of classification."
    It certainly does. I cannot visualise a situation in which the shelters that are provided in the school yards would not be used by the general public in the event of an air raid taking place in the district, if they were not being used by the school children. Therefore, I submit that, now that the revision is taking place under the 1937 Act, the education committees have a real grievance in this matter. I know it will be suggested that the local authorities are the financing authorities, and that, therefore, in dealing with the local authorities, we are in effect dealing with the education committees; but I would point out to the right hon. Gentleman

    855
    that what an education committee does depends largely upon the amount of money which it has to spend. The money that has been spent on air-raid precautions owing to the differentiation in the rate of grant has meant an extra expenditure of £1,000,000 to the education authorities of the country. That will inevitably have a crippling effect upon their work, unless some alteration is made. This question is now before the bodies which originally discussed it. I hope that some alteration will be made by the right hon. Gentleman. If there has been a misunderstanding, and if the Department have not broken faith with the education authorities, it seems to me that the matter can be put right by dealing in a fair and equitable manner with those authorities now. I hope that not only will the right hon. Gentleman listen to this plea, but that he will go into the question of the position of the education authorities with a view to straightening out the anomaly that has arisen.
    10.29 p.m.
    Mr. Ede: My hon. Friend the Member for Farnworth (Mr. Tomlinson) always speaks on these matters with great knowledge and great moderation. I am sure the case he has put before the House is one that must receive the very careful attention of all of us, and I hope the sympathetic consideration of the Minister as far as the point of principle is concerned. As the right hon. Gentleman knows, I have never shared my hon. Friend's view that there was any breach of faith in this matter. I think the right hon. Gentleman has been very wrong, but he remains honourable. He is not right in this matter; he is merely honourable. In view of the general air with which he always rises in the House, I am not sure that I would not perhaps have found it rather more acceptable to find him both wrong and dishonourable; but at any rate, in my view he has escaped being dishonourable. In the first place he did not make the bargain, and in the second place, as my hon. Friend has very fairly put it, the record is silent on the matter. It may be that a difficult position has arisen, which is not uncommon when two people who have made a large bargain and have been silent about details while striking the bargain, take different views about
    856
    what the large bargain means when applied to a particular detail. I rather sympathise with the right hon. Gentleman in that he has been landed now with the recollections of people of negotiations which started five years ago and were conducted by the right hon. Gentleman who is now Secretary of State for Air. The shorthand notes have been examined most carefully by the local authorities, and no doubt by the Home Office, and it is impossible to find a word in the record of those negotiations dealing with the point.
    Therefore, I make no charge that the right hon. Gentleman has departed from the letter of any bargain that was made, and I think it would be stretching matters a great deal too far to suggest that the final decision represents any breach of any understanding arrived at in regard to the matter. But when one comes to deal with the merits of the case, one is bound to say that one is inclined to the belief that the Government Departments themselves have taken refuge in subterfuges which it is difficult for plain people to appreciate. I know the right hon. Gentleman says a child in school is not a member of the public as far as shelter is concerned, because, presumably, a shelter has been found for him at the school. As regards the greater part of the country, I doubt whether shelter has been provided for the ordinary population on a scale sufficient to justify that line of argument. There is not room in public shelters for every inhabitant of the country. But the State compels these children to attend school and by bringing lare numbers of children together on particular sites, completely reverses the Government's general policy, which is one of dispersal.
    From the first, the Government have told us that their line is one of dispersal, but as regards neutral areas—and now evacuation areas by allowing the schools to be reopened—they have reversed that policy. They are compelling large numbers—in many cases several hundreds—of the most defenceless section of the population, the children, to come together and to be exposed to the risks attendant on air raids, should any take place. It therefore appears very anomalous that local authorities, when they deal with the ordinary population, should get a percentage grant towards the erection

    857
    of shelters, which rises very high, but when they deal with the most defenceless section of the population, they get a much lower percentage. In my borough, which is one of the poorest in the country, the figure will be 59 per cent. In Surrey, which is one of the richest counties in the country, the local authority get 50 per cent. If they got the proper percentage, it would be far less than 50, but the Government have agreed on a minimum of 50 per cent. for this purpose. The anomaly is all the greater because the poorest districts have the largest number of children in proportion to the population, for whom to make provision. In proportion to the population three times as many children have to be provided for in my constituency as have to be provided for in the county of Surrey. The proportion of children to the population and the number of children attending elementary schools is higher in the poorest districts. I hope, therefore, that the Minister will listen to the plea which has been made by my hon. Friend for a reconsideration of this matter.
    I know that a committee has been appointed—I have the best of reasons for knowing that the committee has been appointed—to deal with these matters, and I hope that the instructions of the Minister to the representatives of his Department who will meet that committee will be so drawn that this matter shall be generally open to argument. It would be a great pity if, when we arrived at the committee, we were told that the matter was not open for discussion. I am bound to say, and I am speaking only for myself, that I do not share my hon. Friend's view that education committees as such ought to have representation apart from education authorities. In this matter I am very much an authority man as opposed to a committee man. After all, no education committee can have delegated to it the power of raising a loan or levying a rate. When we get to these questions of finance which involve the levying of a rate, the matter has been withdrawn from the purview of the committees. In saying that, I hope that the Minister will recognise that this matter stands in a different category altogether. I have heard the argument from his Department, but I am not sure I have not heard it from his own lips, that there are other local government services in a very similar category,
    858
    like police stations and public-houses. I mean public hospitals. I wonder what made me think about public-houses; it must be the proximity of my hon. Friend the Member for Westhoughton (Mr. Rhys Davies). It is true that on occasions people are compelled to go to police stations, but no one is yet compelled to be a policeman or to go to a public hospital, whereas a child is compelled to go to a public elementary school. That, I suggest to the Minister, is the fundamental distinction between elementary schools and the other forms of local authority activities where shelters have to be provided.
    It is fortunate that Sir Miles Mitchell will be a member of the committee. He will represent the Association of Municipal Corporations. I think that the point of view he expressed at the conference alluded to by my hon. Friend will be represented on the committee. The Urban Councils' Association speaking for another block of education authorities, will be represented. The County Councils Association will also be represented. I hope that when these representatives meet the Minister's Department, they will find on this matter that it will be possible to make sufficient headway to remove what I am sure the Minister must recognise as a deeply-felt grievance on the part of education authorities. If this grievance can be removed and these services can be treated at the same percentage as the normal percentage given for shelters, he will find his relationship with these authorities considerably improved.
    10.40 p.m.
    Mr. Woodburn: I have a matter to raise, and I thought it would be for the convenience of the Home Secretary and the Secretary of State for Scotland if I raised it now. I speak in association with my right hon. Friend the Member for West Stirling (Mr. T. Johnston) and my hon. Friend the Member for Stirling and Falkirk (Mr. Westwood). It is a complaint of the Stirling and Clackmannan A.R.P. Joint Authority, and it deals with the question of first-aid posts. The complaint is that stone hot water bottles were demanded for the treatment of shock cases to the extent of five bottles per person. The chief medical adviser has specified this, and the authority complain that in

    859
    the furnishing of these posts the Department will not allow them to purchase rubber hot water bottles, although stone bottles are not being supplied in sufficient numbers. The request has repeatedly been made for permission to purchase rubber hot water bottles, and there is a serious feeling of grievance because the Department will not give the permission.
    The second complaint is about the equipment of first aid posts. It consists only of one small box containing a limited number of bandages and dressings. No stretchers or blankets or hot water bottles are provided at essential points. Complaints have been coming in from all the people in the districts concerned with A.R.P., and they are supported by the officer in charge and other members of the authority. They have been greatly impressed by the arguments which have been put forward by the people who come from what are termed rural areas, but which are densely populated. In the event of an air raid it would be impossible for any service to reach these people within half an hour, and sometimes three-quarters of an hour. It is suggested that, though the central points may be the most important, other points should be supplied with stretchers and blankets within reasonable reach of these thickly populated areas in Stirlingshire and Clackmannan. Up to now the only reply one has been able to give these people is that the Government have not provided these things.
    I would like to ask the Minister to look into these complaints and see what can be done. I have been in communication with the Secretary of State for Scotland for some time with regard to first-aid posts in Edinburgh. The doctors at these posts have not yet been supplied with helmets or gas masks, yet they are supposed to make their way to first-aid posts immediately an air raid takes place. If a gas raid occurred, these doctors would be unable to reach the posts where they are expected to treat the patients.
    The Secretary of State for Scotland (Mr. Colville): I think I explained to the hon. Member that two doctors per post had been supplied with this equipment and that other doctors who had been attached to the posts had not yet been supplied, but that I was looking into the question of whether equipment could be made available for them.
    Mr. Woodburn:I am glad to be assured of that, because there is some feeling in Edinburgh, and throughout the country generally, that doctors would not be able to reach their points of duty in the event of an air raid. I hope that the Minister will look into the whole question of our air-raid precautions in Stirlingshire and Clackmannan, because it is a densely populated industrial area, and it is felt that the present precautions are not adequate.
    10.45 p.m.
    The Secretary of State for the Home Department (Sir John Anderson): I do not know whether it was the inadvertent reference by the hon. Member for South Shields (Mr. Ede) to public houses which led his hon. Friend so suddenly and unexpectedly to open up the whole question of bottles in this Debate. I know that I am sometimes considered to have some sort of responsibility for what are called "bottle parties," but the particular aspect of the bottle question which was raised by the hon. Member for Stirling and Clackmannan (Mr. Woodburn) is one which I feel bound to leave to my right hon. Friend the Secretary of State for Scotland.
    I am sorry that any controversy should have arisen between hon. Members opposite and the Government regarding the question referred to by the hon. Member for Farnworth (Mr. Tomlinson). I am still more sorry that that controversy should have led to suggestions, as I think wholly unfounded suggestions, of breach of faith. I am grateful to the hon. Member for South Shields for his intervention for the purpose of making it perfectly clear that he, at all events, does not associate himself with the allegations which have been made. I have known for some time of the view which he took of the matter, and I am grateful to him for having stated that view publicly to-night. I hope the House will believe that if I, in the discharge of my responsibility as the Minister primarily concerned with Civil Defence, had thought that there was any ground whatever for the suggestion that a breach of faith had been committed, I should have been the first to try to put the matter right. I have been a public servant for a very long time, and to me a suggestion of breach of faith by a public Department is a very serious matter indeed. I recognise that the hon. Member who raised the matter did his

    861
    best to deal kindly with the Department, that he did not suggest that there had been a deliberate breach of faith, but thought there might have been some inadvertence. Nevertheless, it is the fact that I and my colleagues have received numerous, I might almost say innumerable, communications from local education authorities showing that they are labouring under a sense of grievance in this matter, and I welcome the opportunity—the first I have had, though there have been rather oblique allusions to this question from time to time—of making a considered statement on the subject.
    The negotiations on which reliance is placed culminated in a conference held at the Home Office on 26th October, 1937, the purpose of which was to settle, if possible by agreement, the rates of grant to be paid in respect of certain entirely novel responsibilities which it was proposed to place upon local authorities in connection with air-raid precautions. It was because those responsibilities were wholly distinct from the normal duties and responsibilities of local authorities that the view was taken that the circumstances justified the payment from the Exchequer of rates of grant far beyond those normally payable in respect of grant-aided services undertaken by local authorities. The record shows that the discussions proceeded on that footing. As a result, rates were eventually fixed varying from 65 per cent. to, I think, 85 per cent.—wholly exceptional rates of grant.
    It is not quite true to suggest that the special cases of services for which local authorities are normally responsible, in connection with which Civil Defence expenditure might have to be incurred by local authorities, were left entirely out of account. It is not the case that the problems that might arise in connection with those services were overlooked. There was, in the course of the discussion on 26th October, 1937, a specific reference to such services—police, fire brigades, hospitals, water supply and drainage—and there might have been, in that connection, a reference to schools. But it was clear at the conclusion of the discussion that the cases of local authority services for which local authorities are normally responsible were left for separate negotiation and settlement. In fact, such separate negotiation and settlement did follow in due course.
    862
    I said a moment ago that schools might have been included in that category of special services. They were not so included. There was a reference, very brief, to the problem of schools. It was made by the right hon. Member for South Hackney (Mr. H. Morrison), who put the case for the local authorities to my right hon. Friend the Secretary of State for Air, who was then Home Secretary. The reference was in these words:
    "As to schools, they will, of course, be closed."
    It was obvious, so far as the negotiations with which the right hon. Gentleman was concerned, that the question of grant in respect of air-raid precautions in schools was not in the minds of the negotiators on either side.
    Confining myself, for the moment, to the question of breach of faith, I think it is clear that, if the case rested where it is now, in the course of my argument, my answer to the charge would be complete, but that is not the whole story. Strange as it may seem—in view of the suggestions subsequently made, but first made, let me point out, by a deputation that waited upon me at the Home Office as recently as 31st July, 1939, and that was the first occasion on which any suggestion of breach of faith were made—there were separate discussions in regard to the question of air-raid precautions in schools which overlapped the general discussion, about rates of grant under the Air-Raid Precautions Act. It was at the time that a memorandum was drafted in the Board of Education dealing with precautions in schools. That memorandum was brought before a conference at which the County Councils Association, the Association of Education Committees, the Association of Municipal Corporations, the Federation of Welsh Educational Committees, the London County Council, the National Union of Teachers, a Joint Committee of the Four Secondary Associations, and, I think, the Scottish authorities were represented. That memorandum was discussed by the conference in April, 1937, to which I have referred, and contained this statement:
    "The Board of Education are prepared to recognise for their grant expenditure incurred by local education authorities in the incorporation of protective measures in suitable cases."
    That memorandum was issued—
    Mr. Tomlinson: May I interrupt the right hon. Gentleman? When he says "their grant," I presume he means the Board's grant?
    Sir J. Anderson: That is right.
    Mr. Tomlinson: I think the right hon. Gentleman knows full well that the Board's grant can refer to three or four different varieties of grant.
    Sir J. Anderson: I will deal with that point in a moment. It referred to the Board's grant, whatever that grant might be—not to any special grant under some Statute passed to deal, not with educational matters, but with matters connected with air-raid precautions. That memorandum was issued to the local education authorities in January, 1938. No question of any sort or kind, according to my information, was raised by the local education authorities in regard to that grant until January, 1939—long after the Air-Raid Precautions Act had been brought into operation and the process of considering and approving air-raid precautions schemes was well under way.
    Mr. Tomlinson:I do not wish to interrupt, but it is as well that we should have this straightened out. I do not wish to be unfair, and I do not wish to be misunderstood. If there has been a genuine misunderstanding I think it ought to be cleared up. The point I have in mind is that when the Board's grant was being referred to it meant that the expenditure would rank for grant, but surely the authorities who would be concerned with A.R.P. were entitled to assume that it would rank for the same grant as that which had been paid for other A.R.P. services? That has been the opinion held all through.
    Sir J. Anderson:That may have been the opinion held all through, but I am concerned now to show how mistaken that opinion was. I am pointing out that the discussions which resulted in the issue of that memorandum were under-taken independently—
    Mr. Tomlinson:Yes, but I was interested in those discussions and there was never a discussion with a view to fixing a grant.
    Sir J. Anderson: I am dealing with the issue whether there was any ground for
    864
    the suggestion that there was a breach of faith, which was the serious suggestion put forward. In view of the history of the whole matter it passes my comprehension to understand how a suggestion of a breach of faith can possibly be put forward.
    Mr. A. Jenkins: May I ask one question? Were there any estimates submitted by the Board of Education for the payment of these grants in respect of air-raid precautions?
    Sir J. Anderson: I do not know. That is a Departmental matter for the Board of Education. The point I am making is that the Board of Education were dealing with the problem of air-raid precautions for schools as a Departmental matter, and were issuing their communications in the usual course of business to the local education authorities, and in their communications had made no reference to the rates of grant under the Air-Raid Precautions Act. They referred to their rates of grant which, it may be truly said might be different rates.
    If I have made the position clear as I see it may I pass to what I may call the merits of the case? It has been suggested again and again that the Government ought to have taken the view that, because air-raid precautions expenditure might have to be incurred in connection with schools, such expenditure should be held to qualify for the special rate of grant provided under the Air-Raid Precautions Act.
    It being Eleven of the Clock, the Motion for the Adjournment of the House lapsed, without Question put.
    Question again proposed, "That this House do now adjourn."—[Mr. James Stuart.]
    Sir J. Anderson: The first point I want to make is that schools are not the only special case that has to be taken into consideration. The local authorities, at one time or another, have had to bring before the Government Departments concerned all sorts of special cases of services for which they are responsible, in connection with which Civil Defence or Air-Raid Precautions expenditure has had to be incurred. There was the case of the police, the case of the fire brigades, the case of hospitals, and the case of public utility services for which local authorities

    865
    were responsible. There was the case of their own air-raid precautions for their own establishments. In all these cases, the general principle on which the Government proceeded was that, if the service was a grant-aided service, expenditure should attract grant at the rate appropriate to that service. The case of schools was not one case standing apart from all the others. It was a particular case of a service for which local authorities are normally responsible. In the case of air-raid precautions in connection with the police services—in the case of shelters, for example, at police stations—the rate of grant payable is not the exceptional rate allowed in the special circumstances which I explained a moment ago, because of the exceptional nature of the service undertaken, it is the police rate—50 per cent. In the case of services for which no grant is ordinarily payable negotiations were entered into in certain cases—the cases of public utility services for which local authorities are responsible, such as water, gas and electricity. In those cases where an authority was called upon to undertake special expenditure, the rate of grant agreed on after negotiation was 50 per cent. In the case of shelter provided for the ordinary staffs of local authorities, towards which ordinarily no grant was payable, local authorities were placed in exactly the same position as other employers, and although they are not an Income Tax paying section of the community they were given the grant under the Civil Defence Act at a rate equivalent to the standard rate of Income Tax.
    All these were special cases, in regard to which a rate of grant was fixed which was suitable to the particular circumstances of the service in question. The provision of shelter in schools was, in the view of the Government, an essential part of the educational service. That fact was brought out very clearly when, after the schools in vulnerable areas had been closed for several months, it was decided that they might be reopened, and, in order that they might be reopened, as an essential condition of their being reopened, shelter had to be provided by the local authorities. That shows how inseparably the provision of shelter was linked up with the responsibility of the local authorities for that particular service. It was held, therefore, that the appropriate rate of grant was that con-
    866
    sidered appropriate to education as a grant-aided service. Considerations of financial propriety seem to indicate clearly that the cost of shelter in schools should be brought to account as educational expenditure. I do not think anyone has ever suggested otherwise. If the grant were to be paid as a grant under the Air-Raid Precautions Act, presumably it would have been brought to account quite differently, and the Public Accounts would, to that extent have been misleading.
    When this matter was first brought to my notice, I gave it my best consideration, as the Minister responsible for Civil Defence. I was not the Minister responsible for educational services. It was not my business to negotiate rates of grants for educational services; I had to look at the matter as the Minister responsible for Civil Defence. It seemed to me that the operation of the financial arrangements which the Government were making might result in anomalies, for the reason that the expenditure which local authorities were being required to incur in connection with air-raid precautions in schools might weigh most heavily upon the poorest local authorities. For that reason I felt justified in urging upon the Treasury that such expenditure by local education authorities should be taken into account in the review which I, as Civil Defence Minister, was under an obligation to carry out in due course under the Air-Raid Precautions Act. I take full responsibility for that decision. It appeared to me that that was a reasonable method of approaching what I recognised to be an important financial problem, and I had thought that local authorities would have welcomed that approach to the subject.
    The result is that in the course of the discussions which are about to take place, in the course of the review which will be carried out to cover all expenditure by local authorities on Civil Defence we shall take account of expenditure on air-raid precautions in schools in exactly the same way as we take account of expenditure under the Air-Raid Precautions Act. If we find that there are anomalies which ought to be smoothed out and burdens which ought to be alleviated, it will be open to the local authorities to put forward their claim, and that claim will have careful and sympathetic consideration. I

    867
    want to make this clear. This is not a question of reopening the subject of the rate of grant for air-raid precautions in schools. It is a question of reviewing the general burden of expenditure falling upon local authorities, and we shall take into account in that connection the expenditure incurred in the provision of shelter in schools and any adjustment which may appear reasonable can be made just as if expenditure incurred was part of the expenditure incurred under the Air-Raid Precautions Act. That seems to me to be a reasonable method of meeting any grievance which may arise in this connection, and I hope that local authorities, including local education authorities, now that the matter has been explained, will no longer labour under a sense of grievance.
    This Debate has arisen out of an answer which I gave to the hon. Member for Farnworth in which he asked me why I had not included, among those with whom these negotiations are to be conducted, representatives of the local education
    868
    authorities. It was in respect of my answer to that question that the hon. Member said that he desired, because he considered the answer unsatisfactory, to raise the matter on the Adjournment. The point of principle that arose there has been dealt with quite effectively by the hon. Gentleman the Member for South Shields (Mr. Ede). I have in this connection to deal with the bodies constitutionally responsible for local authority finance. It is not for me to include in those discussions representatives of committees not so responsible. I must negotiate with the authorities responsible constitutionally for local authority finance, but if it should happen that there are among their representatives gentlemen who are specially qualified to put the point of view of education committees, I shall certainly have no complaint to make.
    Adjourned accordingly at Ten Minutes after Eleven o'Clock.

BRITISH ARMY.
  DISCHARGE PURCHASE MONEY (REFUND).
  DISCHARGE PURCHASE MONEY (REFUND).
  INCOME TAX RETURNS.
  INCOME TAX RETURNS.
  GOVERNMENT SERVICES (ADMINISTRATION).
  GOVERNMENT SERVICES (ADMINISTRATION).
  CIVIL AVIATION (GOVERNMENT POLICY).
  CIVIL AVIATION (GOVERNMENT POLICY).
  TIENTSIN (SILVER DEPOSIT).
  TIENTSIN (SILVER DEPOSIT).
  BRITISH FORCES, EGYPT (PARCELS).
  BRITISH FORCES, EGYPT (PARCELS).
AGRICULTURE.
  LABOUR SUPPLY.
  LABOUR SUPPLY.
  TRAINING SCHEMES.
  TRAINING SCHEMES.
MINISTRY OF SUPPLY.
  GREEN FLAX FIBRE.
  GREEN FLAX FIBRE.
  TIMBER CONTROL.
  TIMBER CONTROL.
  ESPARTO GRASS.
  ESPARTO GRASS.
  BRASENOSE COLLEGE.
  BRASENOSE COLLEGE.
  HOUSING (SLUM-CONDEMNED BUILDINGS).
  HOUSING (SLUM-CONDEMNED BUILDINGS).
  WEST INDIES (SUGAR INDUSTRY).
  WEST INDIES (SUGAR INDUSTRY).
  COAL INDUSTRY (ACCIDENTS).
  COAL INDUSTRY (ACCIDENTS).
  PALESTINE (HEBREW NEWSPAPERS).
  PALESTINE (HEBREW NEWSPAPERS).
  COLONIAL DEBTS TO BRITISH EXCHEQUER.
  COLONIAL DEBTS TO BRITISH EXCHEQUER.
  ROYAL NAVY (PREVENTION OF WASTE).
  ROYAL NAVY (PREVENTION OF WASTE).
  UNEMPLOYMENT (PRINTING AND ALLIED TRADES).
  UNEMPLOYMENT (PRINTING AND ALLIED TRADES).
MINISTRY OF INFORMATION.
  GERMAN BROADCASTS.
  GERMAN BROADCASTS.
  ITALY.
  ITALY.
POST OFFICE.
  POSTMEN (WAGES, LONDON).
  POSTMEN (WAGES, LONDON).
  STAMP BOOKS (ADVERTISEMENTS).
  STAMP BOOKS (ADVERTISEMENTS).
Preamble
The House met at four of the clock, The EARL OF ONSLOW on the Woolsack.
TORQUAY CEMETERY BILL.
Returned from the Commons, with the Amendments agreed to.
MID-WESSEX WATER: PETITION FOR BILL.
Examiners' Certificate of non-compliance with the Standing Orders, referred to the Standing Orders Committee.
SOUTH SUBURBAN GAS BILL. [H.L.]
Read 3a, and passed, and sent to the Commons.

GOVERNMENT OF INDIA (ADAPTATION OF ACTS OF PARLIAMENT) (AMENDMENT) ORDER, 1940.
Report from the India and Burma Orders Committee, That they have examined the Order as required by the Standing Orders of the House; that in their opinion the Order does not raise important questions of policy and principle; that the Order is founded on precedent; that in the opinion of the Committee the Order can be passed by the House without special attention, and that no further inquiry is necessary before the House proceeds to a decision on the Resolution to approve the making of the said Order:
Read, and ordered to lie on the Table.

BUSINESS OF THE HOUSE.
LORD SNELL: My Lords, I beg to ask the noble Earl the Leader of the House if His Majesty's Government have any statement to make on foreign affairs.
THE LORD PRESIDENT OF THE COUNCIL (EARL STANHOPE): My Lords, we have no statement to make to-day, but we hope to be in a position to make a statement to-morrow.
LORD ADDISON: My Lords, before we adjourn I should like to be allowed to intervene on a personal matter. For the second time, as was announced by the noble Earl yesterday, the Motion standing on the Paper in my name relating to the Coal Commission has been postponed at the request of the Department. I am very sorry because a number of noble Lords who had expressed their intention of being here to take part in the discussion may have been put to some inconvenience. I am sorry that the Motion has been postponed, but I was told postponement would suit the convenience of the Department and I want to take this opportunity of saying so.
House adjourned at five minutes past four o'clock.